EXHIBIT 4.1
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RIGHTS AGREEMENT
RIGHTS AGREEMENT dated as of December 23, 1998 (the "Agreement"), between
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PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED, a Delaware corporation (the
"Company") and STOCKTRANS, INC. (the "Rights Agent").
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WHEREAS, effective December 16, 1998 (the "Rights Dividend Declaration
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Date"), the Board of Directors of the Company authorized and declared a
distribution of one right for each share of common stock, par value $.01 per
share, of the Company (the "Company Common Stock") outstanding at the Close of
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Business (as hereinafter defined) on December 31, 1998 (the "Record Date"), and
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has authorized the issuance of one right (as such number may hereinafter be
adjusted pursuant hereto) for each share of Company Common Stock issued between
the Record Date (whether originally issued or delivered from the Company's
treasury) and, except as otherwise provided in Section 22, the Distribution Date
(as hereinafter defined), each right issued in respect of a share of Company
Common Stock ("Right") initially representing the right to purchase, upon the
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terms and subject to the conditions hereinafter set forth, one Unit of Series B
Junior Participating Preferred Stock;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
SECTION 1. Certain Definitions. For purposes of this Agreement, the
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following terms have the meanings indicated:
(a) "Acquiring Person" means any Person (other than the Company, any
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Subsidiary of the Company, any employee benefit plan maintained by the Company
or any of its Subsidiaries or any trustee or fiduciary with respect to such plan
acting in such capacity) that shall be the Beneficial Owner of 20% or more of
the shares of Common Stock then outstanding; provided, however, that the term
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"Acquiring Person" shall not include an Exempt Person. Notwithstanding the
foregoing, if a majority of the Board of Directors determines in good faith that
a Person who would otherwise be an Acquiring Person has become such
inadvertently (including, without limitation, because (A) such person was
unaware that he or its is the Beneficial Owner of a percentage of Common Stock
that would otherwise cause such Person to be an Acquiring Person, or (B) such
Person was aware of the percentage of securities of which he or it was the
Beneficial Owner but had no actual knowledge of the consequences of being the
Beneficial Owner of such percentage under this Agreement) and without any
intention of changing or influencing control of the Company, and if such Person,
as promptly as practicable after being advised of such determination, divests
himself or itself of a sufficient number of shares of Common Stock so that such
Person would no longer be the Beneficial Owner of that percentage of securities
which would otherwise result in him or it being an Acquiring Person, then such
Person shall not be deemed to be or to have become an Acquiring Person for any
purposes of this Agreement.
(b) "Affiliate" and "Associate" have the respective meanings ascribed
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to such terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as in effect
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on the date hereof.
(c) A Person shall be deemed the "Beneficial Owner" of, and shall be
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deemed to "beneficially own," any securities:
(i) of which such Person or any of such Person's Affiliates
or Associates is considered to be a "beneficial owner" under Rule 13d-3 of the
General Rules and Regulations under the Exchange Act (the "Exchange Act
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Regulations") as in effect on the date hereof; provided, however, that a Person
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shall not be deemed the "Beneficial Owner" of, or to "beneficially own", any
securities under this
subparagraph (i) as a result of an agreement, arrangement or understanding to
vote such securities if such agreement, arrangement or understanding (A) arises
solely from a revocable proxy given in response to a proxy or consent
solicitation made pursuant to, and in accordance with, the applicable provisions
of the Exchange Act and the Exchange Act Regulations, and (B) is not reportable
by such Person on Schedule 13D under the Exchange Act (or any comparable or
successor report);
(ii) which are beneficially owned, directly or indirectly,
by any other Person (or any Affiliate or Associate of such other Person) 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 (i) of this paragraph (c) of Section 1)
or disposing of such securities; or
(iii) 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 or upon the
satisfaction of conditions) 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,
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however, that under this paragraph (c) a Person shall not be deemed the
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"Beneficial Owner" of, or to "beneficially own", (A) securities tendered
pursuant to a tender or exchange offer made in accordance with Exchange Act
Regulations by such Person or any of such Person's Affiliates or Associates
until such tendered securities are accepted for purchase or exchange, (B)
securities that may be issued upon exercise of Rights at any time prior to the
occurrence of a Triggering Event, or (C) securities that may be issued 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(c) or Section
22 (the "Original Rights") or pursuant to Section 11(i) in connection with an
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adjustment made with respect to any Original Rights.
Notwithstanding the foregoing, an employee, officer or director of the Company
shall not be deemed the "Beneficial Owner" of, or to "beneficially own," any
securities which such Person has the right to acquire from the Company (whether
such right is exercisable immediately or only after the passage of time or upon
the satisfaction of conditions) pursuant to any stock option plan or other
employee benefit plan (the "Underlying Securities"; the right to acquire the
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Underlying Securities shall hereinafter be referred to as a "Company Option");
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provided that such Person has no intention of changing or influencing control of
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the Company at the time of the acquisition of the Company Option or at any time
during which such Person has the right to exercise the Company Option; provided,
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further, that if, notwithstanding the foregoing proviso, a Person would be
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deemed to be an "Acquiring Person" and such Person thereafter becomes the
beneficial owner of one or more additional shares of Company Common Stock other
than pursuant to the exercise of a Company Option, such Person will immediately
and thereafter be deemed the "Beneficial Owner" of, and to "beneficially own,"
the Underlying Securities under all Company Options owned by such Person. An
employee, officer, or director of the Company exercising a Company Option shall
not be deemed the "Beneficial Owner" of, or to "beneficially own," the
Underlying Securities; provided that such Person has no intention of changing or
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influencing control of the Company at the time of the acquisition of the
Underlying Securities; provided, further, that if, notwithstanding the foregoing
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proviso, a Person would be deemed to be an "Acquiring Person" and such Person
thereafter becomes the beneficial owner of one or more additional shares of
Company Common Stock other than pursuant to the exercise of a Company Option,
such Person will immediately and thereafter be deemed the "Beneficial Owner" of,
and to "beneficially own," the Underlying Securities. Any Person other than an
employee, officer or director of the Company (including a former employee,
officer or director of the Company) exercising a Company Option will not be
deemed the "Beneficial Owner" of, or to "beneficially own," the Underlying
Securities; provided that such Person has no intention of changing or
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influencing control of the Company at the time of the acquisition of the
Underlying Securities; and provided, further, that such Person acquires such
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Underlying Securities with the intention of effecting their resale (within five
(5) days of so acquiring them) to a Person other than an Affiliate or an
Associate of such Person or to
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another Person which would be an Acquiring Person (or an Affiliate or an
Associate thereof), and such Person actually disposes of such Underlying
Securities within such five-day period.
(d) "Business Day" means any day other than a Saturday, Sunday or a
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day on which banking institutions in New York City are authorized or obligated
by law or executive order to be closed.
(e) "Close of Business" on any given date means 5:00 P.M., New York
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City time, on such date; provided, however, that if such date is not a Business
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Day it shall mean 5:00 P.M., New York City time, on the next succeeding Business
Day.
(f) "Common Stock" of any Person other than the Company means the
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capital stock of such Person with the greatest voting power, or, if such Person
shall have no capital stock, the equity securities or other equity interest
having power to control or direct the management of such Person.
(g) "Company Common Stock" has the meaning set forth in the Recital.
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(h) "Distribution Date" has the meaning set forth in Section 3(a).
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(i) "Exempt Person" means:
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(i) the Company, any Subsidiary of the Company, any employee
benefit plan or employee stock plan of the Company or of any Subsidiary of the
Company, or any person or entity organized, appointed, established or holding
Company Common Stock for or pursuant to the terms of any such plan; and
(iii) any Person solely by virtue of a reduction in the number
of outstanding shares of Company Common Stock; provided, however, that such
Person shall not be an Exempt Person if, subsequent to such reduction, such
Person shall become the Beneficial Owner of any additional shares of Company
Common Stock.
(j) "Expiration Date" has the meaning set forth in Section 7(a).
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(k) "Person" means any individual, partnership, firm, corporation,
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association, trust, unincorporated organization or other entity, as well as any
syndicate or group deemed to be a person under Section 14(d)(2) of the Exchange
Act.
(l) "Preferred Stock" the Series B Junior Participating Preferred
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Stock, par value $.01 per share, of the Company having the voting powers,
designation, preferences and relative, participating, optional or other special
rights and qualifications, limitations and restrictions described in the
Certificate of Designation set forth as Exhibit B.
(m) "Purchase Price" has the meaning set forth in Section 7(b).
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(n) "Record Date" has the meaning set forth in the Recital.
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(o) "Right" has the meaning set forth in the Recital.
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(p) "Rights Certificate" has the meaning set forth in Section 3(a).
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(q) "Rights Dividend Declaration Date" has the meaning set forth in
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the Recital.
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(r) "Section 11(a)(ii) Event" means any event described in Section
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11(a)(ii)(A), (B) or (C).
(s) "Section 13 Event" means any event described in clause (x), (y) or
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(z) of Section 13(a).
(t) "Stock Acquisition Date" means the first date of public
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announcement (including, without limitation, the filing of any report pursuant
to Section 13(d) of the Exchange Act) by the Company or an Acquiring Person that
an Acquiring Person has become such.
(u) "Subsidiary" means, with reference to any Person, any other Person
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of which an amount of voting securities or equity interests sufficient to elect
at least a majority of the directors or equivalent governing body of such other
Person is beneficially owned, directly or indirectly, by such Person, or
otherwise controlled by such first-mentioned Person.
(v) "Summary of Rights" has the meaning set forth in Section 3(b).
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(w) "Triggering Event" means any Section 11(a)(ii) Event or any
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Section 13 Event.
(x) "Unit" has the meaning set forth in Section 7(b).
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SECTION 2. Appointment of Rights Agent. The Company hereby appoints the
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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. With
the consent of the Rights Agent, the Company may from time to time appoint such
Co-Rights Agents as it may deem necessary or desirable.
SECTION 3. Issue of Rights Certificates.
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(a) Until (i) the earlier of the Close of Business on the tenth
Business Day after the Stock Acquisition Date, and the Close of Business on the
tenth Business Day 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 maintained by the Company or any of its Subsidiaries or any trustee or
fiduciary with respect to such plan acting in such capacity) is first published
or sent or given within the meaning of Rule 14d-4(a) of the Exchange Act
Regulations or any successor rule, if upon consummation thereof such Person
would be the Beneficial Owner of 20% or more of the shares of Company Common
Stock then outstanding, or (ii) such later date as may be determined by action
of a majority of the Board of Directors (such determination to be made prior to
either of the dates specified in (i) above) and of which the Company will give
the Rights Agent prompt written notice (such date above being the "Distribution
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Date"), (x) the Rights will be evidenced (subject to the provisions of paragraph
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(b) of this Section 3) by the certificates for shares of Company Common Stock
registered in the names of the holders of shares of Company Common Stock as of
and subsequent to the Record Date (which certificates for shares of Company
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 Company Common Stock
(including a transfer to the Company). As soon as practicable after the
Distribution Date, the Rights Agent will send by first-class, insured, postage
prepaid mail, to each record holder of shares of Company Common Stock as of the
Close of Business on the Distribution Date, at the address of such holder shown
on the records of the Company, one or more rights certificates, in substantially
the form of Exhibit A (the "Rights Certificates"), evidencing one Right for each
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share of Company Common Stock so held, subject to adjustment as provided herein.
In the event that an adjustment in the number of Rights per share of Company
Common Stock has been made pursuant to Section 11(p), at the time of
distribution of the Rights Certificates, the Company may make the necessary and
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appropriate rounding adjustments (in accordance with Section 14(a) hereof) so
that Rights Certificates representing only whole numbers of Rights are
distributed and cash is paid in lieu of any fractional Rights. As of and after
the Distribution Date, the Rights will be evidenced solely by such Rights
Certificates.
(b) As promptly as practicable following the Record Date, the Company
will send a copy of a Summary of Rights to Purchase Preferred Stock, in a form
which may be appended to certificates that evidence shares of Company Common
Stock, in substantially the form attached hereto as Exhibit C (the "Summary of
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Rights"), by first-class, postage prepaid mail, to each record holder of shares
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of Company Common Stock as of the Close of Business on the Record Date, at the
address of such holder shown on the records of the Company.
