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GLOBAL TELESYSTEMS GROUP, INC.
and
THE BANK OF NEW YORK
Rights Agent
Rights Agreement
Dated as of February 2, 1998
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TABLE OF CONTENTS
PAGE
SECTION 1. Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. Appointment of Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 3. Issue of Rights Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 4. Form of Rights Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 5. Countersignature and Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 6. Transfer, Split Up, Combination and Exchange of Rights Certificates;
Mutilated, Destroyed, Lost or Stolen Rights Certificates . . . . . . . . . . . . . . . . . . . 10
SECTION 7. Exercise of Rights; Purchase Price; Expiration Date of Rights . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 8. Cancellation and Destruction of Rights Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 9. Reservation and Availability of Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 10. Preferred Stock Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 11. Adjustment of Purchase Price, Number and Kind of Shares or
Number of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 12. Certificate of Adjusted Purchase Price or Number of Shares . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 13. Consolidation, Merger or Sale or Transfer of Assets or Earning
Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 14. Fractional Rights and Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 15. Rights of Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 16. Agreement of Rights Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 17. Rights Certificate Holder Not Deemed a Stockholder . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 18. Concerning the Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 19. Merger or Consolidation or Change of Name of Rights Agent . . . . . . . . . . . . . . . . . . . . . . . 31
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PAGE
SECTION 20. Duties of Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 21. Change of Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 22. Issuance of New Rights Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 23. Redemption and Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 24. Notice of Certain Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 25. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 26. Supplements and Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 27. Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 28. Determinations and Actions by the Board of Directors, etc. . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 29. Benefits of this Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 30. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 31. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 32. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 33. Descriptive Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 34. Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
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RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of February 2, 1998 (this
"Agreement"), between Global TeleSystems Group, Inc., a Delaware corporation
(the "Company"), and The Bank of New York, a New York Trust company (the "Rights
Agent").
WHEREAS, on December 5, 1997 (the "Rights Dividend Declaration
Date"), the Board of Directors of the Company authorized and declared, effective
as of the date of entering into this Agreement, a distribution of one Right
(each, a "Right") for each share of Common Stock, par value $1.00 per share, of
the Company (the "Company Common Stock") outstanding at the Close of Business
(as defined below) on [ ], 1998 (the "Record Date"), and has
authorized the issuance of one Right (as such number may hereinafter be adjusted
pursuant hereto) for each share of Company Common Stock issued between the
Record Date (whether originally issued or delivered from the Company's treasury)
and, except as otherwise provided in Section 22, the Distribution Date, each
Right initially representing the right to purchase upon the terms and subject to
the conditions hereinafter set forth one Unit (as defined below) of Series A
Preferred Stock (as defined below);
WHEREAS, the Company desires to set forth certain terms and
conditions governing the Rights; and
WHEREAS, the Company desires to appoint the Rights Agent to
act as rights agent hereunder, in accordance with the terms and conditions
hereof;
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein set forth, the parties hereby agree as follows:
SECTION 1. Certain Definitions. For purposes of this
Agreement, the following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or
which, alone or together with all Affiliates and Associates of such
Person, shall be the Beneficial Owner of 15% or more of the shares of
Company Common Stock then outstanding, but shall not include (w) the
Company, any Subsidiary of the Company, any employee benefit plan
maintained by the Company or any of its Subsidiaries or any trustee or
fiduciary with respect to such plan acting in such capacity, (x) any
such Person who has become and is such a Beneficial Owner solely
because (A) of a change in the aggregate number of shares of the
Company Common Stock since the last date on which such Person acquired
Beneficial Ownership of any shares of the Company Common Stock or (B)
it acquired such Beneficial Ownership in the good faith belief that
such acquisition would not (1) cause such Beneficial Ownership to be
equal to or exceed 15% of the shares of the Company Common Stock then
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outstanding and such Person relied in good faith in computing the
percentage of its Beneficial Ownership on publicly filed reports or
documents of the Company that are inaccurate or out-of-date or (2)
otherwise cause a Distribution Date or the adjustment provided for in
Section 11(a)(ii) to occur, (y) Xxxxxx Xxxxx and his Affiliates,
unless Xx. Xxxxx and his Affiliates become the Beneficial Owner of 20%
or more of the shares of the Company's Common Stock then outstanding,
or (z) Xxxx X. Xxxxxx and his Affiliates, unless Xx. Xxxxxx and his
Affiliates become the Beneficial Owner of 20% or more of the shares of
the Company's Common Stock then outstanding. Notwithstanding clause
(B)(2) of the prior sentence, if any Person that is not an Acquiring
Person due to such clause (B)(2) does not reduce its percentage of
Beneficial Ownership of the Company Common Stock to less than 15% by
the Close of Business on the fifth Business Day after notice from the
Company (the date of notice being the first day) that such person's
Beneficial Ownership of the Company Common Stock so equals to or
exceeds 15%, such Person shall at the end of such five Business Day
period, become an Acquiring Person (and such clause (B)(2) shall no
longer apply to such Person). For purposes of this definition, the
determination whether any Person acted in "good faith" shall be
conclusively determined by the Board of Directors of the Company,
acting by a vote of those directors of the Company whose approval
would be required to redeem the Rights under Section 23.
(b) "Adjustment Shares" has the meaning set forth in
Section 11(a)(ii).
(c) "Adjustment Spread" has the meaning set forth in
Section 34(a)(ii).
(d) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the Exchange Act
Regulations as in effect on the date of this Agreement.
(e) A Person shall be deemed the "Beneficial Owner" of,
and shall be deemed to "beneficially own", and shall be deemed to have
"Beneficial Ownership" of, any securities:
(i) of which such Person or any of such Person's
Affiliates or Associates is considered to be a "beneficial
owner" under Rule 13d-3 of the Exchange Act Regulations as in
effect on the date of this Agreement; provided, however, that
a Person shall not be deemed the "Beneficial Owner" of, or to
"beneficially own", or to have "Beneficial Ownership" of, any
securities under this subparagraph (i) as a result of an
agreement, arrangement or understanding to vote such
securities if such agreement, arrangement or understanding (A)
arises solely from a revocable proxy given in response to a
proxy or consent solicitation made pursuant to, and in
accordance with, the applicable provisions of the Exchange Act
and the Exchange Act Regulations,
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and (B) is not reportable by such Person on Schedule 13D under
the Exchange Act (or any comparable or successor report);
(ii) that are beneficially owned, directly or
indirectly, by any other Person (or any Affiliate or Associate
of such other Person) with which such Person (or any of such
Person's Affiliates or Associates) has any agreement,
arrangement or understanding (whether or not in writing), for
the purpose of acquiring, holding, voting (except pursuant to
a revocable proxy as described in the proviso to subparagraph
(i) of this paragraph (c)) or disposing of such securities; or
(iii) that such Person or any of such Person's
Affiliates or Associates, directly or indirectly, has the
right to acquire (whether such right is exercisable
immediately or only after the passage of time or upon the
satisfaction of conditions) pursuant to any agreement,
arrangement or understanding (whether or not in writing) or
upon the exercise of conversion rights, exchange rights,
rights, warrants or options, or otherwise;
provided, however, that under this paragraph (e) a Person shall not be
deemed the "Beneficial Owner" of, or to "beneficially own, or to have
"Beneficial Ownership" of, (A) securities tendered pursuant to a
tender or exchange offer made in accordance with Exchange Act
Regulations by such Person or any of such Person's Affiliates or
Associates until such tendered securities are accepted for purchase or
exchange, (B) securities that may be issued upon exercise of Rights at
any time prior to the occurrence of a Triggering Event or (C)
securities that may be issued upon exercise of Rights from and after
the occurrence of a Triggering Event, which Rights were acquired by
such Person or any of such Person's Affiliates or Associates prior to
the Distribution Date or pursuant to Section 3(c) or Section 22 or
pursuant to Section 11(a)(i) in connection with an adjustment made
with respect to any such Rights.
(f) "Business Day" shall mean any day other than a
Saturday, Sunday or a day on which banking institutions in The City of
New York are authorized or obligated by law or executive order to
close.
(g) "Close of Business" on any given date shall mean 5:00
P.M., New York City time, on such date; provided, however, that if
such date is not a Business Day it shall mean 5:00 P.M., New York City
time, on the next succeeding Business Day.
(h) "Common Stock" of any Person other than the Company
shall mean the capital stock of such Person with the greatest voting
power, or, if such Person shall
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have no capital stock, the equity securities or other equity interest
having power to control or direct the management of such Person.
(i) "Company" has the meaning set forth in the preamble
to this Agreement.
(j) "Company Common Stock" has the meaning set forth in
the recitals to this Agreement.
(k) "Continuing Director" shall mean a member of the
Board of Directors of the Company who is not an Acquiring Person or an
Affiliate or Associate of an Acquiring Person or a representative or
nominee of an Acquiring Person or of any such Affiliate or Associate,
and who either (i) was a member of the Board of Directors of the
Company prior to the date of this Agreement or (ii) subsequently
became a member of the Board of Directors of the Company and whose
election or nomination for election is approved or recommended by a
vote of a majority of the Board of Directors of the Company, which
majority includes a majority of the Continuing Directors then on the
Board of Directors.
(l) "Current Value" has the meaning set forth in Section
11(a)(iii).
(m) "Depositary Agent" has the meaning set forth in
Section 7(c).
(n) "Distribution Date" has the meaning set forth in
Section 3(a).
(o) "Equivalent Preferred Stock" has the meaning set
forth in Section 11(b).
(p) "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended.
(q) "Exchange Act Regulations" shall mean the General
Rules and Regulations under the Exchange Act.
(r) "Expiration Date" has the meaning set forth in
Section 7(a).
(s) "Final Expiration Date" has the meaning set forth in
Section 7(a).
(t) "Person" shall mean any individual, partnership,
limited liability company, firm, corporation, association, trust,
unincorporated organization or other entity, as well as any syndicate
or group deemed to be a person under Section 14(d)(2) of the Exchange
Act.
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(u) "Preferred Stock" shall mean the Series A Preferred
Stock, par value $1.00 per share, of the Company having the voting
powers, designation, preferences and relative, participating, optional
or other special rights and qualifications, limitations and
restrictions described in the Certificate of Designations set forth as
Exhibit C hereto.
(v) "preferred stock equivalents" has the meaning
specified in Section 11(a)(iii).
(w) "Principal Party" has the meaning set forth in
Section 13(b).
(x) "Purchase Price" has the meaning set forth in
Section 7(b).
(y) "Record Date" has the meaning set forth in the
recitals to this Agreement.
(aa) "Redemption Price" has the meaning set forth in
Section 23(a).
(bb) "Registered Common Stock" has the meaning set forth
in Section 13(b)(ii).
(cc) "Registration Date" has the meaning set forth in
Section 9(c).
(dd) "Registration Statement" has the meaning set forth in
Section 9(c).
(ee) "Right" has the meaning set forth in the recitals to
this Agreement.
(ff) "Rights Agent" has the meaning set forth in the
preamble to this Agreement.
(gg) "Rights Certificate" has the meaning set forth in
Section 3(a).
(hh) "Rights Dividend Declaration Date" has the meaning
set forth in the recitals to this Agreement.
(ii) "Section 11(a)(ii) Event" shall mean any event
described in Section 11(a)(ii)(A), (B) or (C).
(jj) "Section 11(a)(iii) Trigger Date" has the meaning set
forth in Section 11(a)(iii).
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(kk) "Section 13 Event" shall mean any event described in
clause (x), (y) or (z) of Section 13(a).
(ll) "Section 34(a)(i) Exchange Ratio" has the meaning set
forth in Section 34(a)(i).
(mm) "Section 34(a)(ii) Exchange Ratio" has the meaning
set forth in Section 34(a)(ii).
(nn) "Securities Act" shall mean the Securities Act of
1933, as amended.
(oo) "Spread" has the meaning set forth in Section
11(a)(iii).
(pp) "Stock Acquisition Date" shall mean the first date of
public announcement (including, without limitation, the filing of any
report pursuant to Section 13(d) of the Exchange Act) by the Company
or an Acquiring Person that an Acquiring Person has become such.
(qq) "Subsidiary" shall mean, with reference to any
Person, any other Person of which an amount of voting securities or
equity interests sufficient to elect at least a majority of the
directors or equivalent governing body of such other Person is
beneficially owned, directly or indirectly, by such Person, or
otherwise controlled by such first-mentioned Person.
(rr) "Summary of Rights" has the meaning set forth in
Section 3(b).
(ss) "Trading Day" has the meaning set forth in
Section 11(d)(i).
(tt) "Triggering Event" shall mean any Section 11(a)(ii)
Event or any Section 13 Event.
(uu) "Unit" has the meaning set forth in Section 7(b).
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. With the consent of the Rights Agent, the Company may from time
to time appoint such Co-Rights Agents as it may deem necessary or desirable.
SECTION 3. Issue of Rights Certificates. (a) Until the
earlier of (i) the Close of Business on the tenth day after the Stock
Acquisition Date and (ii) the Close of Business on the tenth Business Day (or
such later date as may be approved, prior to such
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time as any Person becomes an Acquiring Person (1) by 75% of the Company's
Board of Directors or (2) by a majority of the Company's Board of Directors and
a majority of the Continuing Directors then in office provided that at the time
of such action there are then in office not less than two Continuing Directors,
and of which the Company will give the Rights Agent prompt written notice)
after the date that a tender or exchange offer by any Person (other than the
Company, any Subsidiary of the Company, any employee benefit plan maintained by
the Company or any of its Subsidiaries or any trustee or fiduciary with respect
to such plan acting in such capacity) is first published or sent or given
within the meaning of Rule 14d-4(a) of the Exchange Act Regulations or any
successor rule, if upon consummation thereof such Person would be the
Beneficial Owner of 15% or more of the shares of Company Common Stock then
outstanding (the earlier of (i) and (ii) above being the "Distribution Date"),
(x) the Rights will be evidenced (subject to the provisions of paragraph (b) of
this Section 3) by the certificates for shares of Company Common Stock
registered in the names of the holders of shares of Company Common Stock as of
and subsequent to the Record Date (which certificates for shares of Company
Common Stock shall be deemed also to be certificates for Rights) and not by
separate certificates, and (y) the Rights will be transferable only in
connection with the transfer of the underlying shares of Company Common Stock
(including a transfer to the Company). As soon as practicable after the
Distribution Date, the Rights Agent will send by first-class, insured, postage
prepaid mail, to each record holder of shares of Company Common Stock as of the
Close of Business on the Distribution Date, at the address of such holder shown
on the records of the Company, one or more rights certificates, in
substantially the form of Exhibit A hereto (the "Rights Certificates"),
evidencing one Right for each share of Company Common Stock so held, subject to
adjustment as provided herein. In the event that an adjustment in the number
of Rights per share of Company Common Stock has been made pursuant to Section
11(p), at the time of distribution of the Rights Certificates, the Company may
make the necessary and appropriate rounding adjustments (in accordance with
Section 14(a)) so that Rights Certificates evidencing only whole numbers of
Rights are distributed and cash is paid in lieu of any fractional Rights. As
of and after the Distribution Date, the Rights will be evidenced solely by such
Rights Certificates.
(b) As promptly as practicable following the Record Date,
the Company will send a copy of a Summary of Rights to Purchase Preferred
Stock, in a form that may be appended to certificates that evidence shares of
Company Common Stock, in substantially the form attached hereto as Exhibit B
(the "Summary of Rights"), by first-class, postage prepaid mail, to each record
holder of shares of Company Common Stock as of the Close of Business on the
Record Date, at the address of such holder shown on the records of the Company.
(c) Rights shall, without any further action, be issued
in respect of all shares of Company Common Stock that are issued (including any
shares of Company Common Stock held in treasury) after the Record Date but
prior to the earlier of the
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Distribution Date and the Expiration Date. Certificates evidencing such shares
of Company Common Stock issued after the Record Date shall bear the following
legend:
"This certificate also evidences and entitles the holder
hereof to certain Rights as set forth in the Rights Agreement, dated
as of February [__], 1998 (the "Rights Agreement"), between Global
TeleSystems Group, Inc. (the "Company") and The Bank of new York (the
"Rights Agent"), the terms of which are hereby incorporated herein by
reference and a copy of which is on file at the principal office of
the stock transfer administration office of the Rights Agent. Under
certain circumstances, as set forth in the Rights Agreement, such
Rights will be evidenced by separate certificates and will no longer
be evidenced by this certificate. The Company will mail to the holder
of this certificate a copy of the Rights Agreement, as in effect on
the date of mailing, without charge promptly after receipt of a
written request therefor. Under certain circumstances set forth in
the Rights Agreement, Rights issued to, or held by, any Person who is,
was or becomes an Acquiring Person or any Affiliate or Associate
thereof (as such terms are defined in the Rights Agreement), whether
currently held by or on behalf of such Person or by any subsequent
holder, may become null and void."
