UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarterly period ended
SEPTEMBER 30, 1999
Commission File No. 000-27327
HOMESERVICES.COM INC.
---------------------
(Exact name of registrant as specified in its charter)
Delaware 41-1945806
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6800 France Avenue South, Suite 600, Edina, Minnesota 55435
- ----------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (612) 928-5900
--------------
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes No X
---- ----
Former name, former address and former fiscal year, if changed since last
report. N/A
---
10,422,942 shares of Common Stock, $0.01 par value, were outstanding as of
November 1, 1999.
<PAGE>
HOMESERVICES.COM INC.
FORM 10-Q
TABLE OF CONTENTS
PART I: FINANCIAL INFORMATION
PAGE NO.
ITEM 1. Financial Statements
Consolidated Balance Sheets.......................... 3
Consolidated Statements of Operations................ 4
Consolidated Statements of Cash Flows................ 5
Notes to Consolidated Financial Statements........... 6
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations..... 9
PART II: OTHER INFORMATION
ITEM 1. Legal Proceedings.................................... 21
ITEM 2. Changes in Securities and Use of Proceeds............ 21
ITEM 3. Defaults upon Senior Securities...................... 21
ITEM 4. Submission of Matters to a Vote of Security Holders.. 21
ITEM 5. Other Information.................................... 21
ITEM 6. Exhibits and Reports on Form 8-K..................... 22
Signatures..................................................... 23
Exhibit Index.................................................. 24
-2-
<PAGE>
<TABLE>
<CAPTION>
HOMESERVICES.COM INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
AS OF
-----------------------------
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
- ---------------
Cash and cash equivalents ..................................... $ 9,896 $ 3,114
Mortgage loans held for sale and other
receivables, net of allowance ............................... 8,266 17,320
Receivable from affiliates .................................... 200 69
Pending real estate sales contracts ........................... 598 -
Cash held in trust ............................................ 9,093 7,932
Income taxes receivable ....................................... 4,509 3,902
Other current assets .......................................... 3,105 2,074
--------- ---------
Total current assets ....................................... 35,667 34,411
--------- ---------
Other Assets:
- -------------
Office property and equipment, net ............................ 21,350 15,453
Intangible assets, net ........................................ 98,888 75,122
Investment in 50% or less owned entities ...................... 1,747 269
Held-to-maturity securities ................................... 849 651
Available-for-sale security ................................... 277 297
Deferred taxes ................................................ 70 2,148
Other assets .................................................. 356 169
--------- ---------
Total other assets ......................................... 123,537 94,109
--------- ---------
TOTAL ASSETS .................................................. $ 159,204 $ 128,520
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
- --------------------
Accounts payable .............................................. $ 5,787 $ 5,448
Accrued expenses .............................................. 14,937 11,345
Payable to affiliates ......................................... 338 367
Cash held in trust ............................................ 9,093 7,932
Current portion of long-term debt ............................. 534 3,436
Other current liabilities ..................................... 944 1,624
--------- ---------
Total current liabilities .................................. 31,633 30,152
--------- ---------
Other Liabilities:
- ------------------
Long-term debt ................................................ 68,597 58,009
Agent profit sharing .......................................... 5,463 5,074
Other noncurrent liabilities .................................. 241 91
--------- ---------
Total other liabilities .................................... 74,301 63,174
--------- ---------
Total liabilities .......................................... 105,934 93,326
--------- ---------
Commitments and contingencies (note 6)
Stockholders' Equity:
- ---------------------
Common stock, $0.01 par value, 38,000,000 shares authorized;
8,235,442 and 6,778,700 shares issued and outstanding,
at September 30, 1999 and December 31, 1998, respectively ... 82 68
Additional paid in capital .................................... 47,933 39,447
Notes receivable .............................................. (799) (896)
Retained earnings (accumulated deficit) ....................... 6,057 (3,434)
Accumulated other comprehensive income (loss) ................. (3) 9
--------- ---------
Total stockholders' equity ................................. 53,270 35,194
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .................... $ 159,204 $ 128,520
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE>
<TABLE>
<CAPTION>
HOMESERVICES.COM INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
THREE MONTHS NINE MONTHS MAY 28, 1998
ENDED SEPTEMBER 30, ENDED THROUGH
--------------------- SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
--------- -------- ------------- -------------
<S> <C> <C> <C> <C>
REVENUES:
Commission revenue ................ $ 112,280 $ 72,130 $ 261,259 $ 98,374
Title fees ........................ 6,116 5,969 16,760 8,424
Other ............................. 4,977 3,238 13,078 4,257
--------- -------- --------- ---------
TOTAL REVENUES ....................... 123,373 81,337 291,097 111,055
--------- -------- --------- ---------
OPERATING EXPENSES:
Commission expense ................ 78,324 48,123 180,409 64,810
Amortization of pending real estate
sales contracts ................. 2,157 10,834 2,157 15,578
Salaries and employee benefits .... 15,829 9,942 40,101 13,463
Occupancy ......................... 4,860 3,555 13,886 4,773
Business promotion and advertising 4,623 3,502 11,841 4,921
Depreciation and amortization ..... 2,357 1,505 6,075 2,105
Other operating expenses .......... 6,264 5,291 17,990 7,011
--------- -------- --------- ---------
TOTAL OPERATING EXPENSES ............. 114,414 82,752 272,459 112,661
--------- -------- --------- ---------
OTHER INCOME (EXPENSE):
Interest income ................... 354 219 662 301
Interest expense .................. (1,128) (728) (3,211) (1,038)
--------- -------- --------- ---------
TOTAL OTHER INCOME (EXPENSE), NET .... (774) (509) (2,549) (737)
--------- -------- --------- ---------
Income (loss) before income taxes .... 8,185 (1,924) 16,089 (2,343)
Income taxes (benefit) ............... 3,320 (761) 6,598 (927)
--------- -------- --------- ---------
NET INCOME (LOSS) .................... $ 4,865 $ (1,163) $ 9,491 $ (1,416)
========= ======== ========= =========
NET INCOME (LOSS) PER SHARE:
Basic and diluted ................. $ 0.62 $ (0.17) $ 1.32 $ (0.21)
========= ======== ========= =========
Average number of common
shares outstanding ................ 7,871 6,779 7,216 6,779
========= ======== ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE>
<TABLE>
<CAPTION>
HOMESERVICES.COM INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
NINE MONTHS MAY 28, 1998
ENDED THROUGH
SEPTEMBER 30, SEPTEMBER 30,
1999 1998
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) .............................................. $ 9,491 $ (1,416)
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:
Depreciation and amortization ................................ 6,075 2,105
Amortization of pending real estate sales contracts .......... 2,157 15,578
Earnings from equity method investments ...................... (843) -
Deferred income taxes ........................................ 2,070 193
Changes in assets and liabilities net of effects from
purchase of subsidiaries:
Increase in income taxes receivable ........................ (607) (3,689)
Decrease in mortgage loans held for sale and
other receivables ....................................... 9,385 2,319
Increase in other assets ................................... (1,114) (2,978)
Increase (decrease) in accounts payable .................... (590) 505
Increase in accrued expenses ............................... 2,325 1,396
Increase (decrease) in other liabilities ................... (140) 3,515
Other, net ................................................... 469 (483)
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES ...................... 28,678 17,045
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of subsidiaries, net of cash acquired ................. (29,014) (95,809)
Purchase of property and equipment ............................. (6,778) (818)
Other investing ................................................ (344) 185
-------- --------
NET CASH USED IN INVESTING ACTIVITIES .......................... (36,136) (96,442)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of long-term debt ...................................... (25,413) (6,479)
Proceeds from long-term debt ................................... 31,647 -
Proceeds from capital transactions ............................. 8,500 37,990
Net change in note payable to parent ........................... - 51,149
Loan costs ..................................................... (494) (185)
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES ...................... 14,240 82,475
-------- --------
Net increase in cash and cash equivalents ...................... 6,782 3,078
Cash and cash equivalents at beginning of period ............... 3,114 -
-------- --------
Cash and cash equivalents at end of period ..................... $ 9,896 $ 3,078
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE>
HOMESERVICES.COM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL:
HomeServices.Com Inc. (the "Company" or "HomeServices"), was formed on July 13,
1999, for the purpose of merging with MidAmerican Realty Services Company
("MidAmerican Realty"). On October 7, 1999 the Company merged with MidAmerican
Realty. The accompanying financial statements include the financial position,
results of operations, and cash flows of HomeServices, MidAmerican Realty, and
its wholly-owned subsidiaries as if the Company was consolidated for all periods
presented.
In the opinion of management, the accompanying unaudited consolidated financial
statements of HomeServices contain all adjustments (consisting only of normal
recurring accruals) necessary to present fairly the financial position as of
September 30, 1999, the results of operations for the three months ended
September 30, 1999 and 1998, the nine months ended September 30, 1999 and for
the period May 28, 1998 through September 30, 1998 and cash flows for the nine
months ended September 30, 1999 and for the period May 28, 1998 through
September 30, 1998. The results of operations for periods presented are not
necessarily indicative of the results to be expected for the full year.
Reference is made to the Company's Registration Statement on Form S-1 (No
333-82997) that includes information necessary or useful to the understanding of
the Company's business and financial statement presentations. The accompanying
financial statements should be read in conjunction with the audited consolidated
financial statements and related notes contained in the Registration Statement.
2. COMPREHENSIVE INCOME:
Comprehensive income for the three months ended September 30, 1999 and 1998 was
income of $4,878,000 and a loss of $1,163,000, respectively, for the nine months
ended September 30, 1999 was income of $9,479,000, and for the period May 28,
1998 through September 30, 1998 was a loss of $1,416,000. Comprehensive income
differs from net income due to changes in the fair market value of
available-for-sale investment securities.
3. LONG-TERM DEBT:
On September 20, 1999, HomeServices entered into a new $75 million senior
secured revolving credit agreement which replaced the then existing $25.0
million revolving credit facility. The senior secured revolving credit agreement
has a term of three years and is secured by a pledge of the capital stock of all
of the existing and future subsidiaries of HomeServices. Amounts outstanding
under this revolving credit facility bear interest, at HomeServices option, at
either the prime lending rate or LIBOR plus a fixed spread of 1.25% to 2.50%
which varies based on HomeServices' cash flow leverage ratio. As of September
30, 1999, the blended average interest rate on the revolving credit facility
borrowings was 7.26%.
4. BUSINESS ACQUISITIONS:
On July 8, 1999, the Company acquired substantially all of the assets of Paul
Semonin Realtors ("Paul Semonin") for $13.3 million. Paul Semonin is a
Louisville, Kentucky based real estate brokerage firm with 11 branch offices and
a leading market share in Louisville, and also operates in Lexington, Kentucky
and southern Indiana. This transaction was accounted for as a purchase business
combination and as such the results of operation of the Company include the
results of Paul Semonin beginning July 8, 1999.
On August 23, 1999, the Company acquired the stock of Roy H. Long Realty Co.,
Inc., ("Long Realty") for $16 million. Long Realty is a Tucson, Arizona based
real estate agency and brokerage business with 12 branch offices in southern
Arizona. The stock purchase agreement requires installment payments to be made
based on certain profitability levels, and are required within 31 days after the
close of calendar year 1999 and 2000. The maximum amount payable under the
-6-
<PAGE>
agreement is $1.5 million per year. This transaction was accounted for as a
purchase business combination and as such the results of operation of the
Company include the results of Long Realty beginning August 23, 1999.
As a result of each acquisition the Company recorded goodwill consisting of the
excess cost over acquired net assets. Acquired goodwill is amortized on a
straight line basis over 30 years. Whenever events or changes in circumstances
indicate that the carrying amount of goodwill may not be recoverable, the
Company reviews the carrying value of goodwill for impairment based on the
operating cash flows (undiscounted and without interest) of the related business
unit. If the projection of operating cash flows over the remaining life of the
goodwill proves to be less than the carrying value of goodwill, an impairment is
recognized. The Company did not recognize an impairment of goodwill during the
periods reported.
The following pro forma financial information represents the unaudited pro forma
results of operations as if the aforementioned acquisitions, and the
acquisitions of Iowa Realty Co., Inc. ("Iowa Realty"), Edina Realty Home
Services ("Edina Realty"), HOME Real Estate Holdings Inc. ("Home Real Estate"),
CBS Real Estate Company ("CBS Real Estate"), J.C. Nichols Residential ("J.C.
Nichols") and Nebraska Land Title & Abstract Company, had been completed on
January 1 for each period presented, after giving effect to certain adjustments
including increased amortization of goodwill generated from the acquisitions.
These pro forma results have been prepared for comparative purposes only and do
not purport to be indicative of the results of operations which would have been
achieved had these acquisitions been completed as of January 1 of each period,
nor are the results indicative of the Company's future results of operations (in
thousands except per share amounts).
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
------------------ ------------------
Revenues.................... $ 340,446 $ 295,182
Operating expenses.......... 320,251 295,944
Net income (loss)........... 10,141 (2,219)
Net income (loss) per share. $ 1.23 $ (0.27)
5. ISSUANCE OF STOCK:
On August 8, 1999, an aggregate of 2,149 shares of common stock of HomeServices'
predecessor, MidAmerican Realty, were issued in connection with the acquisition
of Paul Semonin Realtors at a purchase price of $3,955.33 per share. The per
share value was based on MidAmerican Realty's estimated June 30, 1999 book
value, based on preliminary financial results, which is equivalent to a purchase
price of $5.84 per share of HomeServices stock after giving effect to the
exchange of 677.87 shares of HomeServices common stock for each share of
MidAmerican Realty's common stock in the merger described in note 1.
6. COMMITMENTS AND CONTINGENCIES:
The Company is a party to a number of lawsuits, claims and assessments arising
from the operation of its business. While the results of lawsuits or other
matters against the Company cannot be predicted with certainty, management, in
consultation with legal counsel, does not expect these matters to have a
material adverse effect on the financial position, results of operations or cash
flows of the Company.
The J.C. Nichols asset purchase agreement requires installment payments to be
made based on certain profitability levels achieved. The payments are required
60 days after each close of calendar years 1999 and 2000. The maximum amount
payable under the agreement is $500,000 per year. These payments will be
recorded as additional costs of acquisition.
The CBS Real Estate stock purchase agreement requires certain installment and
retention payments be made after the closing date based on agent retention and
profitability levels. A $250,000 payment was made in late 1998, with subsequent
net
-7-
<PAGE>
payments of $200,000 made in early 1999. The final retention payment is not to
exceed $100,000. The required payments have been made and recorded as additional
costs of acquisition.
The Long Realty stock purchase agreement also requires installment payments be
made after the closing date, based on certain profitability levels achieved.
These payments are required within 31 days after the close of calendar year 1999
and 2000. The maximum amount payable under the agreement is $1.5 million per
year. These payments will be recorded as additional costs of acquisition.
7. SUBSEQUENT EVENT:
On October 14, 1999, the Company completed its initial public offering in which
it sold 2,187,500 newly issued shares of common stock and its majority
shareholder, MidAmerican Energy Holdings Company ("MidAmerican Holdings"), sold
1,062,500 shares. Net proceeds to the Company were approximately $27.8 million.
On October 14, 1999, each director of HomeServices received, as compensation for
agreeing to serve as a director, fully vested options to purchase 50,000 shares
of common stock at an exercise price equal to $5.89. The exercise price
represents the book value of the common stock on June 30, 1999, after giving
effect to the issuance of approximately 677.87 shares of HomeServices' common
stock in exchange for each share of common stock of MidAmerican Realty, in the
merger of HomeServices and MidAmerican Realty on October 7, 1999. HomeServices
expects to take a one-time after tax charge against net income of approximately
$2.2 million in the fourth quarter of 1999 related to these options.
-8-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following is management's discussion and analysis of certain significant
factors which have affected the Company's financial condition and results of
operations during the periods included in the accompanying statements of
operations.
Acquisition History
HomeServices, as successor by merger to MidAmerican Realty, entered the real
estate brokerage business in May 1998 by acquiring Iowa Realty and Edina Realty,
both formerly part of AmerUs Home Services Inc. Iowa Realty operates in Iowa and
Missouri, and Edina operates in Minnesota, Wisconsin, North Dakota, and South
Dakota. HomeServices expanded its business with the purchases in August 1998 of
two established real estate brokerage firms in Omaha, Nebraska, HOME Real Estate
and CBS Real Estate, which were merged to form CBS HOME Real Estate. In
September 1998, HomeServices acquired J.C. Nichols, a brokerage firm operating
in the greater Kansas City area. In December 1998, HomeServices acquired
Nebraska Land Title & Abstract. In July 1999, HomeServices acquired Paul
Semonin, a Louisville, Kentucky real estate brokerage firm operating in
Louisville and Lexington, Kentucky and southern Indiana. In August 1999,
HomeServices acquired Long Realty, a real estate brokerage firm operating in
Tucson and southern Arizona.
Each acquisition was accounted for as a purchase business combination. All
identifiable assets acquired and liabilities assumed were assigned a portion of
the acquisition price equal to their fair value at the date of acquisition.
Acquired identifiable assets consisted primarily of receivables and property and
equipment. The following table displays the purchase price, goodwill recorded
and liabilities assumed for the above acquisitions, in thousands of dollars.
PURCHASE GOODWILL LIABILITIES
PRICE RECORDED ASSUMED
-------- -------- -----------
Iowa Realty and Edina Realty..... $ 78,300 $ 54,607 $ 31,641
Home Real Estate................. 5,200 3,145 301
CBS Real Estate.................. 5,300 3,512 637
J.C. Nichols..................... 16,800 13,128 7,708
Nebraska Land Title & Abstract... 800 346 273
Paul Semonin..................... 13,300 10,177 1,783
Long Realty...................... 16,000 14,700 2,518
Overview
REVENUES. HomeServices' commission revenue consists of sales commissions earned
by providing real estate brokerage services to customers in the purchase and
sale of new and existing homes. Sales commissions typically range from
approximately 5% to 7% of the sales price and may be shared between the seller's
broker and the buyer's broker. In transactions in which HomeServices is acting
as a broker on either the buy side or the sell side of a transaction and a
third-party broker is acting as a broker on the other side of the transaction,
HomeServices will typically share approximately 50% of the sales commission with
the other broker. In transactions in which HomeServices is acting as the sole
broker, HomeServices receives 100% of the sales commission. Commission revenue
is recorded as revenue upon the closing of the home sale transaction. For the
three and nine months ended September 30, 1999, commission revenues represented
approximately 91% and 90%, respectively, of total revenues.
In addition, to a lesser extent, HomeServices earns fee revenue by providing the
following services:
Mortgage origination services for which HomeServices receives various
fees--approximately 1% of revenues for the nine months ended September
30, 1999;
-9-
<PAGE>
Title services for which HomeServices receives a fee from the title
insurance underwriters or from the home buyer--approximately 6% of
revenues for the nine months ended September 30, 1999;
Escrow and other closing administrative services for which
HomeServices typically receives a fee from home buyers--approximately
1% of revenues for the nine months ended September 30, 1999;
Relocation services for corporate customers; franchise services in
which HomeServices provides third parties with the right to use any
one of its brand names in connection with the residential activities
conducted by such third parties, and for which HomeServices receives a
fee from such third parties; and advertising services to third-party
providers of home care related services for which HomeServices
receives a fee--less than 1% of revenues for the nine months ended
September 30, 1999.
Revenue derived from title and other services is recorded as revenue at the time
that the services are performed.
A substantial portion of HomeServices' revenues has been derived from
traditional real estate brokerage services. While HomeServices has not presently
derived any significant revenues from its E-commerce operations, it expects that
a larger percentage of its revenues will be derived from services other than
traditional real estate brokerage services as HomeServices develops its
E-commerce platform.
EXPENSES. Commission expense represents commissions paid to HomeServices' sales
associates and is based on a percentage of the sales commission earned by
HomeServices. Typically, the percentage of the sales commission that is paid to
HomeServices' sales associates will vary based on such factors as sales
associate productivity and rates that are paid to competing associates in the
same local or regional market. The percentage of total commissions which
HomeServices or its predecessor has paid to sales associates average
approximately 65% over the three years ended December 31, 1998. Similar to
commission revenue, commission expense is recorded as an expense upon the
closing of the home sale transaction.
Amortization of pending real estate sales contracts is the expensing of the
value of real estate sales contracts that are pending when real estate brokerage
firms are acquired. Upon the acquisition of real estate brokerage firms,
HomeServices establishes an asset for the value of pending real estate sales
contracts. HomeServices amortized pending real estate sales contracts for its
1998 and 1999 acquisitions over the three-month period subsequent to
acquisition, reflecting the period over which HomeServices estimates that such
contracts result in closed real estate transactions.
Each director of HomeServices has received, as compensation for agreeing to
serve as a director, fully vested options to purchase 50,000 shares of common
stock at an exercise price equal to $5.89. The exercise price represents the
book value of the common stock on June 30, 1999, after giving effect to the
issuance of approximately 677.87 shares of HomeServices' common stock in
exchange for each share of common stock of MidAmerican Realty, in the merger of
HomeServices and MidAmerican Realty on October 7, 1999. HomeServices expects to
take a one-time after tax charge against net income of approximately $2.2
million in the fourth quarter of 1999 related to these options.
HomeServices' office property and equipment are depreciated over their estimated
useful lives, which range from three to 39 years using straight-line and
accelerated methods. As of September 30, 1999, goodwill, net of accumulated
amortization, comprised approximately 61% of HomeServices' total assets and
approximately 183% of stockholder's equity. Goodwill arises when an acquirer
accounts for a business acquisition under the purchase method of accounting and
the purchase price exceeds the fair value of the tangible and separately
measurable intangible net assets of that business. Goodwill is an accumulation
of various factors that HomeServices believes will lead to profits above those
that might normally be expected from just acquiring the tangible assets of a
business. It can reflect different things for each business acquisition,
including factors such as market share, name recognition, competitive position
and management. HomeServices amortizes goodwill over its projected life of 30
years on a straight-line basis. Generally accepted accounting principles require
that this goodwill and all other intangible assets be amortized over the period
benefited. Amortization represents a noncash deduction in the determination of
operating income and so reduces reported earnings, but it does not reduce cash
flows.
-10-
<PAGE>
HomeServices, in accordance with generally accepted accounting principles,
analyzes the recoverability of goodwill at each balance sheet date and
determines at that time the recoverability of any intangible assets. Management
has determined that the period of benefit to be derived from goodwill is at
least 30 years. If management had overlooked factors indicating that shorter
benefit periods were appropriate for material portions of goodwill, earnings for
periods immediately following the acquisition would be overstated. In later
years, HomeServices would then be burdened by the continuing charge against
earnings without receiving the associated benefits to income expected by
management earlier in arriving at the consideration paid for that business. In
that case, earnings in later years could even be impaired if management later
determines that the goodwill period selected earlier was not appropriate or if
management later determines that goodwill is not recoverable as a result of
events or changes in circumstances. The amount of the impairment or writeoff
would be the difference between the goodwill and the present value of the
estimated expected future cash flows over the remaining life of the goodwill.
Such writeoff could adversely affect HomeServices' business, financial condition
and the market price of its common stock.
Management has reviewed all of the factors and expected associated future cash
flows which it considered in determining the amount paid to acquire companies.
Management has concluded that the expected associated future cash flows from
goodwill will continue for at least 30 years and that there was no material
evidence to indicate that any material portion of the expected benefits from
goodwill would dissipate in a shorter period.
All other operating expenses consist primarily of the following: (1) salaries
and employee benefits paid to employees, which excludes sales associates; (2)
occupancy costs, such as rent and utilities; (3) business promotion and
advertising costs; and (4) other general and administrative expenses, including
telecommunications, office supplies, professional and management fees, and
corporate charges for services provided by MidAmerican Holdings.
Income tax expense reflects the tax effect of book income and expense for each
period presented.
RESULTS OF OPERATIONS
Results of operations of HomeServices are significantly influenced by the timing
of the entities acquired as described above. The results of operations reflect
the revenues and expenses of each of the entities from their respective dates of
acquisition as more fully described above under "Acquisition History."
-11-
<PAGE>
HISTORICAL RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999
AND 1998, THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND THE PERIOD MAY 28, 1998
THROUGH SEPTEMBER 30, 1998
The following table reflects selected information for the periods indicated in
dollars and as a percentage of total revenues. Dollars are in thousands except
closed transaction sides or unless otherwise noted.
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS MAY 28 THROUGH
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30, SEPTEMBER 30,
------------------------------------ ------------------- -------------------
1999 1998 1999 1998
---------------- ---------------- ------------------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Commission................... $112,280 91.0% $ 72,130 88.7% $ 261,259 89.7% $ 98,374 88.6%
Title fees................... 6,116 5.0% 5,969 7.3% 16,760 5.8% 8,424 7.6%
Other........................ 4,977 4.0% 3,238 4.0% 13,078 4.5% 4,257 3.8%
-------- -------- --------- ---------
Total revenues............. 123,373 100.0% 81,337 100.0% 291,097 100.0% 111,055 100.0%
-------- -------- --------- ---------
Commission expense........... 78,324 63.5% 48,123 59.2% 180,409 62.0% 64,810 58.4%
Amortization of pending
real estate contracts...... 2,157 1.7% 10,834 13.3% 2,157 0.7% 15,578 14.0%
Depreciation and
amortization............... 2,357 1.9% 1,505 1.9% 6,075 2.1% 2,105 1.9%
All other operating
expenses................... 31,576 25.6% 22,290 27.4% 83,818 28.8% 30,168 27.2%
-------- -------- --------- ---------
Total operating expenses..... 114,414 92.7% 82,752 101.7% 272,459 93.6% 112,661 101.4%
-------- -------- --------- ---------
Operating income............. 8,959 7.3% (1,415) (1.7)% 18,638 6.4% (1,606) (1.4)%
Other income (expense), net.. (774) (0.6)% (509) (0.6)% (2,549) (0.9)% (737) (0.7)%
-------- -------- --------- ---------
Income (loss) before
income taxes.............. 8,185 6.6% (1,924) (2.4)% 16,089 5.5% (2,343) (2.1)%
Income taxes (benefit)....... 3,320 2.7% (761) (0.9)% 6,598 2.3% (927) (0.8)%
-------- -------- --------- ---------
Net income (loss)............ $ 4,865 3.9% $ (1,163) (1.4)% $ 9,491 3.3% $ (1,416) (1.3)%
======== ======== ========= =========
Selected Statistics:
Closed transaction sides..... 23,965 17,133 57,358 23,663
Closed transaction volume
(in millions)............. $ 3,706 $ 2,414 $ 8,583 $ 3,268
Average home sales price..... $ 154.6 $ 140.9 $ 149.6 $ 138.1
</TABLE>
SEASONALITY. HomeServices' real estate brokerage business is subject to
seasonal fluctuations because fewer home sale transactions tend to close during
the first and fourth quarters of the year. Accordingly, revenues of some of the
brokerage firms have historically been weakest in the first and fourth quarters.
Although commission expense is variable with closed transactions, other
expenses, such as rent, are fixed. On a consolidated basis, the relationship
between HomeServices' expenses and revenues may be subject to significant
fluctuation on a quarter-to-quarter basis. As a result, on a consolidated basis,
HomeServices' operating results and profitability are lower in the first and
fourth quarters relative to the remainder of the year. Accordingly, HomeServices
does not believe that its results of operations for the three or nine months
ended September 30, 1999 will be indicative of its results of operations for the
year ending December 31, 1999.
