1
EXHIBIT 4
PEGASUS SYSTEMS, INC.
AND
AMERICAN SECURITIES TRANSFER & TRUST, INC.
RIGHTS AGENT
RIGHTS AGREEMENT
DATED AS OF SEPTEMBER 28, 1998
2
TABLE OF CONTENTS
SECTION PAGE
------- ----
Section 1. Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Appointment of Rights Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3. Issuance of Rights Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(a) Distribution Date; Rights Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(b) Common Stock Certificates; Summary of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(c) Legend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 4. Form of Rights Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(a) Form; Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(b) Acquiring Person Legend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 5. Countersignature and Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(a) Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(b) Registration and Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 6. Transfer, Split Up, Combination and Exchange of Rights Certificates; Mutilated, Destroyed, Lost
or Stolen Rights Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(a) Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(b) Issuance of New Rights Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights. . . . . . . . . . . . . . . . . . . . 11
(a) Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(b) Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(c) Rights Agent Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(d) Partial Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(e) Termination of Acquiring Person's Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(f) Surrender of Rights Certificates; Identity of Beneficial Owner . . . . . . . . . . . . . . . . . . . 13
Section 8. Cancellation and Destruction of Rights Certificates . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 9. Reservation and Availability of Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(a) Reservation of Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(b) Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(c) Registration under the Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(d) Covenant Regarding Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(e) Transfer Taxes and Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 10. Preferred Stock Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
i
3
Section 11. Adjustment of Purchase Price; Number and Kind of Shares or Number of Rights . . . . . . . . . . . . 15
(a) Certain Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(b) Purchase Price Adjustment -- Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(c) Purchase Price Adjustment -- Cash, Assets, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(d) Current Market Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(e) Purchase Price Adjustment Threshold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(f) Equivalent Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(g) Post-Adjustment Rights Issuances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(h) Preferred Stock Anti-Dilution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(i) Adjustment of Number of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(j) Rights Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(k) Adjustment Below Par Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(l) Adjustment Effective as of Future Date; Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(m) Tax Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(n) Restriction on Certain Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(o) Restriction Against Diminishing Benefits of the Rights . . . . . . . . . . . . . . . . . . . . . . . 24
(p) Common Stock Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 12. Certificate of Adjusted Purchase Price or Number of Shares . . . . . . . . . . . . . . . . . . . . . 24
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power . . . . . . . . . . . . . . . 25
(a) Flip-over Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(b) Principal Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(c) Supplemental Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(d) Exceptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 14. Fractional Rights and Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(a) Fractional Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(b) Fractional Shares of Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(c) Fractional Shares of Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(d) Waiver of Fractional Rights and Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 15. Rights of Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 16. Agreement of Rights Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 17. Rights Certificate Holder Not Deemed a Stockholder . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 18. Concerning the Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(a) Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(b) Reliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 19. Merger or Consolidation or Change of Name of Rights Agent . . . . . . . . . . . . . . . . . . . . . 31
(a) Successor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ii
4
(b) Prior Countersignatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 20. Duties of Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(a) Legal Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(b) Certification by the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(c) Liability for Negligence, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(d) Statements of Fact or Recitals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(e) Agreement; Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(f) Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(g) Instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(h) Dealing in Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(i) Agents; Reasonable Care . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(j) Expenses; Repayment Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(k) Exercise of Rights; Consultation with Company . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 21. Change of Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 22. Issuance of New Rights Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 23. Redemption and Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(a) Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(b) Effect of Redemption; Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 24. Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(a) Right to Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(b) Effect of Exchange; Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(c) Common Stock Equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(d) Insufficient Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(e) Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 25. Notice of Certain Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(a) Preferred Stock Transactions, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(b) Other Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 26. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 27. Supplements and Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 28. Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 29. Determinations and Actions by the Board of Directors, etc . . . . . . . . . . . . . . . . . . . . . 39
Section 30. Benefits of this Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 31. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
iii
5
Section 32. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 33. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 34. Descriptive Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
EXHIBIT 1 Certificate of Designation, Preferences and Rights of Series
A Preferred Stock
EXHIBIT 2 Form of Rights Certificate
EXHIBIT 3 Letter to Stockholders
EXHIBIT 4 Press Release
iv
6
RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of September 28, 1998, between Pegasus
Systems, Inc., a Delaware corporation (the "Company"), and American Securities
Transfer & Trust, Inc., a Colorado corporation (the "Rights Agent").
RECITALS
On September 28, 1998 (the "Rights Dividend Declaration Date"), the
Board of Directors of the Company authorized and declared a dividend
distribution of one Right for each share of Common Stock (as hereinafter
defined) of the Company outstanding at the close of business on October 13,
1998 (the "Record Date"), and has authorized the issuance of one Right (as such
number may hereafter be adjusted pursuant to the provisions of Section 11(p)
(Adjustment of Purchase Price; Number and Kind of Shares or Number of Rights --
Common Stock Adjustments)) for each share of Common Stock of the Company issued
between the Record Date (whether originally issued or delivered from the
Company's treasury) and the Distribution Date, each Right initially
representing the right to purchase one one-thousandth of a share of Series A
Preferred Stock of the Company having the rights, powers and preferences set
forth in the form of Certificate of Designation, Preferences and Rights
attached hereto as Exhibit 1, upon the terms and subject to the conditions
hereinafter set forth (the "Rights");
AGREEMENT
In consideration of the premises and the mutual agreements herein set
forth, the parties hereto hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement,
the following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or
which, together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner (as such term is hereinafter defined) of 20% or more of the
shares of Common Stock then outstanding, but shall not include (i) the Company,
(ii) any Subsidiary of the Company, (iii) any employee benefit plan of the
Company or of any Subsidiary of the Company, or any Person or entity organized,
appointed or established by the Company for or pursuant to the terms of any
such plan, or (iv) any Person who becomes an Acquiring Person solely as a
result of a reduction in the number of shares of Common Stock outstanding due
to the repurchase of shares of Common Stock by the Company, unless and until
such Person shall purchase or otherwise become (as a result of actions taken by
such Person or its Affiliates or Associates) the Beneficial Owner of additional
shares of Common Stock constituting 1% or more of the then outstanding shares
of Common Stock; provided, however, that if a Person shall become the
Beneficial Owner of 20% or more of the Common Stock of the Company then
outstanding by reason of share repurchases by the Company and shall, after such
share repurchases by the Company, become the Beneficial Owner of any additional
Common Stock of the Company, then such Person shall be deemed to be an
1
7
"Acquiring Person," unless upon the consummation of the acquisition of such
additional shares of Common Stock such Person does not beneficially own 20% or
more of the shares of Common Stock then outstanding. Notwithstanding the
foregoing, if the Board of Directors of the Company determines in good faith
that a Person who would otherwise be an Acquiring Person, as defined pursuant
to the foregoing provisions of this paragraph, has become such inadvertently
(including, without limitation, because (i) such Person was unaware that it
beneficially owned a percentage of Common Stock that would otherwise cause such
Person to be an Acquiring Person, or (ii) such Person was aware of the extent
of its Beneficial Ownership of Common Stock but had no actual knowledge of the
consequences of such Beneficial Ownership under this Agreement) and without any
intention of changing or influencing control of the Company, and such Person
divests as promptly as practicable a sufficient number of shares of Common
Stock so that such Person would no longer be an Acquiring Person as defined
pursuant to the foregoing provisions of this paragraph, then such Person shall
not be deemed to be or to have become an Acquiring Person for any purposes of
this Agreement.
(b) "Act" shall mean the Securities Act of 1933, as
amended as of the date hereof and in effect from time to time.
(c) "Adjustment Shares" shall have the meaning set forth
in Section 11(a)(ii) (Adjustment of Purchase Price; Number and Kind of Shares
or Number of Rights -- Certain Adjustments).
(d) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act.
(e) "Agreement" shall mean this Rights Agreement as
originally executed or as it may from time to time be supplemented or amended
pursuant to the applicable provisions hereof.
(f) "Beneficial Owner"; "Beneficial Ownership": A Person
shall be deemed the "Beneficial Owner" of, and shall be deemed to "beneficially
own," any securities:
(i) which such Person or any of such Person's
Affiliates or Associates, directly or indirectly, has the right to acquire
(whether such right is exercisable immediately or only after the passage of
time) pursuant to any agreement, arrangement or understanding (whether or not
in writing) or upon the exercise of conversion rights, exchange rights, rights,
warrants or options, or otherwise; provided, however, that a Person shall not,
for purposes of this paragraph (i), be deemed the "Beneficial Owner" of or to
"beneficially own," (A) securities tendered pursuant to a tender or exchange
offer made by such Person or any of such Person's Affiliates or Associates
until such tendered securities are accepted for purchase or exchange, or (B)
securities issuable upon exercise of Rights at any time prior to the occurrence
of a Triggering Event, or (C) securities issuable upon exercise of Rights from
and after the occurrence of a Triggering Event, which Rights were acquired by
such Person or any of such Person's Affiliates or Associates prior to the
Distribution Date or pursuant to Section 3(a) (Issuance of Rights Certificates
-- Distribution Date; Rights Certificates) or Section 22 (Issuance of New
Rights
2
8
Certificates) (the "Original Rights") or pursuant to Section 11(i) (Adjustment
of Purchase Price; Number and Kind of Shares or Number of Rights -- Adjustment
of Number of Rights) in connection with an adjustment made with respect to any
Original Rights;
(ii) which such Person or any of such Person's
Affiliates or Associates, directly or indirectly, has the right to vote or
dispose of or has "beneficial ownership" of (as determined pursuant to Rule
13d-3 of the General Rules and Regulations under the Exchange Act), including
pursuant to any agreement, arrangement or understanding, whether or not in
writing; provided, however, that a Person shall not be deemed the "Beneficial
Owner" of, or to "beneficially own," any security under this subparagraph (ii)
as a result of an agreement, arrangement or understanding to vote such security
if such agreement, arrangement or understanding: (A) arises solely from a
revocable proxy given in response to a public proxy or consent solicitation
made pursuant to, and in accordance with, the applicable provisions of the
General Rules and Regulations under the Exchange Act, and (B) is not also then
reportable by such Person on a Schedule 13D under the Exchange Act (or any
comparable or successor report); or
(iii) which are "beneficially owned," directly or
indirectly, by any other person (or any Affiliate or Associate thereof) with
which such Person (or any of such Person's Affiliates or Associates) has any
agreement, arrangement or understanding (whether or not in writing), for the
purpose of acquiring, holding, voting (except pursuant to a revocable proxy as
described in the proviso to subparagraph (ii) of this paragraph (f)) or
disposing of any voting securities of the Company; provided, however, that
nothing in this paragraph (f) shall cause a person engaged in business as an
underwriter of securities to be the "Beneficial Owner" of or to "beneficially
own," any securities acquired through such person's participation in good faith
in a firm commitment underwriting until the expiration of forty (40) calendar
days after the date of such acquisition.
(g) "Board" means the Board of Directors of the Company.
(h) "Business Day" shall mean any day other than a
Saturday, Sunday or a day on which banking institutions in the State of Texas
are authorized or obligated by law or executive order to close.
(i) "Close of Business" on any given date shall mean 5:00
P.M., Dallas, Texas time, on such date; provided, however, that if such date is
not a Business Day it shall mean 5:00 P.M., Dallas, Texas time, on the next
succeeding Business Day.
(j) "Common Stock" shall mean the common stock, $.01 par
value per share, of the Company, except that "Common Stock" when used with
reference to any Person other than the Company shall mean the capital stock of
such Person with the greatest voting power, or the equity securities or other
equity interest having power to control or direct the management, of such
Person.
3
9
(k) "Common Stock Equivalents" shall have the meaning set
forth in Section 11(a)(iii) (Adjustment of Purchase Price; Number and Kind of
Shares or Number of Rights -- Certain Adjustments).
(l) "Company" shall mean the Person named as the
"Company" in the first paragraph of this Agreement until a successor
corporation shall have become such, or until a Principal Party shall assume,
and thereafter be liable for, all obligations and duties of the Company
hereunder, pursuant to the applicable provisions of this Agreement, and
thereafter "Company" shall mean such successor corporation or Principal Party.
(m) "Current Market Price" shall have the meaning set
forth in Section 11(d) (Adjustment of Purchase Price; Number and Kind of Shares
or Number of Rights -- Current Market Price).
(n) "Current Value" shall have the meaning set forth in
Section 11(a)(iii) (Adjustment of Purchase Price; Number and Kind of Shares or
Number of Rights -- Certain Adjustments).
(o) "Distribution Date" shall have the meaning set forth
in Section 3(a) (Issuance of Rights Certificates -- Distribution Date; Rights
Certificates).
(p) "Equivalent Preferred Stock" shall have the meaning
set forth in Section 11(b) (Adjustment of Purchase Price; Number and Kind of
Shares or Number of Rights -- Purchase Price Adjustment -- Capital Stock).
(q) "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended as of the date hereof and in effect on the date of this
Agreement.
(r) "Exchange Number" shall mean one-half of the number
of shares of Common Stock, one one- thousandth of a share of Preferred Stock,
or shares or other units of other property for which a Right is exercisable
immediately prior to the time of the action of the Board to exchange the
Rights.
(s) "Expiration Date" shall have the meaning set forth in
Section 7(a) (Exercise of Rights; Purchase Price; Expiration Date of Rights --
Exercise).
(t) "Final Expiration Date" shall mean the Close of
Business on October 13, 2008.
(u) "Flip-in Event" shall mean any event described in
Section 11(a)(ii)(A) or (B) (Adjustment of Purchase Price; Number and Kind of
Shares or Number of Rights -- Certain Adjustments).
4
10
(v) "Flip-in Trigger Date" shall have the meaning set
forth in Section 11(a)(iii) (Adjustment of Purchase Price; Number and Kind of
Shares or Number of Rights -- Certain Adjustments).
(w) "Flip-over Event" shall mean any event described in
clauses (x), (y) or (z) of Section 13(a) (Consolidation, Merger or Sale or
Transfer of Assets or Earning Power -- Flip-over Event).
(x) "Original Rights" shall have the meaning set forth in
Section 1(f)(i) (Certain Definitions).
(y) "Person" shall mean any individual, firm,
corporation, partnership, limited liability company or other entity.
(bb) "Preferred Stock" shall mean shares of Preferred
Stock, Series A, $.01 par value per share, of the Company (the "Series A
Preferred Stock"), and, to the extent that there is not a sufficient number of
shares of Series A Preferred Stock authorized to permit the full exercise of
the Rights, any other series of Preferred Stock, $.01 par value per share, of
the Company designated for such purpose containing terms substantially similar
to the terms of the Series A Preferred Stock.
(cc) "Principal Party" shall have the meaning set forth in
Section 13(b) (Consolidation, Merger or Sale or Transfer of Assets or Earning
Power -- Principal Party).
(dd) "Purchase Price" shall have the meaning set forth in
Section 4(a) (Form of Rights Certificates -- Form; Date).
(ee) "Record Date" shall have the meaning set forth in the
Recitals at the beginning of the Agreement.
(ff) "Redemption Date" shall have the meaning set forth in
Section 23(a) (Redemption and Termination -- Redemption).
(gg) "Redemption Price" shall have the meaning set forth
in Section 23(a) (Redemption and Termination -- Redemption).
(hh) "Rights" shall have the meaning set forth in the
Recitals at the beginning of the Agreement.
(ii) "Rights Agent" shall mean the Person named as the
"Rights Agent" in the first paragraph of this Agreement until a successor
Rights Agent shall have become such pursuant to the applicable provisions
hereof and thereafter "Rights Agent" shall mean such successor Rights Agent.
If at any time there is more than one Person appointed by the Company as Rights
Agent pursuant to the applicable provisions of this Agreement, "Rights Agent"
shall mean and include each such Person.
5
11
(jj) "Rights Certificates" shall have the meaning set
forth in Section 3(a) (Issuance of Rights Certificates -- Distribution Date;
Rights Certificates).
(kk) "Rights Dividend Declaration Date" shall have the
meaning set forth in the Recitals at the beginning of the Agreement.
(ll) "Spread" shall have the meaning set forth in Section
11(a)(iii) (Adjustment of Purchase Price; Number and Kind of Shares or Number
of Rights -- Certain Adjustments).
(mm) "Stock Acquisition Date" shall mean the first date of
public announcement (which, for purposes of this definition, shall include,
without limitation, a report filed pursuant to Section 13(d) under the Exchange
Act) by the Company or an Acquiring Person that an Acquiring Person has become
such.
(nn) "Subsidiary" shall mean, with reference to any
Person, any corporation or other entity of which a majority of the voting power
of equity securities or majority of the equity interest is beneficially owned,
directly or indirectly, by such Person, or otherwise controlled by such Person.
(oo) "Substitution Period" shall have the meaning set
forth in Section 11(a)(iii) (Adjustment of Purchase Price; Number and Kind of
Shares or Number of Rights -- Certain Adjustments).
(pp) "Trading Day" shall have the meaning set forth in
Section 11(d)(i) (Adjustment of Purchase Price; Number and Kind of Shares or
Number of Rights -- Current Market Price).
(qq) "Triggering Event" shall mean any Flip-in Event or
any Flip-over Event.
Section 2. Appointment of Rights Agent. The Company hereby
appoints the Rights Agent to act as agent for the Company in accordance with
the terms and conditions hereof, and the Rights Agent hereby accepts such
appointment. The Company may from time to time appoint such additional rights
agents (the "Co-Rights Agents") as it may deem necessary or desirable.
Section 3. Issuance of Rights Certificates.
(a) Distribution Date; Rights Certificates. Until the
earlier of (i) the Close of Business on the tenth Business Day after the Stock
Acquisition Date (or, if the tenth Business Day after the Stock Acquisition
Date occurs before the Record Date, the Close of Business on the Record Date),
or (ii) the Close of Business on the tenth Business Day (or such later date as
the Board shall determine prior to such time as any Person becomes an Acquiring
Person) after the date that a tender or exchange offer by any Person (other
than the Company, any Subsidiary of the Company, any employee benefit plan of
the Company or of any Subsidiary of the Company, or any Person or entity
organized, appointed or established by the Company for or pursuant to the terms
of any such plan) is first published or sent or given within the meaning of
6
12
Rule 14d-2(a) of the General Rules and Regulations under the Exchange Act, if
upon consummation thereof such Person would be the Beneficial Owner of 20% or
more of the shares of Common Stock then outstanding (the earlier of (i) and
(ii) being herein referred to as the "Distribution Date"), (x) the Rights will
be evidenced (subject to the provisions of paragraph (b) of this Section 3) by
the certificates for the Common Stock registered in the names of the holders of
the Common Stock (which certificates for Common Stock shall be deemed also to
be certificates for Rights) and not by separate certificates, and (y) the
Rights will be transferable only in connection with the transfer of the
underlying shares of Common Stock (including a transfer to the Company, except
pursuant to the provision of Section 23 (Redemption and Termination)). As soon
as practicable after the Distribution Date, the Rights Agent will send by
first-class, insured, postage prepaid mail, to each record holder of the Common
Stock as of the Close of Business on the Distribution Date, at the address of
such holder shown on the records of the Company, one or more rights
certificates, in substantially the form of Exhibit 2 hereto (the "Rights
Certificates"), evidencing one Right for each share of Common Stock so held,
subject to adjustment as provided herein. In the event that an adjustment in
the number of Rights per share of Common Stock has been made pursuant to
Section 11(p) (Adjustment of Purchase Price; Number and Kind of Shares or
Number of Rights -- Common Stock Adjustments) at the time of distribution of
the Rights Certificates, the Company shall make the necessary and appropriate
rounding adjustments (in accordance with Section 14(a) (Fractional Rights and
Fractional Shares -- Fractional Rights)) so that Rights Certificates
representing only whole numbers of Rights are distributed and cash is paid in
lieu of any fractional Rights. As of and after the Distribution Date, the
Rights will be evidenced solely by such Rights Certificates.
