EXHIBIT 1
CELLSTAR CORPORATION
and
MELLON INVESTOR SERVICES LLC
Rights Agent
First Amended and Restated Rights Agreement
Dated as of February 11, 2002
TABLE OF CONTENTS
Section Page
Section 1. Certain Definitions ........................................................................ 1
Section 2. Appointment of Rights Agent ................................................................ 5
Section 3. Issuance of Rights Certificates ............................................................ 5
(a) Distribution Date; Rights Certificates ..................................................... 5
(b) Common Stock Certificates; Summary of Rights ............................................... 6
(c) Legend ..................................................................................... 6
Section 4. Form of Rights Certificates ................................................................ 7
(a) Form; Date ................................................................................. 7
(b) Acquiring Person Legend .................................................................... 7
Section 5. Countersignature and Registration .......................................................... 7
(a) Signatures ................................................................................. 7
(b) Registration and Transfer .................................................................. 8
Section 6. Transfer, Split Up, Combination and Exchange of Rights Certificates; Mutilated, Destroyed,
Lost or Stolen Rights Certificates ......................................................... 8
(a) Procedure .................................................................................. 8
(b) Issuance of New Rights Certificates ........................................................ 8
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights .............................. 9
(a) Exercise ................................................................................... 9
(b) Purchase Price ............................................................................. 9
(c) Rights Agent Actions ....................................................................... 9
(d) Partial Exercise ........................................................................... 9
(e) Termination of Acquiring Person's Rights ................................................... 10
(f) Surrender of Rights Certificates; Identity of Beneficial Owner ............................. 10
Section 8. Cancellation and Destruction of Rights Certificates ........................................ 10
Section 9. Reservation and Availability of Capital Stock .............................................. 10
(a) Reservation of Capital Stock ............................................................... 10
(b) Listing .................................................................................... 11
(c) Registration under the Act ................................................................. 11
(d) Covenant Regarding Capital Stock ........................................................... 11
(e) Transfer Taxes and Charges ................................................................. 11
Section 10. Preferred Stock Record Date ................................................................ 12
Section 11. Adjustment of Purchase Price; Number and Kind of Shares or Number of Rights ................ 12
(a) Certain Adjustments ........................................................................ 12
(b) Purchase Price Adjustment -- Capital Stock ................................................. 15
(c) Purchase Price Adjustment -- Cash, Assets, etc. ............................................ 15
(d) Current Market Price ....................................................................... 16
(i)
(e) Purchase Price Adjustment Threshold ........................................................ 17
(f) Equivalent Adjustments ..................................................................... 17
(g) Post-Adjustment Rights Issuances ........................................................... 17
(h) Preferred Stock Anti-Dilution .............................................................. 17
(i) Adjustment of Number of Rights ............................................................. 17
(j) Rights Certificates ........................................................................ 18
(k) Adjustment Below Par Value ................................................................. 18
(l) Adjustment Effective as of Future Date; Exercise ........................................... 18
(m) Tax Adjustments ............................................................................ 18
(n) Restriction on Certain Transactions ........................................................ 19
(o) Restriction Against Diminishing Benefits of the Rights ..................................... 19
(p) Common Stock Adjustments ................................................................... 19
Section 12. Certificate of Adjusted Purchase Price or Number of Shares ................................. 19
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power ....................... 20
(a) Flip-over Event ............................................................................ 20
(b) Principal Party ............................................................................ 20
(c) Supplemental Agreement ..................................................................... 21
(d) Exceptions ................................................................................. 21
Section 14. Fractional Rights and Fractional Shares .................................................... 22
(a) Fractional Rights .......................................................................... 22
(b) Fractional Shares of Preferred Stock ....................................................... 22
(c) Fractional Shares of Common Stock .......................................................... 22
(d) Waiver of Fractional Rights and Shares ..................................................... 23
Section 15. Rights of Action ........................................................................... 23
Section 16. Agreement of Rights Holders ................................................................ 23
Section 17. Rights Certificate Holder Not Deemed a Stockholder ......................................... 24
Section 18. Concerning the Rights Agent ................................................................ 24
(a) Compensation ............................................................................... 24
(b) Reliance ................................................................................... 24
Section 19. Merger or Consolidation or Change of Name of Rights Agent .................................. 24
(a) Successor .................................................................................. 24
(b) Prior Countersignatures .................................................................... 25
Section 20. Duties of Rights Agent ..................................................................... 25
(a) Legal Counsel .............................................................................. 25
(b) Certification by the Company ............................................................... 25
(c) Liability for Negligence, etc. ............................................................. 25
(d) Statements of Fact or Recitals ............................................................. 25
(e) Agreement; Adjustments ..................................................................... 25
(f) Further Assurances ......................................................................... 26
(g) Instructions ............................................................................... 26
(h) Dealing in Rights .......................................................................... 26
(ii)
(i) Agents; Reasonable Care .................................................................... 26
(j) Expenses; Repayment Assurances ............................................................. 26
(k) Exercise of Rights; Consultation with Company .............................................. 27
Section 21. Change of Rights Agent ..................................................................... 27
Section 22. Issuance of New Rights Certificates ........................................................ 27
Section 23. Redemption and Termination ................................................................. 28
(a) Redemption ................................................................................. 28
(b) Effect of Redemption; Procedure ............................................................ 28
Section 24. Exchange ................................................................................... 28
(a) Right to Exchange .......................................................................... 28
(b) Effect of Exchange; Procedure .............................................................. 28
(c) Common Stock Equivalents ................................................................... 29
(d) Insufficient Common Stock .................................................................. 29
(e) Fractional Shares .......................................................................... 29
Section 25. Notice of Certain Events ................................................................... 29
(a) Preferred Stock Transactions, etc. ......................................................... 29
(b) Other Transactions ......................................................................... 30
Section 26. Notices .................................................................................... 30
Section 27. Supplements and Amendments ................................................................. 31
Section 28. Successors ................................................................................. 31
Section 29. Determinations and Actions by the Board of Directors, etc .................................. 31
Section 30. Benefits of this Agreement ................................................................. 31
Section 31. Severability ............................................................................... 32
Section 32. Governing Law .............................................................................. 32
Section 33. Counterparts ............................................................................... 32
Section 34. Descriptive Headings ....................................................................... 32
Exhibit 1 Certificate of Designation, Preferences and Rights of Series A Preferred Stock ............. 34
Exhibit 2 Form of Rights Certificate ................................................................. 41
Exhibit 3 Letter to Stockholders ..................................................................... 48
Exhibit 4 Press Release .............................................................................. 52
(iii)
FIRST AMENDED AND RESTATED RIGHTS AGREEMENT
This FIRST AMENDED AND RESTATED RIGHTS AGREEMENT, dated as of February
11, 2002, is made between CellStar Corporation, a Delaware corporation (the
"Company"), and Mellon Investor Services LLC (formerly known as ChaseMellon
Shareholder Services, L.L.C.), a New Jersey limited liability company, as rights
agent (the "Rights Agent").
RECITALS
On December 30, 1996 (the "Rights Dividend Declaration Date"), the
Board of Directors of the Company authorized and declared a dividend
distribution of one Right for each share of Common Stock (as hereinafter
defined) of the Company outstanding at the close of business on January 9, 1997
(the "Record Date"), and has authorized the issuance of one Right (as such
number may hereafter be adjusted pursuant to the provisions of Section 11(p) for
each share of Common Stock of the Company issued between the Record Date
(whether originally issued or delivered from the Company's treasury) and the
Distribution Date, each Right initially representing the right to purchase one
one-thousandth of a share of Series A Preferred Stock of the Company having the
rights, powers and preferences set forth in the form of Certificate of
Designation, Preferences and Rights attached hereto as Exhibit 1, upon the terms
and subject to the conditions hereinafter set forth (the "Rights").
In June 1997, the Company effected a three-for-two Common Stock split
in the form of a stock dividend. In June 1998, the Company effected a
two-for-one Common Stock split in the form of a stock dividend. In February
2002, the Company effected a one-for-five reverse split of Common Stock. As a
result of such stock splits, each share of Common Stock currently carries with
it five-thirds of a Right, subject to further adjustment pursuant to the
provisions of Section 11(p).
The Company and the Rights Agent entered into that certain Rights
Agreement, dated as of December 30, 1996, as amended from time to time (as so
amended, the "Rights Agreement"). The Company and the Rights Agent hereby amend
and restate the Rights Agreement pursuant to Section 27 of the Rights Agreement.
AGREEMENT
In consideration of the premises and the mutual agreements herein set
forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or which, together
with all Affiliates and Associates of such Person, shall be the Beneficial Owner
(as such term is hereinafter defined) of 15% or more of the shares of Common
Stock then outstanding, but shall not include (i) the Company, (ii) any
Subsidiary of the Company, (iii) any employee benefit plan of the Company or of
any Subsidiary of the Company, or any Person or entity organized, appointed or
established by the Company for or pursuant to the terms of any such plan, (iv)
any Exempt Person, or (v) any Person who becomes an Acquiring Person solely as a
result of a reduction in the number of shares of Common Stock outstanding due to
the repurchase of shares of Common Stock by the Company, unless and until such
Person shall purchase or otherwise become (as a result of actions taken by such
Person or its Affiliates or Associates) the Beneficial Owner of additional
shares of Common Stock constituting 1% or more of the then outstanding shares of
Common Stock. Notwithstanding the foregoing, if (i) the Board determines in good
faith that a Person who would otherwise be an Acquiring
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Person, as defined pursuant to the foregoing provisions of this paragraph, has
become such inadvertently (including, without limitation, because (A) such
Person was unaware that it beneficially owned a percentage of Common Stock that
would otherwise cause such Person to be an Acquiring Person, or (B) such Person
was aware of the extent of its Beneficial Ownership of Common Stock but had no
actual knowledge of the consequences of such Beneficial Ownership under this
Agreement) and without any intention of changing or influencing control of the
Company, and (ii) such Person divests as promptly as practicable, as determined
by the Board, a sufficient number of shares of Common Stock so that such Person
would no longer be an Acquiring Person as defined pursuant to the foregoing
provisions of this paragraph, then such Person shall not be deemed to be or to
have become an Acquiring Person for any purposes of this Agreement.
(b) "Act" shall mean the Securities Act of 1933, as amended and in
effect from time to time.
(c) "Adjustment Shares" shall have the meaning set forth in Section
11(a)(ii)
(d) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Exchange Act.
(e) "Agreement" shall mean this First Amended and Restated Rights
Agreement as originally executed or as it may from time to time be supplemented
or amended pursuant to the applicable provisions hereof.
(f) A Person shall be deemed the "Beneficial Owner" of, and shall be
deemed to "beneficially own" and have "Beneficial Ownership" of, any securities:
(i) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to acquire (whether such right
is exercisable immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding (whether or not in writing) or upon the
exercise of conversion rights, exchange rights, rights, warrants or options, or
otherwise; provided, however, that a Person shall not, for purposes of this
paragraph (i), be deemed the "Beneficial Owner" of or to "beneficially own," (A)
securities tendered pursuant to a tender or exchange offer made by such Person
or any of such Person's Affiliates or Associates until such tendered securities
are accepted for purchase or exchange, (B) securities issuable upon exercise of
Rights at any time prior to the occurrence of a Triggering Event, or (C)
securities issuable upon exercise of Rights from and after the occurrence of a
Triggering Event, which Rights were acquired by such Person or any of such
Person's Affiliates or Associates prior to the Distribution Date or pursuant to
Section 3(a) or Section 22 (the "Original Rights") or pursuant to Section 11(i)
in connection with an adjustment made with respect to any Original Rights;
(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or dispose of or has
"beneficial ownership" of (as determined pursuant to Rule 13d-3 of the General
Rules and Regulations under the Exchange Act), including pursuant to any
agreement, arrangement or understanding, whether or not in writing; provided,
however, that a Person shall not be deemed the "Beneficial Owner" of, or to
"beneficially own," any security under this subparagraph (ii) as a result of an
agreement, arrangement or understanding to vote such security if such agreement,
arrangement or understanding: (A) arises solely from a revocable proxy given in
response to a public proxy or consent solicitation made pursuant to, and in
accordance with, the applicable provisions of the General Rules and Regulations
under the Exchange Act, and (B) is not also then reportable by such Person on a
Schedule 13D under the Exchange Act (or any comparable or successor report); or
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(iii) which are "beneficially owned," directly or indirectly,
by any other Person (or any Affiliate or Associate thereof) with which such
Person (or any of such Person's Affiliates or Associates) has any agreement,
arrangement or understanding (whether or not in writing), for the purpose of
acquiring, holding, voting (except pursuant to a revocable proxy as described in
the proviso to subparagraph (ii) of this paragraph (f)) or disposing of any
voting securities of the Company;
provided, however, that nothing in this paragraph (f) shall cause a person
engaged in business as an underwriter of securities to be the "Beneficial Owner"
of or to "beneficially own," any securities acquired through such person's
participation in good faith in a firm commitment underwriting until the
expiration of forty (40) calendar days after the date of such acquisition.
(g) "Board" means the Board of Directors of the Company.
(h) "Business Day" shall mean any day other than a Saturday, Sunday
or a day on which banking institutions in the State of Texas or the State of New
Jersey are authorized or obligated by law or executive order to close.
(i) "Close of Business" on any given date shall mean 5:00 P.M,
Dallas, Texas time, on such date; provided, however, that if such date is not a
Business Day it shall mean 5:00 P.M., Dallas, Texas , on the next succeeding
Business Day.
(j) "Common Stock" when used in reference to the Company, shall
mean the common stock, par value $0.01 per share, of the Company, except that
"Common Stock" when used with reference to any Person other than the Company
shall mean the capital stock of such Person with the greatest voting power, or
the equity securities or other equity interest having power to control or direct
the management, of such Person.
(k) "Common Stock Equivalents" shall have the meaning set forth in
Section 11(a)(iii).
(l) "Company" shall mean the Person named as the "Company" in the
first paragraph of this Agreement until a successor corporation shall have
become such, or until a Principal Party shall assume, and thereafter be liable
for, all obligations and duties of the Company hereunder, pursuant to the
applicable provisions of this Agreement, and thereafter "Company" shall mean
such successor corporation or Principal Party.
(m) "Current Market Price" shall have the meaning set forth in
Section 11(d).
(n) "Current Value" shall have the meaning set forth in Section
11(a)(iii).
(o) "Distribution Date" shall have the meaning set forth in Section
3(a).
(p) "Equivalent Preferred Stock" shall have the meaning set forth
in Section 11(b).
(q) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended and in effect on the date of this Agreement.
(r) "Exchange Number" shall mean one-half of the number of shares
of Common Stock, one-thousandths of a share of Preferred Stock, or shares or
other units of other property for which a Right is exercisable immediately prior
to the time of the action of the Board to exchange the Rights.
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(s) "Exempt Person" shall mean (i) Xxxx X. Xxxxxxxxx and his
Affiliates and Associates and (ii) any Person who or which becomes the
Beneficial Owner of 15% or more of the shares of Common Stock then outstanding
as the result of such Person's acquisition from the Company of the Company's
securities, and any shares of Common Stock issuable upon conversion or exercise
thereof, in exchange for the Company's 5% Convertible Subordinated Notes due
2002 held by such Person, unless and until such Person or Persons named in
clauses (i) or (ii) of this Section 1(s), while a Beneficial Owner of 15% or
more of the shares of Common Stock then outstanding, shall become the Beneficial
Owner of additional shares of Common Stock constituting 1% or more of the then
outstanding shares of Common Stock.
(t) "Expiration Date" shall have the meaning set forth in Section
7(a).
(u) "Final Expiration Date" shall mean the Close of Business on
January 9, 2007.
(v) "Flip-in Event" shall mean any event described in Section
11(a)(ii) (A) or (B).
(w) "Flip-in Trigger Date" shall have the meaning set forth in
Section 11(a)(iii).
(x) "Flip-over Event" shall mean any event described in clauses
(x), (y) or (z) of Section 13(a).
(y) "Original Rights" shall have the meaning set forth in Section
1(f)(i).
(z) "Person" shall mean any individual, firm, corporation,
partnership or other entity.
(aa) "Preferred Stock" shall mean shares of Preferred Stock, Series
A, par value $0.01, of the Company, and, to the extent that there is not a
sufficient number of shares of Series A Preferred Stock authorized to permit the
full exercise of the Rights, any other series of Preferred Stock, par value
$0.01, of the Company designated for such purpose containing terms substantially
similar to the terms of the Series A Preferred Stock.
(bb) "Principal Party" shall have the meaning set forth in Section
13(b).
(cc) "Purchase Price" shall have the meaning set forth in Section
4(a).
(dd) "Record Date" shall have the meaning set forth in the Recitals
at the beginning of the Agreement.
(ee) "Redemption Date" shall have the meaning set forth in Section
23(a).
(ff) "Redemption Price" shall have the meaning set forth in Section
23(a).
(gg) "Rights" shall have the meaning set forth in the Recitals at
the beginning of the Agreement.
(hh) "Rights Agent" shall mean the Person named as the "Rights
Agent" in the first paragraph of this Agreement until a successor Rights Agent
shall have become such pursuant to the applicable provisions hereof and
thereafter "Rights Agent" shall mean such successor Rights Agent. If at any time
there is more than one Person appointed by the Company as Rights Agent pursuant
to the applicable provisions of this Agreement, "Rights Agent" shall mean and
include each such Person.
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(ii) "Rights Agreement" shall have the meaning set forth in the
Recitals at the beginning of the Agreement.
(jj) "Rights Certificates" shall have the meaning set forth in
Section 3(a).
(kk) "Rights Dividend Declaration Date" shall have the meaning set
forth in the Recitals at the beginning of the Agreement.
(ll) "Spread" shall have the meaning set forth in Section
11(a)(iii).
(mm) "Stock Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed or amended pursuant to Section 13(d) under the
Exchange Act) by the Company or an Acquiring Person that an Acquiring Person has
become such.
(nn) "Subsidiary" shall mean, with reference to any Person, any
corporation or other entity of which a majority of the voting power of equity
securities or majority of the equity interest is beneficially owned, directly or
indirectly, by such Person, or otherwise controlled by such Person.
(oo) "Substitution Period" shall have the meaning set forth in
Section 11(a)(iii).
