Document:

Exhibit 10.1

 

Execution Copy

 

EMPLOYMENT AGREEMENT

 

This EMPLOYMENT AGREEMENT (this “Agreement ”) is entered into as of September 3, 2013 (the “Effective Date ”) by and between VIVUS, Inc., a Delaware corporation (the “Company ”), and Seth H. Z. Fischer (“Executive ”).

 

RECITALS

 

A.                                    The Company is a biopharmaceutical company developing innovative, next-generation therapies to address unmet needs in obesity, diabetes, sleep apnea and sexual health for U.S., European and other world markets.

 

B.                                    The Company and Executive desire to enter into an employment relationship upon the terms and conditions set forth in this Agreement.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the mutual promises contained herein, the Company and Executive agree as follows:

 

1.                                      Appointment.

 

During the Employment Term (as defined in Section 4 of this Agreement), Executive shall serve as the Chief Executive Officer of the Company.  Executive shall devote substantially all of his time, attention, knowledge and skills in furtherance of the business of the Company, it being agreed to by the parties that Executive may continue to serve (i) as a member of the boards of directors of (a) Trius Therapeutics Inc. and (b) BioSig Technologies Inc. and (ii) as an advisor to the chief executive officer of Medhab, LLC, as long as such service does not materially interfere with Executive’s duties to the Company.  Executive shall faithfully and to the best of Executive’s abilities and experience, and in accordance with the standards and ethics of the business in which the Company is engaged, perform all duties that may be required of Executive by this Agreement, the Company’s policies and procedures, and such other duties and responsibilities as may be assigned to him from time to time, as well as the directives of the Company’s Board of Directors (the “Board ”).  Executive shall not engage in any activity that conflicts with or is detrimental to the Company’s best interests, as determined by the Company, during the Employment Term.

 

2.                                      Compensation.

 

2.1                               Base Salary.

 

Executive’s initial base salary (the “Base Salary”) shall be Six Hundred Fifty Thousand Dollars ($650,000) per year, payable in equal installments in accordance with the Company’s standard payroll practices.  The Base Salary shall be subject to review by the Company’s Compensation Committee and may be increased, but not decreased, from time to time.  The base salary as determined herein from time to time shall constitute “Base Salary” for purposes of this Agreement.  As an exempt employee, Executive shall not be eligible for overtime compensation in addition to his Base Salary.

 

 

2.2                               Incentive Compensation.

 

Executive shall be eligible to receive an annual target bonus targeted at eighty percent (80%) of the Base Salary (the “Target Bonus”), subject to the achievement of performance objectives to be determined by the Company’s Compensation Committee.  The actual bonus, if any, will be paid within two and a half (2 1⁄2) months after the end of the Company’s fiscal year in which the bonus is earned.  Except as otherwise provided in Section 4 below, Executive must remain employed until the date such bonuses are paid to be eligible to receive payment of the bonus.

 

2.3                               Equity Grants.

 

As soon as practicable following the Effective Date, the Company shall grant Executive an option to purchase one million (1,000,000) shares of the Company’s common stock at an exercise price per share equal to the fair market value of the Company’s common stock on the date of grant pursuant to the Company’s current stock incentive plan (the “Option”).  One thirty-sixth (1/36th) of the shares subject to the option shall vest each month after the grant date, subject to Executive’s continued employment with the Company on each such vesting date.  Upon the closing of a Change of Control (as defined below), the Option shall automatically vest in full and become immediately exercisable.  Executive’s eligibility for subsequent equity awards will be determined by the Company’s Compensation Committee.

 

2.4                               Fringe Benefits; Paid Leave; Expense Reimbursement.

 

Pursuant to the Company’s benefit policies and expense reimbursement guidelines, as they may be modified from time to time in the Company’s sole discretion, Executive shall be eligible for all standard benefits generally offered to the Company’s senior executives, including, without limitation, coverage under the Company’s group health insurance and retirement plans, indemnification, (including payment of associated legal fees) and coverage under the Company’s Directors and Officers liability insurance policy, and reimbursement of business expenses.  Notwithstanding the foregoing, in the event the Executive decides not to enroll in the Company’s medical plan, the Company shall provide Executive $15,000 annually, payable in equal monthly installments during the Employment Term for such medical benefits (the “Medical Insurance Stipend”), subject to applicable law.  For the avoidance of doubt, upon the Executive’s enrollment in the Company’s group health insurance plan, the Executive shall no longer be eligible to receive the Medical Insurance Stipend.  The Medical Insurance Stipend shall be reported as income to the Executive.  Executive also shall be eligible for four (4) weeks of paid vacation per year subject to the terms and conditions of the Company’s leave policy and an automobile allowance in an amount that is reasonable and customary.

 

2.5                               Location and Housing Assistance.

 

During the Employment Term, for so long as the Company’s headquarters are located in Mountain View, California, the Company will provide the Executive with annual housing assistance and related benefits up to Fifty Thousand Dollars ($50,000) for reasonable costs associated with securing a residence (rental or permanent) near to the Company’s headquarters in Mountain View, California.  Executive agrees that Executive shall secure permanent or rental housing near Mountain View, California within three (3) months following the Effective Date.  Executive will be in the Mountain View, California office on an as needed basis, as determined by the Company’s Board of Directors from time to time.

 

 

3.                                      Duties and Obligations of Executive.

 

3.1                               Devotion to Company Business.

 

During the Employment Term, Executive shall devote substantially all his productive time, ability and attention to the business of the Company (other than vacations and approved leaves of absence).  Except as provided in Section 1 above, Executive shall not engage in any other business duties or pursuits whatsoever, or directly or indirectly render any services of a business or commercial nature to any other person or organization, whether for compensation or otherwise, without the prior written consent of the Board..

 

3.2                               Confidential Information and Invention Assignment.

 

Concurrently with this Agreement, Executive and the Company are entering into a Confidential Information, Invention Assignment and Arbitration Agreement (the “Confidentiality Agreement ”) that is attached to this Agreement as Exhibit A.

 

3.3                               Noncompetition and Nonsolicitation.

 

(a)                                 Non-Solicitation or Hire.  During the Employment Term and for a period of twelve (12) months following the termination of the Executive’s employment for any reason, the Executive shall not (a) directly or indirectly solicit, attempt to solicit or induce (x) any party who is a customer of the Company or its subsidiaries, who was a customer of the Company or its subsidiaries at any time during the twelve (12) month period immediately prior to the date the Executive’s employment terminates or who is a prospective customer that has been identified and targeted by the Company or its subsidiaries, for the purpose of marketing, selling or providing to any such party any services or products offered by or available from the Company or its subsidiaries, or (y) any supplier to the Company or any subsidiary to terminate, reduce or alter negatively its relationship with the Company or any subsidiary or in any manner interfere with any agreement or contract between the Company or any subsidiary and such supplier or (b) hire any employee of the Company or any of its subsidiaries or affiliates (a “Current Employee”) or any person who was an employee of the Company or any of its subsidiaries or affiliates during the twelve (12) month period immediately prior to the date the Executive’s employment terminates (a “Former Employee”) or directly or indirectly solicit or induce a Current or Former Employee to terminate such employee’s employment relationship with the Company or its subsidiaries in order, in either case, to enter into a similar relationship with the Executive, or any other person or any entity.

 

(b)                                 Non-Competition.  During the Employment Term and for a period of twelve (12) months following the termination of the Executive’s employment for any reason (provided that in the event the Executive’s employment is terminated pursuant to Section 4.3 or 4.6 below, the Executive shall only be subject to the restrictions set forth in this Section 3.3(b) during the Employment Term and for a period of six (6) months following such termination of the Executive’s employment), the Executive shall not, without the Company’s prior written consent, directly or indirectly, whether individually, as a director, manager, member, stockholder, partner, owner, employee, consultant or agent of any business, or in any other capacity, other than on behalf of the Company or a subsidiary, organize, establish, own, operate, manage, control, engage in, participate in, invest in, permit the Executive’s name to be used by, act as a consultant or advisor to, render services for (alone or in association with any person, firm, corporation or business organization), or otherwise assist any person or entity that engages in or owns, invests in, operates, manages or controls any venture or enterprise which engages or proposes to engage in the Business (as defined below) conducted by the Company or any of its subsidiaries on the date of the

 

 

Executive’s termination of employment or within twelve (12) months of the Executive’s termination of employment, in the geographic locations where the Company and its subsidiaries engage or propose to engage in such Business.  For purposes of this Agreement, “Business” shall mean the business of selling or developing obesity drugs.  Notwithstanding the foregoing, nothing in this Agreement shall prevent the Executive from owning for passive investment purposes not intended to circumvent this Agreement, less than five percent (5%) of the publicly traded common equity securities of any company engaged in the Business (so long as the Executive has no power to manage, operate, advise, consult with or control the competing enterprise and no power, alone or in conjunction with other affiliated parties, to select a director, manager, general partner, or similar governing official of the competing enterprise other than in connection with the normal and customary voting powers afforded the Executive in connection with any permissible equity ownership).

 

3.4                               Injunctive Relief

 

Executive acknowledges and agrees that the Company will suffer irreparable harm and will have no adequate remedy at law if Executive breaches or threatens to breach any of the covenants or agreements contained in this Section 3.  Executive agrees that, in the event of such breach or threatened breach, the Company shall be entitled to equitable and/or injunctive relief in addition to any other legal or equitable remedies that the Company may have.  Executive further agrees that he shall not in any equity proceeding relating to the enforcement of the terms of this Agreement raise the defense that the Company has an adequate remedy at law. Such injunctive relief may be issued by either an arbitrator pursuant to Section 9.2 or by a court of competent jurisdiction.

 

3.5                               Representations

 

Executive represents and warrants to the Company that (i) the execution, delivery and performance of this Agreement and the Confidentiality Agreement by Executive does not and will not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which Executive is a party or by which Executive is bound, (ii) except as disclosed to the Company in writing as of the date of this Agreement, Executive is not a party to or bound by any employment agreement or covenant not to compete with any other person or entity, and (iii) upon the execution and delivery of this Agreement and the Confidentiality Agreement by Executive, this Agreement and the Confidentiality Agreement shall be valid and binding obligations of Executive.

 

4.                                      Term and Termination.

 

4.1                               Employment Term.

 

Executive shall be employed in the position set forth above as of the Effective Date and shall continue in such position for an initial period of four (4) years from the Effective Date (the “Initial Term”), unless Executive’s employment is earlier terminated by either the Company or Executive as described in this Section 4.  The Initial Term shall be extended for an additional twelve (12) months on the first and each subsequent anniversary of the Effective Date unless the Company or Executive provides written notice of nonrenewal at least sixty (60) days before the applicable anniversary of the Effective Date.  The Initial Term, together with any such extensions, shall be referred to herein as the “Employment Term.”

 

 

4.2                               Voluntary Resignation; Termination For Cause; Nonrenewal by Executive.

 

If the Executive voluntarily resigns from the Company (other than for Good Reason (as defined below)), if the Executive provides written notice of non-renewal pursuant to Section 4.1 above, or if the Company terminates the Executive’s employment for Cause (as defined below), then Executive shall not be entitled to receive severance or other benefits except for non-severance based compensation and benefits that have been earned but not yet paid under this Agreement, such as any unpaid Base Salary through the date of employment termination and any accrued vacation in accordance with Company policy and reimbursement for any unreimbursed expenses incurred through the date of employment termination and those, if any, under the Company’s then existing benefit plans and practices or pursuant to other written agreements with the Company, in accordance with the terms thereof (collectively, the “Accrued Amounts”).

 

4.3                               Involuntary Termination Within Nine Months Following the Effective Date.

 

Subject to Sections 4.8, 4.11 and 8 below, if the Executive’s employment with the Company is terminated at any time prior to the date that is nine (9) months following the Effective Date (x) by the Company other than for Cause, non-renewal or due to Executive’s death or Disability, or (y) voluntarily by the Executive for Good Reason, then Executive shall be entitled to receive the following severance payments in addition to the Accrued Amounts:

 

(a)                                 monthly severance payments during the period from the date of the Executive’s termination until the date six (6) months after the effective date of the termination (the “Six Month Severance Period ”) equal to the monthly Base Salary which the Executive was receiving immediately prior to employment termination (determined after disregarding any reduction in Base Salary that constitutes Good Reason);

 

(b)                                 monthly severance payments during the Six Month Severance Period equal to one-twelfth (1/12th) of the Executive’s Target Bonus for the fiscal year in which the termination occurs for each month in which severance payments are made to the Executive pursuant to subsection (a) above;

 

(c)                                  a lump sum cash payment equal to the prorated amount of the Executive’s Target Bonus for the fiscal year in which the termination occurs, calculated based on the number of days during such fiscal year in which the Executive was employed by the Company (or a successor corporation), with any such prorated bonus to be paid 30 days after employment termination; and

 

(d)                                 the unpaid portion of the annual bonus, if any, relating to any year prior to the calendar year of the Executive’s termination of employment, payable in accordance with Section 2.2 above.

 

4.4                               Disability; Death.

 

Subject to Sections 4.8, 4.11 and 8 below, if the Company terminates Executive’s employment as a result of Executive’s Disability, or Executive’s employment terminates due to Executive’s death, then Executive shall not be entitled to receive severance or other benefits except for the Accrued Amounts and;

 

(a)                                 a lump sum cash payment equal to the prorated amount of the Executive’s Target Bonus for the fiscal year in which the termination occurs, calculated based on the number of days during

 

 

such fiscal year in which the Executive was employed by the Company (or a successor corporation), with any such prorated bonus to be paid 30 days after employment termination; and

 

(b)                                 the unpaid portion of the annual bonus, if any, relating to any year prior to the calendar year of the Executive’s termination of employment, payable in accordance with Section 2.2 above.

 

4.5                               Involuntary Termination on or After Nine Months Following the Effective Date.  Subject to Sections 4.8, 4.11 and 8 below, if the Executive’s employment with the Company is terminated on or following the date that is nine (9) months following the Effective Date (x) by the Company other than for Cause, non-renewal, or due to Executive’s death or Disability, or (y) voluntarily by the Executive for Good Reason, then the Executive shall be entitled to receive the following severance payments in addition to the Accrued Amounts:

 

(a)                                 monthly severance payments during the period from the date of the Executive’s termination until the date twelve (12) months after the effective date of the termination (the “Twelve Month Severance Period ”) equal to the monthly Base Salary which Executive was receiving immediately before employment termination (determined after disregarding any reduction in Base Salary that constitutes Good Reason);

 

(b)                                 monthly severance payments during the Twelve Month Severance Period equal to one-twelfth (1/12th) of the Executive’s Target Bonus for the fiscal year in which the termination occurs for each month in which severance payments are made to the Executive pursuant to subsection (a) above;

 

(c)                                  a lump sum cash payment equal to the prorated amount of the Executive’s Target Bonus for the fiscal year in which the termination occurs, calculated based on the number of days during such fiscal year in which the Executive was employed by the Company (or a successor corporation) , with any such prorated bonus to be paid 30 days after employment termination; and

 

(d)                                 the unpaid portion of the annual bonus, if any, relating to any year prior to the calendar year of the Executive’s termination of employment, payable in accordance with Section 2.2 above.

 

4.6                               Nonrenewal by the Company.  Subject to Sections 4.8, 4.11 and 8 below, if the Company provides written notice of non-renewal pursuant to Section 4.1 above, then Executive shall be entitled to receive the following severance payments in addition to the Accrued Amounts:

 

(a)                                 monthly severance payments during the Six Month Severance Period equal to the monthly Base Salary which the Executive was receiving immediately prior to employment termination;

 

(b)                                 monthly severance payments during the Six Month Severance Period equal to one-twelfth (1/12th) of the Executive’s Target Bonus for the fiscal year in which the termination occurs for each month in which severance payments are made to the Executive pursuant to subsection (a) above;

 

(c)                                  a lump sum cash payment equal to the prorated amount of the Executive’s Target Bonus for the fiscal year in which the termination occurs, calculated based on the number of days during such fiscal year in which the Executive was employed by the Company (or a successor corporation), with any such prorated bonus to be paid 30 days after employment termination; and

 

 

(d)                                 the unpaid portion of the annual bonus, if any, relating to any year prior to the calendar year of the Executive’s termination of employment, payable in accordance with Section 2.2 above.

 

4.7                               Definition of Terms.  The following terms referred to in this Agreement shall have the following meanings:

 

(a)                                 Change of Control.  “Change of Control ” shall mean the occurrence of any of the following events:

 

(i)                                     Ownership.  Any “Person ” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) is or becomes the “Beneficial Owner ” (as defined in Rule l3d-3 under said Act), directly or indirectly, of securities of the Company representing forty percent (40%) or more of the total voting power represented by the Company’s then outstanding voting securities.

 

(ii)                                  Merger/Sale of Assets.  (x) A merger or consolidation of the Company whether or not approved by the Board, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or (y) the shareholders of the Company approve a plan of complete liquidation of the Company or (z) the sale or disposition by the Company of all or substantially all of the Company’s assets.  Notwithstanding the foregoing, the licensing or sale of Qsymia/Qsiva and/or Avanafil or other products developed by the Company in any non-U.S. territory shall not constitute a Change of Control for purposes of this Agreement.

 

(iii)                               Change in Board Composition.  A change in the composition of the Board, as a result of which fewer than a majority of the directors are Incumbent Directors.  “Incumbent Directors ” shall mean directors who either (A) are directors of the Company as of the date of this Agreement, or (B) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but shall not include an individual whose election or nomination is in connection with an actual or threatened Proxy contest relating to the election of directors to the Company).

 

(b)                                 Cause.  “Cause ” shall mean (i) gross negligence or willful misconduct in the performance of the Executive’s duties to the Company where such gross negligence or willful misconduct has resulted or is likely to result in substantial and material damage to the Company or its subsidiaries, (ii) repeated unexcused absences from the Company (other than any failure resulting from incapacity due to physical or mental illness) or a failure to comply with the Board of Directors’ directives pursuant to Section 2.5 above, (iii) commission of any act of fraud with respect to the Company, or (v) conviction of a felony or a crime involving moral turpitude and causing material harm to the standing and reputation of the Company, in each case as determined in good faith by the Board.

 

(c)                                  Disability.  “Disability ” shall mean total and permanent disability as defined in Section 22(e)(3) of the Internal Revenue Code unless the Company maintain a long-term disability plan at the time of Executive’s termination, in which case the determination of disability under such plan shall also be considered “Disability ” for purposes of this Agreement.

 

 

(d)                                 Good Reason.  “Good Reason ” shall mean the Executive’s voluntary termination, upon thirty (30) days prior written notice to the Company, after any one of the following events: (i) a material reduction or change in job duties, responsibilities and requirements inconsistent with the Executive’s position with the Company and the Executive’s prior duties, responsibilities and requirements (including, for example, but not by way of limitation, a material reduction due to the Company becoming part of a larger entity, unless Executive receives substantially the same level of job duties, responsibilities and requirements with respect to the total combined entity and not only with respect to the Company as a division, subsidiary or business unit of the total combined entity (e.g., a material reduction as a result of the Chief Executive Officer of the Company not having the job duties, responsibilities and requirements as the Chief Executive Officer of the combined entity)); or (ii) a material reduction of the Executive’s base compensation or Target Bonus; provided, however, that a voluntary termination of Executive for any events listed under this Section (d)(i) through (d)(iii) shall not constitute “Good Reason ” if such event or events are cured by the Company within thirty (30) days after receipt of written notice from the Executive of Executive’s intent to terminate employment pursuant to this Section, provided, further, that the Executive shall have ninety (90) days from the occurrence of the event that constitutes Good Reason to provide notice to the Company that the Executive intends to resign for Good Reason and the Executive’s resignation must be effective no later than six (6) months following the occurrence of the event that constitutes Good Reason.  Notwithstanding the foregoing, any reduction or change of the Executive’s duties, responsibilities and requirements in connection with, or as a result of, the commencement of a partnership between the Company and any entity pertaining to the sale of any of the Company’s products in the United States commercial territory shall not, by itself, constitute “Good Reason” under this Agreement.

 

4.8                               Limitation on Payments.   In the event that any payments or benefits provided for in this Agreement or otherwise payable to Executive (i) constitute “parachute payments ” within the meaning of Section 280G of the Code and, (ii) but for this Section 4, would be subject to the excise tax imposed by Section 4999 of the Code, then such “parachute payments” (the “280G Amounts ”) will be either:

 

(a)             delivered in full; or

 

(b)             delivered as to such lesser extent which would result in no portion of such payments or benefits being subject to excise tax under Section 4999 of the Code, whichever of the foregoing amounts, taking into account all applicable federal, state and local income taxes and the excise tax imposed by Section 4999, results in the receipt by Executive on an after-tax basis, of the greatest amount of payment and benefits, notwithstanding that all or some portion of such payments or benefits may be taxable under Section 4999 of the Code.  Unless the Company and Executive otherwise agree in writing, any determination required under this Section 4.7 will be made in writing by a nationally recognized firm of independent public accountants selected by the Company (the “Accountants ”) prior to the change in control, whose determination will be conclusive and binding upon Executive and the Company for all purposes.  For purposes of making the calculations required by this Section 4.7, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code.  The Accountants shall be required to evaluate the extent to which payments are exempt from Section 280G as reasonable compensation for services rendered before the change in control or after the change in control.  The Company and Executive will furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section.  The Company will bear all costs the Accountants may incur in connection with any calculations

 

 

contemplated by this Section 4.7.  The Accountants shall provide a copy of its findings to both the Company and the Executive.

 

In the event that a reduction of 280G Amounts is made in accordance with this Section 4.8, the reduction will occur, with respect to the 280G Amounts considered parachute payments within the meaning of Section 280G of the Code, in the following order:  (1) reduction of cash payments in reverse chronological order (that is, the cash payment owed on the latest date following the occurrence of the event triggering the excise tax will be the first cash payment to be reduced); (2) cancellation of equity awards that were granted “contingent on a change in ownership or control ” within the meaning of Code Section 280G; (3) reduction of the accelerated vesting of equity awards in the reverse order of date of grant of the awards (i.e., accelerated vesting of the most recently granted equity awards will be cancelled first); and (4) reduction of employee benefits in reverse chronological order (i.e., the benefit owed on the latest date following the occurrence of the event triggering the excise tax will be the first benefit to be reduced).  In no event will Executive have any discretion with respect to the ordering of payment reductions.

 

4.9                               No Other Promises.  No commitments affecting the terms of Executive’s employment are binding on the Company unless contained in a writing signed by both Executive and the Chair of the Company’s Board.  Executive acknowledges that this Agreement is intended as written, and that no marginal notations or other revisions to this Agreement or the Confidentiality Agreement are binding on the Company unless expressly consented to in writing by the Chair.  Executive acknowledges that in deciding to accept employment with the Company, Executive has not relied on any promises, commitments, statements or representations, whether spoken or in writing, made to Executive by any Company representative, except for what is expressly stated in this Agreement and in the Confidentiality, Agreement.  This Agreement replaces and cancels all previous agreements, commitments, and understandings, whether spoken or written, that the Company may have made in connection with Executive’s employment by the Company.

 

4.10                        Return of Company Property.  Executive agrees that, following the termination of his employment for any reason, he shall return all property of the Company and its affiliates which is then in or thereafter comes into his possession, including, but not limited to, documents, contracts, agreements, plans, photographs, books, notes, electronically stored data and all copies of the foregoing, as well as any automobile or other materials or equipment supplied by the Company or its affiliates to Executive.

 

4.11                        Conditions to Receipt of Severance.  As a condition to receiving the severance and other benefits under this Agreement, Executive will be required to sign and not revoke a separation and release of claims agreement in substantially the form attached hereto as Exhibit B (the “Release ”).  The Release must become effective and irrevocable no later than the thirtieth (30th) day following Executive’s termination of employment (the “Release Deadline Date ”).  If the Release does not become effective and irrevocable by the Release Deadline Date, Executive will forfeit any right to the severance and other benefits under this Agreement.  In no event will the severance or other benefits under this Agreement be paid or provided until the Release becomes effective and irrevocable.  Provided that the Release becomes effective and irrevocable by the Release Deadline Date and subject to Section 8, the severance payments and benefits under this Agreement will be paid, or in the case of installments, will commence on the thirtieth (30th) day following Executive’s employment termination (the “Severance Start Date”)and any severance payments or benefits otherwise payable to Executive during the period immediately following Executive’s termination of employment with the Company through the Severance Start Date will be paid in a lump sum to Executive on the Severance Start Date, with any remaining payments to be made as provided in this Agreement; provided further, that if Executive’s termination of

 

 

employment occurs in one taxable year and the Release Deadline Date occurs in another taxable year, payments will not begin until the beginning of the second taxable year.

 

5.                                      Successors and Assigns.

 

(a)                                 This Agreement is personal to each of the parties hereto.  Except as provided in Section 5(b) below, no party may assign or delegate any rights or obligations hereunder without first obtaining the written consent of the other party hereto.

 

(b)                                 The Company may assign this Agreement to any successor to all or substantially all of the business and/or assets of the Company provided the Company shall require such successor to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place and shall deliver a copy of such assignment to Executive.

 

6.                                      Survival.

 

The respective obligations of, and benefits afforded to, the Company and Executive which by their express terms or clear intent survive termination of Executive’s employment with the Company will survive termination of Executive’s employment with the Company, and will remain in full force and effect according to their terms.

 

7.                                      Notices.

 

Any notice or communications required or permitted to be given to the parties hereto shall be delivered personally or be sent by United States registered or certified mail, postage prepaid and return receipt requested, and addressed or delivered as follows, or at such other addresses the party addressed may have substituted by notice pursuant to this Section:

 

To the Company:

 

VIVUS, Inc.

351 E. Evelyn Avenue

Mountain View, CA 94041

Attn:  General Counsel

 

To Executive:

To Executive’s last known address on file with the Company.

 

8.                                      Limitations Under Code Section 409A.

 

8.1                               Deferred Compensation.  Notwithstanding anything in this Agreement to the contrary, if (i) on the date of Executive’s “separation from service ” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code, ” and such separation, a “Separation from Service ”), any of the Company’s stock is publicly traded on an established securities market or otherwise (within the meaning of Section 409A(a)(2)(B)(i) of the Code), (ii) Executive is determined to be a “specified employee ” within the meaning of Section 409A(a)(2)(B) of the Code, (iii) the payments or

 

 

benefits provided to Executive from the Company on account of Executive’s Separation from Service, to the extent such payments or benefit (after taking into account all exclusions applicable to such payments or benefits under Section 409A of the Code) is properly treated as “deferred compensation ” subject to Section 409A and (iv) such delay is required to avoid the imposition of the tax set forth in Section 409A(a)(1) of the Code, as a result of such Separation from Service, Executive would receive any payment that, absent the application of this Section 8, would be subject to interest and additional tax imposed pursuant to Section 409A(a) of the Code as a result of the application of Section 409A(a)(2)(B)(i) of the Code, then no such payment shall be payable prior to the date that is the first business day after the earliest of (A) six (6) months after Executive’s termination date, (B) Executive’s death or (C) such other date as will cause such payment not to be subject to such interest and additional tax (with a catch-up payment equal to the sum of all amounts that have been delayed to be made as of the date of the initial payment).

 

8.2                               Treatment of Terms. Executive’s right to receive severance payments or benefits under this Agreement will be treated as a right to receive a series of separate payments under Treasury Regulations Section 1.409A-2(b)(2)(iii). Each payment shall not be considered deferred compensation subject to Section 409A if qualifies as either a short-term deferral under Treasury Regulation Section 1.409A-1(b)(4) or as separation pay under Treasury Regulation Section 1.409A-1 (b)(9)(iii).  Notwithstanding anything in this Agreement to the contrary, for purposes of any provision of this Agreement providing for the payment of any amounts or benefits upon or following a termination of employment that are considered “deferred compensation ” under Section 409A of the Code, references to Executive’s “termination of employment ” (and corollary terms) with the Company will be construed to refer to Executive’s Separation from Service with the Company.

 

8.3                               Reimbursement.  To the extent that the reimbursement of any expenses or the provision of any in-kind benefits under this Agreement is subject to Section 409A of the Code, (i) the amount of such expenses eligible for reimbursement, or in-kind benefits to be provided, during any one calendar year will not affect the amount of such expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year; (ii) reimbursement of any such expense will be made by no later than December 31 of the year following the calendar year in which such expense was incurred; and (iii) Executive’s right to receive such reimbursements or in-kind benefits will not be subject to liquidation or exchange for another benefit.

 

8.4                               Amendment.  It is the intention of the parties that payments or benefits payable under this Agreement not be subject to the additional tax imposed pursuant to Section 409A of the Code.  To the extent such potential payments or benefits could become subject to such Section, the parties shall cooperate to amend this Agreement with the goal of giving Executive the economic benefits described herein in a manner that does not result in such tax being imposed.

 

9.                                      Miscellaneous.

 

9.1                               Governing Law.

 

This Agreement, and all disputes or issues arising from or relating to the Company’s employment of Executive, shall be governed, construed, and enforced by the internal laws of the State of New Jersey, without regard to the choice of law rules of any jurisdiction. To the extent any lawsuit is permitted under this Agreement, the Executive hereby expressly consents to the personal and exclusive jurisdiction and venue of the state and federal courts located in New Jersey for any lawsuit filed against the Executive by the Company.

 

 

9.2                               Arbitration and Equitable Relief.

 

(a)                                 Intent of Agreement.  Subject to Section 3.4 of this Agreement, the Company and the Executive agree and intend for this Agreement to govern the resolution of all disputes, claims and other matters that arise out of or concerning the Parties’ relationship, whether related to the Executive’s employment with the Company or not.  The Company and the Executive (collectively, “the Parties ”) shall resolve all such matters in accordance with the provisions of this Agreement.

 

(b)                                 Mandatory Arbitration.  The Parties agree that all claims, complaints, controversies, grievances, or disputes (collectively, “claims ”) that arise out of or relate in any way to the Parties’ relationship, whether based on contract, tort, statutory, or any other legal theory, shall be submitted to mandatory, binding arbitration in New Jersey before a neutral arbitrator who is licensed to practice law in the state in which the arbitration is convened (the “Arbitrator ”).  The arbitration shall be governed by the Federal Arbitration Act, 9 U.S.C. Section 1 et seq, as amended, and shall be administered by the Judicial Arbitration & Mediation Services, Inc. (“JAMS ”), in accordance with pursuant to its then-current Employment Arbitration Rules & Procedures (the “JAMS Rules ”).  A copy of the Employment Arbitration Rules & Procedures is attached hereto as Exhibit C. The Rules are also available online at http://www.jamsadr.com/rules-employment-arbitration/.  The Parties or their representatives may also call JAMS at 800.352.5267 if they have questions about the arbitration process.  If the JAMS Rules are inconsistent with the terms of this Agreement, the terms of this Agreement shall govern.

 

(c)                                  Covered Claims.  This Agreement covers all claims under federal, state or local law arising out of or relating to any offer of employment made by the Company, Executive’s employment by the Company, the breach of any employment agreement, the termination of Executive’s employment with the Company, or any other aspect of Executive’s relationship with the Company, , claims that the Executive may have against the Company or against its officers, directors, supervisors, managers, employees, or agents in their capacity as such, and claims that the Company may have against Executive.  The claims covered by this Agreement (the “Covered Claims ”) include, but are not limited to, claims for breach of any contract or covenant (express or implied), tort claims, claims for wrongful termination (constructive or actual) in violation of public policy, claims for discrimination or harassment (including, but not limited to, harassment or discrimination based on race, sex, gender, religion, national origin, age, marital status, medical condition, psychological condition, mental condition, disability, sexual orientation, or any other characteristic protected by law), claims for violation of any federal, state, or other governmental law, statute, regulation, or ordinance, including, but not limited to, all claims arising under Title VII of the Civil Rights Act, the Age Discrimination in Employment Act, the Americans With Disabilities Act, the California Fair Employment and Housing Act, the Consolidated Omnibus Budget Reconciliation Act of 1985, and Employee Retirement Income Security Act.  The Parties specifically agree that the Covered Claims include claims under the Fair Labor Standards Act, the California Labor Code, the New Jersey Law Against Discrimination, New Jersey Family Leave Act, Conscientious Employee Protection Act, New Jersey Wage Laws, and other federal, state, or local laws governing wages, hours and working conditions, including, but not limited to, claims for overtime, unpaid wages, and meal period and rest break violations.

 

(d)                                 Claims Not Covered.  Claims for workers’ compensation, unemployment compensation benefits, claims as a stockholder or any other claims that, as a matter of law, the Parties cannot agree to arbitrate are not subject to, and are excluded from, this Agreement. Nothing in this Agreement shall be interpreted prohibit or preclude the filing of complaints with the California

 

 

Department of Fair Employment and Housing, the Equal Employment Opportunity Commission, or the National Labor Relations Board.

 

(e)             Waiver of Class Action and Representative Action Claims.  Except as otherwise required by law, the Parties expressly intend and agree that: (a) class action and representative action procedures shall neither be asserted nor apply in any arbitration conducted pursuant to this Agreement; (b) each Party will not assert class or representative action claims against the other in arbitration or otherwise; and (c) the Parties shall only submit their own, individual claims in arbitration and will not seek to represent the interests of any other person.

 

(f)             Waiver of Trial By Jury.  THE EXECUTIVE UNDERSTANDS AND FULLY AGREES THAT BY ENTERING INTO THIS AGREEMENT, BOTH THE COMPANY AND THE EXECUTIVE ARE GIVING UP THEIR CONSTITUTIONAL RIGHT TO HAVE A TRIAL BY JURY, AND ARE GIVING UP THEIR NORMAL RIGHTS OF APPEAL FOLLOWING THE RENDERING OF A DECISION, EXCEPT AS THE FEDERAL ARBITRATION ACT AND APPLICABLE FEDERAL LAW ALLOW FOR JUDICIAL REVIEW OF ARBITRATION PROCEEDINGS.

 

(g)             Claims Procedure.  Arbitration shall be initiated pursuant to this Agreement upon written notice of either Party.  The aggrieved Party shall give written notice of any claim to the other Party by certified or registered mail, return receipt requested.  The Executive agrees to mail written notice of all claims to the Company’s General Counsel at 351 E. Evelyn Avenue, Mountain View, California 94041 (“Notice Address ”).  The Company agrees to mail written notice of all claims to Executive’s last known address on file with the Company.  The written notice shall identify and describe the nature of all claims asserted and the facts upon which such claims are based.  Written notice of arbitration shall be initiated within the statute of limitations and other time limitations applicable to the claim(s) asserted.

 

(h)          Arbitrator Selection.  The Arbitrator shall be selected as provided in the JAMS Rules.

 

(i)            Discovery.  The JAMS Rules regarding discovery shall apply to any arbitration conducted under this Agreement.  The Arbitrator shall decide all discovery disputes.

 

(j)             Substantive Law.  The Arbitrator shall apply the substantive law (and the law of remedies, if applicable) of the state in which the claim arose, or federal law, or both, as applicable to the claim(s) asserted.  The Federal Rules of Evidence shall apply.  The Arbitrator, and not any federal, state, or local court or agency, shall have exclusive authority to resolve any dispute relating to the interpretation, applicability, or enforceability of this Agreement.  The Arbitrator shall conduct and preside over an arbitration hearing of reasonable length, to be determined by the Arbitrator.  The Arbitrator shall provide the Parties with a written decision explaining his or her findings and conclusions.  The Arbitrator’s decision shall be final and binding upon the Parties.

 

(k)          Motions.  The Arbitrator shall have jurisdiction to hear and decide prehearing disputes and is authorized to hold prehearing conferences by telephone or in person as the Arbitrator deems necessary.  The Arbitrator shall have the authority to set deadlines for completion of discovery and the filing of dispositive motions, and to set briefing schedules for any motions.  The Arbitrator shall have the authority to adjudicate any cause of action, claim, or defense, including entire claims, pursuant to a motion for summary adjudication and/or summary judgment, and, in deciding such motions, shall apply applicable substantive state or federal law.

 

 

(l)           Compelling Arbitration/Enforcing Award.  Either Party may bring an action in court to compel arbitration under this Agreement and to confirm, vacate or enforce an arbitration award.  Each Party shall bear its own attorney fees and costs and other expenses of such action.

 

(m)         Arbitration Fees and Costs.  The Company shall be responsible for the Arbitrator’s fees and expenses.  Each Party shall pay its own costs and attorneys’ fees, if any.

 

9.3.                            Amendment.

 

This Agreement may only be modified or amended in a writing that specifically states the intent to modify or amend the Agreement and that is signed by both Executive and the Chairman of the Board.

 

9.4                               Voluntary Agreement.

 

By executing this Agreement, the Parties represent that they have been given the opportunity to fully review, comprehend and negotiate the terms of this Agreement. The Parties understand the terms of this Agreement, and freely and voluntarily sign it.

 

9.5                               Withholdings.

 

All payments made or payable under this Agreement, including all severance payments, shall be subject to customary or legally required withholdings and authorized deductions.

 

9.6                               Severability.

 

The terms and provisions of this Agreement are intended to be separate and divisible provisions and if, for any reason, any court of competent jurisdiction declares any provision of this Agreement invalid or unenforceable, the remainder of this Agreement shall remain fully enforceable and neither the validity nor the enforceability of any other provision of this Agreement shall thereby be affected.  It is the intention of the parties that the limitations set forth in this Agreement be reasonable in all respects.  If for any reason any court of competent jurisdiction finds any provisions of this Agreement to be void or voidable, Executive and the Company agree that the court should reform such provision(s) to render the provision(s) enforceable ensuring that the restrictions and prohibitions contained herein shall be effective to the fullest extent allowed under applicable law.

 

9.7                               Integration.

 

This Agreement and the Confidentiality Agreement constitute the entire agreement of the parties with respect to Executive’s employment with the Company, are a complete merger of all prior negotiations and agreements with respect to that subject, and except as provided in Section 9.6 above, shall not be modified by word or deed, except in a writing signed by the parties.

 

9.8                               Waiver.  No provision of this Agreement shall be deemed waived, nor shall there be an estoppel against the enforcement of any such provision, except by a writing signed by the party charged with the waiver or estoppel.  No waiver shall be deemed continuing unless specifically stated therein, and the written waiver shall operate only as to the specific term or condition waived, and not for the future or as to any act other than that specifically waived.

 

 

9.9                               Construction.  Headings in this Agreement are for convenience only and shall not control the meaning of this Agreement.  Whenever applicable, masculine and neutral pronouns shall equally apply to the feminine genders; the singular shall include the plural and the plural shall include the singular.  The parties have reviewed and understand this Agreement, and each has had a full opportunity to negotiate the terms of this Agreement and to consult with counsel of their own choosing.  Therefore, the parties expressly waive all applicable common law and statutory rules of construction that any provision of this Agreement should be construed against the Agreement’s drafter, and agree that this Agreement and all amendments thereto shall be construed as a whole, according to the fair meaning of the language used.

