Document:

FORBEARANCE AGREEMENT

 

THIS FORBEARANCE AGREEMENT (this “Agreement”), dated February ___, 2011, and effective as of November 22, 2010 (the “Effective Date”), is entered into by and between BRANCH BANKING AND TRUST COMPANY, a North Carolina banking corporation (the “Bank”), as successor-in-interest to Colonial Bank by asset acquisition from the FDIC as Receiver for Colonial Bank (“Colonial Bank”),1 TREBOR INDUSTRIES, INC., a Florida corporation (“Trebor”), and ROBERT M. CARMICHAEL, individually, (“Carmichael”) (Trebor and Carmichael, collectively as the “Loan Parties”).

RECITALS:

 

WHEREAS, on or about February 22, 2007, Trebor, as evidence of a loan made by the Bank (the “First Loan”), executed and delivered to the Bank’s predecessor-in-interest, Colonial Bank, a Business Loan Agreement dated February 22, 2007 (the “First Loan Agreement”);

 

WHEREAS, in connection with the First Loan Agreement, Trebor executed and delivered to the Bank’s predecessor-in-interest, Colonial Bank, a Promissory Note dated February 22, 2007, in the principal amount of $1,000,000.00 (the “First Note”);

 

WHEREAS, to secure payment of the First Note, Trebor executed and delivered to the Bank’s predecessor-in-interest, Colonial Bank, (i) a Mortgage dated February 22, 2007, and recorded on March 8, 2007 in Official Records Book 43713, Page 536, Public Records of Broward County, Florida (the “First Mortgage”) providing the Bank with a first priority mortgage and security interest in the personal property described therein, and the real property more particularly described on Exhibit “A” attached hereto and incorporated herein by reference (the “Mortgaged Property”), and (ii) an Assignment of Rents dated February 22, 2007, and recorded on March 8, 2007 in Official
Records Book 43713, Page 546, Public Records of Broward County, Florida (the “First Assignment”);

 

WHEREAS, the Bank’s predecessor-in-interest, Colonial Bank, perfected its security interest in the collateral described in the First Mortgage and First Assignment by (i) filing a UCC-1 Financing Statement with the Florida Secretary of State on March 8, 2007, File No. 200704951213 and (ii) recording a UCC-1 Financing Statement on March 2, 2007 in the Public Records of Broward County, Florida in Official Records Book 43713, Page 554 (the “First Loan Financing Statements”);

 

WHEREAS, to further secure payment of the First Note and all other indebtedness owed by Trebor to BB&T, Carmichael executed and delivered to the Bank’s predecessor-in-interest, Colonial Bank, a Commercial Guaranty dated February 22, 2007 (the “Guaranty”);

________________________________ 

1 Colonial Bank was formerly known as Colonial Bank, N.A.  The term “Colonial Bank” shall include Colonial Bank, N.A.

 

  

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WHEREAS, on or about February 10, 2010, Trebor, as evidence of a line of credit made by the Bank’s predecessor-in-interest, Colonial Bank, executed and delivered to the Bank’s predecessor-in-interest, Colonial Bank, a Business Loan Agreement dated February 10, 2010 (the “Second Loan Agreement”);

 

WHEREAS, in connection with the Second Loan Agreement, Trebor executed and delivered to the Bank’s predecessor-in-interest, Colonial Bank, a Promissory Note dated February 10, 2010, in the principal amount of $199,990.28 (the “Second Note”)2 (together with the First Note as the “Notes”);

 

WHEREAS, to secure payment of the Second Note, Trebor executed and delivered to the Bank’s predecessor-in-interest, Colonial Bank, a Mortgage dated March 5, 2008, and recorded on March 18, 2008 in Official Records Book 45193, Page 635, Public Records of Broward County, Florida, providing the Bank with a second priority mortgage and security interest in the Mortgaged Property, as modified by that certain Modification of Mortgage dated December 2, 2008, and recorded on December 31, 2008 in Official Records Book 45892, Page 655, Public Records of Broward County, Florida (collectively, as the “Second Mortgage”) (the First Mortgage together with the Second Mortgage, as the “Mortgages”);

 

WHEREAS, the Bank’s predecessor-in-interest, Colonial Bank, perfected its security interest in the collateral described in the Second Mortgage by filing a UCC-1 Financing Statement with the Florida Secretary of State on March 10, 2008, File No. 200807824672 (the “Second Loan Financing Statements”) (the Notes, the Mortgages, the First Loan Agreement, the First Assignment, the First Loan Financing Statements, the Guaranty, the Second Loan Agreement, the Second Loan Financing Statements and any other documents executed in connection therewith as the “Loan Documents”);

 

WHEREAS, the Loan Parties are, as the case may be, the owner and holder of the real property and personal property described in the Loan Documents (the foregoing real and personal property, together with any other property securing the obligations of the Loan Parties to the Bank, is collectively referred to hereinafter as the “Collateral”);

 

WHEREAS, Trebor defaulted under the First Note by failing to pay to the Bank the monthly payment due on August 22, 2010 under the First Note.  By virtue of its default under the First Note, Trebor has defaulted under the Second Note (collectively, as the “Loan Defaults”).3

 

WHEREAS, the Bank is the owner and holder of the Loan Documents;

_______________________________

2 The Second Note renews that certain Promissory Note dated March 5, 2008 in the original principal amount of $100,000.00, as further increased by that certain Promissory Note dated December 2, 2008 in the increased principal amount of $200,000.00, and all subsequent extensions, amendments or modifications thereto.

3 The Second Note provides, in pertinent part, as follows:

DEFAULT.  Each of the following shall constitute an event of default (“Event of Default”) under this Note:

  

Other Defaults. Borrower fails...to comply with or to perform any other term, obligation, covenant or condition contained in any other agreement between Lender and Borrower.

 

  

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WHEREAS, due to the aforesaid Loan Defaults, on or about January __, 2011, the Bank initiated a lawsuit by filing a complaint (the “Complaint”) against the Obligors in the Circuit Court of the Seventeenth Judicial Circuit in and for Broward County, Florida, Case No. 2011-001741 (the “Lawsuit”);

WHEREAS, the Loan Parties do not have any defenses, counterclaims, or offsets against the indebtedness owed to the Bank under the Loan Documents;

 

WHEREAS, due to the aforesaid Loan Defaults by the Loan Parties under the Loan Documents, it was necessary for the Bank to employ attorneys to represent and counsel it in connection with the above-described events and to negotiate and prepare this Agreement, as a result of which employment the Bank has incurred costs and expenses, including attorney’s fees, which costs and expenses, including attorney’s fees, are payable by the Loan Parties under the terms and conditions of the above-described Loan Documents and as set forth herein; and

 

WHEREAS, the Loan Parties have requested that the Bank forbear for a period of time from exercising its various rights and remedies under the Loan Documents and applicable law in response to the aforesaid Loan Defaults, and the Bank, subject to the terms and conditions of this Agreement, has agreed to such forbearance.

 

NOW, THEREFORE, in consideration of Ten Dollars ($10.00), and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby covenant and agree to the following terms:

 

1.            Adoption of Recitals. The foregoing Recitals are hereby adopted and made a part hereof.  The Loan Parties warrant that the Recitals are accurate in every material respect.

 

2.           Purpose of this Agreement.  The purpose of this Agreement is to, among other things, (i) allow Trebor to repay to the Bank the principal, interest, late charges, and attorneys' fees and costs owed pursuant to the Loan Documents, (ii) give Trebor time to attempt to sell or refinance the Collateral, and (iii) modify and consolidate the Notes, upon the terms and conditions stated herein, as described more particularly in Section 6 below.

 

3.            Restatement and Reaffirmation of Obligations.

 

(a)           This Agreement memorializes the agreements between the parties regarding the restatement and reaffirmation of the Loan Parties’ obligations to the Bank pursuant to the Loan Documents, amendments to the terms of the Loan Documents to consolidate the Notes, establishment of terms and conditions for the consolidation and repayment of the Notes, and consolidating the amounts owed under the Notes to a term loan, as described more particularly in Section 6.

 

  

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(b)           This Agreement is not intended to and shall not be construed to create or constitute a release or relinquishment of, and, except as herein specifically provided to the contrary, shall not affect, the liens, security interests, and rights of the Bank.  Nor does this Agreement waive, alter, or modify the Bank’s rights under the Loan Documents or otherwise waive or excuse any defaults thereunder, except as specifically provided herein, and for the sole benefit of the parties hereto.  This Agreement does not supersede, modify, alter, or amend any loan or other relationships between and among the Loan Parties and the Bank other than those specifically described herein.

 

4.           Capitalized Terms; Defined Terms.  Capitalized terms shall have the meaning ascribed herein or in the Loan Documents.  As used in this Agreement (including the foregoing Recitals), the following terms, which are in addition to terms defined elsewhere in this Agreement, shall have the indicated meanings.  Any inconsistency between the terms or definitions contained in this Agreement and the Loan Documents shall be resolved in favor of the definitions and terms contained in this Agreement.  All the terms defined in this Agreement in the singular shall have comparable meanings when used in the plural and vice versa.  The words
“hereof,” “herein,” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provisions in this Agreement.  The words “include” and “including” are intended in every instance to be without limitation to the examples provided. Whenever any agreement, instrument, or document is defined in this Agreement, such definition shall be deemed to mean and include any amendment, restatement, or modification thereof.

 

5.            Representations, Acknowledgments, and Covenants. The Loan Parties represent, acknowledge, and covenant that each of the following is true on the date of execution and shall remain true until all obligations under the Loan Documents are satisfied:

 

(a)          True and Correct Statement.  As a condition to the signing of this Agreement, all parties are relying on the truth, completeness, and correctness of the statements and representations made herein, including the Recitals, and the parties hereto represent that this Agreement contains no material misrepresentations or omissions by any party to this Agreement.    The Loan Parties have verified all legal descriptions referred to herein and in the exhibits attached hereto and acknowledge and covenant that such legal descriptions are correct and accurately describe the Collateral.

 

(b)          Amount Owed.  The Loan Parties hereby acknowledge that the amount owed by Trebor to the Bank is itemized as follows:

 

	
  

	
(i)

	
under the First Note through and including November 22, 2010, is $854,959.70 in principal, plus accrued but unpaid interest in the amount of $20,418.58 and late fees of $300.00, plus per diem interest of $166.01 accruing thereafter; and

	
  

	
(ii)

	
under the Second Note through and including November 22, 2010, is $199,033.57 in principal, plus accrued but unpaid interest in the amount of $359.37, plus per diem interest of $35.93 accruing thereafter.

  

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In addition to these amounts, the Loan Parties owe costs and legal fees (including reasonable attorney’s fees, paralegal fees, and expenses) incurred by the Bank in connection with the negotiation, preparation, execution and enforcement of this Agreement and all other documents entered into in connection herewith.

 

(c)          Collateral.  The Loan Parties acknowledge that all of the Collateral identified in the Loan Documents secures and shall continue to secure the Notes, as well as any additional obligations created hereunder or pursuant to the Loan Documents.  There has been no interruption, cessation, or lapse of the Bank’s security interests in the Collateral.

 

(d)          No Obligation to Restructure/Forbear.  Before execution and delivery of this Agreement, the Bank had no obligation to modify, extend, or otherwise amend the terms and conditions of the Loan Documents or to negotiate with the Loan Parties or any other person or entity concerning any of the foregoing.  The Loan Parties agree that the Bank’s execution of this Agreement does not create any such obligations other than as expressly set forth herein.

 

(e)          No Defenses or Claims.  The Loan Parties, jointly and severally, hereby acknowledge and agree that they do not have any defense, counterclaim, offset, cross-complaint, claim, or demand of any kind or nature whatsoever, including without limitation any usury or lender liability claim or defense, arising out of the Loan Documents or any past relationship between or among the Loan Parties and the Bank that can be asserted by any of the Loan Parties, either to reduce or eliminate all or part of their liability for the obligations, or to seek affirmative relief or damages of any kind from the Bank.  The Loan Parties, jointly and severally, further acknowledge that to the extent that any

such claim should in fact exist, including without limitation any usury or lender liability claim, it is being fully, finally, and irrevocably released as provided in Section 5(f).

 

(f)           Release of Claims.  The Loan Parties, jointly and severally, hereby acknowledge and agree that certain Loan Defaults exist under the Loan Documents and that the Bank is under no obligation whatsoever to restructure or extend the Loan Documents.  In consideration of the terms and conditions of this Agreement, made at the Loan Parties’ request, the Loan Parties, jointly and severally, on behalf of themselves and their respective heirs, successors, and assigns, hereby fully, finally, and irrevocably release the Bank and its officers, directors, affiliates, subsidiaries, parents, representatives, agents, attorneys, employees, predecessors, successors, and assigns
(collectively, the “Released Parties”) from any and all defenses, counterclaims, offsets, cross-claims, claims, and demands of any kind existing as of the date of this Agreement, including, without limitation, any usury or lender liability claims or defenses, whether known or unknown, and whenever and howsoever arising, relating to the Loan Documents or any past relationship between the Bank and any of the Loan Parties.  In addition, the Loan Parties, jointly and severally, hereby agree not to commence, join in, prosecute, or participate in any suit or other proceeding in a position adverse to that of any of the Released Parties arising directly or indirectly from any of the foregoing matters.  The Loan Parties, jointly and severally, hereby assign and convey unequivocally to the Bank, any and all defenses, counterclaims, offsets, cross-claims, claims, and demands of any kind existing as of the date of this Agreement, including, without limitation, any usury or
lender liability claims or defenses, whether known or unknown and whenever and howsoever arising, relating to the Loan Documents or any past relationship between the Loan Parties and the Bank.

 

  

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(g)          Taxes.  The Loan Parties have promptly paid when due, all taxes, assessments, and governmental charges of every kind and nature that have been lawfully levied, assessed, or imposed upon the Loan Parties or their properties (including the use thereof), or any obligations which, if unpaid would become liens against their assets, including, without limitation, all sums due and owing any taxing authority for income and other taxes withheld from the wages and salaries of its employees.  All federal, state, and other tax returns and reports required by law to be filed by the Loan Parties have been duly filed (or proper extensions for filing have
been filed).

 

(h)         Business Decisions.  The Loan Parties have made their own decisions regarding their business operations and their incurrence and payment of third-party debt.

 

(i)           Good faith.  As of the date of this Agreement, the Bank and the Bank’s agents have acted at all times in a fair and reasonable manner, and in good faith in connection with their administration and enforcement of the Loan Documents, their dealings with the Loan Parties with respect to the Loan Documents, and their negotiations in connection with this Agreement and any other transactions related to the Loan Documents and/or this Agreement. The execution and delivery of this Agreement by the Loan Parties was and is their free and voluntary act and deed, without any misapprehension as to the effect thereof, and without any coercion, duress, overreaching, or any other misconduct

by the Bank or any agent of the Bank.

 

(j)          Legal Counsel.  The Loan Parties have had the benefit of, or the opportunity to obtain, legal counsel throughout their dealings with the Bank and the Bank’s agents in connection with the administration and enforcement of the Loan Documents by the Bank and the Bank’s agents and the execution and delivery of this Agreement and the Loan Documents.

 

(k)          Authority to Execute Loan Documents.

 

(i)          The execution, delivery, and performance by the Loan Parties of this Agreement and the other documents referred to herein which are required to be executed and delivered in connection herewith:

 

(1)           is within its respective powers and authority;

 

(2)           does not contravene Trebor’s Articles of Incorporation, by-laws or regulations, or any amendments thereto;

 

(3)           does not contravene any Laws.

 

(iii)          No authorization or approval or action by, and no notice to or filing with, any governmental authority or regulatory body is known to be required for the due execution, delivery, and performance by the Loan Parties of this Agreement or any of the agreements or documents referred to herein, except for the recording thereof, where necessary, to evidence or perfect the liens or security interests granted to the Bank or conveyances made to the Bank in connection herewith.

 

  

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(iv)           This Agreement and the other Loan Documents create and constitute legal, valid, enforceable, and binding obligations of the Loan Parties, as appropriate, in accordance with their respective terms.

 

6.            Forbearance; Consolidation; Interest Rate; Payments.

 

(a)          Initial Payment. Upon the execution of this Agreement (the “Closing Date”), the Loan Parties shall pay (i) any accrued yet unpaid interest due and owing under the Notes through the Closing Date4, and (ii) all of the attorney’s fees, expenses, and costs incurred by the Bank in connection with the preparation of this Agreement, and related documents, including, without limitation, all taxes, documentary stamps, recording fees, and title insurance search fees and premiums needed to perfect and protect the Bank’s security interest in the Collateral.

 

(b)          Consolidation of Indebtedness.  The indebtedness under the Notes shall be consolidated and converted into a term obligation to be evidenced by a Consolidated and Restated Promissory Note from Trebor in favor of Bank (the “Consolidated Note”), in the principal amount of $1,053,993.27, in substantially the form attached hereto as Exhibit “B”.  The Consolidated Note shall accrue interest at a non-default rate equal to a fixed rate of seven and one-half percent (7.50%), and shall be fully due and owing, together with any accrued but unpaid
interest, on May 22, 2012, as described more particularly in the Consolidated Note.  The Consolidated Note shall be secured by the Mortgages and First Assignment.  To that end, Trebor shall execute a mortgage modification agreement (the “Mortgage Modification”), substantially in the form attached hereto as Exhibit “C,” which shall be recorded in the public records of Broward County, Florida.  The Bank must receive a new title insurance policy, or an endorsement to its existing title insurance policy, insuring its security interest in the Collateral, which shall be in form acceptable to the Bank in the Bank’s sole and absolute discretion.  To that end, the Loan Parties shall fully cooperate with the Bank and the title insurance company.