(pp) "Trading Day" shall have the meaning set forth in Section
11(d)(i).
(qq) "Triggering Event" shall mean any Flip-in Event or any
Flip-over Event.
Section 2. Appointment of Rights Agent. The Company hereby appoints
the Rights Agent to act as agent for the Company in accordance with the terms
and conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such Co-Rights Agents as it may deem
necessary or desirable. The Rights Agent shall have no duty to supervise, and in
no event shall be liable for, the acts or omissions of any such co-Rights Agent.
Section 3. Issuance of Rights Certificates.
(a) Distribution Date; Rights Certificates. Until the earlier
of (i) the Close of Business on the tenth Business Day after the Stock
Acquisition Date (or, if the tenth Business Day after the Stock Acquisition Date
occurs before the Record Date, the Close of Business on the Record Date), or
(ii) the Close of Business on the tenth Business Day (or such later date as the
Board shall determine prior to such time as any Person becomes an Acquiring
Person) after the date that a tender or exchange offer by any Person (other than
the Company, any Subsidiary of the Company, any employee benefit plan of the
Company or of any Subsidiary of the Company, or any Person or entity organized,
appointed or established by the Company for or pursuant to the terms of any such
plan) is first published or sent or given within the meaning of Rule 14d-2(a) of
the General Rules and Regulations under the Exchange Act, if upon consummation
thereof such Person would be the Beneficial Owner of 15% or more of the shares
of Common Stock then outstanding (the earlier of (i) and (ii) being herein
referred to as the "Distribution Date"), (x) the Rights will be evidenced
(subject to the provisions of paragraph (b) of this Section 3) by the
certificates for the Common Stock registered in the names of the holders of the
Common Stock (which certificates for Common Stock shall be deemed also to be
certificates for Rights) and not by separate certificates, and (y) the Rights
will be transferable only in connection with the transfer of the underlying
shares of Common Stock (including a transfer to the Company, except pursuant to
the provisions of Section 23. As soon as practicable after the Distribution
Date, the Rights Agent will send by first-class, insured, postage prepaid mail,
to each record holder of the Common Stock as of
5
the Close of Business on the Distribution Date, at the address of such holder
shown on the records of the Company, one or more rights certificates, in
substantially the form of Exhibit 2 hereto (the "Rights Certificates"),
evidencing one Right for each share of Common Stock so held, subject to
adjustment as provided herein. In the event that an adjustment in the number of
Rights per share of Common Stock has been made pursuant to Section 11(p) at the
time of distribution of the Rights Certificates, the Company shall make the
necessary and appropriate rounding adjustments (in accordance with Section 14(a)
so that Rights Certificates representing only whole numbers of Rights are
distributed and cash is paid in lieu of any fractional Rights. As of and after
the Distribution Date, the Rights will be evidenced solely by such Rights
Certificates.
(b) Common Stock Certificates; Summary of Rights. With respect
to certificates for the Common Stock outstanding as of the Record Date, until
the Distribution Date, the Rights associated with the Common Stock represented
by such certificates will be evidenced by such certificates alone and the
registered holders of such Common Stock shall also be the registered holders of
the associated Rights. Until the earlier of the Distribution Date or the
Expiration Date, the transfer of any certificates representing shares of Common
Stock in respect of which Rights have been issued shall also constitute the
transfer of the Rights associated with such shares of Common Stock. On the
Record Date, or as soon as practicable thereafter, the Company sent a copy of a
Summary of Rights to Purchase Preferred Stock, in substantially the form of
Exhibit 3 hereto (the "Summary of Rights"), by first-class, postage-prepaid
mail, to each record holder of shares of Common Stock as of the close of
business of the Record Date, at the address of such holder shown on the records
of the Company.
(c) Legend. Rights shall be issued in respect of all
certificates for shares of Common Stock which are issued (whether originally
issued or from the Company's treasury) after the Record Date but prior to the
earliest of the (i) Distribution Date, (ii) the Expiration Date, or (iii) the
Redemption Date, or, in certain circumstances provided in Section 22 after the
Distribution Date. Certificates representing such shares of Common Stock shall
also be deemed to be certificates for Rights, and shall bear a legend
substantially as follows:
This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in the First Amended and Restated Rights
Agreement, dated as of February 11, 2002 (the "Rights Agreement"), by
and between CellStar Corporation (the "Company") and Mellon Investor
Services LLC (formerly known as ChaseMellon Shareholder Services,
L.L.C.), a new Jersey limited liability company, as Rights Agent (the
"Rights Agent"), the terms of which are hereby incorporated herein by
reference and a copy of which is on file at the principal offices of
the Company. Under certain circumstances, as set forth in the Rights
Agreement, such Rights will be evidenced by separate certificates and
will no longer be evidenced by this certificate. The 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 set forth in
the Rights Agreement, Rights issued to, or held by, any Person who is,
was or becomes an Acquiring Person or any Affiliate or Associate
thereof (as such terms are defined in the Rights Agreement), whether
currently held by or on behalf of such Person or by any subsequent
holder, may become null and void.
With respect to such certificates containing the foregoing legend, until the
earliest of (i) the Distribution Date, (ii) the Expiration Date, or (iii) the
Redemption Date, (x) the Rights associated with the Common Stock represented by
such certificates shall be evidenced by such certificates alone, (y) the
registered holders of such Common Stock shall also be the registered holders of
the associated Rights, and (z) the transfer of any of such certificates shall
also constitute the transfer of the Rights associated with such shares of Common
Stock. In the event that the Company purchases, or acquires any shares of Common
Stock after the Record Date but prior to
6
the Distribution Date, any rights associated with such shares of Common Stock
shall be deemed canceled and retired so that the Company shall not be entitled
to exercise any Rights associated with shares of Common Stock which are no
longer outstanding.
Section 4. Form of Rights Certificates.
(a) Form; Date. The Rights Certificates (and the forms of
election to purchase and of assignment to be printed on the reverse thereof)
shall each be substantially in the form set forth in Exhibit 2 hereto and may
have such marks of identification or designation and such legends, summaries or
endorsements printed thereon as the Company may deem appropriate, which do not
affect the rights, duties obligations or responsibilities of the Rights Agent as
set forth in this Agreement and as are not inconsistent with the provisions of
this Agreement, or as may be required to comply with any applicable law or with
any rule or regulation made pursuant thereto or with any rule or regulation of
any stock exchange on which the Rights may from time to time be listed or any
securities association on whose interdealer quotation system the Rights may be
from time to time authorized for quotation, or to conform to usage. Subject to
the provisions of Section 11 and Section 22, the Rights Certificates, whenever
distributed, shall be dated as of the Record Date and on their face shall
entitle the holders thereof to purchase such number of one one-thousandths of a
share of Preferred Stock as shall be set forth therein at the price set forth
therein (such exercise price per one one-thousandth of a share is referred to
herein as the "Purchase Price"), but the amount and type of securities
purchasable upon the exercise of each Right and the Purchase Price thereof shall
be subject to adjustment as provided herein.
(b) Acquiring Person Legend. Any Rights Certificate issued
pursuant to Section 3(a) or Section 22 that represents Rights beneficially owned
by (i) an Acquiring Person or any Associate or Affiliate of an Acquiring Person,
(ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate)
who becomes a transferee after the Acquiring Person becomes such, or (iii) a
transferee of an Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee prior to or concurrently with the Acquiring Person becoming
such and receives such Rights pursuant to either (A) a transfer (whether or not
for consideration) from the Acquiring Person to holders of equity interests in
such Acquiring Person or to any Person with whom such Acquiring Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which the Board has determined is part of a plan,
arrangement or understanding which has as a primary purpose or effect avoidance
of Section 7(e) and any Rights Certificate issued pursuant to Section 6, Section
11 or Section 22 upon transfer, exchange, replacement or adjustment of any other
Rights Certificate referred to in this sentence, shall contain (to the extent
feasible) a legend substantially as follows:
The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became an Acquiring Person or
an Affiliate or Associate of an Acquiring Person (as such terms are
defined in the First Amended and Restated Rights Agreement, dated as of
February 11, 2002 (the "Rights Agreement"), by and between CellStar
Corporation and Mellon Investor Services LLC (formerly known as
ChaseMellon Shareholder Services, L.L.C.), a new Jersey limited
liability company, as Rights Agent). Accordingly, this Rights
Certificate and the Rights represented hereby may become null and void
in the circumstances specified in Section 7(e) of such Agreement.
Section 5. Countersignature and Registration.
(a) Signatures. The Rights Certificates shall be executed on
behalf of the Company by its Chairman of the Board, its President or any Vice
President, either manually or by facsimile signature, and shall have affixed
thereto the Company's seal or a facsimile thereof which shall be attested to by
the Secretary or an Assistant Secretary of the Company, either manually or by
facsimile signature. The Rights Certificates shall be
7
countersigned by the Rights Agent, either manually or by facsimile signature,
and shall not be valid for any purpose unless so countersigned. In case any
officer of the Company who shall have signed any of the Rights Certificates
shall cease to be such officer of the Company before countersignature by the
Rights Agent and issuance and delivery by the Company, such Rights Certificates,
nevertheless, may be countersigned by the Rights Agent and issued and delivered
by the Company with the same force and effect as though the person who signed
such Rights Certificates had not ceased to be such officer of the Company; and
any Rights Certificates may be signed on behalf of the Company by any person
who, at the actual date of the execution of such Rights Certificate, shall be a
proper officer of the Company to sign such Rights Certificate, although at the
date of the execution of this Agreement any such person was not such an officer.
(b) Registration and Transfer. Following the Distribution Date
and receipt by the Rights Agent of all relevant information and documents, the
Rights Agent will keep or cause to be kept, at its office or offices designated
as the appropriate place for surrender of Rights Certificates upon exercise or
transfer, books for registration and transfer of the Rights Certificates issued
hereunder. Such books shall show the names and addresses of the respective
holders of the Rights Certificates, the number of Rights evidenced on its face
by each of the Rights Certificates and the date of each of the Rights
Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.
(a) Procedure. Subject to the provisions of Section 4(b),
Section 7(e) and Section 14, at any time after the Close of Business on the
Distribution Date, and at or prior to the Close of Business on the Expiration
Date, any Rights Certificate or Certificates may be transferred, split up,
combined or exchanged for another Rights Certificate or Certificates, entitling
the registered holder to purchase a like number of one one-thousandths of a
share of Preferred Stock (or, following a Triggering Event, Common Stock, other
securities, cash or other assets, as the case may be) as the Rights Certificate
or Certificates surrendered then 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 Rights Certificate or Certificates shall make
such request in writing delivered to the Rights Agent, and shall surrender the
Rights Certificate or Certificates to be transferred, split up, combined or
exchanged at the office or offices of the Rights Agent designated for such
purpose. Neither the Rights Agent nor the Company shall be obligated to take any
action whatsoever with respect to the transfer of any such surrendered Rights
Certificate until the registered holder shall have completed and signed the
certificate contained in the form of assignment on the reverse side of such
Rights Certificate and shall have provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request. Thereupon, the
Rights Agent shall, subject to Section 4(b), Section 7(e) and Section 14,
countersign and deliver to the Person entitled thereto a Rights Certificate or
Rights Certificates, as the case may be, as so requested. The Company may
require payment of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer, split up, combination or
exchange of Rights Certificates. The Rights Agent shall have no duty or
obligation under this Section unless and until it is satisfied that all such
taxes and/or governmental charges have been paid.
(b) Issuance of New Rights Certificates. Upon receipt by the
Company and the Rights Agent of evidence reasonably satisfactory to them of the
loss, theft, destruction or mutilation of a Rights Certificate, and, in case of
loss, theft or destruction, of indemnity or security satisfactory to them, and
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Rights Certificate if mutilated, the Company will execute and deliver a new
Rights Certificate of like tenor to the Rights Agent for countersignature and
delivery to the registered owner in lieu of the Rights Certificate so lost,
stolen, destroyed or mutilated.
8
Section 7. Exercise of Rights; Purchase Price; Expiration Date of
Rights.
(a) Exercise. Subject to Section 7(e), the registered holder
of any Rights Certificate may exercise the Rights evidenced thereby (except as
otherwise provided herein, including, without limitation, the restrictions on
exercisability set forth in Section 9(c), Section 11(a)(iii), Section 23(a), and
Section 24(b) in whole or in part at any time after the Distribution Date upon
surrender of the Rights Certificate, with the form of election to purchase and
the certificate on the reverse side thereof duly executed, to the Rights Agent
at the office or offices of the Rights Agent designated for such purpose,
together with payment of the aggregate Purchase Price with respect to the total
number of one one-thousandths of a share of Preferred Stock (or other
securities, cash or other assets, as the case may be) as to which such
surrendered Rights are then exercisable and an amount equal to any applicable
tax or governmental charge, at or prior to the earliest of (i) the Final
Expiration Date, (ii) the Redemption Date, or (iii) the expiration of the Rights
pursuant to Section 13(d) (the earliest of (i), (ii) and (iii) being herein
referred to as the "Expiration Date"). The payment of the Purchase Price and the
applicable tax or governmental charge, if any (as such amount may be reduced
pursuant to Section 11(a)(iii), may be made (x) in cash, (y) by certified check,
cashier's check or money order payable to the order of the Company, or (z) by
delivery of a certificate or certificates (with appropriate stock powers
executed in blank attached thereto) evidencing a number of shares of Common
Stock equal to the then Purchase Price divided by the closing price (as
determined pursuant to Section 11(d) per share of Common Stock on the Trading
Day immediately preceding the date of such exercise. In the event that the
Company is obligated to issue other securities (including Common Stock) of the
Company, pay cash and/or distribute other property pursuant to Section 11(a) the
Company will make all arrangements necessary so that such other securities, cash
and/or other property are available for distribution by the Rights Agent, if and
when necessary to comply with this Agreement. The Company reserves the right to
require prior to the occurrence of a Triggering Event that upon any exercise of
Rights, a number of Rights be exercised so that only whole shares of Preferred
Stock would be issued.
(b) Purchase Price. The Purchase Price for each one
one-thousandth of a share of Preferred Stock pursuant to the exercise of a Right
shall initially be $80.00, and shall be subject to adjustment from time to time
as provided in Section 11 and Section 13(a) and shall be payable in accordance
with paragraph (a) of this Section 7.
(c) Rights Agent Actions. Upon receipt of a Rights Certificate
representing exercisable Rights and the compliance by the holder of such Rights
Certificate with paragraph (a) of this Section 7, the Rights Agent shall,
subject to Section 20(k), thereupon promptly (i) (A) requisition from any
transfer agent of the shares of Preferred Stock (or make available, if the
Rights Agent is the transfer agent for such shares) certificates for the total
number of one one-thousandths of a share of Preferred Stock to be purchased and
the Company hereby irrevocably authorizes its transfer agent to comply with all
such requests, or (B) if the Company shall have elected to deposit the total
number of shares of Preferred Stock issuable upon exercise of the Rights
hereunder with a depositary agent, requisition from the depositary agent
depositary receipts representing such number of one one-thousandths of a share
of Preferred Stock as are to be purchased (in which case certificates for the
shares of Preferred Stock represented by such receipts shall be deposited by the
transfer agent with the depositary agent) and the Company will direct the
depositary agent to comply with such request, (ii) requisition from the Company
the amount of cash, if any, to be paid in lieu of fractional shares in
accordance with Section 14, (iii) after receipt thereof, deliver such
certificates or depositary receipts to or upon the order of the registered
holder of such Rights Certificate, registered in such name or names as may be
designated by such holder, and (iv) after receipt thereof, deliver such cash, if
any, to or upon the order of the registered holder of such Rights Certificate.
(d) Partial Exercise. In case the registered holder of any
Rights Certificate shall exercise less than all the Rights evidenced thereby, a
new Rights Certificate evidencing Rights equivalent to the Rights
9
remaining unexercised shall be issued by the Rights Agent and delivered to, or
upon the order of the registered holder of such Rights Certificate, registered
in such name or names as may be designated by such holder, subject to the
provisions of Section 6 and Section 14.
(e) Termination of Acquiring Person's Rights. Notwithstanding
anything in this Agreement to the contrary, from and after the first occurrence
of a Flip-in Event, any Rights beneficially owned by (i) an Acquiring Person, or
an Associate or Affiliate of an Acquiring Person, (ii) a transferee of an
Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee after such Acquiring Person becomes such, or (iii) a transferee of an
Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee prior to or concurrently with the Acquiring Person becoming such and
receives such Rights pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person to holders of equity interests in such
Acquiring Person or to any Person with whom the Acquiring Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which the Board has determined is part of an agreement,
plan, arrangement or understanding which has as a primary purpose or effect the
avoidance of this Section 7(e), shall become null and void without any further
action and no holder of such Rights shall have any rights whatsoever with
respect to such Rights, whether under any provision of this Agreement or
otherwise. The Company shall notify the Rights Agent when this Section 7(e)
applies and shall use all reasonable efforts to ensure that the provisions of
this Section 7(e) and Section 4(b) are complied with, but neither the Company
nor the Rights Agent shall have any liability to any holder of Rights
Certificates or other Person as a result of the Company's failure to make any
determinations with respect to an Acquiring Person or any of its respective
Affiliates, Associates or transferees hereunder.
(f) Surrender of Rights Certificates; Identity of Beneficial
Owner. Notwithstanding anything in this Agreement to the contrary, neither the
Rights Agent nor the Company shall be obligated to undertake any action with
respect to a registered holder upon the occurrence of any purported exercise as
set forth in this Section 7 unless such registered holder shall have (i)
properly completed and signed the certificate contained in the form of election
to purchase set forth on the reverse side of the Rights Certificate surrendered
for such exercise, and (ii) provided such additional evidence of the identity of
the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company or the Rights Agent shall reasonably request.
Section 8. Cancellation and Destruction of Rights Certificates. All
Rights Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be canceled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Rights Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
canceled Rights Certificates to the Company, or shall, at the written request of
the Company, destroy such canceled Rights Certificates, and in such case shall
deliver a certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of Capital Stock.