(b) Common Stock Certificates; Summary of Rights. With
respect to certificates for the Common Stock outstanding as of the Record Date,
until the Distribution Date, the Rights associated with the Common Stock
represented by such certificates will be evidenced by such certificates alone
and the registered holders of such Common Stock shall also be the registered
holders of the associated Rights. Until the earlier of the Distribution Date
or the Expiration Date, the transfer of any certificates representing shares of
Common Stock in respect of which Rights have been issued shall also constitute
the transfer of the Rights associated with such shares of Common Stock. On the
Record Date, or as soon as practicable thereafter, the Company will send a copy
of a Summary of Rights to Purchase Preferred Stock, in substantially the form
of Exhibit 3 hereto (the "Summary of Rights"), by first-class, postage-prepaid
mail, to each record holder of shares of Common Stock as of the Close of
Business on the Record Date, at the address of such holder shown on the records
of the Company.
(c) Legend. Rights shall be issued in respect of all
certificates for shares of Common Stock which are issued (whether originally
issued or from the Company's treasury) after the Record Date but prior to the
earliest of the (i) Distribution Date, (ii) the Expiration Date, or (iii) the
Redemption Date, or, in certain circumstances provided in Section 22 (Issuance
of New Rights Certificates) after the Distribution Date. Certificates
representing such shares of Common Stock shall also be deemed to be
certificates for Rights, and shall bear the following legend:
This certificate also evidences and entitles the holder hereof
to certain Rights as set forth in the Rights Agreement dated
as of September 28, 1998, by and between
7
13
Pegasus Systems, Inc. (the "Company") and AMERICAN SECURITIES
TRANSFER & TRUST, INC., as Rights Agent (the "Rights
Agreement"), the terms of which are hereby incorporated herein
by reference and a copy of which is on file at the principal
offices of the Company. Under certain circumstances, as set
forth in the Rights Agreement, such Rights will be evidenced
by separate certificates and will no longer be evidenced by
this certificate. The Company will mail to the holder of this
certificate a copy of the Rights Agreement, as in effect on
the date of mailing, without charge promptly after receipt of
a written request therefor. Under certain circumstances set
forth in the Rights Agreement, Rights issued to, or held by,
any Person who is, was or becomes an Acquiring Person or any
Affiliate or Associate thereof (as such terms are defined in
the Rights Agreement), whether currently held by or on behalf
of such Person or by any subsequent holder, may become null
and void.
With respect to such certificates containing the foregoing legend, until the
earliest of (i) the Distribution Date, (ii) the Expiration Date, and (iii) the
Redemption Date, (x) the Rights associated with the Common Stock represented by
such certificates shall be evidenced by such certificates alone, (y) the
registered holders of such Common Stock shall also be the registered holders of
the associated Rights and (z) the transfer of any of such certificates shall
also constitute the transfer of the Rights associated with such shares of
Common Stock. In the event that the Company purchases, or acquires any shares
of Common Stock after the Record Date but prior to the Distribution Date, any
rights associated with such shares of Common Stock shall be deemed canceled and
retired so that the Company shall not be entitled to exercise any Rights
associated with shares of Common Stock which are no longer outstanding.
Section 4. Form of Rights Certificates.
(a) Form; Date. The Rights Certificates (and the forms
of election to purchase and of assignment to be printed on the reverse thereof)
shall each be substantially in the form set forth in Exhibit 2 hereto and may
have such marks of identification or designation and such legends, summaries or
endorsements printed thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange on which the
Rights may from time to time be listed or any securities association on whose
interdealer quotation system the Rights may be from time to time authorized for
quotation, or to conform to usage. Subject to the provisions of Section 11
(Adjustment of Purchase Price; Number and Kind of Shares or Number of Rights)
and Section 22 (Issuance of New Rights Certificates), the Rights Certificates,
whenever distributed, shall be dated as of the Record Date and on their face
shall entitle the holders thereof to purchase such number of one one-thousandth
of a share of Preferred Stock as shall be set forth therein at the price set
forth therein (such exercise price per one one-thousandth of a share is
referred to herein as the "Purchase Price"), but the amount and type of
securities purchasable upon the exercise of each Right and the Purchase Price
thereof shall be subject to adjustment as provided herein.
8
14
(b) Acquiring Person Legend. Any Rights Certificate
issued pursuant to Section 3(a) (Issuance of Rights Certificates --
Distribution Date; Rights Certificates) or Section 22 (Issuance of New Rights
Certificates) that represents Rights beneficially owned by (i) an Acquiring
Person or any Associate or Affiliate of an Acquiring Person, (ii) a transferee
of an Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee after the Acquiring Person becomes such, or (iii) a transferee of an
Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee prior to or concurrently with the Acquiring Person becoming such and
receives such Rights pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person to holders of equity interests in such
Acquiring Person or to any Person with whom such Acquiring Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which the Board has determined is part of a plan,
arrangement or understanding which has as a primary purpose or effect avoidance
of Section 7(e) (Exercise of Rights; Purchase Price; Expiration Date of Rights
-- Termination of Acquiring Person's Rights) and any Rights Certificate issued
pursuant to Section 6 (Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates),
Section 11 (Adjustment of Purchase Price; Number and Kind of Shares or Number
of Rights) or Section 22 (Issuance of New Rights Certificates) upon transfer,
exchange, replacement or adjustment of any other Rights Certificate referred to
in this sentence, shall contain (to the extent feasible) the following legend:
The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became an Acquiring Person
or an Affiliate or Associate of an Acquiring Person (as such terms are
defined in the Rights Agreement dated as of September 28, 1998, by and
between Pegasus Systems, Inc. and AMERICAN SECURITIES TRANSFER &
TRUST, INC., as Rights Agent). Accordingly, this Rights Certificate
and the Rights represented hereby may become null and void in the
circumstances specified in Section 7(e) (Exercise of Rights; Purchase
Price; Expiration Date of Rights -- Termination of Acquiring Person's
Rights) of such Agreement.
Section 5. Countersignature and Registration.
(a) Signatures. The Rights Certificates shall be
executed on behalf of the Company by its Chairman of the Board, its President
or any Vice President, either manually or by facsimile signature, and shall
have affixed thereto the Company's seal or a facsimile thereof which shall be
attested to by the Secretary or an Assistant Secretary of the Company, either
manually or by facsimile signature. The Rights Certificates shall be
countersigned by the Rights Agent, either manually or by facsimile signature,
and shall not be valid for any purpose unless so countersigned. In case any
officer of the Company who shall have signed any of the Rights Certificates
shall cease to be such officer of the Company before countersignature by the
Rights Agent and issuance and delivery by the Company, such Rights
Certificates, nevertheless, may be countersigned by the Rights Agent and issued
and delivered by the Company with the same force and effect as though the
person who signed such Rights Certificates had not ceased to be such officer of
the Company; and any Rights Certificates may be signed on behalf of the Company
by any person who, at the actual date of the execution of such Rights
Certificate, shall be a
9
15
proper officer of the Company to sign such Rights Certificate, although at the
date of the execution of this Rights Agreement any such person was not such an
officer.
(b) Registration and Transfer. Following the
Distribution Date, the Rights Agent will keep or cause to be kept, at its
principal office or offices designated as the appropriate place for surrender
of Rights Certificates upon exercise or transfer, books for registration and
transfer of the Rights Certificates issued hereunder. Such books shall show
the names and addresses of the respective holders of the Rights Certificates,
the number of Rights evidenced on its face by each of the Rights Certificates
and the date of each of the Rights Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of
Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.
(a) Procedure. Subject to the provisions of Section 4(b)
(Form of Rights Certificates -- Acquiring Person Legend), Section 7(e)
(Exercise of Rights; Purchase Price; Expiration Date of Rights -- Termination
of Acquiring Person's Rights) and Section 14 (Fractional Rights and Fractional
Shares), at any time after the Close of Business on the Distribution Date, and
at or prior to the Close of Business on the Expiration Date, any Rights
Certificate or Certificates may be transferred, split up, combined or exchanged
for another Rights Certificate or Certificates, entitling the registered holder
to purchase a like number of one one-thousandth of a share of Preferred Stock
(or, following a Triggering Event, Common Stock, other securities, cash or
other assets, as the case may be) as the Rights Certificate or Certificates
surrendered then entitled such holder (or former holder in the case of a
transfer) to purchase. Any registered holder desiring to transfer, split up,
combine or exchange any Rights Certificate or Certificates shall make such
request in writing delivered to the Rights Agent, and shall surrender the
Rights Certificate or Certificates to be transferred, split up, combined or
exchanged at the principal office or offices of the Rights Agent designated for
such purpose. Neither the Rights Agent nor the Company shall be obligated to
take any action whatsoever with respect to the transfer of any such surrendered
Rights Certificate until the registered holder shall have completed and signed
the certificate contained in the form of assignment on the reverse side of such
Rights Certificate and shall have provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request. Thereupon, the
Rights Agent shall, subject to Section 4(b), Section 7(e) 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) Issuance of New Rights Certificates. Upon receipt by
the Company and the Rights Agent of evidence reasonably satisfactory to them of
the loss, theft, destruction or mutilation of a Rights Certificate, and, in
case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to them, and reimbursement to the Company and the Rights Agent of
all reasonable expenses incidental thereto, and upon surrender to the Rights
Agent and cancellation of the Rights Certificate if mutilated, the Company will
execute and deliver a new
10
16
Rights Certificate of like tenor to the Rights Agent for countersignature and
delivery to the registered owner in lieu of the Rights Certificate so lost,
stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date
of Rights.
(a) Exercise. Subject to Section 7(e) (Exercise of
Rights; Purchase Price; Expiration Date of Rights -- Termination of Acquiring
Person's Rights), the registered holder of any Rights Certificate may exercise
the Rights evidenced thereby (except as otherwise provided herein, including,
without limitation, the restrictions on exercisability set forth in Section
9(c) (Reservation and Availability of Capital Stock -- Registration under the
Act), Section 11(a)(iii) (Adjustment of Purchase Price; Number and Kind of
Shares or Number of Rights -- Certain Adjustments), Section 23(a) (Redemption
and Termination -- Redemption), and Section 24(b) (Exchange -- Effect of
Exchange; Procedure)) 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 principal office or offices of the Rights Agent designated
for such purpose, together with payment of the aggregate Purchase Price with
respect to the total number of one one-thousandth of a share of Preferred Stock
(or other securities, cash or other assets, as the case may be) as to which
such surrendered Rights are then exercisable and an amount equal to any
applicable transfer tax, at or prior to the earliest of (i) the Final
Expiration Date, (ii) the Redemption Date, or (iii) the expiration of the
Rights pursuant to Section 13(d) (Consolidation, Merger or Sale or Transfer of
Assets or Earning Power -- Exceptions) (the earliest of (i), (ii) and (iii)
being herein referred to as the "Expiration Date"). The payment of the
Purchase Price and the applicable transfer tax, if any (as such amount may be
reduced pursuant to Section 11(a)(iii) (Adjustment of Purchase Price; Number
and Kind of Shares or Number of Rights -- Certain Adjustments)), may be made
(x) in cash, (y) by certified check, cashier's check or money order payable to
the order of the Company, or (z) by delivery of a certificate or certificates
(with appropriate stock powers executed in blank attached thereto) evidencing a
number of shares of Common Stock equal to the then Purchase Price divided by
the closing price (as determined pursuant to Section 11(d) (Adjustment of
Purchase Price; Number and Kind of Shares or Number of Rights -- Current Market
Price) per share of Common Stock on the Trading Day immediately preceding the
date of such exercise. In the event that the Company is obligated to issue
other securities (including Common Stock) of the Company, pay cash and/or
distribute other property pursuant to Section 11(a), the Company will make all
arrangements necessary so that such other securities, cash and/or other
property are available for distribution by the Rights Agent, if and when
appropriate. The Company reserves the right to require prior to the occurrence
of a Triggering Event that upon any exercise of Rights, a number of Rights be
exercised so that only whole shares of Preferred Stock would be issued.
(b) Purchase Price. The Purchase Price for each one
one-thousandth of a share of Preferred Stock pursuant to the exercise of a
Right shall initially be $90.00, and shall be subject to adjustment from time
to time as provided in Section 11 (Adjustment of Purchase Price; Number and
Kind of Shares or Number of Rights) and Section 13(a) (Consolidation, Merger or
Sale or Transfer of Assets or Earning Power -- Flip-over Event) and shall be
payable in accordance with paragraph (a) of this Section 7.
11
17
(c) Rights Agent Actions. Upon receipt of a Rights
Certificate representing exercisable Rights and the compliance by the holder of
such Rights Certificate with paragraph (a) of this Section 7, the Rights Agent
shall, subject to Section 20(k) (Duties of Rights Agent -- Exercise of Rights;
Consultation with Company), thereupon promptly (i) (A) requisition from any
transfer agent of the shares of Preferred Stock (or make available, if the
Rights Agent is the transfer agent for such shares) certificates for the total
number of one one-thousandth of a share of Preferred Stock to be purchased and
the Company hereby irrevocably authorizes its transfer agent to comply with all
such requests, or (B) if the Company shall have elected to deposit the total
number of shares of Preferred Stock issuable upon exercise of the Rights
hereunder with a depositary agent, requisition from the depositary agent
depositary receipts representing such number of one one-thousandth of a share
of Preferred Stock as are to be purchased (in which case certificates for the
shares of Preferred Stock represented by such receipts shall be deposited by
the transfer agent with the depositary agent) and the Company will direct the
depositary agent to comply with such request, (ii) requisition from the Company
the amount of cash, if any, to be paid in lieu of fractional shares in
accordance with Section 14 (Fractional Rights and Fractional Shares), (iii)
after receipt thereof, deliver such certificates or depositary receipts to or
upon the order of the registered holder of such Rights Certificate, registered
in such name or names as may be designated by such holder and (iv) after
receipt thereof, deliver such cash, if any, to or upon the order of the
registered holder of such Rights Certificate.
(d) Partial Exercise. In case the registered holder of
any Rights Certificate shall exercise less than all the Rights evidenced
thereby, a new Rights Certificate evidencing Rights equivalent to the Rights
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 (Fractional Rights and Fractional Shares).
(e) Termination of Acquiring Person's Rights.
Notwithstanding anything in this Agreement to the contrary, from and after the
first occurrence of a Flip-in Event, any Rights beneficially owned by (i) an
Acquiring Person, or an Associate or Affiliate of an Acquiring Person, (ii) a
transferee of an Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee after such Acquiring Person becomes such, or (iii) a
transferee of an Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee prior to or concurrently with the Acquiring Person
becoming such and receives such Rights pursuant to either (A) a transfer
(whether or not for consideration) from the Acquiring Person to holders of
equity interests in such Acquiring Person or to any Person with whom the
Acquiring Person has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer which the Board has
determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect the avoidance of this Section 7(e), shall become null
and void without any further action and no holder of such Rights shall have any
rights whatsoever with respect to such Rights, whether under any provision of
this Agreement or otherwise. The Company shall use all reasonable efforts to
ensure that the provisions of this Section 7(e) and Section 4(b) (Form of
Rights Certificates -- Acquiring Person Legend) are complied with, but shall
have no liability to any holder of Rights Certificates or other Person as a
result of its failure
12
18
to make any determinations with respect to an Acquiring Person or any of its
respective Affiliates, Associates or transferees hereunder.
(f) Surrender of Rights Certificates; Identity of
Beneficial Owner. Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a registered holder upon the occurrence of any purported
exercise as set forth in this Section 7 unless such registered holder shall
have (i) completed and signed the certificate contained in the form of election
to purchase set forth on the reverse side of the Rights Certificate surrendered
for such exercise, and (ii) provided such additional evidence of the identity
of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Rights Certificates.
All Rights Certificates surrendered for the purpose of exercise, transfer,
split up, combination or exchange shall, if surrendered to the Company or any
of its agents, be delivered to the Rights Agent for cancellation or in canceled
form, or, if surrendered to the Rights Agent, shall be canceled by it, and no
Rights Certificates shall be issued in lieu thereof except as expressly
permitted by any of the provisions of this Agreement. The Company shall
deliver to the Rights Agent for cancellation and retirement, and the Rights
Agent shall so cancel and retire, any other Rights Certificate purchased or
acquired by the Company otherwise than upon the exercise thereof. The Rights
Agent shall deliver all canceled Rights Certificates to the Company, or shall,
at the written request of the Company, destroy such canceled Rights
Certificates, and in such case shall deliver a certificate of destruction
thereof to the Company.
Section 9. Reservation and Availability of Capital Stock.
(a) Reservation of Capital Stock. The Company will cause
to be reserved and kept available out of its authorized and unissued shares of
Preferred Stock (and, following the occurrence of a Triggering Event, out of
its authorized and unissued shares of Common Stock and/or other securities or
out of its authorized and issued shares of Common Stock held in its treasury),
the number of shares of Preferred Stock (and, following the occurrence of a
Triggering Event, Common Stock and/or other securities) that, as provided in
this Agreement, including the rights of the Company under Section 11(a)(iii)
(Adjustment of Purchase Price; Number and Kind of Shares or Number of Rights --
Certain Adjustments) to otherwise fulfill its obligations, will be sufficient
to permit the exercise in full of all outstanding Rights.
(b) Listing. So long as the shares of Preferred Stock
(and, following the occurrence of a Triggering Event, Common Stock and/or other
securities) issuable and deliverable upon the exercise of the Rights may be
listed on any national securities exchange or authorized for quotation on any
interdealer quotation system of any securities association, the Company shall
use its best efforts to cause, from and after such time as the Rights become
exercisable, all shares reserved for such issuance to be listed on such
exchange or quoted on such system upon official notice of issuance upon such
exercise.