(c) Rights shall, without any further action, be issued in respect of
all shares of Company Common Stock that are issued (including any shares of
Company Common Stock held in treasury) after the Record Date (but prior to the
earlier of the Distribution Date and the Expiration Date), and certificates
evidencing such shares of Company Common Stock issued after the Record Date
shall bear the following legend:
"This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in the Rights Agreement between Primus
Telecommunications Group, Incorporated (the "Company") and StockTrans,
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Inc. (the "Rights Agent") dated as of December 23, 1998, and as
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amended thereafter (the "Rights Agreement), the terms of which are
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hereby incorporated herein by reference and a copy of which is on file
at the principal office of the stock transfer administration office of
the Rights Agent. Under certain circumstances, as set forth in the
Rights Agreement, such Rights will be evidenced by separate
certificates and will no longer be evidenced by this certificate. The
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 certificates evidencing shares of Company Common Stock (whether
or not such certificates include the foregoing legend or have appended to them
the Summary of Rights), until the earlier of the Distribution Date and the
Expiration Date, the Rights associated with the shares of Company Common Stock
evidenced by such certificates shall be evidenced by such certificates alone and
registered holders of the shares of Company Common Stock shall also be the
registered holders of the associated Rights, and the transfer of any of such
certificates shall also constitute the transfer of the Rights associated with
the shares of Company Common Stock evidenced by such certificates.
SECTION 4. Form of Rights Certificates.
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(a) The Rights Certificates (and the forms of election to purchase,
assignment and certificate to be printed on the reverse thereof) shall each be
substantially in the form set forth in Exhibit A hereto and may have such marks
of identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
applicable law or any rule or regulation thereunder or with any rule or
regulation of any stock exchange on which the Rights may from time to time be
listed or to conform to usage. Subject to the provisions of Section 11 and
Section 22, the Rights Certificates, whenever distributed, shall be dated as of
the Record Date and on their face shall entitle the
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holders thereof to purchase such number of Units of Preferred Stock as shall be
set forth therein at the price set forth therein, but the amount and type of
securities, cash or other assets that may be acquired upon the exercise of each
Right and the Purchase Price thereof shall be subject to adjustment as provided
herein.
(b) Any Rights Certificate issued pursuant hereto 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) that becomes a transferee after the
Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person (or
of any such Associate or Affiliate) that becomes a transferee prior to or
concurrently with the Acquiring Person becoming such and that receives such
Rights pursuant to either (A) a transfer (whether or not for consideration) from
the Acquiring Person (or any such Associate or Affiliate) to holders of equity
interests in such Acquiring Person (or such Associate or Affiliate) or to any
Person with whom such Acquiring Person (or such Associate or Affiliate) has any
continuing agreement, arrangement or understanding regarding either the
transferred Rights, shares of Company Common Stock or the Company or (B) a
transfer that a majority of the Board of Directors has determined to be part of
a plan, arrangement or understanding that has as a primary purpose or effect the
avoidance of Section 7(e) shall, upon the written direction of a majority of the
Board of Directors, contain (to the extent feasible) the following legend:
"The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became an Acquiring Person
or an Affiliate or Associate of an Acquiring Person (as such terms are
defined in the Rights Agreement). Accordingly, this Rights
Certificate and the Rights represented hereby may become null and void
in the circumstances specified in Section 7(e) of such Agreement."
SECTION 5. Countersignature and Registration.
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(a) Rights Certificates shall be executed on behalf of the Company by
its Chairman of the Board, the President or one of its Vice Presidents, under
its corporate seal reproduced thereon attested by its Secretary or one of its
Assistant Secretaries. The signature of any of these officers on the Rights
Certificates may be manual or facsimile. Rights Certificates bearing the manual
or facsimile signatures of the individuals who were at any time the proper
officers of the Company shall bind the Company, notwithstanding that such
individuals or any of them have ceased to hold such offices prior to the
countersignature of such Rights Certificates or did not hold such offices at the
date of such Rights Certificates. No Rights Certificate shall be entitled to
any benefit under this Agreement or be valid for any purpose unless there
appears on such Rights Certificate a countersignature duly executed by the
Rights Agent by manual signature of an authorized signatory, and such
countersignature upon any Rights Certificate shall be conclusive evidence, and
the only evidence, that such Rights Certificate has been duly countersigned as
required hereunder.
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its office designated for surrender of Rights Certificates
upon exercise or transfer, books for registration and registration of transfer
of the Rights Certificates issued hereunder. Such books shall show the name and
address of each holder of the Rights Certificates, the number of Rights
evidenced on its face by each Rights Certificate and the date of each Rights
Certificate.
SECTION 6. Transfer, Split Up, Combination and Exchange of Rights
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Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.
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(a) Subject to the provisions of Sections 4(b), 7(e) and 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 Units of Preferred Stock
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(or, following a Triggering Event, other securities, cash or other assets, as
the case may be) as the Rights Certificate or Certificates surrendered then
entitled such holder 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 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 executed the
certificate set forth 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) of the Rights
represented by such Rights Certificate or Affiliates or Associates thereof as
the Company shall reasonably request; whereupon the Rights Agent shall, subject
to the provisions of 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.
(b) If a Rights Certificate shall be mutilated, lost, stolen or
destroyed, upon request by the registered holder of the Rights represented
thereby and upon payment to the Company and the Rights Agent of all reasonable
expenses incident thereto, there shall be issued, in exchange for and upon
cancellation of the mutilated Rights Certificate, or in substitution for the
lost, stolen or destroyed Rights Certificate, a new Rights Certificate, in
substantially the form of the prior Rights Certificate, of like tenor and
evidencing the equivalent number of Rights, but, in the case of loss, theft or
destruction, only upon receipt of evidence satisfactory to the Company and the
Rights Agent of such loss, theft or destruction of such Rights Certificate and,
if requested by the Company or the Rights Agent, indemnity also satisfactory to
it.
SECTION 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.
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(a) Prior to the earlier of (i) the Close of Business on the tenth
anniversary hereof (the "Final Expiration Date"), and (ii) the time at which the
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Rights are redeemed as provided in Section 23 (the earlier of (i) and (ii) being
the "Expiration Date"), the registered holder of any Rights Certificate may,
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subject to the provisions of Sections 7(e) and 9(c), exercise the Rights
evidenced thereby 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 of the Rights Agent designated for such purpose, together
with payment of the aggregate Purchase Price (as hereinafter defined) for the
number of Units of Preferred Stock (or, following a Triggering Event, other
securities, cash or other assets, as the case may be) for which such surrendered
Rights are then exercisable.
(b) The purchase price for each one one-thousandth of a share (each
such one one-thousandth of a share being a "Unit") of Preferred Stock upon
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exercise of Rights shall be $90.00, subject to adjustment from time to time as
provided in Sections 11 and 13(a) (such purchase price, as so adjusted, being
the "Purchase Price"), and shall be payable in accordance with paragraph (c)
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below.
(c) As promptly as practicable following the occurrence of the
Distribution Date, the Company shall deposit with a corporation in good standing
organized under the laws of the United States or any State of the United States,
which is authorized under such laws to exercise corporate trust or stock
transfer powers and is subject to supervision or examination by federal or state
authority (such institution being the "Depositary Agent") certificates
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evidencing the shares of Preferred Stock that may be acquired upon exercise of
the Rights and shall cause such Depositary Agent to enter into an agreement
pursuant to which the Depositary Agent shall issue receipts evidencing interests
in the shares of Preferred Stock so deposited. Upon receipt of a Rights
Certificate evidencing exercisable Rights, with the form of election to purchase
and the certificate duly executed, accompanied by payment, with respect to each
Right so exercised, of the Purchase
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Price for the Units of Preferred Stock (or, following a Triggering Event, other
securities, cash or other assets, as the case may be) to be purchased thereby as
set forth below and an amount equal to any applicable transfer tax or evidence
satisfactory to the Company of payment of such tax, the Rights Agent shall,
subject to Section 20(k), thereupon promptly (i) requisition from the Depositary
Agent depositary receipts evidencing such number of Units of Preferred Stock as
are to be purchased 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 of such depositary receipts, cause the same to be delivered to or
upon the order of the registered holder of such Rights Certificate, registered
in such name or names as may be designated by such holder, and (iv) after
receipt thereof, deliver such cash, if any, to or upon the order of the
registered holder of such Rights Certificate. In the event that the Company is
obligated to issue Company Common Stock, other securities 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 Company Common Stock, other
securities, cash and/or other property are available for distribution by the
Rights Agent, if and when appropriate. The payment of the Purchase Price (as
such amount may be reduced pursuant to Section 11(a)(iii) hereof) may be made in
cash or by certified or bank check or money order payable to the order of the
Company.
(d) In case the registered holder of any Rights Certificate shall
exercise less than all the Rights evidenced thereby, a new Rights Certificate
evidencing the Rights remaining unexercised shall be issued by the Rights Agent
and delivered to, or upon the order of, the registered holder of such Rights
Certificate, registered in such name or names as may be designated by such
holder, subject to the provisions of Section 14.
(e) Notwithstanding anything in this Agreement to the contrary, from
and after the first occurrence of any Section 11(a)(ii) Event, any Rights
beneficially owned by (i) an Acquiring Person or any Associate or Affiliate of
an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) that becomes a transferee after the Acquiring Person
becomes such, or (iii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) that becomes a transferee prior to or concurrently with
the Acquiring Person becoming such and that receives such Rights pursuant to
either (A) a transfer (whether or not for consideration) from the Acquiring
Person (or any such Associate or Affiliate) to holders of equity interests in
such Acquiring Person (or any such Associate or Affiliate) or to any Person with
whom the Acquiring Person (or such Associate or Affiliate) has any continuing
agreement, arrangement or understanding regarding the transferred Rights, shares
of Company Common Stock or the Company or (B) a transfer that a majority of the
Board of Directors has determined to be part of a plan, arrangement or
understanding that has as a primary purpose or effect the avoidance of this
Section 7(e), shall be null and void without any further action, and no holder
of such Rights shall have any rights whatsoever with respect to such Rights,
whether under any provision of this Agreement or otherwise. The Company shall
use all reasonable efforts to ensure that the provisions of this Section 7(e)
and Section 4(b) are complied with, but shall have no liability to any holder of
Rights or any other Person as a result of its failure to make any determination
under this Section 7(e) or such Section 4(b) with respect to an Acquiring Person
or its Affiliates, Associates or transferees.
(f) Notwithstanding anything in this Agreement or any Rights
Certificate 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 by such registered holder unless such
registered holder shall have (i) completed and executed the certificate
following 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) of the Rights evidenced by such Rights Certificate or
Affiliates or Associates thereof as the Company shall reasonably request.
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SECTION 8. Cancellation and Destruction of Rights Certificates. All
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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
this Agreement. The Company shall deliver to the Rights Agent for cancellation
and retirement, and the Rights Agent shall so cancel and retire, any Rights
Certificates 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) The Company shall at all times prior to the Expiration Date cause
to be reserved and kept available, out of its authorized and unissued shares of
Preferred Stock, the number of shares of Preferred Stock that, as provided in
this Agreement, will be sufficient to permit the exercise in full of all
outstanding Rights. Upon the occurrence of any events resulting in an increase
in the aggregate number of shares of Preferred Stock (or other equity securities
of the Company) issuable upon exercise of all outstanding Rights above the
number then reserved, the Company shall make appropriate increases in the number
of shares so reserved.
(b) If the shares of Preferred Stock to be issued and delivered upon
the exercise of the Rights may be listed on any national securities exchange,
the Company shall during the period from the Distribution Date through the
Expiration Date use its best efforts to cause all securities reserved for such
issuance to be listed on such exchange upon official notice of issuance upon
such exercise.
(c) The Company shall use its best efforts (i) as soon as practicable
following the occurrence of a Section 11 (a)(ii) Event and a determination by
the Company in accordance with Section 11(a)(iii) of the consideration to be
delivered by the Company upon exercise of the Rights or, if so required by law,
as soon as practicable following the Distribution Date (such date being the
"Registration Date"), to file a registration statement on an appropriate form
-----------------
under the Securities Act of 1933, as amended (the "Securities Act"), with
--------------
respect to the securities that may be acquired upon exercise of the Rights (the
"Registration Statement"), (ii) to cause the Registration Statement to become
----------------------
effective as soon as practicable after such filing, (iii) to cause the
Registration Statement to continue to be effective (and to include a prospectus
complying with the requirements of the Securities Act) until the earlier of (A)
the date as of which the Rights are no longer exercisable for the securities
covered by the Registration Statement, and (B) the Expiration Date and (iv) to
take as soon as practicable following the Registration Date such action as may
be required to ensure that any acquisition of securities upon exercise of the
Rights complies with any applicable state securities or "blue sky" laws.
(d) The Company shall take such action as may be necessary to ensure
that all shares of Preferred Stock (and, following the occurrence of a
Triggering Event, any other securities that may be delivered upon exercise of
Rights) shall be, at the time of delivery of the certificates or depositary
receipts for such securities, duly and validly authorized and issued and fully
paid and non-assessable.