(a) Reservation of Capital Stock. The Company will cause to be
reserved and kept available out of its authorized and unissued shares of
Preferred Stock (and, following the occurrence of a Triggering Event, out of its
authorized and unissued shares of Common Stock and/or other securities or out of
its authorized and issued shares of Common Stock held in its treasury), the
number of shares of Preferred Stock (and, following the occurrence of a
Triggering Event, Common Stock and/or other securities) that, as provided
10
in this Agreement, including the rights of the Company under Section 11(a)(iii)
to otherwise fulfill its obligations, will be sufficient to permit the exercise
in full of all outstanding Rights.
(b) Listing. So long as the shares of Preferred Stock (and,
following the occurrence of a Triggering Event, Common Stock and/or other
securities) issuable and deliverable upon the exercise of the Rights may be
listed on any stock exchange or authorized for quotation on any interdealer
quotation system of any securities association, the Company shall use its best
efforts to cause, from and after such time as the Rights become exercisable, all
shares reserved for such issuance to be listed on such exchange or quoted on
such system upon official notice of issuance upon such exercise.
(c) Registration under the Act. The Company will use its best
efforts to (i) file, as soon as practicable following the earliest date after
the first occurrence of a Flip-in Event on which the consideration to be
delivered by the Company upon exercise of the Rights has been determined in
accordance with Section 11(a)(iii), or as soon as is required by law following
the Distribution Date, as the case may be, a registration statement on an
appropriate form under the Act with respect to the securities purchasable upon
exercise of the Rights, (ii) cause such registration statement to become
effective as soon as practicable after such filing, and (iii) cause such
registration statement to remain effective (with a prospectus at all times
meeting the requirements of the Act) until the earlier of (A) the date as of
which the Rights are no longer exercisable for such securities, and (B) the
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 not to exceed ninety (90) calendar
days after the date set forth in clause (i) of the first sentence of this
Section 9(c), the exercisability of the Rights in order to prepare and file such
registration statement and permit it to become effective. Upon any such
suspension, the Company shall promptly notify the Rights Agent thereof and issue
a public announcement stating that the exercisability of the Rights has been
temporarily suspended, as well as a public announcement (with prompt notice
thereof to the Rights Agent) at such time as the suspension is no longer in
effect. In addition, if the Company shall determine that a registration
statement is required following the Distribution Date, the Company may
temporarily suspend the exercisability of the Rights until such time as a
registration statement has been declared effective (in each case with prompt
notice thereof to the Rights Agent). Notwithstanding any provision of this
Agreement to the contrary, the Rights shall not be exercisable in any
jurisdiction if the requisite qualification in such jurisdiction shall not have
been obtained, the exercise thereof shall not be permitted under applicable law
or a registration statement shall not have been declared effective.
(d) Covenant Regarding Capital Stock. The Company will take
all such action as may be necessary to ensure that all one one-thousandths of a
share of Preferred Stock (and, following the occurrence of a Triggering Event,
Common Stock and/or other securities) delivered upon exercise of Rights shall,
at the time of delivery of the certificates for such shares (subject to payment
of the Purchase Price), be duly and validly authorized and issued and fully paid
and nonassessable.
(e) Transfer Taxes and Charges. The Company will pay when due
and payable any and all taxes and charges which may be payable in respect of the
issuance or delivery of the Rights Certificates and of any certificates for a
number of one one-thousandths of a share of Preferred Stock (or Common Stock
and/or other securities, as the case may be) upon the exercise of Rights. The
Company shall not, however, be required to pay any tax or charge which may be
payable in respect of any transfer or delivery of Rights Certificates to a
Person other than, or the issuance or delivery of a number of one
one-thousandths of a share of Preferred Stock (or Common Stock and/or other
securities, as the case may be) in respect of a name other than, that of the
registered holder of the Rights Certificates evidencing Rights surrendered for
exercise or to issue or deliver any certificates for a number of one
one-thousandths of a share of Preferred Stock (or Common Stock and/or other
securities, as the case may be) in a name other than that of the registered
holder upon the exercise of any Rights
11
until such tax or charge shall have been paid (any such tax or charge being
payable by the holder of such Rights Certificate at the time of surrender) or
until it has been established to the Company's satisfaction that no such tax or
charge is due.
Section 10. Preferred Stock Record Date. Each Person in whose name any
certificate for a number of one one-thousandths of a share of Preferred Stock
(or Common Stock and/or other securities, as the case may be) is issued upon the
exercise of Rights shall for all purposes be deemed to have become the holder of
record of such fractional shares of Preferred Stock (or Common Stock and/or
other securities, as the case may be) represented thereby on, and such
certificate shall be dated as of, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and all applicable transfer taxes or charges) was made; provided, however, that
if the date of such surrender and payment is a date upon which the Preferred
Stock (or Common Stock and/or other securities, as the case may be) transfer
books of the Company are closed, such Person shall be deemed to have become the
record holder of such shares (fractional or otherwise) on, and such certificate
shall be dated, the next succeeding Business Day on which the Preferred Stock
(or Common Stock and/or other securities, as the case may be) transfer books of
the Company are open. Prior to the exercise of the Rights evidenced thereby, the
holder of a Rights Certificate shall not be entitled to any rights of a
stockholder of the Company with respect to shares for which the Rights shall be
exercisable, including, without limitation, the right to vote, to receive
dividends or other distributions or to exercise any preemptive rights, and shall
not be entitled to receive any notice of any proceedings of the Company, except
as provided herein.
Section 11. Adjustment of Purchase Price; Number and Kind of Shares or
Number of Rights. The Purchase Price, the number and kind of shares covered by
each Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.
(a) Certain Adjustments.
(i) In the event the Company shall at any time after
the date of this Agreement (A) declare a dividend on the Preferred
Stock payable in shares of Preferred Stock, (B) subdivide or split the
outstanding Preferred Stock, (C) combine the outstanding Preferred
Stock into a smaller number of shares, or (D) issue any shares of its
capital stock in a reclassification of the Preferred Stock (including
any such reclassification in connection with a consolidation or merger
in which the Company is the continuing or surviving corporation),
except as otherwise provided in this Section 11(a) and Section 7(e),
the Purchase Price in effect at the time of the record date for such
dividend or of the effective date of such subdivision, split,
combination or reclassification, and the number and kind of shares of
Preferred Stock or capital stock, as the case may be, issuable on such
date, shall be proportionately adjusted so that the holder of any Right
exercised after such time shall be entitled to receive, upon payment of
the aggregate adjusted Purchase Price then in effect necessary to
exercise a Right in full, the aggregate number and kind of shares of
Preferred Stock or capital stock, as the case may be, which, if such
Right had been exercised immediately prior to such date and at a time
when the Preferred Stock (or other capital stock, as the case may be)
transfer books of the Company were open, such holder would have owned
upon such exercise and been entitled to receive by virtue of such
dividend, subdivision, split, combination or reclassification. If an
event occurs which would require an adjustment under both this Section
11(a)(i) and Section 11(a)(ii) the adjustment provided for in this
Section 11(a)(i) shall be in addition to, and shall be made prior to,
any adjustment required pursuant to Section 11(a)(ii).
(ii) In the event:
12
(A) (1) any Acquiring Person or any
Associate or Affiliate of any Acquiring Person, at any time
after the date of this Agreement, directly or indirectly,
shall merge into the Company or otherwise combine with the
Company and the Company shall be the continuing or surviving
corporation of such merger or combination and the Common Stock
of the Company shall remain outstanding and unchanged, or (2)
subject to Section 23, any Person shall, at any time after the
Rights Dividend Declaration Date, become an Acquiring Person,
unless the event causing such Person to become an Acquiring
Person is a Flip-over Event, or is an acquisition of shares of
Common Stock pursuant to a tender offer or an exchange offer
for all outstanding shares of Common Stock at a price and on
terms determined by the Board, prior to the public
announcement of such tender offer or exchange offer, after
receiving advice from one or more investment banking firms
selected by the Board, to be (a) at a price which is fair to
the stockholders of the Company (taking into account all
factors which the Board deems relevant including, without
limitation, prices which could reasonably be achieved if the
Company or its assets were sold on an orderly basis designed
to realize maximum value) and (b) otherwise in the best
interests of the Company and its stockholders, other than such
Acquiring Person, its Affiliates and its Associates; or
(B) during such time as there is an
Acquiring Person, there shall be any reclassification of
securities (including any reverse stock split), or
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, other than a transaction
or transactions to which the provisions of Section 13(a) apply
(whether or not with or into or otherwise involving an
Acquiring Person) 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 which is
directly or indirectly beneficially owned by any Acquiring
Person or any Associate or Affiliate of any Acquiring Person,
then, promptly following the occurrence of any such Flip-in Event
(whether described in Section 11(a)(ii)(A) or (B)), proper provision
shall be made so that each holder of a Right (except as provided below
and in Section 7(e) shall thereafter have the right to receive, upon
exercise thereof at the then current Purchase Price in accordance with
the terms of this Agreement, in lieu of the number of one
one-thousandths of a share of Preferred Stock, such number of shares of
Common Stock of the Company as shall equal the result obtained by (x)
multiplying the then current Purchase Price by the then number of one
one-thousandths of a share of Preferred Stock for which a Right was
exercisable immediately prior to the first occurrence of a Flip-in
Event, and (y) dividing that product (which, following such first
occurrence, shall thereafter be referred to as the "Purchase Price" for
each Right and for all purposes of this Agreement) by 50% of the
Current Market Price per share of Common Stock on the date of such
first occurrence (such number of shares being referred to as the
"Adjustment Shares").
(iii) In the event that the number of shares of
Common Stock that are authorized by the Company's Certificate of
Incorporation but not outstanding or reserved for issuance for purposes
other than upon exercise of the Rights is not sufficient to permit the
exercise in full of the Rights in accordance with the foregoing
subparagraph (ii) of this Section 11(a), the Company shall: (A)
determine the excess of (1) the value of the Adjustment Shares issuable
upon the exercise of a Right (the "Current Value") over (2) the
Purchase Price (such excess, the "Spread"), and (B) with respect to
each Right, subject to Section 7(e), make adequate provision to
substitute for the Adjustment Shares, upon payment of the applicable
Purchase Price, (1) cash, (2) a reduction in the Purchase Price, (3)
Common Stock or other equity securities of the Company (including,
without
13
limitation, shares, or units of shares, of preferred stock which the
Board has deemed to have essentially the same value or economic rights
as shares of Common Stock (such shares of preferred stock being
referred to as "Common Stock Equivalents")), (4) debt securities of the
Company, (5) other assets, or (6) any combination of the foregoing,
having an aggregate value equal to the Current Value (less the amount
of any reduction in the Purchase Price), where such aggregate value has
been determined by the Board based upon the advice of a nationally
recognized investment banking firm selected by the Board; provided,
however, that if the Company shall not have made adequate provision to
deliver value pursuant to clause (B) above within thirty (30) calendar
days following the first occurrence of a Flip-in Event (the date of
such Flip-in Event being referred to herein as the "Flip-in Trigger
Date"), then the Company shall be obligated to deliver, upon the
surrender for exercise of a Right and without requiring payment of the
Purchase Price, shares of Common Stock (to the extent available) and
then, if necessary, cash, which shares and/or cash have an aggregate
value equal to the Spread. If the Board shall determine in good faith
that it is likely that sufficient additional shares of Common Stock or
other equity securities could be authorized for issuance upon exercise
in full of the Rights, the thirty (30) calendar day period set forth
above may be extended to the extent necessary, but not more than ninety
(90) calendar days after the Flip-in Trigger Date, in order that the
Company may seek stockholder approval for the authorization of such
additional shares (such period, the "Substitution Period"). To the
extent that the Company determines that some action need be taken
pursuant to the first and/or second sentences of this Section
11(a)(iii), the Company (x) shall provide, subject to Section 7(e),
that such action shall apply uniformly to all outstanding Rights, and
(y) may suspend the exercisability of the Rights until the expiration
of the Substitution Period in order to seek any authorization of
additional shares and/or to decide the appropriate form of distribution
to be made pursuant to such first sentence and to determine the value
thereof. In the event of any such suspension, the Company shall
promptly notify the Rights Agent thereof and shall issue a public
announcement stating that the exercisability of the Rights has been
temporarily suspended, as well as a public announcement (with prompt
notice to the Rights Agent) at such time as the suspension is no longer
in effect. For purposes of this Section 11(a)(iii), the value of the
Common Stock shall be the Current Market Price per share of the Common
Stock on the Flip-in Trigger Date and the value of any Common Stock
Equivalent shall be deemed to have the same value as the Common Stock
on such date.
(iv) If the rules of the national securities
exchange, registered as such pursuant to Section 6 of the Exchange Act,
or of the national securities association, registered as such pursuant
to Section 15A of the Exchange Act, on which the Common Stock is
principally traded or quoted would prohibit such exchange or
association from listing or continuing to list, or from authorizing for
or continuing quotation and/or transaction reporting through an
inter-dealer quotation system, the Common Stock or other equity
securities of the Company if the Rights were to be exercised for shares
of Common Stock in accordance with subparagraph (ii) of this Section
11(a) because such issuance would nullify, restrict or disparately
reduce the per share voting rights of holders of Common Stock, the
Company shall: (A) determine the Spread, and (B) with respect to each
Right, make adequate provision to substitute for the Adjustment Shares,
upon payment of the applicable Purchase Price, (1) cash, (2) a
reduction in the Purchase Price, (3) equity securities of the Company,
including, without limitation, Common Stock Equivalents, other than
securities which would have the effect of nullifying, restricting or
disparately reducing the per share voting rights of holders of Common
Stock, (4) debt securities of the Company, (5) other assets, or (6) any
combination of the foregoing, having an aggregate value equal to the
Current Value, where such aggregate value has been determined by the
Board based upon the advice of a recognized investment banking firm
selected by the Board; provided, however, if the Company shall not have
made adequate provision to deliver value pursuant to clause (B) above
within thirty (30) calendar days following the Flip-in Trigger Date,
then the Company shall be obligated to deliver, upon the surrender for
exercise of a Right and without
14
requiring payment of the Purchase Price, cash having an aggregate value
equal to the Spread. To the extent that the Company determines that
some action need be taken pursuant to the first sentence of this
Section 11(a)(iv), the Company (x) shall provide, subject to Section
7(e), that such action shall apply uniformly to all outstanding Rights
and (y) may suspend the exercisability of the Rights, but not longer
than ninety (90) calendar days after the Flip-in Trigger Date, in order
to decide the appropriate form of distribution to be made pursuant to
such first sentence and to determine the value thereof. In the event of
any such suspension, the Company shall promptly notify the Rights Agent
thereof and shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as
a public announcement (with prompt notice to the Rights Agent) at such
time as the suspension is no longer in effect. For purposes of this
Section 11(a)(iv), the value of the Common Stock shall be the Current
Market Price per share of the Common Stock on the Flip-in Trigger Date
and the value of any Common Stock Equivalent shall be deemed to have
the same value as the Common Stock on such date.
(b) Purchase Price Adjustment -- Capital Stock. In case the
Company shall fix a record date for the issuance of rights, options or warrants
to all holders of Preferred Stock entitling them to subscribe for or purchase
(for a period expiring within forty-five (45) calendar days after such record
date) Preferred Stock (or shares having the same rights, privileges and
preferences as the shares of Preferred Stock ("Equivalent Preferred Stock")) or
securities convertible into Preferred Stock or Equivalent Preferred Stock at a
price per share of Preferred Stock or per share of Equivalent Preferred Stock
(or having a conversion price per share, if a security convertible into
Preferred Stock or Equivalent Preferred Stock) less than the Current Market
Price per share of Preferred Stock on such record date, the Purchase Price to be
in effect after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the number of shares of Preferred Stock outstanding
on such record date, plus the number of shares of Preferred Stock which the
aggregate offering price of the total number of shares of Preferred Stock and/or
Equivalent Preferred Stock so to be offered (and/or the aggregate initial
conversion price of the convertible securities so to be offered) would purchase
at such Current Market Price, and the denominator of which shall be the number
of shares of Preferred Stock outstanding on such record date, plus the number of
additional shares of Preferred Stock and/or Equivalent Preferred Stock to be
offered for subscription or purchase (or into which the convertible securities
so to be offered are initially convertible). In case such subscription price may
be paid by delivery of consideration part or all of which may be in a form other
than cash, the value of such consideration shall be as determined in good faith
by the Board, whose determination shall be described in a statement filed with
the Rights Agent and shall be binding and conclusive on the Rights Agent and the
holders of the Rights for all purposes. Shares of Preferred Stock owned by or
held for the account of the Company shall not be deemed outstanding for the
purpose of any such computation. Such adjustment shall be made successively
whenever such a record date is fixed, and in the event that such rights or
warrants are not so issued, the Purchase Price shall be adjusted to be the
Purchase Price which would then be in effect if such record date had not been
fixed.
(c) Purchase Price Adjustment -- Cash, Assets, etc. In case
the Company shall fix a record date for a distribution to all holders of
Preferred Stock (including any such distribution made in connection with a
consolidation or merger in which the Company is the continuing corporation) of
evidences of indebtedness, cash (other than a regular quarterly cash dividend
out of the earnings or retained earnings of the Company), assets (other than a
dividend payable in Preferred Stock, but including any dividend payable in stock
other than Preferred Stock) or subscription rights or warrants (excluding those
referred to in Section 11(b), the Purchase Price to be in effect after such
record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the Current Market Price per share of Preferred Stock on such record
date, less the fair market value (as determined in good faith by the Board,
whose determination shall be described in a statement filed with the Rights
Agent and shall be conclusive for all purposes) of the portion of the cash,
assets or evidences of indebtedness so to be
15
distributed or of such subscription rights or warrants applicable to a share of
Preferred Stock and the denominator of which shall be such Current Market Price
per share of Preferred Stock. Such adjustments shall be made successively
whenever such a record date is fixed, and in the event that such distribution is
not so made, the Purchase Price shall be adjusted to be the Purchase Price which
would have been in effect if such record date had not been fixed.
(d) Current Market Price.
