Exhibit 1
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RIGHTS AGREEMENT
Dated as of December 18, 1996
By and Between
STERLING SOFTWARE, INC.
and
THE FIRST NATIONAL BANK OF BOSTON,
as Rights Agent
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TABLE OF CONTENTS
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Page
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1. Certain Definitions....................................... 1
2. Appointment of Rights Agent............................... 5
3. Issue of Right Certificates............................... 5
4. Form of Right Certificates................................ 7
5. Countersignature and Registration......................... 7
6. Transfer, Split Up, Combination and Exchange
of Right Certificates;
Mutilated, Destroyed, Lost or Stolen Right Certificates... 8
7. Exercise of Rights; Purchase Price; Expiration Date
of Rights................................................. 8
8. Cancellation and Destruction of Right Certificates........ 10
9. Company Covenants Concerning Securities and Rights........ 10
10. Record Date............................................... 12
11. Adjustment of Purchase Price, Number and Kind
Securities or Number of Rights............................ 12
12. Certificate of Adjusted Purchase Price or Number of
Securities................................................ 21
13. Consolidation, Merger or Sale or Transfer of Assets
or Earning Power.......................................... 21
14. Fractional Rights and Fractional Securities............... 24
15. Rights of Action.......................................... 25
16. Agreement of Rights Holders............................... 26
17. Right Certificate Holder Not Deemed a Stockholder......... 26
18. Concerning the Rights Agent............................... 27
19. Merger or Consolidation or Change of Name of Rights
Agent..................................................... 27
20. Duties of Rights Agent.................................... 28
(i)
Page
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21. Change of Rights Agent.................................... 30
22. Issuance of New Right Certificates........................ 30
23. Redemption................................................ 31
24. Exchange.................................................. 32
25. Notice of Certain Events.................................. 33
26. Notices................................................... 34
27. Supplements and Amendments................................ 34
28. Successors; Certain Covenants............................. 35
29. Benefits of This Agreement................................ 35
30. Governing Law............................................. 35
31. Severability.............................................. 35
32. Descriptive Headings, Etc................................. 35
33. Determinations and Actions by the Board................... 36
34. Counterparts.............................................. 36
Exhibit A....................................................... A-1
Exhibit B....................................................... B-1
Exhibit C....................................................... C-1
(ii)
RIGHTS AGREEMENT
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This RIGHTS AGREEMENT, dated as of December 18, 1996 (this "Agreement"), is
made and entered into by and between Sterling Software, Inc., a Delaware
corporation (the "Company"), and The First National Bank of Boston, a national
banking association (the "Rights Agent").
RECITALS
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WHEREAS, on December 18, 1996 the Board of Directors of the Company
authorized and declared a dividend distribution of one right (a "Right") for
each share of Common Stock, par value $0.10 per share, of the Company (a "Common
Share") outstanding as of the Close of Business (as hereinafter defined) on
December 31, 1996 (the "Record Date"), each Right initially representing the
right to purchase one one-hundredth of a Preferred Share (as hereinafter
defined), on the terms and subject to the conditions herein set forth, and
further authorized and directed the issuance of one Right (subject to adjustment
as provided herein) with respect to each Common Share issued or delivered by the
Company (whether originally issued or delivered from the Company's treasury)
after the Record Date but prior to the earlier of the Distribution Date (as
hereinafter defined) and the Expiration Date (as hereinafter defined) or as
provided in Section 22.
NOW, THEREFORE, in consideration of the mutual agreements herein set forth,
the parties hereto hereby agree as follows:
1. Certain Definitions. For purposes of this Agreement, the following
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terms have the meanings indicated:
(a) "Acquiring Person" means any Person (other than the Company or any
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Related Person) who or which, together with all Affiliates and Associates of
such Person, is the Beneficial Owner of 15% or more of the then-outstanding
Common Shares; provided, however, that a Person will not be deemed to have
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become an Acquiring Person solely as a result of a reduction in the number of
Common Shares outstanding unless and until such time as (i) such Person or any
Affiliate or Associate of such Person thereafter becomes the Beneficial Owner of
additional Common Shares representing 1% or more of the then-outstanding Common
Shares, other than as a result of a stock dividend, stock split or similar
transaction effected by the Company in which all holders of Common Shares are
treated equally, or (ii) any other Person who is the Beneficial Owner of Common
Shares representing 1% or more of the then-outstanding Common Shares thereafter
becomes an Affiliate or Associate of such Person; provided further, however,
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that a Person (other than the Company or any Related Person) who or which,
together with all Affiliates and Associates of such Person, was, at the time of
the public announcement by the Company of the declaration by its Board of
Directors on December 18, 1996 of the dividend distribution of the Rights, the
Beneficial Owner of 15% or more of the then-outstanding Common Shares shall not
be deemed to have become an Acquiring Person unless and until such time as (A)
such Person or any Affiliate or Associate of such Person thereafter
becomes the Beneficial Owner of additional Common Shares representing 1% or more
of the then-outstanding Common Shares other than as a result of a stock
dividend, stock split or similar transaction effected by the Company in which
all holders of Common Shares are treated equally or (B) any other Person who is
the Beneficial Owner of Common Shares representing 1% or more of the then-
outstanding Common Shares thereafter becomes an Affiliate or Associate of such
Person. Notwithstanding the foregoing, if the Board of Directors of the Company
determines in good faith that a Person who would otherwise be an "Acquiring
Person" as defined pursuant to the foregoing provisions of this paragraph (a),
has become such inadvertently, and such Person divests as promptly as
practicable a sufficient number of Common Shares so that such Person would no
longer be an "Acquiring Person" as defined pursuant to the foregoing provisions
of this paragraph (a), then such Person shall not be deemed to be an "Acquiring
Person" for any purposes of this Agreement.
(b) "Affiliate" and "Associate" will have the respective meanings ascribed
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to such terms in Rule 12b-2 of the General Rules and Regulations under the
Exchange Act, as in effect on the date of this Agreement.
(c) A Person will be deemed the "Beneficial Owner" of, and to
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"Beneficially Own," any securities:
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(i) the beneficial ownership of which such Person or any of such
Person's Affiliates or Associates, directly or indirectly, has the right to
acquire (whether such right is exercisable immediately or only after the
passage of time) pursuant to any agreement, arrangement or understanding
(whether or not in writing), or upon the exercise of conversion rights,
exchange rights, warrants, options or other rights (in each case, other
than upon exercise or exchange of the Rights); provided, however, that a
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Person will not be deemed the Beneficial Owner of, or to Beneficially Own,
securities tendered pursuant to a tender or exchange offer made by or on
behalf of such Person or any of such Person's Affiliates or Associates
until such tendered securities are accepted for purchase or exchange; or
(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has or shares the right to vote or
dispose of, including pursuant to any agreement, arrangement or
understanding (whether or not in writing); or
(iii) of which any other Person is the Beneficial Owner, if such
Person or any of such Person's Affiliates or Associates has any agreement,
arrangement, or understanding (whether or not in writing) with such other
Person (or any of such other Person's Affiliates or Associates) with
respect to acquiring, holding, voting or disposing of any securities of the
Company;
provided, however, that a Person will not be deemed the Beneficial Owner of, or
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to Beneficially Own, any security (A) if such Person has the right to vote such
security pursuant to an agreement, arrangement or understanding (whether or not
in writing) which (1) arises solely from a revocable proxy given to such Person
in response to a public proxy
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or consent solicitation made pursuant to, and in accordance with, the applicable
rules and regulations of the Exchange Act and (2) is not also then reportable on
Schedule 13D under the Exchange Act (or any comparable or successor report), or
(B) if such beneficial ownership arises solely as a result of such Person's
status as a "clearing agency," as defined in Section 3(a)(23) of the Exchange
Act; provided further, however, that nothing in this paragraph (c) will cause a
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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 an underwriting syndicate until the expiration of
40 calendar days after the date of such acquisition, or such later date as the
Board of Directors of the Company may determine in any specific case.
(d) "Business Day" means any day other than a Saturday, Sunday or a day on
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which banking institutions in the State of New York (or such other state in
which the principal office of the Rights Agent is located) are authorized or
obligated by law or executive order to close.
(e) "Close of Business" on any given date means 5:00 P.M., Eastern time,
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on such date; provided, however, that if such date is not a Business Day it
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means 5:00 P.M., Eastern time, on the next succeeding Business Day.
(f) "Common Shares" when used with reference to the Company means the
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shares of Common Stock, par value $0.10 per share, of the Company; provided,
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however, that, if the Company is the continuing or surviving corporation in a
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transaction described in Section 13(a)(ii), "Common Shares" when used with
reference to the Company means shares of the capital stock or units of the
equity interests with the greatest aggregate voting power of the Company.
"Common Shares" when used with reference to any corporation or other legal
entity other than the Company, including an Issuer, means shares of the capital
stock or units of the equity interests with the greatest aggregate voting power
of such corporation or other legal entity.
(g) "Company" means Sterling Software, Inc., a Delaware corporation.
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(h) "Distribution Date" means the earlier of: (i) the Close of Business on
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the tenth calendar day (or, unless the Distribution Date shall have previously
occurred, such later date as may be specified by the Board of Directors of the
Company) after the Share Acquisition Date, or (ii) the Close of Business on the
tenth Business Day (or, unless the Distribution Date shall have previously
occurred, such later date as may be specified by the Board of Directors of the
Company) after the date of the commencement of a tender or exchange offer by any
Person (other than the Company or any Related Person), if upon the consummation
thereof such Person would be the Beneficial Owner of 15% or more of the then-
outstanding Common Shares.
(i) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
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(j) "Expiration Date" means the earliest of (i) the Close of Business on
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the Final Expiration Date, (ii) the time at which the Rights are redeemed as
provided in Section 23, and (iii) the time at which all exercisable Rights are
exchanged as provided in Section 24.
(k) "Final Expiration Date" means the tenth anniversary of the Record Date.
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(l) "Flip-in Event" means any event described in clauses (A), (B) or (C) of
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Section 11(a)(ii).
(m) "Flip-over Event" means any event described in clauses (i), (ii) or
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(iii) of Section 13(a).
(n) "Issuer" has the meaning set forth in Section 13(b).
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(o) "Nasdaq" means The NASDAQ Stock Market.
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(p) "Person" means any individual, firm, corporation or other legal entity,
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and includes any successor (by merger or otherwise) of such entity.
(q) "Preferred Shares" means shares of Series A Junior Participating
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Preferred Stock, par value $0.10 per share, of the Company having the rights and
preferences set forth in the form of Certificate of Designations of Series A
Junior Participating Preferred Stock attached as Exhibit A.
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(r) "Purchase Price" means initially $200 per one one-hundredth of a
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Preferred Share, subject to adjustment from time to time as provided in this
Agreement.
(s) "Record Date" has the meaning set forth in the Recitals to this
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Agreement.
(t) "Redemption Price" means $.01 per Right, subject to adjustment by
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resolution of the Board of Directors of the Company to reflect any stock split,
stock dividend or similar transaction occurring after the Record Date.
(u) "Related Person" means (i) any Subsidiary of the Company or (ii) any
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employee benefit or stock ownership plan of the Company or of any Subsidiary of
the Company or any entity holding Common Shares for or pursuant to the terms of
any such plan.
(v) "Right" has the meaning set forth in the Recitals to this Agreement.
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(w) "Right Certificates" means certificates evidencing the Rights, in
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substantially the form attached as Exhibit B.
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(x) "Rights Agent" means The First National Bank of Boston, a national
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banking association, unless and until a successor Rights Agent has become such
pursuant to the terms of this Agreement, and thereafter, "Rights Agent" means
such successor Rights Agent.
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(y) "Securities Act" means the Securities Act of 1933, as amended.
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(z) "Share Acquisition Date" means the first date of public announcement
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by the Company or an Acquiring Person (by press release, filing made with the
Securities and Exchange Commission or otherwise) that an Acquiring Person has
become such; provided, however, that no such public announcement by an Acquiring
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Person shall have been deemed to have been made for purposes of this paragraph
(y) unless and until a majority of the members of the Board of Directors of the
Company have actual notice thereof.
(aa) "Subsidiary" when used with reference to any Person means any
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corporation or other legal entity of which a majority of the voting power of the
voting equity securities or equity interests is owned, directly or indirectly,
by such Person; provided, however, that for purposes of Section 13(b),
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"Subsidiary" when used with reference to any Person means any corporation or
other legal entity of which at least 20% of the voting power of the voting
equity securities or equity interests is owned, directly or indirectly, by such
Person.
(ab) "Trading Day" means any day on which the principal national securities
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exchange on which the Common Shares are listed or admitted to trading is open
for the transaction of business or, if the Common Shares are not listed or
admitted to trading on any national securities exchange, a Business Day.
(ac) "Triggering Event" means any Flip-in Event or Flip-over Event.
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2. Appointment of Rights Agent. The Company hereby appoints the Rights
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Agent to act as agent for the Company and the holders of the Rights (who, in
accordance with Section 3, will also be, prior to the Distribution Date, the
holders of the Common Shares) in accordance with the terms and conditions
hereof, and the Rights Agent hereby accepts such appointment and hereby
certifies that it complies with the requirements of the New York Stock Exchange
governing transfer agents and registrars. The Company may from time to time act
as Co-Rights Agent or appoint such Co-Rights Agents as it may deem necessary or
desirable upon ten calendar days' prior written notice to the Rights Agent. The
Rights Agent shall have no duty to supervise, and shall in no event be liable
for, the acts or omissions of any such Co-Rights Agent. Any actions which may
be taken by the Rights Agent pursuant to the terms of this Agreement may be
taken by any such Co-Rights Agent. To the extent that any Co-Rights Agent takes
any action pursuant to this Agreement, such Co-Rights Agent will be entitled to
all of the rights and protections of, and subject to all of the applicable
duties and obligations imposed upon, the Rights Agent pursuant to the terms of
this Agreement.
3. Issue of Right Certificates. (a) Until the Distribution Date, (i) the
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Rights will be evidenced by the certificates representing Common Shares
registered in the names of the record holders thereof (which certificates
representing Common Shares will also be deemed to be Right Certificates), (ii)
the Rights will be transferable only in connection with the transfer of the
underlying Common Shares, and (iii) the surrender for transfer of any
certificates evidencing Common Shares in respect of which Rights have been
issued will also constitute the transfer of the Rights associated with the
Common Shares evidenced by
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such certificates. On or as promptly as practicable after the Record Date, the
Company will send by first class, postage prepaid mail, to each record holder of
Common Shares as of the Close of Business on the Record Date, at the address of
such holder shown on the records of the Company as of such date, a copy of a
Summary of Rights to Purchase Preferred Stock in substantially the form attached
as Exhibit C.