 

 (c)         Monthly Interest-Only Payments under the Consolidated Note.   Beginning February 22, 2011, and on the 22nd day of each month thereafter, Trebor shall pay all accrued but unpaid interest on the principal balance under the Consolidated Note.  The total principal balance of the Consolidated Note, together with any accrued but unpaid interest, shall be due and owing on May 22, 2012, as described more particularly in the Consolidated Note.

 

 (d)        Consolidated Note Guaranty.  Contemporaneous with the execution of the Consolidated Note, Carmichael shall execute the Unconditional and Continuing Guaranty in favor of the Bank (the “Additional Guaranty”) guaranteeing all of Trebor’s obligations to the Bank under the Consolidated Note (the “Obligations”), in substantially the form attached hereto as Exhibit “D” and incorporated herein by reference.

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4  For illustrative purposes, accrued interest through February 15, 2011 is $36,871.41(accrued interest through November 22, 2010 of $21,553.09 plus accrued interest from November 22 through February 15, 2011 of $15,318.32).

 

  

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(e)           Mortgaged Property.

(i)           Maintenance.  During the term of this Agreement, the Loan Parties shall maintain the Collateral in the same condition as prior to the execution of this Agreement, including but not limited to maintaining, at Loan Parties’ expense, the property insurance, utility service and lawn maintenance.

(ii)          Refinance or Sale.  The Loan Parties shall use their best efforts to refinance and/or market and attempt to sell the Mortgaged Property to a third-party prior to May 22, 2012.

 

(f)           Consent to Amendment of Complaint and Stipulation of Foreclosure.

 

(i)           The Loan Parties hereby consent to the amendment of the Complaint in order to reflect this Agreement and the documents executed in connection herewith.  The Loan Parties shall not oppose any motion for leave to amend the Complaint filed by the Bank in the Lawsuit.

 

(ii)           Contemporaneously with the execution of this Agreement, the Loan Parties shall execute a Joint Stipulation for Entry of Final Judgment of Foreclosure (the “Joint Stipulation”) in connection with complaint, as may be amended, filed in the Lawsuit, the form of which is attached hereto as Exhibit “E.”  The executed Joint Stipulation shall be held by the Bank in escrow so long as no default exists under this Agreement, the Consolidated Note, the Mortgage Modification, or the Additional Guaranty.

 

(iii)          Upon the Bank’s receipt of the this original executed Agreement the Consolidated Note, the Mortgage Modification, or the Additional Guaranty, the Bank shall cancel all hearings set in the Lawsuit and abate (but not dismiss) the claims filed in the Lawsuit for so long as no default exists under this Agreement, the Consolidated Note, the Mortgage Modification, or the Additional Guaranty.

 

8.           Default; Remedies.

 

(a)          Failure of the Loan Parties or any other person liable to timely pay or perform any of the Obligations is a default (“Default”) under this Agreement.  Upon the occurrence of a Default, the Bank may exercise any or all of the Bank’s remedies under this Agreement or the other Loan Documents including, without limitation, the immediate termination of the Forbearance Period and acceleration of maturity of all payments and Obligations.

 

  

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(b)          If any of the Loan Parties fail to timely make any payment required by this Agreement, or if any of the Loan Parties fails to fully satisfy all of its obligations under the Loan Documents at or prior to the termination of the Forbearance Period, in addition to any other legal remedies available to the Bank, the Bank shall be entitled to the entry of final judgment in its favor against the Loan Parties, and shall be entitled to the entry of an order appointing a receiver for the Collateral.  The Loan Parties, jointly and severally, hereby irrevocably consent to the entry of such final judgment and order in any litigation initiated by the Bank as a result of a Default under the Loan Documents.  The

receiver shall be empowered to manage and operate the Collateral, or any part thereof, to collect and administer rents and proceeds of the Collateral, and to apply said rents and proceeds to the payment of: (i) the Obligations, together with all costs and attorney’s fees, (ii) all impositions, and any other levies, assessments, or liens which may be, or may become, prior in lien or dignity to the Obligations, (iii) premiums for insurance, with interest on all such items, and (iv) the cost of all alterations, repairs, replacements, and expenses incident to taking and retaining possession of the Collateral and the management and operation thereof, all in such order or priority as the Bank in its sole discretion may determine.  The Loan Parties agree that the receiver shall be appointed without regard to whether the Loan Parties have committed waste or permitted deterioration of the Collateral, without regard to the adequacy of any security for the Obligations, and without
regard to the solvency of any of the Loan Parties.

 

(c)          It shall be a Default hereunder if, prior to the complete satisfaction of the Obligations, any of the Loan Parties (i) files a petition in bankruptcy, (ii) seeks appointment of a receiver, trustee, custodian or other similar official for any of the Loan Parties, or for all or any portion of the Collateral, (iii) makes a general assignment for the benefit of creditors; or (iv) if any other person or entity files an involuntary petition in bankruptcy against any of the Loan Parties, that is not dismissed within sixty (60) days of the filing of such involuntary petition.

 

(d)         The occurrence of any of the following conditions shall constitute a Default under this Agreement:

 

(i)           The material incorrectness of any representation or warranty made by any Loan Party to the Bank in any of the Loan Documents, any financial statement, or any other document delivered to the Bank in connection with the Loan Documents and this Agreement;

 

(ii)          A failure by the Loan Parties to timely provide the financial statements and other financial information required pursuant to the Loan Documents;

 

(iii)         A failure to make any payment required under this Agreement that is not cured within five (5) calendar days;

 

(iv)         A sale (by land contract or otherwise), assignment, mortgaging, leasing, encumbering, refinancing, or conveyance of the Collateral, or any portion thereof or legal or equitable interest therein, except with the consent of the Bank and as otherwise expressly permitted in the Loan Documents; or

 

(v)          Any Loan Party shall have concealed, removed, or permitted to be concealed or removed, any part of its property, with intent to hinder, delay, or defraud its creditors or any of them, or made or suffered a transfer of any of its property which may be fraudulent under any bankruptcy, fraudulent conveyance, or similar law; or shall have made any transfer of its property to or for the benefit of a creditor at a time when other creditors similarly situated have not been paid; or shall have suffered or permitted, while insolvent, any creditor to obtain a lien upon any of its property through legal proceedings which is not vacated within sixty (60) days from the date thereof.

 

  

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9.           Notices; Reports; Payments.

 

(a)          Any notice or report required or permitted under this Agreement shall be in writing.

 

(b)          Any notice, report, or payment required under this Agreement shall be deemed to have been given either (i) when delivered in person to the persons designated below for that purpose; (ii) upon delivery to an overnight courier (e.g., Federal Express, Airborne) as evidenced by the sender’s copy, addressed as set forth below; (iii) upon mailing by United States certified mail, return receipt requested, postage paid, to such address; or (iv) on the following business day if sent by email to the email addresses designated below.

 

(c)          Notice shall be deemed received when either (i) delivered in person to the agents designated below for that purpose; (ii) on the first business day after delivery to an overnight courier as evidenced by the sender’s copy, addressed as set forth below; (iii) three (3) days after deposited in the United States Mail, by certified mail, postage prepaid, return receipt requested, addressed to the other party; or (iv) on the first business day after sent by email to the email addresses designated below.  The addresses of the parties are as follows:

	
To the Bank:

	
Branch Banking and Trust Company

	  	
c/o Esteban Nunez, Vice President

	  	
2301 Lucien Way, #395

	  	
Maitland, FL 32751

	  	
Email: ENunez@BBandT.com

	  	  
	
With Copy to:

	
W. Glenn Jensen, Esq.

	  	
Roetzel & Andress, LPA

	  	
420 South Orange Ave.

	  	
CNL II, 7th Floor

	  	
Orlando, FL  32801

	  	
Email:  gjensen@ralaw.com

	  	  
	
To the Loan Parties:

	
Trebor Industries, Inc.

	  	
c/o Robert M. Carmichael, President

	  	
940 N.W. First Street

	  	
Ft. Lauderdale, FL 33311

	  	  
	  	
Robert M. Carmichael

	  	
940 N.W. First Street

	  	
Ft. Lauderdale, FL 33311

 

(d)          The persons and addresses to which notices are to be sent may be changed from time to time by written notice to such effect delivered to the other parties hereto.  Until such a notice of change is received, a party may rely upon the last person or address given.

 

  

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10.          Hold Harmless and Indemnification. The Loan Parties hereby indemnify and hold harmless the Bank, its parent company, subsidiaries, current and former officers, directors, employees, attorneys, agents, and assigns of any and all claims, actions, causes of action, debts, obligations, or liabilities of any type or description whatsoever whether known or unknown arising from this Agreement, the Loan Documents, or any past relationship between any of the Loan Parties and the Bank. This hold harmless and indemnification expressly survives the satisfaction of the Consolidated Notes.

 

11.          Waiver and Confirmation of Guaranties.  By executing this Agreement, Carmichael hereby assents to the terms and conditions of this Agreement and ratify and reaffirm the terms and conditions of the Guaranties.  Carmichael hereby waives any defense to his obligations under the Guaranty based upon or arising out of (i) the modifications to the Loan Documents as herein provided, (ii) the taking of any additional security for repayment of the Loan Parties’ indebtedness to the Bank, and (iii) any act or omission of the Bank occurring on or before the Closing Date.  Notwithstanding any language contained in the Guaranty, Carmichael, to the extent permitted by law,
waives any claim or other right which he might now have or hereafter may acquire against any other Loan Party, which arises from the existence or performance of Carmichael’s liability or other obligations under the Guaranty and any other guaranty which Carmichael has executed in favor of the Bank, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution, indemnification, and any right to participate in any claim or remedy of the Bank against any Loan Party or any of the Collateral, whether or not such claim, remedy, or right arises in equity, or under contract, statute, or common law, until all of the Loan Parties’ indebtedness to the Bank is paid in full.

 

12.          Payment of Costs and Expenses. Any provision of this Agreement and the Loan Documents to the contrary notwithstanding, Loan Parties agree to pay to the Bank all costs and expenses, including but not limited to, appraisal fees, collateral verification and audit expenses, attorney’s fees, including appellate attorney’s fees, post-judgment collection-related attorney’s fees, and all attorneys’ fees and costs incurred by the Bank for all legal services in a bankruptcy case of any Loan Party in connection with the enforcement of and the collection of all sums due under the Loan Documents and this Agreement.

 

13.          No Further Commitment for Additional Accommodations. The Loan Parties expressly agree and stipulate that, except as otherwise herein specifically provided, the Bank has no obligation under the Loan Documents, by law, by equity, by the existence of this Agreement, or by any oral representation or communication of any sort from the Bank to refrain from exercising its rights under the Loan Documents or under this Agreement, or to agree, either now or in the future, to any further forbearances or extensions of time to satisfy the Obligations, or to provide any further accommodation to the Loan Parties under any circumstances whatsoever.

 

14.          No Waiver of Remedies. No delay or failure of the Bank to exercise any right under the Loan Documents shall impair such right or be construed to be a waiver of any default or an acquiescence therein, and any single or partial exercise of any such right shall not preclude other or further exercise thereof or the exercise of any other right. No waiver, amendment, or other variation of the terms, conditions, or provisions of the Loan Documents shall be valid unless made in writing and signed by the Bank, and then only to the extent as specifically set forth in such writing. All remedies contained in the Loan Documents and this Agreement or by law afforded shall be cumulative and all shall

be available to the Bank until the indebtedness has been paid in full.

 

  

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15.          Insurance. The Loan Parties will pay the premium due for property insurance on the Collateral with the same coverage existing prior to the execution of this Agreement. At no time shall the Loan Parties let such insurance lapse. The Loan Parties shall provide proof to the Bank that it has insurance in effect on the Collateral listing the Bank as loss payee.

 

16.          Inspection.  Any of the Bank’s officers, employees, or agents shall have the right, at any time or times hereafter, in the Bank’s name or in the name of Loan Parties to verify the validity, amount, or any other matter relating to the Collateral by mail, telephone, or otherwise.  The Bank (by any of its officers, employees, or agents) shall have the right, at any time or times during usual business hours, to inspect the Collateral and all records related thereto (and to make extracts from such records) and the premises upon which any of such Collateral is located, to discuss Loan Parties’ affairs and finances with any attorney, accountant, account debtor, or
creditor of the Loan Parties, and to verify the amount, quality, quantity, value, and condition of, or any other matter relating to the said Collateral.

 

17.          Time is of the Essence.  The Loan Parties further acknowledge that TIME IS OF THE ESSENCE with respect to the time for performance of the terms and provisions of this Agreement.  None of the Loan Parties shall be given any grace period within which to cure any default or breach under this Agreement except as explicitly provided herein.

 

18.          No Duress; Each Party Advised by Counsel; Traditional Rule of Construction Not Applicable.  The Loan Parties stipulate and agree that the Loan Documents and this Agreement have been executed voluntarily after due deliberation and negotiation and that neither Bank nor any other person has exerted or attempted to exert improper or unlawful pressure or has in any way induced or attempted to induce, through threats or otherwise, any conduct on the part of the Loan Parties including the execution or delivery of this Agreement or any of the Loan Documents or any other document or instrument.  Because this Agreement was negotiated at length with counsel, the parties agree that the
traditional rules calling for a document to be construed against its draftsman shall not apply or be followed.

19.          Loan Documents. Except as herein specifically provided otherwise, the Loan Documents shall remain in full force and effect and be unaffected hereby. In the event of a conflict between the terms of this Agreement, the Loan Documents, and any other agreement between the Bank and the Loan Parties then this Agreement shall be controlling.

 

20.          Waiver, Amendment, and Entirety of Agreement.  No waiver of or consent to any departure from any provision hereof shall be effective unless in writing and signed by the authorized representative of the party against whom such a waiver or consent is asserted and shall be effective only in the specific instance and for the purpose for which given and to the extent specified in such writing.  No delay or omission by any party hereto to exercise any right or remedy upon the happening of any Default hereunder shall impair such right or remedy or be deemed to be a waiver of such Default. This Agreement embodies the entire agreement and understanding between the parties hereto with
respect to the subject matter of this Agreement and supersedes all prior and contemporaneous negotiations, agreements, and understandings relative to such subject matter.

 

  

12

  

 

21.           Titles. Titles to the sections of this Agreement are solely for the convenience of the parties hereto and are not an aid in the interpretation of this Agreement or any part thereof.

 

22.          Third-Party Beneficiaries.  All of the conditions and obligations hereunder are imposed solely and exclusively for the benefit of the parties hereto and their successors and assigns.  No other person or entities shall obtain any interest herein or require satisfaction of such conditions in accordance with the terms hereof or be entitled to assume that any of the parties hereto will enforce such conditions and obligations and no other person shall, under any circumstances, be beneficiary of such conditions.

 

23.          No Assignment by Loan Parties.  The Loan Parties shall not assign this Agreement or any of their respective rights or obligations under the Agreement without prior written consent of the Bank, and any attempted assignment made without such consent shall be void and of no effect.

 

24.          Further Assurances. The Loan Parties shall execute any and all agreements, instruments, and documents, and shall take such further actions as may be reasonably necessary in the opinion of the Bank to fully effectuate this Agreement.

 

25.          Facsimile, Counterparts, and Governing Law.  This Agreement together with any document contemplated to be executed herewith may be executed by facsimile signature, and any such facsimile document shall be deemed to be of the same force and effect as a manually signed original. This Agreement may be executed in multiple counterparts, each of which shall contain an original, and all of which taken together shall constitute one and the same agreement; provided, however, that the Agreement shall be of no force or effect until signed by all parties hereto.  This Agreement shall be construed in accordance with and governed by the laws of the State of Florida.

 

26.          Severability.  In the event that any one or more of the provisions contained in this Agreement shall for any reason be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision of the Agreement, and the Agreement shall be construed as if such invalid or unenforceable provisions had never been contained in this Agreement.

27.          WAIVER OF JURY TRIAL.  AS A MATERIAL INDUCEMENT FOR THE BANK TO ENTER THIS FORBEARANCE AGREEMENT, THE BANK AND THE LOAN PARTIES HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHT EITHER MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT, THE OBLIGATIONS, THE LOAN DOCUMENTS, AND ANY DOCUMENTS EXECUTED HEREWITH OR CONTEMPLATED TO BE EXECUTED IN CONNECTION WITH THIS AGREEMENT, AND ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF EITHER PARTY.

 

  

13

  

 

IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed, sealed and delivered on the day and year first above written.

 

	
TREBOR:

	  
	
TREBOR INDUSTRIES, INC., a Florida corporation

	  	  
	
By:

	  
	  	  
	
Name:

	  
	  	  
	
As:

	  

 

	
STATE OF FLORIDA

	
)

	  	
)SS:

	
COUNTY OF ___________

	
)

 

The foregoing instrument was acknowledged before me the   day of February, 2011, by _________________________, as ______________________ of TREBOR INDUSTRIES, INC., a Florida corporation, on behalf of the corporation, who is personally known to me or who has produced _________________ (type of identification) as identification.

	  	
  

	  	
NOTARY PUBLIC, STATE OF ______________

	  	
  

	  	
(Print, Type or Stamp Commissioned Name of Notary Public)

 

  

14

  

 

	
CARMICHAEL:

	  
	  
	
ROBERT M. CARMICHAEL, individually

 

	
STATE OF FLORIDA

	
)

	  	
)SS:

	
COUNTY OF ___________

	
)

 

The foregoing instrument was acknowledged before me the ____ day of February, 2011, by ROBERT M. CARMICHAEL, individually, who is personally known to me or who has produced _________________ (type of identification) as identification.