 

9.10                        Conflicts with Policies or Prior Agreements. To the extent that this Agreement contradicts, is inconsistent or in conflict with any Company policies or prior agreements between or among any or all of the parties, including the Confidential Information, Invention Assignment and Arbitration Agreement, this Agreement supersedes any conflicting or inconsistent provision of any prior agreement and is controlling to the extent necessary to resolve such conflict or inconsistency. Any and all provisions in a prior agreement not inconsistent with this Agreement remain valid and binding.

 

9.11                        Legal Fees.  The Company shall pay to the Executive all legal fees and expenses incurred by the Executive in negotiating this Agreement in good faith up to $20,000.

 

9.12                        Execution in Counterparts.  To facilitate execution, this Agreement may be executed in as many counterparts as may be required.  It shall not be necessary that the signatures of, or on behalf of, each party, or that the signatures of all persons required to bind any party, appear on each counterpart; but it shall be sufficient that the signature of, or on behalf of, each party, or that the signatures of the persons required to bind any party, appear on one or more of the counterparts.  All counterparts shall collectively constitute a single agreement.  It shall not be necessary in making proof of this Agreement to produce or account for more than a number of counterparts containing the respective signatures of, or on behalf of, all of the parties hereto.

 

[SIGNATURE PAGE FOLLOWS]

 

 

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

 

	
EXECUTIVE
    	
 
    	
COMPANY
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
VIVUS, Inc.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
/s/ Seth H. Z. Fischer
    	
 
    	
/s/   John L. Slebir
    
	
Seth H. Z. Fischer
    	
 
    	
By:
    	
John   L. Slebir
    
	
 
    	
 
    	
Its:
    	
VP,   General Counsel
    

 

 

EXHIBIT A

 

Confidential Information, Invention Assignment and Arbitration

 

 

VIVUS, INC.

AT-WILL EMPLOYMENT, CONFIDENTIAL INFORMATION,

INVENTION ASSIGNMENT, AND ARBITRATION AGREEMENT

 

As a condition of my employment with VIVUS, Inc., its subsidiaries, affiliates, successors or assigns (together, the “Company”), and in consideration of my employment with the Company and my receipt of the compensation now and hereafter paid to me by Company, I agree to the following provisions of this VIVUS, Inc. At-Will Employment, Confidential Information, Invention Assignment, and Arbitration Agreement (this “Agreement”):

 

1.                                      AT-WILL EMPLOYMENT

 

I UNDERSTAND AND ACKNOWLEDGE THAT MY EMPLOYMENT WITH THE COMPANY IS FOR NO SPECIFIED TERM AND CONSTITUTES “AT-WILL” EMPLOYMENT.  I ALSO UNDERSTAND THAT ANY REPRESENTATION TO THE CONTRARY IS UNAUTHORIZED AND NOT VALID UNLESS IN WRITING AND SIGNED BY THE PRESIDENT OR CHIEF EXECUTIVE OFFICER OF THE COMPANY.  ACCORDINGLY, I ACKNOWLEDGE THAT MY EMPLOYMENT RELATIONSHIP MAY BE TERMINATED AT ANY TIME, WITH OR WITHOUT GOOD CAUSE OR FOR ANY OR NO CAUSE, AT MY OPTION OR AT THE OPTION OF THE COMPANY, WITH OR WITHOUT NOTICE.  I FURTHER ACKNOWLEDGE THAT THE COMPANY MAY MODIFY JOB TITLES, SALARIES, AND BENEFITS FROM TIME TO TIME AS IT DEEMS NECESSARY.

 

2.                                      CONFIDENTIALITY

 

A.            Definition of Confidential Information.  I understand that “Company Confidential Information” means information that the Company has or will develop, acquire, create, compile, discover or own, that has value in or to the Company’s business which is not generally known and which the Company wishes to maintain as confidential.  Company Confidential Information includes both information disclosed by the Company to me either before or after the effective date of this Agreement, and information developed or learned by me during the course of my employment with Company.  Company Confidential Information also includes all information of which the unauthorized disclosure could be detrimental to the interests of Company, whether or not such information is identified as Company Confidential Information.  By example, and without limitation, Company Confidential Information includes any and all non-public information that relates to the actual or anticipated business and/or products, research or development of the Company, or to the Company’s technical data, trade secrets, or know-how, including, but not limited to, research, product plans, or other information regarding the Company’s products or services and markets therefore, service provider lists and service providers, supplier lists and suppliers, customer lists and customers (including, but not limited to, service providers, suppliers and customers of the Company on which I called or with which I may become acquainted during the term of my employment), software, developments, inventions, processes, formulas, technology, designs, drawings, engineering, hardware configuration information, marketing, finances, and other business information disclosed by the Company either directly or indirectly in writing, orally or by drawings or inspection of premises, parts, equipment, or other Company property.  Notwithstanding the foregoing, Company Confidential Information shall not include any such information which I can establish (i) was publicly known or made generally

 

 

available prior to the time of disclosure by Company to me; (ii) becomes publicly known or made generally available after disclosure by Company to me through no wrongful action or omission by me; or (iii) is in my rightful possession, without confidentiality obligations, at the time of disclosure by Company as shown by my then-contemporaneous written records.  I understand that nothing in this Agreement is intended to limit employees’ rights to discuss the terms, wages, and working conditions of their employment, as protected by applicable law.

 

B.            Nonuse and Nondisclosure.  I agree that during and after my employment with the Company, I will hold in the strictest confidence, and take all reasonable precautions to prevent any unauthorized use or disclosure of Company Confidential Information, and I will not (i) use the Company Confidential Information for any purpose whatsoever other than for the benefit of the Company in the course of my employment, or (ii) disclose the Company Confidential Information to any third party without the prior written authorization of the President, Chief Executive Officer, or the Board of Directors of the Company. Prior to disclosure when compelled by applicable law; I shall provide prior written notice to the President, Chief Executive Officer, and General Counsel of the Company (as applicable).  I agree that I obtain no title to any Company Confidential Information, and that as between the Company and myself, the Company retains all Confidential Information as the sole property of the Company.  I understand that my unauthorized use or disclosure of Company Confidential Information during my employment may lead to disciplinary action, up to and including immediate termination and legal action by the Company.  I understand that my obligations under this Section 0 shall continue after termination of my employment.

 

C.            Former Employer Confidential Information.  I agree that during my employment with the Company, I will not improperly use, disclose, or induce the Company to use any proprietary information or trade secrets of any former employer or other person or entity with which I have an obligation to keep in confidence.  I further agree that I will not bring onto the Company’s premises or transfer onto the Company’s technology systems any unpublished document, proprietary information, or trade secrets belonging to any such third party unless disclosure to, and use by, the Company has been consented to in writing by such third party.

 

D.            Third Party Information.  I recognize that the Company has received and in the future will receive from third parties associated with the Company, e.g., the Company’s customers, service providers, suppliers, licensors, licensees, partners, or collaborators (“Associated Third Parties”), their confidential or proprietary information (“Associated Third Party Confidential Information”) subject to a duty on the Company’s part to maintain the confidentiality of such Associated Third Party Confidential Information and to use it only for certain limited purposes.  By way of example, Associated Third Party Confidential Information may include the habits or practices of Associated Third Parties, the technology of Associated Third Parties, requirements of Associated Third Parties, and information related to the business conducted between the Company and such Associated Third Parties.  I agree at all times during my employment with the Company and thereafter, that I owe the Company and its Associated Third Parties a duty to hold all such Associated Third Party Confidential Information in the strictest confidence, and not to use it or to disclose it to any person, firm, corporation, or other third party except as necessary in carrying out my work for the Company consistent with the Company’s agreement with such Associated Third Parties.  I further agree to comply with any and all Company policies and guidelines that may be adopted from time to time regarding Associated Third Parties and Associated Third Party Confidential Information.  I understand that my unauthorized use or disclosure of Associated Third Party Confidential Information or

 

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violation of any Company policies during my employment may lead to disciplinary action, up to and including immediate termination and legal action by the Company.

 

3.                                      OWNERSHIP

 

A.                  Assignment of Inventions.  As between Company and myself, I agree that all right, title, and interest in and to any and all copyrightable material, notes, records, drawings, designs, inventions, improvements, developments, discoveries and trade secrets conceived, discovered, authored, invented, developed or reduced to practice by me, solely or in collaboration with others, during the period of time I am in the employ of the Company (including during my off-duty hours), or with the use of Company’s equipment, supplies, facilities, or Company Confidential Information, and any copyrights, patents, trade secrets, mask work rights or other intellectual property rights relating to the foregoing, except as provided in Section 4.G below (collectively, “Inventions”), are the sole property of the Company.  I also agree to promptly make full written disclosure to the Company of any Inventions, and to deliver and assign and hereby irrevocably assign fully to the Company all of my right, title and interest in and to Inventions.  I agree that this assignment includes a present conveyance to the Company of ownership of Inventions that are not yet in existence.  I further acknowledge that all original works of authorship that are made by me (solely or jointly with others) within the scope of and during the period of my employment with the Company and that are protectable by copyright are “works made for hire,” as that term is defined in the United States Copyright Act.  I understand and agree that the decision whether or not to commercialize or market any Inventions is within the Company’s sole discretion and for the Company’s sole benefit, and that no royalty or other consideration will be due to me as a result of the Company’s efforts to commercialize or market any such Inventions.

 

B.                  Pre-Existing Materials.  I have attached hereto as Exhibit A, a list describing all inventions, discoveries, original works of authorship, developments, improvements, trade secrets and other proprietary information or intellectual property rights owned by me or in which I have an interest prior to, or separate from, my employment with the Company and which are subject to California Labor Code Section 2870 (attached hereto as Exhibit B), and which relate to the Company’s proposed business, products, or research and development (“Prior Inventions”); or, if no such list is attached, I represent and warrant that there are no such Prior Inventions.  Furthermore, I represent and warrant that if any Prior Inventions are included on Exhibit A, they will not materially affect my ability to perform all obligations under this Agreement or to perform my job duties.  I will inform the Company in writing before incorporating such Prior Inventions into any Invention or otherwise utilizing such Prior Invention in the course of my employment with the Company, and the Company is hereby granted a nonexclusive, royalty-free, perpetual, irrevocable, transferable worldwide license (with the right to grant and authorize sublicenses) to make, have made, use, import, offer for sale, sell, reproduce, distribute, modify, adapt, prepare derivative works of, display, perform, and otherwise exploit such Prior Inventions, without restriction, including, without limitation, as part of or in connection with such Invention, and to practice any method related thereto. I will not incorporate any invention, improvement, development, concept, discovery, work of authorship or other proprietary information owned by any third party into any Invention without the Company’s prior written permission.

 

C.                  Moral Rights.  Any assignment to the Company of Inventions includes all rights of attribution, paternity, integrity, modification, disclosure and withdrawal, and any other rights throughout the world that may be known as or referred to as “moral rights,” “artist’s

 

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rights,” “droit moral,” or the like (collectively, “Moral Rights”).  To the extent that Moral Rights cannot be assigned under applicable law, I hereby waive and agree not to enforce any and all Moral Rights, including, without limitation, any limitation on subsequent modification, to the extent permitted under applicable law.

 

D.                  Maintenance of Records. I agree to keep and maintain adequate, current, accurate, and authentic written records of all Inventions made by me (solely or jointly with others) during the term of my employment with the Company.  The records will be in the form of notes, sketches, drawings, electronic files, reports, or any other format that may be specified by the Company.  As between Company and myself, the records are and will be available to and remain the sole property of the Company at all times.  I further agree to return my Company issued computer, tablet, data storage device and handheld device (collectively, “Company Issued Devices”) to the Company upon my last day of employment with the Company.  I agree not to erase any data on the Company Issued Devices relating to the Inventions or my duties as an employee of the Company prior to returning such devices to the Company.

 

E.                   Further Assurances.  I agree to assist the Company, or its designee, at the Company’s expense, in every proper way to secure the Company’s rights in the Inventions in any and all countries, including the disclosure to the Company of all pertinent information and data with respect thereto, the execution of all applications, specifications, oaths, assignments, and all other instruments that the Company shall deem proper or necessary in order to apply for, register, obtain, maintain, defend, and enforce such rights, and in order to deliver, assign and convey to the Company, its successors, assigns, and nominees the sole and exclusive rights, title, and interest in and to all Inventions, and testifying in a suit or other proceeding relating to such Inventions.  I further agree that my obligations under this Section 4.E shall continue after the termination of this Agreement.

 

F.                    Attorney-in-Fact.  I agree that, if the Company is unable because of my unavailability, mental or physical incapacity, or for any other reason to secure my signature with respect to any Inventions, including, without limitation, for the purpose of applying for or pursuing any application for any United States or foreign patents or mask work or copyright registrations covering the Inventions assigned to the Company in Section 4.A, then I hereby irrevocably designate and appoint the Company and its duly authorized officers and agents as my agent and attorney-in-fact, to act for and on my behalf to execute and file any papers and oaths, and to do all other lawfully permitted acts with respect to such Inventions to further the prosecution and issuance of patents, copyright and mask work registrations with the same legal force and effect as if executed by me. This power of attorney shall be deemed coupled with an interest, and shall be irrevocable.

 

G.                  Exception to Assignments.  I UNDERSTAND THAT THE PROVISIONS OF THIS AGREEMENT REQUIRING ASSIGNMENT OF INVENTIONS TO THE COMPANY DO NOT APPLY TO ANY INVENTION THAT QUALIFIES FULLY UNDER THE PROVISIONS OF CALIFORNIA LABOR CODE SECTION 2870 (ATTACHED HERETO AS EXHIBIT B).  I WILL ADVISE THE COMPANY PROMPTLY IN WRITING OF ANY INVENTIONS THAT I BELIEVE MEET THE CRITERIA IN CALIFORNIA LABOR CODE SECTION 2870 AND ARE NOT OTHERWISE DISCLOSED ON EXHIBIT A.

 

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4.                                      CONFLICTING OBLIGATIONS

 

A.                  Current Obligations.  I agree that during the term of my employment with the Company, I will not engage in or undertake any other employment, occupation, consulting relationship, or commitment that is directly related to the business in which the Company is now involved or becomes involved or has plans to become involved, nor will I engage in any other activities that conflict with my obligations to the Company.

 

B.                  Prior Relationships.  Without limiting Section 5.A, I represent and warrant that I have no other agreements, relationships, or commitments to any other person or entity that conflict with the provisions of this Agreement, my obligations to the Company under this Agreement, or my ability to become employed and perform the services for which I am being hired by the Company.  I further agree that if I have signed a confidentiality agreement or similar type of agreement with any former employer or other entity, I will comply with the terms of any such agreement to the extent that its terms are lawful under applicable law.  I represent and warrant that after undertaking a careful search (including searches of my computers, cell phones, electronic devices, and documents), I have returned all property and confidential information belonging to all prior employers (and/or other third parties I have performed services for in accordance with the terms of my applicable agreement).  Moreover, I agree to fully indemnify the Company, its directors, officers, agents, employees, investors, shareholders, administrators, affiliates, divisions, subsidiaries, predecessor and successor corporations, and assigns for all verdicts, judgments, settlements, and other losses incurred by any of them resulting from my breach of my obligations under any agreement with a third party to which I am a party or obligation to which I am bound, as well as any reasonable attorneys’ fees and costs if the plaintiff is the prevailing party in such an action, except as prohibited by law.

 

5.                                      RETURN OF COMPANY MATERIALS

 

Upon separation from employment with the Company, on Company’s earlier request during my employment, or at any time subsequent to my employment upon demand from the Company, I will immediately deliver to the Company, and will not keep in my possession, recreate, or deliver to anyone else,  any and all Company property, including, but not limited to, Company Confidential Information, Associated Third Party Confidential Information, all devices and equipment belonging to the Company (including the Company Issued Devices and other electronic devices), all tangible embodiments of the Inventions, all electronically stored information and passwords to access such property and the Company Issued Devices, Company credit cards, records, data, notes, notebooks, reports, files, proposals, lists, correspondence, specifications, drawings, blueprints, sketches, materials, photographs, charts, any other documents and property, and reproductions of any of the foregoing items, including, without limitation, those records maintained pursuant to Section 4.D.  I also consent to an exit interview to confirm my compliance with this Article 6 and other provisions of this Agreement.

 

6.                                      TERMINATION CERTIFICATION

 

Upon separation from employment with the Company, I agree to immediately sign and deliver to the Company the “Termination Certification” attached hereto as Exhibit C.  I also agree to keep the Company advised of my home and business address for a period of three (3) years after termination of my employment with the Company, so that the Company can contact me regarding my continuing obligations provided by this Agreement.

 

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7.                                      NOTIFICATION OF NEW EMPLOYER

 

In the event that I leave the employ of the Company, I hereby grant consent to notification by the Company to my new employer about my obligations under this Agreement.

 

8.                                      SOLICITATION OF EMPLOYEES

 

To the fullest extent permitted under applicable law, I agree that during my employment and for a period of twelve (12) months immediately following the termination of my relationship with the Company for any reason, whether voluntary or involuntary, with or without cause, I will not directly or indirectly solicit any of the Company’s employees to leave their employment at the Company.  I agree that nothing in this Article 9 shall affect my continuing obligations under this Agreement during and after this twelve (12) month period, including, without limitation, my obligations under Article 3.

 

9.                                      CONFLICT OF INTEREST GUIDELINES

 

I agree to diligently adhere to all policies of the Company, including the Company’s insider trading policies and the Company’s Conflict of Interest Guidelines.  A copy of the Company’s current Conflict of Interest Guidelines is attached as Exhibit D hereto, but I understand that these Conflict of Interest Guidelines may be revised from time to time during my employment.

 

10.                               REPRESENTATIONS

 

Without limiting my obligations under Section 4.E above, I agree to execute any proper oath or verify any proper document required to carry out the terms of this Agreement.  I represent and warrant that my performance of all the terms of this Agreement will not breach any agreement to keep in confidence information acquired by me in confidence or in trust prior to my employment by the Company.  I hereby represent and warrant that I have not entered into, and I will not enter into, any oral or written agreement in conflict herewith.

 

11.                               AUDIT

 

I acknowledge that I have no reasonable expectation of privacy in any technology system, email, telephone, voicemail, or documents or devices issued to me by the Company (each a “Company Issued Device”) that are used to conduct the business of the Company.  All information, data, and messages created, received, sent, or stored in these systems are, at all times, the property of the Company.  As such, the Company has the right to audit and search all such items and systems, without further notice to me, to ensure that the Company is licensed to use the software on the Company’s devices in compliance with the Company’s software licensing policies, to ensure compliance with the Company’s policies, and for any other business-related purposes in the Company’s sole discretion.  I understand that I am not permitted to add any unlicensed, unauthorized, or non-compliant applications to the Company Issued Devices or the Company’s technology systems, including, without limitation, open source or free software not authorized by the Company, and that I shall refrain from copying unlicensed software onto the Company’s technology systems or using non-licensed software or websites.  I understand that it is my responsibility to comply with the Company’s policies governing use of

 

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the Company’s documents and the internet, email, telephone, and technology systems to which I will have access in connection with my employment.

 

I am aware that the Company has or may acquire software and systems that are capable of monitoring and recording all network traffic to and from any computer I may use.  The Company reserves the right to access, review, copy, and delete any of the information, data, or messages accessed through these systems with or without notice to me and/or in my absence.  This includes, but is not limited to, all e-mail messages sent or received, all website visits, all chat sessions, all news group activity (including groups visited, messages read, and postings by me), and all file transfers into and out of the Company’s internal networks.  The Company further reserves the right to retrieve previously deleted messages from e-mail or voicemail and monitor usage of the Internet, including websites visited and any information I have downloaded.  In addition, the Company may review Internet and technology systems activity and analyze usage patterns, and may choose to publicize this data to assure that technology systems are devoted to legitimate business purposes.

 

12.                               ARBITRATION AND EQUITABLE RELIEF

 

A.                  Arbitration. IN CONSIDERATION OF MY EMPLOYMENT WITH THE COMPANY, ITS PROMISE TO ARBITRATE ALL EMPLOYMENT-RELATED DISPUTES, AND MY RECEIPT OF THE COMPENSATION, PAY RAISES, AND OTHER BENEFITS PAID TO ME BY THE COMPANY, AT PRESENT AND IN THE FUTURE, I AGREE THAT ANY AND ALL CONTROVERSIES, CLAIMS, OR DISPUTES WITH ANYONE (INCLUDING THE COMPANY AND ANY EMPLOYEE, OFFICER, DIRECTOR, SHAREHOLDER, OR BENEFIT PLAN OF THE COMPANY, IN THEIR CAPACITY AS SUCH OR OTHERWISE), ARISING OUT OF, RELATING TO, OR RESULTING FROM MY EMPLOYMENT WITH THE COMPANY OR THE TERMINATION OF MY EMPLOYMENT WITH THE COMPANY, INCLUDING ANY BREACH OF THIS AGREEMENT OR MY OFFER LETTER, SHALL BE SUBJECT TO BINDING ARBITRATION UNDER THE ARBITRATION PROVISIONS SET FORTH IN CALIFORNIA CODE OF CIVIL PROCEDURE SECTIONS 1280 THROUGH 1294.2, INCLUDING SECTION 1281.8 (THE “ACT”), AND PURSUANT TO CALIFORNIA LAW, AND SHALL BE BROUGHT IN MY INDIVIDUAL CAPACITY, AND NOT AS A PLAINTIFF OR CLASS MEMBER IN ANY PURPORTED CLASS OR REPRESENTATIVE PROCEEDING.  THE FEDERAL ARBITRATION ACT SHALL CONTINUE TO APPLY WITH FULL FORCE AND EFFECT NOTWITHSTANDING THE APPLICATION OF PROCEDURAL RULES SET FORTH IN THE ACT.  DISPUTES THAT I AGREE TO ARBITRATE, AND THEREBY AGREE TO WAIVE ANY RIGHT TO A TRIAL BY JURY, INCLUDE ANY STATUTORY CLAIMS UNDER LOCAL, STATE, OR FEDERAL LAW, INCLUDING, BUT NOT LIMITED TO, CLAIMS UNDER TITLE VII OF THE CIVIL RIGHTS ACT OF 1964, THE AMERICANS WITH DISABILITIES ACT OF 1990, THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, THE OLDER WORKERS BENEFIT PROTECTION ACT, THE SARBANES-OXLEY ACT, THE WORKER ADJUSTMENT AND RETRAINING NOTIFICATION ACT, THE CALIFORNIA FAIR EMPLOYMENT AND HOUSING ACT, THE FAMILY AND MEDICAL LEAVE ACT, THE CALIFORNIA FAMILY RIGHTS ACT, THE CALIFORNIA LABOR CODE, CLAIMS OF HARASSMENT, DISCRIMINATION, AND WRONGFUL TERMINATION, AND ANY  STATUTORY OR COMMON LAW CLAIMS.  NOTWITHSTANDING THE FOREGOING, I UNDERSTAND THAT NOTHING IN THIS AGREEMENT

 

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CONSTITUTES A WAIVER OF MY RIGHTS UNDER SECTION 7 OF THE NATIONAL LABOR RELATIONS ACT.  I FURTHER UNDERSTAND THAT THIS AGREEMENT TO ARBITRATE ALSO APPLIES TO ANY DISPUTES THAT THE COMPANY MAY HAVE WITH ME.

 

B.                  Procedure. I AGREE THAT ANY ARBITRATION WILL BE ADMINISTERED BY JUDICIAL ARBITRATION & MEDIATION SERVICES, INC. (“JAMS”), PURSUANT TO ITS EMPLOYMENT ARBITRATION RULES & PROCEDURES (THE “JAMS RULES”), WHICH ARE AVAILABLE AT http://www.jamsadr.com/rules-employment-arbitration/ AND FROM HUMAN RESOURCES. I AGREE THAT THE ARBITRATOR SHALL HAVE THE POWER TO DECIDE ANY MOTIONS BROUGHT BY ANY PARTY TO THE ARBITRATION, INCLUDING MOTIONS FOR SUMMARY JUDGMENT AND/OR ADJUDICATION, AND MOTIONS TO DISMISS AND DEMURRERS, APPLYING THE STANDARDS SET FORTH UNDER THE CALIFORNIA CODE OF CIVIL PROCEDURE.  I AGREE THAT THE ARBITRATOR SHALL ISSUE A WRITTEN DECISION ON THE MERITS.  I ALSO AGREE THAT THE ARBITRATOR SHALL HAVE THE POWER TO AWARD ANY REMEDIES AVAILABLE UNDER APPLICABLE LAW, AND THAT THE ARBITRATOR SHALL AWARD ATTORNEYS’ FEES AND COSTS TO THE PREVAILING PARTY, WHERE PROVIDED BY APPLICABLE LAW.  I AGREE THAT THE DECREE OR AWARD RENDERED BY THE ARBITRATOR MAY BE ENTERED AS A FINAL AND BINDING JUDGMENT IN ANY COURT HAVING JURISDICTION THEREOF.  I UNDERSTAND THAT THE COMPANY WILL PAY FOR ANY ADMINISTRATIVE OR HEARING FEES CHARGED BY THE ARBITRATOR OR JAMS EXCEPT THAT I SHALL PAY ANY FILING FEES ASSOCIATED WITH ANY ARBITRATION THAT I INITIATE, BUT ONLY SO MUCH OF THE FILING FEES AS I WOULD HAVE INSTEAD PAID HAD I FILED A COMPLAINT IN A COURT OF LAW.  I AGREE THAT THE ARBITRATOR SHALL ADMINISTER AND CONDUCT ANY ARBITRATION IN ACCORDANCE WITH CALIFORNIA LAW, INCLUDING THE CALIFORNIA CODE OF CIVIL PROCEDURE AND THE CALIFORNIA EVIDENCE CODE, AND THAT THE ARBITRATOR SHALL APPLY SUBSTANTIVE AND PROCEDURAL CALIFORNIA LAW TO ANY DISPUTE OR CLAIM, WITHOUT REFERENCE TO RULES OF CONFLICT OF LAW.  TO THE EXTENT THAT THE JAMS RULES CONFLICT WITH CALIFORNIA LAW, CALIFORNIA LAW SHALL TAKE PRECEDENCE.  I AGREE THAT ANY ARBITRATION UNDER THIS AGREEMENT SHALL BE CONDUCTED IN SANTA CLARA COUNTY, CALIFORNIA UNLESS OTHERWISE AGREED TO BY THE COMPANY IN A WRITING SIGNED BY THE COMPANY’S CHIEF EXECUTIVE OFFICER OR PRESIDENT.

 

C.                  Remedy. EXCEPT AS PROVIDED BY THE ACT AND THIS AGREEMENT, ARBITRATION SHALL BE THE SOLE, EXCLUSIVE, AND FINAL REMEDY FOR ANY DISPUTE BETWEEN ME AND THE COMPANY.  ACCORDINGLY, EXCEPT AS PROVIDED FOR BY THE ACT AND THIS AGREEMENT, NEITHER I NOR THE COMPANY WILL BE PERMITTED TO PURSUE COURT ACTION REGARDING CLAIMS THAT ARE SUBJECT TO ARBITRATION.

 

D.                  Administrative Relief. I UNDERSTAND THAT THIS AGREEMENT DOES NOT PROHIBIT ME FROM PURSUING AN ADMINISTRATIVE CLAIM WITH A LOCAL, STATE, OR FEDERAL ADMINISTRATIVE BODY OR GOVERNMENT AGENCY THAT IS AUTHORIZED TO ENFORCE OR ADMINISTER LAWS RELATED TO EMPLOYMENT,

 

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INCLUDING, BUT NOT LIMITED TO, THE DEPARTMENT OF FAIR EMPLOYMENT AND HOUSING, THE EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, THE NATIONAL LABOR RELATIONS BOARD, OR THE WORKERS’ COMPENSATION BOARD.  THIS AGREEMENT DOES, HOWEVER, PRECLUDE ME FROM PURSUING COURT ACTION REGARDING ANY SUCH CLAIM, EXCEPT AS PERMITTED BY LAW.

 

E.                   Voluntary Nature of Agreement. I ACKNOWLEDGE AND AGREE THAT I AM EXECUTING THIS AGREEMENT VOLUNTARILY AND WITHOUT ANY DURESS OR UNDUE INFLUENCE BY THE COMPANY OR ANYONE ELSE.  I ACKNOWLEDGE AND AGREE THAT I HAVE RECEIVED A COPY OF THE TEXT OF CALIFORNIA LABOR CODE SECTION 2870 IN EXHIBIT B.  I FURTHER ACKNOWLEDGE AND AGREE THAT I HAVE CAREFULLY READ THIS AGREEMENT AND THAT I HAVE ASKED ANY QUESTIONS NEEDED FOR ME TO UNDERSTAND THE TERMS, CONSEQUENCES, AND BINDING EFFECT OF THIS AGREEMENT AND FULLY UNDERSTAND IT, INCLUDING THAT I AM WAIVING MY RIGHT TO A JURY TRIAL.  FINALLY, I AGREE THAT I HAVE BEEN PROVIDED AN OPPORTUNITY TO SEEK THE ADVICE OF AN ATTORNEY OF MY CHOICE BEFORE SIGNING THIS AGREEMENT.

 

13.                               MISCELLANEOUS

 

A.                  Governing Law; Consent to Personal Jurisdiction. This Agreement will be governed by the laws of the State of California without regard to California’s conflicts of law rules that may result in the application of the laws of any jurisdiction other than California.  To the extent that any lawsuit is permitted under this Agreement, I hereby expressly consent to the personal and exclusive jurisdiction and venue of the state and federal courts located in California for any lawsuit filed against me by the Company.

 

B.                  Assignability.  This Agreement will be binding upon my heirs, executors, assigns, administrators, and other legal representatives, and will be for the benefit of the Company, its successors, and its assigns.  There are no intended third-party beneficiaries to this Agreement, except as may be expressly otherwise stated.  Notwithstanding anything to the contrary herein, the Company is expressly authorized to assign this Agreement and its rights and obligations under this Agreement to any assignee in connection with a legitimate business purpose or any successor of a business unit or of all or substantially all of the Company’s relevant assets, whether by merger, consolidation, reorganization, reincorporation, sale of assets or stock, or otherwise.

 

C.                  Entire Agreement.  This Agreement, together with the Exhibits herein and any executed written offer letter between me and the Company, to the extent such materials are not in conflict with this Agreement, sets forth the entire agreement and understanding between the Company and me with respect to the subject matter herein and supersedes all prior written and oral agreements, discussions, or representations between us, including, but not limited to, any representations made during my interview(s) or relocation negotiations.  I represent and warrant that I am not relying on any statement or representation not contained in this Agreement.  Any subsequent change or changes in my duties, salary, or compensation will not affect the validity or scope of this Agreement.

 

D.                  Headings. Headings are used in this Agreement for reference only and shall not be considered when interpreting this Agreement.

 

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E.                   Severability.  If a court or other body of competent jurisdiction finds, or the Parties mutually believe, any provision of this Agreement, or portion thereof, to be invalid or unenforceable, such provision will be enforced to the maximum extent permissible so as to effect the intent of the Parties, and the remainder of this Agreement will continue in full force and effect.

 

F.                    Modification, Waiver.  No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, will be effective unless in a writing signed by the President or Chief Executive Officer or General Counsel of the Company and me.  Waiver by the Company of a breach of any provision of this Agreement will not operate as a waiver of any other or subsequent breach.

 

G.                  Survivorship.  The rights and obligations of the parties to this Agreement will survive termination of my employment with the Company.

 

 

	
Date:
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Signature
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Name   of Employee
    
	
 
    	
 
    	
 
    
	
Witness:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Signature
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Name   (typed or printed)
    	
 
    	
 
    

 

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EXHIBIT A

 

LIST OF PRIOR INVENTIONS

AND ORIGINAL WORKS OF AUTHORSHIP

 

	
Title
    	
 
    	
Date
    	
 
    	
Identifying Number or Brief
   Description
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    

 

o No inventions or improvements

 

o Additional Sheets Attached

 

 

	
Date:
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Signature
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Name   of Employee (typed or printed)
    

 

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EXHIBIT B

 

CALIFORNIA LABOR CODE SECTION 2870

INVENTION ON OWN TIME-EXEMPTION FROM AGREEMENT

 

“(a)                           Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employer’s equipment, supplies, facilities, or trade secret information except for those inventions that either:

 

(1)                                 Relate at the time of conception or reduction to practice of the invention to the employer’s business, or actual or demonstrably anticipated research or development of the employer; or

 

(2)                                 Result from any work performed by the employee for the employer.

 

(b)                                 To the extent a provision in an employment agreement purports to require an employee to assign an invention otherwise excluded from being required to be assigned under subdivision (a), the provision is against the public policy of this state and is unenforceable.”

 

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EXHIBIT C

 

VIVUS, INC. TERMINATION CERTIFICATION

 

This is to certify that I do not have in my possession, nor have I failed to return, any devices, records, data, notes, reports, proposals, lists, correspondence, specifications, drawings, blueprints, sketches, materials, equipment, any other documents or property, or reproductions of any and all aforementioned items belonging to VIVUS, Inc., its subsidiaries, affiliates, successors or assigns (together, the “Company”).

 

I further certify that I have complied with all the terms of the Company’s At-Will Employment, Confidential Information, Invention Assignment, and Arbitration Agreement signed by me, including the reporting of any inventions and original works of authorship (as defined therein) conceived or made by me (solely or jointly with others), as covered by that agreement.

 

I further agree that, in compliance with the At-Will Employment, Confidential Information, Invention Assignment, and Arbitration Agreement, I will preserve as confidential all Company Confidential Information and Associated Third Party Confidential Information, including trade secrets, confidential knowledge, data, or other proprietary information relating to products, processes, know-how, designs, formulas, developmental or experimental work, computer programs, databases, other original works of authorship, customer lists, business plans, financial information, or other subject matter pertaining to any business of the Company or any of its employees, clients, consultants, or licensees.

 

I also agree that for twelve (12) months from this date, I will not directly or indirectly solicit any of the Company’s employees to leave their employment at the Company.  I agree that nothing in this paragraph shall affect my continuing obligations under the At-Will Employment, Confidential Information, Invention Assignment, and Arbitration Agreement during and after this twelve (12) month period, including, without limitation, my obligations under Article 3 (Confidentiality) thereof.

 

After leaving the Company’s employment, I will be employed by                                                                                                                                                                            in the position of                                                                                                                               .

 

 

	
Date:
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Signature
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Name   of Employee (typed or printed)
    

 

Address for Notifications:                                                                                 

                                                                                                                           

 

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EXHIBIT D

 

VIVUS, INC. CONFLICT OF INTEREST GUIDELINES

 

It is the policy of VIVUS, Inc. to conduct its affairs in strict compliance with the letter and spirit of the law and to adhere to the highest principles of business ethics.  Accordingly, all officers, employees, and independent contractors must avoid activities that are in conflict, or give the appearance of being in conflict, with these principles and with the interests of the Company.  The following are potentially compromising situations that must be avoided:

 

1.                                      Revealing confidential information to outsiders or misusing confidential information.  Unauthorized divulging of information is a violation of this policy whether or not for personal gain and whether or not harm to the Company is intended.  (The At-Will Employment, Confidential Information, Invention Assignment, and Arbitration Agreement elaborates on this principle and is a binding agreement.)

 

2.                                      Accepting or offering substantial gifts, excessive entertainment, favors, or payments that may be deemed to constitute undue influence or otherwise be improper or embarrassing to the Company.

 

3.                                      Participating in civic or professional organizations that might involve divulging confidential information of the Company.

 

4.                                      Initiating or approving personnel actions affecting reward or punishment of employees or applicants where there is a family relationship or is or appears to be a personal or social involvement.

 

5.                                      Initiating or approving any form of personal or social harassment of employees.

 

6.                                      Investing or holding outside directorship in suppliers, customers, or competing companies, including financial speculations, where such investment or directorship might influence in any manner a decision or course of action of the Company.

 

7.                                      Borrowing from or lending to employees, customers, or suppliers.

 

8.                                      Acquiring real estate of interest to the Company.

 

9.                                      Improperly using or disclosing to the Company any proprietary information or trade secrets of any former or concurrent employer or other person or entity with whom obligations of confidentiality exist.

 

10.                               Unlawfully discussing prices, costs, customers, sales, or markets with competing companies or their employees.

 

11.                               Making any unlawful agreement with distributors with respect to prices.

 

12.                               Improperly using or authorizing the use of any inventions that are the subject of patent claims of any other person or entity.

 

13.                               Engaging in any conduct that is not in the best interest of the Company.

 

Each officer, employee, and independent contractor must take every necessary action to ensure compliance with these guidelines and to bring problem areas to the attention of higher management for review.  Violations of this conflict of interest policy may result in discharge without warning.

 

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EXHIBIT B

 

Confidential Separation Agreement and General Release

 

 

CONFIDENTIAL SEPARATION AGREEMENT AND GENERAL RELEASE

 

This Confidential Separation Agreement and General Release (the “Agreement ”) is being entered into between Seth H. Z. Fischer (“Executive ”) and VIVUS, Inc. (the “Company ”) in connection with the termination of Executive’s employment with the Company on [                          , 20    ] (the “Separation Date ”).

 

Whereas, in connection with Executive’s termination of employment effective as of [                          , 20    ], Executive is eligible to receive the severance benefits provided in Section 4 of the Employment Agreement (the “Employment Agreement ”) dated September 3, 2013, subject to the terms and conditions set forth therein including (but not limited to) entering into this Confidential Separation Agreement and General Release in favor of the Company under Section 4.10 of the Employment Agreement and the provisions of Section 8 of the Employment Agreement.

 

Whereas, in consideration for such severance benefits provided under Section 4 of the Employment Agreement  (the “Severance Benefits”) and pursuant to Section 4.10 of the Employment Agreement, the parties wish to resolve any and all disputes, claims, complaints, grievances, charges, actions, petitions, and demands that Executive may have against the Company and any of the Releasees as defined below, including, but not limited to, any and all claims arising out of or in any way related to Executive’s employment with or separation from the Company.

 

Now, therefore, Executive covenants and agrees as follows:

 

1.                                      Unpaid Wages and PTO.  Executive was paid all outstanding, accrued salary and commissions, together with any accrued but unused vacation, on or before the Separation Date.