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(b) Rights will be issued by the Company in respect of all Common Shares
(other than Common Shares issued upon the exercise or exchange of any Right)
issued or delivered by the Company (whether originally issued or delivered from
the Company's treasury) after the Record Date but prior to the earlier of the
Distribution Date and the Expiration Date. Certificates evidencing such Common
Shares will have stamped on, impressed on, printed on, written on, or otherwise
affixed to them the following legend or such similar legend as the Company may
deem appropriate and as is not inconsistent with the provisions of this
Agreement, or as may be required to comply with any applicable law or with any
rule or regulation made pursuant thereto or with any rule or regulation of any
stock exchange or transaction reporting system on which the Common Shares may
from time to time be listed or quoted, or to conform to usage:
This Certificate also evidences and entitles the holder hereof to certain
Rights as set forth in a Rights Agreement between Sterling Software, Inc.
and The First National Bank of Boston, as Rights Agent, dated as of
December 18, 1996 (the "Rights Agreement"), the terms of which are hereby
incorporated herein by reference and a copy of which is on file at the
principal executive offices of the Company. The Rights are not exercisable
prior to the occurrence of certain events specified in the Rights
Agreement. Under certain circumstances, as set forth in the Rights
Agreement, such Rights may be redeemed, may expire, may be amended, or may
be evidenced by separate certificates and no longer be evidenced by this
Certificate. The Company will mail to the holder of this Certificate a
copy of the Rights Agreement, as in effect on the date of mailing, without
charge promptly after receipt of a written request therefor. Under certain
circumstances as set forth in the Rights Agreement, Rights beneficially
owned by an Acquiring Person or any Affiliate or Associate of an Acquiring
Person (as such terms are defined in the Rights Agreement) may become null
and void.
(c) As promptly as practicable after the Distribution Date, the Company
will prepare and execute, the Rights Agent will countersign and the Company will
send or cause to be sent (and the Rights Agent will, if requested, send), by
first class, insured, postage prepaid mail, to each record holder of Common
Shares as of the Close of Business on the Distribution Date, at the address of
such holder shown on the records of the Company, a Right Certificate evidencing
one Right for each Common Share so held, subject to adjustment as provided
herein. As of and after the Distribution Date, the Rights will be evidenced
solely by such Right Certificates.
(d) In the event that the Company purchases or otherwise acquires any
Common Shares after the Record Date but prior to the Distribution Date, any
Rights associated with
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such Common Shares will be deemed canceled and retired so that the Company will
not be entitled to exercise any Rights associated with the Common Shares so
purchased or acquired.
4. Form of Right Certificates. The Right Certificates (and the form of
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election to purchase, the form of assignment and the form of election to
purchase without the payment of cash to be printed on the reverse thereof) will
be substantially in the form attached as Exhibit B with such changes and marks
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of identification or designation, and such legends, summaries or endorsements
printed thereon, as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange or transaction reporting system on
which the Rights may from time to time be listed or quoted, or to conform to
usage. Subject to the provisions of Section 22, the Right Certificates,
whenever issued, on their face will entitle the holders thereof to purchase such
number of one one-hundredths of a Preferred Share as are set forth therein at
the Purchase Price set forth therein, but the Purchase Price, the number and
kind of securities issuable upon exercise of each Right and the number of Rights
outstanding will be subject to adjustment as provided herein.
5. Countersignature and Registration. (a) The Right Certificates will be
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executed on behalf of the Company by its Chairman of the Board, the Vice
Chairman, its President or any Vice President, either manually or by facsimile
signature, and will have affixed thereto the Company's seal or a facsimile
thereof which will be attested by the Secretary or an Assistant Secretary of the
Company, either manually or by facsimile signature. The Right Certificates will
be manually countersigned by the Rights Agent and will not be valid for any
purpose unless so countersigned. In case any officer of the Company who signed
any of the Right Certificates ceases to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Right Certificates, nevertheless, may be countersigned by the Rights Agent,
and issued and delivered by the Company with the same force and effect as though
the person who signed such Right Certificates had not ceased to be such officer
of the Company; and any Right Certificate may be signed on behalf of the Company
by any person who, at the actual date of the execution of such Right
Certificate, is a proper officer of the Company to sign such Right Certificate,
although at the date of the execution of this Rights Agreement any such person
was not such officer.
(b) Following the Distribution Date, the Rights Agent will keep or cause
to be kept, at the principal office of the Rights Agent designated for such
purpose and at such other offices as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange or any transaction reporting system on
which the Rights may from time to time be listed or quoted, books for
registration and transfer of the Right Certificates issued hereunder. Such books
will show the names and addresses of the respective holders of the Right
Certificates, the number of Rights evidenced on its face by each of the Right
Certificates and the date of each of the Right Certificates.
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6. Transfer, Split Up, Combination and Exchange of Right Certificates;
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Mutilated, Destroyed, Lost or Stolen Right Certificates. (a) Subject to the
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provisions of Sections 7(d) and 14, at any time after the Close of Business on
the Distribution Date and prior to the Expiration Date, any Right Certificate or
Right Certificates representing exercisable Rights may be transferred, split up,
combined or exchanged for another Right Certificate or Right Certificates,
entitling the registered holder to purchase a like number of one one-hundredths
of a Preferred Share (or other securities, as the case may be) as the Right
Certificate or Right Certificates surrendered then entitled such holder (or
former holder in the case of a transfer) to purchase. Any registered holder
desiring to transfer, split up, combine or exchange any such Right Certificate
or Rights Certificates must make such request in a writing delivered to the
Rights Agent and must surrender the Right Certificate or Right Certificates to
be transferred, split up, combined or exchanged at the principal office of the
Rights Agent designated for such purpose. Thereupon or as promptly as
practicable thereafter, subject to the provisions of Sections 7(d) and 14, the
Company will prepare, execute and deliver to the Rights Agent, and the Rights
Agent will countersign and deliver, a Right Certificate or Right Certificates,
as the case may be, as so requested. The Company may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer, split up, combination or exchange of Right
Certificates.
(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 Right Certificate and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and, if requested by the Company,
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Right Certificate if mutilated, the Company will prepare, execute and
deliver a new Right Certificate of like tenor to the Rights Agent and the Rights
Agent will countersign and deliver such new Right Certificate to the registered
holder in lieu of the Right Certificate so lost, stolen, destroyed or mutilated.
7. Exercise of Rights; Purchase Price; Expiration Date of Rights. (a)
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The registered holder of any Right Certificate may exercise the Rights evidenced
thereby (except as otherwise provided herein) in whole or in part at any time
after the Distribution Date and prior to the Expiration Date, upon surrender of
the Right Certificate, with the form of election to purchase on the reverse side
thereof duly executed, to the Rights Agent at the office or offices of the
Rights Agent designated for such purpose, together with payment in cash, in
lawful money of the United States of America by certified check or bank draft
payable to the order of the Company, equal to the sum of (i) the exercise price
for the total number of securities as to which such surrendered Rights are
exercised and (ii) an amount equal to any applicable transfer tax required to be
paid by the holder of such Right Certificate in accordance with the provisions
of Section 9(c). In lieu of the cash payment referred to in the immediately
preceding sentence, at any time after the later of the Share Acquisition Date
and the Distribution Date and prior to the Expiration Date, the registered
holder of a Right Certificate may exercise the Rights evidenced thereby (except
as otherwise provided herein) in whole or in part upon surrender of the Right
Certificate as described above together with an election to exercise such Rights
without payment of
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cash on the reverse side thereof duly completed. With respect to any Rights as
to which such an election to exercise Rights without the payment of cash is
made, the holder will receive a number of Common Shares or other securities
having a value equal to the difference between (i) the value of the Common
Shares or other securities that would have been issuable upon payment of the
cash amount as described above and (ii) the amount of such cash payment. For
purposes of this Section 7(a), the value of any security will be the current per
share market price thereof (or of the security as to which such security is
deemed for purposes of this Agreement to be an equivalent), determined pursuant
to the applicable provisions of Section 11(d), on the date of the occurrence of
the most recent Triggering Event.
(b) Upon receipt of a Right Certificate representing exercisable Rights
with the form of election to purchase duly executed, accompanied by either
payment as described above or a duly completed election to exercise without
payment of cash, the Rights Agent will promptly (i) requisition from any
transfer agent of the Preferred Shares (or make available, if the Rights Agent
is the transfer agent) certificates representing the number of one one-
hundredths of a Preferred Share to be purchased (and the Company hereby
irrevocably authorizes and directs its transfer agent to comply with all such
requests), or, if the Company elects to deposit Preferred Shares issuable upon
exercise of the Rights hereunder with a depositary agent, requisition from the
depositary agent depositary receipts representing such number of one one-
hundredths of a Preferred Share as are to be purchased (and the Company hereby
irrevocably authorizes and directs such depositary agent to comply with all such
requests), (ii) after receipt of such certificates (or depositary receipts, as
the case may be), cause the same to be delivered to or upon the order of the
registered holder of such Right Certificate, registered in such name or names as
may be designated by such holder, (iii) when appropriate, requisition from the
Company or any transfer agent therefor (or make available, if the Rights Agent
is the transfer agent) certificates representing the number of equivalent common
shares to be issued in lieu of the issuance of Common Shares in accordance with
the provisions of Section 11(a)(iii), (iv) when appropriate, after receipt of
such certificates, cause the same to be delivered to or upon the order of the
registered holder of such Right Certificate, registered in such name or names as
may be designated by such holder, (v) when appropriate, requisition from the
Company the amount of cash to be paid in lieu of the issuance of fractional
shares in accordance with the provisions of Section 14 or in lieu of the
issuance of Common Shares in accordance with the provisions of Section
11(a)(iii), (vi) when appropriate, after receipt, deliver such cash to or upon
the order of the registered holder of such Right Certificate, and (vii) when
appropriate, deliver any due xxxx or other instrument provided to the Rights
Agent by the Company for delivery to the registered holder of such Right
Certificate as provided by Section 11(l).
(c) In case the registered holder of any Right Certificate exercises less
than all the Rights evidenced thereby, the Company will prepare, execute and
deliver a new Right Certificate evidencing Rights equivalent to the Rights
remaining unexercised and the Rights Agent will countersign and deliver such new
Right Certificate to the registered holder of such Right Certificate or to his
duly authorized assigns, subject to the provisions of Section 14.
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(d) Notwithstanding anything in this Agreement to the contrary, neither
the Rights Agent nor the Company will be obligated to undertake any action with
respect to any purported transfer, split up, combination or exchange of any
Right Certificate pursuant to Section 6 or exercise of a Right Certificate as
set forth in this Section 7 unless the registered holder of such Right
Certificate has (i) completed and signed the certificate following the form of
assignment or the form of election to purchase, as applicable, set forth on the
reverse side of the Right Certificate surrendered for such transfer, split up,
combination, exchange or 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 has reasonably requested. If, with respect
to any Right Certificate surrendered to the Rights Agent for exercise, transfer,
split up, combination or exchange, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause 1 or 2 thereof,
the Rights Agent will not take any further action with respect to such requested
exercise, transfer, split up, combination or exchange without first consulting
with the Company. The Board of Directors of the Company shall have the authority
to determine the accuracy and completeness of the information provided by the
Beneficial Owner on the certificate attached to the form of assignment and the
form of election to purchase.
8. Cancellation and Destruction of Right Certificates. All Right
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Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange will, if surrendered to the Company or to any of its
stock transfer agents, be delivered to the Rights Agent for cancellation or in
canceled form, or, if surrendered to the Rights Agent, will be canceled by it,
and no Right Certificates will be issued in lieu thereof except as expressly
permitted by the provisions of this Agreement. The Company will deliver to the
Rights Agent for cancellation and retirement, and the Rights Agent will so
cancel and retire, any other Right Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent will deliver
all canceled Right Certificates to the Company, or will, at the written request
of the Company, destroy such canceled Right Certificates, and in such case will
deliver a certificate of destruction thereof to the Company.
9. Company Covenants Concerning Securities and Rights. The Company
--------------------------------------------------
covenants and agrees that:
(a) It will cause to be reserved and kept available out of its
authorized and unissued Preferred Shares or any Preferred Shares held in
its treasury, a number of Preferred Shares that will be sufficient to
permit the exercise in full of all outstanding Rights in accordance with
Section 7.
(b) So long as the Preferred Shares (and, following the occurrence of
a Triggering Event, Common Shares and/or other securities) issuable upon
the exercise of the Rights may be listed on a national securities exchange
it will endeavor to cause, from and after such time as the Rights become
exercisable, all
-10-
securities reserved for issuance upon the exercise of Rights to be listed
on such exchange upon official notice of issuance upon such exercise.
(c) It will take all such action as may be necessary to ensure that
all Preferred Shares (and, following the occurrence of a Triggering Event,
Common Shares and/or other securities) delivered upon exercise of Rights,
at the time of delivery of the certificates for such securities, will be
(subject to payment of the Purchase Price) duly authorized, validly issued,
fully paid and nonassessable securities.
(d) It will pay when due and payable any and all federal and state
transfer taxes and charges that may be payable in respect of the issuance
or delivery of the Right Certificates and of any certificates representing
securities issued upon the exercise of Rights; provided, however, that the
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Company will not be required to pay any transfer tax or charge which may be
payable in respect of any transfer or delivery of Right Certificates to a
person other than, or the issuance or delivery of certificates or
depositary receipts representing securities issued upon the exercise of
Rights in a name other than that of, the registered holder of the Right
Certificate evidencing Rights surrendered for exercise, or to issue or
deliver any certificates or depositary receipts representing securities
issued upon the exercise of any Rights until any such tax or charge has
been paid (any such tax or charge being payable by the holder of such Right
Certificate at the time of surrender) or until it has been established to
the Company's reasonable satisfaction that no such tax is due.
(e) It will use its best efforts (i) to file on an appropriate form,
as soon as practicable following the later of the Share Acquisition Date
and the Distribution Date, a registration statement under the Securities
Act with respect to the securities issuable upon exercise of the Rights,
(ii) to cause such registration statement to become effective as soon as
practicable after such filing, and (iii) to cause such registration
statement to remain effective (with a prospectus at all times meeting the
requirements of the Securities Act) until the earlier of (A) the date as of
which the Rights are no longer exercisable for such securities and (B) the
Expiration Date. The Company 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
after the date set forth in clause (i) of the first sentence of this
Section 9(e), the exercisability of the Rights in order to prepare and file
such registration statement and to permit it to become effective. Upon any
such suspension, the Company will issue a public announcement stating that
the exercisability of the Rights has been temporarily suspended, as well as
a public announcement at such time as the suspension is no longer in
effect. In addition, if the Company determines that a registration
statement should be filed under the Securities Act or any state securities
laws following the Distribution Date, the Company may temporarily suspend
the exercisability of the Rights in each relevant jurisdiction until such
time as a registration statement has been declared effective and, upon any
such suspension, the Company will issue a public announcement
-11-
stating that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement at such time as the suspension
is no longer in effect. Notwithstanding anything in this Agreement to the
contrary, the Rights will not be exercisable in any jurisdiction if the
requisite registration or qualification in such jurisdiction has not been
effected or the exercise of the Rights is not permitted under applicable
law.
(f) Notwithstanding anything in this Agreement to the contrary, after
the later of the Share Acquisition Date and the Distribution Date it will
not take (or permit any Subsidiary to take) any action if at the time such
action is taken it is reasonably foreseeable that such action will
eliminate or otherwise diminish the benefits intended to be afforded by the
Rights.
(g) In the event that the Company is obligated to issue other
securities of the Company and/or pay cash pursuant to Sections 11, 13, 14
or 24 it will make all arrangements necessary so that such other securities
and/or cash are available for distribution by the Rights Agent, if and when
appropriate.