(e) The Company shall pay any documentary, stamp or transfer tax
imposed in connection with the issuance or delivery of the Rights Certificates
or upon the exercise of Rights; provided, however, that the Company shall not be
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required to pay any such tax imposed in connection with the issuance or delivery
of Units of Preferred Stock, or any certificates or depositary receipts for such
Units of Preferred Stock (or, following the occurrence of a Triggering Event,
any other securities, cash or assets, as the case may be) to any person other
than the registered holder of the Rights Certificates evidencing the Rights
surrendered for exercise. The Company shall not be required to issue or deliver
any certificates or depositary receipts for
9
Units of Preferred Stock (or, following the occurrence of a Triggering Event,
any other securities, cash or assets, as the case may be) to, or in a name other
than that of, the registered holder upon the exercise of any Rights until any
such tax shall have been paid (any such tax being payable by the holder of such
Rights Certificate at the time of surrender) or until it has been established to
the Company's satisfaction that no such tax is due.
SECTION 10. Preferred Stock Record Date. Each Person in whose name any
---------------------------
certificate for Units of Preferred Stock (or, following the occurrence of a
Triggering Event, other securities) is issued upon the exercise of Rights shall
for all purposes be deemed to have become the holder of record of the Units of
Preferred Stock (or, following the occurrence of a Triggering Event, other
securities) evidenced thereby on, and such certificate shall be dated, the date
upon which the Rights Certificate evidencing such Rights was duly surrendered
and payment of the Purchase Price (and any applicable transfer taxes) was made;
provided, however, that if the date of such surrender and payment is a date upon
-------- -------
which the Preferred Stock (or, following the occurrence of a Triggering Event,
other securities) transfer books of the Company are closed, such Person shall be
deemed to have become the record holder of such securities on, and such
certificate shall be dated, the next succeeding Business Day on which the
Preferred Stock (or, following the occurrence of a Triggering Event, other
securities) transfer books of the Company are open and, further provided,
------- --------
however, that if delivery of Units of Preferred Stock is delayed pursuant to
-------
Section 9(c), such Persons shall be deemed to have become the record holders of
such Units of Preferred Stock only when such Units first become deliverable.
Prior to the exercise of the Rights evidenced thereby, the holder of a Rights
Certificate shall not be entitled to any rights of a shareholder of the Company
with respect to securities 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 securities covered
----------------
by each Right and the number of Rights outstanding are subject to adjustment
from time to time as provided in this Section 11.
(a) (i) In the event the Company shall at any time after the date
of this Agreement (A) declare a dividend on the Preferred Stock payable in
shares of Preferred Stock, (B) subdivide the outstanding shares of Preferred
Stock, (C) combine the outstanding shares of 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),
the Purchase Price in effect at the time of the record date for such dividend or
of the effective date of such subdivision, combination or reclassification, and
the number and kind of shares of Preferred Stock or capital stock, as the case
may be, issuable on such date upon exercise of the Rights, shall be
proportionately adjusted so that the holder of any Right exercised after such
time shall be entitled to receive, upon payment of the Purchase Price then in
effect, the aggregate number and kind of shares of Preferred Stock or capital
stock, as the case may be, which, if such Right had been exercised immediately
prior to such date, such holder would have owned upon such exercise and been
entitled to receive by virtue of such dividend, subdivision, combination or
reclassification. If an event occurs that 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:
(A) any Acquiring Person or any Associate or Affiliate of
any Acquiring Person, at any time after the date hereof, directly or indirectly,
(1) shall merge into the Company or otherwise combine with the Company and the
Company shall be the continuing or surviving corporation
10
of such merger or combination and Company Common Stock shall remain outstanding
and unchanged, (2) shall, in one transaction or a series of transactions,
transfer any assets to the Company or to any of its Subsidiaries in exchange (in
whole or in part) for shares of Company Common Stock, for other equity
securities of the Company or any such Subsidiary, or for securities exercisable
for or convertible into shares of equity securities of the Company or any of its
Subsidiaries (whether Company Common Stock or otherwise) or otherwise obtain
from the Company or any of its Subsidiaries, with or without consideration, any
additional shares of such equity securities or securities exercisable for or
convertible into such equity securities (other than pursuant to a pro rata
--- ----
distribution to all holders of Company Common Stock), (3) shall sell,
purchase, lease, exchange, mortgage, pledge, transfer or otherwise acquire or
dispose of, in one transaction or a series of transactions, to, from or with the
Company or any of its Subsidiaries or any employee benefit plan maintained by
the Company or any of its Subsidiaries or any trustee or fiduciary with respect
to such plan acting in such capacity, assets (including securities) on terms and
conditions less favorable to the Company or such Subsidiary or plan than those
that could have been obtained in arm's-length negotiations with an unaffiliated
third party, other than pursuant to a transaction set forth in Section 13(a),
(4) shall sell, purchase, lease, exchange, mortgage, pledge, transfer or
otherwise acquire or dispose of, in one transaction or a series of transactions,
to, from or with the Company or any of the Company's Subsidiaries or any
employee benefit plan maintained by the Company or any of its Subsidiaries or
any trustee or fiduciary with respect to such plan acting in such capacity
(other than transactions, if any, consistent with those engaged in, as of the
date hereof, by the Company and such Acquiring Person or such Associate or
Affiliate), assets (including securities) having an aggregate fair market value
of more than $5 million, other than pursuant to a transaction set forth in
Section 13(a), (5) shall sell, purchase, lease, exchange, mortgage, pledge,
transfer or otherwise acquire or dispose of, in one transaction or a series of
transactions, to, from or with the Company or any of its Subsidiaries or any
employee benefit plan maintained by the Company or any of its Subsidiaries or
any trustee or fiduciary with respect to such plan acting in such capacity, any
material trademark, service xxxx or other intellectual property right or any
license granted by a regulatory authority, other than pursuant to a transaction
set forth in Section 13(a), (6) shall receive, or any designee, agent or
representative of such Acquiring Person or any Affiliate or Associate of such
Acquiring Person shall receive, any compensation from the Company or any of its
Subsidiaries other than compensation for full-time employment as a regular
employee at rates in accordance with the Company's (or its Subsidiaries') past
practices, or (7) shall receive the benefit, directly or indirectly (except
proportionately as a holder of Company Common Stock or as required by law or
governmental regulation), of any loans, advances, guarantees, pledges or other
financial assistance or any tax credits or other tax advantage provided by the
Company or any of its Subsidiaries or any employee benefit plan maintained by
the Company or any of its Subsidiaries or any trustee or fiduciary with respect
to such plan acting in such capacity; or
(B) any Person shall become an Acquiring Person, other
than pursuant to any transaction set forth in Section 13(a); or
(C) 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 that is directly or indirectly
beneficially owned by any Acquiring Person or any Associate or Affiliate of any
Acquiring Person;
then, immediately upon the date of the occurrence of an event described in
----
Section 11 (a)(ii)(A)-(C) (a "Section 11(a)(ii) Event"), proper provision shall
-----------------------
be made so that each holder of a Right (except as provided below and in Section
7(e) hereof) shall thereafter have the right to receive, upon exercise thereof
at the then
11
current Purchase Price in accordance with the terms of this Agreement, in lieu
of the number of Units of Preferred Stock for which a Right was exercisable
immediately prior to the first occurrence of a Section 11 (a)(ii) Event, such
number of Units of Preferred Stock as shall equal the result obtained by (x)
multiplying the then current Purchase Price by the then number of Units of
Preferred Stock for which a Right was exercisable immediately prior to the first
occurrence of a Section 11(a)(ii) Event (such product thereafter being, for all
purposes of this Agreement other than Section 13, the "Purchase Price"),
-------- -----
and (y) dividing that product by 50% of the then current market price
(determined pursuant to Section 11(d) hereof) per Unit of Preferred Stock on the
date of such first occurrence (such Units of Preferred Stock being the
"Adjustment Shares").
------------------
(iii) In the event that the number of shares of Preferred 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, by the vote of a majority of the Board of Directors, 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 being the "Spread"), and (B) with respect to each Right, make adequate
------
provision to substitute for such Adjustment Shares, upon payment of the
applicable Purchase Price, (1) cash, (2) a reduction in the Purchase Price, (3)
Company Common Stock or other equity securities of the Company (including,
without limitation, shares, or units of shares, of preferred stock (such other
shares being "preferred 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, where such aggregate value has been
determined by a majority of the Board of Directors, after receiving advice from
a nationally recognized investment banking firm; provided, however, that if the
-------- -------
Company shall not have made adequate provision to deliver value pursuant to
clause (B) above within 30 days following the later of (x) the first occurrence
of a Section 11(a)(ii) Event and (y) the date on which the Company's right of
redemption pursuant to Section 23(a) expires (the later of (x) and (y) being
referred to herein as the "Section 11(a)(iii) 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, Units of Preferred Stock (to
the extent available) and then, if necessary, cash, which Units of Preferred
Stock and/or cash shall have 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)(iii), the Company shall provide,
subject to Section 7(e), that such action shall apply uniformly to all
outstanding Rights. For purposes of this Section 11(a)(iii), the value of a
Unit of Preferred Stock shall be the current market price (as determined
pursuant to Section 11(d) hereof) per Unit of Preferred Stock on the Section
11(a)(iii) Trigger Date and the value of any preferred stock equivalent shall be
deemed to have the same value as the Preferred Stock on such date.
(b) In case the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Preferred Stock entitling them to
subscribe for or purchase (for a period expiring within 45 days after such
record date) shares of Preferred Stock (or shares having substantially the same
rights, privileges and preferences as shares of Preferred Stock ("Equivalent
----------
Preferred Stock")) or securities convertible into Preferred Stock or Equivalent
---------------
Preferred Stock at a price per share of Preferred Stock or per share of
Equivalent Preferred Stock (or having a conversion price per share, if a
security convertible into Preferred Stock or Equivalent Preferred Stock) less
than the current market price (as determined pursuant to Section 11(d) hereof)
per share of Preferred Stock on such record date, the Purchase Price to be in
effect after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the sum of the number of shares of Preferred Stock
outstanding on such record date plus the number of shares of Preferred Stock
that 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
12
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 a majority of the
Board of Directors, whose determination shall be described in a statement filed
with the Rights Agent and shall be binding on the Rights Agent and the holders
of the Rights, shares of Preferred Stock owned by or held for the account of the
Company or any Subsidiary shall not be deemed outstanding for the purpose of any
such computation. Such adjustment shall be made successively whenever such a
record date is fixed, and in the event that such rights or warrants are not so
issued the Purchase Price shall be adjusted to be the Purchase Price which would
then be in effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for a distribution to
all holders of shares 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 shares of 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)
hereof), the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the current market
price (as determined pursuant to Section 11(d) hereof) per share of Preferred
Stock on such record date less the fair market value (as determined in good
faith by a majority of the Board of Directors, whose determination shall be
described in a statement filed with the Rights Agent and shall be binding on the
Rights Agent and the holder of the Rights) of the cash, assets or evidences of
indebtedness so to be distributed or of such subscription rights or warrants
distributable in respect of a share of Preferred Stock and the denominator of
which shall be such current market price (as determined pursuant to Section
11(d) hereof) per share of Preferred Stock. Such adjustments shall be made
successively whenever such a record date is fixed, and in the event that such
distribution is not so made, the Purchase Price shall be adjusted to be the
Purchase Price which would have been in effect if such record date had not been
fixed.
(d) (i) For the purpose of any computation hereunder, the "current
market price" per share of Company Common Stock or Common Stock on any date
shall be deemed to be the average of the daily closing prices per share of such
shares for the 10 consecutive Trading Days (as such term is hereinafter defined)
immediately prior to such date; provided, however, that if prior to the
-------- -------
expiration of such requisite ten Trading Day-period the issuer announces either
(A) a dividend or distribution on such shares payable in such shares or
securities convertible into such shares (other than the Rights), or (B) any
subdivision, combination or reclassification of such shares, then, following the
ex-dividend date for such dividend or the record date for such subdivision, as
the case may be, the "current market price" shall be properly adjusted to take
into account such event. The closing price for each day shall be, if the shares
are listed and admitted to trading on a national securities exchange, as
reported in the principal consolidated transaction reporting system with respect
to securities listed on the principal national securities exchange on which such
shares are listed or admitted to trading or, if such shares are not listed or
admitted to trading on any national securities exchange, the last quoted price
or, if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotation System ("Nasdaq") or such other system then in
------
use, or, if on any such date such shares are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in such shares selected by a majority
of the Board of Directors. If on any such date no market maker is making a
market in such shares, the fair value of such shares on such date as determined
in good faith by a majority of the Board of Directors shall be used. If such
shares are 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 a
majority of the Board of Directors, whose determination shall be described in a
statement filed with the Rights Agent and shall be conclusive for all purposes.
The term "Trading Day" shall mean, if such shares are listed or admitted to
-----------
trading on any national securities exchange, a day on which the
13
principal national securities exchange on which such shares are listed or
admitted to trading is open for the transaction of business or, if such shares
are not so listed or admitted, a Business Day.