 

	
    

	
NOTARY PUBLIC, STATE OF ______________

	
    

	
(Print, Type or Stamp Commissioned Name of Notary Public)

 

  

15

  

 

	
BANK:

	  
	
BRANCH BANKING AND TRUST COMPANY,

a North Carolina banking corporation, as successor-

in-interest to Colonial Bank by asset acquisition from

the FDIC as Receiver for Colonial Bank

	  
	
By:

	    
	  
	
Name:

	    
	  	  
	
Title:

	    

 

	
STATE OF ___________

	
)

	  	
) ss:

	
COUNTY OF                       

	
)

Sworn to and subscribed before me this ____ day of February, 2011, by _____________________ as ____________________of BRANCH BANKING AND TRUST COMPANY, a North Carolina banking corporation, as successor-in-interest to Colonial Bank by asset acquisition from the FDIC as Receiver for Colonial Bank, on behalf of the bank, who is personally known to me or who has produced _________________ (type of identification) as identification.

  

	    
	
NOTARY PUBLIC, STATE OF _______________

	    
	
(Print, Type or Stamp Commissioned Name of Notary Public)

  

16

  

 

EXHIBIT “A”

 

LOTS 7 AND 8, BLOCK 200, F.R. OLIVER’S AMENDED PLAT OF SEMINOLE ADDITION, ACCORDING TO THE MAP OR PLAT THEREOF AS RECORDED IN PLAT BOOK 1, PAGE(S) 88, PUBLIC RECORDS OF MIAMI-DADE COUNTY, FLORIDA, SAID LANDS NOW LYING, BEING AND SITUATE IN BROWARD COUNTY, FLORIDA.

 

  

17

  

EXHIBIT “B”

 

[See attached Consolidated Note]

 

  

18

  

EXHIBIT “C”

 

[See attached Mortgage Modification]

 

  

19

  

EXHIBIT “D”

 

[See attached Additional Guaranty]

 

  

20

  

EXHIBIT “E”

 

[See attached Joint Stipulation to Foreclosure]

 

  

21Unassociated Document

ITEX CORPORATION

 

and

 

OTR, INC.

 

Rights Agent

 

RIGHTS AGREEMENT

 

Dated as of March 11, 2011

 

  

i

  

 

TABLE OF CONTENTS

 

	  	 	  	
Page

	  	 	  	  
	
Section 1.

	 	
Certain Definitions

	
1

	
Section 2.

	 	
Appointment of Rights Agent

	
7

	
Section 3.

	 	
Issue of Rights and Right Certificates

	
7

	
Section 4.

	 	
Form of Right Certificates

	
9

	
Section 5.

	 	
Execution, Countersignature and Registration

	
9

	
Section 6.

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

	
10

	
Section 7.

	 	
Exercise of Rights; Purchase Price; Expiration Date of Rights

	
11

	
Section 8.

	 	
Cancellation and Destruction of Right Certificates

	
12

	
Section 9.

	 	
Reservation and Availability of Preferred Shares

	
13

	
Section 10.

	 	
Preferred Shares Record Date

	
14

	
Section 11.

	 	
Adjustment in Rights After there is an Acquiring Person; Business Combinations

	
14

	
Section 12.

	 	
Certain Adjustments

	
17

	
Section 13.

	 	
Certificate of Adjustment

	
17

	
Section 14.

	 	
Fractional Rights and Fractional Shares

	
18

	
Section 15.

	 	
Rights of Action

	
19

	
Section 16.

	 	
Transfer and Ownership of Rights and Right Certificates

	
19

	
Section 17.

	 	
Right Certificate Holder Not Deemed a Shareholder

	
20

	
Section 18.

	 	
Concerning the Rights Agent

	
20

	
Section 19.

	 	
Merger or Consolidation or Change of Name of Rights Agent

	
20

	
Section 20.

	 	
Duties of Rights Agent

	
21

	
Section 21.

	 	
Change of Rights Agent

	
24

	
Section 22.

	 	
Issuance of New Right Certificates

	
24

	
Section 23.

	 	
Redemption

	
24

	
Section 24.

	 	
Exchange of Rights

	
25

	
Section 25.

	 	
Notices

	
26

	
Section 26.

	 	
Supplements and Amendments

	
27

	
Section 27.

	 	
Successors

	
28

	
Section 28.

	 	
Benefits of this Agreement

	
28

	
Section 29.

	 	
Severability

	
28

	
Section 30.

	 	
Governing Law

	
28

	
Section 31.

	 	
Counterparts; Effectiveness

	
28

	
Section 32.

	 	
Descriptive Headings

	
29

 

  

ii

  

 

RIGHTS AGREEMENT

 

This Rights Agreement (the “Agreement”), is dated as of March 11, 2011, and is made between ITEX Corporation, a Nevada corporation (the “Company”), and OTR, Inc., as rights agent (the “Rights Agent”).

 

The Board of Directors of the Company (the “Board”) has authorized and declared a dividend of one preferred share purchase Right (a “Right”) for each share of Common Stock, par value $0.01 per share, of the Company (the “Common Stock”) outstanding at the Close of Business (as defined below) on March 25, 2011 (the “Record Date”), each Right representing the right to purchase one one-thousandth (1/1,000th) of a Preferred Share (as such term is hereinafter defined), upon the terms and subject to the conditions herein set forth, and has further authorized the issuance of one Right (as such number may hereafter be adjusted pursuant to the
provisions of this Agreement) with respect to each share of Common Stock that shall become outstanding (whether originally issued or delivered from the Company’s treasury) between the Record Date and the earliest of the Distribution Date, the Redemption Date or the Expiration Date (as such terms are hereinafter defined); provided, however, that Rights may be issued with respect to shares of Common Stock that shall become outstanding after the Distribution Date (whether originally issued or delivered from the Company’s treasury) and prior to the earlier of the Redemption Date or the Expiration Date only in accordance with the provisions of Section 22.

Accordingly, 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:

  

(a)           “Acquiring Person” shall mean any Person who or which, alone or together with all Affiliates and Associates of such Person, without the prior written approval of the Board, shall be the Beneficial Owner of more than 15% of the Common Shares then outstanding, but not including (1) the Company, any Subsidiary of the Company, any employee benefit or compensation plan of the Company or any Subsidiary of the Company, or any Person organized, appointed or established by the Company and holding Common Shares for or pursuant to the terms of any such employee benefit or compensation plan, (2) any Person who or which, alone or together with all Affiliates and Associates of such
Person, has become and is the Beneficial Owner of more than 15% of the Common Shares at the time outstanding solely as the result of (i) a reduction in the aggregate number of Common Shares outstanding since the last date on which such Person acquired Beneficial Ownership of any Common Shares, (ii) the exercise of any options, warrants, rights or similar interests (including restricted stock) granted by the Company to its directors, officers and employees,  (iii) any unilateral grant of any security by the Company to such Person or any acquisition directly from the Company of shares of its capital stock by such Person, or (iv) the acquisition by such Person or one or more of its Affiliates or Associates of Beneficial Ownership of additional Common Shares if the Board determines that such acquisition was made in good faith without the knowledge by such Person or one or more of its Affiliates or Associates that such
Person would thereby become an Acquiring Person, which determination of the Board shall be conclusive and binding on such Person, the Rights Agent, the holders of the Rights and all other Persons, and (3) any such Person who would, as of the Close of Business on the date hereof, be an “Acquiring Person” pursuant to the foregoing provisions of clause (2) of this definition (an “Excluded Person”), unless and until such Excluded Person shall acquire after the date hereof, without the prior approval of the Board, Beneficial Ownership of any additional Common Shares (other than any such ownership resulting from the exercise of any options, warrants, rights or similar interests or the vesting of any restricted shares, in each case, granted prior to or after the date hereof to such Excluded Person under any employee benefit or compensation plan of the Company or any of its Subsidiaries).

 

  

1

  

 

Notwithstanding clause (2)(iv) of the prior paragraph, if any Person that is not an Acquiring Person due to such clause (2)(iv) does not reduce its percentage of Beneficial Ownership of Common Shares to 15% or less by the Close of Business on the tenth calendar day after notice from the Company (the date of notice being the first day) that such Person’s Beneficial Ownership of Common Shares would make it an Acquiring Person, such Person shall, at the end of such ten calendar day period, become an Acquiring Person (and such clause (2)(iv) shall no longer apply to such Person).

(b)           “Affiliate” and “Associate,” when used with reference to any Person, shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Exchange Act, as in effect on the date of this Agreement.

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

(i)            which such Person or any of such Person’s Affiliates or Associates is deemed to “beneficially own” within the meaning of Rule 13d-3 of the General Rules and Regulations under the Exchange Act, as in effect on the date of this Agreement;

(ii)           which such Person or any of such Person’s Affiliates or Associates, directly or indirectly, has the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (whether or not in writing) (including any purchase orders for shares of Common Stock initiated prior to the first public announcement of the adoption of this Agreement) or upon the exercise of conversion rights, exchange rights, warrants, options, or other rights (in each case, other than upon exercise or exchange of the Rights); provided, however, that a Person shall not be deemed the Beneficial Owner of, or to beneficially own,
securities tendered pursuant to a tender or exchange offer made by such Person or any of such Person’s Affiliates or Associates until such tendered securities are accepted for purchase or exchange thereunder or cease to be subject to withdrawal by the tendering security holder;

 

(iii)          which such Person or any of such Person’s Affiliates or Associates, directly or indirectly, has or shares the right to vote or dispose of, including pursuant to any agreement, arrangement or understanding (whether or not in writing); or which are beneficially owned, directly or indirectly, by any other Person (or an Affiliate or Associate thereof), with which such Person or any of such Person’s Affiliates or Associates has any agreement, arrangement or understanding (whether or not in writing) with such other Person (or any of such other Person’s Affiliates or Associates) with respect to acquiring, holding, voting or disposing of such securities of the Company; provided, however
 , that a Person shall not be deemed under this clause (iii) to be the Beneficial Owner of, or to beneficially own, or to have Beneficial Ownership of, any security if (A) the agreement, arrangement or understanding (whether or not in writing) to vote such security arises solely from a revocable proxy or consent given to such Person in response to a public proxy or consent solicitation made generally to all holders of Common Shares of the Company pursuant to, and in accordance with, the applicable rules and regulations under the Exchange Act, and the beneficial ownership of such security is not also then reportable on Schedule 13D or 13G under the Exchange Act (or any comparable or successor report); or (B) if such Beneficial Ownership arises solely as a result of such Person’s status as a “clearing agency,” as defined in Section 3(a)(23) of the Exchange Act.  Notwithstanding the foregoing, nothing contained in this clause (iii)
shall cause an officer or director of the Company to be deemed the Beneficial Owner of securities held of record by or in the capacity of the trustee, fiduciary or voting agent of any employee benefit, equity incentive, compensation plan or any franchisee stock purchase plan of the Company or any Subsidiary of the Company for the benefit of any franchisee or employee of the Company or any Subsidiary of the Company, other than the officer or director, by reason of any influence that such officer or director may have over the voting of the securities held in the plan.

  

2

  

 

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

 

Notwithstanding the foregoing, (i) the phrase, “then outstanding,” when used with reference to a Person’s Beneficial Ownership of securities of the Company, shall mean the number of such securities then issued and outstanding together with the number of such securities not then actually issued and outstanding that such Person would be deemed to beneficially own hereunder; (ii) nothing contained in this Section 1(c) shall cause a Person ordinarily engaged in business as an underwriter of securities to be deemed the “Beneficial Owner” of, or to “beneficially own”, or to have “Beneficial Ownership” of, any securities acquired or to be acquired in either (A) a bona fide underwritten public offering of securities pursuant to an underwriting agreement
entered into by the Company and such Person or (B) a bona fide offering of securities pursuant to Rule 144A under the Securities Act pursuant to a purchase agreement entered into by the Company and such Person; and (iii) no director or officer of the Company shall be deemed to Beneficially Own securities Beneficially Owned by any other director or officer of the Company solely as a result of actions taken by such directors or officers in their capacities as directors, officers, agents or employees of the Company.

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

 

(e)           “Business Combination” shall have the meaning set forth in Section 11(b).

(f)           “Business Day” shall mean any day other than a Saturday, a Sunday, or a day on which banking institutions in the State of Washington are authorized or obligated by law or executive order to close.

 

(g)           “Certificate of Designation” shall mean the Certificate of Designation of the Preferred Shares, a copy of which is attached hereto as Exhibit A.

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

  

3

  

 

(i)            “Common Shares,” when used with reference to the Company prior to a Business Combination, shall mean the shares of Common Stock or any other shares of capital stock of the Company into which the Common Stock shall be reclassified or changed.  ”Common Shares,” when used with reference to any Person (other than the Company prior to a Business Combination), shall mean shares of capital stock of such Person (if such Person is a corporation) of any class or series, or units of equity interests in such Person (if such Person is not a corporation) of any class or series, the terms of which do
not limit (as a maximum amount and not merely in proportional terms) the amount of dividends or income payable or distributable on such class or series or the amount of assets distributable on such class or series upon any voluntary or involuntary liquidation, dissolution or winding up of such Person and do not provide that such class or series is subject to redemption at the option of such Person, or any shares of capital stock or units of equity interests into which the foregoing shall be reclassified or changed, and if there shall be more than one class or series of such shares of capital stock or units of equity interests of such Person, then “Common Shares” of such Person shall mean the class or series of capital stock of such Person or units of equity interests in such Person having voting power (being the power under ordinary circumstances (and not merely upon the happening of a contingency) to vote in
the election of directors of such Person (if such Person is a corporation) or to participate in the management and control of such Person (if such Person is not a corporation)), or in the case of multiple classes or series having voting power, having the greatest voting power.

(j)            “Common Stock” shall have the meaning set forth in the introductory paragraph of this Agreement.

(k)           “Company” shall have the meaning set forth in the heading of this Agreement; provided, however, that if there is a Business Combination, “Company” shall have the meaning set forth in Section 11(c)(iii).

(l)           The term “control” with respect to any Person shall mean the power to direct the management and policies of such Person, directly or indirectly, by or through stock ownership, agency or otherwise, or pursuant to or in connection with an agreement, arrangement or understanding (written or oral) with one or more other Persons by or through stock ownership, agency or otherwise; and the terms “controlling” and “controlled” shall have meanings correlative to the foregoing.

(m)          “Distribution Date” shall have the meaning set forth in Section 3(b).

(n)          “Derivative Interest” shall mean any derivative securities (as defined under Rule 16a-1 under the Exchange Act) that increase in value as the value of the underlying equity increases, including, but not limited to, a long convertible security, a long call option and a short put option position, in each case, regardless of whether (x) such interest conveys any voting rights in such security, (y) such interest is required to be, or is capable of being, settled through delivery of such security or (z) transactions hedge the economic effect of such interest.

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

(p)           “Exchange Consideration” shall have the meaning set forth in Section 24(c).

 

(q)           “Exchange Ratio” shall have the meaning set forth in Section 24(a) hereof.

 

(r)           “Exchange Recipient” shall have the meaning set forth in Section 24(e) hereof.

(s)           “Expiration Date” shall mean the Close of Business on the third anniversary of the date of this Agreement.

(t)           “including” shall mean including, without limitation.

 

  

4

  

 

(u)           “Major Part,” when used with reference to the assets of the Company and its Subsidiaries as of any date, shall mean assets (a) having a fair market value aggregating 50% or more of the total fair market value of all the assets of the Company and its Subsidiaries (taken as a whole) as of the date in question, (b) accounting for 50% or more of the total value (net of depreciation and amortization) of all the assets of the Company and its Subsidiaries (taken as a whole) as would be shown on a consolidated or combined balance sheet of the Company and its Subsidiaries as of the date in question, prepared in accordance with generally accepted accounting principles
then in effect, or (c) accounting for 50% or more of the total amount of earnings before interest, taxes, depreciation and amortization or of the revenues of the Company and its Subsidiaries (taken as a whole) as would be shown on, or derived from, a consolidated or combined statement of income or net earnings of the Company and its Subsidiaries for the period of 12 months ending on the last day of the Company’s monthly accounting period next preceding the date in question, prepared in accordance with generally accepted accounting principles then in effect.

(v)           “Market Value,” when used with reference to Common Shares on any date, shall mean the average of the daily closing prices, per share, of such Common Shares for the period which is the shorter of (a) 30 consecutive Trading Days ending on the Trading Day immediately prior to the date in question or (b) the number of consecutive Trading Days beginning on the Trading Day immediately after the date of the first public announcement of the event requiring a determination of the Market Value of Common Shares and ending on the Trading Day immediately prior to the record date of such event.  The closing price for each Trading Day shall be the last sale
price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or The NASDAQ Stock Market or, if the Security is not listed or admitted to trading on the New York Stock Exchange or The NASDAQ Stock Market, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Security is listed or admitted to trading or, if the Security is not listed or admitted to trading on any national securities exchange, the last reported trade quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by Nasdaq (“Nasdaq”) in the OTC Bulletin Board, the Pink OTC Markets, Inc. or such
other system then in use, or if no such quotations are available, the average of the closing bid and asked prices as furnished by a professional market maker making a market in such securities selected by the Board, or if on any such Trading Day no market maker is making a market in such securities, the closing price of such securities on such Trading Day shall be deemed to be the fair value of such securities as determined in good faith by the Board (whose determination shall be described in a statement filed with the Rights Agent and shall be binding on the Rights Agent, the holders of Rights and all other Persons); provided, however, that if a Trading Day occurs during a period following an announcement of any action of the type described in Section 12(a) that would require an adjustment thereunder by the issuer of the securities the closing price of which is to be determined, then, and in each such case, the closing
price of such securities shall be appropriately adjusted to reflect the effect of such action on the market price of such securities; and provided further, however, that for the purpose of determining the closing price of the Preferred Shares for any Trading Day on which there is no market maker for the Preferred Shares, the closing price on such Trading Day shall be deemed to be the Adjustment Number (as defined in the Certificate of Designation)multiplied by the closing price of the Common Shares of the Company on such Trading Day.

