EXHIBIT 4.1
RIGHTS AGREEMENT
DATED AS OF
SEPTEMBER 4, 2001
BETWEEN
COMPAQ COMPUTER CORPORATION
A DELAWARE CORPORATION
AND
EQUISERVE TRUST COMPANY, N.A.
AS RIGHTS AGENT
TABLE OF CONTENTS
Section Page
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1. Certain Definitions........................................................................1
2. Appointment of Rights Agent................................................................8
3. Issuance of Rights Certificates............................................................9
4. Form of Rights Certificates...............................................................11
5. Countersignature and Registration.........................................................12
6. Transfer, Split Up, Combination and Exchange of Rights Certificates;
Mutilated, Destroyed, Lost or Stolen Rights Certificates..................................13
7. Exercise of Rights; Purchase Price; Expiration Date of Rights.............................14
8. Cancellation and Destruction of Rights
Certificates..............................................................................16
9. Reservation and Availability of Capital Stock.............................................17
10. Preferred Stock Record Date.............................................................. 19
11. Adjustment of Purchase Price, Number and Kind of Shares or Number
of Rights................................................................................ 19
12. Certificate of Adjusted Purchase Price or Number of Shares............................... 30
13. Consolidation, Merger or Sale or Transfer of Assets, Cash Flow or
Earning Power............................................................................ 30
14. Fractional Rights and Fractional Shares.................................................. 34
15. Rights of Action......................................................................... 35
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16. Agreement of Rights Holders.............................................................. 36
17. Rights Certificate Holder Not Deemed a Stockholder....................................... 36
18. Concerning the Rights Agent.............................................................. 37
19. Merger or Consolidation or Change of Name of Rights Agent................................ 37
20. Duties of Rights Agent................................................................... 38
21. Change of Rights Agent................................................................... 41
22. Issuance of New Rights Certificates...................................................... 42
23. Redemption and Termination............................................................... 42
24. Exchange................................................................................. 46
25. Notice of Certain Events................................................................. 47
26. Notices.................................................................................. 48
27. Supplements and Amendments............................................................... 49
28. Successors............................................................................... 50
29. Determinations and Action by the Board, etc...............................................50
30. Benefits of this Agreement................................................................51
31. Severability..............................................................................51
32. Governing Law.............................................................................51
33. Counterparts..............................................................................51
34. Descriptive Headings......................................................................52
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EXHIBITS
Exhibit A -- Form of Certificate of Designation, Preferences and Rights
Exhibit B -- Form of Rights Certificates
Exhibit C -- Form of Summary of Rights
iii
RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of September 4, 2001 (the "Agreement"),
between Compaq Computer Corporation, a Delaware corporation (the "Company"), and
EquiServe Trust Company, N.A., a federally chartered trust company (the "Rights
Agent").
W I T N E S S E T H
-------------------
WHEREAS, on September 3, 2001 (the "Rights Dividend Declaration Date"), the
Board of Directors of the Company authorized and declared a dividend
distribution of one Right (as hereinafter defined) for each share of common
stock, par value $0.01 per share, of the Company (the "Common Stock")
outstanding at the close of business on September 17, 2001 (the "Record Date"),
and has authorized the issuance of one Right (as such number may hereinafter be
adjusted pursuant to the provisions of Section 11(p) hereof) for each share of
Common Stock of the Company issued between the Record Date (whether originally
issued or delivered from the Company's treasury) and the Distribution Date (as
hereinafter defined) each Right initially representing the right to purchase one
one-thousandth of a share of Series A Junior Participating Preferred Stock of
the Company (the "Preferred Stock") having the rights, powers and preferences
set forth in the form of Certificate of Designation, Preferences and Rights
attached hereto as Exhibit A, upon the terms and subject to the conditions
hereinafter set forth (the "Rights");
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
Section 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean (x) any Person who or which,
together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of ten percent (10%) or more of the shares of Common Stock
then outstanding, but shall not include (i) the Company, (ii) any
Subsidiary of the Company, (iii) any employee benefit plan of the Company,
or of any Subsidiary of the Company, or any Person or entity organized,
appointed or established by the Company for or pursuant to the terms of any
such plan, (iv) any Person who becomes the Beneficial Owner of ten percent
(10%) or more of the shares of Common Stock then outstanding as a result of
a reduction in the number of shares of Common Stock
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outstanding due to the repurchase of shares of Common Stock by the Company
other than during the Special Period (as defined in Section 23(c) hereof)
or at a time when the rights are not redeemable, unless and until such
Person, after becoming aware that such Person has become the Beneficial
Owner of ten percent (10%) or more of the then outstanding shares of Common
Stock, acquires beneficial ownership of additional shares of Common Stock
representing one percent (1%) or more of the shares of Common Stock then
outstanding, and (v) any such Person who has reported or is required to
report such ownership (but less than 20%) on Schedule 13G under the
Securities Exchange Act of 1934, as amended and in effect on the date of
the Agreement (the "Exchange Act") (or any comparable or successor report)
or on Schedule 13D under the Exchange Act (or any comparable or successor
report) which Schedule 13D does not state any intention to or reserve the
right to control or influence the management or policies of the Company or
engage in any of the actions specified in Item 4 of such schedule (other
than the disposition of the Common Stock) and, within ten (10) Business
Days of being requested by the Company to advise it regarding the same,
certifies to the Company that such Person acquired shares of Common Stock
in excess of 9.9% inadvertently or without knowledge of the terms of the
Rights and who or which, together with all Affiliates and Associates,
thereafter does not acquire additional shares of Common Stock while the
Beneficial Owner of ten percent (10%) or more of the shares of Common Stock
then outstanding; PROVIDED, HOWEVER, that if the Person requested to so
certify fails to do so within ten (10) Business Days, then such Person
shall become an Acquiring Person immediately after such ten
(10)-Business-Day period, or (y) any Person who or which, together with all
Affiliates and Associates of such Person, has entered into any agreement or
arrangement with the Company or any Subsidiary of the Company providing for
an Acquisition Transaction (as defined in 1(b) hereof). Notwithstanding
anything in this Agreement to the contrary, HP shall not be deemed an
"Acquiring Person" so long as the Merger Agreement has not been terminated.
(b) "Acquisition Transaction" shall mean (x) a merger, consolidation
or similar transaction involving the Company or any of its Subsidiaries as
a result of which stockholders of the Company will no longer own a majority
of the outstanding shares of Common Stock of the Company or a publicly
traded entity which controls the Company or, if appropriate, the entity
into which the Company may be merged, consolidated or otherwise combined
(based solely on the shares of Common Stock received or retained by such
stockholders, in their capacity as stockholders of the Company, pursuant to
such transaction), (y) a purchase or other acquisition of all or a
substantial portion of the assets of the Company and its
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Subsidiaries, or
(z) a purchase or other acquisition of securities representing ten percent
(10%) or more of the shares of Common Stock then outstanding.
(c) "Act" shall mean the Securities Act of 1933, as amended.
(d) "Adjustment Shares" shall have the meaning set forth in Section
11(a)(ii) hereof.
(e) "Affected Transaction" shall have the meaning set forth in Section
23(c) hereof.
(f) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations
under the Exchange Act.
(g) A Person shall be deemed the "Beneficial Owner" of, and shall be
deemed to "beneficially own," any securities:
(i) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to acquire (whether
such right is exercisable immediately or only after the passage of
time) pursuant to any agreement, arrangement or understanding (whether
or not in writing) or upon the exercise of conversion rights, exchange
rights, other rights, warrants or options, or otherwise; PROVIDED,
HOWEVER, that a Person shall not be deemed the "Beneficial Owner" of,
or to "beneficially own," (A) 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, (B) securities issuable upon exercise of
Rights at any time prior to the occurrence of a Triggering Event (as
hereinafter defined), or (C) securities issuable upon exercise of
Rights from and after the occurrence of a Triggering Event which
Rights were acquired by such Person or any of such Person's Affiliates
or Associates prior to the Distribution Date (as hereinafter defined)
or pursuant to Section 3(a) or Section 22 hereof (the "Original
Rights") or pursuant to Section 11(i) hereof in connection with an
adjustment made with respect to any Original Rights;
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(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or
dispose of or has "beneficial ownership" of (as determined pursuant to
Rule 13d-3 of the General Rules and Regulations under the Exchange
Act), including pursuant to any agreement, arrangement or
understanding, whether or not in writing; PROVIDED, HOWEVER, that a
Person shall not be deemed the "Beneficial Owner" of, or to
"beneficially own," any security under this subparagraph (ii) as a
result of an agreement, arrangement or understanding to vote such
security if such agreement, arrangement or understanding: (A) arises
solely from a revocable proxy given in response to a public proxy or
consent solicitation made pursuant to, and in accordance with, the
applicable provisions of the General Rules and Regulations under the
Exchange Act, and (B) is not reportable by such Person on Schedule 13D
under the Exchange Act (or any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by
any other Person (or any 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),
for the purpose of acquiring, holding, voting (except pursuant to a
revocable proxy as described in the proviso to subparagraph (ii) of
this paragraph (g)) or disposing of any voting securities of the
Company; PROVIDED, HOWEVER, that nothing in this paragraph (g) shall
cause a Person engaged in business as an underwriter of securities to
be the "Beneficial Owner" of, or to "beneficially own," any securities
acquired through such Person's participation in good faith in a firm
commitment underwriting until the expiration of forty days after the
date of such acquisition, and then only if such securities continue to
be owned by such Person at such expiration of forty days and PROVIDED
FURTHER, HOWEVER, that any stockholder of the Company, with
affiliate(s), associate(s) or other person(s) who may be deemed
representatives of it serving as director(s) of the Company, shall not
be deemed to beneficially own securities held by other Persons as a
result of (i) persons affiliated or otherwise associated with such
stockholder serving as directors or taking any action in connection
therewith, (ii) discussing the status of
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its shares with the Company or other stockholders of the Company
similarly situated or (iii) voting or acting in a manner similar to
other stockholders similarly situated, absent a specific finding by
the Board of Directors of an express agreement among such stockholders
to act in concert with one another as stockholders so as to cause, in
the good faith judgment of the Board of Directors, each such
stockholder to be the Beneficial Owner of the shares held by the
other stockholder(s).
(h) "Business Day" shall mean any day other than a Saturday, Sunday
or a day on which banking institutions in the State of Massachusetts are
authorized or obligated by law or executive order to close.
(i) "Close of business" on any given date shall mean 5:00 P.M.,
Massachusetts time, on such date; PROVIDED, HOWEVER, that if such date is
not a Business Day, it shall mean 5:00 P.M., Massachusetts time, on the
next succeeding Business Day.
(j) "Common Stock" shall mean the common stock, par value $0.01 per
share, of the Company, except that "Common Stock" when used with reference
to any Person other than the Company shall mean the capital stock of such
Person with the greatest voting power, or the equity securities or other
equity interest having power to control or direct the management, of such
Person.
(k) "Common Stock Equivalents" shall have the meaning set forth in
Section 11(a)(iii) hereof.
(l) "Current Market Price" shall have the meaning set forth in Section
11(d)(i) hereof.
(m) "Current Value" shall have the meaning set forth in Section
11(a)(iii) hereof.
(n) "Distribution Date" shall have the meaning set forth in Section
3(a) hereof.
(o) "Equivalent Preferred Stock" shall have the meaning set forth in
Section 11(b) hereof.
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(p) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended and in effect on the date of the Agreement.
(q) "Exchange Ratio" shall have the meaning set forth in Section 24
hereof.
(r) "Expiration Date" shall have the meaning set forth in Section 7(a)
hereof.
(s) "Final Expiration Date" shall have the meaning set forth in
Section 7(a) hereof.
(t) "Heloise Merger Corporation" shall mean Heloise Merger
Corporation, a Delaware corporation and wholly-owned subsidiary of HP.
(u) "HP" shall mean Hewlett-Packard Company, a Delaware corporation
and its subsidiaries.
(v) "Independent Advisor" shall have the meaning set forth in Section
23(c) hereof.
(w) "Interest" shall have the meaning set forth in Section 23(c)
hereof.
(x) "Merger" shall mean the merger of Heloise Merger Corporation with
and into the Company with the Company as the surviving corporation and
becoming a wholly-owned subsidiary of HP, pursuant to the terms of the
Merger Agreement.
(y) "Merger Agreement" shall mean that certain Agreement and Plan of
Reorganization, dated as of September 4, 2001, by and among HP, Heloise
Merger Corporation and the Company, as may be amended with the approval of
the Board of Directors.
(z) "Person" shall mean any individual, firm, corporation, partnership
or other entity.
(aa) "Preferred Stock" shall mean shares of Series A Junior
Participating Preferred Stock, par value $0.01 per share, of the Company,
and, to the
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extent that there are not a sufficient number of shares of Series A Junior
Participating Preferred Stock authorized to permit the full exercise of the
Rights, any other series of preferred stock of the Company designated for
such purpose containing terms substantially similar to the terms of the
Series A Junior Participating Preferred Stock.
(bb) "Principal Party" shall have the meaning set forth in Section
13(b) hereof.
(cc) "Purchase Price" shall have the meaning set forth in Section 4(a)
hereof.
(dd) "Qualified Offer" shall have the meaning set forth in Section
11(a)(ii) hereof.
(ee) "Record Date" shall have the meaning set forth in the preamble of
this Agreement.
(ff) "Rights" shall have the meaning set forth in the preamble of this
Agreement.
(gg) "Rights Agent" shall have the meaning set forth in the preamble
of this Agreement.
(hh) "Rights Certificate" shall have the meaning set forth in Section
3(a) hereof.
(ii) "Rights Dividend Declaration Date" shall have the meaning set
forth in the preamble of this Agreement.
(jj) "Section 11(a)(ii) Event" shall mean any event described in
Section 11(a)(ii) hereof.
(kk) "Section 13 Event" shall mean any event described in clauses (x),
(y) or (z) of Section 13(a) hereof.
(ll) "Special Period" shall have the meaning set forth in Section
23(c) hereof.
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(mm) "Spread" shall have the meaning set forth in Section 11(a)(iii)
hereof.
(nn) "Stock Acquisition Date" shall mean the earlier of (i) the first
date of public announcement (which, for purposes of this definition, shall
include, without limitation, a report filed or amended pursuant to Section
13(d) under the Exchange Act) by the Company or an Acquiring Person that an
Acquiring Person has become such pursuant to clause (x) of the definition
of Acquiring Person other than pursuant to a Qualified Offer, and (ii) the
date that an Acquiring Person has become such pursuant to clause (y) of the
definition of Acquiring Person.
(oo) "Subsidiary" shall mean, with reference to any Person, any
corporation of which an amount of voting securities sufficient to elect at
least a majority of the directors of such corporation is beneficially
owned, directly or indirectly, by such Person, or otherwise controlled by
such Person.
(pp) "Substitution Period" shall have the meaning set forth in Section
11(a)(iii) hereof.
(qq) "Summary of Rights" shall have the meaning set forth in Section
3(b) hereof.
(rr) "Trading Day" shall have the meaning set forth in Section
11(d)(i) hereof.
(ss) "Transaction" shall have the meaning set forth in Section 23(c)
hereof.
(tt) "Triggering Event" shall mean any Section 11(a)(ii) Event or any
Section 13 Event.
(uu) "Value Enhancement Procedures" shall have the meaning set forth
in Section 23(c) hereof.
Section 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints the
Rights Agent to act as agent for the Company in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such co-rights agents as it may deem
necessary or desirable, upon ten (10) days' prior written notice to the Rights
Agent.