 

2.                                      Benefits. As of Executive’s Separation Date, Executive is not eligible to accrue additional benefits under  any of the Company’s benefit plans, including, but not limited to, any dental or medical insurance, long term care plans, retirement or 401(k) plans, vacation leave, sick leave, long term disability insurance, life insurance, or personal accident insurance. [Executive may be eligible to participate in a Consolidated Omnibus Budget Reconciliation Act of 1986, as amended (“COBRA ”) continuation coverage program or any similar state medical and dental insurance continuation coverage program and exercise conversion rights with respect to any group life insurance.]  Executive shall be entitled to payment of Accrued Amounts under the terms and conditions of any Company benefit plans or programs.

 

3.                                      Acknowledgement. Executive acknowledges and agrees that, other than the payments described in Section 1 of this Agreement,  the Accrued Amounts (as defined in Section 4.2 of the Employment Agreement) and the Severance Benefits, he has no entitlement to additional compensation or benefits due from his employment.  Executive further agrees that any Severance Benefit is not compensation for Executive’s services rendered through Executive’s Separation Date, but rather constitutes consideration for the promises contained in this Agreement.

 

4.                                      General Release.  Except for any rights granted under this Agreement, Executive, for himself, and for his heirs, assigns, executors and administrators, hereby releases, remises and forever discharges the Company, its parents, subsidiaries, affiliates, divisions, predecessors, successors, assigns, and their directors, officers, partners, attorneys, shareholders, administrators, employees, agents, representatives, employment benefit plans, plan administrators, fiduciaries, trustees, insurers and re-insurers, and all of their predecessors, successors and assigns, (collectively, the “Releasees ”), of and from all claims, causes of action, covenants, contracts, agreements, promises, damages, disputes, demands, and all other manner of actions whatsoever, in law or in equity, that Executive ever had, may have had, now has, or that his heirs, assigns, executors or administrators hereinafter can, shall or may

 

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have, whether known or unknown, asserted or unasserted, suspected or unsuspected in connection with Executive’s employment or the termination of that employment, or any act or omission with respect to Executive’s employment which has occurred at any time up to and including the date of the execution of this Release (the “Released Claims ”).

 

a.                                      Released Claims.  The Released Claims released include, but are not limited to, any claims for monetary damages; any claims related to Executive’s employment with the Company or the termination thereof; any claims to severance or similar benefits; any claims to expenses, attorneys’ fees or other indemnities ; any claims based on actions or failure to act on or before the date of this Agreement; any claims for other personal remedies or damages sought in any legal proceeding or charge filed with any court or federal, state or local agency either by one or by a person claiming to act on Executive’s behalf or in Executive’s interest.  Executive understands that the Released Claims might have arisen under many different local, state and federal statutes, regulations, case law and/or common law doctrines.  Executive hereby specifically, but without limitation, agrees to release all of the Releasees from any and all claims under the following:

 

i.                  Antidiscrimination laws, such as Title VII of the Civil Rights Act of 1964, as amended, and Executive Order 11246 (which prohibit discrimination based on race, color, national origin, religion, or sex); Section 1981 of the Civil Rights Act of 1866 (which prohibits discrimination based on race or color); the Americans with Disabilities Act and Sections 503 and 504 of the Rehabilitation Act of 1973 (which prohibit discrimination based upon disability); the Age Discrimination in Employment Act, as amended, 29 U.S.C. Section 621 et seq. (which prohibits discrimination on the basis of age); the Equal Pay Act (which prohibits paying men and women unequal pay for equal work); the California Fair Employment and Housing Act, California Government Code Section 12900 et seq. (which prohibits discrimination based on protected characteristics including race, color, religion, sex, gender, sexual orientation, marital status, national origin, language restrictions, ancestry, physical or mental disability, medical condition, age, and denial of leave); the California Equal Pay Law (which prohibits paying men and women unequal pay for equal work), California Labor Code Section 1197.5; the Unruh Civil Rights Act, California Civil Code Section 51 et seq. (which prohibits discrimination based on age, sex, race, color, religion, ancestry, national origin, disability, medical condition, marital status, or sexual orientation); New Jersey Law Against Discrimination, N.J.S.A. § 10:5-1 et seq.; or any other local, state or federal statute, regulation, common law or decision concerning discrimination, harassment, or retaliation on these or any other grounds or otherwise governing the employment relationship.

 

ii.               Other employment laws, such as the federal Worker Adjustment and Retraining Notification Act of 1988 and the California Worker Adjustment and Retraining Notification Act, California Labor Code Sections 1400 et seq. (known as WARN laws, which require that advance notice be given of certain workforce reductions); the Executive Retirement Income Security Act of 1974 (which, among other things, protects employee benefits); the Fair Labor Standards Act of 1938 (which regulates wage and hour matters); the Family and Medical Leave Act of 1993 (which requires employers to provide leaves of absence under certain circumstances); the California Labor Code (which regulates employment and wage and hour matters); the California Family Rights Act of 1993, California Government Code Section 12945.1 et seq. (which requires employers to provide leaves of absence under certain circumstances); New Jersey Family Leave Act, N.J.S.A. § 34:11B-1 et seq.; Conscientious Employee Protection Act (C.E.P.A.), N.J.S.A. §§ 34:19-1 et seq.; New Jersey Wage Laws, N.J.S.A. § 34:11 et seq.; and any other federal, state, or local statute, regulation, common law or decision relating to employment, such as veterans’ reemployment rights laws or any other aspect of employment.

 

iii.            Other laws of general application, such as any federal, state, or local law enforcing express or implied employment or other contracts or covenants; any other federal, state or local laws providing relief for alleged wrongful discharge, physical or personal injury, breach of contract,

 

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emotional distress, fraud, negligent misrepresentation, defamation, invasion of privacy, violation of public policy and similar or related claims; common law claims under any tort, contract or other theory now or hereafter recognized, and any other federal, state, or local statute, regulation, common law or decision otherwise regulating employment.

 

b.                                      Participation in Agency Proceedings.  Nothing in this Agreement shall prevent Executive from filing a charge (including a challenge to the validity of this Agreement) with the Equal Employment Opportunity Commission (the “EEOC ”), the National Labor Relations Board (the “NLRB ”), the California Department of Fair Employment and Housing (the “DFEH ”), or other similar state or local agencies, or from participating in any investigation or proceeding conducted by the EEOC, the NLRB, the DFEH or similar state or local agencies.  However, by entering into this Agreement, Executive understands and agrees that he is waiving any and all rights to recover any monetary relief or other personal relief as a result of any such EEOC, NLRB, DFEH or similar state or local agency proceedings, including any subsequent legal action.

 

c.                                       Claims Not Released.  The Released Claims do not include claims by Executive for: (1) unemployment insurance; (2) worker’s compensation benefits; (3) state disability compensation; (4)  Accrued Amounts ; (5)  any rights for indemnification or contribution under the Company’s certificate of incorporation or by-laws, the laws of the state of incorporation or any rights to insurance coverage under any applicable directors’ and officers’ liability insurance policy and (6) any other rights that cannot by law be released by private agreement.

 

d.                                      Waiver of Rights under California Civil Code Section 1542.  Executive further acknowledges that he has read Section 1542 of the Civil Code of the State of California, which provides as follows:

 

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.

 

Executive understands that Section 1542 gives his the right not to release existing claims of which he is not now aware, unless he voluntarily chooses to waive this right.  Even though Executive is aware of this right, Executive nevertheless hereby voluntarily waives the right described in Section 1542, and elects to assume all risks for claims that now exist in his favor, known or unknown, arising from the subject matter of the Release.

 

Executive acknowledges that different or additional facts may be discovered in addition to what he now knows or believes to be true with respect to the matters released in this Agreement, and Executive agrees that this Agreement will be and remain in effect in all respects as a complete and final release of the matters released, notwithstanding any such different or additional facts.  Executive represents and warrants that he has not previously filed or joined in any claims that are released in this Agreement and that he has not given or sold any portion of any claims released herein to anyone else, and that he will indemnify and hold harmless the persons and entities released in this Agreement from all liabilities, claims, demands, costs, expenses and/or attorneys’ fees incurred as a result of any such prior assignment or transfer.

 

5.                                      Non-Disclosure of This Agreement.  Executive agrees that from and after the date of the receipt of this Agreement, he will not, directly or indirectly, provide to any person or entity any information concerning or relating to the negotiation of this Agreement or its terms and conditions,

 

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except:  (i) to the extent specifically required by law or legal process or as authorized in writing by the Company; (ii) to his tax advisors as may be necessary for the preparation of tax returns or other reports required by law; (iii) to his attorneys as may be necessary to secure advice concerning this Agreement; or (iv) to members of his immediate family.  Executive agrees that prior to disclosing such information under parts (ii), (iii), or (iv), he will inform the recipients that they are bound by the limitations of this section.  Subsequent disclosure by any such recipients will be deemed to be a disclosure by Executive in breach of this Agreement.

 

6.                                      Obligations Regarding Confidential Information.  Executive hereby reaffirms his existing obligations, to the fullest extent permitted by law, under the Confidential Information, Invention Assignment, and Arbitration Agreement that he signed with the Company or its affiliates on or about September 3, 2013 (the “Confidentiality Agreement ”).  Executive understands that his obligations under the Confidentiality Agreement survive his employment with the Company as provided in that agreement.

 

7.                                      Return of Information and Property.  Executive hereby covenants and agrees that Executive shall promptly return all documents (whether in hard copy or electronic format), keys, credit cards, data devices, computer equipment, Company products, keycards, account information, and all other items which are the property of the Company and/or which contain confidential information.  Executive agrees to work in cooperation with the Company’s IT Department to delete all Company confidential information and Company contacts from his/his personal laptop computer, cellular phone and iPad.  If Executive fails to return any company property, the Company will deduct from the Severance an amount equal to the value of non-returned property.

 

8.                                      Non-disparagement.  Executive agrees that he will not make to any person or entity any false, disparaging, or derogatory comments about the Company, its business affairs, its products, its employees, clients, contractors, agents, or any of the other Releasees as defined in Section 4. The Company agrees to instruct the Company’s officers not to make any disparaging statements about Executive to any third party, whether inside or outside the Company.

 

9.                                      General.  This Agreement and the Confidentiality Agreement contain the entire understanding and agreement between the parties relating to the subject matter of this Agreement, and may not be altered or amended except by an instrument in writing signed by both parties.  Executive has not relied upon any representation or statement outside this Agreement with regard to the subject matter, basis or effect of this Agreement.  This Agreement shall be governed, construed, and enforced by the internal laws of the State of New Jersey, without regard to the choice of law rules of any jurisdiction.  To the extent any lawsuit is permitted under this Agreement, the Executive hereby expressly consents to the personal and exclusive jurisdiction and venue of the state and federal courts located in New Jersey for any lawsuit filed against the Executive by the Company. The language of all parts of this Agreement will in all cases be construed as a whole, according to the language’s fair meaning, and not strictly for or against any of the parties.  This Agreement will be binding upon and inure to the benefit of the parties and their respective representatives, successors and permitted assigns.  Neither the waiver by either party of a breach of or default under any of the provisions of the Agreement, nor the failure of such party, on one or more occasions, to enforce any of the provisions of the Agreement or to exercise any right or privilege hereunder will thereafter be construed as a waiver of any subsequent breach or default of a similar nature, or as a waiver of any provisions, rights or privileges hereunder.  The parties agree to take or cause to be taken such further actions as may be necessary or as may be reasonably requested in order to fully effectuate the purposes, terms, and conditions of this Agreement.  This Agreement and the rights and obligations of the parties hereunder may not be assigned by Executive without the prior written consent of the Company, but may be assigned by the Company without Executive’s permission or consent.  If any one or more of the provisions of this Agreement, or any part thereof, will be held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remainder of this Agreement will not in any

 

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way be affected or impaired thereby.  This Agreement may be signed in one or more counterparts, each of which will be deemed an original, and all of which together will constitute one instrument.

 

10.                               Arbitration and Equitable Relief.

 

a.                                Intent of Agreement.  The Company and the Executive agree and intend for this Agreement to govern the resolution of all disputes, claims and other matters that arise out of or concerning our relationship, whether related to Executive’s employment with the Company or not.  The Company and the Executive (collectively, “the Parties ”) shall resolve all such matters in accordance with the provisions of this Agreement.

 

b.                                Mandatory Arbitration.  The Parties agree that all claims, complaints, controversies, grievances, or disputes (collectively, “claims ”) that arise out of or relate in any way to the Parties’ relationship, whether based on contract, tort, statutory, or any other legal theory, shall be submitted to mandatory, binding arbitration in New Jersey before a neutral arbitrator who is licensed to practice law in the state in which the arbitration is convened (the “Arbitrator ”).  The arbitration shall be governed by the Federal Arbitration Act, 9 U.S.C. Section 1 et seq, as amended, and shall be administered by the Judicial Arbitration & Mediation Services, Inc. (“JAMS ”), in accordance with pursuant to its then-current Employment Arbitration Rules & Procedures (the “JAMS Rules ”).  A copy of the Employment Arbitration Rules & Procedures is attached hereto as Exhibit C. The Rules are also available online at http://www.jamsadr.com/rules-employment-arbitration/.  The Parties or their representatives may also call JAMS at 800.352.5267 if they have questions about the arbitration process.  If the JAMS Rules are inconsistent with the terms of this Agreement, the terms of this Agreement shall govern.

 

c.                                 Covered Claims.  This Agreement covers all claims under federal, state or local law arising out of or relating to Executive’s application for employment with the Company, any offer of employment made by the Company, Executive’s employment by the Company, the breach of any employment agreement, the termination of Executive’s employment with the Company, or any other aspect of Executive’s employment relationship with the Company, claims that the Executive may have against the Company or against its officers, directors, supervisors, managers, employees, or agents in their capacity as such, and claims that the Company may have against Executive.  The claims covered by this Agreement (the “Covered Claims ”) include, but are not limited to, claims for breach of any contract or covenant (express or implied), tort claims, claims for wrongful termination (constructive or actual) in violation of public policy, claims for discrimination or harassment (including, but not limited to, harassment or discrimination based on race, sex, gender, religion, national origin, age, marital status, medical condition, psychological condition, mental condition, disability, sexual orientation, or any other characteristic protected by law), claims for violation of any federal, state, or other governmental law, statute, regulation, or ordinance, including, but not limited to, all claims arising under Title VII of the Civil Rights Act, the Age Discrimination in Employment Act, the Americans With Disabilities Act, the California Fair Employment and Housing Act, the Consolidated Omnibus Budget Reconciliation Act of 1985, and Employee Retirement Income Security Act.  The Parties specifically agree that the Covered Claims include claims under the Fair Labor Standards Act, the California Labor Code, and other federal, state, or local laws governing wages, hours and working conditions, including, but not limited to, claims for overtime, unpaid wages, and meal period and rest break violations.

 

d.                                Claims Not Covered.  Claims for workers’ compensation, unemployment compensation benefits, claims as a stockholder or any other claims that, as a matter of law, the Parties cannot agree to arbitrate are not subject to, and are excluded from, this Agreement. Nothing in this Agreement shall be interpreted prohibit or preclude the filing of complaints with the California Department of Fair Employment and Housing, the Equal Employment Opportunity Commission, or the National Labor Relations Board.

 

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e.                                 Waiver of Class Action and Representative Action Claims.  Except as otherwise required by law, the Parties expressly intend and agree that: (a) class action and representative action procedures shall neither be asserted nor apply in any arbitration conducted pursuant to this Agreement; (b) each Party will not assert class or representative action claims against the other in arbitration or otherwise; and (c) the Parties shall only submit their own, individual claims in arbitration and will not seek to represent the interests of any other person.

 

f.                                  Waiver of Trial By Jury.  THE EXECUTIVE UNDERSTANDS AND FULLY AGREES THAT BY ENTERING INTO THIS AGREEMENT, BOTH THE COMPANY AND THE EXECUTIVE ARE GIVING UP THEIR CONSTITUTIONAL RIGHT TO HAVE A TRIAL BY JURY, AND ARE GIVING UP THEIR NORMAL RIGHTS OF APPEAL FOLLOWING THE RENDERING OF A DECISION, EXCEPT AS THE FEDERAL ARBITRATION ACT AND APPLICABLE FEDERAL LAW ALLOW FOR JUDICIAL REVIEW OF ARBITRATION PROCEEDINGS.

 

g.                                Claims Procedure.  Arbitration shall be initiated pursuant to this Agreement upon written notice of either Party.  The aggrieved Party shall give written notice of any claim to the other Party by certified or registered mail, return receipt requested.  The Executive agrees to mail written notice of all claims to the Company’s General Counsel at 351 E. Evelyn Avenue, Mountain View, California 94041 (“Notice Address ”).  The Company agrees to mail written notice of all claims to Executive’s last known address on file with the Company.  The written notice shall identify and describe the nature of all claims asserted and the facts upon which such claims are based.  Written notice of arbitration shall be initiated within the statute of limitations and other time limitations applicable to the claim(s) asserted.

 

h.                                Arbitrator Selection.  The Arbitrator shall be selected as provided in the JAMS Rules.

 

i.                                   Discovery.  The JAMS Rules regarding discovery shall apply to any arbitration conducted under this Agreement.  The Arbitrator shall decide all discovery disputes.

 

j.                                   Substantive Law.  The Arbitrator shall apply the substantive law (and the law of remedies, if applicable) of the state in which the claim arose, or federal law, or both, as applicable to the claim(s) asserted.  The Federal Rules of Evidence shall apply.  The Arbitrator, and not any federal, state, or local court or agency, shall have exclusive authority to resolve any dispute relating to the interpretation, applicability, or enforceability of this Agreement.  The Arbitrator shall conduct and preside over an arbitration hearing of reasonable length, to be determined by the Arbitrator.  The Arbitrator shall provide the Parties with a written decision explaining his or her findings and conclusions.  The Arbitrator’s decision shall be final and binding upon the Parties.

 

k.                                Motions.  The Arbitrator shall have jurisdiction to hear and decide prehearing disputes and is authorized to hold prehearing conferences by telephone or in person as the Arbitrator deems necessary.  The Arbitrator shall have the authority to set deadlines for completion of discovery and the filing of dispositive motions, and to set briefing schedules for any motions.  The Arbitrator shall have the authority to adjudicate any cause of action, claim, or defense, including entire claims, pursuant to a motion for summary adjudication and/or summary judgment, and, in deciding such motions, shall apply applicable substantive state or federal law.

 

l.                                   Compelling Arbitration/Enforcing Award.  Either Party may bring an action in court to compel arbitration under this Agreement and to confirm, vacate or enforce an arbitration award.  Each Party shall bear its own attorney fees and costs and other expenses of such action.

 

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m.                            Arbitration Fees and Costs.  The Company shall be responsible for the Arbitrator’s fees and expenses.  Each Party shall pay its own costs and attorneys’ fees, if any; provided, however, if the Arbitrator determines that the Executive’s position was asserted in good faith with a reasonable basis, the Company shall pay the Executive’s reasonable attorneys’ fees and costs .  Under no circumstances shall the Executive be responsible for the Company’s attorneys’ fees

 

n.                                Term of Agreement.  This Agreement shall survive the termination of Executive’s employment.  It may only be revoked or modified in a writing that specifically states the intent to revoke or modify the Agreement and that is signed by both Executive and the Chairman of the Board.

 

o.                                Severability.  If any provision of this Agreement is adjudged to be void or otherwise unenforceable, in whole or in part, the void or unenforceable provision shall be severed and such adjudication shall not affect the validity of the remainder of this Agreement.

 

p.                                Voluntary Agreement. By executing this Agreement, the Parties represent that they have been given the opportunity to fully review, comprehend and negotiate the terms of this Agreement. The Parties understand the terms of this Agreement, and freely and voluntarily sign it.

 

11.                               No Admission; Attorneys’ Fees.  The parties agree that nothing contained in this Agreement will constitute or be treated as an admission of liability or wrongdoing by either of them.  In any action to enforce the terms of this Agreement, the prevailing party will be entitled to recover its costs and expenses, including reasonable attorneys’ fees.

 

12.                               ADEA Acknowledgment/Time Periods.  With respect to the General Release in Section 4 hereof, Executive agrees and understands that by signing this Agreement, he is specifically releasing all claims under the Age Discrimination in Employment Act, as amended, 29 U.S.C. Section 621 et seq.  Executive acknowledges that he has carefully read and understands this Agreement in its entirety, and executes it voluntarily and without coercion.

 

13.                               Consideration Period. Executive further acknowledges that he is hereby being advised in writing to consult with a competent, independent attorney of his or her choice, at his or her own expense, regarding the legal effect of this Agreement before signing it, and that he is being given a period of twenty-one (21) days within which to consider and execute this Agreement, unless he voluntarily chooses to execute this Agreement before the end of the twenty-one (21) day period.

 

14.                               Revocation Period. Executive understands that he has seven (7) days following his execution of this Agreement to revoke it in writing, and that this Agreement is not effective or enforceable until after this seven (7) day period has expired without revocation.  For a revocation to be effective, written notice must be received by the Chief Financial Officer of the Company at 351 E. Evelyn Avenue, Mountain View, California 94041, by no later than 9:00 a.m. on the eighth (8th) calendar day after the date by which Executive has signed this Agreement (“Revocation Deadline ”).

 

15.                               Execution.  Executive agrees that he will not sign and execute this Agreement before his Separation Date.  Executive understands and agrees that this Agreement shall be null and void and have no legal or binding effect whatsoever if: (1) Executive signs but then timely revokes the Agreement or (2) the Agreement is not signed by Executive on or before the twenty-first (21st) day after Executive receives it.

 

[SIGNATURE PAGE FOLLOWS]

 

7

 

IN WITNESS WHEREOF, the undersigned, intending to be bound hereby, have agreed to the terms and conditions of this Agreement as of the date first set forth below.

 

	
 
    	
EXECUTIVE:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Name: Seth H. Z. Fischer
    
	
 
    	
 
    
	
 
    	
Date:                           ,   20
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
VIVUS, INC.
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    
	
 
    	
Date:                           ,   20
    

 

 

ELECTION TO EXECUTE PRIOR TO EXPIRATION
 OF 21-DAY CONSIDERATION PERIOD

 

I, Seth H. Z. Fischer, understand that I have twenty-one (21) days within which to consider and execute the attached Confidential Separation Agreement and General Release.  However, after having an opportunity to consult counsel, I have freely and voluntarily elected to execute the Confidential Separation Agreement and General Release before such twenty-one (21) day period has expired.

 

 

	
 
    	
 
    	
 
    
	
Date
    	
 
    	
Executive   Signature
    

 

 

EXHIBIT C

to the Employment Agreement and Schedule 1 to the Separation Agreement

 

Employment Arbitration Rules & Procedures

 

 

	
  

  	
  EMPLOYMENT JAMS
  EMPLOYMENT ARBITRATION RULES & PROCEDURES EFFECTIVE JULY 15, 2009

  

 

	
  

  	
  JAMS EMPLOYMENT
  ARBITRATION RULES & PROCEDURES JAMS provides arbitration and mediation
  services from Resolution Centers located throughout the United States. Its
  arbitrators and mediators hear and resolve some of the nation’s largest, most
  complex and contentious disputes, utilizing JAMS Rules & Procedures as
  well as the rules of other domestic and international arbitral institutions.
  JAMS arbitrators and mediators are full-time neutrals who come from the ranks
  of retired state and federal judges and prominent attorneys. These highly
  trained and experienced ADR professionals are dedicated to the highest
  ethical standards of conduct. Parties wishing to write a pre-dispute JAMS
  arbitration clause into their agreement should review the sample arbitration
  clauses on Page 4. These clauses may be modified to tailor the arbitration
  process to meet the parties’ individual needs. 

  

 

	
  

  	
  TABLE OF
  CONTENTS Sample Clauses for Use in Employment Dispute Resolution Programs and
  Contracts Sample Clause for Mediation Only 4 Sample Clause for Mediation and
  Arbitration 4 Case Management Fees 5 JAMS Employment Arbitration Rules &
  Procedures Rule 1. Scope of Rules 6 Rule 2. Party-Agreed Procedures 7 Rule 3.
  Amendment of Rules 7 Rule 4. Conflict with Law 7 Rule 5. Commencing an
  Arbitration 7 Rule 6. Preliminary and Administrative Matters 8 Rule 7. Number
  of Arbitrators and Appointment of Chairperson 10 Rule 8. Service 10 Rule 9.
  Notice of Claims 12 Rule 10. Changes of Claims 13 Rule 11. Interpretation of
  Rules and Jurisdictional Challenges 13 Rule 12. Representation 14 Rule 13.
  Withdrawal from Arbitration 14 Rule 14. Ex Parte Communications 14 Rule 15.
  Arbitrator Selection and Replacement 15 Rule 16. Preliminary Conference 17
  Rule 17. Exchange of Information 17 Rule 18. Summary Disposition of a Claim
  or Issue 18 Rule 19. Scheduling and Location of Hearing 19 Rule 20.
  Pre-Hearing Submissions 19 Rule 21. Securing Witnesses and Documents for the
  Arbitration Hearing 20 Rule 22. The Arbitration Hearing 20 Rule 23. Waiver of
  Hearing 22 Rule 24. Awards 22 Rule 25. Enforcement of the Award 24 Rule 26.
  Confidentiality and Privacy 25 Rule 27. Waiver 25 Rule 28. Settlement and
  Consent Award 25 Rule 29. Sanctions 26 Rule 30. Disqualification of the
  Arbitrator as a Witness or Party and Exclusion of Liability 26 Rule 31. Fees
  27 Rule 32. Bracketed (or High-Low) Arbitration Option 28 Rule 33. Final
  Offer (or Baseball) Arbitration Option 28 Rule 34. Optional Arbitration
  Appeal Procedure 29 

  

 

	
  

  	
  4 JAMS
  Employment Arbitration Rules & Procedures | Effective July 15, 2009 JAMS
  Employment Arbitration Rules & Procedures | Effective July 15, 2009 5
  CASE MANAGEMENT FEES JAMS charges a nominal Case Management Fee. For arbitrations
  the Case Management Fee is: HEARING LENGTH FEE 1 to 3 days $400 per party,
  per day (1 day is defined as 10 hours of professional time) Time in excess of
  initial 30 hours 10% of professional fees JAMS neutrals set their own hourly,
  partial and full-day rates. For information on individual neutrals’ rates and
  the Case Management Fee, please contact JAMS at 800-352-JAMS. The Case
  Management Fee structure is subject to change. All of the JAMS Rules,
  including the Employment Arbitration Rules set forth below, can be accessed
  at the JAMS website: www.jamsadr.com. SAMPLE CLAUSES FOR USE IN EMPLOYMENT
  DISPUTE RESOLUTION PROGRAMS AND CONTRACTS The following are basic sample
  clauses providing for mediation or arbitration in an employment contract. A
  variety of issues may affect the enforceability or effectiveness of these
  sample clauses; therefore, it is recommended that you review applicable law
  in your jurisdiction and consult experienced counsel for advice. The
  information contained herein should not be considered legal advice or legal
  opinion. For information about setting a case, call your local JAMS office at
  1-800-352-5267. Sample Clause for Mediation Only Any controversy, dispute or
  claim arising out of or relating to this [contract] or breach thereof shall
  first be settled through good faith negotiation [OR company employment
  program] [other]. If the dispute cannot be settled through negotiation [OR
  company employment program] [other], the parties agree to attempt in good
  faith to settle the dispute by mediation administered by JAMS. Sample Clause
  for Mediation and Arbitration Any controversy, dispute or claim arising out
  of or relating to this [contract] or breach thereof shall first be settled
  through good faith negotiation [OR company employment program] [other]. If
  the dispute cannot be settled through negotiation [OR company employment
  program] [other], the parties agree to attempt in good faith to settle the
  dispute by mediation administered by JAMS. If the parties are unsuccessful at
  resolving the dispute through mediation, the parties agree to [binding]
  arbitration administered by JAMS pursuant to its Employment Arbitration Rules
  & Procedures and subject to JAMS Policy on Employment Arbitration Minimum
  Standards of Procedural Fairness. Judgment on the Award may be entered in any
  court having jurisdiction. 

  

 

	
  

  	
  6 JAMS
  Employment Arbitration Rules & Procedures | Effective July 15, 2009 JAMS
  Employment Arbitration Rules & Procedures | Effective July 15, 2009 7
  JAMS EMPLOYMENT ARBITRATION RULES & PROCEDURES NOTICE: These Rules are
  the copyrighted property of JAMS. They cannot be copied, reprinted or used in
  any way without permission of JAMS, unless they are being used by the parties
  to an arbitration as the rules for that arbitration. If they are being used
  as the rules for an arbitration, proper attribution must be given to JAMS. If
  you wish to obtain permission to use our copyrighted materials, please
  contact JAMS at 949-224-1810. Rule 1. Scope of Rules (a) The JAMS Employment
  Arbitration Rules & Procedures (“Rules”) govern binding Arbitrations of
  disputes or claims that are administered by JAMS and in which the Parties
  agree to use these Rules or, in the absence of such agreement, the disputes
  or claims are employment-related, unless other Rules are prescribed. (b) The
  Parties shall be deemed to have made these Rules a part of their Arbitration
  agreement (“Agreement”) whenever they have provided for Arbitration by JAMS
  under its Employment Rules or for Arbitration by JAMS without specifying any
  particular JAMS Rules and the disputes or claims meet the criteria of the
  first paragraph of this Rule. (c) The authority and duties of JAMS are
  prescribed in the Agreement of the Parties and in these Rules, and may be
  carried out through such representatives as it may direct. (d) JAMS may, in
  its discretion, assign the administration of an Arbitration to any of its
  Resolution Centers. (e) The term “Party” as used in these Rules includes
  Parties to the Arbitration and their counsel or representatives. (f) “Electronic
  filing” (e-file) means the electronic transmission of documents to and from
  JAMS and other Parties for the purpose of filing via the Internet.
  “Electronic service” (e-service) means the electronic transmission of
  documents via JAMS Electronic Filing System to a party, attorney or
  representative under these Rules. Rule 2. Party-Agreed Procedures The Parties
  may agree on any procedures not specified herein or in lieu of these Rules
  that are consistent with the applicable law and JAMS policies including, without
  limitation, the JAMS Policy on Employment Arbitration Minimum Standards of
  Procedural Fairness, and Rules 15(i), 30 and 31. The Parties shall promptly
  notify JAMS of any such Party-agreed procedures and shall confirm such
  procedures in writing. The Party-agreed procedures shall be enforceable as if
  contained in these Rules. Rule 3. Amendment of Rules JAMS may amend these
  Rules without notice. The Rules in effect on the date of the commencement of
  an Arbitration (as defined in Rule 5) shall apply to that Arbitration, unless
  the Parties have agreed upon another version of the Rules. Rule 4. Conflict
  with Law If any of these Rules, or modification of these Rules agreed on by
  the Parties, is determined to be in conflict with a provision of applicable
  law, the provision of law will govern over the Rule in conflict, and no other
  Rule will be affected. Rule 5. Commencing an Arbitration (a) The Arbitration
  is deemed commenced when JAMS confirms in a Commencement Letter its receipt
  of one of the following: (i) A post-dispute Arbitration agreement fully
  executed by all Parties and that specifies JAMS administration or use of any
  JAMS Rules; or (ii) A pre-dispute written contractual provision requiring the
  Parties to arbitrate the employment dispute or claim and which specifies JAMS
  administration or use of any JAMS Rules or which the Parties agree shall be
  administered by JAMS; or (iii) A written confirmation of an oral agreement of
  all Parties to participate in an Arbitration administered by JAMS or
  conducted pursuant to any JAMS Rules; or (iv) A copy of a court order
  compelling Arbitration at JAMS. (b) The Commencement Letter shall confirm
  which one of the above requirements for commencement has been met, that JAMS
  has received all payments required under the applicable fee schedule, and
  that the claimant has 

  

 

	
  

  	
  8 JAMS
  Employment Arbitration Rules & Procedures | Effective July 15, 2009 JAMS
  Employment Arbitration Rules & Procedures | Effective July 15, 2009 9
  provided JAMS with contact information for all Parties along with evidence
  that the Demand has been served on all Parties. (c) If a Party that is
  obligated to arbitrate in accordance with subparagraph (a) of this Rule fails
  to agree to participate in the Arbitration process, JAMS shall confirm in
  writing that Party’s failure to respond or participate and, pursuant to Rule
  19, the Arbitrator, once appointed, shall schedule, and provide appropriate
  notice of a Hearing or other opportunity for the Party demanding the
  Arbitration to demonstrate its entitlement to relief. (d) The date of
  commencement of the Arbitration is the date of the Commencement Letter, but
  it is not intended to be applicable to any legal requirements such as the
  statute of limitations, any contractual limitations period, or claims notice
  requirements. The term “commencement” as used in this Rule is intended only
  to pertain to the operation of this and other rules (such as Rule 3, 9(a),
  9(c), 13(a), 17(a), 31(a).) Rule 6. Preliminary and Administrative Matters
  (a) JAMS may convene, or the Parties may request, administrative conferences
  to discuss any procedural matter relating to the administration of the
  Arbitration. (b) If no Arbitrator has yet been appointed, at the request of a
  Party and in the absence of Party agreement, JAMS may determine the location
  of the Hearing, subject to Arbitrator review. In determining the location of
  the Hearing, such factors as the subject matter of the dispute, the
  convenience of the Parties and witnesses and the relative resources of the
  Parties shall be considered, but in no event will the Hearing be scheduled in
  a location that precludes attendance by the Employee. (c) If, at any time,
  any Party has failed to pay fees or expenses in full, JAMS may order the
  suspension or termination of the proceedings. JAMS may so inform the Parties
  in order that one of them may advance the required payment. If one Party
  advances the payment owed by a non-paying Party, the Arbitration shall
  proceed and the Arbitrator may allocate the non-paying Party’s share of such
  costs, in accordance with Rules 24(f) and 31(c). An administrative suspension
  shall toll any other time limits contained in these Rules or the Parties’
  Agreement. (d) JAMS does not maintain an official record of documents filed
  in the Arbitration. If the Parties wish to have any documents returned to
  them, they must advise JAMS in writing within 30 days of the conclusion of
  the Arbitration. If special arrangements are required regarding file
  maintenance or document retention, they must be agreed to in writing and JAMS
  reserves the right to impose an additional fee for such special arrangements.
  Documents that are submitted for e-filing are retained for 30 days following
  the conclusion of the Arbitration. (e) Unless the Parties’ agreement or
  applicable law provides otherwise, JAMS, if it determines that the
  Arbitrations so filed have common issues of fact or law, may consolidate
  Arbitrations in the following instances: (i) If a Party files more than one
  Arbitration with JAMS, JAMS may consolidate the Arbitrations into a single
  arbitration. (ii) Where a Demand or Demands for Arbitration is or are
  submitted naming Parties already involved in another Arbitration or
  Arbitrations pending under these Rules, JAMS may decide that the new case or
  cases shall be consolidated into one or more of the pending proceedings and
  referred to one of the Arbitrators or panels of Arbitrators already
  appointed. (iii) Where a Demand or Demands for Arbitration is or are
  submitted naming parties that are not identical to the Parties in the existing
  Arbitration or Arbitrations, JAMS may decide that the new case or cases shall
  be consolidated into one or more of the pending proceedings and referred to
  one of the Arbitrators or panels of Arbitrators already appointed. When
  rendering its decision, JAMS will take into account all circumstances,
  including the links between the cases and the progress already made in the
  existing Arbitrations. Unless applicable law provides otherwise, where JAMS
  decides to consolidate a proceeding into a pending Arbitration, the Parties
  to the consolidated case or cases will be deemed to have waived their right
  to designate an Arbitrator as well as any contractual provision with respect
  to the site of the Arbitration. 