 

(w)          “Person” shall mean an individual, firm, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization or other entity, and shall include any successor (by merger or otherwise) thereof or thereto.

(x)           “Post Transferee” shall have the meaning set forth in Section 7(e).

(y)           “Preferred Shares” shall mean shares of Series A Junior Participating Preferred Stock, par value $0.01 per share, of the Company having the designations and the powers, preferences and rights, and the qualifications, limitations and restrictions set forth in the Certificate of Designation for such Preferred Stock.  Any reference in this Agreement to Preferred Shares shall be deemed to include any authorized fraction of a Preferred Share, unless the context otherwise requires.

  

5

  

 

(z)           “Principal Party” shall mean the Surviving Person in a Business Combination; provided, however, that, (i) if such Surviving Person is a direct or indirect Subsidiary of any other Person, “Principal Party” shall mean the Person which is the ultimate parent of such Surviving Person, and (ii) in the event ultimate control of such Surviving Person is shared by two or more Persons, “Principal Party” shall mean that Person that is immediately controlled by such
two or more Persons.

(aa)         “Prior Transferee” shall have the meaning set forth in Section 7(e).

(bb)        “Purchase Price” with respect to each Right shall mean $15.00, as such amount may from time to time be adjusted as provided in this Agreement, and shall be payable in lawful money of the United States of America.  All references herein to the Purchase Price shall mean the Purchase Price as in effect at the time in question.

 

(cc)         “Record Date” shall have the meaning set forth in the introductory paragraph of this Agreement.

 

(dd)        “Redemption Date” shall have the meaning set forth in Section 23(a).

 

(ee)         “Redemption Price” with respect to each Right shall mean $0.001, as such amount may from time to time be adjusted in accordance with Section 12.  All references herein to the Redemption Price shall mean the Redemption Price as in effect at the time in question.

(ff)          “Registered Common Shares” shall mean Common Shares that are, as of the date of consummation of a Business Combination, and have continuously been for the 12 months immediately preceding such date, registered under Section 12 of the Exchange Act, and if a Person has multiple classes or series of Registered Common Shares outstanding, “Registered Common Shares” of such Person shall mean the class or series of Registered Common Shares of such Person having voting power (being the power under ordinary circumstances (and not merely upon the happening of a contingency) to vote in the election of
directors of such Person (if such Person is a corporation) or to participate in the management and control of such Person (if such Person is not a corporation)), or in the case of multiple classes or series having voting power, having the greatest voting power.

 

(gg)        “Right Certificate” shall mean a certificate evidencing a Right in substantially the form attached hereto as Exhibit B.

 

(hh)        “Rights” shall mean the rights to purchase Preferred Shares (or other securities) as provided in this Agreement.

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

(jj)           “Securities Act” shall mean the Securities Act of 1933, as in effect on the date in question, unless otherwise specifically provided.

(kk)         “Subsidiary” shall mean a Person, at least a majority of the total outstanding voting power (being the power under ordinary circumstances (and not merely upon the happening of a contingency) to vote in the election of directors of such Person (if such Person is a corporation) or to participate in the management and control of such Person (if such Person is not a corporation))  which is owned, directly or indirectly, by another Person or by one or more other Subsidiaries of such other Person or by such other Person and one or more other Subsidiaries of such other Person.

  

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(ll)           ”Surviving Person” shall mean (a) the Person which is the continuing or surviving Person in a consolidation or merger specified in Section 11(b)(i)(A) or 11(b)(i)(B) or (b) the Person to which the Major Part of the assets of the Company and its Subsidiaries is sold, leased, exchanged or otherwise transferred or disposed of in a transaction specified in Section 11(b)(i)(C); provided, however, that, if the Major Part of the assets of the Company and its Subsidiaries is sold, leased, exchanged or otherwise transferred or disposed of in one or more related transactions specified in
Section 11(b)(i)(C) to more than one Person, the “Surviving Person” in such case shall mean the Person that acquired assets of the Company and/or its Subsidiaries with the greatest fair market value in such transaction or transactions.

 

(mm)       “Trading Day” shall mean a day on which the principal national securities exchange (or over-the-counter market or any reputable quotation system specified by the Board as the case may be) on which any securities or Rights, as the case may be, are listed or admitted to trading is open for the transaction of business or, if the securities or Rights in question are not listed or admitted to trading on any national securities exchange (or over-the-counter market, as the case may be), a Business Day.

 

Section 2.             Appointment of Rights Agent

 

The Company hereby appoints the Rights Agent to act as agent for the Company in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment. The Company may from time to time appoint one or more co-Rights Agents as it may deem necessary or desirable (the term “Rights Agent” being used herein to refer, collectively, to the Rights Agent together with any such co-Rights Agents).  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, and shall be provided in writing to the Rights Agent and any such co-Rights Agent.  Subject to Section 20(c), the Rights Agent shall have no duty to supervise and shall not be liable for the acts or
omissions of any such co-Rights Agents.

 

 Section 3.            Issue of Rights and Right Certificates

 

(a)           One Right shall be associated with each Common Share outstanding on the Record Date, each additional Common Share that shall become outstanding between the Record Date and the earliest of the Distribution Date, the Redemption Date or the Expiration Date and each additional Common Share with which Rights are issued after the Distribution Date but prior to the earlier of the Redemption Date or the Expiration Date as provided in Section 22, subject to adjustment as provided in this Agreement.

 

(b)           Until the earlier of (i) such date on which the Company learns that a Person has become an Acquiring Person and (ii) such date, if any, as may be designated by the Board following the commencement of, or first public disclosure of an intent to commence, a tender or exchange offer by any Person (other than the Company, any Subsidiary of the Company, any employee benefit or compensation plan of the Company or of any of its Subsidiaries, or any Person organized, appointed or established by the Company and holding Common Shares for or pursuant to the terms of any such employee benefit or compensation plan) for outstanding Common Shares, if upon consummation of such tender or exchange offer such Person could be the Beneficial Owner of more
than 15% of the outstanding Common Shares (the Close of Business on the earlier of such dates being the “Distribution Date”), (A) the Rights shall, except as otherwise provided in Section 3(c), be evidenced by the certificates for Common Shares registered in the names of the holders thereof, or, in the case of Common Shares held in uncertificated form, by the transaction statement or other record of ownership of such Common Shares, and not by separate Right Certificates, and (B) the Rights, including the right to receive Right Certificates, shall be transferable only in connection with the transfer of the underlying Common Shares.  As soon as practicable after the Distribution Date, the Company shall prepare and execute, the Rights Agent shall countersign, and the Company will send or cause to be sent (and the Rights Agent shall, if requested and provided with all necessary
information, send) by first-class, postage-prepaid mail, to each record holder of Common Shares as of the Close of Business on the Distribution Date, at the address of such holder shown on the records of the Company or the transfer agent or registrar for the Common Shares, one or more Right Certificates evidencing one whole Right for each Common Share held by such record holder, subject to the provisions of Section 14 and to adjustment as provided in this Agreement.  As of and after the Distribution Date, the Rights shall be evidenced solely by such Right Certificates.  The Company shall, as promptly as practicable, notify the Rights Agent in writing upon the occurrence of the Distribution Date and, if such notification is given orally, the Company shall confirm same in writing on or prior to the Business Day next following.  Until such notice is received by the Rights Agent, the Rights Agent may presume conclusively for all purposes that the
Distribution Date has not occurred.

 

  

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(c)           As soon as practicable after the Record Date, the Company will send a copy of a Summary of Rights to Purchase Preferred Shares, in substantially the form attached hereto as Exhibit C (the “Summary of Rights”), by first-class, postage-prepaid mail, to each record holder of Common Shares as of the Close of Business on the Record Date at the address of such holder shown on the records of the Company or the transfer agent or registrar for the Common Shares.  With respect to any Common Shares outstanding as of the Record Date, and until the earliest of the Distribution Date, the Redemption Date or the Expiration Date, (i) in the case of certificated shares, (A)
the Rights associated with the Common Shares represented by any certificate shall be evidenced by such certificate for the Common Shares with a copy of the Summary of Rights attached thereto and the registered holders of the Common Shares shall also be the registered holders of the associated Rights and (B) the surrender for transfer of any such certificate, even without a copy of the Summary of Rights attached thereto, shall also constitute the transfer of the Rights associated with the Common Shares represented thereby, and (ii) in the case of Common Shares held in uncertificated form, (A) the Rights associated with the Common Shares shall be evidenced by the balances indicated in the book-entry account system of the transfer agent for such Common Shares and the registered holders of the Common Shares shall also be the registered holders of the associated Rights and (B) the transfer of any Common Shares in the book-entry account system of the transfer agent for such Common Shares
shall also constitute the transfer of the Rights associated with such Common Shares.

 

(d)           In the case of certificated Common Shares, certificates issued for Common Shares after the Record Date (including upon transfer or exchange of outstanding Common Shares), but prior to the earliest of the Distribution Date, the Redemption Date or the Expiration Date, shall have printed on, written on or otherwise affixed to them a legend in substantially the following form:

 

This certificate also evidences and entitles the holder hereof to certain Rights as set forth in a Rights Agreement dated as of March 11, 2011 (as it may be amended from time to time (the “Rights Agreement”)), between ITEX Corporation (the “Company”) and OTR, Inc., as Rights Agent (the “Rights Agent”), the terms of which (including restrictions on the transfer of such Rights) are hereby incorporated herein by reference and a copy of which is on file at the principal executive offices of the Company.  Under certain circumstances, as set forth in the Rights Agreement, such Rights shall be evidenced by separate certificates and shall no longer be evidenced by this certificate.  The Company shall mail to the holder of this certificate a copy of the Rights
Agreement without charge after receipt of a written request therefor.  RIGHTS BENEFICIALLY OWNED BY ACQUIRING PERSONS OR THEIR AFFILIATES OR ASSOCIATES (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND BY ANY SUBSEQUENT HOLDER OF SUCH RIGHTS ARE NULL AND VOID AND NONTRANSFERABLE.

 

  

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Notwithstanding this Section 3(d), neither the omission of a legend nor the inclusion of a legend that makes reference to a rights agreement other than the Agreement shall affect the enforceability of any part of this Agreement or the rights of any holder of Rights.

 

(e)           In the case of Common Shares held in uncertificated form, the Company shall cause the confirmation and account statements sent to holders of Common Shares in book-entry form (including upon transfer or exchange of outstanding Common Shares) prior to the earliest of the Distribution Date, the Redemption Date or the Expiration Date to bear a legend in substantially the following form:

 

Each share of Common Stock, par value $0.01 per share, of ITEX Corporation (the “Company”) entitles the holder thereof to certain Rights as set forth in a Rights Agreement dated as of March 11, 2011 (as it may be amended from time to time (the “Rights Agreement”)), between the Company and OTR, Inc, as Rights Agent (the “Rights Agent”), the terms of which (including restrictions on the transfer of such Rights) are hereby incorporated herein by reference and a copy of which is on file at the principal executive offices of the Company.  Under certain circumstances, as set forth in the Rights Agreement, such Rights shall be evidenced by separate certificates and shall no longer be evidenced by the shares to which this statement relates.  The Company shall mail to
the holder of shares to which this statement relates a copy of the Rights Agreement without charge after receipt of a written request therefor.  RIGHTS BENEFICIALLY OWNED BY ACQUIRING PERSONS OR THEIR AFFILIATES OR ASSOCIATES (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND BY ANY SUBSEQUENT HOLDER OF SUCH RIGHTS ARE NULL AND VOID AND NONTRANSFERABLE.

 

Notwithstanding this Section 3(e), neither the omission of a legend nor the inclusion of a legend that makes reference to a rights agreement other than the Agreement shall affect the enforceability of any part of this Agreement or the rights of any holder of Rights.

Section 4.             Form of Right Certificates

 

(a)           The Right Certificates (and the form of election to purchase Preferred Shares, the form of assignment and the form of certification to be printed on the reverse thereof) shall be in substantially the same form as Exhibit B hereto and may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange or quotation system on which the Rights may from time to time be listed or quoted, or to conform to usage. Subject to the other provisions
of the Agreement (including Sections 7, 11 and 22), the Right Certificates, whenever issued, shall be dated as of the Distribution Date and shall entitle the holders thereof to purchase such number of Preferred Shares as shall be set forth therein for the Purchase Price set forth therein, subject to adjustment as provided in this Agreement.

Section 5              Execution, Countersignature and Registration

 

(a)           The Right Certificates shall be executed on behalf of the Company by the Chairman of the Board, its President, Chief Executive Officer or its Chief Financial Officer, either manually or by facsimile signature, and shall be attested by the Secretary or an Assistant Secretary of the Company, either manually or by facsimile signature, and may have affixed thereto the Company’s seal or a facsimile thereof. The Right Certificates shall be countersigned by the Rights Agent either manually or, at the Company’s option, by facsimile signature, and shall not be valid or obligatory for any purpose unless so countersigned. In the event that any officer of the Company who shall have signed any of the Right Certificates shall cease to be an officer
before countersignature by the Rights Agent and issuance and delivery by the Company, such Right Certificates, may nevertheless be countersigned by the Rights Agent and issued and delivered by the Company with the same force and effect as though the person who signed such Right Certificates had not ceased to be an officer; and any Right Certificate may be signed on behalf of the Company by any person who, at the actual date of execution of such Right Certificate, shall be a proper officer of the Company to sign such Right Certificate, although at the date of execution of this Agreement any such person was not such an officer of the Company.

 

  

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

 

	
Section 6

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

(a)           Subject to the provisions of Sections 7(e) and 14, at any time after the Distribution Date, and at or prior to the Close of Business on the earlier of the Redemption Date or the Expiration Date, any Right Certificate or Right Certificates (other than Right Certificates representing Rights that have become null and void pursuant to Section  7(e) or that have been exchanged pursuant to Section 24) may be transferred, split up, combined or exchanged for another Right Certificate or Right Certificates, representing, in the aggregate, the same number of Rights as the Right Certificate or Right Certificates surrendered then represented. The Right Certificates are transferable only on the registry books of the Rights Agent. Any registered
holder desiring to transfer, split up, combine or exchange any Right Certificate or Right Certificates shall make such request in writing delivered to the Rights Agent, and shall surrender the Right Certificate or Right Certificates to be transferred, split up, combined or exchanged at the office of the Rights Agent designated for such purpose; provided, however, that neither the Rights Agent nor the Company shall be obligated to take any action whatsoever with respect to the transfer of any Right Certificate surrendered for transfer until the registered holder shall have properly completed and duly signed the certification contained in the form of assignment on the reverse side of such Right 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 or the Rights Agent shall reasonably request. Thereupon the
Rights Agent shall, subject to Sections 7(e) and 14, countersign and deliver to the Person entitled thereto a Right Certificate or Right Certificates, as the case may be, as so requested. The Company may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer, split up, combination or exchange of Right Certificates. If and to the extent the Company does require payment of any such taxes or charges, the Company shall give the Rights Agent prompt written notice thereof and the Rights Agent shall not deliver any Right Certificate unless and until it is satisfied that all such payments have been made, and the Rights Agent shall promptly forward any such sum collected by it to the Company or to such Persons as the Company may specify by written notice.

 

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

  

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(c)           Notwithstanding any other provision hereof, the Company and the Rights Agent may amend this Agreement to provide for uncertificated Rights in addition to or in place of Rights evidenced by Right Certificates.

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

 

(a)           Subject to the other provisions of this Agreement (including Section 7(e) and Section 11), each Right shall entitle the registered holder thereof, upon exercise thereof as provided in this Agreement, to purchase for the Purchase Price, at any time after the Distribution Date and at or prior to the earlier of (i) the Expiration Date and (ii) the Redemption Date, one one-thousandth (1/1,000th) of a Preferred Share, subject to adjustment as provided in this Agreement.

 

(b)          Subject to the other provisions of this Agreement (including Section 7(e) and Section 24), the registered holder of any Right Certificate may exercise the Rights evidenced thereby (except as otherwise provided in this Agreement) in whole or in part at any time after the Distribution Date, upon surrender of the Right Certificate, with the form of election to purchase on the reverse side thereof properly completed and duly executed, to the Rights Agent at the office of the Rights Agent designated for such purpose, together with payment of the Purchase Price for each one one-thousandth (1/1,000th) of a Preferred Share (as such fraction may be adjusted as provided in this Agreement) as to which the Rights are exercised, at or prior to the earlier of (i) the Expiration Date, or (ii) the “Redemption Date”).