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The Rights Agent shall have no duty to supervise, and in no event be
liable for, the acts or omissions of any such co-Rights Agent.
Section 3. ISSUANCE OF RIGHTS CERTIFICATES.
(a) Until the earlier of (i) the close of business on the tenth Business
Day after the Stock Acquisition Date (or, if the tenth Business Day after the
Stock Acquisition Date occurs before the Record Date, the close of business on
the Record Date), or (ii) the close of business on the tenth Business Day (or
such later date as the Board of Directors shall determine, PROVIDED, HOWEVER,
that no deferral of a Distribution Date by the Board of Directors pursuant to
this clause (ii) may be made at any time during the Special Period) after the
date of the commencement of a tender or exchange offer by any Person (other than
the Company, any Subsidiary of the Company, any employee benefit plan of the
Company or of any Subsidiary of the Company, or any Person or entity
organized, appointed or established by the Company for or pursuant to the
terms of any such plan) within the meaning of Rule 14d-2(a) of the General
Rules and Regulations under the Exchange Act, or any successor provision
thereto, if upon consummation thereof, such Person would become an Acquiring
Person, in either instance other than pursuant to a Qualified Offer, (the
earlier of (i) and (ii) being herein referred to as the "Distribution Date"),
(x) the Rights will be evidenced (subject to the provisions of paragraphs (b)
and (c) of this Section 3) by the certificates for the Common Stock
registered in the names of the holders of the Common Stock (which
certificates for Common Stock shall be deemed also to be certificates for
Rights) and not by separate certificates, and (y) the Rights will be
transferable only in connection with the transfer of the underlying shares of
Common Stock (including a transfer to the Company). As soon as practicable
after the Distribution Date, the Rights Agent will send by first-class,
insured, postage-prepaid mail, to each record holder of the Common Stock as
of the close of business on the Distribution Date, at the address of such
holder shown on the records of the Company, one or more rights certificates,
in substantially the form of Exhibit B hereto (the "Rights Certificates"),
evidencing one Right for each share of Common Stock so held, subject to
adjustment as provided herein. In the event that an adjustment in the number
of Rights per share of Common Stock has been made pursuant to Section 11(p)
hereof, at the time of distribution of the Rights Certificates, the Company
shall make the necessary and appropriate rounding adjustments (in accordance
with Section 14(a) hereof) so that Rights Certificates representing only
whole numbers of Rights are distributed and cash is paid in lieu of any
fractional Rights. As of and after the Distribution Date, the Rights will be
evidenced solely by such Rights Certificates.
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(b) The Company will make available, as promptly as practicable following
the Record Date, a copy of a Summary of Rights, in substantially the form
attached hereto as Exhibit C (the "Summary of Rights") to any holder of Rights
who may so request from time to time prior to the Expiration Date. With respect
to certificates for the Common Stock outstanding as of the Record Date, or
issued subsequent to the Record Date but prior to the earlier of the
Distribution Date or the Expiration Date, the Rights will be evidenced by such
certificates for the Common Stock and the registered holders of the Common Stock
shall also be the registered holders of the associated Rights. Until the earlier
of the Distribution Date or the Expiration Date, the transfer of any
certificates representing shares of Common Stock in respect of which Rights have
been issued shall also constitute the transfer of the Rights associated with
such shares of Common Stock.
(c) Rights shall be issued in respect of all shares of Common Stock which
are issued (whether originally issued or from the Company's treasury) after the
Record Date but prior to the earlier of the Distribution Date or the Expiration
Date. Certificates representing such shares of Common Stock shall also be deemed
to be certificates for Rights, and shall bear the following legend:
This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in the Rights Agreement between Compaq Computer
Corporation (the "Company") and the Rights Agent thereunder (the "Rights
Agreement"), the terms of which are hereby incorporated herein by reference
and a copy of which is on file at the principal offices of the Rights
Agent. Under certain circumstances, as set forth in the Rights Agreement,
such Rights will be evidenced by separate certificates and will no longer
be evidenced by this certificate. The Rights Agent will mail to the holder
of this certificate a copy of the Rights Agreement, as in effect on the
date of mailing, without charge, promptly after receipt of a written
request therefor. Under certain circumstances set forth in the Rights
Agreement, Rights issued to, or held by, any Person who is, was or becomes
an Acquiring Person or any Affiliate or Associate thereof (as such terms
are defined in the Rights Agreement), whether currently held by or on
behalf of such Person or by any subsequent holder, may become null and
void.
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With respect to such certificates containing the foregoing legend, until the
earlier of (i) the Distribution Date or (ii) the Expiration Date, the Rights
associated with the Common Stock represented by such certificates shall be
evidenced by such certificates alone and registered holders of Common Stock
shall also be the registered holders of the associated Rights, and the transfer
of any of such certificates shall also constitute the transfer of the Rights
associated with the Common Stock represented by such certificates.
Section 4. FORM OF RIGHTS CERTIFICATES.
(a) The Rights Certificates (and the forms of election to purchase and of
assignment to be printed on the reverse thereof) shall each be substantially in
the form set forth in 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 on which the Rights may from time to time be
listed, or to conform to usage. Subject to the provisions of Section 11 and
Section 22 hereof, the Rights Certificates, whenever distributed, shall be dated
as of the Record Date and on their face shall entitle the holders thereof to
purchase such number of one one-thousandths of a share of Preferred Stock as
shall be set forth therein at the price set forth therein (such exercise price
per one one-thousandth of a share, the "Purchase Price"), but the amount and
type of securities purchasable upon the exercise of each Right and the Purchase
Price thereof shall be subject to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(a), Section 11(i),
Section 11(p) or Section 22 hereof that represents Rights beneficially owned by:
(i) an Acquiring Person or any Associate or Affiliate of an Acquiring Person,
(ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate)
who becomes a transferee after the Acquiring Person becomes such, or (iii) a
transferee of an Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee prior to or concurrently with the Acquiring Person becoming
such and receives such Rights pursuant to either (A) a transfer (whether or not
for consideration) from the Acquiring Person to holders of equity interests in
such Acquiring Person or to any Person with whom such Acquiring Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which the Board of Directors has determined is part of
a plan,
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arrangement or understanding which has as a primary purpose or effect
the avoidance of Section 7(e) hereof, and any Rights Certificate issued pursuant
to Section 6 or Section 11 hereof upon transfer, exchange, replacement or
adjustment of any other Rights Certificate referred to in this sentence, shall
contain (to the extent feasible) the following legend:
The Rights represented by this Rights Certificate are or were beneficially
owned by a Person who was or became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person (as such terms are defined in the Rights
Agreement). Accordingly, this Rights Certificate and the Rights represented
hereby may become null and void in the circumstances specified in Section
7(e) of the Rights Agreement.
Section 5. COUNTERSIGNATURE AND REGISTRATION.
(a) The Rights Certificates shall be executed on behalf of the Company by
its Chairman or Vice-Chairman of its Board of Directors, its Chief Executive
Officer, its President or any Vice President, its Chief Financial Officer or any
Assistant Treasurer, or its Secretary or any Assistant Secretary, either
manually or by facsimile signature, and shall have affixed thereto the Company's
seal or a facsimile thereof which shall be attested by the Secretary or an
Assistant Secretary of the Company, either manually or by facsimile signature.
The Rights Certificates shall be countersigned by the Rights Agent, either
manually or by facsimile signature and shall not be valid for any purpose unless
so countersigned. In case any officer of the Company who shall have signed any
of the Rights Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Rights Certificates, nevertheless, may be countersigned by the Rights Agent
and issued and delivered by the Company with the same force and effect as though
the person who signed such Rights Certificates had not ceased to be such officer
of the Company; and any Rights Certificates may be signed on behalf of the
Company by any person who, at the actual date of the execution of such Rights
Certificate, shall be a proper officer of the Company to sign such Rights
Certificate, although at the date of the execution of this Rights Agreement any
such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep, or cause
to be kept, at its principal office or offices designated as the appropriate
place for surrender of Rights Certificates upon exercise or transfer, books
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for registration and transfer of the Rights Certificates issued hereunder.
Such books shall show the names and addresses of the respective holders of
the Rights Certificates, the number of Rights evidenced on its face by each
of the Rights Certificates and the date of each of the Rights Certificates.
Section 6. TRANSFER, SPLIT-UP, COMBINATION AND EXCHANGE OF RIGHTS CERTIFICATES;
MUTILATED, DESTROYED, LOST OR STOLEN RIGHTS CERTIFICATES.
(a) Subject to the provisions of Section 4(b), Section 7(e) and Section
14 hereof, at any time after the close of business on the Distribution Date,
and at or prior to the close of business on the Expiration Date, any Rights
Certificate or Certificates (other than Rights Certificates representing
Rights that may have been exchanged pursuant to Section 24 hereof) may be
transferred, split up, combined or exchanged for another Rights Certificate
or Certificates, entitling the registered holder to purchase a like number of
one one-thousandths of a share of Preferred Stock (or, following a Triggering
Event, Common Stock, other securities, cash or other assets, as the case may
be) as the Rights Certificate or Certificates surrendered then entitles such
holder (or former holder in the case of a transfer) to purchase. Any
registered holder desiring to transfer, split up, combine or exchange any
Rights Certificate or Certificates shall make such request in writing
delivered to the Rights Agent, and shall surrender the Rights Certificate or
Certificates to be transferred, split up, combined or exchanged at the
principal office or offices of the Rights Agent designated for such purpose.
Neither the Rights Agent nor the Company shall be obligated to take any
action whatsoever with respect to the transfer of any such surrendered Rights
Certificate until the registered holder shall have completed and signed the
certificate contained in the form of assignment on the reverse side of such
Rights Certificate and shall have provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates
or Associates thereof as the Company shall reasonably request. Thereupon the
Rights Agent shall, subject to Section 4(b), Section 7(e), Section 14 and
Section 24 hereof, countersign and deliver to the Person entitled thereto a
Rights Certificate or Rights Certificates, as the case may be, as so
requested. The Company may require payment of a sum sufficient to cover any
tax or governmental charge that may be imposed in connection with any
transfer, split up, combination or exchange of Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a Rights
Certificate, and, in case of loss, theft or destruction, of indemnity or
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security reasonably satisfactory to them, and reimbursement to the Company and
the Rights Agent of all reasonable expenses incidental thereto, and upon
surrender to the Rights Agent and cancellation of the Rights Certificate, if
mutilated, the Company will execute and deliver a new Rights Certificate of like
tenor to the Rights Agent for countersignature and delivery to the registered
owner in lieu of the Rights Certificate so lost, stolen, destroyed or mutilated.
Section 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS.
(a) Subject to Section 7(e) hereof, at any time after the Distribution
Date the registered holder of any Rights Certificate may exercise the Rights
evidenced thereby (except as otherwise provided herein including, without
limitation, the restrictions on exercisability set forth in Section 9(c),
Section 11(a)(iii) and Section 23(a) hereof) in whole or in part upon
surrender of the Rights Certificate, with the form of election to purchase
and the certificate on the reverse side thereof duly executed, to the Rights
Agent at the principal office or offices of the Rights Agent designated for
such purpose, together with payment of the aggregate Purchase Price with
respect to the total number of one one-thousandths of a share (or other
securities, cash or other assets, as the case may be) as to which such
surrendered Rights are then exercisable, at or prior to the earlier of (i)
5:00 P.M., Houston, Texas time, on September 3, 2011, or such later date as
may be established by the Board of Directors prior to the expiration of the
Rights (such date, as it may be extended by the Board of Directors, the
"Final Expiration Date"), or (ii) the time at which the Rights are redeemed
or exchanged as provided in Section 23 and Section 24 hereof (the earlier of
(i) and (ii) being herein referred to as the "Expiration Date").
(b) The Purchase Price for each one one-thousandth of a share of Preferred
Stock pursuant to the exercise of a Right initially shall be $70, shall be
subject to adjustment from time to time as provided in Section 11 and Section
13(a) hereof and shall be payable in accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing exercisable Rights,
with the form of election to purchase and the certificate duly executed,
accompanied by payment, with respect to each Right so exercised, of the Purchase
Price per one one-thousandth of a share of Preferred Stock (or other shares,
securities, cash or other assets, as the case may be) to be purchased as set
forth below and an amount equal to any applicable transfer tax, the Rights Agent
shall, subject to
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Section 20(k) hereof, thereupon promptly (i)(A) requisition from any transfer
agent of the shares of Preferred Stock (or make available, if the Rights
Agent is the transfer agent for such shares) certificates for the total
number of one one-thousandths of a share of Preferred Stock 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 total number of shares of Preferred Stock issuable upon exercise of the
Rights hereunder with a depositary agent, requisition from the depositary
agent depositary receipts representing such number of one one-thousandths of
a share of Preferred Stock as are to be purchased (in which case certificates
for the shares of Preferred Stock represented by such receipts shall be
deposited by the transfer agent with the depositary agent) and the Company
will direct the depositary agent to comply with such request, (ii)
requisition from the Company the amount of cash, if any, to be paid in lieu
of fractional shares in accordance with Section 14 hereof, (iii) after
receipt of such certificates or depositary receipts, cause the same to be
delivered to or, upon the order of the registered holder of such Rights
Certificate, registered in such name or names as may be designated by such
holder, and (iv) after receipt thereof, deliver such cash, if any, to or upon
the order of the registered holder of such Rights Certificate. The payment of
the Purchase Price (as such amount may be reduced pursuant to Section
11(a)(iii) hereof) shall be made in cash or by certified bank check or bank
draft payable to the order of the Company. In the event that the Company is
obligated to issue other securities (including Common Stock) of the Company,
pay cash and/or distribute other property pursuant to Section 11(a) hereof,
the Company will make all arrangements necessary so that such other
securities, cash and/or other property are available for distribution by the
Rights Agent, if and when appropriate. The Company reserves the right to
require prior to the occurrence of a Triggering Event that, upon any exercise
of Rights, a number of Rights be exercised so that only whole shares of
Preferred Stock would be issued.
(d) In case the registered holder of any Rights Certificate shall exercise
less than all the Rights evidenced thereby, a new Rights Certificate evidencing
the Rights remaining unexercised shall be issued by the Rights Agent and
delivered to, or upon the order of, the registered holder of such Rights
Certificate, registered in such name or names as may be designated by such
holder, subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary, from and
after the first occurrence of a Section 11(a)(ii) Event, any Rights beneficially
owned by (i) an Acquiring Person or an Associate or Affiliate of an
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Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee after the Acquiring Person
becomes such, or (iii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee prior to or concurrently
with the Acquiring Person becoming such and receives such Rights pursuant to
either (A) a transfer (whether or not for consideration) from the Acquiring
Person to holders of equity interests in such Acquiring Person or to any
Person with whom the Acquiring Person has any continuing agreement,
arrangement or understanding regarding the transferred Rights or (B) a
transfer which the Board of Directors has determined is part of a plan,
arrangement or understanding which has as a primary purpose or effect the
avoidance of this Section 7(e), 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 insure that the
provisions of this Section 7(e) and Section 4(b) hereof are complied with,
but shall have no liability to any holder of Rights Certificates or any other
Person as a result of its failure to make any determinations with respect to
an Acquiring Person or any of its Affiliates, Associates or transferees
hereunder.
(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 upon the occurrence of any purported exercise as
set forth in this Section 7 unless such registered holder shall have (i)
completed and signed the certificate contained in the form of election to
purchase set forth on the reverse side of the Rights Certificate surrendered for
such exercise, and (ii) provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request.
Section 8. CANCELLATION AND DESTRUCTION OF RIGHTS CERTIFICATES.