RESULTS OF OPERATIONS OF HOMESERVICES FOR THE NINE MONTHS ENDED SEPTEMBER 30,
1999
REVENUES. Total revenues for the first nine months of 1999 were $291.1 million.
Commission revenue accounted for 89.7% of total revenues and was generated by
the entities acquired by HomeServices in 1998 and the third quarter of 1999.
Title fees totaling $16.8 million accounted for 5.8% of total revenues and
included title revenues of the brokerage firms and a title services company
acquired in December 1998. Other revenues include escrow and closing revenue,
mortgage service fee income, franchise fees, relocation and referral revenue and
various other revenues.
-12-
<PAGE>
COMMISSION EXPENSE. Commission expense totaled $180.4 million, or 69.1% of
commission revenue, for the nine months ended September 30, 1999. Commission
expense as a percentage of commission revenue will vary due to sales associate
productivity, seasonality and pay scales of the various subsidiaries.
AMORTIZATION OF PENDING REAL ESTATE SALES CONTRACTS. Upon acquiring the real
estate brokerage companies, HomeServices established an asset for the value of
pending real estate sales contracts. The value of these acquired contracts for
the 1999 acquisitions was $2.8 million of which $2.2 million was amortized to
expense in the third quarter of 1999. This was a noncash expense.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the first nine
months of 1999 totaled $6.1 million, which included $2.0 million of amortization
of goodwill related to the 1998 and 1999 acquisitions.
ALL OTHER OPERATING EXPENSES. All other operating expenses for the first nine
months of 1999 totaled $83.8 million. Salaries and employee benefits accounted
for $40.1 million of the total. Included in salaries and employee benefits for
the 1999 nine-month period was a higher than usual amount of medical claims and
the initiation of the sales agent stock purchase plan. Also included in other
operating expenses were additional occupancy and start-up costs due to expansion
of the title business in Omaha.
OTHER INCOME (EXPENSE), NET. Other income (expense), net for the first nine
months of 1999 consisted primarily of interest expense. Interest expense for the
first nine months of 1999 was $3.2 million. Interest expense in 1999 reflected a
full nine-month amount of interest related to debt used to finance the 1998
acquisitions. Initial financing was obtained through borrowings from MidAmerican
Holdings. In the fourth quarter of 1998, these borrowings were refinanced with
the proceeds of a $35.0 million private placement of 7.12% senior notes and
borrowings of $25.0 million under a revolving credit facility. An additional
$8.0 million of debt was borrowed by HomeServices from MidAmerican Holdings in
August 1999 to finance the acquisition of Long Realty. Other income was
primarily interest income. In September of 1999, the Company replaced the $25
million revolving credit facility with a $75 million facility.
INCOME TAXES (BENEFIT). The effective tax rate for the nine months ended
September 30, 1999, was 41.0%.
NET INCOME (LOSS). Net income for the first nine months of 1999 was $9.5
million, reflecting operations of the entities acquired in 1998 for the full
nine month period in 1999 and Paul Semonin and Long Realty from date of
acquisition through September 30, 1999, which acquisition dates are disclosed
above under "Acquisition History." Net income included the amortization of the
value of real estate contracts that were pending at the date of acquisition of
Paul Semonin and Long Realty. Amortization of these sales contracts for the
first nine months of 1999 resulted in a $2.2 million non-cash charge that
reduced net income by $1.3 million. Net income excluding the impact of
amortization of pending real estate sales contracts for the first nine months of
1999 was $10.8 million.
EBITDA for the nine months ended September 30, 1999 was $26.9 million. EBITDA is
defined as net income (loss) before income taxes, and interest and other income
(expense), net, plus depreciation and amortization and amortization of pending
real estate sales contracts. EBITDA for HomeServices was computed as follows (in
thousands):
-13-
<PAGE>
NINE MONTHS
ENDED
SEPTEMBER 30,
1999
-------------
Net income............................................ $ 9,491
Income taxes.......................................... 6,598
Interest and other (income) expense, net.............. 2,549
---------
Operating income...................................... 18,638
Amortization of pending real estate sales contracts. 2,157
Depreciation and amortization ...................... 6,075
---------
EBITDA .......................................... $ 26,870
=========
HomeServices has included information concerning EBITDA because it believes that
it is useful to an investor in evaluating the operating performance of
HomeServices as it compares to other companies because this measure is a widely
accepted financial indicator used by investors and analysts to compare the
operating performance of companies. While EBITDA is routinely used by investors
and analysts, it may not necessarily be comparable to other similarly titled
measures of other companies due to potential differences in the methods of
calculation. EBITDA is not intended to represent cash flows for the periods
presented, or results of operations in accordance with generally accepted
accounting principles. EBITDA should not be considered in isolation or as a
substitute for measures of performance prepared in accordance with generally
accepted accounting principles.
RESULTS OF OPERATIONS OF HOMESERVICES FOR THE PERIOD FROM MAY 28, 1998 THROUGH
SEPTEMBER 30, 1998
The results of operations for this period reflect the operations of
HomeServices' consolidated subsidiaries, Iowa Realty and Edina Realty and their
subsidiaries, for the entire period. They also include the results of operations
for Home Real Estate, CBS Real Estate and J.C. Nichols from their date of
acquisition through September 30, 1998, which acquisition dates are disclosed
above under "Acquisition History."
REVENUES. Total revenues for the period were $111.1 million. Commission
revenue from the real estate brokerage operations was $98.4 million, or 88.6% of
total revenues. Title fees for the period were $8.4 million, or 7.6% of total
revenues. The amount of title fees is affected by the number of brokerage and
mortgage refinancing transactions. The number of refinancing transactions during
the period was favorably affected by interest rates which were lower in 1998
than in 1997. Other revenues were $4.3 million, or 3.8% of total revenues. Other
revenues include escrow and closing revenue, mortgage service fee income,
franchise fees, relocation and referral revenue and various other revenues.
COMMISSION EXPENSE. Commission expense from the real estate brokerage
operations was $64.8 million, or 65.9% of commission revenue.
AMORTIZATION OF PENDING REAL ESTATE SALES CONTRACTS. Upon acquiring the real
estate brokerage companies, HomeServices established an asset for the value of
pending real estate sales contracts. The value of these acquired contracts for
the 1998 acquisitions was $18.3 million, of which $15.6 million was amortized to
expense in the period from May 28, 1998 through September 30, 1998. This was a
noncash expense.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the period was
$2.1 million, of which $0.7 million was the amortization of goodwill related to
the 1998 business acquisitions.
ALL OTHER OPERATING EXPENSES. All other operating expenses for the period
totaled $30.2 million, or 27.2% of total revenues. All other operating expenses
included salaries and employee benefits of $13.5 million, occupancy costs of
$4.8 million, business promotion and advertising expenses of $4.9 million and
other operating costs.
-14-
<PAGE>
OTHER INCOME (EXPENSE), NET. Other income (expense) consisted primarily of
interest expense, totaling $1.0 million. Initial financing for the acquisitions
was obtained through borrowings from MidAmerican Holdings. In the fourth quarter
of 1998, most of those borrowings were refinanced with the proceeds of a $35.0
million private placement of 7.12% senior notes and borrowings of $25.0 million
under a revolving credit facility. The other income was primarily interest
income.
INCOME TAXES (BENEFIT). The effective tax rate for the period May 28, 1998
through September 30, 1998 was 39.6%.
NET INCOME (LOSS). HomeServices' net loss for the period from May 28, 1998
through September 30, 1998 was $1.4 million. The net loss included the
amortization of the value of real estate sales contracts that were pending at
the date of acquisition for each entity acquired by HomeServices in 1998.
Amortization of these sales contracts for the period May 28, 1998 to September
30, 1998 resulted in an $15.6 million noncash charge that reduced net income by
$9.4 million. Net income excluding the impact of amortization of pending real
estate sales contracts for the period May 28, 1998 through September 30, 1998
was $8.0 million.
EBITDA for the period from May 28, 1998 through September 30, 1998 was $16.1
million. EBITDA for HomeServices was computed as follows (in thousands):
MAY 28, 1998
THROUGH
SEPTEMBER 30,
1998
-------------
Net loss ............................................. $ (1,416)
Income tax benefit.................................... (927)
Interest and other (income) expense, net.............. 737
--------
Operating loss........................................ (1,606)
Amortization of pending real estate sales contracts. 15,578
Depreciation and amortization ...................... 2,105
--------
EBITDA ............................................ $ 16,077
========
THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1998
REVENUES. Total revenues for the three months ended September 30, 1999 were
$123.4 million, an increase of $42.0 million, or 52%, compared to the same
period in 1998. Commission revenue for the three months ended September 30, 1999
was $112.3 million, an increase of $40.2 million, or 56%, compared to the same
period in 1998. Total closed transactions for the three months ended September
30, 1999 were 23,965, an increase of 6,832, or 40%, compared to the same period
in 1998. The increase is primarily due to the inclusion of Home Real Estate
Company, CBS Real Estate Company and J.C. Nichols for the entire period in 1999
and the acquisition of Paul Semonin and Long Realty in the third quarter of
1999. The average home sales price increased from $140,900 in the third quarter
of 1998 to $154,600 in the third quarter of 1999, an increase of 9.7%. The
combination of the increase in closed transactions and the higher average home
sales price resulted in a 54% increase in closed transaction volume to $3.7
billion for the three months ended September 30, 1999 compared to the same
period in 1998.
Title fees for the three months ended September 30, 1999 were $6.1 million, an
increase of $0.1 million, or 2%, compared to the same period in 1998. The
increase in title fees in 1999 was due to the acquisition of a title company in
December 1998, offset by the reduction in refinancing activity due to increasing
interest rates.
Other revenues for the three months ended September 30, 1999 were $5.0 million,
an increase of $1.7 million, or 54%, compared to the same period in 1998. The
increase is primarily due to the acquisitions during the period.
-15-
<PAGE>
COMMISSION EXPENSE. Commission expense from the real estate brokerage operations
for the three months ended September 30, 1999 was $78.3 million, an increase of
$30.2 million, or 63%, compared to the same period in 1998. The increase in
commission expense is due to higher volume resulting from the acquisitions and
paying a higher percentage of commission revenue to the agents due primarily to
higher sales associate productivity. Commission expense as a percentage of
commission revenue increased from 66.7% for the three months ended September 30,
1998 to 69.8% for the same period in 1999.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the three
months ended September 30, 1999 was $2.4 million, an increase of $0.9 million,
or 57%, compared to the same period in 1998, primarily as a result of business
acquisitions.
ALL OTHER OPERATING EXPENSES. All other operating expenses for the three months
ended September 30, 1999 were $31.6 million, an increase of $9.3 million, or
42%, compared to the same period in 1998. The increase is due primarily to the
inclusion of CBS HOME Real Estate and J.C. Nichols for the entire period in
1999, the acquisitions of Paul Semonin and Long Realty in 1999 and, to a lesser
degree, higher activity levels at Iowa Realty and Edina Realty. As a percentage
of total revenue, all other operating expenses decreased to 25.6% from 27.4%.
OTHER INCOME (EXPENSE). Other income (expense) for the three months ended
September 30, 1999 and 1998 consisted primarily of interest expense. Interest
expense for the three months ended September 30, 1999 was $1.1 million, an
increase of $0.4 million, or 55%, compared to the same period in 1998. Interest
expense in 1999 reflected a full quarter of interest related to debt used to
finance the third quarter 1998 acquisitions and additional borrowings to finance
the 1999 acquisitions. Initial financing in 1998 was obtained through borrowings
from MidAmerican Holdings. In the fourth quarter of 1998, most of those
borrowings were refinanced with the proceeds of a $35.0 million private
placement of 7.12% senior notes and borrowings of $25.0 million under the then
existing revolving credit facility. Other income was primarily interest income.
INCOME TAXES. The higher amount of income tax expense for the three months
ended September 30, 1999 as compared to the same period in 1998 is primarily
the result of the difference in income before income taxes between the periods.
NET INCOME. Net income for the three months ended September 30, 1999 was $4.9
million, an increase of $6.0 million compared to the same period in 1998. Net
income was significantly impacted by the timing of acquisitions and the related
amortization of pending real estate sales contacts over the three months after
acquisition which was $2.2 million and $10.8 million in the third quarter of
1999 and 1998, respectively. Net income excluding the impact of amortization of
pending real estate sales contracts in the third quarter of 1999 and 1998 was
$6.1 million and $5.3 million, respectively.
EBITDA for the three months ended September 30, 1999 and 1998 was $13.5 million
and $10.9 million, respectively. The timing of acquisitions significantly
impacted EBITDA. EBITDA for HomeServices was computed as follows (in thousands):
THREE MONTHS ENDED
SEPTEMBER 30,
-------------------
1999 1998
------- --------
Net income (loss)..................................... $ 4,865 $(1,163)
Income taxes (benefit)................................ 3,320 (761)
Interest and other (income) expense, net.............. 774 509
------- -------
Operating income (loss)............................... 8,959 (1,415)
Amortization of pending real estate sales contracts. 2,157 10,834
Depreciation and amortization ...................... 2,357 1,505
------- -------
EBITDA ........................................... $13,473 $10,924
======= =======
-16-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
HomeServices' capital requirements consist primarily of working capital, capital
expenditures and acquisitions. Historically, HomeServices has funded its working
capital and capital expenditures using cash and cash equivalents on hand.
Acquisitions have been financed through borrowings under its revolving credit
facility, the private placement of the 7.12% senior notes, loans from
MidAmerican Holdings and capital contributions. HomeServices' cash and cash
equivalents totaled $9.9 million at September 30, 1999, compared to $3.1 million
at December 31, 1998. On October 14, 1999, HomeServices closed the initial
public offering of its common stock. Net proceeds to HomeServices from the
offering were approximately $27.8 million.
HomeServices' cash provided by operating activities was $28.7 million for the
nine months ended September 30, 1999 and $17.0 million for the period May 28,
1998 through September 30, 1998. The most significant adjustment to net income
(loss) for HomeServices' 1998 periods was the amortization of pending real
estate sales contracts. For the nine months ended September 30, 1999, and at
least in the near future, depreciation and amortization, including goodwill
amortization and amortization of pending real estate sales contracts, will be a
material adjustment to reconcile net income to cash flow from operating
activities.
HomeServices' cash used in investing activities was $36.1 million for the nine
months ended September 30, 1999 and $96.4 million for the period May 28, 1998,
through September 30, 1998. HomeServices' cash used in investing activities for
its 1998 periods was primarily a result of the acquisitions of Iowa Realty,
Edina Realty, Home Real Estate, CBS Real Estate and J.C. Nichols for a combined
$95.8 million, net of cash acquired. HomeServices' cash used in investing
activities for its 1999 periods was primarily a result of the acquisitions of
Paul Semonin and Long Realty for a combined $29.0 million, net of cash acquired.
HomeServices' cash provided by financing activities was $14.2 million for the
nine months ended September 30, 1999, and $82.5 million for the period May 28,
1998 through September 30, 1998. HomeServices' cash provided by financing
activities in each of the periods was the result of capital contributions, loans
from MidAmerican Holdings, and advances under the revolving credit agreement.
In November 1998, HomeServices issued $35.0 million of 7.12% senior notes due in
annual increments of $5.0 million starting in 2004, with the final payment due
in 2010. Under the terms of the 7.12% senior notes and the revolving credit
facility described below, HomeServices may not issue, assume or guarantee debt
that would cause its total debt to exceed 65% of total capitalization and must
maintain equity capitalization of at least $25.5 million.
In May 1998, HomeServices entered into a revolving credit agreement with
MidAmerican Holdings to borrow funds from time to time, primarily to support the
acquisitions. The maximum indebtedness during the life of the agreement through
September 30, 1999, was $54.2 million. As of December 31, 1998 and September 30,
1999, there were no borrowings under this agreement. The interest rate on
borrowings is equal to the 30-day LIBOR rate plus 1%, which was 6.40% at
September 30, 1999. On June 24, 1999, the revolving credit agreement with
MidAmerican Holdings was amended to reduce MidAmerican Holdings' total
commitment and HomeServices' borrowing capacity thereunder from $100.0 million
to $10.0 million.
Also, in November 1998, HomeServices obtained a $25.0 million, five-year
revolving credit facility. On September 20, 1999, HomeServices entered into a
new $75 million senior secured revolving credit agreement which replaced the
then existing $25.0 million revolving credit facility. The senior secured
revolving credit agreement has a term of three years and is secured by a pledge
of the capital stock of all of the existing and future subsidiaries of
HomeServices. Amounts outstanding under this revolving credit facility bear
interest, at HomeServices option, at either the prime lending rate or LIBOR plus
a fixed spread of 1.25% to 2.50%, which varies based on HomeServices' cash flow
leverage ratio. As of September 30, 1999, the blended average interest rate on
the revolving credit facility borrowings was 7.26%.
HomeServices believes that the net proceeds that it received from its initial
public offering of common stock, together with its cash flow from operations and
borrowings under its $75 million revolving credit facility, will be adequate to
meet
-17-
<PAGE>
its needs for working capital, capital expenditures, debt service, planned
acquisitions and the continued development of its E-commerce platform for at
least the next year. If, however, net proceeds from the offering and cash flow
from operations and borrowings under HomeServices' revolving credit facilities
are insufficient to satisfy HomeServices' liquidity requirements, it may need to
raise additional funds through public or private financings or the formation of
strategic joint ventures. HomeServices cannot assure you that such additional
funding, if needed, will be available on favorable terms, or at all. If
HomeServices raises additional funds in the future by issuing equity securities,
the percentage ownership of its then current stockholders would be reduced, and
those equity securities could be preferred securities having rights senior to
the common stock.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
HomeServices is subject to changes in interest rates which could negatively
impact its business. HomeServices' fixed rate long-term debt does not expose
HomeServices to the risk of earnings loss from increased interest expense as a
result of changes in the market interest rate, because the rate is fixed.
HomeServices has managed its interest rate risk for its variable rate debt,
which is based on LIBOR rates, by entering into interest rate swap agreements.
The swap arrangements effectively fix the interest rate for that portion of the
variable rate debt. In the future, HomeServices may continue using interest rate
swaps to reduce risk on the variable debt or, when appropriate, may replace the
variable rate debt with fixed rate debt. As of September 30, 1999, HomeServices'
financial positions related to financial instruments that are sensitive to
changes in interest have not changed materially since December 31, 1998 other
than the replacement of the variable rate credit facility with a new variable
rate credit facility. The prior facility had expected maturities of $3.0 million
annually in 1999, 2000, 2001 and 2002 and $13.0 million in 2003. The new
facility has an expected maturity of $31.5 million in 2002. The interest rate
for both the prior and the new facility is based upon the 30-day LIBOR rate.
YEAR 2000 COMPLIANCE
What is generally known as the year 2000 computer issue arose because many
existing computer programs and embedded systems use only the last two digits to
refer to a year. Therefore, those computer programs do not properly distinguish
between a year that begins with "20" instead of "19". If not corrected, many
computer applications could fail or create erroneous results. The failure to
correct a material year 2000 item could result in an interruption in, or a
failure of, certain normal business activities or operations. Such failures
could materially and adversely affect HomeServices' results of operations,
liquidity and financial condition.
The year 2000 issue could potentially impact systems critical to HomeServices
including real estate listing, agent support, accounting, vendor and agent
payment processing, payroll, and loan origination systems. HomeServices has
performed an inventory of its potential year 2000 issues and has verified the
readiness of all of its systems through a systematic process of assessment,
remediation and testing. To date, HomeServices has incurred $2.0 million in
costs related to addressing the year 2000 issue. HomeServices does not expect
the total remaining cost of readiness to exceed $300,000.
Additionally, HomeServices' business operations are heavily dependent upon
service providers, most significantly communication providers. HomeServices is
inquiring of its material third-party vendors and service providers, including
multiple listing service providers, regarding the status of their year 2000
readiness preparations. HomeServices has completed its assessment of all of its
material third party vendors and service providers to determine that they have
taken actions to minimize the risk of year 2000 problems that would impede their
ability to maintain a business relationship with HomeServices. Approximately 92%
of HomeServices' material third parties have responded affirmatively.
HomeServices is continuing to follow up with its material third parties which
did not respond or whose response was not adequate enough to be considered by
HomeServices as affirmative at this time. The process used to assess material
third parties entails obtaining information about their year 2000 preparedness
activities via correspondence, published reports and/or websites, and by direct
contact (in person or via telephone) as necessary for additional details about
their year 2000 readiness, supply chain assessment, contingency planning
activities and other relevant information. The results of each assessment are
documented and returned to the material third party for verification,
clarification or correction. It is important to note that the purpose of
HomeServices' supply chain/business partner assessment initiative is not to
obtain specific assurances that its material third parties are year 2000
compliant (which is an attribute of hardware and software,
-18-
<PAGE>
not of organizations), but rather to determine they have taken appropriate
actions to minimize the risk of problems stemming from year 2000 problems that
would impede their ability to maintain a business relationship with
HomeServices. Due to inescapable uncertainties about the year 2000 issue,
HomeServices cannot provide assurance that material third party vendors and
service providers will be unaffected by year 2000-related problems. Any failure
by HomeServices' material third-party vendors and service providers to comply in
a timely manner could have a material adverse effect on its operations.
Year 2000 risk scenarios that are applicable to HomeServices have been
identified and written contingency plans have been developed. The objective of
HomeServices' contingency planning effort is to determine the potential causes,
symptoms, triggers and effects of specific risks and to develop individual plans
in response to each of these risks. Each plan consists of mitigation and
recovery tasks to minimize impact in the event of occurrence of a specific risk
scenario. Scenarios that have been identified as applicable to HomeServices
include, but are not limited to, loss of internal and external voice and data
communications, inability to occupy facilities, loss of business applications,
and miscellaneous business interruptions. Contingency plans developed by
HomeServices specify staffing requirements, preventive actions to be taken, and
transition and validation activities, as well as recovery tasks to be exercised
in the event that year 2000 problems are encountered during the transition to
2000. The contingency plans will be subjected to ongoing review and refinement
through the remainder of the year.
In each of HomeServices' future acquisitions, HomeServices intends to evaluate
the systems of the acquired companies to determine whether their systems are
year 2000 ready. If an acquired company's systems are not year 2000 ready,
HomeServices intends to prepare a plan to bring the systems into a state of
readiness. While HomeServices cannot guarantee you that all future acquired
companies will be year 2000 ready on a timely basis, the cost of bringing such
companies into a state of readiness is not expected to have a material adverse
effect on HomeServices' financial condition or results of operations.
Nonetheless, HomeServices may experience material unexpected costs associated
with bringing such companies into a state of readiness.
SEASONALITY
HomeServices' real estate brokerage business is subject to seasonal fluctuations
because fewer home sale transactions tend to close during the first and fourth
quarters of the year. Accordingly, revenues of some of HomeServices' operating
subsidiaries historically have been strongest in the second and third quarters
of the calendar year. While commissions are paid to sales associates only upon
the sale of a home, many of HomeServices' other expenses, such as rent, are
fixed. As a result, on a consolidated basis, the relationship between
HomeServices' expenses and revenues may be subject to significant fluctuation on
a quarter-to-quarter basis. HomeServices believes its charges for occupancy,
telecommunications, professional fees, data processing, equipment leasing,
office expense, corporate charges, and depreciation, which approximated 11% of
total 1998 operating expenses on a historical basis, are costs that can not be
significantly reduced in the short-term during a seasonal slow down.
IMPACT OF INFLATION AND INTEREST RATE CHANGES
HomeServices' results of operations are sensitive to changes in the U.S. economy
and the economies of the markets in which it operates and, to a lesser extent,
interest rates, particularly home mortgage rates. During periods of inflation,
the value of residential real estate increases. While increases in the value of
residential real estate typically lead to corresponding increases in
HomeServices' commissions per transaction side, inflation typically also causes
mortgage interest rates to increase. As mortgage interest rates increase, the
level of residential transaction volume declines, leading to decreased
commission revenue and decreased revenue from the related ancillary services.
Additionally, HomeServices' title businesses receive revenues from refinancing
transactions that also decline during periods of high interest rates.
-19-
<PAGE>
FORWARD-LOOKING STATEMENTS
Certain information included in this report contains forward-looking statements
made pursuant to the Private Securities Litigation Reform Act of 1995 ("Reform
Act"). Such statements involve substantial risks and uncertainties.
Forward-looking statements are based on current expectations and involve a
number of known and unknown risk and uncertainties that could cause the actual
results or performance of the Company to differ materially from any expected
future results or performance, expressed or implied, by the forward-looking
statements. In connection with the safe harbor provisions of the Reform Act, the
Company has identified important factors that could cause actual results to
differ materially from such expectations, including uncertainty with respect to
future acquisitions, development, implementation and customer acceptance of
e-commerce services, general industry conditions and fluctuations, management of
rapid growth, changes to regulations and legislation, interest rate changes,
access to capital and future financings, Year 2000 readiness, all of which,
together with other matters, are described in detail under the caption "Risk
Factors" in the Company's Prospectus dated October 7, 1999. The Company assumes
no responsibility to update forward-looking information contained herein.
-20-
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS.
- ------ ------------------
As of September 30, 1999, there are no material outstanding lawsuits
against the Company or its subsidiaries.
ITEM 2 CHANGES IN SECURITIES AND USE OF PROCEEDS.
- ------ ------------------------------------------
On October 14, 1999, HomeServices completed an initial public offering in which
it sold 2,187,500 shares of its common stock, $0.01 par value, and its majority
stockholder, MidAmerican Holdings, sold 1,062,500 shares of HomeServices' common
stock. The managing underwriters in the offering were U.S. Bancorp Piper Jaffray
Inc. and Credit Suisse First Boston Corporation. The shares of common stock sold
in the offering were registered under the Securities Act of 1933, as amended, on
a Registration Statement on Form S-1 (the "Registration Statement") (No.
333-82997). The Registration Statement, which registered a maximum offering
price of $69,000,000 of common stock, was declared effective by the Securities
and Exchange Commission on October 7, 1999. All 3,250,000 shares of common stock
covered by the Registration Statement were sold in the offering at a price of
$15.00 per share for gross proceeds of $48.75 million. Offering proceeds to
HomeServices, net of approximately $2.6 million in aggregate underwriter
discounts and commissions and approximately $2.7 million in other estimated
expenses, were approximately $27.8 million.
All of the net offering proceeds received on October 14, 1999 from the initial
public offering were used to temporarily reduce borrowings under HomeServices'
senior secured revolving credit agreement. Although HomeServices had disclosed
in the Registration Statement that it had tentative plans to use the net
proceeds from the offering for continued development of its e-commerce
operations, working capital and general corporate purposes, by using the net
proceeds from the offering to repay borrowings under the credit agreement,
HomeServices has the ability to reborrow such amount under the credit agreement
to fund its e-commerce development, working capital and general corporate
purpose activities. None of the net offering proceeds received by HomeServices
have been or will be paid directly or indirectly to any director, officer,
general partner of HomeServices or their associates, persons owning 10% or more
of any class of HomeServices' equity securities, or an affiliate of
HomeServices.
ITEM 3 DEFAULTS UPON SENIOR SECURITIES.
- ------ --------------------------------
Not applicable.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
- ------ ----------------------------------------------------
Not applicable.