10. Record Date. Each Person in whose name any certificate representing
-----------
Preferred Shares (or Common Shares and/or other securities, as the case may be)
is issued upon the exercise of Rights will for all purposes be deemed to have
become the holder of record of the Preferred Shares (or Common Shares and/or
other securities, as the case may be) represented thereby on, and such
certificate will be dated, the date upon which the Right 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
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surrender and payment is a date upon which the transfer books of the Company for
the Preferred Shares (or Common Shares and/or other securities, as the case may
be) are closed, such Person will be deemed to have become the record holder of
such securities on, and such certificate will be dated, the next succeeding
Business Day on which the transfer books of the Company for the Preferred Shares
(or Common Shares and/or other securities, as the case may be) are open. Prior
to the exercise of the Rights evidenced thereby, the holder of a Right
Certificate will not be entitled to any rights of a holder of any security for
which the Rights are or may become exercisable, including without limitation the
right to vote, to receive dividends or other distributions, or to exercise any
preemptive rights, and will not be entitled to receive any notice of any
proceedings of the Company, except as provided herein.
11. Adjustment of Purchase Price, Number and Kind of Securities or Number
---------------------------------------------------------------------
of Rights. The Purchase Price, the number and kind of securities issuable upon
---------
exercise of each Right and the number of Rights outstanding are subject to
adjustment from time to time as provided in this Section 11.
(a) (i) In the event that the Company at any time after the Record Date
(A) declares a dividend on the Preferred Shares payable in Preferred
Shares, (B) subdivides the outstanding Preferred Shares, (C) combines the
outstanding Preferred Shares into a smaller number of Preferred Shares, or
(D) issues any shares of its
-12-
capital stock in a reclassification of the Preferred Shares (including any
such reclassification in connection with a consolidation or merger in which
the Company is the continuing or surviving corporation), except as
otherwise provided in this Section 11(a), the Purchase Price in effect at
the time of the record date for such dividend or of the effective date of
such subdivision, combination or reclassification and/or the number and/or
kind of shares of capital stock issuable on such date upon exercise of a
Right, will be proportionately adjusted so that the holder of any Right
exercised after such time is entitled to receive upon payment of the
Purchase Price then in effect the aggregate number and kind of shares of
capital stock which, if such Right had been exercised immediately prior to
such date and at a time when the transfer books of the Company for the
Preferred Shares were open, the holder of such Right would have owned upon
such exercise (and, in the case of a reclassification, would have retained
after giving effect to such reclassification) and would have been entitled
to receive by virtue of such dividend, subdivision, combination or
reclassification; provided, however, that in no event shall the
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consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock issuable upon exercise
of one Right. If an event occurs which would require an adjustment under
both this Section 11(a)(i) and Section 11(a)(ii) or Section 13, the
adjustment provided for in this Section 11(a)(i) will be in addition to,
and will be made prior to, any adjustment required pursuant to Section
11(a)(ii) or Section 13.
(ii) Subject to the provisions of Section 24, if:
(A) any Person becomes an Acquiring Person; or
(B) any Acquiring Person or any Affiliate or Associate of any Acquiring
Person, directly or indirectly, (1) merges into the Company or otherwise
combines with the Company and the Company is the continuing or surviving
corporation of such merger or combination (other than in a transaction
subject to Section 13), (2) merges or otherwise combines with any
Subsidiary of the Company, (3) in one or more transactions (otherwise than
in connection with the exercise, exchange or conversion of securities
exercisable or exchangeable for or convertible into shares of any class of
capital stock of the Company or any of its Subsidiaries) transfers cash,
securities or any other property to the Company or any of its Subsidiaries
in exchange (in whole or in part) for shares of any class of capital stock
of the Company or any of its Subsidiaries or for securities exercisable or
exchangeable for or convertible into shares of any class of capital stock
of the Company or any of its Subsidiaries, or otherwise obtains from the
Company or any of its Subsidiaries, with or without consideration, any
additional shares of any class of capital stock of the Company or any of
its Subsidiaries or securities exercisable or exchangeable for or
convertible into shares of any class of capital stock of the Company or any
of its Subsidiaries (otherwise than as part of a pro rata distribution to
all holders of shares of any class of capital stock of the Company or any
of its Subsidiaries), (4) sells, purchases, leases, exchanges, mortgages,
pledges, transfers or otherwise disposes (in one or more transactions) to,
from, with or of, as the case may be, the Company or
-13-
any of its Subsidiaries (otherwise than in a transaction subject to Section
13) any property, including securities, on terms and conditions less
favorable to the Company than the Company would be able to obtain in an
arm's-length transaction with an unaffiliated third party, (5) receives any
compensation from the Company or any of its Subsidiaries other than
compensation for service as a director or a regular, full-time employee, in
either case at rates consistent with the Company's (or its Subsidiaries')
past practices, or (6) receives the benefit, directly or indirectly (except
proportionately as a stockholder), of any loans, advances, guarantees,
pledges or other financial assistance or any tax credits or other tax
advantage provided by the Company or any of its Subsidiaries; or
(C) during such time as there is an Acquiring Person, there is any
reclassification of securities of the Company (including any reverse stock
split), or any recapitalization of the Company, or any merger or
consolidation of the Company with any of its Subsidiaries, or any other
transaction or series of transactions involving the Company or any of its
Subsidiaries (whether or not with or into or otherwise involving an
Acquiring Person), other than a transaction subject to Section 13, which
has the effect, directly or indirectly, of increasing by more than 1% the
proportionate share of the outstanding shares of any class of equity
securities of the Company or any of its Subsidiaries, or of securities
exercisable or exchangeable for or convertible into equity securities of
the Company or any of its Subsidiaries, of which an Acquiring Person, or
any Affiliate or Associate of any Acquiring Person, is the Beneficial
Owner;
then, and in each such case, proper provision will be made so that from and
after the latest of the Share Acquisition Date, the Distribution Date and the
date of the occurrence of such Flip-in Event each holder of a Right, except as
provided below, will have a right to receive, upon exercise thereof in
accordance with the terms of this Agreement at an exercise price per Right equal
to the product of the then-current Purchase Price multiplied by the number of
one one-hundredths of a Preferred Share for which a Right was exercisable
immediately prior to the date of the occurrence of such Flip-in Event (or, if
any other Flip-in Event shall have previously occurred, the product of the then-
current Purchase Price multiplied by the number of one one-hundredths of a
Preferred Share for which a Right would have been exercisable immediately prior
to the date of the occurrence of such Flip-in Event if no other Flip-in Event
had previously occurred), in lieu of Preferred Shares, such number of Common
Shares as equals the result obtained by (x) multiplying the then-current
Purchase Price by the number of one one-hundredths of a Preferred Share for
which a Right was exercisable immediately prior to the date of the occurrence of
such Flip-in Event (or, if any other Flip-in Event shall have previously
occurred, multiplying the then-current Purchase Price by the number of one one-
hundredths of a Preferred Share for which a Right would have been exercisable
immediately prior to the date of the occurrence of such Flip-in Event if no
other Flip-in Event had previously occurred), and dividing that product by (y)
50% of the current per share market price of the Common Shares (determined
pursuant to Section 11(d)) on the date of the occurrence of such Flip-in Event.
Notwithstanding anything in this Agreement to the contrary, from and after the
occurrence of a Flip-in Event, any Rights that are Beneficially Owned by (A) any
Acquiring Person (or
-14-
any Affiliate or Associate of any Acquiring Person), (B) a transferee of any
Acquiring Person (or any such Affiliate or Associate) who becomes a transferee
after the occurrence of a Flip-in Event, or (C) a transferee of any Acquiring
Person (or any such Affiliate or Associate) who became a transferee prior to or
concurrently with the occurrence of a Flip-in Event pursuant to either (1) a
transfer from an Acquiring Person to holders of its equity securities or to any
Person with whom it has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (2) a transfer which the Board of Directors
of the Company has determined is part of a plan, arrangement or understanding
which has the purpose or effect of avoiding the provisions of this Section
11(a)(ii), and subsequent transferees of any of such Persons, will be void
without any further action and any holder of such Rights will thereafter have no
rights whatsoever with respect to such Rights under any provision of this
Agreement. The Company will use all reasonable efforts to ensure that the
provisions of this Section 11(a)(ii) are complied with, but will have no
liability to any holder of Right Certificates or any other Person as a result of
its failure to make any determinations with respect to an Acquiring Person or
its Affiliates, Associates or transferees hereunder. Upon the occurrence of a
Flip-in Event, no Right Certificate will be issued pursuant to Section 3 or
Section 6 that represents Rights that are or have become void pursuant to the
provisions of this Section 11(a)(ii), and any Right Certificate delivered to the
Rights Agent that represents Rights that are or have become void pursuant to the
provisions of this Section 11(a)(ii) will be canceled. Upon the occurrence of a
Flip-over Event, any Rights that shall not have been previously exercised
pursuant to this Section 11(a)(ii) shall thereafter be exercisable only pursuant
to Section 13 and not pursuant to this Section 11(a)(ii).
(iii) Upon the occurrence of a Flip-in Event, if there are not
sufficient Common Shares authorized but unissued or issued but not
outstanding to permit the issuance of all the Common Shares issuable in
accordance with Section 11(a)(ii) upon the exercise of a Right, the Board
of Directors of the Company will use its best efforts promptly to authorize
and, subject to the provisions of Section 9(e), make available for issuance
additional Common Shares or other equity securities of the Company having
equivalent voting rights and an equivalent value (as determined in good
faith by the Board of Directors of the Company) to the Common Shares (for
purposes of this Section 11(a)(iii), "equivalent common shares"). In the
event that equivalent common shares are so authorized, upon the exercise of
a Right in accordance with the provisions of Section 7, the registered
holder will be entitled to receive (A) Common Shares, to the extent any are
available, and (B) a number of equivalent common shares, which the Board of
Directors of the Company has determined in good faith to have a value
equivalent to the excess of (x) the aggregate current per share market
value on the date of the occurrence of the most recent Flip-in Event of all
the Common Shares issuable in accordance with Section 11(a)(ii) upon the
exercise of a Right (the "Exercise Value") over (y) the aggregate current
per share market value on the date of the occurrence of the most recent
Flip-in Event of any Common Shares available for issuance upon the exercise
of such Right; provided, however, that if at any time after 90 calendar
-------- -------
days after the latest of the Share Acquisition Date, the Distribution Date
and the date of the occurrence of the most recent Flip-in Event, there are
not sufficient Common Shares
-15-
and/or equivalent common shares available for issuance upon the exercise of
a Right, then the Company will be obligated to deliver, upon the surrender
of such Right and without requiring payment of the Purchase Price, Common
Shares (to the extent available), equivalent common shares (to the extent
available) and then cash (to the extent permitted by applicable law and any
agreements or instruments to which the Company is a party in effect
immediately prior to the Share Acquisition Date), which securities and cash
have an aggregate value equal to the excess of (1) the Exercise Value over
(2) the product of the then-current Purchase Price multiplied by the number
of one one-hundredths of a Preferred Share for which a Right was
exercisable immediately prior to the date of the occurrence of the most
recent Flip-in Event (or, if any other Flip-in Event shall have previously
occurred, the product of the then-current Purchase Price multiplied by the
number of one one-hundredths of a Preferred Share for which a Right would
have been exercisable immediately prior to the date of the occurrence of
such Flip-in Event if no other Flip-in Event had previously occurred). To
the extent that any legal or contractual restrictions prevent the Company
from paying the full amount of cash payable in accordance with the
foregoing sentence, the Company will pay to holders of the Rights as to
which such payments are being made all amounts which are not then
restricted on a pro rata basis and will continue to make payments on a pro
rata basis as promptly as funds become available until the full amount due
to each such Rights holder has been paid.
(b) In the event that the Company fixes a record date for the issuance of
rights, options or warrants to all holders of Preferred Shares entitling them
(for a period expiring within 45 calendar days after such record date) to
subscribe for or purchase Preferred Shares (or securities having equivalent
rights, privileges and preferences as the Preferred Shares (for purposes of this
Section 11(b), "equivalent preferred shares")) or securities convertible into
Preferred Shares or equivalent preferred shares at a price per Preferred Share
or equivalent preferred share (or having a conversion price per share, if a
security convertible into Preferred Shares or equivalent preferred shares) less
than the current per share market price of the Preferred Shares (determined
pursuant to Section 11(d)) on such record date, the Purchase Price to be in
effect after such record date will be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which is the number of Preferred Shares outstanding on such record
date plus the number of Preferred Shares which the aggregate offering price of
the total number of Preferred Shares and/or equivalent preferred shares so to be
offered (and/or the aggregate initial conversion price of the convertible
securities so to be offered) would purchase at such current per share market
price and the denominator of which is the number of Preferred Shares outstanding
on such record date plus the number of additional Preferred Shares and/or
equivalent preferred shares to be offered for subscription or purchase (or into
which the convertible securities so to be offered are initially convertible);
provided, however, that in no event shall the consideration to be paid upon the
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exercise of one Right be less than the aggregate par value of the shares of
capital stock issuable upon exercise of one Right. In case such subscription
price may be paid in a consideration part or all of which is in a form other
than cash, the value of such consideration will be as determined in good faith
by the Board of Directors of the Company, whose determination
-16-
will be described in a statement filed with the Rights Agent. Preferred Shares
owned by or held for the account of the Company will not be deemed outstanding
for the purpose of any such computation. Such adjustment will be made
successively whenever such a record date is fixed, and in the event that such
rights, options or warrants are not so issued, the Purchase Price will be
adjusted to be the Purchase Price which would then be in effect if such record
date had not been fixed.
(c) In the event that the Company fixes a record date for the making of a
distribution to all holders of Preferred Shares (including any such distribution
made in connection with a consolidation or merger in which the Company is the
continuing or surviving corporation) of evidences of indebtedness, cash (other
than a regular periodic cash dividend), assets, stock (other than a dividend
payable in Preferred Shares) or subscription rights, options or warrants
(excluding those referred to in Section 11(b)), the Purchase Price to be in
effect after such record date will be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which is the current per share market price of the Preferred Shares
(as determined pursuant to Section 11(d)) on such record date or, if earlier,
the date on which Preferred Shares begin to trade on an ex-dividend or when
issued basis for such distribution, less the fair market value (as determined in
good faith by the Board of Directors of the Company, whose determination will be
described in a statement filed with the Rights Agent) of the portion of the
evidences of indebtedness, cash, assets or stock so to be distributed or of such
subscription rights, options or warrants applicable to one Preferred Share, and
the denominator of which is such current per share market price of the Preferred
Shares; provided, however, that in no event shall the consideration to be paid
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upon the exercise of one Right be less than the aggregate par value of the
shares of capital stock issuable upon exercise of one Right. Such adjustments
will be made successively whenever such a record date is fixed; and in the event
that such distribution is not so made, the Purchase Price will again be adjusted
to be the Purchase Price which would then be in effect if such record date had
not been fixed.