All Rights Certificates surrendered for the purpose of exercise, transfer,
split-up, combination or exchange shall, if surrendered to the Company or any of
its agents, be delivered to the Rights Agent for cancellation or in cancelled
form, or, if surrendered to the Rights Agent, shall be cancelled by it, and no
Rights Certificates shall be issued in lieu thereof except as expressly
permitted by any of the provisions of this Agreement. The Company shall deliver
to the Rights Agent for cancellation and retirement, and the Rights Agent shall
so cancel and retire, any other Rights Certificate purchased or acquired by the
Company otherwise than upon
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the exercise thereof. The Rights Agent shall deliver all cancelled Rights
Certificates to the Company, or shall, at the written request of the Company,
destroy such cancelled Rights Certificates, and in such case shall deliver a
certificate of destruction thereof to the Company.
Section 9. RESERVATION AND AVAILABILITY OF CAPITAL STOCK.
(a) The Company covenants and agrees that it will cause to be reserved and
kept available out of its authorized and unissued shares of Preferred Stock
(and, following the occurrence of a Section 11(a)(ii) Event, out of its
authorized and unissued shares of Common Stock and/or other securities or out of
its authorized and issued shares held in its treasury), the number of shares of
Preferred Stock (and, following the occurrence of a Section 11(a)(ii) Event,
Common Stock and/or other securities) that, as provided in this Agreement
including Section 11(a)(iii) hereof, will be sufficient to permit the exercise
in full of all outstanding Rights.
(b) So long as the shares of Preferred Stock (and, following the
occurrence of a Section 11(a)(ii) Event, Common Stock and/or other
securities) issuable and deliverable upon the exercise of the Rights may be
listed on any national securities exchange, the Company shall use its best
efforts to cause, from and after such time as the Rights become exercisable,
all shares reserved for such issuance to be listed on such exchange upon
official notice of issuance upon such exercise.
(c) The Company shall use its best efforts to (i) file, as soon as
practicable following the earliest date after the first occurrence of a Section
11(a)(ii) Event on which the consideration to be delivered by the Company upon
exercise of the Rights has been determined in accordance with Section 11(a)(iii)
hereof, a registration statement under the Act, with respect to the securities
purchasable upon exercise of the Rights on an appropriate form, (ii) cause such
registration statement to become effective as soon as practicable after such
filing, and (iii) cause such registration statement to remain effective (with a
prospectus at all times meeting the requirements of the Act) until the earlier
of (A) the date as of which the Rights are no longer exercisable for such
securities, and (B) the date of the expiration of the Rights. The Company will
also take such action as may be appropriate under, or to ensure compliance with,
the securities or "blue sky" laws of the various states in connection with the
exercisability of the Rights. The Company may temporarily suspend, for a period
of time not to exceed ninety (90) days after
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the date set forth in clause (i) of the first sentence of this Section 9(c),
the exercisability of the Rights in order to prepare and file such
registration statement and permit it to become effective. Upon 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 has been rescinded. In
addition, if the Company shall determine that a registration statement is
required following the Distribution Date, the Company may temporarily suspend
the exercisability of the Rights until such time as a registration statement
has been declared effective. Notwithstanding any provision of this Agreement
to the contrary, the Rights shall not be exercisable in any jurisdiction if
the requisite qualification in such jurisdiction shall not have been
obtained, the exercise thereof shall not be permitted under applicable law,
or a registration statement shall not have been declared effective.
(d) The Company covenants and agrees that it will take all such action as
may be necessary to ensure that all one one-thousandths of a share of Preferred
Stock (and, following the occurrence of a Section 11(a)(ii) Event, Common Stock
and/or other securities) delivered upon exercise of Rights shall, at the time of
delivery of the certificates for such shares (subject to payment of the Purchase
Price), be duly and validly authorized and issued and fully paid and
nonassessable.
(e) The Company further covenants and agrees that it will pay when due and
payable any and all federal and state transfer taxes and charges which may be
payable in respect of the issuance or delivery of the Rights Certificates and of
any certificates for a number of one one-thousandths of a share of Preferred
Stock (or Common Stock and/or other securities, as the case may be) upon the
exercise of Rights. The Company shall not, however, be required to pay any
transfer tax which may be payable in respect of any transfer or delivery of
Rights Certificates to a Person other than, or the issuance or delivery of a
number of one one-thousandths of a share of Preferred Stock (or Common Stock
and/or other securities, as the case may be) in respect of a name other than
that of the registered holder of the Rights Certificates evidencing Rights
surrendered for exercise or to issue or deliver any certificates for a number of
one one-thousandths of a share of Preferred Stock (or Common Stock and/or other
securities, as the case may be) in a name other than that of the registered
holder upon the exercise of any Rights until such tax shall have been paid (any
such tax being payable by the holder of such Rights Certificates 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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Section 10. PREFERRED STOCK RECORD DATE. Each person in whose name any
certificate for a number of one one-thousandths of a share of Preferred Stock
(or Common Stock and/or other securities, as the case may be) is issued upon the
exercise of Rights shall for all purposes be deemed to have become the holder of
record of such fractional shares of Preferred Stock (or Common Stock and/or
other securities, as the case may be) represented thereby on, and such
certificate shall be dated, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and all applicable transfer taxes) was made; PROVIDED, HOWEVER, that if the
date of such surrender and payment is a date upon which the Preferred Stock (or
Common Stock and/or other securities, as the case may be) transfer books of the
Company are closed, such Person shall be deemed to have become the record holder
of such shares (fractional or otherwise) on, and such certificate shall be
dated, the next succeeding Business Day on which the Preferred Stock (or Common
Stock and/or other securities, as the case may be) transfer books of the Company
are open. Prior to the exercise of the Rights evidenced thereby, the holder of a
Rights Certificate shall not be entitled to any rights of a stockholder of the
Company with respect to shares for which the Rights shall be exercisable,
including, without limitation, the right to vote, to receive dividends or other
distributions or to exercise any preemptive rights, and shall not be entitled to
receive any notice of any proceedings of the Company, except as provided herein.
Section 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER AND KIND OF SHARES OR
NUMBER OF RIGHTS. The Purchase Price, the number and kind of shares covered by
each Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.
(a)(i) In the event the Company shall at any time after the date of
this Agreement (A) declare a dividend on the Preferred Stock payable in
shares of Preferred Stock, (B) subdivide the outstanding Preferred Stock,
(C) combine the outstanding Preferred Stock into a smaller number of
shares, or (D) issue any shares of its capital stock in a reclassification
of the Preferred Stock (including any such reclassification in connection
with a consolidation or merger in which the Company is the continuing or
surviving corporation), except as otherwise provided in this Section 11(a)
and Section 7(e) hereof, the Purchase Price in effect at the time of the
record date for such dividend or of the effective date of such subdivision,
combination or reclassification, and the number and kind of shares of
19
Preferred Stock or capital stock, as the case may be, issuable on such
date, shall be proportionately adjusted so that the holder of any Right
exercised after such time shall be entitled to receive, upon payment of the
Purchase Price then in effect, the aggregate number and kind of shares of
Preferred Stock or capital stock, as the case may be, which, if such Right
had been exercised immediately prior to such date and at a time when the
Preferred Stock transfer books of the Company were open, such holder would
have owned upon such exercise and been entitled to receive by virtue of
such dividend, subdivision, combination or reclassification. If an event
occurs which would require an adjustment under both this Section 11(a)(i)
and Section 11(a)(ii) hereof, the adjustment provided for in this Section
11(a)(i) shall be in addition to, and shall be made prior to, any
adjustment required pursuant to Section 11(a)(ii) hereof.
(ii) In the event any Person shall, at any time after the Rights
Dividend Declaration Date, become an Acquiring Person, unless the event
causing such Person to become an Acquiring Person is a transaction set
forth in Section 13(a) hereof, or is an acquisition of shares of Common
Stock pursuant to a tender offer or an exchange offer for all outstanding
shares of Common Stock at a price and on terms determined by at least a
majority of the members of the Board of Directors who are not officers of
the Company and who are not representatives, nominees, Affiliates or
Associates of an Acquiring Person, after receiving advice from one or
more investment banking firms, to be (a) at a price which is fair to
stockholders and not inadequate (taking into account all factors which
such members of the Board of Directors deem relevant, including, without
limitation, prices which could reasonably be achieved if the Company or
its assets were sold on an orderly basis designed to realize maximum
value) and (b) otherwise in the best interests of the Company and its
stockholders (provided, however, that no such determination shall be
made during the Special Period) (a "Qualified Offer"),
then, promptly following the occurrence of such event, proper provision
shall be made so that each holder of a Right (except as provided below
and in Section 7(e) hereof) shall thereafter have the right to receive,
upon exercise thereof at the then current Purchase Price in accordance
with the terms of this Agreement, in lieu of a
20
number of one one-thousandths of a share of Preferred Stock, such number
of shares of Common Stock of the Company as shall equal the result obtained
by (x) multiplying the then current Purchase Price by the then number of
one one-thousandths of a share of Preferred Stock for which a Right was
exercisable immediately prior to the first occurrence of a
Section 11(a)(ii) Event, and (y) dividing that product (which, following
such first occurrence, shall thereafter be referred to as the
"Purchase Price" for each Right and for all purposes of this Agreement)
by 50% of the Current Market Price (determined pursuant to Section 11(d)
hereof) per share of Common Stock on the date of such first occurrence
(such number of shares, the "Adjustment Shares"). Notwithstanding anything
in this Agreement to the contrary, neither (i) the execution of the Merger
Agreement nor (ii) the consummation of the transactions contemplated by the
Merger Agreement shall be deemed to be a Section 11(a)(ii) event and
neither shall cause the Rights to be adjusted or exercisable under this
Agreement.
(iii) In the event that the number of shares of Common Stock which is
authorized by the Company's Restated Certificate of Incorporation, but not
outstanding or reserved for issuance for purposes other than upon exercise
of the Rights, is not sufficient to permit the exercise in full of the
Rights in accordance with the foregoing subparagraph (ii) of this Section
11(a), the
Company shall (A) determine the value of the Adjustment Shares issuable
upon the exercise of a Right (the "Current Value"), and (B) with respect to
each Right (subject to Section 7(e) hereof), make adequate provision to
substitute for the Adjustment Shares, upon the exercise of a Right and
payment of the applicable Purchase Price, (1) cash, (2) a reduction in the
Purchase Price, (3) Common Stock or other equity securities of the Company
(including, without limitation, shares, or units of shares, of preferred
stock, such as the Preferred Stock, which the Board of Directors has deemed
to have essentially the same value or economic rights as shares of Common
Stock (such shares of preferred stock being referred to as "Common Stock
Equivalents")), (4) debt securities of the Company, (5) other assets, or
(6) any combination of the foregoing, having an aggregate value equal to
the Current Value (less the amount of any reduction in the Purchase Price),
where such aggregate value has been determined by the Board
21
of Directors based upon the advice of a nationally recognized investment
banking firm selected by the Board of Directors; PROVIDED, HOWEVER, that if
the Company shall not have made adequate provision to deliver value
pursuant to clause (B) above within thirty (30) days following the later of
(x) the first occurrence of a Section 11(a)(ii) Event and (y) the date on
which the Company's right of redemption pursuant to Section 23(a) expires
(the later of (x) and (y) being referred to herein as the
"Section 11(a)(ii) Trigger Date"), then the Company shall be obligated to
deliver, upon the surrender for exercise of a Right and without requiring
payment of the Purchase Price, shares of Common Stock (to the extent
available) and then, if necessary, cash, which shares and/or cash have an
aggregate value equal to the Spread. For purposes of the preceding
sentence, the term "Spread" shall mean the excess of (i) the Current Value
over (ii) the Purchase Price. If the Board of Directors determines in good
faith that it is likely that sufficient additional shares of Common Stock
could be authorized for issuance upon exercise in full of the Rights, the
thirty (30) day period set forth above may be extended to the extent
necessary, but not more than ninety (90) days after the Section 11(a)(ii)
Trigger Date, in order that the Company may seek stockholder approval for
the authorization of such additional shares (such thirty (30) day period,
as it may be extended, is herein called the "Substitution Period"). To the
extent that the Company determines that action should be taken pursuant to
the first and/or third sentences of this Section 11(a)(iii), the Company
(1) shall provide, subject to Section 7(e) hereof, that such action shall
apply uniformly to all outstanding Rights, and (2) may suspend the
exercisability of the Rights until the expiration of the Substitution
Period in order to seek such stockholder approval for such authorization
of additional shares and/or to decide the appropriate form of distribution
to be made pursuant to such first sentence and to determine the value
thereof. In the event of any such suspension, the Company shall issue a
public announcement stating that the exercisability of the Rights has been
temporarily suspended, as well as a public announcement at such time as the
suspension is no longer in effect. For purposes of this Section 11(a)(iii),
the value of each Adjustment Share shall be the Current Market Price (as
determined pursuant to Section 11(d) hereof) per share of the Common Stock
on the Section 11(a)(ii) Trigger Date and the per share or per unit value
of any Common Stock Equivalent shall
22
be deemed to equal the Current Market Price per share of the Common Stock
on such date.
(b) In case the Company shall fix a record date for the issuance of rights,
options or warrants to all holders of Preferred Stock entitling them to
subscribe for or purchase (for a period expiring within forty-five (45) calendar
days after such record date) Preferred Stock (or shares having the same rights,
privileges and preferences as the shares of Preferred Stock ("Equivalent
Preferred Stock")) or securities convertible into Preferred Stock or Equivalent
Preferred Stock at a price per share of Preferred Stock or per share of
Equivalent Preferred Stock (or having a conversion price per share, if a
security convertible into Preferred Stock or Equivalent Preferred Stock) less
than the Current Market Price (as determined pursuant to Section 11(d) hereof)
per share of Preferred Stock on such record date, the Purchase Price to be in
effect after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the number of shares of Preferred Stock outstanding
on such record date, plus the number of shares of Preferred Stock which the
aggregate offering price of the total number of shares of Preferred Stock and/or
Equivalent Preferred Stock so to be offered (and/or the aggregate initial
conversion price of the convertible securities so to be offered) would purchase
at such Current Market Price, and the denominator of which shall be the number
of shares of Preferred Stock outstanding on such record date, plus the number of
additional shares of Preferred Stock and/or Equivalent Preferred Stock to be
offered for subscription or purchase (or into which the convertible securities
so to be offered are initially convertible). In case such subscription price may
be paid by delivery of consideration, part or all of which may be in a form
other than cash, the value of such consideration shall be as determined in
good faith by the Board of Directors, whose determination shall be described
in a statement filed with the Rights Agent and shall be binding on the Rights
Agent and the holders of the Rights. Shares of Preferred Stock owned by or
held for the account of the Company shall not be deemed outstanding for the
purpose of any such computation. Such adjustment shall be made successively
whenever such a record date is fixed, and in the event that such rights or
warrants are not so issued, the Purchase Price shall be adjusted to be the
Purchase Price which would then be in effect if such record date had not been
fixed.