13
19
(c) Registration under the Act. The Company will use its
best efforts to (i) file, as soon as practicable following the earliest date
after the first occurrence of a Flip-in Event on which the consideration to be
delivered by the Company upon exercise of the Rights has been determined in
accordance with Section 11(a)(iii) (Adjustment of Purchase Price; Number and
Kind of Shares or Number of Rights -- Certain Adjustments), or as soon as is
required by law following the Distribution Date, as the case may be, a
registration statement on an appropriate form under the Act with respect to the
securities purchasable upon exercise of the Rights, (ii) cause such
registration statement to become effective as soon as practicable after such
filing, and (iii) cause such registration statement to remain effective (with a
prospectus at all times meeting the requirements of the Act) until the earlier
of (A) the date as of which the Rights are no longer exercisable for such
securities, and (B) the Expiration Date. The Company will also take such
action as may be appropriate under, or to ensure compliance with, the
securities or "blue sky" laws of the various states in connection with the
exercisability of the Rights. The Company may temporarily suspend, for a
period of time not to exceed ninety (90) calendar days after the date set forth
in clause (i) of the first sentence of this Section 9(c), the exercisability of
the Rights in order to prepare and file such registration statement and permit
it to become effective. Upon any such suspension, the Company shall issue a
public announcement stating that the exercisability of the Rights has been
temporarily suspended, as well as a public announcement at such time as the
suspension is no longer in effect. In addition, if the Company shall determine
that a registration statement is required following the Distribution Date, the
Company may temporarily suspend the exercisability of the Rights until such
time as a registration statement has been declared effective. Notwithstanding
any provision of this Agreement to the contrary, the Rights shall not be
exercisable in any jurisdiction if the requisite qualification in such
jurisdiction shall not have been obtained, the exercise thereof shall not be
permitted under applicable law or a registration statement shall not have been
declared effective.
(d) Covenant Regarding Capital Stock. The Company will
take all such action as may be necessary to ensure that all one one-thousandth
of a share of Preferred Stock (and, following the occurrence of a Triggering
Event, Common Stock and/or other securities) delivered upon exercise of Rights
shall, at the time of delivery of the certificates for such shares (subject to
payment of the Purchase Price), be duly and validly authorized and issued and
fully paid and nonassessable.
(e) Transfer Taxes and Charges. The Company will pay
when due and payable any and all federal and state transfer taxes and charges
which may be payable in respect of the issuance or delivery of the Rights
Certificates and of any certificates for a number of one one-thousandth of a
share of Preferred Stock (or Common Stock and/or other securities, as the case
may be) upon the exercise of Rights. The Company shall not, however, be
required to pay any transfer tax which may be payable in respect of any
transfer or delivery of Rights Certificates to a Person other than, or the
issuance or delivery of a number of one one-thousandth of a share of Preferred
Stock (or Common Stock and/or other securities, as the case may be) in respect
of a name other than, that of the registered holder of the Rights Certificates
evidencing Rights surrendered for exercise or to issue or deliver any
certificates for a number of one one-thousandth of a share of Preferred Stock
(or Common Stock and/or other securities, as the case may be) in a name other
than that of the registered holder upon the exercise of any Rights until such
tax
14
20
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 a number of one one-thousandth of a share of Preferred
Stock (or Common Stock and/or other securities, as the case may be) is issued
upon the exercise of Rights shall for all purposes be deemed to have become the
holder of record of such fractional shares of Preferred Stock (or Common Stock
and/or other securities, as the case may be) represented thereby on, and such
certificate shall be dated as of, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and all applicable transfer taxes) was made; provided, however, that if the
date of such surrender and payment is a date upon which the Preferred Stock (or
Common Stock and/or other securities, as the case may be) transfer books of the
Company are closed, such Person shall be deemed to have become the record
holder of such shares (fractional or otherwise) on, and such certificate shall
be dated, the next succeeding Business Day on which the Preferred Stock (or
Common Stock and/or other securities, as the case may be) transfer books of the
Company are open. Prior to the exercise of the Rights evidenced thereby, the
holder of a Rights Certificate shall not be entitled to any rights of a
stockholder of the Company with respect to shares for which the Rights shall be
exercisable, including, without limitation, the right to vote, to receive
dividends or other distributions or to exercise any preemptive rights, and
shall not be entitled to receive any notice of any proceedings of the Company,
except as provided herein.
Section 11. Adjustment of Purchase Price; Number and Kind of
Shares or Number of Rights. The Purchase Price, the number and kind of shares
covered by each Right and the number of Rights outstanding are subject to
adjustment from time to time as provided in this Section 11.
(a) Certain Adjustments.
(i) In the event the Company shall at any time
after the date of this Agreement (A) declare a dividend on the Preferred Stock
payable in shares of Preferred Stock, (B) subdivide or split the outstanding
Preferred Stock, (C) combine the outstanding Preferred Stock into a smaller
number of shares, or (D) issue any shares of its capital stock in a
reclassification of the Preferred Stock (including any such reclassification in
connection with a consolidation or merger in which the Company is the
continuing or surviving corporation), except as otherwise provided in this
Section 11(a) and Section 7(e) (Exercise of Rights; Purchase Price; Expiration
Date of Rights -- Termination of Acquiring Person's Rights), the Purchase
Price in effect at the time of the record date for such dividend or of the
effective date of such subdivision, split, combination or reclassification, and
the number and kind of shares of Preferred Stock or capital stock, as the case
may be, issuable on such date, shall be proportionately adjusted so that the
holder of any Right exercised after such time shall be entitled to receive,
upon payment of the aggregate adjusted Purchase Price then in effect necessary
to exercise a Right in full, the aggregate number and kind of shares of
Preferred Stock or capital stock, as the case may be, which, if such Right had
been exercised immediately prior to such date and at a time when the
15
21
Preferred Stock (or other capital stock, as the case may be) transfer books of
the Company were open, such holder would have owned upon such exercise and been
entitled to receive by virtue of such dividend, subdivision, split, combination
or reclassification. If an event occurs which would require an adjustment
under both this Section 11(a)(i) and Section 11(a)(ii) the adjustment provided
for in this Section 11(a)(i) shall be in addition to, and shall be made prior
to, any adjustment required pursuant to Section 11(a)(ii).
(ii) In the event:
(A) (1) any Acquiring Person or any
Associate or Affiliate of any Acquiring Person, at any time after the date of
this Agreement, directly or indirectly, shall merge into the Company or
otherwise combine with the Company and the Company shall be the continuing or
surviving corporation of such merger or combination and the Common Stock of the
Company shall remain outstanding and unchanged, or (2) subject to Section 23
(Redemption and Termination), any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or of any
subsidiary of the Company, or any Person or entity organized, appointed or
established by the Company for or pursuant to the terms of any such plan),
alone or together with its Affiliates and Associates, shall, at any time after
the Rights Dividend Declaration Date, become an Acquiring Person, unless the
event causing such Person to become an Acquiring Person is a Flip-over Event,
or is an acquisition of shares of Common Stock pursuant to a tender offer or an
exchange offer for all outstanding shares of Common Stock at a price and on
terms determined by a majority of the Board after receiving advice from one or
more recognized investment banking firms selected by the Board, to be (a) at a
price which is fair to the stockholders of the Company (taking into account all
factors which the Board deems relevant including, without limitation, prices
which could reasonably be achieved if the Company or its assets were sold on an
orderly basis designed to realize maximum value) and (b) otherwise in the best
interests of the Company and its stockholders, other than such Acquiring
Person, its Affiliates and its Associates; or
(B) during such time as there is an
Acquiring Person, there shall be any reclassification of securities (including
any reverse stock split), or recapitalization of the Company, or any merger or
consolidation of the Company with any of its Subsidiaries or any other
transaction or series of transactions involving the Company or any of its
Subsidiaries, other than a transaction or transactions to which the provisions
of Section 13(a) (Consolidation, Merger or Sale or Transfer of Assets or
Earning Power -- Flip-over Event) apply (whether or not with or into or
otherwise involving an Acquiring Person) which has the effect, directly or
indirectly, of increasing by more than 1% the proportionate share of the
outstanding shares of any class of equity securities of the Company or any of
its subsidiaries which is directly or indirectly beneficially owned by any
Acquiring Person or any Associate or Affiliate of any Acquiring Person, then,
promptly following the occurrence of any such Flip-in Event (whether described
in Section 11(a)(ii)(A) or (B)), proper provision shall be made so that each
holder of a Right (except as provided below and in Section 7(e) (Exercise of
Rights; Purchase Price; Expiration Date of Rights -- Termination of Acquiring
Person's Rights)) shall thereafter have the right to receive, upon exercise
thereof at the then current Purchase Price in accordance with the terms of this
Agreement, in lieu of the number of one one-thousandth of a share of Preferred
Stock, such
16
22
number of shares of Common Stock of the Company as shall equal the result
obtained by (x) multiplying the then current Purchase Price by the then number
of one one-thousandth of a share of Preferred Stock for which a Right was
exercisable immediately prior to the first occurrence of a Flip-in Event, and
(y) dividing that product (which, following such first occurrence, shall
thereafter be referred to as the "Purchase Price" for each Right and for all
purposes of this Agreement) by 50% of the Current Market Price per share of
Common Stock on the date of such first occurrence (such number of shares being
referred to as the "Adjustment Shares").
(iii) In the event that the number of shares of
Common Stock that are authorized by the Company's Certificate of Incorporation
but not outstanding or reserved for issuance for purposes other than upon
exercise of the Rights is not sufficient to permit the exercise in full of the
Rights in accordance with the foregoing subparagraph (ii) of this Section
11(a), the Company shall: (A) determine the excess of (1) the value of the
Adjustment Shares issuable upon the exercise of a Right (the "Current Value")
over (2) the Purchase Price (such excess, the "Spread"), and (B) with respect
to each Right, subject to Section 7(e)(Exercise of Rights; Purchase Price;
Expiration Date of Rights -- Termination of Acquiring Person's Rights), make
adequate provision to substitute for the Adjustment Shares, upon payment of the
applicable Purchase Price, (1) cash, (2) a reduction in the Purchase Price, (3)
Common Stock or other equity securities of the Company (including, without
limitation, shares, or units of shares, of preferred stock which the Board has
deemed to have essentially the same value or economic rights as shares of
Common Stock (such shares of preferred stock being referred to as "Common Stock
Equivalents")), (4) debt securities of the Company, (5) other assets, or (6)
any combination of the foregoing, having an aggregate value equal to the
Current Value (less the amount of any reduction in the Purchase Price), where
such aggregate value has been determined by the Board based upon the advice of
a recognized investment banking firm selected by the Board; provided, however,
that if the Company shall not have made adequate provision to deliver value
pursuant to clause (B) above within thirty (30) calendar days following the
later of (x) the first occurrence of a Flip-in Event and (y) the date on which
the Company's right of redemption pursuant to Section 23(a) (Redemption and
Termination -- Redemption) expires (the later of (x) and (y) being referred to
herein as the "Flip-in Trigger Date"), then the Company shall be obligated to
deliver, upon the surrender for exercise of a Right and without requiring
payment of the Purchase Price, shares of Common Stock (to the extent available)
and then, if necessary, cash, which shares and/or cash have an aggregate value
equal to the Spread. If the Board shall determine in good faith that it is
likely that sufficient additional shares of Common Stock could be authorized
for issuance upon exercise in full of the Rights, the thirty (30) calendar day
period set forth above may be extended to the extent necessary, but not more
than ninety (90) calendar days after the Flip-in Trigger Date, in order that
the Company may seek stockholder approval for the authorization of such
additional shares (such period, the "Substitution Period"). To the extent that
the Company determines that some action need be taken pursuant to the first
and/or second sentences of this Section 11(a)(iii), the Company (x) shall
provide, subject to Section 7(e), that such action shall apply uniformly to all
outstanding Rights, and (y) may suspend the exercisability of the Rights until
the expiration of the Substitution Period in order to seek any authorization of
additional shares and/or to decide the appropriate form of distribution to be
made pursuant to such first sentence and to determine the value thereof. In
the event of any such suspension, the Company shall issue a public announcement
stating that the exercisability of the Rights has been
17
23
temporarily suspended, as well as a public announcement at such time as the
suspension is no longer in effect. For purposes of this Section 11(a)(iii),
the value of the Common Stock shall be the Current Market Price per share of
the Common Stock on the Flip-in Trigger Date and the value of any Common Stock
Equivalent shall be deemed to have the same value as the Common Stock on such
date.
(iv) If the rules of the national securities
exchange, registered as such pursuant to Section 6 of the Exchange Act, or of
the national securities association, registered as such pursuant to Section 15A
of the Exchange Act, on which the Common Stock is principally traded or quoted
would prohibit such exchange or association from listing or continuing to list,
or from authorizing for or continuing quotation and/or transaction reporting
through an inter-dealer quotation system, the Common Stock or other equity
securities of the Company if the Rights were to be exercised for shares of
Common Stock in accordance with subparagraph (ii) of this Section 11(a) because
such issuance would nullify, restrict or disparately reduce the per share
voting rights of holders of Common Stock, the Company shall: (A) determine the
Spread, and (B) with respect to each Right, make adequate provision to
substitute for the Adjustment Shares, upon payment of the applicable Purchase
Price, (1) cash, (2) a reduction in the Purchase Price, (3) equity securities
of the Company, including, without limitation, Common Stock Equivalents, other
than securities which would have the effect of nullifying, restricting or
disparately reducing the per share voting rights of holders of Common Stock,
(4) debt securities of the Company, (5) other assets, or (6) any combination of
the foregoing, having an aggregate value equal to the Current Value, where such
aggregate value has been determined by the Board based upon the advice of a
recognized investment banking firm selected by the Board; provided, however, if
the Company shall not have made adequate provision to deliver value pursuant to
clause (B) above within thirty (30) calendar days following the Flip-in Trigger
Date, then the Company shall be obligated to deliver, upon the surrender for
exercise of a Right and without requiring payment of the Purchase Price, cash
having an aggregate value equal to the Spread. To the extent that the Company
determines that some action need be taken pursuant to the first sentence of
this Section 11(a)(iv), the Company (x) shall provide, subject to Section 7(e)
(Exercise of Rights; Purchase Price; Expiration Date of Rights -- Termination
of Acquiring Person's Rights), that such action shall apply uniformly to all
outstanding Rights and (y) may suspend the exercisability of the Rights, but
not longer than ninety (90) calendar days after the Flip-in Trigger Date, in
order to decide the appropriate form of distribution to be made pursuant to
such first sentence and to determine the value thereof. In the event of any
such suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a
public announcement at such time as the suspension is no longer in effect. For
purposes of this Section 11(a)(iv), the value of the Common Stock shall be the
Current Market Price per share of the Common Stock on the Flip-in Trigger Date
and the value of any Common Stock Equivalent shall be deemed to have the same
value as the Common Stock on such date.
(b) Purchase Price Adjustment -- Capital Stock. In case
the Company shall fix a record date for the issuance of rights, options or
warrants to all holders of Preferred Stock entitling them to subscribe for or
purchase (for a period expiring within forty-five (45) calendar days after such
record date) Preferred Stock (or shares having the same rights, privileges and
18
24
preferences as the shares of Preferred Stock ("Equivalent Preferred Stock")) or
securities convertible into Preferred Stock or Equivalent Preferred Stock at a
price per share of Preferred Stock or per share of Equivalent Preferred Stock
(or having a conversion price per share, if a security convertible into
Preferred Stock or Equivalent Preferred Stock) less than the Current Market
Price per share of Preferred Stock on such record date, the Purchase Price to
be in effect after such record date shall be determined by multiplying the
Purchase Price in effect immediately prior to such record date by a fraction,
the numerator of which shall be the number of shares of Preferred Stock
outstanding on such record date, plus the number of shares of Preferred Stock
which the aggregate offering price of the total number of shares of Preferred
Stock and/or Equivalent Preferred Stock so to be offered (and/or the aggregate
initial conversion price of the convertible securities so to be offered) would
purchase at such Current Market Price, and the denominator of which shall be
the number of shares of Preferred Stock outstanding on such record date, plus
the number of additional shares of Preferred Stock and/or Equivalent Preferred
Stock to be offered for subscription or purchase (or into which the convertible
securities so to be offered are initially convertible). In case such
subscription price may be paid by delivery of consideration part or all of
which may be in a form other than cash, the value of such consideration shall
be as determined in good faith by the Board, whose determination shall be
described in a statement filed with the Rights Agent and shall be binding on
the Rights Agent and the holders of the Rights. Shares of Preferred Stock
owned by or held for the account of the Company shall not be deemed outstanding
for the purpose of any such computation. Such adjustment shall be made
successively whenever such a record date is fixed, and in the event that such
rights or warrants are not so issued, the Purchase Price shall be adjusted to
be the Purchase Price which would then be in effect if such record date had not
been fixed.
(c) Purchase Price Adjustment -- Cash, Assets, etc. In
case the Company shall fix a record date for a distribution to all holders of
Preferred Stock (including any such distribution made in connection with a
consolidation or merger in which the Company is the continuing corporation) of
evidences of indebtedness, cash (other than a regular quarterly cash dividend
out of the earnings or retained earnings of the Company), assets (other than a
dividend payable in Preferred Stock, but including any dividend payable in
stock other than Preferred Stock) or subscription rights or warrants (excluding
those referred to in Section 11(b) (Adjustment of Purchase Price; Number and
Kind of Shares or Number of Rights Purchase Price Adjustment -- Capital
Stock)), the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to
such record date by a fraction, the numerator of which shall be the Current
Market Price per share of Preferred Stock on such record date, less the fair
market value (as determined in good faith by the Board, whose determination
shall be described in a statement filed with the Rights Agent) of the portion
of the cash, assets or evidences of indebtedness so to be distributed or of
such subscription rights or warrants applicable to a share of Preferred Stock
and the denominator of which shall be such Current Market Price 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.
19
25
(d) Current Market Price.
(i) For the purpose of any computation hereunder,
other than computations made pursuant to Section 11(a)(iii) (Adjustment of
Purchase Price; Number and Kind of Shares or Number of Rights -- Certain
Adjustments), the Current Market Price per share of Common Stock on any date
shall be deemed to be the average of the daily closing prices per share of such
Common Stock for the thirty (30) consecutive Trading Days immediately prior to
such date, and for purposes of computations made pursuant to Section
11(a)(iii), the Current Market Price per share of Common Stock on any date
shall be deemed to be the average of the daily closing prices per share of such
Common Stock for the ten (10) consecutive Trading Days immediately following
such date; provided, however, that in the event that the Current Market Price
per share of the Common Stock is determined during a period following the
announcement by the issuer of such Common Stock of (A) a dividend or
distribution on such Common Stock payable in shares of such Common Stock or
securities convertible into shares of such Common Stock (other than the
Rights), or (B) any subdivision, combination or reclassification of such Common
Stock and the ex-dividend date for such dividend or distribution, or the record
date for such subdivision, combination or reclassification shall not have
occurred prior to the commencement of the requisite thirty (30) Trading Day or
ten (10) Trading Day period, as set forth above, then, and in each such case,
the Current Market Price shall be properly adjusted to take into account
ex-dividend trading. The closing price for each Trading Day shall be the last
sale price, regular way, or, in case no such sale takes place on such Trading
Day, the average of the closing bid and asked prices, regular way, in either
case as reported in the principal consolidated transaction reporting system
with respect to securities listed or admitted to trading on the New York Stock
Exchange or, if the shares of Common Stock are not listed or admitted to
trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the shares of Common Stock
are listed or admitted to trading or, if the shares of Common Stock are not
listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported on the Nasdaq National
Market, the Nasdaq Small Cap Market or such other system then in use, or, if on
any such date the shares of Common Stock are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Common Stock selected by the
Board. If on any such date no market maker is making a market in the Common
Stock, the fair value of such shares on such date as determined in good faith
by the Board shall be used. The term "Trading Day" shall mean a day on which
the principal national securities exchange on which the shares of Common Stock
are listed or admitted to trading is open for the transaction of business or,
if the shares of Common Stock are not listed or admitted to trading on any
national securities exchange, a Business Day. If the Common Stock is not
publicly held or not so listed or traded, Current Market Price per share shall
mean the fair value per share as determined in good faith by the Board, whose
determination shall be described in a statement filed with the Rights Agent and
shall be conclusive for all purposes.