 

(c)           Subject to the other provisions of this Agreement (including Section 7(e)), upon receipt of a Right Certificate representing exercisable Rights, with the form of election to purchase properly completed and duly executed, accompanied by payment of the Purchase Price for the Preferred Shares to be purchased together with an amount equal to any applicable transfer tax, in lawful money of the United States of America, in cash or by certified check or money order payable to the order of the Company, the Rights Agent shall thereupon promptly (i) either (A) requisition from any transfer agent of the Preferred Shares (or make available, if the Rights Agent is the transfer agent for such shares) certificates for the total number of Preferred
Shares to be purchased and the Company hereby irrevocably authorizes its transfer agent to comply with all such requests or (B) if the Company shall have elected to deposit the Preferred Shares with a depositary agent under a depositary arrangement, requisition from the depositary agent depositary receipts representing the number of one one-thousandths (1/1,000ths) of a Preferred Share (as such fraction may be adjusted as provided in this Agreement) to be purchased (in which case certificates for the Preferred Shares to be represented by such receipts shall be deposited by the transfer agent with the depositary agent) and the Company shall direct the depositary agent to comply with all such requests, (ii) when necessary to comply with this Agreement (or otherwise when appropriate, as determined by the Company with notice to the Rights Agent), 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) after receipt of such certificates or depositary receipts, cause the same to be delivered to or, upon the order of the registered holder of such Right Certificate, registered in such name or names as may be designated by such holder and (iv) when necessary to comply with this Agreement (or otherwise when appropriate, as determined by the Company with notice to the Rights Agent), after receipt thereof, deliver such cash, if any, to or upon the order of the registered holder of such Right Certificate.

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

 

  

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(e)           Notwithstanding anything in this Agreement to the contrary, any Rights that are at any time beneficially owned by (i) an Acquiring Person or an Affiliate or Associate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any Associate or Affiliate of such Acquiring Person) who becomes a transferee after the Acquiring Person becomes such (a “Post Transferee”), (iii) a transferee of an Acquiring Person (or of any Associate or Affiliate of such 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 (or from such Affiliate or Associate) to holders of equity interests in such Acquiring Person or to any Person with whom the Acquiring Person (or such Affiliate or Associate) has any continuing agreement, arrangement or understanding regarding the transferred Rights or (B) a transfer which the Board 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) (a “Prior Transferee”), or (iv) any subsequent transferee receiving transferred Rights from a Post Transferee or a Prior Transferee, either directly or through one or more intermediate transferees, shall become null and void without any further action and no holder of such Rights shall have any rights whatsoever with respect to such Rights, whether under any provision of this Agreement or otherwise.  The Company shall
use all reasonable efforts to ensure that the provisions of this Section 7(e) are complied with, but shall have no liability to any holder of any Right Certificate or any other Person as a result of its failure to make any determinations with respect to an Acquiring Person or its Affiliate or Associate, or any transferee thereof, hereunder.  The Company shall give the Rights Agent written notice of the identity of any Acquiring Person, Associate or Affiliate known to it, or the nominee of any of the foregoing, and the Rights Agent may rely on such notice in carrying out its duties under this Agreement and shall be deemed not to have any knowledge of the identity of any such Acquiring Person, Associate or Affiliate, or the nominee of any of the foregoing unless and until it shall have received such notice.

 

(f)            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 any Right Certificates upon the occurrence of any purported exercise as set forth in this Section 7 unless such registered holder shall have (i) properly completed and duly signed the certificate contained in the form of election to purchase set forth on the reverse side of the Right Certificate surrendered for such exercise and (ii) provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Company shall reasonably request.

Section 8.             Cancellation and Destruction of Right Certificates

 

All Right Certificates surrendered or presented for the purpose of exercise, transfer, split up, combination or exchange shall, and any Right Certificate representing Rights that have become null and void and nontransferable pursuant to Section 7(e) surrendered or presented for any purpose shall, if surrendered or presented to the Company or to any of its agents, be delivered to the Rights Agent for cancellation or in canceled form, or, if surrendered or presented to the Rights Agent, shall be canceled by it, and no Right Certificates shall be issued in lieu thereof except as expressly permitted by this Agreement. The Company shall deliver to the Rights Agent for cancellation and retirement, and the Rights Agent shall so cancel and retire, any Right Certificate purchased or acquired by the Company. Subject to
applicable law and regulation, the Rights Agent shall maintain (i) in a retrievable database electronic records of all cancelled or destroyed stock certificates which have been canceled or destroyed by the Rights Agent. The Rights Agent shall maintain such electronic records or physical records for the time period required by applicable law and regulation. Upon written request of the Company (and at the expense of the Company), the Rights Agent shall provide to the Company or its designee copies of such electronic records or physical records relating to rights certificates cancelled or destroyed by the Rights Agent.

 

  

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Section 9              Reservation and Availability of Preferred Shares

 

(a)           The Company shall cause to be reserved and kept available out of its authorized and unissued Preferred Shares or any authorized and issued Preferred Shares held in its treasury, free from preemptive rights or any right of first refusal, a number of Preferred Shares sufficient to permit the exercise in full of all outstanding Rights.

(b)           If there are not sufficient Preferred Shares issued but not outstanding or authorized but unissued to permit the exercise or exchange of Rights in accordance with this Agreement, the Company shall take all such action as may be necessary to authorize additional Preferred Shares for issuance upon the exercise or exchange of Rights pursuant to this Agreement; provided, however, that if the Company is unable to cause the authorization of additional Preferred Shares, then the Company shall, or, if action by the Company’s stockholders is necessary to cause such authorization, in lieu of seeking any such authorization, the Company may, to the extent necessary and permitted by applicable law and any agreements or instruments in effect prior to the
Distribution Date to which it is a party, (i) upon surrender of a Right, pay cash equal to the Purchase Price in lieu of issuing Preferred Shares and requiring payment therefor, (ii) upon due exercise of a Right and payment of the Purchase Price for each Preferred Share as to which such Right is exercised, issue common stock or other equity and/or debt securities having a value equal to the value of the Preferred Shares that otherwise would have been issuable pursuant to this Agreement, which value shall be determined by a nationally recognized investment banking firm selected by the Board, or (iii) upon due exercise of a Right and payment of the Purchase Price for each Preferred Share as to which such Right is exercised, distribute a combination of Preferred Shares, cash and/or other equity and/or debt securities having an aggregate value equal to the value of the Preferred Shares that otherwise would have been issuable pursuant to this Agreement, which value shall be determined by a
nationally recognized investment banking firm selected by the Board.  To the extent that any legal or contractual restrictions (pursuant to agreements or instruments in effect prior to the Distribution Date to which it is party) prevent the Company from paying the full amount payable in accordance with the foregoing sentence, the Company shall pay to holders of the Rights as to which such payments are being made all amounts that are not then restricted on a pro rata basis as such payments become permissible under such legal or contractual restrictions until such payments have been paid in full.

(c)           The Company shall take all actions as may be necessary to ensure that all Preferred Shares delivered upon exercise or exchange of Rights shall, at the time of delivery of the certificates for such Preferred Shares (subject to payment of the Purchase Price), be duly and validly authorized and issued and fully paid and nonassessable shares.

(d)           The Company shall pay when due and payable any and all Federal and state transfer taxes and charges which may be payable in respect of the issuance or delivery of Right Certificates or of any Preferred Shares or Common Shares or other securities upon the exercise or exchange of the Rights.  The Company shall not, however, be required to pay any transfer tax which may be payable in respect of any transfer or delivery of Right Certificates to a Person other than, or in respect of the issuance or delivery of certificates or depositary receipts for the Preferred Shares or Common Shares or other securities, as the case may be, in a name other than that of, the registered holder of the Right Certificate evidencing Rights surrendered for exercise or
exchange or to issue or deliver any certificates or depositary receipts for Preferred Shares or Common Shares or other securities, as the case may be, upon the exercise or exchange of any Rights until any such tax shall have been paid (any such tax being payable by the holder of such Right Certificate at the time of surrender) or until it has been established to the Company’s satisfaction that no such tax is due.

  

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(e)           As soon as practicable after the Distribution Date, the Company shall use its best efforts to: (i) prepare and file a registration statement under the Securities Act with respect to the securities purchasable upon exercise of the Rights on an appropriate form, will use its best efforts to cause such registration statement to become effective as soon as practicable after such filing and will use its best efforts to cause such registration statement to remain effective (with a prospectus at all times meeting the requirements of the Securities Act) until the earlier of the Redemption Date and the Final Expiration Date; and (ii) use its best efforts to 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.

The Company may temporarily suspend, for a period of time not to exceed 120 days, the exercisability of the Rights in order to prepare and file a registration statement under the Securities Act and permit it to become effective. Upon any such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement at such time as the suspension is no longer in effect. Notwithstanding any provision of this Agreement to the contrary, the Rights shall not be exercisable in any jurisdiction unless the requisite qualification in such jurisdiction shall have been obtained and unless a registration statement under the Securities Act (if required) covering the issuance of securities upon exercise of the Rights is
effective.

 Section 10.          Preferred Shares Record Date

 

Each Person in whose name any certificate for Preferred Shares or Common Shares or other securities is issued upon the exercise or exchange of Rights shall for all purposes be deemed to have become the holder of record of the Preferred Shares or Common Shares or other securities, as the case may be, represented thereby on, and such certificate shall be dated, the date on which the Right Certificate evidencing such Rights was duly surrendered and payment of any 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 Shares or Common Shares or other securities, as the case may be, are closed, such Person shall be
deemed to have become the record holder of such Preferred Shares or Common Shares or other securities, as the case may be, on, and such certificate shall be dated, the next succeeding Business Day on which the transfer books of the Company for the Preferred Shares or Common Shares or other securities, as the case may be, are open.

	
Section 11.

	
Adjustments in Rights After there is an Acquiring Person; Business Combinations.  

(a)           Subject to the other provisions of this Agreement (including the definition of Acquired Person and Section 7(e)), upon a Person becoming an Acquiring Person, each holder of a Right shall thereafter have a right to receive, upon exercise thereof for the Purchase Price in accordance with the terms of this Agreement, such number of one one-thousandths (1/1,000ths) of a Preferred Share (as such fraction may be adjusted as provided in this Agreement) as shall equal the result obtained by multiplying the Purchase Price by a fraction, the numerator of which is the number of one one-thousandths (1/1,000ths) of a Preferred Share (as such fraction may be adjusted as provided in this Agreement) for which such Right is then exercisable and the
denominator of which is 50% of the Market Value of the Common Shares on the date on which such Person became an Acquiring Person.

 

(b)           (i)  In the event that, directly or indirectly, any transactions specified in the following clause (A), (B) or (C) of this Section 11(b)(i) (each such transaction being a “Business Combination”) shall be consummated:

 

(A)         the Company shall consolidate with, or merge with and into, any Acquiring Person or any Affiliate or Associate of an Acquiring Person;

 

  

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(B)          any Acquiring Person or any Affiliate or Associate of an Acquiring Person shall merge with and into the Company and, in connection with such merger, all or part of the outstanding Common Shares of the Company shall be changed into or exchanged for capital stock or other securities of the Company or of any Acquiring Person or Affiliate or Associate of an Acquiring Person or cash or any other property; or

 

(C)          the Company shall sell, lease, exchange or otherwise transfer or dispose of (or one or more of its Subsidiaries shall sell, lease, exchange or otherwise transfer or dispose of), in one or more transactions, the Major Part of the assets of the Company and its Subsidiaries to any Acquiring Person or any Affiliate or Associate of an Acquiring Person,

 

then, in each such case, proper provision shall be made so that each holder of a Right, except as provided in Section 7(e), shall thereafter have the right to receive, upon the exercise thereof for the Purchase Price in accordance with the terms of this Agreement, the securities specified below (or, at such holder’s option, the securities specified in Section 11(a) if the Company is the surviving corporation in such Business Combination):

 

(1)           if the Principal Party in such Business Combination has Registered Common Shares outstanding, each Right shall thereafter represent the right to receive, upon the exercise thereof for the Purchase Price in accordance with the terms of this Agreement, such number of Registered Common Shares of such Principal Party, free and clear of all liens, encumbrances or other adverse claims, as shall have an aggregate Market Value as of the time of exercise thereof equal to the result obtained by multiplying the Purchase Price by two;

 

(2)           if the Principal Party involved in such Business Combination does not have Registered Common Shares outstanding, each Right shall thereafter represent the right to receive, upon the exercise thereof for the Purchase Price in accordance with the terms of this Agreement, at the election of the holder of such Right at the time of the exercise thereof, any of:

 

(i)                such number of Common Shares of the Surviving Person in such Business Combination (if the Principal Party is also the Surviving Person in such Business Combination) as shall have an aggregate Book Value immediately after giving effect to such Business Combination equal to the result obtained by multiplying the Purchase Price by two;

 

(ii)               such number of Common Shares of the Principal Party in such Business Combination (if the Principal Party is not also the Surviving Person in such Business Combination) as shall have an aggregate Book Value immediately after giving effect to such Business Combination equal to the result obtained by multiplying the Purchase Price by two; or

 

(iii)              if the Principal Party in such Business Combination is an Affiliate of one or more Persons that has Registered Common Shares outstanding, such number of Registered Common Shares of whichever of such Affiliates of the Principal Party has Registered Common Shares with the greatest aggregate Market Value on the date of consummation of such Business Combination as shall have an aggregate Market Value on the date of such Business Combination equal to the result obtained by multiplying the Purchase Price by two.

 

(ii)  The Company shall not consummate any Business Combination unless each issuer of Common Shares for which Rights may be exercised, as set forth in this Section 11(c), shall have sufficient authorized Common Shares that have not been issued or reserved for issuance (and which shall, when issued upon exercise thereof in accordance with this Agreement, be validly issued, fully paid and nonassessable and free of preemptive rights, rights of first refusal or any other restrictions or limitations on the transfer or ownership thereof) to permit the exercise in full of the Rights in accordance with this Section 11(c) and unless prior thereto:

 

  

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(A)         a registration statement under the Securities Act on an appropriate form, with respect to the Rights and the Common Shares of such issuer purchasable upon exercise of the Rights, shall be effective under the Securities Act; and

 

(B)          the Company and each such issuer shall have:

 

(1)           executed and delivered to the Rights Agent a supplemental agreement providing for the assumption by such issuer of the obligations set forth in this Section 11(b) (including the obligation of such issuer to issue Common Shares upon the exercise of Rights in accordance with the terms set forth in Sections 11(b)(i) and 11(b)(iii)) and further providing that such issuer, at its own expense, shall use its best efforts to:

 

(i)                cause a registration statement under the Securities Act on an appropriate form, with respect to the Rights and the Common Shares of such issuer purchasable upon exercise of the Rights, to remain effective (with a prospectus at all times meeting the requirements of the Securities Act) until the Expiration Date;

 

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

 

(iii)              list the Rights and the Common Shares of such issuer purchasable upon exercise of the Rights on each national securities exchange on which the Common Shares were listed prior to the consummation of the Business Combination or, if the Common Shares were not listed on a national securities exchange prior to the consummation of the Business Combination, on a national securities exchange;

 

(2)  furnished to the Rights Agent a written opinion of independent counsel stating that such supplemental agreement is a valid, binding and enforceable agreement of such issuer; and

 

(3)  filed with the Rights Agent a certificate of a nationally recognized firm of independent accountants setting forth the number of Common Shares of such issuer that may be purchased upon the exercise of each Right after the consummation of such Business Combination.

 

(iii)  After consummation of any Business Combination and subject to the provisions of Section 11(b)(ii), (A) each issuer of Common Shares for which Rights may be exercised as set forth in this Section 11(b) shall be liable for, and shall assume, by virtue of such Business Combination, all the obligations and duties of the Company pursuant to this Agreement, (B) the term “Company” shall thereafter be deemed to refer to such issuer, (C) each such issuer shall take such steps in connection with such consummation as may be necessary to assure that the provisions of this Agreement (including Sections 11(a) and 11(b)) shall thereafter be applicable, as nearly as reasonably may be, in relation to its
Common Shares thereafter deliverable upon the exercise of the Rights, (D) the number of Common Shares of each such issuer thereafter 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 of Sections 11 and 12 and (E) the other provisions of this Agreement (including Sections 7, 9 and 10) with respect to the Preferred Shares shall apply, as nearly as reasonably may be, on like terms to any such Common Shares.

  

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Section 12.           Certain Adjustments

(a)  To preserve the actual or potential economic value of the Rights, if at any time after the date of this Agreement there shall be any change in the Common Shares or the Preferred Shares, whether by reason of stock dividends, stock splits, reclassifications, recapitalizations, mergers, consolidations, combinations or exchanges of securities, split-ups, split-offs, spin-offs, liquidations, other similar changes in capitalization, any distribution or issuance of cash, assets, evidences of indebtedness or subscription rights, options or warrants to holders of Common Shares, or Preferred Shares, as the case may be (other than distribution of the Rights or regular quarterly cash dividends), or otherwise, then, in each such event the Board shall make such appropriate adjustments in the number of Preferred
Shares (or the number and kind of other securities) issuable upon exercise of each Right, the Purchase Price and Redemption Price in effect at such time and the number of Rights outstanding at such time (including the number of Rights or fractional Rights associated with each Common Share) such that following such adjustment such event shall not have had the effect of reducing or limiting the benefits the holders of the Rights would have had absent such event.

(b)  If, as a result of an adjustment made pursuant to Section 12(a), the holder of any Right thereafter exercised shall become entitled to receive any securities other than Preferred Shares, thereafter the number of such securities 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 of Sections 11 and 12 and the other provisions of this Agreement (including Sections 7, 9 and 10) with respect to the Preferred Shares shall apply, as nearly as reasonably may be, on like terms to any such other securities.

 

(c)  All Rights originally issued by the Company subsequent to any adjustment made to the amount of Preferred Shares or other securities relating to a Right shall evidence the right to purchase, for the Purchase Price, the adjusted number and kind of securities purchasable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided in this Agreement.