(c) In case the Company shall fix a record date for a distribution to all
holders of Preferred Stock (including any such distribution made in connection
with a consolidation or merger in which the Company is the continuing
corporation), cash (other than a regular quarterly cash dividend out of the
earnings or
23
retained earnings of the Company), assets (other than a dividend payable in
Preferred Stock, but including any dividend payable in stock other than
Preferred Stock) or evidences of indebtedness, or of subscription rights or
warrants (excluding those referred to in Section 11(b) hereof), the Purchase
Price to be in effect after such record date shall be determined by
multiplying the Purchase Price in effect immediately prior to such record
date by a fraction, the numerator of which shall be the Current Market Price
(as determined pursuant to Section 11(d) hereof) per share of Preferred Stock
on such record date, less the fair market value (as determined in good faith
by the Board of Directors, whose determination shall be described in a
statement filed with the Rights Agent) of the portion of the cash, assets or
evidences of indebtedness so to be distributed or of such subscription rights
or warrants applicable to a share of Preferred Stock, and the denominator of
which shall be such Current Market Price (as determined pursuant to Section
11(d) hereof) per share of Preferred Stock. Such adjustments shall be made
successively whenever such a record date is fixed, and in the event that such
distribution is not so made, the Purchase Price shall be adjusted to be the
Purchase Price which would have been in effect if such record date had not
been fixed.
(d)(i) For the purpose of any computation hereunder, other than
computations made pursuant to Section 11(a)(iii) hereof, the Current Market
Price per share of Common Stock on any date shall be deemed to be the
average of the daily closing prices per share of such Common Stock for the
thirty (30) consecutive Trading Days immediately prior to such date, and
for purposes of computations made pursuant to Section 11(a)(iii) hereof,
the Current Market Price per share of Common Stock on any date shall be
deemed to be the average of the daily closing prices per share of such
Common Stock for the ten (10) consecutive Trading Days immediately
following such date; PROVIDED, HOWEVER, that in the event that the Current
Market Price per share of the Common Stock is determined during a period
following the announcement by the issuer of such Common Stock of (A) a
dividend or distribution on such Common Stock payable in shares of such
Common Stock or securities convertible into shares of such Common Stock
(other than the Rights), or (B) any subdivision, combination or
reclassification of such Common Stock, and the ex-dividend date for such
dividend or distribution, or the record date for such subdivision,
combination or reclassification shall not have occurred prior to the
commencement of the requisite thirty (30) Trading Day or ten (10) Trading
Day period, as set forth above, then, and in each such case, the Current
Market Price shall be properly adjusted to take into account ex-dividend
trading. The closing price for each
24
day shall be the last sale price, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted
to trading on the New York Stock Exchange or, if the shares of Common Stock
are not listed or admitted to trading on the New York Stock Exchange, as
reported in the principal consolidated transaction reporting system with
respect to securities listed on the principal national securities exchange
on which the shares of Common Stock are listed or admitted to trading or,
if the shares of Common Stock are not listed or admitted to trading on any
national securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter
market, as reported by the National Association of Securities Dealers
Automated Quotation System ("NASDAQ") or such other system then in use, or,
if on any such date the shares of Common Stock are not quoted by any such
organization, the average of the closing bid and asked prices as furnished
by a professional market maker making a market in the Common Stock selected
by the Board of Directors. If on any such date no market maker is making a
market in the Common Stock, the fair value of such shares on such date as
determined in good faith by the Board of Directors shall be used. The term
"Trading Day" shall mean a day on which the principal national securities
exchange on which the shares of Common Stock are listed or admitted to
trading is open for the transaction of business or, if the shares of Common
Stock are not listed or admitted to trading on any national securities
exchange, a Business Day. If the Common Stock is not publicly held or not
so listed or traded, Current Market Price per share shall mean the fair
value per share as determined in good faith by the Board of Directors,
whose determination shall be described in a statement filed with the Rights
Agent and shall be conclusive for all purposes.
(ii) For the purpose of any computation hereunder, the Current Market
Price per share of Preferred Stock shall be determined in the same manner
as set forth above for the Common Stock in clause (i) of this Section 11(d)
(other than the last sentence thereof). If the Current Market Price per
share of Preferred Stock cannot be determined in the manner provided above
or if the Preferred Stock is not publicly held or listed or traded in a
manner described in clause (i) of this Section 11(d), the Current Market
Price per share of Preferred Stock shall be conclusively deemed to be an
amount equal
25
to 1000 (as such number may be appropriately adjusted for such events as
stock splits, stock dividends and recapitalizations with respect
to the Common Stock occurring after the date of this Agreement) multiplied
by the Current Market Price per share of the Common Stock. If neither the
Common Stock nor the Preferred Stock is publicly held or so listed or
traded, Current Market Price per share of the Preferred Stock shall mean
the fair value per share as determined in good faith by the Board of
Directors, whose determination shall be described in a statement filed with
the Rights Agent and shall be conclusive for all purposes.
(e) Anything herein to the contrary notwithstanding, no adjustment in the
Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least one percent (1%) in the Purchase Price;
PROVIDED, HOWEVER, that any adjustments which by reason of this Section 11(e)
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this Section 11 shall be made
to the nearest cent or to the nearest ten-thousandth of a share of Common Stock
or other share or ten-millionth of a share of Preferred Stock, as the case may
be. Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than the earlier of (i) three
(3) years from the date of the transaction which mandates such adjustment, or
(ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section 11(a)(ii) or
Section 13(a) hereof, the holder of any Right thereafter exercised shall become
entitled to receive any shares of capital stock other than Preferred Stock,
thereafter the number of such other shares so receivable upon exercise of any
Right and the Purchase Price thereof shall be subject to adjustment from time to
time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Preferred Stock contained in Sections 11(a),
(b), (c), (e), (g), (h), (i), (j), (k) and (m), and the provisions of
Sections 7, 9, 10, 13 and 14 hereof with respect to the Preferred Stock shall
apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-thousandths of a
share of Preferred Stock purchasable from time to time hereunder upon exercise
of the Rights, all subject to further adjustment as provided herein.
26
(h) Unless the Company shall have exercised its election as provided in
Section 11(i), upon each adjustment of the Purchase Price as a result of the
calculations made in Sections 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of one one-thousandths of
a share of Preferred Stock (calculated to the nearest one-millionth) obtained by
(i) multiplying (x) the number of one one-thousandths of a share covered by a
Right immediately prior to this adjustment, by (y) the Purchase Price in effect
immediately prior to such adjustment of the Purchase Price, and (ii) dividing
the product so obtained by the Purchase Price in effect immediately after such
adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment of the
Purchase Price to adjust the number of Rights, in lieu of any adjustment in the
number of one one-thousandths of a share of Preferred Stock purchasable upon the
exercise of a Right. Each of the Rights outstanding after the adjustment in the
number of Rights shall be exercisable for the number of one one-thousandths of a
share of Preferred Stock for which a Right was exercisable immediately prior to
such adjustment. Each Right held of record prior to such adjustment of the
number of Rights shall become that number of Rights (calculated to the nearest
one-ten-thousandth) obtained by dividing the Purchase Price in effect
immediately prior to adjustment of the Purchase Price by the Purchase Price in
effect immediately after adjustment of the Purchase Price. The Company shall
make a public announcement of its election to adjust the number of Rights,
indicating the record date for the adjustment, and, if known at the time, the
amount of the adjustment to be made. This record date may be the date on which
the Purchase Price is adjusted or any day thereafter, but, if the Rights
Certificates have been issued, shall be at least ten (10) days later than the
date of the public announcement.
If Rights Certificates have been issued, upon each adjustment of the number of
Rights pursuant to this Section 11(i), the Company shall, as promptly as
practicable, cause to be distributed to holders of record of Rights Certificates
on such record date Rights Certificates evidencing, subject to Section 14
hereof, the additional Rights to which such holders shall be entitled as a
result of such adjustment, or, at the option of the Company, shall cause to be
distributed to such holders of record in substitution and replacement for the
Rights Certificates held by such holders prior to the date of adjustment, and
upon surrender thereof, if required by the Company, new Rights Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment. Rights Certificates so to be distributed shall be issued, executed
and countersigned in the manner provided for herein (and may bear, at the option
of
27
the Company, the adjusted Purchase Price) and shall be registered in the
names of the holders of record of Rights Certificates on the record date
specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or the
number of one one-thousandths of a share of Preferred Stock issuable upon the
exercise of the Rights, the Rights Certificates theretofore and thereafter
issued may continue to express the Purchase Price per one one-thousandth of a
share and the number of one one-thousandth of a share which were expressed in
the initial Rights Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing the
Purchase Price below the then stated value, if any, of the number of one
one-thousandths of a share of Preferred Stock issuable upon exercise of the
Rights, the Company shall take any corporate action which may, in the opinion of
its counsel, be necessary in order that the Company may validly and legally
issue fully paid and nonassessable such number of one one-thousandths of a share
of Preferred Stock at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an adjustment
in the Purchase Price be made effective as of a record date for a specified
event, the Company may elect to defer until the occurrence of such event the
issuance to the holder of any Right exercised after such record date the number
of one one-thousandths of a share of Preferred Stock and other capital stock or
securities of the Company, if any, issuable upon such exercise over and above
the number of one one-thousandths of a share of Preferred Stock and other
capital stock or securities of the Company, if any, issuable upon such exercise
on the basis of the Purchase Price in effect prior to such adjustment; PROVIDED,
HOWEVER, that the Company shall deliver to such holder a due xxxx or other
appropriate instrument evidencing such holder's right to receive such
additional shares (fractional or otherwise) or securities upon the occurrence
of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that in their good faith judgment the Board of Directors shall
determine to be advisable in order that any (i) consolidation or subdivision of
the Preferred Stock, (ii) issuance wholly for cash of any shares of Preferred
Stock at less than the Current Market Price, (iii) issuance wholly for cash of
shares of Preferred
28
Stock or securities which by their terms are convertible into or exchangeable
for shares of Preferred Stock, (iv) stock dividends or (v) issuance of
rights, options or warrants referred to in this Section 11, hereafter made by
the Company to holders of its Preferred Stock shall not be taxable to such
stockholders.
(n) The Company covenants and agrees that it shall not, at any time after
the Distribution Date, (i) consolidate with any other Person (other than a
Subsidiary of the Company in a transaction which complies with Section 11(o)
hereof), (ii) merge with or into any other Person (other than a Subsidiary of
the Company in a transaction which complies with Section 11(o) hereof), or (iii)
sell or transfer (or permit any Subsidiary to sell or transfer), in one
transaction, or a series of related transactions, assets, cash flow or earning
power aggregating more than 50% of the assets or earning power of the Company
and its Subsidiaries (taken as a whole) to any other Person or Persons (other
than the Company and/or any of its Subsidiaries in one or more transactions each
of which complies with Section 11(o) hereof), if (x) at the time of or
immediately after such consolidation, merger or sale there are any rights,
warrants or other instruments or securities outstanding or agreements in effect
which would substantially diminish or otherwise eliminate the benefits intended
to be afforded by the Rights or (y) prior to, simultaneously with or immediately
after such consolidation, merger or sale, the stockholders of the Person who
constitutes, or would constitute, the "Principal Party" for purposes of Section
13(a) hereof shall have received a distribution of Rights previously owned by
such Person or any of its Affiliates and Associates.
(o) The Company covenants and agrees that, after the Distribution Date, it
will not, except as permitted by Section 23 or Section 27 hereof, take (or
permit any Subsidiary to take) any action if at the time such action is taken it
is reasonably foreseeable that such action will diminish substantially or
otherwise eliminate the benefits intended to be afforded by the Rights.
(p) Anything in this Agreement to the contrary notwithstanding, in the
event that the Company shall at any time after the Rights Dividend Declaration
Date and prior to the earlier of the Distribution Date or the Expiration Date
(i) declare a dividend on the outstanding shares of Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding shares of Common Stock,
or (iii) combine the outstanding shares of Common Stock into a smaller number of
shares, the number of Rights associated with each share of Common Stock then
outstanding, or issued or delivered thereafter but prior to the Distribution
Date, shall be proportionately adjusted so that the number of Rights
29
thereafter
associated with each share of Common Stock following any such event shall equal
the result obtained by multiplying the number of Rights associated with each
share of Common Stock immediately prior to such event by a fraction the
numerator which shall be the total number of shares of Common Stock outstanding
immediately prior to the occurrence of the event and the denominator of which
shall be the total number of shares of Common Stock outstanding immediately
following the occurrence of such event.
Section 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES.
Whenever an adjustment is made as provided in Section 11 and Section 13 hereof,
the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent, and with each transfer agent for the
Preferred Stock and the Common Stock, a copy of such certificate and (c) if a
Distribution Date has occurred, mail a brief summary thereof to each holder of a
Rights Certificate (or, if prior to the Distribution Date, to each holder of a
certificate representing shares of Common Stock) in accordance with Section 25
hereof. The Rights Agent shall be fully protected in relying on any such
certificate and on any adjustment therein contained.
Section 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS CASH FLOW
OR EARNING POWER.
(a) In the event that, following the Stock Acquisition Date, directly or
indirectly, (x) the Company shall consolidate with, or merge with and into, any
other Person (other than a Subsidiary of the Company in a transaction which
complies with Section 11(o) hereof), and the Company shall not be the continuing
or surviving corporation of such consolidation or merger, (y) any Person (other
than a Subsidiary of the Company in a transaction which complies with Section
11(o) hereof) shall consolidate with, or merge with or into, the Company, and
the Company shall be the continuing or surviving corporation of such
consolidation or merger and, in connection with such consolidation or merger,
all or part of the outstanding shares of Common Stock shall be changed into
or exchanged for stock or other securities of any other Person or cash or any
other property, or (z) the Company shall sell or otherwise transfer (or one
or more of its Subsidiaries shall sell or otherwise transfer), in one
transaction or a series of related transactions, assets, cash flow or earning
power aggregating more than 50% of the assets, cash flow or earning power of
the Company and its Subsidiaries (taken as a whole) to any Person or Persons
(other than the Company or any Subsidiary of the Company in one
30
or more transactions each of which complies with Section 11(o) hereof), then,
and in each such case (except as may be contemplated by Section 13(d)
hereof), proper provision shall be made so that: (i) each holder of a Right,
except as provided in Section 7(e) hereof, shall thereafter have the right to
receive, upon the exercise thereof at the then current Purchase Price in
accordance with the terms of this Agreement, such number of validly
authorized and issued, fully paid, non-assessable and freely tradeable shares
of Common Stock of the Principal Party (as such term is hereinafter defined),
not subject to any liens, encumbrances, rights of first refusal or other
adverse claims, as shall be equal to the result obtained by (1) multiplying
the then current Purchase Price by the number of one one-thousandths of a
share of Preferred Stock for which a Right is exercisable immediately prior
to the first occurrence of a Section 13 Event (or, if a Section 11(a)(ii)
Event has occurred prior to the first occurrence of a Section 13 Event,
multiplying the number of such one one-thousandths of a share for which a
Right was exercisable immediately prior to the first occurrence of a Section
11(a)(ii) Event by the Purchase Price in effect immediately prior to such
first occurrence of a Section 11(a)(ii) Event), and (2) dividing that product
(which, following the first occurrence of a Section 13 Event, shall be
referred to as the "Purchase Price" for each Right and for all purposes of
this Agreement) by 50% of the Current Market Price (determined pursuant to
Section 11(d)(i) hereof) per share of the Common Stock of such Principal
Party on the date of consummation of such Section 13 Event; (ii) such
Principal Party shall thereafter be liable for, and shall assume, by virtue
of such Section 13 Event, all the obligations and duties of the Company
pursuant to this Agreement; (iii) the term "Company" shall thereafter be
deemed to refer to such Principal Party, it being specifically intended that
the provisions of Section 11 hereof shall apply only to such Principal Party
following the first occurrence of a Section 13 Event; (iv) such Principal
Party shall take such steps (including, but not limited to, the reservation
of a sufficient number of shares of its Common Stock) in connection with the
consummation of any such transaction as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably may
be, in relation to its shares of Common Stock thereafter deliverable upon the
exercise of the Rights; and (v) the provisions of Section 11(a)(ii) hereof
shall be of no effect following the first occurrence of any Section 13 Event.
