<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------
FORM 8-A
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(B) OR 12(G) OF THE
SECURITIES EXCHANGE ACT OF 1934
TEMPLATE SOFTWARE, INC.
-----------------------
(Exact name of registrant as specified in its charter)
Virginia 52-1042793
-------- ----------
(State of incorporation or organization) (IRS employer
identification no.)
45365 Vintage Park Plaza
Dulles, Virginia 20166
---------------- -----
(Address of principal executive offices) (Zip code)
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH
TO BE SO REGISTERED EACH CLASS IS TO BE REGISTERED
------------------- ------------------------------
None N/A
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
PREFERRED STOCK PURCHASE RIGHTS
-------------------------------
(Title of class)
<PAGE>
ITEM 1. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED.
--------------------------------------------------------
On May 20, 1998, the Board of Directors of Template Software, Inc. a
Virginia corporation (the "Company"), approved a Rights Agreement, dated as of
-------
and to be effective on July 3, 1998 (the "Rights Agreement"), between the
----------------
Company and First Union National Bank, as Rights Agent, having the principal
terms summarized below. In accordance with the Rights Agreement, the Board also
declared a dividend distribution of one Right for each outstanding share of
common stock (the "Common Stock"), of the Company to shareholders of record at
------------
the close of business on July 3, 1998 (the "Record Date").
-----------
Each Right entitles the registered holder to purchase from the Company one
one-hundredth of a share of the Company's Series A Cumulative Preferred Stock
("Preferred Stock"). Each one one-hundredth of a share (a "Unit") of Preferred
--------------- ----
Stock is structured to be the equivalent of one share of Common Stock of the
Company ("Common Stock"). Shareholders will receive one Right per share of
------------
Common Stock held of record at the close of business on the Record Date. The
exercise price of the Right will be $50.00 subject to adjustment (the "Purchase
--------
Price").
- - -----
Rights will also attach to shares of Common Stock issued after the Record
Date but prior to the Distribution Date unless the Board of Directors determines
otherwise at the time of issuance. The description and terms of the Rights are
set forth in the Rights Agreement.
The Rights will be appurtenant to the shares of Common Stock and will be
evidenced by Common Stock certificates, and no separate certificates evidencing
the Rights (the "Rights Certificates") will be distributed initially. The
-------------------
Rights will separate from the Common Stock and a distribution of the Rights
Certificates will occur (the "Distribution Date") upon the earlier of (i) 10
-----------------
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 (the "Stock Acquisition Date"), or (ii) 10 business days following
----------------------
the commencement of a tender offer or exchange offer that would result in a
person or group beneficially becoming an Acquiring Person. Until the
Distribution Date, (i) the Rights will be evidenced by the Common Stock
certificates and will be transferred with and only with such Common Stock
certificates, (ii) any Common Stock certificates issued will contain a notation
incorporating the Rights Agreement by reference and (iii) the surrender for
transfer of any certificates for Common Stock outstanding will also constitute
the transfer of the Rights associated with the Common Stock represented by such
certificates.
The Rights are not exercisable until the Distribution Date and will expire
at the close of business on July 3, 2008, unless earlier redeemed or exchanged
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 such separate Rights Certificates alone will represent the Rights.
While each Right will initially provide for the acquisition of one Unit of
Preferred Stock at the Purchase Price, the Agreement provides that if any person
becomes an Acquiring Person, proper provision shall be made so that each holder
of a Right (except as set forth below) will
<PAGE>
thereafter have the right to receive, upon exercise and payment of the Purchase
Price, Preferred Stock or, at the option of the Company, Common Stock (or, in
certain circumstances, cash, property or other securities of the Company) having
a value equal to twice the amount of the Purchase Price.
In the event that, at any time following the Stock Acquisition Date, (i)
the Company is acquired in a merger, statutory share exchange, or other business
combination in which the Company is not the surviving corporation, or (ii) 50%
or more of the Company's assets or earning power is sold or transferred, each
holder of a Right (except as set forth below) shall thereafter have the right to
receive, upon exercise and payment of the Purchase Price, common stock of the
acquiring company having a value equal to twice the Purchase Price. The events
set forth in this paragraph and in the immediately preceding paragraph are
referred to as the "Triggering Events."
-----------------
Upon the occurrence of a Triggering Event that entitles Rights holders to
purchase securities or assets of the Company, Rights that are or were owned by
the Acquiring Person, or any affiliate or associate of such Acquiring Person, on
or after such Acquiring Person's Stock Acquisition Date shall be null and void
and shall not thereafter be exercised by any person (including subsequent
transferees). Upon the occurrence of a Triggering Event that entitles Rights
holders to purchase common stock of a third party, or upon the authorization of
an Exchange, Rights that are or were owned by any Acquiring Person or any
affiliate or associate of any Acquiring Person on or after such Acquiring
Person's Stock Acquisition Date shall be null and void and shall not thereafter
be exercised by any person (including subsequent transferees).
The Purchase Price payable, and the number of shares of Preferred Stock,
Common Stock or other securities or property issuable upon exercise of the
Rights are subject to adjustment from time to time to prevent dilution.
At any time (including a time after any person becomes an Acquiring
Person), the Company may exchange all or part of the Rights (except as set forth
below) for shares of Common Stock (an "Exchange") at an exchange ratio of one
--------
share per Right, as appropriately adjusted to reflect any stock split or similar
transaction.
At any time until ten days following the Stock Acquisition Date, the
Company may redeem the Rights in whole, but not in part, at a price of $.01 per
Right (the "Redemption Price"). Under certain circumstances set forth in the
----------------
Rights Agreement, the decision to make an Exchange or to redeem the Rights shall
require the concurrence of a majority of the Continuing Directors (as defined
below). Additionally, the Company may thereafter but prior to the occurrence of
a Triggering Event redeem the Rights in whole, but not in part, at the
Redemption Price provided that such redemption is incidental to a merger or
other business combination transaction involving the Company that is approved by
a majority of the Continuing Directors, does not involve an Acquiring Person,
and in which all holders of Common Stock are treated alike. After the
redemption period has expired, the Company's right of redemption may be
reinstated if an Acquiring Person reduces his beneficial ownership to less than
15% 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 ordering redemption of the Rights, with,
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<PAGE>
where required, the concurrence of the Continuing Directors, the Rights will
terminate and the only right of the holders of Rights will be to receive the
Redemption Price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including, without limitation, the right
to vote or to receive dividends. While the distribution of the Rights will not
be taxable to shareholders or to the Company, shareholders may, depending upon
the circumstances, recognize taxable income in the event that the Rights become
exercisable for Preferred Stock (or other consideration) of the Company or for
common stock of the acquiring company as set forth above.
Other than certain provisions relating to the principal economic terms of
the Rights, any of the provisions of the Rights Agreement may be amended by the
Board prior to the Distribution Date. After the Distribution Date, the
provisions of the Rights Agreement may be amended by the Board (in certain
circumstances, only with the concurrence of the Continuing Directors) in order
to cure any ambiguity, to make certain other changes that do not adversely
affect the interests of holders of Rights (excluding the interests of any
Acquiring Person), or to shorten or lengthen any time period under the Rights
Agreement; provided, however, no amendment to adjust the time period governing
redemption may be made at such time as the Rights are not redeemable.
The Rights Agreement (which includes as Exhibit A the form of Rights
Certificate) is attached to this Registration Statement as an exhibit and is
incorporated herein by reference. The foregoing description of the Rights is
qualified in its entirety by reference to the Rights Agreement and its exhibits.
ITEM 2. EXHIBITS.
---------
The following exhibits are filed as a part hereof:
1. Rights Agreement, dated as of July 3, 1998 by and between the Company
and First Union National Bank, as Rights Agent.
2. Form of Rights Certificate, included as Exhibit A to the Rights
Agreement.
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<PAGE>
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereto duly authorized.
TEMPLATE SOFTWARE, INC.
(Registrant)
By: /s/ E. Linwood Pearce
-------------------------
E. Linwood Pearce
Chief Executive Officer
Dated: July 10, 1998
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<PAGE>
EXHIBIT 99.1
________________________________________________________________________________
TEMPLATE SOFTWARE, INC.
AND
FIRST UNION NATIONAL BANK
RIGHTS AGENT
_______________
RIGHTS AGREEMENT
DATED AS OF JULY 3, 1998
________________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 1. Certain Definitions.............................................. 1
Section 2. Appointment of Rights Agent...................................... 5
Section 3. Issue of Rights and 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;
Restriction on Transfer of Rights.............................. 9
Section 8. Cancellation and Destruction of Rights Certificates.............. 11
Section 9. Reservation and Availability Preferred Stock..................... 11
Section 10. Preferred Stock Record Date...................................... 12
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or Number
of Rights...................................................... 13
Section 12. Certificates 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.......................... 22
Section 15. Rights of Action................................................. 23
Section 16. Agreement of Rights Holders...................................... 23
Section 17. Rights Certificate Holder Not Deemed a Shareholder............... 24
Section 18. Concerning the Rights Agent...................................... 24
Section 19. Merger or Consolidation or Change of Name of Rights Agent........ 25
</TABLE>
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<TABLE>
<S> <C>
Section 20. Duties of Rights Agent.......................................... 26
Section 21. Change of Rights Agent.......................................... 28
Section 22. Issuance of New Rights Certificates............................. 29
Section 23. Redemption and Termination...................................... 29
Section 24. Exchange........................................................ 30
Section 25. Notice of Certain Events........................................ 31
Section 26. Notices......................................................... 32
Section 27. Supplements and Amendments...................................... 33
Section 28. Successors...................................................... 34
Section 29. Determinations and Actions by the Board of Directors, etc....... 34
Section 30. Benefits of this Agreement...................................... 34
Section 31. Severability.................................................... 34
Section 32. Governing Law................................................... 35
Section 33. Counterparts.................................................... 35
Section 34. Descriptive Headings............................................ 35
</TABLE>
Exhibit A -- Form of Rights Certificate
Exhibit B -- Form of Summary of Rights
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<PAGE>
RIGHTS AGREEMENT
----------------
This Rights Agreement (this "Agreement"), dated as of July 3, 1998, between
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TEMPLATE SOFTWARE, INC., a Virginia corporation (the "Company"), and FIRST UNION
-------
NATIONAL BANK, a national banking corporation (the "Rights Agent"), provides as
------------
follows:
RECITALS
--------
WHEREAS, the Board of Directors of the Company has authorized and declared
a dividend distribution of one Right (as hereinafter defined) for each
outstanding share of Common Stock of the Company to shareholders of record at
the Close of Business (as hereafter defined) on the Record Date (as hereinafter
defined) and has authorized the issuance of one Right (as such number may
hereinafter be adjusted as provided herein) for each share of Common Stock that
shall be issued between the Record Date and the earliest of the Distribution
Date, the Redemption Date or the Expiration Date (as such terms are hereinafter
defined) unless the Board of Directors provides to the contrary before or at the
time of issuance of any such Common Stock, each Right initially representing the
right to purchase one Unit of Preferred Stock, (as hereinafter defined), and
being in the form of the Rights Certificate attached hereto as Exhibit A, upon
---------
the terms and subject to the conditions hereof (the "Rights");
------
AGREEMENT
---------
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
-------------------
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or which, alone or
----------------
together with all Affiliates and Associates of such Person, shall at any time be
the Beneficial Owner of either or both of (i) 15% or more of the shares of
Common Stock then outstanding or (ii) 15% or more of the Rights then
outstanding, but shall not include (a) 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, (b) any such Person
who has become and is such a Beneficial Owner solely because (1) of a reduction
in the aggregate number of shares of Common Stock outstanding due to a
repurchase of shares of Common Stock by the Company since the last date on which
such Person acquired Beneficial Ownership of any shares of Common Stock or (2)
it acquired such Beneficial Ownership in the good faith belief that such
acquisition would not (A) cause such Beneficial Ownership to equal or exceed 15%
of the shares of Common Stock then outstanding and such Person relied in good
faith in computing the percentage of its Beneficial Ownership on publicly filed
reports or documents of the Company that are inaccurate or out-of-date or (B)
otherwise cause a Distribution Date or the adjustment provided for in Section
11(a) to occur. Notwithstanding clause (b)(2) of the preceding sentence, if any
Person that is not an Acquiring Person due to such clause (b)(2) does not reduce
its percentage of
<PAGE>
Beneficial Ownership of shares of Common Stock to less than 15% by the Close of
Business on the fifth Business Day after notice from the Company (the date of
notice being the first day) that such Person's Beneficial Ownership of shares of
Common Stock so equals or exceeds 15%, such Person shall, at the end of such
five Business Day period, become an Acquiring Person (and such clause (b)(2)
shall no longer apply to such Person). For purposes of this definition, the
determination whether any Person acted in "good faith" shall be conclusively
determined by the Board of Directors of the Company, acting by a vote of those
directors of the Company whose approval would be required to redeem the Rights
under Section 23.
