EXHIBIT 4.1
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CHS ELECTRONICS, INC.
AND
AMERICAN STOCK TRANSFER & TRUST COMPANY
RIGHTS AGENT
SECOND AMENDED AND RESTATED
1998 PREFERRED STOCK PURCHASE RIGHTS AGREEMENT
DATED AS OF MAY 26, 1999
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TABLE OF CONTENTS
PAGE
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Section 1. Certain Definitions..............................................2
Section 2. Appointment of Rights Agent......................................5
Section 3. Issuance of Rights Certificates..................................5
Section 4. Form of Rights Certificates......................................7
Section 5. Countersignature and Registration................................8
Section 6. Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights
Certificates...................................................8
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights....9
Section 8. Cancellation and Destruction of Rights Certificates.............11
Section 9. Reservation and Availability of Preferred Stock; Registration...11
Section 10. Preferred Stock Record Date.....................................12
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or
Number of Rights; Exchange of Rights for Shares of Capital
Stock.........................................................12
Section 12. Certificate of Adjusted Purchase Price or Number of Shares......20
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power.................................................20
Section 14. Fractional Rights and Fractional Shares.........................23
Section 15. Rights of Action................................................23
Section 16. Agreement of Rights Holders.....................................24
Section 17. Rights Certificate Holder Not Deemed a Shareholder..............24
Section 18. Concerning the Rights Agent.....................................25
Section 19. Merger or Consolidation or Change of Name of Rights Agent.......25
Section 20. Duties of Rights Agent..........................................26
Section 21. Change of Rights Agent..........................................27
Section 22. Issuance of New Rights Certificates.............................28
Section 23. Redemption and Termination......................................28
Section 24. Notice of Certain Events........................................30
Section 25. Notices.........................................................30
Section 26. Supplements and Amendments......................................31
Section 27. Successors......................................................31
Section 28. Determinations and Actions by the Board of Directors, etc.......32
Section 29. Benefits of this Agreement......................................32
Section 30. Severability....................................................32
Section 31. Governing Law...................................................32
Section 32. Consent to Jurisdiction; Service of Process.....................33
Section 33. Counterparts....................................................33
Section 34. Descriptive Headings............................................33
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SECOND AMENDED AND RESTATED
1998 PREFERRED STOCK PURCHASE RIGHTS AGREEMENT
1998 PREFERRED STOCK PURCHASE RIGHTS AGREEMENT, dated as of January 16,
1998 and amended and restated as of March 18, 1999 AND May 26, 1999 (the
"Agreement"), between CHS ELECTRONICS, INC., a Florida corporation (the
"Company"), and AMERICAN STOCK TRANSFER & TRUST COMPANY (the "Rights Agent").
W I T N E S S E T H:
WHEREAS, on January 16, 1998 (the "Rights Dividend Declaration Date"), the
Board of Directors of the Company authorized and declared a dividend
distribution of one Right for each share of common stock, $.001 par value, of
the Company (the "Common Stock") outstanding at the close of business on January
30, 1998 (the "Record Date") and has authorized the issuance of one Right (as
such number may hereinafter be adjusted pursuant to the provisions of Section
11(i) hereof) for each share of Common Stock issued between the Record Date
(whether originally issued or delivered from the Company's treasury) and the
Distribution Date (as defined below). Each Right shall initially represent the
right to purchase one one-thousandth of a share of Series A Junior Participating
Preferred Stock, $.001 par value (the "Series A Preferred Stock"), of the
Company, having the rights and preferences set forth in the Form of Certificate
of Designation attached hereto as Exhibit A, upon the terms and subject to the
conditions hereinafter set forth (the "Rights");
WHEREAS, on January 16, 1998, the Company entered into the 1998 Preferred
Stock Purchase Rights Agreement (the "Rights Agreement");
WHEREAS, the Board of Directors of the Company, as of March 18, 1999,
determined that certain provisions of the Rights Agreement should be amended,
that the Company's transfer agent should replace the existing Rights Agent and
that the Rights Agreement should be restated;
WHEREAS, the Company entered into the Amended and Restated Rights
Agreement dated as of March 18, 1999 to reflect the foregoing (the "Amended and
Restated Rights Agreement");
WHEREAS, the Board of Directors of the Company has determined that certain
provisions of the Amended and Restated Rights Agreement should be amended as a
result of transactions entered into by the Company and Computer Associates
International, Inc., as evidenced by the Debenture Purchase Agreement dated May
26, 1999; and
WHEREAS, pursuant to the determination of the Board of Directors of the
Company, the Company and the Rights Agent have agreed to further amend and
restate the Rights Agreement as set forth herein;
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, together
with all Affiliates and Associates of such Person, shall be the Beneficial Owner
of 15% or more of the shares of Common Stock then outstanding. Notwithstanding
the foregoing, the term "Acquiring Person" shall not include (i) the Company,
any Subsidiary of the Company, any employee benefit plan of the Company or of
any Subsidiary of the Company, or any Person or entity organized, appointed or
established by the Company for or pursuant to the terms of any such plan, or
(ii) any Person who or which, together with all Affiliates and Associates of
such Person, would be an Acquiring Person solely by reason of a reduction in the
number of issued and outstanding shares of Common Stock of the Company pursuant
to a transaction or a series of related transactions approved by the Board of
Directors (provided that such transaction or series of related transactions are
approved by the affirmative vote of at least 80% of the members of the Board of
Directors of the Company); provided, further, however, that in the event that
such Person described in the foregoing clause (ii) does not become an Acquiring
Person by reason of a reduction in the number of issued and outstanding shares
of Common Stock of the Company, such Person shall nonetheless become an
Acquiring Person in the event such Person thereafter acquires Beneficial
Ownership of an additional 1% of the Common Stock of the Company, unless the
acquisition of such additional Common Stock would not result in such Person
becoming an Acquiring Person by reason of a reduction in the number of issued
and outstanding shares of Common Stock of the Company, or (iii) Computer
Associates International, Inc., a Delaware corporation ("Computer Associates"),
so long as neither Computer Associates, any of its Affiliates and Associates nor
any Person acting in concert with Computer Associates or any of its Affiliates
and Associates is the Beneficial Owner of more than 19.9% of the Common Stock
(for the purposes of this definition, neither Computer Associates, its
Affiliates and Associates, nor any other person with which any of them is acting
in concert shall be deemed the Beneficial Owner of the Common Stock issuable
upon conversion of the Floating Rate Convertible Debentures due 2003 or the
Warrants issued pursuant to the Debenture Purchase Agreement dated May 26, 1999
between the Company and Computer Associates until such time as the Floating Rate
Convertible Debentures are, in fact, so converted or the Warrants are, in fact,
so exercised).
(b) (i) "Act" shall mean the Securities Act of 1933, as amended.
(ii) "Adverse Person" shall mean any Person who or which,
together with all Affiliates and Associates of such Person, shall become
the direct or indirect Beneficial Owner of 10% or more of the shares of
Common Stock and is deemed by a majority of the Board of Directors of the
Company to be a Person whose ownership interest would cause a material
adverse impact on the business or prospects of the Company or its
shareholders; PROVIDED, HOWEVER, that Computer Associates shall not be
deemed to be an Adverse Person so long as neither Computer Associates, any
of its Affiliates and Associates nor any Person acting in concert with
Computer Associates or any of its Affiliates and Associates is the
Beneficial Owner of more than 19.9% of the Common Stock (for the purposes
of this definition, neither Computer Associates, its Affiliates and
Associates, nor any other person with which any of them is acting in
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concert shall be deemed the Beneficial Owner of the Common Stock issuable
upon conversion of the Floating Rate Convertible Debentures due 2003 or
the Warrants issued pursuant to the Debenture Purchase Agreement dated May
26, 1999 between the Company and Computer Associates until such time as
the Floating Rate Convertible Debentures are, in fact, so converted or the
Warrants are, in fact, so exercised).
(c) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended (the "Exchange Act").
(d) A Person shall be deemed the "Beneficial Owner" of, and shall
be deemed to "beneficially own," any securities:
(i) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to acquire (whether such
right is exercisable immediately or only after the passage of time)
pursuant to any agreement, arrangement or understanding (whether or not in
writing) or upon the exercise of conversion rights, exchange rights,
rights, warrants or options, or otherwise; PROVIDED, HOWEVER, that a
Person shall not be deemed the "Beneficial Owner" of, or to "beneficially
own," (A) securities tendered pursuant to a tender or exchange offer made
by such Person or any of such Person's Affiliates or Associates until such
tendered securities are accepted for purchase or exchange, or (B)
securities issuable upon exercise of Rights at any time prior to the
occurrence of a Triggering Event, or (C) securities issuable upon exercise
of Rights from and after the occurrence of a Triggering Event which Rights
were acquired by such Person or any of such Person's Affiliates or
Associates prior to the Distribution Date or pursuant to Section 3(a) or
Section 22 hereof (the "Original Rights") or pursuant to Section 11(i)
hereof in connection with an adjustment made with respect to any Original
Rights;
(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or dispose of or
has "beneficial ownership" of (as determined pursuant to Rule 13d-3 of the
General Rules and Regulations under the Exchange Act), including pursuant
to any agreement, arrangement or understanding, whether or not in writing;
PROVIDED, HOWEVER, that a Person shall not be deemed the "Beneficial
Owner" of, or to "beneficially own," any security under this subparagraph
(ii) as a result of an agreement, arrangement or understanding to vote
such security if such agreement, arrangement or understanding: (A) arises
solely from a revocable proxy given in response to a public proxy or
consent solicitation made pursuant to, and in accordance with, the
applicable provisions of the General Rules and Regulations under the
Exchange Act, and (B) is not also then reportable by such Person on
Schedule 13D under the Exchange Act (or any comparable or successor
report); or
(iii) which are beneficially owned, directly or indirectly, by
any other Person (or any Affiliate or Associate thereof) with which such
Person (or any of such Person's Affiliates or Associates) has any
agreement, arrangement or understanding (whether or not in writing), for
the purpose of acquiring, holding, voting (except pursuant to a revocable
proxy as described in proviso (A) to subparagraph (ii) of this paragraph
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(d)) or disposing of any voting securities of the Company; PROVIDED,
HOWEVER, that nothing in this paragraph (d) shall cause a person engaged
in business as an underwriter of securities to be the "Beneficial Owner"
of, or to "beneficially own," any securities acquired through such
person's participation in good faith in a firm commitment underwriting
until the expiration of forty days after the date of such acquisition.
Notwithstanding anything in this Section 1(d) to the contrary, a Person
engaged in the business of underwriting securities shall not be deemed a
"Beneficial Owner" of, or to "beneficially own", any securities acquired in good
faith in a firm commitment underwriting until the expiration of 40 days after
the date of such acquisition.
(e) "Business Day" shall mean any day other than a Saturday, Sunday
or a day on which banking institutions in the State of New York are authorized
or obligated by law or executive order to close.
(f) "Close of business" on any given date shall mean 5:00 P.M., New
York time, on such date; PROVIDED, HOWEVER, that if such date if not a Business
Day it shall mean 5:00 P.M., New York time, on the next succeeding day which is
a Business Day.
(g) "Common Stock" shall mean the common stock, $.001 par value, of
the Company, except that "Common Stock" when used with reference to any Person
other than the Company shall mean the capital stock of such Person with the
greatest voting power, or the equity securities or other equity interest having
power to control or direct the management, of such Person.
(h) "Current market price" shall have the meaning set forth in
Section 11(d) hereof.
(i) "Distribution Date" shall have the meaning set forth in Section
3(a) hereof.
(j) "Exchange Act" shall have the meaning set forth in Section 1(c)
hereof.
(k) "Expiration Date" shall have the meaning set forth in Section
7(a) hereof.
(l) "Final Expiration Date" shall have the meaning set forth in
Section 7(a) hereof.
(m) "Person" shall mean any individual, firm, corporation,
partnership or other entity.
(n) "Principal Party" shall have the meaning set forth in Section
13(b) hereof.
(o) "Purchase Price" shall have the meaning set forth in Section
4(a) hereof.
(p) "Redemption Price" shall have the meaning set forth in Section
23(a) hereof.
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(q) "Rights" shall have the meaning set forth in the WHEREAS clause
at the beginning of this Agreement.
(r) "Rights Certificates" shall have the meaning set forth in
Section 3(a) hereof.
(s) "Section 11(a)(ii) Event" shall mean any event described in
Section 11(a)(ii) hereof.
(t) "Section 13 Event" shall mean any event described in clauses
(x), (y) or (z) of Section 13(a) hereof.
(u) "Series A Preferred Stock" shall have the meaning set forth in
the WHEREAS clause at the beginning of this Agreement.
(v) "Stock Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include, a report
filed pursuant to the Exchange Act) by the Company, an Acquiring Person or an
Adverse Party that an Acquiring Person and/or an Adverse Party has become such.
(w) "Subsidiary" shall mean, with reference to any Person, any
corporation of which an amount of voting securities sufficient to elect at least
a majority of the directors of such corporation is beneficially owned, directly
or indirectly, by such Person, or otherwise controlled by such Person.
(x) "Trading Day" shall have the meaning set forth in Section 11(d)
hereof.