(b) "Principal Party" shall mean:
(i) in the case of any transaction described in clause (x) or (y) of
the first sentence of Section 13(a), the Person that is the issuer of any
securities into which shares of Common Stock of
31
the Company are converted in such merger or consolidation, and if no
securities are so issued, the Person that is the other party to such
merger or consolidation; and
(ii) in the case of any transaction described in clause (z) of the
first sentence of Section 13(a), the Person that is the party receiving the
greatest portion of the assets, cash flow or earning power transferred
pursuant to such transaction or transactions; PROVIDED, HOWEVER, that in
any such case, (1) if the Common Stock of such Person is not at such time
and has not been continuously over the preceding twelve (12) month period
registered under Section 12 of the Exchange Act, and such Person is a
direct or indirect Subsidiary of another Person the Common Stock of which
is and has been so registered, "Principal Party" shall refer to such other
Person; and (2) in case such Person is a Subsidiary, directly or
indirectly, of more than one Person, the Common Stock of two or more of
which are and have been so registered, "Principal Party" shall refer to
whichever of such Persons is the issuer of the Common Stock having the
greatest aggregate market value.
(c) The Company shall not consummate any such consolidation, merger, sale
or transfer unless the Principal Party shall have a sufficient number of
authorized shares of its Common Stock which have not been issued or reserved for
issuance to permit the exercise in full of the Rights in accordance with this
Section 13 and unless prior thereto the Company and such Principal Party shall
have executed and delivered to the Rights Agent a supplemental agreement
providing for the terms set forth in paragraphs (a) and (b) of this Section 13
and further providing that, as soon as practicable after the date of any
consolidation, merger or sale of assets mentioned in paragraph (a) of this
Section 13, the Principal Party will
(i) prepare and file a registration statement under the Act, with
respect to the Rights and the securities purchasable upon exercise of
the Rights on an appropriate form, and will use its best efforts to
cause such registration statement to (A) become effective as soon as
practicable after such filing and (B) remain effective (with a
prospectus at all times meeting the requirements of the Act) until
the Expiration Date; and
32
(ii) take all such other action as may be necessary to enable the
Principal Party to issue the securities purchasable upon exercise of the
Rights, including but not limited to the registration or qualification of
such securities under all requisite securities laws of jurisdictions of the
various states and the listing of such securities on such exchanges and
trading markets as may be necessary or appropriate; and
(iii) will deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates which comply
in all respects with the requirements for registration on Form 10 under the
Exchange Act.
The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. In the event that a Section 13 Event
shall occur at any time after the occurrence of a Section 11(a)(ii) Event, the
Rights which have not theretofore been exercised shall thereafter become
exercisable in the manner described in Section 13(a).
(d) Notwithstanding anything in this Agreement to the contrary, Section 13
shall not be applicable to a transaction described in subparagraphs (x) and (y)
of Section 13(a) if (i) such transaction is consummated with a Person or Persons
who acquired shares of Common Stock pursuant to a tender offer or exchange offer
for all outstanding shares of Common Stock which is a Qualified Offer as such
term is defined in Section 11(a)(ii) hereof (or a wholly owned subsidiary of any
such Person or Persons), (ii) the price per share of Common Stock offered in
such transaction is not less than the price per share of Common Stock paid to
all holders of shares of Common Stock whose shares were purchased pursuant to
such tender offer or exchange offer and (iii) the form of consideration being
offered to the remaining holders of shares of Common Stock pursuant to such
transaction is the same as the form of consideration paid pursuant to such
tender offer or exchange offer. Notwithstanding anything in this Agreement to
the contrary, neither (i) the execution of the Merger Agreement nor (ii) the
consummation of the transactions contemplated by the Merger Agreement shall be
deemed to be a Section 13 Event and neither shall cause the Rights to be
adjusted or exercisable under this Agreement. Upon consummation of any such
transaction contemplated by this Section 13(d) (other than the Merger), all
Rights hereunder shall expire.
33
Section 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
(a) The Company shall not be required to issue fractions of Rights, except
prior to the Distribution Date as provided in Section 11(i) or Section 11(p)
hereof, or to distribute Rights Certificates which evidence fractional Rights.
In lieu of such fractional Rights, the Company shall pay to the registered
holders of the Rights Certificates with regard to which such fractional Rights
would otherwise be issuable, an amount in cash equal to the same fraction of the
current market value of 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
for the Trading Day immediately prior to the date on which such fractional
Rights would have been otherwise issuable. The closing price of the Rights for
any day shall be the last sale price, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Rights are not listed or
admitted to trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Rights are listed or
admitted to trading, or if the Rights are not listed or admitted to trading on
any national securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter market,
as reported by NASDAQ or such other system then in use or, if on any such date
the Rights are not quoted by any such organization, the average of the closing
bid and asked prices as furnished by a professional market maker making a market
in the Rights, selected by the Board of Directors. If on any such date no such
market maker is making a market in the Rights, the fair value of the Rights on
such date as determined in good faith by the Board of Directors shall be used.
(b) The Company shall not be required to issue fractions of shares of
Preferred Stock (other than fractions which are integral multiples of one
one-thousandth of a share of Preferred Stock) upon exercise of the Rights or to
distribute certificates which evidence fractional shares of Preferred Stock
(other than fractions which are integral multiples of one one-thousandth of a
share of Preferred Stock). In lieu of fractional shares of Preferred Stock that
are not integral multiples of one one-thousandth of a share of Preferred Stock,
the Company may pay to the registered holders of Rights Certificates at the
time such Rights are exercised as herein provided an amount in cash equal to
the same fraction of the current market value of one one-thousandth of a
share of Preferred Stock. For purposes of this
34
Section 14(b), the current market value of one one-thousandth of a share of
Preferred Stock shall be one one-thousandth of the closing price of a share
of Preferred Stock (as determined pursuant to Section 11(d)(ii) hereof) for
the Trading Day immediately prior to the date of such exercise.
(c) Following the occurrence of a Triggering Event, the Company shall not
be required to issue fractions of shares of Common Stock upon exercise of the
Rights or to distribute certificates which evidence fractional shares of Common
Stock. In lieu of fractional shares of Common Stock, the Company may pay to the
registered holders of Rights Certificates at the time such Rights are exercised
as herein provided an amount in cash equal to the same fraction of the current
market value of one (1) share of Common Stock. For purposes of this Section
14(c), the current market value of one share of Common Stock shall be the
closing price per share of Common Stock (as determined pursuant to Section
11(d)(i) hereof) on the Trading Day immediately prior to the date of such
exercise.
(d) The holder of a Right by the acceptance of the Rights expressly waives
his right to receive any fractional Rights or any fractional shares upon
exercise of a Right, except as permitted by this Section 14.
Section 15. RIGHTS OF ACTION. All rights of action in respect of this
Agreement are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock); and any registered holder of any Rights Certificate (or, prior to
the Distribution Date, of the Common Stock), without the consent of the Rights
Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of the Common Stock), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Rights Certificate in the manner provided
in such Rights Certificate and in this Agreement. Without limiting the foregoing
or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and shall be entitled to specific performance
of the obligations hereunder and injunctive relief against actual or threatened
violations of the obligations hereunder of any Person subject to this Agreement.
35
Section 16. AGREEMENT OF RIGHTS HOLDERS. Every holder of a Right by
accepting the same consents and agrees with the Company and the Rights Agent and
with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable only in
connection with the transfer of Common Stock;
(b) after the Distribution Date, the Rights Certificates are transferable
only on the registry books of the Rights Agent if surrendered at the principal
office or offices of the Rights Agent designated for such purposes, duly
endorsed or accompanied by a proper instrument of transfer and with the
appropriate forms and certificates fully executed;
(c) subject to Section 6(a) and Section 7(f) hereof, the Company and the
Rights Agent may deem and treat the Person in whose name a Rights Certificate
(or, prior to the Distribution Date, the associated Common Stock certificate) is
registered as the absolute owner thereof and of the Rights evidenced thereby
(notwithstanding any notations of ownership or writing on the Rights
Certificates or the associated Common Stock certificate made by anyone other
than the Company or the Rights Agent) for all purposes whatsoever, and neither
the Company nor the Rights Agent, subject to the last sentence of Section 7(e)
hereof, shall be required to be affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the contrary, neither the
Company nor the Rights Agent shall have any liability to any holder of a 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, decree or ruling issued by a court of competent jurisdiction or by
a governmental, regulatory or administrative agency or commission, or any
statute, rule, regulation or executive order promulgated or enacted by any
governmental authority, prohibiting or otherwise restraining performance of such
obligation; PROVIDED, HOWEVER, the Company must use its best efforts to have any
such order, decree or ruling lifted or otherwise overturned as soon as possible.
Section 17. RIGHTS CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER. No holder,
as such, of any Rights Certificate shall be entitled to vote, receive dividends
or be deemed for any purpose the holder of the number of one one-thousandths of
a share of Preferred Stock or any other securities of the Company which may at
any time be issuable on the exercise of the Rights represented thereby,
36
nor shall anything contained herein or in any Rights Certificate be construed
to confer upon the holder of any Rights Certificate, as such, any of the
rights of a stockholder of the Company or any right to vote for the election
of directors or upon any matter submitted to stockholders at any meeting
thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in Section 25 hereof), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by such Rights
Certificate shall have been exercised in accordance with the provisions
hereof.
Section 18. CONCERNING THE RIGHTS AGENT.
(a) The Company agrees to pay to the Rights Agent reasonable compensation
for all services rendered by it hereunder and, from time to time, on demand of
the Rights Agent, its reasonable expenses and counsel fees and disbursements and
other disbursements incurred in the administration and execution of this
Agreement and the exercise and performance of its duties hereunder. The Company
also agrees to indemnify the Rights Agent for, and to hold it harmless against,
any loss, liability, or expense, incurred without gross negligence, bad faith or
willful misconduct on the part of the Rights Agent, for anything done or omitted
by the Rights Agent in connection with the acceptance and administration of this
Agreement, including the costs and expenses of defending against any claim of
liability in the premises.
(b) The Rights Agent shall be protected and shall incur no liability for or
in respect of any action taken, suffered or omitted by it in connection with its
administration of this Agreement in reliance upon any Rights Certificate or
certificate for Common Stock 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.
Section 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT.
(a) Any corporation into which the Rights Agent or any successor Rights
Agent may be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Rights Agent or
37
any successor Rights Agent shall be a party, or any corporation succeeding to
the corporate trust, stock transfer or other stockholder services business of
the Rights Agent or any successor Rights Agent, shall be the successor to the
Rights Agent under this Agreement without the execution or filing of any
paper or any further act on the part of any of the parties hereto; but only
if such corporation would be eligible for appointment as a successor Rights
Agent under the provisions of Section 21 hereof. In case at the time such
successor Rights Agent shall succeed to the agency created by this Agreement,
any of the Rights Certificates shall have been countersigned but not
delivered, any such successor Rights Agent may adopt the countersignature of
a predecessor Rights Agent and deliver such Rights Certificates so
countersigned; and in case at that time any of the Rights Certificates shall
not have been countersigned, any successor Rights Agent may countersign such
Rights Certificates either in the name of the predecessor or in the name of
the successor Rights Agent; and in all such cases such Rights Certificates
shall have the full force provided in the Rights Certificates and in this
Agreement.
(b) In case at any time the name of the Rights Agent shall be changed and
at such time any of the Rights Certificates shall have been countersigned but
not delivered, the Rights Agent may adopt the countersignature under its prior
name and deliver Rights Certificates so countersigned; and in case at that time
any of the Rights Certificates shall not have been countersigned, the Rights
Agent may countersign such Rights Certificates either in its prior name or in
its changed name; and in all such cases such Rights Certificates shall have the
full force provided in the Rights Certificates and in this Agreement.
Section 20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the duties
and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Rights Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action taken
or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person and the
determination of Current Market Price) be proved or established by the Company
38
prior to taking or suffering any action hereunder, such fact or matter (unless
other evidence in respect thereof be herein specifically prescribed) may be
deemed to be conclusively proved and established by a certificate signed by the
Chairman of the Board of Directors, the President, any Vice President, the
Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary
of the Company and delivered to the Rights Agent; and such certificate shall
be full authorization to the Rights Agent for any action taken or suffered in
good faith by it under the provisions of this Agreement in reliance upon such
certificate.
(c) The Rights Agent shall be liable hereunder only for its own gross
negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Rights
Certificates or be required to verify the same (except as to its
countersignature on such Rights Certificates), but all such statements and
recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect of
the validity of this Agreement or the execution and delivery hereof (except the
due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Rights Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Rights Certificate; nor shall it
be responsible for any adjustment required under the provisions of Section 11,
Section 13 or Section 24 hereof or responsible for the manner, method or amount
of any such adjustment or the ascertaining of the existence of facts that would
require any such adjustment (except with respect to the exercise of Rights
evidenced by Rights Certificates after actual notice of any such adjustment);
nor shall it by any act hereunder be deemed to make any representation or
warranty as to the authorization or reservation of any shares of Common Stock or
Preferred Stock to be issued pursuant to this Agreement or any Rights
Certificate or as to whether any shares of Common Stock or Preferred Stock will,
when so issued, be validly authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may
39
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 the
Chairman of the Board of Directors, the Chief Executive Officer, the President,
any Vice President, the Secretary, any Assistant Secretary, the Chief Financial
Officer, the Treasurer or any Assistant Treasurer of the Company, and to apply
to such officers for advice or instructions in connection with its duties, and
it shall not be liable for any action taken or suffered to be taken by it in
good faith in accordance with instructions of any such officer.
(h) The Rights Agent and any stockholder, director, officer or employee of
the Rights Agent may buy, sell or deal in any of the Rights or other securities
of the Company or become pecuniarily interested in any transaction in which the
Company may be interested, or contract with or lend money to the Company or
otherwise act as fully and freely as though it were not Rights Agent under this
Agreement. Nothing herein shall preclude the Rights Agent from acting in any
other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by or through
its attorneys or agents, 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, HOWEVER, reasonable care was exercised in the
selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
there shall be reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.
(k) If, with respect to any Rights Certificate surrendered to the Rights
Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause 1 and/or 2
thereof, the
40
Rights Agent shall not take any further action with respect to such requested
exercise or transfer without first consulting with the Company.
Section 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon thirty (30) days' notice in writing mailed to the Company, and to each
transfer agent of the Common Stock and Preferred Stock, by registered or
certified mail, and, if such resignation occurs after the Distribution Date, to
the registered holders of the Rights Certificates by first-class mail. The
Company may remove the Rights Agent or any successor Rights Agent upon thirty
(30) days' 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 Stock and
Preferred Stock, by registered or certified mail, and, if such removal occurs
after the Distribution Date, to the holders of the Rights Certificates by
first-class mail. If the Rights Agent shall resign or be removed or shall
otherwise become incapable of acting, the Company shall appoint a successor to
the Rights Agent. If the Company shall fail to make such appointment within a
period of thirty (30) days after giving notice of such removal or after it has
been notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Rights Certificate (who shall,
with such notice, submit his Rights Certificate for inspection by the Company),
then any registered holder of any Rights Certificate may apply to any court of
competent jurisdiction for the appointment of a new Rights Agent. Any successor
Rights Agent, whether appointed by the Company or by such a court, shall be (a)
a legal business entity organized and doing business under the laws of the
United States or of the State of Texas or of any other state of the United
States, in good standing, having an office in the State of Texas, which is
authorized under such laws to exercise corporate trust, stock transfer or
stockholder services powers and which has at the time of its appointment as
Rights Agent a combined capital and surplus of at least $50,000,000 or (b) an
affiliate of a legal business entity described in clause (a) of this sentence.