With respect to certificates evidencing shares of Company
Common Stock (whether or not such certificates include the foregoing legend or
have appended to them the Summary of Rights), until the earlier of the
Distribution Date and the Expiration Date, the Rights associated with the
shares of Company Common Stock evidenced by such certificates shall be
evidenced by such certificates alone and registered holders of the shares of
Company Common Stock shall also be the registered holders of the associated
Rights, and the transfer of any of such certificates shall also constitute the
transfer of the Rights associated with the shares of Company Common Stock
evidenced by such certificates.
SECTION 4. Form of Rights Certificates. (a) The Rights
Certificates (and the forms of election to purchase, assignment and certificate
to be printed on the reverse thereof) shall each be substantially in the form
set forth in Exhibit A hereto and may have such marks of identification or
designation and such legends, summaries or endorsements printed thereon as the
Company may deem appropriate and as are not inconsistent with the provisions of
this Agreement, or as may be required to comply with any applicable law or any
rule or regulation thereunder or with any rule or regulation of any stock
exchange on which the Rights may from time to time be listed or to conform to
usage. Subject to the provisions of Section 11 and Section 22, the Rights
Certificates, whenever distributed, shall be dated as of the Record Date and on
their face shall entitle the holders thereof to purchase such number of Units
of Preferred Stock as shall be set forth therein at the price set forth
therein, but the amount and type of securities, cash or other assets that may
be acquired upon
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the exercise of each Right and the Purchase Price thereof shall be subject to
adjustment as provided herein.
(b) Any Rights Certificate issued pursuant hereto that
evidences Rights beneficially owned by: (i) an Acquiring Person or any
Associate or Affiliate of an Acquiring Person, (ii) a transferee of an
Acquiring Person (or of any such Associate or Affiliate) that becomes a
transferee after the Acquiring Person becomes such, or (iii) a transferee of an
Acquiring Person (or of any such Associate or Affiliate) that becomes a
transferee prior to or concurrently with the Acquiring Person becoming such and
that receives such Rights pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person (or any such Associate or Affiliate)
to holders of equity interests in such Acquiring Person (or such Associate or
Affiliate) or to any Person with whom such Acquiring Person (or such Associate
or Affiliate) has any continuing agreement, arrangement or understanding
regarding either the transferred Rights, shares of Company Common Stock or the
Company or (B) a transfer that either (1) 75% of the Company's Board of
Directors or (2) a majority of the Company's Board of Directors and a majority
of the Continuing Directors, has determined to be part of a plan, arrangement
or understanding that has as a primary purpose or effect the avoidance of
Section 7(e), shall, upon the written direction of either (1) 75% of the
Company's Board of Directors or (2) a majority of the Company's Board of
Directors and a majority of the Continuing Directors, contain (to the extent
feasible) the following legend:
"The Rights evidenced 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 evidenced hereby may become null and void
in the circumstances specified in Section 7(e) of such Agreement."
SECTION 5. Countersignature and Registration. (a) Rights
Certificates shall be executed on behalf of the Company by its Chairman of the
Board, the President or one of its Vice Presidents, under its corporate seal
reproduced thereon attested by its Secretary or one of its Assistant
Secretaries. The signature of any one or more of these officers on the Rights
Certificates may be manual or facsimile. Rights Certificates bearing the
manual or facsimile signatures of the individuals who were at any time the
proper officers of the Company shall bind the Company, notwithstanding that
such individuals or any of them have ceased to hold such offices prior to the
countersignature of such Rights Certificates or did not hold such offices at
the date of such Rights Certificates. No Rights Certificate shall be entitled
to any benefit under this Agreement or be valid for any purpose unless there
appears on such Rights Certificate a countersignature duly executed by the
Rights Agent by manual signature of an authorized signatory, and such
countersignature upon any Rights Certificate
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shall be conclusive evidence, and the only evidence, that such Rights
Certificate has been duly countersigned as required hereunder.
(b) Following the Distribution Date, the Rights Agent
will keep or cause to be kept, at its office designated for surrender of Rights
Certificates upon exercise or transfer, books for registration and transfer of
the Rights Certificates issued hereunder. Such books shall show the name and
address of each holder of the Rights Certificates, the number of Rights
evidenced on its face by each Rights Certificate and the date of each Rights
Certificate.
SECTION 6. Transfer, Split Up, Combination and Exchange of
Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.
(a) Subject to the provisions of Sections 4(b), 7(e) and 14, at any time after
the Close of Business on the Distribution Date, and at or prior to the Close of
Business on the Expiration Date, any Rights Certificate or Certificates may be
transferred, split up, combined or exchanged for another Rights Certificate or
Certificates, entitling the registered holder to purchase a like number of
Units of Preferred Stock (or, following a Triggering Event, other securities,
cash or other assets, as the case may be) as the Rights Certificate or
Certificates surrendered then entitled such holder to purchase. Any registered
holder desiring to transfer, split up, combine or exchange any Rights
Certificate or Certificates shall make such request in writing delivered to the
Rights Agent, and shall surrender the Rights Certificate or Certificates to be
transferred, split up, combined or exchanged at the office of the Rights Agent
designated for such purpose. Neither the Rights Agent nor the Company shall be
obligated to take any action whatsoever with respect to the transfer of any
such surrendered Rights Certificate until the registered holder shall have
completed and executed the certificate set forth in the form of assignment on
the reverse side of such Rights Certificate and shall have provided such
additional evidence of the identity of the Beneficial Owner (or former
Beneficial Owner) of the Rights evidenced by such Rights Certificate or
Affiliates or Associates thereof as the Company shall reasonably request;
whereupon the Rights Agent shall, subject to the provisions of Sections 4(b),
7(e) and 14, countersign and deliver to the Person entitled thereto a Rights
Certificate or Rights Certificates, as the case may be, as so requested. The
Company may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer, split
up, combination or exchange of Rights Certificates.
(b) If a Rights Certificate shall be mutilated,
destroyed, lost or stolen, upon request by the registered holder of the Rights
evidenced thereby and upon payment to the Company and the Rights Agent of all
reasonable expenses incident thereto, there shall be issued, in exchange for
and upon cancellation of the mutilated Rights Certificate, or in substitution
for the lost, stolen or destroyed Rights Certificate, a new Rights Certificate,
in substantially the form of the prior Rights Certificate, of like tenor and
evidencing the equivalent number of Rights, but, in the case of loss, theft or
destruction, only upon receipt
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of evidence satisfactory to the Company and the Rights Agent of such loss,
theft or destruction of such Rights Certificate and, if requested by the
Company or the Rights Agent, indemnity also satisfactory to it.
SECTION 7. Exercise of Rights; Purchase Price; Expiration
Date of Rights. (a) Prior to the earlier of (i) the Close of Business on the
tenth anniversary hereof (the "Final Expiration Date") and (ii) the time at
which the Rights are redeemed as provided in Section 23 (the earlier of (i) and
(ii) being the "Expiration Date"), the registered holder of any Rights
Certificate may, subject to the provisions of Sections 7(e) and 9(c), exercise
the Rights evidenced thereby in whole or in part at any time after the
Distribution Date upon surrender of the Rights Certificate, with the form of
election to purchase and the certificate on the reverse side thereof duly
executed, to the Rights Agent at the office of the Rights Agent designated for
such purpose, together with payment of the aggregate Purchase Price (as
hereinafter defined) for the number of Units of Preferred Stock (or, following
a Triggering Event, other securities, cash or other assets, as the case may be)
for which such surrendered Rights are then exercisable.
(b) The purchase price for each one one-thousandth of a
share (each such one one-thousandth of a share being a "Unit") of Preferred
Stock upon exercise of Rights shall be $75.00, subject to adjustment from time
to time as provided in Sections 11 and 13(a) (such purchase price, as so
adjusted, being the "Purchase Price"), and shall be payable in accordance with
paragraph (c) below.
(c) As promptly as practicable following the occurrence
of the Distribution Date, the Company shall deposit with a corporation in good
standing organized under the laws of the United States or any State of the
United States, that is authorized under such laws to exercise corporate trust
or stock transfer powers and is subject to supervision or examination by
federal or state authority (such institution being the "Depositary Agent"),
certificates evidencing the shares of Preferred Stock that may be acquired upon
exercise of the Rights and shall cause such Depositary Agent to enter into an
agreement pursuant to which the Depositary Agent shall issue receipts
evidencing interests in the shares of Preferred Stock so deposited. Upon
receipt of a Rights Certificate evidencing exercisable Rights, with the form of
election to purchase and the certificate duly executed, accompanied by payment,
with respect to each Right so exercised, of the Purchase Price for the Units of
Preferred Stock (or, following a Triggering Event, other securities, cash or
other assets, as the case may be) to be purchased thereby as set forth below
and an amount equal to any applicable transfer tax or evidence satisfactory to
the Company of payment of such tax, the Rights Agent shall, subject to Section
20(k), thereupon promptly (i) requisition from the Depositary Agent depositary
receipts evidencing such number of Units of Preferred Stock as are to be
purchased and the Company will direct the Depositary Agent to comply with such
request, (ii) requisition from the Company the amount of cash, if any, to be
paid in lieu of fractional shares in accordance with Section 14, (iii) after
receipt of such depositary receipts, cause the
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same to be delivered to or upon the order of the registered holder of such
Rights Certificate, registered in such name or names as may be designated by
such holder, and (iv) after receipt thereof, deliver such cash, if any, to or
upon the order of the registered holder of such Rights Certificate. In the
event that the Company is obligated to issue Company Common Stock, other
securities of the Company, pay cash and/or distribute other property pursuant
to Section 11(a), the Company will make all arrangements necessary so that such
Company Common Stock, other securities, cash and/or other property are
available for distribution by the Rights Agent, if and when appropriate.
Subject to Section 34, the payment of the Purchase Price (as such amount may be
reduced pursuant to Section 11(a)(iii)) may be made in cash or by certified or
bank check payable to the order of the Company, or by wire transfer of
immediately available funds to the account of the Company (provided that notice
of such wire transfer shall be given by the holder of the related Right to the
Rights Agent).
(d) In case the registered holder of any Rights
Certificate shall exercise less than all the Rights evidenced thereby, a new
Rights Certificate evidencing the Rights remaining unexercised shall be issued
by the Rights Agent and delivered to, or upon the order of, the registered
holder of such Rights Certificate, registered in such name or names as may be
designated by such holder, subject to the provisions of Section 14.
(e) Notwithstanding anything in this Agreement to the
contrary, from and after the first occurrence of any Section 11(a)(ii) Event or
Section 13 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) that becomes a
transferee after the Acquiring Person becomes such, or (iii) a transferee of an
Acquiring Person (or of any such Associate or Affiliate) that becomes a
transferee prior to or concurrently with the Acquiring Person becoming such and
that receives such Rights pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person (or any such Associate or Affiliate)
to holders of equity interests in such Acquiring Person (or such Associate or
Affiliate) or to any Person with whom such Acquiring Person (or such Associate
or Affiliate) has any continuing agreement, arrangement or understanding
regarding the transferred Rights, shares of Company Common Stock or the Company
or (B) a transfer that either (1) 75% of the Company's Board of Directors or
(2) a majority of the Company's Board of Directors and a majority of the
Continuing Directors, has determined to be part of a plan, arrangement or
understanding that has as a primary purpose or effect the avoidance of this
Section 7(e), shall be null and void without any further action, and no holder
of such Rights shall have any rights whatsoever with respect to such Rights,
whether under any provision of this Agreement or otherwise. The Company shall
use all reasonable efforts to ensure that the provisions of this Section 7(e)
and Section 4(b) are complied with, but shall have no liability to any holder
of Rights or any other Person as a result of its failure to make any
determination under this Section 7(e) or Section 4(b) with respect to an
Acquiring Person or its Affiliates, Associates or transferees.
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(f) Notwithstanding anything in this Agreement or any
Rights Certificate to the contrary, neither the Rights Agent nor the Company
shall be obligated to undertake any action with respect to a registered holder
upon the occurrence of any purported exercise by such registered holder unless
such registered holder shall have (i) completed and executed the certificate
following the form of election to purchase set forth on the reverse side of the
Rights Certificate surrendered for such exercise and (ii) provided such
additional evidence of the identity of the Beneficial Owner (or former
Beneficial Owner) of the Rights evidenced by such Rights Certificate or
Affiliates or Associates thereof as the Company shall reasonably request.
SECTION 8. Cancellation and Destruction of Rights
Certificates. All Rights Certificates surrendered for the purpose of exercise,
transfer, split up, combination or exchange shall, if surrendered to the
Company or any of its agents, be delivered to the Rights Agent for cancellation
or in cancelled form, or, if surrendered to the Rights Agent, shall be
cancelled by it, and no Rights Certificates shall be issued in lieu thereof
except as expressly permitted by this Agreement. The Company shall deliver to
the Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any Rights Certificates acquired by the Company otherwise
than upon the exercise thereof. The Rights Agent shall deliver all cancelled
Rights Certificates to the Company, or shall, at the written request of the
Company, destroy such cancelled Rights Certificates, and in such case shall
deliver a certificate of destruction thereof to the Company.
SECTION 9. Reservation and Availability of Capital Stock.
(a) The Company shall at all times prior to the Expiration Date cause to be
reserved and kept available, out of its authorized and unissued shares of
Preferred Stock, the number of shares of Preferred Stock that, as provided in
this Agreement, will be sufficient to permit the exercise in full of all
outstanding Rights. Upon the occurrence of any events resulting in an increase
in the aggregate number of shares of Preferred Stock (or other equity
securities of the Company) issuable upon exercise of all outstanding Rights
above the number then reserved, the Company shall make appropriate increases in
the number of shares so reserved.
(b) If the shares of Preferred Stock to be issued and
delivered upon the exercise of the Rights may be listed on any national
securities exchange, the Company shall during the period from the Distribution
Date through the Expiration Date use its best efforts to cause all securities
reserved for such issuance to be listed on such exchange upon official notice
of issuance upon such exercise.
(c) The Company shall use its best efforts (i) as soon as
practicable following the occurrence of a Section 11(a)(ii) Event and a
determination by the Company in accordance with Section 11(a)(iii) of the
consideration to be delivered by the Company upon exercise of the Rights or, if
so required by law, as soon as practicable following the Distribution Date
(such date being the "Registration Date"), to file a registration statement on
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an appropriate form under the Securities Act with respect to the securities
that may be acquired upon exercise of the Rights (the "Registration
Statement"), (ii) to cause the Registration Statement to become effective as
soon as practicable after such filing, (iii) to cause the Registration
Statement to continue to be effective (and to include a prospectus complying
with the requirements of the Securities Act) until the earlier of (A) the date
as of which the Rights are no longer exercisable for the securities covered by
the Registration Statement and (B) the Expiration Date and (iv) to take as soon
as practicable following the Registration Date such action as may be required
to ensure that any acquisition of securities upon exercise of the Rights
complies with any applicable state securities or "blue sky" laws. If the
Registration Statement does not become effective prior to the close of business
on the 45th Business Day following the occurrence of a Section 11(a)(ii) Event,
the Company shall, unless otherwise determined by either (1) 75% of the
Company's Board of Directors or (2) a majority of the Company's Board of
Directors and a majority of the Continuing Directors, on the 46th Business Day
following the occurrence of such Section 11(a)(ii) Event, be obligated to
exercise the option described in Section 34.
(d) The Company shall take such action as may be
necessary to ensure that all shares of Preferred Stock (and, following the
occurrence of a Triggering Event, any other securities that may be delivered
upon exercise of Rights) shall be, at the time of delivery of the certificates
or depositary receipts for such securities, duly and validly authorized and
issued and fully paid and non-assessable.
(e) The Company shall pay any documentary, stamp or
transfer tax imposed in connection with the issuance or delivery of the Rights
Certificates or upon the exercise of Rights; provided, however, the Company
shall not be required to pay any such tax imposed in connection with the
issuance or delivery of Units of Preferred Stock, or any certificates or
depositary receipts for such Units of Preferred Stock (or, following the
occurrence of a Triggering Event, any other securities, cash or assets, as the
case may be) to any person other than the registered holder of the Rights
Certificates evidencing the Rights surrendered for exercise. The Company shall
not be required to issue or deliver any certificates or depositary receipts for
Units of Preferred Stock (or, following the occurrence of a Triggering Event,
any other securities, cash or assets, as the case may be) to, or in a name
other than that of, the registered holder of the Rights Certificate upon the
exercise of any Rights evidenced thereby until any such tax shall have been
paid (any such tax being payable by the holder of such Rights Certificate at
the time of surrender) or until it has been established to the Company's
satisfaction that no such tax is due.