(y) "Triggering Event" shall mean any Section 11(a)(ii) Event or any
Section 13 Event.
SECTION 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints the
Rights Agent to act as agent for the Company in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such Co-Rights Agents as it may deem
necessary or desirable.
SECTION 3. ISSUANCE OF RIGHTS CERTIFICATES.
(a) Until the earlier of (i) the close of business on the tenth day
after the Stock Acquisition Date (or, if the tenth day after the Stock
Acquisition Date occurs before the Record Date, the close of business on the
Record Date), or (ii) the close of business on the tenth business day (or such
later date as may be determined by action of the Board of Directors (but only if
such action is approved by the affirmative vote of at least 80% of the members
of the Board of Directors of the Company prior to such time as any Person
becomes an Acquiring Person or an Adverse Party) after the date that a tender or
exchange offer by any Person (other than the Company, any Subsidiary of the
Company, any employee benefit plan of the Company or of any Subsidiary of the
Company, or any Person or entity organized, appointed or established by the
Company for or pursuant to the terms of any such plan) is first published or
sent or given within the meaning of Rule 14d-2(a) of the General Rules and
Regulations under the Exchange Act, if
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upon consummation thereof, such Person would be an Acquiring Person or an
Adverse Party (the earlier of (i) or (ii) being herein referred to as the
"Distribution Date"), (x) the Rights will be evidenced (subject to the
provisions of paragraph (b) of this Section 3) by the certificates for the
Common Stock registered in the names of the holders of the Common Stock (which
certificates for Common Stock shall be deemed also to be certificates for
Rights) and not by separate certificates, and (y) the Rights will be
transferable only in connection with the transfer of the underlying shares of
Common Stock (including a transfer to the Company). As soon as practicable after
the Distribution Date, the Rights Agent will send by first-class, insured,
postage prepaid mail, to each record holder of the Common Stock as of the close
of business on the Distribution Date, at the address of such holder shown on the
records of the Company, one or more rights certificates, in substantially the
form attached hereto as Exhibit B (the "Rights Certificates"), evidencing one
Right for each share of Common Stock so held, subject to adjustment as provided
herein. In the event that an adjustment in the number of Rights per share of
Common Stock has been made pursuant to Section 11(i) hereof, at the time of
distribution of the Rights Certificates, the Company shall make the necessary
and appropriate rounding adjustments (in accordance with Section 14(a) hereof)
so that Rights Certificates representing only whole numbers of Rights are
distributed and cash is paid in lieu of any fractional Rights. As of and after
the Distribution Date, the Rights will be evidenced solely by such Rights
Certificates.
(b) After the Record Date, the Company sent a copy of a Summary of
Rights, in substantially the form attached to the Rights Agreement dated as of
January 16, 1999 as Exhibit C (the "Summary of Rights"), by first-class, postage
prepaid mail, to each record holder of the 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. Attached hereto is an Amended and Restated Summary of Rights
which the Company may, but shall not be required to, send to holders of its
Common Stock. With respect to certificates for the Common Stock outstanding as
of the Record Date, until the Distribution Date, the Rights will be evidenced by
such certificates for the Common Stock and the registered holders of the Common
Stock shall also be the registered holders of the associated Rights. Until the
earlier of the Distribution Date or the Expiration Date, the transfer of any
certificates representing shares of Common Stock in respect of which Rights have
been issued shall also constitute the transfer of the Rights associated with
such shares of Common Stock.
(c) Rights shall be issued in respect of all shares of Common Stock
which are issued after the Record Date but prior to the earlier of the
Distribution Date or the Expiration Date. Certificates representing such shares
of Common Stock issued after the date hereof and prior to the earlier of the
Distribution Date or the Expiration Date shall also be deemed to be certificates
for Rights, and shall bear the following legend:
"This certificate also evidences and entitles the holder hereof to certain
Rights as set forth in the Rights Agreement between CHS Electronics, Inc.
(the "Company") and Interwest Transfer Company, as Rights Agent (the
"Rights Agent"), dated as of January 16, 1998, as amended and restated as
of March 18, 1999 and as further amended and restated as of May 26, 1999
(the "Rights Agreement"), the terms of which are hereby incorporated
herein by reference and a copy of which is on file
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at the principal offices of the Company. Under certain circumstances, as
set forth in the Rights Agreement, such Rights will be evidenced by
separate certificates and will no longer be evidenced by this certificate.
The Rights Agent 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 the 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, AN ADVERSE
PARTY 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."
SECTION 4. FORM OF RIGHTS CERTIFICATES.
(a) The Rights Certificates (and the forms of election to purchase
and of assignment to be printed on the reverse thereof) shall each be in
substantially the form attached hereto as Exhibit B and may have such marks of
identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange on which the Rights may from time to
time be listed, or to conform to usage. Subject to the provisions of Section 11
and Section 22 hereof, the Rights Certificates, whenever distributed, shall be
dated as of the Record Date and on their face shall entitle the holders thereof
to purchase such number of one one-thousandths of a share of Series A Preferred
Stock as shall be set forth therein at the price per one one-thousandths of a
share of Series A Preferred Stock set forth therein (such exercise price per
share being hereinafter referred to as the "Purchase Price"), but the amount and
type of securities purchasable upon the exercise of each Right and the Purchase
Price thereof shall be subject to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(a) or
Section 22 hereof that represents Rights beneficially owned by: (i) an Acquiring
Person, an Adverse Person or any Associate or Affiliate thereof, (ii) a
transferee of an Acquiring Person or an Adverse Person (or of any such Associate
or Affiliate) who becomes a transferee after the Acquiring Person or Adverse
Person becomes such or (iii) a transferee of an Acquiring Person or an Adverse
Person (or of any such Associate or Affiliate) who becomes a transferee prior to
or concurrently with the Acquiring Person or the Adverse Person becoming such
and receives such Rights pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person or the Adverse Person to holders of
equity interests in such Acquiring Person or Adverse Person or to any Person
with whom such Acquiring Person or Adverse Person has any continuing agreement,
arrangement or understanding regarding the transferred Rights or (B) a transfer
which the Board of Directors of the Company has determined is part of a plan,
arrangement or understanding which has as a primary purpose or effect avoidance
of Section 7(e) hereof, and any Rights Certificate issued pursuant to Section 6
or Section 11 hereof upon transfer, exchange, replacement or adjustment of any
other Rights Certificate referred to in this sentence, shall contain (to the
extent feasible) the following legend:
"The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became an Acquiring Person, an
Adverse Person or an
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Affiliate or Associate thereof (as such terms are defined in the Rights
Agreement between CHS Electronics, Inc. and American Stock Transfer &
Trust Company, as Rights Agent (the "Rights Agreement"). Accordingly, this
Rights Certificate and the Rights represented hereby may become null and
void in the circumstances specified in Section 7(e) of the Rights
Agreement."
SECTION 5. COUNTERSIGNATURE AND REGISTRATION.
(a) The Rights Certificates shall be executed on behalf of the
Company by its Chairman of the Board, its President or any Vice President,
either manually or by facsimile signature, and shall be attested by the
Secretary or an Assistant Secretary of the Company, either manually or by
facsimile signature. The Rights Certificates shall be manually or by facsimile
signature countersigned by the Rights Agent and shall not be valid for any
purpose unless so countersigned. In case any officer of the Company who shall
have signed any of the Rights Certificates shall cease to be such officer of the
Company before countersignature by the Rights Agent and issuance and delivery by
the Company, such Rights Certificates, nevertheless, may be countersigned by the
Rights Agent and issued and delivered by the Company with the same force and
effect as though the person who signed such Rights Certificates had not ceased
to be such officer of the Company; and any Rights Certificates may be signed on
behalf of the Company by any person who, at the actual date of the execution of
such Rights Certificate, shall be a proper officer of the Company authorized to
sign such Rights Certificate, although at the date of the execution of this
Rights Agreement any such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its principal office or offices designated as the
appropriate place for surrender of Rights Certificates upon exercise or
transfer, books for registration and transfer of the Rights Certificates issued
hereunder. Such books shall show the name and addresses of the respective
holders of the Rights Certificates, the number of Rights evidenced on its face
by each of the Rights Certificates and the date of each of the Rights
Certificates.
SECTION 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHTS
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHTS CERTIFICATES.
(a) Subject to the provisions of Section 4(b), Section 7(e) and
Section 14 hereof, 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 thereof to purchase a like number of one one-thousandths of a
share of Series A Preferred Stock as the Rights Certificate or Certificates
surrendered then entitled such holder (or former holder in the case of a
transfer) to purchase. Any registered holder desiring to transfer, split up,
combine or exchange any Rights Certificate or Certificates shall make such
request in writing delivered to the Rights Agent and shall surrender the Rights
Certificate or Certificates to be transferred, split up, combined or exchanged
at the principal office or offices of the Rights Agent designated for such
purpose. Neither the Rights Agent nor the Company shall be obligated to take any
action whatsoever with respect to the transfer of any such surrendered Rights
Certificate until the registered holder shall have completed and signed the
certificate contained in the form of assignment on the reverse side of such
Rights Certificate and shall have provided such
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additional evidence of the identity of the Beneficial Owner (or former
Beneficial Owner) or Affiliates or Associates thereof as the Company shall
reasonably request. Thereupon the Rights Agent shall, subject to Section 4(b),
Section 7(e) and Section 14 hereof, 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) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Rights Certificate, and, in case of loss, theft or destruction, of indemnity
or security reasonably satisfactory to them, and reimbursement to the Company
and the Rights Agent of all reasonable expenses incidental thereto, and upon
surrender to the Rights Agent and cancellation of the Rights Certificate if
mutilated, the Company will execute and deliver a new Rights Certificate of like
tenor to the Rights Agent for countersignature and delivery to the registered
owner in lieu of the Rights Certificate so lost, stolen, destroyed or mutilated.
SECTION 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS.
(a) Subject to Section 7(e) hereof, the registered holder of any
Rights Certificate may exercise the Rights evidenced thereby (except as
otherwise provided herein including, without limitation, the restrictions on
exercisability set forth in Section 9(c) and Section 23(a) hereof) in whole or
in part at any time after the Distribution Date upon surrender of the Rights
Certificate, with the form of election to purchase and the certificate on the
reverse side thereof duly executed, to the Rights Agent at the principal office
or offices of the Rights Agent designated for such purpose, together with
payment of the Purchase Price for each one one-thousandths of a share of Series
A Preferred Stock as to which such surrendered Rights are then exercisable, at
or prior to the earlier of (i) the close of business on January 15, 2008 earlier
of (i) and (ii) being herein referred to as the "Expiration Date").
(b) The Purchase Price for each one one-thousandth of a share of
Series A Preferred Stock pursuant to the exercise of a Right shall initially be
$100, and shall be subject to adjustment from time to time as provided in
Sections 11 and 13(a) hereof and shall be payable in accordance with paragraph
(c) below.
(c) Upon receipt of a Rights Certificate representing 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 per one one-thousandth of a share of Series A Preferred Stock to be
purchased, as set forth below and an amount equal to any applicable transfer
tax, the Rights Agent shall, subject to Section 20(j) hereof, thereupon promptly
(i) (A) requisition from any transfer agent of the shares of Series A Preferred
Stock (or make available, if the Rights Agent is the transfer agent for such
shares) certificates for the total number of shares of Series A Preferred Stock
to be purchased and the Company hereby irrevocably authorizes its transfer agent
to comply with all such requests or (B) if the Company shall have elected to
deposit the total number of shares of Series A Preferred Stock issuable upon
exercise of the Rights hereunder with a depositary agent, requisition from the
depositary agent depositary receipts representing such number of shares of
Series A Preferred Stock as are to be
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purchased (in which case certificates for the shares of Series A Preferred Stock
represented by such receipts shall be deposited by the transfer agent with the
depositary agent) and the Company will direct the depositary agent to comply
with such request, (ii) requisition from the Company the amount of cash, if any,
to be paid in lieu of fractional shares in accordance with Section 14 hereof,
(iii) after receipt of such certificates or depositary receipts, cause the same
to be delivered to or upon the order of the registered holder of such Rights
Certificate, registered in such name or names as may be designated by such
holder and (iv) after receipt thereof, deliver such cash, if any, to or upon the
order of the registered holder of such Rights Certificate. The payment of the
Purchase Price shall be made in cash or by certified or cashier's check payable
to the Company.