(b) "Affiliate" and "Associate" shall have the respective meanings
--------- ---------
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Exchange Act.
(c) A Person shall be deemed the "Beneficial Owner" of, and shall be
----------------
deemed to "beneficially own," any securities:
----------------
(i) that such Person or any of such Person's Affiliates or
Associates is deemed to "beneficially own" within the meaning of Rule 13d-3
of the General Rules and Regulations under the Exchange Act;
(ii) that such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to acquire (whether such
right is exercisable immediately or only after the passage of time)
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 to be 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 the Rights.
(iii) that such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote, 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 (iii) 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 solicitation made pursuant to, and in accordance with,
the applicable provisions of the General Rules and Regulations under the
Exchange Act, and (B) the beneficial ownership of such security is not also
then reportable by such Person on Schedule 13D or Schedule 13G under the
Exchange Act (or any comparable or successor report); or
(iv) that are beneficially owned, directly or indirectly, by any
other Person (or any Affiliate or Associate thereof) with which such Person
(or any of such Person's Affiliates or Associates) has any agreement,
arrangement or understanding (whether or not in writing), for the purpose
of acquiring, holding, voting (except pursuant to a revocable proxy as
described in the proviso to subparagraph (iii) of this Section 1(c)) or
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<PAGE>
disposing of any voting securities of the Company; provided, however, that
notwithstanding any provision of this Section 1(c), any Person engaged in
business as an underwriter of securities who acquires any securities of the
Company through such Person's participation in good faith in a firm
commitment underwriting registered under the Securities Act of 1933, as
amended (the "Act"), shall not be deemed the "Beneficial Owner" of, or to
"beneficially own," such securities until the expiration of 40 days after
the date of acquisition; and provided, further, that in no case shall an
officer or director of the Company be deemed (x) the beneficial owner of
any securities beneficially owned by another officer or director of the
Company solely by reason of actions undertaken by such persons in their
capacity as officers or directors of the Company; or (y) the beneficial
owner of securities held of record by the trustee of any employee benefit
plan of the Company or any Subsidiary of the Company for the benefit of any
employee of the Company or any Subsidiary of the Company, other than the
officer or director, by reason of any influence that such officer or
director may have over the voting of the securities held in the plan.
(d) "Business Day" shall mean any day other than a Saturday, Sunday or a
------------
day on which national banking institutions in the State of North Carolina are
authorized or obligated by law or executive order to close.
(e) "Close of Business" on any given date shall mean 5:00 P.M. (Virginia
-----------------
time) on such date; provided, however, that if such date is not a Business Day
it shall mean 5:00 P.M. (Virginia time) on the next succeeding Business Day.
(f) "Common Stock" shall mean the common stock, $.01 par value per share,
------------
of the Company, except that "Common Stock" when used with reference to any
Person other than the Company, if such Person is a corporation, shall mean the
capital stock of such Person with the greatest voting power, or the equity
securities or other equity interest in such Person having power to control or
direct the management of such Person, or any shares of capital stock or other
equity interests into which the foregoing shall be reclassified or changed.
(g) "Continuing Director" shall mean any member of the Board of Directors
-------------------
of the Company, while a member of the Board, who is not an Acquiring Person, or
an Affiliate or Associate of an Acquiring Person, or a representative of an
Acquiring Person or of any such Affiliate or Associate, and (i) who is a member
of the Board on the date of this Agreement or (ii) whose subsequent nomination
for election or election to the Board was recommended or approved by a majority
of the Continuing Directors serving at the time of such nomination or election.
(h) "Distribution Date" shall mean the earlier of (i) the Close of
-----------------
Business on the tenth day after the Stock Acquisition Date (as hereinafter
defined) or (ii) the close of business on the tenth business day after the date
that a tender or exchange offer by any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan 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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<PAGE>
upon consummation thereof, such Person would be an Acquiring Person
(irrespective of whether any shares were actually purchased pursuant to any such
offer).
(i) "Equivalent Shares" shall mean shares of Preferred Stock (as
-----------------
hereinafter defined) and any other class or series of capital stock of the
Company that is entitled to participate in dividends and other distributions,
including distributions upon the liquidation, dissolution or winding up of the
Company, on a proportional basis with the Common Stock. In calculating the
number of any class or series of Equivalent Shares for purposes of Section 11
hereof, the number of shares, or fractions of a share, of such class or series
of capital stock that is entitled to the same dividend or distribution as a
whole share of Common Stock shall be deemed to be one share.
(j) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended and in effect on the date of this Agreement, unless a different date is
otherwise specifically provided herein.
(k) "Exchange Date" shall mean the date on which the Board of Directors
-------------
authorizes the exchange of Rights for shares of Common Stock pursuant to Section
24 hereof.
(l) "Expiration Date" shall mean the earliest of (i) the close of business
---------------
on the Final Expiration Date, or (ii) the time at which the Rights are redeemed
as provided in Section 23 hereof, or (iii) the Exchange Date.
(m) "Final Expiration Date" shall mean 10 years from the date hereof.
---------------------
(n) "Person" shall mean any individual, firm, corporation, partnership or
------
other entity and any particular Person shall include any "group" acting as
described in Section 13(d)(3) of the Exchange Act.
(o) "Preferred Stock" shall mean shares of Series A Cumulative Preferred
---------------
Stock, without par value per share, of the Company.
(p) "Purchase Price" shall have the meaning set forth in Section 4(a)
--------------
hereof, as adjusted in accordance with this Agreement and as in effect from time
to time.
(q) "Record Date" shall mean the Close of Business on July 3, 1998.
-----------
(r) "Rights" shall mean the rights to purchase Preferred Stock (or other
------
securities) as provided in this Agreement and "Rights Certificate" shall have
------------------
the meaning set forth in Section 3(a) hereof.
(s) "Section 11(a)(ii) Event" shall mean any occurrence of the event
-----------------------
described in the first sentence of Section 11(a)(ii) hereof.
(t) "Section 13 Event" shall mean any event described in clause (w), (x),
----------------
(y) or (z) of Section 13(a) hereof.
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<PAGE>
(u) "Stock Acquisition Date" shall mean the first date of public
----------------------
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to Section 13(d) of the Exchange Act) by the
Company or an Acquiring Person that an Acquiring Person has become such.
(v) "Subsidiary" shall mean, with reference to any Person, any corporation
----------
or other entity of which an amount of voting securities sufficient to elect a
majority of the directors or Persons having similar authority of such
corporation or other entity is beneficially owned, directly or indirectly, by
such Person, or otherwise controlled by such Person.
(w) "Triggering Event" shall mean any Section 11(a)(ii) Event or any
----------------
Section 13 Event.
(x) "Unit" shall mean one one-hundredth of a share of Preferred Stock.
----
Section 2. Appointment of Rights Agent.
----------------------------
The Company hereby appoints the Rights Agent to act as agent for the
Company and the holders of the Rights (who, in accordance with Section 3 hereof,
shall prior to the Distribution Date also be holders of Common Stock) 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. Issue of Rights and Rights Certificates.
----------------------------------------
(a) Until the Distribution Date, (x) the Rights shall be evidenced
(subject to the provisions of paragraphs (b) and (c) 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
shall be transferable only in connection with the transfer of the underlying
shares of Common Stock (including a transfer to the Company). Subject to the
provisions of Section 7(e) hereof, as soon as practicable after the Company has
notified the Rights Agent of the occurrence of a Distribution Date, the Rights
Agent shall send by first-class, insured, postage prepaid mail, to each such
record holder of shares of the Common Stock as of the close of business on the
Distribution Date, at the address of such holder shown on the records of the
Company, one or more rights certificates, in substantially the form of Exhibit A
---------
hereto (the "Rights Certificates"), evidencing one Right for each share of
-------------------
Common Stock so held, subject to adjustment as provided herein. In the event
that an adjustment in the number of Rights per share of Common Stock has been
made pursuant to Section 11(o) 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 shall be evidenced solely by such Rights Certificates.
(b) A Summary of Rights, in substantially the form attached hereto as
Exhibit B (the "Summary of Rights"), shall be sent by the Company by first-
- - --------- -----------------
class, postage prepaid mail, to each record holder of the Common Stock on the
Record Date, at the address of each such holder
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<PAGE>
shown on the records of the Company. Until the Distribution Date, the Rights
shall be evidenced by such certificates evidencing 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 evidencing shares of Common
Stock in respect of which Rights have been issued shall also constitute, subject
to the provisions of Section 7(e) hereof, the transfer of the Rights associated
with such shares of Common Stock.
(c) Unless the Board of Directors by resolution adopted at or before the
time of the issuance (including pursuant to the exercise of rights under the
Company's benefit plans) of any shares of Common Stock specifies to the
contrary, Rights shall be issued in respect of all shares of Common Stock that
are issued after the Record Date but prior to the earlier of the Distribution
Date or the Expiration Date. Certificates representing shares of Common Stock
outstanding prior to the Record Date that are issued upon transfer or exchange
of such Common Stock, shall also be deemed to be certificates for Rights, and
shall bear the following legend:
This certificate also evidences and entitles the holder hereof to certain
Rights as set forth in the Rights Agreement between Template Software, Inc.