(i) For the purpose of any computation hereunder, other
than computations made pursuant to Section 11(a)(iii) the Current Market Price
per share of Common Stock on any date shall be deemed to be the average of the
daily closing prices per share of such Common Stock for the thirty (30)
consecutive Trading Days immediately prior to such date, and for purposes of
computations made pursuant to Section 11(a)(iii) the Current Market Price per
share of Common Stock on any date shall be deemed to be the average of the daily
closing prices per share of such Common Stock for the ten (10) consecutive
Trading Days immediately following such date; provided, however, that in the
event that the Current Market Price per share of the Common Stock is determined
during a period following the announcement by the issuer of such Common Stock of
(A) a dividend or distribution on such Common Stock payable in shares of such
Common Stock or securities convertible into shares of such Common Stock (other
than the Rights), or (B) any subdivision, combination or reclassification of
such Common Stock and the ex-dividend date for such dividend or distribution, or
the record date for such subdivision, combination or reclassification shall not
have occurred prior to the commencement of the requisite thirty (30) Trading Day
or ten (10) Trading Day period, as set forth above, then, and in each such case,
the Current Market Price shall be properly adjusted to take into account
ex-dividend trading. The closing price for each Trading Day shall be the last
sale price, regular way, or, in case no such sale takes place on such Trading
Day, the average of the closing bid and asked prices, regular way, in either
case as reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange or, if the shares of Common Stock are not listed or admitted to trading
on the New York Stock Exchange, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the principal
national securities exchange on which the shares of Common Stock are listed or
admitted to trading or, if the shares of Common Stock are not listed or admitted
to trading on any national securities exchange, the last quoted price or, if not
so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotation System or such other system then in use, or,
if on any such date the shares of Common Stock are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Common Stock selected by the
Board. If on any such date no market maker is making a market in the Common
Stock, the fair value of such shares on such date as determined in good faith by
the Board shall be used. The term "Trading Day" shall mean a day on which the
principal national securities exchange on which the shares of Common Stock are
listed or admitted to trading is open for the transaction of business or, if the
shares of Common Stock are not listed or admitted to trading on any national
securities exchange, a Business Day. If the Common Stock is not publicly held or
not so listed or traded, Current Market Price per share shall mean the fair
value per share as determined in good faith by the Board, whose determination
shall be described in a statement filed with the Rights Agent and shall be
conclusive for all purposes.
(ii) For the purpose of any computation hereunder, the
Current Market Price per share of Preferred Stock shall be determined in the
same manner as set forth above for the Common Stock in clause (i) of this
Section 11(d) (other than the last sentence thereof). If the Current Market
Price per share of Preferred Stock cannot be determined in the manner provided
above or if the Preferred Stock is not publicly held or listed or traded in a
manner described in clause (i) of this Section 11(d), the Current Market Price
per share of Preferred Stock shall be conclusively deemed to be an amount equal
to 1,000 (as such number may be appropriately adjusted for such events as stock
splits, stock dividends and recapitalizations with respect to the
16
Common Stock occurring after the date of this Agreement) multiplied by the
Current Market Price per share of the Common Stock. If neither the Common Stock
nor the Preferred Stock is publicly held or so listed or traded, Current Market
Price per share of the Preferred Stock shall mean the fair value per share as
determined in good faith by the Board, whose determination shall be described in
a statement filed with the Rights Agent and shall be conclusive for all
purposes. For all purposes of this Agreement, the Current Market Price of one
one-thousandth of a share of Preferred Stock shall be equal to the Current
Market Price of one share of Preferred Stock divided by 1,000.
(e) Purchase Price Adjustment Threshold. Anything herein to
the contrary notwithstanding, no adjustment in the Purchase Price shall be
required unless such adjustment would require an increase or decrease of at
least one percent (1%) in the Purchase Price; provided however, that any
adjustments which by reason of this Section 11(e) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations under this Section 11 shall be made to the nearest cent or to
the nearest thousandth of a share of Common Stock or other share or
one-millionth of a share of Preferred Stock, as the case may be. Notwithstanding
the first sentence of this Section 11(e), any adjustment required by this
Section 11 shall be made no later than the earlier of (i) three (3) years from
the date of the transaction which mandates such adjustment, or (ii) the
Expiration Date.
(f) Equivalent Adjustments. If as a result of an adjustment
made pursuant to Section 11(a)(ii) or Section 13(a) the holder of any Right
thereafter exercised shall become entitled to receive any shares of capital
stock other than Preferred Stock, thereafter the number of such other shares so
receivable upon exercise of any Right and the Purchase Price thereof shall be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Preferred Stock
contained in Sections 11(a), (b), (c), (e), (g), (h), (i), (j), (k) and (m), and
the provisions of Sections 7, 9, 10, 13 and 14 with respect to the Preferred
Stock shall apply on like terms to any such other shares.
(g) Post-Adjustment Rights Issuances. All Rights originally
issued by the Company subsequent to any adjustment made to the Purchase Price
hereunder shall evidence the right to purchase, at the adjusted Purchase Price,
the number of one one-thousandths of a share of Preferred Stock purchasable from
time to time hereunder upon exercise of the Rights, all subject to further
adjustment as provided herein.
(h) Preferred Stock Anti-Dilution. Unless the Company shall
have exercised its election as provided in Section 11(i), upon each adjustment
of the Purchase Price as a result of the calculations made in Section 11(b) and
Section 11(c), each Right outstanding immediately prior to the making of such
adjustment shall thereafter evidence the right to purchase, at the adjusted
Purchase Price, that number of one one-thousandths of a share of Preferred Stock
(calculated to the nearest one-millionth) obtained by (i) multiplying (x) the
number of one one-thousandths of a share covered by a Right immediately prior to
this adjustment, by (y) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price, and (ii) dividing the product so obtained by
the Purchase Price in effect immediately after such adjustment of the Purchase
Price.
(i) Adjustment of Number of Rights. The Company may elect on
or after the date of any adjustment of the Purchase Price to adjust the number
of Rights, in lieu of any adjustment in the number of one one-thousandths of a
share of Preferred Stock purchasable upon the exercise of a Right. Each of the
Rights outstanding after the adjustment in the number of Rights shall be
exercisable for the number of one one-thousandths of a share of Preferred Stock
for which a Right was exercisable immediately prior to such adjustment. Each
Right held of record prior to such adjustment of the number of Rights shall
become that number of Rights (calculated to the nearest one-ten-thousandth)
obtained by dividing the Purchase Price in effect immediately prior to
adjustment of the Purchase Price by the Purchase Price in effect immediately
after adjustment of the Purchase Price. The Company shall make a public
announcement and promptly notify the
17
Rights Agent of its election to adjust the number of Rights, indicating the
record date for the adjustment, and, if known at the time, the amount of the
adjustment to be made. This record date may be the date on which the Purchase
Price is adjusted or any day thereafter, but, if the Rights Certificates have
been issued, shall be at least ten (10) calendar days later than the date of the
public announcement. If Rights Certificates have been issued, upon each
adjustment of the number of Rights pursuant to this Section 11(i), the Company
shall, as promptly as practicable, cause to be distributed to holders of record
of Rights Certificates on such record date Rights Certificates evidencing,
subject to Section 14 the additional Rights to which such holders shall be
entitled as a result of such adjustment, or, at the option of the Company, shall
cause to be distributed to such holders of record in substitution and
replacement for the Rights Certificates held by such holders prior to the date
of adjustment, and upon surrender thereof, if required by the Company, new
Rights Certificates evidencing all the Rights to which such holders shall be
entitled after such adjustment. Rights Certificates so to be distributed shall
be issued, executed and countersigned in the manner provided for herein (and may
bear, at the option of the Company, the adjusted Purchase Price) and shall be
registered in the names of the holders of record of Rights Certificates on the
record date specified in the public announcement.
(j) Rights Certificates. Irrespective of any adjustment or
change in the Purchase Price or the number of one one-thousandths of a share of
Preferred Stock issuable upon the exercise of the Rights, the Rights
Certificates theretofore and thereafter issued may continue to express the
Purchase Price per one one-thousandth of a share and the number of one
one-thousandths of a share which were expressed in the initial Rights
Certificates issued hereunder.
(k) Adjustment Below Par Value. Before taking any action that
would cause an adjustment reducing the Purchase Price below the then par or
stated value, if any, of the number of one one-thousandths of a share of
Preferred Stock issuable upon exercise of the Rights, the Company shall take any
corporate action which is or may, in the opinion of its counsel, be necessary in
order that the Company may validly and legally issue fully paid and
nonassessable such number of one one-thousandths of a share of Preferred Stock
at such adjusted Purchase Price.
(l) Adjustment Effective as of Future Date; Exercise. In any
case in which this Section 11 shall require that an adjustment in the Purchase
Price be made effective as of a record date for a specified event, the Company
may elect to defer (with prompt notice of any such election to the Rights Agent)
until the occurrence of such event the issuance to the holder of any Right
exercised after such record date the number of one one-thousandths of a share of
Preferred Stock and other capital stock or securities of the Company, if any,
issuable upon such exercise over and above the number of one one-thousandths of
a share of Preferred Stock and other capital stock or securities of the Company,
if any, issuable upon such exercise on the basis of the Purchase Price in effect
prior to such adjustment; provided, however, that the Company shall deliver to
such holder a due xxxx or other appropriate instrument evidencing such holder's
right to receive such additional shares (fractional or otherwise) or securities
upon the occurrence of the event requiring such adjustment.
(m) Tax Adjustments. Anything in this Section 11 to the
contrary notwithstanding, the Company shall be entitled to make such reductions
in the Purchase Price, in addition to those adjustments expressly required by
this Section 11, as and to the extent that in its good faith judgment the Board
shall determine to be advisable in order that any (i) consolidation or
subdivision of the Preferred Stock, (ii) issuance wholly for cash of any shares
of Preferred Stock at less than the Current Market Price, (iii) issuance wholly
for cash of shares of Preferred Stock or securities which by their terms are
convertible into or exchangeable for shares of Preferred Stock, (iv) stock
dividends or (v) issuance of rights, options or warrants referred to in this
Section 11, hereafter made by the Company to holders of its Preferred Stock
shall not be taxable to such stockholders.
18
(n) Restriction on Certain Transactions. The Company shall not, at any
time after the earlier of the Stock Acquisition Date or the Distribution Date,
(i) consolidate with any other Person (other than a Subsidiary of the Company in
a transaction which complies with Section 11(o), (ii) merge with or into any
other Person (other than a Subsidiary of the Company in a transaction which
complies with Section 11(o)), (iii) enter into a statutory share exchange or
similar transaction with any other Person (other than a Subsidiary of the
Company in a transaction which complies with Section 11(o)), or (iv) sell or
transfer (or permit any Subsidiary to sell or transfer), in one transaction, or
a series of related transactions, assets, cash flow or earning power aggregating
more than 50% of the assets, cash flow or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person or Persons (other than the
Company and/or any of its Subsidiaries in one or more transactions each of which
complies with Section 11(o)), if (x) at the time of or immediately after such
consolidation, merger, statutory share exchange or similar transaction, or sale
there are any rights, warrants or other instruments or securities outstanding or
agreements in effect which would substantially diminish or otherwise eliminate
the benefits intended to be afforded by the Rights or (y) prior to,
simultaneously with or immediately after such consolidation, merger, statutory
share exchange or similar transaction, or sale, the stockholders of the Person
who constitutes, or would constitute, the "Principal Party" for purposes of
Section 13(a) shall have received a distribution of Rights previously owned by
such Person or any of its Affiliates and Associates.
(o) Restriction Against Diminishing Benefits of the Rights. The
Company covenants and agrees that, after the earlier of the Stock Acquisition
Date or the Distribution Date, it will not, except as permitted by Section 23 or
Section 27 take (or permit any Subsidiary to take) any action if at the time
such action is taken it is reasonably foreseeable that such action will diminish
substantially or otherwise eliminate the benefits intended to be afforded by the
Rights.
(p) Common Stock Adjustments. Anything in this Agreement to the
contrary notwithstanding, in the event that the Company shall at any time after
the Rights Dividend Declaration Date and prior to the Distribution Date (i)
declare a dividend on the outstanding shares of Common Stock payable in shares
of Common Stock, (ii) subdivide or split the outstanding shares of Common Stock,
or (iii) combine the outstanding shares of Common Stock into a smaller number of
shares, the number of Rights associated with each share of Common Stock then
outstanding, or issued or delivered thereafter but prior to the Distribution
Date, shall be proportionately adjusted so that the number of Rights thereafter
associated with each share of Common Stock following any such event shall equal
the result obtained by multiplying the number of Rights associated with each
share of Common Stock immediately prior to such event by a fraction, the
numerator of which shall be the total number of shares of Common Stock
outstanding immediately prior to the occurrence of the event and the denominator
of which shall be the total number of shares of Common Stock outstanding
immediately following the occurrence of such event. The adjustments provided for
in this Section 11(p) shall be made successively whenever such a dividend is
declared or paid or such subdivision, combination or consolidation is effected.
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Section 11 or Section 13 the
Company shall (a) promptly prepare a certificate setting forth such adjustment
and a brief statement of the facts and computations accounting for such
adjustment, (b) promptly file with the Rights Agent, and with each transfer
agent for the Preferred Stock and the Common Stock, a copy of such certificate,
and (c) mail or cause the Rights Agent to mail a brief summary thereof to each
holder of a Rights Certificate (or, if prior to the Distribution Date, to each
holder of a certificate representing shares of Common Stock) in accordance with
Section 26 (Notices). The Rights Agent shall be fully protected in relying on
any such certificate and on any adjustment or statement therein contained and
shall have no duty or liability with respect to, and shall not be deemed to have
knowledge of, any adjustment or any such event unless and until it shall have
received such a certificate.
19
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning
Power.
(a) Flip-over Event. In the event that, following the Stock
Acquisition Date, directly or indirectly, (x) the Company shall consolidate
with, or merge with and into, or enter into a statutory stock exchange or
similar transaction with, any other Person (other than a Subsidiary of the
Company in a transaction which complies with Section 11(o), and the Company
shall not be the continuing or surviving corporation of such consolidation,
merger or statutory share exchange or similar transaction, (y) any Person (other
than a Subsidiary of the Company in a transaction which complies with Section
11(o)) shall consolidate with, or merge with or into, or enter into a statutory
stock exchange or similar transaction with, the Company, and the Company shall
be the continuing or surviving corporation of such consolidation, merger or
statutory share exchange or similar transaction and, in connection with such
consolidation, merger or statutory share exchange or similar transaction, all or
part of the outstanding shares of Common Stock shall be changed into or
exchanged for stock or other securities of any other Person or cash or any other
property, or (z) the Company shall sell or otherwise transfer (or one or more of
its Subsidiaries shall sell or otherwise transfer), in one transaction or a
series of related transactions, assets, cash flow or earning power aggregating
more than 50% of the assets, cash flow or earning power of the Company and its
Subsidiaries (taken as a whole) to any Person or Persons (other than the Company
or any Subsidiary of the Company in one or more transactions each of which
complies with Section 11(o)), then, and in each such case (except as may be
contemplated by Section 13(d), (i) proper provision shall be made so that: each
holder of a Right, except as provided in Section 7(e) shall thereafter have the
right to receive, upon the exercise thereof at the then current Purchase Price
in accordance with the terms of this Agreement, such number of validly
authorized and issued, fully paid, nonassessable and freely tradeable shares of
Common Stock of the Principal Party, not subject to any liens, encumbrances,
rights of first refusal or other adverse claims, as shall be equal to the result
obtained by (A) multiplying the then current Purchase Price by the number of one
one-thousandths of a share of Preferred Stock for which a Right is exercisable
immediately prior to the first occurrence of a Flip-over Event (or, if a Flip-in
Event has occurred prior to the first occurrence of a Flip-over Event,
multiplying the number of such one one-thousandths of a share for which a Right
was exercisable immediately prior to the first occurrence of a Flip-in Event by
the Purchase Price in effect immediately prior to such first occurrence), and
(B) dividing that product (which, following the first occurrence of a Flip-over
Event, shall be referred to as the "Purchase Price" for each Right and for all
purposes of this Agreement) by 50% of the Current Market Price per share of the
Common Stock of such Principal Party on the date of consummation of such
Flip-over Event; (ii) such Principal Party shall thereafter be liable for, and
shall assume, by virtue of such Flip-over Event, all the obligations and duties
of the Company pursuant to this Agreement; (iii) the term "Company" shall
thereafter be deemed to refer to such Principal Party, it being specifically
intended that the provisions of Section 11 shall apply only to such Principal
Party following the first occurrence of a Flip-over Event; (iv) such Principal
Party shall take such steps (including, but not limited to, the reservation of a
sufficient number of shares of its Common Stock) in connection with the
consummation of any such transaction as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably may
be, in relation to its shares of Common Stock thereafter deliverable upon the
exercise of the Rights; and (v) the provisions of Section 11(a)(ii) hereof shall
be of no effect following the first occurrence of any Flip-over Event.
Notwithstanding anything in this Agreement to the contrary, if a Flip-over Event
shall occur prior to the Distribution Date, then (i) the Rights shall survive
such Flip-over Event and shall not as a result thereof be cancelled, terminated
or otherwise cease to exist and (ii) the Distribution Date shall be deemed to
have occurred on the day immediately prior to the date of such Flip-over Event.
(b) Principal Party. "Principal Party" shall mean
(i) in the case of any transaction described in clause (x) or
(y) of the first sentence of Section 13(a), the Person that is the
issuer of any securities into which shares of Common Stock of the
Company are converted in such consolidation, merger or statutory share
exchange or
20
similar transaction, and if no securities are so issued, the Person
that is the other party to such consolidation, merger or statutory
share exchange or similar transaction, or
(ii) in the case of any transaction described in clause (z) of
the first sentence of Section 13(a), the Person that is the party
receiving the greatest portion of the assets, cash flow or earning
power transferred pursuant to such transaction or transactions;
provided, however, that in any such case, (1) if the Common Stock of such Person
is not at such time and has not been continuously over the preceding twelve (12)
month period registered under Section 12 of the Exchange Act, and such Person is
a direct or indirect Subsidiary of another Person the Common Stock of which is
and has been so registered, "Principal Party" shall refer to such other Person;
and (2) in case such Person is a Subsidiary, directly or indirectly, of more
than one Person, the Common Stock of two or more of which is and has been so
registered, "Principal Party" shall refer to whichever of such Persons is the
issuer of the total outstanding Common Stock having the greatest aggregate
market value.