SECTION 10. Preferred Stock Record Date. Each Person in
whose name any certificate for Units of Preferred Stock (or, following the
occurrence of a Triggering Event, other securities) is issued upon the exercise
of Rights shall for all purposes be deemed to have become the holder of record
of the Units of Preferred Stock (or, following the occurrence of a Triggering
Event, other securities) evidenced thereby on, and such certificate
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shall be dated, the date upon which the Rights Certificate evidencing such
Rights was duly surrendered and payment of the Purchase Price (and any
applicable transfer taxes) was made; provided, however, that if the date of
such surrender and payment is a date upon which the Preferred Stock (or,
following the occurrence of a Triggering Event, other securities) transfer
books of the Company are closed, such Person shall be deemed to have become the
record holder of such securities on, and such certificate shall be dated, the
next succeeding Business Day on which the Preferred Stock (or, following the
occurrence of a Triggering Event, other securities) transfer books of the
Company are open; and further provided, however, that if delivery of Units of
Preferred Stock is delayed as a result of a failure to register such Units of
Preferred Stock pursuant to Section 9(c), such Persons shall be deemed to have
become the record holders of such Units of Preferred Stock only when such Units
first become deliverable. Prior to the exercise of the Rights evidenced
thereby, the holder of a Rights Certificate shall not be entitled to any rights
of a stockholder of the Company with respect to securities for which the Rights
shall be exercisable, including, without limitation, the right to vote, to
receive dividends or other distributions or to exercise any preemptive rights,
and shall not be entitled to receive any notice of any proceedings of the
Company, except as provided herein.
SECTION 11. Adjustment of Purchase Price, Number and Kind of
Shares or Number of Rights. The Purchase Price, the number and kind of
securities covered by each Right and the number of Rights outstanding are
subject to adjustment from time to time as provided in this Section 11.
(a) (i) In the event the Company shall at any time after
the date of this Agreement (A) declare a dividend on the Preferred
Stock payable in shares of Preferred Stock, (B) subdivide the
outstanding 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), the Purchase Price
in effect at the time of the record date for such dividend or of the
effective date of such subdivision, combination or reclassification,
and the number and kind of shares of Preferred Stock or capital stock,
as the case may be, issuable on such date upon exercise of the Rights,
shall be proportionately adjusted so that the holder of any Right
exercised after such time shall be entitled to receive, upon payment
of the Purchase Price then in effect, the aggregate number and kind of
shares of Preferred Stock or capital stock, as the case may be, which,
if such Right had been exercised immediately prior to such date, such
holder would have owned upon such exercise and been entitled to
receive by virtue of such dividend, subdivision, combination or
reclassification. If an event occurs that would require an adjustment
under both this Section 11(a)(i) and Section 11(a)(ii), the adjustment
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provided for in this Section 11(a)(i) shall be in addition to, and
shall be made prior to, any adjustment required pursuant to Section
11(a)(ii).
(ii) In the event:
(A) any Acquiring Person or any Associate or
Affiliate of any Acquiring Person, at any time after the date
of this Agreement, directly or indirectly, shall (1) 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 Company Common Stock shall
remain outstanding and unchanged, (2) in one transaction or a
series of transactions, transfer any assets to the Company or
to any of its Subsidiaries in exchange (in whole or in part)
for shares of Company Common Stock, for other equity
securities of the Company or any such Subsidiary, or for
securities exercisable for or convertible into shares of
equity securities of the Company or any of its Subsidiaries
(whether Company Common Stock or otherwise) or otherwise
obtain from the Company or any of its Subsidiaries, with or
without consideration, any additional shares of such equity
securities or securities exercisable for or convertible into
such equity securities (other than pursuant to a pro rata
distribution to all holders of Company Common Stock), (3)
sell, purchase, lease, exchange, mortgage, pledge, transfer or
otherwise acquire or dispose of, in one transaction or a
series of transactions, to, from or with the Company or any of
its Subsidiaries or any employee benefit plan maintained by
the Company or any of its Subsidiaries or any trustee or
fiduciary with respect to such plan acting in such capacity,
assets (including securities) on terms and conditions less
favorable to the Company or such Subsidiary or plan than those
that could have been obtained in arm's-length negotiations
with an unaffiliated third party, other than pursuant to a
transaction set forth in Section 13(a), (4) sell, purchase,
lease, exchange, mortgage, pledge, transfer or otherwise
acquire or dispose of, in one transaction or a series of
transactions, to, from or with the Company or any of the
Company's Subsidiaries or any employee benefit plan maintained
by the Company or any of its Subsidiaries or any trustee or
fiduciary with respect to such plan acting in such capacity
(other than transactions, if any, consistent with those
engaged in, as of the date hereof, by the Company and such
Acquiring Person or such Associate or Affiliate), assets
(including securities) having an aggregate fair market value
of more than $5,000,000, other than pursuant to a transaction
set forth in Section 13(a), (5) sell, purchase, lease,
exchange, mortgage, pledge, transfer or otherwise acquire or
dispose of, in one transaction or a series of transactions,
to, from or with the Company or any of its Subsidiaries or any
employee benefit plan maintained by the Company or any of its
Subsidiaries or any trustee or fiduciary with respect to such
plan acting in such capacity, any
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material trademark or material service xxxx, other than
pursuant to a transaction set forth in Section 13(a), (6)
receive, or any designee, agent or representative of such
Acquiring Person or any Affiliate or Associate of such
Acquiring Person shall receive, any compensation from the
Company or any of its Subsidiaries other than compensation for
full-time employment as a regular employee at rates in
accordance with the Company's (or its Subsidiaries') past
practices, or (7) receive the benefit, directly or indirectly
(except proportionately as a holder of Company Common Stock or
as required by law or governmental regulation), of any loans,
advances, guarantees, pledges or other financial assistance or
any tax credits or other tax advantage provided by the Company
or any of its Subsidiaries or any employee benefit plan
maintained by the Company or any of its Subsidiaries or any
trustee or fiduciary with respect to such plan acting in such
capacity; or
(B) any Person shall become an Acquiring Person,
unless the event causing such Person to become an Acquiring
Person is a transaction set forth in Section 13(a); or
(C) during such time as there is an Acquiring
Person, there shall be any reclassification of securities
(including any reverse stock split), or recapitalization of
the Company, or any merger or consolidation of the Company
with any of its Subsidiaries or any other transaction or
series of transactions involving the Company or any of its
Subsidiaries, other than a transaction or transactions to
which the provisions of Section 13(a) apply (whether or not
with or into or otherwise involving an Acquiring Person),
which has the effect, directly or indirectly, of increasing by
more than 1% the proportionate share of the outstanding shares
of any class of equity securities of the Company or any of its
Subsidiaries that is directly or indirectly beneficially owned
by any Acquiring Person or any Associate or Affiliate of any
Acquiring Person;
then, immediately upon the date of the occurrence of an event
described in Section 11(a)(ii)(A), (B) or (C) (a "Section 11(a)(ii)
Event"), proper provision shall be made so that each holder of a Right
(except as provided below and in Section 7(e)) 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 Units of Preferred Stock for which a Right was
exercisable immediately prior to the first occurrence of a Section
11(a)(ii) Event, such number of Units of Preferred Stock as shall
equal the result obtained by (x) multiplying the then current Purchase
Price by the then number of Units of Preferred Stock for which a Right
was exercisable immediately prior to the first occurrence of a Section
11(a)(ii) Event (such product thereafter being, for all purposes of
this Agreement other than Section 13, the
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"Purchase Price"), and (y) dividing that product by 50% of the then
current market price (determined pursuant to Section 11(d)) per Unit
of Preferred Stock on the date of such first occurrence (such Units of
Preferred Stock being the "Adjustment Shares").
(iii) In the event that the number of shares of Preferred
Stock that are authorized by the Company's Certificate of
Incorporation but not outstanding or reserved for issuance for
purposes other than upon exercise of the Rights is not sufficient to
permit the exercise in full of the Rights in accordance with the
foregoing subparagraph (ii) of this Section 11(a), the Company, by the
vote of either (aa) 75% of the Company's Board of Directors or (bb) a
majority of the Company's Board of Directors and a majority of the
Continuing Directors, shall: (A) determine the excess of (1) the
value of the Adjustment Shares issuable upon the exercise of a Right
(the "Current Value") over (2) the Purchase Price (such excess being
the "Spread"), and (B) with respect to each Right, make adequate
provision to substitute for such Adjustment Shares, upon payment of
the applicable Purchase Price, (1) cash, (2) a reduction in the
Purchase Price, (3) Company Common Stock or other equity securities of
the Company (including, without limitation, shares, or units of
shares, of preferred stock (such other shares being "preferred stock
equivalents")), (4) debt securities of the Company, (5) other assets
or (6) any combination of the foregoing, having an aggregate value
equal to the Current Value, where such aggregate value has been
determined by either (aa) 75% of the Company's Board of Directors or
(bb) a majority of the Company's Board of Directors and a majority of
the Continuing Directors, after receiving advice from a nationally
recognized investment banking firm; provided, however, that if the
Company shall not have made adequate provision to deliver value
pursuant to clause (B) above within thirty days following the later of
(x) the first occurrence of a Section 11(a)(ii) Event and (y) the date
on which the Company's right of redemption pursuant to Section 23(a)
expires (the later of (x) and (y) being referred to herein as the
"Section 11(a)(iii) Trigger Date"), then the Company shall be
obligated to deliver, upon the surrender for exercise of a Right and
without requiring payment of the Purchase Price, Units of Preferred
Stock (to the extent available) and then, if necessary, cash, which
Units of Preferred Stock and/or cash shall have an aggregate value
equal to the Spread. To the extent that the Company determines that
some action need be taken pursuant to the first sentence of this
Section 11(a)(iii), the Company shall provide, subject to Section
7(e), that such action shall apply uniformly to all outstanding
Rights. For purposes of this Section 11(a)(iii), the value of a Unit
of Preferred Stock shall be the current market price (as determined
pursuant to Section 11(d)) per Unit of Preferred Stock on the Section
11(a)(iii) Trigger Date and the value of any preferred stock
equivalent shall be deemed to have the same value as the Preferred
Stock on such date.
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(b) In case the Company shall fix a record date for the
issuance of rights, options or warrants to all holders of Preferred
Stock entitling them to subscribe for or purchase (for a period
expiring within forty- five calendar days after such record date)
shares of Preferred Stock (or shares having substantially the same
rights, privileges and preferences as shares of Preferred Stock
("Equivalent Preferred Stock")) or securities convertible into
Preferred Stock or Equivalent Preferred Stock at a price per share of
Preferred Stock or per share of Equivalent Preferred Stock (or having
a conversion price per share, if a security convertible into Preferred
Stock or Equivalent Preferred Stock) less than the current market
price (as determined pursuant to Section 11(d)) per share of Preferred
Stock on such record date, the Purchase Price to be in effect after
such record date shall be determined by multiplying the Purchase Price
in effect immediately prior to such record date by a fraction, the
numerator of which shall be the sum of the number of shares of
Preferred Stock outstanding on such record date plus the number of
shares of Preferred Stock 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 either (1) 75% of the Company's Board of Directors or (2) a
majority of the Company's Board of Directors and a majority of the
Continuing Directors, whose determination shall be described in a
statement filed with the Rights Agent and shall be binding on the
Rights Agent and the holders of the Rights. Shares of Preferred Stock
owned by or held for the account of the Company or any Subsidiary
shall not be deemed outstanding for the purpose of any such
computation. Such adjustment shall be made successively whenever such
a record date is fixed, and in the event that such rights or warrants
are not so issued, the Purchase Price shall be adjusted to be the
Purchase Price that would then be in effect if such record date had
not been fixed.
(c) In case the Company shall fix a record date for a
distribution to all holders of shares of Preferred Stock (including
any such distribution made in connection with a consolidation or
merger in which the Company is the continuing corporation) of
evidences of indebtedness, cash (other than a regular quarterly cash
dividend out of the earnings or retained earnings of the Company),
assets (other than a dividend payable in shares of Preferred Stock,
but including any dividend payable in stock other than Preferred
Stock) or subscription rights or warrants (excluding those referred to
in Section 11(b)), the Purchase Price to be in effect after such
record date
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shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of
which shall be the current market price (as determined pursuant to
Section 11(d)) per share of Preferred Stock on such record date less
the fair market value (as determined in good faith by a majority of
either (1) 75% of the Company's Board of Directors or (2) a majority
of the Company's Board of Directors and a majority of the Continuing
Directors, whose determination shall be described in a statement filed
with the Rights Agent and shall be binding on the Rights Agent and the
holder of the Rights) of the cash, assets or evidences of indebtedness
so to be distributed or of such subscription rights or warrants
distributable in respect of a share of Preferred Stock and the
denominator of which shall be such current market price (as determined
pursuant to Section 11(d)) 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 that would
have been in effect if such record date had not been fixed.
(d) (i) For the purpose of any computation hereunder,
the "current market price" per share of Company Common Stock or Common
Stock on any date shall be deemed to be the average of the daily
closing prices per share of such shares for the ten consecutive
Trading Days immediately prior to such date; provided, however, if
prior to the expiration of such requisite ten Trading Day period the
issuer announces either (A) a dividend or distribution on such shares
payable in such shares or securities convertible into such shares
(other than the Rights) or (B) any subdivision, combination or
reclassification of such shares, then, following the ex-dividend date
for such dividend or the record date for such subdivision, as the case
may be, the "current market price" shall be properly adjusted to take
into account such event. The closing price for each day shall be, if
the shares are listed and admitted to trading on a national securities
exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal
national securities exchange on which such shares are listed or
admitted to trading or, if such shares are not listed or admitted to
trading on any national securities exchange, the last quoted price or,
if not so quoted, the average of the high bid and low asked prices in
the over-the-counter market, as reported by The Nasdaq Stock Market
Consolidated Quotations Service or such other system then in use, or,
if on any such date such shares are not quoted by any such
organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in such
shares selected by either (1) 75% of the Company's Board of Directors
or (2) a majority of the Company's Board of Directors and a majority
of the Continuing Directors. If on any such date no market maker is
making a market in such shares, the fair value of such shares on such
date as determined in good faith by either (1) 75% of the Company's
Board of Directors or (2) a majority of the Company's Board of
Directors and a majority of the Continuing Directors shall be used.
If such shares
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are not publicly held or not so listed or traded, "current market
price" per share shall mean the fair value per share as determined in
good faith by either (1) 75% of the Company's Board of Directors or
(2) a majority of the Company's Board of Directors and a majority of
the Continuing Directors, whose determination shall be described in a
statement filed with the Rights Agent and shall be conclusive for all
purposes. The term "Trading Day" shall mean, if such shares are
listed or admitted to trading on any national securities exchange, a
day on which the principal national securities exchange on which such
shares are listed or admitted to trading is open for the transaction
of business or, if such shares are not so listed or admitted, a
Business Day.
(ii) For the purpose of any computation hereunder, the
"current market price" per share of Preferred Stock shall be
determined in the same manner as set forth above for Company Common
Stock in clause (i) of this Section 11(d) (other than the fourth
sentence thereof). If the current market price per share of Preferred
Stock cannot be determined in the manner provided above or if the
Preferred Stock is not publicly held or listed or traded in a manner
described in clause (i) of this Section 11(d), the "current market
price" per share of Preferred Stock shall be conclusively deemed to be
an amount equal to 1,000 (as such amount may be appropriately adjusted
for such events as stock splits, stock dividends and recapitalizations
with respect to Company Common Stock occurring after the date of this
Agreement) multiplied by the current market price per share of Company
Common Stock. If neither Company Common Stock nor Preferred Stock is
publicly held or so listed or traded, "current market price" per share
of the Preferred Stock shall mean the fair value per share as
determined in good faith by either (1) 75% of the Company's Board of
Directors or (2) a majority of the Company's Board of Directors and a
majority of the Continuing Directors, whose determination shall be
described in a statement filed with the Rights Agent and shall be
binding on the Rights Agent and the holders of the Rights. For all
purposes of this Agreement, the "current market price" of a Unit of
Preferred Stock shall be equal to the "current market price" of one
share of Preferred Stock divided by 1,000.
(e) Anything herein to the contrary notwithstanding, no
adjustment in the Purchase Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in the
Purchase Price; provided, however, that any adjustments which by
reason of this Section 11(e) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment.
All calculations under this Section 11 shall be made to the nearest
cent or to the nearest one-hundredth of a share of Company Common
Stock or Common Stock or other share or hundred-thousandth of a share
of Preferred Stock, as the case may be. Notwithstanding the first
sentence of this Section 11(e), any adjustment required by this
Section 11 shall
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be made no later than the earlier of (i) three years from the date of
the transaction that mandates such adjustment and (ii) the Expiration
Date.