(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 Company Common Stock in clause (i) of this
Section 11(d) (other than the fourth 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 amount may be appropriately adjusted for such events as stock
splits, stock dividends and recapitalizations with respect to Company Common
Stock occurring after the date of this Agreement) multiplied by the current
market price per share of Company Common Stock. If neither Company Common Stock
nor 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 a majority of the Board of Directors, whose
determination shall be described in a statement filed with the Rights Agent and
shall be binding on the Rights Agent and the holders of the Rights. For all
purposes of this Agreement, the "current market price" of a Unit of Preferred
Stock shall be equal to the "current market price" of one share of Preferred
Stock divided by 1,000.
(e) Anything herein to the contrary notwithstanding, no adjustment in
the Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least 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 one-thousandth of a share of Company Common Stock or
Common Stock or other share or hundred-thousandth 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 years from the date of the transaction that mandates such
adjustment and (ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section 11(a)(ii)
or 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), (d), (e),
(g), (h), (i), (j), (k), (l) 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) 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 Units of Preferred Stock
(or other securities or amount of cash or combination thereof) that may be
acquired from time to time hereunder upon exercise of the Rights, all subject to
further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided
in Section 11(i), upon each adjustment of the Purchase Price as a result of the
calculations made in Sections 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of Units of Preferred
Stock (calculated to the nearest hundred-thousandth of a Unit) obtained by (i)
multiplying (x) the number of Units of Preferred Stock 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.
14
(i) The Company may elect on or after the date of any adjustment of
the Purchase Price to adjust the number of Rights, in lieu of any adjustment in
the number of Units of Preferred Stock that may be acquired 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 Units 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 hundred-thousandth) obtained by
dividing the Purchase Price in effect immediately prior to adjustment of the
Purchase Price by the Purchase Price in effect immediately after adjustment of
the Purchase Price. The Company shall make a public announcement of its
election to adjust the number of Rights, indicating the record date for the
adjustment, and, if known at the time, the amount of the adjustment to be made.
This record date may be the date on which the Purchase Price is adjusted or any
day thereafter, but, if the Rights Certificates have been issued, shall be at
least 10 days later than the date of such 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 to be so 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) Irrespective of any adjustment or change in the Purchase Price or
the number of Units 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 Unit and the number of Units of Preferred Stock
that were expressed in the initial Rights Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below the then par value of the number of Units of Preferred
Stock issuable upon exercise of the Rights, the Company shall take any corporate
action which may, in the opinion of its counsel, be necessary in order that the
Company may validly and legally issue such fully paid and nonassessable number
of Units of Preferred Stock at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised after such record date
of that number of Units of Preferred Stock and shares of other capital stock or
securities of the Company, if any, issuable upon such exercise over and above
the number of Units of Preferred Stock and shares of 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
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the Company shall deliver to such holder a due xxxx or other appropriate
instrument evidencing such holder's right to receive such additional shares
(fractional or otherwise) or securities upon the occurrence of the event
requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that in their good faith judgment a majority of the Board of
Directors shall determine to be advisable in order that any (i) consolidation or
subdivision of the Preferred Stock, (ii) issuance wholly for cash of any shares
of Preferred Stock at less than the current market price, (iii) issuance wholly
for cash of shares of Preferred Stock or securities that by their terms are
convertible into or exchangeable for shares of Preferred Stock, (iv) stock
dividends or (v) issuance of rights, options or warrants
15
referred to in this Section 11, hereafter made by the Company to holders of its
Preferred Stock, shall not be taxable to such holders or shall reduce the taxes
payable by such holders.
(n) The Company shall not, at any time after the Distribution Date,
(i) consolidate with any other Person (other than a Subsidiary of the Company in
a transaction that complies with Section 11(o) hereof), (ii) merge with or into
any other Person (other than a Subsidiary of the Company in a transaction which
complies with Section 11(o) hereof), or (iii) sell or transfer (or permit any
Subsidiary to sell or transfer), in one transaction, or a series of
transactions, assets or earning power aggregating more than 50% of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to any
other Person or Persons (other than the Company and/or any of its Subsidiaries
in one or more transactions each of which complies with Section 11(o) hereof),
if (x) at the time of or immediately after such consolidation, merger or sale
there are any rights, warrants or other instruments or securities outstanding or
agreements in effect that would substantially diminish or otherwise eliminate
the benefits intended to be afforded by the Rights or (y) prior to,
simultaneously with or immediately after such consolidation, merger or sale, the
Person which constitutes, or would constitute, the "Principal Party" for
purposes of Section 13(a) shall have distributed or otherwise transferred to its
shareholders or other persons holding an equity interest in such Person, Rights
previously owned by such Person or any of its Affiliates and Associates;
provided, however, that this Section 11(n) shall not affect the ability of any
-------- -------
Subsidiary of the Company to consolidate with, merge with or into, or sell or
transfer assets or earning power to, any other Subsidiary of the Company.
(o) After the Distribution Date, the Company shall not, except as
permitted by Section 23 or Section 26, take (or permit any Subsidiary to take)
any action if at the time such action is taken it is reasonably foreseeable that
such action will diminish substantially or otherwise eliminate the benefits
intended to be afforded by the Rights.
(p) Anything in this Agreement to the contrary notwithstanding, in the
event that the Company shall at any time after the Rights Dividend Declaration
Date and prior to the Distribution Date (i) declare a dividend on the
outstanding shares of Company Common Stock payable in shares of Company Common
Stock, (ii) subdivide the outstanding shares of Company Common Stock, (iii)
combine the outstanding shares of Company Common Stock into a smaller number of
shares, or (iv) issue any shares of its capital stock in a reclassification of
Company Common Stock (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing or surviving
corporation), the number of Rights associated with each share of Company 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 Company Common Stock following
any such event shall equal the result obtained by multiplying the number of
Rights associated with each share of Company Common Stock immediately prior to
such event by a fraction, the numerator of which shall be the total number of
shares of Company Common Stock outstanding immediately prior to the occurrence
of the event and the denominator of which shall be the total number of shares of
Company Common Stock outstanding immediately following the occurrence of such
event.
SECTION 12. Certificate of Adjusted Purchase Price or Number of Shares.
----------------------------------------------------------
Whenever an adjustment is made as provided in Section 11 or Section 13, the
Company shall (a) promptly prepare a certificate setting forth such adjustment
and a brief statement of the facts accounting for such adjustment, (b) promptly
file with the Rights Agent, and with each transfer agent for the Preferred Stock
and the Company Common Stock, a copy of such certificate, and (c) 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 evidencing shares of Company
Common Stock) in accordance with Section 25. The Rights Agent shall be fully
protected in relying on any such certificate and on any adjustment therein
contained and shall not be deemed to have knowledge of any such adjustment
unless and until it shall have received such certificate.
16
SECTION 13. Consolidation, Merger or Sale or Transfer of Assets or Earning
--------------------------------------------------------------
Power.
-----
(a) In the event that, following the Stock Acquisition Date, directly
or indirectly, either (x) the Company shall consolidate with, or merge with and
into, any other Person (other than a Subsidiary of the Company in a transaction
which complies with Section 11(o) hereof), and the Company shall not be the
continuing or surviving corporation of such consolidation or merger, (y) any
Person (other than a Subsidiary of the Company in a transaction which complies
with Section 11(o) hereof) shall consolidate with, or merge with or into, the
Company, and the Company shall be the continuing or surviving corporation of
such consolidation or merger and, in connection with such consolidation or
merger, all or part of the outstanding shares of Company Common Stock shall be
converted 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) to any
Person or Persons (other than the Company or any of its Subsidiaries in one or
more transactions each of which complies with Section 11(o) hereof), in one or
more transactions assets or earning power aggregating more than 50% of the
assets or earning power of the Company and its Subsidiaries (taken as a whole)
(any such event being a "Section 13 Event"), then, and in each such case, proper
----------------
provision shall be made so that: (i) each holder of a Right, except as provided
in Section 7(e), shall thereafter have the right to receive, upon the exercise
thereof at the then current Purchase Price, such number of validly authorized
and issued, fully paid and nonassessable shares of Common Stock of the Principal
Party (as such term is hereinafter defined), which shares shall not be subject
to any liens, encumbrances, rights of first refusal, transfer restrictions or
other adverse claims, as shall be equal to the result obtained by (1)
multiplying the then current Purchase Price by the number of Units of Preferred
Stock for which a Right is exercisable immediately prior to the first occurrence
of a Section 13 Event (or, if a Section 11(a)(ii) Event has occurred prior to
the first occurrence of a Section 13 Event, multiplying the number of such Units
for which a Right would be exercisable hereunder but for the occurrence of such
Section 11(a)(ii) Event by the Purchase Price which would be in effect hereunder
but for such first occurrence) and (2) dividing that product (which, following
the first occurrence of a Section 13 Event, shall be the "Purchase Price" for
all purposes of this Agreement) by 50% of the current market price (determined
pursuant to Section 11(d) hereof) per share of the Common Stock of such
Principal Party on the date of consummation of such Section 13 Event; (ii) such
Principal Party shall thereafter be liable for, and shall assume, by virtue of
such Section 13 Event, all the obligations and duties of the Company pursuant to
this Agreement; (iii) the term "Company" shall thereafter be deemed to refer to
such Principal Party, it being specifically intended that the provisions of
Section 11 shall apply only to such Principal Party following the first
occurrence of a Section 13 Event; (iv) such Principal Party shall take such
steps (including, but not limited to the reservation of a sufficient number of
shares of its Common Stock) in connection with the consummation of any such
transaction as may be necessary to ensure that the provisions of this Agreement
shall thereafter be applicable to its shares of Common Stock thereafter
deliverable upon the exercise of the Rights; and (v) the provisions of Section
11(a)(ii) shall be of no further effect following the first occurrence of any
Section 13 Event.
(b) "Principal Party" means:
---------------
(i) in the case of any transaction described in clause (x) or
(y) of the first sentence of Section 13(a), (A) the Person that is the issuer of
any securities into which shares of Company Common Stock are converted in such
merger or consolidation, or, if there is more than one such issuer, the issuer
of Common Stock that has the highest aggregate current market price (determined
pursuant to Section 11(d) hereof) and (B) if no securities are so issued, the
Person that is the other party to such merger or consolidation, or, if there is
more than one such Person, the Person the Common Stock of which has the highest
aggregate current market price (determined pursuant to Section 11(d) hereof);
and
(ii) in the case of any transaction described in clause (z) of
the first sentence of Section 13(a), the Person that is the party receiving the
largest portion of the assets or earning power transferred pursuant to such
transaction or transactions, or, if each Person that is a party to such
17
transaction or transactions receives the same portion of the assets or earning
power transferred pursuant to such transaction or transactions or if the Person
receiving the largest portion of the assets or earning power cannot be
determined, whichever Person the Common Stock of which has the highest aggregate
current market price (determined pursuant to Section 11(d) hereof); 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 12-month period
registered under Section 12 of the Exchange Act ("Registered Common Stock"), or
-----------------------
such Person is not a corporation, and such Person is a direct or indirect
Subsidiary of another Person that has Registered Common Stock outstanding,
"Principal Party" shall refer to such other Person: (2) if the Common Stock of
such Person is not Registered Common Stock or such Person is not a corporation,
and such Person is a direct or indirect Subsidiary of another Person but is not
a direct or indirect Subsidiary of another Person which has Registered Common
Stock outstanding, "Principal Party" shall refer to the ultimate parent entity
of such first-mentioned Person; (3) if the Common Stock of such Person is not
Registered Common Stock or such Person is not a corporation, and such Person is
directly or indirectly controlled by more than one Person, and one or more of
such other Persons has Registered Common Stock outstanding, "Principal Party"
shall refer to whichever of such other Persons is the issuer of the Registered
Common Stock having the highest aggregate current market price (determined
pursuant to Section 11(d) hereof); and (4) if the Common Stock of such Person is
not Registered Common Stock or such Person is not a corporation, and such Person
is directly or indirectly controlled by more than one Person, and none of such
other Persons have Registered Common Stock outstanding, "Principal Party" shall
refer to whichever ultimate parent entity is the corporation having the greatest
shareholders equity or, if no such ultimate parent entity is a corporation,
shall refer to whichever ultimate parent entity is the entity having the
greatest net assets.
(c) The Company shall not consummate any such consolidation, merger,
sale or transfer unless the Principal Party shall have a sufficient number of
authorized shares of its Common Stock that 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 the Principal Party will:
(i) file on an appropriate form, as soon as practicable
following the execution of such agreement, a registration statement under the
Securities Act with respect to the Common Stock that may be acquired upon
exercise of the Rights, (B) cause such registration statement to remain
effective (and to include a prospectus complying with the requirements of the
Securities Act) until the Expiration Date, and (C) as soon as practicable
following the execution of such agreement, take such action as may be required
to ensure that any acquisition of such Common Stock upon the exercise of the
Rights complies with any applicable state security or "blue sky" laws; and
(ii) 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.