  

 

	
  

  	
  10 JAMS
  Employment Arbitration Rules & Procedures | Effective July 15, 2009 JAMS
  Employment Arbitration Rules & Procedures | Effective July 15, 2009 11
  (f) Where a third party seeks to participate in an Arbitration already
  pending under these Rules or where a Party to an Arbitration under these
  Rules seeks to compel a third party to participate in a pending Arbitration,
  the Arbitrator shall determine such request, taking into account all
  circumstances the Arbitrator deems relevant and applicable. Rule 7. Number of
  Arbitrators and Appointment of Chairperson (a) The Arbitration shall be
  conducted by one neutral Arbitrator unless all Parties agree otherwise. In
  these Rules, the term “Arbitrator” shall mean, as the context requires, the
  Arbitrator or the panel of Arbitrators in a tripartite Arbitration. (b) In cases
  involving more than one Arbitrator the Parties shall agree on, or in the
  absence of agreement JAMS shall designate, the Chairperson of the Arbitration
  Panel. If the Parties and the Arbitrators agree, a single member of the
  Arbitration Panel may, acting alone, decide discovery and procedural matters,
  including the conduct of hearings to receive documents and testimony from
  third parties who have been subpoenaed to produce documents. (c) Where the
  Parties have agreed that each Party is to name one Arbitrator, the
  Arbitrators so named shall be neutral and independent of the appointing Party
  unless the Parties have agreed that they shall be non-neutral. Rule 8.
  Service (a) The Arbitrator may at any time require electronic filing and
  service of documents in an Arbitration. If an Arbitrator requires electronic
  filing, the Parties shall maintain and regularly monitor a valid, usable and
  live email address for the receipt of all documents filed through JAMS
  Electronic Filing System. Any document filed electronically shall be
  considered as filed with JAMS when the transmission to JAMS Electronic Filing
  System is complete. Any document e-filed by 11:59 p.m. (of the sender’s time
  zone) shall be deemed filed on that date. Upon completion of filing, JAMS
  Electronic Filing System shall issue a confirmation receipt that includes the
  date and time of receipt. The confirmation receipt shall serve as proof of
  filing. (b) Every document filed with JAMS Electronic Filing System shall be
  deemed to have been signed by the Arbitrator, Case Manager, attorney or
  declarant who submits the document to JAMS Electronic Filing System, and
  shall bear the typed name, address, telephone number, and Bar number of a
  signing attorney. Documents containing signatures of third-parties (i.e., unopposed
  motions, affidavits, stipulations, etc.) may also be filed electronically by
  indicating that the original signatures are maintained by the filing Party in
  paper-format. (c) Delivery of e-service documents through JAMS Electronic
  Filing System to other registered users shall be considered as valid and
  effective service and shall have the same legal effect as an original paper
  document. Recipients of e-service documents shall access their documents
  through JAMS Electronic Filing System. E-service shall be deemed complete
  when the party initiating e-service completes the transmission of the
  electronic document(s) to JAMS Electronic Filing System for e-filing and/or
  e-service. Upon actual or constructive receipt of the electronic document(s)
  by the party to be served, a Certificate of Electronic Service shall be
  issued by JAMS Electronic Filing System to the party initiating e-service and
  that Certificate shall serve as proof of service. Any party who ignores or
  attempts to refuse e-service shall be deemed to have received the electronic
  document(s) 72 hours following the transmission of the electronic document(s)
  to JAMS Electronic Filing System. (d) If an electronic filing or service does
  not occur because of (1) an error in the transmission of the document to JAMS
  Electronic Filing System or served Party which was unknown to the sending
  Party, (2) a failure to process the electronic document when received by JAMS
  Electronic Filing System, (3) the Party was erroneously excluded from the
  service list, or (4) other technical problems experienced by the filer, the
  Arbitrator or JAMS may for good cause shown permit the document to be filed
  nunc pro tunc to the date it was first attempted to be sent electronically.
  Or, in the case of service, the Party shall, absent extraordinary
  circumstances, be entitled to an order extending the date for any response or
  the period within which any right, duty or other act must be performed. (e)
  For documents that are not filed electronically, service by a Party under
  these Rules is effected by providing one signed copy of the document to each
  Party and two copies in the case of a sole Arbitrator and four copies in the
  case of a tripartite panel to JAMS. Service may be made 

  

 

	
  

  	
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  hand-delivery, overnight delivery service or U.S. mail. Service by any of
  these means is considered effective upon the date of deposit of the document.
  Service by electronic mail or facsimile transmission is considered effective
  upon transmission, but only if followed within one week of delivery by
  service of an appropriate number of copies and originals by one of the other
  service methods. In computing any period of time prescribed or allowed by
  these Rules for a Party to do some act within a prescribed period after the
  service of a notice or other paper on the Party and the notice or paper is
  served on the Party only by U.S. Mail, three (3) calendar days shall be added
  to the prescribed period. Rule 9. Notice of Claims (a) Each Party shall
  afford all other Parties reasonable and timely notice of its claims,
  affirmative defenses or counterclaims. Any such notice shall include a short
  statement of its factual basis. No claim, remedy, counterclaim, or
  affirmative defense will be considered by the Arbitrator in the absence of
  such prior notice to the other Parties, unless the Arbitrator determines that
  no Party has been unfairly prejudiced by such lack of formal notice or all
  Parties agree that such consideration is appropriate notwithstanding the lack
  of prior notice. (b) Within fourteen (14) calendar days after the
  commencement of an Arbitration, Claimant shall submit to JAMS and serve on
  the other Parties a notice of its claim and remedies sought. Such notice
  shall consist of either a Demand for Arbitration or a copy of a Complaint
  previously filed with a court. (In the latter case, Claimant may accompany
  the Complaint with a copy of any Answer to that Complaint filed by any
  Respondent.) (c) Within fourteen (14) calendar days of service of the notice
  of claim, a Respondent may submit to JAMS and serve on other Parties a
  response and must so submit and serve a statement of any affirmative defenses
  (including jurisdictional challenges) or counterclaims it may have. (d)
  Within fourteen (14) calendar days of service of a counterclaim, a claimant
  may submit to JAMS and serve on other Parties a response to such counterclaim
  and must so submit and serve a statement of any affirmative defenses
  (including jurisdictional challenges) it may have. (e) Any claim or
  counterclaim to which no response has been served will be deemed denied. Rule
  10. Changes of Claims After the filing of a claim and before the Arbitrator
  is appointed, any Party may make a new or different claim against a Party or
  any third Party that is subject to Arbitration in the proceeding. Such claim
  shall be made in writing, filed with JAMS and served on the other Parties.
  Any response to the new claim shall be made within fourteen (14) calendar
  days after service of such claim. After the Arbitrator is appointed, no new
  or different claim may be submitted except with the Arbitrator’s approval. A
  Party may request a Hearing on this issue. Each Party has the right to
  respond to any new or amended claim in accordance with Rule 9(d). Rule 11.
  Interpretation of Rules and Jurisdictional Challenges (a) Once appointed, the
  Arbitrator shall resolve disputes about the interpretation and applicability
  of these Rules and conduct of the Arbitration Hearing. The resolution of the
  issue by the Arbitrator shall be final. (b) Whenever in these Rules a matter
  is to be determined by “JAMS” (such as in Rules 6; 11 (d); 15(d), (f), (g) or
  (i)), such determination shall be made in accordance with JAMS administrative
  procedures. (c) Jurisdictional and arbitrability disputes, including disputes
  over the formation, existence, validity, interpretation or scope of the
  agreement under which Arbitration is sought, and who are proper Parties to
  the Arbitration, shall be submitted to and ruled on by the Arbitrator. Unless
  the relevant law requires otherwise, the Arbitrator has the authority to
  determine jurisdiction and arbitrability issues as a preliminary matter. (d)
  Disputes concerning the appointment of the Arbitrator shall be resolved by
  JAMS. (e) The Arbitrator may, upon a showing of good cause or sua sponte,
  when necessary to facilitate the Arbitration, extend any deadlines
  established in these Rules, provided that the time for rendering the Award
  may only be altered in accordance with Rules 22(i) or 24. 

  

 

	
  

  	
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  Rule 12. Representation (a) The Parties may be represented by counsel or any
  other person of the Party’s choice. Each Party shall give prompt written
  notice to the Case Manager and the other Parties of the name, address,
  telephone and fax numbers, and email address of its representative. The
  representative of a Party may act on the Party’s behalf in complying with
  these Rules. (b) Changes in Representation. A Party shall give prompt written
  notice to the Case Manager and the other Parties of any change in its
  representation, including the name, address, telephone and fax numbers, and
  email address of the new representative. Such notice shall state that the
  written consent of the former representative, if any, and of the new
  representative, has been obtained and shall state the effective date of the
  new representation. Rule 13. Withdrawal from Arbitration (a) No Party may
  terminate or withdraw from an Arbitration after the issuance of the
  Commencement Letter (see Rule 5) except by written agreement of all Parties
  to the Arbitration. (b) A Party that asserts a claim or counterclaim may
  unilaterally withdraw that claim or counterclaim without prejudice by serving
  written notice on the other Parties and on the Arbitrator. However, the
  opposing Parties may, within fourteen (14) calendar days of service of notice
  of the withdrawal of the claim or counterclaim, request that the Arbitrator
  order that the withdrawal be with prejudice. If such a request is made, it
  shall be determined by the Arbitrator. Rule 14. Ex Parte Communications (a)
  No Party may have any ex parte communication with a neutral Arbitrator
  jointly selected by the Parties. The Arbitrator(s) may authorize any Party to
  communicate directly with the Arbitrator(s) by email or other written
  correspondence, so long as copies are simultaneously forwarded to the JAMS
  Case Manager and the other Parties. (b) A Party may have ex parte
  communication with its appointed neutral or non-neutral Arbitrator as
  necessary to secure the Arbitrator’s services and to assure the absence of
  conflicts and in connection with the selection of the Chairperson of the
  arbitral panel. (c) The Parties may agree to permit more extensive ex parte
  communication between a Party and a non-neutral Arbitrator. More extensive
  communications with a nonneutral arbitrator may also be permitted by
  applicable law and rules of ethics. Rule 15. Arbitrator Selection and
  Replacement (a) Unless the Arbitrator has been previously selected by
  agreement of the Parties, JAMS may attempt to facilitate agreement among the
  Parties regarding selection of the Arbitrator. (b) If the Parties do not
  agree on an Arbitrator, JAMS shall send the Parties a list of at least five
  (5) Arbitrator candidates in the case of a sole Arbitrator and ten (10)
  Arbitrator candidates in the case of a tripartite panel. JAMS shall also
  provide each Party with a brief description of the background and experience
  of each Arbitrator candidate. JAMS may replace any or all names on the list
  of Arbitrator candidates for reasonable cause at any time before the Parties
  have submitted their choice pursuant to subparagraph (c) below. (c) Within
  seven (7) calendar days of service by the Parties of the list of names, each
  Party may strike two (2) names in the case of a sole Arbitrator and three (3)
  names in the case of a tripartite panel, and shall rank the remaining
  Arbitrator candidates in order of preference. The remaining Arbitrator
  candidate with the highest composite ranking shall be appointed the
  Arbitrator. JAMS may grant a reasonable extension of the time to strike and rank
  the Arbitrator candidates to any Party without the consent of the other
  Parties. (d) If this process does not yield an Arbitrator or a complete
  panel, JAMS shall designate the sole Arbitrator or as many members of the
  tripartite panel as are necessary to complete the panel. (e) If a Party fails
  to respond to a list of Arbitrator candidates within seven (7) calendar days
  after its service, JAMS shall deem that Party to have accepted all of the
  Arbitrator candidates. 

  

 

	
  

  	
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  (f) Entities whose interests are not adverse with respect to the issues in
  dispute shall be treated as a single Party for purposes of the Arbitrator
  selection process. JAMS shall determine whether the interests between
  entities are adverse for purposes of Arbitrator selection, considering such
  factors as whether the entities are represented by the same attorney and
  whether the entities are presenting joint or separate positions at the
  Arbitration. (g) If, for any reason, the Arbitrator who is selected is unable
  to fulfill the Arbitrator’s duties, a successor Arbitrator shall be chosen in
  accordance with this Rule. If a member of a panel of Arbitrators becomes
  unable to fulfill his or her duties after the beginning of a Hearing but
  before the issuance of an Award, a new Arbitrator will be chosen in
  accordance with this Rule unless, in the case of a tripartite panel, the
  Parties agree to proceed with the remaining two Arbitrators. JAMS will make
  the final determination as to whether an Arbitrator is unable to fulfill his
  or her duties, and that decision shall be final. (h) Any disclosures
  regarding the selected Arbitrator shall be made as required by law or within
  ten (10) calendar days from the date of appointment. The obligation of the
  Arbitrator to make all required disclosures continues throughout the
  Arbitration process. Such disclosures may be provided in electronic format,
  provided that JAMS will produce a hard copy to any Party that requests it.
  (i) At any time during the Arbitration process, a Party may challenge the
  continued service of an Arbitrator for cause. The challenge must be based
  upon information that was not available to the Parties at the time the
  Arbitrator was selected. A challenge for cause must be in writing and
  exchanged with opposing Parties who may respond within seven (7) days of
  service of the challenge. JAMS shall make the final determination as to such
  challenge. Such determination shall take into account the materiality of the
  facts and any prejudice to the Parties. That decision will be final. (j)
  Where the Parties have agreed that a Party-appointed Arbitrator is to be
  non-neutral, that Party-appointed Arbitrator is not obliged to withdraw if
  requested to do so only by the party who did not appoint that Arbitrator.
  Rule 16. Preliminary Conference At the request of any Party or at the
  direction of the Arbitrator, a Preliminary Conference shall be conducted with
  the Parties or their counsel or representatives. The Preliminary Conference
  may address any or all of the following subjects: (a) The exchange of
  information in accordance with Rule 17 or otherwise; (b) The schedule for
  discovery as permitted by the Rules, as agreed by the Parties or as required
  or authorized by applicable law; (c) The pleadings of the Parties and any
  agreement to clarify or narrow the issues or structure the Arbitration
  Hearing; (d) The scheduling of the Hearing and any pre-Hearing exchanges of
  information, exhibits, motions or briefs; (e) The attendance of witnesses as
  contemplated by Rule 21; (f) The scheduling of any dispositive motion
  pursuant to Rule 18; (g) The premarking of exhibits; preparation of joint
  exhibit lists and the resolution of the admissibility of exhibits; (h) The
  form of the Award; and (i) Such other matters as may be suggested by the
  Parties or the Arbitrator. The Preliminary Conference may be conducted
  telephonically and may be resumed from time to time as warranted. Rule 17.
  Exchange of Information (a) The Parties shall cooperate in good faith in the
  voluntary and informal exchange of all non-privileged documents and other
  information (including electronically stored information (“ESI”)) relevant to
  the dispute or claim immediately after commencement of the Arbitration. They
  shall complete an initial exchange of all relevant, nonprivileged documents,
  including, without limitation, copies of all documents in their possession or
  control on which 

  

 

	
  

  	
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  they rely in support of their positions, names of individuals whom they may
  call as witnesses at the Arbitration Hearing, and names of all experts who
  may be called to testify at the Arbitration Hearing, together with each
  expert’s report that may be introduced at the Arbitration Hearing, within
  twenty-one (21) calendar days after all pleadings or notice of claims have
  been received. The Arbitrator may modify these obligations at the Preliminary
  Conference. (b) Each Party may take at least one deposition of an opposing
  Party or an individual under the control of the opposing Party. The Parties
  shall attempt to agree on the number, time, location, and duration of the
  deposition(s). Absent agreement, the Arbitrator shall determine these issues
  including whether to grant a request for additional depositions, based upon
  the reasonable need for the requested information, the availability of other
  discovery, and the burdensomeness of the request on the opposing Parties and
  witness. (c) As they become aware of new documents or information, including
  experts who may be called upon to testify, all Parties continue to be
  obligated to provide relevant, nonprivileged documents, to supplement their
  identification of witnesses and experts and to honor any informal agreements
  or understandings between the Parties regarding documents or information to
  be exchanged. Documents that were not previously exchanged, or witnesses and
  experts that were not previously identified, may not be considered by the
  Arbitrator at the Hearing, unless agreed by the Parties or upon a showing of
  good cause. (d) The Parties shall promptly notify JAMS when a dispute exists regarding
  discovery issues. A conference shall be arranged with the Arbitrator, either
  by telephone or in person, and the Arbitrator shall decide the dispute. With
  the written consent of all Parties, and in accordance with an agreed written
  procedure, the Arbitrator may appoint a special master to assist in resolving
  a discovery dispute. Rule 18. Summary Disposition of a Claim or Issue The
  Arbitrator may permit any Party to file a Motion for Summary Disposition of a
  particular claim or issue, either by agreement of all interested Parties or
  at the request of one Party, provided other interested Parties have
  reasonable notice to respond to the motion. Rule 19. Scheduling and Location
  of Hearing (a) The Arbitrator, after consulting with the Parties that have appeared,
  shall determine the date, time and location of the Hearing. The Arbitrator
  and the Parties shall attempt to schedule consecutive Hearing days if more
  than one day is necessary. (b) If a Party has failed to participate in the
  Arbitration process, and the Arbitrator reasonably believes that the Party
  will not participate in the Hearing, the Arbitrator may set the Hearing
  without consulting with that Party. The non-participating Party shall be
  served with a Notice of Hearing at least thirty (30) calendar days prior to
  the scheduled date unless the law of the relevant jurisdiction allows for or
  the Parties have agreed to shorter notice. (c) The Arbitrator, in order to
  hear a third party witness, or for the convenience of the Parties or the
  witnesses, may conduct the Hearing at any location. Any JAMS Resolution
  Center may be designated a Hearing location for purposes of the issuance of a
  subpoena or subpoena duces tecum to a third party witness. Rule 20.
  Pre-Hearing Submissions (a) Except as set forth in any scheduling order that
  may be adopted, at least fourteen (14) calendar days before the Arbitration
  Hearing, the Parties shall file with JAMS and serve and exchange (1) a list
  of the witnesses they intend to call, including any experts, (2) a short description
  of the anticipated testimony of each such witness and an estimate of the
  length of the witness’ direct testimony, and (3) a list of all exhibits
  intended to be used at the Hearing. The Parties should exchange with each
  other a copy of any such exhibits to the extent that it has not been
  previously exchanged. The Parties should pre-mark exhibits and shall attempt
  to resolve any disputes regarding the admissibility of exhibits prior to the
  Hearing. (b) The Arbitrator may require that each Party submit concise
  written statements of position, including summaries of the facts and evidence
  a Party intends to present, discussion of the applicable law and the basis
  for the requested Award or denial of relief sought. The statements, which may
  be in the form of a letter, shall be filed with JAMS and served upon the
  other Parties, at least seven (7) calendar days before the Hearing date.
  Rebuttal statements or 

  

 

	
  

  	
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  other pre-Hearing written submissions may be permitted or required at the
  discretion of the Arbitrator. Rule 21. Securing Witnesses and Documents for
  the Arbitration Hearing At the written request of a Party, all other Parties
  shall produce for the Arbitration Hearing all specified witnesses in their
  employ or under their control without need of subpoena. The Arbitrator may
  issue subpoenas for the attendance of witnesses or the production of
  documents either prior to or at the Hearing pursuant to this Rule or Rule
  19(c). The subpoena or subpoena duces tecum shall be issued in accordance
  with the applicable law. Pre-issued subpoenas may be used in jurisdictions
  that permit them. In the event a Party or a subpoenaed person objects to the
  production of a witness or other evidence, the Party or subpoenaed person may
  file an objection with the Arbitrator, who shall promptly rule on the
  objection, weighing both the burden on the producing Party and witness and the
  need of the proponent for the witness or other evidence. Rule 22. The
  Arbitration Hearing (a) The Arbitrator will ordinarily conduct the
  Arbitration Hearing in the manner set forth in these Rules. The Arbitrator
  may vary these procedures if it is determined reasonable and appropriate to
  do so. It is expected that the Employee will attend the Arbitration Hearing,
  as will any other individual Party with information about a significant
  issue. (b) The Arbitrator shall determine the order of proof, which will
  generally be similar to that of a court trial. (c) The Arbitrator shall
  require witnesses to testify under oath if requested by any Party, or
  otherwise in the discretion of the Arbitrator. (d) Strict conformity to the
  rules of evidence is not required, except that the Arbitrator shall apply
  applicable law relating to privileges and work product. The Arbitrator shall
  consider evidence that he or she finds relevant and material to the dispute,
  giving the evidence such weight as is appropriate. The Arbitrator may be
  guided in that determination by principles contained in the Federal Rules of
  Evidence or any other applicable rules of evidence. The Arbitrator may limit
  testimony to exclude evidence that would be immaterial or unduly repetitive,
  provided that all Parties are afforded the opportunity to present material
  and relevant evidence. (e) The Arbitrator shall receive and consider relevant
  deposition testimony recorded by transcript or videotape, provided that the
  other Parties have had the opportunity to attend and cross-examine. The
  Arbitrator may in his or her discretion consider witness affidavits or other
  recorded testimony even if the other Parties have not had the opportunity to
  cross-examine, but will give that evidence only such weight as the Arbitrator
  deems appropriate. (f) The Parties will not offer as evidence, and the
  Arbitrator shall neither admit into the record nor consider, prior settlement
  offers by the Parties or statements or recommendations made by a mediator or
  other person in connection with efforts to resolve the dispute being
  arbitrated, except to the extent that applicable law permits the admission of
  such evidence. (g) The Hearing or any portion thereof may be conducted
  telephonically with the agreement of the Parties or in the discretion of the
  Arbitrator. (h) When the Arbitrator determines that all relevant and material
  evidence and arguments have been presented, and any interim or partial awards
  have been issued, the Arbitrator shall declare the Hearing closed. The
  Arbitrator may defer the closing of the Hearing until a date agreed upon by
  the Arbitrator and the Parties, to permit the Parties to submit post-Hearing
  briefs, which may be in the form of a letter, and/or to make closing
  arguments. If post-Hearing briefs are to be submitted, or closing arguments
  are to be made, the Hearing shall be deemed closed upon receipt by the
  Arbitrator of such briefs or at the conclusion of such closing arguments. (i)
  At any time before the Award is rendered, the Arbitrator may, sua sponte or
  on application of a Party for good cause shown, re-open the Hearing. If the
  Hearing is reopened and the re-opening prevents the rendering of the Award
  within the time limits specified by these Rules, the time limits will be
  extended until the reopened Hearing is declared closed by the Arbitrator. (j)
  The Arbitrator may proceed with the Hearing in the absence of a Party that,
  after receiving notice of the Hearing pursuant to Rule 19, fails to attend.
  The Arbitrator may 

  

 

	
  

  	
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  not render an Award solely on the basis of the default or absence of the
  Party, but shall require any Party seeking relief to submit such evidence as
  the Arbitrator may require for the rendering of an Award. If the Arbitrator
  reasonably believes that a Party will not attend the Hearing, the Arbitrator
  may schedule the Hearing as a telephonic Hearing and may receive the evidence
  necessary to render an Award by affidavit. The notice of Hearing shall
  specify if it will be in person or telephonic. (k) (i) Any Party may arrange
  for a stenographic or other record to be made of the Hearing and shall inform
  the other Parties in advance of the Hearing. The requesting Party shall bear
  the cost of such stenographic record. If all other Parties agree to share the
  cost of the stenographic record, it shall be made available to the Arbitrator
  and may be used in the proceeding. (ii) If there is no agreement to share the
  cost, the stenographic record may not be provided to the Arbitrator and may
  not be used in the proceeding unless the Party arranging for the stenographic
  record either agrees to provide access to the stenographic record at no
  charge or on terms that are acceptable to the Parties and the reporting
  service. (iii) If the Parties agree to an Optional Arbitration Appeal
  Procedure (see Rule 34), they shall ensure that a stenographic or other
  record is made of the Hearing. (iv) The Parties may agree that the cost of
  the stenographic record shall or shall not be allocated by the Arbitrator in
  the Award. Rule 23. Waiver of Hearing The Parties may agree to waive the oral
  Hearing and submit the dispute to the Arbitrator for an Award based on
  written submissions and other evidence as the Parties may agree. Rule 24.
  Awards (a) The Arbitrator shall render a Final Award or a Partial Final Award
  within thirty (30) calendar days after the date of the close of the Hearing
  as defined in Rule 22(h) or, if a Hearing has been waived, within thirty (30)
  calendar days after the receipt by the Arbitrator of all materials specified
  by the Parties, except (i) by the agreement of the Parties, (ii) upon good
  cause for an extension of time to render the Award, or (iii) as provided in
  Rule 22(i). The Arbitrator shall provide the Final Award or the Partial Final
  Award to JAMS for issuance in accordance with this Rule. (b) Where a panel of
  Arbitrators has heard the dispute, the decision and Award of a majority of
  the panel shall constitute the Arbitration Award. (c) In determining the
  merits of the dispute the Arbitrator shall be guided by the rules of law
  agreed upon by the Parties. In the absence of such agreement, the Arbitrator
  will be guided by the law or the rules of law that the Arbitrator deems to be
  most appropriate. The Arbitrator may grant any remedy or relief that is just
  and equitable and within the scope of the Parties’ agreement, including but
  not limited to specific performance of a contract or any other equitable or
  legal remedy. (d) In addition to a Final Award or Partial Final Award, the
  Arbitrator may make other decisions, including interim or partial rulings,
  orders and Awards. (e) Interim Measures. The Arbitrator may grant whatever
  interim measures are deemed necessary, including injunctive relief and
  measures for the protection or conservation of property and disposition of
  disposable goods. Such interim measures may take the form of an interim
  Award, and the Arbitrator may require security for the costs of such measures.
  Any recourse by a Party to a court for interim or provisional relief shall
  not be deemed incompatible with the agreement to arbitrate or a waiver of the
  right to arbitrate. (f) The Award of the Arbitrator may allocate Arbitration
  fees and Arbitrator compensation and expenses unless such an allocation is
  expressly prohibited by the Parties’ agreement or by applicable law. (Such a
  prohibition may not limit the power of the Arbitrator to allocate Arbitration
  fees and Arbitrator compensation and expenses pursuant to Rule 31(c)). (g)
  The Award of the Arbitrator may allocate attorneys’ fees and expenses and
  interest (at such rate and from such date as the Arbitrator may deem
  appropriate) if provided by the Parties’ agreement or allowed by applicable
  law. (h) The Award will consist of a written statement signed by the
  Arbitrator regarding the disposition of each claim and the relief, if any, as
  to each claim. The Award shall also contain a concise written statement of
  the reasons for the 

  

 

	
  

  	
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  Award, stating the essential findings and conclusions on which the award is
  based. The Parties may agree to any other form of award, unless the
  arbitration is based on an arbitration agreement that is required as a
  condition of employment. (i) After the Award has been rendered, and provided
  the Parties have complied with Rule 31, the Award shall be issued by serving
  copies on the Parties. Service may be made by U.S. Mail. It need not be sent
  certified or registered. (j) Within seven (7) calendar days after service of
  the Award by JAMS, any Party may serve upon the other Parties and on JAMS a
  request that the Arbitrator correct any computational, typographical or other
  similar error in an Award (including the reallocation of fees pursuant to
  Rule 31), or the Arbitrator may sua sponte propose to correct such errors in
  an Award. A Party opposing such correction shall have seven (7) calendar days
  thereafter in which to file any objection. The Arbitrator may make any
  necessary and appropriate correction to the Award within twenty-one (21)
  calendar days of receiving a request or fourteen (14) calendar days after the
  Arbitrator’s proposal to do so. The Arbitrator may extend the time within
  which to make corrections upon good cause. The corrected Award shall be
  served upon the Parties in the same manner as the Award. (k) The Award is
  considered final, for purposes of either an Optional Arbitration Appeal
  Procedure pursuant to Rule 34 or a judicial proceeding to enforce, modify or
  vacate the Award pursuant to Rule 25, fourteen (14) calendar days after
  service is deemed effective if no request for a correction is made, or as of
  the effective date of service of a corrected Award. Rule 25. Enforcement of
  the Award Proceedings to enforce, confirm, modify or vacate an Award will be
  controlled by and conducted in conformity with the Federal Arbitration Act, 9
  U.S.C. Sec 1 et seq. or applicable state law. The Parties to an Arbitration
  under these Rules shall be deemed to have consented that judgment upon the
  Award may be entered in any court having jurisdiction thereof. Rule 26.
  Confidentiality and Privacy (a) JAMS and the Arbitrator shall maintain the
  confidential nature of the Arbitration proceeding and the Award, including
  the Hearing, except as necessary in connection with a judicial challenge to
  or enforcement of an Award, or unless otherwise required by law or judicial
  decision. (b) The Arbitrator may issue orders to protect the confidentiality
  of proprietary information, trade secrets or other sensitive information. (c)
  Subject to the discretion of the Arbitrator or agreement of the Parties, any
  person having a direct interest in the Arbitration may attend the Arbitration
  Hearing. The Arbitrator may exclude any non-Party from any part of a Hearing.
  Rule 27. Waiver (a) If a Party becomes aware of a violation of or failure to
  comply with these Rules and fails promptly to object in writing, the objection
  will be deemed waived, unless the Arbitrator determines that waiver will
  cause substantial injustice or hardship. (b) If any Party becomes aware of
  information that could be the basis of a challenge for cause to the continued
  service of the Arbitrator, such challenge must be made promptly, in writing,
  to the Arbitrator or JAMS. Failure to do so shall constitute a waiver of any
  objection to continued service by the Arbitrator. Rule 28. Settlement and
  Consent Award (a) The Parties may agree, at any stage of the Arbitration
  process, to submit the case to JAMS for mediation. The JAMS mediator assigned
  to the case may not be the Arbitrator or a member of the Appeal Panel, unless
  the Parties so agree pursuant to Rule 28(b). (b) The Parties may agree to seek
  the assistance of the Arbitrator in reaching settlement. By their written
  agreement to submit the matter to the Arbitrator for settlement assistance,
  the Parties will be deemed to have agreed that the assistance of the
  Arbitrator in such settlement efforts will not disqualify the Arbitrator from
  continuing to serve as Arbitrator if settlement is not reached; nor shall
  such 

  

 

	
  

  	
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  assistance be argued to a reviewing court as the basis for vacating or
  modifying an Award. (c) If, at any stage of the Arbitration process, all
  Parties agree upon a settlement of the issues in dispute and request the
  Arbitrator to embody the agreement in a Consent Award, the Arbitrator shall
  comply with such request unless the Arbitrator believes the terms of the
  agreement are illegal or undermine the integrity of the Arbitration process.
  If the Arbitrator is concerned about the possible consequences of the
  proposed Consent Award, he or she shall inform the Parties of that concern
  and may request additional specific information from the Parties regarding
  the proposed Consent Award. The Arbitrator may refuse to enter the proposed Consent
  Award and may withdraw from the case. Rule 29. Sanctions The Arbitrator may
  order appropriate sanctions for failure of a Party to comply with its
  obligations under any of these Rules. These sanctions may include, but are
  not limited to, assessment of Arbitration fees and Arbitrator compensation
  and expenses, any other costs occasioned by the actionable conduct including
  reasonable attorney’s fees, exclusion of certain evidence, drawing adverse
  inferences, or in extreme cases determining an issue or issues submitted to
  Arbitration adversely to the Party that has failed to comply. Rule 30.
  Disqualification of the Arbitrator as a Witness or Party and Exclusion of
  Liability (a) The Parties may not call the Arbitrator, the Case Manager or
  any other JAMS employee or agent as a witness or as an expert in any pending
  or subsequent litigation or other proceeding involving the Parties and
  relating to the dispute that is the subject of the Arbitration. The
  Arbitrator, Case Manager and other JAMS employees and agents are also
  incompetent to testify as witnesses or experts in any such proceeding. (b)
  The Parties shall defend and/or pay the cost (including any attorneys’ fees)
  of defending the Arbitrator, Case Manager and/or JAMS from any subpoenas from
  outside Parties arising from the Arbitration. (c) The Parties agree that
  neither the Arbitrator, Case Manager nor JAMS is a necessary Party in any
  litigation or other proceeding relating to the Arbitration or the subject
  matter of the Arbitration, and neither the Arbitrator, Case Manager nor JAMS,
  including its employees or agents, shall be liable to any Party for any act
  or omission in connection with any Arbitration conducted under these Rules,
  including but not limited to any disqualification of or recusal by the Arbitrator.
  Rule 31. fees (a) Except as provided in paragraph (c) below, unless the
  Parties have agreed to a different allocation, each Party shall pay its
  pro-rata share of JAMS fees and expenses as set forth in the JAMS fee
  schedule in effect at the time of the commencement of the Arbitration. To the
  extent possible, the allocation of such fees and expenses shall not be
  disclosed to the Arbitrator. JAMS agreement to render services is jointly
  with the Party and the attorney or other representative of the Party in the
  Arbitration. The nonpayment of fees may result in an administrative
  suspension of the case in accordance with Rule 6(c). (b) JAMS requires that
  the Parties deposit the fees and expenses for the Arbitration prior to the
  Hearing and the Arbitrator may preclude a Party that has failed to deposit
  its pro-rata or agreed-upon share of the fees and expenses from offering
  evidence of any affirmative claim at the Hearing. (c) If an arbitration is
  based on a clause or agreement that is required as a condition of employment,
  the only fee that an employee may be required to pay is the initial JAMS Case
  Management Fee. JAMS does not preclude an employee from contributing to
  administrative and arbitrator fees and expenses. If an arbitration is not
  based on a clause or agreement that is required as a condition of employment,
  the Parties are jointly and severally liable for the payment of JAMS
  Arbitration fees and Arbitrator compensation and expenses. In the event that
  one Party has paid more than its share of such fees, compensation and
  expenses, the Arbitrator may award against any other Party any such fees,
  compensation and expenses that such Party owes with respect to the
  Arbitration. (d) Entities whose interests are not adverse with respect to the
  issues in dispute shall be treated as a single Party for 

  

 

	
  

  	
  28 JAMS
  Employment Arbitration Rules & Procedures | Effective July 15, 2009 JAMS
  Employment Arbitration Rules & Procedures | Effective July 15, 2009 29
  purposes of JAMS assessment of fees. JAMS shall determine whether the
  interests between entities are adverse for purpose of fees, considering such
  factors as whether the entities are represented by the same attorney and
  whether the entities are presenting joint or separate positions at the
  Arbitration. Rule 32. Bracketed (or High-Low) Arbitration Option (a) At any
  time before the issuance of the Arbitration Award, the Parties may agree, in
  writing, on minimum and maximum amounts of damages that may be awarded on
  each claim or on all claims in the aggregate. The Parties shall promptly
  notify JAMS, and provide to JAMS a copy of their written agreement setting
  forth the agreed-upon maximum and minimum amounts. (b) JAMS shall not inform
  the Arbitrator of the agreement to proceed with this option or of the
  agreed-upon minimum and maximum levels without the consent of the Parties.
  (c) The Arbitrator shall render the Award in accordance with Rule 24. (d) In
  the event that the Award of the Arbitrator is between the agreed-upon minimum
  and maximum amounts, the Award shall become final as is. In the event that
  the Award is below the agreed-upon minimum amount, the final Award issued
  shall be corrected to reflect the agreed-upon minimum amount. In the event
  that the Award is above the agreed-upon maximum amount, the final Award
  issued shall be corrected to reflect the agreed-upon maximum amount. Rule 33.
  final Offer (or Baseball) Arbitration Option (a) Upon agreement of the
  Parties to use the option set forth in this Rule, at least seven (7) calendar
  days before the Arbitration Hearing, the Parties shall exchange and provide
  to JAMS written proposals for the amount of money damages they would offer or
  demand, as applicable, and that they believe to be appropriate based on the
  standard set forth in Rule 24(c). JAMS shall promptly provide a copy of the
  Parties’ proposals to the Arbitrator, unless the Parties agree that they
  should not be provided to the Arbitrator. At any time prior to the close of
  the Arbitration Hearing, the Parties may exchange revised written proposals
  or demands, which shall supersede all prior proposals. The revised written
  proposals shall be provided to JAMS, which shall promptly provide them to the
  Arbitrator, unless the Parties agree otherwise. (b) If the Arbitrator has
  been informed of the written proposals, in rendering the Award the Arbitrator
  shall choose between the Parties’ last proposals, selecting the proposal that
  the Arbitrator finds most reasonable and appropriate in light of the standard
  set forth in Rule 24(c). This provision modifies Rule 24(h) in that no
  written statement of reasons shall accompany the Award. (c) If the Arbitrator
  has not been informed of the written proposals, the Arbitrator shall render
  the Award as if pursuant to Rule 24, except that the Award shall thereafter
  be corrected to conform to the closest of the last proposals, and the closest
  of the last proposals will become the Award. (d) Other than as provided
  herein, the provisions of Rule 24 shall be applicable. Rule 34. Optional
  Arbitration Appeal Procedure At any time before the Award becomes final
  pursuant to Rule 24, the Parties may agree to the JAMS Optional Arbitration
  Appeal Procedure. All Parties must agree in writing for such procedure to be
  effective. Once a Party has agreed to the Optional Arbitration Appeal Procedure,
  it cannot unilaterally withdraw from it, unless it withdraws, pursuant to
  Rule 13, from the Arbitration. 

  

 

	
  

  	
  1.800.352.JAMS
  | www.jamsadr.com © Copyright 2009 JAMS. All rights reserved.Exhibit 4.1

 

EXECUTION COPY

 

TAX BENEFITS PRESERVATION RIGHTS AGREEMENT

 

DATED AS OF SEPTEMBER 3, 2013

 

BY AND BETWEEN

 

IMPAC MORTGAGE HOLDINGS, INC.

 

AND

 

AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC

 

 

Table of Contents

 

	
 
    	
Page
    
	
 
    	
 
    
	
Section 1. Certain Definitions
    	
2
    
	
Section 2. Appointment of Rights Agent
    	
9
    
	
Section 3.   Issuance of Rights Certificates
    	
9
    
	
Section 4.   Form of Rights Certificates
    	
11
    
	
Section 5.   Countersignature and Registration
    	
12
    
	
Section 6. Transfer, Split   Up, Combination and Exchange of Rights Certificates; Mutilated, Destroyed,   Lost or Stolen Rights Certificates
    	
13
    
	
Section 7.   Exercise of Rights; Purchase Price; Expiration Date of Rights
    	
14
    
	
Section 8. Cancellation and Destruction of Rights Certificates
    	
17
    
	
Section 9.   Reservation and Availability of Preferred Stock
    	
17
    
	
Section 10. Record Date for Securities Issued
    	
19
    
	
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or Number of   Rights
    	
19
    
	
Section 12. Certificate of Adjusted Purchase Price or Number of Shares
    	
27
    
	
Section 13.   Consolidation, Merger or Sale or Transfer of Assets or Earning Power
    	
28
    
	
Section 14.   Fractional Rights and Fractional Shares
    	
32
    
	
Section 15. Rights of Action
    	
33
    
	
Section 16. Agreement of Rights Holders
    	
33
    
	
Section 17. Rights Certificate Holder Not Deemed a Stockholder
    	
34
    
	
Section 18. Concerning the Rights Agent
    	
34
    
	
Section 19.   Merger or Consolidation or Change of Name of Rights Agent
    	
35
    
	
Section 20. Duties of Rights Agent
    	
35
    
	
Section 21. Change of Rights Agent
    	
37
    
	
Section 22. Issuance of New Rights Certificates
    	
38
    
	
Section 23.   Redemption
    	
39
    
	
Section 24.   Exchange
    	
40
    
	
Section 25.   Process to Seek Exemption
    	
42
    
	
Section 26.   Notice of Certain Events
    	
43
    
	
Section 27. Notices
    	
44
    
	
Section 28. Supplements and Amendments
    	
45
    
	
Section 29. Successors
    	
46
    
	
Section 30. Determinations and Actions by the Board of Directors
    	
46
    
	
Section 31. Benefits of this Agreement
    	
46
    
	
Section 32. Severability
    	
47
    
	
Section 33. Governing Law
    	
47
    
	
Section 34. Counterparts
    	
47
    
	
Section 35. Descriptive Headings
    	
48
    
	
Section 36. Force Majeure
    	
48
    

 

 

TAX BENEFITS PRESERVATION RIGHTS AGREEMENT

 

This Tax Benefits Preservation Rights Agreement, dated as of September 3, 2013 (as it may be amended from time to time as provided herein, the “Agreement”), is entered into by and between Impac Mortgage Holdings, Inc., a Maryland corporation (the “Company”), and American Stock Transfer & Trust Company, LLC, a New York limited liability trust company (the “Rights Agent” which term shall include any successor Rights Agent hereunder). Capitalized terms contained herein and not otherwise defined shall have the meanings ascribed to them in Section 1.

 

W I T N E S S E T H

 

WHEREAS, the Company has generated Tax Benefits (as defined in Section 1) for United States federal income tax purposes, and as such Tax Benefits may potentially provide valuable tax benefits to the Company, the Company desires to avoid an “ownership change” within the meaning of Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”) and the Treasury Regulations promulgated thereunder, and thereby preserve the ability to utilize fully such Tax Benefits and, in furtherance of such objective, the Company desires to enter into this Agreement;

 

WHEREAS, the Board of Directors of the Company (“Board of Directors”) has authorized, and the Company declared, a dividend distribution of one Rights (as defined below) for each share of Common Stock outstanding as of the Close of Business on September 16, 2013 (the “Record Date”), and authorized the issuance of one Right for each share of Common Stock of the Company issued between the Record Date and the earlier of the Distribution Date or the Expiration Date, each Right initially representing the right to purchase one one-thousandth of a share (as such number may be adjusted pursuant to the provisions of this Agreement) of Series A-1 Junior Participating Preferred Stock of the Company having the rights, powers and preferences set forth on Exhibit A hereto, upon the terms and subject to the conditions hereinafter set forth (the “Rights”);

 

WHEREAS, the Company views the Tax Benefits as highly valuable assets of the Company that are likely to inure to the benefit of the Company and its stockholders, and the Company believes that it is in the best interests of the Company and its stockholders that the Company provide for the protection of the Tax Benefits on the terms and conditions set forth herein; and

 

WHEREAS, the Company desires to appoint the Rights Agent to act as rights agent hereunder, in accordance with the terms and conditions hereof.