(f) If as a result of an adjustment made pursuant to
Section 11(a)(ii) or 13(a), the holder of any Right thereafter
exercised shall become entitled to receive any shares of capital stock
other than Preferred Stock, thereafter the number of such other shares
so receivable upon exercise of any Right and the Purchase Price
thereof shall be subject to adjustment from time to time in a manner
and on terms as nearly equivalent as practicable to the provisions
with respect to the Preferred Stock contained in Sections 11(a), (b),
(c), (d), (e), (g), (h), (i), (j), (k), (l) and (m), and the
provisions of Sections 7, 9, 10, 13 and 14 with respect to the
Preferred Stock shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company
subsequent to any adjustment made to the Purchase Price hereunder
shall evidence the right to purchase, at the adjusted Purchase Price,
the number of Units of Preferred Stock (or other securities or amount
of cash or combination thereof) that may be acquired from time to time
hereunder upon exercise of the Rights, all subject to further
adjustment as provided herein.
(h) Unless the Company shall have exercised its election
as provided in Section 11(i), upon each adjustment of the Purchase
Price as a result of the calculations made in Sections 11(b) and (c),
each Right outstanding immediately prior to the making of such
adjustment shall thereafter evidence the right to purchase, at the
adjusted Purchase Price, that number of Units of Preferred Stock
(calculated to the nearest one hundred- thousandth of a Unit) obtained
by (i) multiplying (x) the number of Units of Preferred Stock covered
by a Right immediately prior to this adjustment by (y) the Purchase
Price in effect immediately prior to such adjustment of the Purchase
Price and (ii) dividing the product so obtained by the Purchase Price
in effect immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any
adjustment of the Purchase Price to adjust the number of Rights, in
lieu of any adjustment in the number of Units of Preferred Stock that
may be acquired upon the exercise of a Right. Each of the Rights
outstanding after the adjustment in the number of Rights shall be
exercisable for the number of Units of Preferred Stock for which a
Right was exercisable immediately prior to such adjustment. Each
Right held of record prior to such adjustment of the number of Rights
shall become that number of Rights (calculated to the nearest
hundred-thousandth) obtained by dividing the Purchase Price in effect
immediately prior to adjustment of the Purchase Price by the Purchase
Price in effect immediately after adjustment of the Purchase Price.
The Company shall make a public announcement of its election to adjust
the number of Rights, indicating
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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 days
later than the date of such public announcement. If Rights
Certificates have been issued, upon each adjustment of the number of
Rights pursuant to this Section 11(i), the Company shall, as promptly
as practicable, cause to be distributed to holders of record of Rights
Certificates on such record date Rights Certificates evidencing,
subject to Section 14, the additional Rights to which such holders
shall be entitled as a result of such adjustment, or, at the option of
the Company, shall cause to be distributed to such holders of record
in substitution and replacement for the Rights Certificates held by
such holders prior to the date of adjustment, and upon surrender
thereof, if required by the Company, new Rights Certificates
evidencing all the Rights to which such holders shall be entitled
after such adjustment. Rights Certificates to be so distributed shall
be issued, executed and countersigned in the manner provided for
herein (and may bear, at the option of the Company, the adjusted
Purchase Price) and shall be registered in the names of the holders of
record of Rights Certificates on the record date specified in the
public announcement.
(j) Irrespective of any adjustment or change in the
Purchase Price or the number of Units of Preferred Stock issuable upon
the exercise of the Rights, the Rights Certificates theretofore and
thereafter issued may continue to express the Purchase Price per Unit
and the number of Units of Preferred Stock that were expressed in the
Initial Rights Certificates issued hereunder without prejudice to any
such adjustment or change.
(k) Before taking any action that would cause an
adjustment reducing the Purchase Price below the then par value of the
number of Units of Preferred Stock issuable upon exercise of the
Rights, the Company shall take any corporate action that may, in the
opinion of its counsel, be necessary in order that the Company may
validly and legally issue such fully paid and non-assessable number of
Units of Preferred Stock at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require
that an adjustment in the Purchase Price be made effective as of a
record date for a specified event, the Company may elect to defer
until the occurrence of such event the issuance to the holder of any
Right exercised after such record date of that number of Units of
Preferred Stock and shares of other capital stock or securities of the
Company, if any, issuable upon such exercise over and above the number
of Units of Preferred Stock and shares of other capital stock or
securities of the Company, if any, issuable upon such exercise on the
basis of the Purchase Price in effect prior to such adjustment;
provided, however, that the Company shall deliver to such holder a due
xxxx or other
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appropriate instrument evidencing such holder's right to receive such
additional shares (fractional or otherwise) or securities upon the
occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make such reductions
in the Purchase Price, in addition to those adjustments expressly
required by this Section 11, as and to the extent that in the good
faith judgment of either (1) 75% of the Company's Board of Directors
or (2) a majority of the Company's Board of Directors and a majority
of the Continuing Directors shall determine to be advisable in order
that any (i) consolidation or subdivision of the Preferred Stock, (ii)
issuance wholly for cash of any shares of Preferred Stock at less than
the current market price, (iii) issuance wholly for cash of shares of
Preferred Stock or securities that by their terms are convertible into
or exchangeable for shares of Preferred Stock, (iv) stock dividends or
(v) issuance of rights, options or warrants referred to in this
Section 11, hereafter made by the Company to holders of its Preferred
Stock, shall not be taxable to such holders or shall reduce the taxes
payable by such holders.
(n) The Company shall not, at any time after the
Distribution Date, (i) consolidate with any other Person (other than a
Subsidiary of the Company in a transaction that complies with Section
11(o)), (ii) merge with or into any other Person (other than a
Subsidiary of the Company in a transaction that complies with Section
11(o)), or (iii) sell or transfer (or permit any Subsidiary to sell or
transfer), in one transaction, or a series of transactions, assets or
earning power aggregating more than 50% of the assets or earning power
of the Company and its Subsidiaries (taken as a whole) to any other
Person or Persons (other than the Company and/or any of its
Subsidiaries in one or more transactions each of which complies with
Section 11(o)), if (x) at the time of or immediately after such
consolidation, merger or sale there are any rights, warrants or other
instruments or securities outstanding or agreements in effect that
would substantially diminish or otherwise eliminate the benefits
intended to be afforded by the Rights or (y) prior to, simultaneously
with or immediately after such consolidation, merger or sale, the
Person that constitutes, or would constitute, the "Principal Party"
for purposes of Section 13(a) shall have distributed or otherwise
transferred to its stockholders or other persons holding an equity
interest in such Person Rights previously owned by such Person or any
of its Affiliates and Associates; provided, however, this Section
11(n) shall not affect the ability of any Subsidiary of the Company to
consolidate with, merge with or into, or sell or transfer assets or
earning power to, any other Subsidiary of the Company.
(o) After the Distribution Date, the Company shall not,
except as permitted by Section 23 or Section 26, take (or permit any
Subsidiary to take) any action if at
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the time such action is taken it is reasonably foreseeable that such
action will diminish substantially or otherwise eliminate the benefits
intended to be afforded by the Rights.
(p) Anything in this Agreement to the contrary
notwithstanding, in the event that the Company shall at any time after
the Rights Dividend Declaration Date and prior to the Distribution
Date (i) declare a dividend on the outstanding shares of Company
Common Stock payable in shares of Company Common Stock, (ii) subdivide
the outstanding shares of Company Common Stock, (iii) combine the
outstanding shares of Company Common Stock into a smaller number of
shares, or (iv) issue any shares of its capital stock in a
reclassification of Company Common Stock (including any such
reclassification in connection with a consolidation or merger in which
the Company is the continuing or surviving corporation), the number of
Rights associated with each share of Company Common Stock then
outstanding, or issued or delivered thereafter but prior to the
Distribution Date, shall be proportionately adjusted so that the
number of Rights thereafter associated with each share of Company
Common Stock following any such event shall equal the result obtained
by multiplying the number of Rights associated with each share of
Company Common Stock immediately prior to such event by a fraction the
numerator of which shall be the total number of shares of Company
Common Stock outstanding immediately prior to the occurrence of the
event and the denominator of which shall be the total number of shares
of Company Common Stock outstanding immediately following the
occurrence of such event.
SECTION 12. Certificate of Adjusted Purchase Price or Number
of Shares. Whenever an adjustment is made as provided in Section 11 or Section
13, the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent, and with each transfer agent for the
Preferred Stock and the Company Common Stock, a copy of such certificate, and
(c) mail a brief summary thereof to each holder of a Rights Certificate (or, if
prior to the Distribution Date, to each holder of a certificate evidencing
shares of Company Common Stock) in accordance with Section 25. The Rights
Agent shall be fully protected in relying on any such certificate and on any
adjustment therein contained and shall not be deemed to have knowledge of any
such adjustment unless and until it shall have received such certificate.
SECTION 13. Consolidation, Merger or Sale or Transfer of
Assets or Earning Power. (a) In the event that, following the Stock
Acquisition Date, directly or indirectly, either (x) the Company shall
consolidate with, or merge with and into, any other Person (other than a
Subsidiary of the Company in a transaction that complies with Section 11(o)),
and the Company shall not be the continuing or surviving corporation of such
consolidation or merger, (y) any Person (other than a Subsidiary of the Company
in a transaction that complies with Section 11(o)) shall consolidate with, or
merge with or into,
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the Company, and the Company shall be the continuing or surviving corporation
of such consolidation or merger and, in connection with such consolidation or
merger, all or part of the outstanding shares of Company Common Stock shall be
converted into or exchanged for stock or other securities of any other Person
or cash or any other property, or (z) the Company shall sell or otherwise
transfer (or one or more of its Subsidiaries shall sell or otherwise transfer)
to any Person or Persons (other than the Company or any of its Subsidiaries in
one or more transactions each of which complies with Section 11(o)), in one or
more transactions, assets or earning power aggregating more than 50% of the
assets or earning power of the Company and its Subsidiaries, taken as a whole
(any such event described in clause (x), (y) or (z) being a "Section 13
Event"), then, and in each such case, proper provision shall be made so that:
(i) each holder of a Right, except as provided in Section 7(e), shall
thereafter have the right to receive, upon the exercise thereof at the then
current Purchase Price, such number of validly authorized and issued, fully
paid and non-assessable shares of Common Stock of the Principal Party, which
shares shall not be subject to any liens, encumbrances, rights of first
refusal, transfer restrictions or other adverse claims, as shall be equal to
the result obtained by (1) multiplying the then current Purchase Price by the
number of Units of Preferred Stock for which a Right is exercisable immediately
prior to the first occurrence of a Section 13 Event (or, if a Section 11(a)(ii)
Event has occurred prior to the first occurrence of a Section 13 Event,
multiplying the number of such Units for which a Right would be exercisable
hereunder but for the occurrence of such Section 11(a)(ii) Event by the
Purchase Price that would be in effect hereunder but for such first occurrence)
and (2) dividing that product (which, following the first occurrence of a
Section 13 Event, shall be the "Purchase Price" for all purposes of this
Agreement) by 50% of the current market price (determined pursuant to Section
11(d)) per share of the Common Stock of such Principal Party on the date of
consummation of such Section 13 Event; (ii) such Principal Party shall
thereafter be liable for, and shall assume, by virtue of such Section 13 Event,
all the obligations and duties of the Company pursuant to this Agreement; (iii)
the term "Company" shall, for all purposes of this Agreement, thereafter be
deemed to refer to such Principal Party, it being specifically intended that
the provisions of Section 11 shall apply only to such Principal Party following
the first occurrence of a Section 13 Event; (iv) such Principal Party shall
take such steps (including, but not limited to, the reservation of a sufficient
number of shares of its Common Stock) in connection with the consummation of
any such transaction as may be necessary to ensure that the provisions of this
Agreement shall thereafter be applicable to its shares of Common Stock
thereafter deliverable upon the exercise of the Rights; and (v) the provisions
of Section 11(a)(ii) shall be of no further effect following the first
occurrence of any Section 13 Event.
(b) "Principal Party" shall mean:
(i) in the case of any transaction described in clause
(x) or (y) of the first sentence of Section 13(a), (A) the Person that
is the issuer of any securities into which shares of Company Common
Stock are converted in such merger or
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consolidation, or, if there is more than one such issuer, the issuer
of Common Stock that has the highest aggregate current market price
(determined pursuant to Section 11(d)) and (B) if no securities are so
issued, the Person that is the other party to such merger or
consolidation, or, if there is more than one such Person, the Person
the Common Stock of which has the highest aggregate current market
price (determined pursuant to Section 11(d)); and
(ii) in the case of any transaction described in clause
(z) of the first sentence of Section 13(a), the Person that is the
party receiving the largest portion of the assets or earning power
transferred pursuant to such transaction or transactions, or, if each
Person that is a party to such transaction or transactions receives
the same portion of the assets or earning power transferred pursuant
to such transaction or transactions or if the Person receiving the
largest portion of the assets or earning power cannot be determined,
whichever Person the Common Stock of which has the highest aggregate
current market price (determined pursuant to Section 11(d)); 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-month period registered under Section 12 of the Exchange Act
("Registered Common Stock"), or such Person is not a corporation, and
such Person is a direct or indirect Subsidiary of another Person that
has Registered Common Stock outstanding, "Principal Party" shall refer
to such other Person; (2) if the Common Stock of such Person is not
Registered Common Stock or such Person is not a corporation, and such
Person is a direct or indirect Subsidiary of another Person but is not
a direct or indirect Subsidiary of another Person that has Registered
Common Stock outstanding, "Principal Party" shall refer to the
ultimate parent entity of such first-mentioned Person; (3) if the
Common Stock of such Person is not Registered Common Stock or such
Person is not a corporation, and such Person is directly or indirectly
controlled by more than one Person, and one or more of such other
Persons has Registered Common Stock outstanding, "Principal Party"
shall refer to whichever of such other Persons is the issuer of the
Registered Common Stock having the highest aggregate current market
price (determined pursuant to Section 11(d)); and (4) if the Common
Stock of such Person is not Registered Common Stock or such Person is
not a corporation, and such Person is directly or indirectly
controlled by more than one Person, and none of such other Persons
have Registered Common Stock outstanding, "Principal Party" shall
refer to whichever ultimate parent entity is the corporation having
the greatest stockholders' equity or, if no such ultimate parent
entity is a corporation, shall refer to whichever ultimate parent
entity is the entity having the greatest net assets.
(c) The Company shall not consummate any such
consolidation, merger, sale or transfer unless the Principal Party shall have a
sufficient number of authorized shares of its Common Stock that have not been
issued or reserved for issuance to permit the
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exercise in full of the Rights in accordance with this Section 13, and unless
prior thereto the Company and such Principal Party shall have executed and
delivered to the Rights Agent a supplemental agreement providing for the terms
set forth in paragraphs (a) and (b) of this Section 13 and further providing
that the Principal Party will:
(i) (A) file on an appropriate form, as soon as
practicable following the execution of such agreement, a registration
statement under the Securities Act with respect to the Common Stock
that may be acquired upon exercise of the Rights, (B) cause such
registration statement to remain effective (and to include a
prospectus complying with the requirements of the Securities Act)
until the Expiration Date, and (C) as soon as practicable following
the execution of such agreement take such action as may be required to
ensure that any acquisition of such Common Stock upon the exercise of
the Rights complies with any applicable state securities or "blue sky"
laws; and
(ii) deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates that
comply in all respects with the requirements for registration on Form
10 under the Exchange Act.
(d) In case the Principal Party that is to be a party to
a transaction referred to in this Section 13 has a provision in any of its
authorized securities or in its Certificate of Incorporation or By-laws or
other instrument governing its corporate affairs, which provision would have
the effect of (i) causing such Principal Party to issue, in connection with, or
as a consequence of, the consummation of a transaction referred to in this
Section 13, shares of Common Stock of such Principal Party at less than the
then current market price per share (determined pursuant to Section 11(d)) or
securities exercisable for, or convertible into, Common Stock of such Principal
Party at less than such then current market price (other than to holders of
Rights pursuant to this Section 13) or (ii) providing for any special payment,
tax or similar provisions in connection with the issuance of the Common Stock
of such Principal Party pursuant to the provisions of this Section 13, then, in
such event, the Company shall not consummate any such transaction unless prior
thereto the Company and such Principal Party shall have executed and delivered
to the Rights Agent a supplemental agreement providing that the provision in
question of such Principal Party shall have been cancelled, waived or amended,
or that the authorized securities shall be redeemed, so that the applicable
provision will have no effect in connection with, or as a consequence of, the
consummation of the proposed transaction.
(e) The provisions of this Section 13 shall similarly
apply to successive mergers or consolidations or sales or other transfers. In
the event that a Section 13 Event shall occur at any time after the occurrence
of a Section 11(a)(ii) Event, the Rights that have not theretofore been
exercised shall thereafter become exercisable in the manner described in
Section 13(a).