 

(d)  Irrespective of any adjustment or change in the Purchase Price or the number of Preferred Shares or number or kind of other securities issuable upon the exercise of the Rights, the Right Certificates theretofore and thereafter issued may continue to express the terms that were expressed in the initial Right Certificates issued hereunder.

 

(e)  In any case in which action taken pursuant to Section 12(a) requires that an adjustment be made effective as of a record date for a specified event, the Company may elect to defer (with prompt written notice thereof to the Rights Agent) until the occurrence of such event the issuing to the holder of any Right exercised after such record date the Preferred Shares and/or other securities, if any, issuable upon such exercise over and above the Preferred Shares and/or other securities, if any, issuable before giving effect 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 securities upon the occurrence
of the event requiring such adjustment.

Section 13.           Certificate of Adjustment

Whenever an adjustment is made or any event occurs affecting the Rights or their exercisability (including an event which causes the Rights to become null and void) as provided in Section 11 or 12, the Company shall (a) promptly prepare a certificate setting forth such adjustment or describing such event and a brief, reasonably detailed statement of the facts, computations and methodology accounting for such adjustment, (b) promptly file with the Rights Agent and with each transfer agent for the Preferred Shares, a copy of such certificate and (c) mail a brief summary thereof to each holder of a Right Certificate (or, if prior to the Distribution Date, to each holder of Common Shares) in accordance with Section 25, provided that the failure to prepare, file or mail such certificate or
summary shall not affect the validity of such adjustment.  The Rights Agent shall be fully protected in relying on any such certificate and on any adjustment or statement therein contained and, subject to Section 20(c) shall have no duty or liability with respect to, and shall not be deemed to have knowledge of, any adjustment or any such event unless it shall have received such a certificate.

  

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 Section 14.          Fractional Rights and Fractional Shares

(a)           The Company may, but shall not be required to, issue fractions of Rights or distribute Right Certificates which evidence fractional Rights.  In lieu of such fractional Rights, the Company may pay to the registered holders of the Right Certificates with regard to which such fractional Rights would otherwise be issuable an amount in cash equal to the same fraction of the current market value of a whole Right.  For purposes of this Section 14(a), the current market value of a whole Right shall be the closing price of the Rights (as determined pursuant to the second sentence of the definition of Market Value contained in Section 1) for the Trading Day immediately prior to the date on which such fractional Rights would
have been otherwise issuable.

 

(b)  The Company may, but shall not be required to, issue fractions of Preferred Shares upon exercise of the Rights or distribute certificates that evidence fractional Preferred Shares.  In lieu of fractional Preferred Shares, the Company may elect to (i) utilize a depository arrangement as provided by the terms of the Preferred Shares or (ii) in the case of a fraction of a Preferred Share (other than one one-thousandths (1/1,000ths) of a Preferred Share (as such fraction may adjusted as provided in this Agreement) or any integral multiple thereof), pay to the registered holders of Right Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market value of one Preferred Share, if any are outstanding and
publicly traded (or the same fraction of the current market value of one Common Share times the Adjustment Number (as defined in the Certificate of Designation) if the Preferred Shares are not outstanding and publicly traded).  For purposes of this Section 14(b), the current market value of a Preferred Share (or Common Share) shall be the closing price of a Preferred Share (or Common Share) (as determined pursuant to the second sentence of the definition of Market Value contained in Section 1) for the Trading Day immediately prior to the date of such exercise.  If, as a result of an adjustment made pursuant to Section 12(a), the holder of any Right thereafter exercised shall become entitled to receive any securities other than Preferred Shares, the provisions of this Section 14(b) shall apply, as nearly as reasonably practicable, on like terms to such other securities.

 

(c)  The Company may, but shall not be required to, issue fractions of Common Shares upon exchange of Rights pursuant to Section 24, or to distribute certificates that evidence fractional Common Shares.  In lieu of such fractional Common Shares, the Company may pay to the registered holders of the Right Certificates with regard to which such fractional Common Shares would otherwise be issuable an amount in cash equal to the same fraction of the current Market Value of one Common Share as of the date on which a Person became an Acquiring Person.

 

(d)  Each holder of Rights by the acceptance of such Rights expressly waives such holder’s right to receive any fractional Rights or any fractional shares upon exercise of a Right except as provided in this Section 15.

 

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

 

  

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Section 15.           Rights of Action

 

(a)           All rights of action in respect of this Agreement, excepting the rights of action given to the Rights Agent under Sections 18 and 20, are vested in the respective registered holders of the Right Certificates (and, prior to the Distribution Date, the registered holders of the Common Shares); and any registered holder of any Right Certificate (or, prior to the Distribution Date, of the Common Shares), without the consent of the Rights Agent or of the holder of any other Right Certificate (or, prior to the Distribution Date, of the Common Shares) may, in such holder’s own behalf and for such holder’s own benefit, enforce, and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in
respect of, such holder’s right to exercise the Rights evidenced by such Right Certificate in the manner provided in such Right Certificate and in this Agreement.  Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Agreement and shall be entitled to specific performance of the obligations of any Person under, and injunctive relief against actual or threatened violations of the obligations of any Person subject to, this Agreement.  Notwithstanding anything in this Agreement to the contrary, neither the Company nor the Rights Agent shall have any liability to any holder of a Right or other Person as a result of its inability to perform any of its obligations under this Agreement by reason of any preliminary or permanent injunction or other order, judgment decree or ruling (whether interlocutory or final)
issued by a court of competent jurisdiction or by a governmental, regulatory, self-regulatory or administrative agency or commission, or any statute, rule, regulation or executive order promulgated or enacted by any governmental authority, prohibiting or otherwise restraining performance of such obligation; provided, however, the Company must use reasonable efforts to have any such injunction, order, judgment, decree or ruling lifted or otherwise overturned as soon as possible.

 

(b)  Any holder of Rights who prevails in an action to enforce the provisions of this Agreement shall be entitled to recover the reasonable costs and expenses, including attorneys’ fees, incurred in such action.

Section 16.           Transfer and Ownership of Rights and Right Certificates

 

(a)           Prior to the Distribution Date, the Rights shall be transferable only in connection with the transfer of the Common Shares and the Right associated with each such Common Share shall be automatically transferred upon the transfer of each such Common Share.

 

(b)          After the Distribution Date, the Right Certificates shall be transferable, subject to Section 7(e), only on the registry books of the Rights Agent if surrendered at the principal office of the Rights Agent, duly endorsed or accompanied by a proper instrument of transfer and with the appropriate forms and certificates properly completed and duly executed.

 

(c)           The Company and the Rights Agent may deem and treat the Person in whose name a Right Certificate (or, prior to the Distribution Date, the associated Common Shares certificate) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Right Certificates or the associated certificate for Common Shares made by anyone other than the Company or the Rights Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent shall be affected by any notice to the contrary.

 

  

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Section 17.           Right Certificate Holder Not Deemed a Stockholder

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

Section 18.           Concerning the Rights Agent

(a)  The Company agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder and, from time to time, on demand of the Rights Agent, its reasonable expenses and counsel fees and other disbursements incurred in the preparation, negotiation, delivery, amendment, administration and execution of this Agreement and the exercise and performance of its duties hereunder, including any taxes or governmental charges imposed as a result of the action taken by it hereunder (other than any taxes on the fees payable to it). The provisions of this Section 18 and Section 20 below shall survive the termination of this Agreement, the exercise or expiration of the Rights and the resignation, replacement or removal of the Rights Agent.

 

(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 acceptance and administration of this Agreement and the exercise and performance of its duties hereunder (other than matters arising out of or resulting from a conflict of interest of the Rights Agent or other business interests of the Rights Agent) in reliance upon any Right Certificate or certificate for the Common Shares, or for other securities of the Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, statement, or other paper or document believed by it to be genuine and to be signed, executed and, where necessary, verified or acknowledged, by the proper
Person or Persons, or upon the written advice or opinion of counsel as set forth in Section 20.  The Rights Agent shall not be deemed to have knowledge of any event of which it was supposed to receive notice thereof hereunder and, subject to Section 20(c), the Rights Agent shall be fully protected and incur no liability for failing to take action in connection therewith unless and until it has received such notice in writing.

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

(a)           Any Person into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any Person resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any Person succeeding to the shareholder services or stock transfer or corporate trust 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 however, that such Person would be eligible for appointment as a successor Rights Agent under the provisions of Section
20. In case at the time such successor Rights Agent shall succeed to the agency created by this Agreement any of the Right Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of the predecessor Rights Agent and deliver such Right Certificates so countersigned; and in case at that time any of the Right Certificates shall not have been countersigned, any successor Rights Agent may countersign such Right Certificates either in the name of the predecessor Rights Agent or in the name of the successor Rights Agent; and in all such cases such Right Certificates shall have the full force provided in the Right Certificates and in this Agreement.

  

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

 

Section 20.           Duties of Rights Agent

  

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

 

(a)  The Rights Agent may consult with legal counsel (who may be legal counsel for the Company or legal counsel for the Rights Agent), and the written advice or opinion of such counsel shall be full and complete authorization and protection to the Rights Agent and, subject to Section 20(c), the Rights Agent shall incur no liability for or in respect of any action taken, suffered or omitted by it in accordance with such written advice or opinion.

 

(b)  Whenever in the performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter (including the identity of any Acquiring Person and the determination of the current per share market price of any security) be proved or established by the Company prior to taking, suffering or omitting to take any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by any corporate officer of the Company having the rank of Vice President or above and delivered to the Rights Agent; and such certificate shall be full and complete authorization and protection to the Rights Agent and, subject to Section 20(c), the Rights
Agent shall incur no liability for or in respect of any action taken, suffered or omitted by it in reliance upon such certificate.

 

(c)  The Rights Agent shall be liable hereunder to the Company and any other Person only for its own gross negligence, bad faith or intentional misconduct (which gross negligence, bad faith or willful misconduct must be determined by a final, non-appealable judgment of a court of competent jurisdiction).  Anything to the contrary notwithstanding, in no event shall the Rights Agent be liable for special, punitive, indirect, consequential or incidental loss or damage of any kind whatsoever (including but not limited to lost profits), even if the Rights Agent has been advised of the likelihood of such loss or damage.

 

(d)  Subject to Section 20(c), the Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Right Certificates (except as to its countersignature thereof) or be required to verify the same, and all such statements and recitals are and shall be deemed to have been made by the Company only.

 

  

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(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 Right Certificate (except its countersignature thereof) and, subject to Section 20(c), shall have no liability therefor; nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Right Certificate; nor shall it be responsible for any change in the exercisability of the Rights (including the Rights becoming null and void pursuant to Section 7(e)) or any change or adjustment in the terms of Rights as required under the provisions of Section 11 or 12 or responsible for the manner, method or
amount of any such change or adjustment or the ascertaining of the existence of facts that would require any such change or adjustment (except with respect to the exercise of Rights evidenced by Right Certificates after actual notice of any such adjustment pursuant to Section 13); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any Preferred Shares or Common Shares to be issued pursuant to this Agreement or any Right Certificate or as to whether any Preferred Shares or Common Shares will, when so issued, be validly authorized and issued, fully paid and nonassessable.

 

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

 

(g)  The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from any corporate officer of the Company having the rank of Vice President or above in connection with its duties and such instructions shall be full authorization and protection to the Rights Agent and, subject to Section 20(c), the Rights Agent shall not be liable for or in respect of any action taken, suffered or omitted by it in accordance with any such instructions or for any delay in acting while waiting for such instructions.  In the event of any conflict or inconsistency between or among any such instructions, the later in time shall govern.  Any application by the Rights Agent for written instructions from the Company may, at the option of the
Rights Agent, set forth in writing any action proposed to be taken, suffered or omitted by the Rights Agent under this Agreement and the date on and/or after which such action shall be taken or suffered or such omission shall be effective.  Subject to Section 20(c), the Rights Agent shall not be liable for any action taken or suffered by, or omission of, the Rights Agent in accordance with a proposal included in any such application on or after the date specified in such application (which date shall not be less than five Business Days after the date any officer of the Company actually receives such application, unless any such officer shall have consented in writing to an earlier date) unless, prior to the later of (i) the expiry of such five Business Day period and (ii) the Right’s Agent taking any such action (or the effective date in the case of an omission), the Rights Agent shall have received either a written instructions in response to such application
specifying the action to be taken, suffered or omitted, or a written or oral objection by the Company to such proposal.

 

(h)  The Rights Agent and any stockholder, affiliate, director, officer or employee of the Rights Agent may buy, sell or deal in any of the Rights or other securities of the Company or become pecuniarily interested in any transaction in which the Company or its Subsidiaries may be interested, or contract with or lend money to the Company or its Subsidiaries 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 or any stockholder, affiliate, director, officer or employee from acting in any other capacity for the Company or for any other Person.

 

(i)  If, with respect to any Right Certificate surrendered to the Rights Agent for exercise or transfer, the certificate contained in the form of assignment or the form of election to purchase set forth on the reverse thereof, as the case may be, has either not been properly completed or indicates an affirmative response to any clause thereof, the Rights Agent shall not take any further action with respect to such requested exercise or transfer without first consulting with the Company.

 

  

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(j)  The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself (through its directors, officers and employees) or by or through its attorneys or agents, and the Rights Agent shall not be answerable or accountable for any act, default, neglect or misconduct of any such attorneys or agents or for any loss to the Company resulting from any such act, default, neglect or misconduct, provided that reasonable care was exercised in the selection and continued employment thereof.

 

(k)  The Company shall indemnify the Rights Agent for, and hold the Rights Agent harmless against, any loss, liability, damage, claim or expense (including reasonable fees and expenses of legal counsel) that the Rights Agent may incur resulting from any action taken, suffered or omitted by the Rights Agent in connection with the acceptance, administration, exercise and performance of its duties under this Agreement (other than matters arising out of or resulting from a conflict of interest of the Rights Agent or other business interests of the Rights Agent); provided, however, that the Rights Agent shall not be indemnified or held harmless with respect to any such loss, liability, damage or expense incurred by the Rights Agent as a result of, or
arising out of, its own gross negligence, bad faith or intentional misconduct.  In no case shall the Company be liable with respect to any action, proceeding, suit or claim against the Rights Agent unless the Rights Agent shall have notified the Company, by letter or by facsimile confirmed by letter, of the assertion of any action, proceeding, suit or claim against the Rights Agent, promptly after the Rights Agent shall have notice of any such assertion of an action, proceeding, suit or claim or have been served with the summons or other first legal process giving information as to the nature and basis of the action, proceeding, suit or claim.  The Company shall be entitled to participate at its own expense in the defense of any such action, proceeding, suit or claim, and, if the Company so elects, the Company shall assume the defense of any such action, proceeding, suit or claim.  In the event that the Company assumes such defense, the Company shall not
thereafter be liable for the fees and expenses of any additional counsel retained by the Rights Agent, so long as the Company shall retain counsel satisfactory to the Rights Agent, in the exercise of its reasonable judgment, to defend such action, proceeding, suit or claim.  The Rights Agent agrees not to settle any litigation in connection with any action, proceeding, suit or claim with respect to which it may seek indemnification from the Company without the prior written consent of the Company.  If a final, non-appealable judgment of a court of competent jurisdiction shall be issued in favor of the Rights Agent in respect of an action by the Rights Agent to enforce the indemnification provisions of this Section 20(k), then the Company shall reimburse the Rights Agent’s for its costs and expenses in enforcing such indemnification provisions.

 

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

 

  

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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 30 days’ notice in writing mailed to the Company and to each transfer agent of the Common Shares and the Preferred Shares known to the Rights Agent, after due inquiry, by registered or certified mail, and to the holders of the Right Certificates (or, prior to the Distribution Date, of the Common Shares) by first-class mail.  The Company may remove the Rights Agent or any successor Rights Agent upon 30 days’ notice in writing, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the Common Shares and the Preferred Shares by registered or certified mail, and to the holders of the Right Certificates (or, prior to the
Distribution Date, of the Common Shares) by first-class mail.  If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Rights Agent.  If the Company shall fail to make such appointment within a period of 30 days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Right Certificate (or, prior to the Distribution Date, of the Common Shares) (who shall, with such notice, submit such holder’s Right Certificate or, prior to the Distribution Date, the certificate representing such holder’s Common Shares, for inspection by the Company), then the registered holder of any Right Certificate (or, prior to the Distribution Date, of the Common Shares) 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 Person organized and doing business under the laws of the United States (or any state of the United States so long as such entity is authorized to conduct a stock transfer or corporate trust business in such state), 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 $50,000,000; provided, however, that the principal transfer agent for the Common Shares shall in any event be qualified to be the Rights Agent.  After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent
without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose.  Not later than the effective date of any such appointment, the Company shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Common Shares and the Preferred Shares, and mail a notice thereof in writing to the registered holders of the Right Certificates (or, prior to the Distribution Date, of the Common Shares).  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 Right Certificates

 

Notwithstanding any of the provisions of this Agreement or of the Rights to the contrary, the Company may, at its option, issue new Right Certificates evidencing Rights in such form as may be approved by its Board to reflect any adjustment or change made in accordance with the provisions of this Agreement.  In addition, in connection with the issuance or sale of Common Shares following the Distribution Date and prior to the earlier of the Redemption Date and the Expiration Date, the Company (a) shall, with respect to Common Shares so issued, granted or sold pursuant to the exercise of stock options or under any employee plan or arrangement (whether or not subject to vesting or other restrictions), or upon the exercise, conversion or exchange of securities, notes or debentures issued by the Company,
or pursuant to a contractual obligation of the Company and (b) may, in any other case, if deemed necessary or appropriate by the Board, issue Right Certificates representing the appropriate number of Rights in connection with such issuance or sale; provided, however, that (i) no such Right Certificate shall be issued 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 Right Certificate would be issued, (ii) no such Right Certificate shall be issued if, and to the extent that, appropriate adjustment shall otherwise have been made in lieu of the issuance thereof and (iii) no such Right Certificate shall be issued to an Acquiring Person or an Affiliate or Associate of an Acquiring Person.