 

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

 

 

Section 1. Certain Definitions. For purposes of this Agreement, the following terms have the meanings indicated:

 

“Acquiring Person” means any Person who or which, together with all Affiliates and Associates of such Person, shall be the Beneficial Owner of 4.99% or more of the shares of Common Stock of the Company then outstanding, but shall not include (i) any Exempt Person or (ii) any Existing Holder, unless and until such time as such Existing Holder becomes the Beneficial Owner of a percentage of the shares of Common Stock of the Company then outstanding equal to or exceeding such Existing Holder’s Existing Holder Percentage (at which such time such Existing Holder shall be deemed an “Acquiring Person”).

 

Notwithstanding the foregoing, no Person shall become an “Acquiring Person” (i) as the result of an acquisition by the Company of Common Stock of the Company which, by reducing the number of shares outstanding, increases the proportionate number of shares Beneficially Owned by such Person to 4.99% (or in the case of an Existing Holder, the Existing Holder Percentage applicable to such Existing Holder) or more of the shares of Common Stock of the Company then outstanding; provided, however, that if a Person shall become the Beneficial Owner of 4.99% (or in the case of an Existing Holder, the Existing Holder Percentage applicable to such Existing Holder) or more of the shares of Common Stock of the Company then outstanding by reason of share purchases by the Company and shall, after such share purchases by the Company, become the Beneficial Owner of any additional shares (other than pursuant to a stock split, stock dividend or similar transaction) of Common Stock of the Company and immediately thereafter be the Beneficial Owner of 4.99% (or in the case of an Existing Holder, the Existing Holder Percentage applicable to such Existing Holder) or more of the shares of Common Stock of the Company then outstanding, then such Person shall be deemed to be an “Acquiring Person,” and (ii) who becomes the Beneficial Owner of 4.99% or more of the outstanding shares of Common Stock as a result of the acquisition of shares of Common Stock directly from the Company, as long as, prior to the acquisition of shares of Common Stock directly from the Company, the Company has been apprised in writing by any such Person of the number of shares of Common Stock Beneficially Owned by such Person immediately prior to any such acquisition; provided, however, that if a Person shall become the Beneficial Owner of 4.99% or more of the shares of Common Stock then outstanding as a result of a direct purchase from the Company and shall, after that date, acquire one or more additional shares of the Company’s Common Stock without the prior written consent of the Company and shall then Beneficially Own more than 4.99% of the shares of Common Stock then outstanding, then such Person shall be deemed to be an “Acquiring Person.”  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 is the Beneficial Owner, will be calculated in accordance with Section 382 and the Treasury Regulations promulgated thereunder.

 

In addition, notwithstanding the foregoing, and notwithstanding anything to the contrary provided in this Agreement including without limitation in Sections 1, 3(a) or 27, a Person shall not be an “Acquiring Person” if the Board of Directors determines in good faith at any time that a Person who would otherwise be an “Acquiring Person,” has become such inadvertently without intending to become an “Acquiring Person,” and such Person divests (including by entering into an agreement with the Company, which agreement is satisfactory to the Board in its sole 

 

2

 

discretion, to divest and subsequently divests in accordance with the terms of such agreement, without exercising or retaining any power, including voting power, with respect to such shares of Common Stock) as promptly as practicable (or within such period of time as the Board of Directors determines is reasonable) a sufficient number of shares of Common Stock of the Company so that such Person would no longer be an “Acquiring Person.”

 

“Adjustment Shares” has the meaning set forth in Section 11(a)(ii).

 

“Affiliate” and “Associate” 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, shall also include with respect to any Person, any other Person whose shares of Common Stock or other securities of the Company (i) would be deemed to be constructively owned by such Person for purposes of Section 382 of the Code, (ii) would be deemed owned by a “single entity” as defined in Section 1.382-3(a)(1) of the Treasury Regulations, or (iii) otherwise aggregated with shares owned by such first Person, pursuant to the provisions of Section 382 of the Code, or any successor or replacement provision, and the Treasury Regulations thereunder;  provided , however , that a Person shall not be deemed to be the Affiliate or Associate of another Person solely because either or both Persons are or were directors of the Company.

 

A Person shall be deemed the “Beneficial Owner” of, and shall be deemed to “Beneficially Own” and have “Beneficial Ownership” of (or any derivative of such phrases), any securities:

 

(i) that such Person or any of such Person’s Affiliates or Associates, directly or indirectly, owns or has the legal, equitable or contractual right or obligation to acquire (whether directly or indirectly and whether exercisable immediately or only after the passage of time, compliance with regulatory requirements, satisfaction of one or more conditions (whether or not within the control of such Person) or otherwise) (A) pursuant to any agreement, arrangement or understanding whether or not in writing (other than customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities); (B) upon the exercise of any conversion rights, exchange rights, rights (other than the Rights), warrants or options, or otherwise; (C) pursuant to the power to revoke a trust, discretionary account or similar arrangement; (D) pursuant to the power to terminate a repurchase or similar so-called “stock borrowing” agreement, arrangement or understanding; (E) pursuant to the automatic termination of a trust, discretionary account or similar arrangement; or (F) any securities (including rights, options or warrants) that are convertible or exchangeable into, or exercisable for, shares of Common Stock until such time as such securities are converted, exchanged or exercised, except to the extent that the acquisition or transfer of securities (including rights, options or warrants) would be treated as exercised on the date of its acquisition or transfer pursuant to Section 1.382-4(d) of the Treasury Regulations promulgated under Section 382;  provided, however, that a Person will not be deemed to be the Beneficial Owner of, or to Beneficially Own, securities (1) tendered pursuant to a tender or exchange offer made by or on behalf of such Person or any of such Person’s Affiliates or Associates until such tendered securities are accepted for purchase or exchange; (2) issuable upon the exercise of Rights at any time prior to the occurrence of a Triggering Event; (3) issuable upon the exercise of Rights from and after the occurrence of a Triggering Event if such Rights were acquired by such Person or any 

 

3

 

of such Person’s Affiliates or Associates prior to the Distribution Date or pursuant to Section 3(a) or Section 22 (the “Original Rights”) or pursuant to Section 11(i) in connection with an adjustment made with respect to any Original Rights; or (4) that a Person or any of such Person’s Affiliates or Associates may be deemed to have the right to acquire pursuant to any merger or other acquisition agreement between the Company and such Person (or one or more of its Affiliates or Associates), or any tender, voting or support agreement entered into by such Person (or one or more of its Affiliates or Associates) in connection therewith, if such agreement has been approved by the Board prior to there being an Acquiring Person;

 

(ii)    that such Person or any of such Person’s Affiliates or Associates, directly or indirectly, has the right to vote (including the power to vote or to direct the voting of) or dispose (or direct the disposition) of or has “beneficial ownership” of (as determined pursuant to Rule 13d-3 of the General Rules and Regulations promulgated under the Exchange Act, as in effect on the date of this Agreement), including pursuant to any agreement, arrangement or understanding whether or not in writing; provided, however, that a Person will not be deemed the Beneficial Owner of, or to Beneficially Own, any security as a result of an agreement, arrangement or understanding whether or not in writing to vote such security if such agreement, arrangement or understanding (A) arises solely from a revocable proxy or consent given to such Person in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable provisions of the General Rules and Regulations promulgated under the Exchange Act; and (B) is not also then reportable by such Person on Schedule 13D pursuant to the Exchange Act (or any comparable or successor report); or

 

(iii)    that are Beneficially Owned, directly or indirectly, by any other Person (or any of such Person’s Affiliates or Associates) with which such first Person (or any of such first Person’s Affiliates or Associates) has any agreement, arrangement or understanding whether or not in writing (other than customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities) for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy to the extent contemplated by subsection (ii) of this definition) 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” pursuant to Section 1.382-3(a)(1) of the Treasury Regulations;  provided, however, that no person who is an officer, director or employee of an Exempt Person will be deemed, solely by reason of such person’s status or authority as such, to be a Beneficial Owner of, to have Beneficial Ownership of or to Beneficially Own any securities of the Company that are Beneficially Owned (including in a fiduciary capacity) by an Exempt Person or by any other such officer, director or employee of an Exempt Person; provided further, however, that any stockholder of the Company, together with any Affiliate, Associate or other person who may be deemed to be a representative of such stockholder then serving as a director of the Company, will not be deemed to be the Beneficial Owner of, to have Beneficial Ownership of or to Beneficially Own any securities of the Company held by any other Person as a result of any Person affiliated or otherwise associated with such stockholder serving as a director of the Company.

 

Notwithstanding anything in this Agreement to the contrary, to the extent not within the foregoing provisions of this definition, a Person will be deemed to be the Beneficial Owner of, and will be deemed to Beneficially Own or have Beneficial Ownership of, Stock held by any other Person that such Person would be deemed to own constructively or indirectly or otherwise would be aggregated with Stock owned by such Person pursuant to Section 382, or any successor provision or replacement provision and Treasury Regulations thereunder.

 

4

 

“Agreement” has the meaning set forth in the preamble hereto.

 

“Board of Directors” has the meaning set forth in the preamble to this Agreement.

 

“Book Entry Shares” has the meaning set forth in Section 3(a).

 

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

 

“Charter” when used in reference to the Company means the charter of the Company, as may be amended or supplemented from time to time.

 

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

 

“Code” has the meaning set forth in the preamble to this Agreement.

 

“Common Stock” when used in reference to the Company means the Common Stock, par value $0.01 per share, of the Company or any other shares of capital stock of the Company into which such stock shall be reclassified or changed. “Common Stock” when used with reference to any Person other than the Company organized in corporate form means (i) the capital stock or other equity interest of such Person with the greatest voting power, (ii) the equity securities or other equity interest having power to control or direct the management of such Person or (iii) if such Person is a Subsidiary of another Person, the Person or Persons which ultimately control such first-mentioned Person and which have issued any such outstanding capital stock, equity securities or equity interest. “Common Stock” when used with reference to any Person not organized in corporate form shall mean units of beneficial interest which (x) shall represent the right to participate generally in the profits and losses of such Person (including without limitation any flow-through tax benefits resulting from an ownership interest in such Person) and (y) shall be entitled to exercise the greatest voting power of such Person or, in the case of a limited partnership, shall have the power to remove or otherwise replace the general partner or partners.

 

“Common Stock Equivalents” has the meaning set forth in Section 11(a)(iii).

 

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

 

“Current Exchange Value” has the meaning set forth in Section 24(d).

 

“Current Value” has the meaning set forth in Section 11(a)(iii).

 

“Depositary Agent” has the meaning set forth in Section 7(c).

 

5

 

“Distribution Date” means the earlier of (i) the Close of Business on the 10th  Business Day (or such later date as may be determined by action of the Board of Directors, which action must be taken prior to the Distribution Date that otherwise would have occurred) after the Stock Acquisition Date  (or, if the 10th Business Day after the Stock Acquisition Date occurs before the Record Date, then the Record Date); or (ii) the Close of Business on the 10 th  Business Day (or such later date as may be determined by the Board of Directors) after the date that a tender or exchange offer by any Person (other than an Exempt Person) is first published, sent or given within the meaning of Rule 14d-2(a) of the General Rules and Regulations promulgated under the Exchange Act if, assuming the successful consummation thereof, such Person would be an Acquiring Person (including any such date which is after the date of this Agreement and prior to the issuance of the Rights);  provided, however, that if any tender or exchange offer referred to in clause (ii)  is cancelled, terminated or otherwise withdrawn prior to the Distribution Date without the purchase or exchange of any shares of Common Stock pursuant thereto, then such offer will be deemed, for purposes of this paragraph, never to have been made.

 

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

 

“Exchange Date” has the meaning set forth in Section 7(a).

 

“Exchange Ratio” has the meaning set forth in Section 24(a).

 

“Exempt Person” means (i) the Company or any Subsidiary of the Company, in each case including the officers and members of the board of directors thereof acting in their fiduciary capacities, (ii) any employee benefit plan or compensation arrangement of the Company or any Subsidiary of the Company, (iv) any Person holding (or acting in a fiduciary capacity in respect of) shares of Common Stock of the Company organized, appointed or established by the Company or any Subsidiary of the Company for or pursuant to the terms of any such employee benefit plan or compensation arrangement, and (v) any Person deemed to be an “Exempt Person” in accordance with Section 25.

 

“Exemption Request” has the meaning set forth in Section 25(a).

 

“Existing Holder Percentage” means, with respect to any Existing Holder, the percentage of the outstanding shares of Common Stock of the Company that such Existing Holder, together with all Affiliates and Associates of such Existing Holder, Beneficially Owns (including any Convertible Promissory Notes Due 2018 held by such Existing Holder) immediately prior to the first public announcement of the adoption of this Plan; provided,  however, that, in the event any Existing Holder shall sell, transfer, or otherwise dispose of any outstanding shares of Common Stock of the Company after the first public announcement of the adoption of this Plan, the Existing Holder Percentage shall, subsequent to such sale, transfer or disposition, mean, with respect to such Existing Holder, the lesser of (i) the Existing Holder Percentage as in effect immediately prior to such sale, transfer or disposition or (ii) the percentage of outstanding shares of Common Stock of the Company that such Existing Holder Beneficially Owns immediately following such sale, transfer or disposition.

 

“Existing Holder” means any Person who or which, together with all Affiliates and Associates of such Person, is, immediately prior to the first public announcement of the adoption of this Plan, the Beneficial Owner of 4.99% or more of the shares of Common Stock of the Company then outstanding, including (i) EJF Capital LLC and Emanual J. Friedman and together with all their Affiliates and Associates, (ii) IsZo Capital LP, IsZoCapital GP LLC, IsZo 

 

6

 

Capital Management LP and Brian L. Sheehy and together with all their Affiliates and Associates, (iii) Todd M. Pickup and Vintage Trust II, dated July 19, 2007 and together with all their Affiliates and Associates,  and (iv) Richard H. Pickup and RHP Trust, dated May 31, 2011 and together with all their Affiliates and Associates.  Notwithstanding anything to the contrary provided in this Agreement, any Existing Holder who becomes the Beneficial Owner of less than 4.99% of the shares of Common Stock of the Company then outstanding shall cease to be an Existing Holder and shall be subject to all of the provisions of this Agreement in the same manner as any Person who is not and was not an Existing Holder.

 

“Expiration Date” and “Final Expiration Date” have the meanings set forth in Section 7(a).

 

“Fair Market Value” of any securities or other property shall be as determined in accordance with Section 11(d).

 

“Force Majeure Condition” has the meanings set forth in Section 36.

 

“Group” has the meaning set forth in clause (b) of the definition of “Person.”

 

“Maryland Courts” has the meaning set forth in Section 33.

 

“Original Rights” has the meaning set forth in the definition of “Beneficial Owner.”

 

“Person” means any individual, firm, corporation, partnership, limited liability company, joint venture, business trust, trust, association, syndicate, group (as such term is used in Rule 13d-5 of the General Rules and Regulations promulgated under the Exchange Act, as in effect on the Rights Dividend Declaration Date), other entity or any group of Persons making a “coordinated acquisition” of shares of Common Stock within the meaning of Treasury Regulation § 1.382-3(a)(1) or who are otherwise treated as an “entity” within the meaning of Treasury Regulation § 1.382-3(a)(1), and, in each case, will include any successor (by merger or otherwise) of any such Person, but will not include a Public Group (as defined in Section 1.382-2T(f)(13) of the Treasury Regulations.

 

“Preferred Stock” means shares of Series A-1 Junior Participating Preferred Stock, par value $0.01 per share, of the Company having the rights and preferences set forth in the form of the articles supplementary attached hereto as Exhibit A, and, to the extent that there are not a sufficient number of shares of shares of Preferred Stock authorized to permit the full exercise of the Rights, any other series of preferred stock of the Company designated for such purpose containing terms substantially similar to the terms of the Preferred Stock .

 

“Preferred Stock Equivalents” has the meaning set forth in Section 11(b).

 

“Principal Party” has the meaning set forth in Section 13(b).

 

“Purchase Price” means, as of any date, the price at which a holder may purchase securities issuable upon exercise of one whole Right. Until adjustment thereof in accordance with the terms hereof, the Purchase Price shall equal $50.00.

 

“Record Date” has the meaning set forth in the Preamble of this Agreement.

 

7

 

“Redemption Date” has the meaning set forth in Section 7(a).

 

“Redemption Price” has the meaning set forth in Section 23.

 

“Registered Common Stock” has the meaning set forth in Section 13(b).

 

“Requesting Person” has the meaning set forth in Section 25(a).

 

“Rights” has the meaning set forth in the Preamble of this Agreement.

 

“Rights Agent” has the meaning set forth in the Preamble of this Agreement.

 

“Rights Certificate” has the meaning set forth in Section 4(a).

 

“Section 11(a)(ii) Event” has the meaning set forth in Section 11(a)(ii).

 

“Section 11(a)(ii) Trigger Date” has the meaning set forth in Section 11(a)(iii).

 

“Section 13 Event” means any event described in clauses (x), (y) or (z) of Section 13(a).

 

“Section 382” means Section 382 of the Code or any successor or replacement provision and the Treasury Regulations promulgated thereunder.

 

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

 

“Spread” has the meaning set forth in Section 11(a)(iii).

 

“Stock Acquisition Date” means the first date of public announcement (which, for purposes of this definition, includes the filing or amending of a report pursuant to Section 13(d) of the Exchange Act or pursuant to a comparable successor statute) by the Company or an Acquiring Person that an Acquiring Person has become such or that discloses information that reveals the existence of an Acquiring Person.

 

“Subsidiary” means, with reference to any Person, any corporation or other entity of which securities or other ownership interests having ordinary voting power sufficient to elect a majority of the board of directors or other persons performing similar functions of such corporation or other entity or a majority of the equity or ownership interests, is Beneficially Owned, directly or indirectly or otherwise controlled by such Person either alone or together with one or more Affiliates of such Person.

 

“Substitution Period” has the meaning set forth in Section 11(a)(iii).

 

“Tax Benefits” means the net operating losses, capital loss carryovers, general business credit carryovers, alternative minimum tax credit carryovers, foreign tax credit carryovers, any loss or deduction attributable to a “net unrealized built-in loss” within the meaning of Section 382 of the Code, and the Treasury Regulations promulgated thereunder, in each case of the Company or any of its Subsidiaries, and any other tax attribute the benefit of which is subject to possible limitation pursuant to Section 382 of the Code, and the Treasury Regulations promulgated thereunder.

 

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

 

“Treasury Regulations” means the final, temporary and proposed income tax regulations promulgated by the United States Department of the Treasury pursuant to the Code, as amended or superseded from time to time.

 

“Triggering Event” means any Section 11(a)(ii) Event or any Section 13 Event.

 

Section 2. Appointment of Rights Agent.

 

The Company hereby appoints the Rights Agent to act as rights agent for the Company and the holders of the Rights (who, in accordance with Section 3, will prior to the Distribution Date also be the holders of shares of Common Stock) in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment. The Company may from time to time appoint such Co-Rights Agents as it may deem necessary or desirable. In the event the Company appoints one or more Co-Rights Agents, the respective duties of the Rights Agent and any Co-Rights Agents shall be as the Company shall determine. The Company shall give ten (10) days’ prior written notice to the Rights Agent of the appointment of one or more Co-Rights Agents and the respective duties of the Rights Agent and any such Co-Rights Agents. The Rights Agent shall have no duty to supervise, and shall in no event be liable for, the acts or omissions of any such Co-Rights Agent.

 

Section 3. Issuance of Rights Certificates.

 

(a) Rights Evidenced by Certificates for Common Shares and Book Entry Shares. Until the Distribution Date, (i) the Rights (unless earlier expired, redeemed or terminated) will be evidenced (subject to the provisions of Section 3(b) and Section 3(c)) by the certificates for the Common Stock registered in the names of the holders thereof or, in the case of uncertificated Common Stock registered in book entry form (“Book Entry Shares”), by notation in book entry accounts reflecting the ownership of such Common Stock (which certificates and Book Entry Shares, as applicable, will also be deemed to be Rights Certificates) and not by separate Rights Certificates; and (ii) the Rights (and the right to receive Rights Certificates) will be transferable only in connection with the transfer of the underlying Common Stock (including a transfer to the Company). As soon as practicable after the Distribution Date, the Company will prepare and execute, the Rights Agent will countersign and the Company will send or cause to be sent (and the Rights Agent will, if requested, send) (by mailing, in accordance with Section 27 or by such means as may be selected by the Company) to each record holder of Common Stock as of the Close of Business on the Distribution Date (other than any Acquiring Person or any of its Affiliates or Associates), at the address of such holder shown on the transfer books of the Company or the transfer agent for the Common Stock, one or more Rights Certificates evidencing one Right for each share of Common Stock so held, subject to adjustment as provided herein. Receipt of a Rights Certificate by any Person will not preclude a later determination that all or part of the Rights represented thereby are null and void pursuant to Section 7(e). To the 

 

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extent that a Section 11(a)(ii) Event has also occurred, the Company may implement such procedures as it deems appropriate in its sole discretion to minimize the possibility that Rights are received by any Person whose Rights are null and void pursuant to Section 7(e). In the event that an adjustment in the number of Rights per shares of Common Stock has been made pursuant to Section 11, then at the time of distribution of the Rights Certificates, the Company will make the necessary and appropriate rounding adjustments (in accordance with Section 14(a)) so that Rights Certificates representing only whole numbers of Rights are distributed and cash is paid in lieu of any fractional Rights (in accordance with Section 14(a)). As of and after the Distribution Date, the Rights will be evidenced solely by the Rights Certificates and may be transferred by the transfer of the Rights Certificates as permitted hereby, separately and apart from any transfer of Common Stock, and the holders of such Rights Certificates as shown on the transfer books of the Company or the transfer agent for the Rights (which may be the Rights Agent) will be the record holders thereof. The Company will promptly notify the Rights Agent in writing upon the occurrence of the Distribution Date. Until such notice is provided to the Rights Agent, it may presume conclusively that the Distribution Date has not occurred.

 

(b) Summary of Rights; Outstanding Common Stock. The Company will make available, or cause to be made available, promptly after the Record Date, a copy of the Summary of Rights to any holder of Rights who may so request from time to time prior to the Expiration Date. With respect to certificates for Common Stock and Book Entry Shares, as applicable, outstanding as of the Record Date or issued subsequent to the Record Date, until the earlier of the Distribution Date or the Expiration Date, the Rights will be evidenced by such certificates or Book Entry Shares, and the registered holders of the Common Stock will also be the registered holders of the associated Rights. Until the earlier of the Distribution Date or the Expiration Date, the surrender for transfer of any Common Stock in respect of which Rights have been issued (with or without a copy of the Summary of Rights) will also constitute the transfer of the Rights associated with such Common Stock. Notwithstanding anything to the contrary in this Agreement, upon the effectiveness of a redemption pursuant to Section 23 or an exchange pursuant to Section 24, the Company will not thereafter issue any additional Rights and, for the avoidance of doubt, no Rights will be attached to or will be issued with any Common Stock (including any Common Stock issued pursuant to an exchange) at any time thereafter.

 

(c) Legend. Certificates for the Common Stock of the Company issued after the Record Date, but prior to the earlier of the Distribution Date or the Expiration Date, shall be deemed also to be certificates for Rights, and shall bear a legend, substantially in the form set forth below:

 

THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER HEREOF TO CERTAIN RIGHTS AS SET FORTH IN A TAX BENEFITS PRESERVATION RIGHTS AGREEMENT BETWEEN IMPAC MORTGAGE HOLDINGS, INC. (THE “COMPANY”) AND AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC (OR ANY SUCCESSOR THERETO), AS RIGHTS AGENT, DATED AS OF SEPTEMBER 3, 2013 AS AMENDED, RESTATED, RENEWED, SUPPLEMENTED OR EXTENDED 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 OFFICES OF THE COMPANY AND THE STOCK TRANSFER ADMINISTRATION OFFICE OF THE RIGHTS AGENT. UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT, SUCH RIGHTS 

 

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WILL BE EVIDENCED BY SEPARATE CERTIFICATES AND WILL NO LONGER BE EVIDENCED BY THIS CERTIFICATE. THE COMPANY MAY REDEEM THE RIGHTS AT A REDEMPTION PRICE OF $0.001 PER RIGHT, SUBJECT TO ADJUSTMENT, UNDER THE TERMS OF THE RIGHTS AGREEMENT. THE COMPANY WILL 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, RIGHTS ISSUED TO OR HELD BY ACQUIRING PERSONS OR ANY AFFILIATES OR ASSOCIATES THEREOF (AS DEFINED IN THE RIGHTS AGREEMENT), AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS, MAY BECOME NULL AND VOID. THE RIGHTS SHALL NOT BE EXERCISABLE, AND SHALL BE VOID SO LONG AS HELD, BY A HOLDER IN ANY JURISDICTION WHERE THE REQUISITE QUALIFICATION, IF ANY, TO THE ISSUANCE TO SUCH HOLDER, OR THE EXERCISE BY SUCH HOLDER, OF THE RIGHTS IN SUCH JURISDICTION SHALL NOT HAVE BEEN OBTAINED OR BE OBTAINABLE.

 

With respect to any Book Entry Shares, a legend in substantially similar form will be included in a notice to the record holder of such shares in accordance with applicable law. With respect to such certificates or Book Entry Shares, as applicable, containing the foregoing legend, the Rights associated with the Common Stock of the Company represented by such certificates or Book Entry Shares shall be evidenced by such certificates or Book Entry Shares alone until the earlier of the Distribution Date or the Expiration Date, the registered holders of the Common Stock will also be registered holders of the associated Rights, and the surrender or transfer of any of such certificates or Book Entry Shares shall also constitute the surrender or transfer of the Rights associated with the Common Stock of the Company represented by such certificates or Book Entry Shares. In the event that the Company purchases or acquires any shares of Common Stock of the Company after the Record Date but prior to the Distribution Date, any Rights associated with such Common Stock of the Company 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 of the Company which are no longer outstanding. The failure to print the foregoing legend on any such certificate representing Common Stock of the Company or any defect therein or the failure to provide notice thereof shall not affect the enforceability of any part of the Agreement or the rights of any holder of Rights.

 

Section 4. Form of Rights Certificates.

 

(a) Rights Certificates.  The Rights Certificates (and the forms of election to purchase shares and of assignment and certificate to be printed on the reverse thereof) shall each be substantially in the form of Exhibit B  hereto and may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any applicable law, rule or regulation or with any rule or regulation of any stock exchange on which the Rights may from time to time be listed, or the Financial Industry Regulatory Authority or to conform to customary usage. The Rights Certificates shall be in a machine printable format and in a form reasonably satisfactory to the Rights Agent. Subject to the provisions of Section 11 and Section 22, the Rights Certificates, whenever distributed, 

 

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shall be dated as of the Record Date (or in the case of Rights issued with respect to Common Stock issued by the Company after the Record Date, as of the date of issuance of such Common Stock), shall show the date of countersignature, and on their face shall entitle the holders thereof to purchase such number of one one-thousandths of a share of Preferred Stock as shall be set forth therein at the Purchase Price, but the number and type of such securities and the Purchase Price shall be subject to adjustment as provided herein.

 

(b) Certain Legends.  Any Rights Certificate issued pursuant to Section 3(a), Section 11(i) or Section 22 that represents Rights Beneficially Owned by (i) an Acquiring Person or any Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any Associate or Affiliate of an Acquiring Person) who becomes a transferee after the Acquiring Person becomes such, (iii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee prior to or concurrently with the Acquiring Person becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person to holders of equity interests in such Acquiring Person or to any Person with whom the Acquiring Person has any continuing agreement, arrangement or understanding (whether or not in writing) regarding the transferred Rights, the shares of Common Stock of the Company associated with such Rights or the Company or (B) a transfer which the Board of Directors has determined is part of a plan, arrangement or understanding which has as a primary purpose or effect the avoidance of Section 7(e), or (iv) any nominee of any of the foregoing, and any Rights Certificate issued pursuant to Section 6, Section 11 or Section 22 upon transfer, exchange, replacement or adjustment of any other Rights Certificate referred to in this sentence, will contain (to the extent feasible) the following legend:

 

THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME 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 UNDER CERTAIN CIRCUMSTANCES AS SPECIFIED IN SECTION 7(e) OF THE RIGHTS AGREEMENT.

 

The Company shall give notice to the Rights Agent promptly after it becomes aware of the existence and identity of any Acquiring Person or any Associate or Affiliate thereof. The Company shall instruct the Rights Agent in writing of the Rights which should be so legended. The failure to print the foregoing legend on any such Rights Certificate or any defect therein shall not affect in any manner whatsoever the application or interpretation of the provisions of Section 7(e).

 

Section 5. Countersignature and Registration.

 

(a) Countersignature.  The Rights Certificates shall be executed on behalf of the Company by its Chairman or Vice Chairman of the Board of Directors, its President, any Vice President, Chief Executive Officer, its Chief Operating Officer or its Chief Financial Officer, either manually or by facsimile signature, and shall have affixed thereto the Company’s seal (if 

 

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any) or a facsimile thereof which shall be attested to by the Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary of the Company, either manually or by facsimile signature. The Rights Certificates shall be countersigned, either manually or by facsimile signature, by an authorized signatory of the Rights Agent and shall not be valid for any purpose unless so countersigned, and such countersignature upon any Rights Certificate shall be conclusive evidence, and the only evidence, that such Rights Certificate has been duly countersigned as required hereunder. In case any officer of the Company who shall have signed any of the Rights Certificates shall cease to be such officer of the Company before countersignature by the Rights Agent and issuance and delivery by the Company, such Rights Certificates, nevertheless, may be countersigned by an authorized signatory of the Rights Agent, and issued and delivered by the Company with the same force and effect as though the person who signed or attested to such Rights Certificates had not ceased to be such officer of the Company; and any Rights Certificates may be signed or attested to on behalf of the Company by any person who, at the actual date of the execution of such Rights Certificate, shall be a proper officer of the Company to sign such Rights Certificate, although at the date of the execution of this Rights Agreement any such person was not such an officer.

 

(b) Transfer Books.  Following the Distribution Date, the Rights Agent will keep or cause to be kept, at one of its offices designated as the appropriate place for surrender of Rights Certificates upon exercise or transfer, books for registration and transfer of the Rights Certificates issued hereunder. Such books shall show the names and addresses of the respective holders of the Rights Certificates, the number of Rights evidenced on its face by each of the Rights Certificates and the date of each of the Rights Certificates.  The Rights Agent will not register, or permit to be registered, any transfer or exchange of any Rights Certificates (or the underlying Rights) that have become null and void pursuant to Section 7(e), have been redeemed pursuant to Section 23 or have been exchanged pursuant to Section 24.

 

Section 6. Transfer, Split Up, Combination and Exchange of Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.

 

(a) Transfer, Split Up, Combination and Exchange of Rights Certificates.  Subject to the provisions of Section 4(b), Section 7(e), Section 14 and Section 24, at any time after the Close of Business on the Distribution Date, and at or prior to the Close of Business on the Expiration Date, any Rights Certificate or Certificates may be transferred, split up, combined or exchanged for another Rights Certificate or Certificates (other than any Rights Certificate representing Rights that have become null and void pursuant to Section 7(e) or that have been exchanged pursuant to Section 24), entitling the registered holder to purchase a like number of one one-thousandths of a share of Preferred Stock (or following a Triggering Event, Common Stock of the Company, cash, property, debt securities, Preferred Stock or any combination thereof, including any such securities, cash or property following a Section 13 Event) as the Rights Certificate or Certificates surrendered then entitled such holder to purchase and at the same Purchase Price. Any registered holder desiring to transfer, split up, combine or exchange any Rights Certificate shall make such request in writing delivered to the Rights Agent, and shall surrender the Rights Certificate or Certificates to be transferred, split up, combined or exchanged, with the form of assignment and certificate duly executed, at the office or offices of the Rights Agent designated for such purpose. Neither the Rights Agent nor the Company shall be obligated to take any action whatsoever with respect to the transfer of any such surrendered 

 

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Rights Certificate until the registered holder shall have completed and signed the certificate contained in the form of assignment on the reverse side of such Rights Certificate and shall have provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Company shall reasonably request. Thereupon the Rights Agent shall, subject to Section 4(b), Section 7(e), Section 14 and Section 24, countersign and deliver to the Person entitled thereto a Rights Certificate or Certificates, as the case may be, as so requested. The Company may require payment by the registered holder of a Rights Certificate, of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer, split up, combination or exchange of Rights Certificates.

 

(b) Mutilated, Destroyed, Lost or Stolen Rights Certificates. Subject to the provisions of Section 7(e), Section 11(a)(ii) and Section 24, 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 such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Company or the Rights Agent may request, 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 will execute and deliver a new Rights Certificate of like tenor to the Rights Agent for countersignature and delivery to the registered owner in lieu of the Rights Certificate so lost, stolen, destroyed or mutilated.  Every new Rights Certificate issued pursuant to this Section 6(b) in lieu of any lost, stolen, destroyed or mutilated Rights Certificate will evidence an original additional contractual obligation of the Company, whether or not the lost, stolen, destroyed or mutilated Rights Certificate will be at any time enforceable by anyone, and, subject to Section 7(e) will be entitled to all the benefits of this Plan equally and proportionately with any and all other Rights duly issued hereunder.

 

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

 

(a) Exercise of Rights.  Subject to Section 7(e), Section 23(b) and Section 24(a), the registered holder of any Rights Certificate may exercise the Rights evidenced thereby (except as otherwise provided herein) in whole or in part on any Business Day at any time after the Distribution Date and prior to the Close of Business on the Expiration Date upon surrender of the Rights Certificate, with the form of election to purchase and the certificate on the reverse side thereof properly completed and duly executed, to the Rights Agent at the office or offices of the Rights Agent designated for such purpose, together with payment of the aggregate Purchase Price for the total number of one one-thousandths of a share of Preferred Stock (or other securities, cash or other assets, as the case may be) as to which such surrendered Rights are then exercised, at or prior to the earliest of (i) the Close of Business on September 2, 2016 (the “Final Expiration Date”), (ii) the time at which the Rights are redeemed as provided in Section 23 (the “Redemption Date”), (iii) the time at which such Rights are exchanged as provided in Section 24 (the “Exchange Date”), (iv) the final adjournment of the Company’s 2014 annual meeting of stockholders if the stockholders fail to approve this Agreement with an affirmative vote of a majority of the votes cast by holders of shares of Common Stock at the 2014 annual meeting of stockholders (or any adjournment or postponement thereof), (v) the repeal of Section 382 of the Code or any successor statute if the 

 

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Board of Directors determines that this Plan is no longer necessary for the preservation of Tax Benefits, (vi) the beginning of a taxable year of the Company with respect to which the Board of Directors determines that no Tax Benefits may be carried forward, or (vii) such time as the Board of Directors determines that a limitation on the use of the Tax Benefits under Section 382 of the Code would no longer be material to the Company (the earliest of (i), through (vii) being herein referred to as the “Expiration Date”). The Board of Directors shall at least annually consider whether to make the determination provided by Section 7(a)(vii) in light of all relevant factors, including, in particular, the amount and anticipated utilization of the Company’s Tax Benefits and the Company’s market capitalization. The Company shall promptly notify the Rights Agent in writing upon the occurrence of the Expiration Date and, if such notification is given orally, the Company shall confirm same in writing on or prior to the Business Day next following. Until such notice is received by the Rights Agent, the Rights Agent may presume conclusively for all purposes, prior to the Close of Business on September 3, 2016, that the Expiration Date has not occurred. Except as set forth in Section 7(e) and notwithstanding any other provision of this Agreement, any Person who prior to the Distribution Date becomes a record holder of shares of Common Stock of the Company is entitled to all of the rights of a registered holder of a Rights Certificate with respect to the Rights associated with such shares of Common Stock of the Company in accordance with the provisions of this Agreement, as of the date such Person becomes a record holder of shares of Common Stock of the Company.

 

(b) Price.  The Purchase Price for each one-one thousandth of a share of Preferred Stock issuable pursuant to the exercise of a Right is initially $50.00 and is subject to adjustment from time to time as provided in Section 11 or Section 13, and payable in accordance with Section 7(c).

 

(c) Payment.  As promptly as practicable following the Distribution Date, the Company shall deposit with a corporation, trust, bank or similar institution in good standing organized under the laws of the United States or any State of the United States, which is authorized under such laws to exercise corporate trust or stock transfer powers and is subject to supervision or examination by a federal or state authority (such institution is hereinafter referred to as the “Depositary Agent”), certificates representing the shares of Preferred Stock that may be acquired upon exercise of the Rights and the Company shall cause such Depositary Agent to enter into an agreement pursuant to which the Depositary Agent shall issue receipts representing interests in the shares of Preferred Stock so deposited. Upon receipt of a Rights Certificate representing exercisable Rights, with the form of election to purchase and the certificate on the reverse side thereof duly executed, accompanied by payment of the Purchase Price for the shares to be purchased and an amount equal to any applicable transfer tax (as determined by the Rights Agent) by certified check or bank draft payable to the order of the Company or by money order, the Rights Agent shall, subject to Section 7(f), Section 20(k) and Section 14(b), thereupon promptly (i) requisition from the Depositary Agent (or make available, if the Rights Agent is the Depositary Agent) depositary receipts or certificates for the number of one one-thousandths of a share of Preferred Stock (or other securities, cash or other assets, as the case may be) to be purchased and the Company hereby irrevocably authorizes the Depositary Agent to comply with all such requests, (ii) when appropriate, requisition from the Company the amount of cash, if any, to be paid in lieu of issuance of fractional shares in accordance with Section 14, (iii) promptly after receipt of such certificates or depositary receipts, cause the same to be delivered to or upon the order of the registered holder of such Rights Certificate, registered in 

 

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such name or names as may be designated by such holder and (iv) when appropriate, after receipt of each certificate or depositary receipts promptly deliver such cash to or upon the order of the registered holder of such Rights Certificate. In the event that the Company is obligated to issue other securities (including Common Stock of the Company) of the Company, pay cash or distribute other property pursuant to Section 11(a), the Company will make all arrangements necessary so that such other securities, cash or other property are available for distribution by the Rights Agent, if and when appropriate. The payment of the Purchase Price may be made by certified or bank check payable to the order of the Company, or by money order or wire transfer of immediately available funds to the account of the Company (provided that notice of such wire transfer shall be given by the holder of the related Rights to the Rights Agent).  The Purchase Price shall be payable in lawful money of the United States of America. Notwithstanding anything to the contrary in this Plan, the Company reserves the right to require that prior to the occurrence of a Triggering Event, upon any exercise of Rights, a number of Rights be exercised so that only whole shares of Preferred Stock would be issued.