(d) In case the Principal Party that is to be a party to a transaction
referred to in this Section 13 has a provision in any of its authorized
securities or in its Certificate of Incorporation or By-laws or other instrument
governing its corporate affairs, which provision would have the effect of (i)
causing such Principal Party to issue, in connection with, or as a consequence
of, the consummation of a transaction referred to in this Section 13, shares of
Common Stock of such Principal Party at less than the then current market price
per share (determined pursuant to Section 11(d) hereof) or securities
exercisable for, or convertible into Common Stock of such Principal Party at
less than such then current market price (other than to holders of Rights
pursuant to this Section 13) or (ii) providing for any special payment, tax or
similar provisions in connection with the issuance of the Common Stock of such
Principal Party pursuant to the provisions of this Section 13; then, in such
event, the Company shall not consummate any such transaction
18
unless prior thereto the Company and such Principal Party shall have executed
and delivered to the Rights Agent a supplemental agreement providing that the
provision in question of such Principal Party shall have been canceled, waived
or amended, or that the authorized securities shall be redeemed, so that the
applicable provision will have no effect in connection with, or as a consequence
of, the consummation of the proposed transaction.
(e) The provisions of this Section 13 shall similarly apply to
successive mergers or consolidations or sales or other transfers. In the event
that a Section 13 Event shall occur at any time after the occurrence of a
Section 11(a)(ii) Event, the Rights which have not theretofore been exercised
shall thereafter become exercisable in the manner described in Section 13(a).
SECTION 14. Fractional Rights and Fractional Shares.
---------------------------------------
(a) The Company shall not be required to issue fractions of Rights or
to distribute Rights Certificates that evidence fractional Rights. In lieu of
such fractional Rights, there shall be paid to the Persons to which such
fractional Rights would otherwise be issuable, an amount in cash equal to such
fraction of the market value of a whole Right. For purposes of this Section
14(a), the market value of a whole Right shall be the closing price of the
Rights for the Trading Day immediately prior to the date on which such
fractional Rights would have been otherwise issuable. The closing price of the
Rights for any day shall be, if the Rights are listed or admitted to trading on
a national securities exchange, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the principal
national securities exchange on which the Rights are listed or admitted to
trading or, if the Rights are not listed or admitted to trading on any national
securities exchange, the last quoted price or, if not so quoted, the average of
the high bid and low asked prices in the over-the-counter market as reported by
Nasdaq or such other system then in use or, if on any such date the Rights are
not quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in the Rights
selected by a majority of the Board of Directors. If on any such date no such
market maker is making a market in the Rights, the fair value of the Rights on
such date as determined in good faith by a majority of the Board of Directors
shall be used and such determination shall be described in a statement filed
with the Rights Agent and the holders of the Rights.
(b) The Company shall not be required to issue fractions of shares of
Preferred Stock (other than fractions that are integral multiples of one one-
thousandth of a share of Preferred Stock) upon exercise of the Rights or to
distribute certificates that evidence such fractional shares of Preferred Stock
(other than fractions which are integral multiples of one one-thousandth of a
share of Preferred Stock). In lieu of such fractional shares of Preferred Stock
that are not integral multiples of one one-thousandth of a share, 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 then current market price of a share of Preferred Stock on the day of
exercise, determined in accordance with Section 11(d).
(c) The holder of a Right by the acceptance of the Rights 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, other than rights of action vested in the Rights Agent pursuant to
Section 18, are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of
certificates evidencing shares of Company Common Stock); and any registered
holder of a Rights Certificate (or, prior to the Distribution Date, of a
certificate evidencing shares of Company 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 a certificate evidencing shares of Company Common
Stock), may, in his or her own behalf and for his or her own benefit,
19
enforce, and may institute and maintain any suit, action or proceeding against
the Company or any other Person 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 to 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 Company 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 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 duly 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 Company 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 Company 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 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 any other Person as a result of its inability to perform any of
its obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, the Company must use its best
-------- -------
efforts to have any such order, decree or ruling lifted or otherwise overturned
as promptly as practicable.
SECTION 17. Rights Certificate Holder Not Deemed a Shareholder. 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 shares of
Preferred Stock or any other securities of the Company that may at any time be
issuable on the exercise of the Rights evidenced 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 shareholder of
the Company or any right to vote for the election of directors or upon any
matter submitted to shareholders at any meeting thereof, or to give or withhold
consent to any corporate action, or, except as provided in Section 24, to
receive notice of meetings or other actions affecting shareholders, or to
receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by such Rights Certificate shall have been exercised in
accordance with the provisions hereof.
SECTION 18. Concerning the Rights Agent.
---------------------------
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable
20
expenses, including reasonable fees and disbursements of its counsel, incurred
in connection with the execution and administration of this Agreement and the
exercise and performance of its duties hereunder. The Company shall indemnify
the Rights Agent for, and hold it harmless against, any loss, liability, or
expense, incurred without gross negligence, bad faith or wilful misconduct on
the part of the Rights Agent, for anything done or omitted by the Rights Agent
in connection with the acceptance and administration of this Agreement,
including the costs and expenses of defending against any claim of liability
hereunder.
(b) The Rights Agent shall be protected and shall incur no liability
for or in respect of any action taken, suffered or omitted by it in connection
with its administration of this Agreement in reliance upon any Rights
Certificate or certificate for Preferred 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 have been signed and/or
executed or made by the proper Person or Persons.
SECTION 19. Merger or Consolidation or Change of Name of Rights Agent.
---------------------------------------------------------
(a) Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Rights Agent
or any successor Rights Agent shall be a party, or any corporation succeeding to
the corporate trust or shareholder services businesses 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 document or any further
act on the part of any of the parties hereto; provided, however, that such
-------- -------
corporation 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 Rights Certificates either in the name of the
predecessor or in the name of the successor Rights Agent; and in all such cases
such Rights Certificates shall have the full force provided in the Rights
Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be changed
and at such time any of the Rights Certificates shall have been countersigned
but not delivered, the Rights Agent may adopt the countersignature under its
prior name and deliver Rights Certificates so countersigned; and in case at that
time any of the Rights Certificates shall not have been countersigned, the
Rights Agent may countersign such Rights Certificates either in its prior name
or in its changed name; and in all such cases such Rights Certificates shall
have the full force provided in the Rights Certificates and in this Agreement.
SECTION 20. Duties of Rights Agent. The Rights Agent undertakes the
----------------------
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Rights Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action taken
or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person and the
determination of "current market price") be proved or established by the Company
prior to taking or suffering any action hereunder, such fact or matter (unless
other evidence in respect thereof be specified herein) may be deemed to be
conclusively proved and established by a certificate signed
21
by the Chairman of the Board, the Chief Executive Officer, the President, any
Vice President, the Treasurer, any Assistant Treasurer, the Secretary or any
Assistant Secretary of the Company and delivered to the Rights Agent; provided,
--------
however, that so long mas any Person is an Acquiring Person hereunder, such
-------
certificate shall be signed and delivered by a majority of the Board of
Directors; and such certificate shall be full authorization to the Rights Agent
for any action taken or suffered in good faith by it under the provisions of
this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its own gross
negligence, bad faith or wilful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement or in the Rights
Certificates or be required to verify the same (except as to its
countersignature on such Rights Certificates), but all such statements and
recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not have any responsibility for the
validity of this Agreement or the execution and delivery hereof (except the due
execution hereof by the Rights Agent) or for the validity or execution of any
Rights Certificate (except its countersignature thereof); nor shall it be
responsible for any breach by the Company of any covenant or failure by the
Company to satisfy conditions contained in this Agreement or in any Rights
Certificate; nor shall it be responsible for any adjustment required under the
provisions of Section 11 or Section 13 or for the manner, method or amount of
any such adjustment or the ascertaining of the existence of facts that would
require any such adjustment (except with respect to the exercise of Rights
evidenced by Rights Certificates after receipt by the Rights Agent of the
certificate describing any such adjustment contemplated by Section 12); 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 Preferred Stock or any
other securities to be issued pursuant to this Agreement or any Rights
Certificate or as to whether any shares of Preferred Stock or any other
securities will, when so issued, be validly authorized and issued, fully paid
and nonassessable.
(f) The Company shall perform, execute, acknowledge and deliver or
cause to be performed, executed, acknowledged and delivered all such further
acts, instruments and assurances as may reasonably be required by the Rights
Agent for the performance by the Rights Agent of its duties under this
Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
Chairman of the Board, the Chief Executive Officer, 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 it shall not be liable for any
action taken or suffered to be taken by it in good faith in accordance with
instructions of any such officer; provided, however, that so long as any Person
-------- -------
is an Acquiring Person hereunder, the Rights Agent shall accept such
instructions and advice only from a majority of the Board of Directors and shall
not be liable for any action taken or suffered to be taken by it in good faith
in accordance with such instructions of the majority of the Board of Directors.
Any application by the Rights Agent for written instructions from the Company
may, at the option of the Rights Agent, set forth in writing any action proposed
to be taken or omitted by the Rights Agent under this Rights Agreement and the
date on and/or after which such action shall be taken or such omission shall be
effective. The Rights Agent shall not be liable for any action taken by, or
omission of, the Rights Agent in accordance with a proposal included in 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 such 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
22
in the case of an omission), the Rights Agent shall have received written
instructions in response to such application specifying the action to be taken
or omitted.
(h) The Rights Agent and any shareholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not the Rights
Agent under this Agreement. Nothing herein shall preclude the Rights Agent from
acting in any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents.
(j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties or in the exercise of its rights hereunder if
the Rights Agent shall have reasonable grounds for believing that repayment of
such funds or adequate indemnification against such risk or liability is not
reasonably assured to it.
(k) If, with respect to any Rights Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed, not signed or indicates an affirmative response to clause 1
and/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. If such certificate has been completed and signed and shows a negative
response to clauses 1 and 2 of such certificate, unless previously instructed
otherwise in writing by the Company (which instructions may impose on the Rights
Agent additional ministerial responsibilities, but no discretionary
responsibilities), the Rights Agent may assume without further inquiry that the
Rights Certificate is not owned by a person described in Section 4(b) or Section
7(e) and shall not be charged with any knowledge to the contrary.
SECTION 21. Change of Rights Agent. The Rights Agent or any successor
----------------------
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days' prior notice in writing mailed to the Company, and to each
transfer agent of the Preferred Stock and the Company Common 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 30 days' prior notice in writing, mailed to the Rights Agent
or successor Rights Agent, as the case may be, and to each transfer agent of the
Preferred Stock and the Company Common 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 30 days after
giving notice of such removal or after it has been notified in writing of such
resignation or incapacity by the resigning or incapacitated Rights Agent or by
the holder of a Rights Certificate (who shall, with such notice, submit his or
her Rights Certificate for inspection by the Company), then any registered
holder of any Rights Certificate may apply to any court of competent
jurisdiction for the appointment of a new Rights Agent. Any successor Rights
Agent, whether appointed by the Company or by such a court, shall be (a) a
corporation organized and doing business under the laws of the United States or
any state of the United States in good standing, shall be authorized under such
laws to exercise corporate trust or stock transfer powers, shall be subject to
supervision or examination by federal or state authorities and shall have at the
time of its appointment as Rights Agent a combined capital and surplus of at
least $100,000,000 or (b) an Affiliate of a corporation described in clause (a).
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
23
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 Preferred Stock and the
Company Common 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, however, or any defect therein, shall not affect the legality
or validity of the resignation or removal of the Rights Agent or the appointment
of the successor Rights Agent.
SECTION 22. Issuance of New Rights Certificates. Notwithstanding any of
-----------------------------------
the provisions of this Agreement or 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 a majority of the Board of Directors to reflect any
adjustment or change made in accordance with the provisions of this Agreement in
the Purchase Price or the number or kind or class of shares or other securities
or property that may be acquired under the Rights Certificates. In addition, in
connection with the issuance or sale of shares of Company Common Stock following
the Distribution Date and prior to the Expiration Date, the Company (a) shall
with respect to shares of Company 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 hereinafter issued by the
Company, and (b) may, in any other case, if deemed necessary or appropriate by a
majority of the Board of Directors, issue Rights Certificates representing the
appropriate number of Rights in connection with such issuance or sale; provided,
--------
however, that (i) no such Rights Certificate shall be issued if, and to the
-------
extent that, the Company shall be advised by counsel that such issuance would
create a significant risk of material adverse tax consequences to the Company or
the person to whom such Rights Certificate would be issued, and (ii) no such
Rights Certificate shall be issued if, and to the extent that, appropriate
adjustment shall otherwise have been made in lieu of the issuance thereof.
SECTION 23. Redemption and Termination.