(the "Company") and First Union National Bank, a national banking
-------
corporation (the "Rights Agent") dated as of July 3, 1998 (the "Rights
------------ ------
Agreement"), the terms of which are hereby incorporated herein by
---------
copy of which is on file reference and a at the principal offices of the
Company. Under certain circumstances, as set forth in the Rights Agreement,
such Rights will be evidenced by separate certificates and will no longer
be evidenced by this certificate. The Company will mail to the holder of
this certificate a copy of the Rights Agreement, as in effect on the date
of mailing, without charge promptly after receipt of a written request
therefor. Under certain circumstances set forth in the Rights Agreement,
Rights that are owned or that were previously owned by a Person who is, was
or becomes an Acquiring Person or any Affiliate or Associate of an
Acquiring Person may become null and void.
With respect to such certificates containing the foregoing legend, until
the earlier of (i) the Distribution Date or (ii) the Expiration Date, the Rights
associated with the Common Stock represented by such certificates shall be
evidenced by such certificates alone and registered holders of Common Stock
shall also be the registered holders of the associated Rights, and the transfer
of any of such certificates shall also constitute, subject to the provisions of
Section 7(e) hereof, the transfer of the Rights associated with the Common Stock
represented by such certificates.
In the event that the Company purchases or acquires any shares of Common
Stock after the Record Date but prior to the Distribution Date, any Rights
associated with such shares of Common Stock shall be deemed canceled and retired
so that the Company shall not be entitled to exercise any Rights associated with
the shares of Common Stock that are no longer outstanding.
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<PAGE>
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 substantially in
the form set forth in Exhibit A hereto and may have such marks of identification
or designation and such legends, summaries or endorsements printed thereon as
the Company may deem appropriate and as are not inconsistent with the provisions
of this Agreement, or as may be required to comply with any applicable law or
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
Distribution Date, and on their face shall entitle the holders thereof to
purchase such number of Units of Preferred Stock as shall be set forth therein
at the price set forth therein (such exercise price per unit, 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 or
any Associate or Affiliate of an Acquiring Person, (ii) a transferee of an
Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee after the Acquiring Person becomes such, or (iii) a transferee of an
Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee prior to or concurrently with the Acquiring Person becoming such and
receives such Rights pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person to holders of equity interests in such
Acquiring Person or to any Person with whom such Acquiring Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer that the Board of Directors of the Company has
determined is part of a plan, arrangement or understanding which has 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 or an Affiliate or
an Associate of an Acquiring Person. Accordingly, this Rights Certificate
and the Rights represented hereby may become void in the circumstances
specified in Section 7(e) of the Rights Agreement.
The Company shall notify the Rights Agent, and, if such notification is
given orally, the Company shall confirm promptly the same in writing, at such
time as the Company has notice that any Person constitutes an Acquiring Person
or an Affiliate or Associate of an Acquiring Person, and until such notice is
received by the Rights Agent the Rights Agent may conclusively presume for all
purposes that the foregoing legend need be imprinted only on Right Certificates
beneficially owned by Persons that the Company has previously identified to the
Rights Agent as constituting an Acquiring Person or an Affiliate or Associate of
an Acquiring Person and transferees of any such Persons.
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<PAGE>
Section 5. Countersignature and Registration.
----------------------------------
(a) The Rights Certificates shall be executed on behalf of the Company by
its Chairman of the Board, Chief Executive Officer, President or any Vice
President, either manually or by facsimile signature, and shall have affixed
thereto the Company's seal or a facsimile thereof which shall be attested by the
Secretary or an Assistant Secretary of the Company, either manually or by
facsimile signature. The Rights Certificates shall be countersigned manually or
by facsimile by the Rights Agent and shall not be valid for any purpose unless
so countersigned. The Rights Certificates shall be countersigned by an
authorized signatory of the Rights Agent but it shall not be necessary for the
same signatory to countersign all of the Rights Certificates issued hereunder.
In case any officer of the Company who shall have signed any of the Rights
Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Rights Certificates, nevertheless, may be countersigned by the Rights Agent
and issued and delivered by the Company with the same force and effect as though
the person who signed such Rights Certificates had not ceased to be such officer
of the Company; and any Rights Certificates may be signed on behalf of the
Company by any person who, at the actual date of the execution of such Rights
Certificate, shall be a proper officer of the Company to sign such Rights
Certificate, although at the date of the execution of this Agreement any such
person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or cause to
be kept, at its principal office or offices designated as the appropriate place
for surrender of Rights Certificates upon exercise or transfer, books for
registration and transfer of the Rights Certificates issued hereunder. Such
books shall show the names and addresses of the respective holders of the Rights
Certificates, the number of Rights evidenced on its face by each of the Rights
Certificates and the date of each of the Rights Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Rights
------------------------------------------------------
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.
- - -----------------------------------------------------------------------
(a) 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, (other than Rights Certificates that have
become void pursuant to Section 7(e) hereof or that have been exchanged pursuant
to Section 24 hereof) entitling the registered holder to purchase a like number
of Units of Preferred Stock (or, following a Triggering Event, Common Stock,
other securities, cash or other assets, as the case may be) as the Rights
Certificate or Certificates surrendered then entitle 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
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<PAGE>
and shall have provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request. Thereupon the Rights Agent
shall 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 from the holder of the Rights 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) Subject to Section 7(e) hereof, 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; Restriction on Transfer 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), Section 11(a)(ii), Section 11(a)(iii),
Section 13, Section 23(a), and Section 24 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, except as otherwise provided
in Section 11(a)(ii) hereof, with payment of the aggregate Purchase Price with
respect to the total number of Units of Preferred Stock (or Common Stock or
other securities or property, as the case may be) as to which surrendered Rights
are then exercisable, at or prior to the Expiration Date.
(b) The Purchase Price for each Unit of Preferred Stock pursuant to the
exercise of a Right shall initially be $50.00 and shall be subject to adjustment
from time to time as provided in Section 11 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 Unit of Preferred Stock (or Common Stock, other securities or
property, as the case may be) to be purchased as set forth below and an amount
equal to any applicable transfer tax, the Rights Agent shall, subject to Section
20(k) hereof, thereupon promptly, (i) (A) requisition from any transfer agent of
the Units of Preferred Stock (or make available, if the Rights Agent is the
transfer agent for such shares) certificates for the total number of Units of
Preferred Stock to be purchased and the Company hereby irrevocably authorizes
its transfer agent to comply with all such requests, or (B) if the Company shall
have elected to deposit the total number of Units of Preferred Stock issuable
upon exercise of the
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<PAGE>
Rights hereunder with a depositary agent, requisition from the depositary agent
depositary receipts representing such number of Units of Preferred Stock as are
to be purchased (in which case certificates for the Units of Preferred Stock
represented by such receipts shall be deposited by the transfer agent with the
depositary agent) and the Company will direct the depositary agent to comply
with such request, (ii) requisition from the Company the amount of cash, if any,
to be paid in lieu of fractional shares in accordance with Section 14 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 (as such amount may be reduced (including to zero) pursuant
to Section 11(a)(iii) hereof) may be made in cash or by certified bank check or
bank draft payable to the order of the Company. In the event that the Company is
obligated to issue other securities of the Company, pay cash and/or distribute
other property pursuant to Section 11(a) hereof, the Company will make all
arrangements necessary so that such other securities, cash and/or other property
are available for distribution by the Rights Agent, if and when appropriate.
(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 or an Associate or Affiliate of an Acquiring
Person, (ii) a transferee of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee after the Acquiring Person becomes such, or
(iii) a transferee of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee prior to or concurrently with the Acquiring
Person becoming such and receives such Rights pursuant to either (A) a transfer
(whether or not for consideration) from the Acquiring Person to holders of
equity interests in such Acquiring Person or to any Person with whom the
Acquiring 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 any other Person as a result of its failure to make
any determinations with respect to an Acquiring Person or its Affiliates or
Associates, or any transferee thereof, 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
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<PAGE>
election to purchase set forth on the reverse side of the Rights Certificate
surrendered for such exercise and (ii) provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Rights Certificates.
----------------------------------------------------
All Rights Certificates surrendered for the purpose of exercise, transfer,
split up, combination or exchange shall, if surrendered to the Company or any of
its agents, be delivered to the Rights Agent for cancellation or in canceled
form, or, if surrendered to the Rights Agent, shall be canceled by it, and no
Rights Certificates shall be issued in lieu thereof except as expressly
permitted by any of the provisions of this Agreement. The Company shall deliver
to the Rights Agent for cancellation and retirement, and the Rights Agent shall
so cancel and retire, any other Rights Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall
deliver all canceled Rights Certificates to the Company, or shall, at the
written request of the Company, destroy such canceled Rights Certificates, and
in such case shall deliver a certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of Preferred Stock.
------------------------------------------------
(a) The Company covenants and agrees that it will cause to be reserved and
kept available out of its authorized and unissued shares of Preferred Stock (or,
following the occurrence of a Triggering Event, out of its authorized and
unissued Preferred Stock or other securities, as the case may be), the number of
shares of Preferred Stock (or such other securities) that, except as provided in
Section 11(a)(iii) hereof, will be sufficient from time to time to permit the
exercise in full of all outstanding Rights and all Rights that are at the time
issuable, in accordance with the provisions of this Agreement.
(b) So long as the shares of Preferred Stock (and, following the occurrence
of a Triggering Event, any other securities) 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.
(c) The Company shall use its best efforts (i) to file, as soon as
practicable following the earliest date after the first occurrence of a Section
11(a)(ii) Event on which the consideration to be delivered by the Company upon
exercise of the Rights has been determined in accordance with Section 11(a)(ii)
and (iii) hereof, or as soon as is required by law following the Distribution
Date, as the case may be, a registration statement under the Act on an
appropriate form, with respect to the securities purchasable upon exercise of
the Rights, (ii) to cause such registration statement to become effective as
soon as practicable after such filing, and (iii) to cause such registration
statement to remain effective (with a prospectus at all times meeting the
requirements of the Act) until the earlier of (A) the date as of which the
Rights are no longer exercisable for such securities, and (B) the Expiration
Date. The Company will also take such action as may be appropriate under, or to
ensure compliance with, the securities or "blue sky" laws of the various states
in connection with the exercisability of the Rights. The Company may
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<PAGE>
temporarily suspend, for a period of time not to exceed ninety 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, and notify the Rights Agent,
that the exercisability of the Rights has been temporarily suspended. The
Company shall also issue 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 Preferred Stock (or other
securities, as the case may be) delivered upon exercise of the Rights shall, at
the time of delivery of the certificates for such shares (subject to payment of
the Purchase Price), be duly authorized, validly issued, 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 that may be
payable in respect of the issuance or delivery of the Rights Certificates and of
any certificates for shares of Preferred Stock (or other securities, as the case
may be) upon the exercise of Rights. The Company shall not, however, be
required to pay any transfer tax that 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 Preferred Stock (or other securities, as the
case may be) in respect of a name other than that of, the registered holder of
the Rights Certificates evidencing Rights surrendered for exercise or to issue
or deliver any certificates for a number of shares of Preferred Stock (or other
securities, as the case may be) in a name other than that of the registered
holder upon the exercise of any Rights until such tax 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 Units of
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 Units of Preferred Stock (or other securities, as the case may
be) represented thereby on, and such certificate shall be dated, the date upon
which the Rights Certificate evidencing such Rights was duly surrendered and
payment of the Purchase Price (and all applicable transfer taxes) was made;
provided, however, that if the date of such surrender and payment is a date upon
which the Preferred Stock (or other securities, as the case may be) transfer
books of the Company are closed, such Person shall be deemed to have become the
record holder of such shares (fractional or otherwise) on, and such certificate
shall be dated, the next succeeding Business Day on which such transfer books
are open. Prior to the exercise of the Rights evidenced thereby, the holder of
a Rights Certificate as such 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
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<PAGE>
distributions or to exercise any preemptive rights, and shall not be entitled to
receive any notice of any proceedings of the Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or
----------------------------------------------------------
Number of Rights.