After appointment, the successor Rights Agent shall be vested with the same
powers, rights, duties and responsibilities as if it had been originally named
as Rights Agent without further act or deed; but the predecessor Rights Agent
shall deliver and transfer to the successor Rights Agent any property at the
time held by it hereunder, and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose. Not later than the effective
date of any such appointment, the Company shall file notice thereof in writing
with the predecessor Rights Agent and each transfer agent of the Common Stock
and the Preferred Stock, and, if such appointment occurs after the Distribution
Date, mail a notice thereof in writing to the registered holders of the Rights
Certificates. Failure to give any notice provided for
41
in this Section 21, however, or any defect therein, shall not affect the
legality or validity of the resignation or removal of the Rights Agent or the
appointment of the successor Rights Agent, as the case may be.
Section 22. ISSUANCE OF NEW RIGHTS CERTIFICATES. Notwithstanding any of the
provisions of this Agreement or of the Rights to the contrary, the Company may,
at its option, issue new Rights Certificates evidencing Rights in such form as
may be approved by the Board of Directors to reflect any adjustment or change in
the Purchase Price and the number or kind or class of shares or other securities
or property purchasable under the Rights Certificates made in accordance with
the provisions of this Agreement. In addition, in connection with the issuance
or sale of shares of Common Stock following the Distribution Date and prior to
the redemption or expiration of the Rights, the Company (a) shall, with respect
to shares of Common Stock so issued or sold pursuant to the exercise of stock
options or under any employee plan or arrangement, granted or awarded as of the
Distribution Date, or upon the exercise, conversion or exchange of securities
hereinafter issued by the Company, and (b) may, in any other case, if deemed
necessary or appropriate by the Board of Directors, issue Rights Certificates
representing the appropriate number of Rights in connection with such issuance
or sale; PROVIDED, HOWEVER, that (i) no such Rights Certificate shall be issued
if, and to the extent that, the Company shall be advised by counsel that such
issuance would create a significant risk of material adverse tax consequences to
the Company or the Person to whom such Rights Certificate would be issued, and
(ii) no such Rights Certificate shall be issued if, and to the extent that,
appropriate adjustment shall otherwise have been made in lieu of the issuance
thereof.
Section 23. REDEMPTION AND TERMINATION.
(a) The Board of Directors may, at its option, at any time prior to the
earlier of (i) the close of business on the tenth Business Day following the
Stock Acquisition Date (or, if the Stock Acquisition Date shall have occurred
prior to the Record Date, the close of business on the tenth Business Day
following the Record Date), or (ii) the Final Expiration Date, redeem all but
not less than all of the then outstanding Rights at a redemption price of $.001
per Right, as such amount may be appropriately adjusted to reflect any stock
split, stock dividend or similar transaction occurring after the date hereof
(such redemption price being hereinafter referred to as the "Redemption Price").
Notwithstanding anything contained in this Agreement to the contrary, the Rights
shall not be exercisable after the first occurrence of a Section 11(a)(ii) Event
until such time as the Company's right of
42
redemption hereunder has expired. The Company may, at its option, pay the
Redemption Price in cash, shares of Common Stock (based on the Current Market
Price, as defined in Section 11(d)(i) hereof, of the Common Stock at the time
of redemption) or any other form of consideration deemed appropriate by the
Board of Directors.
(b) Immediately upon the action of the Board of Directors ordering the
redemption of the Rights, evidence of which shall have been filed with the
Rights Agent and without any further action and without any notice, the right to
exercise the Rights will terminate and the only right thereafter of the holders
of Rights shall be to receive the Redemption Price for each Right so held.
Promptly after the action of the Board of Directors 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 each holder's last address as it appears upon the registry books
of the Rights Agent or, prior to the Distribution Date, on the registry books of
the transfer agent for the Common Stock. Any notice which is mailed in the
manner herein provided shall be deemed given, whether or not the holder receives
the notice. Each such notice of redemption will state the method by which the
payment of the Redemption Price will be made.
(c) Notwithstanding the provisions of Section 23(a) hereof, if, within 180
days of a public announcement by a third party of an intent or proposal to
engage (without the current and continuing concurrence of the Board of
Directors) in a transaction involving an acquisition of or business combination
with the Company or otherwise to become an Acquiring Person, there is an
election of Directors (whether at one or more stockholder meetings and/or
pursuant to a written stockholder consent) resulting in a majority of the Board
of Directors being comprised of persons who were not nominated by the Board of
Directors in office immediately prior to such election, then following the
effectiveness of such election for a period of 180 days (the "Special Period")
the Rights, if otherwise then redeemable absent the provisions of this paragraph
(c), shall be redeemable upon either of the following conditions being
satisfied, but not otherwise:
(A) by a vote of a majority of the Directors then in office, provided
that
(I) before such vote, the Board of Directors shall have
implemented the Value Enhancement Procedures (as defined below) and
43
(II) promptly after such vote, the Company publicly announces
such vote and
(a) the manner in which the Value Enhancement Procedures
were implemented,
(b) any material financial, business, personal or other
benefit or relationship (an "Interest") which each Company
Director and each Affiliate of such Company Director (identifying
each Director and Affiliate separately in relation to each such
Interest) has in connection with any suggested, proposed or
pending transaction with or involving the Company (a
"Transaction"), or with any other party or Affiliate of any other
party to a Transaction, where such Transaction would or might, or
is intended to, be permitted or facilitated by redemption of the
Rights (an "Affected Transaction"), other than treatment as a
stockholder on a pro rata basis with other stockholders or
pursuant to compensation arrangements as a director or employee
of the Company or a subsidiary which have been previously
disclosed by the Company,
(c) the individual vote of each Director on the motion to
redeem the Rights, and
(d) the statement of any Director who voted for or against
the motion to redeem the Rights and desires to have a statement
included in such announcement, or
(B) if clause (A) is not applicable, by a vote of a majority of
the Directors then in office, provided that (I) if there is a
challenge to the Directors' action approving redemption and/or any
related Affected Transaction as a breach of the fiduciary duty of care
or loyalty, the Directors, solely for purposes of determining the
effectiveness of such redemption pursuant to this clause (B), are able
to establish the entire fairness of such redemption and, if
applicable, such related Affected Transaction, and (II) the Company
shall have publicly announced the vote of the Board of Directors
approving such redemption and, if applicable, such related Affected
Transaction, which announcement
44
shall set forth the information prescribed by clauses (A)(II)(b), (c)
and (d) above.
"Value Enhancement Procedures" shall mean:
(1) the selection by the Board of Directors of an independent
financial advisor (the "Independent Advisor") from among financial advisors
that have national standing, have established expertise in advising on
mergers, acquisitions and related matters and have no Interest relating to
an Affected Transaction, and have not during the preceding year provided
services to, been engaged by or been a financing source for any other party
to an Affected Transaction or any Affiliate of any such party or of any
Director (other than the Company and its subsidiaries);
(2) whether or not there is a then-pending Affected Transaction, the
receipt by the Board of Directors from its Independent Advisor of (a) such
advisor's view (expressed in such form and subject to such qualifications
and limitations as the Independent Advisor deems appropriate) regarding
whether redemption of the Rights will serve the best interests of the
Company and its stockholders or (b) such advisor's statement that it is
unable to express such a view, setting forth the reasons therefor;
(3) if there is a then-pending Affected Transaction,
(A) the establishment and implementation by the Board of
Directors of a process and procedures approved by its Independent
Advisor which the Board of Directors and such advisor conclude would
be most likely to result in the best value reasonably available to
stockholders (regardless of whether such Affected Transaction involves
a "sale of control" or "break-up" of the Company for Delaware law
purposes),
(B) the Board of Directors (I) receiving the opinion of its
Independent Advisor, in customary form and content for transactions of
the type involved, that the Affected Transaction is fair to the
Company's stockholders from a financial point of view and (II)
determining, and the Independent Advisor confirming, that it has no
reason to believe that a superior transaction is reasonably available
for the benefit of the Company's stockholders, and
45
(C) the execution of a definitive transaction agreement and other
definitive documentation necessary to effect the Affected Transaction.
(d) Neither the Company nor any of its Affiliates or Associates may redeem,
acquire or purchase for value any Rights at any time in any manner other than
that specifically set forth in this Section 23 and other than in connection with
the purchase or repurchase by any of them of Common Stock prior to the
Distribution Date.
Section 24. EXCHANGE.
(a) The Board of Directors may, at its option, at any time after any Person
becomes an Acquiring Person, exchange all or part of the then outstanding and
exercisable Rights (which shall not include Rights that have become void
pursuant to the provisions of Section 7(e) hereof) for Common Stock at an
exchange ratio of one share of Common Stock 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 of Directors 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 Stock 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 Stock then outstanding.
(b) Immediately upon the action of the Board of Directors ordering the
exchange of any Rights pursuant to subsection (a) of this Section 24 and without
any further action and without any notice, the right to exercise such Rights
shall terminate and the only right thereafter of a holder of such Rights shall
be to receive that number of shares of Common Stock equal to the number of such
Rights held by such holder multiplied by the Exchange Ratio. The Company shall
promptly give public notice of any such exchange; PROVIDED, HOWEVER, that the
failure to give, or any defect in, such notice shall not affect the validity of
such exchange. The Company promptly shall mail a notice of any such exchange to
all of the holders of such Rights at their last addresses as they appear upon
the registry books of the Rights Agent. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of exchange will state the method by which the exchange
of the Common Stock for Rights will be effected and, in the event of any partial
exchange, the number of
46
Rights which will be exchanged. Any partial exchange shall be effected pro
rata based on the number of Rights (other than Rights which have become void
pursuant to the provisions of Section 7(e) hereof) held by each holder of
Rights.
(c) In any exchange pursuant to this Section 24, the Company, at its
option, may substitute Preferred Stock (or Equivalent Preferred Stock, as such
term is defined in paragraph (b) of Section 11 hereof) for Common Stock
exchangeable for Rights, at the initial rate of one one-thousandth of a share of
Preferred Stock (or Equivalent Preferred Stock) for each share of Common Stock,
as appropriately adjusted to reflect stock splits, stock dividends and other
similar transactions after the date hereof.
(d) In the event that there shall not be sufficient shares of Common Stock
issued but not outstanding or authorized but unissued to permit any exchange of
Rights as contemplated in accordance with this Section 24, the Company shall
take all such action as may be necessary to authorize additional shares of
Common Stock for issuance upon exchange of the Rights.
(e) The Company shall not be required to issue fractions of shares of
Common Stock or to distribute certificates which evidence fractional shares of
Common Stock. In lieu of such fractional shares of Common Stock, there shall be
paid to the registered holders of the Rights Certificates with regard to which
such fractional shares of Common Stock would otherwise be issuable, an amount in
cash equal to the same fraction of the current market value of a whole share of
Common Stock. For the purposes of this subsection (e), the current market value
of a whole share of Common Stock shall be the closing price of a share of Common
Stock (as determined pursuant to the second sentence of Section 11(d)(i) hereof)
for the Trading Day immediately prior to the date of exchange pursuant to this
Section 24.
Section 25. NOTICE OF CERTAIN EVENTS.
(a) In case the Company shall propose, at any time after the Distribution
Date, (i) to pay any dividend payable in stock of any class to the holders of
Preferred Stock or to make any other distribution to the holders of Preferred
Stock (other than a regular quarterly cash dividend out of earnings or retained
earnings of the Company), or (ii) to offer to the holders of Preferred Stock
rights or warrants to subscribe for or to purchase any additional shares of
Preferred Stock or shares of stock of any class or any other securities, rights
or options, or
47
(iii) to effect any reclassification of its Preferred Stock (other than a
reclassification involving only the subdivision of outstanding shares of
Preferred Stock), or (iv) to effect any consolidation or merger into or with
any other Person (other than a Subsidiary of the Company in a transaction
which complies with Section 11(o) hereof), or to effect any sale or other
transfer (or to permit one or more of its Subsidiaries to effect any sale or
other transfer), in one transaction or a series of related transactions, of
more than 50% of the assets, cash flow or earning power of the Company and
its Subsidiaries (taken as a whole) to any other Person or Persons (other
than the Company and/or any of its Subsidiaries in one or more transactions
each of which complies with Section 11(o) hereof), or (v) to effect the
liquidation, dissolution or winding up of the Company, then, in each such
case, the Company shall give to each holder of a Rights Certificate, to the
extent feasible and in accordance with Section 26 hereof, a notice of such
proposed action, which shall specify the record date for the purposes of such
stock dividend, distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of the shares of Preferred Stock, if any such date is
to be fixed, and such notice shall be so given in the case of any action
covered by clause (i) or (ii) above at least twenty (20) days prior to the
record date for determining holders of the shares of Preferred Stock for
purposes of such action, and in the case of any such other action, at least
twenty (20) days prior to the date of the taking of such proposed action or
the date of participation therein by the holders of the shares of Preferred
Stock, whichever shall be the earlier.
(b) In case a Section 11(a)(ii) Event shall occur, then, in any such case,
(i) the Company shall as soon as practicable thereafter give to each holder of a
Rights Certificate, to the extent feasible and in accordance with Section 26
hereof, a notice of the occurrence of such event, which shall specify the event
and the consequences of the event to holders of Rights under Section 11(a)(ii)
hereof, and (ii) all references in the preceding paragraph to Preferred Stock
shall be deemed thereafter to refer to Common Stock and/or, if appropriate,
other securities.
Section 26. NOTICES. Notices or demands authorized by this Agreement to be
given or made by the Rights Agent or by the holder of any Rights Certificate to
or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing by
the Rights Agent with the Company) as follows:
48
Compaq Computer Corporation
00000 Xxxxx Xxxxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Corporate Secretary
Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights
Certificate 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 by the Rights Agent with the Company) as follows:
EquiServe Trust Company, N.A.
c/o EquiServe L.P.
000 Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: General Counsel
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Common Stock) shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed to such holder at the address of
such holder as shown on the registry books of the Company.
Section 27. SUPPLEMENTS AND AMENDMENTS.
(a) Prior to the Distribution Date, and subject to the provisions of
Section 27(b) hereof, the Company and the Rights Agent shall, if the Company so
directs, supplement or amend any provision of this Agreement without the
approval of any holders of certificates representing shares of Common Stock.
From and after the Distribution Date, and subject to the provisions of Section
27(b) hereof, the Company and the Rights Agent shall, if the Company so directs,
sup plement or amend this Agreement without the approval of any holders of
Rights Cer tificates in order (i) to cure any ambiguity, (ii) to correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provisions herein, (iii) to shorten or lengthen any time period
hereunder, or (iv) to change or supplement the provisions hereunder in any
manner which the Company may deem necessary or desirable and which shall not
adversely affect the interests of the
49
holders of Rights Certificates (other than an Acquiring Person or an
Affiliate or Associate of an Acquiring Person). Upon the delivery of a
certificate from an appropriate officer of the Company which states that the
proposed supplement or amendment is in compliance with the terms of this
Section 27, the Rights Agent shall execute such supplement or amendment.
Prior to the Distribution Date, the interests of the holders of Rights shall
be deemed coincident with the interests of the holders of Common Stock.
(b) Notwithstanding anything herein to the contrary, no supplement or
amendment shall be made to this Agreement during the Special Period or at a time
when the Rights are not redeemable, except as contemplated by clause (i) or (ii)
of Section 27(a) hereof.