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SECTION 14. Fractional Rights and Fractional Shares. (a)
The Company shall not be required to issue fractions of Rights or to distribute
Rights Certificates that evidence fractional Rights. In lieu of such
fractional Rights, there shall be paid to the Persons to which such fractional
Rights would otherwise be issuable, an amount in cash equal to such fraction of
the market value of a whole Right. For purposes of this Section 14(a), the
market value of a whole Right shall be the closing price of the Rights for the
Trading Day immediately prior to the date on which such fractional Rights would
have been otherwise issuable. The closing price of the Rights for any day
shall be, if the Rights are listed or admitted to trading on a national
securities exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the Rights are listed or admitted to trading or,
if the Rights are not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by The
Nasdaq Stock Market Consolidated Quotations Service 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 either (1)
75% of the Company's Board of Directors or (2) a majority of the Company's
Board of Directors and a majority of the Continuing Directors. If on any such
date no such market maker is making a market in the Rights, the fair value of
the Rights on such date as determined in good faith by either (1) 75% of the
Company's Board of Directors or (2) a majority of the Company's Board of
Directors and a majority of the Continuing Directors shall be used and such
determination shall be described in a statement filed with the Rights Agent and
shall be conclusive for all purposes.
(b) The Company shall not be required to issue fractions
of shares of Preferred Stock (other than fractions that are integral multiples
of one one-thousandth of a share of Preferred Stock) upon exercise of the
Rights or to distribute certificates that evidence such fractional shares of
Preferred Stock (other than fractions that are integral multiples of one
one-thousandth of a share of Preferred Stock). In lieu of such fractional
shares of Preferred Stock that are not integral multiples of one one-thousandth
of a share, the Company may pay to the registered holders of Rights
Certificates at the time such Rights are exercised as herein provided an amount
in cash equal to the same fraction of the then current market price of a share
of Preferred Stock on the day of exercise, determined in accordance with
Section 11(d).
(c) The holder of a Right by the acceptance of such Right
expressly waives his right to receive any fractional Rights or any fractional
shares upon exercise of a Right, except as permitted by this Section 14.
SECTION 15. Rights of Action. All rights of action in
respect of this Agreement, other than rights of action vested in the Rights
Agent pursuant to Section 18, are
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vested in the respective registered holders of the Rights Certificates (and,
prior to the Distribution Date, the registered holders of certificates
evidencing shares of Company Common Stock); and any registered holder of a
Rights Certificate (or, prior to the Distribution Date, of a certificate
evidencing shares of Company Common Stock), without the consent of the Rights
Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of a certificate evidencing shares of Company Common Stock),
may, in such registered holder's own behalf and for such registered holder's
own benefit, enforce, and may institute and maintain any suit, action or
proceeding against the Company or any other Person to enforce, or otherwise act
in respect of, such registered holder's 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 Company Common
Stock;
(b) after the Distribution Date, the Rights Certificates
are transferable only on the registry books of the Rights Agent if
surrendered at the office of the Rights Agent designated for such
purposes, duly endorsed or accompanied by a proper instrument of
transfer and with the appropriate forms and certificates duly
executed;
(c) subject to Section 6(a) and Section 7(f), the Company
and the Rights Agent may deem and treat the person in whose name a
Rights Certificate (or, prior to the Distribution Date, the associated
Company Common Stock certificate) is registered as the absolute owner
thereof and of the Rights evidenced thereby (notwithstanding any
notations of ownership or writing on the Rights Certificates or the
associated Company Common Stock certificate made by anyone other than
the Company or the Rights Agent) for all purposes whatsoever, and
neither the Company nor the Rights Agent, subject to the last sentence
of Section 7(e), shall be affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the
contrary, neither the Company nor the Rights Agent shall have any
liability to any holder of a Right or any other Person as a result of
its inability to perform any of its obligations under this
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Agreement by reason of any preliminary or permanent injunction or
other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency
or commission, or any statute, rule, regulation or executive order
promulgated or enacted by any governmental authority, prohibiting or
otherwise restraining performance of such obligation; provided,
however, the Company must use its best efforts to have any such order,
decree or ruling lifted or otherwise overturned as promptly as
practicable.
SECTION 17. Rights Certificate Holder Not Deemed a
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 shares of Preferred Stock or any other securities of the Company that
may at any time be issuable on the exercise of the Rights evidenced thereby,
nor shall anything contained herein or in any Rights Certificate be construed
to confer upon the holder of any Rights Certificate, as such, any of the rights
of a 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, except as provided
in Section 24, to receive notice of meetings or other actions affecting
stockholders, or to receive dividends or subscription rights, or otherwise.
SECTION 18. Concerning the Rights Agent. (a) The Company
agrees to pay to the Rights Agent reasonable compensation for all services
rendered by it hereunder and, from time to time, on demand of the Rights Agent,
its reasonable expenses, including reasonable fees and disbursements of its
counsel, incurred in connection with the execution and administration of this
Agreement and the exercise and performance of its duties hereunder. The
Company shall indemnify the Rights Agent for, and hold it harmless against, any
loss, liability, or expense, incurred without negligence, bad faith or willful
misconduct on the part of the Rights Agent, for anything done or omitted by the
Rights Agent in connection with the acceptance and administration of this
Agreement, including the costs and expenses of defending against any claim of
liability hereunder.
(b) The Rights Agent shall be protected and shall incur
no liability for or in respect of any action taken, suffered or omitted by it
in connection with its administration of this Agreement in reliance upon any
Rights Certificate or certificate for Preferred Stock or for other securities
of the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement or other paper or document believed by it to be genuine and to have
been signed, executed and, where necessary, verified or acknowledged by the
proper Person or Persons.
SECTION 19. Merger or Consolidation or Change of Name of
Rights Agent. (a) Any corporation into which the Rights Agent or any
successor Rights Agent may be merged or with which it may be consolidated, or
any corporation resulting from any merger
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or consolidation to which the Rights Agent or any successor Rights Agent shall
be a party, or any corporation succeeding to the corporate trust or shareholder
services 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 document or any further act on the part of any of the parties
hereto; provided that such corporation would be eligible for appointment as a
successor Rights Agent under the provisions of Section 21. In case at the time
such successor Rights Agent shall succeed to the agency created by this
Agreement, any of the Rights Certificates shall have been countersigned but not
delivered, any such successor Rights Agent may adopt the countersignature of a
predecessor Rights Agent and deliver such Rights Certificates so countersigned;
and in case at that time any of the Rights Certificates shall not have been
countersigned, any successor Rights Agent may countersign such Rights
Certificates either in the name of the predecessor or in the name of the
successor Rights Agent; and in all such cases such Rights Certificates shall
have the full force provided in the Rights Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent
shall be changed and at such time any of the Rights Certificates shall have
been countersigned but not delivered, the Rights Agent may adopt the
countersignature under its prior name and deliver Rights Certificates so
countersigned; and in case at that time any of the Rights Certificates shall
not have been countersigned, the Rights Agent may countersign such Rights
Certificates either in its prior name or in its changed name; and in all such
cases such Rights Certificates shall have the full force provided in the Rights
Certificates and in this Agreement.
SECTION 20. Duties of Rights Agent. The Rights Agent
undertakes the duties and obligations imposed by this Agreement upon the
following terms and conditions, by all of which the Company and the holders of
Rights Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who
may be legal counsel for the Company), and the opinion of such counsel
shall be full and complete authorization and protection to the Rights
Agent as to any action taken or omitted by it in good faith and in
accordance with such opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable that
any fact or matter (including, without limitation, the identity of any
Acquiring Person and the determination of "current market price") be
proved or established by the Company prior to taking or suffering any
action hereunder, such fact or matter (unless other evidence in
respect thereof be specified herein) may be deemed to be conclusively
proved and established by a certificate signed by the Chairman of the
Board, the President, any Vice President, the Treasurer, any Assistant
Treasurer, the Secretary or any Assistant Secretary of the Company and
delivered to the Rights Agent; provided, however, that
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so long as any Person is an Acquiring Person hereunder, such
certificate shall be signed and delivered by either (1) 75% of the
Company's Board of Directors or (2) a majority of the Company's Board
of Directors and a majority of the Continuing Directors; and such
certificate shall be full authorization to the Rights Agent for any
action taken or suffered in good faith by it under the provisions of
this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for
its own negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason
of any of the statements of fact or recitals contained in this
Agreement or in the Rights Certificates or be required to verify the
same (except as to its countersignature on such Rights Certificates),
but all such statements and recitals are and shall be deemed to have
been made by the Company only.
(e) The Rights Agent shall not have any responsibility
for the validity of this Agreement or the execution and delivery
hereof (except the due execution and delivery hereof by the Rights
Agent) or for the validity or execution of any Rights Certificate
(except its countersignature thereof); nor shall it be responsible for
any breach by the Company of any covenant or failure by the Company to
satisfy conditions contained in this Agreement or in any Rights
Certificate; nor shall it be responsible for any adjustment required
under the provisions of Section 11 or Section 13 or for the manner,
method or amount of any such adjustment or the ascertaining of the
existence of facts that would require any such adjustment (except with
respect to the exercise of Rights evidenced by Rights Certificates
after receipt by the Rights Agent of the certificate describing any
such adjustment contemplated by Section 12); nor shall it by any act
hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any shares of Preferred Stock or any
other securities to be issued pursuant to this Agreement or any Rights
Certificate or as to whether any shares of Preferred Stock or any
other securities will, when so issued, be validly authorized and
issued, fully paid and non-assessable.
(f) The Company shall perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered
all such further acts, instruments and assurances as may reasonably be
required by the Rights Agent for the performance by the Rights Agent
of its duties under this Agreement.
(g) The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties
hereunder from the Chairman of the Board, the President, any Vice
President, the Secretary, any Assistant Secretary, the Treasurer or
any Assistant Treasurer of the Company, and to apply to
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such officers for advice or instructions in connection with its
duties, and it shall not be liable for any action taken or suffered to
be taken by it in good faith in accordance with instructions of any
such officer; provided, however, that so long as any Person is an
Acquiring Person hereunder, the Rights Agent shall accept such
instructions and advice only from a majority of the Continuing
Directors and shall not be liable for any action taken or suffered to
be taken by it in good faith in accordance with such instructions of
either (1) 75% of the Company's Board of Directors or (2) a majority
of the Company's Board of Directors and a majority of the Continuing
Directors. Any application by the Rights Agent for written
instructions from the Company may, at the option of the Rights Agent,
set forth in writing any action proposed to be taken or omitted by the
Rights Agent under this Rights Agreement and the date on and/or after
which such action shall be taken or such omission shall be effective.
The Rights Agent shall not be liable for any action taken by, or
omission of, the Rights Agent in accordance with a proposal included
in any such application on or after the date specified in such
application (which date shall not be less than five Business Days
after the date any such officer of the Company actually receives such
application, unless any such officer shall have consented in writing
to an earlier date) unless, prior to taking any such action (or the
effective date in the case of an omission), the Rights Agent shall
have received written instructions in response to such application
specifying the action to be taken or omitted.
(h) The Rights Agent and any stockholder, director,
officer or employee of the Rights Agent may buy, sell or deal in any
of the Rights or other securities of the Company or become pecuniarily
interested in any transaction in which the Company may be interested,
or contract with or lend money to the Company or otherwise act as
fully and freely as though it were not Rights Agent under this
Agreement. Nothing herein shall preclude the Rights Agent from acting
in any other capacity for the Company or for any other Person.
(i) The Rights Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder
either itself or by or through its attorneys or agents.
(j) No provision of this Agreement shall require the
Rights Agent to expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its duties or in the
exercise of its rights hereunder if the Rights Agent shall have
reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not
reasonably assured to it.
(k) If, with respect to any Rights Certificate
surrendered to the Rights Agent for exercise or transfer, the
certificate attached to the form of assignment or form of election to
purchase, as the case may be, has either not been completed, not
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signed or indicates an affirmative response to clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with
respect to such requested exercise or transfer without first
consulting with the Company. If such certificate has been completed
and signed and shows a negative response to clauses 1 and 2 of such
certificate, unless previously instructed otherwise in writing by the
Company (which instructions may impose on the Rights Agent additional
ministerial responsibilities, but no discretionary responsibilities),
the Rights Agent may assume without further inquiry that the Rights
Certificate is not owned by a person described in Section 4(b) or
Section 7(e) and shall not be charged with any knowledge to the
contrary.
SECTION 21. Change of Rights Agent. The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon thirty days' prior notice in writing mailed to the Company, and
to each transfer agent of the Preferred Stock and the Company Common Stock, by
registered or certified mail, and to the holders of the Rights Certificates (or
certificates for the Company Common Stock prior to the Distribution Date) by
first-class mail. The Company may remove the Rights Agent or any successor
Rights Agent upon thirty days' prior notice in writing, mailed to the Rights
Agent or successor Rights Agent, as the case may be, and to each transfer agent
of the Preferred Stock and the Company Common Stock, by registered or certified
mail, and to the holders of the Rights Certificates (or certificates for the
Company Common Stock prior to the Distribution Date) 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 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 or, prior to the Distribution Date,
the holder of a certificate for the Company Common Stock (who shall, with such
notice, submit such holder's Rights Certificate or certificate for Company
Common Stock, as the case may be, for inspection by the Company), then any
registered holder of any Rights Certificate or, prior to the Distribution Date,
the holder of a certificate for the Company Common Stock may apply to any court
of competent jurisdiction for the appointment of a new Rights Agent. Any
successor Rights Agent, whether appointed by the Company or by such a court,
shall be (a) a corporation organized and doing business under the laws of the
United States or any state of the United States in good standing, shall be
authorized to do business as a banking institution in the State of New York,
shall be authorized under such laws to exercise corporate trust or stock
transfer powers, shall be subject to supervision or examination by federal or
state authorities and shall have at the time of its appointment as Rights Agent
a combined capital and surplus of at least $100,000,000 or (b) an Affiliate of
a corporation described in clause (a). After appointment, the successor Rights
Agent shall be vested with the same powers, rights, duties and responsibilities
as if it had been originally named as Rights Agent without further act or deed;
but the predecessor Rights Agent shall deliver and transfer to the successor
Rights Agent any property at the time held by it hereunder, and execute and
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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 Preferred Stock and the Company Common Stock,
and mail a notice thereof in writing to the registered holders of the Rights
Certificates (or certificates for the Company Common Stock prior to the
Distribution Date). Failure to give any notice provided for in this Section
21, however, or any defect therein, shall not affect the legality or validity
of the resignation or removal of the Rights Agent or the appointment of the
successor Rights Agent.
SECTION 22. Issuance of New Rights Certificates.
Notwithstanding any of the provisions of this Agreement or the Rights to the
contrary, the Company may, at its option, issue new Rights Certificates
evidencing Rights in such form as may be approved by either (x) 75% of the
Company's Board of Directors or (y) a majority of the Company's Board of
Directors and a majority of the Continuing Directors to reflect any adjustment
or change made in accordance with the provisions of this Agreement in the
Purchase Price or the number or kind or class of shares or other securities or
property that may be acquired upon exercise of the Rights. In addition, in
connection with the issuance or sale of shares of Company Common Stock
following the Distribution Date and prior to the Expiration Date, the Company
(a) shall, with respect to shares of Company Common Stock so issued or sold
pursuant to the exercise of stock options or under any employee plan or
arrangement, or upon the exercise, conversion or exchange of securities
hereinafter issued by the Company, and (b) may, in any other case, if deemed
necessary or appropriate by either (1) 75% of the Company's Board of Directors
or (2) a majority of the Company's Board of Directors and a majority of the
Continuing Directors, issue Rights Certificates evidencing the appropriate
number of Rights in connection with such issuance or sale; provided, however,
that (i) no such Rights Certificate shall be issued if, and to the extent that,
the Company shall be advised by counsel that such issuance would create a
significant risk of material adverse tax consequences to the Company or the
person to whom such Rights Certificate would be issued and (ii) no such Rights
Certificate shall be issued if, and to the extent that, appropriate adjustment
shall otherwise have been made in lieu of the issuance thereof.
SECTION 23. Redemption and Termination. (a) Subject to
Section 28, the Company may, at its option, by approval of either (1) 75% of
the Company's Board of Directors or (2) a majority of the Company's Board of
Directors and a majority of the Continuing Directors then in office provided
that at the time of such action there are then in office not less than two
Continuing Directors, at any time prior to the earlier of (i) the Close of
Business on the tenth Day following the Stock Acquisition Date or (ii) the
Final Expiration Date, redeem all but not less than all of the then outstanding
Rights at a redemption price of $.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 the
"Redemption Price"), and the Company may, at its option, by action of a
majority of the Company's Board of Directors, pay the Redemption Price either
in shares of Company
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Common Stock (based on the current market price, determined in accordance with
Section 11(d), of the shares of Company Common Stock at the time of redemption)
or cash. Subject to the foregoing, the redemption of the Rights may be made
effective at such time, on such basis and with such conditions as the Board of
Directors in its sole discretion may establish.