- - -----------------
The Purchase Price, and 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 Preferred Stock payable in
shares of Preferred Stock, (B) subdivide the outstanding Preferred Stock,
(C) combine the outstanding Preferred Stock into a smaller number of
shares, or (D) issue any shares of its capital stock in a reclassification
of the Preferred Stock (including any such reclassification in connection
with a consolidation or merger in which the Company is the continuing or
surviving corporation), except as otherwise provided in this Section 11(a),
the Purchase Price in effect at the time of the record date for such
dividend or of the effective date of such subdivision, combination or
reclassification, and the number and kind of shares of Preferred Stock or
the number and kind of shares of other capital stock, as the case may be,
issuable on such date, shall be proportionately adjusted so that the holder
of any Right exercised after such time shall be entitled to receive, upon
payment of the Purchase Price then in effect, the aggregate number of
shares of Preferred Stock or the number and kind of shares of other capital
stock, as the case may be, that, if such Right had been exercised
immediately prior to such date and at a time when the 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. If an event occurs that
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) Subject to Section 23 and Section 24 hereof, in the event any
Person becomes an Acquiring Person, then, proper provision shall be made by
the Company so that each record holder of each Right (except as provided in
Section 7(e) hereof) shall thereafter have the right to receive, upon
exercise thereof for the Purchase Price in accordance with terms of this
Agreement, such number of Units of Preferred Stock (or, in lieu of
Preferred Stock, at the option of the Company and to the extent available,
such number of shares of Common Stock) as shall equal the result obtained
by multiplying the Purchase Price by a fraction, the numerator of which is
the number of Units of Preferred Stock for which a Right is then
exercisable and the denominator of which is 50% of the current market price
of a share of Common Stock (determined pursuant to Section 11(d) hereof) on
the date of the first occurrence of a Section 11(a)(ii) Event (such result
being hereinafter referred to as the "Adjustment Shares").
-----------------
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<PAGE>
(iii) To the extent that the number of shares of Preferred Stock that
are authorized by the Company's Articles of Incorporation but not
outstanding or reserved for issuance for purposes other than upon exercise
of the Rights is not sufficient to permit the exercise in full of the
Rights in accordance with the foregoing subparagraph (ii) of this Section
11(a), and subject to such limitations as are necessary to prevent a
default under any agreement for money borrowed as presently constituted to
which the Company is a party and subject to any limitations contained in
Section 13.1-653 of the Virginia Stock Corporation Act, the Company shall:
(A) determine the excess of (1) the value of the Adjustment Shares issuable
upon the exercise of a Right (the "Current Value"), over (2) the Purchase
-------------
Price (such excess being hereinafter referred to as the "Spread"), and (B)
------
with respect to each Right, make adequate provision to substitute for such
unavailable Adjustment Shares, upon payment of the applicable Purchase
Price, (1) cash, (2) a reduction in the Purchase Price, (3) other equity
securities of the Company, (4) debt securities of the Company, (5) other
assets, or (6) any combination of the foregoing, having, together with the
Adjustment Shares issued upon exercise of such Right, an aggregate value
equal to the Current Value, where such aggregate value has been determined
by the Board of Directors of the Company based upon the advice of a
nationally recognized investment banking firm selected by the Board of
Directors of the Company; provided, however, if the Company shall not have
made adequate provision to deliver value pursuant to clause (B) above
within 30 days following the first occurrence of a Section 11(a)(ii) Event,
then the Company shall be obligated to deliver, upon the surrender for
exercise of a Right and without requiring payment of the Purchase Price,
shares of Preferred Stock of the Company or Common Stock (to the extent
such securities are available) and then, if necessary, cash, which
securities and/or assets in the aggregate are equal to the Spread. If the
Board of Directors of the Company shall determine in good faith that it is
likely that sufficient additional shares of preferred stock of the Company
or Common Stock could be authorized for issuance upon exercise in full of
the Rights, the 30 day period set forth above may be extended to the extent
necessary, but not more than 90 days following the first occurrence of a
Section 11(a)(ii) Event, in order that the Company may seek shareholder
approval for the authorization of such additional shares (such period, as
it may be extended, the "Substitution Period"). To the extent that the
-------------------
Company determines that some action need be taken pursuant to the first
and/or second sentences of this Section 11(a)(iii), the Company (x) shall
provide, subject to Section 7(e) hereof, that such action shall apply
uniformly to all outstanding Rights, and (y) may suspend the exercisability
of the Rights until the expiration of the Substitution Period in order to
seek any authorization of additional shares and/or to decide the
appropriate form of distribution to be made pursuant to such first sentence
and to determine the value thereof. In the event of any such suspension,
the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a
public announcement at such time as the suspension is no longer in effect.
For purposes of this Section 11(a)(iii), the value of the Common Stock
shall be the current market price (as determined pursuant to Section 11(d)
hereof) per share of the Common Stock on the date of the first occurrence
of a Section 11(a)(ii) Event.
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<PAGE>
(b) If at any time after the date of this Agreement the Company shall fix a
record date for the issuance of rights, options or warrants to all holders of
Common Stock or of any class or series of Equivalent Shares entitling such
holders (for a period expiring within 45 calendar days after such record date)
to subscribe for or to purchase Common Stock or Equivalent Shares (or securities
convertible into Common Stock or Equivalent Shares) at a price per share (or
having a conversion price per share, if a security convertible into Common Stock
or Equivalent Shares) less than the current market price of such Common Stock or
Equivalent Shares on such record date, then, in each such case, each Right
outstanding immediately prior to such record date shall thereafter evidence the
right to purchase, for the Purchase Price, that number of Units of Preferred
Stock or Equivalent Shares obtained by multiplying the number of Units of
Preferred Stock issuable upon exercise of a Right immediately prior to such
record date by a fraction, the numerator of which shall be the total number of
shares of Common Stock and Equivalent Shares (if any) outstanding on such record
date plus the number of additional shares of Common Stock and Equivalent Shares
(if any) to be offered for subscription or purchase (or into which the
convertible securities so to be offered are initially convertible) and the
denominator of which shall be the total number of shares of Common Stock and
Equivalent Shares (if any) outstanding on such record date plus the number of
shares of Common Stock or Equivalent Shares, as the case may be, that the
aggregate offering price of the total number of shares of Common Stock or
Equivalent Shares, as the case may be, 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. In case such subscription price may be
paid in a consideration, part or all of which shall 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. Common Stock and Equivalent Shares
owned by or held for the account of the Company or any Subsidiary 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, each Right
shall be adjusted to evidence the right to receive that number of Units of
Preferred Stock that such Right would have entitled the holder to receive, for
the Purchase Price, if such record date had not been fixed.
(c) If at any time after the date of this Agreement the Company shall fix a
record date for the making of a distribution to all holders of Common Stock or
of any class or series of Equivalent Shares (including any such distribution
made in connection with a consolidation or merger in which the Company is the
continuing or surviving corporation) of cash (other than a regular quarterly
cash dividend of the Company in compliance with Section 13.1-653 of the Virginia
Stock Corporation Act), evidences of indebtedness, assets, securities (other
than Common Stock or any Equivalent Shares) or subscription rights, options or
warrants (excluding those referred to in Section 11(b) hereof), then, in each
such case, each Right outstanding immediately prior to such record date shall
thereafter evidence the right to purchase, for the Purchase Price, that number
of Units of Preferred Stock obtained by multiplying the number of Units of
Preferred Stock issuable upon exercise of a Right immediately prior to such
record date by a fraction, the numerator of which shall be the current market
price of a share of Common Stock or an Equivalent Share on the record date and
the denominator of which shall be the current market price of a share of Common
Stock or an Equivalent Share on such record date less the fair market value (as
determined in good faith by the Board of Directors of the Company,
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<PAGE>
whose determination shall be described in a statement filed with the Rights
Agent) of the portion of the cash, evidences of indebtedness, assets or
securities so to be distributed or of such subscription rights, options or
warrants applicable to a share of Common Stock or an Equivalent Share, as the
case may be. Such adjustments shall be made successively whenever such a record
date is fixed; and in the event that such distribution is not so made, each
Right shall be adjusted to evidence the right to receive that number of Units of
Preferred Stock that such Right would have entitled the holder to receive, for
the Purchase Price, if such record date had not been fixed.
(d) (i) For the purpose of any computation hereunder, other than
computations made pursuant to Section 11(a)(iii) hereof, the "current
market price" per share of Common Stock on any date shall be deemed to be
the average of the daily closing prices per share of such Common Stock for
the 30 consecutive Trading Days (as such term is hereinafter defined)
immediately prior to such date, and for purposes of computations made
pursuant to Section 11(a)(iii) hereof, the "current market price" per share
of Common Stock on any date shall be deemed to be the average of the daily
closing prices per share of such Common Stock for the ten consecutive
Trading Days immediately following such date; provided, however, that in
the event that the current market price per share of the Common Stock is
determined during a period following the announcement by the issuer of such
Common Stock of (A) a dividend or distribution on such Common Stock payable
in shares of such Common Stock or securities convertible into shares of
such Common Stock (other than the Rights), or (B) any subdivision,
combination or reclassification of such Common Stock, and prior to the
expiration of the requisite 30 Trading Day or ten Trading Day period, as
set forth above, 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"
shall be properly adjusted to take into account ex-dividend trading. 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 by the National Association of
Securities Dealers, Inc. Automated Quotation System ("Nasdaq") or, if the
------
shares of Common Stock are not listed or admitted to trading on Nasdaq, as
reported in the principal consolidated transaction reporting system with
respect to securities listed on the principal national securities exchange
on which the shares of Common Stock are listed or admitted to trading or,
if the shares of Common Stock are not listed or admitted to trading on any
national securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter
market, as reported by Nasdaq or such other system then in use, or, if on
any such date the shares of Common Stock are not quoted by any such
organization, the average of the closing bid and asked prices as furnished
by a professional market maker making a market in the Common Stock selected
by the Board of Directors of the Company. If on any such date no market
maker is making a market in the Common Stock, the fair value of such shares
on such date as determined in good faith by the Board 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 shares of Common
Stock are listed or admitted to
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<PAGE>
trading is open for the transaction of business or, if the shares of Common
Stock are not listed or admitted to trading on any national securities
exchange, a Business Day. If the Common Stock is not publicly held or not
so listed or traded, "current market price" per share shall mean the fair
value per share as determined in good faith by the Board of Directors of
the Company, whose determination shall be described in a statement filed
with the Rights Agent and shall be conclusive for all purposes.