(d) In case the registered holder of any Rights Certificate shall
exercise less than all the Rights evidenced thereby, a new Rights Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent and delivered to, or upon the order of, the registered
holder of such Rights Certificate, registered in such name or names as may be
designated by such holder, subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary, from
and after the first occurrence of a Section 11(a)(ii) Event, any Rights
beneficially owned by (i) an Acquiring Person, an Adverse Person or an Associate
or Affiliate thereof, (ii) a transferee of an Acquiring Person or an Adverse
Person (or of any such Associate or Affiliate) who becomes a transferee after
the Acquiring Person or Adverse Person becomes such or (iii) a transferee of an
Acquiring Person or an Adverse Person (or of any such Associate or Affiliate)
who becomes a transferee prior to or concurrently with the Acquiring Person or
Adverse Person becoming such and receives such Rights pursuant to either (A) a
transfer (whether or not for consideration) from the Acquiring Person or the
Adverse Person to holders of equity interests in such Acquiring Person or
Adverse Person or to any Person with whom the Acquiring Person or the Adverse
Person has any continuing agreement, arrangement or understanding regarding the
transferred Rights or (B) a transfer which the Board of Directors of the Company
has determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect the avoidance of this Section 7(e), shall become null
and void without any further action and no holder of such Rights shall have any
rights whatsoever with respect to such Rights, whether under any provision of
this Agreement or otherwise. The Company shall use all reasonable efforts to
ensure that the provisions of this Section 7(e) and Section 4(b) hereof are
complied with, but shall have no liability to any holder of Rights Certificates
or other Person as a result of its failure to make any determinations with
respect to an Acquiring Person, an Adverse Person or their respective
Affiliates, Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a registered holder upon the occurrence of any purported
exercise as set forth in this Section 7 unless such registered holder shall have
(i) completed and signed the certificate contained in the form of election to
purchase set forth on the reverse side of the Rights Certificate surrendered for
such exercise and (ii) provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request.
10
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
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Rights Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
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 PREFERRED STOCK; REGISTRATION.
(a) The Company covenants and agrees that, from and after the
Distribution Date, it will cause to be reserved and kept available out of its
authorized and unissued shares of Series A Preferred Stock not reserved for
another purpose the number of shares of Series A Preferred Stock that, as
provided in this Agreement, will be sufficient to permit the exercise in full of
all outstanding Rights in accordance with Section 7 hereof.
(b) So long as the shares of Series A Preferred Stock issuable and
deliverable upon the exercise of the Rights may be listed on any national
securities exchange, the Company shall use its best efforts to cause, from and
after such time as the Rights become exercisable, all shares reserved for such
issuance to be listed on such exchange upon official notice of issuance upon
such exercise.
(c) The Company shall use its best efforts to (i) file, as soon as
is required by law following the Distribution Date, a registration statement
under the Act, with respect to the securities purchasable upon exercise of the
Rights on an appropriate form, (ii) cause such registration statement to become
effective as soon as practicable after such filing, and (iii) cause such
registration statement to remain effective (with a prospectus at all times
meeting the requirements of the Act) until the earlier of (A) the date as of
which the Rights are no longer exercisable for such securities, and (B) the date
of the expiration of the Rights. The Company will also take such action as may
be appropriate under, or to ensure compliance with, the securities or "blue sky"
laws of the various states in connection with the exercisability of the Rights.
The Company may temporarily suspend, for a period of time not to exceed ninety
(90) days after the date set forth in clause (i) of the first sentence of this
Section 9(c), the exercisability of the Rights in order to prepare and file such
registration statement and permit it to become effective. Upon any such
suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in effect.
Notwithstanding any provision of this Agreement to the contrary, the Rights
shall not be exercisable in any jurisdiction unless the requisite qualification
in such jurisdiction shall have been obtained.
(d) The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all shares of Series A Preferred Stock
delivered upon exercise of
11
Rights shall, at the time of delivery of the certificates for such shares
(subject to payment of the Purchase Price), be duly and validly authorized and
issued and fully paid and nonassessable.
(e) The Company further covenants and agrees that it will pay when
due and payable any and all federal and state transfer taxes and charges which
may be payable in respect of the issuance or delivery of the Rights Certificates
and of any certificates for a number of shares of Series A Preferred Stock upon
the exercise of Rights. The Company shall not, however, be required to pay any
transfer tax which may be payable in respect of any transfer or delivery of
Rights Certificates to a Person other than, or the issuance or delivery of a
number of shares of Series A Preferred Stock in respect of a name other than
that of, the registered holder of the Rights Certificates evidencing Rights
surrendered for exercise or to issue or deliver any certificates for a number of
shares of Series A Preferred Stock in a name other than that of the registered
holder upon the exercise of any Rights until 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 a number of shares of Series A Preferred Stock (or other
securities, as the case may be) is issued upon the exercise of Rights shall for
all purposes be deemed to have become the holder of record of such shares of
Series A Preferred Stock (or other securities) represented thereby on, and such
certificates shall be dated, the date upon which the Rights Certificate
evidenced such Rights was duly surrendered and payment of the Purchase Price
(and all applicable transfer taxes) was made; PROVIDED, HOWEVER, that if the
date of such surrender and payment is a date upon which the Series A Preferred
Stock transfer books of the Company are closed, such Person shall be deemed to
have become the record holder of such shares on, and such certificate shall be
dated, the next succeeding Business Day on which the Series A Preferred Stock
transfer books of the Company are open. Prior to the exercise of the Rights
evidenced thereby, the holder of a Rights Certificate shall not be entitled to
any rights of a shareholder of the Company with respect to shares for which the
Rights shall be exercisable, including, without limitation, the right to vote,
to receive dividends or other distributions or to exercise any preemptive
rights, and shall not be entitled to receive any notice of any proceeding of the
Company except as provided herein.
SECTION 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER AND KIND OF SHARES OR
NUMBER OF RIGHTS; EXCHANGE OF RIGHTS FOR SHARES OF CAPITAL STOCK. The Purchase
Price, the number and kind of shares covered by each Right and the number of
Rights outstanding are subject to adjustment from time to time as provided in
this Section 11.
(a) (i) In the event the Company shall at any time after the
date of this Agreement (A) declare a dividend on the Series A Preferred
Stock payable in shares of Series A Preferred Stock, (B) subdivide the
outstanding Series A Preferred Stock, (C) combine the outstanding Series A
Preferred Stock into a smaller number of shares, or (D) issue any shares
of its capital stock in a reclassification of the Series A Preferred Stock
(including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing or surviving corporation),
except as otherwise provided in this Section 11(a) and Section 7(e)
hereof, the Purchase Price in effect at the time of the record date for
such dividend or of the effective date of such subdivision,
12
combination or reclassification, and the number and kind of shares of
capital stock issuable on such date, shall be proportionately adjusted so
that the holder of any Right exercised after such time shall be entitled
to receive the aggregate number and kind of shares of capital stock which,
if such Right had been exercised immediately prior to such date and at a
time when the Series A Preferred Stock transfer books of the Company were
open, he would have owned upon such exercise and been entitled to receive
by virtue of such dividend, subdivision, combination or reclassification;
PROVIDED, HOWEVER, that in no event shall the consideration to be paid
upon the exercise of one Right be less than the aggregate par value of the
shares of capital stock of the Company issuable upon exercise of one
Right. If an event occurs which would require an adjustment under both
this Section 11(a)(i) and Section 11(a)(ii) hereof, the adjustment
provided for in this Section 11(a)(i) shall be in addition to, and shall
be made prior to, any adjustment required pursuant to Section 11(a)(ii)
hereof.
(ii) the event that any Person shall, at any time after the
Rights Dividend Declaration Date (as defined in the WHEREAS clause at the
beginning of this Agreement), becomes an Acquiring Person or an Adverse
Person, unless the event causing such Person to become an Acquiring Person
or an Adverse Person is an acquisition of shares of Common Stock pursuant
to a cash tender offer for all outstanding shares of Common Stock at a
price and on terms determined by the affirmative vote of at least 80% of
the members of the Board of Directors of the Company, after receiving
advice from one or more investment banking firms, to be (a) at a price
which is fair to shareholders (taking into account all factors which such
members of the Board deem relevant including, without limitation, prices
which could reasonably be achieved if the Company or its assets were sold
on an orderly basis designed to realize maximum value) and (b) otherwise
in the best interests of the Company and its shareholders (a "Qualifying
Tender Offer"), then, subject to the last sentence of Section 23(a) and
except as otherwise provided in this Section 11, each holder of a Right
(except as provided in Section 7(e) hereof) shall thereafter have the
right to receive, upon exercise thereof, at a price equal to the then
current Purchase Price multiplied by the number of one one-thousandths of
a share of Series A Preferred Stock for which a Right is then exercisable,
in accordance with the terms of this Agreement and in lieu of shares of
Series A Preferred Stock, such number of shares of the Common Stock as
shall equal the result obtained by (x) multiplying the then current
Purchase Price by the number of one one-thousandths of a share of Series A
Preferred Stock for which a Right is then exercisable and dividing that
product by (y) 50% of the then current market price per share of the
Company's Common Stock (determined pursuant to Section 11(d) hereof) on
the date of the occurrence of such 11(a)(ii) Event.
(iii) In the event that there shall not be sufficient shares
of Common Stock issued but not outstanding or authorized but unissued to
permit the exercise in full of the Rights in accordance with the foregoing
subparagraph (ii), the Company shall take all such action as may be
necessary to authorize additional shares of Common Stock for issuance upon
exercise of the Rights. In the event that the Company shall, after good
faith effort, be unable to take all such action as may be necessary to
authorize such additional shares of Common Stock, the Company shall
substitute, for each share of
13
Common Stock that would otherwise be issuable upon exercise of a Right, a
number of shares of Series A Preferred Stock or fraction thereof such that
the current market price per share of one share of Series A Preferred
Stock multiplied by such number or fraction is equal to the current market
price per share of one share of Common Stock as of the date of issuance of
such shares of Series A Preferred Stock or fraction thereof.
(b) In case the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Series A Preferred Stock entitling
them to subscribe for or purchase (for a period expiring within forty-five (45)
calendar days after such record date) Series A Preferred Stock (or shares having
the same rights, privileges and preference as the shares of Series A Preferred
Stock ("equivalent preferred stock")) or securities convertible into Series A
Preferred Stock or equivalent preferred stock at a price per share of Series A
Preferred Stock or per share of equivalent preferred stock (or having a
conversion price per share, if a security convertible into Series A Preferred
Stock or equivalent preferred stock) less than the current market price as
determined pursuant to Section 11(d) hereof) per share of Series A Preferred
Stock on such record date, the Purchase Price to be in effect after such record
date, shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the number of shares of Series A Preferred Stock outstanding on such
record date, plus the number of shares of Series A Preferred Stock which the
aggregate offering price of the total number of shares of Series A 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 Series A Preferred Stock outstanding on such record date,
plus the number of additional shares of Series A 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);
PROVIDED, HOWEVER, that in no event shall the consideration to be paid upon the
exercise of one Right be less than the aggregate par value of the shares of
capital stock of the Company issuable upon exercise of one Right. In case such
subscription price may be paid by delivery of consideration part or all of which
may be in a form other than cash, the value of such consideration shall be as
determined in good faith by the Board of Directors of the Company, 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
Series A Preferred Stock owned by or held for the account of the Company shall
not be deemed outstanding for the purpose of any such computation. Such
adjustment shall be made successively whenever such a record date is fixed, and
in the event that such rights, options or warrants are not so issued, the
Purchase Price shall be adjusted to be the Purchase Price which would then be in
effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for a distribution
to all holders of Series A 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 or semi-annual cash dividend out of the earnings or retained earnings
of the Company), assets (other than a dividend payable in Series A Preferred
Stock, but including any dividend payable in stock other than Series A Preferred
Stock) or subscription rights or warrants (excluding those referred to in
Section 11(b) hereof), the Purchase Price to be in effect after such record date
shall be determined by multiplying the
14
Purchase Price in effect immediately prior to such record date by a fraction,
the numerator of which shall be the current market price (as determined pursuant
to Section 11(d) hereof) per share of Series A Preferred Stock on such record
date, less the fair market value (as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent) of the portion of the cash, assets or evidences of
indebtedness so to be distributed or of such subscription rights or warrants
applicable to a share of Series A Preferred Stock and the denominator of which
shall be such current market price (as determined pursuant to Section 11(d)
hereof) per share of Series A Preferred Stock; PROVIDED, HOWEVER, that in no
event shall the consideration to be paid upon the exercise of one Right be less
than the aggregate par value of the shares of capital stock of the Company to be
issued upon exercise of one Right. Such adjustments shall be made successively
whenever such a record date is fixed, and in the event that such distribution is
not so made, the Purchase Price shall be adjusted to be the Purchase Price which
would have been in effect if such record date had not been fixed.
(d) (i) For the purpose of any computation hereunder, the
"current market price" per share of any security (a "Security" for the
purpose of this Section 11(d)(i)) on any date shall be deemed to be the
average of the daily closing prices per share of such Security for the 30
consecutive Trading Days (as such term is hereinafter defined) immediately
prior to such date; PROVIDED HOWEVER, that in the event that the current
market price per share of the Security is determined during a period
following the announcement by the issuer of such Security of (A) a
dividend or distribution on such Security payable in shares of such
Security or securities convertible into such shares, or (B) any
subdivision, combination or reclassification of such Security and prior to
the expiration of 30 Trading Days after the ex-dividend date for such
dividend or distribution, or the record date for such subdivision,
combination or reclassification, then, and in each such case, the current
market price per share shall be appropriately adjusted to reflect the
current market price per share equivalent of such Security. The closing
price for each day shall be the last sale price, regular way, or, in case
no such sale takes place on such day, the average of the closing bid and
asked prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities
listed or admitted to trading on the New York Stock Exchange or, if the
Security is not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting
system with respect to securities listed on the principal national
securities exchange on which the Security is listed or admitted to trading
or, if the Security is not listed or admitted to trading on any national
securities exchange, the last quoted price or, if not so quoted, the
average of the high bid and low asked prices in the over-the-counter
market, as reported by the National Association of Securities Dealers,
Inc. Automated Quotations System ("Nasdaq") or such other system then in
use, or, if on any such date the Security is 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 Security selected by
the Board of Directors of the Company. If on any such date no market maker
is making a market in the Security, the fair value of such Security on
such date as determined in good faith by the Board of Directors of the
Company shall be used. The term "Trading Day" shall mean a day on which
the principal national securities exchange on which the Security is listed
or admitted to trading is open for the
15
transaction of business or, if the Security is not listed or admitted to
trading on any national securities exchange, a Business Day.