Section 23.           Redemption

 

(a)  The Board may, at its option, at any time prior to the earlier of (i) the Distribution Date and (ii) the Expiration Date, order the redemption of all, but not fewer than all, the then outstanding Rights at the Redemption Price (the date of such redemption being the “Redemption Date”), and the Company, at its option, may pay the Redemption Price either in cash or Common Shares or other securities of the Company deemed by the Board, in the exercise of its sole discretion, to be at least equivalent in value to the Redemption Price.

 

  

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(b)  Immediately upon the action of the Board ordering the redemption of the Rights, 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.  Promptly after the action of the Board ordering the redemption of the Rights, 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 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 Shares.  Each such notice of redemption shall state the method by which payment of the
Redemption Price will be made.  The notice, if mailed in the manner herein provided, shall be conclusively presumed to have been duly given, whether or not the holder of Rights receives such notice.  In any case, failure to give such notice by mail, or any defect in the notice, to any particular holder of Rights shall not affect the sufficiency of the notice to other holders of Rights.  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 except as specifically set forth in this Section or in Section 11(b) or in connection with the purchase of Common Shares prior to the Distribution Date.

Section 24.           Exchange of Rights

 

(a)           The Board may, at its option, at any time after any Person becomes an Acquiring Person, mandatorily exchange all or part of the then outstanding and exercisable Rights (which shall not include Rights that shall have become null and void pursuant to the provisions of Section 7(e)) for Common Shares at an exchange ratio of one Common Share per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (such exchange ratio being hereinafter referred to as the “Exchange Ratio”).  Notwithstanding the foregoing, the Board shall not be empowered to effect such exchange at any time after any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or any such Subsidiary, or any entity holding Common Shares for or pursuant to the terms of any such plan), together with all Affiliates and Associates of such Person, becomes the Beneficial Owner of 50% or more of the Common Shares then outstanding.

 

(b)           Immediately upon the action of the Board ordering the exchange of any Rights pursuant to Section 24(a) and without any further action and without any notice, the right to exercise such Rights shall terminate and the only right thereafter of a holder of such Rights shall be to receive that number of Common Shares equal to the number of such Rights held by such holder multiplied by the Exchange Ratio. The Company shall promptly give public notice of any such exchange; provided, however, that the failure to give, or any defect in, such notice shall not affect the validity of such exchange. The Company promptly shall mail a notice of any such exchange to
all of the holders of such Rights at their last addresses as they appear upon the registry books of the Rights Agent, provided, however, that the failure to give, or any defect in, such notice shall not affect the validity of such exchange.  Any notice that is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of exchange will state the method by which the exchange of the Common Shares for Rights will be effected and, in the event of any partial exchange, the number of Rights that will be exchanged. Any partial exchange shall be effected pro rata based on the number of Rights (other than Rights that have become void pursuant to the provisions of Section 7(e)) held by each holder of Rights.

 

  

25

  

 

(c)           In lieu of issuing Common Shares in accordance with Section 24(a) hereof, the Board may, at its option, at any time after a Person becomes an Acquiring Person, mandatorily exchange all or part of the then outstanding and exercisable Rights (which shall not include Rights that shall have become null and void and nontransferable pursuant to Section 7(e)) for consideration per Right consisting of either (A) one-half of the securities that would be issuable at such time upon the exercise of one Right in accordance with Section 11(a) or, if applicable, Section 9(b)(ii) or 9(b)(iii), (B) if applicable, the cash consideration specified in Section 9(b)(i), or (C) such other cash, property, Preferred Shares, Common Shares,
debt securities or any combination thereof having an aggregate value equal to the value of the Common Shares that otherwise would have been issuable pursuant to Section 24(a), which aggregate value shall be determined by a nationally recognized investment banking firm selected by the Board (the consideration issuable per Right pursuant to this Section 24(c) being the “Exchange Consideration”). For purposes of the preceding clause, the value of the Common Shares shall be the Market Value.  Following the Distribution Date, the Board may suspend the exercisability of the Rights for a period of up to 60 days following the Distribution Date to the extent that the Board has not determined whether to exercise the right of exchange under this Section 24(c). 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.

(d)           If the Board elects to exchange all the Rights for Common Shares or Exchange Consideration pursuant to this Section 24 prior to the physical distribution of the Right Certificates, the Company may distribute the Common Shares or Exchange Consideration in lieu of distributing Right Certificates, in which case for purposes of this Agreement holders of Rights shall be deemed to have simultaneously received and surrendered for exchange Right Certificates on the date of such distribution.  

 

(e)           Notwithstanding anything in this Section 24 to the contrary, the exchange of the Rights may be effected at such time, on such basis and with such conditions as the Board in its sole discretion may establish.  Without limiting the foregoing, the Board may (i) in lieu of transferring Common Shares or Exchange Consideration contemplated by this Section 24 to the Persons entitled thereto (the “Exchange Recipients”) in connection with the exchange issue, transfer or deposit such Common Shares or Exchange Consideration to or into a trust or other Person that is not controlled by the Company or any of its Affiliates or Associates to hold such Common Shares or Exchange
Consideration for the benefit of the Exchange Recipients, (ii) permit such trust or other entity to exercise all of the rights that a stockholder of record would possess with respect to any Common Shares deposited in such trust or other Person and (iii) impose such procedures as it determines to be appropriate to verify that the Exchange Recipients are not Acquiring Persons or Affiliates or Associates of Acquiring Persons as of any time period or periods established by the Board. In such event, the trust or other Person shall use commercially reasonable efforts to distribute the Common Shares or Exchange Consideration to the Exchange Recipients as promptly as practicable after its receipt of such property. If the Board determines, before the Distribution Date, to effect an exchange in accordance with this Section 24, the Board may delay the occurrence of the Distribution Date to such time no later than 20 calendar days after the Shares Acquisition Date as the Board determines to be
advisable.

 Section 25.          Notices

 

Notices or demands authorized by this Agreement to be given or made by the Rights Agent or by the holder of a Right Certificate (or, prior to the Distribution Date, of the Common Shares) to or on the Company shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Rights Agent) as follows:

 

	
ITEX Corporation

3326 160th Avenue SE

Suite 100

Bellevue, WA  98008

Attn: Chief Executive Officer

	  

 

  

26

  

 

Subject to the provisions of Section 20 hereof, any notice or demand authorized by this Agreement to be given or made by the Company or by the holder of a Right Certificate (or, prior to the Distribution Date, of the Common Shares) to or on the Rights Agent shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Company) as follows:

 

	
OTR, Inc.

1001 SW 5th Ave.

Ste 1550

Portland, OR 97204-1143

Attn: VP - Operations

	  

 

Notices or demands authorized by this Agreement to be given or made by the Company or the Rights Agent to any holder of a Right Certificate (or, prior to the Distribution Date, of the Common Shares) shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed to such holder at the address of such holder as shown on the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the transfer agent for the Common Shares.

 

Section 26.           Supplements and Amendments

 

At any time prior to the time any Person becomes an Acquiring Person, and subject to the last sentence of this Section 26, the Company may, and the Rights Agent shall if the Company so directs, supplement or amend any provision of this Agreement in any manner which the Company may deem necessary or desirable (including the date on which the Distribution Date or Expiration Date shall occur, the amount of the Purchase Price, the definition of “Acquiring Person” or the time during which the Rights may be redeemed pursuant to Section 23) without the approval of any holder of the Rights.  From and after the Distribution Date, and subject to applicable law, the Company may, and the Rights Agent shall if the Company so directs, amend this Agreement without the approval of any holders of
Right Certificates (a) to cure any ambiguity or to correct or supplement any provision contained herein which may be defective or inconsistent with any other provision of this Agreement or (b) to otherwise change or supplement any other provisions in this Agreement in any matter which the Company may deem necessary or desirable and which does not adversely affect the interests of the holders of Right Certificates (other than an Acquiring Person or an Affiliate or Associate of an Acquiring Person), any such supplement or amendment to be evidenced in writing.  Any supplement or amendment adopted during any period after any Person has become an Acquiring Person but prior to the Distribution Date shall be null and void unless such supplement or amendment could have been adopted under the prior sentence from and after the Distribution Date.  Any supplement or amendment to this Agreement duly approved by the Company that does not affect the Rights
Agent’s own rights, duties, obligations or immunities under this Agreement shall become effective immediately upon execution by the Company, whether or not also executed by the Rights Agent.  Upon delivery of a certificate from an appropriate officer of the Company that states that the proposed supplement or amendment complies with this Section 26, the Rights Agent shall execute such supplement or amendment.  Notwithstanding anything to the contrary contained in this Agreement, the Rights Agent may, but shall not be obligated to, enter into any supplement or amendment that affects the Rights Agent’s own rights, duties, obligations or immunities under this Agreement.  In addition, notwithstanding anything to the contrary contained in this Agreement, no supplement or amendment to this Agreement shall be made which extends the date on which the Expiration Date shall occur or reduces the Redemption Price (except as required by
Section 12(a)).

 

  

27

  

 

Section 27.           Successors

 

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

 

Section 28.           Benefits of this Agreement

 

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

 

(b)  Except as explicitly otherwise provided in this Agreement, the Board shall have the exclusive power and authority to administer this Agreement and to exercise all rights and powers specifically granted to the Board or to the Company, or as may be necessary or advisable, in the administration of this Agreement, including the right and power to (i) interpret the provisions of this Agreement and (ii) make all determinations deemed necessary or advisable for the administration of this Agreement (including a determination to redeem or not redeem the Rights or to amend this Agreement and a determination of whether there is an Acquiring Person).

 

(c)  Nothing contained in this Agreement shall be deemed to be in derogation of the obligation of the Board to exercise its fiduciary duty.  Without limiting the foregoing, nothing contained herein shall be construed to suggest or imply that the Board shall not be entitled to reject any tender offer or other acquisition proposal, or to recommend that holders of Common Shares reject any tender offer, or to take any other action (including the commencement, prosecution, defense or settlement of any litigation and the submission of additional or alternative offers or other proposals) with respect to any tender offer or other acquisition proposal that the Board believes is necessary or appropriate in the exercise of such fiduciary duty.

Section 29.           Severability

If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated.

 

Section 30.           Governing Law

This Agreement and each Right Certificate issued hereunder shall be deemed to be a contract made under the law of the State of Washington and for all purposes shall be governed by and construed in accordance with the law of such State applicable to contracts to be made and performed entirely within such State.

 

Section 31.           Counterparts; Effectiveness

 

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. This Agreement shall be effective as of the Close of Business on the date hereof.

  

28

  

Section 32.           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.

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

 

	 	
ITEX CORPORATION

	 	  
	 	
By:

	
/s/ Steven White

	 	  	
Steven White

	 	  	
President and Chief Executive Officer

	 	  	  
	 	
OTR, Inc.

	 	  	  
	 	
By:

	
/s/ Bob Roach

	 	
Name: 

	
Bob Roach

	 	
Title:

	
Vice President - Operations

 

  

29

  

 

Exhibit A

CERTIFICATE OF DESIGNATION

 

SERIES A JUNIOR PARTICIPATING PREFERRED STOCK

OF

ITEX CORPORATION

 

Pursuant to NRS 78.1955:

 

ITEX Corporation, a Nevada corporation (the “Company”), in accordance with NRS 78.1955, hereby certifies that, pursuant to the authority conferred upon the Board of Directors by the Articles of Incorporation, as amended, of the Company (“Articles of Incorporation”), the following resolution creating a series of Preferred Stock was duly adopted by the Board of Directors of the Company (“Board of Directors”) on March 11, 2011.

 

RESOLVED, that pursuant to the authority conferred upon the Board of Directors of the Company by the Articles of Incorporation, the Board of Directors does hereby provide for the designation of a series of Preferred Stock, $0.01 par value per share, to be named “Series A Junior Participating Preferred Stock” consisting of Fifty Thousand (50,000) shares, and the Board of Directors does hereby fix and herein state and express the designation, powers, preferences and relative and other special rights and the qualifications, limitations and restrictions of the Series A Junior Participating Preferred Stock as follows:

 

Series A Junior Participating Preferred Stock:

 

Section 1              Designation and Amount

 

There shall be a series of Preferred Stock that shall be designated as “Series A Junior Participating Preferred Stock” and the number of shares constituting such series shall be 50,000.  Such number of shares may be increased or decreased by resolution of the Board of Directors; provided, however, that no decrease shall reduce the number of shares of Series A Junior Participating Preferred Stock to less than the number of shares then issued and outstanding plus the number of shares issuable upon exercise of outstanding rights, options or
warrants or upon conversion of outstanding securities issued by the Company.

 

Section 2              Dividends and Distributions

(A)         Subject to the prior and superior rights of the holders of any shares of any class or series of stock of the Company ranking prior and superior to the shares of Series A Junior Participating Preferred Stock with respect to dividends, the holders of shares of Series A Junior Participating Preferred Stock, in preference to the holders of shares of any class or series of stock of the Company ranking junior to the Series A Junior Participating Preferred Stock in respect thereof, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the 20th 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 Junior Participating Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $10.00 or (b) the Adjustment Number (as defined below) times the aggregate per share amount of all cash dividends, and the Adjustment Number times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend payable in shares of Common Stock, par value $0.01 per share, of the Company (the “Common Stock”), or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A
Junior Participating Preferred Stock.  The “Adjustment Number” shall initially be 1,000.  In the event the Company shall at any time after March 11, 2011 (i) declare and pay any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the Adjustment Number in effect immediately prior to such event shall be adjusted by multiplying such Adjustment Number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

  

A-1

  

 

(B)          The Company shall declare a dividend or distribution on the Series A Junior Participating Preferred Stock as provided in paragraph (A) above immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock).

(C)            Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Junior Participating Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares of Series A Junior Participating 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 Junior Participating 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 Junior Participating Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding.  The Board of Directors may fix a record date for the determination of holders of shares of Series A Junior Participating Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be no more than 60 days prior to the date fixed for the payment thereof.

Section 3               Voting Rights

The holders of shares of Series A Junior Participating Preferred Stock shall have the following voting rights:

(A)          Each share of Series A Junior Participating Preferred Stock shall entitle the holder thereof to a number of votes equal to the Adjustment Number on all matters submitted to a vote of the stockholders of the Company.

(B)          Except as required by law, by Section 3(C) and by Section 10 hereof, holders of Series A Junior Participating Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action.

  

A-2

  

 

(C)          If, at the time of any annual meeting of stockholders for the election of directors, the equivalent of six quarterly dividends (whether or not consecutive) payable on any share or shares of Series A Junior Participating Preferred Stock are in default, the number of directors constituting the Board of Directors of the Company shall be increased by two.  In addition to voting together with the holders of Common Stock for the election of other directors of the Company, the holders of record of the Series A Junior Participating Preferred Stock, voting separately as a class to the exclusion of the holders of Common Stock, shall be entitled at said meeting of stockholders (and at each subsequent annual meeting of stockholders), unless all dividends
in arrears on the Series A Junior Participating Preferred Stock have been paid or declared and set apart for payment prior thereto, to vote for the election of two directors of the Company, the holders of any Series A Junior Participating Preferred Stock being entitled to cast a number of votes per share of Series A Junior Participating Preferred Stock as is specified in paragraph (A) of this Section 3.  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).  Until the default in payments of all dividends which permitted the election of said directors shall cease to exist, any director who shall have been so elected pursuant to the provisions of this Section 3(C) may be removed at any time, without cause, only by the affirmative vote of the holders
of the shares of Series A Junior Participating Preferred Stock at the time entitled to cast a majority of the votes entitled to be cast for the election of any such director at a special meeting of such holders called for that purpose, and any vacancy thereby created may be filled by the vote of such holders.  If and when such default shall cease to exist, the holders of the Series A Junior Participating Preferred Stock shall be divested of the foregoing special voting rights, subject to revesting in the event of each and every subsequent like default in payments of dividends.  Upon the termination of the foregoing special voting rights, the terms of office of all persons who may have been elected directors pursuant to said special voting rights shall forthwith terminate, and the number of directors constituting the Board of Directors shall be reduced by two.  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 Junior Participating Preferred Stock in this Section 3.

Section 4               Certain Restrictions

(A)           Whenever quarterly dividends or other dividends or distributions payable on the Series A Junior Participating 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 Junior Participating Preferred Stock outstanding shall have been paid in full, the Company 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 Junior Participating 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 Junior Participating Preferred Stock, except dividends paid ratably on the Series A Junior Participating Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; or

(iii)           purchase or otherwise acquire for consideration any shares of Series A Junior Participating Preferred Stock, or any shares of stock ranking on a parity with the Series A Junior Participating Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of Series A Junior Participating Preferred Stock, or to such holders and holders of any such shares ranking on a parity therewith, upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective
series or classes.

  

A-3

  

 

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

Section 5               Reacquired Shares

Any shares of Series A Junior Participating Preferred Stock purchased or otherwise acquired by the Company in any manner whatsoever shall be retired promptly after the acquisition thereof.  All such shares shall upon their retirement become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors, subject to any conditions and restrictions on issuance set forth herein.