--------------------------
(a) Subject to Section 30, the Company may, at its option, by action
of a majority of the Board of Directors, at any time prior to (i) the Close of
Business on the tenth Business Day following the Stock Acquisition Date, or (ii)
such later date as a majority of the Board of Directors shall determine (such
determination to be made prior to the date specified in (i) above) and of which
the Company will give the Rights Agent prompt written notice, but in no event
later than the Final Expiration Date, redeem all but not less than all the then
outstanding Rights at a redemption price of $.001 per Right, as such amount may
be appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such redemption price being the
"Redemption Price"), and the Company may, at its option, by action of a majority
-----------------
of the Board of Directors, pay the Redemption Price either in shares of Company
Common Stock (based on the "current market price" as defined in Section 11(d),
of the shares of Company Common Stock at the time of redemption) or cash.
(b) Immediately upon the action of a majority of the Board of
Directors ordering the redemption of the Rights, evidence of which shall be
filed with the Rights Agent, and without any further action and without any
notice, the right to exercise the Rights will terminate and the only right
thereafter of the holders of Rights shall be to receive the Redemption Price for
each Right so held. Promptly after the action of a majority of the Board of
Directors ordering the redemption of the Rights, the Company shall give notice
of such redemption to the Rights Agent and the holders of the then outstanding
Rights by mailing such notice to all such holders at each holder's last address
as it appears upon the registry books of the Rights Agent or, prior to the
Distribution Date, on the registry books of the transfer agent for Company
Common Stock. Any notice that is mailed in the manner herein provided shall be
deemed given whether or not the holder receives the notice. Each such notice of
redemption will state the method by which the payment of the Redemption Price
will be made.
24
SECTION 24. Notice of Certain Events.
------------------------
(a) In case the Company shall propose, at any time after the
Distribution Date, (i) to pay any dividend payable in stock of any class to the
holders of Preferred Stock or to make any other distribution to the holders of
Preferred Stock (other than a regular quarterly cash dividend out of earnings or
retained earnings of the Company), (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 or merger into or
with any other Person (other than a Subsidiary of the Company in a transaction
which complies with Section 11(o) hereof), or to effect any sale or other
transfer (or to permit one or more of its Subsidiaries to effect any sale or
other transfer), in one or more transactions, of more than 50% of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to any
other Person or Persons (other than the Company and/or any of its Subsidiaries
in one or more transactions each of which complies with Section 11(o) hereof),
or (v) to effect the liquidation, dissolution or winding up of the Company,
then, in each such case, the Company shall give to each holder of a Rights
Certificate, to the extent feasible and in accordance with Section 25, a notice
of such proposed action, which shall specify the record date for the purposes of
such stock dividend, distribution of rights or warrants, or the date on which
such reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of the shares of Preferred Stock, if any such date is to
be fixed, and such notice shall be so given in the case of any action covered by
clause (i) or (ii) above at least 20 days prior to the record date for
determining holders of the shares of Preferred Stock for purposes of such
action, and in the case of any such other action, at least 20 days prior to the
date of the taking of such proposed action or the date of participation therein
by the holders of the shares of Preferred Stock whichever shall be the earlier;
provided, however, that no such notice shall be required pursuant to this
-------- -------
Section 24, if any Subsidiary of the Company effects a consolidation or merger
with or into, or effects a sale or other transfer of assets or earnings power
to, any other Subsidiary of the Company.
(b) 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 in accordance with Section 25, 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).
SECTION 25. Notices. All notices and other communications provided for
-------
hereunder shall, unless otherwise stated herein, be in writing (including by
telex, telegram or cable) and mailed or sent or delivered, if to the Company, at
its address at:
0000 Xxx Xxxxxx Xxxx
Xxxxx 000
XxXxxx, XX 00000
Attention: Chief Executive Officer
Fax: (000) 000-0000
and if to the Rights Agent, at its address at:
StockTrans, Inc.
0 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: President
Fax: (000) 000-0000
25
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 Company Common Stock) shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed to such holder at the address of
such holder as shown on the registry books of the Company.
SECTION 26. Supplements and Amendments. Prior to the Distribution Date
--------------------------
and subject to the penultimate sentence of this Section 26, the Company and the
Rights Agent shall, if the Company so directs, supplement or amend any provision
of this Agreement without the approval of any holders of certificates evidencing
shares of Company Common Stock. From and after the Distribution Date and
subject to the penultimate sentence of this Section 26, 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 in order
(i) to cure any ambiguity, (ii) to correct or supplement any provision contained
herein that may be defective or inconsistent with any other provisions herein,
(iii) to shorten or lengthen any time period hereunder, or (iv) to change or
supplement the provisions hereunder in any manner that the Company may deem
necessary or desirable and that shall not adversely affect the interests of the
holders of Rights Certificates (other than an Acquiring Person or an Affiliate
or Associate of an Acquiring Person); provided, however, that this Agreement may
-------- -------
not be supplemented or amended to lengthen, pursuant to clause (iii) of this
sentence, (A) subject to Section 30, a time period relating to when the Rights
may be redeemed at such time as the Rights are not then redeemable, or (B) any
other time period unless such lengthening is for the purpose of protecting,
enhancing or clarifying the rights of, and/or the benefits to the holders of
Rights. Upon the delivery of a certificate from an appropriate officer of the
Company or, so long as any Person is an Acquiring Person hereunder, from the
majority of the Board of Directors that states that the proposed supplement or
amendment is in compliance with the terms of this Section 26, the Rights Agent
shall execute such supplement or amendment, subject to the Right Agent's right
to apply to counsel chosen by the Right Agent and the Right Agent being
reasonably assured that such supplement or amendment is in no way detrimental to
the Right Agent's right or interest. Notwithstanding anything contained in this
Agreement to the contrary, no supplement or amendment shall be made that changes
the Redemption Price, the Purchase Price, the Expiration Date or the number of
Units of Preferred Stock for which a Right is exercisable without the approval
of a majority of the Board of Directors. Prior to the Distribution Date, the
interests of the holders of Rights shall be deemed coincident with the interests
of the holders of Company Common Stock.
SECTION 27. Successors. All the covenants and provisions of this
----------
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
SECTION 28. Determinations and Actions by the Board of Directors, etc. For
---------------------------------------------------------
all purposes of this Agreement, any calculation of the number of shares of
Company Common Stock outstanding at any particular time, including for purposes
of determining the particular percentage of such outstanding shares of Company
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 Exchange Act
Regulations as in effect on the date hereof. Except as otherwise specifically
provided herein, the Board of Directors of the Company 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 (i) to interpret the provisions of this
Agreement, and (ii) to make all determinations deemed necessary or advisable for
the administration of this 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
or by a majority of the Board of Directors in good faith shall (x) be final,
conclusive and binding on the Company, the Rights Agent, the holders of the
Rights and all other parties, and (y) not subject the Board or any member
thereof to any liability to the holders of the Rights.
26
SECTION 29. Benefits of this Agreement. Nothing in this Agreement shall
--------------------------
be construed to give to any Person other than the Company, the Rights Agent and
the registered holders of the Rights Certificates (and, prior to the
Distribution Date, registered holders of shares of Company 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 shares of Company Common Stock).
SECTION 30. 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 a majority of the
Board of Directors determines in its good faith judgment that severing the
invalid language from this Agreement would adversely affect the purpose or
effect of this Agreement and the Rights shall not then be redeemable, the right
of redemption set forth in Section 23 hereof shall be reinstated and shall not
expire until the Close of Business on the tenth Business Day following the date
of such determination by a majority of the Board of Directors.
SECTION 31. Governing Law. This Agreement each Right and each Rights
-------------
Certificate issued hereunder shall be governed by, and construed in accordance
with, the laws of the State of Delaware applicable to contracts executed in and
to be performed entirely in such State; provided, however, that Sections 18, 19,
-------- -------
20 and 21 shall be governed by, and construed in accordance with, the laws of
the Commonwealth of Pennsylvania.
SECTION 32. Counterparts. This Agreement may be executed (including by
------------
facsimile) in one or more counterparts and by the different parties hereto in
separate counterparts, each of which when executed shall be deemed to be an
original, but all of which taken together shall constitute one and the same
instrument.
SECTION 33. Descriptive Headings. The headings contained in this
--------------------
Agreement are for descriptive purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
SECTION 34. Exchange.
--------
(a) The Company may at any time after to the Distribution Date, upon
resolution of a majority of the Board of Directors, exchange all or part of the
then outstanding and exercisable Rights (which shall not include Rights that
have become void pursuant to Section 7(e) hereof) for Units of Preferred Stock
at an exchange ratio specified in the following sentence, as appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof. Subject to such adjustment, upon such
resolution each Right may be exchanged for that number of Units of Preferred
Stock obtained by dividing the Adjustment Spread (as defined below) by the then
current market price (determined pursuant to Section 11(d) hereof) per Unit of
Preferred Stock on the earlier of (i) the date on which any Person becomes an
Acquiring Person and (ii) the date on which a tender or exchange offer by any
Person (other than the Company, any Subsidiary of the Company, any employee
benefit plan maintained by the Company or any of its Subsidiaries or any trustee
or fiduciary with respect to such plan acting in such capacity) is first
published or sent or given within the meaning of Rule 14d-4(a) of the Exchange
Act Regulations or any successor rule, if upon consummation thereof such Person
would be the Beneficial Owner of 20% or more of the shares of Company Common
Stock then outstanding (such exchange ratio being the "Exchange Ratio"). The
--------------
"Adjustment Spread" shall equal (x) the aggregate market price on the date of
------------------
such event of the number of Adjustment Shares determined pursuant to Section
11(a)(ii), minus (y) the Purchase Price.
27
(b) Immediately upon the action of a majority of the Board of
Directors ordering the exchange of any Rights pursuant to Section 34(a) and
without any further action and without any notice, the right to exercise such
Rights shall terminate and the only right thereafter of a holder of such Rights
shall be to receive that number of Units of Preferred Stock equal to the number
of such Rights held by such holder multiplied by the Exchange Ratio. The
Company shall promptly give public notice of any such exchange; provided,
--------
however, that the failure to give, or any defect in, such notice shall not
-------
affect the validity of such exchange. The Company promptly shall mail a notice
of any such exchange to all 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 shall state the method
by which the exchange of Units of Preferred Stock for Rights 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 void pursuant to the provisions
of Section 7(e) hereof) held by each holder of Rights.
(c) In the event that the number of shares of Preferred 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 are
not sufficient to permit any exchange of Rights as contemplated in accordance
with this Section 34, the Company shall take all such action as may be necessary
to authorize additional shares of Preferred Stock for issuance upon exchange of
the Rights or make adequate provision to substitute (1) cash, (2) Company Common
Stock or other equity securities of the Company, (3) debt securities of the
Company, (4) other assets, or (5) any combination of the foregoing, having an
aggregate value equal to the Adjustment Spread, where such aggregate value has
been determined by a majority of the Board of Directors.
(d) The Company shall not be required to issue fractions of Units of
Preferred Stock or to distribute certificates that evidence fractional Units.
In lieu of fractional Units, the Company may pay to the registered holders of
Rights Certificates at the time such Rights are exchanged as herein provided an
amount in cash equal to the same fraction of the current market price
(determined pursuant to Section 11(d) hereof) of one Unit of Preferred Stock.
28
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, all as of the date first above written.
ATTEST: PRIMUS TELECOMMUNICATIONS
GROUP, INCORPORATED
By: /s/ XXXXXX X. XXXXXXX By: /s/ K. XXXX XXXXX
--------------------------------- --------------------------------------
Xxxxxx X. Xxxxxxx K. Xxxx Xxxxx
Secretary President and Chief Executive Officer
ATTEST: STOCKTRANS, INC.
By: /s/ XXXX XXX XXXXXXXX By: /s/ XXXXXXXX XXXXXX
--------------------------------- --------------------------------------
Xxxx Xxx Xxxxxxxx Xxxxxxxx Xxxxxx
Secretary President
29
EXHIBIT A
---------
Form of Series B Rights Certificate
Certificate No. B-__ ___________ Rights
NOT EXERCISABLE AFTER THE EXPIRATION DATE (AS DEFINED IN THE RIGHTS AGREEMENT
REFERRED TO BELOW). THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE
COMPANY, ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES (SPECIFIED IN THE RIGHTS AGREEMENT), RIGHTS BENEFICIALLY OWNED BY
ACQUIRING PERSONS (AS DEFINED IN THE RIGHTS AGREEMENT) OR 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 REFERRED TO BELOW). ACCORDINGLY, THIS
RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND VOID IN
THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF THE RIGHTS AGREEMENT.]*
Series B Rights Certificate
PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED
This certifies that _____________, or registered assigns, is the
registered holder of the number of Rights set forth above, each of which
entitles the registered holder thereof, subject to the terms and conditions of
the Rights Agreement dated as of December 23, 1998, and as amended to from time
to time thereafter (the "Rights Agreement; terms defined therein are used herein
----------------
with the same meaning unless otherwise defined herein) between Primus
Telecommunications Group, Incorporated, a Delaware corporation (the "Company"),
-------
and StockTrans, Inc., as Rights Agent (which term shall include any successor
Rights Agent under the Rights Agreement), to purchase from the Company at any
time after the Distribution Date and prior to the Expiration Date at the office
of the Rights Agent, one one-thousandth of one fully paid and nonassessable
share of Series B Junior Participating Preferred Stock, par value $.01 per share
(the "Preferred Stock"), of the Company at the Purchase Price initially of
---------------
$90.00 per one one-thousandth share (each such one one-thousandth of a share
being a "Unit") of Preferred Stock, upon presentation and surrender of this
----
Rights Certificate with the Election to Purchase and related certificate duly
executed. The number of Rights evidenced by this Rights Certificate (and the
number of Units that may be purchased upon exercise thereof) set forth above,
and the Purchase Price per Unit set forth above shall be subject to adjustment
in certain events as provided in the Rights Agreement.