(ii) For the purpose of any computation hereunder, the "current market
price" per share of Preferred Stock shall be determined in the same manner
as set forth above for the Common Stock in Section 11(d)(i) hereof (other
than the last sentence thereof). If the current market price per share of
Preferred Stock cannot be determined in the manner provided above or if the
Preferred Stock is not publicly held or listed or traded in a manner
described in clause (i) of this Section 11(d), the "current market price"
per share of Preferred Stock shall be conclusively deemed to be an amount
equal to 100 (as such number may be appropriately adjusted for such events
as stock splits, stock dividends and recapitalizations with respect to the
Common Stock and Preferred Stock occurring after the date of this
Agreement) multiplied by the current market price per share of the Common
Stock. If neither the Common Stock nor the Preferred Stock is publicly
held or so listed or traded, "current market price" per share of the
Preferred Stock shall mean the fair value per share as determined in good
faith by the Board of Directors of the Company, whose determination shall
be described in a statement filed with the Rights Agent and shall be
conclusive for all purposes. For all purposes of this Agreement, the
"current market price" of one one-hundredth of a share of Preferred Stock
shall be equal to the "current market price" of one share of Preferred
Stock divided by 100.
(e) Anything herein to the contrary notwithstanding, no adjustment in the
number of Units of Preferred Stock for which a Right is exercisable or in the
Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least one percent in such number of shares or in the
Purchase Price; provided, however, that any adjustments that 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 ten-thousandth of a Unit
of Preferred Stock, as the case may be. Notwithstanding the first sentence of
this Section 11(e), any adjustment required by this Section 11 shall be made no
later than the earlier of (i) three years from the date of the transaction that
mandates such adjustment, or (ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section 11(a) or 13(a)
hereof, the holder of any Right thereafter exercised shall become entitled to
receive any shares of capital stock other than Preferred Stock, thereafter the
number of such other shares so receivable upon exercise of any Right and if
required, the Purchase Price thereof shall be subject to adjustment from time to
time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Preferred Stock contained in Section 11(a), (b),
(c), (e), (g), (h), (i), (k) and (l) hereof, and the provisions of Sections 7,
9, 10, 13 and 14 hereof with respect to the Preferred Stock shall apply on like
terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the number or kind of shares purchasable upon exercise of the
Rights or to the Purchase Price
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<PAGE>
hereunder shall evidence the right to purchase, at the adjusted Purchase Price,
the adjusted number of Units of Preferred Stock or other securities 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 below
in this Section 11(h), upon each adjustment of the Purchase Price as a result of
the calculations made in Section 11(b) and (c), each Right outstanding
immediately prior to the making of such adjustment shall thereafter evidence the
right to purchase, at the adjusted Purchase Price, that number of Units of
Preferred Stock obtained by (i) multiplying (x) the number of Units of Preferred
Stock covered by a Right immediately prior to this adjustment by (y) the
Purchase Price in effect immediately prior to such adjustment and (ii) dividing
the product so obtained by the Purchase Price in effect immediately after such
adjustment of the Purchase Price. On or after the date of any adjustment of the
Purchase Price, in lieu of any adjustment in the number of Units of Preferred
Stock or any other capital stock purchasable upon the exercise of a Right, the
Company may elect to adjust the number of Rights. Each of the Rights
outstanding after the adjustment in the number of Rights shall be exercisable
for the number of Units of Preferred Stock for which a Right was exercisable
immediately prior to such adjustment. Each Right held of record prior to such
adjustment of the number of Rights shall become that number of Rights
(calculated to the nearest 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 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(h), 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.
(i) Irrespective of any adjustment or change in the Purchase Price or the
number of Units of Preferred Stock or the number and kind of other securities
issuable upon the exercise of the Rights, the Rights Certificates theretofore
and thereafter issued may continue to express the Purchase Price per Unit, the
number of Units and the other terms that were expressed in the initial Rights
Certificates issued hereunder.
(j) In any case in which this Section 11 shall require that an adjustment
be made effective as of a record date for a specified event, the Company may
elect to defer until the
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<PAGE>
occurrence of such event the issuance to the holder of any Right exercised after
such record date of the number of Units of Preferred Stock and other capital
stock or securities of the Company, if any, issuable upon such exercise over and
above the number of Units of Preferred Stock and other capital stock or
securities of the Company, if any, issuable upon such exercise before giving
effect to such adjustment; provided, however, that the Company shall deliver to
such holder a due bill 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.
(k) 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 Preferred Stock, (ii) issuance wholly for cash of any shares
of Preferred Stock at less than the current market price, (iii) issuance wholly
for cash of shares of Preferred Stock or securities that by their terms are
convertible into or exchangeable for shares of Preferred Stock, (iv) stock
dividend or (v) issuance of rights, options or warrants referred to in this
Section 11, hereafter made by the Company to holders of its Preferred Stock
shall not be taxable to such shareholders.
(l) 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 that complies with Section 11(m)
hereof), (ii) merge with or into any other Person (other than a Subsidiary of
the Company in a transaction that complies with Section 11(m) hereof), (iii)
effect a statutory share exchange with any Person (other than a Subsidiary of
the Company in a transaction that complies with Section 11(m) hereof), or (iv)
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(m) hereof), if at the time of or immediately after such
consolidation, merger, statutory share exchange or sale there are any rights,
warrants or other instruments or securities outstanding or agreements in effect
that would substantially diminish or otherwise eliminate the benefits intended
to be afforded by the Rights.
(m) The Company covenants and agrees that, after the Distribution Date, it
will not, except as permitted by Section 23 or Section 27 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.
(n) Anything in this Agreement to the contrary notwithstanding, in the
event that the Company shall at any time after the Record Date and prior to the
Distribution Date (i) declare a dividend on the outstanding shares of Common
Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common
Stock, or (iii) combine the outstanding Common Stock into a smaller number of
shares, the number of Rights associated with each share of Common Stock then
outstanding, or issued or delivered thereafter but prior to the Distribution
Date, shall be
-19-
<PAGE>
proportionately adjusted so that the number of Rights thereafter associated with
each share of Common Stock following any such event shall equal the result
obtained by multiplying the number of Rights associated with each share of
Common Stock immediately prior to such event by a fraction the numerator of
which shall be the total number of shares of Common Stock outstanding
immediately prior to the occurrence of the event and the denominator of which
shall be the total number of shares of Common Stock outstanding immediately
following the occurrence of such event.
Section 12. Certificates of Adjusted Purchase Price or Number of Shares.
------------------------------------------------------------
Whenever an adjustment is made as provided in Section 11 or 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 each transfer agent for the
Preferred Stock or the 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. The Rights Agent shall be
fully protected in relying on any such certificate and on any adjustment therein
contained, and shall not be deemed to have knowledge of any such adjustment
unless and until it shall have received such a certificate.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
------------------------------------------------------
Earning Power.
- - --------------
(a) In the event that, following the Stock Acquisition Date, directly or
indirectly, (w) the Company shall consolidate with, or merge with and into, any
other Person (other than a Subsidiary of the Company in a transaction that
complies with Section 11(m) hereof), and the Company shall not be the continuing
or surviving corporation of such consolidation or merger, (x) any Person (other
than a Subsidiary of the Company in a transaction that complies with Section
11(m) 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, (y) the Company shall be a party to a statutory share exchange with
any other Person (other than a Subsidiary of the Company in a transaction that
complies with Section 11(m) hereof) after which the Company is a Subsidiary of
any other Person, or (z) the Company shall sell or otherwise transfer (or one or
more of its Subsidiaries shall sell or otherwise transfer), in one transaction
or a series of related transactions, assets 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(m) hereof), then, and in each such case, proper provision shall
be made so that: (i) each record holder of a Right, except as provided in
Section 7(e) hereof, shall thereafter have the right to receive, upon the
exercise thereof at the then current Purchase Price in accordance with the terms
of this Agreement, such number of validly authorized and issued, fully paid,
nonassessable and freely tradable shares of Common Stock of the Principal Party
(as 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 shares of
Common Stock for which
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<PAGE>
a Right is exercisable immediately prior to the first occurrence of a Section 13
Event (or, if a Section 11(a)(ii) Event has occurred prior to the first
occurrence of a Section 13 Event, multiplying the number of such shares 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 (2) dividing that product (which, following the
first occurrence of a Section 13 Event, shall be referred to as the "Purchase
Price" for each Right for all purposes of this Agreement) by 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; and (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 ensure 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 (w), (x) or
(y) of the first sentence of Section 13(a) hereof, the Person that is the
issuer of any securities into which shares of Common Stock of the Company
are converted in such merger, consolidation or statutory share exchange,
and if no securities are so issued, the Person that is the other party to
such merger, consolidation or statutory share exchange; and
(ii) in the case of any transaction described in clause (z) of the
first sentence of Section 13(a) hereof, the Person that is the party
receiving the greatest portion of the assets or earning power transferred
pursuant to such transaction or transactions;
provided, however, that in any such case, (1) if the Common Stock of such
Person is not at such time and has not been continuously over the preceding
twelve-month period registered under Section 12 of the Exchange Act, and
such Person is a direct or indirect Subsidiary of another Person the Common
Stock of which is and has been so registered, "Principal Party" shall refer
to such other Person; and (2) in case such Person is a Subsidiary, directly
or indirectly, of more than one Person, the Common Stocks of two or more of
which are and have been so registered, "Principal Party" shall refer to
whichever of such Persons is the issuer of the Common Stock having the
greatest aggregate market value.
(c) The Company shall not consummate any such consolidation, merger,
statutory share exchange, sale or transfer unless the Principal Party shall have
a sufficient number of authorized shares of its Common Stock that have not been
issued or reserved for issuance to permit the exercise in full of the Rights in
accordance with this Section 13 and unless prior
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<PAGE>
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, statutory share
exchange or sale of assets mentioned in paragraph (a) of this Section 13, the
Principal Party will
(i) unless counsel for the Company has advised the Board in writing
that registration under the Act is not required, prepare and file a
registration statement under the Act on an appropriate form 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 similarly comply
with applicable state securities laws; and
(ii) deliver to record holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates that comply
in all respects with the requirements for registration on Form 10 under the
Exchange Act.
The provisions of this Section 13 shall similarly apply to successive
mergers or consolidations or statutory share exchanges or sales or other
transfers. In the event that a Section 13 Event shall occur at any time after
the occurrence of a Section 11(a)(ii) Event, the Rights that have not
theretofore been exercised shall thereafter become exercisable in the manner
described in Section 13(a) hereof.