Section 6               Liquidation, Dissolution or Winding Up

(A)           Upon any liquidation, dissolution or winding up of the Company, voluntary or otherwise, no distribution shall be made to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Junior Participating Preferred Stock unless, prior thereto, the holders of shares of Series A Junior Participating Preferred Stock shall have received an amount per share (the “Series A Liquidation Preference”) equal to the greater of (i) $1.00 plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, or (ii) the Adjustment Number times the per share amount of all cash and other property to be distributed in
respect of the Common Stock upon such liquidation, dissolution or winding up of the Company.

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

(C)            Neither the merger or consolidation of the Company into or with another entity nor the merger or consolidation of any other entity into or with the Company shall be deemed to be a liquidation, dissolution or winding up of the Company within the meaning of this Section 6.

Section 7               Consolidation, Merger

In case the Company 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 Junior Participating Preferred Stock shall at the same time be similarly exchanged or changed in an amount per share equal to the Adjustment Number 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.

Section 8               No Redemption

Shares of Series A Junior Participating Preferred Stock shall not be subject to redemption by the Company.

  

A-4

  

 

Section 9               Ranking

 

The Series A Junior Participating Preferred Stock shall rank junior to all other series of the Preferred Stock as to the payment of dividends and as to the distribution of assets upon liquidation, dissolution or winding up, unless the terms of any such series shall provide otherwise, and shall rank senior to the Common Stock as to such matters.

Section 10            Amendment

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

Section 10            Fractional Shares

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

IN WITNESS WHEREOF, the undersigned has executed this Certificate and does affirm the foregoing as true as of March 11, 2011.

	 	
ITEX CORPORATION

	 	  
	 	
By:

	
/s/ Steven White

	 	  	
Steven White

	 	  	
President and Chief Executive Officer

  

A-5

  

Exhibit B

FORM OF RIGHT CERTIFICATE

 

	
Certificate No. R-______________

	
________ Rights

	  	
NOT EXERCISABLE AFTER MARCH 11, 2014 OR SUCH EARLIER DATE AS PROVIDED BY THE PLAN OR EARLIER IF REDEMPTION OR EXCHANGE OCCURS.  THE RIGHTS ARE SUBJECT TO REDEMPTION AT $0.001 PER RIGHT AND TO EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS OWNED BY OR TRANSFERRED TO ANY PERSON WHO IS OR BECOMES AN ACQUIRING PERSON (AS DEFINED IN THE RIGHTS AGREEMENT) AND CERTAIN TRANSFEREES THEREOF WILL BECOME NULL AND VOID AND WILL NO LONGER BE TRANSFERABLE.

	  

RIGHT CERTIFICATE

ITEX CORPORATION

This certifies that ____________________________ or registered assigns, is the registered owner of the number of Rights set forth above, each of which entitles the owner thereof, subject to the terms, provisions and conditions of the Rights Agreement, dated as of March 11, 2011, as the same may be amended from time to time (the “Rights Agreement”), between ITEX Corporation, a Nevada corporation (the “Company”), and OTR, Inc., as Rights Agent (the “Rights Agent”), to purchase from the Company at any time after the Distribution Date (as such term is defined in the Rights Agreement) and prior to 5:00 P.M., Pacific time, on March 11, 2014 at the office or agency of the Rights Agent designated for such purpose, or of its successor as Rights Agent, one one-thousandth of a fully paid
non-assessable share of Series A Junior Participating Preferred Stock, par value $0.01 per share (the “Preferred Stock”), of the Company at a purchase price of $15.00 per one one-thousandth of a share of Preferred Stock (the “Purchase Price”), upon presentation and surrender of this Right Certificate with the Form of Election to Purchase duly executed.  The number of Rights evidenced by this Rights Certificate (and the number of one one-thousandths of a share of Preferred Stock which may be purchased upon exercise hereof) set forth above, and the Purchase Price set forth above, are the number and Purchase Price as of March 11, 2011, based on the Preferred Stock as constituted at such date.  As provided in the Rights Agreement, the Purchase Price, the number of one one-thousandths of a share of Preferred Stock (or other securities or property) which may be purchased upon the exercise of the Rights and the number of Rights evidenced by this
Right Certificate are subject to modification and adjustment upon the happening of certain events.

This Right Certificate is subject to all of the terms, provisions and conditions of the Rights Agreement, which terms, provisions and conditions are hereby incorporated herein by reference and made a part hereof and to which Rights Agreement reference is hereby made for a full description of the rights, limitations of rights, obligations, duties and immunities hereunder of the Rights Agent, the Company and the holders of the Right Certificates.  Copies of the Rights Agreement are on file at the principal executive offices of the Company.  The Company will mail to the holder of this Right Certificate a copy of the Rights Agreement without charge after receipt of a written request therefor.

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

  

B-1

  

 

Subject to the provisions of the Rights Agreement, the Rights evidenced by this Certificate (i) may be redeemed by the Company at a redemption price of $0.001 per Right or (ii) may be exchanged in whole or in part for shares of the Company’s Common Stock, par value $0.01 per share, or shares of Preferred Stock.

No fractional shares of Common Stock or Preferred Stock will be issued upon the exercise or exchange of any Right or Rights evidenced hereby (other than fractions of Preferred Stock which are integral multiples of one one-thousandths of a share of Preferred Stock, which may, at the election of the Company, be evidenced by depositary receipts), but in lieu thereof a cash payment will be made, as provided in the Rights Agreement.

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

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

WITNESS the facsimile signature of the proper officers of the Company and its corporate seal.  Dated as of _________ __, 2011.

	  	
ITEX CORPORATION

	  	  	  
	  	
By:

	  
	  	  	
Name:

	  	  	
Title:

	
ATTEST:

	  
	  	  
	  	  
	
Name:

	  
	
Title:

	  

Countersigned:

OTR, Inc., as Rights Agent

	
By:

	  	  
	  	
Name:

	  
	  	
Title:

	  

  

B-2

  

 

Form of Reverse Side of Right Certificate

FORM OF ASSIGNMENT

(To be executed by the registered holder if such

holder desires to transfer the Right Certificate)

 

	
FOR VALUE RECEIVED __________________________ hereby sells, assigns and transfers unto

	  
	  	  

(Please print name and address of transferee)

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

	
Dated:

	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	
Signature

Signature Guaranteed:

 

Signatures must be guaranteed by a bank, trust company, broker, dealer or other eligible institution participating in a recognized signature guarantee medallion program.

 

(To be completed)

The undersigned hereby certifies that the Rights evidenced by this Right Certificate are not beneficially owned by, were not acquired by the undersigned from, and are not being sold, assigned or transferred to an Acquiring Person or an Affiliate or Associate thereof (as defined in the Plan).

	  	  
	  	
Signature

  

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Form of Reverse Side of Right Certificate — continued

FORM OF ELECTION TO PURCHASE

(To be executed if holder desires to exercise

Rights represented by Right Certificate)

TO ITEX CORPORATION:

The undersigned hereby irrevocably elects to exercise ________ Rights represented by this Right Certificate to purchase the shares of Preferred Stock (or other securities or property) issuable upon the exercise of such Rights and requests that certificates representing such shares of Preferred Stock (or such other securities) be issued in the name of:

	  
	 
	
(Please print name and address)

	  
	  

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

Please insert social security or other identifying number:

	  
	  
	
(Please print name and address)

	  
	  

	
Dated:

	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	
Signature

(Signature must conform to holder specified on Right Certificate)

 

Signature Guaranteed:

Signature must be guaranteed by a bank, trust company, broker, dealer or other eligible institution participating in a recognized signature guarantee medallion program.

  

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Form of Reverse Side of Right Certificate — continued

 

(To be completed)

The undersigned hereby certifies that the Rights evidenced by this Right Certificate are not beneficially owned by, were not acquired by the undersigned from, and are not being sold, assigned or transferred to, an Acquiring Person or an Affiliate or Associate thereof (as defined in the Plan).

	  	  
	  	
Signature

  

 

NOTICE

The signature in the Form of Assignment or Form of Election to Purchase, as the case may be, must conform to the name as written upon the face of this Right Certificate in every particular, without alteration or enlargement or any change whatsoever.

In the event the certification set forth above in the Form of Assignment or the Form of Election to Purchase, as the case may be, is not completed, such Assignment or Election to Purchase will not be honored.

 

  

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Exhibit C

	  	
RIGHTS BENEFICIALLY OWNED BY ANY ACQUIRING PERSONS OR THEIR AFFILIATES OR ASSOCIATES AND BY ANY SUBSEQUENT HOLDER OF SUCH RIGHTS ARE NULL AND VOID AND NONTRANSFERABLE.

	  

Series A Junior Participating Preferred Stock

SUMMARY OF RIGHTS TO PURCHASE

SHARES OF PREFERRED STOCK OF

ITEX CORPORATION

On March 11, 2011, the Board of Directors (the “Board”) of ITEX Corporation, a Nevada corporation (the “Company”), declared a dividend of one right (collectively, the “Rights”) for each outstanding share of Common Stock, par value $0.01 per share, of the Company (the “Common Shares”).  The Rights will be issued to the holders of record of Common Shares outstanding at March 25, 2011 (the “Record Date”) and with respect to Common
Shares issued thereafter until the Distribution Date (as defined below).  Each Right, when it becomes exercisable as described below, will entitle the registered holder to purchase from the Company one one-thousandth (1/1,000th) of a share of Series A Junior Participating Preferred Stock, par value $0.01 per share, of the Company (the “Preferred Shares”) at a price of $15.00 (the “Purchase Price”).  The description and terms of the Rights are set forth in a Rights Agreement dated as of March 11, 2011, as it may be amended from time to time (the “Rights Agreement”), between the Company and OTR, Inc., an Oregon corporation, as Rights Agent (the “Rights Agent
”).

Until the earlier of (i) such time as the Company learns that a person or group (including any affiliate or associate of such person or group), other than any person or group with beneficial ownership of more than 15% of the outstanding Common Stock as of March 11, 2011 (only so long as such person or group does not increase its beneficial ownership of Common Stock, subject to certain exceptions), has acquired, or obtained the right to acquire, beneficial ownership of more than 15% of the outstanding Common Shares (any such person or group being called an “Acquiring Person”) and (ii) such date, if any, as may be designated by the Board following the commencement of, or first public disclosure of an intention to commence, a tender
or exchange offer for outstanding Common Shares which could result in such person or group becoming the beneficial owner of more than 15% of the outstanding Common Shares (the earlier of such dates being called the “Distribution Date”), the Rights will be evidenced by certificates for Common Shares registered in the names of the holders thereof, or, in the case of Common Shares held in uncertificated form, by the transaction statement or other record of ownership of such Common Shares, and not by separate Right Certificates.  With respect to any Common Shares outstanding as of the Record Date, until the earliest of the Distribution Date, the Redemption Date or the Expiration Date, (i) in the case of certificated shares, the Rights associated with the Common Shares represented by a certificate shall be evidenced by such certificate along with a copy of this Summary of Rights, and the surrender for
transfer of any such certificate shall also constitute the transfer of the Rights associated with the Common Shares represented thereby, and (ii) in the case of Common Shares held in uncertificated form, the Rights associated with the Common Shares shall be evidenced by the balances indicated in the book-entry account system of the transfer agent for the Common Shares, and the transfer of any Common Shares in the book-entry account system of the transfer agent for such Common Shares shall also constitute the transfer of the Rights associated with such Common Shares.  Therefore, until the Distribution Date, the Rights may be transferred with and only with the underlying Common Shares.

As soon as practicable following the Distribution Date, separate certificates evidencing the Rights (“Right Certificates”) will be mailed to holders of record of the Common Shares as of the close of business on the Distribution Date, and such separate Right Certificates alone will thereafter evidence the Rights.

  

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The Rights are not exercisable until the Distribution Date and will expire at 5:00 p.m., Pacific time, on March 11, 2014 (the “Expiration Date”), unless earlier redeemed or exchanged by the Company as described below.

The number of Preferred Shares or other securities issuable upon exercise of the Rights is subject to adjustment by the Board in the event of any change in the Common Shares or Preferred Shares, whether by reason of stock dividends, stock splits, reclassifications, recapitalizations, mergers, consolidations, combinations or exchanges of securities, split-ups, split-offs, spin-offs, liquidations, other similar changes in capitalization, any distribution or issuance of assets, evidences of indebtedness or subscription rights, options or warrants to holders of Common Shares or Preferred Shares or otherwise.  The Purchase Price and the number of Preferred Shares or other securities issuable upon exercise of the Rights are subject to adjustment from time to time in the event of the declaration of a stock
dividend on the Common Shares payable in Common Shares or a subdivision or combination of the Common Shares prior to the Distribution Date.

The Preferred Shares are authorized to be issued in fractions which are an integral multiple of one one-thousandth (1/1,000th) of a Preferred Share.  The Company may, but is not required to, issue fractions of shares upon the exercise of Rights, and in lieu of fractional shares, the Company may make a cash payment based on the market price of such shares on the first trading date prior to the date of exercise or utilize a depositary arrangement as provided by the terms of the Preferred Shares.

Subject to the right of the Board to redeem or exchange the Rights as described below, at such time as there is an Acquiring Person, the holder of each Right will thereafter have the right to receive, upon exercise thereof, for the Purchase Price, that number of one one-thousandths (1/1,000ths) of a Preferred Share equal to the number of Common Shares which at the time of such transaction would have a market value of twice the Purchase Price.  Any Rights that are or were beneficially owned by an Acquiring Person on or after the Distribution Date will become null and void and will not be subject to the “flip-in” provision.

In the event the Company is acquired in a merger or other business combination by an Acquiring Person that has common shares publicly traded in the United States or 50% or more of the Company’s assets or assets representing 50% or more of the Company’s earning power are sold, leased, exchanged or otherwise transferred (in one or more transactions) to an Acquiring Person that has common shares publicly traded in the United States, proper provision must be made so that each Right will entitle its holder to purchase, for the Purchase Price, that number of common shares of such entity which at the time of the transaction would have a market value of twice the Purchase Price.  In the event the Company is acquired in a merger or other business combination by an Acquiring Person that does not have
common shares publicly traded in the United States or 50% or more of the Company’s assets or assets representing 50% or more of the earning power of the Company are sold, leased, exchanged or otherwise transferred (in one or more transactions) to an Acquiring Person that does not have common shares publicly traded in the United States, proper provision must be made so that each Right will entitle its holder to purchase, for the Purchase Price, at such holder’s option, (i) that number of common shares of the surviving corporation in the transaction with such entity which at the time of the transaction would have a book value of twice the Purchase Price, (ii) that number of common shares of such entity which at the time of the transaction would have a book value of twice the Purchase Price or (iii) if such entity has an affiliate which has common shares publicly traded in the United States, that number of common shares of such affiliate which at the time of the
transaction would have a market value of twice the Purchase Price.  The “flip-over” provision only applies to a merger or similar business combination with an Acquiring Person.

  

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ANY RIGHTS THAT ARE OR WERE, AT ANY TIME ON OR AFTER THE DATE AN ACQUIRING PERSON BECOMES SUCH, BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR ANY AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (OR A TRANSFEREE THEREOF) WILL BECOME NULL AND VOID AND ANY HOLDER OF ANY SUCH RIGHT (INCLUDING ANY SUBSEQUENT HOLDER) WILL BE UNABLE TO EXERCISE ANY SUCH RIGHT.

The Rights are redeemable by the Board at a redemption price of $0.001 per Right (the “Redemption Price”) any time prior to the earlier of (i) the Distribution Date and (ii) the Expiration Date (the date of such redemption being the “Redemption Date”).  Immediately upon the action of the Board electing to redeem the Rights, and without any further action and without any notice, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive the Redemption Price.

After there is an Acquiring Person the Board may elect to exchange each Right (other than Rights owned by an Acquiring Person which will have become void) for consideration per Right consisting of (i)  Common Shares at an exchange ratio of one Common Share per Right (or other cash, property, Preferred Shares, Common Shares, debt securities or any combination thereof having an aggregate value equal to the value of the Common Shares that otherwise would have been issuable), (ii) one-half of the securities that would be issuable at such time upon the exercise of one Right pursuant to the terms of the Rights Agreement, or (iii) cash in an amount equal to the Purchase Price.  Notwithstanding the foregoing, the Board is not empowered to effect such exchange at any time after any person (other than the
Company, any subsidiary of the Company, any employee benefit plan of the Company or any such subsidiary, or any entity holding Common Shares for or pursuant to the terms of any such plan), together with all affiliates and associates of such person, becomes the beneficial owner of 50% or more of the Common Shares then outstanding.

At any time prior to such time as there shall be an Acquiring Person, the Company may, without the approval of any holder of the Rights, supplement or amend any provision of the Rights Agreement (including the date on which the Distribution Date will occur, the amount of the Purchase Price or the definition of “Acquiring Person”), except that no supplement or amendment may be made that extends the Expiration Date or reduces the Redemption Price.

Until a Right is exercised, the holder thereof, as such, will have no rights as a stockholder of the Company, including, without limitation, the right to vote or to receive dividends.

A copy of the Rights Agreement, including the terms of the Preferred Shares, will be filed with the Securities and Exchange Commission as an Exhibit to a Registration Statement on Form 8-A.  A copy of the Rights Agreement is available free of charge from the Company upon written request.  This summary description of the Rights does not purport to be complete and is qualified in its entirety by reference to the Rights Agreement, which is incorporated herein by reference.

 

  

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