(ii) For the purpose of any computation hereunder,
the Current Market Price per share of Preferred Stock shall be determined in
the same manner as set forth above for the Common Stock in clause (i) of this
Section 11(d) (other than the last sentence thereof). If the Current Market
Price per share of Preferred Stock cannot be determined in the manner
20
26
provided above or if the Preferred Stock is not publicly held or listed or
traded in a manner described in clause (i) of this Section 11(d), the Current
Market Price per share of Preferred Stock shall be conclusively deemed to be an
amount equal to 1,000 (as such number may be appropriately adjusted for such
events as stock splits, stock dividends and recapitalizations with respect to
the Common Stock occurring after the date of this Agreement) multiplied by the
Current Market Price per share of the Common Stock. If neither the Common
Stock nor the Preferred Stock is publicly held or so listed or traded, Current
Market Price per share of the Preferred Stock shall mean the fair value per
share as determined in good faith by the Board, whose determination shall be
described in a statement filed with the Rights Agent and shall be conclusive
for all purposes. For all purposes of this Agreement, the Current Market Price
of one one-thousandth of a share of Preferred Stock shall be equal to the
Current Market Price of one share of Preferred Stock divided by 1,000.
(e) Purchase Price Adjustment Threshold. Anything herein
to the contrary notwithstanding, no adjustment in the Purchase Price shall be
required unless such adjustment would require an increase or decrease of at
least one percent (1%) in the Purchase Price; provided however, that any
adjustments which by reason of this Section 11(e) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations under this Section 11 (Adjustment of Purchase Price; Number
and Kind of Shares or Number of Rights) shall be made to the nearest cent or to
the nearest thousandth of a share of Common Stock or other share or one
ten-millionth of a share of Preferred Stock, as the case may be.
Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than the earlier of (i)
three (3) years from the date of the transaction which mandates such
adjustment, or (ii) the Expiration Date.
(f) Equivalent Adjustments. If as a result of an
adjustment made pursuant to Section 11(a)(ii) (Adjustment of Purchase Price;
Number and Kind of Shares or Number of Rights -- Certain Adjustments) or
Section 13(a) (Consolidation Merger or Sale or Transfer of Assets or Earning
Power -- Flip-over Event) the holder of any Right thereafter exercised shall
become entitled to receive any shares of capital stock other than Preferred
Stock, thereafter the number of such other shares so receivable upon exercise
of any Right and the Purchase Price thereof shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to
the provisions with respect to the Preferred Stock contained in Sections 11(a),
(b), (c), (e), (g), (h), (i), (j), (k) and (m), and the provisions of Sections
7, 9, 10, 13 and 14 with respect to the Preferred Stock shall apply on like
terms to any such other shares.
(g) Post-Adjustment Rights Issuances. All Rights
originally issued by the Company subsequent to any adjustment made to the
Purchase Price hereunder shall evidence the right to purchase, at the adjusted
Purchase Price, the number of one one-thousandth of a share of Preferred Stock
purchasable from time to time hereunder upon exercise of the Rights, all
subject to further adjustment as provided herein.
(h) Preferred Stock Anti-Dilution. Unless the Company
shall have exercised its election as provided in Section 11(i) (Adjustment of
Purchase Price; Number and Kind of Shares or Number of Rights -- Adjustment of
Number of Rights), upon each adjustment of the
21
27
Purchase Price as a result of the calculations made in Section 11(b)
(Adjustment of Purchase Price; Number and Kind of Shares or Number of Rights --
Purchase Price Adjustment -- Capital Stock) and Section 11(c) (Adjustment of
Purchase Price; Number and Kind of Shares or Number of Rights -- Purchase Price
Adjustment -- Cash, Assets, etc.), each Right outstanding immediately prior to
the making of such adjustment shall thereafter evidence the right to purchase,
at the adjusted Purchase Price, that number of one one-thousandth of a share of
Preferred Stock (calculated to the nearest one ten-millionth) obtained by (i)
multiplying (x) the number of one one-thousandth of a share covered by a Right
immediately prior to this adjustment, by (y) the Purchase Price in effect
immediately prior to such adjustment of the Purchase Price, and (ii) dividing
the product so obtained by the Purchase Price in effect immediately after such
adjustment of the Purchase Price.
(i) Adjustment of Number of Rights. The Company may
elect on or after the date of any adjustment of the Purchase Price to adjust
the number of Rights, in lieu of any adjustment in the number of one
one-thousandth of a share of Preferred Stock purchasable upon the exercise of a
Right. Each of the Rights outstanding after the adjustment in the number of
Rights shall be exercisable for the number of one one-thousandth of a share of
Preferred Stock for which a Right was exercisable immediately prior to such
adjustment. Each Right held of record prior to such adjustment of the number
of Rights shall become that number of Rights (calculated to the nearest one
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 ten (10) calendar days later
than the date of the public announcement. If Rights Certificates have been
issued, upon each adjustment of the number of Rights pursuant to this Section
11(i), the Company shall, as promptly as practicable, cause to be distributed
to holders of record of Rights Certificates on such record date Rights
Certificates evidencing, subject to Section 14 (Fractional Rights and
Fractional Shares) the additional Rights to which such holders shall be
entitled as a result of such adjustment, or, at the option of the Company,
shall cause to be distributed to such holders of record in substitution and
replacement for the Rights Certificates held by such holders prior to the date
of adjustment, and upon surrender thereof, if required by the Company, new
Rights Certificates evidencing all the Rights to which such holders shall be
entitled after such adjustment. Rights Certificates so to be distributed shall
be issued, executed and countersigned in the manner provided for herein (and
may bear, at the option of the Company, the adjusted Purchase Price) and shall
be registered in the names of the holders of record of Rights Certificates on
the record date specified in the public announcement.
(j) Rights Certificates. Irrespective of any adjustment
or change in the Purchase Price or the number of one one-thousandth of a share
of Preferred Stock issuable upon the exercise of the Rights, the Rights
Certificates theretofore and thereafter issued may continue to express the
Purchase Price per one one-thousandth of a share and the number of one
one-thousandth of a share which were expressed in the initial Rights
Certificates issued hereunder.
22
28
(k) Adjustment Below Par Value. Before taking any action
that would cause an adjustment reducing the Purchase Price below the then par
or stated value, if any, of the number of one one-thousandth of a share of
Preferred Stock issuable upon exercise of the Rights, the Company shall take
any corporate action which is or may, in the opinion of its counsel, be
necessary in order that the Company may validly and legally issue fully paid
and nonassessable such number of one one-thousandth of a share of Preferred
Stock at such adjusted Purchase Price.
(l) Adjustment Effective as of Future Date; Exercise. In
any case in which this Section 11 (Adjustment of Purchase Price; Number and
Kind of Shares or Number of Rights) shall require that an adjustment in the
Purchase Price be made effective as of a record date for a specified event, the
Company may elect to defer until the occurrence of such event the issuance to
the holder of any Right exercised after such record date the number of one
one-thousandth of a share of Preferred Stock and other capital stock or
securities of the Company, if any, issuable upon such exercise over and above
the number of one one-thousandth of a share of Preferred Stock and other
capital stock or securities of the Company, if any, issuable upon such exercise
on the basis of the Purchase Price in effect prior to such adjustment;
provided, however, that the Company shall deliver to such holder a due xxxx or
other appropriate instrument evidencing such holder's right to receive such
additional shares (fractional or otherwise) or securities upon the occurrence
of the event requiring such adjustment.
(m) Tax Adjustments. Anything in this Section 11
(Adjustment of Purchase Price; Number and Kind of Shares or Number of Rights)
to the contrary notwithstanding, the Company shall be entitled to make such
reductions in the Purchase Price, in addition to those adjustments expressly
required by this Section 11, as and to the extent that in its good faith
judgment the Board shall determine to be advisable in order that any (i)
consolidation or subdivision of the Preferred Stock, (ii) issuance wholly for
cash of any shares of Preferred Stock at less than the Current Market Price,
(iii) issuance wholly for cash of shares of Preferred Stock or securities which
by their terms are convertible into or exchangeable for shares of Preferred
Stock, (iv) stock dividends or (v) issuance of rights, options or warrants
referred to in this Section 11, hereafter made by the Company to holders of its
Preferred Stock shall not be taxable to such stockholders.
(n) Restriction on Certain Transactions. 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 which
complies with Section 11(o) (Adjustment of Purchase Price; Number and Kind of
Shares or Number of Rights -- Restriction Against Diminishing Benefits of the
Rights)), (ii) merge with or into any other Person (other than a Subsidiary of
the Company in a transaction which complies with Section 11(o)), (iii) enter
into a statutory share exchange or similar transaction with any other Person
(other than a Subsidiary of the Company in a transaction which complies with
Section 11(o)), or (iv) sell or transfer (or permit any Subsidiary to sell or
transfer), in one transaction, or a series of related transactions, assets,
cash flow or earning power aggregating more than 50% of the assets, cash flow
or earning power of the Company and its Subsidiaries (taken as a whole) to any
other Person or Persons (other than the Company and/or any of its Subsidiaries
in one or more transactions each of which complies with Section 11(o)), if (x)
at the time of or immediately after such consolidation, merger, statutory
23
29
share exchange or similar transaction, or sale there are any rights, warrants
or other instruments or securities outstanding or agreements in effect which
would substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights or (y) prior to, simultaneously with or immediately
after such consolidation, merger, statutory share exchange or similar
transaction, or sale, the stockholders of the Person who constitutes, or would
constitute, the "Principal Party" for purposes of Section 13(a) (Consolidation,
Merger or Sale or Transfer of Assets or Earning Power -- Flip-over Event) shall
have received a distribution of Rights previously owned by such Person or any
of its Affiliates and Associates.
(o) Restriction Against Diminishing Benefits of the
Rights. The Company covenants and agrees that, after the Distribution Date, it
will not, except as permitted by Section 23 (Redemption and Termination) or
Section 27 (Supplements and Amendments) take (or permit any Subsidiary to take)
any action if at the time such action is taken it is reasonably foreseeable
that such action will diminish substantially or otherwise eliminate the
benefits intended to be afforded by the Rights.
(p) Common Stock Adjustments. Anything in this Agreement
to the contrary notwithstanding, in the event that the Company shall at any
time after the Rights Dividend Declaration Date and prior to the Distribution
Date (i) declare a dividend on the outstanding shares of Common Stock payable
in shares of Common Stock, (ii) subdivide or split the outstanding shares of
Common Stock, or (iii) combine the outstanding shares of Common Stock into a
smaller number of shares, the number of Rights associated with each share of
Common Stock then outstanding, or issued or delivered thereafter but prior to
the Distribution Date, shall be proportionately adjusted so that the number of
Rights thereafter associated with each share of Common Stock following any such
event shall equal the result obtained by multiplying the number of Rights
associated with each share of Common Stock immediately prior to such event by a
fraction, the numerator of which shall be the total number of shares of Common
Stock outstanding immediately prior to the occurrence of the event and the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately following the occurrence of such event. The
adjustments provided for in this Section 11(p) shall be made successively
whenever such a dividend is declared or paid or such subdivision, combination
or consolidation is effected.
Section 12. Certificate of Adjusted Purchase Price or Number of
Shares. Whenever an adjustment is made as provided in Section 11 (Adjustment
of Purchase Price; Number and Kind of Shares or Number of Rights) and Section
13 (Consolidation, Merger or Sale or Transfer of Assets or Earning Power) the
Company shall (a) promptly prepare a certificate setting forth such adjustment
and a brief statement of the facts accounting for such adjustment, (b) promptly
file with the Rights Agent, and with each transfer agent for the Preferred
Stock and the Common Stock, a copy of such certificate, and (c) mail or cause
the Rights Agent to mail a brief summary thereof to each holder of a Rights
Certificate (or, if prior to the Distribution Date, to each holder of a
certificate representing shares of Common Stock) in accordance with Section 26
(Notices). The Rights Agent shall be fully protected in relying on any such
certificate and on any adjustment therein contained.
24
30
Section 13. Consolidation, Merger or Sale or Transfer of Assets
or Earning Power.
(a) Flip-over Event. In the event that, following the
Stock Acquisition Date, directly or indirectly, (x) the Company shall
consolidate with, or merge with and into, or enter into a statutory stock
exchange or similar transaction with, any other Person (other than a Subsidiary
of the Company in a transaction which complies with Section 11(o)(Adjustment of
Purchase Price; Number and Kind of Shares or Number of Rights -- Restriction
Against Diminishing Benefits of the Rights)), and the Company shall not be the
continuing or surviving corporation of such consolidation, merger or statutory
share exchange or similar transaction, (y) any Person (other than a Subsidiary
of the Company in a transaction which complies with Section 11(o)) shall
consolidate with, or merge with or into, or enter into a statutory stock
exchange or similar transaction with, the Company, and the Company shall be the
continuing or surviving corporation of such consolidation, merger or statutory
share exchange or similar transaction and, in connection with such
consolidation, merger or statutory share exchange or similar transaction, all
or part of the outstanding shares of Common Stock shall be changed into or
exchanged for stock or other securities of any other Person or cash or any
other property, or (z) the Company shall sell or otherwise transfer (or one or
more of its Subsidiaries shall sell or otherwise transfer), in one transaction
or a series of related transactions, assets, cash flow or earning power
aggregating more than 50% of the assets, cash flow or earning power of the
Company and its Subsidiaries (taken as a whole) to any Person or Persons (other
than the Company or any Subsidiary of the Company in one or more transactions
each of which complies with Section 11(o)), then, and in each such case (except
as may be contemplated by Section 13(d) (Consolidation, Merger or Sale or
Transfer of Assets or Earning Power -- Exceptions)), (i) proper provision shall
be made so that each holder of a Right, except as provided in Section 7(e)
(Exercise of Rights; Purchase Price; Expiration Date of Rights -- Termination
of Acquiring Person's Rights) shall thereafter have the right to receive, upon
the exercise thereof at the then current Purchase Price in accordance with the
terms of this Agreement, such number of validly authorized and issued, fully
paid, nonassessable and freely tradeable shares of Common Stock of the
Principal Party, not subject to any liens, encumbrances, rights of first
refusal or other adverse claims, as shall be equal to the result obtained by
(A) multiplying the then current Purchase Price by the number of one
one-thousandth of a share of Preferred Stock for which a Right is exercisable
immediately prior to the first occurrence of a Flip-over Event (or, if a
Flip-in Event has occurred prior to the first occurrence of a Flip-over Event,
multiplying the number of such one one-thousandth of a share for which a Right
was exercisable immediately prior to the first occurrence of a Flip-in Event by
the Purchase Price in effect immediately prior to such first occurrence), and
(B) dividing that product (which, following the first occurrence of a Flip-over
Event, shall be referred to as the "Purchase Price" for each Right and for all
purposes of this Agreement) by 50% of the Current Market Price per share of the
Common Stock of such Principal Party on the date of consummation of such
Flip-over Event; (ii) such Principal Party shall thereafter be liable for, and
shall assume, by virtue of such Flip-over Event, all the obligations and duties
of the Company pursuant to this Agreement; (iii) the term "Company" shall
thereafter be deemed to refer to such Principal Party, it being specifically
intended that the provisions of Section 11 (Adjustment of Purchase Price;
Number and Kind of Shares or Number of Rights) shall apply only to such
Principal Party following the first occurrence of a Flip-over Event; (iv) such
Principal Party shall take such steps (including, but not limited to, the
reservation
25
31
of a sufficient number of shares of its Common Stock) in connection with the
consummation of any such transaction as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably may
be, in relation to its shares of Common Stock thereafter deliverable upon the
exercise of the Rights; and (v) the provisions of Section 11(a)(ii) (Adjustment
of Purchase Price; Number and Kind of Shares or Number of Rights -- Certain
Adjustments) hereof shall be of no effect following the first occurrence of any
Flip-over Event.
(b) Principal Party. "Principal Party" shall mean
(i) in the case of any transaction described in
clause (x) or (y) of the first sentence of Section 13(a)
(Consolidation, Merger or Sale or Transfer of Assets or Earning Power
-- Flip-over Event), the Person that is the issuer of any securities
into which shares of Common Stock of the Company are converted in such
consolidation, merger or statutory share exchange or similar
transaction, and if no securities are so issued, the Person that is
the other party to such consolidation, merger or statutory share
exchange or similar transaction, and
(ii) in the case of any transaction described in
clause (z) of the first sentence of Section 13(a) (Consolidation,
Merger or Sale or Transfer of Assets or Earning Power -- Flip-over
Event), the Person that is the party receiving the greatest portion of
the assets, cash flow or earning power transferred pursuant to such
transaction or transactions;
provided, however, that in any such case, (1) if the Common Stock of such
Person is not at such time and has not been continuously over the preceding
twelve (12) month period registered under Section 12 of the Exchange Act, and
such Person is a direct or indirect Subsidiary of another Person the Common
Stock of which is and has been so registered, "Principal Party" shall refer to
such other Person; and (2) in case such Person is a Subsidiary, directly or
indirectly, of more than one Person, the Common Stocks of two or more of which
are and have been so registered, "Principal Party" shall refer to whichever of
such Persons is the issuer of the total outstanding Common Stock having the
greatest aggregate market value.
(c) Supplemental Agreement. The Company shall not
consummate a Flip-over Event unless the Principal Party shall have a sufficient
number of authorized shares of its Common Stock which have not been issued or
reserved for issuance to permit the exercise in full of the Rights in
accordance with this Section 13 (Consolidation, Merger or Sale or Transfer of
Assets or Earning Power) and unless prior thereto the Company and such
Principal Party shall have executed and delivered to the Rights Agent a
supplemental agreement providing for the terms set forth in paragraphs (a) and
(b) of this Section 13 and further providing that, as soon as practicable after
the date of such Flip-over Event, the Principal Party will
(i) prepare and file a registration statement
under the Act, with respect to the Rights and the securities
purchasable upon exercise of the Rights on an appropriate form, and
will use its best efforts to cause such registration statement to (A)
become
26
32
effective as soon as practicable after such filing and (B) remain
effective (with a prospectus at all times meeting the requirements of
the Act) until the Expiration Date; and
(ii) will deliver to holders of the Rights
historical financial statements for the Principal Party and each of
its Affiliates which comply in all respects with the requirements for
registration on Form 10 under the Exchange Act.
The provisions of this Section 13 (Consolidation, Merger or Sale or Transfer of
Assets or Earning Power) shall similarly apply to successive consolidation,
mergers or statutory share exchanges or similar transactions or sales or other
transfers. In the event that a Flip-over Event shall occur at any time after
the occurrence of a Flip-in Event, the Rights which have not theretofore been
exercised shall thereafter become exercisable in the manner described in
Section 13(a) (Consolidation, Merger or Sale or Transfer of Assets or Earning
Power -- Flip-over Event).