ITEM 5 OTHER INFORMATION.
- ------ ------------------
Not applicable.
-21-
<PAGE>
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K.
- ------ ---------------------------------
(A) EXHIBITS:
Exhibits Filed Herewith
- -----------------------
Exhibit 3.1 Restated Bylaws of HomeServices.Com Inc.
Exhibit 3.2 Amended and Restated Certificate of Incorporation of
HomeServices.Com Inc.
Exhibit 3.3 Certificate of Designation for the Series A Junior
Participating Preferred Stock.
Exhibit 4.1 Rights Agreement.
Exhibit 10.1 Registration Rights Agreement.
Exhibit 10.2 Services Agreement.
Exhibit 10.3 Stock Option Plan.
Exhibit 10.4 Tax Indemnity Agreement.
Exhibit 10.5 Amendment, Consent and Waiver Agreement by
Massachusetts Mutual Life Insurance Company, CM Life
Insurance Company and the Guardian Life Insurance
Company of America in favor of MidAmerican Realty
Services Company dated August 27, 1999.
Exhibit 10.6 Second Amendment, dated September 15, 1999, to
Note Purchase Agreement dated November 1, 1998.
Exhibit 27.1 Financial Data Schedule.
(B) REPORTS ON FORM 8-K
Not applicable.
-22-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HOMESERVICES.COM INC.
-----------------------------------------------
(Registrant)
Date: November 19, 1999 /s/ Dwayne J. Coben
-----------------------------------------------
Dwayne J. Coben
Senior Vice President & Chief Financial Officer
-23-
<PAGE>
EXHIBIT INDEX
Exhibit No.
- -----------
Exhibit 3.1 Restated Bylaws of HomeServices.Com Inc.
Exhibit 3.2 Amended and Restated Certificate of Incorporation of
HomeServices.Com Inc.
Exhibit 3.3 Certificate of Designation for the Series A Junior
Participating Preferred Stock.
Exhibit 4.1 Rights Agreement.
Exhibit 10.1 Registration Rights Agreement.
Exhibit 10.2 Services Agreement.
Exhibit 10.3 Stock Option Plan.
Exhibit 10.4 Tax Indemnity Agreement.
Exhibit 10.5 Amendment, Consent and Waiver Agreement by
Massachusetts Mutual Life Insurance Company, CM Life
Insurance Company and the Guardian Life Insurance
Company of America in favor of MidAmerican Realty
Services Company dated August 27, 1999.
Exhibit 10.6 Second Amendment, dated September 15, 1999, to
Note Purchase Agreement dated November 1, 1998.
Exhibit 27.1 Financial Data Schedule.
-24-
AMENDED AND RESTATED
BYLAWS
OF
HOMESERVICES.COM INC.
(hereinafter called the "Corporation")
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the
Corporation shall be in the City of Wilmington, County of New Castle, State
of Delaware.
Section 2. Other Offices. The Corporation may also have offices at
such other places both within and without the State of Delaware as the Board of
Directors may from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. Meetings of the stockholders for the
election of directors or for any other purpose shall be held at such time and
place, either within or without the State of Delaware as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
Section 2. Annual Meetings. Annual meetings of stockholders shall be
held on such date and at such time as shall be designated from time to time by
the Board of Directors and stated in the notice of the meeting, at which
meetings the stockholders shall elect a Board of Directors (or specified
classes thereof), and transact such other business as may properly be brought
before the meeting. Written notice of the annual meeting stating the place,
date and hour of the meeting shall be given to each stockholder of record
entitled to vote at such meeting not less than ten nor more than sixty days
before the date of the meeting.
<PAGE>
Section 3. Special Meetings. Unless otherwise prescribed by law or by
the certificate of incorporation of the Corporation (as amended and restated
from time to time and including any certificate of designation for any series
of preferred stock, the "Certificate of Incorporation"), special meetings of
stockholders, for any purpose or purposes, may be called by (i) the Chairman of
the Board of Directors or (ii) the Board of Directors. The ability of the
stockholders to call a special meeting of stockholders is hereby specifically
denied. At a special meeting of stockholders, only such business shall be
conducted as shall be specified in the notice of meeting (or any supplement
thereto). Written notice of a special meeting stating the place, date and hour
of the meeting and the purpose or purposes for which the meeting is called
shall be given not less than ten nor more than sixty days before the date of
the meeting to each stockholder entitled to vote at such meeting.
Section 4. Quorum. Except as otherwise provided by law or by the
Certificate of Incorporation, the holders of a majority of the capital stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business. A quorum, once established, shall
not be broken by the withdrawal of enough votes to leave less than a quorum.
<PAGE>
Section 5. Adjournment. If a quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement
at the meeting, until a quorum shall be present or represented. The chairman of
any meeting of stockholders shall also have the power to adjourn such meeting
if (i) a quorum is not present or represented or (ii) the Board of Directors
determines that adjournment is necessary or appropriate to enable stockholders
to consider fully information which the Board of Directors determines has not
been made sufficiently or timely available to stockholders or to otherwise
enable stockholders to exercise effectively their voting rights. At such
adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally noticed. If the adjournment is for more than thirty days, or if
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder entitled to
vote at the meeting.
Section 6. Voting. Unless otherwise required by law or provided by
the Certificate of Incorporation or these Bylaws, any question brought before
any meeting of stockholders, other than the election of directors, shall be
decided by the vote of the holders of a majority of the total number of votes
of the capital stock represented and entitled to vote thereat. Each stockholder
represented at a meeting of stockholders shall be entitled to cast one vote for
each share of the capital stock entitled to vote thereat held by such
stockholder. Such votes may be cast in person or by proxy but no proxy shall be
voted on or after three years from its date, unless such proxy provides for a
longer period. The Board of Directors, in its discretion, or the officer of the
Corporation presiding at a meeting of stockholders, in such officer's
discretion, may require that any votes cast at such meeting shall be cast by
written ballot.
<PAGE>
Section 7. Nature of Business at Annual Meetings of Stockholders. No
business may be transacted at an annual meeting of stockholders, other than
business that is either (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors (or
any duly authorized committee thereof), (b) otherwise properly brought before
the annual meeting by or at the direction of the Board of Directors (or any
duly authorized committee thereof) or (c) otherwise properly brought before the
annual meeting by any stockholder of the Company (i) who is a stockholder of
record on the date of the giving of the notice provided for in this Section 7
and on the record date for the determination of stockholders entitled to vote
at such annual meeting and (ii) who complies with the notice procedures set
forth in this Section 7.
In addition to any other applicable requirements, for business to be
properly brought before an annual meeting by a stockholder, such stockholder
must have given timely notice thereof in proper written form to the Secretary
of the Company. To be timely, a stockholder's notice to the Secretary must be
delivered to or mailed and received at the principal executive offices of the
Company not less than ninety (90) days nor more than one hundred twenty (120)
days prior to the anniversary date of the immediately preceding annual meeting
of stockholders; provided, however, that in the event that the annual meeting
is called for a date that is not within thirty (30) days before or after such
anniversary date, notice by the stockholder in order to be timely must be so
received not later than the close of business on the tenth (10th) day following
the day on which such notice of the date of the annual meeting was mailed or
such public disclosure of the date of the annual meeting was made, whichever
first occurs. To be in proper written form, a stockholder's notice to the
Secretary must set forth as to each matter such stockholder proposes to bring
before the annual meeting (i) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting, (ii) the name and record address of such stockholder,
(iii) the class or series and number of shares of capital stock of the Company
which are owned beneficially or of record by such stockholder, (iv) a
description of all arrangements or understandings between such stockholder and
any other person or persons (including their names) in connection with the
proposal of such business by such stockholder and any material interest of such
stockholder in such business and (v) a representation that such stockholder
intends to appear in person or by proxy at the annual meeting to bring such
business before the meeting.
<PAGE>
No business shall be conducted at the annual meeting of stockholders
except business brought before the annual meeting in accordance with the
procedures set forth in this Section 7, provided, however, that, once business
has been properly brought before the annual meeting in accordance with such
procedures, nothing in this Section 7 shall be deemed to preclude discussion by
any stockholder of any such business. If the chairman of an annual meeting
determines that business was not properly brought before the annual meeting in
accordance with the foregoing procedures, the chairman shall declare to the
meeting that the business was not properly brought before the meeting and such
business shall not be transacted.
Section 8. List of Stockholders Entitled to Vote. The officer of the
Corporation who has charge of the stock ledger of the Corporation shall prepare
and make, at least ten days before every meeting of stockholders, a complete
list of the stockholders of record entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder of the Corporation who is
present.
Section 9. Stock Ledger. The stock ledger of the Corporation shall be
the only evidence as to who are the stockholders entitled to examine the stock
ledger, the list required by Section 8 of this Article II or the books of the
Corporation, or to vote in person or by proxy at any meeting of stockholders.
<PAGE>
Section 10. Conduct of Meetings. The Board of Directors of the
Corporation may adopt by resolution such rules and regulations for the conduct
of the meeting of the stockholders as it shall deem appropriate. At each
meeting of the stockholders of the Corporation, the Chairman of the Board of
Directors or the President of the Corporation, or, in their absence, a director
chosen by a majority of the directors present, shall act as chairman. The
Secretary of the Corporation shall act as secretary at each meeting of
stockholders of the Corporation. In case the Secretary shall be absent from any
meeting of Stockholders, an Assistant Secretary shall perform the duties of
secretary at such meeting; and in the absence from any such meeting of the
Secretary and all the Assistant Secretaries, the chairman of the meeting may
appoint any person to act as secretary of the meeting. Except to the extent
inconsistent with such rules and regulations as adopted by the Board of
Directors, the chairman of any meeting of the stockholders shall have the right
and authority to prescribe such rules, regulations and procedures and to do all
such acts as, in the judgment of such chairman, are appropriate for the proper
conduct of the meeting.
ARTICLE III
DIRECTORS
Section 1. Number and Election of Directors. The Board of Directors
shall consist of not less than three nor more than fifteen members, the exact
number of which shall be fixed from time to time by the Board of Directors.
Except as provided in Section 2 of this Article III, directors shall be elected
by a plurality of the votes cast at the Annual Meeting of Stockholders, and
each director so elected shall hold office until such director's successor is
duly elected and qualified, or until such director's earlier death, resignation
or removal. Any director may resign at any time upon notice to the Corporation.
Directors need not be stockholders.
<PAGE>
Section 2. Nomination of Directors. Only persons who are nominated in
accordance with the following procedures shall be eligible for election as
directors of the Company, except as may be otherwise provided in the
Certificate of Incorporation with respect to the right of holders of preferred
stock of the Corporation to nominate and elect a specified number of directors
in certain circumstances. Nominations of persons for election to the Board of
Directors may be made at any annual meeting of stockholders, or at any special
meeting of stockholders called for the purpose of electing directors, (a) by or
at the direction of the Board of Directors (or any duly authorized committee
thereof) or (b) by any stockholder of the Company (i) who is a stockholder of
record on the date of the giving of the notice provided for in this Section 2
and on the record date for the determination of stockholders entitled to vote
at such meeting and (ii) who complies with the notice procedures set forth in
this Section 2.
In addition to any other applicable requirements, for a nomination to
be made by a stockholder, such stockholder must have given timely notice
thereof in proper written form to the Secretary of the Company. To be timely, a
stockholder's notice to the Secretary must be delivered to or mailed and
received at the principal executive offices of the Company (a) in the case of
an annual meeting, not less than ninety (90) days nor more than one hundred
twenty (120) days prior to the anniversary date of the immediately preceding
annual meeting of stockholders; provided, however, that in the event that the
annual meeting is called for a date that is not within thirty (30) days before
or after such anniversary date, notice by the stockholder in order to be timely
must be so received not later than the close of business on the tenth (10th)
day following the day on which such notice of the date of the annual meeting
was mailed or such public disclosure of the date of the annual meeting was
made, whichever first occurs; and (b) in the case of a special meeting of
stockholders called for the purpose of electing directors, not later than the
close of business on the tenth (10th) day following the day on which notice of
the date of the special meeting was mailed or public disclosure of the date of
the special meeting was made, whichever first occurs.
<PAGE>
To be in proper written form, a stockholder's notice to the Secretary
must set forth (a) as to each person whom the stockholder proposes to nominate
for election as a director (i) the name, age, business address and residence
address of the person, (ii) the principal occupation or employment of the
person, (iii) the class or series and number of shares of capital stock of the
Company which are owned beneficially or of record by the person and (iv) any
other information relating to the person that would be required to be disclosed
in a proxy statement or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to Section 14 of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
rules and regulations promulgated thereunder; and (b) as to the stockholder
giving the notice (i) the name and record address of such stockholder, (ii) the
class or series and number of shares of capital stock of the Company which are
owned beneficially or of record by such stockholder, (iii) a description of all
arrangements or understandings between such stockholder and each proposed
nominee and any other person or persons (including their names) pursuant to
which the nomination(s) are to be made by such stockholder, (iv) a
representation that such stockholder intends to appear in person or by proxy at
the meeting to nominate the persons named in its notice and (v) any other
information relating to such stockholder that would be required to be disclosed
in a proxy statement or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to Section 14 of
the Exchange Act and the rules and regulations promulgated thereunder. Such
notice must be accompanied by a written consent of each proposed nominee to
being named as a nominee and to serve as a director if elected.
<PAGE>
No person shall be eligible for election as a director of the Company
unless nominated in accordance with the procedures set forth in this Section 2.
If the chairman of the meeting determines that a nomination was not made in
accordance with the foregoing procedures, the chairman shall declare to the
meeting that the nomination was defective and such defective nomination shall
be disregarded.
Section 3. Vacancies. Unless otherwise required by law or the
Certificate of Incorporation, vacancies arising through death, resignation,
removal, an increase in the authorized number of directors or otherwise may be
filled only by a majority of the directors then in office, though less than a
quorum, or by a sole remaining director, and the directors so chosen shall hold
office until the next annual election and until their successors are duly
elected and qualified, or until their earlier death, resignation or removal.
Section 4. Duties and Powers. The business and affairs of the
Corporation shall be managed by or under the direction of the Board of
Directors which may exercise all such powers of the Corporation and do all such
lawful acts and things as are not by statute or by the Certificate of
Incorporation or by these Bylaws directed or required to be exercised or done
by the stockholders.
<PAGE>
Section 5. Meetings. The Board of Directors may hold meetings, both
regular and special, either within or without the State of Delaware. Regular
meetings of the Board of Directors may be held without notice at such time and
at such place as may from time to time be determined by the Board of Directors.
Special meetings of the Board of Directors may only be called by the Chairman
of the Board of Directors, the President, or by a majority of directors then in
office. Notice thereof stating the place, date and hour of the meeting shall be
given to each director either by mail not less than forty-eight (48) hours
before the date of the meeting, by telephone, facsimile or telegram on
twenty-four (24) hours' notice, or on such shorter notice as the person or
persons calling such meeting may deem necessary or appropriate in the
circumstances.
Section 6. Inclusion of Business. Any director may require that any
one or more proposals of such director shall be discussed at any meeting of the
Board of Directors by delivering notice as provided in Article VI hereof to
each director and the Corporation either within one day after such director
receives notice of such meeting or in the notice by such director calling a
special meeting of the Board of Directors.
Section 7. Quorum. Except as may be otherwise specifically provided
by law, the Certificate of Incorporation or these Bylaws, at all meetings of
the Board of Directors, a majority of the entire Board of Directors shall
constitute a quorum for the transaction of business. The act of a majority of
the directors present at any meeting at which there is a quorum shall be the
act of the Board of Directors. If a quorum shall not be present at any meeting
of the Board of Directors, the directors present thereat may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
<PAGE>
Section 8. Actions of Board. Unless otherwise provided by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee
thereof may be taken without a meeting, if all the members of the Board of
Directors or committee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of the Board of
Directors or committee.
Section 9. Meetings by Means of Conference Telephone. Unless
otherwise provided by the Certificate of Incorporation or these Bylaws, members
of the Board of Directors of the Corporation, or any committee designated by
the Board of Directors, may participate in a meeting of the Board of Directors
or such committee by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this Section 8 shall
constitute presence in person at such meeting.
Section 10. Committees. The Board of Directors may by resolution
passed by a majority of the entire Board of Directors designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of any such committee. In the absence or disqualification
of a member of a committee, and in the absence of a designation by the Board of
Directors of an alternate member to replace the absent or disqualified member,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not such member or members constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any absent or disqualified member. Any committee, to
the extent permitted by law and provided in the resolution establishing such
committee, shall have and may exercise all the powers and authority of the
Board of Directors in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to all
papers which may require it. Each committee shall keep regular minutes and
report to the Board of Directors when required.
<PAGE>
Section 11. Compensation. The directors shall be paid their
reasonable out-of-pocket expenses, if any, of attendance at each meeting of the
Board of Directors and each meeting of any committee thereof and may be paid a
fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as director, payable in cash or securities. No such payment shall
preclude any director from serving the Corporation in any other capacity and
receiving compensation therefor. Members of special or standing committees may
be allowed like compensation for attending committee meetings.
Section 12. Interested Directors. No contract or transaction between
the Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof
which authorizes the contract or transaction, or solely because the director or
officer's vote is counted for such purpose if (i) the material facts as to the
director or officer's relationship or interest and as to the contract or
transaction are disclosed or are known to the Board of Directors or the
committee, and the Board of Directors or committee in good faith authorizes the
contract or transaction by the affirmative votes of a majority of the
disinterested directors, even though the disinterested directors be less than a
quorum; or (ii) the material facts as to the director or officer's relationship
or interest and as to the contract or transaction are disclosed or are known to
the stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or (iii) the
contract or transaction is fair as to the Corporation as of the time it is
authorized, approved or ratified, by the Board of Directors, a committee
thereof or the stockholders. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the Board of Directors or
of a committee which authorizes the contract or transaction.
<PAGE>
ARTICLE IV
OFFICERS
Section 1. General. The officers of the Corporation shall be chosen
by the Board of Directors and shall include a President, a Secretary and a
Treasurer. The Board of Directors, in its discretion, may also choose a
Chairman of the Board of Directors (who must be a director), a Chief Executive
Officer and one or more Vice Presidents, Assistant Secretaries, Assistant
Treasurers and other officers. Any number of offices may be held by the same
person, unless otherwise prohibited by law, the Certificate of Incorporation or
these Bylaws. The officers of the Corporation need not be stockholders of the
Corporation nor, except in the case of the Chairman of the Board of Directors,
need such officers be directors of the Corporation.
Section 2. Election. The Board of Directors at its first meeting held
after each Annual Meeting of Stockholders shall elect the officers of the
Corporation who shall hold their offices for such terms and shall exercise such
powers and perform such duties as shall be determined from time to time by the
Board of Directors or by the Chairman of the Board of Directors, and all
officers of the Corporation shall hold office until their successors are chosen
and qualified, or until their earlier death, resignation or removal. Any
officer elected by the Board of Directors may be removed at any time by the
affirmative vote of a majority of the Board of Directors or by the Chairman of
the Board of Directors. Any vacancy occurring in any office of the Corporation
shall be filled by the Board of Directors or by the Chairman of the Board of
Directors. The salaries of all officers of the Corporation shall be fixed by
the Board of Directors.
Section 3. Voting Securities Owned by the Corporation. Powers of
attorney, proxies, waivers of notice of meeting, consents and other instruments
relating to securities owned by the Corporation may be executed in the name of
and on behalf of the Corporation by the President or any Vice President or any
other officer authorized to do so by the Board of Directors and any such
officer may, in the name of and on behalf of the Corporation, take all such
action as any such officer may deem advisable to vote in person or by proxy at
any meeting of security holders of any corporation in which the Corporation may
own securities and at any such meeting shall possess and may exercise any and
all rights and power incident to the ownership of such securities and which, as
the owner thereof, the Corporation might have exercised and possessed if
present. The Board of Directors may, by resolution, from time to time confer
like powers upon any other person or persons.
<PAGE>
Section 4. Chairman of the Board of Directors. The Chairman of the
Board of Directors shall preside at all meetings of the stockholders and of the
Board of Directors. The Chairman of the Board of Directors shall be the Chief
Executive Officer of the Corporation, unless the Board of Directors designates
the President as the Chief Executive Officer, and except where by law the
signature of the President is required, the Chairman of the Board of Directors
shall possess the same power as the President to sign all contracts,
certificates and other instruments of the Corporation which may be authorized
by the Board of Directors. During the absence or disability of the President,
the Chairman of the Board of Directors shall exercise all the powers and
discharge all the duties of the President. The Chairman of the Board of
Directors shall also perform such other duties and may exercise such other
powers as from time to time may be assigned to him by these Bylaws or by the
Board of Directors.
Section 5. President. The President shall, subject to the direction
and control of the Chairman of the Board of Directors or the Board of
Directors, have general supervision of the business of the Corporation and
shall see that all orders and resolutions of the Board of Directors are carried
into effect. In the absence or disability of the Chairman of the Board of
Directors, the President shall preside at all meetings of the stockholders and
the Board of Directors. The President shall also perform such other duties and
may exercise such other powers as from time to time may be assigned to him by
these Bylaws or by the Chairman of the Board of Directors or by the Board of
Directors.
<PAGE>
Section 6. Vice Presidents. Each Vice President shall perform such
duties and have such other powers as the Chairman of the Board of Directors or
the Board of Directors from time to time may prescribe.
Section 7. Secretary. The Secretary shall attend all meetings of the
Board of Directors and all meetings of stockholders and record all the
proceedings thereat in a book or books to be kept for that purpose; the
Secretary shall also perform like duties for committees of the Board of
Directors. The Secretary shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the Board of Directors,
and shall perform such other duties as may be prescribed by the Chairman of the
Board of Directors or the Board of Directors, under whose supervision the
Secretary shall be. If the Secretary shall be unable or shall refuse to cause
to be given notice of all meetings of the stockholders and special meetings of
the Board of Directors, and if there be no Assistant Secretary, then either the
Board of Directors or the Chairman of the Board of Directors may choose another
officer to cause such notice to be given. The Secretary shall have custody of
the seal of the Corporation and the Secretary or any Assistant Secretary, if
there be one, shall have authority to affix the same to any instrument
requiring it and when so affixed, it may be attested by the signature of the
Secretary or by the signature of any such Assistant Secretary. The Board of
Directors hereby gives general authority to any other officer to affix the seal
of the Corporation and to attest the affixing by such officer's signature. The
Secretary shall see that all books, reports, statements, certificates and other
documents and records required by law to be kept or filed are properly kept or
filed, as the case may be.
<PAGE>
Section 8. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all transactions as Treasurer and of the financial condition of the
Corporation.
Section 9. Assistant Secretaries. Assistant Secretaries, if there be
any, shall perform such duties and have such powers as from time to time may be
assigned to them by the Board of Directors, the President, any Vice President,
or the Secretary.
Section 10. Assistant Treasurers. Assistant Treasurers, if there be
any, shall perform such duties and have such powers as from time to time may be
assigned to them by the Board of Directors, the President, any Vice President,
if there be one, or the Treasurer, and in the absence of the Treasurer or in
the event of the Treasurer's disability or refusal to act, shall perform the
duties of the Treasurer, and when so acting, shall have all the powers of and
be subject to all the restrictions upon the Treasurer.
Section 11. Other Officers. Such other officers as the Board of
Directors or the Chairman of the Board of Directors may choose shall perform
such duties and have such powers as from time to time may be assigned to them
by the Board of Directors. The Board of Directors may delegate to any other
officer of the Corporation the power to choose such other officers and to
prescribe their respective duties and powers.
<PAGE>
ARTICLE V
STOCK
Section 1. Form of Certificates. Every holder of stock in the
Corporation shall be entitled to have a certificate signed, in the name of the
Corporation (i) by the Chairman of the Board of Directors and (ii) by the
Secretary or an Assistant Secretary of the Corporation, certifying the number
of shares owned by such stockholder in the Corporation.
Section 2. Signatures. Any or all of the signatures on a certificate
may be a facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if such person were such officer, transfer agent or registrar at the date of
issue.
Section 3. Lost Certificates. The Secretary may direct a new
certificate to be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue of a new certificate,
the Secretary may, in his discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or the owner's legal representative, to advertise the same in such
manner as the Secretary shall require and/or to give the Corporation a bond in
such sum as he may direct as indemnity against any claim that may be made
against the Corporation with respect to the certificate alleged to have been
lost, stolen or destroyed or the issuance of such new Certificate.
<PAGE>
Section 4. Transfers. Stock of the Corporation shall be transferable
in the manner prescribed by law and in these Bylaws. Transfers of stock shall
be made on the books of the Corporation only by the person named in the
certificate or by such person's attorney lawfully constituted in writing and
upon the surrender of the certificate therefor, properly endorsed for transfer
and payment of all necessary transfer taxes; provided, however, that such
surrender and endorsement or payment of taxes shall not be required in any case
in which the officers of the Corporation shall determine to waive such
requirement. Every which shall be cancelled before a new certificate exchanged,
returned or surrendered to the Corporation shall be marked "Cancelled," with
the date of cancellation, by the Secretary or Assistant Secretary of the
Corporation or the transfer agent thereof. No transfer of stock shall be valid
as against the Corporation for any purpose until it shall have been entered in
the stock records of the Corporation by an entry showing from and to whom
transferred.
Section 5. Record Date.
(a) In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix a record date, which record
date shall not precede the date upon which the resolution fixing the record
date is adopted by the Board of Directors, and which record date shall not be
more than sixty nor less than ten days before the date of such meeting. If no
record date is fixed by the Board of Directors, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders
shall be at the close of business on the day next preceding the day on which
notice is given, or, if notice is waived, at the close of business on the day
next preceding the day on which the meeting is held. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; providing, however,
that the Board of Directors may fix a new record date for the adjourned
meeting.
<PAGE>
(b) In order that the Corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the Board
of Directors may fix a record date, which record date shall not precede the
date upon which the resolution fixing the record date is adopted by the Board
of Directors, and which record date shall not be more than ten days after the
date upon which the resolution fixing the record date is adopted by the Board
of Directors. If no record date has been fixed by the Board of Directors, the
record date for determining stockholders entitled to consent to corporate
action in writing without a meeting, when no prior action by the Board of
Directors is required by law, shall be the first date on which a signed written
consent setting forth the action taken or proposed to be taken is delivered to
the Corporation by delivery to its registered office in this State, its
principal place of business, or an officer or agent of the Corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to a corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested. If no record date
has been fixed by the Board of Directors and prior action by the Board of
Directors is required by law, the record date for determining stockholders
entitled to consent to corporate action in writing without a meeting shall be
at the close of business on the day on which the Board of Directors adopts the
resolutions taking such prior action.
(c) In order that the Corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix a record date, which record date
shall not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than sixty days prior to such
action. If no record date is fixed, the record date for determining
stockholders for any such purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto.
In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or entitled to express consent to corporate action in
writing without a meeting, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock, or for the
purpose of any other lawful action, the Board of Directors may fix, in advance,
a record date, which shall not be more than sixty days nor less than ten days
before the date of such meeting, nor more than sixty days prior to any other
action. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
<PAGE>
Section 6. Record Owners. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any beneficial, equitable or other
claim to or interest in such share or shares on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise required by law.