Upon the occurrence of a Section 11(a)(ii) Event, if the Rights
evidenced by this Rights Certificate are beneficially owned by an Acquiring
Person or an Affiliate or Associate of any such Acquiring Person or, under
certain circumstances described in the Rights Agreement, a transferee of any
such Acquiring Person, Associate or Affiliate, such Rights shall become null and
void and no holder hereof shall have any right with respect to such Rights from
and after the occurrence of such Section 11(a)(ii) Event.
In certain circumstances described in the Rights Agreement, the rights
evidenced hereby may entitle the registered holder thereof to purchase capital
stock of an entity other than the Company or receive common stock, cash or other
assets, all as provided in the Rights Agreement.
This Rights Certificate is subject to all the terms and conditions of
the Rights Agreement, which terms and conditions are hereby incorporated herein
by reference and made a part hereof and to which reference is hereby made for a
full description of the rights, limitations of rights, obligations, duties and
immunities hereunder of the Rights Agent, the Company and the holders of the
Rights Certificates. Copies of
-----------------------------
* The portion of the legend in brackets shall be inserted only if applicable
and shall replace the preceding sentence.
the Rights Agreement are on file at the principal office of the Company and are
available from the Company upon written request.
This Rights Certificate, with or without other Rights Certificates,
upon surrender at the office of the Rights Agent designated for such purpose,
may be exchanged for another Rights Certificate or Rights Certificates of like
tenor and date evidencing an aggregate number of Rights equal to the aggregate
number of Rights evidenced by the Rights Certificate or Rights Certificates
surrendered. If this Rights Certificate shall be exercised in part, the
registered holder shall be entitled to receive, upon surrender hereof, another
Rights Certificate or Rights Certificates for the number of whole Rights not
exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may be redeemed by the Company under certain
circumstances at its option at a redemption price of $.001 per Right, payable at
the Company's option in cash or in common stock of the Company, subject to
adjustment in certain events as provided in the Rights Agreement.
No fractional shares of Preferred Stock will be issued upon the
exercise of any Right or Rights evidenced hereby (other than fractions which are
integral multiples of one one-thousandth of a share of Preferred Stock), but in
lieu thereof a cash payment will be made, as provided in the Rights Agreement.
No holder of this Rights Certificate, as such, shall be entitled to
vote or receive dividends or be deemed for any purpose the holder of Preferred
Stock or of any other securities which may at any time be issuable on the
exercise hereof, nor shall anything contained in the Rights Agreement or herein
be constituted to confer upon the holder hereof, as such, any of the rights of a
shareholder of the Company or any right to vote for the election of directors or
upon any matter submitted to shareholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting shareholders (except as provided in the Rights
Agreement), or to receive dividends or subscription rights, or otherwise, until
the 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.
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal. Dated as of _____ __, 199_/200_.
ATTEST: PRIMUS TELECOMMUNICATIONS GROUP,
INCORPORATED
By: _________________________ By: ________________________________
Name: Name:
Title: Title:
Countersigned:
STOCKTRANS, INC., as Rights Agent
By: _________________________
Name:
Title:
A-2
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if
such holder desires to transfer the
Rights Certificate)
FOR VALUE RECEIVED _______________________ hereby sells, assigns and transfers
unto _____________________________________________
________________________________________________________________
(Please print name and address of transferee)
________________________________________________________________,
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint __________ Attorney, to
transfer the within Rights Certificate on the books of the within-named Company,
with full power of substitution.
Dated: _________ __, 199_/200_
______________________________
Signature
Signature Guaranteed:
A-3
Certificate
-----------
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) this Rights Certificate [_]is [_]is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of any such Acquiring Person (as such terms are defined
pursuant to the Rights Agreement); 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: _____________ __, 199_/200_ ____________________
Signature
Signature Guaranteed:
______________________________
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.
Signatures must be guaranteed by a member in the Securities Transfer
Agents Medallion Program, the Stock Exchange Medallion Program or the New York
Stock Exchange Medallion Program.
In the event the certification set forth above is not completed, the
Company will deem the beneficial owner of the Rights evidenced by this Rights
Certificate to be an Acquiring Person or an Affiliate or Associate thereof (as
defined in the Rights Agreement) and, in the case of an Assignment, will affix a
legend to that effect on any Rights Certificates issued in exchange for this
Rights Certificate.
A-4
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if the registered holder
desires to exercise Rights represented
by the Rights Certificate.)
To: PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED
The undersigned hereby irrevocably elects to exercise ________ Rights
represented by this Rights Certificate to purchase the Units of Preferred Stock
issuable upon the exercise of the Rights (or such other securities of the
Company or of any other person or other property which may be issuable upon the
exercise of the Rights) and requests that certificates for such Units be issued
in the name of and delivered to:
______________________________
(Please print name and address)
______________________________
Please insert social security
or other identifying number: __________________
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 he registered in the name of and delivered to:
______________________________
(Please print name and address)
______________________________
Please insert social security
or other identifying number: _________________
Dated: ______ __, 199_/200_
______________________________
Signature
Signature Guaranteed:
A-5
Certificate
-----------
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Rights Certificate [_]are [_]are not
beneficially owned by an Acquiring Person or an Affiliate or an Associate
thereof (as defined in the Rights Agreement); and
(2) after due inquiry and to the best knowledge of the undersigned,
the undersigned [_]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 thereof.
Dated: _____ ___, 199_/200_ __________________________
Signature
Signature Guaranteed:
______________________________
NOTICE
------
The signature in the foregoing Election to Purchase and Certificate
must conform to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
Signatures must be guaranteed by a member in the Securities Transfer
Agents Medallion Program, the Stock Exchange Medallion Program or the New York
Stock Exchange Medallion Program.
In the event the certification set forth above is not completed, the
Company will deem the beneficial owner of the Rights evidenced by this Rights
Certificate to be an Acquiring Person or an Affiliate or Associate thereof (as
defined in the Rights Agreement) and, in the case of an Assignment, will affix a
legend to that effect on any Rights Certificates issued in exchange for this
Rights Certificate.
A-6
EXHIBIT B
---------
CERTIFICATE OF DESIGNATION
OF THE VOTING POWERS, DESIGNATIONS
PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL OR OTHER SPECIAL RIGHTS AND QUALIFICATIONS,
LIMITATIONS AND RESTRICTIONS OF THE
SERIES B JUNIOR PARTICIPATING PREFERRED STOCK
______________________________
Pursuant to Section 151 of the
General Corporation Law of
the State of Delaware
______________________________
I, K. Xxxx Xxxxx, President of Primus Telecommunications Group,
Incorporated, a corporation organized and existing under the General Corporation
Law of the State of Delaware (the "Corporation"), DO HEREBY CERTIFY:
-----------
that, pursuant to authority conferred upon the Board of Directors of the
Corporation by its Certificate of Incorporation (the "Certificate"), and,
-----------
pursuant to the provisions of Section 151 of the General Corporation Law of the
State of Delaware, such Board of Directors, at a duly called meeting held on
December 16, 1998, at which a quorum was present and acted throughout, adopted
the following resolutions, which resolutions remain in full force and effect on
the date hereof creating a series of 30,000 shares of Preferred Stock having a
par value of $.01 per share, designated as Series B Junior Participating
Preferred Stock (the "Series B Preferred Stock") out of the class of the
------------------------
Corporation's preferred stock, par value of $.01 per share (the "Preferred
---------
Stock"):
RESOLVED, that pursuant to the authority vested in the Board of Directors
in accordance with the provisions of the Certificate, the Board of Directors
does hereby create, authorize and provide for the issuance of the Series B
Preferred Stock having the voting powers, designation, relative, participating,
optional and other special tights, preferences, and qualifications, limitations
and restrictions thereof that are set forth as follows:
Section 1. Designation and Amount. The shares of such series shall be
----------------------
designated as "Series B Junior Participating Preferred Stock" and the number of
shares constituting such series shall be 30,000.
Section 2. Dividends and Distributions.
---------------------------
(A) Subject to the prior and superior rights of the holders of any
shares of any other series of Preferred Stock or any other shares of preferred
stock of the Corporation ranking prior and superior to the shares of Series B
Preferred Stock with respect to dividends, each holder of one one-thousandth
(1/1000) of a share (a "Unit") of Series B 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, (i) dividends payable in cash when and if declared
by the Board of Directors of the Corporation in respect of the common stock
(each such date being a "Dividend Payment Date") commencing on the first
---------------------
Dividend Payment Date after the first issuance of such Unit of Series B
Preferred Stock, in an amount per Unit (rounded to the nearest cent) equal to,
subject to the provision for adjustment hereinafter set forth, the aggregate per
share amount of all cash dividends declared on shares of the common stock since
the immediately preceding Dividend Payment Date, or, with respect to the first
Dividend
Payment Date, since the first issuance of a Unit of Series B Preferred Stock,
and (ii) subject to the provision for adjustment hereinafter set forth,
distributions (payable in kind) on each Dividend Payment Date in an amount per
Unit equal to the aggregate per share amount of all noncash dividends or other
distributions (other than a dividend payable in shares of common stock or a
subdivision of the outstanding shares of common stock, by reclassification or
otherwise) declared on shares of common stock since the immediately preceding
Dividend Payment Date, or with respect to the first Dividend Payment Date, since
the first issuance of a Unit of Series B Preferred Stock. In the event that the
Corporation shall at any after December 16, 1998 (the "Rights Declaration
------------------
Date"), (i) declare any dividend on outstanding shares of common stock payable
in shares of common stock, (ii) subdivide outstanding shares of common stock or
(iii) combine outstanding shares of common stock into a smaller number of
shares, then in each such case the amount to which the holder of a Unit of
Series B Preferred Stock was entitled immediately prior to such event pursuant
to the next preceding sentence shall be adjusted by multiplying such amount by a
fraction the numerator of which shall be the number of shares of common stock
that are outstanding immediately after such event and the denominator of which
shall be 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 Units
of Series B Preferred Stock as provided in paragraph (A) above immediately after
it declares a dividend or distribution on the shares of common stock (other than
a dividend payable in shares of common stock).
Section 3. Voting Rights. The holders of Units of Series B Preferred
-------------
Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth,
each Unit of Series B Preferred Stock shall entitle the holder thereof to one
vote on all matters submitted to a vote of the holders of Common Stock of the
Corporation. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on outstanding shares of Common Stock
payable in shares of Common Stock, (ii) subdivide outstanding shares of Common
Stock or (iii) combine the outstanding shares of Common Stock into a smaller
number of shares, then in each such case the number of votes per Unit to which
holders of Units of Series B Preferred Stock were entitled immediately prior to
such event shall be adjusted by multiplying such number by a fraction the
numerator of which shall be the number of shares of Common Stock outstanding
immediately after such event and the denominator of which shall be 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
Units of Series B Preferred Stock and the holders of shares of Common Stock
shall vote together as one class on all matters submitted to a vote of holders
of Common Stock of the Corporation.
(C) Except as set forth herein, holders of Units of Series B Preferred
Stock shall have no special voting rights and their consents shall not be
required (except to the extent they are entitled to vote with holders of shares
of Common Stock as set forth herein) for taking any corporate action.
Section 4. Certain Restrictions.
--------------------
(A) Whenever any dividends or distributions payable on Units of Series
B Preferred Stock as provided in Section 2 have not been paid in full,
thereafter and until all such accrued and unpaid dividends and distributions,
whether or not declared, on outstanding Units of Series B Preferred Stock shall
have been paid in full, the Corporation shall not:
(i) declare or pay dividends on, make any other distributions
on, or redeem or repurchase or otherwise acquire for consideration, any shares
of junior stock;
B-2
(ii) declare or pay dividends on or make any other
distributions on any shares of parity stock, except dividends paid ratably on
Units of Series B Preferred Stock and shares of all such parity stock on which
dividends are payable or in arrears in proportion to the total amounts to which
the holders of such Units and all such shares are then entitled;
(iii) redeem or repurchase or otherwise acquire for
consideration shares of any parity stock; provided, however, that the
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Corporation may at any time redeem, repurchase or otherwise acquire shares of
any such parity stock in exchange for shares of any junior stock;
(iv) repurchase or otherwise acquire for consideration (other
than shares of junior stock) any Units of Series B Preferred Stock, except in
accordance with a repurchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of such Units on the same
terms.