(d) (i) For the purpose of any computation hereunder, the "current per
share market price" of Common Shares on any date will be deemed to be the
average of the daily closing prices per share of such Common Shares for the
30 consecutive Trading Days immediately prior to such date; provided,
--------
however, that in the event that the current per share market price of the
-------
Common Shares is determined during a period following the announcement by
the issuer of such Common Shares of (A) a dividend or distribution on such
Common Shares payable in such Common Shares or securities convertible into
such Common Shares (other than the Rights) or (B) any subdivision,
combination or reclassification of such Common Shares, and prior to the
expiration of 30 Trading Days after the ex-dividend date for such dividend
or distribution, or the record date for such subdivision, combination or
reclassification, then, and in each such case, the current per share market
price will be appropriately adjusted to take into account ex-dividend
trading or to reflect the current per share market price per Common Share
equivalent. The closing price for each day will 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
-17-
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 Common Shares 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 Common Shares are listed or
admitted to trading or, if the Common Shares 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 Common Shares 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 Shares
selected by the Board of Directors of the Company. If the Common Shares
are not publicly held or not so listed or traded, or are not the subject of
available bid and asked quotes, "current per share market price" will mean
the fair value per share as determined in good faith by the Board of
Directors of the Company, whose determination will be described in a
statement filed with the Rights Agent.
(ii) For the purpose of any computation hereunder, the "current per
share market price" of the Preferred Shares will be determined in the same
manner as set forth above for Common Shares in Section 11(d)(i), other than
the last sentence thereof. If the current per share market price of the
Preferred Shares cannot be determined in the manner provided above, the
"current per share market price" of the Preferred Shares will be
conclusively deemed to be an amount equal to the current per share market
price of the Common Shares multiplied by one hundred (as such number may be
appropriately adjusted to reflect events such as stock splits, stock
dividends, recapitalizations or similar transactions relating to the Common
Shares occurring after the date of this Agreement). If neither the Common
Shares nor the Preferred Shares are publicly held or so listed or traded,
or the subject of available bid and asked quotes, "current per share market
price" of the Preferred Shares will mean the fair value per share as
determined in good faith by the Board of Directors of the Company, whose
determination will be described in a statement filed with the Rights Agent.
For all purposes of this Agreement, the current per share market price of
one one-hundredth of a Preferred Share will be equal to the current per
share market price of one Preferred Share divided by one hundred.
(e) Except as set forth below, no adjustment in the Purchase Price will be
required unless such adjustment would require an increase or decrease of at
least 1% in such price; provided, however, that any adjustments which by reason
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of this Section 11(e) are not required to be made will be carried forward and
taken into account in any subsequent adjustment. All calculations under this
Section 11 will be made to the nearest cent or to the nearest one one-millionth
of a Preferred Share or one ten-thousandth of a Common Share or other security,
as the case may be. Notwithstanding the first sentence of this Section 11(e),
any adjustment required by this Section 11 will be made no later than the
earlier of (i) three years from the date of the transaction which requires such
adjustment and (ii) the Expiration Date.
-18-
(f) If as a result of an adjustment made pursuant to Section 11(a), the
holder of any Right thereafter exercised becomes entitled to receive any
securities of the Company other than Preferred Shares, thereafter the number
and/or kind of such other securities so receivable upon exercise of any Right
(and/or the Purchase Price in respect thereof) will be subject to adjustment
from time to time in a manner and on terms as nearly equivalent as practicable
to the provisions with respect to the Preferred Shares (and the Purchase Price
in respect thereof) contained in this Section 11, and the provisions of Sections
7, 9, 10, 13 and 14 with respect to the Preferred Shares (and the Purchase Price
in respect thereof) will apply on like terms to any such other securities (and
the Purchase Price in respect thereof).
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder will evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-hundredths of a
Preferred Share issuable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
(h) Unless the Company has exercised its election as provided in Section
11(i), upon each adjustment of the Purchase Price pursuant to Section 11(b) or
Section 11(c), each Right outstanding immediately prior to the making of such
adjustment will thereafter evidence the right to purchase, at the adjusted
Purchase Price, that number of one one-hundredths of a Preferred Share
(calculated to the nearest one one-millionth of a Preferred Share) obtained by
(i) multiplying (x) the number of one one-hundredths of a Preferred Share
issuable upon exercise of a Right immediately prior to such adjustment of the
Purchase Price by (y) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price and (ii) dividing the product so obtained by
the Purchase Price in effect immediately after such adjustment of the Purchase
Price.
(i) The Company may elect, on or after the date of any adjustment of the
Purchase Price, to adjust the number of Rights in substitution for any
adjustment in the number of one one-hundredths of a Preferred Share issuable
upon the exercise of a Right. Each of the Rights outstanding after such
adjustment of the number of Rights will be exercisable for the number of one
one-hundredths of a Preferred Share 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 will 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
will 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. Such record date may be the date on which
the Purchase Price is adjusted or any day thereafter, but, if the Right
Certificates have been issued, will be at least 10 calendar days later than the
date of the public announcement. If Right Certificates have been issued, upon
each adjustment of the number of Rights pursuant to this Section 11(i), the
Company will, as promptly as practicable, cause to be distributed to holders of
record of Right Certificates on such record date Right Certificates evidencing,
subject to the provisions of Section 14,
-19-
the additional Rights to which such holders are entitled as a result of such
adjustment, or, at the option of the Company, will cause to be distributed to
such holders of record in substitution and replacement for the Right
Certificates held by such holders prior to the date of adjustment, and upon
surrender thereof if required by the Company, new Right Certificates evidencing
all the Rights to which such holders are entitled after such adjustment. Right
Certificates so to be distributed will be issued, executed, and countersigned in
the manner provided for herein (and may bear, at the option of the Company, the
adjusted Purchase Price) and will be registered in the names of the holders of
record of Right Certificates on the record date specified in the public
announcement.
(j) Without respect to any adjustment or change in the Purchase Price
and/or the number and/or kind of securities issuable upon the exercise of the
Rights, the Right Certificates theretofore and thereafter issued may continue to
express the Purchase Price and the number and kind of securities which were
expressed in the initial Right Certificate issued hereunder.
(k) Before taking any action that would cause an adjustment reducing the
Purchase Price below one one-hundredth of the then par value, if any, of the
Preferred Shares or below the then par value, if any, of any other securities of
the Company issuable upon exercise of the Rights, the Company will 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
Preferred Shares or such other securities, as the case may be, at such adjusted
Purchase Price.
(l) In any case in which this Section 11 otherwise requires that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised after such record date
the number of Preferred Shares or other securities of the Company, if any,
issuable upon such exercise over and above the number of Preferred Shares or
other securities of the Company, if any, issuable upon such exercise on the
basis of the Purchase Price in effect prior to such adjustment; provided,
--------
however, that the Company delivers to such holder a due xxxx or other
-------
appropriate instrument evidencing such holder's right to receive such additional
Preferred Shares or other securities upon the occurrence of the event requiring
such adjustment.
(m) Notwithstanding anything in this Agreement to the contrary, the Company
will be entitled to make such reductions in the Purchase Price, in addition to
those adjustments expressly required by this Section 11, as and to the extent
that in its good faith judgment the Board of Directors of the Company determines
to be advisable in order that any (i) consolidation or subdivision of the
Preferred Shares, (ii) issuance wholly for cash of Preferred Shares at less than
the current per share market price therefor, (iii) issuance wholly for cash of
Preferred Shares or securities which by their terms are convertible into or
exchangeable for Preferred Shares, (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 Shares is not taxable to such
stockholders.
-20-
(n) Notwithstanding anything in this Agreement to the contrary, in the
event that the Company at any time after the Record Date prior to the
Distribution Date (i) pays a dividend on the outstanding Common Shares payable
in Common Shares, (ii) subdivides the outstanding Common Shares, (iii) combines
the outstanding Common Shares into a smaller number of shares, or (iv) issues
any shares of its capital stock in a reclassification of the outstanding Common
Shares (including any such reclassification in connection with a consolidation
or merger in which the Company is the continuing or surviving corporation), the
number of Rights associated with each Common Share then outstanding, or issued
or delivered thereafter but prior to the Distribution Date, will be
proportionately adjusted so that the number of Rights thereafter associated with
each Common Share following any such event equals the result obtained by
multiplying the number of Rights associated with each Common Share immediately
prior to such event by a fraction the numerator of which is the total number of
Common Shares outstanding immediately prior to the occurrence of the event and
the denominator of which is the total number of Common Shares outstanding
immediately following the occurrence of such event. The adjustments provided
for in this Section 11(n) will be made successively whenever such a dividend is
paid or such a subdivision, combination or reclassification is effected.
12. Certificate of Adjusted Purchase Price or Number of Securities.
--------------------------------------------------------------
Whenever an adjustment is made as provided in Section 11 or Section 13, the
Company will promptly (a) prepare a certificate setting forth such adjustment
and a brief statement of the facts accounting for such adjustment, (b) file with
the Rights Agent and with each transfer agent for the Preferred Shares and the
Common Shares a copy of such certificate, and (c) if such adjustment is made
after the Distribution Date, mail a brief summary of such adjustment to each
holder of a Right Certificate in accordance with Section 26.
13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power.
--------------------------------------------------------------------
(a) In the event that:
(i) at any time after a Person has become an Acquiring Person,
the Company consolidates with, or merges with or into, any other Person and
the Company is not the continuing or surviving corporation of such
consolidation or merger; or
(ii) at any time after a Person has become an Acquiring Person,
any Person consolidates with the Company, or merges with or into the
Company, and the Company is the continuing or surviving corporation of such
merger or consolidation and, in connection with such merger or
consolidation, all or part of the Common Shares is changed into or
exchanged for stock or other securities of any other Person or cash or any
other property; or
(iii) at any time after a Person has become an Acquiring Person,
the Company, directly or indirectly, sells or otherwise transfers (or one
or more of its Subsidiaries sells or otherwise transfers), in one or more
transactions, assets or earning power (including without limitation
securities creating any obligation on the part of the Company and/or any of
its Subsidiaries) representing in the aggregate
-21-
more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any Person or Persons other than the
Company or one or more of its wholly owned Subsidiaries;
then, and in each such case, proper provision will be made so that from and
after the latest of the Share Acquisition Date, the Distribution Date and the
date of the occurrence of such Flip-over Event (A) each holder of a Right
thereafter has the right to receive, upon the exercise thereof in accordance
with the terms of this Agreement at an exercise price per Right equal to the
product of the then-current Purchase Price multiplied by the number of one one-
hundredths of a Preferred Share for which a Right was exercisable immediately
prior to the Share Acquisition Date, such number of duly authorized, validly
issued, fully paid, nonassessable and freely tradeable Common Shares of the
Issuer, free and clear of any liens, encumbrances and other adverse claims and
not subject to any rights of call or first refusal, as equals the result
obtained by (x) multiplying the then-current Purchase Price by the number of one
one-hundredths of a Preferred Share for which a Right is exercisable immediately
prior to the Share Acquisition Date and dividing that product by (y) 50% of the
current per share market price of the Common Shares of the Issuer (determined
pursuant to Section 11(d)), on the date of the occurrence of such Flip-over
Event; (B) the Issuer will thereafter be liable for, and will assume, by virtue
of the occurrence of such Flip-over Event, all the obligations and duties of the
Company pursuant to this Agreement; (C) the term "Company" will thereafter be
deemed to refer to the Issuer; and (D) the Issuer will take such steps
(including without limitation the reservation of a sufficient number of its
Common Shares to permit the exercise of all outstanding Rights) in connection
with such consummation as may be necessary to assure that the provisions hereof
are thereafter applicable, as nearly as reasonably may be possible, in relation
to its Common Shares thereafter deliverable upon the exercise of the Rights.
(b) For purposes of this Section 13, "Issuer" means (i) in the case of any
Flip-over Event described in Sections 13(a)(i) or (ii) above, the Person that is
the continuing, surviving, resulting or acquiring Person (including the Company
as the continuing or surviving corporation of a transaction described in Section
13(a)(ii) above), and (ii) in the case of any Flip-over Event described in
Section 13(a)(iii) above, the Person that is the party receiving the greatest
portion of the assets or earning power (including without limitation securities
creating any obligation on the part of the Company and/or any of its
Subsidiaries) transferred pursuant to such transaction or transactions;
provided, however, that, in any such case, (A) if (1) no class of equity
-------- -------
security of such Person is, at the time of such merger, consolidation or
transaction and has been continuously over the preceding 12-month period,
registered pursuant to Section 12 of the Exchange Act, and (2) such Person is a
Subsidiary, directly or indirectly, of another Person, a class of equity
security of which is and has been so registered, the term "Issuer" means such
other Person; and (B) in case such Person is a Subsidiary, directly or
indirectly, of more than one Person, a class of equity security of two or more
of which are and have been so registered, the term "Issuer" means whichever of
such Persons is the issuer of the equity security having the greatest aggregate
market value. Notwithstanding the foregoing, if the Issuer in any of the Flip-
over Events listed above is not a corporation or other legal entity having
outstanding equity securities, then, and in each such case, (x) if the Issuer is
directly or indirectly wholly
-22-
owned by a corporation or other legal entity having outstanding equity
securities, then all references to Common Shares of the Issuer will be deemed to
be references to the Common Shares of the corporation or other legal entity
having outstanding equity securities which ultimately controls the Issuer, and
(y) if there is no such corporation or other legal entity having outstanding
equity securities, (I) proper provision will be made so that the Issuer creates
or otherwise makes available for purposes of the exercise of the Rights in
accordance with the terms of this Agreement, a kind or kinds of security or
securities having a fair market value at least equal to the economic value of
the Common Shares which each holder of a Right would have been entitled to
receive if the Issuer had been a corporation or other legal entity having
outstanding equity securities; and (II) all other provisions of this Agreement
will apply to the issuer of such securities as if such securities were Common
Shares.
(c) The Company will not consummate any Flip-over Event if, (i) at the time
of or immediately after such Flip-over Event, there are or would be any rights,
warrants, instruments or securities outstanding or any agreements or
arrangements in effect which would eliminate or substantially diminish the
benefits intended to be afforded by the Rights, (ii) prior to, simultaneously
with or immediately after such Flip-over Event, the stockholders of the Person
who constitutes, or would constitute, the Issuer for purposes of Section 13(a)
shall have received a distribution of Rights previously owned by such Person or
any of its Affiliates or Associates, or (iii) the form or nature of the
organization of the Issuer would preclude or limit the exercisability of the
Rights. In addition, the Company will not consummate any Flip-over Event unless
the Issuer has a sufficient number of authorized Common Shares (or other
securities as contemplated in Section 13(b) above) 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 to such consummation the Company and the
Issuer have executed and delivered to the Rights Agent a supplemental agreement
providing for the terms set forth in subsections (a) and (b) of this Section 13
and further providing that as promptly as practicable after the consummation of
any Flip-over Event, the Issuer will:
(A) prepare and file a registration statement under the Securities
Act with respect to the Rights and the securities issuable upon exercise of
the Rights on an appropriate form, and 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 Securities Act) until the Expiration Date;
(B) take all 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; and
(C) deliver to holders of the Rights historical financial
statements for the Issuer and each of its Affiliates which comply in all
respects with the requirements for registration on Form 10 under the
Exchange Act.
-23-
(d) The provisions of this Section 13 will similarly apply to successive
mergers or consolidations or sales or other transfers. In the event that a
Flip-over Event occurs at any time after the occurrence of a Flip-in Event,
except for Rights that have become void pursuant to Section 11(a)(ii), Rights
that shall not have been previously exercised will cease to be exercisable in
the manner provided in Section 11(a)(ii) and will thereafter be exercisable in
the manner provided in Section 13(a).