ARTICLE VI
NOTICES
Section 1. Notices. Whenever written notice is required by law, the
Certificate of Incorporation or these Bylaws, to be given to any director,
member of a committee or stockholder, such notice may be given by mail,
addressed to such director, member of a committee or stockholder, at such
person's address as it appears on the records of the Corporation, with postage
thereon prepaid, and such notice shall be deemed to be given at the time when
the same shall be deposited in the United States mail. Written notice may also
be given personally or by telegram, telex or cable.
Section 2. Waivers of Notice. Whenever any notice is required by law,
the Certificate of Incorporation or these Bylaws, to be given to any director,
member of a committee or stockholder, a waiver thereof in writing, signed, by
the person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto. Attendance of a person at a
meeting, present in person or represented by proxy, shall constitute a waiver
of notice of such meeting, except where the person attends the meeting for the
express purpose of objecting at the beginning of the meeting to the transaction
of any business because the meeting is not lawfully called or convened.
<PAGE>
Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders, directors or members of a
committee of directors need be specified in any written waiver of notice unless
so required by law, the Certificate of Incorporation or these Bylaws.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
Corporation, subject to the requirements of the DGCL and provisions of the
Certificate of Incorporation, if any, may be declared by the Board of Directors
at any regular or special meeting of the Board of Directors (or any action by
written consent in lieu thereof in accordance with Section 6 of Article III
hereof), and may be paid in cash, in property, or in shares of the
Corporation's capital stock. Before payment of any dividend, there may be set
aside out of any funds of the Corporation available for dividends such sum or
sums as the Board of Directors from time to time, in its absolute discretion,
deems proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for any proper purpose, and the Board of Directors may modify or abolish any
such reserve.
Section 2. Disbursements. All checks or demands for money and notes
of the Corporation shall be signed by such officer or officers or such other
person or persons as the Board of Directors may from time to time designate.
<PAGE>
Section 3. Fiscal Year. The fiscal year of the Corporation
shall be fixed by resolution of the Board of Directors.
Section 4. Corporate Seal. The corporate seal shall have inscribed
thereon the name of the Corporation, the year of its organization and the words
"Corporate Seal, Delaware". The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE VIII
INDEMNIFICATION
Section 1. Power to Indemnify in Actions, Suits or Proceedings other
Than Those by or in the Right of the Corporation. Subject to Section 3 of this
Article VIII, the Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that such person is or was a director or officer of the
Corporation, or is or was a director or officer of the Corporation serving at
the request of the Corporation as a director or officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise, against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by such
person in connection with such action, suit or proceeding if such person acted
in good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe such person's
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which such person reasonably believed to
be in or not opposed to the best interests of the Corporation, and, with
respect to any criminal action or proceeding, had reasonable cause to believe
that such person's conduct was unlawful.
<PAGE>
Section 2. Power to Indemnify in Actions, Suits or Proceedings by or
in the Right of the Corporation. Subject to Section 3 of this Article VIII, the
Corporation shall indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action or suit by or
in the right of the Corporation to procure a judgment in its favor by reason of
the fact that such person is or was a director or officer of the Corporation,
or is or was a director or officer of the Corporation serving at the request of
the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise against expenses (including attorneys' fees) actually and reasonably
incurred by such person in connection with the defense or settlement of such
action or suit if such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the
Corporation; except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
Section 3. Authorization of Indemnification. Any indemnification
under this Article VIII (unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case upon a determination that
indemnification of the director or officer is proper in the circumstances
because such person has met the applicable standard of conduct set forth in
Section 1 or Section 2 of this Article VIII, as the case may be. Such
determination shall be made with respect to a person who is a director or
officer at the time of such determination, (i) by a majority vote of the
directors who are not parties to such action, suit or proceeding, even though
less than a quorum, or (ii) by a committee of such directors designated by a
majority vote of such directors, even though less than a quorum, or (iii) if
there are no such directors, or if such directors so direct, by independent
legal counsel in a written opinion, or (iv) by the stockholders. Such
determination shall be made, with respect to former directors and officers, by
any person or persons having the authority to act on the matter on behalf of
the Corporation. To the extent, however, that a director or officer of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding described above, or in defense of any claim, issue
or matter therein, such person shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
therewith, without the necessity of authorization in the specific case.
<PAGE>
Section 4. Good Faith Defined. For purposes of any determination
under Section 3 of this Article VIII, a person shall be deemed to have acted in
good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the Corporation, or, with respect to any
criminal action or proceeding, to have had no reasonable cause to believe such
person's conduct was unlawful, if such person's action is based on the records
or books of account of the Corporation or another enterprise, or on information
supplied to such person by the officers of the Corporation or another
enterprise in the course of their duties, or on the advice of legal counsel for
the Corporation or another enterprise or on information or records given or
reports made to the Corporation or another enterprise by an independent
certified public accountant or by an appraiser or other expert selected with
reasonable care by the Corporation or another enterprise. The term "another
enterprise" as used in this Section 4 shall mean any other corporation or any
partnership, joint venture, trust, employee benefit plan or other enterprise of
which such person is or was serving at the request of the Corporation as a
director, officer, employee or agent. The provisions of this Section 4 shall
not be deemed to be exclusive or to limit in any way the circumstances in which
a person may be deemed to have met the applicable standard of conduct set forth
in Sections 1 or 2 of this Article VIII, as the case may be.
Section 5. Indemnification by a Court. Notwithstanding any contrary
determination in the specific case under Section 3 of this Article VIII, and
notwithstanding the absence of any determination thereunder, any director or
officer may apply to the Court of Chancery in the State of Delaware for
indemnification to the extent otherwise permissible under Sections 1 and 2 of
this Article VIII. The basis of such indemnification by a court shall be a
determination by such court that indemnification of the director or officer is
proper in the circumstances because such person has met the applicable
standards of conduct set forth in Sections 1 or 2 of this Article VIII, as the
case may be. Neither a contrary determination in the specific case under
Section 3 of this Article VIII nor the absence of any determination thereunder
shall be a defense to such application or create a presumption that the
director or officer seeking indemnification has not met any applicable standard
of conduct. Notice of any application for indemnification pursuant to this
Section 5 shall be given to the Corporation promptly upon the filing of such
application. If successful, in whole or in part, the director or officer
seeking indemnification shall also be entitled to be paid the expense of
prosecuting such application.
<PAGE>
Section 6. Expenses Payable in Advance. Expenses incurred by a
director or officer in defending or investigating a threatened or pending
action, suit or proceeding shall be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that such person is not entitled to be
indemnified by the Corporation as authorized in this Article VIII.
Section 7. Nonexclusivity of Indemnification and Advancement of
Expenses. The indemnification and advancement of expenses provided by or
granted pursuant to this Article VIII shall not be deemed exclusive of any
other rights to which those seeking indemnification or advancement of expenses
may be entitled under the Certificate of Incorporation, any Bylaw, agreement,
vote of stockholders or disinterested directors or otherwise, both as to action
in such person's official capacity and as to action in another capacity while
holding such office, it being the policy of the Corporation that
indemnification of the persons specified in Sections 1 and 2 of this Article
VIII shall be made to the fullest extent permitted by law. The provisions of
this Article VIII shall not be deemed to preclude the indemnification of any
person who is not specified in Sections 1 or 2 of this Article VIII but whom
the Corporation has the power or obligation to indemnify under the provisions
of the General Corporation Law of the State of Delaware, or otherwise.
Section 8. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director or officer of the
Corporation, or is or was a director or officer of the Corporation serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise against any liability asserted against such person and
incurred by such person in any such capacity, or arising out of such person's
status as such, whether or not the Corporation would have the power or the
obligation to indemnify such person against such liability under the provisions
of this Article VIII.
<PAGE>
Section 9. Certain Definitions. For purposes of this Article VIII,
references to "the Corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors or officers, so that any person who is or was a director or officer
of such constituent corporation, or is or was a director or officer of such
constituent corporation serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise, shall stand in
the same position under the provisions of this Article VIII with respect to the
resulting or surviving corporation as such person would have with respect to
such constituent corporation if its separate existence had continued. For
purposes of this Article VIII, references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the Corporation which
imposes duties on, or involves services by, such director or officer with
respect to an employee benefit plan, its participants or beneficiaries; and a
person who acted in good faith and in a manner such person reasonably believed
to be in the interest of the participants and beneficiaries of an employee
benefit plan shall be deemed to have acted in a manner "not opposed to the best
interests of the Corporation" as referred to in this Article VIII.
Section 10. Survival of Indemnification and Advancement of Expenses.
The indemnification and advancement of expenses provided by, or granted
pursuant to, this Article VIII shall, unless otherwise provided when authorized
or ratified, continue as to a person who has ceased to be a director or officer
and shall inure to the benefit of the heirs, executors and administrators of
such a person.
Section 11. Limitation on Indemnification. Notwithstanding anything
contained in this Article VIII to the contrary, except for proceedings to
enforce rights to indemnification (which shall be governed by Section 5
hereof), the Corporation shall not be obligated to indemnify any director or
officer in connection with a proceeding (or part thereof) initiated by such
person unless such proceeding (or part thereof) was authorized or consented to
by the Board of Directors of the Corporation.
<PAGE>
Section 12. Indemnification of Employees and Agents. The Corporation
may, to the extent authorized from time to time by the Board of Directors,
provide rights to indemnification and to the advancement of expenses to
employees and agents of the Corporation similar to those conferred in this
Article VIII to directors and officers of the Corporation.
ARTICLE IX
AMENDMENTS
Section 1. Amendments. These Bylaws may be altered, amended or
repealed, in whole or in part, or new Bylaws may be adopted by a majority
of the entire Board of Directors or by the stockholders as provided in the
Certificate of Incorporation.
Section 2. Entire Board of Directors. As used in this Article IX and
in these Bylaws generally, the term "entire Board of Directors" means the total
number of directors which the Corporation would have if there were no
vacancies.
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
HOMESERVICES.COM INC.
-----------------------------------------
Pursuant to Sections 242 and 245 of the General
Corporation Law of the State of Delaware
-----------------------------------------
HomeServices.Com Inc. (the "Corporation"), a corporation organized
and existing under the General Corporation Law of the State of Delaware (the
"GCL"), does hereby certify as follows:
FIRST: The name of the Corporation is HomeServices.Com Inc. The
name under which the Corporation was originally incorporated was
HomeServices.Com Inc. and the original Certificate of Incorporation of the
Corporation was filed with the Secretary of State of the State of Delaware
on July 13, 1999.
SECOND: This Amended and Restated Certificate of Incorporation was
duly adopted by the Board of Directors and by the stockholders of the
Corporation under the provisions of Sections 228, 242 and 245 of the GCL.
THIRD: This Amended and Restated Certificate of Incorporation
amends and restates the Certificate of Incorporation of the Corporation, as
heretofore amended.
FOURTH: The text of the Restated Certificate of Incorporation is
amended and restated in its entirety as follows:
ARTICLE I: The name of the Corporation is HomeServices.Com Inc.
(hereinafter, the "Corporation").
ARTICLE II: The address of the registered office of the Corporation
in the State of Delaware is 1209 Orange Street, in the City of Wilmington,
County of New Castle. The name of its registered agent at that address is The
Corporation Trust Company.
<PAGE>
ARTICLE III: The purpose of the Corporation is to engage in any
lawful act or activity for which a corporation may be organized under the
General Corporation Law of the State of Delaware as set forth in Title 8 of the
Delaware Code (the "GCL").
ARTICLE IV: (a) The total number of shares of stock which the
Corporation shall have authority to issue is 38,000,000 shares of Common Stock,
each having a par value of $0.01, and 2,000,000 shares of Preferred Stock, each
having a par value of $0.01.
(b) The powers, preferences and rights, and the qualifications,
limitations and restrictions, of each class of the Common Stock are as follows:
(1) The holders of shares of Common Stock shall not have
cumulative voting rights.
(2) Subject to the rights of the holders of Preferred Stock, and
subject to any other provisions of this Amended and Restated Certificate of
Incorporation, as it may be amended from time to time, holders of shares of
Common Stock shall be entitled to receive such dividends and other
distributions in cash, stock or property of the Corporation when, as and if
declared thereon by the Board of Directors from time to time out of assets or
funds of the Corporation legally available therefor.
(3) In the event of any liquidation, dissolution or winding up
(either voluntary or involuntary) of the Corporation, the holders of shares of
Common Stock shall be entitled to receive the assets and funds of the
Corporation available for distribution after payments to creditors and to the
holders of any Preferred Stock of the Corporation that may at the time be
outstanding, in proportion to the number of shares held by them, respectively.
(4) In the event of a merger or consolidation of the Corporation
with or into another entity (whether or not the Corporation is the surviving
entity), the holders of each share of Common Stock shall be entitled to receive
the same per share consideration on a per share basis.
(5) No holder of shares of Common Stock shall be entitled to
preemptive or subscription rights.
(6) Subject to the requirements of applicable law, the Corporation
shall have the power to issue and sell all or any part of any shares of any
class of stock herein or hereafter authorized to such persons, and for such
consideration, as the Board of Directors shall from time to time, in its
discretion, determine, whether or not greater consideration could be received
upon the issue or sale of the same number of shares of another class, and as
otherwise permitted by law. Subject to the requirements of applicable law, the
Corporation shall have the power to purchase any shares of any class of stock
herein or hereafter authorized from such persons, and for such consideration,
as the Board of Directors shall from time to time, in its discretion,
determine, whether or not less consideration could be paid upon the purchase of
the same number of shares of another class, and as otherwise permitted by law.
<PAGE>
(c) The Board of Directors is expressly authorized to provide for the
issuance of all or any shares of the Preferred Stock in one or more classes or
series, and to fix for each such class or series such voting powers, full or
limited, or no voting powers, and such distinctive designations, preferences
and relative, participating, optional or other special rights and such
qualifications, limitations or restrictions thereof, as shall be stated and
expressed in the resolution or resolutions adopted by the Board of Directors
providing for the issuance of such class or series and as may be permitted by
the GCL, including, without limitation, the authority to provide that any such
class or series may be (i) subject to redemption at such time or times and at
such price or prices; (ii) entitled to receive dividends (which may be
cumulative or non-cumulative) at such rates, on such conditions, and at such
times, and payable in preference to, or in such relation to, the dividends
payable on any other class or classes or any other series; (iii) entitled to
such rights upon the dissolution of, or upon any distribution of the assets of,
the Corporation; or (iv) convertible into, or exchangeable for, shares of any
other class or classes of stock, or of any other series of the same or any
other class or classes of stock, of the Corporation at such price or prices or
at such rates of exchange and with such adjustments; all as may be stated in
such resolution or resolutions.
ARTICLE V: (a) The business and affairs of the Corporation
shall be managed by or under the direction of the Board of Directors.
(b) The number of directors of the Corporation shall be no fewer than
three, nor more than fifteen, the exact number of which shall be fixed from
time to time by the Board of Directors. Election of directors need not be by
written ballot unless the Bylaws so provide.
(c) The directors shall be divided into three classes, designated
Class I, Class II and Class III. Each class shall consist, as nearly as may be
possible, of one-third of the total number of directors constituting the entire
Board of Directors. The initial division of the Board of Directors into classes
shall be made by the decision of the affirmative vote of a majority of the
entire Board of Directors. The term of the initial Class I directors shall
terminate on the date of the 2000 annual meeting of stockholders; the term of
the initial Class II directors shall terminate on the date of the 2001 annual
meeting of stockholders; and the term of the initial Class III directors shall
terminate on the date of the 2002 annual meeting of stockholders. At each
succeeding annual meeting of stockholders beginning in 2000, successors to the
class of directors whose term expires at that annual meeting shall be elected
for a three-year term. If the number of directors is changed, any increase or
decrease shall be apportioned among the classes so as to maintain the number of
directors in each class as nearly equal as possible. A director shall hold
office until the annual meeting for the year in which his or her term expires
and until his or her successor shall be elected and shall qualify, subject,
however, to prior death, resignation, retirement, disqualification or removal
from office.
<PAGE>
(d) Subject to the terms of any one or more classes or series of
Preferred Stock, any vacancy on the Board of Directors caused by death,
resignation, retirement, disqualification or removal or any other cause
(including an increase in the number of directors) may be filled by resolution
adopted by a majority of the Board of Directors then in office whether or not
such majority constitutes less than quorum, or by a sole remaining director.
Any director of any class elected to fill a vacancy resulting from an increase
in the number of directors of such class shall hold office for a term that
shall coincide with the remaining term of that class. Any director elected to
fill a vacancy not resulting from an increase in the number of directors shall
have the same remaining term as that of his predecessor. No decrease in the
size of the Board of Directors shall have the effect of shortening the term of
any incumbent director.
(e) Subject to the rights, if any, of the holders of shares of
Preferred Stock then outstanding, any or all of the directors of the
Corporation may be removed from office at any time, but only for cause and only
by the affirmative vote of the holders of at least a majority of the voting
power of the Corporation's then outstanding capital stock entitled to vote
generally in the election of directors. Notwithstanding the foregoing, whenever
the holders of any one or more classes or series of Preferred Stock issued by
the Corporation shall have the right, voting separately by class or series, to
elect directors at an annual or special meeting of stockholders, the election,
term of office, filling of vacancies and other features of such directorships
shall be governed by the terms of this Amended and Restated Certificate of
Incorporation applicable thereto, and such directors so elected shall not be
divided into classes pursuant to this Article V unless expressly provided by
such terms.
ARTICLE VI: In addition to the powers and authority hereinbefore or
by statute expressly conferred upon them, the directors are hereby empowered to
exercise all such powers and do all such acts and things as may be exercised or
done by the Corporation, subject, nevertheless, to the provisions of the GCL,
this Amended and Restated Certificate of Incorporation, and any Bylaws adopted
by the stockholders; provided, however, that no Bylaws hereafter adopted by the
stockholders shall invalidate any prior act of the directors which would have
been valid if such Bylaws had not been adopted. The directors shall have
concurrent power with the stockholders to make, alter, amend, change, add to or
repeal the Bylaws of the Corporation except as otherwise provided therein.
ARTICLE VII: No director shall be personally liable to the
Corporation or any of its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholder, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of the law, (iii) pursuant to Section 174 of the GCL and (iv)
for any transaction from which the director derived an improper personal
benefit. Any repeal or modification of this Article VII by the stockholders of
the Corporation shall not adversely affect any right or protection of a
director of the Corporation existing at the time of such repeal or modification
with respect to acts or omissions occurring prior to such repeal or
modification.
<PAGE>
ARTICLE VIII: The Corporation shall indemnify its directors and
officers to the fullest extent authorized or permitted by law, as now or
hereafter in effect, and such right to indemnification shall continue as to a
person who has ceased to be a director or officer of the Corporation and shall
inure to the benefit of his or her heirs, executors and personal and legal
representatives; provided, however, that, except for proceedings to enforce
rights to indemnification, the Corporation shall not be obligated to indemnify
any director or officer (or his or her heirs, executors or personal or legal
representatives) in connection with a proceeding (or part thereof) initiated by
such person unless such proceeding (or part thereof) was authorized or
consented to by the Board of Directors. The right to indemnification conferred
by this Article VIII shall include the right to be paid by the Corporation the
expenses incurred in defending or otherwise participating in any proceeding as
incurred in advance of its final disposition
The Corporation may, to the extent authorized from time to time by
the Board of Directors, provide rights to indemnification and to the
advancement of expenses to employees and agents of the Corporation similar to
those conferred in this Article VIII to directors and officers of the
Corporation.
The rights to indemnification and to the advance of expenses
conferred in this Article VIII shall not be exclusive of any other right which
any person may have or hereafter acquire under this Restated Certificate of
Incorporation, the Bylaws of the Corporation, any statute, agreement, vote of
stockholders or disinterested directors, contract or otherwise.
Any repeal or modification of this Article VIII by the stockholders
of the Corporation shall not adversely affect any rights to indemnification and
to the advancement of expenses of a director or officer of the Corporation
existing at the time of such repeal or modification with respect to any acts or
omissions occurring prior to such repeal or modification.
ARTICLE IX: The Corporation hereby elects not to be governed
by Section 203 of the GCL pursuant to Section 203(b) therein.
ARTICLE X: Meetings of stockholders may be held within or without the
State of Delaware, as the Bylaws may provide. The books of the Corporation may
be kept (subject to any provision contained in the GCL) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of the Corporation.
<PAGE>
ARTICLE XI: Any action required or permitted to be taken by the
stockholders of the Corporation may be effected only upon the vote of the
stockholders at an annual or special meeting of stockholders of the
Corporation, duly noticed and called under the Bylaws of the Corporation and
the ability of the stockholders to consent in writing to the taking of any
action is hereby specifically denied.
ARTICLE XII: In furtherance and not in limitation of the powers
conferred upon it by the laws of the State of Delaware, the Board of Directors
shall have the power to adopt, amend, alter or repeal the Corporation's Bylaws.
The affirmative vote of at least a majority of the directors then in office
shall be required to adopt, amend, alter or repeal the Corporation's Bylaws.
The Corporation's Bylaws also may be adopted, amended, altered or repealed by
the affirmative vote of the holders of at least eighty percent (80%) of the
voting power of the shares entitled to vote at an election of directors.
ARTICLE XIII: The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this Amended and Restated
Certificate of Incorporation, in the manner now or hereafter prescribed by
statute, and all rights conferred upon stockholders herein are granted subject
to this reservation; provided, however, that notwithstanding any other
provision of this Amended and Restated Certificate of Incorporation (and in
addition to any other vote required by law), the affirmative vote of at least
eighty percent (80%) of the voting power of the shares entitled to vote at an
election of directors shall be required to amend, alter, change or repeal, or
to adopt any provision as part of this Amended and Restated Certificate of
Incorporation inconsistent with the purpose and intent of Articles V, VIII, XI
and XII of this Amended and Restated Certificate of Incorporation or this
Article XIII.
ARTICLE XIV: This Restated Certificate of Incorporation shall become
effective at 11:00 a.m., Eastern Daylight Time, on the date on which this
Restated Certificate of Incorporation is filed with the Secretary of State of
the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Amended and
Restated Certificate of Incorporation to be executed on its behalf this 7th day
of October, 1999.
HOMESERVICES.COM INC.
By: /s/ Steven A. McArthur
--------------------------
Name: Steven A. McArthur
Title: Senior Vice President,
General Counsel and
Secretary
CERTIFICATE OF DESIGNATION, PREFERENCES AND
RIGHTS OF SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
HomeServices.Com Inc.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
The undersigned officers of HomeServices.Com Inc. (the
"Corporation"), a corporation organized and existing under the General
Corporation Law of the State of Delaware, in accordance with the provisions of
Section 103 thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors
by the Restated Certificate of Incorporation of the said Corporation, the said
Board of Directors on October 6, 1999, adopted the following resolution
creating a series of shares of Preferred Stock designated as Series A Junior
Participating Preferred Stock:
RESOLVED, that pursuant to the authority vested in the Board of
Directors of this Corporation in accordance with the provisions of its Restated
Certificate of Incorporation, a series of Preferred Stock of the Corporation be
and it hereby is created, and that the designation and amount thereof and the
voting powers, preferences and relative, participating, optional and other
special rights of the shares of such series, and the qualifications,
limitations or restrictions thereof are as follows:
Section 1. Designation and Amount. The shares of such series shall be
designated as "Series A Junior Participating Preferred Stock" and the number of
shares constituting such series shall be 100,000.
<PAGE>
Section 2. Dividends and Distributions.
(A) Subject to the prior and superior rights of the holders of any
shares of any series of Preferred Stock ranking prior and superior to the
shares of Series A Junior Participating Preferred Stock with respect to
dividends, the holders of shares of Series A Junior Participating Preferred
Stock shall be entitled to receive, when, as and if declared by the Board of
Directors out of funds legally available for the purpose, quarterly dividends
payable in cash on the first day of January, April, July and October in each
year (each such date being referred to herein as a "Quarterly Dividend Payment
Date"), commencing on the first Quarterly Dividend Payment Date after the first
issuance of a share or fraction of a share of Series A Junior Participating
Preferred Stock, in an amount per share (rounded to the nearest cent) equal to
the greater of (a) $10.00 or (b) subject to the provision for adjustment
hereinafter set forth, 1,000 times the aggregate per share amount of all cash
dividends, and 1,000 times the aggregate per share amount (payable in kind) of
all non-cash dividends or other distributions other than a dividend payable in
shares of Common Stock or a subdivision of the outstanding shares of Common
Stock (by reclassification or otherwise), declared on the Common Stock, par
value $0.01 per share, of the Corporation (the "Common Stock") since the
immediately preceding Quarterly Dividend Payment Date, or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Junior Participating Preferred Stock. In the
event the Corporation shall at any time after October 14, 1999 (the "Rights
Declaration Date") (i) declare any dividend on Common Stock payable in shares
of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine
the outstanding Common Stock into a smaller number of shares, then in each such
case the amount to which holders of shares of Series A Junior Participating
Preferred Stock were entitled immediately before such event under clause (b) of
the preceding sentence shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately before such
event.
(B) The Corporation shall declare a dividend or distribution on the
Series A Junior Participating Preferred Stock as provided in Paragraph (A)
above immediately after it declares a dividend or distribution on the Common
Stock (other than a dividend payable in shares of Common Stock); provided that,
in the event no dividend or distribution shall have been declared on the Common
Stock during the period between any Quarterly Dividend Payment Date and the
next subsequent Quarterly Dividend Payment Date, a dividend of $10.00 per share
on the Series A Junior Participating Preferred Stock shall nevertheless be
payable on such subsequent Quarterly Dividend Payment Date.
<PAGE>
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Junior Participating Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares of Series
A Junior Participating Preferred Stock, unless the date of issue of such shares
is before the record date for the first Quarterly Dividend Payment Date, in
which case dividends on such shares shall begin to accrue from the date of
issue of such shares, or unless the date of issue is a Quarterly Dividend
Payment Date or is a date after the record date for the determination of
holders of shares of Series A Junior Participating Preferred Stock entitled to
receive a quarterly dividend and before such Quarterly Dividend Payment Date,
in either of which events such dividends shall begin to accrue and be
cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid
dividends shall not bear interest. Dividends paid on the shares of Series A
Junior Participating Preferred Stock in an amount less than the total amount of
such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at the time
outstanding. The Board of Directors may fix a record date for the determination
of holders of shares of Series A Junior Participating Preferred Stock entitled
to receive payment of a dividend or distribution declared thereon, which record
date shall be no more than 30 days before the date fixed for the payment
thereof.
Section 3. Voting Rights. The holders of shares of Series A
Junior Participating Preferred Stock shall have the following voting
rights:
(A) Subject to the provision for adjustment hereinafter set forth,
each share of Series A Junior Participating Preferred Stock shall entitle the
holder thereof to 1,000 votes on all matters submitted to a vote of the
stockholders of the Corporation. In the event the Corporation shall at any time
after the Rights Declaration Date (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock,
or (iii) combine the outstanding Common Stock into a smaller number of shares,
then in each such case the number of votes per share to which holders of shares
of Series A Junior Participating Preferred Stock were entitled immediately
before such event shall be adjusted by multiplying such number by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately before such event.
<PAGE>
(B) Except as otherwise provided herein or by law, the holders of
shares of Series A Junior Participating Preferred Stock and the holders of
shares of Common Stock shall vote together as one class on all matters
submitted to a vote of stockholders of the Corporation.