(c) Supplemental Agreement. The Company shall not consummate a
Flip-over Event unless the Principal Party shall have a sufficient number of
authorized shares of its Common Stock which have not been issued or reserved for
issuance to permit the exercise in full of the Rights in accordance with this
Section 13 and unless prior thereto the Company and such Principal Party shall
have executed and delivered to the Rights Agent a supplemental agreement
providing for the terms set forth in paragraphs (a) and (b) of this Section 13
and further providing that, as soon as practicable after the date of such
Flip-over Event, the Principal Party will
(i) prepare and file a registration statement under
the Act, with respect to the Rights and the securities purchasable upon
exercise of the Rights on an appropriate form, and will use its best
efforts to cause such registration statement to (A) become effective as
soon as practicable after such filing and (B) remain effective (with a
prospectus at all times meeting the requirements of the Act) until the
Expiration Date and take all such other action as may be necessary to
enable the Principal Party to issue the securities purchasable upon
exercise of the Rights and to permit public trading in such securities
including, but not limited to, the registration or qualification of
such securities under all requisite securities laws or jurisdictions of
the various states and the listing of such securities on such exchange
and trading markets as may be necessary or appropriate; and
(ii) will deliver to holders of the Rights historical
financial statements for the Principal Party and each of its Affiliates
which comply in all respects with the requirements for registration on
Form 10 under the Exchange Act.
The provisions of this Section 13 shall similarly apply to successive
consolidations, mergers or statutory share exchanges or similar transactions or
sales or other transfers. In the event that a Flip-over Event shall occur at any
time after the occurrence of a Flip-in Event, the Rights which have not
theretofore been exercised shall thereafter become exercisable in the manner
described in Section 13(a).
(d) Exceptions. Notwithstanding anything in this Agreement to
the contrary, Section 13 shall not be applicable to a transaction described in
subparagraphs (x) and (y) of Section 13(a) if (i) such transaction is
consummated with a Person or Persons who acquired shares of Common Stock
pursuant to a tender offer or exchange offer for all outstanding shares of
Common Stock which complies with the provisions of Section 11(a)(ii)(A) (or a
wholly-owned subsidiary of any such Person or Persons), (ii) the price per share
of Common Stock offered in such transaction is not less than the price per share
of Common Stock paid to all holders of shares of Common Stock whose shares were
purchased pursuant to such tender or exchange offer and (iii) the form of
consideration being offered in such transaction is the same as the form of
consideration
21
paid to all holders of shares of Common Stock whose shares were purchased
pursuant to such tender offer or exchange offer. Upon consummation of any such
transaction contemplated by this Section 13(d), all Rights hereunder shall
expire.
Section 14. Fractional Rights and Fractional Shares.
(a) Fractional Rights. The Company shall not be required to
issue fractions of Rights, except prior to the Distribution Date as provided in
Section 11(p), or to distribute Rights Certificates which evidence fractional
Rights. In lieu of such fractional Rights, there shall be paid to the registered
holders of the Rights Certificates with regard to which such fractional Rights
would otherwise be issuable, an amount in cash equal to the same fraction of the
current market value of a whole Right. For purposes of this Section 14(a), the
current market value of a whole Right shall be the closing price of the Rights
for the Trading Day immediately prior to the date on which such fractional
Rights would have been otherwise issuable. The closing price of the Rights for
any Trading Day shall be the last sale price, regular way, or, in case no such
sale takes place on such Trading Day, the average of the closing bid and asked
prices, regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Rights are not listed or
admitted to trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Rights are listed or
admitted to trading, or if the Rights are not listed or admitted to trading on
any national securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter market
as reported by the National Association of Securities Dealers, Inc. Automated
Quotation System 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. If on any such date no such market maker is
making a market in the Rights, the fair value of the Rights on such date as
determined in good faith by the Board shall be used.
(b) Fractional Shares of Preferred Stock. The Company shall not
be required to issue fractions of shares of Preferred Stock (other than
fractions which are integral multiples of one one-thousandth of a share of
Preferred Stock which may at the option of the Company, be evidenced by
depositary receipts) upon exercise of the Rights or to distribute certificates
which evidence fractional shares of Preferred Stock (other than fractions which
are integral multiples of one one-thousandth of a share of Preferred Stock).
Interests in fractions of Preferred Stock in integral multiples of one
one-thousandth of a share of Preferred Stock may, at the election of the
Company, be evidenced by depositary receipts, pursuant to an appropriate
agreement between the Company and a depositary selected by it; provided,
however, that such agreement shall provide that the holders of such depositary
receipts shall have all the rights, privileges and preferences to which they are
entitled as beneficial owners of the Preferred Stock represented by such
depositary receipts. In lieu of fractional shares of Preferred Stock that are
not integral multiples of one one-thousandth of a share of Preferred Stock, the
Company may pay to the registered holders of Rights Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market value of one one-thousandth of a share of
Preferred Stock. For purposes of this Section 14(b), the current market value of
one one-thousandth of a share of Preferred Stock shall be one one-thousandth of
the closing price of a share of Preferred Stock (as determined pursuant to
Section 11(d)(ii) for the Trading Day immediately prior to the date of such
exercise.
(c) Fractional Shares of Common Stock. Following the occurrence
of a Triggering Event, the Company shall not be required to issue fractions of
shares of Common Stock upon exercise of the Rights or to distribute certificates
which evidence fractional shares of Common Stock. In lieu of fractional shares
of Common Stock, the Company may pay to the registered holders of Rights
Certificates at the time such Rights are exercised as herein provided an amount
in cash equal to the same fraction of the current market value of
22
one (1) share of Common Stock. For purposes of this Section 14(c), the current
market value of one share of Common Stock shall be the closing price of one
share of Common Stock (as determined pursuant to Section 11(d)(i) for the
Trading Day immediately prior to the date of such exercise.
(d) Waiver of Fractional Rights and Shares. The holder of a Right by
the acceptance of the Right expressly waives his or her right to receive any
fractional Rights or any fractional shares upon exercise of a Right, except as
permitted by this Section 14.
Section 15. Rights of Action. All rights of action in respect of this
Agreement, excepting the rights of action given to the Rights Agent under this
Agreement, are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock); and any registered holder of any Rights Certificate (or, prior to
the Distribution Date, of the Common Stock), without the consent of the Rights
Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of the Common Stock), may, in his or her own behalf and for
his or her 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 or her right to exercise the Rights evidenced by such Rights Certificate in
the manner provided in such Rights Certificate and in this Agreement. Without
limiting the foregoing or any remedies available to the holders of Rights, it is
specifically acknowledged that the holders of Rights would not have an adequate
remedy at law for any breach of this Agreement and shall be entitled to specific
performance of the obligations hereunder and injunctive relief against actual or
threatened violations of the obligations hereunder of any Person subject to this
Agreement.
Section 16. Agreement of Rights Holders. Every holder of a Right by
accepting the same consents and agrees with the Company and the Rights Agent and
with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of Common Stock;
(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the office or offices of the Rights Agent designated for such purposes, duly
endorsed or accompanied by a proper instrument of transfer and with the
appropriate forms and certificates fully executed;
(c) subject to Section 6(a) and Section 7(f), the Company and the
Rights Agent may deem and treat the Person in whose name a Rights Certificate
(or, prior to the Distribution Date, the associated Common Stock certificate) is
registered as the absolute owner thereof and of the Rights evidenced thereby
(notwithstanding any notations of ownership or writing on the Rights
Certificates or the associated Common Stock certificate made by anyone other
than the Company or the Rights Agent) for all purposes whatsoever, and neither
the Company nor the Rights Agent, subject to the last sentence of Section 7(e),
shall be required to be affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Rights Agent shall have any liability to any holder
of a Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree, judgment or ruling (whether interlocutory or
final) issued by a court of competent jurisdiction or by a governmental,
regulatory or administrative agency or commission, or any statute, rule,
regulation or executive order promulgated or enacted by any governmental
authority, prohibiting or otherwise restraining performance of such obligation;
provided, however, the Company must use its best efforts to have any such order,
decree, judgment or ruling lifted or otherwise overturned as soon as possible.
23
Section 17. Rights Certificate Holder Not Deemed a Stockholder. No holder,
as such, of any Rights Certificate shall be entitled to vote, receive dividends
or be deemed for any purpose the holder of the number of one one-thousandths of
a share of Preferred Stock or any other securities of the Company which may at
any time be issuable on the exercise of the Rights represented thereby, nor
shall anything contained herein or in any Rights Certificate be construed to
confer upon the holder of any Rights Certificate, as such, any of the rights of
a stockholder of the Company or any right to vote for the election of directors
or upon any matter submitted to stockholders at any meeting thereof, or to give
or withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting stockholders (except as provided in Section 25), or to
receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by such Rights Certificate shall have been exercised in
accordance with the provisions hereof.
Section 18. Concerning the Rights Agent.
(a) Compensation and Indemnification. The Company agrees to pay to the
Rights Agent reasonable compensation for all services rendered by it hereunder
and, from time to time, on demand of the Rights Agent, its reasonable expenses
and counsel fees and other disbursements incurred in the preparation, delivery,
amendment, administration and execution of this Agreement and the exercise and
performance of its duties hereunder. The Company also agrees to indemnify the
Rights Agent for, and to hold it harmless against, any loss, liability, damage,
judgment, fine, penalty, claim, demand, settlement, cost or expense (including,
without limitation, the reasonable fees and expenses of legal counsel), incurred
without gross negligence or bad faith on the part of the Rights Agent (which
gross negligence or bad faith must be determined by a final, non-appealable
order, judgment, decree or ruling of a court of competent jurisdiction), for any
action taken, suffered or omitted by the Rights Agent in connection with the
acceptance, administration, exercise and performance of its duties under this
Agreement. The costs and expenses incurred in enforcing this right of
indemnification and defending against or investigating any claim of liability
shall be paid by the Company. The provisions of this Section 18 and Section 20
below shall survive the termination of this Agreement, the exercise or
expiration of the Rights and the resignation or removal of the Rights Agent.
(b) Reliance. The Rights Agent shall be authorized and protected and
shall incur no liability for, or in respect of any action taken, suffered or
omitted by it in connection with its acceptance and administration of this
Agreement and the exercise and performance of its duties hereunder, in reliance
upon any Rights Certificate or certificate for the Preferred Stock or Common
Stock or for other securities of the Company, instrument of assignment or
transfer, power of attorney, endorsement, affidavit, letter, notice, direction,
consent, certificate, statement, or other paper or document believed by it to be
genuine and to be signed, executed and, where necessary, verified or
acknowledged, by the proper Person or Persons, or otherwise upon the advice of
counsel as set forth in Section 20 hereof.
Section 19. Merger or Consolidation or Change of Name of Rights Agent.
(a) Successor. Any Person into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any Person
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any Person succeeding to the
corporate trust or shareholder service business of the Rights Agent or any
successor Rights Agent, shall be the successor to the Rights Agent under this
Agreement without the execution or filing of any paper or any further act on the
part of any of the parties hereto; provided, however, that such Person would be
eligible for appointment as a successor Rights Agent under the provisions of
Section 21. In case at the time such successor Rights Agent shall succeed to the
agency created by this Agreement, any of the Rights Certificates shall have been
countersigned but not delivered, any such successor Rights Agent may adopt the
countersignature of a predecessor Rights Agent and deliver such Rights
Certificates so countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such
24
Rights Certificates either in the name of the predecessor or in the name of the
successor Rights Agent; and in all such cases such Rights Certificates shall
have the full force provided in the Rights Certificates and in this Agreement.
(b) Prior Countersignatures. In case at any time the name of the
Rights Agent shall be changed and at such time any of the Rights Certificates
shall have been countersigned but not delivered, the Rights Agent may adopt the
countersignature under its prior name and deliver Rights Certificates so
countersigned; and in case at that time any of the Rights Certificates shall not
have been countersigned, the Rights Agent may countersign such Rights
Certificates either in its prior name or in its changed name; and in all such
cases such Rights Certificates shall have the full force provided in the Rights
Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes to perform
only the duties and obligations expressly imposed by this Agreement (and no
implied duties) upon the following terms and conditions, by all of which the
Company and the holders of Rights Certificates, by their acceptance thereof,
shall be bound:
(a) Legal Counsel. The Rights Agent may consult with legal counsel
(who may be legal counsel for the Company or an employee of the Rights Agent),
and the advice or opinion of such counsel shall be full and complete
authorization and protection to the Rights Agent and the Rights Agent shall
incur no liability for or in respect of any action taken, suffered or omitted by
it and in accordance with such advice or opinion.
(b) Certification by the Company. Whenever in the performance of
its duties under this Agreement the Rights Agent shall deem it necessary or
desirable that any fact or matter (including without limitation, the identity of
an Acquiring Person and the determination of the Current Market Price) be proved
or established by the Company prior to taking, suffering or omitting to take any
action hereunder, such fact or matter (unless other evidence in respect thereof
be herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the President, any Vice
President, the Secretary, any Assistant Secretary, the Treasurer or any
Assistant Treasurer of the Company and delivered to the Rights Agent; and such
certificate shall be full and complete authorization and protection to the
Rights Agent and the Rights Agent shall incur no liability for or in respect of
any action taken, suffered or omitted by it under the provisions of this
Agreement in reliance upon such certificate.
(c) Liability for Negligence, etc. The Rights Agent shall be liable
hereunder to the Company and any other Person only for its own gross negligence
or bad faith (which gross negligence or bad faith must be determined by a final,
non-appealable order, judgment, decree or ruling of a court of competent
jurisdiction). Anything to the contrary notwithstanding, in no event shall the
Rights Agent be liable for special, punitive, indirect, consequential or
incidental loss or damage of any kind whatsoever (including but not limited to
lost profits), even if the Rights Agent has been advised of the likelihood of
such loss or damage. Any liability of the Rights Agent under this Rights
Agreement will be limited to the amount of fees paid by the Company to the
Rights Agent.
(d) Statements of Fact or Recitals. The Rights Agent shall not be
liable for or by reason of any of the statements of fact or recitals contained
in this Agreement or in the Rights Certificates (except its countersignature
thereof) or be required to verify the same, but all such statements and recitals
are and shall be deemed to have been made by the Company only.
(e) Agreement; Adjustments. The Rights Agent shall not have any
liability for, nor be under any responsibility in respect of the validity of
this Agreement or the execution and delivery hereof
25
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Rights Certificate (except its countersignature);
nor shall it be liable or responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Rights Certificate;
nor shall it be liable or responsible for any adjustment required under the
provisions of Section 11 or Section 13 or responsible for the manner, method or
amount of any such adjustment or the ascertaining of the existence of facts that
would require any such adjustment (except with respect to the exercise of Rights
evidenced by Rights Certificates after actual notice of any such adjustment);
nor shall it by any act hereunder be deemed to make any representation or
warranty as to the authorization or reservation of any shares of Common Stock or
Preferred Stock to be issued pursuant to this Agreement or any Rights
Certificate or as to whether any shares of Common Stock or Preferred Stock will,
when so issued, be validly authorized and issued, fully paid and nonassessable.
(f) Further Assurances. 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) Instructions. 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 the President, any Vice President, the Secretary,
any Assistant Secretary, the Treasurer or any Assistant Treasurer of the
Company, and to apply to such officers for advice or instructions in connection
with its duties, and such instructions shall be full authorization and
protection to the Rights Agent and the Rights Agent shall not be liable for or
in respect of any action taken, suffered or omitted by it in accordance with
instructions of any such officer or for any delay in acting while waiting for
those instructions. The Rights Agent shall be fully authorized and protected in
relying upon the most recent instructions received by any such officer. Any
application by the Rights Agent for written instructions from the Company may,
at the option of the Rights Agent, set forth in writing any action proposed to
be taken, suffered or omitted by the Rights Agent under this Rights Agreement
and the date on and/or after which such action shall be taken or suffered or
such omission shall be effective. The Rights Agent shall not be liable for any
action taken or suffered by, or omission of, the Rights Agent in accordance with
a proposal included in any such application on or after the date specified in
such application (which date shall not be less than five Business Days after the
date any officer of the Company actually receives such application, unless any
such officer shall have consented in writing to an earlier date) unless, prior
to taking any such action (or the effective date in the case of an omission),
the Rights Agent shall have received written instructions in response to such
application specifying the action to be taken, suffered or omitted.
(h) Dealing in Rights. The Rights Agent and any stockholder,
affiliate, director, officer or employee of the Rights Agent may buy, sell or
deal in any of the Rights or other securities of the Company or become
pecuniarily interested in any transaction in which the Company may be
interested, or contract with or lend money to the Company or otherwise act as
fully and freely as though the Rights Agent were not Rights Agent under this
Agreement. Nothing herein shall preclude the Rights Agent or any such
stockholder, affiliate, director, officer or employee from acting in any other
capacity for the Company or for any other Person.
(i) Agents; Reasonable Care. The Rights Agent may execute and
exercise any of the rights or powers hereby vested in it or perform any duty
hereunder either itself (through its directors, officers and employees) or by or
through its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct, provided, however, reasonable care was exercised in the
selection and continued employment thereof.
(j) Expenses; Repayment Assurances. No provision of this Agreement
shall require the Rights Agent to expend or risk its own funds or otherwise
incur any financial liability in the performance of
26
any of its duties hereunder or in the exercise of its rights if it reasonably
believes that repayment of such funds or adequate indemnification against such
risk or liability is not reasonably assured to it.
(k) Exercise of Rights; Consultation with Company. If, with respect
to any Rights Certificate surrendered to the Rights Agent for exercise or
transfer, the certificate contained in the form of assignment or the form of
election to purchase set forth on the reverse thereof, as the case may be, has
either not been completed or indicates an affirmative response to clause 1 or 2
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise or transfer without first consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon thirty (30) calendar days' notice in writing mailed to the Company, and to
each transfer agent of the Common Stock and Preferred Stock, by registered or
certified mail, and to the holders of the Rights Certificates by first-class
mail. The Company may remove the Rights Agent or any successor Rights Agent upon
thirty (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
Common Stock and Preferred Stock, by registered or certified mail, and to the
holders of the Rights Certificates by first-class mail. If the Rights Agent
shall resign or be removed or shall otherwise become incapable of acting, the
Company shall appoint a successor to the Rights Agent. If the Company shall fail
to make such appointment within a period of thirty (30) 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 Rights Certificate (who shall, with such notice, submit his
Rights Certificate for inspection by the Company), then the registered holder of
any Rights Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether appointed
by the Company or by such a court, shall be (a) a Person organized and doing
business under the laws of the United States or of any State of the United
States, in good standing, which is authorized under such laws to exercise stock
transfer powers or shareholder services, is subject to supervision or
examination by federal or state authority and has at the time of its appointment
as Rights Agent a combined capital and surplus of at least $50,000,000 or (b) an
Affiliate of the Person described in clause (a) of this sentence. After
appointment, the successor Rights Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as Rights
Agent without further act or deed; but the predecessor Rights Agent shall
deliver and transfer to the successor Rights Agent any property at the time held
by it hereunder, and execute and deliver any further assurance, conveyance, act
or deed necessary for the purpose. Not later than the effective date of any such
appointment, the Company shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Common Stock and the
Preferred Stock, and mail a notice thereof in writing to the registered holders
of the Rights Certificates. Failure to give any notice provided for in this
Section 21, or any defect therein, shall not affect the legality or validity of
the resignation or removal of the Rights Agent or the appointment of the
successor Rights Agent, as the case may be.