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(n) hereof, or to
distribute Rights Certificates that evidence fractional Rights. In lieu of such
fractional Rights, there shall be paid to the registered holders of the Rights
Certificates with regard to which such fractional Rights would otherwise be
issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right. For purposes of this Section 14(a), the current market
value of a whole Right shall be the closing price of the Rights for the Trading
Day immediately prior to the date on which such fractional Rights would have
been otherwise issuable. The closing price of the Rights for any 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 Nasdaq or, if the Rights
are not listed or admitted to trading on Nasdaq, 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
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<PAGE>
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
Preferred Stock (other than fractions that are integral multiples of one one-
hundredth of a share of Preferred Stock) upon exercise of the Rights or to
distribute certificates that evidence fractional shares of Preferred Stock
(other than in such integral multiples). In lieu of fractional shares of
Preferred Stock that are not in such integral multiples, the Company may pay to
the registered holders of Rights Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same fraction of the
current market value of one one-hundredth of a share of Preferred Stock. For
purposes of this Section 14(b), the current market value of one one-hundredth of
a share of Preferred Stock shall be one one-hundredth of the current market
price of a share of 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 Right expressly waives
his right to receive any fractional Right 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 in respect of
which Rights have been issued); and any registered holder of any Rights
Certificate (or, prior to the Distribution Date, of such Common Stock), without
the consent of the Rights Agent or of the holder of any other Rights Certificate
(or, prior to the Distribution Date, of such 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 in the manner provided in such Rights Certificate and in this
Agreement. Without limiting the foregoing or any remedies available to the
holders of Rights, it is specifically acknowledged that the holders of Rights
would not have an adequate remedy at law for any breach of this Agreement and
shall be entitled to specific performance of the obligations hereunder and
injunctive relief against actual or threatened violations of the obligations
hereunder of any Person subject to this Agreement.
Section 16. Agreement of Rights Holders.
----------------------------
Every holder of a Right by accepting the same consents and agrees with the
Company and the Rights Agent and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable only in
connection with the transfer of Common Stock;
(b) after the Distribution Date, the Rights Certificates are transferable
only on the registry books of the Rights Agent if surrendered at the principal
office or offices of the Rights
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<PAGE>
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 Certificate
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,
subject to the last sentence of Section 7(e) hereof, nor the Rights Agent 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
obligation; provided, however, the Company must use its best efforts to have any
such order, decree or ruling lifted or otherwise overturned as soon as possible.
Section 17. Rights Certificate Holder Not Deemed a 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 Units of Preferred
Stock or any other securities of the Company that 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 action, or to receive notice of meetings or other actions
affecting shareholders (except as provided in Section 25 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, its directors, officers, employees
and agents for, and to hold each of them harmless against, any loss, liability,
or expense incurred without gross negligence, bad faith or willful misconduct on
the part of the Rights Agent, for anything done or omitted by the Rights Agent
or any such indemnified party in connection with the acceptance and
administration of this Agreement or the exercise or
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<PAGE>
performance of its duties hereunder, including the costs and expenses of
defending against any claim of liability in the premises.
(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 or the exercise or performance of its duties
hereunder in reliance upon any Rights Certificate or certificate for Common
Stock or for other securities of the Company, instrument of assignment or
transfer, power of attorney, endorsement, affidavit, letter, notice, direction,
instruction, 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.
(c) The indemnity provided in this Section 18 shall survive the expiration
of the Rights and the termination of this Agreement.
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 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.
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<PAGE>
Section 20. Duties of Rights Agent.
-----------------------
The Rights Agent undertakes the duties and obligations imposed by this
Agreement upon the following terms and conditions, by all of which the Company
and the holders of Rights Certificates, by their acceptance thereof, shall be
bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the advice or 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 advice
or 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 any
person believed by the Rights Agent to be the Chairman of the Board, the Chief
Executive Officer, the President, any Vice President, the Secretary or any
Assistant Secretary of the Company and delivered to the Rights Agent; and such
certificate shall be full authorization to the Rights Agent for any action taken
or suffered in good faith by it under the provisions of this Agreement in
reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its own gross
negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Rights
Certificates or be required to verify the same (except as to its
countersignature on such Rights Certificates), but all such statements and
recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect of
the validity of any provision 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 hereunder or responsible
for the manner, method or amount of any such adjustment or the ascertaining of
the existence of facts that would require any such adjustment (except with
respect to the exercise of Rights evidenced by Rights Certificates after actual
notice of any such adjustment); nor shall it by any act hereunder be deemed to
make any representation or warranty as to the authorization or reservation of
any shares of Preferred Stock to be issued pursuant to this Agreement or any
Rights Certificate or as to whether any shares of Preferred Stock will, when so
issued, be duly authorized, validly issued, fully paid and nonassessable.
-26-
<PAGE>
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
person believed by the Rights Agent to be the Chairman, the Chief Executive
Officer, the President, any Vice President, the Secretary or any Assistant
Secretary 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 or for any delay in acting while awaiting
instructions. At any time the Rights Agent may apply to the Company for written
instructions with respect to any matter arising in connection with the Rights
Agent's duties and obligations arising under this Agreement. Such application
by the Rights Agent for written instructions from the Company may, at the option
of the Rights Agent, set forth in writing any action proposed to be taken or
omitted by the Rights Agent with respect to its duties or obligations under this
Agreement and the date on and/or after which such action shall be taken and the
Rights Agent shall not be liable for any action taken or omitted in accordance
with a proposal included in any such application on or after the date specified
therein (which date shall be not less than one Business Day after the Company
receives such application, without the Company's consent) unless, prior to
taking or initiating any such action, the Rights Agent has received written
instructions in response to such application specifying the action to be taken
or omitted.
(h) The Rights Agent and any shareholder, director, officer or employee of
the Rights Agent may buy, sell or deal in any of the Rights or other securities
of the Company or become pecuniarily interested in any transaction in which the
Company may be interested, or contract with or lend money to the Company or
otherwise act as fully and freely as though it were not Rights Agent under this
Agreement. Nothing herein shall preclude the Rights Agent from acting in any
other capacity for the Company.
(i) The Rights Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by or through
its attorneys or agents, 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, the Rights Agent was not grossly
negligent in the selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
there shall be reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.
(k) 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
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<PAGE>
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 of transfer
without first consulting with the Company.
(l) The Rights Agent undertakes only the express duties and obligations
imposed on it by this Agreement and no implied duties or obligations shall be
read into this Agreement against the Rights Agent.
(m) Anything in this Agreement to the contrary notwithstanding, in no event
shall the Rights Agent be liable for special, indirect or consequential loss or
damage of any kind whatsoever (including but not limited to lost profits).
Section 21. Change of Rights Agent.
-----------------------
The Rights Agent or any successor Rights Agent may resign and be discharged
from its duties under this Agreement upon 30 days' notice in writing mailed to
the Company, and to each transfer agent of the Preferred Stock or Common Stock,
by registered or certified mail. The Company may remove the Rights Agent or any
successor Rights Agent upon 30 days' notice in writing, mailed to the Rights
Agent or successor Rights Agent, as the case may be, and to each transfer agent
of the Preferred Stock or Common Stock, by registered or certified mail, and to
the holders of the Rights Certificates by first-class mail. If the Rights Agent
shall resign or be removed or shall otherwise become incapable of acting, the
Company shall appoint a successor to the Rights Agent. If the Company shall
fail to make such appointment within a period of 30 days after giving notice of
such removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Rights Certificate (who shall, with such notice, submit his 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 the Commonwealth of Virginia (or of
any other state of the United States so long as such corporation is authorized
to do business as a banking institution or trust company in the Commonwealth of
Virginia), in good standing, having a principal office in the Commonwealth of
Virginia, that is authorized under such laws to exercise corporate trust powers
and is subject to supervision or examination by federal or state authority.
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.
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<PAGE>
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, the Company may, 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 the issuance or sale of shares of Common
Stock following the Distribution Date.
Section 23. Redemption and Termination.
---------------------------
(a) (i) The Company may, at its option, at any time prior to the
earlier of (A) the close of business on the tenth day following the Stock
Acquisition Date, or (B) the Final Expiration Date, redeem all but not less
than all the then outstanding Rights (which shall not include any rights
that have become void pursuant to Section 7(e) hereof) at a redemption
price of $.01 per Right, as it may be appropriately adjusted by the Board
of Directors of the Company to reflect any stock split or combination,
stock dividend or similar transaction occurring after the date hereof (such
redemption price being hereinafter referred to as the "Redemption Price")
----------------
and the Company may, at its option, pay the Redemption Price either in
shares of Common Stock (based on the current market price (as determined
pursuant to Section 11(d) hereof) per share of the Common Stock at the time
of redemption) or cash; provided, however, that if the Board of Directors
of the Company authorizes redemption of the Rights in either of the
circumstances set forth in clauses (x) and (y) below, then there must be
Continuing Directors in office and such authorization shall require the
concurrence of a majority of such Continuing Directors: (x) such
authorization occurs on or after the date a Person becomes an Acquiring
Person, or (y) such authorization occurs on or after the date of a change
(resulting from a proxy 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 that would
result in such Person becoming an Acquiring Person or that would cause the
occurrence of a Triggering Event.
(ii) In addition, if there are Continuing Directors then in office,
the Board of Directors may redeem all but not less than all of the then
outstanding Rights at the Redemption Price with the concurrence of a
majority of such Continuing Directors, following the occurrence of a Stock
Acquisition Date and following the expiration of the right of redemption
hereunder, if either (A) (1) a Person who is an Acquiring 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, such that such Person is
thereafter a Beneficial Owner of less than 15% of the outstanding shares of
Common Stock and (2) there are no other Persons,
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<PAGE>
immediately following the occurrence of the event described in clause (1),
who are Acquiring Persons, or (B) in connection with the type of
transaction specified in Section 13(a) hereof in which all holders of
Common Stock are treated alike and not involving an Acquiring Person or an
Affiliate or Associate of an Acquiring Person or any other Person in which
such Acquiring Person, Affiliate or Associate has any interest, or any
other Person acting directly or indirectly on behalf of or in association
with any such Acquiring Person, Affiliate or Associate.
Notwithstanding anything contained in this Agreement to the contrary, the Rights
shall not be exercisable after the first occurrence of a Triggering Event until
such time as the Company's right of redemption under Section 23(a)(i) above is
not exercisable.
(b) Immediately upon the action of the Board of Directors of the Company
authorizing the redemption of the Rights pursuant to subsection (a) of this
Section 23 and without any further action and without any notice, the right to
exercise the Rights shall terminate and the only right thereafter of a holder of
such Rights shall be to receive the Redemption Price for each Right so held.
Promptly after the action of the Board of Directors authorizing the redemption
of the Rights, the Company shall give notice of such redemption to the Rights
Agent and to the holders of such 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. Any notice that is mailed in the
manner herein provided shall be deemed given, whether or not the holder receives
the notice. Each such notice of redemption shall state the method by which the
payment of the Redemption Price will be effected.
Section 24. Exchange.
---------
(a) The Company may, at its option, by resolution of its Board of
Directors, at any time (including a time after any Person becomes an Acquiring
Person), exchange all or part of the then outstanding and exercisable Rights
(which shall not include Rights that have become void pursuant to Section 7(e)
hereof) for shares of 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 with respect to the Common Stock after
the date hereof (such exchange ratio being hereinafter referred to as the
"Exchange Ratio"); provided, however, under the circumstances described in the
--------------
proviso to Section 23(a)(i) hereof, an Exchange shall be effective only if there
are Continuing Directors and shall require the concurrence of a majority of such
Continuing Directors.