(d) Exceptions. Notwithstanding anything in this
Agreement to the contrary, Section 13 (Consolidation, Merger or Sale or
Transfer of Assets or Earning Power) shall not be applicable to a transaction
described in subparagraphs (x) and (y) of Section 13(a) (Consolidation, Merger
or Sale or Transfer of Assets or Earning Power -- Flip-over Event) if (i) such
transaction is consummated with a Person or Persons who acquired shares of
Common Stock pursuant to a tender offer or exchange offer for all outstanding
shares of Common Stock which satisfies the requirements of Section 11(a)(ii)(A)
(Adjustment of Purchase Price; Number and Kind of Shares or Number of Rights
-- Certain Adjustments) (or a wholly-owned subsidiary of any such Person or
Persons), (ii) the price per share of Common Stock offered in such transaction
is not less than the price per share of Common Stock paid to all holders of
shares of Common Stock whose shares were purchased pursuant to such tender or
exchange offer and (iii) the form of consideration being offered in such
transaction is the same as the form of consideration paid to all holders of
shares of Common Stock whose shares were purchased pursuant to such tender
offer or exchange offer. Upon consummation of any such transaction
contemplated by this Section 13(d), all Rights hereunder shall expire.
Section 14. Fractional Rights and Fractional Shares.
(a) Fractional Rights. The Company shall not be required
to issue fractions of Rights, except prior to the Distribution Date as provided
in Section 11(p) (Adjustment of Purchase Price; Number and Kind of Shares or
Number of Rights -- Common Stock Adjustments), or to distribute Rights
Certificates which evidence fractional Rights. In lieu of such fractional
Rights, there shall be paid to the registered holders of the Rights
Certificates with regard to which such fractional Rights would otherwise be
issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right. For purposes of this Section 14(a), the current market
value of a whole Right shall be the closing price of the Rights for the Trading
Day immediately prior to the date on which such fractional Rights would have
been otherwise issuable. The closing price of the Rights for any Trading Day
shall be the last sale price, regular way, or, in case no such sale takes place
on such Trading Day, the average of the closing bid and asked prices, regular
way, in either case as reported in the principal consolidated transaction
reporting system with respect to securities listed or admitted to trading
27
33
on the New York Stock Exchange or, if the Rights are not listed or admitted to
trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Rights are listed or
admitted to trading, or if the Rights are not listed or admitted to trading on
any national securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter market
as reported on the Nasdaq National Market, the Nasdaq Small Cap Market or such
other system then in use or, if on any such date the Rights are not quoted by
any such organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the Rights selected
by the Board. If on any such date no such market maker is making a market in
the Rights, the fair value of the Rights on such date as determined in good
faith by the Board shall be used.
(b) Fractional Shares of Preferred Stock. The Company
shall not be required to issue fractions of shares of Preferred Stock (other
than fractions which are integral multiples of one one-thousandth of a share of
Preferred Stock which may at the option of the Company, be evidenced by
depositary receipts) upon exercise of the Rights or to distribute certificates
which evidence fractional shares of Preferred Stock (other than fractions which
are integral multiples of one one-thousandth of a share of Preferred Stock).
Interests in fractions of Preferred Stock in integral multiples of one
one-thousandth of a share of Preferred Stock may, at the election of the
Company, be evidenced by depositary receipts, pursuant to an appropriate
agreement between the Company and a depositary selected by it; provided,
however, that such agreement shall provide that the holders of such depositary
receipts shall have all the rights, privileges and preferences to which they
are entitled as beneficial owners of the Preferred Stock represented by such
depositary receipts. In lieu of fractional shares of Preferred Stock that are
not integral multiples of one one-thousandth of a share of Preferred Stock, the
Company may pay to the registered holders of Rights Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the
same fraction of the current market value of one one-thousandth of a share of
Preferred Stock. For purposes of this Section 14(b), the current market value
of one one-thousandth of a share of Preferred Stock shall be one one-thousandth
of the closing price of a share of Preferred Stock (as determined pursuant to
Section 11(d)(ii) (Adjustment of Purchase Price; Number and Kind of Shares or
Number of Rights -- Current Market Price) for the Trading Day immediately prior
to the date of such exercise.
(c) Fractional Shares of Common Stock. Following the
occurrence of a Triggering Event, the Company shall not be required to issue
fractions of shares of Common Stock upon exercise of the Rights or to
distribute certificates which evidence fractional shares of Common Stock. In
lieu of fractional shares of Common Stock, the Company may pay to the
registered holders of Rights Certificates at the time such Rights are exercised
as herein provided an amount in cash equal to the same fraction of the current
market value of one (1) share of Common Stock. For purposes of this Section
14(c), the current market value of one share of Common Stock shall be the
closing price of one share of Common Stock (as determined pursuant to Section
11(d)(i) (Adjustment of Purchase Price; Number and Kind of Shares or Number of
Rights -- Current Market Price) for the Trading Day immediately prior to the
date of such exercise.
28
34
(d) Waiver of Fractional Rights and Shares. The holder
of a Right by the acceptance of the Right expressly waives his or her right to
receive any fractional Rights or any fractional shares upon exercise of a
Right, except as permitted by this Section 14 (Fractional Rights and Fractional
Shares).
Section 15. Rights of Action. All rights of action in respect of
this Agreement are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of
the Common Stock); and any registered holder of any Rights Certificate (or,
prior to the Distribution Date, of the Common Stock), without the consent of
the Rights Agent or of the holder of any other Rights Certificate (or, prior to
the Distribution Date, of the Common Stock), may, in his or her own behalf and
for his or her own benefit, enforce, and may institute and maintain any suit,
action or proceeding against the Company to enforce, or otherwise act in
respect of, his or her right to exercise the Rights evidenced by such Rights
Certificate in the manner provided in such Rights Certificate and in this
Agreement. Without limiting the foregoing or any remedies available to the
holders of Rights, it is specifically acknowledged that the holders of Rights
would not have an adequate remedy at law for any breach of this Agreement and
shall be entitled to specific performance of the obligations hereunder and
injunctive relief against actual or threatened violations of the obligations
hereunder of any Person subject to this Agreement.
Section 16. Agreement of Rights Holders. Every holder of a Right
by accepting the same consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of Common Stock;
(b) after the Distribution Date, the Rights Certificates
are transferable only on the registry books of the Rights Agent if surrendered
at the principal office or offices of the Rights Agent designated for such
purposes, duly endorsed or accompanied by a proper instrument of transfer and
with the appropriate forms and certificates fully executed;
(c) subject to Section 6(a) (Transfer, Split Up,
Combination and Exchange of Rights Certificates; Mutilated, Destroyed, Lost or
Stolen Rights Certificates -- Procedure) and Section 7(f) (Exercise of Rights;
Purchase Price; Expiration Date of Rights -- Surrender of Rights Certificates;
Identity of Beneficial Owner), the Company and the Rights Agent may deem and
treat the person in whose name a Rights Certificate (or, prior to the
Distribution Date, the associated Common Stock certificate) is registered as
the absolute owner thereof and of the Rights evidenced thereby (notwithstanding
any notations of ownership or writing on the Rights Certificates or the
associated Common Stock certificate made by anyone other than the Company or
the Rights Agent) for all purposes whatsoever, and neither the Company nor the
Rights Agent, subject to the last sentence of Section 7(e) (Exercise of Rights;
Purchase Price; Expiration Date of Rights -- Termination of Acquiring Person's
Rights), shall be required to take any action or be affected by any notice to
the contrary; and
29
35
(d) notwithstanding anything in this Agreement to the
contrary, neither the Company nor the Rights Agent shall have any liability to
any holder of a Right or other Person as a result of its inability to perform
any of its obligations under this Agreement by reason of any preliminary or
permanent injunction or other order, decree or ruling issued by a court of
competent jurisdiction or by a governmental, regulatory or administrative
agency or commission, or any statute, rule, regulation or executive order
promulgated or enacted by any governmental authority, prohibiting or otherwise
restraining performance of such obligation; provided, however, the Company must
use its best efforts to have any such order, decree or ruling lifted or
otherwise overturned as soon as possible.
Section 17. Rights Certificate Holder Not Deemed a Stockholder.
No holder, as such, of any Rights Certificate shall be entitled to vote,
receive dividends or be deemed for any purpose the holder of the number of one
one-thousandth of a share of Preferred Stock or any other securities of the
Company which may at any time be issuable on the exercise of the Rights
represented thereby, nor shall anything contained herein or in any Rights
Certificate be construed to confer upon the holder of any Rights Certificate,
as such, any of the rights of a stockholder of the Company or any right to vote
for the election of directors or upon any matter submitted to stockholders at
any meeting thereof, or to give or withhold consent to any corporate action, or
to receive notice of meetings or other actions affecting stockholders (except
as provided in Section 25 (Notice of Certain Events)), or to receive dividends
or subscription rights, or otherwise, until the Right or Rights evidenced by
such Rights Certificate shall have been exercised in accordance with the
provisions hereof.
Section 18. Concerning the Rights Agent.
(a) Compensation. The Company shall pay to the Rights
Agent reasonable compensation for all services rendered by it hereunder and,
from time to time, on demand of the Rights Agent, its reasonable expenses and
counsel fees and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder. The Company agrees to indemnify the Rights Agent for, and to hold
it harmless against, any loss, liability or expense, incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent,
for anything done or omitted to be done by the Rights Agent in connection with
the acceptance and administration of this Agreement, including the costs and
expenses of defending against or investigating any claim of liability in the
premises.
(b) Reliance. The Rights Agent shall be protected and
shall incur no liability for or in respect of any action taken, suffered or
omitted to be taken by it in connection with its administration of this
Agreement in reliance upon any Rights Certificate or certificate for Common
Stock or for other securities of the Company, instrument of assignment or
transfer, power of attorney, endorsement, affidavit, letter, notice, direction,
consent, certificate, statement or other paper or document believed by it to be
genuine and to be signed, executed and, where necessary, verified or
acknowledged, by the proper Person or Persons, or otherwise upon the advice of
counsel as set forth in Section 20 (Duties of Rights Agent).
30
36
Section 19. Merger or Consolidation or Change of Name of Rights
Agent.
(a) Successor. 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 stock transfer business of the
Rights Agent or any successor Rights Agent, shall be the successor to the
Rights Agent under this Agreement without the execution or filing of any paper
or any further act on the part of any of the parties hereto; provided, however,
that such corporation would be eligible for appointment as a successor Rights
Agent under the provisions of Section 21 (Change of Rights Agent). 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) Prior Countersignatures. In case at any time the
name of the Rights Agent shall be changed and at such time any of the Rights
Certificates shall have been countersigned but not delivered, the Rights Agent
may adopt the countersignature under its prior name and deliver Rights
Certificates so countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, the Rights Agent may
countersign such Rights Certificates either in its prior name or in its changed
name; and in all such cases such Rights Certificates shall have the full force
provided in the Rights Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes
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) Legal Counsel. 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 to be taken by it in good faith
and in accordance with such opinion.
(b) Certification by the Company. Whenever in the
performance of its duties under this Agreement the Rights Agent shall deem it
necessary or desirable that any fact or matter (including, without limitation,
the identity of 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 herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by the President, any Vice President, the
Secretary, any Assistant Secretary, the Treasurer or any Assistant Treasurer of
the Company and delivered to the Rights Agent; and such certificate
31
37
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) Liability for Negligence, etc. The Rights Agent
shall be liable hereunder only for its own negligence, bad faith or willful
misconduct.
(d) Statements of Fact or Recitals. The Rights Agent
shall not be liable for or by reason of any of the statements of fact or
recitals contained in this Agreement or in the Rights Certificates 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) Agreement; Adjustments. The Rights Agent shall not
be under any responsibility in respect of the validity of this Agreement or the
execution and delivery hereof (except the due execution hereof by the Rights
Agent) or in respect of the validity or execution of any Rights Certificate
(except its countersignature); nor shall it be responsible for any breach by
the Company of any covenant or condition contained in this Agreement or in any
Rights Certificate; nor shall it be responsible for any adjustment required
under the provisions of Section 11 (Adjustment of Purchase Price; Number and
Kind of Shares or Number of Rights) or Section 13 (Consolidation, Merger or
Sale or Transfer of Assets or Earning Power) or responsible for the manner,
method or amount of any such adjustment or the ascertaining of the existence of
facts that would require any such adjustment (except with respect to the
exercise of Rights evidenced by Rights Certificates after actual notice of any
such adjustment); nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any shares
of Common Stock or Preferred Stock to be issued pursuant to this Agreement or
any Rights Certificate or as to whether any shares of Common Stock or Preferred
Stock will, when so issued, be validly authorized and issued, fully paid and
nonassessable.
(f) Further Assurances. The Company will perform,
execute, acknowledge and deliver or cause to be performed, executed,
acknowledged and delivered all such further and other acts, instruments and
assurances as may reasonably be required by the Rights Agent for the carrying
out or performing by the Rights Agent of the provisions of this Agreement.
(g) Instructions. The Rights Agent is hereby authorized
and directed to accept instructions with respect to the performance of its
duties hereunder from the President, any Vice President, the Secretary, any
Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company
and to apply to such persons 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 the instructions of any such person.
(h) Dealing in Rights. The Rights Agent and any
stockholder, director, officer or employee of the Rights Agent may buy, sell or
deal in any of the Rights or other securities of the Company or become
pecuniarily interested in any transaction in which the Company may be
interested, or contract with or lend money to the Company or otherwise act as
fully and freely
32
38
as though it were not Rights Agent under this Agreement. Nothing herein shall
preclude the Rights Agent from acting in any other capacity for the Company or
for any other legal entity.
(i) Agents; Reasonable Care. The Rights Agent may
execute and exercise any of the rights or powers hereby vested in it or perform
any duty hereunder either itself or by or through its attorneys or agents, and
the Rights Agent shall not be answerable or accountable for any act, default,
neglect or misconduct of any such attorneys or agents or for any loss to the
Company resulting from any such act, default, neglect or misconduct; provided,
however, reasonable care was exercised in the selection and continued
employment thereof.
(j) Expenses; Repayment Assurances. No provision of this
Agreement shall require the Rights Agent to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its duties
hereunder or in the exercise of its rights if there shall be reasonable grounds
for believing that repayment of such funds or adequate indemnification against
such risk or liability is not reasonably assured to it.
(k) Exercise of Rights; Consultation with Company. If,
with respect to any Rights Certificate surrendered to the Rights Agent for
exercise or transfer, the certificate attached to the form of assignment or
form of election to purchase, as the case may be, has either not been completed
or indicates an affirmative response to clause 1 and/or 2 thereof, the Rights
Agent shall not take any further action with respect to such requested exercise
or transfer without first consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon thirty (30) calendar days' notice in writing mailed to the
Company, and to each transfer agent of the Common Stock and Preferred Stock, by
registered or certified mail, and to the holders of the Rights Certificates by
first-class mail. The Company may remove the Rights Agent or any successor
Rights Agent upon thirty (30) calendar days' notice in writing, mailed to the
Rights Agent or successor Rights Agent, as the case may be, and to each
transfer agent of the Common Stock and Preferred Stock, by registered or
certified mail, and to the holders of the Rights Certificates by first-class
mail. If the Rights Agent shall resign or be removed or shall otherwise become
incapable of acting, the Company shall appoint a successor to the Rights Agent.
If the Company shall fail to make such appointment within a period of thirty
(30) calendar days after giving notice of such removal or after it has been
notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Rights Certificate (who shall,
with such notice, submit his Rights Certificate for inspection by the Company),
then the registered holder of any Rights Certificate may apply to any court of
competent jurisdiction for the appointment of a new Rights Agent. Any
successor Rights Agent, whether appointed by the Company or by such a court,
shall be (a) a corporation organized and doing business under the laws of the
United States or of any State of the United States, in good standing, which is
authorized under such laws to exercise stock transfer or corporate trust
powers, is subject to supervision or examination by federal or state authority
and has at the time of its appointment as Rights Agent a combined capital and
surplus of at least $50,000,000 or (b) an Affiliate of a corporation described
in clause (a) of this sentence. After appointment, the successor Rights Agent
shall be vested with
33
39
the same powers, rights, duties and responsibilities as if it had been
originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver
any further assurance, conveyance, act or deed necessary for the purpose. Not
later than the effective date of any such appointment, the Company shall file
notice thereof in writing with the predecessor Rights Agent and each transfer
agent of the Common Stock and the Preferred Stock, and mail a notice thereof in
writing to the registered holders of the Rights Certificates. Failure to give
any notice provided for in this Section 21 (Change of Rights Agent), or any
defect therein, shall not affect the legality or validity of the resignation or
removal of the Rights Agent or the appointment of the successor Rights Agent,
as the case may be.
Section 22. Issuance of New Rights Certificates. Notwithstanding
any of the provisions of this Agreement or of the Rights to the contrary, the
Company may, at its option, issue new Rights Certificates evidencing Rights in
such form as may be approved by the Board to reflect any adjustment or change
in the Purchase Price and the number or kind or class of shares or other
securities or property purchasable under the Rights Certificates made in
accordance with the provisions of this Agreement. In addition, in connection
with the issuance or sale of shares of Common Stock following the Distribution
Date and prior to the redemption or expiration of the Rights, the Company (a)
shall, with respect to shares of Common Stock so issued or sold pursuant to the
exercise of stock options or under any employee plan or arrangement, or upon
the exercise, conversion or exchange of securities hereafter issued by the
Company, in either case outstanding as of the Distribution Date, and (b) may,
in any other case, if deemed necessary or appropriate by the Board, issue
Rights Certificates representing the appropriate number of Rights in connection
with such issuance or sale; provided, however, that (i) no such Rights
Certificate shall be issued if, and to the extent that, the Company shall be
advised by counsel that such issuance would create a significant risk of
material, adverse tax consequences to the Company or the Person to whom such
Rights Certificate would be issued, and (ii) no such Rights Certificate shall
be issued if, and to the extent that, appropriate adjustment shall otherwise
have been made in lieu of the issuance thereof.
Section 23. Redemption and Termination.
(a) Redemption. The Company may, at its option, at any
time prior to the earlier of (i) the Close of Business on the tenth Business
Day following the Stock Acquisition Date (or, if the Stock Acquisition Date
shall have occurred prior to the Record Date, the Close of Business on the
tenth Business Day following the Record Date), or (ii) the Final Expiration
Date, redeem (the date of such redemption being referred to herein as the
"Redemption Date") all but not less than all of the then outstanding Rights at
a redemption price of $0.01 per Right, as such amount may be appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof (such redemption price being hereinafter
referred to as the "Redemption Price"); provided, however, that any redemption
after the Stock Acquisition Date must be authorized by a majority of the entire
Board; provided further, however, that if, following the occurrence of a Stock
Acquisition Date and following the expiration of the right of redemption
hereunder but prior to any Triggering Event, (i) a Person who is an Acquiring
Person shall have transferred or otherwise disposed of a number of shares of
Common Stock in
34
40
one transaction or series of transactions, not directly or indirectly involving
the Company or any of its Subsidiaries, which did not result in the occurrence
of a Triggering Event such that such Person is thereafter a Beneficial Owner of
20% or less of the outstanding shares of Common Stock, and (ii) there are not
other Persons, immediately following the occurrence of the event described in
clause (i), who are Acquiring Persons, then the right of redemption shall be
reinstated and thereafter be subject to the provisions of this Section 23.