(ii) For the purpose of any computation hereunder, the
"current market price per share" of the Series A Preferred Stock shall be
determined in accordance with the method set forth in Section 11(d)(i). If
the Series A Preferred Stock is not publicly traded, the "current market
price per share" of the Series A Preferred Stock shall be conclusively
deemed to be the current market price per share of the Common Stock as
determined pursuant to Section 11(d))(i) (appropriately adjusted to
reflect any stock split, stock dividend or similar transaction occurring
after the date hereof), multiplied by one thousand. If neither the Common
Stock nor the Series A Preferred Stock is publicly held or so listed or
traded, "current market price per share" shall mean the fair value per
share as determined in good faith by the Board of Directors of the
Company, whose determination shall be described in a statement filed with
the Rights Agent.
(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 one percent (1%) in the Purchase Price;
PROVIDED, HOWEVER, that any adjustments which by reason of this Section 11(e)
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this Section 11 shall be made
to the nearest cent or to the nearest one-ten-thousandth of a share of Series A
Preferred Stock or other share or security as the case may be. Notwithstanding
the first sentence of this Section 11(e), any adjustment required by this
Section 11 shall be made no later than the earlier of (i) three (3) years from
the date of the transaction which mandates such adjustment, or (ii) the
Expiration Date.
(f) If as a result of an adjustment made pursuant to Section
11(a)(ii) or Section 13(a) hereof, the holder of any Right thereafter exercised
shall become entitled to receive any shares or fraction of a share of capital
stock other than Series A Preferred Stock, thereafter the number or fraction 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 Series A Preferred Stock contained in Sections 11(a), (b), (c), (e), (g),
(h), (i), (j), (k) and (m), and the provisions of Sections 7, 9, 10, 13 and 14
hereof with respect to the Series A 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 one one-thousandths of a
share of Series A Preferred Stock purchasable 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 one one-thousandths of
a share of Series A Preferred Stock (calculated to the nearest
16
one-ten-thousandth) obtained by (i) multiplying (x) the number of one
one-thousandths of a share covered by a Right immediately prior to this
adjustment, by (y) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price, and (ii) dividing the product so obtained by
the Purchase Price in effect immediately after such adjustment of the Purchase
Price.
(i) The Company may elect on or after the date of any adjustment of
the Purchase Price to adjust the number of Rights, in lieu of any adjustment in
the number of one one-thousandths of a share of Series A Preferred Stock
purchasable upon the exercise of a Right. Each of the Rights outstanding after
the adjustment in the number of Rights shall be exercisable for the number of
one one-thousandths of a share of Series A Preferred Stock for which a Right was
exercisable immediately prior to such adjustment. Each Right held of record
prior to such adjustment of the number of Rights shall become that number of
Rights (calculated to the nearest one-ten-thousandth) obtained by dividing the
Purchase Price in effect immediately prior to adjustment of the Purchase Price
by the Purchase Price in effect immediately after adjustment of the Purchase
Price. The Company shall make a public announcement of its election to adjust
the number of Rights, indicating the record date for the adjustment, and, if
known at the time, the amount of the adjustment to be made. This record date may
be the date on which the Purchase Price is adjusted or any day thereafter, but,
if the Rights Certificates have been issued, shall be at least ten (10) days
later than the date of the public announcement. If Rights Certificates have been
issued, upon each adjustment of the number of Rights pursuant to this Section
11(i), the Company shall, as promptly as practicable, cause to be distributed to
holders of record of Rights Certificates on such record date Rights Certificates
evidencing, subject to Section 14 hereof, the additional Rights to which such
holders shall be entitled as a result of such adjustment, or, at the option of
the Company, shall cause to be distributed to such holders of record in
substitution and replacement for the Rights Certificates held by such holders
prior to the date of adjustment, and upon surrender thereof, if required by the
Company, new Rights Certificates evidencing all the Rights to which such holders
shall be entitled after such adjustment. Rights Certificates so to be
distributed shall be issued, executed and countersigned in the manner provided
for herein (and may bear, at the option of the Company, the adjusted Purchase
Price) and shall be registered in the names of the holders of record of Rights
Certificates on the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price
or the number of one one-thousandths of a share of Series A Preferred Stock
issuable upon the exercise of the Rights, the Rights Certificates theretofore
and thereafter issued may continue to express the Purchase Price per share and
the number of one one-thousandths of a share of Series A Preferred Stock which
were expressed in the initial Rights Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below one one-thousandth of the then stated or par value, if
any, of the shares of Series A Preferred Stock issuable upon exercise of the
Rights, the Company shall take any corporate action which may, in the opinion of
its counsel, be necessary in order that the Company may validly and legally
issue such number of fully paid and nonassessable shares of Series A 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
17
elect to defer until the occurrence of such event the issuance to the holder of
any Right exercised after such record date the number of shares of Series A
Preferred Stock and other capital stock or securities of the Company, if any,
issuable upon such exercise over and above the number of shares of Series A
Preferred Stock and other capital stock or securities of the Company, if any,
issuable upon such exercise on the basis of the Purchase Price in effect prior
to such adjustment; PROVIDED, HOWEVER, that the Company shall deliver to such
holder a due xxxx or other appropriate instrument evidencing such holder's right
to receive such additional shares (fractional or otherwise) or securities upon
the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that in its good faith judgment the Board of Directors of the Company
shall determine to be advisable in order that any (i) consolidation or
subdivision of the Series A Preferred Stock, (ii) issuance wholly for cash of
any shares of Series A Preferred Stock at less than the current market price,
(iii) issuance wholly for cash of shares of Series A Preferred Stock or
securities which by their terms are convertible into or exchangeable for shares
of Series A Preferred Stock, (iv) dividends on Series A Preferred Stock payable
in Series A Preferred Stock or (v) issuance of rights, options or warrants
referred to in this Section 11, hereafter made by the Company to holders of its
Series A Preferred Stock shall not be taxable to such shareholders.
(n) The Company covenants and agrees that it shall not, at any time
after the Distribution Date, (i) consolidate with any other Person (other than a
Subsidiary of the Company in a transaction which complies with Section 11(o)
hereof), (ii) merge with or into any other Person (other than a Subsidiary of
the Company in a transaction which complies with Section 11(o) hereof) or (iii)
sell or transfer (or permit any Subsidiary to sell or transfer), in one
transaction, or a series of related transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person or Persons (other than the
Company and/or any of its Subsidiaries in one or more transactions each of which
complies with Section 11(o) hereof), if (x) at the time of or immediately after
such consolidation, merger or sale there are any rights, warrants or other
instruments or securities outstanding or agreements in effect which would
substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights or (y) prior to, simultaneously with or immediately after
such consolidation, merger or sale, the stockholders of the Person who
constitute, or would constitute, the "Principal Party" for purposes of Section
13(a) hereof shall have received a distribution of Rights previously owned by
such Person or any of its Affiliates and Associates.
(o) The Company covenants and agrees that, after the Distribution
Date, it will not, except as permitted by Section 23 or Section 26 hereof, take
(or permit any Subsidiary to take) any action if at the time such action is
taken it is reasonably foreseeable that such action will diminish substantially
or otherwise eliminate the benefits intended to be afforded by the Rights.
(p) Anything in this Agreement to the contrary notwithstanding, in
the event that the Company shall at any time after the Rights Dividend
Declaration Date and prior to the Distribution Date (i) declare a dividend on
the outstanding shares of Common Stock payable in
18
shares of Common Stock, (ii) subdivide the outstanding shares of Common Stock,
or (iii) combine the outstanding shares of Common Stock into a smaller number of
shares, then in any such case (A) the number of one one-thousandths of a share
of Series A Preferred Stock purchasable after such event upon proper exercise of
each Right shall be determined by multiplying the number of one one-thousandths
of a share of Series A Preferred Stock so purchasable immediately prior to such
event by a fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately before such event and the denominator of which is
the number of shares of Common Stock outstanding immediately after such event,
and (B) each share of Common Stock outstanding immediately after such event
shall have issued with respect to it that number of Rights which each share of
Common Stock outstanding immediately prior to such event had issued with respect
to it. The adjustments provided for in this Section 11(p) shall be made
successively whenever such a dividend is declared or paid or such a subdivision,
combination or consolidation is effected.
(q) (i) The Board of Directors of the Company may, at its
option, at any time after any Person becomes an Acquiring Person or an
Adverse Person, exchange all or part of the then outstanding and
exercisable Rights (which shall not include Rights that have become void
pursuant to the provisions of Section 7(e) hereof) for Common Stock at an
exchange ratio of one share of Common 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 "Exchange Ratio"). Notwithstanding the foregoing, the
Board of Directors shall not be empowered to effect such exchange at any
time after any Person (other than the Company, any Subsidiary of the
Company, any employee benefit plan of the Company or any such Subsidiary,
or any entity holding Common Stock for or pursuant to the terms of any
such plan), together with all Affiliates and Associates of such Person,
becomes the Beneficial Owner of 50% or more of the Common Stock then
outstanding.
(ii) Immediately upon the action of the Board of Directors of
the Company ordering the exchange of any Rights pursuant to paragraph (i)
of this Section 11(q) 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 shares of Common Stock equal to the number of such Rights held
by such holder multiplied by the Exchange Ratio. The Company shall
promptly give public notice of any such exchange; PROVIDED, HOWEVER, that
the failure to give, or any defect in, such notice shall not affect the
validity of such exchange. The Company promptly shall mail a notice of any
such exchange to all of the holders of such Rights at their last addresses
as they appear upon the registry books of the Rights Agent. Any notice
which is mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice. Each such notice of
exchange will state the method by which the exchange of the Common Stock
for Rights will be effected and, in the event of any partial exchange, the
number of Rights which will be exchanged. Any partial exchange shall be
effected pro rata based on the number of Rights (other than Rights which
have become void pursuant to the provisions of Section 7(e) hereof), held
by each holder of Rights.
19
(iii) In the event that there shall not be sufficient Common
Stock available for issuance to permit any exchange of Rights as
contemplated in accordance with this Section 11(q), the Company shall take
all such action as may be necessary to authorize additional Common Stock
for issuance upon exchange of the Rights. In the event that the Company
shall, after good faith effort, be unable to take all such action as may
be necessary to authorize such additional Common Stock, the Company shall
substitute, for each share of Common Stock that would otherwise be
issuable upon exchange of a Right, a number of shares of Series A
Preferred Stock or fraction thereof such that the current market price per
share of one share of Series A Preferred Stock multiplied by such number
or fraction is equal to the current market price per share of one share of
Common Stock as of the date of issuance of such share of Series A
Preferred Stock or fraction thereof.
(iv) The Company shall not be required to issue fractions of
shares of Common Stock or to distribute certificates which evidence
fractional shares of Common Stock. In lieu of such fractional shares of
Common Stock, the Company shall pay to the registered holders of the Right
Certificates with regard to which such fractional shares of Common Stock
would otherwise be issuable an amount in cash equal to the same fraction
of the current market value of a whole share of Common stock. For the
purposes of this paragraph (iv), the current market value of a whole share
of Common Stock shall be the closing price of a share of Common Stock (as
determined pursuant to the second sentence of Section 11(d)(i) hereof) for
the Trading Day immediately prior to the date of exchange pursuant to this
Section 11.
SECTION 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES.
Whenever an adjustment is made as provided in Section 11 and Section 13 hereof,
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 the transfer agent for the
Series A Preferred Stock or 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 representing
shares of Common Stock) in accordance with Section 25 hereof.