 

(d)  Partial Exercise.   In case the registered holder of any Rights Certificate shall exercise less than all the Rights evidenced thereby, a new Rights Certificate evidencing Rights equivalent to the Rights remaining unexercised shall be issued by the Rights Agent and delivered to the registered holder of such Rights Certificate or to his duly authorized assigns, subject to the provisions of Section 14.

 

(e) Prohibited Issuances.  Notwithstanding anything in this Agreement to the contrary, from and after the first occurrence of a Triggering Event, any Rights Beneficially Owned by (i) an Acquiring Person or any Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any Associate or Affiliate of an Acquiring Person) who becomes a transferee after the Acquiring Person becomes such or (iii) a transferee of an Acquiring Person (or of any Associate or Affiliate of an Acquiring Person) who becomes a transferee prior to or concurrently with the Acquiring Person becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person to holders of equity interests in such Acquiring Person or to any Person with whom the Acquiring Person has any continuing agreement, arrangement or understanding (whether or not in writing) regarding the transferred Rights, the shares of Common Stock of the Company associated with such Rights or the Company, or (B) a transfer which the Board of Directors has determined is part of a plan, arrangement or understanding which has as a primary purpose or effect the avoidance of this Section 7(e), (iv) any subsequent transferee receiving transferred Rights as described in subsections (ii) or (iii) above, either directly or through one or more intermediate transferees, or (v) any nominee of any of the foregoing will, in each case, be null and void without any further action and no holder (whether or not such holder is an Acquiring Person or an Affiliate or Associate of an Acquiring Person) of such Rights shall have any rights whatsoever (including the right to exercise) with respect to such Rights or any Rights Certificates that formerly evidenced such Rights, whether under any provision of this Agreement or otherwise. From and after the first occurrence of a Triggering Event, no Rights Certificate will be issued pursuant to this Agreement (including to any Person described in subsections (i) through (v) of this section 7(e), an) that represents one or more Rights that are or have become void pursuant to this Section 7(e) or with respect to any Shares of Common Stock otherwise deemed to be Beneficially Owned by any of the foregoing, and any Rights Certificate delivered to the Rights Agent that represents Rights that are or have become null and void pursuant to this Section 7(e) will be cancelled. The 

 

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Company shall use all reasonable efforts to ensure that the provisions of this Section 7(e) and Section 4(b) 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 any Affiliates or Associates of an Acquiring Person or any transferee of any of them hereunder.

 

(f) Information Concerning Ownership.  Notwithstanding anything in this Agreement to the contrary, neither the Rights Agent nor the Company shall be obligated to undertake any action with respect to a registered holder of Rights upon the occurrence of any purported exercise or transfer of Rights as set forth in this Section 7 unless such registered holder, in addition to having complied with the requirements of Section 7(a), shall have (i) properly completed and duly executed the certificate contained in the form of election to purchase or form of assignment, as applicable, set forth on the reverse side of the Rights Certificate surrendered for such exercise, and (ii) provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Company or the Rights Agent shall reasonably request.  If such registered holder does not comply with the foregoing requirements, then the Company will be entitled to conclusively deem such Rights to be Beneficially Owned by an Acquiring Person (or an Affiliate or Associate of an Acquiring Person, or other Person described in Section 7(e), as applicable) and, accordingly, such Rights will be null and void and not exercisable or transferable.

 

Section 8. Cancellation and Destruction of Rights Certificates.

 

All Rights Certificates surrendered for the purpose of exercise, transfer, split up, combination, redemption or exchange shall, if surrendered to the Company or any of its agents, be delivered to the Rights Agent for cancellation or in canceled form, or, if surrendered to the Rights Agent, shall be canceled by it, and no 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 canceled 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 evidencing the destruction thereof to the Company (or, at the Company’s option, appropriate copies of the electronic or physical evidence relating to he Rights Certificates so canceled or destroyed by the Rights Agent).

 

Section 9. Reservation and Availability of Preferred Stock.

 

(a) Reservation.  The Company covenants and agrees that it will use all reasonable efforts to cause to be reserved and kept available out of its authorized and unissued shares of preferred stock (and, following the occurrence of a Triggering Event, out of its authorized and unissued Shares of Common Stock or other securities), the number of shares of Preferred Stock (and, following the occurrence of a Triggering Event, Shares of Common Stock or other securities) that that will be sufficient to permit the exercise in full of all outstanding and exercisable Rights. Upon the occurrence of any events resulting in an increase in the aggregate number of shares of Preferred Stock issuable upon exercise of all outstanding Rights in excess of the number then reserved, the Company shall make appropriate increases in the number of shares so reserved.

 

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(b) Listing.  The Company shall use commercially reasonable efforts to cause, from and after such time as the Rights become exercisable (but only to the extent that it is reasonably likely that the Rights will be exercised), all shares of Preferred Stock issued or reserved for issuance to be listed, upon official notice of issuance, upon the principal national securities exchange, if any, upon which the Common Stock of the Company is listed or, if the principal market for the Common Stock of the Company is not on any national securities exchange, to be eligible for quotation on such system as the Common Stock is then quoted.

 

(c) Registration.  The Company shall use commercially reasonable efforts to (i) file, as soon as practicable following the earliest date after the occurrence of a Section 11(a)(ii) Event on which the consideration to be delivered by the Company upon exercise of the Rights described in Section 11(a)(ii) or Section 11(a)(iii), or as soon as required by law following the Distribution Date, as the case may be, a registration statement under the Securities Act, with respect to the securities purchasable upon exercise of the Rights on an appropriate form, (ii) cause such registration statement to become effective as soon as practicable after such filing and (iii) cause such registration statement to remain effective (with a prospectus that at all times meets 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 will also take such action as may be appropriate under, and which will 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 to exceed one hundred twenty (120) days after the date determined in accordance with the provisions of the first sentence of this Section 9(c), the exercisability of the Rights in order to prepare and file such registration statement and permit it to become effective. Upon 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, in each case with prompt written notice to the Rights Agent. Notwithstanding any such provision of this Agreement to the contrary, the Rights shall not be exercisable in any jurisdiction unless the requisite qualification in such jurisdiction shall have been obtained (and the exercise thereof is permitted pursuant to applicable law), or an exemption therefrom is available, and until a registration statement in respect thereof has been declared and remains effective.

 

(d) Valid Issuance.  The Company covenants and agrees that it will take all such action as may be necessary to ensure that all shares of Preferred Stock (and, following the occurrence of a Triggering Event, Common Stock or other securities of the Company) delivered upon the exercise of the Rights shall, at the time of delivery of the certificates or depositary receipts for such shares (subject to payment of the Purchase Price), be duly and validly authorized and issued and fully paid and nonassessable.

 

(e)  Taxes and Charges.  The Company further covenants and agrees that it will pay when due and payable any and all federal and state transfer taxes and governmental charges which may be payable in respect of the issuance or delivery of the Rights Certificates or of any certificates for shares of Preferred Stock and/or other property upon the exercise or surrender of Rights. The Company shall not, however, be required to pay any transfer tax or governmental charges which may be payable in respect of any transfer or delivery of Rights Certificates or the issuance or delivery of other securities or property to a Person other than, or in respect of the issuance or

 

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delivery of securities or other property in a name other than that of, the registered holder of the Rights Certificates evidencing Rights surrendered for exercise or to issue or deliver any certificates for securities or other property in a name other than that of the registered holder upon the exercise of any Rights until such tax shall have been paid (any such tax being payable by the holder of such Rights Certificate at the time of surrender) or until it has been established to the Company’s satisfaction that no such tax is due. The foregoing also apply to any transfer taxes and governmental charges that may be payable in respect of any uncertificated Rights Certificates, shares or other securities.

 

Section 10. Record Date for Securities Issued.

 

Each Person in whose name any certificate for  a number of one one-thousandths of Preferred Stock or other securities (including any fraction of a share of Preferred Stock or such other securities) is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of the shares of Preferred Stock or such other securities represented thereby on, and such certificate shall be dated (or registration on the transfer books of the Company or the applicable transfer agent effected), the date upon which the Rights Certificate evidencing such Rights was duly surrendered and payment of the Purchase Price (and any applicable transfer taxes) was made; provided, however , that if the date of such surrender and payment is a date upon which the transfer books of the Company for the Preferred Stock or such other securities, as applicable, are closed, such Person shall be deemed to have become the record holder of such shares of Preferred Stock or such other securities on, and such certificate shall be dated  (or registration on the transfer books of the Company or the applicable transfer agent effected), the next succeeding Business Day on which the transfer books of the Company are open; and further  provided,  however , that if delivery of shares of Preferred Stock or such other securities is delayed pursuant to Section 9(c), such Person shall be deemed to have become the record holder of such shares of Preferred Stock or such other securities only when such shares or such other securities first become deliverable. Prior to the exercise of the Rights evidenced thereby, the holder of a Rights Certificate shall not be entitled to any rights of a stockholder of the Company with respect to shares for which the Rights shall be exercisable, including, without limitation, the right to vote, to receive dividends or other distributions or to exercise any preemptive rights, and shall not be entitled to receive any notice of any proceedings of the Company, except as provided herein.

 

Section 11. Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights. The Purchase Price, the number and kind of shares or other property covered by each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 11.

 

(a) Certain Events.

 

(i) Certain Adjustments to Preferred Stock. Notwithstanding anything to the contrary in this Agreement, in the event the Company shall at any time after the date of this Agreement (A) declare a dividend on the Preferred Stock payable in shares of Preferred Stock, (B) subdivide or split the outstanding Preferred Stock, (C) combine or consolidate the outstanding Preferred Stock into a smaller number of shares of Preferred Stock (by reverse stock split or otherwise), or (D) issue, change or alter any shares of its capital stock in a reclassification or recapitalization of 

 

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the Preferred Stock (including any such reclassification or recapitalization in connection with a share exchange, consolidation or merger in which the Company is the continuing or surviving corporation), then, in each such event, except as otherwise provided in this Section 11(a)(i) and Section 7(e), the Purchase Price in effect at the time of the record date for such dividend or the effective time of such subdivision, split, combination, consolidation, reclassification or recapitalization, and the number and kind of shares of Preferred Stock or capital stock of the Company, as the case may be, issuable on such date or at such time, shall be proportionately adjusted so that the holder of any Rights exercised after such time shall be entitled to receive, upon payment of the Purchase Price then in effect, the aggregate number and kind of shares of Preferred Stock or securities of the Company, as the case may be, if such Rights had been exercised immediately prior to such date and at a time when the Preferred Stock transfer books of the Company were open, such holder would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, split, combination, consolidation, reclassification or recapitalization; provided, however , that in no event shall the consideration to be paid upon the exercise of a Right be less than the aggregate par value of the shares of capital stock of the Company issuable upon exercise of a Right. If an event occurs which would require an adjustment under both Section 11(a)(i) and Section 11(a)(ii), the adjustment provided for in this Section 11(a)(i) shall be in addition to, and shall be made prior to, any adjustment required pursuant to Section 11(a)(ii).

 

(ii) Exercise of Rights Following Certain Events.  Subject to the provisions of Section 23 and Section 24, in the event any Person, alone or together with its Affiliates and Associates, shall become an Acquiring Person, then, promptly following any such occurrence (a “Section 11(a)(ii) Event”), proper provision shall be made so that each holder of a Right, except as provided in Section 7(e), shall thereafter have a right to receive, upon exercise thereof at the then current Purchase Price in accordance with the terms of this Agreement, in lieu of a number of one one-thousandths of a share of Preferred Stock, such number of shares of Common Stock of the Company as shall equal the result obtained by (x) multiplying the then current Purchase Price by the then number of one one-thousandths of a share of Preferred Stock for which a Right was exercisable immediately prior to the first occurrence of a Section 11(a)(ii) Event, whether or not such Right was then exercisable, and dividing that product by (y) 50% of the Fair Market Value per share of Common Stock of the Company (determined pursuant to Section 11(d)) on the date of the occurrence of a Section 11(a)(ii) Event (such number of shares being referred to as the “Adjustment Shares”).

 

(iii) Insufficient Common Stock.  In the event that the number of shares of Common Stock of the Company which are authorized by the Company’s Charter but not outstanding or reserved for issuance for purposes other than upon exercise of the Right is not sufficient to permit the exercise in full of the Rights in accordance with the foregoing subparagraph (ii) of this Section 11(a), the Company shall: (A) determine the excess of (X) the Fair Market Value of the Adjustment Shares issuable upon the exercise of a Right (the “Current Value”) over (Y) the Purchase Price attributable to each Right (such excess being referred to as the “Spread”) and (B) with respect to all or a portion of each Right (subject to Section 7(e)), make adequate provision to substitute for the Adjustment Shares, upon payment of the applicable Purchase Price, (1) other equity securities of the Company (including shares or units of shares of any series of preferred stock that, by virtue of having dividend, voting and liquidation rights substantially comparable to those of the Common Stock, the Board of Directors has deemed in 

 

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good faith to have substantially the same value or economic rights as the Common Stock (such shares of preferred stock being referred to herein as “Common Stock Equivalents”)), (2) cash, (3) a reduction in the Purchase Price, (4) Preferred Stock Equivalents which the Board of Directors has deemed in good faith to have substantially the same value as shares of Common Stock of the Company, (5) debt securities of the Company, (6) other assets or securities of the Company or (7) any combination of the foregoing, in each case having an aggregate value equal to the Current Value (less the amount of any reduction in the Purchase Price), where such aggregate value has been determined by the Board of Directors after receiving the advice of a nationally recognized investment banking firm selected by the Board of Directors;  provided, however, that if the Company shall not have made adequate provision to deliver value pursuant to clause (B) above within thirty (30) days following the later of (x) the first occurrence of a Section 11(a)(ii) Event and (y) the date on which the Company’s right of redemption pursuant to Section 23(a) expires (the later of (x) and (y) being referred to herein as the “Section 11(a)(ii) Trigger Date”), then the Company shall be obligated to deliver, upon the surrender for exercise of a Right and without requiring payment of the Purchase Price, shares of Common Stock of the Company (to the extent available and except to the extent that the Company has not obtained any necessary stockholder or regulatory approval for such issuance) and then, if necessary, cash, which shares or cash have an aggregate value equal to the Spread. If the Board of Directors determines in good faith that it is likely that sufficient additional shares of Common Stock of the Company could be authorized for issuance or that any necessary stockholder or regulatory approval for such issuance could be obtained upon exercise in full of the Rights, the 30-day period set forth above may be extended and re-extended to the extent necessary from time to time, but not more than one hundred twenty (120) 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 or take such action necessary for regulatory approval  (such period, as it may be extended, being referred to herein as the “Substitution Period”). To the extent that the Company determines that some action need be taken pursuant to the first and/or second sentences of this Section 11(a)(iii), the Company (x) shall provide, subject to Section 7(e), 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, seek such stockholder approval, to take any action necessary to obtain such regulatory approval, or to decide the appropriate form of distribution to be made pursuant to such first sentence and to determine the value thereof. In the event of any such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended and a public announcement at such time as the suspension is no longer in effect. For purposes of this Section 11(a)(iii), the value of the Common Stock of the Company and of the Preferred Stock shall be the Fair Market Value (as determined pursuant to Section 11(d)) per share of the Common Stock of the Company and the Preferred Stock, respectively, on the Section 11(a)(ii) Trigger Date, the value of any Common Stock Equivalent shall be deemed to have the same value as the Common Stock of the Company on such date and the value of any Preferred Stock Equivalent shall be deemed to have the same value as the Preferred Stock on such date.  The Board of Directors may, but will not be required to, establish procedures to allocate the right to receive Common Stock upon the exercise of the Rights among holders of Rights pursuant to this Section 11(a)(iii).

 

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(b) Dilutive Rights Offering.  If the Company shall fix a record date for the issuance of rights, options or warrants to all holders of Preferred Stock entitling them (for a period expiring within forty-five (45) calendar days after such record date) to subscribe for or purchase Preferred Stock (or securities having the same or more favorable rights, privileges and preferences as the shares of Preferred Stock (“Preferred Stock Equivalents”)) or securities convertible into Preferred Stock or Preferred Stock Equivalents at a price per share of Preferred Stock or per share of Preferred Stock Equivalents (or having a conversion price per share, if a security convertible into Preferred Stock or Preferred Stock Equivalents) less than the Fair Market Value (as determined pursuant to Section 11(d)) per share of Preferred Stock on such record date, the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of 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 Preferred Stock Equivalents to be offered (and the aggregate initial conversion price of the convertible securities so to be offered) would purchase at such Fair Market Value and the denominator of which shall be the number of shares of Preferred Stock outstanding on such record date, plus the number of additional shares of Preferred Stock and Preferred Stock Equivalents 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 a Right be less than the aggregate par value of the shares of stock of the Company issuable upon exercise of a Right. In case such subscription price may be paid in a consideration part or all of which shall be in a form other than cash, the value of such consideration shall be the Fair Market Value thereof determined in accordance with Section 11(d). 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 adjustments 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) Distributions.  If the Company shall fix a record date for the making of a distribution to all holders of Preferred Stock (including any such distribution made in connection with a share exchange, consolidation or merger in which the Company is the continuing or surviving corporation), of evidences of indebtedness, cash (other than a regular periodic cash dividend out of the earnings or retained earnings of the Company), assets (other than a dividend payable in Preferred Stock, but including any dividend payable in stock other than Preferred Stock) or convertible securities, 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 shall be the Fair Market Value (as determined pursuant to Section 11(d)) per one one-thousandth of a share of Preferred Stock on such record date, less the Fair Market Value (as determined pursuant to Section 11(d)) of the portion of the cash, assets or evidences of indebtedness so to be distributed or of such convertible securities, subscription rights, options or warrants applicable to one one-thousandth of a share of Preferred Stock and the denominator of which shall be the Fair Market Value (as determined pursuant to Section 11(d)) per one one-thousandth of a share of Preferred Stock; provided, however, that in no event shall the consideration to be paid upon the exercise of a Rights be less than the aggregate par value of the shares of stock of the Company issuable upon exercise of a Rights. 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 be in effect if such record date had not been fixed.

 

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(d) Fair Market Value.  For the purpose of this Agreement, the “Fair Market Value” of any share of Preferred Stock, Common Stock or any other stock or any Rights or other security or any other property shall be determined as provided in this Section 11(d).

 

(i) General.   In the case of a publicly-traded stock or other security, the Fair Market Value on any date shall be deemed to be the average of the daily closing prices per share of such stock or per unit of such other security for the thirty (30) consecutive Trading Days immediately prior to such date, and for purposes of computations made pursuant to Section 11(a)(iii), the Fair Market Value on any date shall be deemed to be the average of the daily closing prices per share of stock or per unit of such other security for the ten (10) consecutive Trading Days immediately following but not including such date; provided, however, that in the event that the Fair Market Value per share of any share of stock is determined during a period following the announcement by the issuer of such stock of (x) a dividend or distribution on such stock payable in shares of such stock or securities convertible into shares of such stock or (y) any subdivision, combination or reclassification of such stock, and prior to the expiration of the thirty (30) Trading Day period or ten (10) Trading Day period, as applicable, after the ex-dividend date for such dividend or distribution, or the record date for such subdivision, combination or reclassification, then, and in each such case, the Fair Market Value shall be properly adjusted to take into account ex-dividend trading. The closing price for each day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the NYSE MKT or, if the securities are not listed or admitted to trading on the NYSE MKT, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which such security is listed or admitted to trading; or, if not listed or admitted to trading on any national securities exchange, the last quoted price (or, if not so quoted, the average of the last quoted high bid and low asked prices) in the over-the-counter market, as reported by the OTC Bulletin Board, the Pink Sheets or such other system then in use; or, if on any such date no bids for such security are 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 such security selected by the Board of Directors. If on any such date no market maker is making a market in such security, the Fair Market Value of such security on such date shall be determined in good faith by the Board of Directors whose determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes.  If the Fair Market Value of the Preferred Stock cannot be determined in the manner provided above or if the Preferred Stock is not publicly held or not listed or traded in a manner described above, then the Fair Market Value of the Preferred Stock will be conclusively deemed to be (x) the Fair Market Value of the Common Stock as determined pursuant to this Section 11(d) multiplied by (y) 1,000 (as such number may be appropriately adjusted to reflect any subdivision, combination, consolidation, reverse stock split or reclassification of the Common Stock occurring after the date of this Agreement). If a security (other than the Preferred Stock) is not publicly held or not so listed 

 

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or traded, or if on any such date such security is not so quoted and no such market maker is making a market in the security, then the Fair Market Value means the fair value per share as determined in good faith by the Board of Directors, after consultation with a nationally recognized investment banking firm, whose determination will be described in a statement filed with the Rights Agent and will be conclusive and binding on the Rights Agent and the holders of the Rights.

 

(ii) Property or Other Securities.  In the case of property other than securities, the Fair Market Value thereof shall be determined in good faith by the Board of Directors, which determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes.

 

(e) Insignificant Changes.  Anything herein to the contrary notwithstanding, no adjustment in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at least 1.0% in the Purchase Price; provided, however , that any adjustments which by reason of this Section 11(e) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 11 shall be made to the nearest cent or to the nearest ten-thousandth of a share of Common Stock of the Company or ten millionth of a share of Preferred Stock, as the case may be, or to such other figure as the Board of Directors may deem appropriate. 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 mandates such adjustment or (ii) the Expiration Date.

 

(f) Shares Other Than Preferred Stock.  If as a result of any provision of Section 11(a) or Section 13(a), the holder of any Right thereafter exercised shall become entitled to receive any shares of stock of the Company other than Preferred Stock, thereafter the number of such other shares so receivable upon exercise of any Right shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Preferred Stock contained in Section 11(a), (b), (c), (d), (e), (g) through (k) and (m), inclusive, and the provisions of Sections 7, 9, 10, 13 and 14 with respect to the Preferred Stock shall apply on like terms to any such other shares.

 

(g) Rights Issued Subsequent to Adjustment.  All Rights originally issued by the Company subsequent to any adjustment made to the Purchase Price hereunder shall evidence the right to purchase, at the adjusted Purchase Price, the number of one one-thousandths of a share of Preferred Stock (or other securities, assets or amount of cash or combination thereof) purchasable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein.

 

(h) Effect of Adjustments on Existing Rights.  Unless the Company shall have exercised its election as provided in Section 11(i), upon each adjustment of the Purchase Price as a result of the calculations made in Sections 11(b) and (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-ten millionth) as the Board of Directors determines is appropriate to preserve the economic value of the Rights, including, by way of example, that number obtained by 

 

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(i) multiplying (x) the number of one one-thousandths of a share of Preferred Stock for which a Rights may be exercisable immediately prior to this adjustment by (y) the Purchase Price in effect immediately prior to such adjustment of the Purchase Price and (ii) dividing the product so obtained by the Purchase Price in effect immediately after such adjustment of the Purchase Price.

 

(i) Adjustment in Number of Rights.  The Company may elect on or after the date of any adjustment of the Purchase Price to adjust the number of Rights, in substitution for any adjustment in the number of shares of Preferred Stock purchasable upon the exercise of a Right. Each of the Rights outstanding after the adjustment in 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 Right held of record prior to such adjustment of the number of Rights shall become that number of Rights (calculated to the nearest one ten-thousandth) obtained by dividing the Purchase Price in effect immediately 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. This record date may be the date on which the Purchase Price is adjusted or any day thereafter, but, if the Rights Certificates have been issued, shall be at least ten (10) days later than the date of the public announcement. If Rights Certificates have been issued, upon each adjustment of the number of Rights pursuant to this Section 11(i), the Company shall, as promptly as practicable, cause to be distributed to holders of record of Rights Certificates on such record date Rights Certificates evidencing, subject to Section 14, the additional Rights to which such holders shall be entitled as a result of such adjustment, or, at the option of the Company, shall cause to be distributed to such holders of record in substitution and replacement for the Rights Certificates held by such holders 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 shall be entitled after such adjustment. Rights Certificates so to be distributed shall be issued, executed and countersigned in the manner provided for herein (and 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) Rights Certificates Unchanged.  Irrespective of any adjustment or change in the Purchase Price or the number of one one-thousandths of a share of Preferred Stock issuable upon the exercise of the Rights, the Rights Certificates theretofore and thereafter issued may continue to express the Purchase Price per one ten-thousandth of a share and the number of one ten-thousandths of a share which were expressed in the initial Rights Certificates issued hereunder without prejudice to any adjustment or change.

 

(k) Par Value Limitations.  Before taking any action that would cause an adjustment reducing the Purchase Price below the then aggregate par value, if any, of the number of one one-thousandths of a share of Preferred Stock issuable upon exercise of the Rights, the Company shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue fully paid and nonassessable shares of Preferred Stock at such adjusted Purchase Price.

 

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(l) Deferred Issuance.  In any case in which this Section 11 shall require that an adjustment in the Purchase Price be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event the issuing to the holder of any Rights exercised after such record date the number of one one-thousandths of a share of Preferred Stock or other stock, securities, assets or cash of the Company, if any, issuable upon such exercise over and above the number of one one-thousandths of a share of Preferred Stock and other stock, securities, assets or cash of the Company, if any, issuable upon such exercise on the basis of the Purchase Price in effect prior to such adjustment; provided, however, that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder’s right to receive such additional shares (fractional or otherwise) or securities upon the occurrence of the event requiring such adjustment.

 

(m) Reduction in Exercise Price.  Anything in this Section 11 to the contrary notwithstanding, the Company shall be entitled to make such reductions in the Purchase Price, in addition to those adjustments expressly required by this Section 11, as and to the extent that it in its sole discretion shall determine to be advisable in order that any consolidation or subdivision of the Preferred Stock or Common Stock, issuance wholly for cash of any shares of Preferred Stock or Common Stock at less than the Fair Market Value, issuance wholly for cash of shares of Preferred Stock or Common Stock or securities which by their terms are convertible into or exchangeable for shares of Preferred Stock, or Common Stock, stock dividends or issuance of rights, options or warrants referred to hereinabove in this Section 11, hereafter made by the Company to holders of its Preferred Stock or Common Stock, shall not be taxable to such stockholders.

 

(n) No Diminishment of Rights.  The Company covenants and agrees that after the Distribution Date it will not, except as permitted by Section 23, Section 24 or Section 28, take (or permit to be taken) any action if at the time such action is taken it is reasonably foreseeable that such action will substantially diminish or otherwise eliminate the benefits intended to be afforded by the Rights.

 

(o) Certain Adjustments to Common Stock.  Notwithstanding anything in this Agreement to the contrary, in the event the Company shall at any time after the date of this Agreement and prior to the Distribution Date (i) declare or pay any dividend on the outstanding Common Stock of the Company payable in shares of Common Stock, (ii) subdivide or split the outstanding Common Stock (other than by the payment of dividends payable in Common Stock) (iii) combine or consolidate the outstanding Common Stock (by reverse stock split or otherwise) into a lesser number of shares of Common Stock of the Company, or (iv) issue, change or alter any shares of its capital stock in a reclassification or recapitalization of the Common Stock (including any such reclassification or recapitalization in connection with a share exchange, consolidation or merger in which the Company is the continuing or surviving corporation), then in each such event, except as otherwise provided in this Section 11 or Section 7(e), (A) the number of one one-thousandths of a share of Preferred Stock (or shares of such other capital stock) purchasable after such event upon proper exercise of each Right shall be determined by multiplying the number of one one-thousandths of a share of Preferred Stock (or shares of such other capital stock) so purchasable immediately prior to such event by a fraction, the numerator of which is the number of shares of Common Stock of the Company outstanding immediately prior to such event and the denominator of which is the number of shares of Common Stock of the Company 

 

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outstanding immediately after such event, (B) the Purchase Price in effect at the time of the record date for such dividend or of the effective date of such subdivision, split, combination, consolidation or reclassification will be adjusted so that the Purchase Price thereafter equals the result obtained by multiplying the Purchase Price in effect immediately prior to such time by a fraction, the numerator of which shall be the total number of shares of Common Stock outstanding immediately prior to such event and the denominator of which shall be the total number of shares of Common Stock outstanding immediately after such event; provided,  however, that in no event will the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company issuable upon the exercise of such Right, and (C) each share of Common Stock  (or shares of capital stock issued in such reclassification of the Common Stock) of the Company outstanding immediately after such event shall have issued with respect to it that number of Rights which each share of Common Stock of the Company outstanding immediately prior to such event had issued with respect to it.  Each Share of Common Stock that becomes outstanding after an adjustment has been made pursuant to this Section 11(o) will have issued with it that number of Rights, exercisable at the Purchase Price and for the number of one one-thousandths of a Preferred Share (or shares of such other capital stock), as one share of Common Stock has associated with it immediately following the adjustment made pursuant to this Section 11(o). If an event occurs that would require an adjustment pursuant to both this Section 11(o) and Section 11(a)(ii), then the adjustment provided for in this Section 11(o) will be in addition to, and will be made prior to, any adjustment required pursuant to Section 11(a)(ii).  The adjustments provided for in this Section 11(o) shall be made successively whenever such a dividend is declared or paid or such a subdivision, split, combination, consolidation or reclassification is effected.

 

(p) Adjustment of Rights Associated with Certain Distributions. Other than in connection with a transaction contemplated by Section 11(o), in the event that the Company, at any time after the date of this Agreement and prior to the Distribution Date, issues or distributes any securities or assets in respect of Common Stock (other than (A) a distribution or dividend of its capital stock and (B) pursuant to any non-extraordinary periodic cash dividend), then the Company will make such adjustments, if any, in the Purchase Price or the number of Rights or securities or other property purchasable upon exercise of Rights as the Board of Directors, in its sole discretion, may deem to be appropriate under the circumstances in order to adequately protect the interests of the holders of the Rights generally, and the Company and the Rights Agent will amend this Plan as necessary to provide for such adjustments.

 

Section 12. Certificate of Adjusted Purchase Price or Number of Shares.

 

Whenever an adjustment is made as provided in Section 11 or Section 13, the Company shall (a) promptly prepare a certificate setting forth such adjustment and a brief statement of the facts accounting for such adjustment, (b) promptly file with the Rights Agent and with each transfer agent for the Preferred Stock and the Common Stock of the Company a copy of such certificate and (c) if a Distribution Date has occurred, 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 of the Company) in accordance with Section 26. Notwithstanding the foregoing, the failure of the Company to make or provide such certification or notice will not affect the validity of such adjustment or the force or effect of the requirement for such adjustment.  The Rights Agent shall be fully protected in relying on any such certificate and on any adjustment contained therein and shall not be deemed to have knowledge of any such adjustment unless and until it shall have received such certificate.

 

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

 

(a) In the event that, following the Stock Acquisition Date, directly or indirectly, (x) the Company shall consolidate with, or merge with and into, any other Person (other than a wholly-owned Subsidiary of the Company in a transaction which is not prohibited by Section 11(n)), and the Company shall not be the continuing or surviving corporation of such consolidation or merger, (y) any Person (other than a wholly-owned Subsidiary of the Company in a transaction which is not prohibited by the proviso at the end of the first sentence of Section 11(n)) shall consolidate with the Company, or merge with and into the Company and the Company shall be the continuing or surviving corporation of such merger and, in connection with such merger, all or part of the shares of Common Stock of the Company shall be changed into or exchanged for stock or other securities of any other Person or cash or any other property, or (z) the Company shall sell, mortgage or otherwise transfer (or one or more of its wholly-owned Subsidiaries shall sell, mortgage or otherwise transfer), in one transaction or a series of related transactions, assets or earning power aggregating 50% or more of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to any other Person or Persons (other than the Company or one or more of its wholly-owned Subsidiaries in one or more transactions, each of which individually (and together) is not prohibited by the proviso at the end of the first sentence of Section 11(n)), then, and in each such case, proper provision shall be made so that: (i) each holder of a Right (except as provided in Section 7(e)) shall have the right to receive, upon the exercise thereof at the then current Purchase Price in accordance with the terms of this Agreement, and in lieu of Preferred Shares, such number of validly authorized and issued, fully paid and nonassessable shares of freely tradable Common Stock of the Principal Party (as hereinafter defined in Section 13(b)), free and clear of rights of call or first refusal, liens, encumbrances, transfer restrictions or other adverse claims, as shall be equal to the result obtained by (1) multiplying the then current Purchase Price by the number of one one-thousandths of a share of Preferred Stock for which a Right is exercisable immediately prior to the first occurrence of a Section 13 Event (or, if a Section 11(a)(ii) Event has occurred prior to the first occurrence of a Section 13 Event, multiplying the number of such one one-thousandths of a Preferred Share for which a Right was exercisable immediately prior to the first occurrence of a Section 11(a)(ii) Event by the Exercise Price in effect immediately prior to such first occurrence of a Section 11(a)(ii) Event), and (2) dividing that product (which, following the first occurrence of a Section 13 Event, will be referred to as the “Purchase Price” for each Right and for all purposes of this Agreement) by 50% of the Fair Market Value (determined pursuant to Section 11(d)) per share of the Common Stock of such Principal Party on the date of consummation of such Section 13 Event, provided,  however, that the price per Right so payable and the number of shares of Common Stock of such Principal Party so receivable upon exercise of a Right will be subject to further adjustment as appropriate in accordance with Section 11(e) to reflect any events covered thereby occurring in respect of the Common Stock of such Principal Party after the occurrence of such Section 13 Event; (ii) such Principal Party shall thereafter be liable for, and shall assume, by virtue of such consolidation, merger, sale, mortgage or transfer, all the obligations and duties of the Company pursuant to this Agreement; (iii) the term “Company” shall thereafter be deemed to refer to such Principal Party, it being specifically intended that the provisions of Section 11 shall apply to such Principal Party; (iv) such Principal

 

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Party shall take such steps (including, but not limited to, the reservation of a sufficient number of shares of its Common Stock to permit exercise of all outstanding Rights in accordance with this Section 13(a) and the making of payments in cash and/or other securities in accordance with Section 11(a)(iii)) in connection with such consummation as may be necessary to assure that the provisions hereof shall thereafter be applicable, as nearly as reasonably may be, in relation to its shares of Common Stock thereafter deliverable upon the exercise of the Rights; (v) the provisions of Section 11(a)(ii) will be of no effect following the first occurrence of any Section 13 Event; and (vi) upon the subsequent occurrence of any consolidation, merger, sale, exchange, mortgage, transfer or other extraordinary transaction in respect of such Principal Party, each holder of a Right will thereupon be entitled to receive, upon exercise of a Right and payment of the Exercise Price as provided in this Section 13(a), such cash, shares, rights, warrants and other property that such holder would have been entitled to receive had such holder, at the time of such transaction, owned the Common Stock of the Principal Party receivable upon the exercise of a Right pursuant to this Section 13(a), and such Principal Party must take such steps (including reservation of a sufficient number of shares of its capital stock) as may be necessary to permit the subsequent exercise of the Rights in accordance with the terms hereof for such cash, shares, rights, warrants and other property.

 

(b) “Principal Party” shall mean

 

(i)                        in the case of any transaction described in clause (x) or (y) of the first sentence of Section 13(a), the Person that is the issuer of any securities into which shares of Common Stock of the Company are converted in such merger or consolidation, or, if there is more than one such issuer, the issuer of Common Stock that has the highest aggregate Fair Market Value (determined pursuant to Section 11(d)), and if no securities are so issued, the Person that is the other party to the merger or consolidation, or, if there is more than one such Person, the Person the Common Stock of which has the highest aggregate Fair Market Value (determined pursuant to Section 11(d)), if the Person that is the other party to the merger does not survive such consolidation or merger, the Person that does survive such consolidation or merger (including the Company if it survives) or the Person resulting from the consolidation or merger; and

 

(ii)                    in the case of any transaction described in clause (z) of the first sentence of Section 13(a), the Person that is the party receiving the greatest portion of the assets or earning power transferred pursuant to such transaction or transactions, or, if each Person that is a party to such transaction or transactions receives the same portion of the assets or earning power transferred pursuant to such transaction or transactions or if the Person receiving the largest portion of the assets or earning power cannot be determined, whichever Person the Common Stock of which has the highest aggregate Fair Market Value (determined pursuant to Section 11(d));

 

provided, however, that in any such case described in clauses (i) or (ii) of Section 13(b), (1) if the Common Stock of such Person is not at such time and has not been continuously over the preceding 12-month period registered under Section 12 of the Exchange Act (“Registered Common Stock”) or such Person is not a corporation, and such Person is a direct or indirect Subsidiary or Affiliate of another Person who has Registered Common Stock outstanding, “Principal Party” shall refer to such other Person; (2) if the Common Stock of such Person is not Registered Common Stock or such Person is not a corporation, and such Person is a

 

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direct or indirect Subsidiary of another Person but is not a direct or indirect Subsidiary of another Person which has Registered Common Stock outstanding, “Principal Party” shall refer to the ultimate parent entity of such first-mentioned Person; (3) if the Common Stock of such Person is not Registered Common Stock or such Person is not a corporation, and such Person is directly or indirectly controlled by more than one Person, and one or more of such other Persons has Registered Common Stock outstanding, “Principal Party” shall refer to whichever of such other Persons is the issuer of the Registered Common Stock having the highest aggregate Fair Market Value (determined pursuant to Section 11(d)); and (4) if the Common Stock of such Person is not Registered Common Stock or such Person is not a corporation, and such Person is directly or indirectly controlled by more than one Person, and none of such other Persons has Registered Common Stock outstanding, “Principal Party” shall refer to whichever ultimate parent entity is the corporation having the greatest stockholders’ equity or, if no such ultimate parent entity is a corporation, “Principal Party” shall refer to whichever ultimate parent entity is the entity having the greatest net assets.