Notwithstanding anything contained in this Agreement to the contrary, the
Rights shall not be exercisable after the first occurrence of a Flip-in Event
until such time as the Company's right of redemption hereunder has expired.
The redemption of the Rights by the Company may be made effective at such time,
on such basis and with such conditions as the Board in its sole discretion may
establish. The Company may, at its option, pay the Redemption Price in cash,
shares of Common Stock (based on the Current Market Price of the Common Stock
at the time of redemption) or any other form of consideration deemed
appropriate by the Board.
(b) Effect of Redemption; Procedure. Immediately upon
the action of the Company ordering the redemption of the Rights and without any
further action and without any notice, the right to exercise the Rights will
terminate and the only right thereafter of the holders of Rights shall be to
receive the Redemption Price for each Right so held. Promptly after the
Redemption Date, the Company shall (i) give notice of such redemption to the
Rights Agent, (ii) give public notice of such redemption; provided, however,
that the failure to give, or any defect in, such notice shall not affect the
validity of such redemption, and (iii) mail notice of such redemption to the
holders of the then outstanding Rights at their last addresses as they appear
upon the registry books of the Rights Agent or, prior to the Distribution Date,
on the registry books of the Transfer Agent for the Common Stock. Any notice
which is mailed in the manner herein provided shall be deemed given, whether or
not the holder receives the notice. Each such notice of redemption will state
the method by which the payment of the Redemption Price will be made. Amounts
payable shall be rounded down to the nearest $0.01.
Section 24. Exchange.
(a) Right to Exchange. The Company may, at its option,
at any time and from time to time after the first occurrence of a Flip-in
Event, exchange all or part of the then outstanding and exercisable Rights
(other than Rights which have become void as provided in Section 7(e) (Exercise
of Rights; Purchase Price; Expiration Date of Rights -- Termination of
Acquiring Person's Rights)) for the Exchange Number of shares of Common Stock,
shares or units of Preferred Stock which the Board has determined to be a
Common Stock Equivalent, units of other property or any combination thereof as
determined by the Board. Notwithstanding the foregoing, the Company shall not
be empowered to effect such exchange at any time after any Person (other than
the Company, any Subsidiary of the Company, any employee benefit plan of the
Company or any such Subsidiary or any entity holding shares of Common Stock for
or pursuant to any such plan), together with all Affiliates and Associates of
such Person, becomes the Beneficial Owner of 50% or more of the shares of
Common Stock then outstanding. The exchange of the Rights by the Company may
be made effective at such time, on such basis and with such conditions as the
Board in its sole discretion may establish.
35
41
(b) Effect of Exchange; Procedure. Immediately upon the
action of the Company ordering the exchange of any Rights pursuant to paragraph
(a) of this Section 24, evidence of which shall have been filed with the Rights
Agent and without any further action and without any notice, the right to
exercise such Rights will terminate and the only right thereafter of a holder
of such Rights shall be to receive that number of shares of Common Stock,
Common Stock Equivalents or units of other property equal to the number of such
Rights held by such holder multiplied by the Exchange Number. Promptly after
the action of the Company ordering the exchange of the Rights, the Company
shall (i) file evidence of such action with the Rights Agent, (ii) give public
notice of such exchange; provided, however, that the failure to give, or any
defect in, such notice shall not affect the validity of such exchange, and
(iii) mail notice of such exchange to the holders of such Rights at their last
addresses as they appear upon the registry books of the Rights Agent. Any
notice which is mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice. Each such notice of exchange
will state the method by which the exchange will be effected and, in the event
of any partial exchange, the number of Rights which will be exchanged. Any
partial exchange shall be effected pro rata based on the number of Rights
(other than Rights which have become void as provided in Section 7(e) (Exercise
of Rights; Purchase Price; Expiration Date of Rights -- Termination of
Acquiring Person's Rights)) held by each holder of Rights.
(c) Common Stock Equivalents. In any exchange pursuant
to this Section 24, the Company, at its option, may substitute Common Stock
Equivalents for Common Stock exchangeable for Rights, at the initial rate of
one share of Common Stock Equivalent for each share of Common Stock, as
appropriately adjusted to reflect adjustments in the voting rights of the
Common Stock pursuant to the Company's Certificate of Incorporation, so that
the share of Common Stock Equivalent delivered in lieu of each share of Common
Stock shall have the same voting rights as one share of Common Stock.
(d) Insufficient Common Stock. In the event that the
number of shares of Common Stock which are authorized by the Company's
Certificate of Incorporation but not outstanding or reserved for issuance for
purposes other than upon exercise of the Rights is not sufficient to permit any
exchange of Rights in accordance with this Section 24, the Company may, at its
option, take all such action as may be necessary to authorize additional shares
of Common Stock for issuance upon such exchange.
(e) Fractional Shares. Upon the action of the Company
ordering the exchange of any Rights pursuant to paragraph (a) of this Section
24, the Company shall not be required to issue fractions of shares or to
distribute certificates which evidence fractional shares. In lieu of such
fractional shares, the Company may pay to the registered holders of the Rights
Certificates with regard to which such fractional shares would otherwise be
issuable an amount in cash equal to the same fraction of the current market
value of one share of Common Stock. For purposes of this Section 24, the
current market value of one share of Common Stock shall be the closing price of
one share of Common Stock (as determined pursuant to Section 11(d)(i)
(Adjustment of Purchase Price; Number and Kind of Shares or Number of Rights --
Current Market Price)) for the Trading Day immediately prior to the date of
exchange pursuant to this Section 24, and the
36
42
value of any Common Stock Equivalent shall be deemed to have the same current
market value as the Common Stock on such date.
Section 25. Notice of Certain Events.
(a) Preferred Stock Transactions, etc. In case the
Company shall propose, at any time after the Distribution Date, (i) to pay any
dividend payable in stock of any class to the holders of Preferred Stock or to
make any other distribution to the holders of Preferred Stock (other than a
regular quarterly cash dividend out of earnings or retained earnings of the
Company); (ii) to offer to the holders of Preferred Stock rights or warrants to
subscribe for or to purchase any additional shares of Preferred Stock or shares
of stock of any class or any other securities, rights or options; (iii) to
effect any reclassification of its Preferred Stock (other than a
reclassification involving only the subdivision of outstanding shares of
Preferred Stock); (iv) to effect any consolidation with, merger into or with,
or statutory share exchange or similar transaction with, any other Person
(other than a Subsidiary of the Company in a transaction which complies with
Section 11(o) (Adjustment of Purchase Price; Number and Kind of Shares or
Number of Rights -- Restriction against Diminishing Benefits of the Rights)),
or to effect any sale or other transfer (or to permit one or more of its
Subsidiaries to effect any sale or other transfer), in one transaction or a
series of related transactions, of more than 50% of the assets, cash flow or
earning power of the Company and its Subsidiaries (taken as a whole) to any
other Person or Persons (other than the Company and/or any of its Subsidiaries
in one or more transactions each of which complies with Section 11(o)); (v) to
effect the liquidation, dissolution or winding up of the Company or (vi) to
declare or pay any dividend on the shares of Common Stock payable in Common
Stock or to effect a subdivision, combination or consolidation of the shares of
Common Stock (by reclassification or otherwise than by payment of dividends in
Common Stock), then, in each such case, the Company shall give to each holder
of a Rights Certificate, to the extent feasible and in accordance with Section
26 (Notices), a notice of such proposed action, which shall specify the record
date for the purposes of such stock dividend, distribution of rights or
warrants, or the date on which such reclassification, consolidation, merger,
statutory share exchange or similar transaction, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of the shares of Preferred Stock, if any such date is to
be fixed, and such notice shall be so given in the case of any action covered
by clause (i) or (ii) above at least twenty (20) calendar days prior to the
record date for determining holders of the shares of Preferred Stock for
purposes of such action, and in the case of any such other action, at least
twenty (20) calendar days prior to the date of the taking of such proposed
action or the date of participation therein by the holders of the shares of
Preferred Stock, whichever shall be the earlier.
(b) Other Transactions. In case any of the events set
forth in Section 11(a)(ii) (Adjustment of Purchase Price; Number and Kind of
Shares or Number of Rights -- Certain Adjustments) shall occur, then, in any
such case, (i) the Company shall as soon as practicable thereafter give to each
holder of a Rights Certificate, to the extent feasible and in accordance with
Section 26 (Notices), a notice of the occurrence of such event, which shall
specify the event and the consequences of the event to holders of Rights under
Section 11(a)(ii), and (ii) all references
37
43
in the preceding paragraph to Preferred Stock shall be deemed thereafter to
refer to Common Stock and/or, if appropriate, other securities.
Section 26. Notices. Notices or demands authorized by this
Agreement to be given or made by the Rights Agent or by the holder of any
Rights Certificate to or on the Company shall be sufficiently given or made if
sent by telecopier (with receipt confirmed) or by first-class mail, postage
prepaid, addressed (until another address is filed in writing with the Rights
Agent) as follows:
Pegasus Systems, Inc.
0000 Xxxxxx Xxxxx Xxxxxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Telecopier: (000) 000-0000
Subject to the provisions of Section 21 (Change of Rights Agent), any notice or
demand authorized by this Agreement to be given or made by the Company or by
the holder of any Rights Certificate to or on the Rights Agent shall be
sufficiently given or made if sent by telecopier (with receipt confirmed) or by
first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Company) as follows:
AMERICAN SECURITIES TRANSFER & TRUST, INC.
0000 Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000-0000
Telecopier: (000) 000-0000
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Common Stock) shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed to such holder at the address of
such holder as shown on the registry books of the Company.
Section 27. Supplements and Amendments. Prior to the
Distribution Date and subject to the penultimate sentence of this Section 27,
the Company and the Rights Agent shall, if the Company so directs, supplement
or amend any provision of this Agreement without the approval of any holders of
certificates representing shares of Common Stock; provided, however, that any
supplement or amendment of this Agreement after the Stock Acquisition Date must
be approved by a majority of the entire Board. From and after the Distribution
Date and subject to the penultimate sentence of this Section 27, the Company
and the Rights Agent shall, if the Company so directs, supplement or amend this
Agreement without the approval of any holders of Rights Certificates in order
(i) to cure any ambiguity, (ii) to correct or supplement any provision
contained herein which may be defective or inconsistent with any other
provisions herein, (iii) to shorten or lengthen any time period hereunder or
(iv) to change or supplement the provisions hereunder in any manner which the
Company may deem necessary or desirable and which shall not adversely affect
the interests of the holders of Rights Certificates (other than an Acquiring
38
44
Person or an Affiliate or Associate of any such Acquiring Person); provided,
however, this Agreement may not be supplemented or amended to lengthen,
pursuant to clause (iii) of this sentence, (A) 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; provided further, that any supplement or amendment of this
Agreement after the Stock Acquisition Date must be approved by a majority of
the entire Board. Upon the delivery of a certificate from an appropriate
officer of the Company which states that the proposed supplement or amendment
is in compliance with the terms of this Section 27, the Rights Agent shall
execute such supplement or amendment. Notwithstanding anything contained in
this Agreement to the contrary, no supplement or amendment shall be made which
changes the Redemption Price, the Final Expiration Date, the Purchase Price, or
the number of one one-thousandth of a share of Preferred Stock for which a
right is exercisable; provided, however, that at any time prior to (i) the
existence of an Acquiring Person or (ii) the date that a tender or exchange
offer by any Person (other than the Company, any Subsidiary of the Company, any
employee benefit plan of the Company or any Subsidiary of the Company, or any
Person or entity organized, appointed or established by the Company for or
pursuant to the terms of any such plan) is first published or sent or given
within the meaning of Rule 14d-2(a) of the General Rules and Regulations under
the Exchange Act, if upon consummation thereof, such Person would be the
Beneficial Owner of 20% or more of the shares of Common Stock then outstanding,
the Board may amend this Agreement to increase the Purchase Price or extend the
Final Expiration Date. Prior to the Distribution Date, the interests of the
holders of Rights shall be deemed coincident with the interests of the holders
of Common Stock.
Section 28. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 29. Determinations and Actions by the Board of Directors,
etc. For all purposes of this Agreement, any calculation of the number of
shares of Common Stock outstanding at any particular time, including for
purposes of determining the particular percentage of such outstanding shares of
Common Stock of which any Person is the Beneficial Owner, shall be made in
accordance with the last sentence of Rule 13d-3(d)(1)(i) of the General Rules
and Regulations under the Exchange Act. The Board shall have the exclusive
power and authority to administer this Agreement and to exercise all rights and
powers specifically granted to the Board or to the Company, or as may be
necessary or advisable in the administration of this Agreement, including,
without limitation, the right and power to (i) interpret the provisions of this
Agreement, and (ii) make all determinations deemed necessary or advisable for
the administration of this Agreement (including a determination to redeem or
not redeem the Rights or to amend the Agreement). All such actions,
calculations, interpretations and determinations (including, for purposes of
clause (y) below, all omissions with respect to the foregoing) which are done
or made by the Board in good faith, shall (x) be final, conclusive and binding
on the Company, the Rights Agent, the holders of the Rights and all other
parties, and (y) not subject the Board to any liability to the holders of the
Rights.
39
45
Section 30. Benefits of this Agreement. Nothing in this
Agreement shall be construed to give to any Person other than the Company, the
Rights Agent and the registered holders of the Rights Certificates (and, prior
to the Distribution Date, registered holders of the Common Stock) any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the Distribution
Date, registered holders of the Common Stock).
Section 31. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board
determines in its good faith judgment that severing the invalid language from
this Agreement would adversely affect the purpose or effect of this Agreement,
the right of redemption set forth in Section 23 (Redemption and Termination)
shall be reinstated and shall not expire until the Close of Business on the
tenth Business Day following the date of such determination by the Board.
Section 32. Governing Law. This Agreement, each Right and each
Rights Certificate issued hereunder shall be deemed to be a contract made under
the laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts
made and to be performed entirely within such State.
Section 33. Counterparts. This Agreement may be executed in any
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
Section 34. Descriptive Headings. Descriptive headings of the
several Sections of this Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions
hereof.
40
46
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and their respective corporate seals to be hereunto affixed
and attested, all as of the day and year first above written.
Attest: PEGASUS SYSTEMS, INC.
By: /s/ XXX X. XXXXX By: /s/ XXXX X. XXXXX, III
------------------------------- ------------------------------
Xxx X. Xxxxx Xxxx X. Xxxxx, III
General Counsel and Secretary President and Chief
Executive Officer
AMERICAN SECURITIES TRANSFER
& TRUST, INC.
By: By: /s/ XXXXX X. XXXXXXXX
------------------------------- ------------------------------
Name: Name: Xxxxx X. Xxxxxxxx
Title: Title: Vice President
Trust Officer
41
47
EXHIBIT 1
CERTIFICATE OF
DESIGNATION, PREFERENCES AND RIGHTS OF
SERIES A PREFERRED STOCK
OF
PEGASUS SYSTEMS, INC.
Pursuant to the provisions of
Subchapter V, Section 151(g) of the Delaware General Corporation Law ("DGCL"),
the undersigned, Xxxx X. Xxxxx, III, Chief Executive Officer and President of
Pegasus Systems, Inc. (the "Corporation"), a corporation organized and existing
under the DGCL, DOES HEREBY CERTIFY:
That pursuant to the authority
conferred upon the Board of Directors (the "Board") by the Second Amended and
Restated Articles of Incorporation of the Corporation, as amended, the said
Board on September 28, 1998, adopted the following resolutions creating a
series of one hundred thousand shares of Preferred Stock, $.01 par value per
share, designated as Series A Preferred Stock:
RESOLVED, that, pursuant to the
authority vested in the Board in accordance with the provisions of its Second
Amended and Restated Articles of Incorporation, as amended, the Board does
hereby create, authorize and provide for the issuance upon the exercise of the
Corporation's Preferred Stock Purchase Rights, of a series of Preferred Stock
of the Corporation, and does hereby fix and state that the designations,
amounts, powers, preferences and relative and other special rights and the
qualifications, limitations or restrictions thereof are as follows:
Series A Preferred Stock
Section 1. Designation and Amount.
The shares of such series shall be designated as Series A Preferred Stock and
the number of shares constituting such series shall be 100,000.
Section 2. Dividends and
Distributions.
(A) Subject to the prior and superior
rights of the holders of any shares of any series of Preferred Stock ranking
prior and superior to the shares of Series A Preferred Stock with respect to
dividends, the holders of shares of Series A Preferred Stock shall be entitled
to receive, when, as and if declared by the Board of Directors out of funds
legally available for that purpose, quarterly dividends payable in cash on the
1st day of November, February, May, and August in each year commencing November
1, 1998 (each such date being referred to herein as a "Quarterly Dividend
Payment Date"), commencing on the first Quarterly Dividend Payment Date after
the first issuance of a share or fraction of a share of Series A Preferred
Stock, in an amount per share rounded to the nearest cent equal to the
-1-
48
greater of (a) $0.10 or (b) subject to the provision for adjustment hereinafter
set forth, one thousand (1,000) times the aggregate per share amount of all
cash dividends, and one thousand (1,000) times the aggregate per share amount
(payable in kind) of all non-cash dividends or other distributions other than a
dividend payable in shares of the common stock of the Corporation, $.01 par
value per share ("the Common Stock"), or a subdivision of the outstanding
shares of Common Stock (by reclassification or otherwise), declared on the
Common Stock, since the immediately preceding Quarterly Dividend Payment Date,
or, with respect to the first Quarterly Dividend Payment Date, since the first
issuance of any share or fraction of a share of Series A Preferred Stock. In
the event the Corporation shall at any time after September 28, 1998 (the
"Rights Declaration Date") (i) declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii)
combine the outstanding Common Stock into a smaller number of shares, then in
each such case the amount to which holders of shares of Series A Preferred
Stock were entitled immediately prior to such event under clause (b) of the
preceding sentence shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(B) The Corporation shall declare a
dividend or distribution on the Series A Preferred Stock as provided in
paragraph (A) above immediately after it declares a dividend or distribution on
the Common Stock (other than a dividend payable in shares of Common Stock);
provided that, in the event no dividend or distribution shall have been
declared on the Common Stock during the period between any Quarterly Dividend
Payment Date and the next subsequent Quarterly Dividend Payment Date, a
dividend of $0.10 per share on the Series A Preferred Stock shall nevertheless
be payable on such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue
and be cumulative on outstanding shares of Series A Preferred Stock from the
Quarterly Dividend Payment Date next preceding the date of issue of such shares
of Series A Preferred Stock, unless the date of issue of such shares is prior
to the record date for the first Quarterly Dividend Payment Date, in which case
dividends on such shares shall begin to accrue from the date of issue of such
shares, or unless the date of issue is a Quarterly Dividend Payment Date or is
a date after the record date for the determination of holders of shares of
Series A Preferred Stock entitled to receive a quarterly dividend and before
such Quarterly Dividend Payment Date, in either of which events such dividends
shall begin to accrue and be cumulative from such Quarterly Dividend Payment
Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on
the shares of Series A Preferred Stock in an amount less than the total amount
of such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at the time
outstanding. The Board of Directors may fix a record date for the determination
of holders of shares of Series A Preferred Stock entitled to receive payment of
a dividend or distribution declared thereon, which record date shall be no more
than thirty (30) days prior to the date fixed for the payment thereof.