Section 22. Issuance of New Rights Certificates. Notwithstanding any of the
provisions of this Agreement or of the Rights to the contrary, the Company may,
at its option, issue new Rights Certificates evidencing Rights in such form as
may be approved by the Board to reflect any adjustment or change in the Purchase
Price and the number or kind or class of shares or other securities or property
purchasable under the Rights Certificates made in accordance with the provisions
of this Agreement. In addition, in connection with the issuance or sale of
shares of Common Stock following the Distribution Date and prior to the
redemption or expiration of the Rights, the Company (a) shall, with respect to
shares of Common Stock so issued or sold pursuant to the exercise of stock
options or under any employee plan or arrangement, or upon the exercise,
conversion or exchange of securities hereafter issued by the Company, in either
case outstanding as of the Distribution Date, and (b) may, in any other case, if
deemed necessary or appropriate by the Board, issue Rights Certificates
representing the appropriate number of Rights in connection with such issuance
or sale;
27
provided, however, that (i) no such Rights Certificate shall be issued if, and
to the extent that, the Company shall be advised by counsel that such issuance
would create a significant risk of material, adverse tax consequences to the
Company or the Person to whom such Rights Certificate would be issued, and (ii)
no such Rights Certificate shall be issued if, and to the extent that,
appropriate adjustment shall otherwise have been made in lieu of the issuance
thereof.
Section 23. Redemption and Termination.
(a) Redemption. The Company may, at its option, at any time prior
to the earlier of (i) the Stock Acquisition Date, or (ii) the Final Expiration
Date, redeem (the date of such redemption being referred to herein as the
"Redemption Date") all but not less than all of the then outstanding Rights at a
redemption price of $0.001 per Right, as such amount may be appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof (such redemption price being hereinafter
referred to as the "Redemption Price"). The redemption of the Rights by the
Company may be made effective at such time, on such basis and with such
conditions as the Board in its sole discretion may establish. The Company may,
at its option, pay the Redemption Price in cash, shares of Common Stock (based
on the Current Market Price of the Common Stock at the time of redemption) or
any other form of consideration deemed appropriate by the Board.
(b) Effect of Redemption; Procedure. Immediately upon the action of
the Company ordering the redemption of the Rights and without any further action
and without any notice, the right to exercise the Rights will terminate and the
only right thereafter of the holders of Rights shall be to receive the
Redemption Price for each Right so held. Promptly after the Redemption Date, the
Company shall (i) give notice of such redemption to the Rights Agent, (ii) give
public notice of such redemption; provided, however, that the failure to give,
or any defect in, such notice shall not affect the validity of such redemption,
and (iii) mail notice of such redemption to the holders of the then outstanding
Rights at their last addresses as they appear upon the registry books of the
Rights Agent or, prior to the Distribution Date, on the registry books of the
Transfer Agent for the Common Stock. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of redemption will state the method by which the
payment of the Redemption Price will be made. Amounts payable shall be rounded
down to the nearest $0.01.
Section 24. Exchange.
(a) Right to Exchange. The Company may, at its option, at any time
and from time to time after the first occurrence of a Flip-in Event, exchange
all or part of the then outstanding and exercisable Rights (other than Rights
which have become null and void as provided in Section 7(e) for the Exchange
Number of shares of Common Stock, shares or units of Preferred Stock which the
Board has determined to be a Common Stock Equivalent, units of other property or
any combination thereof as determined by the Board. Notwithstanding the
foregoing, the Company shall not be empowered to effect such exchange at any
time after any Person (other than the Company, any Subsidiary of the Company,
any employee benefit plan of the Company or any such Subsidiary or any entity
holding shares of Common Stock for or pursuant to any such plan), together with
all Affiliates and Associates of such Person, becomes the Beneficial Owner of
50% or more of the shares of Common Stock then outstanding. The exchange of the
Rights by the Company may be made effective at such time, on such basis and with
such conditions as the Board in its sole discretion may establish.
(b) Effect of Exchange; Procedure. Immediately upon the action of
the Company ordering the exchange of any Rights pursuant to paragraph (a) of
this Section 24, evidence of which shall have been filed with the Rights Agent
and without any further action and without any notice, the right to exercise
28
such Rights will terminate and the only right thereafter of a holder of such
Rights shall be to receive that number of shares of Common Stock, Common Stock
Equivalents or units of other property equal to the number of such Rights held
by such holder multiplied by the Exchange Number. Promptly after the action of
the Company ordering the exchange of the Rights, the Company shall (i) file
evidence of such action with the Rights Agent, (ii) give public notice of such
exchange; provided, however, that the failure to give, or any defect in, such
notice shall not affect the validity of such exchange, and (iii) mail notice of
such exchange to the holders of such Rights at their last addresses as they
appear upon the registry books of the Rights Agent. Any notice which is mailed
in the manner herein provided shall be deemed given, whether or not the holder
receives the notice. Each such notice of exchange will state the method by which
the exchange will be effected and, in the event of any partial exchange, the
number of Rights which will be exchanged. Any partial exchange shall be effected
pro rata based on the number of Rights (other than Rights which have become null
and void as provided in Section 7(e) held by each holder of Rights.
(c) Common Stock Equivalents. In any exchange pursuant to this
Section 24, the Company, at its option, may substitute Common Stock Equivalents
for Common Stock exchangeable for Rights, at the initial rate of one share of
Common Stock Equivalent for each share of Common Stock, as appropriately
adjusted to reflect adjustments in the voting rights of the Common Stock
pursuant to the Company's Certificate of Incorporation, so that the share of
Common Stock Equivalent delivered in lieu of each share of Common Stock shall
have the same voting rights as one share of Common Stock.
(d) Insufficient Common Stock. In the event that the number of
shares of Common Stock which are authorized by the Company's Certificate of
Incorporation but not outstanding or reserved for issuance for purposes other
than upon exercise of the Rights is not sufficient to permit any exchange of
Rights in accordance with this Section 24, the Company may, at its option, take
all such action as may be necessary to authorize additional shares of Common
Stock for issuance upon such exchange.
(e) Fractional Shares. Upon the action of the Company ordering the
exchange of any Rights pursuant to paragraph (a) of this Section 24, the Company
shall not be required to issue fractions of shares or to distribute certificates
which evidence fractional shares. In lieu of such fractional shares, the Company
may pay to the registered holders of the Rights Certificates with regard to
which such fractional shares would otherwise be issuable an amount in cash equal
to the same fraction of the current market value of one share of Common Stock.
For purposes of this Section 24, the current market value of one share of Common
Stock shall be the closing price of one share of Common Stock (as determined
pursuant to Section 11(d)(i) for the Trading Day immediately prior to the date
of exchange pursuant to this Section 24, and the value of any Common Stock
Equivalent shall be deemed to have the same current market value as the Common
Stock on such date.
Section 25. Notice of Certain Events.
(a) Preferred Stock Transactions, etc. In case the Company shall
propose, at any time after the Distribution Date, (i) to pay any dividend
payable in stock of any class to the holders of Preferred Stock or to make any
other distribution to the holders of Preferred Stock (other than a regular
quarterly cash dividend out of earnings or retained earnings of the Company);
(ii) to offer to the holders of Preferred Stock rights or warrants to subscribe
for or to purchase any additional shares of Preferred Stock or shares of stock
of any class or any other securities, rights or options; (iii) to effect any
reclassification of its Preferred Stock (other than a reclassification involving
only the subdivision of outstanding shares of Preferred Stock); (iv) to effect
any consolidation with, merger into or with, or statutory share exchange or
similar transaction with, any other Person (other than a Subsidiary of the
Company in a transaction which complies with Section 11(o), or to effect any
sale or other transfer (or to permit one or more of its Subsidiaries to effect
any sale or other transfer), in one transaction or a series of related
transactions, of more than 50% of the assets, cash flow or earning
29
power of the Company and its Subsidiaries (taken as a whole) to any other Person
or Persons (other than the Company and/or any of its Subsidiaries in one or more
transactions each of which complies with Section 11(o)); (v) to effect the
liquidation, dissolution or winding up of the Company, or (vi) to declare or pay
any dividend on the shares of Common Stock payable in Common Stock or to effect
a subdivision, combination or consolidation of the shares of Common Stock (by
reclassification or otherwise than by payment of dividends in Common Stock),
then, in each such case, the Company shall give to each holder of a Rights
Certificate, to the extent feasible, and to the Rights Agent, in accordance with
Section 26, a notice of such proposed action, which shall specify the record
date for the purposes of such stock dividend, distribution of rights or
warrants, or the date on which such reclassification, consolidation, merger,
statutory share exchange or similar transaction, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of the shares of Preferred Stock, if any such date is to
be fixed, and such notice shall be so given in the case of any action covered by
clause (i) or (ii) above at least twenty (20) calendar days prior to the record
date for determining holders of the shares of Preferred Stock for purposes of
such action, and in the case of any such other action, at least twenty (20)
calendar days prior to the date of the taking of such proposed action or the
date of participation therein by the holders of the shares of Preferred Stock,
whichever shall be the earlier.
(b) Other Transactions. In case any of the events set forth in
Section 11(a)(ii) shall occur, then, in any such case, (i) the Company shall as
soon as practicable thereafter give to each holder of a Rights Certificate, to
the extent feasible, and to the Rights Agent, in accordance with Section 26, a
notice of the occurrence of such event, which shall specify the event and the
consequences of the event to holders of Rights under Section 11(a)(ii), and (ii)
all references in the preceding paragraph to Preferred Stock shall be deemed
thereafter to refer to Common Stock and/or, if appropriate, other securities.
Section 26. Notices. Notices or demands authorized by this Agreement to be
given or made by the Rights Agent or by the holder of any Rights Certificate to
or on the Company shall be sufficiently given or made if sent by telecopier
(with receipt confirmed) or by first-class mail, postage prepaid, addressed
(until another address is filed in writing with the Rights Agent) as follows:
CellStar Corporation
0000 Xxxxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxx 00000
Attention: President
Telecopier: (000) 000-0000
Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by telecopier (with receipt confirmed) or by first-class mail, postage
prepaid, addressed (until another address is filed in writing with the Company)
as follows:
Mellon Investor Services LLC
000 X Xxxxx, Xxx 0000
Xxxxxx, XX 00000
Attention: Relationship Manager
Telecopier: (000) 000-0000
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Common Stock) shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed to such holder at the address of
such holder as shown on the registry books of the Company.
30
Section 27. Supplements and Amendments. For so long as the Rights are
redeemable, and subject to the penultimate sentence of this Section 27, the
Company may and the Rights Agent shall, if the Company so directs, supplement or
amend any provision of this Agreement without the approval of any holders of
certificates representing shares of Common Stock or, on and after the
Distribution Date, any holders of Rights Certificates. At any time when the
Rights are no longer redeemable, and subject to the penultimate sentence of this
Section 27, the Company and the Rights Agent shall, if the Company so directs,
supplement or amend this Agreement without the approval of any holders of Rights
Certificates; provided, however, that no such supplement or amendment may (i)
adversely affect the interests of the holders of Rights Certificates, or, prior
to the Distribution Date, the holders of Common Stock (other than an Acquiring
Person or an Affiliate or Associate of any such Person), (ii) cause this
Agreement again to become amendable other than in accordance with this sentence,
or (iii) cause the Rights again to become redeemable. Upon the delivery of a
certificate from an appropriate officer of the Company which states that the
proposed supplement or amendment is in compliance with the terms of this Section
27 and, provided such supplement or amendment does not change or increase the
Rights Agent's rights, duties, liabilities, obligations or immunities hereunder,
the Rights Agent shall execute such supplement or amendment. Notwithstanding
anything contained in this Agreement to the contrary, no supplement or amendment
shall be made which changes the Redemption Price, the Final Expiration Date, the
Purchase Price, or the number of one one-thousandths of a share of Preferred
Stock for which a right is exercisable; provided, however, that at any time
prior to (i) the Stock Acquisition Date or (ii) the date that a tender or
exchange offer by any person (other than the Company, any Subsidiary of the
Company, any employee benefit plan of the Company or any Subsidiary of the
Company, or any Person or entity organized, appointed or established by the
Company for or pursuant to the terms of any such plan) is first published or
sent or given within the meaning of Rule 14d-2(a) of the General Rules and
Regulations under the Exchange Act, if upon consummation thereof, such Person
would be the Beneficial Owner of 15% or more of the shares of Common Stock then
outstanding, the Board may amend this Agreement to increase the Purchase Price
or extend the Final Expiration Date. Prior to the Distribution Date, the
interests of the holders of Rights shall be deemed coincident with the interests
of the holders of Common Stock.
Section 28. Successors. All the covenants and provisions of this Agreement
by or for the benefit of the Company or the Rights Agent shall bind and inure to
the benefit of their respective successors and assigns hereunder.
Section 29. Determinations and Actions by the Board of Directors, etc. For
all purposes of this Agreement, any calculation of the number of shares of
Common Stock outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding shares of Common Stock
of which any Person is the Beneficial Owner, shall be made in accordance with
the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations
under the Exchange Act. The Board shall have the exclusive power and authority
to administer this Agreement and to exercise all rights and powers specifically
granted to the Board or to the Company, or as may be necessary or advisable in
the administration of this Agreement, including, without limitation, the right
and power to (i) interpret the provisions of this Agreement, and (ii) make all
determinations deemed necessary or advisable for the administration of this
Agreement (including a determination to redeem or not redeem the Rights or to
amend the Agreement). All such actions, calculations, interpretations and
determinations (including, for purposes of clause (y) below, all omissions with
respect to the foregoing) which are done or made by the Board in good faith,
shall (x) be final, conclusive and binding on the Company, the Rights Agent, the
holders of the Rights and all other parties, and (y) not subject the Board to
any liability to the holders of the Rights. The Rights Agent is entitled always
to assume the Board acted in good faith and shall be fully protected and incur
no liability in reliance thereon.
Section 30. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any Person other than the Company, the Rights Agent and the
registered holders of the Rights Certificates
31
(and, prior to the Distribution Date, registered holders of the Common Stock)
any legal or equitable right, remedy or claim under this Agreement; but this
Agreement shall be for the sole and exclusive benefit of the Company, the Rights
Agent and the registered holders of the Rights Certificates (and, prior to the
Distribution Date, registered holders of the Common Stock).
Section 31. Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board determines
in its good faith judgment that severing the invalid language from this
Agreement would adversely affect the purpose or effect of this Agreement, the
right of redemption set forth in Section 23 shall be reinstated and shall not
expire until the Close of Business on the tenth Business Day following the date
of such determination by the Board.
Section 32. Governing Law. This Agreement, each Right and each Rights
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts made
and to be performed entirely within such State.
Section 33. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
Section 34. Descriptive Headings. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
* * * * *
32
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
CELLSTAR CORPORATION
By: _____________________________________
Name: Xxxxxx Xxxx Xxxxxxxxx
Title: Senior Vice President,
Secretary and General Counsel
MELLON INVESTOR SERVICES LLC,
as Rights Agent
By: _____________________________________
Name:________________________________
Title:_______________________________
33
Exhibit 1
CERTIFICATE OF
DESIGNATION, PREFERENCES AND RIGHTS OF
SERIES A PREFERRED STOCK
of
CELLSTAR CORPORATION
Pursuant to Section 151 of the General Corporation Law of the State of
Delaware
We, Xxxx X. Xxxxxxxxx, Chairman of the Board, and Xxxxxx X. Xxxxxxxxx,
Secretary, of CellStar Corporation (the "Corporation"), a corporation organized
and existing under the General Corporation Law of the State of Delaware (the
"GCL"), in accordance with the provisions of Section 103 of the GCL, DO HEREBY
CERTIFY:
That pursuant to the authority conferred upon the Board of Directors (the
"Board") by the Amended and Restated Certificate of Incorporation of the
Corporation, the said Board on December 30, 1996, adopted the following
resolutions creating a series of 45,000 shares of Preferred Stock, par value
$0.01 per share, designated as Series A Preferred Stock:
RESOLVED, that, pursuant to the authority vested in the Board in accordance
with the provisions of its Amended and Restated Certificate of Incorporation,
the Board does hereby create, authorize and provide for the issuance upon the
exercise of the Corporation's Preferred Stock Purchase Rights, of a series of
Preferred Stock of the Corporation, and does hereby fix and state that the
designations, amounts, powers, preferences and relative and other special rights
and the qualifications, limitations or restrictions thereof are as follows:
Series A Preferred Stock
Section 1. Designation and Amount. The shares of such series shall be
designated as Series A Preferred Stock and the number of shares constituting
such series shall be 45,000.
Section 2. Dividends and Distributions.