(b) Immediately upon the action of the Board of Directors of the Company
authorizing the exchange of the Rights pursuant to subsection (a) of this
Section 24 and without any further action and without any notice, the right to
exercise the Rights will terminate and the only right thereafter of a holder of
such Rights shall be to receive that number of shares of Common Stock equal to
the number of Rights held by such holder multiplied by the Exchange Ratio.
Promptly after the action of the Board of Directors authorizing the exchange of
the Rights, the Company shall give notice of such exchange to the Rights Agent
and to the holders of such Rights by mailing such notice to all such holders at
each holder's last address as it appears
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<PAGE>
upon the registry books of the Rights Agent or, prior to the Distribution Date,
on the registry books of the transfer agent for the Common Stock. Any notice
that is mailed in the manner herein provided shall be deemed given, whether or
not the holder receives the notice. Each such notice of exchange will state the
method by which the exchange of the shares of Common Stock for Rights will be
effected.
(c) In the event that there shall not be sufficient shares of Common Stock
authorized but unissued to permit the exchange in full of such Rights in
accordance with this Section 24, the Company shall take all such action as may
be necessary to authorize additional shares of Common Stock for issuance upon
exchange of the Rights. In the event 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 Common Stock that would otherwise be issuable upon exchange of a Right, a
number of shares of other equity securities of the Company or fraction thereof
such that the current per share market price of one share of such other equity
securities multiplied by such number or fraction is equal to the current per
share market price of one share of Common Stock as of the date of issuance of
such shares of such other equity securities or fraction thereof.
(d) The Company shall not be required to issue fractions of shares of
Common Stock or to distribute certificates that evidence fractional shares of
Common Stock. In lieu of such fractional shares of Common Stock, there shall be
paid 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 subsection (d), 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 Section 11(d) hereof) for the Trading Day
immediately prior to the Exchange Date.
Section 25. Notice of Certain Events.
-------------------------
(a) In case the Company shall propose, at any time after the Distribution
Date, (i) to pay any dividend payable in stock of any class to the holders of
Preferred Stock or to make any other distribution to the holders of Preferred
Stock (other than a regular quarterly cash dividend of the Company in compliance
with Section 13.1-653 of the Virginia Stock Corporation Act), or (ii) to offer
to the holders of Preferred Stock rights or warrants to subscribe for or to
purchase any additional shares of Preferred Stock or shares of stock of any
class or any other securities, rights or options, or (iii) to effect any
reclassification of its Preferred Stock (other than a reclassification involving
only the subdivision of outstanding shares of 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 that complies with Section 11(m)
hereof), or to effect a statutory share exchange with any Person (other than a
Subsidiary of the Company in a transaction that complies with Section 11(m)
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 a Subsidiary of the Company in one or more transactions each
of which complies with Section 11(m) hereof), or (v)
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<PAGE>
to effect the liquidation, dissolution or winding up of the Company, then, in
each such case, the Company shall give to each holder of a Rights Certificate,
to the extent feasible and in accordance with Section 26 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, statutory share exchange, sale,
transfer, liquidation, dissolution, or winding up is to take place and the date
of participation therein by the holders of the shares of Preferred Stock, if any
such date is to be fixed, and such notice shall be so given in the case of any
action covered by clause (i) or (ii) above at least 20 days prior to the record
date for determining holders of the shares of Preferred Stock for purposes of
such action, and in the case of any such other action, at least 20 days prior to
the date of the taking of such proposed action or the date of participation
therein by the holders of the shares of Preferred Stock whichever shall be the
earlier.
(b) In case any Section 11(a)(ii) Event shall occur, then, in any such
case, (i) the Company shall as soon as practicable thereafter give to each
holder of a Rights Certificate, to the extent feasible and in accordance with
Section 26 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
Preferred Stock shall be deemed thereafter to refer, if appropriate, not only to
Preferred Stock but also to Common Stock or other securities.
Section 26. Notices.
--------
Notices or demands authorized by this Agreement to be given or made by the
Rights Agent or by the holder of any Rights Certificate to or on the Company
shall be sufficiently given or made if sent by first-class mail, postage
prepaid, addressed (until another address is filed in writing with the Rights
Agent) as follows:
Template Software, Inc.
45365 Vintage Park Plaza
Dulles, Virginia 20166
Attention: Chief Executive Officer
with a copy to: Hunton & Williams
1751 Pinnacle Drive, Suite 1700
McLean, Virginia
Attention: Joseph W. Conroy, Esquire
Subject to the provisions of Section 21 hereof, 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:
First Union National Bank
Corporate Trust Client Services NC-1153
1525 West W.T. Harris Boulevard 3C3
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<PAGE>
Charlotte, North Carolina 28288-1153
Attention: Shareholder Services Group
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Common Stock) shall be sufficiently given or made if sent by first-
class mail, postage prepaid, addressed to such holder at the address of such
holder as shown on the registry books of the Company.
Section 27. Supplements and Amendments.
---------------------------
Prior to the Distribution Date and subject to the penultimate sentence of
this Section 27, the Company may, and the Rights Agent shall, if the Company so
directs, supplement or amend any provision of this Agreement without the
approval of any holders of certificates representing shares of Common Stock.
From and after the Distribution Date and subject to the penultimate sentence of
this Section 27, the Company and the Rights Agent shall, if the Company so
directs, supplement or amend this Agreement without the approval of any holders
of Rights Certificates in order (i) to cure any ambiguity, (ii) to correct or
supplement any provision contained herein that may be defective or inconsistent
with any other provisions herein, (iii) to shorten or lengthen any time period
hereunder (which lengthening or shortening, under the circumstances described in
the proviso to Section 23(a)(i) hereof, shall be effective only if there are
Continuing Directors and shall require the concurrence of a majority of such
Continuing Directors), or (iv) to change or supplement the provisions hereunder
in any manner that the Company may deem necessary or desirable and that shall
not adversely affect the interests of the holders of Rights Certificates (other
than an Acquiring Person or an Affiliate or Associate of an Acquiring Person);
provided, that this Agreement may not be supplemented or amended to lengthen,
pursuant to clause (iii) of this sentence, (A) a time period relating to when
the Rights may be redeemed at such time as the Rights are not then redeemable,
or (B) any other time period unless such lengthening is for the purpose of
protecting, enhancing or clarifying the rights of, and/or the benefits to, the
holders of Rights. Upon the delivery of a certificate from an appropriate
officer of the Company that states that the proposed supplement or amendment is
in compliance with the terms of this Section 27, the Rights Agent shall execute
such supplement or amendment. No supplement or amendment shall be made that
changes the Redemption Price, the Final Expiration Date, the Purchase Price or
the number of shares of Common Stock for which a Right is exercisable; provided,
however, that at any time prior to the Distribution Date, the Board of Directors
of the Company may amend this Agreement to increase the Purchase Price or extend
the Final Expiration Date. Prior to the Distribution Date, the interests of the
holders of Rights shall be deemed coincident with the interests of the holders
of Common Stock. Notwithstanding anything contained in this Agreement to the
contrary, no supplement or amendment that changes the rights or duties of the
Rights Agent under this Agreement shall be effective without the consent of the
Rights Agent.
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<PAGE>
Section 28. Successors.
-----------
All the covenants and provisions of this Agreement by or for the benefit of
the Company or the Rights Agent shall bind and inure to the benefit of their
respective successors and assigns hereunder.
Section 29. Determinations and Actions by the Board of Directors, etc.
----------------------------------------------------------
For all purposes of this Agreement, any calculation of the number of shares
of Common Stock outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding shares of Common Stock
of which any Person is the Beneficial Owner, shall be made in accordance with
the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations
under the Exchange Act. The Board of Directors of the Company (and, where
specifically provided for herein, the Continuing Directors) shall have the
exclusive power and authority to administer this Agreement and to exercise all
rights and powers specifically granted to the Board, or the Company (or, where
specifically provided for herein, the Continuing Directors), 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
(or, where specifically provided for herein, by the Continuing Directors) in
good faith, shall (x) be final, conclusive and binding on the Company, the
Rights Agent, the holders of the Rights and all other parties, and (y) not
subject the Board or the Continuing Directors to any liability to the holders of
the Rights.
Section 30. Benefits of this Agreement.
---------------------------
Nothing in this Agreement shall be construed to give to any Person other
than the Company, the Rights Agent, the registered holders from time to time 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; and this Agreement shall be for the sole and exclusive benefit of the
Company and the Persons specified above.
Section 31. Severability.
-------------
If any term, provision, covenant or restriction of this Agreement is held
by a court of competent jurisdiction or other authority to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated; provided, however, that
notwithstanding anything in this Agreement to the contrary, if any such term,
provision, covenant or restriction is held by such court or authority to be
invalid, void or unenforceable and the Board 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
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<PAGE>
expire until the close of business on the tenth day following the date of such
determination by the Board of Directors.
Section 32. Governing Law.
--------------
This Agreement, each Right and each Rights Certificate issued hereunder
shall be deemed to be a contract made under the laws of the Commonwealth of
Virginia and for all purposes shall be governed by and construed in accordance
with the laws of the Commonwealth of Virginia applicable to contracts made and
to be performed entirely within the Commonwealth of Virginia.
Section 33. Counterparts.
-------------
This Agreement may be executed in any number of counterparts and each of
such counterparts shall for all purposes be deemed to be an original, and all
such counterparts shall together constitute but one and the same instrument.
Section 34. Descriptive Headings.
---------------------
Descriptive headings of the several Sections of this Agreement are inserted
for convenience only and shall not control or affect the meaning or construction
of any of the provisions hereof.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, all as of the day and year first above written.
TEMPLATE SOFTWARE, INC., a Virginia
corporation
By: /s/ E. Linwood Pearce
----------------------------------
E. Linwood Pearce
Chief Executive Officer
FIRST UNION NATIONAL BANK, a national
banking corporation
By: /s/ Victor W. LaTessa
---------------------------------
Victor W. LaTessa
Vice President
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<PAGE>
EXHIBIT A
---------
[Form of Rights Certificate]
Certificate No. R- _________ Rights
NOT EXERCISABLE AFTER JULY 3, 2008, OR EARLIER IF REDEEMED OR EXCHANGED BY THE
COMPANY. THE COMPANY, AT ITS OPTION, MAY REDEEM THE RIGHTS EVIDENCED BY THIS
CERTIFICATE AT A REDEMPTION PRICE OF $.01 PER RIGHT OR EXCHANGE THE RIGHTS FOR
SHARES OF COMMON STOCK ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER
CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON (AS SUCH
TERM IS DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH
RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS RIGHTS
CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN
ACQUIRING PERSON OR AN AFFILIATE OR AN ASSOCIATE OF AN ACQUIRING PERSON.
ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY
BECOME VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF THE RIGHTS
AGREEMENT.]/1/
Rights Certificate
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 July 3, 1998 (the "Rights
Agreement"), between Template Software, Inc., a Virginia corporation (the
"Company"), and First Union National Bank, a national banking corporation (the
"Rights Agent"), to purchase from the Company at any time prior to 5:00 P.M.
(Virginia time) on July 3, 2008 at the office or offices of the Rights Agent
designated for such purpose, or its successors as Rights Agent, one one-
hundredth of a fully paid, non-assessable share (a "Unit") of Series A
Cumulative Preferred Stock (the "Preferred Stock") or other securities of the
Company, at a purchase price of $50 per Unit (the "Purchase Price"), upon
presentation and surrender of this Rights Certificate with the Form of Election
to Purchase and related Certificate duly executed. (All capitalized terms not
defined herein shall have the meaning set forth in the Rights Agreement.) The
Purchase Price may be paid in cash or by certified bank check or bank draft
payable to the order of the Company. The number of Rights evidenced by this
Rights Certificate
______________________
/1/ The bracketed language shall be inserted only if applicable.
A-1
<PAGE>
(and the number of shares which may be purchased upon exercise thereof) set
forth above, and the Purchase Price per share set forth above, are the number
and Purchase Price as of ______ __, [199_], based on the Preferred Stock as
constituted at such date.
As provided in the Rights Agreement, the Purchase Price and the number and
kind of shares of Preferred Stock or other securities that may be purchased upon
the exercise of the Rights evidenced by this Rights Certificate are subject to
modification and adjustment upon the happening of certain events, including
Triggering Events.
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.
Under certain circumstances specified in Section 7(e) of the Rights Agreement,
Rights that are or were owned by an Acquiring Person or an Affiliate or
Associate of an Acquiring Person may become null and void and no longer
exercisable by any Person (including any subsequent transferee). 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 or the Secretary
of the Company.
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 Units of Preferred Stock as the Rights
evidenced by the Rights Certificate or Rights Certificates surrendered then
entitle 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 Company, at its
option, may redeem the Rights evidenced by this Certificate at a redemption
price of $.01 per Right or exchange the Rights for shares of Common Stock.
No fractional shares of Preferred Stock will be issued upon the exercise of
any Right or Rights evidenced hereby (other than fractions that are integral
multiples of one one-hundredth of a share of Preferred Stock), but in lieu
thereof a cash payment will be made, as provided in the Rights Agreement.
No holder of this Rights Certificate shall be entitled to vote or receive
dividends or be deemed for any purpose the holder of shares of Preferred Stock
or of any other securities of the Company that 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
A-2
<PAGE>
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.
WITNESS the facsimile signatures of the proper officers of the Company and
its corporate seal.
Dated as of ___________ __, ______
[SEAL]
ATTEST: TEMPLATE SOFTWARE, INC.
_____________________ By: _____________________________
Secretary E. Linwood Pearce
Chief Executive Officer
Countersigned:
FIRST UNION NATIONAL BANK
By: _____________________________
Authorized Signature
A-3
<PAGE>
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
- - ------------------
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED ________________________ hereby sells, assigns and transfers
unto
_______________________________________________________________________________
(Please print name and address of transferee)
_______________________________________________________________________________
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _________________________
Attorney, to transfer the within Rights Certificate on the books of the within-
named Company, with full power of substitution.
Dated: ________________, ____
_____________________________
Signature
Signature Medallion Stamp Guaranteed:
A-4
<PAGE>
Certificate
-----------
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Rights Certificate [ ] is [ ] is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of any such Acquiring Person (as such terms are defined
pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it [ ]
did [ ] did not acquire the Rights evidenced by this Rights Certificate from any
Person who is, was or subsequently became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.
Dated: _______________, ____ _____________________________
Signature
Signature Medallion Stamp 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.
A-5
<PAGE>
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if holder desires to exercise
Rights represented by the Rights Certificate.)
To: TEMPLATE SOFTWARE, INC.:
The undersigned hereby irrevocably elects to exercise ____________ Rights
represented by this Rights Certificate to purchase the shares of Preferred Stock
issuable upon the exercise of the Rights (or such other securities of the
Company or of any other person that may be issuable upon the exercise of the
Rights) and requests that certificates for such shares (or other securities) 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)
Date: _______________, ____
_____________________________
Signature
Signature Medallion Stamp Guaranteed:
A-6
<PAGE>
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 or
an Affiliate or Associate of any such Acquiring Person (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 or an Affiliate or Associate of
an Acquiring Person.
Dated: _________________, ____ _____________________________
Signature
Signature Medallion Stamp 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.
A-7
<PAGE>
EXHIBIT B
---------
SUMMARY OF RIGHTS TO PURCHASE PREFERRED STOCK
---------------------------------------------
On May 20, 1998, the Board of Directors of Template Software, Inc. a
Virginia corporation (the "Company"), approved a Rights Agreement, dated as of
-------
and to be effective on July 3, 1998 (the "Rights Agreement"), between the
----------------
Company and First Union National Bank, as Rights Agent, having the principal
terms summarized below. In accordance with the Rights Agreement, the Board also
declared a dividend distribution of one Right for each outstanding share of
common stock (the "Common Stock"), of the Company to shareholders of record at
------------
the close of business on July 3, 1998 (the "Record Date").
-----------
Each Right entitles the registered holder to purchase from the Company one
one-hundredth of a share of the Company's Series A Cumulative Preferred Stock
("Preferred Stock"). Each one one-hundredth of a share (a "Unit") of Preferred
--------------- ----
Stock is structured to be the equivalent of one share of Common Stock of the
Company ("Common Stock"). Shareholders will receive one Right per share of
------------
Common Stock held of record at the close of business on the Record Date. The
exercise price of the Right will be $50.00 subject to adjustment (the "Purchase
--------
Price").
- - -----
Rights will also attach to shares of Common Stock issued after the Record
Date but prior to the Distribution Date unless the Board of Directors determines
otherwise at the time of issuance. The description and terms of the Rights are
set forth in the Rights Agreement.
The Rights will be appurtenant to the shares of Common Stock and will be
evidenced by Common Stock certificates, and no separate certificates evidencing
the Rights (the "Rights Certificates") will be distributed initially. The
-------------------
Rights will separate from the Common Stock and a distribution of the Rights
Certificates will occur (the "Distribution Date") upon the earlier of (i) 10
-----------------
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 (the "Stock Acquisition Date"), or (ii) 10 business days following
----------------------
the commencement of a tender offer or exchange offer that would result in a
person or group beneficially becoming an Acquiring Person. Until the
Distribution Date, (i) the Rights will be evidenced by the Common Stock
certificates and will be transferred with and only with such Common Stock
certificates, (ii) any Common Stock certificates issued will contain a notation
incorporating the Rights Agreement by reference and (iii) the surrender for
transfer of any certificates for Common Stock outstanding will also constitute
the transfer of the Rights associated with the Common Stock represented by such
certificates.
The Rights are not exercisable until the Distribution Date and will expire
at the close of business on July 3, 2008, unless earlier redeemed or exchanged
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 such separate Rights Certificates alone will represent the Rights.
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<PAGE>
While each Right will initially provide for the acquisition of one Unit of
Preferred Stock at the Purchase Price, the Agreement provides that if any person
becomes an Acquiring Person, proper provision shall be made so that each holder
of a Right (except as set forth below) will thereafter have the right to
receive, upon exercise and payment of the Purchase Price, Preferred Stock or, at
the option of the Company, Common Stock (or, in certain circumstances, cash,
property or other securities of the Company) having a value equal to twice the
amount of the Purchase Price.
In the event that, at any time following the Stock Acquisition Date, (i)
the Company is acquired in a merger, statutory share exchange, or other business
combination in which the Company is not the surviving corporation, or (ii) 50%
or more of the Company's assets or earning power is sold or transferred, each
holder of a Right (except as set forth below) shall thereafter have the right to
receive, upon exercise and payment of the Purchase Price, common stock of the
acquiring company having a value equal to twice the Purchase Price. The events
set forth in this paragraph and in the immediately preceding paragraph are
referred to as the "Triggering Events."
-----------------
Upon the occurrence of a Triggering Event that entitles Rights holders to
purchase securities or assets of the Company, Rights that are or were owned by
the Acquiring Person, or any affiliate or associate of such Acquiring Person, on
or after such Acquiring Person's Stock Acquisition Date shall be null and void
and shall not thereafter be exercised by any person (including subsequent
transferees). Upon the occurrence of a Triggering Event that entitles Rights
holders to purchase common stock of a third party, or upon the authorization of
an Exchange, Rights that are or were owned by any Acquiring Person or any
affiliate or associate of any Acquiring Person on or after such Acquiring
Person's Stock Acquisition Date shall be null and void and shall not thereafter
be exercised by any person (including subsequent transferees).
The Purchase Price payable, and the number of shares of Preferred Stock,
Common Stock or other securities or property issuable upon exercise of the
Rights are subject to adjustment from time to time to prevent dilution.
At any time (including a time after any person becomes an Acquiring
Person), the Company may exchange all or part of the Rights (except as set forth
below) for shares of Common Stock (an "Exchange") at an exchange ratio of one
--------
share per Right, as appropriately adjusted to reflect any stock split or similar
transaction.
At any time until ten days following the Stock Acquisition Date, the
Company may redeem the Rights in whole, but not in part, at a price of $.01 per
Right (the "Redemption Price"). Under certain circumstances set forth in the
----------------
Rights Agreement, the decision to make an Exchange or to redeem the Rights shall
require the concurrence of a majority of the Continuing Directors (as defined
below). Additionally, the Company may thereafter but prior to the occurrence of
a Triggering Event redeem the Rights in whole, but not in part, at the
Redemption Price provided that such redemption is incidental to a merger or
other business combination transaction involving the Company that is approved by
a majority of the Continuing Directors, does not involve an Acquiring Person,
and in which all holders of Common Stock are treated alike. After the
redemption period has expired, the Company's right of redemption may be
B-2
<PAGE>
reinstated if an Acquiring Person reduces his beneficial ownership to less than
15% 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 ordering redemption of the Rights, with, where required, the concurrence
of the Continuing Directors, the Rights will terminate and the only right of the
holders of Rights will be to receive the Redemption Price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including, without limitation, the right
to vote or to receive dividends. While the distribution of the Rights will not
be taxable to shareholders or to the Company, shareholders may, depending upon
the circumstances, recognize taxable income in the event that the Rights become
exercisable for Preferred Stock (or other consideration) of the Company or for
common stock of the acquiring company as set forth above.
Other than certain provisions relating to the principal economic terms of
the Rights, any of the provisions of the Rights Agreement may be amended by the
Board prior to the Distribution Date. After the Distribution Date, the
provisions of the Rights Agreement may be amended by the Board (in certain
circumstances, only with the concurrence of the Continuing Directors) in order
to cure any ambiguity, to make certain other changes that do not adversely
affect the interests of holders of Rights (excluding the interests of any
Acquiring Person), or to shorten or lengthen any time period under the Rights
Agreement; provided, however, no amendment to adjust the time period governing
redemption may be made at such time as the Rights are not redeemable.
B-3