14. Fractional Rights and Fractional Securities. (a) The Company will not
-------------------------------------------
be required to issue fractions of Rights or to distribute Right Certificates
which evidence fractional Rights. In lieu of such fractional Rights, the
Company will pay as promptly as practicable to the registered holders of the
Right Certificates with regard to which such fractional Rights otherwise would
be issuable, an amount in cash equal to the same fraction of the current market
value of one Right. For the purposes of this Section 14(a), the current market
value of one Right is the closing price of the Rights for the Trading Day
immediately prior to the date on which such fractional Rights otherwise would
have been issuable. The closing price for any day is 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 of
the Company. If the Rights are not publicly held or are not so listed or
traded, or are not the subject of available bid and asked quotes, the current
market value of one Right will mean the fair value thereof as determined in good
faith by the Board of Directors of the Company, whose determination will be
described in a statement filed with the Rights Agent.
(b) The Company will not be required to issue fractions of Preferred
Shares (other than fractions which are integral multiples of one one-hundredth
of a Preferred Share) upon exercise of the Rights or to distribute certificates
which evidence fractional Preferred Shares (other than fractions which are
integral multiples of one one-hundredth of a Preferred Share). Fractions of
Preferred Shares in integral multiples of one one-hundredth of a Preferred Share
may, at the election of the Company, be evidenced by depositary receipts
pursuant to an appropriate agreement between the Company and a depositary
selected by it, provided that such agreement provides that the holders of such
depositary receipts have all the rights, privileges and preferences to which
they are entitled as beneficial owners of the Preferred Shares represented by
such depositary receipts. In lieu of fractional Preferred Shares that are not
integral multiples of one one-hundredth of a Preferred Share, the Company may
pay to any Person to whom or which such fractional
-24-
Preferred Shares would otherwise be issuable an amount in cash equal to the same
fraction of the current market value of one Preferred Share. For purposes of
this Section 14(b), the current market value of one Preferred Share is the
closing price of the Preferred Shares (as determined in the same manner as set
forth for Common Shares in the second sentence of Section 11(d)(i)) for the
Trading Day immediately prior to the date of such exercise; provided, however,
-------- -------
that if the closing price of the Preferred Shares cannot be so determined, the
closing price of the Preferred Shares for such Trading Day will be conclusively
deemed to be an amount equal to the closing price of the Common Shares
(determined pursuant to the second sentence of Section 11(d)(i)) for such
Trading Day multiplied by one hundred (as such number may be appropriately
adjusted to reflect events such as stock splits, stock dividends,
recapitalizations or similar transactions relating to the Common Shares
occurring after the date of this Agreement); provided further, however, that if
-------- ------- -------
neither the Common Shares nor the Preferred Shares are publicly held or listed
or admitted to trading on any national securities exchange, or the subject of
available bid and asked quotes, the current market value of one Preferred Share
will mean the fair value thereof as determined in good faith by the Board of
Directors of the Company, whose determination will be described in a statement
filed with the Rights Agent.
(c) Following the occurrence of a Triggering Event, the Company will not
be required to issue fractions of Common Shares or other securities issuable
upon exercise or exchange of the Rights or to distribute certificates which
evidence any such fractional securities. In lieu of issuing any such fractional
securities, the Company may pay to any Person to whom or which such fractional
securities would otherwise be issuable an amount in cash equal to the same
fraction of the current market value of one such security. For purposes of this
Section 14(c), the current market value of one Common Share or other security
issuable upon the exercise or exchange of Rights is the closing price thereof
(as determined in the same manner as set forth for Common Shares in the second
sentence of Section 11(d)(i)) for the Trading Day immediately prior to the date
of such exercise or exchange; provided, however, that if neither the Common
-------- -------
Shares nor any such other securities are publicly held or listed or admitted to
trading on any national securities exchange, or the subject of available bid and
asked quotes, the current market value of one Common Share or such other
security will mean the fair value thereof as determined in good faith by the
Board of Directors of the Company, whose determination will mean the fair value
thereof as be described in a statement filed with the Rights Agent.
15. Rights of Action. All rights of action in respect of this Agreement,
----------------
excepting the rights of action given to the Rights Agent under Section 18, are
vested in the respective registered holders of the Right Certificates (and,
prior to the Distribution Date, the registered holders of the Common Shares);
and any registered holder of any Right Certificate (or, prior to the
Distribution Date, of the Common Shares), without the consent of the Rights
Agent or of the holder of any other Right Certificate (or, prior to the
Distribution Date, of the holder of any Common Shares), 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 Right Certificate in the
manner provided in such Right Certificate and in this Agreement. Without
limiting the foregoing or any remedies available to the
-25-
holders of Rights, it is specifically acknowledged that the holders of Rights
would not have an adequate remedy at law for any breach of this Agreement and
will be entitled to specific performance of the obligations under this
Agreement, and injunctive relief against actual or threatened violations of the
obligations of any Person subject to this Agreement.
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 are transferable only
in connection with the transfer of the Common Shares;
(b) After the Distribution Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if surrendered
at the principal office of the Rights Agent designated for such purpose,
duly endorsed or accompanied by a proper instrument of transfer;
(c) The Company and the Rights Agent may deem and treat the person in
whose name the Right Certificate (or, prior to the Distribution Date, the
associated Common Share certificate) is registered as the absolute owner
thereof and of the Rights evidenced thereby (notwithstanding any notations
of ownership or writing on the Right Certificate or the associated Common
Share certificate made by anyone other than the Company or the Rights
Agent) for all purposes whatsoever, and neither the Company nor the Rights
Agent will be affected by any notice to the contrary;
(d) Such holder expressly waives any right to receive any fractional
Rights and any fractional securities upon exercise or exchange of a Right,
except as otherwise provided in Section 14.
(e) Notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Rights Agent will 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,
-------- -------
that the Company will use its best efforts to have any such order, decree
or ruling lifted or otherwise overturned as soon as possible.
17. Right Certificate Holder Not Deemed a Stockholder. No holder, as
-------------------------------------------------
such, of any Right Certificate will be entitled to vote, receive dividends, or
be deemed for any purpose the holder of Preferred Shares or any other securities
of the Company which may at any time be issuable upon the exercise of the Rights
represented thereby, nor will anything contained herein or in any Right
Certificate be construed to confer upon the
-26-
holder of any Right Certificate, as such, any of the rights of a stockholder of
the Company or any right to vote for the election of Directors or upon any
matter submitted to stockholders at any meeting thereof, 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), or to receive
dividends or subscription rights, or otherwise, until the Right or Rights
evidenced by such Right Certificate shall have been exercised in accordance with
the provisions of this Agreement or exchanged pursuant to the provisions of
Section 24.
18. Concerning the Rights Agent. (a) The Company will pay to the Rights
---------------------------
Agent reasonable compensation for all services rendered by it hereunder and,
from time to time, on demand of the Rights Agent, its reasonable expenses and
counsel fees and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder. The Company will also indemnify the Rights Agent for, and hold it
harmless against, any loss, liability, suit, action, proceeding or expense,
incurred without gross negligence, bad faith, or willful misconduct on the part
of the Rights Agent, for anything done or omitted to be done by the Rights Agent
in connection with the acceptance and administration of this Agreement,
including the costs and expenses of defending against any claim of liability
arising therefrom, directly or indirectly.
(b) The Rights Agent will be protected and will incur no liability for or
in respect of any action taken, suffered, or omitted by it in connection with
its administration of this Agreement in reliance upon any Right Certificate or
certificate evidencing Preferred Shares or Common Shares or other securities of
the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement or other paper or document believed by it to be genuine and to be
signed, executed, and, where necessary, verified or acknowledged, by the proper
Person or Persons.
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 any successor Rights
Agent is a party, or any corporation succeeding to the business of the Rights
Agent or any successor Rights Agent, will be the successor to the Rights Agent
under this Agreement without the execution or filing of any paper or any further
act on the part of any of the parties hereto, provided that such corporation
would be eligible for appointment as a successor Rights Agent under the
provisions of Section 21. If at the time such successor Rights Agent succeeds
to the agency created by this Agreement any of the Right Certificates shall have
been countersigned but not delivered, any such successor Rights Agent may adopt
the countersignature of the predecessor Rights Agent and deliver such Right
Certificates so countersigned; and if at that time any of the Right Certificates
shall not have been countersigned, any successor Rights Agent may countersign
such Right Certificates either in the name of the predecessor Rights Agent or in
the name of the successor Rights Agent; and in all such cases such Right
Certificates will have the full force provided in the Right Certificates and in
this Agreement.
-27-
(b) If at any time the name of the Rights Agent changes and at such time
any of the Right Certificates have been countersigned but not delivered, the
Rights Agent may adopt the countersignature under its prior name and deliver
Right Certificates so countersigned; and if at that time any of the Right
Certificates have not been countersigned, the Rights Agent may countersign such
Right Certificates either in its prior name or in its changed name; and in all
such cases such Right Certificates will have the full force provided in the
Right Certificates and in this Agreement.
20. Duties of Rights Agent. The Rights Agent undertakes the duties and
----------------------
obligations imposed by this Agreement upon the following terms and conditions,
by all of which the Company and the holders of Right Certificates, by their
acceptance thereof, will 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 will 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 deems it necessary or desirable that any fact or matter be
proved or established by the Company prior to taking or suffering any
action hereunder, such fact or matter (unless other evidence in respect
thereof be herein specifically prescribed) may be deemed to be conclusively
proved and established by a certificate signed by any one of the Chairman
of the Board, the President, any Vice President, the Secretary or the
Treasurer of the Company and delivered to the Rights Agent, and such
certificate will 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 will be liable hereunder only for its own gross
negligence, bad faith or willful misconduct.
(d) The Rights Agent will not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Right
Certificates (except its countersignature thereof) or be required to verify
the same, but all such statements and recitals are and will be deemed to
have been made by the Company only.
(e) The Rights Agent will not be under any responsibility in respect
of the validity of this Agreement or the execution and delivery hereof
(except the due execution and delivery hereof by the Rights Agent) or in
respect of the validity or execution of any Right Certificate (except its
countersignature thereof); nor will it be responsible for any breach by the
Company of any covenant contained in this Agreement or in any Right
Certificate; nor will it be responsible for any adjustment required under
the provisions of Sections 11 or 13 (including any adjustment which results
in Rights becoming void) or responsible for the manner, method or amount
-28-
of any such adjustment or the ascertaining of the existence of facts that
would require any such adjustment (except with respect to the exercise of
Rights evidenced by Right Certificates after actual notice of any such
adjustment); nor will it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any
shares of stock or other securities to be issued pursuant to this Agreement
or any Right Certificate or as to whether any shares of stock or other
securities will, when issued, be duly authorized, validly issued, fully
paid and nonassessable.
(f) The Company will perform, execute, acknowledge and deliver or
cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be
required by the Rights Agent for the carrying out or performing by the
Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from
any one of the Chairman of the Board, the President, any Vice President,
the Secretary or the Treasurer of the Company, and to apply to such
officers for advice or instructions in connection with its duties, and it
will 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 will preclude
the Rights Agent from acting in any other capacity for the Company or for
any other Person.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or
by or through its attorneys or agents, and the Rights Agent will 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 reasonable care was
exercised in the selection and continued employment thereof. The Rights
Agent will not be under any duty or responsibility to ensure compliance
with any applicable federal or state securities laws in connection with the
issuance, transfer or exchange of Right Certificates.
(j) If, with respect to any Right Certificate surrendered to the
Rights Agent for exercise, transfer, split up, combination or exchange, the
certificate attached to the form of assignment or form of election to
purchase, as the case may be, has either not been completed or indicates an
affirmative response to clause 1 or 2 thereof, the Rights Agent will not
take any further action with respect to such
-29-
requested exercise, transfer, split up, combination or exchange without
first consulting with the Company.
21. Change of Rights Agent. The Rights Agent or any successor Rights
----------------------
Agent may resign and be discharged from its duties under this Agreement upon 30
calendar days' notice in writing mailed to the Company and to each transfer
agent of the Preferred Shares or the Common Shares by registered or certified
mail, and to the holders of the Right Certificates by first class mail. The
Company may remove the Rights Agent or any successor Rights Agent upon 30
calendar 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 Preferred Shares
and the Common Shares by registered or certified mail, and to the holders of the
Right Certificates by first class mail. If the Rights Agent resigns or is
removed or otherwise becomes incapable of acting, the Company will appoint a
successor to the Rights Agent. If the Company fails to make such appointment
within a period of 30 calendar days after giving notice of such removal or after
it has been notified in writing of such resignation or incapacity by the
resigning or incapacitated Rights Agent or by the holder of a Right Certificate
(who will, with such notice, submit his Right Certificate for inspection by the
Company), then the registered holder of any Right Certificate may apply to any
court of competent jurisdiction for the appointment of a new Rights Agent. Any
successor Rights Agent, whether appointed by the Company or by such a court,
will be a corporation or other legal entity organized and doing business under
the laws of the United States or of the State of New York (or of any other state
of the United States so long as such corporation is authorized to do business as
a banking institution in the State of New York), in good standing, having a
principal office in the State of New York, which is authorized under such laws
to exercise corporate trust or stock transfer powers and is subject to
supervision or examination by federal or state authority and which has at the
time of its appointment as Rights Agent a combined capital and surplus of at
least $50 million. After appointment, the successor Rights Agent will 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 will 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 will file
notice thereof in writing with the predecessor Rights Agent and each transfer
agent of the Preferred Shares or the Common Shares, and mail a notice thereof in
writing to the registered holders of the Right Certificates. Failure to give
any notice provided for in this Section 21, however, or any defect therein, will
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.
22. Issuance of New Right Certificates. Notwithstanding any of the
----------------------------------
provisions of this Agreement or of the Rights to the contrary, the Company may,
at its option, issue new Right Certificates evidencing Rights in such form as
may be approved by its Board of Directors to reflect any adjustment or change in
the Purchase Price per share and the number or kind of securities issuable upon
exercise of the Rights made in accordance with the provisions of this Agreement.
In addition, in connection with the issuance or sale by the Company of Common
Shares following the Distribution Date and prior to the
-30-
Expiration Date, the Company (a) will, with respect to Common Shares so issued
or sold pursuant to the exercise, exchange or conversion of securities (other
than Rights) issued prior to the Distribution Date which are exercisable or
exchangeable for, or convertible into Common Shares, and (b) may, in any other
case, if deemed necessary, appropriate or desirable by the Board of Directors of
the Company, issue Right Certificates representing an equivalent number of
Rights as would have been issued in respect of such Common Shares if they had
been issued or sold prior to the Distribution Date, as appropriately adjusted as
provided herein as if they had been so issued or sold; provided, however, that
-------- -------
(i) no such Right Certificate will be issued if, and to the extent that, in its
good faith judgment the Board of Directors of the Company determines that the
issuance of such Right Certificate could have a material adverse tax consequence
to the Company or to the Person to whom or which such Right Certificate
otherwise would be issued and (ii) no such Right Certificate will be issued if,
and to the extent that, appropriate adjustment otherwise has been made in lieu
of the issuance thereof.