(A) Subject to the prior and superior rights of the holders of any
shares of any series of Preferred Stock ranking prior and superior to the shares
of Series A Preferred Stock with respect to dividends, the holders of shares of
Series A Preferred Stock shall be entitled to receive, when, as and if declared
by the Board of Directors out of funds legally available for that purpose,
quarterly dividends payable in cash on the 1st day of March, June, September and
December in each year commencing March 1, 1997 (each such date being referred to
herein as a "Quarterly Dividend Payment Date"), commencing on the first
Quarterly Dividend Payment Date after the first issuance of a share or fraction
of a share of Series A Preferred Stock, in an amount per share (rounded to the
nearest cent) equal to the greater of (a) $0.01 or (b) subject to the provision
for adjustment hereinafter set forth, one thousand (1,000) times the aggregate
per share amount of all cash dividends, and one thousand (1,000) times the
aggregate per share amount (payable in kind) of all non-cash dividends or other
distributions other than a dividend payable in shares of the common stock of the
Corporation, par value $0.01 per share ("the Common Stock"), or a subdivision of
the outstanding shares of Common Stock (by reclassification or otherwise),
declared on the Common Stock, since the immediately preceding Quarterly Dividend
Payment Date, or, with respect to the first Quarterly Dividend Payment Date,
since the first issuance of any share or fraction of a share of Series A
Preferred Stock. In the event the
34
Corporation shall at any time after December 30, 1996 (the "Rights Declaration
Date") (i) declare any dividend on Common Stock payable in shares of Common
Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the amount to which holders of shares of Series A Preferred Stock were entitled
immediately prior to such event under clause (b) of the preceding sentence shall
be adjusted by multiplying such amount by a fraction the numerator of which is
the number of shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the
Series A Preferred Stock as provided in paragraph (A) above immediately after it
declares a dividend or distribution on the Common Stock (other than a dividend
payable in shares of Common Stock); provided that, in the event no dividend or
distribution shall have been declared on the Common Stock during the period
between any Quarterly Dividend Payment Date and the next subsequent Quarterly
Dividend Payment Date, a dividend of $0.01 per share on the Series A Preferred
Stock shall nevertheless be payable on such subsequent Quarterly Dividend
Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Series A Preferred Stock, unless
the date of issue of such shares is prior to the record date for the first
Quarterly Dividend Payment Date, in which case dividends on such shares shall
begin to accrue from the date of issue of such shares, or unless the date of
issue is a Quarterly Dividend Payment Date or is a date after the record date
for the determination of holders of shares of Series A Preferred Stock entitled
to receive a quarterly dividend and before such Quarterly Dividend Payment Date,
in either of which events such dividends shall begin to accrue and be cumulative
from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall
not bear interest. Dividends paid on the shares of Series A Preferred Stock in
an amount less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding. The Board of Directors may fix a
record date for the determination of holders of shares of Series A Preferred
Stock entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be no more than thirty (30) days prior to the
date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series A Preferred Stock
shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth,
each share of Series A Preferred Stock shall entitle the holder thereof to one
thousand (1,000) votes on all matters submitted to a vote of the stockholders of
the Corporation. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the number of votes per share to which holders of shares of Series A Preferred
Stock were entitled immediately prior to such event shall be adjusted by
multiplying such number by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) Except as otherwise provided herein or by law, the holders of
shares of Series A Preferred Stock and the holders of shares of Common Stock
shall vote together as one class on all matters submitted to a vote of
stockholders of the Corporation. Except as otherwise provided herein or by law,
the
35
holders of the shares of Series A Preferred Stock shall not be entitled to vote
as a separate class on any matters submitted to a vote of the stockholders.
(C) (i) If at any time dividends on any Series A Preferred Stock
shall be in arrears in an amount equal to six (6) quarterly dividends thereon,
the occurrence of such contingency shall xxxx the beginning of a period (herein
called a "default period") which shall extend until such time when all accrued
and unpaid dividends for all previous quarterly dividend periods and for the
current quarterly dividend period on all shares of Series A Preferred Stock then
outstanding shall have been declared and paid or set apart for payment. During
each default period, all holders of Series A Preferred Stock, voting as a class,
shall have the right to elect two (2) Directors to the Board of Directors of the
Corporation.
(ii) During any default period, such voting right of the
holders of Series A Preferred Stock may be exercised initially at a special
meeting called pursuant to subparagraph (iii) of this Section 3(C) or at any
annual meeting of stockholders of the Corporation, and thereafter at annual
meetings of stockholders of the Corporation, provided that such voting right
shall not be exercised unless the holders of one-third (1/3) in number of shares
of Series A Preferred Stock outstanding shall be present in person or by proxy.
The absence of a quorum of the holders of Common Stock shall not affect the
exercise by the holders of Series A Preferred Stock of such voting right. At any
meeting at which the holders of Series A Preferred Stock shall exercise such
voting right initially during an existing default period, they shall have the
right, voting as a class, to elect Directors to fill such vacancies, if any, in
the Board of Directors as may then exist up to two (2) Directors or, if such
right is exercised at an annual meeting, to elect two (2) Directors. If the
number which may be so elected at any special meeting does not amount to the
required number, the holders of the Series A Preferred Stock shall have the
right to make such increase in the number of Directors constituting the whole
Board of Directors as shall be necessary to permit the election by them of the
required number. After the holders of the Series A Preferred Stock shall have
exercised their right to elect Directors in any default period and during the
continuance of such period, the number of Directors constituting the whole Board
of Directors shall not be increased or decreased except by vote of the holders
of Series A Preferred Stock as herein provided or pursuant to the rights of any
equity securities ranking senior to or pari passu with the Series A Preferred
Stock.
(iii) Unless the holders of Series A Preferred Stock shall,
during an existing default period, have previously exercised their right to
elect Directors, the Board of Directors may order, or any stockholder or
stockholders owning in the aggregate not less than ten percent (10%) of the
total number of shares of Series A Preferred Stock outstanding may request, the
calling of a special meeting of the holders of Series A Preferred Stock, which
meeting shall thereupon be called by the President, a Vice President or the
Secretary of the Corporation. Notice of such meeting and of any annual meeting
at which holders of Series A Preferred Stock are entitled to vote pursuant to
this subparagraph (C)(iii) shall be given to each holder of record of Series A
Preferred Stock by mailing a copy of such notice to him at his last address as
the same appears on the books of the Corporation. Such meeting shall be called
for a time not earlier than twenty (20) days and not later than sixty (60) days
after such order or request or in default of the calling of such meeting within
sixty (60) days after such order or request, such meeting may be called on
similar notice by any stockholder or stockholders owning in the aggregate not
less than ten percent (10%) of the total number of shares of Series A Preferred
Stock outstanding. Notwithstanding the provisions of this subparagraph (C)(iii),
no such special meeting shall be called during the period within sixty (60) days
immediately preceding the date fixed for the next annual meeting of the
stockholders of the Corporation.
(iv) In any default period, the holders of Common Stock, and
other classes of stock of the Corporation if applicable, shall continue to be
entitled to elect the whole number of Directors until the holders of the Series
A Preferred Stock shall have exercised their right to elect two (2) Directors
voting as a class, after the exercise of which right (x) the Directors so
elected by the holders of the Series A Preferred Stock shall continue in office
until their successors shall have been elected by such holders or until the
36
expiration of the default period, and (y) any vacancy in the Board of Directors
may (except as provided in subparagraph (C)(ii) of this Section 3) be filled by
vote of a majority of the remaining Directors theretofore elected by the holders
of the class of stock which elected the Director whose office shall have become
vacant. References in this paragraph (C) to Directors elected by the holders of
a particular class of stock shall include Directors elected by such Directors to
fill vacancies as provided in clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default
period, (x) the right of the holders of the Series A Preferred Stock as a class
to elect Directors shall cease, (y) the term of any Directors elected by the
holders of Series A Preferred Stock as a class shall terminate and (z) the
number of Directors constituting the whole Board of Directors shall be such
number as may be provided for in the Corporation's Amended and Restated
Certificate of Incorporation or bylaws irrespective of any increase made
pursuant to the provisions of subparagraph (C)(ii) of this Section 3 (such
number being subject, however, to change thereafter in any manner provided by
law or in the Corporation's Amended and Restated Certificate of Incorporation or
bylaws). Any vacancies in the Board of Directors effected by the provisions of
clauses (y) and (z) in the preceding sentence may be filled as provided in the
Corporation's Amended and Restated Certificate of Incorporation.
(D) Except as set forth herein, holders of Series A Preferred
Stock shall have no special voting rights and their consent shall not be
required (except to the extent they are entitled to vote with holders of Common
Stock as set forth herein) for taking any corporate action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Preferred Stock as provided in Section 2
are in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series A Preferred Stock
outstanding shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise acquire for consideration
any shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to, the Series A Preferred Stock;
(ii) declare or pay dividends on, or make any other
distributions on, any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series A
Preferred Stock, except dividends paid ratably on the Series A Preferred Stock
and all such parity stock on which dividends are payable or in arrears in
proportion to the total amounts to which the holders of all such shares are then
entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series A Preferred Stock,
provided that the Corporation may at any time redeem, purchase or otherwise
acquire shares of any such parity stock in exchange for shares of any stock of
the Corporation ranking junior (either as to dividends or upon dissolution,
liquidation or winding up) to the Series A Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any
shares of Series A Preferred Stock, or any shares of stock ranking on a parity
with the Series A Preferred Stock, except in accordance with a purchase offer
made in writing or by publication (as determined by the Board of Directors) to
all holders of such shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other relative rights
and preferences of the respective series and classes, shall determine in good
faith will result in fair and equitable treatment among the respective series or
classes.
37
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under paragraph (A) of
this Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
Section 5. Reacquired Shares. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
to be created by resolution or resolutions of the Board of Directors, subject to
the conditions and restrictions on issuance set forth herein.
Section 6. Liquidation, Dissolution or Winding Up.
(A) Upon any liquidation (voluntary or otherwise), dissolution
or winding up of the Corporation, no distribution shall be made to the holders
of shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock unless, prior
thereto, the holders of shares of Series A Preferred Stock shall have received
$250 per share, plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such payment (the
"Series A Liquidation Preference"). Following the payment of the full amount of
the Series A Liquidation Preference, no additional distributions shall be made
to the holders of shares of Series A Preferred Stock unless, prior thereto, the
holders of shares of Common Stock shall have received an amount per share (the
"Common Adjustment") equal to the quotient obtained by dividing (i) the Series A
Liquidation Preference by (ii) one thousand (1,000) (as appropriately adjusted
as set forth in paragraph (C) of this Section to reflect such events as stock
splits, stock dividends and recapitalizations with respect to the Common Stock)
(such number in clause (ii) immediately above being referred to as the
"Adjustment Number"). Following the payment of the full amount of the Series A
Liquidation Preference and the Common Adjustment in respect of all outstanding
shares of Series A Preferred Stock and Common Stock, respectively, holders of
Series A Preferred Stock and holders of shares of Common Stock shall receive
their ratable and proportionate share of the remaining assets to be distributed
in the ratio of the Adjustment Number to one (1) with respect to such Preferred
Stock and Common Stock, on a per share basis, respectively.
(B) In the event, however, that there are not sufficient
assets available to permit payment in full of the Series A Liquidation
Preference and the liquidation preferences of all other series of preferred
stock, if any, which rank on a parity with the Series A Preferred Stock, then
such remaining assets shall be distributed ratably to the holders of such parity
shares in proportion to their respective liquidation preferences. In the event,
however, that there are not sufficient assets available to permit payment in
full of the Common Adjustment, then such remaining assets shall be distributed
ratably to the holders of Common Stock.
(C) In the event the Corporation shall at any time after the
Rights Declaration Date (i) declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii)
combine the outstanding Common Stock into a smaller number of shares, then in
each such case the Adjustment Number in effect immediately prior to such event
shall be adjusted by multiplying such Adjustment Number by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock,
securities, cash or any other property, then in any such case the shares of
Series A Preferred Stock shall at the same time be similarly exchanged or
changed in an amount per share (subject to the
38
provision for adjustment hereinafter set forth) equal to one thousand (1,000)
times the aggregate amount of stock, securities, cash and/or any other property
(payable in kind), as the case may be, into which or for which each share of
Common Stock is changed or exchanged. In the event the Corporation shall at any
time after the Rights Declaration Date (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock,
or (ii) combine the outstanding Common Stock into a smaller number of shares,
then in each such case the amount set forth in the preceding sentence with
respect to the exchange or change of shares of Series A Preferred Stock shall be
adjusted by multiplying such amount by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 8. Redemption. The outstanding shares of Series A Preferred
Stock may be redeemed at the option of the Board of Directors as a whole, but
not in part, at any time, or from to time to time, at a cash price per share
equal to one hundred five percent (105%) of (i) the product of the Adjustment
Number times the Average Market Value (as such term is hereinafter defined) of
the Common Stock, plus (ii) all dividends which on the redemption date have
accrued on the shares to be redeemed and have not been paid, or declared and a
sum sufficient for the payment thereof set apart, without interest. The "Average
Market Value" is the average of the closing sale prices of the Common Stock
during the thirty (30) day period immediately preceding the date before the
redemption date on the Composite Tape for New York Stock Exchange Listed Stocks,
or, if such stock is not quoted on the Composite Tape, on the New York Stock
Exchange, or, if such stock is not listed on such Exchange, on the principal
United States securities exchange registered under the Securities Exchange Act
of 1934, as amended, on which such stock is listed, or, if such stock is not
listed on any such exchange, the average of the closing sale prices with respect
to a share of Common Stock during such thirty (30) day period, as quoted on the
National Association of Securities Dealers, Inc. Automated Quotations System or
any system then in use, or if no such quotations are available, the fair market
value of the Common Stock as determined by the Board of Directors in good faith.
Section 9. Ranking. The Series A Preferred Stock shall rank junior to
all other series of the Corporation's Preferred Stock as to the payment of
dividends and the distribution of assets, unless the terms of any such series
shall provide otherwise.
Section 10. Amendment. The Amended and Restated Certificate of
Incorporation of the Corporation shall not be further amended in any manner
which would materially alter or change the powers, preferences or special rights
of the Series A Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of a majority or more of the outstanding shares
of Series A Preferred Stock, voting separately as a class.
Section 11. Fractional Shares. At the Corporation's sole discretion,
Series A Preferred Stock may be issued in fractions of a share which shall
entitle the holder, in proportion to such holder's fractional shares, to
exercise voting rights, receive dividends, participate in distributions and to
have the benefit of all other rights of holders of Series A Preferred Stock.
* * * * *
39
IN WITNESS WHEREOF, we have executed and subscribed this Certificate
and do affirm the foregoing as true as of December 30, 1996.
______________________________________________
Xxxx X. Xxxxxxxxx, Chairman of the Board and
Chief Executive Officer
Attest:
_________________________________
Xxxxxx X. Xxxxxxxxx, Secretary
40
Exhibit 2
[Form of Rights Certificate]
Certificate No. R____ ______ Rights
NOT EXERCISABLE AFTER THE EARLIER OF JANUARY 9, 2007, OR SUCH DATE AS THE RIGHTS
REPRESENTED HEREBY ARE REDEEMED BY CELLSTAR CORPORATION (THE "CORPORATION"). THE
RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE SUBJECT TO REDEMPTION, AT THE
OPTION OF THE CORPORATION, AT $0.001 PER RIGHT ON THE TERMS SET FORTH IN THE
FIRST AMENDED AND RESTATED RIGHTS AGREEMENT, DATED AS OF _________________-,
2002, BETWEEN THE CORPORATION AND MELLON INVESTOR SERVICES LLC (FORMERLY KNOWN
AS CHASEMELLON SHAREHOLDER SERVICES, L.L.C.), A NEW JERSEY LIMITED LIABILITY
COMPANY, AS RIGHTS AGENT (THE "RIGHTS AGREEMENT"). UNDER CERTAIN CIRCUMSTANCES,
RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON (AS SUCH TERM IS DEFINED IN THE
RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND
VOID. [THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE
BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN
AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE
RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS
REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN
SECTION 7(e) OF SUCH AGREEMENT.]/1/
Rights Certificate
CellStar Corporation
This certifies that __________________________________________________,
or its, his or her 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 First Amended and Restated Rights
Agreement, dated as of February 11, 2002 (the "Rights Agreement"), between
CellStar Corporation, a Delaware corporation (the "Corporation"), and Mellon
Investor Services LLC (formerly known as ChaseMellon Shareholder Services,
L.L.C.), New Jersey limited liability company, as Rights Agent (the "Rights
Agent"), to purchase from the Corporation at any time prior to 5:00 P.M.
(Dallas, Texas time) on January 9, 2007 at the office or offices of the Rights
Agent designated for such purpose, or its successors as Rights Agent, one
one-thousandth (1/1,000) of a fully paid, nonassessable share of Series A
Preferred Stock (the "Preferred Stock") of the Corporation, at a purchase price
of $____ per one one-thousandth (1/1,000) of a share (the "Purchase Price"),
upon presentation and surrender of this Rights Certificate with the Form of
Election to Purchase and related Certificate duly executed. The number of Rights
evidenced by this Rights Certificate (and the number of shares which may be
purchased upon exercise thereof) set forth above, and the Purchase Price set
forth above, are the number and Purchase Price as of _____________, ______,
based on the Preferred Stock as constituted at such date. The Corporation
reserves the right to require prior to the
__________________________
/1/ The portion of the legend in brackets shall be inserted only if applicable
and shall replace the preceding sentence.
41
occurrence of a Triggering Event (as such term is defined in the Rights
Agreement) that upon any exercise of Rights, a number of Rights be exercised so
that only whole shares of Preferred Stock would be issued.
Upon the occurrence of a Flip-in Event (as such term is defined in the
Rights Agreement), if the Rights evidenced by this Rights Certificate are
beneficially owned by (i) an Acquiring Person or an Associate or Affiliate or
any such Person (as such terms are defined in the Rights Agreement), (ii) a
transferee of an Acquiring Person or its Associate or Affiliate who becomes a
transferee after such Acquiring Person or its Associate or Affiliate becomes
such, or (iii) under certain circumstances specified in the Rights Agreement, a
transferee of an Acquiring Person or its Associate or Affiliate who becomes a
transferee prior to or concurrently with the Acquiring Person becoming such,
such Rights shall become null and void and no holder hereof shall have any right
with respect to such Rights from and after the occurrence of such Flip-in Event.
As provided in the Rights Agreement, the Purchase Price and the number
and kind of shares of Preferred Stock or other securities, which may be
purchased upon the exercise of the Rights evidenced by this Rights Certificate
are subject to modification and adjustment upon the happening of certain events,
including Triggering Events (as such term is defined in the Rights Agreement).
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Corporation and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the above-mentioned office of the
Rights Agent and are also available upon written request to the Rights Agent.