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, (x) the Company shall consolidate with, or merge with
and into, any other Person (other than a Subsidiary of the Company in a
transaction which complies with Section 11(o) hereof), and the Company shall not
be the continuing or surviving corporation of such consolidation or merger, (y)
any Person (other than a Subsidiary of the Company in a transaction which
complies with Section 11(o) hereof) shall consolidate with, or merge with or
into, the Company, and the Company shall be the continuing or surviving
corporation of such consolidation or merger and, in connection with such
consolidation or merger, all or part of the outstanding shares of Common Stock
shall be changed into or exchanged for stock or other securities of any other
Person or cash or any other property or (z) the Company shall sell or otherwise
transfer (or one or more of its Subsidiaries shall sell or otherwise transfer)
in one
20
transaction or a series of related 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 Person or Persons (other than the Company
or any Subsidiary of the Company in one or more transactions each of which
complies with Section 11(o) hereof), then, and in each such case, proper
provisions shall be made so that: (i) each holder of a Right, except as provided
in Section 7(e) hereof, shall thereafter have the right to receive, upon the
exercise thereof at a price equal to the then current Purchase Price multiplied
by the number of one one-thousandths of a share of Series A Preferred Stock for
which a Right is then exercisable (disregarding any adjustment of the Purchase
Price pursuant to Section 11(a)(ii) hereof) in accordance with the terms of this
Agreement, such number of validly authorized and issued, fully paid,
nonassessable and freely tradable shares of Common Stock of the Principal Party
(as such term is hereinafter defined), not subject to any liens, encumbrances,
rights of first refusal or other adverse claims, as shall be equal to the result
obtained by (1) multiplying the then current Purchase Price by the number of one
one-thousandths of a share of Series A 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 one one-hundredths of a share for
which a Right was exercisable immediately prior to the first occurrence of a
Section 11(a)(ii) Event by the Purchase Price in effect immediately prior to
such first occurrence), and dividing that product (which, following the first
occurrence of a Section 13 Event, shall be referred to as the "Purchase Price"
for each Right and for all purposes of this Agreement) by (2) 50% of the current
market price (determined pursuant to Section 11(d)(i) hereof) per share of the
Common Stock of such Principal Party on the date of consummation of such Section
13 Event; (ii) such Principal Party shall thereafter be liable for, and shall
assume, by virtue of such Section 13 Event, all the obligations and duties of
the Company pursuant to this Agreement; (iii) the term "Company" shall
thereafter be deemed to refer to such Principal Party, it being specifically
intended that the provisions of Section 11 hereof 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 assure that
the provisions hereof shall thereafter be applicable, as nearly as reasonably
may be, in relation to its shares of Common Stock thereafter deliverable upon
the exercise of the Rights; and (v) the provisions of Section 11(a)(ii) hereof
shall be of no effect following the first occurrence of any 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), the Person that is the issuer
of any securities into which shares of Common Stock of the Company are
converted in such merger or consolidation, and if no securities are so
issued, the Person that is the other party to such merger or
consolidation; 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 greatest portion of the assets or earning power transferred
pursuant to such transaction or transactions;
21
PROVIDED, HOWEVER, that in any such case, (1) if the Common Stock of such Person
is not at such time and has not been continuously over the preceding twelve (12)
month period registered under Section 12 of the Exchange Act, and such Person is
a direct or indirect Subsidiary of another Person the Common Stock of which is
and has been so registered, "Principal Party" shall refer to such other Person;
and (2) in case such Person is a Subsidiary, directly or indirectly, of more
than one Person, the Common Stocks of five or more of which are and have been so
registered, "Principal Party" shall refer to whichever of such Persons is the
issuer of the Common Stock having the greatest aggregate market value.
(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 which have not been issued or reserved for
issuance to permit the exercise in full of the Rights in accordance with this
Section 13 and unless prior thereto the Company and such Principal Party shall
have executed and delivered to the Rights Agent a supplemental agreement
providing for the terms set forth in paragraphs (a) and (b) of this Section 13
and further providing that, as soon as practicable after the date of any
consolidation, merger or sale of assets mentioned in paragraph (a) of this
Section 13, the Principal Party will
(i) prepare and file a registration statement under the Act,
with respect to the Rights and the securities purchasable upon exercise of
the Rights on an appropriate form, and will use its best efforts to cause
such registration statement to (A) become effective as soon as practicable
after such filing and (B) remain effective (with a prospectus at all times
meeting the requirements of the Act) until the Expiration Date; and
(ii) will deliver to holders of the Rights historical
financial statements for the Principal Party and each of its Affiliates
which comply in all respects with the requirements for registration on
Form 10 under the Exchange Act.
The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. In the event that a Section 13 Event
shall occur at any time after the occurrence of a Section 11(a)(ii) Event, the
Rights which have not theretofore been exercised shall thereafter become
exercisable in the manner described in Section 13(a).
(d) Notwithstanding anything in this Agreement to the contrary,
Section 13 shall not be applicable to a transaction described in subparagraphs
(x) and (y) of Section 13(a) if (i) such transaction is consummated with a
Person or Persons who acquired shares of Common Stock pursuant to a cash tender
offer for all outstanding shares of Common stock which complies with the
provisions of Section 11(a)(ii) hereof (or a wholly owned Subsidiary of any such
Person or Persons), (ii) the price per share of Common Stock offered in such
transaction is not less than the price per share of Common Stock paid to all
holders of shares of Common Stock whose shares were purchased pursuant to such
tender offer, and (iii) the form of consideration being offered to the remaining
holders of shares of Common stock pursuant to such transaction is the same as
the form of consideration paid pursuant to such tender offer. Upon consummation
of any such transaction contemplated by this Section 13(d), all Rights hereunder
shall expire.
22
SECTION 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
(a) The Company shall not be required to issue fractions of Rights,
except prior to the Distribution Date as provided in Section 11(p) hereof, or to
distribute Rights Certificates which evidence fractional Rights. In lieu of such
fractional Rights, there shall be paid to the registered holders of the Rights
Certificates with regard to which such fractional Rights would be otherwise be
issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right. For purposes of this Section 14(a), the current market
value of a whole Right shall be the closing price of the Rights for the Trading
Day immediately prior to the date on which such fractional Rights would have
been otherwise issuable. The closing price of the Rights for any day shall be
the last sale price, regular way, or, in case no such sale takes place on such
day, the average of the closing bid and asked prices, regular way, in either
case as reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange or, if the Rights are not listed or admitted to trading on the New York
Stock Exchange, as reported in the principal consolidated transaction reporting
system with respect to securities listed on the principal national securities
exchange on which the Rights are listed or admitted to trading, or if the Rights
are not listed or admitted to trading on any national securities exchange, the
last quoted price or, if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by Nasdaq or such other
system then in use or, if on any such date the Rights are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Rights selected by the Board of
Directors of the Company. If on any such date no such market maker is making a
market in the Rights the fair value of the Rights on such date as determined in
good faith by the Board of Directors of the Company shall be used.
(b) The Company shall not be required to issue fractions of shares
of Series A Preferred Stock (other than fractions which are integral multiples
of one one-thousandths of a share of Series A Preferred Stock) upon exercise of
the Rights or to distribute certificates which evidence fractional shares of
Series A Preferred Stock (other than fractions which are integral multiples of
one one-thousandths of a share of Series A Preferred Stock). In lieu of
fractional shares of Series A Preferred Stock that are not integral multiples of
one one-thousandth of a share of Series A Preferred Stock, the Company may pay
to the registered holders of Rights Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same fraction of the
current market value of a share of Series A Preferred Stock. For purposes of
this Section 14(b), the current market value of a share of Series A Preferred
Stock shall be the closing price of a share of Series A Preferred Stock (as
determined pursuant to Section 11(d) hereof) for the Trading Day immediately
prior to the date of such exercise.
(c) The holder of a Right by the acceptance of the Rights 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 are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock); and any registered holder of any Rights Certificate (or, prior to
the Distribution Date, of the Common Stock), without the consent
23
of the Rights Agent or of the holder of any other Rights Certificate (or, prior
to the Distribution Date, of the Common Stock), may, in his own behalf and for
his own benefit, enforce, and may institute and maintain any suit, action or
proceeding against the Company to enforce, or otherwise act in respect of, his
right to exercise the Rights evidenced by such Rights Certificate and in this
Agreement. Without limiting the foregoing or any remedies available to the
holders of the Rights, the holders of the 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 of the same consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of Common Stock;
(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office or offices of the Rights Agent designated for such
purposes, duly endorsed or accompanied by a proper instrument of transfer and
with the appropriate forms and certificates fully executed;
(c) subject to Section 6(a) and Section 7(f) hereof, the Company and
the Rights Agent may deem and treat the person in whose name a Rights
Certificate (or, prior to the Distribution Date, the associated Common Stock
certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the
Rights Certificates or the associated Common Stock certificate made by anyone
other than the Company or the Rights Agent) for all purposes whatsoever, and
neither the Company nor the Rights Agent, subject to the last sentence of
Section 7(e) hereof, shall be required to be affected by any notice to the
contrary; and
(d) notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Rights Agent shall have any liability to any holder
of a Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree 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 obligations.
SECTION 17. RIGHTS CERTIFICATE HOLDER NOT DEEMED A SHAREHOLDER. No holder,
as such, of any Rights Certificate shall be entitled to vote, receive dividends
or be deemed for any purpose the holder of the fraction of a share (or number of
shares) of Series A Preferred Stock or any other securities of the Company which
may at any time be issuable on the exercise of the Rights represented thereby,
nor shall anything contained herein or in any Rights Certificate be construed to
confer upon the holder of any Rights Certificate, as such, any of the rights of
a 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
24
action, or to receive notice of meetings or other actions affecting shareholders
(except as provided in Section 24 hereof), or to receive dividends or
subscription rights, or otherwise, until the Right or Rights evidenced by such
Rights Certificate shall have been exercised in accordance with the provisions
hereof.
SECTION 18. CONCERNING THE RIGHTS AGENT.
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
disbursements and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability, 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.
(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 Series A 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 be
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 or consolidation to which the Rights Agent
or any successor Rights Agent shall be a party, or any corporation succeeding to
the corporate trust business of the Rights Agent or any successor Rights Agent,
shall be the successor to the Rights Agent under this Agreement without the
execution or filing of any paper or any further act on the part of any of the
parties hereto; PROVIDED, HOWEVER, that such corporation would be eligible for
appointment as a successor Rights Agent under the provisions of Section 21
hereof. 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
25
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 of its choice
(which may be counsel to the Company) subject to the approval of the Company
which approval shall not be unreasonably withheld. 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 herein specifically prescribed) may be
deemed to be conclusively proved and established by a certificate signed by the
Chairman of the Board, the Vice Chairman of the Board, if any, the President,
any Vice President, the Treasurer or the Secretary of the Company and delivered
to the Rights Agent; and such certificate shall be full authorization to the
Rights Agent and shall release the Rights Agent from any liability 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, and shall not be liable for any
action it takes or omits to take in good faith which it believes to be
authorized or within its rights or powers granted hereunder. The Rights Agent
need only perform such duties which are specifically set forth herein.
(d) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Rights Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Rights Certificate;
nor shall it be responsible for any adjustment required under the provisions of
Section 11 or Section 13 hereof or responsible for the manner, method or amount
of any such adjustment (except with respect to the exercise of Rights evidenced
by Rights Certificates after actual notice of any such adjustment); nor shall it
by any act hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any shares of Series A Preferred Stock to be
issued pursuant to this Agreement or any Rights Certificate or as to whether any
shares of Series A Preferred Stock will, when so issued, be validly authorized
and issued, fully paid and nonassessable.
(e) The Company agrees that it will perform, execute, acknowledge
and deliver or cause to be performed, executed, acknowledged and delivered all
such further and
26
other acts, instruments and assurances as may reasonably be required by the
Rights Agent for the carrying out or performing by the Rights Agent of the
provisions of this Agreement.
(f) 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 Vice Chairman of the Board, if any, the President,
any Vice President, the Secretary or the Treasurer of the Company, and to apply
to such officers for advice or instructions in connection with its duties, and
it 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. The Rights Agent
may rely upon any instruction and shall not be responsible to investigate any
factual matters set forth in any such instruction which it reasonably believes
in good faith to have been signed and presented to it by an authorized officer
of the Company.
(g) 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 legal entity.
(h) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct; PROVIDED, HOWEVER, reasonable care was exercised in the
selection and continued employment thereof.
(i) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, including personnel and other
internal costs, or in the exercise of its rights unless there shall be
reasonable grounds for believing that repayment of such funds or adequate
indemnification against such risk or liability is assured to it.
(j) If, with respect to any Rights Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise or transfer without first consulting with the Company.
SECTION 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon sixty (60) days' notice in writing mailed to the Company, and to each
transfer agent of the Common Stock, by registered or certified mail, and to the
holders of the Rights Certificates by first-class mail. The Company may remove
the Rights Agent or any successor Rights Agent upon sixty (60) days' notice in
writing, mailed to the Rights Agent or successor Rights Agent, as the case may
be, and to the transfer agent of the Common Stock, by registered or certified
mail, and to the holders of the Rights Certificates by first-class mail. If the
Rights Agent shall resign or be removed or shall
27
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 sixty (60) days after giving notice of such removal or after it has
been notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Rights Certificate (who shall,
with such notice, submit his Rights Certificate for inspection by the Company),
then any registered holder of any Rights Certificate may apply to any court of
competent jurisdiction for the appointment of a new Rights Agent. Any successor
Rights Agent, whether appointed by the Company or by such a court, shall be a
corporation organized and doing business under the laws of the United States or
of any state of the United States, in good standing, which is authorized under
such laws to exercise corporate trust powers and is subject to supervision or
examination by federal or state authority and which has at the time of its
appointment as Rights Agent a combined capital and surplus of at least
$5,000,000. After appointment, the successor Rights Agent shall be vested with
the same powers, rights, duties and responsibilities as if it had been
originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment, the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Stock and mail a notice thereof in writing to the registered holders
of the Rights Certificates. Failure to give any notice provided for in this
Section 21, however, or any defect therein, shall not affect the legality or
validity of the resignation or removal of the Rights Agent or the appointment of
the successor Rights Agent, as the case may be.