(b) Immediately upon the action ordering the redemption
of the Rights by either (1) 75% of the Company's Board of Directors or (2) a
majority of the Company's Board of Directors and a majority of the Continuing
Directors, evidence of which shall be filed with the Rights Agent, and without
any further action and without any notice, the right to exercise the Rights
will terminate and the only right thereafter of the holders of Rights shall be
to receive the Redemption Price for each Right so held. Promptly after the
action ordering the redemption of the Rights by either (1) 75% of the Company's
Board of Directors or (2) a majority of the Company's Board of Directors and a
majority of the Continuing Directors, the Company shall give notice of such
redemption to the Rights Agent and the holders of the then outstanding Rights
by mailing such notice to all such holders at each holder's last address as it
appears upon the registry books of the Rights Agent or, prior to the
Distribution Date, on the registry books of the transfer agent for Company
Common Stock. Any notice that is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each such notice
of redemption will state the method by which the payment of the Redemption
Price will be made.
SECTION 24. Notice of Certain Events. (a) In case the
Company shall propose, at any time after the Distribution Date, (i) to pay any
dividend payable in stock of any class to the holders of Preferred Stock or to
make any other distribution to the holders of Preferred Stock (other than a
regular quarterly cash dividend out of earnings or retained earnings of the
Company), (ii) to offer to the holders of Preferred Stock rights or warrants to
subscribe for or to purchase any additional shares of Preferred Stock or shares
of stock of any class or any other securities, rights or options, (iii) to
effect any reclassification of the Preferred Stock (other than a
reclassification involving only the subdivision of outstanding shares of
Preferred Stock), (iv) to effect any consolidation or merger into or with any
other Person (other than a Subsidiary of the Company in a transaction that
complies with Section 11(o)), or to effect any sale or other transfer (or to
permit one or more of its Subsidiaries to effect any sale or other transfer),
in one or more transactions, of more than 50% of the assets or earning power of
the Company and its Subsidiaries (taken as a whole) to any other Person or
Persons (other than the Company and/or any of its Subsidiaries in one or more
transactions each of which complies with Section 11(o)) or (v) to effect the
liquidation, dissolution or winding up of the Company, then, in each such case,
the Company shall give to each holder of a Rights Certificate (or, prior to the
Distribution Date, to each holder of certificates for Company Common Stock), to
the extent feasible and in accordance with Section 25, a notice of such
proposed action, which shall specify the record date for the purposes of such
stock dividend, distribution of rights or warrants, or the date on which such
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reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution or winding up is to take place and the date of participation
therein by the holders of the shares of Preferred Stock, if any such date is to
be fixed, and such notice shall be so given in the case of any action covered
by clause (i) or (ii) above at least 20 days prior to the record date for
determining holders of the shares of Preferred Stock for purposes of such
action, and in the case of any such other action, at least 20 days prior to the
date of the taking of such proposed action or the date of participation therein
by the holders of the shares of Preferred Stock, whichever shall be the
earlier; provided, however, no such notice shall be required pursuant to this
Section 24 if any Subsidiary of the Company effects a consolidation or merger
with or into, or effects a sale or other transfer of assets or earning power
to, any other Subsidiary of the Company.
(b) In case any of the events set forth in Section
11(a)(ii) shall occur, then, in any such case, the Company shall as soon as
practicable thereafter give to each holder of a Rights Certificate, to the
extent feasible and in accordance with Section 25, a notice of the occurrence
of such event, which shall specify the event and the consequences of the event
to holders of Rights under Section 11(a)(ii).
SECTION 25. Notices. All notices and other communications
provided for hereunder shall, unless otherwise stated herein, be in writing and
mailed or sent or delivered (including by facsimile transmission), if to the
Company, at its address at:
Global TeleSystems Group, Inc.
0000 Xxxxxxxx Xxxxx
Xxxxx Xxxxx, 00xx Xxxxx
XxXxxx, XX 00000
Attention: Xxxxx Xxxxxx
Telecopy No.: (000) 000-0000
and if to the Rights Agent, at its address at:
Bank of New York
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Stock Transfer Administration
Telecopy No.: (000) 000-0000
Notices or demands authorized or required 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 evidencing
shares of Company Common Stock) shall be sufficiently given or made if sent by
first-class mail, postage prepaid,
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addressed to such holder at the address of such holder as shown on the registry
books of the Rights Agent or, prior to the Distribution Date, on the registry
books of the transfer agent for the Company Common Stock.
SECTION 26. Supplements and Amendments. Prior to the
Distribution Date and subject to the penultimate sentence of this Section 26,
the Company and the Rights Agent shall, if the Company so directs, supplement
or amend any provision of this Agreement without the approval of any holders of
certificates evidencing shares of Company Common Stock. From and after the
Distribution Date and subject to the penultimate sentence of this Section 26,
the Company and the Rights Agent shall, if the Company so directs, supplement
or amend this Agreement without the approval of any holders of Rights
Certificates in order (i) to cure any ambiguity, (ii) to correct or supplement
any provision contained herein that may be defective or inconsistent with any
other provisions herein, (iii) to shorten or lengthen any time period hereunder
or (iv) to change or supplement the provisions hereunder in any manner 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 Person or an Affiliate or Associate of an Acquiring Person);
provided, however, that this Agreement may not be supplemented or amended to
lengthen, pursuant to clause (iii) of this sentence, (A) subject to Section 30,
a time period relating to when the Rights may be redeemed at such time as the
Rights are not then redeemable or (B) any other time period unless such
lengthening is for the purpose of protecting, enhancing or clarifying the
rights of, and/or the benefits to, the holders of Rights. Upon the delivery of
a certificate from an appropriate officer of the Company or, so long as any
Person is an Acquiring Person hereunder, from the majority either (1) 75% of
the Company's Board of Directors or (2) a majority of the Company's Board of
Directors and a majority of the Continuing Directors if at the time of such
action there are then in office not less than two Continuing Directors, that
states that the proposed supplement or amendment is in compliance with the
terms of this Section 26, the Rights Agent shall execute such supplement or
amendment. Prior to the Distribution Date, the interests of the holders of
Rights shall be deemed coincident with the interests of the holders of Company
Common Stock.
SECTION 27. Successors. All the covenants and provisions of
this Agreement by or for the benefit of the Company or the Rights Agent shall
bind and inure to the benefit of their respective successors and assigns
hereunder.
SECTION 28. Determinations and Actions by the Board of
Directors, etc. (a) For all purposes of this Agreement, any calculation of
the number of shares of Company Common Stock outstanding at any particular
time, including for purposes of determining the particular percentage of such
outstanding shares of Company Common Stock of which any Person is the
Beneficial Owner, shall be made in accordance with the last sentence of Rule
13d-3(d)(1)(i) of the Exchange Act Regulations as in effect on the date hereof.
Except as otherwise specifically provided herein, and subject to paragraph (b)
of this Section 28, the
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Board of Directors of the Company shall have the exclusive power and authority
to administer this Agreement and to exercise all rights and powers specifically
granted to the Board of Directors of the Company or to the Company, or as may
be necessary or advisable in the administration of this Agreement, including,
without limitation, the right and power (i) to interpret the provisions of this
Agreement and (ii) to make all determinations deemed necessary or advisable for
the administration of this Agreement. All such actions, calculations,
interpretations and determinations (including, for purposes of clause (y)
below, all omissions with respect to the foregoing) that 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 of Directors of the Company or any member thereof to
any liability to the holders of the Rights.
(b) Notwithstanding anything to the contrary contained in
this Agreement, the concurrence of either (1) 75% of the Company's Board of
Directors or (2) a majority of the Company's Board of Directors and a majority
of the Continuing Directors then in office, shall be required to give effect to
any action, calculation, interpretation or determination made by the Board of
Directors of the Company in the administration of this Agreement and the
exercise of the rights or powers granted to the Board of Directors of the
Company, to the Continuing Directors or to the Company pursuant to this
Agreement and no effect shall be given to any such action, calculation,
interpretation, determination or exercise of rights or powers unless at least
two Continuing Directors are then in office.
SECTION 29. Benefits of this Agreement. Nothing in this
Agreement shall be construed to give to any Person other than the Company, the
Rights Agent and the registered holders of the Rights Certificates (and, prior
to the Distribution Date, registered holders of shares of Company Common Stock)
any legal or equitable right, remedy or claim under this Agreement. This
Agreement shall be for the sole and exclusive benefit of the Company, the
Rights Agent and the registered holders of the Rights Certificates (and, prior
to the Distribution Date, registered holders of shares of Company Common
Stock).
SECTION 30. Severability. If any term, provision, covenant
or restriction of this Agreement is held by a court of competent jurisdiction
or other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and either (a) 75% of
the Company's Board of Directors or (b) a majority of the Company's Board of
Directors and a majority of the Continuing Directors determines in its good
faith judgment that severing the invalid language from this Agreement would
adversely affect the purpose or effect of this Agreement and the Rights shall
not then be redeemable, the right of redemption set forth in Section 23 shall
be reinstated and shall not expire until the Close of Business on the tenth
Business Day
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following the date of such determination by either (1) 75% of the Company's
Board of Directors or (2) a majority of the Company's Board of Directors and a
majority of the Continuing Directors.
SECTION 31. Governing Law. This Agreement, each Right and
each Rights Certificate issued hereunder shall be governed by, and construed in
accordance with, the laws of the State of Delaware provided, however, that the
rights and obligations of the Rights Agent shall be governed by and construed
in accordance with the laws of the State of New York, without regard to
conflicts of laws principles thereof.
SECTION 32. Counterparts. This Agreement may be executed
(including by facsimile) in one or more counterparts, and by the different
parties hereto in separate counterparts, each of which when executed shall be
deemed to be an original, but all of which taken together shall constitute one
and the same instrument.
SECTION 33. Descriptive Headings. The headings contained in
this Agreement are for descriptive purposes only and shall not affect in any
way the meaning or interpretation of this Agreement.
SECTION 34. Exchange. (a) (i) The Company may, at its
option, at any time after any person becomes an Acquiring Person, upon
resolution adopted by a majority of the Company's Board of Directors, exchange
all or part of the then outstanding and exercisable Rights (which shall not
include Rights that have become void pursuant Section 7(e)) for Units of
Preferred Stock at an exchange ratio of one Unit of Preferred Stock per Right,
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such exchange ratio being
hereinafter referred to as the "Section 34(a)(i) Exchange Ratio").
Notwithstanding the foregoing, the Company may not effect such exchange at any
time after any Person (other than the Company, any Subsidiary of the Company,
any employee benefit plan maintained by the Company or any of its Subsidiaries,
or any trustee or fiduciary with respect to such plan acting in such capacity),
together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of 50% or more of the shares of Company Common Stock then
outstanding.
(ii) The Company may, at its option, at any time after any
person becomes an Acquiring Person, upon resolution adopted by a majority of
the Company's Board of Directors, exchange all or part of the then outstanding
and exercisable Rights (which shall not include Rights that have become void
pursuant to Section 7(e)) for Units of Preferred Stock at an exchange ratio
specified in the following sentence, as appropriately adjusted to reflect any
stock split, stock dividend or similar transaction occurring after the date
hereof. Subject to such adjustment, each Right may be exchanged for that
number of Units of Preferred Stock obtained by dividing the Adjustment Spread
(as defined below) by the then current market price (determined pursuant to
Section 11(d)) per Unit of Preferred Stock on the earlier of (i) the date on
which any Person becomes an Acquiring Person and (ii) the date on which a
tender or exchange offer by any Person (other than the Company, any Subsidiary
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of the Company, any employee benefit plan maintained by the Company or any of
its Subsidiaries or any trustee or fiduciary with respect to such plan acting
in such capacity) is first published or sent or given within the meaning of
Rule 14d-4(a) of the Exchange Act Regulations or any successor rule, if upon
consummation thereof such Person would be the Beneficial Owner of 15% or more
of the shares of Company Common Stock then outstanding (such exchange ratio
being the "Section 34(a)(ii) Exchange Ratio"). The "Adjustment Spread" shall
equal (x) the aggregate market price on the date of such event of the number of
Adjustment Shares determined pursuant to Section 11(a)(ii), minus (y) the
Purchase Price. Notwithstanding the foregoing, the Company may not effect such
exchange at any time after any Person (other than the Company, any Subsidiary
of the Company, any employee benefit plan maintained by the Company or any of
its Subsidiaries, or any trustee or fiduciary with respect to such plan acting
in such capacity), together with all Affiliates and Associates of such Person,
becomes the Beneficial Owner of 50% or more of the shares of the Company Common
Stock then outstanding.
Notwithstanding anything contained in this Section 34(a) to
the contrary, the Company may not exchange any Rights pursuant to this Section
34(a) unless (x) at the time of the action of the Board of Directors of the
Company approving such exchange, there are then in office not less than two
Continuing Directors and (y) such exchange is approved by a majority of the
Continuing Directors then in office.
(b) Immediately upon the action of either (1) 75% of the
Company's Board of Directors or (2) a majority of the Company's Board of
Directors and a majority of the Continuing Directors ordering the exchange of
any Rights pursuant to Section 34(a) and without any further action and without
any notice, the right to exercise such Rights shall terminate and the only
right thereafter of a holder of such Rights shall be to receive that number of
Units of Preferred Stock equal to the number of such Rights held by such holder
multiplied by the Section 34(a)(i) Exchange Ratio or Section 34(a)(ii) Exchange
Ratio, as the case may be. The Company shall promptly give public notice of
any such exchange; provided, however, that the failure to give, or any defect
in, such notice shall not affect the validity of such exchange. The Company
promptly shall mail a notice of any such exchange to all of the holders of such
Rights at their last addresses as they appear upon the registry books of the
Rights Agent. Any notice that is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each such notice
of exchange shall state the method by which the exchange of Units of Preferred
Stock for Rights will be effected and, in the event of any partial exchange,
the number of Rights that will be exchanged. Any partial exchange shall be
effected pro rata based on the number of Rights (other than Rights that have
become void pursuant to Section 7(e)) held by each holder of Rights.
(c) In the event that the number of shares of Preferred
Stock that are authorized by the Company's Certificate of Incorporation but not
outstanding or reserved for
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issuance for purposes other than upon exercise of the Rights are not sufficient
to permit any exchange of Rights as contemplated in accordance with this
Section 34, the Company shall take all such action as may be necessary to
authorize additional shares of Preferred Stock for issuance upon exchange of
the Rights or make adequate provision to substitute (1) cash, (2) Company
Common Stock or other equity securities of the Company, (3) debt securities of
the Company, (4) other assets or (5) any combination of the foregoing, having
an aggregate value equal to the Adjustment Spread, where such aggregate value
has been determined by either (x) 75% of the Company's Board of Directors or
(y) a majority of the Company's Board of Directors and a majority of the
Continuing Directors.
(d) The Company shall not be required to issue fractions
of Units of Preferred Stock or to distribute certificates that evidence
fractional Units. In lieu of fractional Units, the Company may pay to the
registered holders of Rights Certificates at the time such Rights are exchanged
as herein provided an amount in cash equal to the same fraction of the current
market price (determined pursuant to Section 11(d)) of one Unit of Preferred
Stock.
47
44
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed on their behalf as of the date first above
written.
GLOBAL TELESYSTEMS GROUP, INC.
By
--------------------------------------
Name:
Title:
THE BANK OF NEW YORK, as
Rights Agent
By
--------------------------------------
Name:
Title:
48
EXHIBIT A
Form of Rights Certificate
Certificate No. ______ ______Rights
NOT EXERCISABLE AFTER THE EXPIRATION DATE (AS DEFINED IN THE RIGHTS AGREEMENT
REFERRED TO BELOW). THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE
COMPANY, ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES (SPECIFIED IN THE RIGHTS AGREEMENT), RIGHTS BENEFICIALLY OWNED BY
ACQUIRING PERSONS (AS DEFINED IN THE RIGHTS AGREEMENT) OR ANY SUBSEQUENT HOLDER
OF SUCH RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS
RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME
AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS
SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT REFERRED TO BELOW).
ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY
BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(E) OF THE
RIGHTS AGREEMENT.]*
RIGHTS CERTIFICATE
GLOBAL TELESYSTEMS GROUP, INC.
This certifies that _____________________, or registered
assigns, is the registered holder of the number of Rights set forth above, each
of which entitles the registered holder thereof, subject to the terms and
conditions of the Rights Agreement dated as of February __, 1998 (the "Rights
Agreement"; terms defined therein are used herein with the same meaning unless
otherwise defined herein) between Global TeleSystems Group, Inc., a Delaware
corporation (the "Company"), and The Bank of New York, as Rights Agent (which
term shall include any successor Rights Agent under the Rights Agreement), to
purchase from the Company at any time after the Distribution Date and prior to
the Expiration Date at the office of the Rights Agent, one one-thousandth of a
fully paid and non-assessable share of Series A Preferred Stock, par value
$1.00 per share (the "Preferred Stock"), of the Company at the Purchase Price
initially of $75 per one one-thousandth share (each such one one-thousandth of
a share being a "Unit") of Preferred Stock, upon presentation and surrender of
this Rights Certificate with the Election to Purchase and related certificate
duly executed. The number of Rights evidenced by this Rights Certificate (and
the number of Units which may be purchased upon exercise thereof) set
__________________________________
* THE PORTION OF THE LEGEND IN BRACKETS SHALL BE INSERTED ONLY IF
APPLICABLE AND SHALL REPLACE THE PRECEDING SENTENCE.