This Rights Certificate, with or without other Rights Certificates, upon
surrender at the principal office or offices of the Rights Agent designated for
such purpose, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of one one-thousandths of a share of Preferred
Stock as the Rights evidenced by the Rights Certificate or Rights Certificates
surrendered shall have entitled such holder to purchase. If this Rights
Certificate shall be exercised in part, the holder shall be entitled to receive
upon surrender hereof another Rights Certificate or Rights Certificates for the
number of whole Rights for which this Rights Certificate is not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Certificate (i) may be redeemed by the Corporation at its option at a
redemption price of $0.001 per Right at any time prior to the earlier of (a) the
Stock Acquisition Date (as such term is defined in the Rights Agreement) or (b)
the Final Expiration Date (as such term is defined in the Rights Agreement) and
(ii) may be exchanged in whole or in part for Preferred Stock, shares of the
Corporation's Common Stock, par value $0.01 per share, other property or any
combination thereof.
In addition, the Rights may be exchanged, in whole or in part, for shares
of the Common Stock, or shares of common stock equivalents of the Corporation
having essentially the same value or economic rights as such shares. Immediately
upon the action of the Board of Directors of the Corporation authorizing any
such exchange, and without any further action or any notice, the Rights (other
than Rights which are not subject to such exchange) will terminate and the
Rights will only enable holders to receive the shares issuable upon such
exchange.
No fractional shares of Preferred Stock will be issued upon the exercise
of any Right or Rights evidenced hereby (other than fractions which are integral
multiples of one one-thousandth (1/1,000) of a share
42
of Preferred Stock, which may, at the election of the Corporation, be evidenced
by depositary receipts), but a cash payment will be made in lieu thereof, as
provided in the Rights Agreement.
No holder of this Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of shares of Preferred Stock
or of any other securities of the Corporation which may at any time be issuable
on the exercise hereof, nor shall anything contained in the Rights Agreement or
herein be construed to confer upon the holder hereof, as such, any of the rights
of a stockholder of the Corporation or any right to vote for the election of
directors or upon any matter submitted to stockholders of the Corporation 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 of the
Corporation (except as provided in the Rights Agreement), or to receive
dividends or subscription rights, or otherwise, until the Right or Rights
evidenced by this Rights Certificate shall have been exercised as provided in
the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
* * * * *
43
WITNESS the facsimile signature of the proper officers of the Corporation
and its corporate seal.
Dated as of _________________
ATTEST: CELLSTAR CORPORATION
By: ___________________________________
________________________________
Secretary Title:_____________________________
Countersigned:
RIGHTS AGENT
By:________________________________
Authorized Signature
44
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED,
hereby sells, assigns and transfers unto _______________________________________
________________________________________________________________________________
(Please print name and address of transferee)
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint __________________________
Attorney, to transfer the within Rights Certificate on the books of the
within-named Corporation, with full power of substitution.
Dated: ______________________________ ________________________________________
Signature
Signature Guaranteed:
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Rights Certificate [] is [] is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of an Acquiring Person (as such terms are defined in the
Rights Agreement); and
(2) after due inquiry and to the best knowledge of the undersigned, it
[] did [] did not acquire the Rights evidenced by this Rights Certificate from
any Person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person.
Dated: ________________________________ ________________________________________
Signature
Signature Guaranteed:
45
NOTICE
The signature to the foregoing Assignment and Certificate must correspond
to the name as written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any change whatsoever.
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to
exercise Rights represented by the
Rights Certificate.)
To: CELLSTAR CORPORATION
The undersigned hereby irrevocably elects to exercise _______________
Rights represented by this Rights Certificate to purchase the shares of
Preferred Stock issuable upon the exercise of the Rights (or such other
securities of the Corporation or of any other person which may be issuable upon
the exercise of the Rights) and requests that certificates for such shares be
issued in the name of and delivered to:
Please insert social security or
other identifying number
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
Please insert social security or
other identifying number
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
Dated: _____________________________ ________________________________________
Signature
Signature Guaranteed:
46
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not
being acquired or exercised by or on behalf of a Person who is or was an
Acquiring Person or an Affiliate or Associate of an Acquiring Person (as such
terms are defined in the Rights Agreement); and
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate from
any Person who is, was or became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.
Dated: _____________________________ ________________________________________
Signature
Signature Guaranteed:
NOTICE
The signature to the foregoing Election to Purchase and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
47
Exhibit 3
[Letter to Stockholders]
January 10, 1997
Dear CellStar Stockholder:
On December 30, 1996, your Board of Directors adopted a Stockholder
Rights Plan designed to prevent a potential acquiror from gaining control of the
Company without fairly compensating all of the Company's stockholders.
The Rights will initially trade with shares of the Company's Common
Stock and will have no impact on the way in which the Company's shares are
traded. There are no separate certificates or market for the Rights.
The Rights will not become exercisable and trade separately from the
Common Stock until the earlier of (1) ten business days after a public
announcement that a person has acquired 15% or more of the Common Stock of the
Company or (2) ten business days (or any later date determined by the Company's
Board of Directors) after a person makes a tender or exchange offer for 15% or
more of the Company's Common Stock.
Many other public companies have adopted similar plans, indicating
widespread agreement that such plans can help Directors deflect coercive and
inadequate offers.
A summary of the terms of the Rights is included with this letter.
Sincerely,
Xxxx X. Xxxxxxxxx,
Chairman of the Board and
Chief Executive Officer
48
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED STOCK
On December 30, 1996, the Board of Directors of CellStar Corporation
(the "Company") declared a dividend distribution of one Right for each
outstanding share of the Company's common stock, $0.01 par value (the "Common
Stock"), to stockholders of record at the close of business on January 9, 1997.
Each Right entitles the registered holder to purchase from the Company one
one-thousandth (1/1,000) of a share of Series A Preferred Stock, par value
$10.00 per share (the "Preferred Stock"), at a Purchase Price of $80.00 per one
one-thousandth (1/1,000) of a share, subject to adjustment. The description and
terms of the Rights are set forth in a Rights Agreement (the "Rights Agreement")
between the Company and ChaseMellon Shareholder Services, L.L.C., as Rights
Agent (the "Rights Agent").
Initially, the Rights will be attached to all Common Stock certificates
representing shares then outstanding, and no separate Rights Certificates will
be distributed. The Rights will separate from the Common Stock upon the earlier
of (i) ten (10) business days following a public announcement that a person
(other than Xxxx X. Xxxxxxxxx, the Company's founder, Chairman of the Board and
Chief Executive Officer) or group of affiliated or associated persons (an
"Acquiring Person") has acquired, or obtained the right to acquire, beneficial
ownership of fifteen percent (15%) or more of the outstanding shares of Common
Stock (the "Stock Acquisition Date"), or (ii) ten (10) business days (or such
later date as the Board of Directors shall determine) following the commencement
of a tender or exchange offer that would result in a person or group
beneficially owning fifteen percent (15%) or more of such outstanding shares of
Common Stock. The date the Rights separate is referred to as the "Distribution
Date."
Until the Distribution Date, (i) the Rights will be evidenced by the
Common Stock certificates and will be transferred with and only with such Common
Stock certificates, (ii) new Common Stock certificates issued after December 30,
1996 will contain a notation incorporating the Rights Agreement by reference,
and (iii) the surrender for transfer of any certificates for Common Stock
outstanding will also constitute the transfer of the Rights associated with the
Common Stock represented by such certificates. Pursuant to the Rights Agreement,
the Company reserves the right to require prior to the occurrence of a
Triggering Event (as defined below) that, upon any exercise of Rights, a number
of Rights be exercised so that only whole shares of Preferred Stock will be
issued.
The Rights are not exercisable until the Distribution Date and will
expire at the close of business on January 9, 2007, unless earlier redeemed by
the Company as described below.
As soon as practicable after the Distribution Date, Rights Certificates
will be mailed to holders of record of the Common Stock as of the close of
business on the Distribution Date and, thereafter, the separate Rights
Certificates will represent the Rights. Except in connection with shares of
Common Stock issued or sold pursuant to the exercise of stock options under any
employee plan or arrangements, or upon the exercise, conversion or exchange of
securities hereafter issued by the Company, or as otherwise determined by the
Board of Directors, only shares of Common Stock issued prior to the Distribution
Date will be issued with Rights.
In the event that (i) the Company is the surviving corporation in a
merger or other business combination with an Acquiring Person (or any associate
or affiliate thereof) and its Common Stock remains outstanding and unchanged,
(ii) any person shall acquire beneficial ownership of more than fifteen percent
(15%) of the outstanding shares of Common Stock (except pursuant to (A) certain
consolidations or mergers involving the Company or sales or transfers of the
combined assets, cash flow or earning power of the Company and its subsidiaries
or (B) an offer for all outstanding shares of Common Stock at a price and upon
terms and conditions which a majority of the Disinterested Directors (as defined
below) determines to be in the best interests of the Company and its
stockholders), or (iii) there occurs a reclassification of securities, a
49
recapitalization of the Company or any of certain business combinations or other
transactions (other than certain consolidations and mergers involving the
Company and sales or transfers of the combined assets, cash flow or earning
power of the Company and its subsidiaries) involving the Company or any of its
subsidiaries which has the effect of increasing by more than one percent (1%)
the proportionate share of any class of the outstanding equity securities of the
Company or any of its subsidiaries beneficially owned by an Acquiring Person (or
any associate or affiliate thereof), each holder of a Right (other than the
Acquiring Person and certain related parties) will thereafter have the right to
receive, upon exercise, Common Stock (or, in certain circumstances, cash,
property or other securities of the Company) having a value equal to two times
the Purchase Price of the Right. However, Rights are not exercisable following
the occurrence of either of the events described above until such time as the
Rights are no longer redeemable by the Company as described below.
Notwithstanding any of the foregoing, following the occurrence of any of the
events described in this paragraph, all Rights that are, or (under certain
circumstances specified in the Rights Agreement) were, beneficially owned by any
Acquiring Person will be null and void.
For example, at a Purchase Price of $80 per Right, each Right not owned
by an Acquiring Person (or by certain related parties or transferees) following
an event set forth in the preceding paragraph would entitled its holder to
purchase $160 worth of Common Stock (or other consideration, as noted above) for
$80. Assuming that the Common Stock had a per share market price of $40 at such
time, the holder of each valid Right would be entitled to purchase four shares
of Common Stock for $80.
In the event that, at any time following the Stock Acquisition Date,
(i) the Company shall enter into a merger or other business combination
transaction in which the Company is not the surviving corporation, (ii) the
Company is the surviving corporation in a consolidation, merger or similar
transaction pursuant to which all or part of the outstanding shares of Common
Stock are changed into or exchanged for stock or other securities of any other
person or cash or any other property or (iii) more than 50% of the combined
assets, cash flow or earning power of the Company and its subsidiaries is sold
or transferred (in each case other than certain consolidations with, mergers
with and into, or sales of assets, cash flow or earning power by or to
subsidiaries of the Company as specified in the Rights Agreement), each holder
of a Right (except Rights which previously have been voided as set forth above)
shall thereafter have the right to receive, upon exercise, common stock of the
acquiring company having a value equal to two times the Purchase Price of the
Right. The events described in this paragraph and in the second preceding
paragraph are referred to as the "Triggering Events."
The Purchase Price payable, the number and kind of shares covered by
each Right and the number of Rights outstanding are 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 Stock, (ii) if
holders of the Preferred Stock are granted certain rights, options or warrants
to subscribe for Preferred Stock or securities convertible into Preferred Stock
at less than the current market price of the Preferred Stock, or (iii) upon the
distribution to holders of the Preferred Stock of evidences of indebtedness,
cash (excluding regular quarterly cash dividends), assets (other than dividends
payable in Preferred Stock) or subscription rights or warrants (other than those
referred to in (ii) immediately above).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least one percent (1%) of the
Purchase Price. No fractional shares of Preferred Stock are required to be
issued (other than fractions which are integral multiples of one one-thousandth
(1/1,000) of a share of Preferred Stock) and, in lieu thereof, the Company may
make an adjustment in cash based on the market price of the Preferred Stock on
the trading date immediately prior to the date of exercise.
At any time after any person or group becomes an Acquiring Person and
prior to the acquisition by such person or group of fifty percent (50%) or more
of the outstanding shares of Common Stock, the Board of
Directors of the Company may, without payment of the Purchase Price by the
holder, exchange the Rights
50
(other than Rights owned by such person or group, which will become null and
void), in whole or in part, for shares of Common Stock at an exchange ratio of
one-half (1/2) the number of shares of Common Stock (or in certain circumstances
Preferred Stock) for which a Right is exercisable immediately prior to the time
of the Company's decision to exchange the Rights (subject to adjustment).
At any time until ten (10) business days following the Stock
Acquisition Date, the Company may redeem the Rights in whole, but not in part,
at a price of $0.001 per Right (payable in cash, shares of Common Stock or other
consideration deemed appropriate by the Board of Directors). Immediately upon
the action of the Board of Directors ordering redemption of the Rights, the
Rights will terminate and the only right of the holders of Rights will be to
receive the $0.001 redemption price.
The term "Disinterested Director" means any member of the Board of
Directors of the Company who was a member of the Board prior to the date of the
Rights Agreement, and any person who is subsequently elected to the Board if
such person is recommended or approved by a majority of the Disinterested
Directors, but shall not include an Acquiring Person, or an affiliate or
associate of an Acquiring Person, or any representative of the foregoing
entities.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends. While the distribution of the Rights will not
be taxable to stockholders or to the Company, stockholders may, depending upon
the circumstances, recognize taxable income in the event that the Rights become
exercisable for Common Stock (or other consideration) of the Company or for
common stock of an acquiring company as set forth above or in the event that the
Rights are redeemed.
Other than those provisions relating to the principal economic terms of
the Rights, any of the provisions of the Rights Agreement may be amended by the
Board of Directors of the Company prior to the Distribution Date; provided, that
any amendments after the Stock Acquisition Date must be approved by a majority
of the Disinterested Directors. After the Distribution Date, the provisions of
the Rights Agreement may be amended by the Board in order to cure any ambiguity,
inconsistency or defect, to make changes which do not adversely affect the
interest of holders of Rights (excluding the interest of any Acquiring Person)
or to shorten or lengthen any time period under the Rights Agreement; provided,
however, that no amendment to adjust the time period governing redemption shall
be made at such time as the Rights are not redeemable; and, provided, that any
amendments after the Stock Acquisition Date must be approved by a majority of
the Disinterested Directors.
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 filed on January 3, 1997. A copy of the Rights Agreement is available
free of charge from the Rights Agent. This summary description of the Rights
does not purport to be complete and is qualified in its entirety by reference to
the Rights Agreement, which is incorporated herein by reference.
51
Exhibit 4
[Press Release]
FOR IMMEDIATE RELEASE Media Contact:
December 30, 1996 Xxxxx Xxxxxxxx: (000) 000-0000
Investor Contact:
Xxxxxxx Xxxxx: (000) 000-0000
CELLSTAR ADOPTS STOCKHOLDER RIGHTS PLAN
CARROLLTON, Texas, December 30, 1996 CellStar Corporation [Nasdaq: CLST] (the
"Company") today announced that its Board of Directors has adopted a Stockholder
Rights Plan (the "Plan").
The Plan is designed to protect the Company from unfair or coercive takeover
attempts and to prevent a potential acquirer from gaining control of the Company
without fairly compensating all of the Company's stockholders.
The Plan creates a dividend of one right for each outstanding share of the
Company's Common Stock. The rights are represented by and traded with the
Company's Common Stock. There are no separate certificates or market for the
rights.
The rights do not become exercisable or trade separately from the Common Stock
unless one or both of the following conditions are met: a public announcement
that a person has acquired 15% or more of the Common Stock of the Company, or a
tender or exchange offer is made for 15% or more of the Common Stock of the
Company.
Should either of the aforementioned conditions be met and the rights become
exercisable, each right will entitle the holder thereof to buy 1/1,000th of a
share of the Company's Series A Preferred Stock at an exercise price of $80.00.
Each share of the Series A Preferred Stock will essentially be the economic
equivalent of one share of Common Stock.
52
Under certain circumstances the rights entitle the holders to buy the Company's
stock at a 50% discount. In the event that (1) the Company is the surviving
corporation in a merger or other business combination with an entity that owns
15% or more of the Company's outstanding stock; (2) any person shall acquire
beneficial ownership of 15% of the Company's outstanding stock; or (3) there is
any type of recapitalization of the Company that results in an increase by more
than 1% the proportionate share of equity securities of the Company owned by a
person who owns 15% or more of the Company's outstanding stock, each right
holder will have the option to buy for the purchase price Common Stock of the
Company having a value equal to two times the purchase price of the right.
Under certain circumstances the rights entitle the holders to buy shares of the
acquirer's Common Stock at a 50% discount. In the event that, at any time after
a person has acquired 15% or more of the Company's Common Stock, (1) the Company
enters into a merger or other business combination transaction in which the
Company is not the surviving corporation; (2) the Company is the surviving
corporation in a transaction in which all or part of the Common Stock is
exchanged for cash, property or securities of any other person; or (3) more than
50% of the assets, cash flow or earning power of the Company is sold, each right
holder will have the option to buy for the purchase price stock of the acquiring
company having a value equal to two times the purchase price of the right. The
rights may be redeemed by the Company for $0.001 per right at any time until 10
business days following the first public announcement of the acquisition of
beneficial ownership of 15% of the Company's Common Stock.
The distribution of the rights will be made to stockholders of record as of
January 9, 1997. A copy of the Stockholder Rights Plan containing all the
provisions of the new rights will be filed with the Securities and Exchange
Commission by January 3, 1997. The Company's Plan is similar to those adopted by
many other companies.
53
CellStar Corporation is an integrated wholesale distributor and retailer of
cellular telephones and related products, with operations in the United States,
the United Kingdom, Mexico, South America, Hong Kong, China, Singapore,
Malaysia, Taiwan and the Philippines. The Company wholesales a diverse line of
cellular products to cellular carriers, distributors, agents, mass merchandisers
and automotive dealers and retails such products to end users through
approximately 15 stand-alone retail sales locations and 21 Communications
Centers located in Sam's Clubs. The Company is the largest independent
non-carrier distributor of Motorola, Nokia, NEC and Ericsson cellular telephones
and accessories throughout the world.
###
54