23. Redemption. (a) Prior to the Expiration Date, the Board of Directors
----------
of the Company may, at its option, redeem all but not less than all of the then-
outstanding Rights at the Redemption Price at any time prior to the Close of
Business on the later of (i) the Share Acquisition Date and (ii) the
Distribution Date. Any such redemption will be effective immediately upon the
action of the Board of Directors of the Company ordering the same, unless such
action of the Board of Directors of the Company expressly provides that such
redemption will be effective at a subsequent time or upon the occurrence or
nonoccurrence of one or more specified events (in which case such redemption
will be effective in accordance with the provisions of such action of the Board
of Directors of the Company).
(b) Immediately upon the effectiveness of the redemption of the Rights as
provided in Section 23(a), 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 will be to receive the Redemption Price,
without interest thereon. Promptly after the effectiveness of the redemption of
the Rights as provided in Section 23(a), the Company will publicly announce such
redemption and, within 10 calendar days thereafter, will give notice of such
redemption to the holders of the then-outstanding Rights by mailing such notice
to all such holders at their last addresses as they appear upon the registry
books of the Company; provided, however, that the failure to give, or any defect
-------- -------
in, any such notice will not affect the validity of the redemption of the
Rights. Any notice which is mailed in the manner herein provided will be deemed
given, whether or not the holder receives the notice. The notice of redemption
mailed to the holders of Rights will state the method by which the payment of
the Redemption Price will be made. The Company may, at its option, pay the
Redemption Price in cash, Common Shares (based upon the current per share market
price of the Common Shares (determined pursuant to Section 11(d)) at the time of
redemption), or any other form of consideration deemed appropriate by the Board
of Directors of the Company (based upon the fair market value of such other
consideration, determined by the Board of Directors of the Company in good
faith) or any combination thereof. The Company may, at its option, combine the
payment of the Redemption Price with any other payment being made concurrently
to holders of Common Shares and, to the
-31-
extent that any such other payment is discretionary, may reduce the amount
thereof on account of the concurrent payment of the Redemption Price. If legal
or contractual restrictions prevent the Company from paying the Redemption Price
(in the form of consideration deemed appropriate by the Board of Directors) at
the time of redemption, the Company will pay the Redemption Price, without
interest, promptly after such time as the Company ceases to be so prevented from
paying the Redemption Price.
(c) At any time following the Share Acquisition Date, the Board of
Directors of the Company may relinquish the right to redeem the Rights under
this Section 23 by duly adopting a resolution to that effect. Immediately upon
adoption of such resolution, the rights of the Board of Directors of the Company
to redeem the Rights will terminate without further action and without any
notice. Promptly after adoption of such a resolution, the Company will publicly
announce such action; provided, however, that the failure to give, or any defect
-------- -------
in, any such notice will not affect the validity of the action of the Board of
Directors of the Company.
24. Exchange. (a) The Board of Directors of the Company may, at its
--------
option, at any time after the later of the Share Acquisition Date and the
Distribution Date, exchange all or part of the then-outstanding and exercisable
Rights (which will not include Rights that have become void pursuant to the
provisions of Section 11(a)(ii)) for Common Shares at an exchange ratio of one
Common Share per Right, appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the Record Date (such exchange
ratio being hereinafter referred to as the "Exchange Ratio"). Any such exchange
will be effective immediately upon the action of the Board of Directors of the
Company ordering the same, unless such action of the Board of Directors of the
Company expressly provides that such exchange will be effective at a subsequent
time or upon the occurrence or nonoccurrence of one or more specified events (in
which case such redemption will be effective in accordance with the provisions
of such action of the Board of Directors of the Company). Notwithstanding the
foregoing, the Board of Directors of the Company will not be empowered to effect
such exchange at any time after any Person (other than the Company or any
Related Person), who or which, together with all Affiliates and Associates of
such Person, becomes the Beneficial Owner of 50% or more of the then-outstanding
Common Shares.
(b) Immediately upon the effectiveness of the exchange of any Rights as
provided in Section 24(a), and without any further action and without any
notice, the right to exercise such Rights will terminate and the only right with
respect to such Rights thereafter of the holder of such Rights will be to
receive that number of Common Shares equal to the number of such Rights held by
such holder multiplied by the Exchange Ratio. Promptly after the effectiveness
of the exchange of any Rights as provided in Section 24(a), the Company will
publicly announce such exchange and, within 10 calendar days thereafter, will
give notice of such exchange to all of the holders of such Rights at their last
addresses as they appear upon the registry books of the Rights Agent; provided,
--------
however, that the failure to give, or any defect in, such notice will not affect
-------
the validity of such exchange. Any notice which is mailed in the manner herein
provided will be deemed given, whether or not the holder receives the notice.
Each such notice of exchange will state the method by
-32-
which the exchange of the Common Shares for Rights will be effected and, in the
event of any partial exchange, the number of Rights which will be exchanged.
Any partial exchange will be effected pro rata based on the number of Rights
(other than Rights which have become void pursuant to the provisions of Section
11(a)(ii)) held by each holder of Rights.
(c) In any exchange pursuant to this Section 24, the Company, at its
option, may substitute for any Common Share exchangeable for a Right (i)
equivalent common shares (as such term is used in Section 11(a)(iii)), (ii)
cash, (iii) debt securities of the Company, (iv) other assets, or (v) any
combination of the foregoing, in any event having an aggregate value, as
determined in good faith by the Board of Directors of the Company (whose
determination will be described in a statement filed with the Rights Agent),
equal to the current market value of one Common Share (determined pursuant to
Section 11(d)) on the Trading Day immediately preceding the date of the
effectiveness of the exchange pursuant to this Section 24.
25. Notice of Certain Events. (a) If, after the Distribution Date, the
------------------------
Company proposes (i) to pay any dividend payable in stock of any class to the
holders of Preferred Shares or to make any other distribution to the holders of
Preferred Shares (other than a regular periodic cash dividend), (ii) to offer to
the holders of Preferred Shares rights, options or warrants to subscribe for or
to purchase any additional Preferred Shares or shares of stock of any class or
any other securities, rights, or options, (iii) to effect any reclassification
of its Preferred Shares (other than a reclassification involving only the
subdivision of outstanding Preferred Shares), (iv) to effect any consolidation
or merger into or with, or to effect any sale or other transfer (or to permit
one or more of its Subsidiaries to effect any sale or other transfer), in one or
more transactions, of assets or earning power (including without limitation
securities creating any obligation on the part of the Company and/or any of its
Subsidiaries) representing more than 50% of the assets and earning power of the
Company and its Subsidiaries, taken as a whole, to any other Person or Persons
other than the Company or one or more of its wholly owned Subsidiaries, (v) to
effect the liquidation, dissolution or winding up of the Company, or (vi) to
declare or pay any dividend on the Common Shares payable in Common Shares or to
effect a subdivision, combination or reclassification of the Common Shares then,
in each such case, the Company will give to each holder of a Right Certificate,
to the extent feasible and in accordance with Section 26, a notice of such
proposed action, which specifies the record date for the purposes of such stock
dividend, distribution or offering of rights, options 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 Common Shares and/or Preferred
Shares, if any such date is to be fixed, and such notice will be so given, in
the case of any action covered by clause (i) or (ii) above, at least 10 calendar
days prior to the record date for determining holders of the Preferred Shares
for purposes of such action, and, in the case of any such other action, at least
10 calendar days prior to the date of the taking of such proposed action or the
date of participation therein by the holders of the Common Shares and/or
Preferred Shares, whichever is the earlier.
-33-
(b) In case any Triggering Event occurs, then, in any such case, the
Company will as soon as practicable thereafter give to the Rights Agent and each
holder of a Right Certificate, in accordance with Section 26, a notice of the
occurrence of such event, which specifies the event and the consequences of the
event to holders of Rights.
26. Notices. (a) Notices or demands authorized by this Agreement to be
-------
given or made by the Rights Agent or by the holder of any Right Certificate to
or on the Company will be sufficiently given or made if sent by first class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:
Sterling Software, Inc.
0000 Xxxxx Xxxxxxx Xxxxxxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: General Counsel
(b) Subject to the provisions of Section 21 hereof, any notice or demand
authorized by this Agreement to be given or made by the Company or by the holder
of any Right Certificate to or on the Rights Agent will be sufficiently given or
made if sent by first-class mail, postage prepaid, addressed (until another
address is filed in writing with the Company) as follows:
The First National Bank of Boston
X.X. Xxx 0000
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Vice President,
Shareholder Services Division
(c) Notices or demands authorized by this Agreement to be given or made by
the Company or the Rights Agent to the holder of any Right Certificate (or, if
prior the Distribution Date, to the holder of any certificate evidencing Common
Shares) will 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.
27. Supplements and Amendments. Prior to the time at which the Rights
--------------------------
cease to be redeemable pursuant to Section 23, and subject to the last sentence
of this Section 27, the Company may in its sole and absolute discretion, and the
Rights Agent will if the Company so directs, supplement or amend any provision
of this Agreement in any respect (including, without limitation, the definition
of Purchase Price) without the approval of any holders of Rights or Common
Shares. From and after the time at which the Rights cease to be redeemable
pursuant to Section 23, and subject to the last sentence of this Section 27, the
Company may, and the Rights Agent will if the Company so directs, supplement or
amend this Agreement without the approval of any holders of Rights or Common
Shares 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 supplement or amend the
-34-
provisions hereunder in any manner which the Company may deem desirable;
provided that no such supplement or amendment shall adversely affect the
interests of the holders of Rights as such (other than an Acquiring Person or an
Affiliate or Associate of an Acquiring Person), and no such supplement or
amendment shall cause the Rights again to become redeemable or cause this
Agreement again to become supplementable or amendable otherwise than in
accordance with the provisions of this sentence. Without limiting the
generality or effect of the foregoing, this Agreement may be supplemented or
amended to provide for such voting powers for the Rights and such procedures for
the exercise thereof, if any, as the Board of Directors of the Company may
determine to be appropriate. Upon the delivery of a certificate from an 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 will execute such
supplement or amendment; provided, however, that the failure or refusal of the
-------- -------
Rights Agent to execute such supplement or amendment will not affect the
validity of any supplement or amendment adopted by the Board of Directors of the
Company, any of which will be effective in accordance with the terms thereof.
Notwithstanding anything in this Agreement to the contrary, no supplement or
amendment may be made which decreases the stated Redemption Price to an amount
less than $0.01 per Right.
28. Successors; Certain Covenants. All the covenants and provisions of
-----------------------------
this Agreement by or for the benefit of the Company or the Rights Agent will be
binding on and inure to the benefit of their respective successors and assigns
hereunder.
29. Benefits of This Agreement. Nothing in this Agreement will be
--------------------------
construed to give to any Person other than the Company, the Rights Agent, and
the registered holders of the Right Certificates (and, prior to the Distribution
Date, the Common Shares) any legal or equitable right, remedy or claim under
this Agreement. This Agreement will be for the sole and exclusive benefit of the
Company, the Rights Agent, and the registered holders of the Right Certificates
(or prior to the Distribution Date, the Common Shares).
30. Governing Law. This Agreement, each Right and each Right Certificate
-------------
issued hereunder will be deemed to be a contract made under the internal
substantive laws of the State of Delaware and for all purposes will be governed
by and construed in accordance with the internal substantive laws of such State
applicable to contracts to be made and performed entirely within such State.
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 will remain in full force and
effect and will in no way be affected, impaired or invalidated; provided,
--------
however, that nothing contained in this Section 31 will affect the ability of
-------
the Company under the provisions of Section 27 to supplement or amend this
Agreement to replace such invalid, void or unenforceable term, provision,
covenant or restriction with a legal, valid and enforceable term, provision,
covenant or restriction.
-35-
32. Descriptive Headings, Etc. Descriptive headings of the several
-------------------------
Sections of this Agreement are inserted for convenience only and will not
control or affect the meaning or construction of any of the provisions hereof.
Unless otherwise expressly provided, references herein to Articles, Sections and
Exhibits are to Articles, Sections and Exhibits of or to this Agreement.
33. Determinations and Actions by the Board. For all purposes of this
---------------------------------------
Agreement, any calculation of the number of Common Shares outstanding at any
particular time, including for purposes of determining the particular percentage
of such outstanding Common Shares of which any Person is the Beneficial Owner,
will 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 of
the Company will have the exclusive power and authority to administer this
Agreement and to exercise all rights and powers specifically granted to the
Board of Directors of the Company 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 any determination to redeem or not redeem the Rights
or to amend or not amend this Agreement). All such actions, calculations,
interpretations and determinations (including, for purposes of clause (y) below,
any omission with respect to any of the foregoing) which are done or made by the
Board of Directors of the Company in good faith will (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 of the Company to any
liability to any Person, including without limitation the Rights Agent and the
holders of the Rights.
34. Counterparts. This Agreement may be executed in any number of
------------
counterparts and each of such counterparts will for all purposes be deemed to be
an original, and all such counterparts will together constitute but one and the
same instrument.
-36-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
[SEAL]
Attest: STERLING SOFTWARE, INC.
/s/ Xxx X. XxXxxxxxx, Xx. By: /s/ Xxxxxxxxx X. Xxxxx
-------------------------------- --------------------------------
Xxx X. XxXxxxxxx, Xx., Xxxxxxxxx X. Xxxxx,
Assistant Secretary Executive Vice President,
Chief Financial Officer,
General Counsel and Secretary
[SEAL]
Attest: THE FIRST NATIONAL BANK OF BOSTON
/s/ Xxxxxxx X. Xxxxxxxx By: /s/ Xxxxxx X. Xxxxxxxxx
-------------------------------- --------------------------------
Xxxxxxx X. Xxxxxxxx Xxxxxx X. Xxxxxxxxx
Assistant Secretary Administration Manager
-37-
EXHIBIT A
---------
FORM
of
CERTIFICATE OF DESIGNATIONS
of
SERIES A JUNIOR PARTICIPATING
PREFERRED STOCK
of
STERLING SOFTWARE, INC.
(Pursuant to Section 151 of the
General Corporation Law of the State of Delaware)
Sterling Software, Inc., a corporation organized and existing under
the General Corporation Law of the State of Delaware (hereinafter called the
"Company"), DOES HEREBY CERTIFY:
That, pursuant to authority vested in the Board of Directors of the
Company by its Certificate of Incorporation, and pursuant to the provisions of
Section 151 of the General Corporation Law of the State of Delaware, the Board
of Directors of the Company has adopted the following resolution providing for
the issuance of a series of Preferred Stock:
RESOLVED, that pursuant to the authority expressly granted to and
vested in the Board of Directors of the Company (hereinafter called the "Board
of Directors" or the "Board") by the Certificate of Incorporation of the
Company, a series of Preferred Stock, par value $0.10 per share (the "Preferred
Stock"), of the Company be, and it hereby is, created, and that the designation
and amount thereof and the powers, designations, 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:
I. Designation and Amount
----------------------
The shares of such series will be designated as Series A Junior
Participating Preferred Stock (the "Series A Preferred") and the number of
shares constituting the Series A Preferred is 750,000. Such number of shares
may be increased or decreased by resolution of the Board; provided, however,
-------- -------
that no decrease will reduce the number of shares of Series A Preferred to a
number less than the number of shares then outstanding plus the number of shares
reserved for issuance upon the exercise of outstanding options, rights or
warrants or upon the conversion of any outstanding securities issued by the
Company convertible into shares of Series A Preferred.