(C) (i) If at any time dividends on any Series A Junior Participating
Preferred Stock shall be in arrears in an amount equal to six (6) quarterly
dividends thereon, the occurrence of such contingency shall mark the beginning
of a period (herein called a "default period") which shall extend until such
time when all accrued and unpaid dividends for all previous quarterly dividend
periods and for the current quarterly dividend period on all shares of Series A
Junior Participating Preferred Stock then outstanding shall have been declared
and paid or set apart for payment. During each default period, all holders of
Preferred Stock (including holders of the Series A Junior Participating
Preferred Stock) with dividends in arrears in an amount equal to six (6)
quarterly dividends thereon, voting as a class, irrespective of series, shall
have the right to elect two (2) directors.
(ii) During any default period, such voting right of the holders
of Series A Junior Participating Preferred Stock may be exercised initially at
a special meeting called pursuant to subparagraph (iii) of this Section 3(C) or
at any annual meeting of stockholders, and thereafter at annual meetings of
stockholders, provided that neither such voting right nor the right of the
holders of any other series of Preferred Stock, if any, to increase, in certain
cases, the authorized number of directors shall be exercised unless the holders
of ten percent (10%) in number of shares of Preferred Stock outstanding shall
be present in person or by proxy. The absence of a quorum of the holders of
Common Stock shall not affect the exercise by the holders of Preferred Stock of
such voting right. At any meeting at which the holders of Preferred Stock shall
exercise such voting right initially during an existing default period, they
shall have the right, voting as a class, to elect directors to fill such
vacancies, if any, in the Board of Directors as may then exist up to two (2)
directors or, if such right is exercised at an annual meeting, to elect two (2)
directors. If the number which may be so elected at any special meeting does
not amount to the required number, the holders of the Preferred Stock shall
have the right to make such increase in the number of directors as shall be
necessary to permit the election by them of the required number. After the
holders of the Preferred Stock shall have exercised their right to elect
directors in any default period and during the continuance of such period, the
number of directors shall not be increased or decreased except by vote of the
holders of Preferred Stock as herein provided or pursuant to the rights of any
equity securities ranking senior to or pari passu with the Series A Junior
Participating Preferred Stock.
<PAGE>
(iii) Unless the holders of Preferred Stock shall, during an
existing default period, have previously exercised their right to elect
directors, the Board of Directors may order, or any stockholder or stockholders
owning in the aggregate not less than ten percent (10%) of the total number of
shares of Preferred Stock outstanding, irrespective of series, may request, the
calling of a special meeting of the holders of Preferred Stock, which meeting
shall thereupon be called by the President, a Vice-President or the Secretary
of the Corporation. Notice of such meeting and of any annual meeting at which
holders of Preferred Stock are entitled to vote pursuant to this Paragraph
(C)(iii) shall be given to each holder of record of Preferred Stock by mailing
a copy of such notice to him at his last address as the same appears on the
books of the Corporation. Such meeting shall be called for a time not earlier
than 20 days and not later than 60 days after such order or request or in
default of the calling of such meeting within 60 days after such order or
request, such meeting may be called on similar notice by any stockholder or
stockholders owning in the aggregate not less than ten percent (10%) of the
total number of shares of Preferred Stock outstanding. Notwithstanding the
provisions of this Paragraph (C)(iii), no such special meeting shall be called
during the period within 60 days immediately preceding the date fixed for the
next annual meeting of the stockholders.
(iv) In any default period, the holders of Common Stock, and
other classes of stock of the Corporation if applicable, shall continue to be
entitled to elect the whole number of directors until the holders of Preferred
Stock shall have exercised their right to elect two (2) directors voting as a
class, after the exercise of which right (x) the directors so elected by the
holders of Preferred Stock shall continue in office until their successors
shall have been elected by such holders or until the expiration of the default
period, and (y) any vacancy in the Board of Directors may (except as provided
in Paragraph (C)(ii) of this Section 3) be filled by vote of a majority of the
remaining directors theretofore elected by the holders of the class of stock
which elected the director whose office shall have become vacant. References in
this Paragraph (C) to directors elected by the holders of a particular class of
stock shall include directors elected by such directors to fill vacancies as
provided in clause (y) of the foregoing sentence.
<PAGE>
(v) Immediately upon the expiration of a default period, (x) the
right of the holders of Preferred Stock as a class to elect directors shall
cease, (y) the term of any directors elected by the holders of Preferred Stock
as a class shall terminate, and (z) the number of directors shall be such
number as may be provided for in the certificate of incorporation or by-laws
irrespective of any increase made pursuant to the provisions of Paragraph
(C)(ii) of this Section 3 (such number being subject, however, to change
thereafter in any manner provided by law or in the certificate of incorporation
or by-laws). Any vacancies in the Board of Directors effected by the provisions
of clauses (y) and (z) in the preceding sentence may be filled by a majority of
the remaining directors.
(D) Except as set forth herein, holders of Series A Junior
Participating Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for taking any corporate
action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Junior Participating Preferred Stock as provided in
Section 2 are in arrears, thereafter and until all accrued and unpaid dividends
and distributions, whether or not declared, on shares of Series A Junior
Participating Preferred Stock outstanding shall have been paid in full, the
Corporation shall not
(i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise acquire for
consideration any shares of stock ranking junior (either as to dividends
or upon liquidation, dissolution or winding up) to the Series A Junior
Participating Preferred Stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series
A Junior Participating Preferred Stock, except dividends paid ratably on
the Series A Junior Participating Preferred Stock and all such parity
stock on which dividends are payable or in arrears in proportion to the
total amounts to which the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series
A Junior Participating Preferred Stock, provided that the Corporation may
at any time redeem, purchase or otherwise acquire shares of any such
parity stock in exchange for shares of any stock of the Corporation
ranking junior (either as to dividends or upon dissolution, liquidation or
winding up) to the Series A Junior Participating Preferred Stock; or
<PAGE>
(iv) purchase or otherwise acquire for consideration any
shares of Series A Junior Participating Preferred Stock, or any shares of
stock ranking on a parity with the Series A Junior Participating Preferred
Stock, except in accordance with a purchase offer made in writing or by
publication (as determined by the Board of Directors) to all holders of
such shares upon such terms as the Board of Directors, after consideration
of the respective annual dividend rates and other relative rights and
preferences of the respective series and classes, shall determine in good
faith will result in fair and equitable treatment among the respective
series or classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under Paragraph (A) of
this Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
Section 5. Reacquired Shares. Any shares of Series A Junior
Participating Preferred Stock purchased or otherwise acquired by the
Corporation in any manner whatsoever shall be retired and cancelled promptly
after the acquisition thereof. All such shares shall upon their cancellation
become authorized but unissued shares of Preferred Stock and may be reissued as
part of a new series of Preferred Stock to be created by resolution or
resolutions of the Board of Directors, subject to the conditions and
restrictions on issuance set forth herein.
Section 6. Liquidation, Dissolution or Winding Up. (A) Upon any
liquidation (voluntary or otherwise), dissolution or winding up of the
Corporation, no distribution shall be made to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Junior Participating Preferred Stock unless, prior
thereto, the holders of shares of Series A Junior Participating Preferred Stock
shall have received an amount equal to $1,000 per share of Series A
Participating Preferred Stock, plus an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment (the "Series A Liquidation Preference"). Following the payment of
the full amount of the Series A Liquidation Preference, no additional
distributions shall be made to the holders of shares of Series A Junior
Participating Preferred Stock unless, prior thereto, the holders of shares of
Common Stock shall have received an amount per share (the "Common Adjustment")
equal to the quotient obtained by dividing (i) the Series A Liquidation
Preference by (ii) 1,000 (as appropriately adjusted as set forth in
subparagraph (C) below to reflect such events as stock splits, stock dividends
and recapitalizations with respect to the Common Stock) (such number in clause
(ii), the "Adjustment Number"). Following the payment of the full amount of the
Series A Liquidation Preference and the Common Adjustment in respect of all
outstanding shares of Series A Junior Participating Preferred Stock and Common
Stock, respectively, holders of Series A Junior Participating Preferred Stock
and holders of shares of Common Stock shall receive their ratable and
proportionate share of the remaining assets to be distributed in the ratio of
the Adjustment Number to 1 with respect to such Preferred Stock and Common
Stock, on a per share basis, respectively.
<PAGE>
(B) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series A Liquidation Preference and
the liquidation preferences of all other series of preferred stock, if any,
which rank on a parity with the Series A Junior Participating Preferred Stock,
then such remaining assets shall be distributed ratably to the holders of such
parity shares in proportion to their respective liquidation preferences. In the
event, however, that there are not sufficient assets available to permit
payment in full of the Common Adjustment, then such remaining assets shall be
distributed ratably to the holders of Common Stock.
(C) In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such
case the Adjustment Number in effect immediately before such event shall be
adjusted by multiplying such Adjustment Number by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately before such event.
Section 7. Consolidation, Merger, etc. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
Series A Junior Participating Preferred Stock shall at the same time be
similarly exchanged or changed in an amount per share (subject to the provision
for adjustment hereinafter set forth) equal to 1,000 times the aggregate amount
of stock, securities, cash and/or any other property (payable in kind), as the
case may be, into which or for which each share of Common Stock is changed or
exchanged. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such
case the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series A Junior Participating Preferred Stock
shall be adjusted by multiplying such amount by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately before such event.
<PAGE>
Section 8. No Redemption. The shares of Series A Junior
Participating Preferred Stock shall not be redeemable.
Section 9. Ranking. The Series A Junior Participating Preferred Stock
shall rank junior to all other series of the Corporation's Preferred Stock as
to the payment of dividends and the distribution of assets, unless the terms of
any such series shall provide otherwise.
Section 10. Amendment. At any time when any shares of Series A Junior
Participating Preferred Stock are outstanding, neither the Restated Certificate
of Incorporation of the Corporation nor this Certificate of Designation shall
be amended in any manner which would materially alter or change the powers,
preferences or special rights of the Series A Junior Participating Preferred
Stock so as to affect them adversely without the affirmative vote of the
holders of a majority or more of the outstanding shares of Series A Junior
Participating Preferred Stock, voting separately as a class.
Section 11. Fractional Shares. Series A Junior Participating
Preferred Stock may be issued in fractions of a share which shall entitle the
holder, in proportion to such holder's fractional shares, to exercise voting
rights, receive dividends, participate in distributions and to have the benefit
of all other rights of holders of Series A Junior Participating Preferred
Stock.
<PAGE>
IN WITNESS WHEREOF, HomeServices.Com Inc. has caused this
Certificate of Designation to be executed in its corporate name this 14th
day of October, 1999.
HOMESERVICES.COM INC.
By: /s/ Steven A. McArthur
-----------------------------
Name: Steven A. McArthur
Title: Senior Vice President,
General Counsel and
Secretary
------------------------------------------------------
HOMESERVICES.COM INC.
and
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.,
as Rights Agent
----------------
Rights Agreement
Dated as of October 14, 1999
------------------------------------------------------
TABLE OF CONTENTS
Section Page
------- ----
1. Certain Definitions . . . . . . . . . . . . . . . . . . . . . . 1
2. Appointment of Rights Agent . . . . . . . . . . . . . . . . . . . 11
3. Issuance of Rights Certificates . . . . . . . . . . . . . . . . . 12
4. Form of Rights Certificates . . . . . . . . . . . . . . . . . . . 15
5. Countersignature and Registration . . . . . . . . . . . . . . . . 17
6. Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7. Exercise of Rights; Purchase Price; Expiration Date of Rights . . 20
8. Cancellation and Destruction of Rights
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9. Reservation and Availability of Capital Stock . . . . . . . . . . 26
10. Preferred Stock Record Date . . . . . . . . . . . . . . . . . . 29
11. Adjustment of Purchase Price, Number and Kind of Shares or Number
of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
12. Certificate of Adjusted Purchase Price or Number of Shares . . . 50
13. Consolidation, Merger or Sale or Transfer of Assets, Cash Flow or
Earning Power . . . . . . . . . . . . . . . . . . . . . . . . . 50
14. Fractional Rights and Fractional Shares . . . . . . . . . . . . 56
15. Rights of Action . . . . . . . . . . . . . . . . . . . . . . . . 59
16. Agreement of Rights Holders . . . . . . . . . . . . . . . . . . 60
17. Rights Certificate Holder Not Deemed a Stockholder . . . . . . . 61
18. Concerning the Rights Agent . . . . . . . . . . . . . . . . . . 62
<PAGE>
19. Merger or Consolidation or Change of Name of Rights Agent . . . 63
20. Duties of Rights Agent . . . . . . . . . . . . . . . . . . . . . 64
21. Change of Rights Agent . . . . . . . . . . . . . . . . . . . . . 69
22. Issuance of New Rights Certificates . . . . . . . . . . . . . . 71
23. Redemption and Termination . . . . . . . . . . . . . . . . . . . 72
24. Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
25. Notice of Certain Events . . . . . . . . . . . . . . . . . . . . 76
26. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
27. Supplements and Amendments . . . . . . . . . . . . . . . . . . . 79
28. Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
29. Determinations and Action by the Board, etc. . . . . . . . . . . . 80
30. Benefits of this Agreement . . . . . . . . . . . . . . . . . . . . 81
31. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
32. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . 83
33. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
34. Descriptive Headings . . . . . . . . . . . . . . . . . . . . . . . 83
EXHIBITS
Exhibit A -- Form of Certificate of Designation,
Preferences and Rights
Exhibit B -- Form of Rights Certificates
Exhibit C -- Form of Summary of Rights
<PAGE>
RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of October 14, 1999 (the "Agreement"),
between HomeServices.Com Inc., a Delaware corporation (the "Company"), and
ChaseMellon Shareholder Services, L.L.C., a New Jersey limited liability
company (the "Rights Agent").
W I T N E S S E T H
WHEREAS, on October 6, 1999 (the "Rights Dividend Declaration Date"),
the Board of Directors of the Company authorized and declared a dividend
distribution of one Right (as hereinafter defined) for each share of Common
Stock (as hereinafter defined) of the Company outstanding at the close of
business on the date of the consummation of the initial public offering of the
Common Stock of the Company (the "Record Date"), and has authorized the
issuance of one Right (as such number may hereinafter be adjusted pursuant to
the provisions of Section 11(p) hereof) for each share of Common Stock of the
Company issued between the Record Date (whether originally issued or delivered
from the Company's treasury) and the Distribution Date (as hereinafter
defined), each Right initially representing the right to purchase one
one-thousandth of a share of Series A Junior Participating Preferred Stock of
the Company (the "Preferred Stock") having the rights, powers and preferences
set forth in the form of Certificate of Designation, Preferences and Rights
attached hereto as Exhibit A, upon the terms and subject to the conditions
hereinafter set forth (the "Rights");
<PAGE>
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement,
the following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or which,
together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of 15% or more of the shares of Common Stock then outstanding,
but shall not include (i) the Company, (ii) any Subsidiary of the Company,
(iii) any employee benefit plan of the Company, or of any Subsidiary of the
Company, or any Person or entity organized, appointed or established by the
Company for or pursuant to the terms of any such plan, (iv) MidAmerican Energy
Holdings Company, an Iowa corporation ("MidAmerican Holdings"), and its
affiliates and any successors thereof, (v) any Person who becomes the
Beneficial Owner of fifteen percent (15%) or more of the shares of Common Stock
then outstanding as a result of a reduction in the number of shares of Common
Stock outstanding due to the repurchase of shares of Common Stock by the
Company unless and until such Person, after becoming aware that such Person has
become the Beneficial Owner of fifteen percent (15%) or more of the then
outstanding shares of Common Stock, acquires beneficial ownership of additional
shares of Common Stock representing one percent (1%) or more of the shares of
Common Stock then outstanding, (vi) any Person who acquires shares of Common
Stock from the Beneficial Owner of at least 15% or more of the shares of Common
Stock that was outstanding immediately upon consummation of the initial public
offering of the Common Stock of the Company, and as a result of such
acquisition such Person also becomes the Beneficial Owner of 15% or more of the
then outstanding shares of Common Stock, or (vii) any such Person who has
reported or is required to report such ownership (but less than 20%) on
Schedule 13G under the Securities and Exchange Act of 1934, as amended and in
effect on the date of the Agreement (the "Exchange Act") (or any comparable or
successor report) or on Schedule 13D under the Exchange Act (or any comparable
or successor report) which Schedule 13D does not state any intention to or
reserve the right to control or influence the management or policies of the
Company or engage in any of the actions specified in Item 4 of such schedule
(other than the disposition of the Common Stock) and, within 10 Business Days
of being requested by the Company to advise it regarding the same, certifies to
the Company that such Person acquired shares of Common Stock in excess of 14.9%
inadvertently or without knowledge of the terms of the Rights and who, together
with all Affiliates and Associates, thereafter does not acquire additional
shares of Common Stock while the Beneficial Owner of 15% or more of the shares
of Common Stock then outstanding; provided, however, that if the Person
requested to so certify fails to do so within 10 Business Days, then such
Person shall become an Acquiring Person immediately after such 10-Business- Day
period.
<PAGE>
(b) "Act" shall mean the Securities Act of 1933, as amended.
(c) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act.
(d) A Person shall be deemed the "Beneficial Owner" of, and
shall be deemed to "beneficially own," any securities:
(i) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to acquire (whether such
right is exercisable immediately or only after the passage of time)
pursuant to any agreement, arrangement or understanding (whether or not in
writing) or upon the exercise of conversion rights, exchange rights,
rights, warrants or options, or otherwise; provided, however, that a
Person shall not be deemed the "Beneficial Owner" of, or to "beneficially
own," (A) securities tendered pursuant to a tender or exchange offer made
by such Person or any of such Person's Affiliates or Associates until such
tendered securities are accepted for purchase or exchange, (B) securities
issuable upon exercise of Rights at any time before the occurrence of a
Triggering Event (as hereinafter defined), or (C) securities issuable upon
exercise of Rights from and after the occurrence of a Triggering Event
which Rights were acquired by such Person or any of such Person's
Affiliates or Associates before the Distribution Date (as hereinafter
defined) or pursuant to Section 3(a) or Section 22 hereof (the "Original
Rights") or pursuant to Section 11(i) hereof in connection with an
adjustment made with respect to any Original Rights;
(ii) which such Person or any of such Person's Affiliates
or Associates, directly or indirectly, has the right to vote or dispose of
or has "beneficial ownership" of (as determined pursuant to Rule 13d-3 of
the General Rules and Regulations under the Exchange Act), including
pursuant to any agreement, arrangement or understanding, whether or not in
writing; provided, however, that a Person shall not be deemed the
"Beneficial Owner" of, or to "beneficially own," any security under this
subparagraph (ii) as a result of an agreement, arrangement or
understanding to vote such security if such agreement, arrangement or
understanding: (A) arises solely from a revocable proxy given in response
to a public proxy or consent solicitation made pursuant to, and in
accordance with, the applicable provisions of the General Rules and
Regulations under the Exchange Act, (B) is not reportable by such Person
on Schedule 13D under the Exchange Act (or any comparable or successor
report) and (C) does not constitute a trust, proxy, power of attorney or
other device with the purpose or effect of allowing two or more persons,
acting in concert, to avoid being deemed "beneficial owners" of such
security or otherwise avoid the status of "Acquiring Person" under the
terms of this Agreement or as part of a plan or scheme to evade the
reporting requirements under Schedule 13D or Section 13(d) or 13(g) of the
Exchange Act; or
<PAGE>
(iii) which are beneficially owned, directly or indirectly,
by any other Person (or any Affiliate or Associate thereof) with which
such Person (or any of such Person's Affiliates or Associates) has any
agreement, arrangement or understanding (whether or not in writing), for
the purpose of acquiring, holding, voting (except pursuant to a revocable
proxy as described in the proviso to subparagraph (ii) of this paragraph
(d)) or disposing of any voting securities of the Company; provided,
however, that nothing in this paragraph (d) shall cause a Person engaged
in business as an underwriter of securities to be the "Beneficial Owner"
of, or to "beneficially own," any securities acquired through such
Person's participation in good faith in a firm commitment underwriting
until the expiration of forty days after the date of such acquisition, and
then only if such securities continue to be owned by such Person at such
expiration of forty days and provided further, however, that any
stockholder of the Company, with affiliate(s), associate(s) or other
person(s) who may be deemed representatives of it serving as director(s)
of the Company, shall not be deemed to beneficially own securities held by
other Persons as a result of (i) persons affiliated or otherwise
associated with such stockholder serving as directors or taking any action
in connection therewith, (ii) discussing the status of its shares with the
Company or other stockholders of the Company similarly situated or (iii)
voting or acting in a manner similar to other stockholders similarly
situated, absent a specific finding by the Board of Directors of an
express agreement among such stockholders to act in concert with one
another as stockholders so as to cause, in the good faith judgment of the
Board of Directors, each such stockholder to be the Beneficial Owner of
the shares held by the other stockholder(s).
<PAGE>
(e) "Business Day" shall mean any day other than a Saturday,
Sunday or a day on which banking institutions in the State of New Jersey or the
State of Texas or the State of New York are authorized or obligated by law or
executive order to close.
(f) "Close of business" on any given date shall mean 5:00 p..m.,
New York City time, on such date; provided, however, that if such date is not a
Business Day, it shall mean 5:00 p.m., New York City time, on the next
succeeding Business Day.
(g) "Common Stock" shall mean, when used in reference to the
Company, the common stock, par value $0.01 per share, of the Company, except
that "Common Stock" when used with reference to any Person other than the
Company shall mean the capital stock of such Person with the greatest voting
power, or the equity securities or other equity interest having power to
control or direct the management, of such Person.
(h) "Common Stock Equivalents" shall have the meaning set forth
in Section 11(a)(iii) hereof.
(i) "Current Market Price" shall have the meaning set forth in
Section 11(d)(i) hereof.
(j) "Current Value" shall have the meaning set forth in Section
11(a)(iii) hereof.
(k) "Distribution Date" shall have the meaning set forth in
Section 3(a) hereof.
<PAGE>
(l) "Equivalent Preferred Stock" shall have the meaning set
forth in Section 11(b) hereof.
(m) "Exchange Act" shall mean the Securities and Exchange Act of
1934, as amended.
(n) "Exchange Ratio" shall have the meaning set forth in Section
24(a) hereof.
(o) "Expiration Date" shall have the meaning set forth in
Section 7(a) hereof.
(p) "Final Expiration Date" shall have the meaning set forth in
Section 7(a) hereof.
(q) "Person" shall mean any individual, firm, corporation,
partnership, limited liability company or other entity.
(r) "Preferred Stock" shall mean shares of Series A Junior
Participating Preferred Stock, par value $0.01 per share, of the Company, and,
to the extent that there are not a sufficient number of shares of Series A
Junior Participating Preferred Stock authorized to permit the full exercise of
the Rights, any other series of preferred stock of the Company designated for
such purpose containing terms substantially similar to the terms of the Series
A Junior Participating Preferred Stock.
(s) "Principal Party" shall have the meaning set forth in
Section 13(b) hereof.
<PAGE>
(t) "Purchase Price" shall have the meaning set forth in Section
7(b) hereof.
(u) "Qualified Offer" shall have the meaning set forth in
Section 11(a)(ii) hereof.
(v) "Record Date" shall have the meaning set forth in the
Recitals at the beginning of this Agreement.
(w) "Rights" shall have the meaning set forth in the Recitals at
the beginning of this Agreement.
(x) "Rights Agent" shall have the meaning set forth in the
parties clause at the beginning of this Agreement.
(y) "Rights Certificate" shall have the meaning set forth in
Section 3(a) hereof.
(z) "Rights Dividend Declaration Date" shall have the meaning
set forth in the Recitals at the beginning of this Agreement.
(aa) "Section 11(a)(ii) Event" shall mean any event described in
Section 11(a)(ii) hereof.
(bb) "Section 13 Event" shall mean any event described in
clauses (x), (y) or (z) of Section 13(a) hereof.
(cc) "Spread" shall have the meaning set forth in Section
11(a)(iii) hereof.
<PAGE>
(dd) "Stock Acquisition Date" shall mean the first date of
public announcement (which, for purposes of this definition, shall include,
without limitation, a report filed or amended pursuant to Section 13(d) under
the Exchange Act) by the Company or an Acquiring Person that an Acquiring
Person has become such other than pursuant to a Qualified Offer.
(ee) "Subsidiary" shall mean, with reference to any Person, any
corporation of which an amount of voting securities sufficient to elect at
least a majority of the directors of such corporation is beneficially owned,
directly or indirectly, by such Person, or otherwise controlled by such Person.
(ff) "Substitution Period" shall have the meaning set forth in
Section 11(a)(iii) hereof.
(gg) "Summary of Rights" shall have the meaning set forth in
Section 3(b) hereof.
(hh) "Trading Day" shall have the meaning set forth in Section
11(d)(i) hereof.
(ii) "Triggering Event" shall mean any Section 11(a)(ii) Event
or any Section 13 Event.
Section 2. Appointment of Rights Agent. The Company hereby appoints
the Rights Agent to act as rights agent for the Company in accordance with the
terms and conditions hereof, and the Rights Agent hereby accepts such
appointment. The Company may from time to time appoint such co-rights agents as
it may deem necessary or desirable.
<PAGE>
Section 3. Issuance of Rights Certificates.
(a) Until the earlier of (i) the close of business on the tenth
Business Day after the Stock Acquisition Date or (ii) the close of business on
the tenth Business Day (or such later date as the Board shall determine) 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 upon consummation
thereof, such Person would become an Acquiring Person, in either instance other
than pursuant to a Qualified Offer (the earlier of (i) and (ii) being herein
referred to as the "Distribution Date"), (x) the Rights will be evidenced
(subject to the provisions of paragraph (b) of this Section 3) by the
certificates for the Common Stock registered in the names of the holders of the
Common Stock (which certificates for Common Stock shall be deemed also to be
certificates for Rights) and not by separate certificates, and (y) the Rights
will be transferable only in connection with the transfer of the underlying
shares of Common Stock (including a transfer to the Company). As soon as
practicable after the Distribution Date, the Company must notify the Rights
Agent of the Distribution Date and request that the Company's transfer agent
provide a list of the Company's stockholders. As soon as practicable after the
Rights Agent receives such notice from the Company, the Rights Agent will send
by first-class, insured, postage-prepaid mail, to each record holder of the
Common Stock as of the close of business on the Distribution Date, at the
address of such holder shown on the records of the Company, one or more right
certificates, in substantially the form of Exhibit B hereto (the "Rights
Certificates"), evidencing one Right for each share of Common Stock so held,
subject to adjustment as provided herein. If an adjustment in the number of
Rights per share of Common Stock has been made pursuant to Section 11(p)
hereof, at the time of distribution of the Rights Certificates, the Company
shall make the necessary and appropriate rounding adjustments (in accordance
with Section 14(a) hereof) so that Rights Certificates representing only whole
numbers of Rights are distributed and cash is paid in lieu of any fractional
Rights. As of and after the Distribution Date, the Rights will be evidenced
solely by such Rights Certificates.