49
2
forth above, and the Purchase Price per Unit set forth above shall be subject
to adjustment in certain events as provided in the Rights Agreement.
Upon the occurrence of a Section 11(a)(ii) Event or Section 13
Event, if the Rights evidenced by this Rights Certificate are beneficially
owned by an Acquiring Person or an Affiliate or Associate of any such Acquiring
Person or, under certain circumstances described in the Rights Agreement, a
transferee of any such Acquiring Person, Associate or Affiliate, such Rights
shall become null and void and no holder hereof shall have any right with
respect to such Rights from and after the occurrence of such Section 11(a)(ii)
Event.
In certain circumstances described in the Rights Agreement, the
Rights evidenced hereby may entitle the registered holder thereof to purchase
capital stock of an entity other than the Company or receive common stock, cash
or other assets, all as provided in the Rights Agreement.
This Rights Certificate is subject to all of the terms and
conditions of the Rights Agreement, which terms and conditions are hereby
incorporated herein by reference and made a part hereof and to which Rights
Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates. Copies
of the Rights Agreement are on file at the principal office of the Company and
are available from the Company upon written request.
This Rights Certificate, with or without other Rights
Certificates, upon surrender at the office of the Rights Agent designated for
such purpose, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing an aggregate number of Rights
equal to the aggregate number of Rights evidenced by the Rights Certificate or
Rights Certificates surrendered. If this Rights Certificate shall be exercised
in part, the registered holder shall be entitled to receive, upon surrender
hereof, another Rights Certificate or Rights Certificates for the number of
whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may be redeemed by the Company under certain
circumstances at its option at a redemption price of $0.01 per Right, payable
at the Company's option in cash or in common stock of the Company, subject to
adjustment in certain events as provided in the Rights Agreement.
No fractional shares of Preferred Stock will be issued upon the
exercise of any Right or Rights evidenced hereby (other than fractions which
are integral multiples of one one-thousandth of a share of Preferred Stock),
but in lieu thereof a cash payment will be made, as provided in the Rights
Agreement.
50
3
No holder of this Rights Certificate, as such, shall be entitled
to vote or receive dividends or be deemed for any purpose the holder of
Preferred Stock or of any other securities which may at any time be issuable on
the exercise hereof, nor shall anything contained in the Rights Agreement or
herein be construed to confer upon the holder hereof, as such, any of the
rights of a shareholder of the Company or any right to vote for the election of
directors or upon any matter submitted to shareholders at any meeting thereof,
or to give or withhold consent to any corporate action, or to receive notice of
meetings or other actions affecting shareholders (except as provided in the
Rights Agreement), or to receive dividends or subscription rights, or
otherwise, until the Rights evidenced by this Rights Certificate shall have
been exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the
Company and its corporate seal. Dated as of _________, [199__] [200__].
ATTEST: GLOBAL TELESYSTEMS GROUP, INC.
By By
----------------------- -------------------------
Name: Name:
Title: Title:
Countersigned:
The Bank of New York, as
Rights Agent
By
-----------------------
Name:
Title:
51
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if
such holder desires to transfer the
Rights Certificate.)
FOR VALUE RECEIVED __________________________________________________ hereby
sells, assigns and transfers unto ______________________
________________________________________________________________________________
(Please print name and address of transferee)
________________________________________________________________________________
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _________________ Attorney,
to transfer the within Rights Certificate on the books of the within-named
Company, with full power of substitution.
Dated: , [199_] [200_]
----------
---------------------------
Signature
Signature Guaranteed:
52
CERTIFICATE
The undersigned hereby certifies by checking the appropriate
boxes that:
(1) this Rights Certificate [ ] is [ ] is not being sold,
assigned and transferred by or on behalf of a Person who is or was an Acquiring
Person or an Affiliate or Associate of any such Acquiring Person (as such terms
are defined pursuant to the Rights Agreement); and
(2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this
Rights Certificate from any Person who is, was or subsequently became an
Acquiring Person or an Affiliate or Associate of an Acquiring Person.
Dated: ------------ -- , [199__] [200__]
Signature
Signature Guaranteed:
--------------------------------------------------------------
NOTICE
The signature to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
In the event the certification set forth above is not completed,
the Company will deem the beneficial owner of the Rights evidenced by this
Rights Certificate to be an Acquiring Person or an Affiliate or Associate
thereof (as defined in the Rights Agreement) and, in the case of an Assignment,
will affix a legend to that effect on any Rights Certificates issued in
exchange for this Rights Certificate.
53
FORM OF ELECTION TO PURCHASE
(To be executed if the registered holder
desires to exercise Rights represented
by the Rights Certificate.)
To: Global TeleSystems Group, Inc.
The undersigned hereby irrevocably elects to exercise
____________ Rights represented by this Rights Certificate to purchase the
Units of Preferred Stock issuable upon the exercise of the Rights (or such
other securities of the Company or of any other person or other property which
may be issuable upon the exercise of the Rights) and requests that certificates
for such Units be issued in the name of and delivered to:
____________________________________________________________
(Please print name and address)
____________________________________________________________
Please insert social security
or other identifying number: ______________________________
If such number of Rights shall not be all the Rights evidenced
by this Rights Certificate, a new Rights Certificate for the balance of such
Rights shall be registered in the name of and delivered to:
______________________________________________________________
(Please print name and address)
______________________________________________________________
Please insert social security
or other identifying number: ____________________________
Dated: , [199__] [200__]
------- --
------------------------------
Signature
Signature Guaranteed:
54
CERTIFICATE
The undersigned hereby certifies by checking the appropriate
boxes that:
(1) the Rights evidenced by this Rights Certificate [ ] are
[ ] are not beneficially owned by an Acquiring Person or an Affiliate or an
Associate thereof (as defined in the Rights Agreement); and
(2) after due inquiry and to the best knowledge of the
undersigned, the undersigned [ ] did [ ] did not acquire the Rights evidenced
by this Rights Certificate from any person who is, was or subsequently became
an Acquiring Person or an Affiliate or Associate thereof.
Dated: , [199__] [200__] ---------------------------
-------- --
Signature
Signature Guaranteed:
--------------------------------------------------------------
NOTICE
The signature in the foregoing Election to Purchase and
Certificate must conform to the name as written upon the face of this Rights
Certificate in every particular, without alteration or enlargement or any
change whatsoever.
In the event the certification set forth above is not completed,
the Company will deem the beneficial owner of the Rights evidenced by this
Rights Certificate to be an Acquiring Person or an Affiliate or Associate
thereof (as defined in the Rights Agreement) and, in the case of an Assignment,
will affix a legend to that effect on any Rights Certificates issued in
exchange for this Rights Certificate.
55
EXHIBIT B
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED STOCK
On December 5, 1997, the Board of Directors of Global TeleSystems
Group, Inc. (the "Company") authorized and declared, effective as of the date of
entering into the Rights Agreement, a distribution of one Right for each
outstanding share of Common Stock, par value $1.00 per share (the "Company
Common Stock"), to stockholders of record at the close of business on February
2, 1998 (the "Record Date") and for each share of Company Common Stock issued
(including shares distributed from Treasury) by the Company thereafter and prior
to the Distribution Date. Each Right entitles the registered holder, subject to
the terms of the Rights Agreement (as defined below), to purchase from the
Company one one-thousandth of a share (a "Unit") of Series A Preferred Stock,
par value $1.00 per share (the "Preferred Stock"), at a Purchase Price of $75
per Unit, subject to adjustment. The Purchase Price is payable in cash or by
certified or bank check payable to the order of the Company or by wire transfer
to the account of the Company (provided a notice of such wire transfer is given
by the holder of the related Right to the Rights Agent). The description and
terms of the Rights are set forth in a Rights Agreement between the Company and
The Bank of New York, as Rights Agent (the "Rights Agreement").
Copies of the form of Rights Agreement and the Certificate of
Designation for the Preferred Stock have been filed with the Securities and
Exchange Commission as exhibits to a Registration Statement on Form 8-A dated
February 2, 1998 (the "Form 8-A"). Copies of the Rights Agreement and the
Certificate of Designation are available free of charge from the Company. This
summary description of the Rights and the Preferred Stock does not purport to be
complete and is qualified in its entirety by reference to all the provisions of
the Rights Agreement and the Certificate of Designation, including the
definitions therein of certain terms, which Rights Agreement and Certificate of
Designation are incorporated herein by reference.
The Rights Agreement
Initially, the Rights will attach to all certificates
representing shares of outstanding Company Common Stock, and no separate Rights
Certificates will be distributed. The Rights will separate from the Company
Common Stock and the "Distribution Date" will occur upon the earlier of (i) 10
days following a public announcement (the date of such announcement being the
"Stock Acquisition Date") that a person or group of affiliated or associated
persons (other than the Company, any subsidiary of the Company or any employee
benefit plan of the Company or such subsidiary) (an "Acquiring Person") has
acquired, obtained the right to acquire, or otherwise obtained beneficial
ownership of 15% or more of the then outstanding shares of Company Common
Stock; provided, however, that Xxxxxx Xxxxx and his affiliates and Xxxx X.
Xxxxxx and his
56
B-2
affiliates shall not be deemed Acquiring Persons unless they have acquired,
obtained the right to acquire, or otherwise obtained beneficial ownership of
20% or more of the then outstanding shares of Company Common Stock, and (ii) 10
business days (or such later date as may be determined by action of the Board
of Directors prior to such time as any person becomes an Acquiring Person)
following the commencement of a tender offer or exchange offer that would
result in a person or group beneficially owning 15% or more of the then
outstanding shares of Company Common Stock. Until the Distribution Date, (i)
the Rights will be evidenced by Company Common Stock certificates and will be
transferred with and only with such Company Common Stock certificates, (ii) new
Company Common Stock certificates issued after the Record Date (also including
shares distributed from Treasury) will contain a notation incorporating the
Rights Agreement by reference and (iii) the surrender for transfer of any
certificates representing outstanding Company Common Stock will also constitute
the transfer of the Rights associated with the Company Common Stock represented
by such certificates.
The Rights are not exercisable until the Distribution Date and
will expire at the close of business on the tenth anniversary of the Rights
Agreement unless earlier redeemed by the Company as described below.
As soon as practicable after the Distribution Date, Rights
Certificates will be mailed to holders of record of Company Common Stock as of
the close of business on the Distribution Date and, thereafter, the separate
Rights Certificates alone will represent the Rights.
In the event that (i) the Company is the surviving corporation
in a merger with an Acquiring Person and shares of Company Common Stock shall
remain outstanding, (ii) a Person becomes an Acquiring Person, (iii) an
Acquiring Person engages in one or more "self-dealing" transactions as set
forth in the Rights Agreement, or (iv) during such time as there is an
Acquiring Person, an event occurs which results in such Acquiring Person's
ownership interest being increased by more than 1% (e.g., by means of a
recapitalization) (each such event being a "Section 11(a)(ii) Event"), then, in
each such case, each holder of a Right will thereafter have the right to
receive, upon exercise, Units of Preferred Stock (or, in certain circumstances,
Company Common Stock, cash, property or other securities of the Company) having
a value equal to two times the exercise price of the Right. The exercise price
is the Purchase Price multiplied by the number of Units of Preferred Stock
issuable upon exercise of a Right prior to the events described in this
paragraph. Notwithstanding any of the foregoing, following the occurrence of
any of the events set forth in this paragraph, all Rights that are, or (under
certain circumstances specified in the Rights Agreement) were, beneficially
owned by any Acquiring Person will be null and void.
In the event that, at any time following the Stock Acquisition
Date, (i) the Company is acquired in a merger or other business combination
transaction and the Company is not the surviving corporation (other than a
merger described in the preceding paragraph), (ii) any Person consolidates or
merges with the Company and all or part of the
57
B-3
Company Common Stock is converted or exchanged for securities, cash or property
of any other Person or (iii) 50% or more of the Company's assets or earning
power is sold or transferred, each holder of a Right (except Rights which
previously have been voided as described above) shall thereafter have the right
to receive, upon exercise, common stock of the ultimate parent of the Acquiring
Person having a value equal to two times the exercise price of the Right.
The Purchase Price payable, and the number of Units of Preferred
Stock issuable, upon exercise of the Rights are subject to adjustment from time
to time to prevent dilution (i) in the event of a stock dividend on, or a
subdivision, combination or reclassification of, the Preferred Stock, (ii) if
holders of the Preferred Stock are granted certain rights or warrants to
subscribe for Preferred Stock or convertible securities at less than the
current market price of the Preferred Stock, or (iii) upon the distribution to
the holders of the Preferred Stock of evidences of indebtedness, cash or assets
(excluding regular quarterly cash dividends) or of subscription rights or
warrants (other than those referred to above).
With certain exceptions, no adjustment in the Purchase Price
will be required until cumulative adjustments amount to at least 1% of the
Purchase Price. The Company is not required to issue fractional Units. In
lieu thereof, an adjustment in cash may be made based on the market price of
the Preferred Stock prior to the date of exercise.
At any time until ten business days following the Stock
Acquisition Date, either (a) 75% of the Company's Board of Directors or (b) a
majority of the Company's Board of Directors and a majority of the Continuing
Directors, may redeem the Rights in whole, but not in part, at a price of $0.01
per Right (subject to adjustment in certain events) (the "Redemption Price"),
payable, at the election of either (a) 75% of the Company's Board of Directors
or (b) a majority of the Company's Board of Directors and a majority of the
Continuing Directors, in cash or shares of Company Common Stock. Immediately
upon the action of either (a) 75% of the Company's Board of Directors or (b) a
majority of the Company's Board of Directors and a majority of the Continuing
Directors, ordering the redemption of the Rights, the Rights will terminate and
the only right of the holders of Rights will be to receive the Redemption
Price.
The Board of Directors, at its option, may exchange each Right
for (i) one Unit of Preferred Stock or (ii) such number of Units of Preferred
Stock as will equal (x) the difference between the aggregate market price of
the number of Units of Preferred Stock to be received upon a Section 11(a)(ii)
Event and the purchase price set forth in the Rights Agreement, divided by (y)
the market price per Unit of Preferred Stock upon a Section 11(a)(ii) Event.
Until a Right is exercised, the holder thereof, as such, will
have no rights as a stockholder of the Company, including, without limitation,
the right to vote or to receive dividends. While the distribution of the
Rights will not be taxable to stockholders or to the
58
B-4
Company, stockholders may, depending upon the circumstances, recognize taxable
income in the event that the Rights become exercisable for Units of Preferred
Stock (or other consideration).
Any of the provisions of the Rights Agreement may be amended
without the approval of the holders of Company Common Stock at any time prior
to the Distribution Date. After the Distribution Date, the provisions of the
Rights Agreement may be amended in order to cure any ambiguity, defect or
inconsistency, to make changes which do not adversely affect the interests of
holders of Rights (excluding the interests of any Acquiring Person), or to
shorten or lengthen any time period under the Rights Agreement; provided,
however, that no amendment to adjust the time period governing redemption shall
be made at such time as the Rights are not redeemable. Supplements or
amendments to the Rights Agreement may be made only if approved by (a) 75% of
the Company's Board of Directors or (b) a majority of the Company's Board of
Directors and a majority of the Continuing Directors.
Description of Preferred Stock
The Units of Preferred Stock that may be acquired upon exercise
of the Rights will be nonredeemable and subordinate to any other shares of
preferred stock that may be issued by the Company.
Each Unit of Preferred Stock will have a minimum preferential
quarterly dividend of $.01 per Unit or any higher per share dividend declared
on the Company Common Stock.
In the event of liquidation, the holder of a Unit of Preferred
Stock will receive a preferred liquidation payment equal to the greater of $.01
per Unit and the per share amount paid in respect of a share of Company Common
Stock.
Each Unit of Preferred Stock will have one vote, voting together
with the Company Common Stock. The holders of Units of Preferred Stock, voting
as a separate class, shall be entitled to elect two directors if dividends on
the Preferred Stock are in arrears for six fiscal quarters.
In the event of any merger, consolidation or other transaction
in which shares of Company Common Stock are exchanged, each Unit of Preferred
Stock will be entitled to receive the per share amount paid in respect of each
share of Company Common Stock.
The rights of holders of the Preferred Stock to dividends,
liquidation and voting, and in the event of mergers and consolidations, are
protected by customary antidilution provisions.
59
B-5
Because of the nature of the Preferred Stock's dividend,
liquidation and voting rights, the economic value of one Unit of Preferred
Stock that may be acquired upon the exercise of each Right is expected to
approximate the economic value of one share of Company Common Stock.