A-1
II. Dividends and Distributions
---------------------------
(a) Subject to the rights of the holders of any shares of any series
of Preferred Stock ranking prior to the shares of Series A Preferred with
respect to dividends, the holders of shares of Series A Preferred, in preference
to the holders of Common Stock, par value $0.10 per share (the "Common Stock"),
of the Company, and of any other junior stock, will be entitled to receive,
when, as and if declared by the Board out of funds legally available for the
purpose, dividends payable in cash on such dates as are from time to time
established for the payment of cash dividends on the Common Stock (each such
date being referred to herein as a "Dividend Payment Date"), commencing on the
first Dividend Payment Date after the first issuance of a share or fraction of a
share of Series A Preferred (the "First Dividend Payment Date"), in an amount
per share (rounded to the nearest cent) equal to the greater of (i) $1.00 or
(ii) subject to the provision for adjustment hereinafter set forth, one hundred
times the aggregate per share amount of all cash dividends, and one hundred
times the aggregate per share amount (payable in kind) of all non-cash dividends
or other distributions, other than a dividend payable in shares of Common Stock
or a subdivision of the outstanding shares of Common Stock (by reclassification
or otherwise), declared on the Common Stock since the immediately preceding
Dividend Payment Date or, with respect to the First Dividend Payment Date, since
the first issuance of any share or fraction of a share of Series A Preferred.
In the event that the Company at any time (i) declares a dividend on the
outstanding shares of Common Stock payable in shares of Common Stock, (ii)
subdivides the outstanding shares of Common Stock, (iii) combines the
outstanding shares of Common Stock into a smaller number of shares, or (iv)
issues any shares of its capital stock in a reclassification of the outstanding
shares of Common Stock (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing or surviving
corporation), then, in each such case and regardless of whether any shares of
Series A Preferred are then issued or outstanding, the amount to which holders
of shares of Series A Preferred would otherwise be entitled immediately prior to
such event under clause (ii) of the preceding sentence will 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) Dividends will accrue on outstanding shares of Series A Preferred
from the Dividend Payment Date next preceding the date of issue of such shares,
unless (i) the date of issue of such shares is prior to the record date for the
First Dividend Payment Date, in which case dividends on such shares will accrue
from the date of the first issuance of a share of Series A Preferred or (ii) the
date of issue is a Dividend Payment Date or is a date after the record date for
the determination of holders of shares of Series A Preferred entitled to receive
a dividend and before such Dividend Payment Date, in either of which events such
dividends will accrue from such Dividend Payment Date. Accrued but unpaid
dividends will cumulate from the applicable Dividend Payment Date but will not
bear interest. Dividends paid on the shares of Series A Preferred in an amount
less than the total amount of such dividends at the time accrued and payable on
such shares will be allocated pro rata on a share-by-share basis among all such
shares at the time outstanding.
A-2
The Board may fix a record date for the determination of holders of shares of
Series A Preferred entitled to receive payment of a dividend or distribution
declared thereon, which record date will be not more than 60 calendar days prior
to the date fixed for the payment thereof.
III. Voting Rights
-------------
The holders of shares of Series A Preferred will have the following voting
rights:
(a) Subject to the provision for adjustment hereinafter set forth,
each share of Series A Preferred will entitle the holder thereof to one
hundred votes on all matters submitted to a vote of the stockholders of the
Company. In the event the Company at any time (i) declares a dividend on
the outstanding shares of Common Stock payable in shares of Common Stock,
(ii) subdivides the outstanding shares of Common Stock, (iii) combines the
outstanding shares of Common Stock into a smaller number of shares, or (iv)
issues any shares of its capital stock in a reclassification of the
outstanding shares of Common Stock (including any such reclassification in
connection with a consolidation or merger in which the Company is the
continuing or surviving corporation), then, in each such case and
regardless of whether any shares of Series A Preferred are then issued or
outstanding, the number of votes per share to which holders of shares of
Series A Preferred would otherwise be entitled immediately prior to such
event will be adjusted by multiplying such number by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such
event.
(b) Except as otherwise provided herein, in any other Preferred Stock
Designation creating a series of Preferred Stock or any similar stock, or
by law, the holders of shares of Series A Preferred and the holders of
shares of Common Stock and any other capital stock of the Company having
general voting rights will vote together as one class on all matters
submitted to a vote of stockholders of the Company.
(c) Except as set forth in the Certificate of Incorporation or herein,
or as otherwise provided by law, holders of shares of Series A Preferred
will have no voting rights.
IV. Certain Restrictions
--------------------
(a) Whenever dividends or other distributions payable on the Series A
Preferred are in arrears, thereafter and until all accrued and unpaid dividends
and distributions, whether or not declared, on shares of Series A Preferred
outstanding have been paid in full, the Company will not:
A-3
(i) Declare or pay dividends, or make any other distributions, on
any shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the shares of Series A
Preferred;
(ii) Declare or pay dividends, or make any other distributions, on
any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution, or winding up) with the shares of Series A
Preferred, except dividends paid ratably on the shares of Series A
Preferred 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, purchase or otherwise acquire for consideration
shares of any stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the shares of Series A
Preferred; provided, however, that the Company may at any time redeem,
-------- -------
purchase or otherwise acquire shares of any such junior stock in exchange
for shares of any stock of the Company ranking junior (either as to
dividends or upon dissolution, liquidation or winding up) to the shares of
Series A Preferred; or
(iv) Redeem, purchase or otherwise acquire for consideration any
shares of Series A Preferred, or any shares of stock ranking on a parity
with the shares of Series A Preferred, except in accordance with a purchase
offer made in writing or by publication (as determined by the Board) to all
holders of such shares upon such terms as the Board, after consideration of
the respective annual dividend rates and other relative rights and
preferences of the respective series and classes, may determine in good
faith will result in fair and equitable treatment among the respective
series or classes.
(b) The Company will not permit any majority-owned subsidiary of the
Company to purchase or otherwise acquire for consideration any shares of stock
of the Company unless the Company could, under paragraph (a) of this Article IV,
purchase or otherwise acquire such shares at such time and in such manner.
V. Reacquired Shares
-----------------
Any shares of Series A Preferred purchased or otherwise acquired by the
Company in any manner whatsoever will be retired and canceled promptly after the
acquisition thereof. All such shares will upon their cancellation become
authorized but unissued shares of Preferred Stock and may be reissued as part of
a new series of Preferred Stock subject to the conditions and restrictions on
issuance set forth herein, in the Certificate of Incorporation of the Company,
or in any other Preferred Stock Designation creating a series of Preferred Stock
or any similar stock or as otherwise required by law.
A-4
VI. Liquidation, Dissolution or Winding Up
--------------------------------------
Upon any liquidation, dissolution or winding up of the Company, no
distribution will be made (a) to the holders of shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution, or winding up) to the
shares of Series A Preferred unless, prior thereto, the holders of shares of
Series A Preferred have received $100 per share, plus an amount equal to accrued
and unpaid dividends and distributions thereon, whether or not declared, to the
date of such payment; provided, however, that the holders of shares of Series A
-------- -------
Preferred will be entitled to receive an aggregate amount per share, subject to
the provision for adjustment hereinafter set forth, equal to one hundred times
the aggregate amount to be distributed per share to holders of shares of Common
Stock or (b) to the holders of shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution, or winding up) with the shares of
Series A Preferred, except distributions made ratably on the shares of Series A
Preferred and all such parity stock in proportion to the total amounts to which
the holders of all such shares are entitled upon such liquidation, dissolution,
or winding up. In the event the Company at any time (i) declares a dividend on
the outstanding shares of Common Stock payable in shares of Common Stock, (ii)
subdivides the outstanding shares of Common Stock, (iii) combines the
outstanding shares of Common Stock into a smaller number of shares, or (iv)
issues any shares of its capital stock in a reclassification of the outstanding
shares of Common Stock (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing or surviving
corporation), then, in each such case and regardless of whether any shares of
Series A Preferred are then issued or outstanding, the aggregate amount to which
each holder of shares of Series A Preferred would otherwise be entitled
immediately prior to such event under the proviso in clause (a) of the preceding
sentence will 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.
VII. Consolidation, Merger, Etc.
---------------------------
In the event that the Company enters into any consolidation, merger,
combination or other transaction in which the shares of Common Stock are
exchanged for or changed into other stock or securities, cash and/or any other
property, then, in each such case, each share of Series A Preferred will at the
same time be similarly exchanged for or changed into an amount per share,
subject to the provision for adjustment hereinafter set forth, equal to one
hundred times the aggregate amount of stock, securities, cash and/or any other
property (payable in kind), as the case may be, into which or for which each
share of Common Stock is changed or exchanged. In the event the Company at any
time (a) declares a dividend on the outstanding shares of Common Stock payable
in shares of Common Stock, (b) subdivides the outstanding shares of Common
Stock, (c) combines the outstanding shares of Common Stock in a smaller number
of shares, or (d) issues any shares of its capital stock in a reclassification
of the outstanding shares of Common Stock (including any such reclassification
in connection with a consolidation or merger in which the Company is the
continuing or surviving corporation), then, in each such case and
A-5
regardless of whether any shares of Series A Preferred are then issued or
outstanding, the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series A Preferred will 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.
VIII. Redemption
----------
The shares of Series A Preferred are not redeemable.
IX. Rank
----
The shares of Series A Preferred rank, with respect to the payment of
dividends and the distribution of assets, junior to all other series of the
Company's Preferred Stock.
X. Amendment
---------
Notwithstanding anything contained in the Certificate of Incorporation
of the Company to the contrary and in addition to any other vote required by
applicable law, the Certificate of Incorporation of the Company may not be
amended in any manner that would materially alter or change the powers,
preferences or special rights of the Series A Preferred so as to affect them
adversely without the affirmative vote of the holders of at least 80% of the
outstanding shares of Series A Preferred, voting together as a single series.
A-6
IN WITNESS WHEREOF, this Certificate of Designations is executed on
behalf of the Company by its Executive Vice President, Chief Financial Officer,
General Counsel and Secretary and attested by its Assistant Secretary this 18th
day of December, 1996.
__________________________________
Xxxxxxxxx X. Xxxxx,
Executive Vice President,
Chief Financial Officer,
General Counsel and Secretary
Attest:
______________________________
Xxx X. XxXxxxxxx, Xx.,
Assistant Secretary
A-7
EXHIBIT B
---------
FORM OF RIGHT CERTIFICATE
Certificate No. R- __________ Rights
NOT EXERCISABLE AFTER DECEMBER 31, 2006 (SUBJECT TO POSSIBLE EXTENSION AT
THE OPTION OF THE COMPANY) OR EARLIER IF REDEEMED, EXCHANGED OR AMENDED.
THE RIGHTS ARE SUBJECT TO REDEMPTION, EXCHANGE AND AMENDMENT AT THE OPTION
OF THE COMPANY, ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER
CERTAIN CIRCUMSTANCES SPECIFIED IN THE RIGHTS AGREEMENT, RIGHTS
BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN AFFILIATE OR AN ASSOCIATE
OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT)
OR A TRANSFEREE THEREOF MAY BECOME NULL AND VOID.
Right Certificate
STERLING SOFTWARE, INC.
This certifies that _______________, or registered assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions, and conditions of the
Rights Agreement, dated as of December 18, 1996 (the "Rights Agreement"),
between Sterling Software, Inc., a Delaware corporation (the "Company"), and The
First National Bank of Boston, a national banking association, as Rights Agent
(the "Rights Agent"), to purchase from the Company at any time after the
Distribution Date (as such term is defined in the Rights Agreement) and prior to
5:00 P.M. (Eastern time) on the Expiration Date (as such term is defined in the
Rights Agreement) at the principal office or offices of the Rights Agent
designated for such purpose, one one-hundredth of a fully paid nonassessable
share of Series A Junior Participating Preferred Stock, par value $0.10 per
share (the "Preferred Shares"), of the Company, at a purchase price of $200 per
one one-hundredth of a Preferred Share (the "Purchase Price"), upon presentation
and surrender of this Right Certificate with the Form of Election to Purchase
and related Certificate duly executed. If this Right Certificate is exercised
in part, the holder will be entitled to receive upon surrender hereof another
Right Certificate or Right Certificates for the number of whole Rights not
exercised. The number of Rights evidenced by this Right Certificate (and the
number of one one-hundredths of a Preferred Share which may be purchased upon
exercise thereof) set forth above, and the Purchase Price set forth above, are
the number and Purchase Price as of the date of the Rights Agreement, based on
the Preferred Shares as constituted at such date.
B-1
As provided in the Rights Agreement, the Purchase Price and/or the number
and/or kind of securities issuable upon the exercise of the Rights evidenced by
this Right Certificate are subject to adjustment upon the occurrence of certain
events.
This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities of the Rights Agent,
the Company and the holders of the Right Certificates, which limitations of
rights include the temporary suspension of the exercisability of the Rights
under the circumstances specified in the Rights Agreement. Copies of the Rights
Agreement are on file at the above-mentioned office of the Rights Agent and can
be obtained from the Company without charge promptly after receipt of a written
request therefor. Terms used herein with initial capital letters and not
defined herein are used herein with the meanings ascribed thereto in the Rights
Agreement.
Pursuant to the Rights Agreement, from and after the occurrence of a Flip-
in Event, any Rights that are Beneficially Owned by (i) any Acquiring Person (or
any Affiliate or Associate of any Acquiring Person), (ii) a transferee of any
Acquiring Person (or any such Affiliate or Associate) who becomes a transferee
after the occurrence of a Flip-in Event, or (iii) a transferee of any Acquiring
Person (or any such Affiliate or Associate) who became a transferee prior to or
concurrently with the Flip-in Event pursuant to either (a) a transfer from an
Acquiring Person to holders of its equity securities or to any Person with whom
it has any continuing agreement, arrangement or understanding regarding the
transferred Rights or (b) a transfer which the Board of Directors of the Company
has determined is part of a plan, arrangement or understanding which has the
purpose or effect of avoiding certain provisions of the Rights Agreement, and
subsequent transferees of any of such Persons, will be void without any further
action and any holder of such Rights will thereafter have no rights whatsoever
with respect to such Rights under any provision of the Rights Agreement. From
and after the occurrence of a Flip-in Event, no Right Certificate will be issued
that represents Rights that are or have become void pursuant to the provisions
of the Rights Agreement, and any Right Certificate delivered to the Rights Agent
that represents Rights that are or have become void pursuant to the provisions
of the Rights Agreement will be canceled.
This Right Certificate, with or without other Right Certificates, may be
transferred, split up, combined or exchanged for another Right Certificate or
Right Certificates entitling the holder to purchase a like number of one one-
hundredths of a Preferred Share (or other securities, as the case may be) as the
Right Certificate or Right Certificates surrendered entitled such holder (or
former holder in the case of a transfer) to purchase, upon presentation and
surrender hereof at the principal office of the Rights Agent designated for such
purpose, with the Form of Assignment (if appropriate) and the related
Certificate duly executed.
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Certificate may be redeemed by the Company at its option at a redemption
price of $.01
B-2
per Right or may be exchanged in whole or in part. The Rights Agreement may be
supplemented and amended by the Company, as provided therein.