(b) The Company will make available a copy of a Summary of
Rights, in substantially the form attached hereto as Exhibit C (the "Summary of
Rights"), to any holder of Rights who may so request from time to time before
the Expiration Date. With respect to certificates for the Common Stock
outstanding as of the Record Date, until the Distribution Date, the Rights will
be evidenced by such certificates for the Common Stock and the registered
holders of the Common Stock shall also be the registered holders of the
associated Rights. Until the earlier of the Distribution Date or the Expiration
Date (as such term is defined in Section 7(a) hereof), the transfer of any
certificates representing shares of Common Stock in respect of which Rights
have been issued shall also constitute the transfer of the Rights associated
with such shares of Common Stock.
<PAGE>
(c) Rights shall be issued in respect of all shares of Common
Stock which are issued (whether originally issued or from the Company's
treasury) after the Record Date but before the earlier of the Distribution Date
or the Expiration Date. Certificates representing such shares of Common Stock
shall also be deemed to be certificates for Rights, and shall bear the
following legend:
This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in the Rights Agreement between the Company
and the Rights Agent thereunder (the "Rights Agreement"), the terms of
which are hereby incorporated herein by reference and a copy of which is
on file at the principal offices of the Company and may be obtained upon
written request. Under certain circumstances set forth in the Rights
Agreement, Rights issued to, or held by, any Person who is, was or becomes
an Acquiring Person or any Affiliate or Associate thereof (as such terms
are defined in the Rights Agreement), whether currently held by or on
behalf of such Person or by any subsequent holder, may become null and
void.
With respect to such certificates containing the foregoing legend, until the
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 the transfer of the Rights
associated with the Common Stock represented by such certificates.
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 B 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 and which do not affect the rights,
duties, or responsibilities of the Rights Agent or as may be required to comply
with any applicable law or with any rule or regulation made pursuant thereto or
with any rule or regulation of any stock exchange on which the Rights may from
time to time be listed, or to conform to usage. Subject to the provisions of
Section 11 and Section 22 hereof, the Rights Certificates, whenever
distributed, shall be dated as of the Record Date and on their face shall
entitle the holders thereof to purchase such number of one one-thousandths of a
share of Preferred Stock as shall be set forth therein at the Purchase Price
per one one-thousandth of a share, 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.
<PAGE>
(b) Any Rights Certificate issued pursuant to Section 3(a),
Section 11(i) 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 before or concurrently with the Acquiring
Person becoming such and receives such Rights pursuant to either (A) a transfer
(whether or not for consideration) from the Acquiring Person to holders of
equity interests in such Acquiring Person or to any Person with whom such
Acquiring Person has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer which the Board of Directors
of the Company has determined is part of an agreement, arrangement or
understanding which has as a primary purpose or effect avoidance of Section
7(e) hereof (provided that the Company shall have notified the Rights Agent
that this Section 4(b) applies), 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
Associate of an Acquiring Person (as such terms are defined in the Rights
Agreement). Accordingly, this Rights Certificate and the Rights
represented hereby may become null and void in the circumstances specified
in Section 7(e) of the Rights Agreement.
Section 5. Countersignature and Registration.
(a) The Rights Certificates shall be executed on behalf of the
Company by its Chairman of the Board, its President or any Vice President,
either manually or by facsimile signature, and shall 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 by the Rights Agent,
either manually or by facsimile signature, and shall not be valid for any
purpose unless so countersigned. In case any officer of the Company who shall
have signed any of the Rights Certificates shall cease to be such officer of
the Company before countersignature by the Rights Agent and issuance and
delivery by the Company, such Rights Certificates, nevertheless, may be
countersigned by the Rights Agent and issued and delivered by the Company with
the same force and effect as though the person who signed such Rights
Certificates had not ceased to be such officer of the Company; and any Rights
Certificates may be signed on behalf of the Company by any person who, at the
actual date of the execution of such Rights Certificate, shall be a proper
officer of the Company to sign such Rights Certificate, although at the date of
the execution of this Rights Agreement any such person was not such an officer.
<PAGE>
(b) Following receipt by the Rights Agent from the Company of
notice of the Distribution Date and receipt by the Rights Agent from the
Company's transfer agent of a list of the Company's stockholders, the Rights
Agent will keep, or cause to be kept, at its 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 before the close of business on the Expiration Date, any Rights
Certificate or Certificates (other than Rights Certificates representing Rights
that may have been exchanged pursuant to Section 24 hereof) may be transferred,
split up, combined or exchanged for another Rights Certificate or Certificates,
entitling the registered holder to purchase a like number of one
one-thousandths of a share of Preferred Stock (or, following a Triggering
Event, Common Stock, other securities, cash or other assets, as the case may
be) as the Rights Certificate or Certificates surrendered then entitles 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 office or offices of the
Rights Agent designated for such purpose. Neither the Rights Agent nor the
Company shall be obligated to take any action whatsoever with respect to the
transfer of any such surrendered Rights Certificate until the registered holder
shall have completed and signed the certificate contained in the form of
assignment on the reverse side of such Rights Certificate and shall have
provided such additional evidence of the identity of the Beneficial Owner (or
former Beneficial Owner) or Affiliates or Associates thereof as the Company or
the Rights Agent shall reasonably request. Thereupon the Rights Agent shall,
subject to Section 4(b), Section 7(e), Section 14 hereof and Section 24 hereof,
countersign and deliver to the Person entitled thereto a Rights Certificate or
Rights Certificates, as the case may be, as so requested. The Company may
require payment of a sum sufficient to cover any tax or governmental charge
that may be imposed in connection with any transfer, split up, combination or
exchange of Rights Certificates. The Rights Agent shall have no duty or
obligation under this Section 6(a) unless and until it is satisfied that all
such taxes and/or governmental charges have been paid.
<PAGE>
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation
of a Rights Certificate, and, in case of loss, theft or destruction, of
indemnity or security reasonably satisfactory to them, and reimbursement to the
Company and the Rights Agent of all reasonable expenses incidental thereto, and
upon surrender to the Rights Agent and cancellation of the Rights Certificate
if mutilated, the Company will execute and deliver a new Rights Certificate of
like tenor to the Rights Agent for countersignature and delivery to the
registered owner in lieu of the Rights Certificate so lost, stolen, destroyed
or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date
of Rights.
(a) Subject to Section 7(e) hereof, at any time after the
Distribution Date 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)(iii) and Section 23(a) hereof) in whole or in part upon
surrender of the Rights Certificate, with the form of election to purchase and
the certificate on the reverse side thereof duly executed, to the Rights Agent
at the office or offices of the Rights Agent designated for such purpose,
together with payment of the aggregate Purchase Price with respect to the total
number of one one-thousandths of a share (or other securities, cash or other
assets, as the case may be) as to which such surrendered Rights are then
exercisable, at or before the earlier of (i) 5:00 p.m., New York City time, on
the tenth anniversary of the date of the consummation of the initial public
offering of the Common Stock of the Company, or such later date as may be
established by the Board of Directors before the expiration of the Rights (such
date, as it may be extended by the Board, the ("Final Expiration Date"), or
(ii) the time at which the Rights are redeemed or exchanged as provided in
Section 23 and Section 24 hereof (the earlier of (i) and (ii) being herein
referred to as the "Expiration Date").
<PAGE>
(b) The Purchase Price for each one one-thousandth of a share of
Preferred Stock pursuant to the exercise of a Right shall initially be the
amount equal to the product of four times the average daily closing price of
the Common Stock for the first five days of trading subsequent to the
consummation of the initial public offering of the Common Stock and shall be
subject to adjustment from time to time as provided in Section 11 and Section
13(a) hereof and shall be payable in accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing
exercisable Rights, with the form of election to purchase and the certificate
duly executed, accompanied by payment, with respect to each Right so exercised,
of the Purchase Price per one one-thousandth of a share of Preferred Stock (or
other shares, securities, cash or other assets, as the case may be) to be
purchased as set forth below and an amount equal to any applicable tax or
governmental charge that may be imposed in connection with the exercise of such
Rights, the Rights Agent shall, subject to Section 20(k) hereof, thereupon
promptly (i) (A) requisition from any transfer agent of the shares of Preferred
Stock (or make available, if the Rights Agent is the transfer agent for such
shares) certificates for the total number of one one-thousandths of a share of
Preferred Stock to be purchased and the Company hereby irrevocably authorizes
its transfer agent to comply with all such requests, or (B) if the Company
shall have elected to deposit the total number of shares of Preferred Stock
issuable upon exercise of the Rights hereunder with a depositary agent,
requisition from the depositary agent depositary receipts representing such
number of one one-thousandths of a share of Preferred Stock as are to be
purchased (in which case certificates for the shares of Preferred Stock
represented by such receipts shall be deposited by the transfer agent with the
depositary agent) and the Company will direct the depositary agent to comply
with such request, (ii) requisition from the Company the amount of cash, if
any, to be paid in lieu of fractional shares in accordance with Section 14
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 pursuant to Section
11(a)(iii) hereof) shall be made in cash or by certified bank check or bank
draft payable to the order of the Company. If the Company is obligated to issue
other securities (including Common Stock) of the Company, pay cash and/or
distribute other property pursuant to Section 11(a) 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
necessary to comply with this Agreement. The Company reserves the right to
require before the occurrence of a Triggering Event that, upon any exercise of
Rights, a number of Rights be exercised so that only whole shares of Preferred
Stock would be issued.
<PAGE>
(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 before 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 an agreement, 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 insure that the provisions of this Section
7(e) and Section 4(b) hereof are complied with, but neither the Company nor the
Rights Agent shall have any liability to any holder of Rights Certificates or
any other Person as a result of the Company's failure to make any
determinations with respect to an Acquiring Person or its Affiliates,
Associates or transferees hereunder.
<PAGE>
(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) properly completed and signed the certificate contained in the form of
election to purchase set forth on the reverse side of the Rights Certificate
surrendered for such exercise, and (ii) provided such additional evidence of
the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates
or Associates thereof as the Company or the Rights Agent shall reasonably
request.
Section 8. Cancellation and Destruction of Rights Certificates. All
Rights Certificates surrendered for the purpose of exercise, transfer,
split-up, combination or exchange shall, if surrendered to the Company or any
of its agents, be delivered to the Rights Agent for cancellation or in
cancelled form, or, if surrendered to the Rights Agent, shall be cancelled by
it, and no Rights Certificates shall be issued in lieu thereof except as
expressly permitted by any of the provisions of this Agreement. The Company
shall deliver to the Rights Agent for cancellation and retirement, and the
Rights Agent shall so cancel and retire, any other Rights Certificate purchased
or acquired by the Company otherwise than upon the exercise thereof. The Rights
Agent shall deliver all cancelled Rights Certificates to the Company, or shall,
at the written request of the Company, destroy such cancelled Rights
Certificates, and in such case shall deliver a certificate of destruction
thereof to the Company.
<PAGE>
Section 9. Reservation and Availability of Capital 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 (and, following the occurrence of a Triggering Event, out of
its authorized and unissued shares of Common Stock and/or other securities or
out of its authorized and issued shares held in its treasury), the number of
shares of Preferred Stock (and, following the occurrence of a Triggering Event,
Common Stock and/or other securities) that, as provided in this Agreement
including Section 11(a)(iii) hereof, will be sufficient to permit the exercise
in full of all outstanding Rights.
(b) So long as the shares of Preferred Stock (and, following the
occurrence of a Triggering Event, Common Stock and/or other securities)
issuable and deliverable upon the exercise of the Rights may be listed on any
national securities exchange or the Nasdaq National Market, the Company shall
use its best efforts to cause, from and after such time as the Rights become
exercisable, all shares reserved for such issuance to be listed on such
exchange upon official notice of issuance upon such exercise.
(c) The Company shall use its best efforts to (i) file, as soon
as 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)(iii) hereof, a registration statement under the Act, with respect
to the securities purchasable upon exercise of the Rights on an appropriate
form, (ii) cause such registration statement to become effective as soon as
practicable after such filing, and (iii) cause such registration statement to
remain effective (with a prospectus at all times meeting the requirements of
the Act) until the earlier of (A) the date as of which the Rights are no longer
exercisable for such securities, and (B) the date of the expiration of the
Rights. The Company will also take such action as may be appropriate under, or
to ensure compliance with, the securities or "blue sky" laws of the various
states in connection with the exercisability of the Rights. The Company may
temporarily suspend, for a period of time not to exceed ninety (90) days after
the date set forth in clause (i) of the first sentence of this Section 9(c),
the exercisability of the Rights in order to prepare and file such registration
statement and permit it to become effective. Upon any such suspension, the
Company shall issue a public announcement stating that the exercisability of
the Rights has been temporarily suspended, as well as a public announcement at
such time as the suspension has been rescinded. In addition, if the Company
shall determine that a registration statement is required following the
Distribution Date, the Company may temporarily suspend the exercisability of
the Rights until such time as a registration statement has been declared
effective. The Company shall notify the Rights Agent of any public announcement
made by the Company pursuant to this Section 9(c) and will provide the Rights
Agent with a copy of such public announcement. Notwithstanding any provision of
this Agreement to the contrary, the Rights shall not be exercisable in any
jurisdiction if the requisite qualification in such jurisdiction shall not have
been obtained, the exercise thereof shall not be permitted under applicable
law, or a registration statement shall not have been declared effective.
<PAGE>
(d) The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all one one-thousandths of a share of
Preferred Stock (and, following the occurrence of a Triggering Event, Common
Stock and/or other securities) delivered upon exercise of Rights shall, at the
time of delivery of the certificates for such shares (subject to payment of the
Purchase Price), be duly and validly authorized and issued and fully paid and
nonassessable.
(e) The Company further covenants and agrees that it will pay
when due and payable any and all taxes and governmental charges which may be
payable in respect of the issuance or delivery of the Rights Certificates and
of any certificates for a number of one one-thousandths of a share of Preferred
Stock (or Common Stock and/or other securities, as the case may be) upon the
exercise of Rights. The Company shall not, however, be required to pay any tax
or charge which may be payable in respect of any transfer or delivery of Rights
Certificates to a Person other than, or the issuance or delivery of a number of
one one-thousandths of a share of Preferred Stock (or Common Stock and/or other
securities, as the case may be) in respect of a name other than that of the
registered holder of the Rights Certificates evidencing Rights surrendered for
exercise or to issue or deliver any certificates for a number of one
one-thousandths of a share of Preferred Stock (or Common Stock and/or other
securities, as the case may be) in a name other than that of the registered
holder upon the exercise of any Rights until such tax or charge shall have been
paid (any such tax or charge 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 or charge is due.
Section 10. Preferred Stock Record Date. Each Person in whose name
any certificate for a number of one one-thousandths of a share of Preferred
Stock (or Common Stock and/or other securities, as the case may be) is issued
upon the exercise of Rights shall for all purposes be deemed to have become the
holder of record of such fractional shares of Preferred Stock (or Common Stock
and/or other securities, as the case may be) represented thereby on, and such
certificate shall be dated, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and all applicable taxes and governmental charges) was made; provided,
however, that if the date of such surrender and payment is a date upon which
the Preferred Stock (or Common Stock and/or other securities, as the case may
be) transfer books of the Company are closed, such Person shall be deemed to
have become the record holder of such shares (fractional or otherwise) on, and
such certificate shall be dated, the next succeeding Business Day on which the
Preferred Stock (or Common Stock and/or other securities, as the case may be)
transfer books of the Company are open. Before the exercise of the Rights
evidenced thereby, the holder of a Rights Certificate shall not be entitled to
any rights of a stockholder of the Company with respect to shares for which the
Rights shall be exercisable, including, without limitation, the right to vote,
to receive dividends or other distributions or to exercise any preemptive
rights, and shall not be entitled to receive any notice of any proceedings of
the Company, except as provided herein.
<PAGE>
Section 11. Adjustment of Purchase Price, Number and Kind of Shares
or Number of Rights. The Purchase Price, the number and kind of shares covered
by each Right and the number of Rights outstanding are subject to adjustment
from time to time as provided in this Section 11.
(a)(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)
and Section 7(e) hereof, the Purchase Price in effect at the time of the
record date for such dividend or of the effective date of such
subdivision, combination or reclassification, and the number and kind of
shares of Preferred Stock or capital stock, as the case may be, issuable
on such date, shall be proportionately adjusted so that the holder of any
Right exercised after such time shall be entitled to receive, upon payment
of the Purchase Price then in effect, the aggregate number and kind of
shares of Preferred Stock or capital stock, as the case may be, which, if
such Right had been exercised immediately before such date and at a time
when the Preferred Stock transfer books of the Company were open, such
holder would have owned upon such exercise and been entitled to receive by
virtue of such dividend, subdivision, combination or reclassification. If
an event occurs which would require an adjustment under both this Section
11(a)(i) and Section 11(a)(ii) hereof, the adjustment provided for in this
Section 11(a)(i) shall be in addition to, and shall be made before, any
adjustment required pursuant to Section 11(a)(ii) hereof.
(ii) In the event any Person shall, at any time after the
Rights Dividend Declaration Date, become an Acquiring Person, unless the
event causing such Person to become an Acquiring Person is a transaction
set forth in Section 13(a) hereof, or is an acquisition of shares of
Common Stock pursuant to a tender offer or an exchange offer for all
outstanding shares of Common Stock at a price and on terms determined by
at least a majority of the members of the Company's Board of Directors who
are not officers of the Company and who are not representatives, nominees,
Affiliates or Associates of an Acquiring Person, after receiving advice
from one or more investment banking firms, to be (a) at a price which is
fair to stockholders and not inadequate (taking into account all factors
which such members of the Board deem relevant, including, without
limitation, prices which could reasonably be achieved if the Company or
its assets were sold on an orderly basis designed to realize maximum
value) and (b) otherwise in the best interests of the Company and its
stockholders (a "Qualified Offer"), then, promptly following the
occurrence of such event, proper provision shall be made so that each
holder of a Right (except as provided below and in Section 7(e) hereof)
shall thereafter have the right to receive, upon exercise thereof at the
then current Purchase Price in accordance with the terms of this
Agreement, in lieu of a number of one one- thousandths of a share of
Preferred Stock, such number of shares of Common Stock of the Company as
shall equal the result obtained by (x) multiplying the then current
Purchase Price by the then number of one one-thousandths of a share of
Preferred Stock for which a Right was exercisable immediately before the
first occurrence of a Section 11(a)(ii) Event, and (y) dividing that
product (which, following such first occurrence, shall thereafter be
referred to as the "Purchase Price" for each Right and for all purposes of
this Agreement) by 50% of the Current Market Price (determined pursuant to
Section 11(d) hereof) per share of Common Stock on the date of such first
occurrence (such number of shares, the "Adjustment Shares").
<PAGE>
(iii) If the number of shares of Common Stock which are
authorized by the Company's Restated Certificate of Incorporation, but
which are not outstanding or reserved for issuance for purposes other than
upon exercise of the Rights, are not sufficient to permit the exercise in
full of the Rights in accordance with the foregoing subparagraph (ii) of
this Section 11(a), the Company shall (A) determine the value of the
Adjustment Shares issuable upon the exercise of a Right (the "Current
Value"), and (B) with respect to each Right (subject to Section 7(e)
hereof), make adequate provision to substitute for the Adjustment Shares,
upon the exercise of a Right and payment of the applicable Purchase Price,
(1) cash, (2) a reduction in the Purchase Price, (3) Common Stock or other
equity securities of the Company (including, without limitation, shares,
or units of shares, of preferred stock, such as the Preferred Stock, which
the Board has deemed to have essentially the same value or economic rights
as shares of Common Stock (such shares of preferred stock being referred
to as "Common Stock Equivalents")), (4) debt securities of the Company,
(5) other assets, or (6) any combination of the foregoing, having an
aggregate value equal to the Current Value (less the amount of any
reduction in the Purchase Price), where such aggregate value has been
determined by the Board based upon the advice of a nationally recognized
investment banking firm selected by the Board; provided, however, that if
the Company shall not have made adequate provision to deliver value
pursuant to clause (B) above within thirty (30) days following the later
of (x) the first occurrence of a Section 11(a)(ii) Event and (y) the date
on which the Company's right of redemption pursuant to Section 23(a)
expires (the later of (x) and (y) being referred to herein as the "Section
11(a)(ii) Trigger Date"), then the Company shall be obligated to deliver,
upon the surrender for exercise of a Right and without requiring payment
of the Purchase Price, shares of Common Stock (to the extent available)
and then, if necessary, cash, which shares and/or cash have an aggregate
value equal to the Spread. For purposes of the preceding sentence, the
term "Spread" shall mean the excess of (i) the Current Value over (ii) the
Purchase Price. If the Board determines in good faith that it is likely
that sufficient additional shares of Common Stock could be authorized for
issuance upon exercise in full of the Rights, the thirty (30) day period
set forth above may be extended to the extent necessary, but not more than
ninety (90) days after the Section 11(a)(ii) Trigger Date, in order that
the Company may seek stockholder approval for the authorization of such
additional shares (such thirty (30) day period, as it may be extended, is
herein called the "Substitution Period"). To the extent that action is to
be taken pursuant to the first and/or third sentences of this Section
11(a)(iii), the Company (1) shall provide, subject to Section 7(e) hereof,
that such action shall apply uniformly to all outstanding Rights, and (2)
may suspend the exercisability of the Rights until the expiration of the
Substitution Period in order to seek such stockholder approval for such
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. The
Company shall notify the Rights Agent of any public announcement made by
the Company pursuant to this Section 11(a)(iii) and shall provide the
Rights Agent with a copy of such public announcement. For purposes of this
Section 11(a)(iii), the value of each Adjustment Share shall be the
Current Market Price per share of the Common Stock on the Section
11(a)(ii) Trigger Date and the per share or per unit value of any Common
Stock Equivalent shall be deemed to equal the Current Market Price per
share of the Common Stock on such date.
<PAGE>
(b) In case the Company shall fix a record date for the issuance
of rights, options or warrants to all holders of Preferred Stock entitling them
to subscribe for or purchase (for a period expiring within forty-five (45)
calendar days after such record date) Preferred Stock (or shares having the
same rights, privileges and preferences as the shares of Preferred Stock
("Equivalent Preferred Stock")) or securities convertible into Preferred Stock
or Equivalent Preferred Stock at a price per share of Preferred Stock or per
share of Equivalent Preferred Stock (or having a conversion price per share, if
a security convertible into Preferred Stock or Equivalent Preferred Stock) less
than the Current Market Price (as determined pursuant to Section 11(d) hereof)
per share of Preferred Stock on such record date, the Purchase Price to be in
effect after such record date shall be determined by multiplying the Purchase
Price in effect immediately before such record date by a fraction, the
numerator of which shall be the number of shares of Preferred Stock outstanding
on such record date, plus the number of shares of Preferred Stock which the
aggregate offering price of the total number of shares of Preferred Stock
and/or Equivalent Preferred Stock so to be offered (and/or the aggregate
initial conversion price of the convertible securities so to be offered) would
purchase at such Current Market Price, and the denominator of which shall be
the number of shares of Preferred Stock outstanding on such record date, plus
the number of additional shares of Preferred Stock and/or Equivalent Preferred
Stock to be offered for subscription or purchase (or into which the convertible
securities so to be offered are initially convertible). In case such
subscription price may be paid by delivery of consideration, part or all of
which may be in a form other than cash, the value of such consideration shall
be as determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent and
shall be binding on the Rights Agent and the holders of the Rights. Shares of
Preferred Stock owned by or held for the account of the Company shall not be
deemed outstanding for the purpose of any such computation. Such adjustment
shall be made successively whenever such a record date is fixed, and if such
rights or warrants are not so issued, the Purchase Price shall be adjusted to
be the Purchase Price which would then be in effect if such record date had not
been fixed.
<PAGE>
(c) In case the Company shall fix a record date for a
distribution to all holders of Preferred Stock (including any such distribution
made in connection with a consolidation or merger in which the Company is the
continuing corporation) of evidences of indebtedness, cash (other than a
regular quarterly cash dividend out of the earnings or retained earnings of the
Company), OR assets (other than a dividend payable in Preferred Stock, but
including any dividend payable in stock other than Preferred Stock) or of
subscription rights or warrants (excluding those referred to in Section 11(b)
hereof), the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately before such
record date by a fraction, the numerator of which shall be the Current Market
Price (as determined pursuant to Section 11(d) hereof) per share of Preferred
Stock on such record date, less the fair market value (as determined in good
faith by the Board of Directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent) of the portion of the
cash, assets or evidences of indebtedness so to be distributed or of such
subscription rights or warrants applicable to a share of Preferred Stock, and
the denominator of which shall be such Current Market Price (as determined
pursuant to Section 11(d) hereof) per share of Preferred Stock. Such
adjustments shall be made successively whenever such a record date is fixed,
and if such distribution is not so made, the Purchase Price shall be adjusted
to be the Purchase Price which would have been in effect if such record date
had not been fixed.
(d)(i) For the purpose of any computation hereunder, 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 thirty (30)
consecutive Trading Days immediately before but not including 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 (10) consecutive Trading Days immediately following but not including
such date; provided, however, that if the Current Market Price per share of the
Common Stock is determined during a period following the announcement by the
issuer of such Common Stock of (A) a dividend or distribution on such Common
Stock payable in shares of such Common Stock or securities convertible into
shares of such Common Stock (other than the Rights), or (B) any subdivision,
combination or reclassification of such Common Stock, and the ex-dividend date
for such dividend or distribution, or the record date for such subdivision,
combination or reclassification shall not have occurred before the commencement
of the requisite thirty (30) Trading Day or ten (10) Trading Day period, as set
forth above, then, and in each such case, the Current Market Price shall be
properly adjusted to take into account ex- dividend trading. The closing price
for each day shall be the last sale price, regular way, or, in case no such
sale takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the shares of Common Stock are
not listed or admitted to trading on the New York Stock Exchange, as reported
in the principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on which the
shares of Common Stock are listed or admitted to trading or, if the shares of
Common Stock are not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by the
National Association of Securities Dealers Automated Quotation System
("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. If on any such date no
market maker is making a market in the Common Stock, the fair value of such
shares on such date as determined in good faith by the Board shall be used. The
term "Trading Day" shall mean a day on which the principal national securities
exchange on which the shares of Common Stock are listed or admitted to trading
is open for the transaction of business or, if the shares of Common Stock are
not listed or admitted to trading on any national securities exchange, a
Business Day. If the Common Stock is not publicly held or not so listed or
traded, Current Market Price per share shall mean the fair value per share as
determined in good faith by the Board, whose determination shall be described
in a statement filed with the Rights Agent and shall be conclusive for all
purposes.
<PAGE>
(ii) For the purpose of any computation hereunder, the
Current Market Price per share of Preferred Stock shall be determined in
the same manner as set forth above for the Common Stock in clause (i) of
this Section 11(d) (other than the last sentence thereof). If the Current
Market Price per share of Preferred Stock cannot be determined in the
manner provided above or if the Preferred Stock is not publicly held or
listed or traded in a manner described in clause (i) of this Section
11(d), the Current Market Price per share of Preferred Stock shall be
conclusively deemed to be an amount equal to 1,000 (as such number may be
appropriately adjusted for such events as stock splits, stock dividends
and recapitalizations with respect to the Common Stock occurring after the
date of this Agreement) multiplied by the Current Market Price per share
of the Common Stock. If neither the Common Stock nor the Preferred Stock
is publicly held or so listed or traded, Current Market Price per share of
the Preferred Stock shall mean the fair value per share as determined in
good faith by the Board, whose determination shall be described in a
statement filed with the Rights Agent and shall be conclusive for all
purposes. For all purposes of this Agreement, the Current Market Price of
one one-thousandth of a share of Preferred Stock shall be equal to the
Current Market Price of one share of Preferred Stock divided by 1,000.