 

(c) Certain Arrangements.  The Company shall not consummate any Section 13 Event unless prior thereto (x) the Principal Party shall have a sufficient number of authorized shares of its Common Stock, which have not been issued or reserved for issuance, to permit the exercise in full of the Rights in accordance with this Section 13, and (y) the Company and each Principal Party and each other Person who may become a Principal Party as a result of such consolidation, merger, sale or transfer shall have executed and delivered to the Rights Agent a supplemental agreement providing for the terms set forth in Section 13(a) and (b) and further providing that, as soon as practicable after the date of any Section 13 Event, the Principal Party at its own expense will:

 

(i)                        prepare and file a registration statement under the Securities Act with respect to the Rights and the securities purchasable upon exercise of the Rights on an appropriate form, cause such registration statement to become effective as soon as practicable after such filing and cause such registration statement to remain effective (with a prospectus that at all times meets the requirements of the Securities Act) until the Expiration Date;

 

(ii)                    qualify or register the Rights and the securities purchasable upon exercise of the Rights under the blue sky laws of such jurisdictions as may be necessary or appropriate;

 

(iii)                list (or continue the listing of) the Rights and the securities purchasable upon exercise of the Rights on a national securities exchange or meet the eligibility requirements for listing on an automated quotation system or such other system on which the Common Stock of the Company is then traded;

 

(iv)                 deliver to holders of the Rights historical financial statements for the Principal Party and each of its Affiliates which comply in all respects with the requirements for registration on Form 10 under the Exchange Act; and

 

(v)                     take all other action as may be necessary to allow the Principal Party to issue the securities purchasable upon exercise of the Rights.

 

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(d) Prohibited Transactions.

 

(i)                        In case the Principal Party which is to be a party to a transaction referred to in this Section 13 has a provision in any of its authorized securities or in its charter or By-laws or other instrument governing its affairs, which provision would have the effect of (A) causing such Principal Party to issue (other than to holders of Rights pursuant to this Section 13), in connection with, or as a consequence of, the consummation of a transaction referred to in this Section 13, shares of Common Stock of such Principal Party at less than the then current Fair Market Value (determined pursuant to Section 11(d)) or securities exercisable for, or convertible into, Common Stock of such Principal Party at less than such Fair Market Value, or (B) providing for any special payment, tax or similar provisions in connection with the issuance of the Common Stock of such Principal Party pursuant to the provisions of this Section 13, then, in such event, the Company shall not consummate any such transaction unless prior thereto the Company and such Principal Party shall have executed and delivered to the Rights Agent a supplemental agreement providing that the provision in question of such Principal Party shall have been canceled, waived or amended, or that the authorized securities shall be redeemed, so that the applicable provision will have no effect in connection with, or as a consequence of, the consummation of the proposed transaction.

 

(ii)                    Notwithstanding anything to the contrary in this Agreement, the Company hereby agrees with each holder of Rights that it will not consummate or permit to occur any Section 13 Event if (A) at the time or immediately after such Section 13 Event there are any rights, warrants, instruments or securities outstanding, or any agreements or arrangements, that, as a result of the consummation of such Section 13 Event, would eliminate or diminish in any material respect the benefits intended to be afforded by the Rights; (B) all rights of first refusal or preemptive rights in respect of the issuance of Common Stock or common stock equivalents of the Principal Party upon exercise of outstanding Rights have not been irrevocably waived or rendered inapplicable; (C) prior to, simultaneously with or immediately after such Section 13 Event, the stockholders of the Person who constitutes, or would constitute, the Principal Party have received a distribution of Rights previously owned by such Person or any of its Affiliates or Associates; or (D) the form or nature of organization of the Principal Party would preclude or limit the exercisability of the Rights.

 

(e) Continued Applicability.  The provisions of this Section 13 will similarly apply to successive mergers, consolidations, sales, exchanges, mortgages, transfers or other extraordinary transactions. In the event that a Section 13 Event occurs at any time after the occurrence of a Section 11(a)(ii) Event, then the Rights that have not theretofore been exercised will thereafter become exercisable in the manner described in Section 13(a) (without taking into account any prior adjustment required by Section 11(a)(ii)).

 

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Section 14. Fractional Rights and Fractional Shares.

 

(a) Cash in Lieu of Fractional Rights.  The Company shall not be required to issue fractions of Rights, except prior to the Distribution Date as provided in Section 11(o), or to distribute Rights Certificates which evidence fractional Rights. If the Company elects not to issue such fractional Rights, the Company shall pay, in lieu of such fractional Rights, 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 Fair Market Value of a whole Right, calculated as of the Trading Daye immediately prior to the date on which such fractional Rights would have been otherwise issuable.

 

(b) Cash in Lieu of Fractional Preferred Stock.  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 or exchange 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).  Interests in fractions of shares of Preferred Stock in integral multiples of one one-thousandth of a shares of Preferred Stock may, at the election of the Company, be evidenced by depositary receipts pursuant to an appropriate agreement between the Company and a depositary selected by the Company;  provided,  however, that such agreement must provide that the holders of such depositary receipts have all of 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 or exchanged as herein provided an amount in cash equal to the same fraction of the Fair Market Value of one one-thousandth of a share of Preferred Stock. For purposes of this Section 14(b), the Fair Market Value of one one-thousandth of a share of Preferred Stock shall be one one thousandth of the Fair Market Value of a share of Preferred Stock, calculated as of the Trading Day immediately prior to the date of such exercise or exchange.

 

(c) Cash in Lieu of Fractional Shares of Common Stock. The Company is not required to issue fractions of shares of Common Stock or to distribute certificates that evidence fractional shares of Common Stock upon the exercise or exchange of Rights. In lieu of such fractional shares of Common Stock, the Company may pay to the registered holders of Rights Certificates at the time such Rights are exercised or exchanged as provided herein an amount in cash equal to the same fraction of the current market value of a share of  Common Stock. For purposes of this Section 14(c), the current market value of a shares of Common Stock will be the Fair Market Value of a shares of Common Stock, calculated as of the Trading Day immediately prior to the date of such exercise or exchange.

 

(d) Waiver of Fractional Rights.  The holder of a Rights by the acceptance of the Rights expressly waives his right to receive any fractional Rights or any fractional shares upon exercise of a Rights, except as permitted by this Section 14.

 

(e) Procedure for Payment. Whenever a payment for fractional Rights, Preferred Stock or Common Stock is to be made by the Rights Agent pursuant to this Agreement, the Company will (i) promptly prepare and deliver to the Rights Agent a certificate setting forth in reasonable detail the facts related to such payment and the prices or formulas utilized in calculating such payments; and (ii) provide sufficient monies to the Rights Agent to make such payments.

 

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Section 15. Rights of Action.

 

All rights of action in respect of this Agreement, other than rights of action vested in the Rights Agent pursuant to Sections 18 and 20, are vested in the respective registered holders of the Rights Certificates (or, prior to the Distribution Date, the registered holders of the Common Stock of the Company); and any registered holder of any Rights Certificate (or, prior to the Distribution Date, of the Common Stock of the Company), without the consent of the Rights Agent or of the holder of any other Rights Certificate (or, prior to the Distribution Date, of the Common Stock of the Company), may, in such registered holder’s own behalf and for such registered holder’s own benefit, enforce, and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, 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.

 

Section 16. Agreement of Rights Holders. Every holder of a Right, by accepting the same, consents and agrees with the Company and the Rights Agent and with every other holder of a Rights that:

 

(a) prior to the Distribution Date, each Right will be transferable only simultaneously and together with the transfer of shares of Common Stock of the Company;

 

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

 

(c) subject to Sections 6(a) and 7(f), 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 certificate representing Common Stock of the Company or Book Entry Shares, as applicable) 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 certificate representing Common Stock of the Company or Book Entry Shares, as applicable, made by anyone other than the Company or the Rights Agent) for all purposes whatsoever, and, subject to Section 7(e), neither the Company nor the Rights Agent shall be affected by any notice to the contrary; and

 

(d) notwithstanding anything in this Agreement to the contrary, neither the Company nor the Rights Agent shall have any liability to any holder of a Rights or other Person as the 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 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 obligations; provided, however, that the Company must use commercially reasonable efforts to have any such order, decree or ruling lifted or otherwise overturned as promptly as practical;

 

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(e) Rights that are Beneficially Owned by certain Persons will, under the circumstances set forth in Section 7(e), become null and void; and

 

(f) this Agreement may be supplemented or amended from time to time in accordance with Section 28.

 

Section 17.  Rights Certificate Holder Not Deemed a Stockholder.

 

No holder, as such, of any Rights Certificate shall be entitled to vote, receive dividends or be deemed for any purpose the holder of the shares of Preferred Stock or any other securities of the Company which may at any time be issuable on the exercise or exchange of the Rights represented thereby, nor shall anything contained herein or in any Rights Certificate be construed to confer upon the holder of any Rights Certificate, as such, any of the rights of a 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 Section 26), or to receive dividends or subscription rights, or otherwise, until the Rights or Rights evidenced by such Rights Certificate shall have been exercised or exchanged in accordance with the provisions hereof.

 

Section 18. Concerning the Rights Agent.

 

(a) The Company agrees to pay to the Rights Agent such compensation as shall be agreed to in writing between the Company and the Rights Agent for all services rendered by it hereunder and, from time to time, on demand of the Rights Agent, its reasonable expenses and attorney fees and disbursements and other disbursements incurred in the administration and execution of this Agreement and the exercise and performance of its duties hereunder. The Company also agrees to indemnify the Rights Agent for, and to hold it harmless against, any loss, liability, or expense, incurred without gross negligence, bad faith or willful misconduct on the part of the Rights Agent, for anything done or omitted by the Rights Agent in connection with the acceptance and administration of this Agreement, including the costs and expenses of defending against any claim of liability arising therefrom, directly or indirectly. The provisions of this Section 18(a) shall survive the expiration of the Rights and the termination of this Agreement.

 

(b) The Rights Agent shall be protected and shall incur no liability for or in respect of any action taken, suffered or omitted by it in connection with its administration of this Agreement in reliance upon any Rights Certificate or certificate representing Common Stock of the Company, Preferred Stock, or other securities of the Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, statement, or other paper or document believed by it in good faith and without gross negligence to be genuine and to be signed and executed by the proper Person or Persons.

 

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(c) The Rights Agent shall not be liable for consequential damages under any provision of this Agreement or for any consequential damages arising out of any act or failure to act hereunder. Any liability of the Rights Agent under this Agreement will be limited to the amount of fees paid by the Company to the Rights Agent.

 

Section 19. Merger or Consolidation or Change of Name of Rights Agent.

 

(a) Any corporation into which the Rights Agent or any successor Rights Agent may be merged or with which it may effect a share exchange be consolidated, or any corporation resulting from any merger, share exchange or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any corporation succeeding to the corporate trust or stockholder services business of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto,  provided that  such corporation would be eligible for appointment as a successor Rights Agent under the provisions of Section 21.  The purchase of all or substantially all of the Rights Agent’s assets employed in the performance of this Agreement, or transfer or rights agent services generally, will be deemed to be a merger, share exchange or consolidation for purposes of this Section 19.  In case at the time such successor Rights Agent shall succeed to the agency created by this Agreement, any of the Rights Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of the predecessor Rights Agent and deliver such Rights Certificates so countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned, any successor Rights Agent may countersign such Rights Certificates either in the name of the predecessor 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) In case at any time the name of the Rights Agent shall be changed and at such time any of the Rights Certificates shall have been countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver Rights Certificates so countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned, the Rights Agent may countersign such Rights Certificates either in its prior name or in its changed name; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement.

 

Section 20. Duties of Rights Agent. The Rights Agent undertakes the duties and obligations expressly imposed by this Agreement upon the following terms and conditions, by all of which the Company and the holders of Rights Certificates, by their acceptance thereof, shall be bound:

 

(a) The Rights Agent may consult with legal counsel selected by it (who may be legal counsel for the Company), and the opinion of such counsel shall be full and complete authorization and protection to the Rights Agent as to any action taken or omitted by it in good faith and in accordance with such opinion.

 

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(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 “Fair Market Value”) be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof shall be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by a person believed by the Rights Agent to be the Chairman of the Board of Directors, a Vice Chairman of the Board of Directors, the President, a Vice President, the Treasurer, any Assistant Treasurer, the Secretary or an Assistant Secretary of the Company and delivered to the Rights Agent. Any such certificate shall be full authorization to the Rights Agent for any action taken or suffered in good faith by it under the provisions of this Agreement in reliance upon such certificate.

 

(c) The Rights Agent shall be liable hereunder only for its own gross negligence, bad faith or willful misconduct.

 

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

 

(e) The Rights Agent shall not be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution hereof by the Rights Agent) or in respect of the validity or execution of any Rights Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Rights Certificate; nor shall it be responsible for any change in the exercisability of the Rights (including the Rights becoming void pursuant to Section 7(e)) or any adjustment required under the provisions of Sections 11, 13 or 24(c) or responsible for the manner, method or amount of any such adjustment or the ascertaining of the existence of facts that would require any such adjustment (except with respect to the exercise of Rights evidenced by Rights Certificates after receipt of a certificate describing any such adjustment furnished in accordance with Section 12), nor shall it be responsible for any determination by the Board of Directors of the Fair Market Value of the Rights or Preferred Stock pursuant to the provisions of Section 14; 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 of the Company or Preferred Stock to be issued pursuant to this Agreement or any Rights Certificate or as to whether or not any shares of Common Stock of the Company or Preferred Stock will, when so issued, be validly authorized and issued, fully paid and nonassessable.

 

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

 

(g) The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder and certificates delivered pursuant to any provision hereof from any person believed by the Rights Agent to be the Chairman of the Board of Directors, any Vice Chairman of the Board of Directors, the President, a Vice President, the Secretary, an Assistant Secretary, the Treasurer or an Assistant Treasurer of the Company, and is authorized to apply to such officers for advice or instructions in connection with its duties, and it

 

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shall not be liable for any action taken or suffered to be taken by it in good faith in accordance with instructions of any such officer. Any application by the Rights Agent for written instructions from the Company may, at the option of the Rights Agent, set forth in writing any action proposed to be taken or omitted by the Rights Agent under this Agreement and the date on or after which such action shall be taken or such omission shall be effective. The Rights Agent shall not be liable for any action taken by, or omission of, the Rights Agent in accordance with a proposal included in 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 officer of the Company actually receives such application, unless any such officer shall have consented in writing to an earlier date) unless, prior to taking any such action (or the effective date in the case of an omission), the Rights Agent shall have received written instructions in response to such application specifying the action to be taken or omitted.

 

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

 

(i) The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys or agents.

 

(j) 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 there shall be reasonable grounds for believing that repayment of such funds or adequate indemnification against such risk or liability is not reasonably assured to it.

 

(k) If, with respect to any Rights Certificate surrendered to the Rights Agent for exercise or transfer, the certificate attached to the form of assignment or form of election to purchase, as the case may be, has either not been completed or indicates an affirmative response to clause (1) or clause (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.

 

Section 21. Change of Rights Agent.

 

The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Agreement upon thirty (30) days’ notice in writing mailed to the Company by first class mail, provided, however, that in the event the transfer agency relationship in effect between the Company and the Rights Agent with respect to the Common Stock of the Company terminates, the Rights Agent will be deemed to have resigned automatically on the effective date of such termination. The Company may remove the Rights Agent or any successor Rights Agent (with or without cause), effective immediately or on a specified date, by written notice given to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the Common Stock of the Company and Preferred Stock, and by giving notice to the holders of the Rights Certificates by any means reasonably determined by the Company to inform such holders

 

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of such removal (including without limitation, by including such information in one or more of the Company’s reports to stockholders or reports or filings with the Securities and Exchange Commission). If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Rights Agent. If the Company shall fail to make such appointment within a period of thirty (30) days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Rights Certificate (who shall, with such notice, submit his Rights Certificate for inspection by the Company), then the incumbent Rights Agent or the registered holder of any Rights Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, shall be (a) a corporation organized and doing business under the laws of the United States, the State of Maryland or the State of New York (or of any other state of the United States so long as such corporation is authorized to do business as a banking institution in the State of Maryland or the State of New York), in good standing, which is authorized under such laws to exercise stock transfer or corporate trust powers and is subject to supervision or examination by federal or state authority and which has at the time of its appointment as Rights Agent a combined capital and surplus of at least $100,000,000 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 Common Stock of the Company and the Preferred Stock, and give notice to the holders of the Rights Certificates by any means reasonably determined by the Company to inform such holders of such appointment (including without limitation, by including such information in one or more of the Company’s reports to stockholders or reports or filings with the Securities and Exchange Commission). Failure to give any notice provided for in this Section 21, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be.

 

Section 22. Issuance of New Rights Certificates.

 

Notwithstanding any of the provisions of this Agreement or of the Rights to the contrary, the Company may, at its option, issue new Rights Certificates evidencing Rights in such form as may be approved by the Board of Directors to reflect any adjustment or change in the Purchase Price per share and the number or kind or class of shares of stock 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 of shares of Common Stock of the Company following the Distribution Date and prior to the redemption or expiration of the Rights, the Company (a) shall, with respect to shares of Common Stock of the Company so issued or sold pursuant to the exercise of stock options or under any employee plan or arrangement, or upon the exercise, conversion or exchange of securities hereafter issued by the Company, and (b) may, in any other case, if deemed necessary or appropriate by the Board of Directors, issue Rights Certificates representing the appropriate number of Rights in connection with such issuance or sale; provided, however, that (i) no such Rights Certificate shall be issued

 

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if, and to the extent that, the Company shall be advised by counsel that such issuance would create a significant risk of material adverse tax consequences to the Company or the Person to whom such Rights Certificate would be issued, and (ii) no such Rights Certificate shall be issued if, and to the extent that, appropriate adjustments shall otherwise have been made in lieu of the issuance thereof.

 

Section 23.  Redemption.

 

(a) Right to Redeem.  The Board of Directors may, at its option, at any time prior to the earlier to occur of (i) the Distribution Date, or (ii) the Close of Business on the Final Expiration Date, redeem all but not less than all of the then outstanding Rights at a redemption price of $0.001 per Right, as such amount may be appropriately adjusted to reflect any stock dividend declared or paid, any split, recapitalization, subdivision or combination of the outstanding shares of Common Stock of the Company or any similar event occurring after the date of this Agreement (such redemption price, as adjusted from time to time, being hereinafter referred to as the “Redemption Price”).  Notwithstanding anything to the contrary in this Agreement, the Rights will not be exercisable after the first occurrence of a Section 11(a)(ii) Event until such time as the Company’s right of redemption pursuant to this Section 23 has expired. Such redemption of the Rights by the Board may be made effective at such time, on such basis and with such conditions as the Board of Director in its sole discretion may establish. The date on which the Board of Directors elects to make the redemption effective is referred to as the “Redemption Date.”

 

(b) General Redemption Procedures.  Immediately upon the action of the Board of Directors ordering the redemption of the Rights (or at such later time as the Board of Directors may establish for the effectiveness of such redemption), and without any further action and without any notice, the right to exercise the Rights will terminate and the only right thereafter of the holders of Rights shall be to receive the Redemption Price for each Rights so held. Promptly after the action of the Board of Directors ordering the redemption of the Rights in accordance with this Section 23, the Company shall give notice of such redemption to the Rights Agent and the holders of the then outstanding Rights by mailing such notice to the Rights Agent and to all such holders at their last addresses as they appear upon the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the transfer agent for the Common Stock of the Company. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. The Company promptly shall mail a notice of any such exchange to all of the holders of such Rights at their last addresses as they appear upon the registry books of the Rights Agent. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of redemption will state the method by which the payment of the Redemption Price will be made. The failure to given, or any defect in, any notice required by this Section 23 will not affect the legality or validity of the action taken by the Board of Directors or of the redemption.

 

(c) Form of Payment of Redemption Price.  The Company may, at its option, pay the Redemption Price in cash, shares of Common Stock of the Company (based on the Fair Market Value of the Common Stock of the Company as of the time of redemption) or any other form of consideration deemed appropriate by the Board of Directors, in its sole discretion, to be at least equivalent to the Redemption Price.

 

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(d) Discharge of Obligations. Notwithstanding anything to the contrary in this Agreement, in the event of a redemption pursuant to Section 23(a), the Company may, at its option, discharge all of its obligations with respect to the Rights by (i) issuing a press release or making a publicly-available filing with the Securities and Exchange Commission announcing the manner of redemption of the Rights and (ii) mailing payment of the Redemption Price to the holders of Rights at the addresses of such holders as shown on the transfer books of the Rights Agent or, prior to the Distribution Date, on the transfer books of the Company or the transfer agent for the Common Stock, and upon such action, all outstanding Right Certificates will be void without any further action by the Company.

 

(e) Prohibited Purchases.  Notwithstanding anything to the contrary in this Agreement, neither the Company nor any of its Affiliates or Associates may redeem, acquire or purchase for value any Rights at any time in any manner other than that specifically set forth in this Section 23 or Section 24 or in connection with the purchase of shares of Common Stock of the Company prior to the Distribution Date.

 

Section 24. Exchange.

 

(a) Exchange of Common Stock for Rights.  The Board of Directors may, at its option, at any time on or after any Person becomes an Acquiring Person, exchange all or part of the then outstanding Rights, whether or not previously exercised (but which exchange shall not include Rights that have become null and void pursuant to the provisions of Section 7(e)) for shares of Common Stock of the Company at an exchange ratio of one share of Common Stock of the Company per Right, appropriately adjusted to reflect any stock split, stock dividend, recapitalization or similar transaction occurring after the date hereof (such exchange ratio being hereinafter referred to as the “Exchange Ratio”). Notwithstanding the foregoing, the Board of Directors shall not be empowered to effect such exchange at any time after any Acquiring Person, together with all Affiliates and Associates of such Person, becomes the Beneficial Owner of 50% or more of the shares of Common Stock of the Company then outstanding.  Notwithstanding the foregoing, from and after the occurrence of a Section 13 Event, any Rights that theretofore have not been exchanged pursuant to this Section 24(a) will thereafter be exercisable only in accordance with Section 13 and may not be exchanged (or eligible for exchange) pursuant to this Section 24(a).

 

(b) Exchange Procedures.  Immediately upon the action of the Board of Directors ordering the exchange of any Rights pursuant to subsection (a) of this Section 24 and without any further action and without any notice, the right to exercise such Rights shall terminate and the only right thereafter of a holder of such Rights shall be to receive that number of shares of Common Stock of the Company equal to the number of such Rights held by such holder multiplied by the Exchange Ratio. The Company shall promptly give notice of any such exchange in accordance with Section 27 and shall promptly mail a notice of any such exchange to all of the holders of such Rights at their last addresses as they appear upon the registry books of the Rights Agent; provided, however, that the failure to give, or any defect in, such notice shall not affect the validity of such exchange. 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 of the Company for Rights will be effected and, in the event of any partial exchange, the number of

 

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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 7(e)) held by each holder of Rights.  Following the determination to exchange rights pursuant to this Section 24, the Company may implement such procedures as it deems appropriate, in its sole discretion, to minimize the possibility that any shares of Common Stock (or other consideration) issuable pursuant to this Section 24 are received by Persons whose Rights are null and void pursuant to Section 7(e). Prior to effecting any exchange, the Company may require as a condition thereof, that any registered holder of Rights provide such evidence (including the identity of the Beneficial Owner (or former Beneficial Owner) thereof and the Affiliates or Associates of such Beneficial Owner or former Beneficial Owner) as the Company may reasonably request in order to determine if such Rights are null and void pursuant to Section 7(e). If such registered holder does not comply with the foregoing requirements, then the Company will be entitled to conclusively deem such Rights to be Beneficially Owned by an Acquiring Person (or an Affiliate or Associate of an Acquiring Person, or any Person described in Section 7(e)) and, accordingly, such Rights will be null and void and not exchangeable in connection herewith. Any shares of Common Stock (or other securities) issued at the direction of the Board of Directors pursuant to this Section 24 will be duly and validly authorized and issued and fully paid and nonassesable, and the Company will be deemed to have received as consideration for such issuance a benefit having a calculate that is at least equal to the aggregate par value of the shares of Common Stock (or other securities) so issued. The failure to give, or any defect in, any notice required by this Section 24 will not affect the legality ot validity f the action taken by the Board of Directors.  The exchange of the Rights pursuant to Section 24(a) may be made effective at such time, on such basis and with such conditions as the Board of Directors, in its sole discretion, may establish.

 

(c) Preferred Stock Substitution.  In any exchange pursuant to this Section 24, the Company, at its option, may substitute Preferred Stock (or Preferred Stock Equivalent, as such term is defined in Section 11(b)) for Common Stock of the Company exchangeable for Rights, at the initial rate of one one-thousandth of a share of Preferred Stock (or Preferred Stock Equivalent) for each share of Common Stock of the Company, as appropriately adjusted to reflect adjustments in the voting rights of the Preferred Stock pursuant to the terms thereof, so that the fraction of a share of Preferred Stock delivered in lieu of each share of Common Stock of the Company shall have the same voting rights as one share of Common Stock of the Company.

 

(d) Insufficient Shares.  In the event that there shall not be sufficient shares of Common Stock of the Company authorized but unissued to permit any exchange of Rights as contemplated in accordance with this Section 24, the Company shall take all such action as may be necessary to authorize additional shares of Common Stock of the Company for issuance upon exchange of the Rights or alternatively, at the option of the Board of Directors, with respect to each Right (i) pay cash in lieu of issuing Shares of Common Stock in exchange therefor in an amount equal to the product of the Fair Market Value of the Common Stock multiplied by the number of shares of Common Stock for which the Right would otherwise be exchangeable (without regard to whether there were sufficient shares of Common Stock available therefore) (the “Current Exchange Value”); (ii) issue debt or equity securities (or a combination thereof) having a value equal to the Current Exchange Value in lieu of issuing Common Stock in exchange for each such Right, where the value of such securities will be determined by the Board of Directors based upon the advice of a nationally recognized investment banking firm selected by the Board of

 

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Directors, which determination will be described in a written statement filed with the Rights Agent and will be binding on the Rights Agent and the holders of Rights; or (iii) deliver any combination of cash, property, Common Stock, Preferred Stock, Common Stock Equivalents, Preferred Stock Equivalents or other securities having a value equal to the Current Exchange Value in exchange for each Right.  To the extent that the Company determines that some action need be taken pursuant to this Section 24(d), then the Board of Directors may temporarily suspend the exercisability of the Rights for a period of up to 120 days following the date on which the Board of Directors orders the exchange of Rights pursuant to Section 24(a) in order to seek any authorization of additional shares of Common Stock or to decide the appropriate form of distribution to be made pursuant to the above provision and to determine the value thereof. Upon any such suspension, the Company will issue a public announcement stating, and notify the Rights Agent in writing, that the exercisability of the Rights has been temporarily suspended, as well as issue a public announcement, and notify the Rights Agent in writing, at such time as the suspension is no longer in effect.

 

(e) Fractional Shares.  The Company shall not be required to issue fractions of Common Stock of the Company or to distribute certificates which evidence fractional shares of Common Stock of the Company. If the Company elects not to issue such fractional shares of Common Stock of the Company, the Company shall pay, in lieu of such fractional shares of Common Stock of the Company, to the registered holders of the Rights Certificates with regard to which such fractional shares of Common Stock of the Company would otherwise be issuable, an amount in cash equal to the same fraction of the Fair Market Value of a whole share of Common Stock of the Company. For the purposes of this paragraph (e), the Fair Market Value of a whole share of Common Stock of the Company shall be the closing price of a share of Common Stock of the Company (as determined pursuant to the second sentence of Section 11(d)(i)) for the Trading Day immediately prior to the date the Board of Directors ordered the exchange of Rights pursuant to this Section 24.

 

Section 25. Process to Seek Exemption.

 

Any Person who desires to effect any acquisition of Common Stock that would, if consummated, result in such Person beneficially owning 4.99% or more of the then outstanding Common Stock (or, in the case of an Existing Holder, additional shares of Common Stock) (a “Requesting Person”) may, prior to the Stock Acquisition Date and in accordance with this Section 25, request that the Board of Directors grant an exemption with respect to such acquisition under this Plan so that such Person would be deemed to be an “Exempt Person” under subsection (v) of the definition thereof in Section 1 for purposes of this Agreement (an “Exemption Request”).  An Exemption Request shall be in proper form and shall be delivered by overnight delivery service or registered mail, return receipt requested, to the Secretary of the Company at the principal executive office of the Company.  The Exemption Request shall be deemed made upon receipt by the Secretary 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 4.99% or more of the then outstanding Common Stock (or in the case of an Existing Holder, additional shares of

 

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Common Stock) and the maximum number and percentage of shares of Common Stock that the Requesting Person proposes to acquire.  The Board of Directors shall make a determination whether to grant an exemption in response to an Exemption Request as promptly as practicable (and, in any event, within ten (10) Business Days) after receipt thereof; provided, that the failure of the Board of Directors to make a determination within such period shall be deemed to constitute the denial by the Board of Directors of the Exemption Request.  The Requesting Person shall respond promptly to reasonable and appropriate requests for additional information from the Board of Directors and its advisors to assist the Board of Directors in making its determination.  For purposes of considering the Exemption Request, any calculation of the number of shares of Common Stock outstanding at any particular time, including for purposes of determining the particular percentage of such outstanding Common Stock of which any Person is the Beneficial Owner, shall be made pursuant to and in accordance with Section 382 of the Code. The Board of Directors shall only grant an exemption in response to an Exemption Request if the Board of Directors determines in its sole discretion that the acquisition of Beneficial Ownership of shares of Common Stock by the Requesting Person (A) will not adversely impact in any material respect the time period in which the Company could use the Tax Benefits or limit or impair the availability to the Company of the Tax Benefits or (B) is in the best interests of the Company despite the fact that it may adversely impact in a material respect the time period in which the Company could use the Tax Benefits or limit or impair the availability to the Company of the Tax Benefits. 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 of Directors), in each case as and to the extent the Board of Directors shall determine necessary or desirable to provide for the protection of the Company’s Tax Benefits.  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 of Directors’ determination with respect thereto, unless the information contained in the Exemption Request or the Board of Directors’ determination with respect thereto otherwise becomes publicly available.  The Exemption Request shall be considered and evaluated by directors serving on the Board of Directors, or a duly constituted committee thereof, who are independent of the Company and the Requesting Person and disinterested with respect to the Exemption Request, and the action of a majority of such independent and disinterested directors shall be deemed to be the determination of the Board of Directors for purposes of such Exemption Request.

 

Section 26. Notice of Certain Events.

 

(a) Certain Distributions.  In case the Company shall propose, at any time after the Distribution Date, (i) to pay any dividend payable in stock of any class to the holders of Preferred Stock or to make any other distribution to the holders of Preferred Stock (other than a regular periodic cash dividend out of earnings or retained earnings of the Company), or (ii) to offer to the holders of Preferred Stock rights or warrants 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, or (iii) to effect any reclassification of Preferred Stock (other than a reclassification involving only the subdivision of outstanding shares of Preferred Stock), or (iv) to effect any

 

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consolidation or merger into or with, or to effect any sale, mortgage or other transfer (or to permit one or more of its Subsidiaries to effect any sale, mortgage or other transfer), in one transaction or a series of related transactions, of 50% or more of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to, any other Person (other than a Subsidiary of the Company in one or more transactions each of which is not prohibited by the proviso at the end of the first sentence of Section 11(n)), or (v) to effect the liquidation, dissolution or winding up of the Company, or (vi) to declare or pay any dividend on the Common Stock of the Company payable in Common Stock of the Company or to effect a subdivision, combination or consolidation of the Common Stock of the Company (by reclassification or otherwise than by payment of dividends in Common Stock of the Company) then in each such case, the Company shall give to each holder of a Rights Certificate and to the Rights Agent, in accordance with Section 27, a notice of such proposed action, which shall specify the record date for the purposes of such stock dividend, distribution of rights or warrants, 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 the shares of Common Stock of the Company and/or 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 twenty (20) days prior to the record date for determining holders of the shares of Preferred Stock for purposes of such action, and in the case of any such other action, at least twenty (20) days prior to the date of the taking of such proposed action or the date of participation therein by the holders of the shares of Common Stock of the Company and/or Preferred Stock, whichever shall be the earlier; provided, however, no such notice shall be required pursuant to this Section 26 as a result of any Subsidiary of the Company effecting a consolidation or merger with or into, or effecting a sale or other transfer of assets or earnings power to, any other Subsidiary of the Company in a manner not inconsistent with the provisions of this Agreement.

 

(b) Certain Events.  In case any Triggering Event shall occur, then, in any such case, the Company shall as soon as practicable thereafter give to each registered holder of a Rights Certificate and to the Rights Agent, in accordance with Section 27, a notice of the occurrence of such event, which shall specify the event and the consequences of the event to holders of Rights under Section 11(a)(ii) or Section 13.

 

Section 27. Notices. Notices or demands authorized by this Agreement to be given or made by the Rights Agent or by the holder of any Rights Certificate to or on the Company shall be sufficiently given or made if in writing sent by first-class mail, postage prepaid, by facsimile transmission (when such fax is transmitted to the fax number set forth below and confirmation of transmission is received) or by nationally-recognized overnight courier addressed (until another address is filed in writing with the Rights Agent) as follows:

 

Impac Mortgage Holdings, Inc.

19500 Jamboree Road

Irvine, California 92612

Facsimile: 949-475-3969

Attention: General Counsel

 

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Subject to the provisions of Section 21, any notice or demand authorized by this Agreement to be given or made by the Company or by the holder of any Rights Certificate to or on the Rights Agent shall be sufficiently given or made if sent by first-class mail, postage prepaid, by facsimile transmission (when such fax is transmitted to the fax number set forth below and confirmation of transmission is received)  or by nationally-recognized overnight courier addressed (until another address is filed in writing with the Company) as follows:

 

American Stock Transfer & Trust Company, LLC

6201 15 th  Avenue

Brooklyn, NY 11219

Facsimile: 718-921-8200

Attention: General Counsel

 

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, prior to the Distribution Date, to the holder of any certificate representing shares of Common Stock of the Company) shall be sufficiently given or made if sent by recognized national overnight delivery service or first-class mail, postage prepaid, addressed to such holder at the address of such holder as shown on the registry books of the Company.  Any notice that is sent or mailed in the manner herein provided will be deemed given whether or not the holder receives the notice. Notwithstanding anything to the contrary in this Agreement, prior to the Distribution Date, the issuance of a press release or the making of a publicly-available filing by the Company with the Securities and Exchange Commission will constitute sufficient notice by the Rights Agent or the Company to the holders of securities of the Company, including the Rights, for all purposes of this Agreement and no other notice need be given.

 

Section 28. Supplements and Amendments.

 

Prior to the occurrence of a Distribution Date, the Company may in its sole discretion and the Rights Agent shall, if the Board of Directors so directs, supplement or amend any provision of this Agreement as the Board of Directors may deem necessary or desirable without the approval of any holders of certificates representing shares of Common Stock of the Company. From and after the occurrence of a Distribution Date, the Company and the Rights Agent shall, if the Board of Directors so directs, supplement or amend this Agreement without the approval of any holder of Rights Certificates 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 or otherwise defective, including any change in order to satisfy any applicable law, rule or regulation, (iii) to shorten or lengthen any time period hereunder, or (iv) to change or supplement the provisions hereof in any manner which the Company may deem necessary or desirable and which shall not adversely affect the interests of the holders of Rights Certificates (other than an Acquiring Person or any Affiliate or Associate of an Acquiring Person or Any Person described in Section 7(e)); provided, however, that this Agreement may not be supplemented or amended to lengthen, pursuant to clause (iii) of this sentence, a time period relating to when the Rights may be redeemed at such time as the Rights are not then redeemable, provided  further, however, that the right of the Board of Directors to extend the Distribution Date does not require any amendment or supplement hereunder. Upon the delivery of such certificate from an appropriate officer of the Company which states that the proposed supplement or amendment is in

 

45

 

compliance with the terms of this Section 28, the Rights Agent shall execute such supplement or amendment, and any failure of the Rights Agent to so execute such supplement or amendment shall not affect the validity of the actions taken by the Board of Directors pursuant to this Section 28; provided, that any supplement or amendment that does not amend Section 18, Section 19, Section 20 or Section 21 or this Section 28 or any other Section of this Plan in a manner that is adverse to the Rights Agent will become effective immediately upon execution by the Company, whether or not also executed by the Rights Agent. Prior to the occurrence of a Distribution Date, the interests of the holders of Rights shall be deemed coincident with the interests of the holders of Common Stock of the Company. Notwithstanding any other provision hereof, the Rights Agent’s consent must be obtained regarding any amendment or supplement pursuant to this Section 28 which alters the Rights Agent’s rights or duties.

 

Section 29. Successors.

 

All the covenants and provisions of this Agreement by or for the benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder.

 

Section 30. Determinations and Actions by the Board of Directors.

 

The Board of Directors shall have the exclusive power and authority to administer this Agreement and to exercise all rights and powers specifically granted to the Board of Directors 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 computations deemed necessary or advisable for the administration of this Agreement (including a determination to redeem or not redeem the Rights or to amend the Agreement). 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 of Directors in good faith shall (x) be final, conclusive and binding on the Company, the Rights Agent, the holders of the Rights and all other Persons, and (y) not subject any member of the Board of Directors to any liability to any Person, including the Rights Agent and the holders of the Rights.  In administering this Agreement, and exercising the right and powers specifically granted to the Board of Directors and to the Company hereunder, and in interpreting this Agreement and making any determination hereunder, the Board of Directors (or an authorized committee thereof) may consider any and all facts, circumstances or information that it deems to be necessary, useful or appropriate.

 

Section 31. 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, the Common Stock of the Company) 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 the Common Stock of the Company).

 

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Section 32. Severability.

 

If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated; provided,  however, that notwithstanding anything in this Agreement to the contrary, if any such term, provision, covenant or restriction is held by such court or authority to be invalid, void or unenforceable and the Board of Directors determines in good faith that severing the invalid language from the Agreement would adversely affect the purpose or effect of the Agreement, the right of redemption set forth in Section 23 shall be reinstated and shall not expire until the Close of Business on the tenth day following the date of such determination by the Board of Directors.

 

Section 33. Governing Law.