-2-
49
Section 3. Voting Rights. The holders
of shares of Series A Preferred Stock shall have the following voting rights:
(A) Subject to the provision for
adjustment hereinafter set forth, each share of Series A Preferred Stock shall
entitle the holder thereof to one thousand (1,000) votes on all matters
submitted to a vote of the stockholders of the Corporation. In the event the
Corporation shall at any time after the Rights Declaration Date (i) declare any
dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock, or (iii) combine the outstanding Common Stock into a
smaller number of shares, then in each such case the number of votes per share
to which holders of shares of Series A Preferred Stock were entitled
immediately prior to such event shall be adjusted by multiplying such number by
a fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to
such event.
(B) Except as otherwise provided herein
or by law, the holders of shares of Series A Preferred Stock and the holders of
shares of Common Stock shall vote together as one class on all matters
submitted to a vote of stockholders of the Corporation. Except as otherwise
provided herein or by law, the holders of the shares of Series A Preferred
Stock shall not be entitled to vote as a separate class on any matters
submitted to a vote of the stockholders.
(C) (i)If at any time dividends on any
Series A Preferred Stock shall be in arrears in an amount equal to six (6)
quarterly dividends thereon, the holders of the Series A Preferred Stock,
voting as a separate series from all other series of Preferred Stock and
classes of capital stock, shall be entitled to elect two members of the Board
of Directors in addition to any directors elected by any other series, class or
classes of securities, and the authorized number of directors will
automatically be increased by two. Promptly thereafter, the Board of Directors
of this Corporation shall, as soon as may be practicable, call a special
meeting of holders of Series A Preferred Stock for the purpose of electing such
members of the Board of Directors. Said special meeting shall in any event be
held within 45 days of the occurrence of such arrearage.
(ii) During any period when the
holders of Series A Preferred Stock, voting as a separate series, shall be
entitled and shall have exercised their right to elect two directors, then and
during such time as such right continues (a) the then authorized number of
directors shall be increased by two, and the holders of Series A Preferred
Stock, voting as a separate series, shall be entitled to elect the additional
directors so provided for, and (b) each such additional director shall not be a
member of any existing class of the Board of Directors, but shall serve until
the next annual meeting of stockholders for the election of directors, or until
his successor shall be elected and shall qualify, or until his right to hold
such office terminates pursuant to the provisions of this Section 3(C).
(iii) A director elected pursuant
to the terms hereof may be removed with or without cause by the holders of
Series A Preferred Stock entitled to vote in an election of such Director.
-3-
50
(iv) If during any interval
between annual meetings of stockholders for the election of directors and while
the holders of Series A Preferred Stock shall be entitled to elect two
directors, there is no such director in office by reason of resignation, death
or removal, then, promptly thereafter, the Board of Directors shall call a
special meeting of the holders of Series A Preferred Stock for the purpose of
filling such vacancy and such vacancy shall be filled at such special meeting.
Such special meeting shall in any event be held within 90 days of the occurrence
of such vacancy, unless an annual meeting of stockholders is scheduled during
such 90-day period.
(v) At such time as the arrearage
is fully cured, and all dividends accumulated and unpaid on any shares of Series
A Preferred Stock outstanding are paid, and, in addition thereto, at least one
regular dividend has been paid subsequent to curing such arrearage, the term of
office of any directors elected pursuant to this Section 3(C), or his successor,
shall automatically terminate, and the authorized number of directors shall
automatically decrease by two, the rights of the holders of the shares of the
Series A Preferred Stock to vote as provided in this Section 3(C) shall cease,
subject to renewal from time to time upon the same terms and conditions, and the
holders of shares of the Series A Preferred Stock shall have only the limited
voting rights elsewhere herein set forth.
(D) Except as set forth herein,
holders of Series A Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent they are entitled to
vote with holders of Common Stock as set forth herein) for taking any corporate
action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or
other dividends or distributions payable on the Series A Preferred Stock as
provided in Section 2 are in arrears, thereafter and until all accrued and
unpaid dividends and distributions, whether or not declared, on shares of
Series A Preferred Stock outstanding shall have been paid in full, the
Corporation shall not:
(i) declare or pay dividends on,
make any other distributions on, or redeem or purchase or otherwise acquire for
consideration any shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to, the Series A Preferred Stock;
(ii) declare or pay dividends on,
or make any other distributions on, any shares of stock ranking junior (either
as to dividends or upon liquidation, dissolution or winding up) to the Series A
Preferred Stock, except dividends paid ratably on the Series A Preferred Stock
and all such junior stock on which dividends are payable or in arrears in
proportion to the total amounts to which the holders of all such shares are then
entitled;
(iii) redeem or purchase or
otherwise acquire for consideration shares of any stock ranking on a parity
(either as to dividends
-4-
51
or upon liquidation, dissolution or winding up) with the Series A Preferred
Stock, provided that the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such parity stock in exchange for shares of any
stock of the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A Preferred Stock; or
(iv) purchase or otherwise
acquire for consideration any shares of Series A Preferred Stock, or any shares
of stock ranking on a parity with the Series A Preferred Stock, except in
accordance with a purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of such shares upon such
terms as the Board of Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of the respective
series and classes, shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.
(B) The Corporation shall not permit
any subsidiary of the Corporation to purchase or otherwise acquire for
consideration any shares of stock of the Corporation unless the Corporation
could, under paragraph (A) of this Section 4, purchase or otherwise acquire
such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
to be created by resolution or resolutions of the Board of Directors, subject
to the conditions and restrictions on issuance set forth herein.
Section 6. Liquidation, Dissolution or Winding Up.
(A) Upon any liquidation (voluntary
or otherwise), dissolution or winding up of the Corporation, no distribution
shall be made to the holders of shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series A
Preferred Stock unless, prior thereto, the holders of shares of Series A
Preferred Stock shall have received $180.00 per share, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment (the "Series A Liquidation Preference").
Notwithstanding any provision of the Second Amended and Restated Articles of
Incorporation, as amended, to the contrary, following the payment of the full
amount of the Series A Liquidation Preference, no additional distributions
shall be made to the holders of shares of Series A Preferred Stock unless,
prior thereto, the holders of shares of Common Stock shall have received an
amount per share (the "Common Adjustment") equal to the quotient obtained by
dividing (i) the Series A Liquidation Preference by (ii) one thousand (1,000)
(as appropriately adjusted as set forth in paragraph (C) of this Section to
reflect such events as stock splits, stock dividends and recapitalizations with
respect to the Common Stock) (such number in clause (ii) immediately above
being referred to as the "Adjustment Number"). Following the payment of the
full amount of the Series A Liquidation Preference and the Common Adjustment in
respect of all outstanding shares of Series A Preferred Stock and Common Stock,
respectively, holders of Series A Preferred Stock and holders of shares of
Common Stock shall receive their ratable and proportionate share of the
remaining assets to
-5-
52
be distributed in the ratio of the Adjustment Number to one (1) with respect to
such Preferred Stock and Common Stock, on a per share basis, respectively.
(B) In the event, however, that there
are not sufficient assets available to permit payment in full of the Series A
Liquidation Preference and the liquidation preferences of all other series of
preferred stock, if any, which rank on a parity with the Series A Preferred
Stock, then such remaining assets shall be distributed ratably to the holders
of such parity shares in proportion to their respective liquidation
preferences. In the event, however, that there are not sufficient assets
available to permit payment in full of the Common Adjustment, then such
remaining assets shall be distributed ratably to the holders of Common Stock.
(C) In the event the Corporation
shall at any time after the Rights Declaration Date (i) declare any dividend on
Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding
Common Stock, or (iii) combine the outstanding Common Stock into a smaller
number of shares, then in each such case the Adjustment Number in effect
immediately prior to such event shall be adjusted by multiplying such
Adjustment Number by a fraction the numerator of which is the number of shares
of Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding immediately
prior to such event.
Section 7. Consolidation, Merger, etc. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock,
securities, cash or any other property, then in any such case the shares of
Series A Preferred Stock shall at the same time be similarly exchanged or
changed in an amount per share (subject to the provision for adjustment
hereinafter set forth) equal to one thousand (1,000) times the aggregate amount
of stock, securities, cash and/or any other property (payable in kind), as the
case may be, into which or for which each share of Common Stock is changed or
exchanged. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (ii) combine the
outstanding Common Stock into a smaller number of shares, then in each such
case the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series A Preferred Stock shall be adjusted by
multiplying such amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 8. Redemption. The outstanding shares of Series A Preferred
Stock may be redeemed at the option of the Board of Directors as a whole, but
not in part, at any time, or from time to time, at a cash price per share equal
to one hundred five percent (105%) of (i) the product of the Adjustment Number
times the Average Market Value (as such term is hereinafter defined) of the
Common Stock, plus (ii) all dividends which on the redemption date have accrued
on the shares to be redeemed and have not been paid, or declared and a sum
sufficient for the payment thereof set apart, without interest. The "Average
Market Value" is the average of the closing sale prices of the Common Stock
during the thirty (30) day period immediately preceding
-6-
53
the date before the redemption date on the Composite Tape for New York Stock
Exchange Listed Stocks, or, if such stock is not quoted on the Composite Tape,
on the New York Stock Exchange, or, if such stock is not listed on such
Exchange, on the principal United States securities exchange registered under
the Securities Exchange Act of 1934, as amended, on which such stock is listed,
or, if such stock is not listed on any such exchange, the average of the
closing sale prices with respect to a share of Common Stock during such thirty
(30) day period, as quoted on the Nasdaq National Market, the Nasdaq Small Cap
Market or any system then in use, or if no such quotations are available, the
fair market value of the Common Stock as determined by the Board of Directors
in good faith.
Section 9. Ranking. The Series A Preferred Stock shall rank junior to
all other series of the Corporation's Preferred Stock as to the payment of
dividends and the distribution of assets, unless the terms of any such series
shall provide otherwise.
Section 10. Amendment. Except as otherwise provided in the Second
Amended and Restated Articles of Incorporation, as amended, or by law, the
Second Amended and Restated Articles of Incorporation of the Corporation, as
amended, shall not be further amended in any manner which would materially
alter or change the powers, preferences or special rights of the Series A
Preferred Stock so as to affect them adversely without the affirmative vote of
the holders of a majority or more of the outstanding shares of Series A
Preferred Stock, voting separately as a class.
Section 11. Fractional Shares. At the Corporation's sole discretion,
Series A Preferred Stock may be issued in fractions of a share which shall
entitle the holder, in proportion to such holder's fractional shares, to
exercise voting rights, receive dividends, participate in distributions and to
have the benefit of all other rights of holders of Series A Preferred Stock.
IN WITNESS WHEREOF, the undersigned has executed and subscribed this
Certificate and does affirm the foregoing as true as of September 28, 1998.
---------------------------------------
Xxxx X. Xxxxx, III
Chief Executive Officer and President
Attest:
-------------------------------
Xxx X. Xxxxx
General Counsel and Secretary
-7-
54
EXHIBIT 2
[FORM OF RIGHTS CERTIFICATE]
Certificate No. R____ ______ Rights
NOT EXERCISABLE AFTER THE EARLIER OF OCTOBER 13, 2008 OR SUCH DATE AS THE
RIGHTS REPRESENTED HEREBY ARE REDEEMED BY PEGASUS SYSTEMS, INC. (THE
"CORPORATION"). THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE SUBJECT
TO REDEMPTION, AT THE OPTION OF THE CORPORATION, AT $0.01 PER RIGHT ON THE
TERMS SET FORTH IN THE RIGHTS AGREEMENT DATED AS OF SEPTEMBER 28, 1998, BY AND
BETWEEN THE CORPORATION AND AMERICAN SECURITIES TRANSFER & TRUST, INC., AS
RIGHTS AGENT (THE "RIGHTS AGREEMENT"). UNDER CERTAIN CIRCUMSTANCES, RIGHTS
BENEFICIALLY OWNED BY AN ACQUIRING PERSON (AS SUCH TERM IS DEFINED IN THE
RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND
VOID. [THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE
BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN
AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE
RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS
REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN
SECTION 7(e) (EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS --
TERMINATION OF ACQUIRING PERSON'S RIGHTS) OF SUCH AGREEMENT.](1)
RIGHTS CERTIFICATE
PEGASUS SYSTEMS, INC.
This certifies that ___________________________________, or its, his or
her registered assigns, is the registered owner of the number of rights set
forth above, each of which entitles the owner thereof, subject to the terms,
provisions and conditions of the Rights Agreement, dated as of September 28,
1998 (the "Rights Agreement"), between Pegasus Systems, Inc., a Delaware
corporation (the "Corporation"), and American Securities Transfer & Trust,
Inc., a Colorado corporation (the "Rights Agent"), to purchase from the
Corporation at any time prior to 5:00 P.M. (Dallas, Texas time) on October 13,
2008 at the office or offices of the Rights Agent designated for such purpose,
or its successors as Rights Agent, one one-thousandth (1/1,000) of a fully
paid, nonassessable share of Series A Preferred Stock (the "Preferred Stock")
of the Corporation, at a purchase price of $90.00 per one one-thousandth
(1/1,000) of a share (the "Purchase Price"), upon
----------------------------------
(1) The portion of the legend in brackets shall be inserted only if
applicable and shall replace the preceding sentence.
-1-
55
presentation and surrender of this Rights Certificate with the Form of Election
to Purchase and related Certificate duly executed. The number of Rights
evidenced by this Rights Certificate (and the number of shares which may be
purchased upon exercise thereof) set forth above, and the Purchase Price set
forth above, are the number and Purchase Price as of _____________, ______,
based on the Preferred Stock as constituted at such date. The Corporation
reserves the right to require, prior to the occurrence of a Triggering Event
(as such term is defined in the Rights Agreement), that upon any exercise of
Rights, a number of Rights be exercised so that only whole shares of Preferred
Stock would be issued.
Upon the occurrence of a Flip-in Event (as such term is defined in the
Rights Agreement), if the Rights evidenced by this Rights Certificate are
beneficially owned by (i) an Acquiring Person or an Associate or Affiliate or
any such Person (as such terms are defined in the Rights Agreement), (ii) a
transferee of an Acquiring Person or its Associate or Affiliate who becomes a
transferee after such Acquiring Person or its Associate or Affiliate becomes
such, or (iii) under certain circumstances specified in the Rights Agreement, a
transferee of an Acquiring Person or its Associate or Affiliate who becomes a
transferee prior to or concurrently with the Acquiring Person becoming such,
such Rights shall become null and void and no holder hereof shall have any
right with respect to such Rights from and after the occurrence of such Flip-in
Event.
As provided in the Rights Agreement, the Purchase Price and the number
and kind of shares of Preferred Stock or other securities, which may be
purchased upon the exercise of the Rights evidenced by this Rights Certificate
are subject to modification and adjustment upon the happening of certain
events, including Triggering Events (as such term is defined in the Rights
Agreement).
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Corporation and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the above-mentioned office of the
Rights Agent and are also available upon written request to the Rights Agent.
This Rights Certificate, with or without other Rights Certificates, upon
surrender at the principal office or offices of the Rights Agent designated for
such purpose, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of one one-thousandth of a share of Preferred
Stock as the Rights evidenced by the Rights Certificate or Rights Certificates
surrendered shall have entitled such holder to purchase. If this Rights
Certificate shall be exercised in part, the holder shall be entitled to receive
upon surrender hereof another Rights Certificate or Rights Certificates for the
number of whole Rights for which this Rights Certificate is not exercised.
-2-
56
Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Certificate (i) may be redeemed by the Corporation at its option at a
redemption price of $0.01 per Right at any time prior to the earlier of (a) the
Close of Business (as such term is defined in the Rights Agreement) on the
tenth (10th) Business Day (as such term is defined in the Rights Agreement)
following the Stock Acquisition Date (as such term is defined in the Rights
Agreement) (as such time period may be extended pursuant to the Rights
Agreement) or (b) the Final Expiration Date (as such term is defined in the
Rights Agreement) and (ii) may be exchanged in whole or in part for Preferred
Stock, shares of the Corporation's Common Stock, no par value, other property
or any combination thereof.
In addition, the Rights may be exchanged, in whole or in part, for shares
of the Common Stock, or shares of common stock equivalents of the Corporation
having essentially the same value or economic rights as such shares.
Immediately upon the action of the Board of Directors of the Corporation
authorizing any such exchange, and without any further action or any notice,
the Rights (other than Rights which are not subject to such exchange) will
terminate and the Rights will only enable holders to receive the shares
issuable upon such exchange.
No fractional shares of Preferred Stock will be issued upon the exercise
of any Right or Rights evidenced hereby (other than fractions which are
integral multiples of one one-thousandth (1/1,000) of a share of Preferred
Stock, which may, at the election of the Corporation, be evidenced by
depositary receipts), but a cash payment will be made in lieu thereof, as
provided in the Rights Agreement.
No holder of this Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of shares of Preferred Stock
or of any other securities of the Corporation which may at any time be issuable
on the exercise hereof, nor shall anything contained in the Rights Agreement or
herein be construed to confer upon the holder hereof, as such, any of the
rights of a stockholder of the Corporation or any right to vote for the
election of directors or upon any matter submitted to stockholders of the
Corporation at any meeting thereof, or to give or withhold consent to any
corporate action or to receive notice of meetings or other actions affecting
stockholders of the Corporation (except as provided in the Rights Agreement),
or to receive dividends or subscription rights, or otherwise, until the Right
or Rights evidenced by this Rights Certificate shall have been exercised as
provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
3
57
WITNESS the facsimile signature of the proper officers of the Corporation
and its corporate seal.
Dated as of
--------------------
ATTEST:
PEGASUS SYSTEMS, INC.
--------------------------------
Secretary By:
--------------------------------
Title:
Countersigned:
RIGHTS AGENT
By:
---------------------------
Authorized Signature
4
58
[FORM OF REVERSE SIDE OF RIGHTS CERTIFICATE]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED,
--------------------------------------------------------------------------------
hereby sells, assigns and transfers unto
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(PLEASE PRINT NAME AND ADDRESS OF TRANSFEREE)
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ___________________________
Attorney, to transfer the within Rights Certificate on the books of the
within-named Corporation, with full power of substitution.
Dated:
--------------------- ------------------------------
Signature
Signature Guaranteed:
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Rights Certificate [ ] is [ ] is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of an Acquiring Person (as such terms are defined in the
Rights Agreement); and
(2) after due inquiry and to the best knowledge of the undersigned, it [ ]
did [ ] did not acquire the Rights evidenced by this Rights Certificate from any
Person who is, was or subsequently became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.