(e) Anything herein to the contrary notwithstanding, no
adjustment in the Purchase Price shall be required unless such adjustment would
require an increase or decrease of at least one percent (1%) in the Purchase
Price; provided, however, that any adjustments which by reason of this Section
11(e) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Section 11
shall be made to the nearest cent or to the nearest ten- thousandth of a share
of Common Stock or other share or one-millionth of a share of Preferred Stock,
as the case may be. Notwithstanding the first sentence of this Section 11(e),
any adjustment required by this Section 11 shall be made no later than the
earlier of (i) three (3) years from the date of the transaction which mandates
such adjustment, or (ii) the Expiration Date.
<PAGE>
(f) If as a result of an adjustment made pursuant to Section
11(a)(ii) or Section 13(a) hereof, the holder of any Right thereafter exercised
shall become entitled to receive any shares of capital stock other than
Preferred Stock, thereafter the number of such other shares so receivable upon
exercise of any Right and the Purchase Price thereof shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Preferred Stock contained in
Sections 11(a), (b), (c), (e), (g), (h), (i), (j), (k) and (m), and the
provisions of Sections 7, 9, 10, 13 and 14 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 Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one- thousandths of
a share of Preferred Stock purchasable from time to time hereunder upon
exercise of the Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as
provided in Section 11(i), upon each adjustment of the Purchase Price as a
result of the calculations made in Sections 11(b) and (c), each Right
outstanding immediately before the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of
one one-thousandths of a share of Preferred Stock (calculated to the nearest
one-millionth) obtained by (i) multiplying (x) the number of one
one-thousandths of a share covered by a Right immediately before this
adjustment, by (y) the Purchase Price in effect immediately before such
adjustment of the Purchase Price, and (ii) dividing the product so obtained by
the Purchase Price in effect immediately after such adjustment of the Purchase
Price.
<PAGE>
(i) The Company may elect on or after the date of any adjustment
of the Purchase Price to adjust the number of Rights, in lieu of any adjustment
in the number of one one-thousandths of a share of Preferred Stock purchasable
upon the exercise of a Right. Each of the Rights outstanding after the
adjustment in the number of Rights shall be exercisable for the number of one
one-thousandths of a share of Preferred Stock for which a Right was exercisable
immediately before such adjustment. Each Right held of record before 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 before 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. The Company shall
notify the Rights Agent of any public announcement made by the Company pursuant
to this Section 11(i) and shall provide the Rights Agent with a copy of such
public announcement. This record date may be the date on which the Purchase
Price is adjusted or any day thereafter, but, if the Rights Certificates have
been issued, shall be at least ten (10) days later than the date of the public
announcement. If Rights Certificates have been issued, upon each adjustment of
the number of Rights pursuant to this Section 11(i), the Company shall, as
promptly as practicable, cause to be distributed to holders of record of Rights
Certificates on such record date Rights Certificates evidencing, subject to
Section 14 hereof, the additional Rights to which such holders shall be
entitled as a result of such adjustment, or, at the option of the Company,
shall cause to be distributed to such holders of record in substitution and
replacement for the Rights Certificates held by such holders before the date of
adjustment, and upon surrender thereof, if required by the Company, new Rights
Certificates evidencing all the Rights to which such holders shall be entitled
after such adjustment. Rights Certificates so to be distributed shall be
issued, executed and countersigned in the manner provided for herein (and may
bear, at the option of the Company, the adjusted Purchase Price) and shall be
registered in the names of the holders of record of Rights Certificates on the
record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase
Price or the number of one one-thousandths of a share of Preferred Stock
issuable upon the exercise of the Rights, the Rights Certificates theretofore
and thereafter issued may continue to express the Purchase Price per one
one-thousandth of a share and the number of one one-thousandth of a share which
were expressed in the initial Rights Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment
reducing the Purchase Price below the then stated value, if any, of the number
of one one-thousandths of a share of Preferred Stock issuable upon exercise of
the Rights, the Company shall take any corporate action which may, in the
opinion of its counsel, be necessary in order that the Company may validly and
legally issue fully paid and nonassessable such number of one one-thousandths
of a share of Preferred Stock at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised after such record date
the number of one one-thousandths of a share of Preferred Stock and other
capital stock or securities of the Company, if any, issuable upon such exercise
over and above the number of one one-thousandths of a share of Preferred Stock
and other capital stock or securities of the Company, if any, issuable upon
such exercise on the basis of the Purchase Price in effect before 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; and provided further that
the Company must give notice to the Rights Agent of any election made pursuant
to this Section 11(l).
(m) Anything in this Section 11 to the contrary notwithstanding,
the Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that in their good faith judgment 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 which by their terms are
convertible into or exchangeable for shares of Preferred Stock, (iv) stock
dividends or (v) issuance of rights, options or warrants referred to in this
Section 11, hereafter made by the Company to holders of its Preferred Stock
shall not be taxable to such stockholders.
<PAGE>
(n) The Company covenants and agrees that it shall not, at any
time after the Distribution Date, (i) consolidate with any other Person (other
than a Subsidiary of the Company in a transaction which complies with Section
11(o) hereof), (ii) merge with or into any other Person (other than a
Subsidiary of the Company in a transaction which complies with Section 11(o)
hereof), or (iii) sell or transfer (or permit any Subsidiary to sell or
transfer), in one transaction, or a series of related transactions, assets,
cash flow or earning power aggregating more than 50% of the assets or earning
power of the Company and its Subsidiaries (taken as a whole) to any other
Person or Persons (other than the Company and/or any of its Subsidiaries in one
or more transactions each of which complies with Section 11(o) hereof), if (x)
at the time of or immediately after such consolidation, merger or sale there
are any rights, warrants or other instruments or securities outstanding or
agreements in effect which would substantially diminish or otherwise eliminate
the benefits intended to be afforded by the Rights or (y) before,
simultaneously with or immediately after such consolidation, merger or sale,
the stockholders of the Person who constitutes, or would constitute, the
"Principal Party" for purposes of Section 13(a) hereof shall have received a
distribution of Rights previously owned by such Person or any of its Affiliates
and Associates.
(o) The Company covenants and agrees that, after the
Distribution Date, it will not, except as permitted by Section 23 or Section 26
hereof, take (or permit any Subsidiary to take) any action if at the time such
action is taken it is reasonably foreseeable that such action will diminish
substantially or otherwise eliminate the benefits intended to be afforded by
the Rights.
(p) Anything in this Agreement to the contrary notwithstanding,
if the Company shall at any time after the Rights Dividend Declaration Date and
before the Distribution Date (i) declare a dividend on the outstanding shares
of Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding shares of Common Stock, or (iii) combine the outstanding shares of
Common Stock into a smaller number of shares, the number of Rights associated
with each share of Common Stock then outstanding, or issued or delivered
thereafter but before the Distribution Date, shall be proportionately adjusted
so that the number of Rights thereafter associated with each share of Common
Stock following any such event shall equal the result obtained by multiplying
the number of Rights associated with each share of Common Stock immediately
before such event by a fraction the numerator which shall be the total number
of shares of Common Stock outstanding immediately before 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.
<PAGE>
Section 12. Certificate of Adjusted Purchase Price or Number of
Shares. Whenever an adjustment is made as provided in Section 11 and Section 13
hereof, the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief, reasonably detailed statement of the facts and
computations accounting for such adjustment, (b) promptly file with the Rights
Agent, and with each transfer agent for the Preferred Stock and the Common
Stock, a copy of such certificate and (c) if a Distribution Date has occurred,
mail a brief summary thereof to each holder of a Rights Certificate in
accordance with Section 27 hereof. The Rights Agent shall be fully protected in
relying on any such certificate and on any adjustment therein contained.
Section 13. Consolidation, Merger or Sale or Transfer of Assets,
Cash Flow or Earning Power.
(a) If, following the Stock Acquisition Date, directly or
indirectly, (x) the Company shall consolidate with, or merge with and into, any
other Person (other than a Subsidiary of the Company in a transaction which
complies with Section 11(o) hereof), and the Company shall not be the
continuing or surviving corporation of such consolidation or merger, (y) any
Person (other than a Subsidiary of the Company in a transaction which complies
with Section 11(o) hereof) shall consolidate with, or merge with or into, the
Company, and the Company shall be the continuing or surviving corporation of
such consolidation or merger and, in connection with such consolidation or
merger, all or part of the outstanding shares of Common Stock shall be changed
into or exchanged for stock or other securities of any other Person or cash or
any other property, or (z) the Company shall sell or otherwise transfer (or one
or more of its Subsidiaries shall sell or otherwise transfer), in one
transaction or a series of related transactions, assets, cash flow or earning
power aggregating more than 50% of the assets, cash flow or earning power of
the Company and its Subsidiaries (taken as a whole) to any Person or Persons
(other than the Company or any Subsidiary of the Company in one or more
transactions each of which complies with Section 11(o) hereof), then, and in
each such case (except as may be contemplated by Section 13(d) hereof) proper
provision shall be made so that: (i) each holder of a Right, except as provided
in Section 7(e) hereof, shall thereafter have the right to receive, upon the
exercise thereof at the then current Purchase Price in accordance with the
terms of this Agreement, such number of validly authorized and issued, fully
paid, non-assessable and freely tradeable shares of Common Stock of the
Principal Party (as such term is hereinafter defined), not subject to any
liens, encumbrances, rights of first refusal or other adverse claims, as shall
be equal to the result obtained by (1) multiplying the then current Purchase
Price by the number of one one-thousandths of a share of Preferred Stock for
which a Right is exercisable immediately before the first occurrence of a
Section 13 Event (or, if a Section 11(a)(ii) Event has occurred before the
first occurrence of a Section 13 Event, multiplying the number of such one
one-thousandths of a share for which a Right was exercisable immediately before
the first occurrence of a Section 11(a)(ii) Event by the Purchase Price in
effect immediately before such first occurrence), and dividing that product
(which, following the first occurrence of a Section 13 Event, shall be referred
to as the "Purchase Price" for each Right and for all purposes of this
Agreement) by (2) 50% of the Current Market Price (determined pursuant to
Section 11(d)(i) hereof) per share of the Common Stock of such Principal Party
on the date of consummation of such Section 13 Event; (ii) such Principal Party
shall thereafter be liable for, and shall assume, by virtue of such Section 13
Event, all the obligations and duties of the Company pursuant to this
Agreement; (iii) the term "Company" shall thereafter be deemed to refer to such
Principal Party, it being specifically intended that the provisions of Section
11 hereof shall apply only to such Principal Party following the first
occurrence of a Section 13 Event; (iv) such Principal Party shall take such
steps (including, but not limited to, the reservation of a sufficient number of
shares of its Common Stock) in connection with the consummation of any such
transaction as may be necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in relation to its
shares of Common Stock thereafter deliverable upon the exercise of the Rights;
and (v) the provisions of Section 11(a)(ii) hereof shall be of no effect
following the first occurrence of any Section 13 Event.
<PAGE>
(b) "Principal Party" shall mean:
(i) in the case of any transaction described in clause (x)
or (y) of the first sentence of Section 13(a), the Person that is the
issuer of any securities into which shares of Common Stock of the Company
are converted in such merger or consolidation, and if no securities are so
issued, the Person that is the other party to such merger or
consolidation; and
(ii) in the case of any transaction described in clause (z)
of the first sentence of Section 13(a), the Person that is the party
receiving the greatest portion of the assets, cash flow or earning power
transferred pursuant to such transaction or transactions;
provided, however, that in any such case, (1) if the Common Stock of such
Person is not at such time and has not been continuously over the preceding
twelve (12) month period registered under Section 12 of the Exchange Act, and
such Person is a direct or indirect Subsidiary of another Person the Common
Stock of which is and has been so registered, "Principal Party" shall refer to
such other Person; and (2) in case such Person is a Subsidiary, directly or
indirectly, of more than one Person, the Common Stocks of two or more of which
are and have been so registered, "Principal Party" shall refer to whichever of
such Persons is the issuer of the Common Stock having the greatest aggregate
market value.
(c) The Company shall not consummate any such consolidation,
merger, sale or transfer unless the Principal Party shall have a sufficient
number of authorized shares of its Common Stock which have not been issued or
reserved for issuance to permit the exercise in full of the Rights in
accordance with this Section 13 and unless prior thereto the Company and such
Principal Party shall have executed and delivered to the Rights Agent a
supplemental agreement providing for the terms set forth in paragraphs (a) and
(b) of this Section 13 and further providing that, as soon as practicable after
the date of any consolidation, merger or sale of assets mentioned in paragraph
(a) of this Section 13, the Principal Party will
(i) prepare and file a registration statement under the
Act, with respect to the Rights and the securities purchasable upon
exercise of the Rights on an appropriate form, and will use its best
efforts to cause such registration statement to (A) become effective as
soon as practicable after such filing and (B) remain effective (with a
prospectus at all times meeting the requirements of the Act) until the
Expiration Date; and
<PAGE>
(ii) take such all such other action as may be necessary to
enable the Principal Party to issue the securities purchasable upon
exercise of the Rights, including but not limited to the registration or
qualification of such securities under all requisite securities laws of
jurisdictions of the various states and the listing of such securities on
such exchanges and trading markets as may be necessary or appropriate; and
(iii) will deliver to holders of the Rights historical
financial statements for the Principal Party and each of its Affiliates
which comply in all respects with the requirements for registration on
Form 10 under the Exchange Act.
The provisions of this Section 13 shall similarly apply to successive mergers
or consolidations or sales or other transfers. If a Section 13 Event shall
occur at any time after the occurrence of a Section 11(a)(ii) Event, the Rights
which have not theretofore been exercised shall thereafter become exercisable
in the manner described in Section 13(a).
(d) Notwithstanding anything in this Agreement to the contrary,
Section 13 shall not be applicable to a transaction described in subparagraphs
(x) and (y) of Section 13(a) if (i) such transaction is consummated with a
Person or Persons who acquired shares of Common Stock pursuant to a tender
offer or exchange offer for all outstanding shares of Common Stock which is a
Qualified Offer as such term is defined in Section 11(a)(ii) hereof (or a
wholly owned subsidiary of any such Person or Persons), (ii) the price per
share of Common Stock offered in such transaction is not less than the price
per share of Common Stock paid to all holders of shares of Common Stock whose
shares were purchased pursuant to such tender offer or exchange offer and (iii)
the form of consideration being offered to the remaining holders of shares of
Common Stock pursuant to such transaction is the same as the form of
consideration paid pursuant to such tender offer or exchange offer. Upon
consummation of any such transaction contemplated by this Section 13(d), all
Rights hereunder shall expire.
Section 14. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue fractions of
Rights, except before the Distribution Date as provided in Section 11(p)
hereof, or to distribute Rights Certificates which evidence fractional Rights.
In lieu of such fractional Rights, the Company shall pay 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 before the date on which such fractional
Rights would have been otherwise issuable. The closing price of the Rights for
any day shall be the last sale price, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Rights are not listed or
admitted to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the Rights are
listed or admitted to trading, or if the Rights are not listed or admitted to
trading on any national securities exchange, the last quoted price or, if not
so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by NASDAQ or such other system then in use
or, if on any such date the Rights are not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a professional
market maker making a market in the Rights, selected by the Board of Directors
of the Company. If on any such date no such market maker is making a market in
the Rights, the fair value of the Rights on such date as determined in good
faith by the Board of Directors of the Company shall be used.
(b) The Company shall not be required to issue fractions of
shares of Preferred Stock (other than fractions which are integral multiples of
one one-thousandth of a share of Preferred Stock) upon exercise of the Rights
or to distribute certificates which evidence fractional shares of Preferred
Stock (other than fractions which are integral multiples of one one-thousandth
of a share of Preferred Stock). In lieu of fractional shares of Preferred Stock
that are not integral multiples of one one-thousandth of a share of Preferred
Stock, the Company may pay to the registered holders of Rights Certificates at
the time such Rights are exercised as herein provided an amount in cash equal
to the same fraction of the current market value of one one-thousandth of a
share of Preferred Stock. For purposes of this Section 14(b), the current
market value of one one-thousandth of a share of Preferred Stock shall be one
one-thousandth of the closing price of a share of Preferred Stock (as
determined pursuant to Section 11(d)(ii) hereof) for the Trading Day
immediately before the date of such exercise.
<PAGE>
(c) Following the occurrence of a Triggering Event, the Company
shall not be required to issue fractions of shares of Common Stock upon
exercise of the Rights or to distribute certificates which evidence fractional
shares of Common Stock. In lieu of fractional shares of Common Stock, the
Company may pay to the registered holders of Rights Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the
same fraction of the current market value of one (1) share of Common Stock. For
purposes of this Section 14(c), the current market value of one share of Common
Stock shall be the closing price of one share of Common Stock (as determined
pursuant to Section 11(d)(i) hereof) for the Trading Day immediately before the
date of such exercise.
(d) The holder of a Right by the acceptance of the Rights
expressly waives his right to receive any fractional Rights or any fractional
shares upon exercise of a Right, except as permitted by this Section 14.
Section 15. Rights of Action. All rights of action in respect of this
Agreement are vested in the respective registered holders of the Rights
Certificates (and, before the Distribution Date, the registered holders of the
Common Stock); and any registered holder of any Rights Certificate (or, before
the Distribution Date, of the Common Stock), without the consent of the Rights
Agent or of the holder of any other Rights Certificate (or, before the
Distribution Date, of the Common Stock), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Rights Certificate 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.
<PAGE>
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) before 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 office or offices of the Rights Agent designated for such purposes, duly
endorsed or accompanied by a proper instrument of transfer and with the
appropriate forms and certificates fully executed;
(c) subject to Section 6(a) and Section 7(f) hereof, the Company
and the Rights Agent may deem and treat the Person in whose name a Rights
Certificate (or, before the Distribution Date, the associated Common Stock
certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the
Rights Certificates or the associated Common Stock certificate made by anyone
other than the Company or the Rights Agent) for all purposes whatsoever, and
neither the Company nor the Rights Agent, subject to the last sentence of
Section 7(e) hereof, shall be required to be affected by any notice to the
contrary; and
(d) notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Rights Agent shall have any liability to any holder
of a Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree, judgment or ruling (whether interlocutory or
final) 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, judgment, decree or ruling lifted or otherwise overturned as soon as
possible.
Section 17. Rights Certificate Holder Not Deemed a Stockholder. No
holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the number of one
one-thousandths of a share of Preferred Stock or any other securities of the
Company which may at any time be issuable on the exercise of the Rights
represented thereby, nor shall anything contained herein or in any Rights
Certificate be construed to confer upon the holder of any Rights Certificate,
as such, any of the rights of a stockholder of the Company or any right to vote
for the election of directors or upon any matter submitted to stockholders at
any meeting thereof, or to give or withhold consent to any corporate action, or
to receive notice of meetings or other actions affecting stockholders (except
as provided in Section 25 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 preparation, delivery,
amendment, administration and execution of this Agreement and the exercise and
performance of its duties hereunder. The Company also agrees to indemnify the
Rights Agent for, and to hold it harmless against, any loss, liability, damage,
judgment, fine, penalty, claim, demand, settlement, cost or expense (including
the reasonable fees and expenses of legal counsel), incurred without gross
negligence, bad faith or willful misconduct on the part of the Rights Agent,
for any action taken, suffered or omitted by the Rights Agent in connection
with the acceptance and administration of this Agreement, including, without
limitation, the costs and expenses of defending against any claim of liability
in the premises. Anything to the contrary notwithstanding, in no event shall
the Rights Agent be liable for special, punitive, indirect, consequential or
incidental loss or damage of any kind whatsoever (including but not limited to
lost profits), even if the Rights Agent has been advised of the likelihood of
such loss or damage.
<PAGE>
(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 acceptance and administration of this Agreement in reliance
upon any Rights Certificate or certificate for Common Stock or for other
securities of the Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement, or other paper or document believed by it to be genuine
and to be signed, executed and, where necessary, verified or acknowledged, by
the proper Person or Persons.
Section 19. Merger or Consolidation or Change of Name of Rights
Agent.
(a) Any Person into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any Person
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any Person succeeding to the
shareholder services business of the Rights Agent or any successor Rights
Agent, shall be the successor to the Rights Agent under this Agreement without
the execution or filing of any paper or any further act on the part of any of
the parties hereto; but only if such Person 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.
Section 20. Duties of Rights Agent. The Rights Agent undertakes to
perform only the duties and obligations expressly imposed by this Agreement
(and no other implied duties or obligations) 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:
<PAGE>
(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, and the
Rights Agent shall incur no liability for or in respect of any action taken,
suffered 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 before taking, suffering or omitting any action hereunder, such fact or
matter (unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and established by a
certificate signed by the Chairman of the Board, the President, any Vice
President, the Treasurer, any Assistant Treasurer, the Secretary or any
Assistant Secretary of the Company and delivered to the Rights Agent; and such
certificate shall be full authorization and protection to the Rights Agent, and
the Rights Agent shall incur no liability for or in respect of any action
taken, suffered or omitted 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 have any liability for or be
under any responsibility in respect of the validity of this Agreement or the
execution and delivery hereof (except the due execution hereof by the Rights
Agent) or in respect of the validity or execution of any Rights Certificate
(except its countersignature thereof); nor shall it be responsible for any
breach by the Company of any covenant or condition contained in this Agreement
or in any Rights Certificate; nor shall it be responsible for any adjustment
required under the provisions of Section 11, Section 13 or Section 24 hereof or
responsible for the manner, method or amount of any such adjustment or the
ascertaining of the existence of facts that would require any such adjustment
(except with respect to the exercise of Rights evidenced by Rights Certificates
after actual notice of any such adjustment); nor shall it by any act hereunder
be deemed to make any representation or warranty as to the authorization or
reservation of any shares of Common Stock or Preferred Stock to be issued
pursuant to this Agreement or any Rights Certificate or as to whether any
shares of Common Stock or Preferred Stock will, when so issued, be validly
authorized and issued, fully paid and nonassessable.
<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 the
Chairman of the Board, the President, any Vice President, the Secretary, any
Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company,
and to apply to such officers for advice or instructions in connection with its
duties, such advice or instructions shall be full authorization and protection
to the Rights Agent and the Rights Agent shall incur no liability for or in
respect of any action taken, suffered or omitted by it in good faith in
accordance with instructions of any such officer.
(h) The Rights Agent and any stockholder, Affiliate, director,
officer or employee of the Rights Agent may buy, sell or deal in any of the
Rights or other securities of the Company or become pecuniarily interested in
any transaction in which the Company may be interested, or contract with or
lend money to the Company or otherwise act as fully and freely as though it
were not Rights Agent under this Agreement. Nothing herein shall preclude the
Rights Agent from acting in any other capacity for the Company or for any other
Person.
(i) The Rights Agent may execute and exercise any of the rights
or powers hereby vested in it or perform any duty hereunder either itself or by
or through its attorneys or agents, 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 or any other Person
resulting from any such act, default, neglect or misconduct absent gross
negligence, bad faith or willful misconduct 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 it believes that repayment of such funds or adequate
indemnification against such risk or liability is not reasonably assured to it.
(k) If, with respect to any Rights Certificate surrendered to
the Rights Agent for exercise or transfer, the certificate attached to the form
of assignment or form of election to purchase, as the case may be, has either
not been completed or indicates an affirmative response to clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with respect to
such requested exercise or transfer without first consulting with the Company.
<PAGE>
Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon thirty (30) days' notice in writing mailed to the Company, and to each
transfer agent of the Common Stock and Preferred Stock, by registered or
certified mail, and, if such resignation occurs after the Distribution Date, to
the registered holders of the Rights Certificates by first-class mail. The
Company may remove the Rights Agent or any successor Rights Agent upon thirty
(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 Common Stock and
Preferred Stock, by registered or certified mail, and, if such removal occurs
after the Distribution Date, to the holders of the Rights Certificates by
first-class mail. If the Rights Agent shall resign or be removed or shall
otherwise become incapable of acting, the Company shall appoint a successor to
the Rights Agent. If the Company shall fail to make such appointment within a
period of thirty (30) 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)
a Person organized and doing business under the laws of the United States or
any state of the United States, in good standing, having an office in the State
of New York, which is authorized under such laws to exercise stock transfer
powers and is subject to supervision or examination by federal or state
authority and which has at the time of its appointment as Rights Agent a
combined capital and surplus of at least $50,000,000 or (b) an Affiliate of
such Person described in clause (a) of this sentence. 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 the
Preferred Stock, and, if such appointment occurs after the Distribution Date,
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.
<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 the Board of Directors to reflect any
adjustment or change in the Purchase Price and the number or kind or class of
shares or other securities or property purchasable under the Rights
Certificates made in accordance with the provisions of this Agreement. In
addition, in connection with the issuance or sale of shares of Common Stock
following the Distribution Date and before the redemption or expiration of the
Rights, the Company (a) shall, with respect to shares of Common Stock so issued
or sold pursuant to the exercise of stock options or under any employee plan or
arrangement, granted or awarded as of the Distribution Date, or upon the
exercise, conversion or exchange of securities hereinafter issued by the
Company, and (b) may, in any other case, if deemed necessary or appropriate by
the Board of Directors of the Company, issue Rights Certificates representing
the appropriate number of Rights in connection with such issuance or sale;
provided, however, that (i) no such Rights Certificate shall be issued if, and
to the extent that, the Company shall be advised by counsel that such issuance
would create a significant risk of material adverse tax consequences to the
Company or the Person to whom such Rights Certificate would be issued, and (ii)
no such Rights Certificate shall be issued if, and to the extent that,
appropriate adjustment shall otherwise have been made in lieu of the issuance
thereof.
Section 23. Redemption and Termination.
(a) The Board of Directors of the Company may, at its option, at
any time before the earlier of (i) the close of business on the tenth Business
Day following the Stock Acquisition Date or (ii) the close of business on the
Final Expiration Date, redeem all but not less than all of the then outstanding
Rights at a redemption price of $.01 per Right, as such amount may be
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such redemption price being
hereinafter referred to as the "Redemption Price"). Notwithstanding anything
contained in this Agreement to the contrary, the Rights shall not be
exercisable after the first occurrence of a Section 11(a)(ii) Event until such
time as the Company's right of redemption hereunder has expired. The Company
may, at its option, pay the Redemption Price in cash, shares of Common Stock
(based on the Current Market Price, as defined in Section 11(d)(i) hereof, of
the Common Stock at the time of redemption) or any other form of consideration
deemed appropriate by the Board of Directors.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights, without any further action and
without any notice, the right to exercise the Rights will terminate and the
only right thereafter of the holders of Rights shall be to receive the
Redemption Price for each Right so held. Promptly after the action of the Board
of Directors ordering the redemption of the Rights, the Company shall give
notice of such redemption to the Rights Agent and the holders of the then
outstanding Rights by mailing such notice to all such holders at each holder's
last address as it appears upon the registry books of the Rights Agent or,
before the Distribution Date, on the registry books of the transfer agent for
the Common Stock. Any notice which is mailed in the manner herein provided
shall be deemed given, whether or not the holder receives the notice. Each such
notice of redemption will state the method by which the payment of the
Redemption Price will be made.