 

This Agreement and the Rights issued hereunder shall be governed by and construed in accordance with the internal laws of Maryland without regard to the principles of conflicts of laws; provided, however, that all provisions regarding the rights, obligations, duties and immunities of the Rights Agent shall be governed by and construed in accordance with, the laws of the State of New York. The courts of the State of Maryland and of the United States of America located in the State of Maryland (the “Maryland Courts”) shall have exclusive jurisdiction over any suit, action or proceeding arising out of or relating to or concerning this Agreement and the transactions contemplated hereby, and any Person commencing or otherwise involved in any such litigation shall waive any objection to the laying of venue of such litigation in the Maryland Courts and shall not plead or claim in any Maryland Court that such litigation brought therein has been brought in an inconvenient forum. The Company and the registered holders of Rights Certificates (and, prior to the Distribution Date, the registered holders of Common Stock) each hereby waive, to the fullest extent permitted by applicable law, any objection that they now or hereafter have to personal jurisdiction or to the laying of venue of any such suit, action or proceeding brought in any court referred to in this Section 33 (or the appellate courts thereof).  The Company and the registered holders of Rights Certificates (and, prior to the Distribution Date, the registered holders of Shares of Common Stock) each hereby agree that, to the fullest extent permitted by applicable law, a final and non-appealable judgment in any such suit, action or proceeding brought in any such court will be conclusive and binding upon such Persons.  Notwithstanding the foregoing, the Company and the Rights Agent may mutually agree to a jurisdiction other than Maryland for any litigation directly between the Company and the Rights Agent arising out of or relating to this Agreement.

 

Section 34. Counterparts.

 

This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.  A signature to this Agreement transmitted electronically (including by fax and .pdf) will have the same authority, effect and enforceability as an original signature. No party hereto may raise the use of such electronic transmission to deliver a signature, or the fact that any signature or agreement or instrument was transmitted or communicated through such electronic transmission, as a defense to the formation of a contract, and each party forever waives any such defense, except to the extent such defense relates to lack of authenticity.

 

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Section 35. Descriptive Headings.

 

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

 

Section 36. Force Majeure.

 

Notwithstanding anything to the contrary contained herein, neither the Company nor the Rights Agent shall be liable for any delay or failure in performance resulting directly from any act or event beyond its reasonable control and without the fault or gross negligence of the delayed or non-performing party that causes a sudden, substantial or widespread disruption in business activities, including, without limitation, fire, flood, natural disaster or act of God, strike or other industrial disturbance, war (declared or undeclared), embargo, blockade, legal restriction, riot, insurrection, act of terrorism, disruption in transportation, communications, electric power or other utilities, or other vital infrastructure or any means of disrupting or damaging internet or other computer networks or facilities (each, a “Force Majeure Condition”); provided, that such delayed or non-performing party shall use reasonable commercial efforts to resume performance as soon as practicable. If any Force Majeure Condition occurs, the party delayed or unable to perform shall give prompt written notice to the other party, stating the nature of the Force Majeure Condition and any action being taken to avoid or minimize its effect.

 

[Remainder of page intentionally left blank]

 

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

 

 

	
ATTEST:

 
    	
 
    	
IMPAC   MORTGAGE HOLDINGS, INC.
    
	
By:
    	
/s/   R. Morrison
    	
 
    	
By:
    	
/s/   William S. Ashmore
    
	
 
    	
Name:   R. Morrison
    	
 
    	
 
    	
Name:  William S. Ashmore
    
	
 
    	
Title:  EVP
    	
 
    	
 
    	
Title:   President
    

 

 

	
ATTEST:

 
    	
 
    	
AMERICAN   STOCK TRANSFER & TRUST COMPANY, LLC, as Rights Agent
    
	
By:
    	
/s/   Cindy Armenia
    	
 
    	
By:
    	
/s/   Jennifer Donovan
    
	
 
    	
Name:   Cindy Armenia
    	
 
    	
 
    	
Name:   Jennifer Donovan
    
	
 
    	
Title   Relationship Manager
    	
 
    	
 
    	
Title   SVP
    

 

 

Exhibit A

 

IMPAC MORTGAGE HOLDINGS, INC.

 

ARTICLES SUPPLEMENTARY

 

SERIES A-1 JUNIOR PARTICIPATING PREFERRED STOCK

 

 

IMPAC MORTGAGE HOLDINGS, INC.

 

ARTICLES SUPPLEMENTARY

 

SERIES A-1 JUNIOR PARTICIPATING PREFERRED STOCK

 

Impac Mortgage Holdings, Inc., a Maryland corporation (the “Corporation”), hereby certifies to the State Department of Assessments and Taxation of Maryland that:

 

FIRST: Under a power contained in Article VI of the charter of the Corporation (the “Charter”), the Board of Directors of the Corporation (the “Board”), by duly adopted resolutions, reclassified and designated 2,500,000 shares of the authorized but unissued shares of Series A Junior Participating Preferred Stock of the Corporation, $0.01 par value per share, as shares of Series A-1 Junior Participating Preferred Stock, $0.01 par value per share, with the following preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms and conditions of redemption, which, upon any restatement of the Charter, shall become part of Article VI of the Charter, with any necessary or appropriate renumbering or relettering of the sections or subsections hereof:

 

Section 1. Designation and Amount. The shares of such series shall be designated as “Series A-1 Junior Participating Preferred Stock” (the “Series A-1 Preferred Stock”) and the number of shares constituting such series shall be 2,500,000. Such number of shares may be increased or decreased by resolution of the Board in accordance with the Charter; provided, that no decrease shall reduce the number of shares of Series A-1 Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Corporation convertible into Series A-1 Preferred Stock.

 

Section 2. Dividends and Distributions.

 

(A) (i) Subject to the rights of the holders of any shares of any class or series of preferred stock of the Corporation, $0.01 par value per share (the “Preferred Stock”) (or any similar stock) ranking prior and superior to the Series A-1 Preferred Stock with respect to dividends, the holders of shares of Series A-1 Preferred Stock, in preference to the holders of shares of Common Stock of the Corporation, par value $0.01 per share (“Common Stock”) and of any other class or series of stock ranking junior to the Series A-1 Preferred Stock, shall be entitled to receive, when, as and if authorized by the Board and declared by the Corporation out of funds legally available for the purpose, quarterly dividends payable in cash on the first day of March, June, September and December in each year (each such date being referred to herein as a “Quarterly Dividend Payment Date”), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A-1 Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $0.01 or (b) subject to the provisions for adjustment hereinafter set forth, 1,000 times the aggregate per share amount of all cash dividends, and 1,000 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment

 

A-1

 

Date, or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A-1 Preferred Stock. The multiple of cash and non-cash dividends declared on the Common Stock to which holders of the Series A-1 Preferred Stock are entitled, which shall be 1,000 initially but which shall be adjusted from time to time as hereinafter provided, is hereinafter referred to as the “Dividend Multiple.” In the event the Corporation shall at any time after September 3, 2013 (the “Rights Declaration Date”) (i) declare or pay any dividend on Common Stock payable in shares of Common Stock, or (ii) 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 Dividend Multiple thereafter applicable to the determination of the amount of dividends which holders of shares of Series A-1 Preferred Stock shall be entitled to receive shall be the Dividend Multiple applicable immediately prior to such event multiplied 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.

 

(ii) Notwithstanding anything else contained in this paragraph (A), the Corporation shall, out of funds legally available for that purpose, declare a dividend or distribution on the Series A-1 Preferred Stock as provided in this paragraph (A) immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $0.01 per share on the Series A-1 Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date.

 

(B) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A-1 Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares of Series A-1 Preferred Stock, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A-1 Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A-1 Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix in accordance with applicable law a record date for the determination of holders of shares of Series A-1 Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than such 90 days prior to the date fixed for the payment thereof.

 

A-2

 

Section 3. Voting Rights. The holders of shares of Series A-1 Preferred Stock shall have the following voting rights:

 

(A) Subject to the provision for adjustment hereinafter set forth, each share of Series A-1 Preferred Stock shall entitle the holder thereof to 1,000 votes on all matters submitted to a vote of the stockholders of the Corporation. The number of votes which a holder of a share of Series A-1 Preferred Stock is entitled to cast, which shall initially be 1,000 but which may be adjusted from time to time as hereinafter provided, is hereinafter referred to as the “Vote Multiple.” In the event the Corporation shall at any time after the Rights Declaration Date (i) declare or pay any dividend on Common Stock payable in shares of Common Stock, or (ii) 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 Vote Multiple thereafter applicable to the determination of the number of votes per share to which holders of shares of Series A-1 Preferred Stock shall be entitled shall be the Vote Multiple immediately prior to such event multiplied by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

 

(B) Except as otherwise provided in the Charter or by law, the holders of shares of Series A-1 Preferred Stock and the holders of shares of Common Stock and the holders of shares of any other stock of this Corporation having general voting rights, shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation.

 

(C) (i) Whenever, at any time or times, dividends payable on any shares of Series A-1 Preferred Stock shall be in arrears in an amount equal to at least six full quarter dividends (whether or not declared and whether or not consecutive), the holders of record of the outstanding shares of Series A-1 Preferred Stock shall have the exclusive right, voting separately as a single class, to elect two directors of the Corporation at a special meeting of stockholders of the Corporation or at the Corporation’s next annual meeting of stockholders, and at each subsequent annual meeting of stockholders, as provided below.

 

(ii) Upon the vesting of such right of the holders of shares of Series A-1 Preferred Stock, the maximum authorized number of members of the Board of Directors shall automatically be increased by two and the two vacancies so created shall be filled by vote of the holders of the outstanding shares of Series A-1 Preferred Stock as hereinafter set forth. A special meeting of the stockholders of the Corporation then entitled to vote shall be called by the Chairman of the Board, Chief Executive Officer or President of the Corporation or the Secretary of the Corporation, if requested in writing by the holders of record of not less than 10% of the shares of Series A-1 Preferred Stock then outstanding.  At such special meeting, or, if no such special meeting shall have been called, then at the next annual meeting of stockholders of the Corporation, the holders of the shares of Series A-1 Preferred Stock shall elect, voting as above provided, two directors of the Corporation to fill the aforesaid vacancies created by the automatic increase in the number of members of the Board of Directors.  Notice of the meeting and of any annual meeting at which holders of Series A-1 Preferred Stock are entitled to vote pursuant to this paragraph (C)(ii) shall be given to each holder of record of Series A-1 Preferred Stock by mailing a copy of such notice to him at his last address as the same appears on the books of the Corporation.  The meeting shall be called for a time not earlier than 10 days and not later than 90 days after the order or request or, in default of the calling of the meeting, within 90 days after the order or request, the meeting may be called on similar notice by any stockholder or stockholders owning in the aggregate not less than 5% of the shares of Series A-1 Preferred Stock then outstanding. Notwithstanding the provisions of this paragraph (c)(ii), no such special meeting shall be called during the period within 90 days immediately preceding the date fixed for the next annual meeting of the stockholders.

 

A-3

 

(iii) At any and all meetings for the election of directors by holders of shares of Series A-1 Preferred Stock, the holders of a majority of the outstanding shares of Series A-1 Preferred Stock shall be necessary to constitute a quorum for such election, whether present in person or proxy, and such two directors shall be elected by a plurality of the votes cast by the holders of Series A-1 Preferred Stock. Each such additional director shall serve until the next annual meeting of stockholders for the election of directors, or until his successor shall be elected and shall qualify, or until his right to hold such office terminates pursuant to the provisions of this Section 3(C). Any director elected by holders of shares of Series A-1 Preferred Stock pursuant to this Section 3(C) may be removed at any annual or special meeting, by vote of a majority of the outstanding shares of Series A-1 Preferred Stock, with or without cause. In case any vacancy shall occur among the directors elected by the holders of shares of Series A-1 Preferred Stock pursuant to this Section 3(C), such vacancy may be filled by the remaining director so elected, or his successor then in office, and the director so elected to fill such vacancy shall serve until the next meeting of stockholders for the election of directors.

 

(iv) The right of the holders of shares of Series A-1 Preferred Stock, voting separately as a class, to elect two members of the Board as aforesaid shall continue until, and only until, such time as all arrears in dividends (whether or not declared) on the Series A-1 Preferred Stock shall have been paid or declared and set apart for payment, at which time such right shall terminate, subject to revesting in the event of each and every subsequent default of the character above-mentioned. Upon any termination of the right of the holders of the Series A-1 Preferred Stock as a class to vote for directors as herein provided, the term of office of all directors then in office elected by the holders of shares of Series A-1 Preferred Stock pursuant to this Section 3(C) shall terminate immediately and the number of directors shall be reduced accordingly. The voting rights granted by this Section 3(C) shall be in addition to any other voting rights granted to the holders of the Series A-1 Preferred Stock in this Section 3.

 

(D) Except as set forth herein, holders of Series A-1 Preferred Stock shall have no voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action.

 

Section 4. Certain Restrictions.

 

(A) Whenever dividends or distributions payable on the Series A-1 Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A-1 Preferred Stock outstanding shall have been paid in full, the Corporation shall not:

 

(i) declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A-1 Preferred Stock;

 

(ii) declare or pay dividends on or make any other distributions on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A-1 Preferred Stock, except dividends paid ratably on the Series A-1 Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled;

 

A-4

 

(iii) except as permitted in subsection 4(A)(iv) below, redeem, purchase or otherwise acquire for consideration shares of any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A-1 Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such parity stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A-1 Preferred Stock; or

 

(iv) redeem, purchase or otherwise acquire for consideration any shares of Series A-1 Preferred Stock, or any shares of any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A-1 Preferred 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, shall determine in good faith will result in fair and equitable treatment among the respective series or classes.

 

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

 

Section 5. Reacquired Shares. Any shares of Series A-1 Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall become authorized but unissued shares of Preferred Stock without designation as to Series A-1 and may be reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board, subject to the conditions and restrictions on issuance set forth in the Charter or otherwise required by law.

 

Section 6. Liquidation, Dissolution or Winding Up. Upon any liquidation, dissolution or winding up of the Corporation (voluntary or otherwise), no distribution shall be made (x) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A-1 Preferred Stock unless, prior thereto, the holders of shares of Series A-1 Preferred Stock shall have received an amount (the “Series A-1 Liquidation Preference”) equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, plus an amount equal to the greater of (1) $1,000.00 per share or (2) an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to 1,000 times the aggregate amount of all cash or other property to be distributed per share to holders of Common Stock upon such liquidation, dissolution or winding up of the Corporation, or (y) to the holders of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A-1 Preferred Stock, except distributions made ratably on the Series A-1 Preferred Stock and all other such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. In the event the Corporation shall at any time after the Rights

 

A-5

 

Declaration Date (i) declare or pay any dividend on Common Stock payable in shares of Common Stock, or (ii) effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the aggregate amount per share to which holders of shares of Series A-1 Preferred Stock were entitled immediately prior to such event under clause (x) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

 

In the event, however, that there are not sufficient assets available to permit payment in full of the Series A-1 Liquidation Preference and the liquidation preferences of all other classes and series of stock of the Corporation, if any, that rank on a parity with the Series A-1 Preferred Stock in respect thereof, then the assets available for such distribution shall be distributed ratably to the holders of the Series A-1 Preferred Stock and the holders of such parity shares in proportion to their respective liquidation preferences.

 

Neither the consolidation of nor merging of the Corporation with or into any other entity or entities, nor the sale or other transfer of all or substantially all of the assets of the Corporation, shall be deemed to be a liquidation, dissolution or winding up of the Corporation within the meaning of this Section 6.

 

Section 7. Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the outstanding shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each share of Series A-1 Preferred Stock shall at the same time be similarly exchanged or changed in an amount per share (subject to the provision for adjustment hereinafter set forth) equal to 1,000 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged, plus accrued and unpaid dividends, if any, payable with respect to the Series A-1 Preferred Stock. In the event the Corporation shall at any time after the Rights Declaration Date (i) declare or pay any dividend on Common Stock payable in shares of Common Stock, or (ii) effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series A-1 Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

 

Section 8. Redemption. The shares of Series A-1 Preferred Stock shall not be redeemable; provided, however, that the foregoing shall not limit the ability of the Corporation to purchase or otherwise deal in such shares to the extent otherwise permitted by the Charter (including this Articles Supplementary) or by law.

 

A-6

 

Section 9. Ranking. Any class or series of shares of stock of the Corporation shall be deemed to rank: (A) prior to the Series A-1 Preferred Stock, as to the payment of dividends and as to distribution of assets upon liquidation, dissolution or winding up, if the holders of such class or series shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of Series A-1 Preferred Stock, or they are the Corporation’s 9.375% Series B Cumulative Redeemable Preferred Stock or 9.125% Series C Cumulative Redeemable Preferred Stock; (B) on a parity with the Series A-1 Preferred Stock, as to the payment of dividends and as to distribution of assets upon liquidation, dissolution or winding up, whether or not the dividend rates, dividend payment dates or redemption or liquidation prices per share thereof be different from those of the Series A-1 Preferred Stock, if the holders of such class or series and the Series A-1 Preferred Stock shall be entitled to the receipt of dividends and of amounts distributable upon liquidation, dissolution or winding up in proportion to their respective amounts of accrued and unpaid dividends per share or liquidation preferences, without preference or priority one over the other; or (C) junior to the Series A-1 Preferred Stock, as to the payment of dividends or as to the distribution of assets upon liquidation, dissolution or winding up.

 

Section 10. Fractional Shares. Series A-1 Preferred Stock may be issued in whole shares or in any fraction of a share that is one one-thousandth (1/1,000th) of a share or any integral multiple of such fraction, which shall entitle the holder, in proportion to such holder’s fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series A-1 Preferred Stock. In lieu of fractional shares, the Corporation may elect to make a cash payment as provided in the Rights Agreement for fractions of a share other than one one-thousandth (1/1,000th) of a share or any integral multiple thereof.

 

Section 11. Amendment. At any time any shares of Series A-1 Preferred Stock are outstanding, the Charter and the foregoing Sections 1 through 10, inclusive, and this Section 11 shall not be amended in any manner, including by merger, consolidation or otherwise, which would materially alter or change the powers, preferences or special rights of the Series A-1 Preferred Stock so as to affect them adversely without the affirmative vote of the holders of two-thirds or more of the outstanding shares of Series A-1 Preferred Stock, voting separately as a class.

 

SECOND: The Series A-1 Preferred Stock has been classified and designated by the Board of Directors under the authority contained in the Charter.

 

THIRD: These Articles Supplementary have been approved by the Board of Directors in the manner and by the vote required by law.

 

FOURTH: The undersigned officer of the Corporation acknowledges these Articles Supplementary to be the corporate act of the Corporation and, as to all matters or facts required to be verified under oath, the undersigned officer acknowledges that, to the best of his knowledge, information and belief, these matters and facts are true in all material respects and that this statement is made under the penalties of perjury.

 

A-7

 

IN WITNESS WHEREOF, the Corporation has caused these Articles Supplementary to be signed in its name and on its behalf by its President and attested to by its Secretary as of the 3rd day of September, 2013.

 

 

	
Attested:
    	
 
    	
IMPAC   MORTGAGE HOLDINGS, INC.
    
	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    	
By:
    	
 
    
	
 
    	
Name:   Ronald M. Morrison
    	
 
    	
 
    	
Name:   William S. Ashmore
    
	
 
    	
Title:   Executive Vice President & General Counsel
    	
 
    	
 
    	
Title:   President
    

 

A-8

 

Exhibit B

 

FORM OF RIGHTS CERTIFICATE

 

Certificate No. R-                    Rights

 

NOT EXERCISABLE AFTER SEPTEMBER 16, 2016 OR EARLIER IF NOTICE OF REDEMPTION IS GIVEN OR THE RIGHTS ARE TERMINATED IN ACCORDANCE WITH SECTION 7(a) OF THE RIGHTS AGREEMENT (DEFINED BELOW). THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF IMPAC MORTGAGE HOLDINGS, INC., AT $0.001 PER RIGHT, ON THE TERMS SET FORTH IN THE TAX BENEFITS PRESERVATION RIGHTS AGREEMENT BETWEEN IMPAC MORTGAGE HOLDINGS, INC. AND AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC, AS RIGHTS AGENT, DATED AS OF SEPTEMBER 3, 2013 (THE “RIGHTS AGREEMENT”). UNDER CERTAIN CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF THE RIGHTS AGREEMENT, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN ASSOCIATE OR AFFILIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID.

 

Rights Certificate

 

IMPAC MORTGAGE HOLDINGS, INC.

 

This certifies that           , or registered assigns, is the registered owner of the number of Rights set forth above, each of which entitles the owner thereof, subject to the terms, provisions and conditions of the Tax Benefits Preservation Rights Agreement dated as of September 3, 2013 (the “Rights Agreement”) between Impac Mortgage Holdings, Inc., a Maryland corporation (the “Company”), and American Stock Transfer & Trust Company, LLC, a New York limited liability 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 the close of business on September 16, 2016 at the office or offices of the Rights Agent designated for such purpose, or its successors as Rights Agent, one one-thousandth of a fully paid, non-assessable share of the Series A-1 Junior Participating Preferred Stock (the “Preferred Stock”) of the Company, at a purchase price of $50.00 per one one-thousandth of a share (the “Purchase Price”), upon presentation and surrender of this Rights Certificate with the Form of Election to Purchase and the related Certificate duly executed. The number of Rights evidenced by this Rights Certificate (and the number of shares which may be purchased upon exercise thereof) set forth above, and the Purchase Price per share set forth above, are the number and Purchase Price as of            , based on the Preferred Stock as constituted at such date.

 

B-1

 

Upon the occurrence of a Section 11(a)(ii) Event (as such term is defined in the Rights Agreement), if the Rights evidenced by this Rights Certificate are beneficially owned by  (i) an Acquiring Person or any Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any Associate or Affiliate of an Acquiring Person) who becomes a transferee after the Acquiring Person becomes such or (iii) a transferee of an Acquiring Person (or of any Associate or Affiliate of an Acquiring Person) who becomes a transferee prior to or concurrently with the Acquiring Person becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person to holders of equity interests in such Acquiring Person or to any Person with whom the Acquiring Person has any continuing agreement, arrangement or understanding (whether or not in writing) regarding the transferred Rights, the shares of Common Stock of the Company associated with such Rights or the Company, or (B) a transfer which the Board of Directors has determined is part of a plan, arrangement or understanding which has as a primary purpose or effect the avoidance of Section 7(e) of the Rights Agreement, (iv) any subsequent transferee receiving transferred Rights as described in subsections (ii) or (iii) above, either directly or through one or more intermediate transferees, or (v) any nominee of any of the foregoing, such Rights shall become null and void and no holder hereof shall have any right with respect to such Rights from and after the occurrence of such Section 11(a)(ii) Event.

 

As provided in the Rights Agreement, the Purchase Price and the number of shares of Preferred Stock or other securities which may be purchased upon the exercise of the Rights evidenced by this Rights Certificate are subject to modification and adjustment upon the happening of certain events.

 

This Rights Certificate is subject to all of the terms, provisions and conditions of the Rights Agreement, which terms, provisions and conditions are hereby incorporated herein by reference and made a part hereof and to which Rights Agreement reference is hereby made for a full description of the rights, limitations of rights, obligations, duties and immunities hereunder of the Rights Agent, the Company and the holders of the Rights Certificates, which limitations of rights include the temporary suspension of the exercisability of such Rights under the specific circumstances set forth in the Rights Agreement. Copies of the Rights Agreement are on file at the principal office of the Company and the designated office of the Rights Agent and are also available upon written request to the Company or the Rights Agent.

 

This Rights Certificate, with or without other Rights Certificates, upon surrender at the office or offices of the Rights Agent designated for such purpose, may be exchanged for another Rights Certificate or Certificates of like tenor and date evidencing Rights entitling the holder to purchase a like aggregate number of shares of Preferred Stock as the Rights evidenced by the Rights Certificate or Certificates surrendered shall have entitled such holder to purchase. If this Rights Certificate shall be exercised in part, the holder shall be entitled to receive upon surrender hereof another Rights Certificate or Certificates for the number of whole Rights not exercised. If this Rights Certificate shall be exercised in whole or in part pursuant to Section 11(a)(ii) of the Rights Agreement, the holder shall be entitled to receive this Rights Certificate duly marked to indicate that such exercise has occurred as set forth in the Rights Agreement.

 

B-2

 

Under certain circumstances, subject to the provisions of the Rights Agreement, the Board of Directors at its option may cause the Company to exchange all or any part of the Rights evidenced by this Certificate for shares of the Company’s Common Stock or Preferred Stock at an exchange ratio (subject to adjustment) specified in the Rights Agreement.

 

Subject to the provisions of the Rights Agreement, the Rights evidenced by this Certificate may be redeemed by the Board of Directors at its option at a redemption price of $0.001 per Right (payable in cash, Common Stock or other consideration deemed appropriate by the Board of Directors).

 

The Company is not obligated to issue fractional shares of stock upon the exercise of any Right or Rights evidenced hereby (other than fractions which are integral multiples of one one-thousandth of a share of Preferred Stock, which may, at the election of the Company, be evidenced by depositary receipts). If the Company elects not to issue such fractional shares, in lieu thereof a cash payment will be made, as provided in the Rights Agreement. The Company, at its election, may require that a number of Rights be exercised so that only whole shares of Preferred Stock would be issued.

 

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

 

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

 

WITNESS the facsimile signature of the proper officers of the Company as a document under corporate seal.

 

 

	
ATTESTED:
    	
 
    	
IMPAC   MORTGAGE HOLDINGS, INC.
    
	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    	
 
    	
Name:
    
	
 
    	
Title
    	
 
    	
 
    	
Title
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Countersigned:
    	
 
    	
 
    	
 
    

 

	
AMERICAN STOCK TRANSFER & TRUST COMPANY,   LLC
    
	
 
    
	
By:
    	
 
    
	
 
    	
Name:
    
	
 
    	
Title:
    

 

B-3

 

[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   Guaranteed:* 
    
	
 
    
	
*   Signatures must be guaranteed by a participant in a Medallion Signature   Guarantee Program at a guarantee level satisfactory to the Rights Agent. a   notary public is not sufficient.
    

 

CERTIFICATE

 

The undersigned hereby certifies by checking the appropriate boxes that:

 

(1) the Rights evidenced by this Rights Certificate o are not being transferred 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, the undersigned did not directly or indirectly 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 any such Person.

 

	
Dated:                       ,
    	
Signature
    

 

NOTICE

 

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

 

B-4

 

FORM OF ELECTION TO PURCHASE

 

(To be executed if holder desires to

 exercise the Rights Certificate.)

 

To IMPAC MORTGAGE HOLDINGS, INC.:

 

The undersigned hereby irrevocably elects to exercise              Rights represented by this Rights Certificate to purchase the shares of Preferred Stock issuable upon the exercise of the Rights (or such other securities of the Company or of any other person which may be issuable upon the exercise of the Rights) and requests that certificates for such shares be issued in the name of:

 

	
Please   insert social security or other identifying taxpayer number:
    	
 
    
	
 
    
	
 
    
	
 
    
	
 
    

(Please print name and address)

 

If such number of Rights shall not be all the Rights evidenced by this Rights Certificate or if the Rights are being exercised pursuant to Section 11(a)(ii) of the Rights Agreement, a new Rights Certificate for the balance of such Rights shall be registered in the name of and delivered to:

 

	
Please   insert social security or other identifying taxpayer number:
    	
 
    
	
 
    
	
 
    
	
 
    
	
 
    

(Please print name and address)

 

	
Dated:                       ,
    	
Signature
    

 

	
Signature   Guaranteed:*
    	
 
    	
 
    	
 
    

 

*  Signatures must be guaranteed by a  participant in a Medallion Signature Guarantee Program at a guarantee level satisfactory  to the Rights Agent.  a notary public is not sufficient.

 

B-5

 

CERTIFICATE

 

The undersigned hereby certifies by checking the appropriate boxes that:

 

(1) the Rights evidenced by this Rights Certificate 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 in the Rights Agreement); and

 

(2) after due inquiry and to the best knowledge of the undersigned, the undersigned did not directly or indirectly 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 any such Person.

 

	
Dated:                       ,
    	
Signature
    

 

	
Signature   Guaranteed:*
    	
 
    	
 
    	
 
    

 

*  Signatures must be guaranteed by a  participant in a Medallion Signature Guarantee Program at a guarantee level satisfactory  to the Rights Agent.  a notary public is not sufficient.

 

NOTICE

 

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

 

B-6

 

Exhibit C

 

FORM OF

 SUMMARY OF RIGHTS

 

SUMMARY OF

TAX BENEFIT PRESERVATION PLAN

 OF

IMPAC MORTGAGE HOLDINGS, INC.

 

On September 3, 2013, the Board of Directors (the “Board”) of Impac Mortgage Holdings, Inc. (the “Company”) authorized and declared a dividend distribution of one right (a “Right”) for each outstanding share of common stock, par value $0.01 per share (the “Common Stock”), of the Company to stockholders of record as of the close of business on September 16, 2013 (the “Record Date”).  Each Right entitles the registered holder to purchase from the Company one one-thousandth of a share of Series A-1 Participating Preferred Stock, par value $0.01 per share (the “Preferred Stock”), of the Company at an exercise price of $50.00 per one one-thousandth of a Preferred Share, subject to adjustment (the “Purchase Price”). The complete terms of the Rights are set forth in a Tax Benefits Preservation Rights Agreement (the “Rights Agreement”), dated as of September 3, 2013, between the Company and American Stock Transfer & Trust Company, LLC, as rights agent.

 

By adopting the Rights Agreement, the Board is helping to preserve the value of certain deferred tax benefits, including those generated by net operating losses (collectively, the “Tax Benefits”).  In general, the Company may “carry forward” net operating losses in certain circumstances to offset current and future taxable income, which will reduce federal and state income tax liability, subject to certain requirements and restrictions. The Rights Agreement also has certain ancillary anti-takeover effects.

 

The Tax Benefits can be valuable to the Company.  However, the Company’s ability to use these Tax Benefits would be substantially limited and impaired if it were to experience an “ownership change” for purposes of Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”) and the Treasury Regulations promulgated thereunder.  Generally, the Company will experience an “ownership change” if the percentage of the shares of Common Stock owned by one or more “five-percent shareholders” increases by more than 50 percentage points over the lowest percentage of shares of Common Stock owned by such stockholder at any time during the prior three year on a rolling basis.  The Rights Agreement reduces the likelihood that changes in the Company’s investor base have the unintended effect of limiting the Company’s use of its Tax Benefits.  As such, the Rights Agreement has a 4.99% “trigger” threshold that is intended to act as a deterrent to any person or entity seeking to acquire 4.99% or more of the outstanding Common Stock without the prior approval of the Board.   This would protect the Tax Benefits because changes in ownership by a person owning less than 4.99% of the Company’s stock are not included in the calculation of “ownership change” for purposes of Section 382 of the Code. The Board believes it is in the best interest of the Company and its 

 

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stockholders that the Company provide for the protection of the Tax Benefits by adopting the Rights Agreement.  The Board has established procedures to consider requests to exempt certain acquisitions of the Company’s securities from the Rights Agreement if the Board determines that doing so would not limit or impair the availability of the Tax Benefits or is otherwise in the best interests of the Company.

 

For those interested in the specific terms of the Rights Agreement, the following is a summary description. Please note, however, that this description is only a summary and is not complete, and should be read together with the entire Rights Agreement, which will be filed by the Company with the Securities and Exchange Commission as an exhibit to a Registration Statement on Form 8-A and a Current Report on Form 8-K. A copy of the Rights Agreement is available free of charge from the Company.

 

Issuance and Transfer of Rights; Rights Certificates

 

The Board has declared a dividend of one Right for each outstanding share of Common Stock.  Until the Distribution Date (as defined below):

 

·                  the Rights will be evidenced by and trade with the certificates for shares of Common Stock (or, with respect to any uncertificated shares of Common Stock registered in book entry form, by notation in book entry), and no separate rights certificates will be distributed;

 

·                  new Common Stock certificates issued after the Record Date will contain a legend incorporating the Rights Agreement by reference (for uncertificated shares of Common Stock registered in book entry form, this legend will be contained in a notation in book entry); and

 

·                  the surrender for transfer of any certificates for shares of Common Stock (or the surrender for transfer of any uncertificated Shares of Common Stock registered in book entry form) will also constitute the transfer of the Rights associated with such Common Stock.

 

Distribution Date; Separation of Rights

 

Subject to certain exceptions specified in the Rights Agreement, the Rights will separate from the Common Stock and become separately tradable and exercisable only upon the earlier of:

 

	
(i)
    	
ten   business days (or such later day as the Board may determine) following a   public announcement that a person or group of affiliated or associated   persons (collectively, an “Acquiring Person”)   has acquired beneficial ownership of 4.99% or more of the outstanding Common   Stock; or
    
	
 
    	
 
    
	
(ii)
    	
ten   business days (or such later day as the Board may determine) following the   announcement of a tender offer or exchange offer that would result in a   person or group becoming an Acquiring Person.
    

 

C-2

 

The date on which the Rights separate from the Common Stock and become exercisable is referred to as the “Distribution Date.”

 

As soon as practicable after the Distribution Date, the Company will mail Rights certificates to the Company’s stockholders as of the close of business on the Distribution Date and the Rights will become transferable apart from the Common Stock. Thereafter, such Rights certificates alone will represent the Rights.

 

The Rights Agreement includes a procedure whereby the Board will consider requests to exempt certain acquisitions of Common Stock from the applicable ownership trigger if the Board determines that the requested acquisition will not adversely impact in any material respect the time period in which the Company could use the Tax Benefits or limit or impair the availability to the Company of the Tax Benefits, or is in the best interests of the Company despite the fact it may adversely impact in a material respect the time period in which the Company could use the Tax Benefits or limit or impair the availability of the Tax Benefits.

 

Rights Holders Have No Rights as Stockholder Until Right Is Exercised

 

Until a Right is exercised, the holder of such Right will have no rights as a stockholder of the Company (beyond those possessed as an existing stockholder), including, without limitation, the right to vote or to receive dividends with respect to the Right.

 

Existing Holders

 

The Rights Agreement provides that any person or entity who otherwise would be an Acquiring Person on the date the Rights Agreement was adopted (each, an “Existing Holder”) will not be deemed to be an “Acquiring Person” for purposes of the Rights Agreement unless such Existing Holder increases its beneficial ownership over such Existing Holder’s lowest percentage of ownership of the Common Stock after the adoption of the Rights Agreement, subject to specified exceptions.

 

Preferred Shares Purchasable Upon Exercise of Right

 

After the Distribution Date, each Right will entitle the holder to purchase, for $50.00 (the “Purchase Price”), one one-thousandth of a Preferred Share having economic and other terms similar to that of one Share of Common Stock. This portion of a Preferred Share is intended to give the stockholder approximately the same dividend, voting and liquidation rights as would one Share of Common Stock, and should approximate the value of one Share of Common Stock.

 

More specifically, each one one-thousandth of a Preferred Share, if issued, will:

 

·      not be redeemable;

·      entitle holders to quarterly dividend payments of $0.00001 per share, or an amount equal to the dividend paid on one share of Common Stock, whichever is greater;

·      entitle holders upon liquidation either to receive $1.00 per share or an amount equal to the payment made on one share of Common Stock, whichever is greater;

·      have the same voting power as one share of Common Stock; and

 

C-3

 

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

 

“Flip-in” Rights

 

At any time after a Distribution Date has occurred, each holder of a Right, other than the Acquiring Person, will thereafter have the right to receive, upon paying the Purchase Price and in lieu of a number of one one-thousandths of a share of Preferred Stock, Common Stock (or, in certain circumstances, cash or other of our securities) having a market value equal to two times the Purchase Price of the Right.   However, the Rights are not exercisable following the occurrence of the foregoing event until such time as the Rights are no longer redeemable by the Company, as further described below.  Following the occurrence of an event set forth above, all Rights that are or, under certain circumstances specified in the Rights Agreement, were beneficially owned by an Acquiring Person or certain of its transferees will be null and void.

 

“Flip-over” Rights

 

In the event any person or group becomes an Acquiring Person and the Company merges into or engages in certain other business combinations with an Acquiring Person, or 50% or more of the Company’s consolidated assets or earning power are sold to an Acquiring Person, each holder of a Right (other than void Rights owned by an Acquiring Person) will thereafter have the right to receive, upon payment of the Purchase Price, common stock of the acquiring company that at the time of such transaction will have a market value equal to two times the Purchase Price of the Right.

 

Exchange of Rights

 

At any time after a person becomes an Acquiring Person, in lieu of allowing the “flip-in” to occur, the Board may exchange the Rights (other than void Rights owned by an Acquiring Person), in whole or in part, at an exchange ratio of one share of the Common Stock (or, under certain circumstances, cash, property or other securities of the Company, including fractions of a share of preferred stock) per Right (subject to adjustment). Notwithstanding the foregoing, the Board may not conduct such an exchange at any time any person (other than the Company or certain entities affiliated with the Company) together with such person’s affiliates or associates becomes the beneficial owner of 50% or more of the Common Stock.

 

Redemption of Rights

 

At any time prior to a Distribution Date, the Board may redeem the Rights in whole, but not in part, at a price of $0.001 per Right and on such terms and conditions as the Board may establish. Immediately upon the action of the Board ordering 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.  The redemption price will be adjusted if the Company undertakes a stock dividend or a stock split.

 

C-4

 

Expiration Date of the Rights

 

The Rights will expire on the earliest of:

 

·                                          September 2, 2016, the three-year anniversary of the adoption of the Rights Agreement;

·                                          the time at which the Rights are redeemed or exchanged under the Rights Agreement;

·                                          the final adjournment of the Company’s 2014 annual meeting of stockholders if stockholders fail to approve the Rights Agreement with a majority of the votes cast by holders of shares of common stock at the 2014 annual meeting of stockholders;

·                                          the repeal of Section 382 or any successor statute, if the Board determines that the Plan is no longer necessary for the preservation of Tax Benefits;

·                                          the beginning of a taxable year with respect to which the Board determines that no Tax Benefits may be carried forward; or

·                                          such time when the Board determines that a limitation on the use of Tax Benefits under Section 382 would no longer be material to the Company.

 

Amendment of Rights

 

The terms of the Rights may be amended by a resolution of the Board without the consent of the holders of the Rights prior to the Distribution Date.  Thereafter, the terms of the Rights and the Rights Agreement may be amended without the consent of the holders of Rights in order to (i) cure any ambiguities, (ii) shorten or lengthen any time period pursuant to the Rights Agreement or (iii) make changes that do not adversely affect the interests of holders of the Rights.

 

Anti-Dilution Provisions

 

The Board may adjust the Purchase Price, the number of shares of Preferred Stock issuable and the number of outstanding Rights to prevent dilution that may occur from a stock dividend, a stock split or a reclassification of the Preferred Stock or Common Stock.

 

With certain exceptions, no adjustments to the Purchase Price will be made until the cumulative adjustments amount to at least 1% of the Purchase Price. No fractional shares of Preferred Stock will be issued and, in lieu thereof, an adjustment in cash will be made based on the current market price of the Preferred Stock.

 

Taxes

 

The distribution of Rights should not be taxable for federal income tax purposes. However, following an event that renders the Rights exercisable or upon redemption of the Rights, stockholders may recognize taxable income.

 

C-5

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