SECTION 22. ISSUANCE OF NEW RIGHTS CERTIFICATES. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Rights Certificates evidencing Rights in such form
as may be approved by its Board of Directors to reflect any adjustment or change
in the Purchase Price and the number or kind or class of shares or other
securities or property purchasable under the Rights Certificates made in
accordance with the provisions of this Agreement. In addition, in connection
with the issuance or sale of shares of Common Stock following the Distribution
Date and prior to the redemption or expiration of the Rights, the Company (a)
shall, with respect to shares of Common Stock so issued or sold pursuant to the
exercise of stock options or under any employee plan or arrangement, or upon the
exercise, conversion or exchange of securities hereinafter issued by the
Company, and (b) may, in any other case, if deemed necessary or appropriate by
the Board of Directors of the Company, issue Rights Certificates representing
the appropriate number of Rights in connection with such issuance or sale;
PROVIDED, HOWEVER, that (i) no such Rights Certificate shall be issued if, and
to the extent that, the Company shall be advised by counsel that such issuance
would create a significant risk of material adverse tax consequences to the
Company or the Person to whom such Rights Certificate would be issued, and (ii)
no such Rights Certificate shall be issued if, and to the extent that,
appropriate adjustment shall otherwise have been made in lieu of the issuance
thereof.
SECTION 23. REDEMPTION AND TERMINATION.
(a) The Board of Directors of the Company may, at its option, at any
time prior to the earlier of (i) the close of business on the tenth day
following the Stock Acquisition
28
Date (or, if the Stock Acquisition Date shall have occurred prior to the Record
Date, the close of business on the tenth day following the Record Date) subject
to extension by the Company pursuant to Section 26 hereof, or (ii) the Final
Expiration Date, redeem all but not less than all the then outstanding Rights
for cash at a redemption price of $.000001 per Right, as such amount may be
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such redemption price being
hereinafter referred to as the "Redemption Price"); PROVIDED, HOWEVER, if the
Board of Directors of the Company authorizes redemption of the Rights in either
of the circumstances set forth in clauses (i) and (ii) below, then such
authorization shall require the affirmative vote of at least 80% of the members
of the Board of Directors of the Company: (i) such authorization occurs on or
after the time a Person becomes an Acquiring Person or an Adverse Person or (ii)
such authorization occurs on or after the date of a change (resulting from a
proxy or consent solicitation) in a majority of the directors in office at the
commencement of such solicitation if any Person who is a participant in such
solicitation has stated (or, if upon the commencement of such solicitation, a
majority of the Board of Directors of the Company has determined in good faith)
that such person (or any of its Affiliates or Associates) intends to take, or
may consider taking, any action which would result in such Person becoming an
Acquiring Person or an Adverse Person or which would cause the occurrence of a
Triggering Event; PROVIDED FURTHER, however, that if, following the occurrence
of a Stock Acquisition Date and following the expiration of the right of
redemption hereunder but prior to any Triggering Event, (i) a Person who is an
Acquiring Person or an Adverse Person shall have transferred or otherwise
disposed of a number of shares of Common Stock in one transaction or a series of
transactions, not directly or indirectly involving the Company or any of its
Subsidiaries, which did not result in the occurrence of a Triggering Event such
that such Person is thereafter a Beneficial Owner of less than 10% of the
outstanding shares of Common Stock, and (ii) there are no other Persons,
immediately following the occurrence of the event described in clause (i), who
are Acquiring Persons or Adverse Persons, then the right of redemption shall be
reinstated and thereafter be subject to the provisions of this Section 23.
Notwithstanding anything contained in this Agreement to the contrary, the Rights
shall not be exercisable after the first occurrence of a Section 11(a)(ii) Event
until such time as the Company's right of redemption hereunder has expired.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights, evidence of which shall have been
filed with the Rights Agent and without any further action and without any
notice, the right to exercise the Rights will terminate and the only right
thereafter of the holders of Rights shall be to receive the Redemption Price for
each Right so held. Promptly after the action of the Board of Directors ordering
the redemption of the Rights, the Company shall give notice of such redemption
to the Rights Agent and the holders of the then outstanding Rights by mailing
such notice to all such holders at each holder's last address as it appears upon
the registry books of the Rights Agent or, prior to the Distribution Date, on
the registry books of the Transfer Agent for the Common Stock; PROVIDED,
HOWEVER, that the failure to give, or any defect in, any such notice shall not
affect the validity of such redemption. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of redemption will state the method by which the
payment of the Redemption Price will be made.
29
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 Series A Preferred Stock or to make any other distribution to the
holders of Series A Preferred Stock (other than a regular quarterly cash
dividend out of earnings or retained earnings of the Company), or (ii) to offer
to the holders of Series A Preferred Stock rights or warrants to subscribe for
or to purchase any additional shares of Series A Preferred Stock or shares of
stock of any class or any other securities, rights or options, or (iii) to
effect any reclassification of its Series A Preferred Stock (other than a
reclassification involving only the subdivision of outstanding shares of Series
A Preferred Stock), or (iv) to effect any consolidation or merger into or with
any other Person (other than a Subsidiary of the Company in a transaction which
complies with Section 11(o) hereof), or to effect any sale or other transfer (or
to permit one or more of its Subsidiaries to effect any sale or other transfer),
in one transaction or a series of related transactions, of more than 50% of the
assets or earning power of the Company and its Subsidiaries (taken as a whole)
to any other Person or Persons (other than the Company and/or any of its
Subsidiaries in one or more transactions each of which complies with Section
11(o) hereof), or (v) to effect the liquidation, dissolution or winding up of
the Company, or (vi) to declare or pay any dividend on the Common Stock payable
in shares of Common Stock or to effect a subdivision, combination or
consolidation of the Common Stock (by reclassification or otherwise than by
payment of dividends in Common Stock), then, in each such case, the Company
shall give to each holder of a Rights Certificate, to the extent feasible and in
accordance with Section 25 hereof, a notice of such proposed action, which shall
specify the record date for the purposes of such stock dividend, distribution of
rights or warrants, or the date on which such reclassification, consolidation,
merger, sale, transfer, liquidation, dissolution, or winding up is to take place
and the date of participation therein by the holders of the shares of Series A
Preferred Stock, if any such date is to be fixed, and such notice shall be so
given in the case of any action covered by clause (i) or (ii) above at least
twenty (20) days prior to the record date for determining holders of the shares
of Common Stock for purposes of such action, and in the case of any such other
action, at least twenty (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 Common Stock whichever shall be the earlier.
(b) In case any of the events set forth in Section 11(a)(ii) hereof
shall occur, then, in any such case, (i) the Company shall as soon as
practicable thereafter give to each holder of a Rights Certificate, to the
extent feasible and in accordance with Section 25 hereof, 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) hereof, and (ii) all
references in the preceding paragraph to Series A Preferred Stock shall be
deemed thereafter to refer, if appropriate, to other securities.
SECTION 25. NOTICES. Notices or demands authorized by this Agreement to be
given or made by the Rights Agent or by the holder of any Rights Certificate to
or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:
CHS Electronics, Inc.
30
0000 X.X. 00xx Xxxxxx
Xxxxx, Xxxxxxx 00000
Attention: Chairman of the Board,
Chief Executive Officer and President
Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Company) as follows:
American Stock Transfer & Trust Company
0000 00xx Xxxxxx
Xxxxxxxx, Xxx Xxxx 00000
Attention: Vice President, Stock Transfer
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Common Stock) shall be sufficiently given or made if sent by
first-class mail, postage pre-paid, addressed to such holder at the address of
such holder as shown on the registry books of the Company.
SECTION 26. SUPPLEMENTS AND AMENDMENTS. For as long as the Rights are then
redeemable and except as provided in the last sentence of this Section 26, the
Company may in its sole and absolute discretion, 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 the Rights or the Common Stock. At any
time when the Rights are not then redeemable and except as provided in the last
sentence of this Section 26, the Company may, 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 (a) to cure any ambiguity, (b) to
correct or supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein or (c) to change or supplement the
provisions hereunder in any manner which the Company may deem necessary or
desirable, provided, that no such supplement or amendment pursuant to clause (c)
above shall materially adversely affect the interests of the holders of Rights
Certificates as such. Upon the delivery of a certificate from an appropriate
officer of the Company which states that the proposed supplement or amendment is
in compliance with the terms of this Section 26, the Rights Agent shall execute
such supplement or amendment. Notwithstanding anything contained in this Rights
Agreement to the contrary, no supplement or amendment shall be made which
changes the Redemption Price or the Final Expiration Date and no supplements or
amendments may be made after the time that any Person becomes an Acquiring
Person or an Adverse Person (other than pursuant to a Qualifying Tender Offer),
unless such supplement or amendment is approved by the affirmative vote of at
least 80% of the members of the Board of Directors of the Company.
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.
31
SECTION 28. DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS, ETC. For
all purposes of this Agreement, any calculation of the number of shares of
Common Stock outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding shares of Common Stock
of which any Person is the Beneficial Owner, shall be made in accordance with
the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations
under the Exchange Act. The Board of Directors of the Company (subject to the
required vote as set forth herein) shall have the exclusive power and authority
to administer this Agreement and to exercise all rights and powers specifically
granted to the Board (subject to the required vote as set forth herein) or to
the Company, or as may be necessary or advisable in the administration of this
Agreement, including, without limitation, the right and power to (i) interpret
the provisions of this Agreement and (ii) make all determinations deemed
necessary or advisable for the administration of this Agreement (including a
determination to redeem or not redeem the Rights or to amend the Agreement). All
such actions, calculations, interpretations and determinations (including, for
purposes of clause (y) below, all omissions with respect to the foregoing) which
are done or made by the Board (subject to the required vote as set forth herein)
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 to the Board to any liability to the holders of the Rights.
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 the Common Stock) any legal or equitable right,
remedy or claim under this Agreement; but this Agreement shall be for the sole
and exclusive benefit of the Company, the Rights Agent and the registered
holders of the Rights Certificates (and, prior to the Distribution Date,
registered holders of the Common Stock).
SECTION 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 the Board of
Directors of the Company determines in its good faith judgment that severing the
invalid language from this Agreement would adversely affect the purpose or
effect of this Agreement, the right of redemption set forth in Section 23 hereof
shall be reinstated and shall not expire until the close of business on the
tenth day following the date of such determination by the Board of Directors.
Without limiting the foregoing, if any provision requiring that a determination
be made by less than the entire Board (or at a time or with the concurrence of a
group of directors consisting of less than the entire Board) is held by a court
of competent jurisdiction or other authority to be invalid, void or
unenforceable, such determination shall then be made by the Board in accordance
with applicable law and the Company's Articles of Incorporation and By-laws.
SECTION 31. GOVERNING LAW. This Agreement, each Right and each Rights
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Florida and
32
for all purposes shall be governed by and construed in accordance with the laws
of such State applicable to contracts made and to be performed entirely within
such State.
SECTION 32. CONSENT TO JURISDICTION; SERVICE OF PROCESS. The Company, the
Rights Agent and the holders of the Rights Certificates hereby irrevocably
submit to the jurisdiction of the state or federal courts located in Dade
County, Florida in connection with any suit, action or other proceeding arising
out of or relating to this Agreement and the transactions contemplated hereby,
and hereby agree not to assert, by way of motion, as a defense, or otherwise in
any such suit, action or proceeding that the suit, action or proceeding is
brought in an inconvenient forum, that the venue of the suit, action or
proceeding is improper or that this Agreement or the subject matter hereof may
not be enforced by such courts.
SECTION 33. COUNTERPARTS. This Agreement may be executed in counterparts
and both of such counterparts shall for all purposes be deemed to be an
original, and such counterparts shall together constitute but one and the same
instrument.
SECTION 34. DESCRIPTIVE HEADINGS. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
(SIGNATURES ON FOLLOWING PAGE)
33
IN WITNESS WHEREOF, the parties hereto have caused this Second Amended and
Restated 1998 Preferred Stock Purchase Rights Agreement to be duly executed and
attested, all as of May 26, 1999.
Attest: CHS ELECTRONICS, INC.
By: By:
-------------------------- -----------------------------------
Name: Xxxxxxx Xxxxxxxxxxx Name: Xxxxxxx Xxxxxx
Title: Secretary Title: Chairman of the Board, Chief
Executive Officer and
President
Attest: AMERICAN STOCK TRANSFER &
TRUST COMPANY
By: By:
-------------------------- -----------------------------------
Name: Name:
Title: Title:
34
EXHIBIT A
FORM
of
CERTIFICATE OF DESIGNATIONS
of
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
CHS ELECTRONICS, INC.