60
EXHIBIT C
CERTIFICATE OF DESIGNATION
OF THE VOTING POWERS, DESIGNATION,
PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL OR OTHER SPECIAL RIGHTS AND QUALIFICATIONS,
LIMITATIONS AND RESTRICTIONS OF THE
SERIES A PREFERRED STOCK
-----------------------------------
Pursuant to Section 151 of the
General Corporation Law of
the State of Delaware
-----------------------------------
I, ______________________________________________________ of
Global TeleSystems Group, Inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation"), DO HEREBY
CERTIFY:
that, pursuant to authority conferred upon the Board of
Directors of the Corporation by its Certificate of Incorporation (the
"Certificate") and delegated to a committee of the Board of Directors of the
Corporation at a duly called meeting held on December 5, 1997, at which a quorum
was present and acted throughout, and, pursuant to the provisions of Section 151
of the General Corporation Law of the State of Delaware, said committee, at a
duly called meeting held on January 30, 1998, at which a quorum was present and
acted throughout, adopted the following resolutions, which resolutions remain in
full force and effect on the date hereof creating a series of 200,000 shares of
Preferred Stock having a par value of $1.00 per share, designated as Series A
Preferred Stock (the "Series A Preferred Stock") out of the authorized preferred
stock, par value of $1.00 per share (the "Preferred Stock"):
RESOLVED, that pursuant to the authority vested in this
committee of the Board of Directors in accordance with the provisions of the
Certificate, and resolutions of the Board of Directors duly adopted on December
5, 1997, this committee of the Board of Directors does hereby create, authorize
and provide for the issuance of the Series A Preferred Stock having the voting
powers, designation, relative, participating, optional and other special rights,
preferences, and qualifications, limitations and restrictions thereof that are
set forth as follows:
Section 1. Designation and Amount. The shares of such series
shall be designated as "Series A Preferred Stock" and the number of shares
constituting such series shall be 200,000.
61
C-2
Section 2. Dividends and Distributions. (A) Subject to the
prior and superior rights of the holders of any shares of any other series of
Preferred Stock or any other shares of preferred stock of the Corporation
ranking prior and superior to the shares of Series A Preferred Stock with
respect to dividends, each holder of one one- thousandth (1/1,000) of a share
(a "Unit") 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, (i) quarterly dividends payable in cash on the last day of March,
June, September and December in each year (each such date being a "Quarterly
Dividend Payment Date"), commencing on the first Quarterly Dividend Payment
Date after the first issuance of such Unit of Series A Preferred Stock, in an
amount per Unit (rounded to the nearest cent) equal to the greater of (a) $.01
or (b) subject to the provision for adjustment hereinafter set forth, the
aggregate per share amount of all cash dividends declared on shares of the
Common Stock since the immediately preceding Quarterly Dividend Payment Date,
or, with respect to the first Quarterly Dividend Payment Date, since the first
issuance of a Unit of Series A Preferred Stock, and (ii) subject to the
provision for adjustment hereinafter set forth, quarterly distributions
(payable in kind) on each Quarterly Dividend Payment Date in an amount per Unit
equal to the aggregate per share amount of all non-cash dividends or other
distributions (other than a dividend payable in shares of Common Stock or a
subdivision of the outstanding shares of Common Stock, by reclassification or
otherwise) declared on shares of 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 a Unit of Series A Preferred
Stock. In the event that the Corporation shall at any time after February 2,
1998 (the "Rights Declaration Date") (i) declare any dividend on outstanding
shares of Common Stock payable in shares of Common Stock, (ii) subdivide
outstanding shares of Common Stock or (iii) combine outstanding shares of
Common Stock into a smaller number of shares, then in each such case the amount
to which the holder of a Unit of Series A Preferred Stock was entitled
immediately prior to such event pursuant to the preceding sentence shall be
adjusted by multiplying such amount by a fraction the numerator of which shall
be the number of shares of Common Stock that are outstanding immediately after
such event and the denominator of which shall be the number of shares of Common
Stock that were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or
distribution on Units of Series A Preferred Stock as provided in paragraph (A)
above immediately after it declares a dividend or distribution on the shares of
Common Stock (other than a dividend payable in shares of Common Stock);
provided, however, that, in the event no dividend or distribution shall have
been declared on the Common Stock during the period between any Quarterly
Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date,
a dividend of $0.01 per Unit on the Series A Preferred Stock shall nevertheless
be payable on such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and shall be
cumulative on each outstanding Unit of Series A Preferred Stock from the
Quarterly Dividend Payment Date next preceding the date of issuance of such
Unit of Series A Preferred Stock, unless the date
62
C-3
of issuance of such Unit is prior to the record date for the first Quarterly
Dividend Payment Date, in which case, dividends on such Unit shall begin to
accrue from the date of issuance of such Unit, or unless the date of issuance
is a Quarterly Dividend Payment Date or is a date after the record date for the
determination of holders of Units 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 Units of Series A
Preferred Stock in an amount less than the aggregate amount of all such
dividends at the time accrued and payable on such Units shall be allocated pro
rata on a unit-by-unit basis among all Units of Series A Preferred Stock at the
time outstanding. The Board of Directors may fix a record date for the
determination of holders of Units of Series A Preferred Stock entitled to
receive payment of a dividend or distribution declared thereon, which record
date shall be no more than 30 days prior to the date fixed for the payment
thereof.
Section 3. Voting Rights. The holders of Units of Series A
Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth,
each Unit of Series A Preferred Stock shall entitle the holder thereof to one
vote 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 outstanding shares of Common Stock payable in
shares of Common Stock, (ii) subdivide outstanding shares of Common Stock or
(iii) combine the outstanding shares of Common Stock into a smaller number of
shares, then in each such case the number of votes per Unit to which holders of
Units of Series A Preferred Stock were entitled immediately prior to such event
shall be adjusted by multiplying such number by a fraction the numerator of
which shall be the number of shares of Common Stock outstanding immediately
after such event and the denominator of which shall be the number of shares of
Common Stock that were outstanding immediately prior to such event.
(B) Except as otherwise provided herein or by law, the holders of
Units of Series 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.
(C) (i) If at any time dividends on any Units of Series A
Preferred Stock shall be in arrears in an amount equal to six quarterly
dividends thereon, then during the period (a "default period") from the
occurrence of such event until such time as all accrued and unpaid dividends
for all previous quarterly dividend periods and for the current quarterly
dividend period on all Units of Series A Preferred Stock then outstanding shall
have been declared and paid or set apart for payment, all holders of Units of
Series A Preferred Stock, voting separately as a class, shall have the right to
elect two Directors.
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(ii) During any default period, such voting rights of the holders of
Units of Series A Preferred Stock may be exercised initially at a special
meeting called pursuant to subparagraph (iii) of this Section 3(C) or at any
annual meeting of stockholders, and thereafter at annual meetings of
stockholders, provided that neither such voting rights nor any right of the
holders of Units of Series A Preferred Stock to increase, in certain cases, the
authorized number of Directors may be exercised at any meeting unless one-third
of the outstanding Units of Preferred Stock shall be present at such meeting in
person or by proxy. The absence of a quorum of the holders of Common Stock
shall not affect the exercise by the holders of Units of Series A Preferred
Stock of such rights. At any meeting at which the holders of Units of Series A
Preferred Stock shall exercise such voting rights initially during an existing
default period, they shall have the right, voting separately as a class, to
elect Directors to fill up to two vacancies in the Board of Directors, if any
such vacancies may then exist, or, if such right is exercised at an annual
meeting, to elect two Directors. If the number which may be so elected at any
special meeting does not amount to the required number, the holders of the
Series A Preferred Stock shall have the right to make such increase in the
number of Directors as shall be necessary to permit the election by them of the
required number. After the holders of Units of Series A Preferred Stock shall
have exercised their right to elect Directors during any default period, the
number of Directors shall not be increased or decreased except as approved by a
vote of the holders of Units of Series A Preferred Stock as herein provided or
pursuant to the rights of any equity securities ranking senior to the Series A
Preferred Stock.
(iii) Unless the holders of Series A Preferred Stock shall, during an
existing default period, have previously exercised their right to elect
Directors, the Board of Directors may order, or any stockholder or stockholders
owning in the aggregate not less than 25% of the total number of the Units of
Series A Preferred Stock outstanding may request, the calling of a special
meeting of the holders of Units of Series A Preferred Stock, which meeting
shall thereupon be called by the Secretary of the Corporation. Notice of such
meeting and of any annual meeting at which holders of Units of Series A
Preferred Stock are entitled to vote pursuant to this paragraph (C)(iii) shall
be given to each holder of record of Units of Series A Preferred Stock by
mailing a copy of such notice to him at his last address as the same appears on
the books of the Corporation. Such meeting shall be called for a time not
earlier than 20 days and not later then 60 days after such order or request or
in default of the calling of such meeting within 60 days after such order or
request, such meeting may be called on similar notice by any stockholder or
stockholders owning in the aggregate not less than 25% of the total number of
outstanding Units of Series A Preferred Stock. Notwithstanding the provisions
of this paragraph (C)(iii), no such special meeting shall be called during the
60 days immediately preceding the date fixed for the next annual meeting of the
stockholders.
(iv) During any default period, the holders of shares of Common Stock
and Units of Series A Preferred Stock, and other classes or series of stock of
the Corporation, if applicable, shall continue to be entitled to elect all the
Directors until holders of the Units of Series A Preferred Stock shall have
exercised their right to elect two Directors voting as
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a separate class, after the exercise of which right (x) the Directors so
elected by the holders of Units of Series A Preferred Stock shall continue in
office until their successors shall have been elected by such holders or until
the expiration of the default period, and (y) any vacancy in the Board of
Directors may (except as provided in paragraph (C)(ii) of this Section 3) be
filled by vote of a majority of the remaining Directors theretofore elected by
the holders of the class of capital stock which elected the Director whose
office shall have become vacant. References in this paragraph (C) to Directors
elected by the holders of a particular class of capital stock shall include
Directors elected by such Directors to fill vacancies as provided in clause (y)
of the foregoing sentence.
(v) Immediately upon the expiration of a default period, (x) the
right of the holders of Units of Series A Preferred Stock as a separate class
to elect Directors shall cease, (y) the term of any Directors elected by the
holders of Units of Series A Preferred Stock as a separate class shall
terminate, and (z) the number of Directors shall be such number as may be
provided for in the Certificate or by-laws irrespective of any increase made
pursuant to the provisions of paragraph (C)(ii) of this Section 3 (such number
being subject, however, to change thereafter in any manner provided by law or
in the Certificate or by-laws). Any vacancies in the Board of Directors
effected by the provisions of clauses (y) and (z) in the preceding sentence may
be filled by a majority of the remaining Directors.
(vi) The provisions of this paragraph (C) shall govern the election
of Directors by holders of Units of Preferred Stock during any default period
notwithstanding any provisions of the Certificate to the contrary.
(D) Except as set forth herein, holders of Units of
Series A Preferred Stock shall have no special voting rights and their consents
shall not be required (except to the extent they are entitled to vote with
holders of shares of Common Stock as set forth herein) for taking any corporate
action.
Section 4. Certain Restrictions. (A) Whenever quarterly
dividends or other dividends or distributions payable on Units of 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
outstanding Units of Series A Preferred Stock shall have been paid in full, the
Corporation shall not
(i) declare or pay dividends on, make any other distributions
on, or redeem or purchase or otherwise acquire for consideration any
shares of junior stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of parity stock, except dividends paid
ratably on Units of Series A Preferred Stock and shares of all such
parity stock on which dividends are payable or in arrears in
proportion to the total amounts to which the holders of such Units and
all such shares are then entitled;
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(iii) redeem or purchase or otherwise acquire for
consideration shares of any parity stock, provided, however, that the
Corporation may at any time redeem, purchase or otherwise acquire
shares of any such parity stock in exchange for shares of any junior
stock;
(iv) purchase or otherwise acquire for consideration any Units
of 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 Units.
(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 Units of Series A
Preferred Stock purchased or otherwise acquired by the Corporation in any
manner whatsoever shall be retired and cancelled promptly after the acquisition
thereof. All such Units shall, upon their cancellation, become authorized but
unissued Units of Preferred Stock and may be reissued as part of a new series
of Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein.
Section 6. Liquidation, Dissolution or Winding Up. (A) Upon
any voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, no distribution shall be made (i) to the holders of shares of
junior stock unless the holders of Units of Series A Preferred Stock shall have
received, subject to adjustment as hereinafter provided in paragraph (B), the
greater of either (a) $0.01 per Unit plus an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not earned or declared, to the
date of such payment, or (b) the amount equal to the aggregate per share amount
to be distributed to holders of shares of Common Stock, or (ii) to the holders
of shares of parity stock, unless simultaneously therewith distributions are
made ratably on Units of Series A Preferred Stock and all other shares of such
parity stock in proportion to the total amounts to which the holders of Units
of Series A Preferred Stock are entitled under clause (i)(a) of this sentence
and to which the holders of shares of such parity stock are entitled, in each
case upon such liquidation, dissolution or winding up.
(B) In the event the Corporation shall at any time after
the Rights Declaration Date (i) declare any dividend on outstanding shares of
Common Stock payable in shares of Common Stock, (ii) subdivide outstanding
shares of Common Stock, or (iii) combine outstanding shares of Common Stock
into a smaller number of shares, then in each such case the aggregate amount to
which holders of Units of Series A Preferred Stock were entitled immediately
prior to such event pursuant to clause (i)(b) of paragraph (A) of this Section
6 shall be adjusted by multiplying such amount by a fraction the numerator of
which shall be the number of shares of Common Stock that are outstanding
immediately after such
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event and the denominator of which shall be the number of shares of Common
Stock that were outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the
Corporation shall enter into any consolidation, merger, combination or other
transaction in which the shares of common stock are exchanged for or converted
into other stock or securities, cash and/or any other property, then in any
such case Units of Series A Preferred Stock shall at the same time be similarly
exchanged for or converted into an amount per Unit (subject to the provision
for adjustment hereinafter set forth) equal to the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is converted or
exchanged. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on outstanding shares of Common Stock
payable in shares of Common Stock, (ii) subdivide outstanding shares of Common
Stock, or (iii) combine outstanding Common Stock into a smaller number of
shares, then in each such case the amount set forth in the immediately
preceding sentence with respect to the exchange or conversion of Units of
Series A Preferred Stock shall be adjusted by multiplying such amount by a
fraction the numerator of which shall be the number of shares of Common Stock
that are outstanding immediately after such event and the denominator of which
shall be the number of shares of Common Stock that were outstanding immediately
prior to such event.
Section 8. Redemption. The Units of Series A Preferred Stock
shall not be redeemable.
Section 9. Ranking. The Units of Series A Preferred Stock
shall rank junior to all other series of the Preferred Stock and to any other
class of preferred stock that hereafter may be issued by the Corporation as to
the payment of dividends and the distribution of assets, unless the terms of
any such series or class shall provide otherwise.
Section 10. Amendment. The Certificate, including, without
limitation, this resolution, shall not hereafter be amended, either directly or
indirectly, or through merger or consolidation with another corporations in any
manner that would 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 Units
of Series A Preferred Stock, voting separately as a class.
Section 11. Fractional Shares. The Series A Preferred Stock
may be issued in Units or other fractions of a share, which Units or fractions
shall entitle the holder, in proportion to such holder's fractional shares, to
exercise voting rights, receive dividends, participate in distributions and to
have the benefit of all other rights of holders of Series A Preferred Stock.
Section 12. Certain Definitions. As used herein with respect
to the Series A Preferred Stock, the following terms shall have the following
meanings:
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(A) The term "Common Stock" shall mean the class of stock
designated as the common stock, par value $1.00 per share, of the Corporation
at the date hereof or any other class of stock resulting from successive
changes or reclassification of such common stock.
(B) The term "junior stock" (i) as used in Section 4,
shall mean the Common Stock and any other class or series of capital stock of
the Corporation hereafter authorized or issued over which the Series A
Preferred Stock has preference or priority as to the payment of dividends and
(ii) as used in Section 6, shall mean the Common Stock and any other class or
series of capital stock of the Corporation over which the Series A Preferred
Stock has preference or priority in the distribution of assets on any
liquidation, dissolution or winding up of the Corporation.
(C) The term "parity stock" (i) as used in Section 4,
shall mean any class or series of stock of the Corporation hereafter authorized
or issued ranking pari passu with the Series A Preferred Stock as to the
payment of dividends and (ii) as used in Section 6, shall mean any class or
series of capital stock ranking pari passu with the Series A Preferred Stock in
the distribution of assets on any liquidation, dissolution or winding up of the
Corporation.
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IN WITNESS WHEREOF, Global TeleSystems Group, Inc. has caused
this Certificate to be signed by its and
attested by its Secretary this 2nd day of February, 1998.
GLOBAL TELESYSTEMS GROUP, INC.
By
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Attest:
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