Section 28. SUCCESSORS. All the covenants and provisions of this Agreement
by or for the benefit of the Company or the Rights Agent shall bind and inure to
the benefit of their respective successors and assigns hereunder.
Section 29. DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS, ETC. For
all purposes of this Agreement, any calculation of the number of shares of
Common Stock or any other class of capital stock outstanding at any particular
time, including for purposes of determining the particular percentage of such
outstanding shares of Common Stock of which any Person is the Beneficial Owner,
shall be made in accordance with the last sentence of Rule 13d-3(d)(1)(i) of the
General Rules and Regulations under the Exchange Act. The Board of Directors
shall have the exclusive power and authority to administer this Agreement and to
exercise all rights and powers specifically granted to the Board of Directors or
to the Company, or as may be necessary or advisable in the administration of
this Agreement, including, without limitation, the right and power to (i)
interpret the provisions of this Agreement, and (ii) make all determinations
deemed necessary or advisable for the administration of this Agreement
(including a determination to redeem or not redeem the Rights or to amend the
Agreement). All such actions, calculations, interpretations and determinations
(including, for purposes of clause (y) below, all omissions with respect to the
foregoing) which are done or made by the Board of Directors in good faith, shall
(x) be final, conclusive and binding on the Company, the Rights Agent, the
holders of the Rights and all other parties, and (y) not subject the Board of
Directors, or any of the directors on the Board of Directors, to any liability
to the holders of the Rights.
50
Section 30. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be
construed to give to any Person other than the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the Distribution
Date, registered holders of the Common Stock) any legal or equitable right,
remedy or claim under this Agreement; but this Agreement shall be for the sole
and exclusive benefit of the Company, the Rights Agent and the registered
holders of the Rights Certificates (and, prior to the Distribution Date,
registered holders of the Common Stock).
Section 31. SEVERABILITY. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated;
PROVIDED, HOWEVER, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by
such court or authority to be invalid, void or unenforceable and the Board of
Directors determines in its good faith judgment that severing the invalid
language from this Agreement would adversely affect the purpose or effect of
this Agreement, the right of redemption set forth in Section 23 hereof shall
be reinstated and shall not expire until the close of business on the tenth
Business Day following the date of such determination by the Board of
Directors. Without limiting the foregoing, if any provision requiring a
specific group of directors to act is held to by any court of competent
jurisdiction or other authority to be invalid, void or unenforceable, such
determination shall then be made by the Board of Directors in accordance with
applicable law and the Company's Restated Certificate of Incorporation and
Bylaws.
Section 32. GOVERNING LAW. This Agreement, each Right and each Rights
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts made
and to be performed entirely within such State.
Section 33. COUNTERPARTS. This Agreement may be executed in 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.
51
Section 34. 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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
52
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
COMPAQ COMPUTER CORPORATION
By /s/ Xxxx Xxxxxx
---------------------------------------
Name: Xxxx Xxxxxx
Title: Senior Vice President and Chief
Financial Officer
EQUISERVE TRUST COMPANY, N.A.
By /s/ Xxxxxxxxx Xxxxxxxx
---------------------------------------
Name: Xxxxxxxxx Xxxxxxxx
Title: Managing Director
53
Exhibit A
CERTIFICATE OF DESIGNATION, PREFERENCES AND
RIGHTS OF SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
COMPAQ COMPUTER CORPORATION
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
We, the undersigned officers of Compaq Computer Corporation, a corporation
organized and existing under the General Corporation Law of the State of
Delaware, in accordance with the provisions of Section 103 thereof, DO HEREBY
CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by the
Restated Certificate of Incorporation of the said Corporation, the said Board of
Directors on September 3, 2001, adopted the following resolution creating a
series of three million (3,000,000) shares of Preferred Stock designated as
Series A Junior Participating Preferred Stock:
RESOLVED, that pursuant to the authority vested in the Board of Directors
of this Corporation in accordance with the provisions of its Restated
Certificate of Incorporation, a series of Preferred Stock of the Corporation be
and it hereby is created, and that the designation and amount thereof and the
voting powers, preferences and relative, participating, optional and other
special rights of the shares of such series, and the qualifications, limitations
or restrictions thereof are as follows:
Section 1. DESIGNATION AND AMOUNT. The shares of such series shall be
designated as "Series A Junior Participating Preferred Stock" and the number of
shares constituting such series shall be three million (3,000,000).
A-1
Section 2. DIVIDENDS AND DISTRIBUTIONS.
(A) Subject to the prior and superior rights of the holders of any shares
of any series of Preferred Stock 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 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
March 31, June 30, September 30 and December 31 of 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) $.01
or (b) subject to the provision for adjustment hereinafter set forth, 1,000
times the aggregate per share amount of all cash dividends, and 1,000 times the
aggregate per share amount (payable in kind) of all non-cash dividends or other
distributions other than a dividend payable in shares of Common Stock or a
subdivision of the outstanding shares of Common Stock (by reclassification or
otherwise), declared on the Common Stock, par value $.01 per share, of the
Corporation (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. In the event the Corporation shall at any
time after September 3, 2001 (the "Rights Declaration Date") (i) declare 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 amount to which holders of
shares of Series A Junior Participating Preferred Stock were entitled
immediately prior to such event under clause (b) of the preceding sentence shall
be adjusted by multiplying such amount by a fraction the numerator of which is
the number of shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) The Corporation 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
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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 thirty (30) 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) Subject to the provision for adjustment hereinafter set forth, each
share of Series A Junior Participating Preferred Stock shall entitle the holder
thereof to one thousand (1,000) votes on all matters submitted to a vote of the
stockholders of the Corporation. In the event the Corporation shall at any time
after the Rights Declaration Date (i) declare 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 number of votes per share to which holders of shares
of Series A Junior Participating Preferred Stock were entitled immediately prior
to such event shall be adjusted by multiplying such number by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event
A-3
and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
(B) Except as otherwise provided herein or by law, the holders of shares of
Series A Junior Participating Preferred Stock and the holders of shares of
Common Stock shall vote together as one class on all matters submitted to a vote
of stockholders of the Corporation.
(C)(i) If at any time dividends on any Series A Junior Participating
Preferred Stock shall be in arrears in an amount equal to six (6) quarterly
dividends thereon, the occurrence of such contingency shall xxxx the beginning
of a period (herein called a "default period") which shall extend until such
time when all accrued and unpaid dividends for all previous quarterly dividend
periods and for the current quarterly dividend period on all shares of Series A
Junior Participating Preferred Stock then outstanding shall have been declared
and paid or set apart for payment. During each default period, all holders of
Preferred Stock (including holders of the Series A Junior Participating
Preferred Stock) with dividends in arrears in an amount equal to six (6)
quarterly dividends thereon, voting as a class, irrespective of series, shall
have the right to elect two (2) directors.
(ii) During any default period, such voting right of the holders of
Series A Junior Participating Preferred Stock may be exercised initially at
a special meeting called pursuant to subparagraph (iii) of this Section
3(C) or at any annual meeting of stockholders, and thereafter at annual
meetings of stockholders, provided that neither such voting right nor the
right of the holders of any other series of Preferred Stock, if any, to
increase, in certain cases, the authorized number of directors shall be
exercised unless the holders of ten percent (10%) in number of shares of
Preferred Stock outstanding shall be present in person or by proxy. The
absence of a quorum of the holders of Common Stock shall not affect the
exercise by the holders of Preferred Stock of such voting right. At any
meeting at which the holders of Preferred Stock shall exercise such voting
right initially during an existing default period, they shall have
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the right, voting as a class, to elect directors to fill such vacancies, if
any, in the Board of Directors as may then exist up to two (2) directors
or, if such right is exercised at an annual meeting, to elect two (2)
directors. If the number which may be so elected at any special
meeting does not amount to the required number, the holders of the
Preferred Stock shall have the right to make such increase in the number of
directors as shall be necessary to permit the election by them of the
required number. After the holders of the Preferred Stock shall have
exercised their right to elect directors in any default period and during
the continuance of such period, the number of directors shall not be
increased or decreased except by vote of the holders of Preferred Stock as
herein provided or pursuant to the rights of any equity securities ranking
senior to or pari passu with the Series A Junior Participating Preferred
Stock.
(iii) Unless the holders of Preferred Stock shall, during an existing
default period, have previously exercised their right to elect directors,
the Board of Directors may order, or any stockholder or stockholders owning
in the aggregate not less than ten percent (10%) of the total number of
shares of Preferred Stock outstanding, irrespective of series, may request,
the calling of a special meeting of the holders of Preferred Stock, which
meeting shall thereupon be called by the President, a Vice-President or the
Secretary of the Corporation. Notice of such meeting and of any annual
meeting at which holders of Preferred Stock are entitled to vote pursuant
to this Paragraph (C)(iii) shall be given to each holder of record of
Preferred Stock by mailing a copy of such notice to him at his last address
as the same appears on the books of the Corporation. Such meeting shall be
called for a time not earlier than 20 days and not later than 60 days after
such order or request or in default of the calling of such meeting within
60 days after such order or request, such meeting may be called on similar
notice by any stockholder or stockholders owning in the aggregate not less
than ten percent (10%) of the total number of shares of Preferred Stock
outstanding. Notwithstanding the provisions of this Paragraph (C)(iii), no
such special meeting shall be
A-5
called during the period within 60 days immediately preceding the date
fixed for the next annual meeting of the stockholders.
(iv) In any default period, the holders of Common Stock, and other
classes of stock of the Corporation if applicable, shall continue to be
entitled to elect the whole number of directors until the holders of
Preferred Stock shall have exercised their right to elect two (2)
directors voting as a class, after the exercise of which right (x)
the directors so elected by the holders of Preferred Stock shall
continue in office until their successors shall have been elected by such
holders or until the expiration of the default period, and (y) any vacancy
in the Board of Directors may (except as provided in Paragraph (C)(ii) of
this Section 3) be filled by vote of a majority of the remaining directors
theretofore elected by the holders of the class of stock which elected the
director whose office shall have become vacant. References in this
Paragraph (C) to directors elected by the holders of a particular class of
stock shall include directors elected by such directors to fill vacancies
as provided in clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default period, (x) the right
of the holders of Preferred Stock as a class to elect directors shall
cease, (y) the term of any directors elected by the holders of Preferred
Stock as a class shall terminate, and (z) the number of directors shall be
such number as may be provided for in the Restated Certificate of
Incorporation or Bylaws irrespective of any increase made pursuant to the
provisions of Paragraph (C)(ii) of this Section 3 (such number being
subject, however, to change thereafter in any manner provided by law or in
the certificate of incorporation or by-laws). Any vacancies in the Board of
Directors effected by the provisions of clauses (y) and (z) in the
preceding sentence may be filled by a majority of the remaining directors.
(D) Except as set forth herein, holders of Series A Junior Participating
Preferred Stock shall have no special voting rights and their consent
A-6
shall not be required (except to the extent they are entitled to vote with
holders of Common Stock as set forth herein) for taking any corporate action.
Section 4. CERTAIN RESTRICTIONS.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A 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
Corporation shall not
(i) declare or pay dividends on, make any other distributions on, or
redeem or purchase or otherwise acquire for consideration any shares of
stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A 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;
(iii) redeem or purchase or otherwise acquire for consideration shares
of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Junior
Participating Preferred Stock, provided that the Corporation may at any
time redeem, purchase or otherwise acquire shares of any such parity stock
in exchange for shares of any stock of the Corporation ranking junior
(either as to dividends or upon dissolution, liquidation or winding up) to
the Series A Junior Participating Preferred Stock; or
A-7
(iv) 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
such shares upon such terms as the Board of Directors, after consideration
of the respective annual dividend rates and other relative rights and
preferences of the respective series and classes, shall determine in good
faith will result in fair and equitable treatment among the respective
series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under Paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
Section 5. REACQUIRED SHARES. Any shares of Series A Junior Participating
Preferred Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and cancelled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock and may be reissued as part of a new series
of Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein.
Section 6. LIQUIDATION, DISSOLUTION OR WINDING UP. (A) Upon any liquidation
(voluntary or otherwise), dissolution or winding up of the Corporation, 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 equal to $100 per share of Series A Participating Preferred Stock,
plus an amount equal to accrued and unpaid dividends and distributions thereon,
whether or not declared, to the date of such payment (the "Series A Liquidation
Preference"). Following the payment of the full amount of the Series A
Liquidation Preference, no additional distributions shall be made to the holders
of shares of Series A Junior Participating Preferred Stock unless, prior
thereto, the holders of shares of Common Stock shall have received an
A-8
amount per share (the "Common Adjustment") equal to the quotient obtained by
dividing (i) the Series A Liquidation Preference by (ii) 1,000 (as
appropriately adjusted as set forth in subparagraph (C) below to reflect such
events as stock splits, stock dividends and recapitalizations with respect to
the Common Stock) (such number in clause (ii), the "Adjustment Number").
Following the payment of the full amount of the Series A Liquidation
Preference and the Common Adjustment in respect of all outstanding shares of
Series A Junior Participating Preferred Stock and Common Stock, respectively,
holders of Series A Junior Participating Preferred Stock and holders of
shares of Common Stock shall receive their ratable and proportionate share of
the remaining assets to be distributed in the ratio of the Adjustment Number
to one (1) with respect to such Preferred Stock and Common Stock, on a per
share basis, respectively.
(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 series of preferred stock, if any, which
rank on a parity with the Series A Junior Participating Preferred Stock, then
such remaining assets shall be distributed ratably to the holders of such parity
shares in proportion to their respective liquidation preferences. In the event,
however, that there are not sufficient assets available to permit payment in
full of the Common Adjustment, then such remaining assets shall be distributed
ratably to the holders of Common Stock.
(C) In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare 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.
Section 7. CONSOLIDATION, MERGER, ETC. In case the Corporation shall enter
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
Series A Junior
A-9
Participating Preferred Stock shall at the same time be similarly exchanged
or changed in an amount per share (subject to the provision for adjustment
hereinafter set forth) equal to 1,000 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or
exchanged. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare 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 amount set forth in the preceding sentence with respect to
the exchange or change of shares of Series A Junior Participating Preferred
Stock shall be adjusted by multiplying such amount by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
Section 8. NO REDEMPTION. The shares of Series A Junior Participating
Preferred Stock shall not be redeemable.
Section 9. RANKING. The Series A Junior Participating Preferred Stock shall
rank junior to all other series of the Corporation's Preferred Stock as to the
payment of dividends and the distribution of assets, unless the terms of any
such series shall provide otherwise.
Section 10. AMENDMENT. At any time when any shares of Series A Junior
Participating Preferred Stock are outstanding, neither the Restated Certificate
of Incorporation of the Corporation nor this Certificate of Designation shall be
amended in any manner 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 a majority or more of the outstanding shares of Series A Junior Participating
Preferred Stock, voting separately as a class.
Section 11. FRACTIONAL SHARES. Series A Junior Participating Preferred
Stock may be issued in fractions of a share which shall entitle the holder, in
proportion to such holder's fractional shares, to exercise voting rights,
receive
A-10
dividends, participate in distributions and to have the benefit of all
other rights of holders of Series A Junior Participating Preferred Stock.
A-11
IN WITNESS WHEREOF, we have executed and subscribed this Certificate and do
affirm the foregoing as true under the penalties of perjury this ___ day of
September, 2001.
By:
-----------------------------
Name:
Title:
Attest:
By:
-------------------------
Name:
Title:
A-12
EXHIBIT B
[Form of Rights Certificate]
Certificate No. R- ________ Rights
NOT EXERCISABLE AFTER SEPTEMBER 3, 2011 OR EARLIER IF REDEEMED BY THE COMPANY.
THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $.001 PER
RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON (AS SUCH TERM IS
DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY
BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR
WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN
AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE
RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS
REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN
SECTION 7(e) OF SUCH AGREEMENT.]*
--------
* The portion of the legend in brackets shall be inserted only if applicable
and if so inserted shall replace the preceding sentence.
B-1
Rights Certificate
COMPAQ COMPUTER 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 September 4, 2001 (the "Rights Agreement"), between
Compaq Computer Corporation, a Delaware corporation (the "Company"), and
EquiServe Trust Company, N.A., a federally chartered trust company (the "Rights
Agent"), to purchase from the Company at any time prior to 5:00 P.M. (Texas
time) on September 3, 2011 (unless such date is extended prior thereto by the
Board of Directors) at the office or offices of the Rights Agent designated for
such purpose, or its successors as Rights Agent, one one-thousandth of a fully
paid, non-assessable share of Series A Junior Participating Preferred Stock (the
"Preferred Stock") of the Company, at a purchase price of $70 per one
one-thousandth of a share (the "Purchase Price"), upon presentation and
surrender of this Rights Certificate with the Form of Election to Purchase and
related Certificate duly executed. The number of Rights evidenced by this Rights
Certificate (and the number of shares which may be purchased upon exercise
thereof) set forth above, and the Purchase Price per share set forth above, are
the number and Purchase Price as of September 17, 2001, based on the Preferred
Stock as constituted at such date. The Company reserves the right to require
prior to the occurrence of a Triggering Event (as such term is defined in the
Rights Agreement) that a number of Rights be exercised so that only whole shares
of Preferred Stock will be issued.
Upon the occurrence of a Section 11(a)(ii) Event (as such term is defined
in the Rights Agreement), if the Rights evidenced by this Rights Certificate are
beneficially owned by (i) an Acquiring Person or an Affiliate or Associate of
any such Acquiring Person (as such terms are defined in the Rights Agreement),
(ii) a transferee of any such Acquiring Person, Associate or Affiliate, or (iii)
under certain circumstances specified in the Rights Agreement, a transferee of a
person who, after such transfer, became an Acquiring Person, or an Affiliate or
Associate of an Acquiring Person, such Rights shall become null and void and no
holder hereof shall have any right with respect to such Rights from and after
the occurrence of such Section 11(a)(ii) Event.
B-2
As provided in the Rights Agreement, the Purchase Price and the number
and kind of shares of Preferred Stock or other securities, which may be
purchased upon the exercise of the Rights evidenced by this Rights
Certificate are subject to modification and adjustment upon the happening of
certain events, including Triggering Events.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the above-mentioned office of the
Rights Agent and are also available upon written request to the Rights Agent.
This Rights Certificate, with or without other Rights Certificates, upon
surrender at the principal office or offices of the Rights Agent designated for
such purpose, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of one one-thousandths of a share of Preferred
Stock as the Rights evidenced by the Rights Certificate or Rights Certificates
surrendered shall have entitled such holder to purchase. If this Rights
Certificate shall be exercised in part, the holder shall be entitled to receive
upon surrender hereof another Rights Certificate or Rights Certificates for the
number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Certificate may be redeemed by the Company at its option at a redemption
price of $.001 per Right at any time prior to the earlier of the close of
business on (i) the tenth Business Day following the Stock Acquisition Date (as
such time period may be extended pursuant to the Rights Agreement), and (ii) the
Final Expiration Date. For 180 days following a change in control of the Board
of Directors, that has not been approved by the Board of Directors, occurring
within six months of announcement of an unsolicited third party acquisition or
business combination proposal or of a third party's intent or proposal otherwise
to become an Acquiring Person, the new directors are entitled to redeem the
rights (assuming the
B-3
rights would have otherwise been redeemable), including to
facilitate an acquisition or business combination transaction involving the
Company, but only (1) if they have followed certain prescribed procedures or
(2) if such procedures are not followed, and if their decision regarding
redemption and any acquisition or business combination is challenged as a
breach of fiduciary duty of care or loyalty, the directors (solely for
purposes of the effectiveness of the redemption decision) are able to
establish the entire fairness of the redemption or transaction. In addition,
under certain circumstances following the Stock Acquisition Date, the Rights
may be exchanged, in whole or in part, for shares of the Common Stock, or
shares of preferred stock of the Company having essentially the same value or
economic rights as such shares. Immediately upon the action of the Board of
Directors authorizing any such exchange, and without any further action or
any notice, the Rights (other than Rights which are not subject to such
exchange) will terminate and the Rights will only enable holders to receive
the shares issuable upon such exchange.
No fractional shares of Preferred Stock will be issued upon the exercise of
any Right or Rights evidenced hereby (other than fractions which are integral
multiples of one one-thousandth of a 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 Rights Certificate shall be entitled to vote or receive
dividends or be deemed for any purpose the holder of shares of Preferred Stock
or of any other securities of the Company which may at any time be issuable on
the exercise hereof, nor shall anything contained in the Rights Agreement or
herein be construed to confer upon the holder hereof, as such, any of the rights
of a stockholder of the Company or any right to vote for the election of
directors or upon any matter submitted to stockholders at any meeting thereof,
or to give consent to or withhold consent from any corporate action, or, to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Rights
Certificate shall have been exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
B-4
WITNESS the facsimile signatures of the proper officers of the Company and
its corporate seal.
Dated as of ____________.
ATTEST: COMPAQ COMPUTER
CORPORATION
-------------------------------------
Secretary By: -----------------------
Name:
Title:
Countersigned:
EQUISERVE TRUST COMPANY,
N.A.
By
------------------------------------------
Authorized Signature
B-5
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED
-------------------------------------------------------
hereby sells, assigns and transfers unto
--------------------------------------
-------------------------------------------------------------------------------
(Please print name and address of transferee)
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint __________________ Attorney,
to transfer the within Rights Certificate on the books of the within named
Company, with full power of substitution.
Dated: __________________,__
-------------------------
Signature
Signature Guaranteed:
B-6
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Rights Certificate [ ] is [ ] is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of any such Acquiring Person (as such terms are defined
pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it [ ]
did [ ] did not acquire the Rights evidenced by this Rights Certificate from any
Person who is, was or subsequently became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.
Dated: _______________, _____
------------------------------
Signature
Signature Guaranteed:
B-7
NOTICE
The signature to the foregoing Assignment and Certificate must correspond
to the name as written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any change whatsoever.
B-8
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise Rights
represented by the Rights Certificate.)
To: COMPAQ COMPUTER CORPORATION:
The undersigned hereby irrevocably elects to exercise __________ Rights
represented by this Rights Certificate to purchase the shares of Preferred Stock
issuable upon the exercise of the Rights (or such other securities of the
Company or of any other person which may be issuable upon the exercise of the
Rights) and requests that certificates for such shares be issued in the name of
and delivered to:
Please insert social security
or other identifying number
------------------------------------------------------------------------------
(Please print name and address)
------------------------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
------------------------------------------------------------------------------
(Please print name and address)
------------------------------------------------------------------------------
Dated: _______________,__
-------------------------
Signature
Signature Guaranteed:
B-9
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not
being exercised by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of any such Acquiring Person (as such terms are
defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it [ ]
did [ ] did not acquire the Rights evidenced by this Rights Certificate from any
Person who is, was or became an Acquiring Person or an Affiliate or Associate of
an Acquiring Person.
Dated: ______________,__
--------------------------------
Signature
Signature Guaranteed:
B-10
NOTICE
The signature to the foregoing Election to Purchase and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
B-11
EXHIBIT C
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED STOCK
On September 3, 2001, the Board of Directors of Compaq Computer Corporation
(the "Company") declared a dividend distribution of one Right for each
outstanding share of Company Common Stock to stockholders of record at the close
of business on September 17, 2001 (the "Record Date"). Each Right entitles the
registered holder to purchase from the Company a unit consisting of one
one-thousandth of a share (a "Unit") of Series A Junior Participating Preferred
Stock, par value $.01 per share (the "Series A Preferred Stock") at a Purchase
Price of $70 per Unit, subject to adjustment. The description and terms of the
Rights are set forth in a Rights Agreement (the "Rights Agreement") between the
Company and EquiServe Trust Company, N.A., as Rights Agent.
Initially, the Rights will be attached to all Common Stock certificates
representing shares then outstanding, and no separate Rights Certificates will
be distributed. Subject to certain exceptions specified in the Rights Agreement,
the Rights will separate from the Common Stock and a Distribution Date will
occur upon the earlier of (i) 10 business days following a public announcement
that a person or group of affiliated or associated persons (an "Acquiring
Person") has acquired beneficial ownership of ten percent (10%) or more of the
outstanding shares of Common Stock other than as a result of repurchases of
stock by the Company or certain inadvertent actions by institutional or certain
other stockholders, or the date a Person has entered into an agreement or
arrangement with the Company or any Subsidiary of the Company providing for an
Acquisition Transaction (the "Stock Acquisition Date") or (ii) 10 business days
(or such later date as the Board shall determine, provided, however, that no
deferral of a Distribution Date by the Board pursuant to the terms of the Rights
Agreement described in this clause (ii) may be made at any time during the
Special Period (as defined below)) following the commencement of a tender offer
or exchange offer that would result in a person or group becoming an Acquiring
Person. An Acquisition Transaction is defined in the Rights Agreement as (x) a
merger, consolidation or similar transaction involving the Company or any of its
Subsidiaries as a result of which stockholders of the Company will no longer own
a majority of the outstanding shares of Common Stock of the Company or a
publicly traded entity which controls the Company or, if appropriate, the entity
into which the Company may be merged, consolidated or otherwise combined (based
solely on the shares of Common Stock received or retained by such stockholders,
in their capacity as stockholders of the Company, pursuant to such
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transaction), (y) a purchase or other acquisition of all or a substantial
portion of the assets of the Company and its Subsidiaries, or (z) a purchase or
other acquisition of securities representing ten percent (10%) or more of the
shares of Common Stock then outstanding. Until the Distribution Date, (i) the
Rights will be evidenced by the Common Stock certificates and will be
transferred with and only with such Common Stock certificates, (ii) new Common
Stock certificates issued after the Record Date will contain a notation
incorporating the Rights Agreement by reference and (iii) the surrender for
transfer of any certificates for Common Stock outstanding will also constitute
the transfer of the Rights associated with the Common Stock represented by such
certificate. Pursuant to the Rights Agreement, the Company reserves the right to
require prior to the occurrence of a Triggering Event (as defined below) that,
upon any exercise of Rights, a number of Rights be exercised so that only whole
shares of Preferred Stock will be issued.
The Rights are not exercisable until the Distribution Date and will expire
at 5:00 P.M. (Houston, Texas time) on September 3, 2011, unless such date is
extended or the Rights are earlier redeemed or exchanged by the Company as
described below.
As soon as practicable after the Distribution Date, Rights Certificates
will be mailed to holders of record of the Common Stock as of the close of
business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights. Except as otherwise determined by
the Board of Directors, only shares of Common Stock issued prior to the
Distribution Date will be issued with Rights.
In the event that a Person becomes an Acquiring Person, except pursuant to
an offer for all outstanding shares of Common Stock which the independent
directors determine to be fair and not inadequate and to otherwise be in the
best interests of the Company and its stockholders, after receiving advice from
one or more investment banking firms (a "Qualified Offer"), each holder of a
Right will thereafter have the right to receive, upon exercise, Common Stock
(or, in certain circumstances, cash, property or other securities of the
Company) having a value equal to two times the exercise price of the Right.
Notwithstanding any of the foregoing, following the occurrence of the event set
forth in this paragraph, all Rights that are, or (under certain circumstances
specified in the Rights Agreement) were, beneficially owned by any Acquiring
Person will be null and void. However, Rights are not exercisable following the
occurrence of the event set forth above until such time as the Rights are no
longer redeemable by the Company as set forth below.
For example, at an exercise price of $200 per Right, each Right not owned
by an Acquiring Person (or by certain related parties) following an event set
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forth in the preceding paragraph would entitle its holder to purchase $400 worth
of Common Stock (or other consideration, as noted above) for $200. Assuming that
the Common Stock had a per share value of $40 at such time, the holder of each
valid Right would be entitled to purchase 10 shares of Common Stock for $200.
In the event that, at any time following the Stock Acquisition Date, (i)
the Company engages in a merger or other business combination transaction in
which the Company is not the surviving corporation (other than with an entity
which acquired the shares pursuant to a Qualified Offer), (ii) the Company
engages in a merger or other business combination transaction in which the
Company is the surviving corporation and the Common Stock of the Company is
changed or exchanged, or (iii) 50% or more of the Company's assets, cash flow or
earning power is sold or transferred, each holder of a Right (except Rights
which have previously been voided as set forth above) shall thereafter have the
right to receive, upon exercise, Common Stock of the acquiring company having a
value equal to two times the exercise price of the Right. The events set forth
in this paragraph and in the second preceding paragraph are referred to as the
"Triggering Events."
At any time after a person becomes an Acquiring Person and prior to the
acquisition by such person or group of fifty percent (50%) or more of the
outstanding Common Stock, the Board may exchange the Rights (other than Rights
owned by such person or group which have become void), in whole or in part, at
an exchange ratio of one share of Common Stock, or one one-thousandth of a share
of Preferred Stock (or of a share of a class or series of the Company's
preferred stock having equivalent rights, preferences and privileges), per Right
(subject to adjustment).
At any time until ten business days following the Stock Acquisition Date,
the Company may redeem the Rights in whole, but not in part, at a price of $.001
per Right (payable in cash, Common Stock or other consideration deemed
appropriate by the Board of Directors). Immediately upon the action of the Board
of Directors ordering redemption of the Rights, the Rights will terminate and
the only right of the holders of Rights will be to receive the $.001 redemption
price.
Notwithstanding the foregoing paragraph, for 180 days (the "Special
Period") following a change in control of the Board of Directors that has not
been approved by the Board of Directors, occurring within six months of
announcement of an unsolicited third party acquisition or business combination
proposal or of a third party's intent or proposal otherwise to become an
Acquiring Person, the new directors are entitled to redeem the rights (assuming
the rights would have otherwise been redeemable), including to facilitate an
acquisition or business combination transaction involving the Company, but only
(1) if they have followed certain
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prescribed procedures or (2) if such procedures are not followed, and if their
decision regarding redemption and any acquisition or business combination is
challenged as a breach of fiduciary duty of care or loyalty, the directors
(solely for purposes of the effectiveness of the redemption decision) are able
to establish the entire fairness of the redemption or transaction.
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. While the distribution of the Rights will not
be taxable to stockholders or to the Company, stockholders may, depending upon
the circumstances, recognize taxable income in the event that the Rights become
exercisable for Common Stock (or other consideration) of the Company or for
common stock of the acquiring company or in the event of the redemption of the
Rights as set forth above.
Any of the provisions of the Rights Agreement may be amended by the Board
of Directors prior to the Distribution Date. After the Distribution Date, the
provisions of the Rights Agreement may be amended by the Board in order to cure
any ambiguity, to make changes which do not adversely affect the interests of
holders of Rights, or to shorten or lengthen any time period under the Rights
Agreement. The foregoing notwithstanding, no amendment may be made to the Rights
Agreement during the Special Period or at a time when the Rights are not
redeemable, except to cure any ambiguity or correct or supplement any provision
contained in the Rights Agreement which may be defective or inconsistent with
any other provision therein.
A copy of the Rights Agreement is being filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form
8-A/Current Report on Form 8-K. A copy of the Rights Agreement is available free
of charge from the Rights Agent. 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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