(Pursuant to Section 607.0602 of the
Florida Business Corporation Act)
------------------------------------
CHS Electronics, Inc., a corporation organized and existing under
the Business Corporation Act of the State of Florida (hereinafter called the
"Corporation"), hereby certifies that the following resolution was adopted by
the Board of Directors of the Corporation as required by Section 607.0602 of the
Business Corporation Act at a meeting duly called and held on January 16, 1998:
RESOLVED, that pursuant to the authority granted to and vested in
the Board of Directors of this Corporation (hereinafter called the "Board of
Directors" or the "Board") in accordance with the provisions of the Articles of
Incorporation of the Corporation, the Board of Directors hereby creates a series
of Preferred Stock, par value $.001 per share (the "Preferred Stock"), of the
Corporation and hereby states the designation and number of shares, and fixes
the relative rights, preferences, and limitations thereof as follows:
Series A Junior Participating Preferred Stock:
1. DESIGNATION AND AMOUNT. The shares of such series shall be
designated as "Series A Junior Participating Preferred Stock" (the "Series A
Preferred Stock") and the number of shares constituting the Series A Preferred
Stock shall be 100,000. Such number of shares may be increased or decreased by
resolution of the Board of Directors; provided, that no decrease shall reduce
the number of shares of Series A Preferred Stock to a number less than the
number of shares then outstanding plus the number of shares reserved for
issuance upon the exercise of outstanding options, rights or warrants or upon
the conversion of any outstanding securities issued by the Corporation
convertible into Series A Preferred Stock.
A-1
2. RANK. The Series A Preferred Stock shall rank: (i) prior to all
of the Corporation's Common Stock, par value $.001 per share (the "Common
Stock"); (ii) prior to any class or series of capital stock of the Corporation
hereafter created specifically ranking by its terms junior to any Series A
Preferred Stock of whatever subdivision (collectively, with the Common Stock,
"Junior Securities"); and (iii) on parity with any class or series of capital
stock of the Corporation hereafter created specifically ranking by its terms on
parity with the Series A Preferred Stock ("Parity Securities"), in each case as
to distributions of assets upon liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary.
3. DIVIDENDS AND DISTRIBUTIONS.
(A) Subject to the rights of the holders of Senior Securities,
the holders of shares of Series A Preferred Stock, in preference to the
holders of Junior Stock, shall be entitled to receive, when, as and if
declared by the Board of Directors out of funds legally available for the
purpose, quarterly dividends payable in cash on the first day of March,
June, September and December in each year (each such date being referred
to herein as a "Quarterly Dividend Payment Date"), commencing on the first
Quarterly Dividend Payment Date after the first issuance of a share or
fraction of a share of Series A Preferred Stock, in an amount per share
(rounded to the nearest cent) equal to the greater of (a) $1 or (b)
subject to the provision for adjustment hereinafter set forth, 100 times
the aggregate per share amount of all cash dividends, and 100 times the
aggregate per share amount (payable in kind) of all non-cash dividends or
other distributions, other than a dividend payable in shares of Common
Stock or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date or, with respect to
the first Quarterly Dividend Payment Date, since the first issuance of any
share or fraction of a share of Series A Preferred Stock. In the event the
Corporation shall at any time declare or pay any dividend on the Common
Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of
Common Stock) into a greater or lesser number of shares of Common Stock,
then in each such case the amount to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event under clause
(b) of the preceding sentence shall be adjusted by multiplying such amount
by a fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding
immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution
on the Series A Preferred Stock as provided in paragraph (A) of this
Section immediately after it declares a dividend or distribution on the
Common Stock (other than a dividend payable in shares of Common Stock);
provided that, in the event no dividend or distribution shall have been
declared on the Common Stock during the period between any Quarterly
Dividend Payment Date and the next subsequent Quarterly Dividend Payment
Date, a dividend of $1 per share on the Series A Preferred Stock shall
nevertheless be payable on such subsequent Quarterly Dividend Payment
Date.
A-2
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Preferred Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares, unless the
date of issue of such shares is prior to the record date for the first
Quarterly Dividend Payment Date, in which case dividends on such shares
shall begin to accrue from the date of issue of such shares, or unless the
date of issue is a Quarterly Dividend Payment Date or is a date after the
record date for the determination of holders of shares of Series A
Preferred Stock entitled to receive a quarterly dividend and before such
Quarterly Dividend Payment Date, in either of which events such dividends
shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date. Accrued but unpaid dividends shall not bear interest.
Dividends paid on the shares of Series A Preferred Stock in an amount less
than the total amount of such dividends at the time accrued and payable on
such shares shall be allocated pro rata on a share-by-share basis among
all such shares at the time outstanding. The Board of Directors may fix a
record date for the determination of holders of shares of Series A
Preferred Stock entitled to receive payment of a dividend or distribution
declared thereon, which record date shall be not more than 60 days prior
to the date fixed for the payment thereof.
4. VOTING RIGHTS. The holders of shares of Series A Preferred Stock
shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set
forth, each share of Series A Preferred Stock shall entitle the holder
thereof to one vote on all matters submitted to a vote of the shareholders
of the Corporation. In the event the Corporation shall at any time declare
or pay any dividend on the Common Stock payable in shares of Common Stock,
or effect a subdivision or combination or consolidation of the outstanding
shares of Common Stock (by reclassification or otherwise than by payment
of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the number of votes per
share to which holders of shares of Series A Preferred Stock were entitled
immediately prior to such event shall be adjusted by multiplying such
number by a fraction, the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator
of which is the number of shares of Common Stock that were outstanding
immediately prior to such event.
(B) Except as otherwise provided herein, in any other
Certificate of Designations creating a series of Preferred Stock or any
similar stock, or by law, the holders of shares of Series A Preferred
Stock and the holders of shares of Common Stock and any other capital
stock of the Corporation having general voting rights shall vote together
as one class on all matters submitted to a vote of stockholders of the
Corporation.
(C) Except as set forth herein, or as otherwise provided by
law, holders of Series A Preferred Stock shall have no special voting
rights and their consent shall not be required (except to the extent they
are entitled to vote with holders of Common Stock as set forth herein) for
taking any corporate action.
A-3
5. CERTAIN RESTRICTIONS.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Preferred Stock as provided in
Section 3 are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on shares of Series
A Preferred Stock outstanding shall have been paid in full, the
Corporation shall not:
(i) declare or pay dividends, or make any other
distributions, on any Junior Securities;
(ii) declare or pay dividends, or make any other
distributions, on any Parity Securities, except dividends paid
ratably on the Series A Preferred Stock and all such Parity
Securities on which dividends are payable or in arrears in
proportion to the total amounts to which the holders of all such
shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration any Junior Securities, provided that the Corporation
may at any time redeem, purchase or otherwise acquire Junior
Securities in exchange for other Junior Securities; or
(iv) redeem or purchase or otherwise acquire for
consideration any Parity Securities, 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 Parity Securities
upon such terms as the Board of Directors, after consideration of
the respective annual dividend rates and other relative rights and
preferences of the respective series and classes, shall determine in
good faith will result in fair and equitable treatment among the
respective series or classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares
of stock of the Corporation unless the Corporation could, under paragraph
(A) of this Section 5, purchase or otherwise acquire such shares at such
time and in such manner.
6. REACQUIRED SHARES. Any shares 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
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
subject to the conditions and restrictions on issuance set forth herein, in the
Articles of Incorporation, or in any other Certificate of Designations creating
a series of Preferred Stock or any similar stock or as otherwise required by
law.
7. LIQUIDATION, DISSOLUTION OR WINDING UP. Upon any liquidation,
dissolution or winding up of the Corporation, no distribution shall be made (1)
to the holders of Junior Securities unless, prior thereto, the holders of shares
of Series A Preferred Stock shall have received $100 per share, plus an amount
equal to accrued and unpaid dividends and
A-4
distributions thereon, whether or not declared, to the date of such payment,
provided that the holders of shares of Series A Preferred Stock shall be
entitled to receive an aggregate amount per share, subject to the provision for
adjustment hereinafter set forth, equal to 100 times the aggregate amount to be
distributed per share to holders of shares of Common Stock, or (2) to the
holders of Parity Securities, except distributions made ratably on the Series A
Preferred Stock and all such Parity Securities in proportion to the total
amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up. In the event the Corporation shall at
any time declare or pay any dividend on the Common Stock payable in shares of
Common Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the aggregate amount to which
holders of shares of Series A Preferred Stock were entitled immediately prior to
such event under the proviso in clause (1) of the preceding sentence shall be
adjusted by multiplying such amount by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
8. CONSOLIDATION, MERGER, ETC. In case the Corporation shall enter
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Series A Preferred Stock shall at the same time be similarly exchanged or
changed into an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 100 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series A Preferred Stock shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
9. NO REDEMPTION. The shares of Series A Preferred Stock shall not
be redeemable.
10. AMENDMENT. The Articles of Incorporation of the Corporation
shall not be amended in any manner which would materially alter or change the
powers, preferences or special rights of the Series A Preferred Stock so as to
affect them adversely without the affirmative vote of the holders of at least
two-thirds of the outstanding shares of Series A Preferred Stock, voting
together as a single class.
A-5
IN WITNESS WHEREOF, this Certificate of Designations is executed on behalf
of the Corporation by its President and attested by its Secretary this 16th day
of January, 1998.
By: /s/
--------------------------
Xxxxxxx Xxxxxx, President
Attest:
By: /s/
------------------------------
Xxxxxxx Xxxxxxxxxxx, Secretary
A-6
EXHIBIT B
[FORM OF RIGHTS CERTIFICATE]
Certificate No. R-_______________________ ______________________________ Rights
NOT EXERCISABLE AFTER JANUARY 15, 2008 OR EARLIER IF REDEEMED BY THE
COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE
COMPANY, AT $.000001 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS
AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN
ACQUIRING PERSON OR ADVERSE PERSON (AS SUCH TERM IS DEFINED IN THE RIGHTS
AGREEMENT) AND ANY SUBSEQUENT HOLDER OF THE 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, AN
ADVERSE PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON OR AN
ADVERSE PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT).
ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY
BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF
SUCH AGREEMENT.]1
RIGHTS CERTIFICATE
CHS ELECTRONICS, INC.
This certifies that _________________________________, or registered
assigns, is the registered owner of the number of Rights set forth above, each
of which entitles the owner thereof, subject to the terms, provisions and
conditions of the Rights Agreement, dated as of January 16, 1998 and amended and
restated as of March 18, 1999 and as further amended and restated as of May 26,
1999 (the "Rights Agreement"), between CHS Electronics, Inc., a Florida
corporation (the "Company"), and American Stock Transfer & Trust Company (the
"Rights Agent"), to purchase from the Company at any time prior to 5:00 P.M.
(New York time) on January 15, 2008 at the
-----------
1 The portion of the legend in brackets shall be inserted only if applicable
and shall replace the preceding sentence.
B-1
office or offices of the Rights Agent designated for such purpose, or its
successors as Rights Agent, one one-thousandth of a fully paid, non-assessable
share of Series A Junior Participating Preferred Stock, par value $.001 per
share (the "Series A Preferred Stock"), of the Company, at a purchase price of
$100 per one one-thousandth of a share of Series A Preferred Stock (the
"Purchase Price"), upon presentation and surrender of this Rights Certificate
with the Form of Election to Purchase and related Certificate duly executed. The
Purchase Price shall be paid in cash. The number of Rights evidenced by this
Rights Certificate (and the number of one one-thousandths of a share of Series A
Preferred Stock which may be purchased upon exercise thereof) set forth above,
and the Purchase Price per one one-thousandth of a share set forth above, are
the number and Purchase Price as of January 16, 1998, based on the Series A
Preferred Stock as constituted at such date.
Upon the occurrence of a Section 11(a)(ii) Event (as such term is defined
in the Rights Agreement), if the Rights evidenced by this Rights Certificate are
beneficially owned by (i) an Acquiring Person, an Adverse Person or an Affiliate
or Associate thereof (as such terms are defined in the Rights Agreement), (ii) a
transferee of any such Acquiring Person, Adverse Person, Associate or Affiliate,
or (iii) under certain circumstances specified in the Rights Agreement, a
transferee of a person who, after such transfer, became an Acquiring Person, an
Adverse Person or an Affiliate or Associate thereof, 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.
As provided in the Rights Agreement, the Purchase Price and the number (or
fraction thereof) and kind of shares of Series A Preferred Stock or other
capital stock or other securities, which may be purchased upon the exercise of
the Rights evidenced by this Rights Certificate are
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subject to modification and adjustment upon the happening of certain events,
including Triggering Events.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the above-mentioned office of the
Rights Agent and are also available upon written request to the Rights Agent.
This Rights Certificate, with or without other Rights Certificates, upon
surrender at the principal office or offices of the Rights Agent designated for
such purpose, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of shares of Series A Preferred Stock as the
Rights evidenced by the Rights Certificate or Rights Certificates surrendered
shall have entitled such holder to purchase. If this Rights Certificate shall be
exercised in part, the holder shall be entitled to receive upon surrender hereof
another Rights Certificate or Rights Certificates for the number of whole Rights
not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Certificate may be redeemed by the Company at its option at a redemption
price of $.000001 per Right at any time prior to the earlier of the close of
business on (i) the tenth day following the Stock Acquisition Date (as such time
period may be extended pursuant to the Rights Agreement) and (ii) the Final
Expiration Date. Under certain circumstances set forth in the Rights Agreement,
the decision to
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redeem shall require the concurrence of at least 80% of the members of the Board
of Directors of the Company. After the expiration of the redemption period, the
Company's right of redemption may be reinstated if an Acquiring Person or an
Adverse Person reduces his beneficial ownership to less than 10% of the
outstanding shares of Common Stock in a transaction or series of transactions
not involving the Company.
No fractional shares of Series A 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 Series A Preferred
Stock), but in lieu thereof a cash payment will be made, as provided in the
Rights Agreement.