The Company is not required to issue fractions of Preferred Shares (other
than fractions which are integral multiples of one one-hundredth of a Preferred
Share, which may, at the option of the Company, be evidenced by depositary
receipts) or other securities issuable upon the exercise of any Right or Rights
evidenced hereby. In lieu of issuing such fractional Preferred Shares or other
securities, the Company may make a cash payment, as provided in the Rights
Agreement.
No holder of this Right Certificate, as such, will be entitled to vote or
receive dividends or be deemed for any purpose the holder of the Preferred
Shares or of any other securities of the Company which may at any time be
issuable upon the exercise of the Right or Rights represented hereby, nor will
anything contained herein or in the Rights Agreement be construed to confer upon
the holder hereof, as such, any of the rights of a stockholder of the Company or
any right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in the Rights Agreement), or to receive
dividends or subscription rights, or otherwise, until the Right or Rights
evidenced by this Right Certificate have been exercised in accordance with the
provisions of the Rights Agreement.
This Right Certificate will not be valid or obligatory for any purpose
until it has been countersigned by the Rights Agent.
B-3
WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal. Dated as of _______________, ____.
[SEAL]
ATTEST: STERLING SOFTWARE, INC.
______________________________ By: _________________________________
[Assistant] Secretary [Name]
[Title]
Countersigned:
THE FIRST NATIONAL BANK OF BOSTON
By: ______________________________
Authorized Signature
B-4
Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate)
FOR VALUE RECEIVED, _______________ hereby sells, assigns and transfers
unto____________________________________________________________________________
________________________________________________________________________________
(Please print name and address of transferee)
________________________________________________________________________________
this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint _______________ Attorney, to
transfer the within Right Certificate on the books of the within-named Company,
with full power of substitution.
Dated: __________, ____
____________________________________________
Signature
Signature Guaranteed:
B-5
CERTIFICATE
-----------
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Right Certificate [_] are [_] are
not being sold, assigned, transferred, split up, combined or exchanged by or on
behalf of a Person who is or was an Acquiring Person or an Affiliate or
Associate of any such Person (as such terms are defined in the Rights
Agreement);
(2) after due inquiry and to the best knowledge of the undersigned,
it [_] did [_] did not acquire the Rights evidenced by this Right Certificate
from any Person who is, was or became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.
Dated: __________, ____
___________________________________________
Signature
B-6
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if holder desires to
exercise the Right Certificate)
To Sterling Software, Inc.
The undersigned hereby xxx elects to exercise __________ Rights
represented by this Right Certificate to purchase the one one-hundredths of a
Preferred Share or other securities issuable upon the exercise of such Rights
and requests that certificates for such securities be issued in the name of and
delivered to:
Please insert social security
or other identifying number: ___________________________________________________
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
If such number of Rights is not all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
will be registered in the name of and delivered to:
Please insert social security
or other identifying number: ___________________________________________________
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
Optional Election to Exercise without Payment of Cash:
With respect to the exercise of __________ of the Rights specified
above, the undersigned hereby elects to exercise such Rights without payment of
cash and to receive a number of Common Shares or other securities having a value
(as determined pursuant to the Rights Agreement) equal to the difference between
(i) the value of the Common Shares or other securities that would have been
issuable upon the exercise thereof upon payment of the cash amount as provided
in the Rights Agreement, and (ii) the amount of such cash payment.
Dated: __________, ____
____________________________________________
Signature
Signature Guaranteed:
B-7
CERTIFICATE
-----------
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Right Certificate [_] are [_] are
not being exercised by or on behalf of a Person who is or was an Acquiring
Person or an Affiliate or Associate of any such Person (as such terms are
defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned,
it [_] did [_] did not acquire the Rights evidenced by this Right Certificate
from any Person who is, was, or became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.
Dated: __________, ____
________________________________________
Signature
NOTICE
SIGNATURES ON THE FOREGOING FORM OF ASSIGNMENT AND FORM OF ELECTION TO
PURCHASE AND IN THE RELATED CERTIFICATES MUST CORRESPOND TO THE NAME AS WRITTEN
UPON THE FACE OF THIS RIGHT CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE WHATSOEVER.
SIGNATURES MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED MEDALLION SIGNATURE PROGRAM) PURSUANT TO RULE 17AD-15
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
B-8
EXHIBIT C
---------
SUMMARY OF RIGHTS TO PURCHASE PREFERRED STOCK
The Board of Directors (the "Board") of Sterling Software, Inc. (the
"Company") has declared a dividend distribution of one right (a "Right") for
each outstanding share of Common Stock, par value $0.10 per share (the "Common
Shares"), of the Company. The distribution is payable on December 31, 1996 (the
"Record Date") to the stockholders of record as of the close of business on the
Record Date. Each Right entitles the registered holder thereof to purchase from
the Company one one-hundredth of a share of Series A Junior Participating
Preferred Stock, par value $0.10 per share (the "Preferred Shares"), of the
Company at a price (the "Purchase Price") of $200 per one one-hundredth of a
Preferred Share, subject to adjustment. The description and terms of the Rights
are set forth in a Rights Agreement, dated as of December 18, 1996 (the "Rights
Agreement"), between the Company and The First National Bank of Boston, as
Rights Agent (the "Rights Agent").
Under the Rights Agreement, the Rights will be evidenced by the
certificates evidencing Common Shares until the earlier (the "Distribution
Date") of: (i) the close of business on the tenth calendar day (or such later
date as may be specified by the Board) following the first date (the "Share
Acquisition Date") of public announcement that a person (other than the Company,
a subsidiary or employee benefit or stock ownership plan of the Company or any
of its affiliates or associates), together with its affiliates and associates,
has acquired beneficial ownership of 15% or more of the outstanding Common
Shares (any such person being hereinafter called an "Acquiring Person") or (ii)
the close of business on the tenth business day (or such later date as may be
specified by the Board) following the commencement of a tender offer or exchange
offer by a person (other than the Company, a subsidiary or employee benefit or
stock ownership plan of the Company or any of its affiliates or associates), the
consummation of which would result in beneficial ownership by such person of 15%
or more of the outstanding Common Shares.
The Rights Agreement provides that, until the Distribution Date, the
Rights may be transferred with and only with the Common Shares. Until the
Distribution Date (or earlier redemption or expiration of the Rights), any
certificate evidencing Common Shares of the Company issued upon transfer or new
issuance of the Common Shares will contain a notation incorporating the Rights
Agreement by reference. Until the Distribution Date (or earlier redemption or
expiration of the Rights), the surrender for transfer of any certificates
evidencing Common Shares will also constitute the transfer of the Rights
associated with such certificates. As soon as practicable following the
Distribution Date, separate certificates evidencing the Rights ("Rights
Certificates") will be mailed to holders of record of Common Shares as of the
close of business on the Distribution Date and such separate Rights Certificates
alone will evidence the Rights. No Right is exercisable at any time prior to
the Distribution Date. The Rights will expire on the tenth anniversary of the
Record Date (the "Final Expiration Date") unless earlier redeemed, exchanged or
amended by the Company as described below. Until a Right is exercised, the
holder thereof, as such, will have no rights as a stockholder of the Company,
including the right to vote or to receive dividends.
The Purchase Price payable, and the number of the Preferred Shares or
other securities issuable, upon exercise of the Rights will be subject to
adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Preferred
Shares, (ii) upon the grant to holders of Preferred Shares of certain rights or
warrants to subscribe for or purchase the Preferred
C-1
Shares at a price, or securities convertible into the Preferred Shares with a
conversion price, less than the then-current market price of the Preferred
Shares, or (iii) upon the distribution to holders of the Preferred Shares of
evidences of indebtedness, cash (excluding regular periodic cash dividends),
assets, stock (excluding dividends payable in the Preferred Shares) or
subscription rights or warrants (other than those referred to above). The
number of outstanding Rights and the number of one one-hundredths of the
Preferred Shares issuable upon exercise of each Right will be subject to
adjustment in the event of a stock dividend on the Common Shares payable in
Common Shares or a subdivision, combination or reclassification of Common Shares
occurring, in any such case, prior to the Distribution Date.
The Preferred Shares issuable upon exercise of the Rights will not be
redeemable. Each Preferred Share will be entitled, in connection with the
declaration of a cash dividend on the Common Shares, to a preferential dividend
payment equal to the greater of (i) $1.00 per share and (ii) an amount equal to
100 times the aggregate dividends declared per Common Share. Subject to
customary anti-dilution provisions, in the event of liquidation, the holders of
Preferred Shares will be entitled to a preferential liquidation payment equal to
the greater of (a) $100 per share and (b) an amount equal to 100 times the
liquidation payment made per Common Share. Because of the nature of the
Preferred Shares' dividend, voting and liquidation rights, the value of the one
one-hundredth interest in a Preferred Share purchasable upon exercise of a Right
should approximate the value of one Common Share.
Rights will be exercisable to purchase Preferred Shares only after the
Distribution Date occurs and prior to the occurrence of a Flip-in Event as
described below. A Distribution Date resulting from the commencement of a
tender offer or exchange offer described in clause (ii) of the second paragraph
of this summary could precede the occurrence of a Flip-in Event and thus result
in the Rights being exercisable to purchase Preferred Shares. A Distribution
Date resulting from any occurrence described in clause (i) of the second
paragraph of this summary would necessarily follow the occurrence of a Flip-in
Event and thus result in the Rights being exercisable to purchase Common Shares
or other securities as described below.
Under the Rights Agreement, in the event ( a "Flip-in Event") that (i)
any person, together with its affiliates and associates, becomes the beneficial
owner of 15% or more of the outstanding Common Shares, (ii) any Acquiring Person
or any affiliate or associate thereof merges into or combines with the Company
and the Company is the surviving corporation, (iii) any Acquiring Person or any
affiliate or associate thereof effects certain other transactions with the
Company, or (iv) during such time as there is an Acquiring Person the Company
effects certain transactions, in each case as described in the Rights Agreement,
then, in each such case, proper provision will be made so that from and after
the latest of the Share Acquisition Date, the Distribution Date and the date of
the occurrence of such Flip-in Event each holder of a Right, other than Rights
that are or were owned beneficially by an Acquiring Person (which, from and
after the date of a Flip-in Event, will be void), will have the right to
receive, upon exercise thereof at the then-current exercise price of the Right,
that number of Common Shares (or, under certain circumstances, an economically
equivalent security or securities of the Company) that at the time of such Flip-
in Event have a market value of two times the exercise price of the Right.
In the event (a "Flip-over Event") that, at any time after a person
has become an Acquiring Person, (i) the Company merges with or into any person
and the Company is not
C-2
the surviving corporation, (ii) any person merges with or into the Company and
the Company is the surviving corporation, but all or part of the Common Shares
are changed or exchanged for stock or other securities of any other person or
cash or any other property, or (iii) 50% or more of the Company's assets or
earning power, including securities creating obligations of the Company, are
sold, in each case as described in the Rights Agreement, then, in each such
case, proper provision will be made so that from and after the latest of the
Share Acquisition Date, the Distribution Date and the date of the occurrence of
such Flip-over Event each holder of a Right, other than Rights which have become
void, will have the right to receive, upon the exercise thereof at the then-
current exercise price of the Right, that number of shares of common stock (or,
under certain circumstances, an economically equivalent security or securities)
of such other person that at the time of such Flip-over Event have a market
value of two times the exercise price of the Right.
From and after the later of the Share Acquisition Date and the
Distribution Date, Rights (other than any Rights that have become void) will be
exercisable as described above, upon payment of the aggregate exercise price in
cash or, at the election of the holder thereof, without the payment of cash. If
a holder of Rights elects to exercise Rights without the payment of cash, such
holder will be entitled to receive upon the exercise of such Rights securities
having a value equal to the difference between (i) the value of the Common
Shares or other securities that would have been issuable upon payment of the
aggregate exercise price in cash and (ii) the amount of such aggregate exercise
price. In addition, at any time after the later of the Share Acquisition Date
and the Distribution Date and prior to the acquisition by any person or group of
affiliated or associated persons of 50% or more of the outstanding Common
Shares, the Company may exchange the Rights (other than any rights that have
become void), in whole or in part, at an exchange ratio of one Common Share per
Right (subject to adjustment).
For all purposes of the Rights Agreement, any person that, at the time
of public announcement by the Company on December 18, 1996 of the declaration of
the dividend distribution of the Rights, has beneficial ownership of 15% or more
of the then-outstanding Common Shares, or that becomes the beneficial owner of
15% or more of the then-outstanding Common Shares solely as a result of a
reduction in the number of Common Shares outstanding, will not be deemed to have
become an Acquiring Person unless and until such time as (i) such person, or any
affiliate or associate of such person, thereafter becomes the beneficial owner
of additional Common Shares representing 1% or more of the then-outstanding
Common Shares or (ii) any other person that is the beneficial owner of Common
Shares representing 1% or more of the then-outstanding Common Shares thereafter
becomes an affiliate or associate of such person.
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment in the Purchase
Price of at least 1%. The Company will not be required to issue fractional
Preferred Shares (other than fractions that are integral multiples of one one-
hundredth of a Preferred Share, which may, at the option of the Company, be
evidenced by depositary receipts) or fractional Common Shares or other
securities issuable upon the exercise of Rights. In lieu of issuing such
securities, the Company may make a cash payment, as provided in the Rights
Agreement.
The Company may, at its option, redeem the Rights in whole, but not in
part, at a price of $.01 per Right, subject to adjustment (the "Redemption
Price"), at any time prior to the close of business on the later of (i) the
Share Acquisition Date and (ii) the
C-3
Distribution Date. Immediately upon any redemption of the Rights, the right to
exercise the Rights will terminate and the only right of the holders of Rights
will be to receive the Redemption Price.
The Rights Agreement may be amended by the Company without the
approval of any holders of Rights Certificates, including amendments that
increase or decrease the Purchase Price, add other events requiring adjustment
to the Purchase Price payable and the number of the Preferred Shares or other
securities issuable upon the exercise of the Rights or that modify procedures
relating to the redemption of the Rights, except that no amendment may be made
that decreases the stated Redemption Price to an amount less than $.01 per
Right.
The Board will have the exclusive power and authority to administer
the Rights Agreement and to exercise all rights and powers specifically granted
to the Board or to the Company therein, or as may be necessary or advisable in
the administration of the Rights Agreement, including without limitation the
right and power to interpret the provisions of the Rights Agreement and to make
all determinations deemed necessary or advisable for the administration of the
Rights Agreement (including any determination to redeem or not redeem the Rights
or to amend or not amend the Rights Agreement). All such actions, calculations,
interpretations and determinations (including any omission with respect to any
of the foregoing) which are done or made by the Board in good faith will be
final, conclusive and binding on the Company, the Rights Agent, the holders of
the Rights and all other parties and will not subject the Board to any liability
to any person, including without limitation the Rights Agent and the holders of
the Rights.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an exhibit to a Registration Statement on Form 8-A. A
copy of the Rights Agreement is available free of charge from the Company.
This summary description of the Rights is as of the Record Date, does
not purport to be complete and is qualified in its entirety by reference to the
Rights Agreement, which is incorporated herein by this reference.
C-4