(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 Xxxxxxx 0,
xxxxxxxxxx or otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any Units of Series B 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
Units shall, upon their cancellation, become authorized but unissued Units 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 voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, no distribution shall be made (i) to the holders
of shares of junior stock unless the holders of Units of Series B Preferred
Stock shall have received, subject to adjustment as hereinafter provided in
paragraph (B), the amount, per Unit, equal to the aggregate per share amount to
be distributed to holders of shares of common stock, or (ii) to the holders of
shares of parity stock, unless simultaneously therewith distributions are made
ratably on Units of Series B Preferred Stock and all other shares of such parity
stock in proportion to the total amounts to which the holders of Units of Series
B Preferred Stock are entitled under clause (i) of this sentence and to which
the holders of shares of such parity stock are entitled, in each case upon such
liquidation, dissolution or winding up.
(B) In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on outstanding shares of common stock
payable in shares of common stock, (ii) subdivide outstanding shares of common
stock, or (iii) combine outstanding shares of common stock into a smaller number
of shares, then in each such case the aggregate amount to which holders of Units
of Series B Preferred Stock were entitled immediately prior to such event
pursuant to clause (i) of paragraph (A) of this Section 6 shall be adjusted by
multiplying such amount by a fraction the numerator of which shall be the number
of shares of common stock that are outstanding immediately after such event and
the denominator of which shall be 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 converted into other stock or
securities, cash and/or any other property, then in any such case Units of
Series B Preferred Stock shall at the same time be similarly exchanged for or
converted into an amount per Unit (subject to the provision for adjustment
hereinafter set forth) equal to 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 converted or exchanged. In the event the
Corporation shall at any time after the Rights Declaration Date
B-3
(i) declare any dividend on outstanding shares of common stock payable in shares
of common stock, (ii) subdivide outstanding shares of common stock, or (iii)
combine outstanding common stock into a smaller number of shares, then in each
such case the amount set forth in the immediately preceding sentence with
respect to the exchange or conversion of Units of Series B Preferred Stock shall
be adjusted by multiplying such amount by a fraction the numerator of which
shall be the number of shares of common stock that are outstanding immediately
after such event and the denominator of which shall be the number of shares of
common stock that were outstanding immediately prior to such event.
Section 8. Redemption. The Units of Series B Preferred Stock shall not be
----------
redeemable.
Section 9. Ranking. The Units of Series B Preferred Stock shall rank
-------
junior to all other series of the Preferred Stock and to any other class of
preferred stock that hereafter may be issued by the Corporation as to the
payment of dividends and the distribution of assets, unless the terms of any
such series or class shall provide otherwise.
Section 10. Amendment. The Certificate, including, without limitation,
---------
this resolution, shall not hereafter be amended, either directly or indirectly,
or through merger or consolidation with another corporation in any manner that
would alter or change the powers, preferences or special rights of the Series B
Preferred Stock so as to affect them adversely without the affirmative vote of
the holders of a majority or more of the outstanding Units of Series B Preferred
Stock, voting separately as a class.
Section 11. Fractional Shares. The Series B Preferred Stock may be issued
-----------------
in Units or other fractions of a share, which Units or fractions 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 B Preferred Stock.
Section 12. Certain Definitions. As used herein with respect to the
-------------------
Series B Preferred Stock, the following terms shall have the following meanings:
(A) The term "Common Stock" means the class of common stock designated
as the Common Stock, par value $.01 per share, of the Corporation at the date
hereof or any other class of stock resulting from successive changes or
reclassification of the common stock.
(B) The term "junior stock" (i) as used in Section 4 means the common
stock and any other class or series of capital stock of the Corporation
hereafter authorized or issued over which the Series B Preferred Stock has
preference or priority as to the payment of dividends and (ii) as used in
Section 6, shall mean the common stock and any other class or series of capital
stock of the Corporation over which the Series B Preferred Stock has preference
or priority in the distribution of assets on any liquidation, dissolution or
winding up of the Corporation.
(C) The term "parity stock" (i) as used in Section 4, means any class
or series of stock of the Corporation hereafter authorized or issued ranking
pari passu with the Series B Preferred Stock as to dividends and (ii) as used in
---- -----
Section 6, shall mean any class or series of capital stock ranking pari passu
---- -----
with the Series B Preferred Stock in the distribution of assets on any
liquidation, dissolution or winding up.
B-4
IN WITNESS WHEREOF, Primus Telecommunications Group, Incorporated has
caused this Certificate to be signed by its President and attested by its
Secretary this ______ day of December, 1998.
PRIMUS TELECOMMUNICATIONS GROUP,
INCORPORATED
By:
-------------------------
K. Xxxx Xxxxx
President
Attest:
By:
----------------------
Xxxxxx X. Xxxxxxx
Secretary
B-5
EXHIBIT C
---------
SUMMARY OF RIGHTS TO PURCHASE PREFERRED STOCK
On December 16, 1998, the Board of Directors of Primus Telecommunications
Group, Incorporated, a Delaware corporation (the "Company"), declared a
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distribution of one Right (as defined below) for each outstanding share of
Common Stock, par value $.01 per share (the "Company Common Stock"), to
--------------------
stockholders of record at the close of business on December 31, 1998 (the
"Record Date") and for each share of Company Common Stock issued (including
------------
shares distributed from Treasury) by the Company thereafter and prior to the
Distribution Date. Each Right entitles the registered holder, subject to the
terms of the Rights Agreement, to purchase from the Company one one-thousandth
of a share (a "Unit") of Series B Junior Participating Preferred Stock, par
----
value $.01 per share (the "Preferred Stock"), at a Purchase Price of $90.00 per
---------------
Unit, subject to adjustment (the "Right"). The Purchase Price is payable in
-----
cash or by certified or bank check or money order payable to the order of the
Company. The description and terms of the Rights are set forth in a Rights
Agreement between the Company and StockTrans, Inc., as Rights Agent (the "Rights
------
Agreement").
---------
Copies of the Rights Agreement and the Certificate of Designation for the
Preferred Stock have been filed with the Securities and Exchange Commission as
exhibits to a Registration Statement on Form 8-A dated December , 1998
(the "Form 8-A"). Copies of the Rights Agreement and the Certificate of
--------
Designation are available free of charge from the Company. This summary
description of the Rights and the Preferred Stock does not purport to be
complete and is qualified in its entirety by reference to all the provisions of
the Rights Agreement and the Certificate of Designation, including the
definitions therein of certain terms, which Rights Agreement and Certificate of
Designation are incorporated herein by reference.
THE RIGHTS AGREEMENT
Initially, the Rights will attach to all certificates representing shares
of outstanding Company Common Stock, and no separate Rights Certificates will be
distributed. The Rights will separate from the Company Common Stock and the
"Distribution Date" will occur (i) upon the earlier of (x) 10 business days
following a public announcement (the date of such announcement being the "Stock
-----
Acquisition Date") that a person or group of affiliated or associated persons
----------------
(other than the Company, any subsidiary of the Company or any employee benefit
plan of the Company or such subsidiary) (an "Acquiring Person") has acquired,
----------------
obtained the right to acquire, or otherwise obtained beneficial ownership of 20%
or more of the then outstanding shares of Company Common Stock, and (y) 10
business days following the commencement of a tender offer or exchange offer
that would result in an Acquiring Person owning 20% or more of the then
outstanding shares of Company Common Stock, or (ii) such later date as may be
determined by action of a majority of the members of the Board of Directors
(such determination to be made prior to such time as any person becomes an
Acquiring Person pursuant to (x) or (y) above). Until the Distribution Date,
(i) the Rights will be evidenced by Company Common Stock certificates and will
be transferred with and only with such Company Common Stock certificates, (ii)
new Company Common Stock certificates issued after the Record Date (also
including shares distributed from Treasury) will contain a notation
incorporating the Rights Agreement by reference and (iii) the surrender for
transfer of any certificates representing outstanding Company Common Stock will
also constitute the transfer of the Rights associated with the Company Common
Stock represented by such certificates.
The Rights are not exercisable until the Distribution Date and will expire
at the close of business on the tenth anniversary of the Rights Agreement 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 Company Common Stock as of the close of
business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights.
In the event that (i) the Company is the surviving corporation in a merger
with an Acquiring Person and shares of Company Common Stock shall remain
outstanding, (ii) a Person becomes the beneficial owner of 20% or more of the
then outstanding shares of Company Common Stock, (iii) an Acquiring Person
engages in one or more "self-dealing" transactions as set forth in the Rights
Agreement, or (iv) during such time as there is an Acquiring Person, an event
occurs which results in such Acquiring Person's ownership interest being
increased by more than 1% (e.g., by means of a reverse stock split or
----
recapitalization), then, in each such case, each holder of a Right will
----
thereafter have the right to receive, upon exercise, Units of Preferred Stock
(or, in certain circumstances, Company Common Stock, cash, property or other
securities of the Company) having a value equal to two times the exercise price
of the Right. The exercise price is the Purchase Price multiplied by the number
of Units of Preferred Stock issuable upon exercise of a Right prior to the
events described in this paragraph. Notwithstanding any of the foregoing,
following the occurrence of any of the events set forth in this paragraph, all
Rights that are, or (under certain circumstances specified in the Rights
Agreement) were, beneficially owned by any Acquiring Person will be null and
void.
In the event that, at any time following the Stock Acquisition Date, (i)
the Company is acquired in a merger or other business combination transaction
and the Company is not the surviving corporation (other than a merger described
in the preceding paragraph), (ii) any Person consolidates or merges with the
Company and all or part of the Company Common Stock is converted or exchanged
for securities, cash or property of any other Person or (iii) 50% or more of the
Company's assets or earning power is sold or transferred, each holder of a Right
(except Rights which previously have been voided as described above) shall
thereafter have the right to receive, upon exercise, common stock of the
Acquiring Person having a value equal to two times the exercise price of the
Right.
The Purchase Price payable, and the number of Units of Preferred Stock
issuable, upon exercise of the Rights 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 or warrants to
subscribe for Preferred Stock or convertible securities at less than the current
market price of the Preferred Stock, or (iii) upon the distribution to the
holders of the Preferred Stock of evidences of indebtedness, cash or assets
(excluding regular quarterly cash dividends) or of subscription rights or
warrants (other than those referred to above).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. The Company is not required to issue fractional Units. In lieu thereof,
an adjustment in cash may be made based on the market price of the Preferred
Stock prior to the date of exercise.
At any time until (i) ten business days following the Stock Acquisition
Date or (ii) such later date as a majority of the members of the Board of
Directors shall determine (such determination to be made prior to the date
specified in (i) above), a majority of the Board of Directors may redeem the
Rights in whole, but not in part, at a price of $.001 per Right (subject to
adjustment in certain events) (the "Redemption Price"), payable, at the election
----------------
of such majority of the Board of Directors, in cash or shares of Company Common
Stock. Immediately upon the action of a majority of the Board of Directors
ordering the redemption of the Rights, the Rights will terminate and the only
right of the holders of Rights will be to receive the Redemption Price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends. 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 Units of Preferred Stock (or other consideration).
C-2
Any of the provisions of the Rights Agreement may be amended by the Board
of Directors without the approval of the holders of Company Common Stock at any
time prior to the Distribution Date. After the Distribution Date, the
provisions of the Rights Agreement may be amended in order to cure any
ambiguity, defect or inconsistency, to make changes which do not adversely
affect the interests of holders of Rights (excluding the interests 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.
DESCRIPTION OF PREFERRED STOCK
The Units of Preferred Stock that may be acquired upon exercise of the
Rights will be nonredeemable and subordinate to any other shares of preferred
stock that may be issued by the Company.
Each Unit of Preferred Stock will be entitled to dividends at the same rate
per share as dividends declared on the Company Common Stock and shall be
entitled to payment of dividends to the extent dividends are declared on the
Company Common Stock. In the event of liquidation, the holder of a Unit of
Preferred Stock will receive the per share amount paid in respect of a share of
Company Common Stock.
In the event of any merger, consolidation or other transaction in which
shares of Company Common Stock are exchanged, each Unit of Preferred Stock will
be entitled to receive the per share amount paid in respect of each share of
Company Common Stock. Each Unit of Preferred Stock will have one vote, voting
together with the Company Common Stock. The rights of holders of the Preferred
Stock to dividends, liquidation and voting, and in the event of mergers and
consolidations, are protected by customary antidilution provisions.
Because of the nature of the Preferred Stock's dividend, liquidation and
voting rights, the economic value of one Unit of Preferred Stock that may be
acquired upon the exercise of each Right should approximate the economic value
of one share of the Company Common Stock.
C-3