No holder of this Rights Certificate shall be entitled to vote or receive
dividends or be deemed for any purpose the holder of shares of Series A
Preferred Stock or of any other securities of the Company 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 Right or Rights evidenced by this Rights
Certificate shall have been exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
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WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal.
Dated as of ______________, ____
ATTEST: CHS ELECTRONICS, INC.
By:
-------------------------------- --------------------------------
Secretary Title:
Countersigned:
AMERICAN STOCK TRANSFER & TRUST COMPANY
By:
------------------------
Authorized Signature
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[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 will 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:_____________, ____
-----------------------
Signature
Signature Guaranteed:
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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 thereof (as such terms are defined pursuant to the Rights
Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it [ ]
did [ ] did not acquire the Rights evidenced by this Rights Certificate from any
Person who is, was or subsequently became an Acquiring Person, an Adverse Person
or an Affiliate or Associate thereof.
Dated:_______________, ____
-----------------------
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.
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FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to
exercise Rights represented by the
Rights Certificate.)
To: CHS Electronics, Inc.
The undersigned hereby irrevocably elects to exercise _______________
Rights represented by this Rights Certificate to purchase the shares of Series A
Preferred Stock issuable upon the exercise of the Rights (or such other
securities of the Company or of any other person which may be issuable upon the
exercise of the Rights) and requests that certificates for such shares be issued
in the name of and delivered to: Please insert social security or other
identifying number
--------------------------------------------------------------------------------
(Please print name and address)
--------------------------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
Please insert social security or other identifying number
--------------------------------------------------------------------------------
(Please print name and address)
Dated:______________, ____
--------------------------------------
Signature
Signature Guaranteed:
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CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not
being exercised by or on behalf of a Person who is or was an Acquiring Person,
an Adverse Person or an Affiliate or Associate thereof (as such terms are
defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it [ ]
did [ ] did not acquire the Rights evidenced by this Rights Certificate from any
Person who is, was or became an Acquiring Person, an Adverse Person or an
Affiliate or Associate thereof. Dated:_________________, ____
--------------------------------------
Signature
Signature Guaranteed:
NOTICE
The signature to the foregoing Election to Purchase and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
B-9
EXHIBIT C
SUMMARY OF RIGHTS TO PURCHASE
SERIES A PREFERRED STOCK
[CHS ELECTRONICS, INC. LETTERHEAD]
_____________, 1999
To Our Shareholders:
On January 16, 1998, pursuant to a Common Stock Purchase Rights Plan, your
Board of Directors declared a dividend distribution of one Right (a "Right") for
each outstanding share of common stock, $.001 par value (the "Common Stock"), of
the Company to shareholders of record at the close of business on January 30,
1998. The Plan was amended and restated as of March 18, 1999 and further amended
and restated as of May 26, 1999. Each Right entitles the registered holder to
purchase from the Company one one-thousandth of a share of Series A Junior
Participating Preferred Stock, $.001 par value (the "Series A Preferred Stock"),
of the Company at a price of $100 per one one-thousandth of a share (the
"Purchase Price"), subject to adjustment. This letter describes the Board's
reasons for adopting the Series A Preferred Stock Purchase Rights Plan and
summarizes the material terms of the Rights Plan, as amended. Neither the Rights
Plan nor the amendments thereto were adopted in response to any specific effort
to acquire control of the Company, and the Board is not aware of any such
effort.
The Rights Plan contains provisions designed to protect shareholders in
the event of an unsolicited attempt to acquire the Company, including a gradual
accumulation of shares in the open market, a partial or two-tier tender offer
that does not treat all shareholders equally, a squeeze-out merger and other
abusive takeover tactics that could impair the Board's ability to represent your
interests fully. The main purpose and value of a rights plan is to potentially
slow down the process by which a takeover of the Company may occur in order to
allow the Company's Board of Directors and shareholders to have a sufficient
amount of time to research and evaluate whether or not a takeover is in the
Company's best interest. In terms of mechanics, rights plans deter certain
abusive takeover tactics by (i) making them unacceptably expensive to the
prospective acquirer, and (ii) by simultaneously encouraging the prospective
acquirer to negotiate with the board of directors of the target.
The Rights Plan is definitely not intended to prevent an acquisition of
the Company on terms that are favorable and fair to all shareholders. Further,
it should not dissuade any prospective offeror willing to negotiate with your
Board of Directors and certainly will not interfere with a
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merger or any other business combination transaction that your Board of
Directors deems to be fair and provide full value to the shareholders. Further,
the Rights Plan is not intended to perpetuate the existence of current
management of the Company. The Rights Plan, however, is designed to deal with
the very serious problem of unilateral actions by hostile acquirers that are
calculated to deprive the Company's Board and its shareholders of their ability
to determine the destiny of the Company.
According to a study conducted by Xxxxxxxxx & Company, Inc., a respected
proxy solicitation and shareholder relations organization, companies protected
by shareholders rights plans received significantly higher premiums on their
shares in takeover contests than companies that had not adopted such a plan,
after adjustment for changes in the S&P 500 Index. The study also concluded that
such plans do not prevent takeovers and they also do not diminish the value of a
company's stock. There can be no assurance, however, that the Plan will result
in any premium being paid on the Company's Common Stock in the event of a
takeover contest.
The issuance of the Rights does not in any way weaken the financial
strength of the Company or interfere with its business plans. The issuance of
the Rights has no dilutive effect, will not affect reported earnings per share,
is not taxable to the Company or to you, and will not change the way in which
you can presently trade the Company's shares. As explained in detail below, the
Rights will only be exercisable if and when the problem arises which they were
created to deal with.
Your Board was aware when it acted that some people have advanced
arguments that securities of the sort we are issuing deter legitimate
acquisition proposals. We carefully considered these views and concluded that
the arguments are speculative and do not justify leaving shareholders without
any protection against unfair treatment by an acquirer.
Initially, the Rights will be attached to all Common Stock certificates
representing shares then outstanding, and no separate Rights Certificates will
be distributed. The Rights will separate from the Common Stock and a
distribution of the Rights will occur upon the earlier of (i) ten business days
following a public announcement that a person or group of affiliated or
associated persons (an "Acquiring Person") has acquired, or obtained the right
to acquire, beneficial ownership of 15% or more of the outstanding shares of
Common Stock, (ii) ten business days after a person or group of affiliated or
associated persons has (x) become the direct or indirect beneficial owner of at
least 10% of the Company's outstanding Common Stock, and (y) whose ownership
interest is deemed by the Board of Directors of the Company to cause a material
adverse impact on the business or prospects of the Company or its shareholders
(such persons or group hereinafter called an "Adverse Person"), or (iii) ten
business days following the commencement of a tender offer or exchange offer
that would result in a person or group becoming an Acquiring Person or an
Adverse Person. Until the date that the Rights are distributed (the
"Distribution Date"), (i) the Rights will be evidenced by the Common Stock
certificates and will be transferred with and only with such Common Stock
certificates, (ii) new Common Stock certificates issued after the date that the
Rights Plan is adopted, will contain a notation incorporating the Rights
Agreement by reference and (iii) the surrender for transfer of any certificates
for Common Stock outstanding also will constitute the transfer of the Rights
associated with the Common Stock represented by such certificates.
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The Rights are not exercisable until the Distribution Date and will expire
ten years after the adoption of the Rights Plan, unless earlier redeemed by the
Company as described below.
As soon as practicable after the Distribution Date, Rights Certificates
will be mailed to holders of record of the Common Stock as of the close of
business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights. Except as otherwise determined by
the Board of Directors, only shares of Common Stock issued prior to the
Distribution Date will be issued with Rights.
If, following a person becoming an Acquiring Person or an Adverse Person,
(i) the Company shall consolidate with or merge into any other person in which
the Company is not the surviving corporation, (ii) any other person shall merge
into the Company and all or part of the outstanding Common Stock shall be
changed into or exchanged for securities of any other person or cash or any
other property, or (iii) the Company sells 50% or more of its assets or earning
power, each Right then outstanding would "flip over" and thereby would become a
right to buy that number of shares of common stock of the acquiring company
which at the time of such transaction has a market value of two times the
exercise price of the Right. Thus, if the acquiring company's common stock at
the time of such transaction were trading at $25 per share and the exercise
price of the Rights at such time was $100 per one one-thousandth of a share,
each Right would thereafter be exercisable at $100 for 8 shares (I.E., the
number of shares that could be purchased for $200, or two times the exercise
price of the Right) of the acquiring company's common stock.
In the event a person becomes an Acquiring Person or an Adverse Person
(except pursuant to an offer for all outstanding shares of Common Stock that is
determined by the Board of Directors to be fair to and otherwise in the best
interest of the Company and its Shareholders, a "Qualifying Tender Offer"), each
Right then outstanding would "flip in" and become a right to buy that number of
shares of Common Stock of the Company which at the time of such acquisition
would have a market value of two times the exercise price of the Right. The
acquirer who triggered the Rights would be excluded from the "flip-in" because
his Rights would have become null and void upon his triggering acquisition.
Thus, if the Company's Common Stock at the time of the "flip-in" were trading at
$25 per share and the exercise price of the Rights at such time were $100 per
one one-thousandth of a share, each Right would thereafter be exercisable at
$100 for 8 shares of the Company's Common Stock.
In the event that the "flip in" is triggered, if there is not sufficient
authorized Common Stock available for issuance upon the exercise of each Right,
the Company shall take all such action as may be necessary to authorize
additional shares of Common Stock. In the event that the Company shall be unable
to take all such action, the Company shall substitute, for each share of Common
Stock that would be otherwise issuable upon exercise of a Right, a number of
shares of Series A Preferred Stock or fraction thereof having a current market
value equal to one share of Common Stock.
At any time after a person becomes an Acquiring Person or an Adverse
Person and before the acquisition by a person or group of 50% or more of the
outstanding Common Stock of the Company, the board may exchange the Rights
(other than Rights owned by such person or group
C-3
which have become void), in whole or in part, at an exchange ratio of one share
of the Company's Common Stock per Right, subject to adjustment.
At any time until ten days following the public announcement that a person
has become an Acquiring Person or an Adverse Person, the Company may redeem the
Rights in whole, but not in part, at a price of $.000001 per Right, payable in
cash. Under certain circumstances set forth in the Rights Agreement, the
decision to redeem shall require the affirmative vote of at least 80% of the
members of the Board of Directors of the Company. After the redemption period
has expired, the Company's rights of redemption may be reinstated if the
Acquiring Person or Adverse Person reduces his or her beneficial ownership to
less than 10% of the outstanding shares of Common Stock in a transaction or
series of transactions not involving the Company. Immediately upon the action of
the Board of Directors ordering redemption of the Rights, with, where required,
the affirmative vote of at least 80% of the members of the Board of Directors of
the Company, the Rights will terminate and the only right which the holders of
Rights will thereafter have will be to receive the $.000001 redemption price.
The Purchase Price payable, and the number of shares of Series A Preferred
Stock or other securities or property 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
Series A Preferred Stock, (ii) if holders of the Series A Preferred Stock are
granted certain rights or warrants to subscribe for Series A Preferred Stock or
convertible securities at less than the current market price of the Series A
Preferred Stock, or (iii) upon the distribution to holders of the Series A
Preferred Stock of evidences of indebtedness 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. No fractional shares of Series A Preferred Stock (other than fractions
which are integral multiples of one one-thousandth of a share) or Common Stock
will be issued and, in lieu thereof, an adjustment in cash will be made based on
the market price of the Series A Preferred Stock or the Common Stock, as
applicable, on the last trading date prior to the date of exercise.
The shares of Series A Preferred Stock purchasable upon exercise of the
Rights will not be redeemable. Each share of Series A Preferred Stock will be
entitled to a minimum preferential quarterly dividend payment of $1 per share
but will be entitled to an aggregate dividend of 100 times the dividend declared
per share of Common Stock. In the event of liquidation, the holders of the
Series A Preferred Stock will be entitled to a minimum preferential liquidation
payment of $100 per share but will be entitled to an aggregate payment of 100
times the payment made per share of Common Stock. Each share of Series A
Preferred Stock will have one vote, voting together with the Common Stock.
Finally, in the event of any merger, consolidation or other transaction in which
shares of Common Stock are exchanged, each share of Series A Preferred Stock
will be entitled to receive 100 times the amount received per share of Common
Stock. These rights are protected by customary antidilution provisions.
Because of the nature of the dividend, liquidation and voting rights of
the Series A Preferred Stock, the value of the one one-thousandth interest in a
share of Series A Preferred Stock
C-4
purchasable upon exercise of each Right should approximate the value of one
share of Common Stock.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including, without limitation, the right
to vote or to receive dividends.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A dated
January 16, 1998. A copy of the Rights Agreement is available free of charge
from the Rights Agent. This summary description of the Rights does not purport
to be complete and is qualified in its entirety by reference to the Rights
Agreement, which is incorporated herein by reference.
In declaring the Rights dividend, we have expressed our confidence in the
future and our determination that you, our shareholders, be given every
opportunity to participate fully in that future.
On behalf of the Board of Directors.
--------------------------------------
Xxxxxxx Xxxxxx
Chairman of the Board, Chief
Executive Officer and President
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