Dated:
------------------- ------------------------------
Signature
Signature Guaranteed:
5
59
NOTICE
The signature to the foregoing Assignment and Certificate must correspond
to the name as written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any change whatsoever.
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to
exercise Rights represented by the
Rights Certificate.)
To: Pegasus Systems, Inc.
The undersigned hereby irrevocably elects to exercise _______________
Rights represented by this Rights Certificate to purchase the shares of
Preferred Stock issuable upon the exercise of the Rights (or such other
securities of the Corporation or of any other person which may be issuable upon
the exercise of the Rights) and requests that certificates for such shares be
issued in the name of and delivered to:
Please insert social security or
other identifying number
--------------------------------------------------------------------------------
(PLEASE PRINT NAME AND ADDRESS)
--------------------------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
Please insert social security or
other identifying number
--------------------------------------------------------------------------------
(PLEASE PRINT NAME AND ADDRESS)
--------------------------------------------------------------------------------
Dated:
------------------- ---------------------------------
Signature
Signature Guaranteed:
-6-
60
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not
being acquired or exercised by or on behalf of a Person who is or was an
Acquiring Person or an Affiliate or Associate of an Acquiring Person (as such
terms are defined in the Rights Agreement); and
(2) after due inquiry and to the best knowledge of the undersigned, it [ ]
did [ ] did not acquire the Rights evidenced by this Rights Certificate from any
Person who is, was or became an Acquiring Person or an Affiliate or Associate of
an Acquiring Person.
Dated:
---------------------- -----------------------------------
Signature
Signature Guaranteed:
NOTICE
The signature to the foregoing Election to Purchase and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
-7-
61
EXHIBIT 3
[PEGASUS SYSTEMS, INC. LETTERHEAD]
October 27, 1998
Dear Pegasus Systems Stockholders,
As you may be aware, on September 28, 1998, your Board of Directors
approved and adopted a Stockholder Rights Plan (the "Plan"). The Plan is
designed to prevent a potential acquiror from gaining control of Pegasus
Systems, Inc. (the "Company") without fairly compensating all of its
stockholders. It provides for a dividend distribution of one preferred stock
purchase right (a "Right") for each outstanding share of common stock of the
Company held on October 13, 1998.
The Rights will initially trade with shares of the Company's common stock
and will have no impact on the way in which the Company's shares are traded.
At the outset of the Plan, there are no separate certificates or market for the
Rights. The Rights will not become exercisable and trade separately from the
common stock until the earlier of (i) ten business days after a public
announcement that a person has acquired 20% or more of the common stock of the
Company or (ii) ten business days (or any later date determined by the
Company's Board of Directors) after a person makes a tender or exchange offer
for 20% or more of the Company's common stock.
Pertinent details of the Plan are described in the attached Summary of
Rights To Purchase Preferred Stock, which we urge you to read carefully.
The adoption of the Plan is intended to help assure that any potential
acquiror seeking to obtain control of the Company will pay full and fair value
to all stockholders. The Rights are not intended to prevent any takeover or
proxy contest for control of the Company, but rather to increase the ability of
your Board effectively to represent the best interests of stockholders in the
event of an unsolicited attempt to acquire the Company. We are not aware of
any effort to acquire the Company, but we remain concerned about the
possibility of a takeover attempt that might include coercive and unfair
tactics that do not result in a fair price being paid to all stockholders. As
a prudent response to such a possibility, your Board has authorized the
issuance of the Rights. Since 1985, over 2,500 companies have adopted similar
plans, indicating widespread agreement that such plans can help directors
deflect coercive and inadequate offers.
-1-
62
Issuance of the Rights will not have a dilutive effect, will not affect
reported earnings per share and should not cause the Company or you to
recognize gain for federal income tax purposes. In addition, the Plan does not
weaken the financial strength of the Company or interfere with its business
plans.
A copy of the Plan has been filed with the Securities and Exchange
Commission and is available free of charge from the Company.
Your Board of Directors and management are enthusiastic about the
potential for the Company and are committed to serving the best interests of
the Company's stockholders. The Board believes that the Plan represents a
sound and reasonable means of addressing the complex problems created by the
possibility of unfair takeover attempts. Accordingly, we take great
satisfaction in providing these new Rights to you to preserve the long-term
value of your investment in the Company.
Respectfully,
-------------------------------
Xxx X. Xxxxx
General Counsel
Attachment
-2-
63
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED STOCK
On September 28, 1998, the Board of Directors of PEGASUS SYSTEMS, INC.
(the "Company") declared a dividend distribution of one Right for each
outstanding share of the Company's common stock, $.01 par value (the "Common
Stock"), to stockholders of record at the close of business on October 13,
1998. This dividend distribution will be made on or about October 27, 1998.
Each Right entitles the registered holder to purchase from the Company one
one-thousandth (1/1,000th) of a share of Series A Preferred Stock, $.01 par
value (the "Preferred Stock"), at a Purchase Price of $90.00 per one
one-thousandth (1/1,000th) of a share, subject to adjustment. The description
and terms of the Rights are set forth in a Rights Agreement (the "Rights
Agreement") between the Company and American Securities Transfer & Trust, Inc.,
a Colorado corporation, as Rights Agent (the "Rights Agent").
Initially, the Rights will be attached to all Common Stock certificates
representing shares then outstanding, and no separate Rights Certificates will
be distributed. The Rights will separate from the Common Stock upon the
earlier of (i) ten (10) business days following a public announcement that a
person or group of affiliated or associated persons (an "Acquiring Person") has
acquired, or obtained the right to acquire, beneficial ownership of twenty
percent (20%) or more of the outstanding shares of Common Stock (the "Stock
Acquisition Date"), or (ii) ten (10) business days (or such later date as the
Board of Directors shall determine) following the commencement of a tender or
exchange offer that would result in a person or group beneficially owning
twenty percent (20%) or more of such outstanding shares of Common Stock. The
date the Rights separate is referred to as the "Distribution Date."
Until the Distribution Date, (i) the Rights will be evidenced by the
Common Stock certificates and will be transferred with and only with such
Common Stock certificates, (ii) new Common Stock certificates issued after
October 13, 1998 will contain a notation incorporating the Rights Agreement by
reference, and (iii) the surrender for transfer of any certificates for Common
Stock outstanding will also constitute the transfer of the Rights associated
with the Common Stock represented by such certificates. Pursuant to the Rights
Agreement, the Company reserves the right to require prior to the occurrence of
a Triggering Event (as defined below) that, upon any exercise of Rights, a
number of Rights be exercised so that only whole shares of Preferred Stock will
be issued.
The Rights are not exercisable until the Distribution Date and will expire
at the close of business on October 13, 2008, unless earlier redeemed by the
Company as described below.
As soon as practicable after the Distribution Date, Rights Certificates
will be mailed to holders of record of the Common Stock as of the close of
business on the Distribution Date and, thereafter, the separate Rights
Certificates will represent the Rights. Except in connection with shares of
Common Stock issued or sold pursuant to the exercise of stock options under any
employee plan or arrangement, or upon the exercise, conversion or exchange of
securities
64
hereafter issued by the Company, or as otherwise determined by the Board of
Directors, only shares of Common Stock issued prior to the Distribution Date
will be issued with Rights.
In the event that (i) the Company is the surviving corporation in a merger
or other business combination with an Acquiring Person (or any associate or
affiliate thereof) and its Common Stock remains outstanding and unchanged, (ii)
any person shall acquire beneficial ownership of more than twenty percent (20%)
of the outstanding shares of Common Stock (except pursuant to (A) certain
consolidations or mergers involving the Company or sales or transfers of the
combined assets, cash flow or earning power of the Company and its subsidiaries
or (B) an offer for all outstanding shares of Common Stock at a price and upon
terms and conditions which a majority of the Board of Directors determines to
be in the best interests of the Company and its stockholders), or (iii) there
occurs a reclassification of securities, a recapitalization of the Company or
any of certain business combinations or other transactions (other than certain
consolidations and mergers involving the Company and sales or transfers of the
combined assets, cash flow or earning power of the Company and its
subsidiaries) involving the Company or any of its subsidiaries which has the
effect of increasing by more than one percent (1%) the proportionate share of
any class of the outstanding equity securities of the Company or any of its
subsidiaries beneficially owned by an Acquiring Person (or any associate or
affiliate thereof), each holder of a Right (other than the Acquiring Person and
certain related parties) will thereafter have the right to receive, upon
exercise, Common Stock (or, in certain circumstances, cash, property or other
securities of the Company) having a value equal to two times the Purchase Price
of the Right. However, Rights are not exercisable following the occurrence of
either of the events described above until such time as the Rights are no
longer redeemable by the Company as described below. Notwithstanding any of
the foregoing, following the occurrence of any of the events described in this
paragraph, all Rights that are, or (under certain circumstances specified in
the Rights Agreement) were, beneficially owned by any Acquiring Person will be
null and void.
For example, at a Purchase Price of $90.00 per Right, each Right not owned
by an Acquiring Person (or by certain related parties or transferees) following
an event set forth in the preceding paragraph would entitle its holder to
purchase $180.00 worth of Common Stock (or other consideration, as noted above)
for $90.00.
In the event that, at any time following the Stock Acquisition Date, (i)
the Company shall enter into a merger or other business combination transaction
in which the Company is not the surviving corporation, (ii) the Company is the
surviving corporation in a consolidation, merger or similar transaction
pursuant to which all or part of the outstanding shares of Common Stock are
changed into or exchanged for stock or other securities of any other person or
cash or any other property or (iii) more than 50% of the combined assets, cash
flow or earning power of the Company and its subsidiaries is sold or
transferred (in each case other than certain consolidations with, mergers with
and into, or sales of assets, cash flow or earning power by or to subsidiaries
-2-
65
of the Company as specified in the Rights Agreement), each holder of a Right
(except Rights which previously have been voided as set forth above) shall
thereafter have the right to receive, upon exercise, common stock of the
acquiring company having a value equal to two times the Purchase Price of the
Right. The events described in this paragraph and in the second preceding
paragraph are referred to as the "Triggering Events."
The Purchase Price payable, the number and kind of shares covered by each
Right and the number of Rights outstanding are subject to adjustment from time
to time to prevent dilution (i) in the event of a stock dividend on, or a
subdivision, combination or reclassification of, the Preferred Stock, (ii) if
holders of the Preferred Stock are granted certain rights, options or warrants
to subscribe for Preferred Stock or securities convertible into Preferred Stock
at less than the current market price of the Preferred Stock, or (iii) upon the
distribution to holders of the Preferred Stock of evidences of indebtedness,
cash (excluding regular quarterly cash dividends), assets (other than dividends
payable in Preferred Stock) or subscription rights or warrants (other than
those referred to in clause (ii) immediately above).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least one percent (1%) of
the Purchase Price. No fractional shares of Preferred Stock are required to be
issued (other than fractions which are integral multiples of one one-thousandth
(1/1,000th) of a share of Preferred Stock) and, in lieu thereof, the Company
may make an adjustment in cash based on the market price of the Preferred Stock
on the trading date immediately prior to the date of exercise.
At any time after any person or group becomes an Acquiring Person and
prior to the acquisition by such person or group of fifty percent (50%) or more
of the outstanding shares of Common Stock, the Board of Directors of the
Company may, without payment of the Purchase Price by the holder, exchange the
Rights (other than Rights owned by such person or group, which will become
void), in whole or in part, for shares of Common Stock at an exchange ratio of
one-half (1/2) the number of shares of Common Stock (or in certain
circumstances Preferred Stock) for which a Right is exercisable immediately
prior to the time of the Company's decision to exchange the Rights (subject to
adjustment).
At any time until ten (10) business days following the Stock Acquisition
Date, the Company may redeem the Rights in whole, but not in part, at a price
of $0.01 per Right (payable in cash, shares of Common Stock or other
consideration deemed appropriate by the Board of Directors). Immediately upon
the action of the Board of Directors ordering redemption of the Rights, the
Rights will terminate and the only right of the holders of Rights will be to
receive the $0.01 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
-3-
66
the distribution of the Rights will not be taxable to stockholders or to the
Company, stockholders may, depending upon the circumstances, recognize taxable
income in the event that the Rights become exercisable for Common Stock (or
other consideration) of the Company or for common stock of an acquiring company
as set forth above or in the event that the Rights are redeemed.
Other than those provisions relating to the principal economic terms of
the Rights, any of the provisions of the Rights Agreement may be amended by the
Board of Directors of the Company prior to the Distribution Date; provided,
that any amendments after the Stock Acquisition Date must be approved by a
majority of the entire Board of Directors. After the Distribution Date, the
provisions of the Rights Agreement may be amended by the Board in order to cure
any ambiguity, inconsistency or defect, to make changes which do not adversely
affect the interest of holders of Rights (excluding the interest of any
Acquiring Person) or to shorten or lengthen any time period under the Rights
Agreement; provided, however, that no amendment to adjust the time period
governing redemption shall be made at such time as the Rights are not
redeemable; and, provided, that any amendments after the Stock Acquisition Date
must be approved by a majority of the entire Board of Directors.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A filed
on October _____, 1998. A copy of the Rights Agreement is available free of
charge from the Rights Agent. This summary description of the Rights does not
purport to be complete and is qualified in its entirety by reference to the
Rights Agreement, which is incorporated herein by reference.
-4-
67
EXHIBIT 4
FOR IMMEDIATE RELEASE
CONTACTS:
Xxxxxx Xxxxxx Xxxxx Xxxxxxx
Chief Financial Officer Corporate Communications
Pegasus Systems, Inc. Pegasus Systems, Inc.
(000) 000-0000 (000) 000-0000
xxxxxx@xxxxxx.xxx xxxxxx@xxxxxx.xxx
PEGASUS SYSTEMS' BOARD OF DIRECTORS AUTHORIZES STOCK REPURCHASE
AND STOCKHOLDER PROTECTION PLAN
DALLAS -- SEPTEMBER 28, 1998 -- Pegasus Systems, Inc. (Nasdaq: PEGS) today
announced its Board of Directors authorized the repurchase of shares of the
Company's common stock from time to time in an aggregate amount of up to $6
million. The Board also authorized the activation of a stockholder protection
plan designed to assure all Pegasus Systems stockholders receive fair and equal
treatment in the potentiality of any takeover attempt.
As of June 30, 1998, Pegasus Systems had 10,505,985 shares of common stock
outstanding. The Pegasus purchases may be made on the open market, in privately
negotiated transactions or otherwise, depending upon market conditions, share
availability and other factors. Shares repurchased may be reserved for later
reissue in connection with employee benefit plans, a potential exercise of
existing warrants to purchase shares of the Company's common stock and other
general corporate purposes.
"The Board of Directors believes the current valuation of Pegasus Systems'
common shares makes the stock a solid investment and represents an attractive
opportunity to enhance long-term shareholder value," said Xxxx X. Xxxxx III,
Pegasus Systems' chief executive officer. "The buyback authorization expresses
our confidence in the Company's strategic plan for future growth and sound
business fundamentals.
"Additionally, the rights issued under our stockholder plan are intended to
enable all Pegasus Systems stockholders to realize the long-term value of their
investment in the Company. Although the rights do not prevent a takeover, they
should encourage anyone seeking to acquire Pegasus Systems Inc. to negotiate
with the Board prior to attempting such a takeover. The rights also guard
against partial tender offers and other abusive tactics," Xxxxx continued. "At
this time, we are not aware of any takeover attempt."
- MORE -
68
Pegasus Systems Stock Repurchase/Stockholder Protection Plan - Page 2
An overview of the Pegasus Systems stockholder protection plan is attached.
This news release contains statements relating to future results, which are
forward-looking statements regarding future events and the future financial
performance of the company. Actual results may differ materially from those
projected as a result of certain risks and uncertainties detailed in the
Company's periodic reports and registration statement filed with the Securities
and Exchange Commission, including without limitation the Form 10-K for the 1997
fiscal year of Pegasus Systems.
ABOUT PEGASUS SYSTEMS, INC.
Pegasus Systems, Inc. provides global electronic commerce and transaction
processing solutions to hotels, travel agencies, meetings and convention
planners, corporate travel departments and Internet businesses around the world
via its services that include: THISCO(TM), HCC(TM), TravelWeb(R), NetBooker(TM)
and Pegasus IQ(TM). The Company's THISCO, TravelWeb and NetBooker hotel room
reservation services improve the efficiency and effectiveness of the reservation
process by enabling travel agents and individual travelers to electronically
access hotel room inventory information and conduct reservation transactions.
The Company's HCC service, the global leader in hotel commission payment
processing, improves the efficiency and effectiveness of the commission payment
process for participating hotels and travel agencies by consolidating payments
and providing comprehensive transaction reports. Pegasus Systems' new Pegasus IQ
unit will provide data mining services for the hotel industry. Pegasus Systems
has its headquarters in Dallas, Texas and offices in Rockville, Maryland and
London, England. The company's stock is traded on the Nasdaq National Market
under the symbol PEGS.
# # #
69
PEGASUS SYSTEMS STOCKHOLDER PROTECTION PLAN OVERVIEW
ADOPTED September 28, 1998
The Board of Directors of Pegasus Systems, Inc. (the "Company") has declared a
dividend distribution of one preferred stock purchase right for each outstanding
share of the Company's common stock. Each right will entitle stockholders to buy
one one-thousandth of a share of the Company's Series A Preferred Stock for each
share of the Company's common stock held, at a price of $90.00. The rights will
be exercisable only if a person or group of affiliated or associated persons
acquires, or has announced the intent to acquire, 20% or more of the Company's
common stock.
The rights will provide for protection against self-dealing transactions by a
control stockholder. In case of acquisition through a merger or other business
combination, the rights will entitle holders to purchase a number of the
acquiring company's common shares having the market value at that time of twice
the rights exercise price. In the event of the acquisition or the announcement
of the intention to acquire 20% or more of the Company's common stock, rights
holders may, upon exercise, receive the Company's common shares having a market
value of two times the exercise price of the rights. Under similar
circumstances, the Board of Directors may exchange each right for shares of the
Company's common stock at an exchange ratio of one half the number of shares of
common stock (or in certain circumstances preferred stock) for which a right is
exercisable immediately prior to the time of the Company's decision to exchange
the rights.
The rights plan will not prevent tender offers or other takeover attempts.
However, it will enable stockholders to realize the long-term value of the
Company's common stock in the event of a takeover. It is the Company's belief
that the plan will cause anyone contemplating a takeover of the Company to first
discuss its plans with the Board of Directors.
The Company is entitled to redeem the rights in whole, but not in part, at a
price of $.01 per right at any time prior to the acquisition of 20% or more of
the Company's common stock.
The dividend distribution will be made to stockholders of record on October 13,
1998. The rights will be evidenced by, and transferred with, the Company's
common stock certificates until such time as the acquisition of, or the
announcement of the intention to acquire, 20% or more of the Company's common
stock. If either event were to occur, separate rights certificates would be
mailed to stockholders as soon as practicable.
# # #