<PAGE>
Section 24. Exchange.
(a) The Board of Directors of the Company may, at its option, at
any 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 null and void pursuant to the provisions of Section 7(e)
hereof) for Common Stock at an exchange ratio of one share of Common Stock per
Right, appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof (such exchange ratio being
hereinafter referred to as the "Exchange Ratio"). Notwithstanding the
foregoing, the Board of Directors of the Company shall not be empowered to
effect such exchange at any time after any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or any such
Subsidiary, or any Person holding Common Stock for or pursuant to the terms of
any such plan), together with all Affiliates and Associates of such Person,
becomes the Beneficial Owner of 50% or more of the Common Stock then
outstanding.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the exchange of any Rights pursuant to subsection (a) of this
Section 24 and without any further action and without any notice, the right to
exercise such Rights shall terminate and the only right thereafter of the
holders of such Rights shall be to receive that number of shares of Common
Stock equal to the number of such Rights held by such holder multiplied by the
Exchange Ratio. The Company shall promptly give public notice of any such
exchange (with prompt notice thereof to the Rights Agent); provided, however,
that the failure to give, or any defect in, such notice shall not affect the
validity of such exchange. The Company promptly shall mail a notice of any such
exchange to the Rights Agent and to all of the holders of such Rights at their
last addresses as they appear upon the registry books of the Rights Agent. Any
notice which is mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice. Each such notice of exchange
will state the method by which the exchange of the Common Stock for Rights will
be effected and, in the event of any partial exchange, the number of Rights
which will be exchanged. Any partial exchange shall be effected pro rata based
on the number of Rights (other than Rights which have become void pursuant to
the provisions of Section 7(e) hereof) held by each holder of Rights.
(c) In any exchange pursuant to this Section 24, the Company, at
its option, may substitute Preferred Stock (or Equivalent Preferred Stock, as
such term is defined in paragraph (b) of Section 11 hereof) for Common Stock
exchangeable for Rights, at the initial rate of one one-thousandth of a share
of Preferred Stock (or Equivalent Preferred Stock) for each share of Common
Stock, as appropriately adjusted to reflect stock splits, stock dividends and
other similar transactions after the date hereof.
(d) If there shall not be sufficient shares of Common Stock
issued but not outstanding or authorized but unissued to permit any exchange of
Rights as contemplated 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.
<PAGE>
(e) The Company shall not be required to issue fractions of
shares of Common Stock or to distribute certificates which evidence fractional
shares of Common Stock. In lieu of such fractional shares of Common Stock,
there shall be paid to the registered holders of the Rights 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
(e), the current market value of a whole share of Common Stock shall be the
closing price of a share of Common Stock (as determined pursuant to the second
sentence of Section 11(d)(i) hereof) for the Trading Day immediately before the
date of exchange pursuant to this Section 24.
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 out of earnings
or retained earnings of the Company), 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 which complies with Section 11(o) hereof), or
to effect any sale or other transfer (or to permit one or more of its
Subsidiaries to effect any sale or other transfer), in one transaction or a
series of related transactions, of more than 50% of the assets, cash flow or
earning power of the Company and its Subsidiaries (taken as a whole) to any
other Person or Persons (other than the Company and/or any of its Subsidiaries
in one or more transactions each of which complies with Section 11(o) hereof),
or (v) to effect the liquidation, dissolution or winding up of the Company,
then, in each such case, the Company shall give to each holder of a Rights
Certificate, to the extent feasible, and to the Rights Agent 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,
sale, transfer, liquidation, dissolution, or winding up is to take place and
the date of participation therein by the holders of the shares of Preferred
Stock, if any such date is to be fixed, and such notice shall be so given in
the case of any action covered by clause (i) or (ii) above at least twenty (20)
days before the record date for determining holders of the shares of Preferred
Stock for purposes of such action, and in the case of any such other action, at
least twenty (20) days before 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.
<PAGE>
(b) In case any of the events set forth in Section 11(a)(ii)
hereof shall occur, then, in any such case, (i) the Company shall as soon as
practicable thereafter give to each holder of a Rights Certificate, to the
extent feasible, and to the Rights Agent 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 to Common Stock and/or, if appropriate, other
securities.
Section 26. Notices. Notices or demands authorized by this Agreement
to be given or made by the Rights Agent or by the holder of any Rights
Certificate to or on the Company shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing by the Rights Agent with the Company) as follows:
HomeServices.Com Inc.
6800 France Avenue South, Suite 600
Edina, Minnesota 55435
Attention: Corporate Secretary
Subject to the provisions of Section 21, any notice or demand authorized by
this Agreement to be given or made by the Company or by the holder of any
Rights Certificate to or on the Rights Agent shall be sufficiently given or
made if sent by first-class mail, postage prepaid, addressed (until another
address is filed in writing by the Rights Agent with the Company) as follows:
ChaseMellon Shareholder Services, L.L.C.
2323 Bryan Street, Suite 2300
Dallas, Texas 75201-2656
Attention: Relationship Manager
<PAGE>
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 before 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. Before the Distribution Date,
and subject to the last sentence of this Section 27, the Company and the Rights
Agent shall, if the Company so directs, supplement or amend any provision of
this Agreement without the approval of any holders of certificates representing
shares of Common Stock. From and after the Distribution Date, the Company and
the Rights Agent shall, if the Company so directs, supplement or amend this
Agreement without the approval of any holders of Rights Certificates in order
(i) to cure any ambiguity, (ii) to correct or supplement any provision
contained herein which may be defective or inconsistent with any other
provisions herein, (iii) to shorten or lengthen any time period hereunder, or
(iv) to change or supplement the provisions hereunder in any manner which the
Company may deem necessary or desirable and which shall not adversely affect
the interests of the holders of Rights Certificates (other than an Acquiring
Person or an Affiliate or Associate of an Acquiring Person); provided, this
Agreement may not be supplemented or amended to lengthen any time period
hereunder, pursuant to clause (iii) of this sentence. Upon the delivery of a
certificate from an appropriate officer of the Company and, if requested by the
Rights Agent, an opinion of counsel, which states that the proposed supplement
or amendment is in compliance with the terms of this Section 27, the Rights
Agent shall execute such supplement or amendment. Before 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 herein to
the contrary, (i) this Agreement may not be amended at a time when the Rights
are not redeemable and (ii) the Rights Agent may, but shall not be obligated
to, enter into any supplement or amendment that affects the Rights Agents' own
right, duties, obligations or immunities under this Agreement.
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
shall have the exclusive power and authority to administer this Agreement and
to exercise all rights and powers specifically granted to the Board or to the
Company, or as may be necessary or advisable in the administration of this
Agreement, including, without limitation, the right and power to (i) interpret
the provisions of this Agreement, and (ii) make all determinations deemed
necessary or advisable for the administration of this Agreement (including a
determination to redeem or not redeem the Rights or to amend the Agreement).
All such actions, calculations, interpretations and determinations (including,
for purposes of clause (y) below, all omissions with respect to the foregoing)
which are done or made by the Board in good faith, shall (x) be final,
conclusive and binding on the Company, the Rights Agent, the holders of the
Rights and all other Persons, and (y) not subject the Board, or any of the
directors on the Board to any liability to the holders of the Rights. For
purposes of clause (x) in the preceding sentence, the Rights Agent may assume
that the Board of Directors acted in good faith.
<PAGE>
Section 30. Benefits of this Agreement. Nothing in this Agreement
shall be construed to give to any Person other than the Company, the Rights
Agent and the registered holders of the Rights Certificates (and, before the
Distribution Date, registered holders of the Common Stock) any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, before the Distribution
Date, registered holders of the Common Stock).
Section 31. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board 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, if it had previously expired, shall be reinstated and shall not expire
until the close of business on the tenth Business Day following the date of
such determination by the Board of Directors. Without limiting the foregoing,
if any provision requiring a specific group of Directors of the Company to act
is held to by any court of competent jurisdiction or other authority to be
invalid, void or unenforceable, such determination shall then be made by the
Board of Directors of the Company in accordance with applicable law and the
Company's Restated Certificate of Incorporation and Restated By-laws.
Section 32. Governing Law. This Agreement, each Right and each Rights
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts
made and to be performed entirely within such State, except that the rights,
duties and obligations of the Rights Agent shall be governed by and construed
in accordance with the laws of the State of New York applicable to contracts
made and to be performed within such State.
Section 33. Counterparts. This Agreement may be executed in any
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
Section 34. Descriptive Headings. Descriptive headings of the
several sections of this Agreement are inserted for convenience only and
shall not control or affect the meaning or construction of any of the
provisions hereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year first above written.
HomeServices.Com Inc.
By /s/ Steven A. McArthur
----------------------------
Name: Steven A. McArthur
Title: Senior Vice President,
General Counsel and
Secretary
ChaseMellon Shareholder Services, L.L.C.
By /s/ Cindy Bennett
-------------------------------
Name: Cindy Bennett
Title: Relationship Manager
<PAGE>
Exhibit A
FORM OF
CERTIFICATE OF DESIGNATION, PREFERENCES AND
RIGHTS OF SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
HomeServices.Com Inc.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
The undersigned officers of HomeServices.Com Inc. (the
"Corporation"), a corporation organized and existing under the General
Corporation Law of the State of Delaware, in accordance with the provisions of
Section 103 thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors
by the Restated Certificate of Incorporation of the said Corporation, the said
Board of Directors on October 6, 1999, adopted the following resolution
creating a series of shares of Preferred Stock designated as Series A Junior
Participating Preferred Stock:
RESOLVED, that pursuant to the authority vested in the Board of
Directors of this Corporation in accordance with the provisions of its Restated
Certificate of Incorporation, a series of Preferred Stock of the Corporation be
and it hereby is created, and that the designation and amount thereof and the
voting powers, preferences and relative, participating, optional and other
special rights of the shares of such series, and the qualifications,
limitations or restrictions thereof are as follows:
Section 1. Designation and Amount. The shares of such series shall be
designated as "Series A Junior Participating Preferred Stock" and the number of
shares constituting such series shall be 100,000.
<PAGE>
Section 2. Dividends and Distributions.
(A) Subject to the prior and superior rights of the holders of any
shares of any series of Preferred Stock ranking prior and superior to the
shares of Series A Junior Participating Preferred Stock with respect to
dividends, the holders of shares of Series A Junior Participating Preferred
Stock shall be entitled to receive, when, as and if declared by the Board of
Directors out of funds legally available for the purpose, quarterly dividends
payable in cash on the first day of January, April, July and October in each
year (each such date being referred to herein as a "Quarterly Dividend Payment
Date"), commencing on the first Quarterly Dividend Payment Date after the first
issuance of a share or fraction of a share of Series A Junior Participating
Preferred Stock, in an amount per share (rounded to the nearest cent) equal to
the greater of (a) $10.00 or (b) subject to the provision for adjustment
hereinafter set forth, 1,000 times the aggregate per share amount of all cash
dividends, and 1,000 times the aggregate per share amount (payable in kind) of
all non-cash dividends or other distributions other than a dividend payable in
shares of Common Stock or a subdivision of the outstanding shares of Common
Stock (by reclassification or otherwise), declared on the Common Stock, par
value $0.01 per share, of the Corporation (the "Common Stock") since the
immediately preceding Quarterly Dividend Payment Date, or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Junior Participating Preferred Stock. In the
event the Corporation shall at any time after October 14, 1999 (the "Rights
Declaration Date") (i) declare any dividend on Common Stock payable in shares
of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine
the outstanding Common Stock into a smaller number of shares, then in each such
case the amount to which holders of shares of Series A Junior Participating
Preferred Stock were entitled immediately before such event under clause (b) of
the preceding sentence shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately before such
event.
(B) The Corporation shall declare a dividend or distribution on the
Series A Junior Participating Preferred Stock as provided in Paragraph (A)
above immediately after it declares a dividend or distribution on the Common
Stock (other than a dividend payable in shares of Common Stock); provided that,
in the event no dividend or distribution shall have been declared on the Common
Stock during the period between any Quarterly Dividend Payment Date and the
next subsequent Quarterly Dividend Payment Date, a dividend of $10.00 per share
on the Series A Junior Participating Preferred Stock shall nevertheless be
payable on such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Junior Participating Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares of Series
A Junior Participating Preferred Stock, unless the date of issue of such shares
is before the record date for the first Quarterly Dividend Payment Date, in
which case dividends on such shares shall begin to accrue from the date of
issue of such shares, or unless the date of issue is a Quarterly Dividend
Payment Date or is a date after the record date for the determination of
holders of shares of Series A Junior Participating Preferred Stock entitled to
receive a quarterly dividend and before such Quarterly Dividend Payment Date,
in either of which events such dividends shall begin to accrue and be
cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid
dividends shall not bear interest. Dividends paid on the shares of Series A
Junior Participating Preferred Stock in an amount less than the total amount of
such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at the time
outstanding. The Board of Directors may fix a record date for the determination
of holders of shares of Series A Junior Participating Preferred Stock entitled
to receive payment of a dividend or distribution declared thereon, which record
date shall be no more than 30 days before the date fixed for the payment
thereof.
Section 3. Voting Rights. The holders of shares of Series A
Junior Participating Preferred Stock shall have the following voting
rights:
(A) Subject to the provision for adjustment hereinafter set forth,
each share of Series A Junior Participating Preferred Stock shall entitle the
holder thereof to 1,000 votes on all matters submitted to a vote of the
stockholders of the Corporation. In the event the Corporation shall at any time
after the Rights Declaration Date (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock,
or (iii) combine the outstanding Common Stock into a smaller number of shares,
then in each such case the number of votes per share to which holders of shares
of Series A Junior Participating Preferred Stock were entitled immediately
before such event shall be adjusted by multiplying such number by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately before such event.
<PAGE>
(B) Except as otherwise provided herein or by law, the holders of
shares of Series A Junior Participating Preferred Stock and the holders of
shares of Common Stock shall vote together as one class on all matters
submitted to a vote of stockholders of the Corporation.
(C) (i) If at any time dividends on any Series A Junior Participating
Preferred Stock shall be in arrears in an amount equal to six (6) quarterly
dividends thereon, the occurrence of such contingency shall mark the beginning
of a period (herein called a "default period") which shall extend until such
time when all accrued and unpaid dividends for all previous quarterly dividend
periods and for the current quarterly dividend period on all shares of Series A
Junior Participating Preferred Stock then outstanding shall have been declared
and paid or set apart for payment. During each default period, all holders of
Preferred Stock (including holders of the Series A Junior Participating
Preferred Stock) with dividends in arrears in an amount equal to six (6)
quarterly dividends thereon, voting as a class, irrespective of series, shall
have the right to elect two (2) directors.
(ii) During any default period, such voting right of the holders
of Series A Junior Participating Preferred Stock may be exercised initially at
a special meeting called pursuant to subparagraph (iii) of this Section 3(C) or
at any annual meeting of stockholders, and thereafter at annual meetings of
stockholders, provided that neither such voting right nor the right of the
holders of any other series of Preferred Stock, if any, to increase, in certain
cases, the authorized number of directors shall be exercised unless the holders
of ten percent (10%) in number of shares of Preferred Stock outstanding shall
be present in person or by proxy. The absence of a quorum of the holders of
Common Stock shall not affect the exercise by the holders of Preferred Stock of
such voting right. At any meeting at which the holders of Preferred Stock shall
exercise such voting right initially during an existing default period, they
shall have the right, voting as a class, to elect directors to fill such
vacancies, if any, in the Board of Directors as may then exist up to two (2)
directors or, if such right is exercised at an annual meeting, to elect two (2)
directors. If the number which may be so elected at any special meeting does
not amount to the required number, the holders of the Preferred Stock shall
have the right to make such increase in the number of directors as shall be
necessary to permit the election by them of the required number. After the
holders of the Preferred Stock shall have exercised their right to elect
directors in any default period and during the continuance of such period, the
number of directors shall not be increased or decreased except by vote of the
holders of Preferred Stock as herein provided or pursuant to the rights of any
equity securities ranking senior to or pari passu with the Series A Junior
Participating Preferred Stock.
<PAGE>
(iii) Unless the holders of Preferred Stock shall, during an
existing default period, have previously exercised their right to elect
directors, the Board of Directors may order, or any stockholder or stockholders
owning in the aggregate not less than ten percent (10%) of the total number of
shares of Preferred Stock outstanding, irrespective of series, may request, the
calling of a special meeting of the holders of Preferred Stock, which meeting
shall thereupon be called by the President, a Vice-President or the Secretary
of the Corporation. Notice of such meeting and of any annual meeting at which
holders of Preferred Stock are entitled to vote pursuant to this Paragraph
(C)(iii) shall be given to each holder of record of Preferred Stock by mailing
a copy of such notice to him at his last address as the same appears on the
books of the Corporation. Such meeting shall be called for a time not earlier
than 20 days and not later than 60 days after such order or request or in
default of the calling of such meeting within 60 days after such order or
request, such meeting may be called on similar notice by any stockholder or
stockholders owning in the aggregate not less than ten percent (10%) of the
total number of shares of Preferred Stock outstanding. Notwithstanding the
provisions of this Paragraph (C)(iii), no such special meeting shall be called
during the period within 60 days immediately preceding the date fixed for the
next annual meeting of the stockholders.
(iv) In any default period, the holders of Common Stock, and
other classes of stock of the Corporation if applicable, shall continue to be
entitled to elect the whole number of directors until the holders of Preferred
Stock shall have exercised their right to elect two (2) directors voting as a
class, after the exercise of which right (x) the directors so elected by the
holders of Preferred Stock shall continue in office until their successors
shall have been elected by such holders or until the expiration of the default
period, and (y) any vacancy in the Board of Directors may (except as provided
in Paragraph (C)(ii) of this Section 3) be filled by vote of a majority of the
remaining directors theretofore elected by the holders of the class of stock
which elected the director whose office shall have become vacant. References in
this Paragraph (C) to directors elected by the holders of a particular class of
stock shall include directors elected by such directors to fill vacancies as
provided in clause (y) of the foregoing sentence.
<PAGE>
(v) Immediately upon the expiration of a default period, (x) the
right of the holders of Preferred Stock as a class to elect directors shall
cease, (y) the term of any directors elected by the holders of Preferred Stock
as a class shall terminate, and (z) the number of directors shall be such
number as may be provided for in the certificate of incorporation or by-laws
irrespective of any increase made pursuant to the provisions of Paragraph
(C)(ii) of this Section 3 (such number being subject, however, to change
thereafter in any manner provided by law or in the certificate of incorporation
or by-laws). Any vacancies in the Board of Directors effected by the provisions
of clauses (y) and (z) in the preceding sentence may be filled by a majority of
the remaining directors.
(D) Except as set forth herein, holders of Series A Junior
Participating Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for taking any corporate
action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Junior Participating Preferred Stock as provided in
Section 2 are in arrears, thereafter and until all accrued and unpaid dividends
and distributions, whether or not declared, on shares of Series A Junior
Participating Preferred Stock outstanding shall have been paid in full, the
Corporation shall not
(i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise acquire for
consideration any shares of stock ranking junior (either as to dividends
or upon liquidation, dissolution or winding up) to the Series A Junior
Participating Preferred Stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series
A Junior Participating Preferred Stock, except dividends paid ratably on
the Series A Junior Participating Preferred Stock and all such parity
stock on which dividends are payable or in arrears in proportion to the
total amounts to which the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series
A Junior Participating Preferred Stock, provided that the Corporation may
at any time redeem, purchase or otherwise acquire shares of any such
parity stock in exchange for shares of any stock of the Corporation
ranking junior (either as to dividends or upon dissolution, liquidation or
winding up) to the Series A Junior Participating Preferred Stock; or
<PAGE>
(iv) purchase or otherwise acquire for consideration any
shares of Series A Junior Participating Preferred Stock, or any shares of
stock ranking on a parity with the Series A Junior Participating Preferred
Stock, except in accordance with a purchase offer made in writing or by
publication (as determined by the Board of Directors) to all holders of
such shares upon such terms as the Board of Directors, after consideration
of the respective annual dividend rates and other relative rights and
preferences of the respective series and classes, shall determine in good
faith will result in fair and equitable treatment among the respective
series or classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under Paragraph (A) of
this Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
Section 5. Reacquired Shares. Any shares of Series A Junior
Participating Preferred Stock purchased or otherwise acquired by the
Corporation in any manner whatsoever shall be retired and cancelled promptly
after the acquisition thereof. All such shares shall upon their cancellation
become authorized but unissued shares of Preferred Stock and may be reissued as
part of a new series of Preferred Stock to be created by resolution or
resolutions of the Board of Directors, subject to the conditions and
restrictions on issuance set forth herein.
Section 6. Liquidation, Dissolution or Winding Up. (A) Upon any
liquidation (voluntary or otherwise), dissolution or winding up of the
Corporation, no distribution shall be made to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Junior Participating Preferred Stock unless, prior
thereto, the holders of shares of Series A Junior Participating Preferred Stock
shall have received an amount equal to $1,000 per share of Series A
Participating Preferred Stock, plus an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment (the "Series A Liquidation Preference"). Following the payment of
the full amount of the Series A Liquidation Preference, no additional
distributions shall be made to the holders of shares of Series A Junior
Participating Preferred Stock unless, prior thereto, the holders of shares of
Common Stock shall have received an amount per share (the "Common Adjustment")
equal to the quotient obtained by dividing (i) the Series A Liquidation
Preference by (ii) 1,000 (as appropriately adjusted as set forth in
subparagraph (C) below to reflect such events as stock splits, stock dividends
and recapitalizations with respect to the Common Stock) (such number in clause
(ii), the "Adjustment Number"). Following the payment of the full amount of the
Series A Liquidation Preference and the Common Adjustment in respect of all
outstanding shares of Series A Junior Participating Preferred Stock and Common
Stock, respectively, holders of Series A Junior Participating Preferred Stock
and holders of shares of Common Stock shall receive their ratable and
proportionate share of the remaining assets to be distributed in the ratio of
the Adjustment Number to 1 with respect to such Preferred Stock and Common
Stock, on a per share basis, respectively.
<PAGE>
(B) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series A Liquidation Preference and
the liquidation preferences of all other series of preferred stock, if any,
which rank on a parity with the Series A Junior Participating Preferred Stock,
then such remaining assets shall be distributed ratably to the holders of such
parity shares in proportion to their respective liquidation preferences. In the
event, however, that there are not sufficient assets available to permit
payment in full of the Common Adjustment, then such remaining assets shall be
distributed ratably to the holders of Common Stock.
(C) In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such
case the Adjustment Number in effect immediately before such event shall be
adjusted by multiplying such Adjustment Number by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately before such event.
Section 7. Consolidation, Merger, etc. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
Series A Junior Participating Preferred Stock shall at the same time be
similarly exchanged or changed in an amount per share (subject to the provision
for adjustment hereinafter set forth) equal to 1,000 times the aggregate amount
of stock, securities, cash and/or any other property (payable in kind), as the
case may be, into which or for which each share of Common Stock is changed or
exchanged. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such
case the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series A Junior Participating Preferred Stock
shall be adjusted by multiplying such amount by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately before such event.
<PAGE>
Section 8. No Redemption. The shares of Series A Junior
Participating Preferred Stock shall not be redeemable.
Section 9. Ranking. The Series A Junior Participating Preferred Stock
shall rank junior to all other series of the Corporation's Preferred Stock as
to the payment of dividends and the distribution of assets, unless the terms of
any such series shall provide otherwise.
Section 10. Amendment. At any time when any shares of Series A Junior
Participating Preferred Stock are outstanding, neither the Restated Certificate
of Incorporation of the Corporation nor this Certificate of Designation shall
be amended in any manner which would materially alter or change the powers,
preferences or special rights of the Series A Junior Participating Preferred
Stock so as to affect them adversely without the affirmative vote of the
holders of a majority or more of the outstanding shares of Series A Junior
Participating Preferred Stock, voting separately as a class.
Section 11. Fractional Shares. Series A Junior Participating
Preferred Stock may be issued in fractions of a share which shall entitle the
holder, in proportion to such holder's fractional shares, to exercise voting
rights, receive dividends, participate in distributions and to have the benefit
of all other rights of holders of Series A Junior Participating Preferred
Stock.
<PAGE>
IN WITNESS WHEREOF, HomeServices.Com Inc. has caused this
Certificate of Designation to be executed in its corporate name this 14th
day of October, 1999.
HOMESERVICES.COM INC.
By:
-------------------------------
Name: Steven A. McArthur
Title: Senior Vice President,
General Counsel and
Secretary
<PAGE>
Exhibit B
[Form of Rights Certificate]
Certificate No. R- ________ Rights
NOT EXERCISABLE AFTER OCTOBER 14, 2009 (THE TENTH ANNIVERSARY OF THE DATE OF
THE CONSUMMATION OF THE INITIAL PUBLIC OFFERING OF THE COMMON STOCK OF THE
COMPANY) UNLESS EXTENDED PRIOR THERETO BY THE BOARD OF DIRECTORS OR EARLIER IF
REDEEMED BY THE COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF
THE COMPANY, AT $.01 PER RIGHT 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.
Rights Certificate
HomeServices.Com Inc.
This certifies that , or registered assigns, is the registered owner
of the number of Rights set forth above, each of which entitles the owner
thereof, subject to the terms, provisions and conditions of the Rights
Agreement, dated as of October 14, 1999 (the "Rights Agreement"), between
HomeServices.Com Inc., a Delaware corporation (the "Company"), and ChaseMellon
Shareholder Services, L.L.C., a New Jersey limited liability company (the
"Rights Agent"), to purchase from the Company at any time before 5:00 p.m. (New
York City time) on October 14, 2009 (the tenth anniversary of the date of
consummation of the initial public offering of the Common Stock) (unless such
date is extended prior thereto by the Board of Directors) at the office or
offices of the Rights Agent designated for such purpose, or its successors as
Rights Agent, one one-thousandth of a fully paid, non-assessable share of
Series A Junior Participating Preferred Stock (the "Preferred Stock") of the
Company, at the Purchase Price (as defined in the Rights Agreement), which
shall initially be $_____ [insert the amount equal to the product of four times
the average daily closing price of the Common Stock for the first five days of
trading subsequent to the consummation of the initial public offering of the
Common Stock] per one one-thousandth of a share, upon presentation and
surrender of this Rights Certificate with the Form of Election to Purchase and
related Certificate duly executed. The number of Rights evidenced by this
Rights Certificate (and the number of shares which may be purchased upon
exercise thereof) set forth above, and the Purchase Price per share set forth
above, are the number and Purchase Price as of October __, 1999, [the close of
business on the fifth day of trading subsequent to the consummation of the
initial public offering of the Common Stock] based on the Preferred Stock as
constituted at such date. The Company reserves the right to require before the
occurrence of a Triggering Event (as such term is defined in the Rights
Agreement) that a number of Rights be exercised so that only whole shares of
Preferred Stock will be issued.
<PAGE>
Upon the occurrence of a Section 11(a)(ii) Event (as such term is
defined in the Rights Agreement), if the Rights evidenced by this Rights
Certificate are beneficially owned by (i) an Acquiring Person or an Affiliate
or Associate of any such Acquiring Person (as such terms are defined in the
Rights Agreement), (ii) a transferee of any such Acquiring Person, Associate or
Affiliate, or (iii) under certain circumstances specified in the Rights
Agreement, a transferee of a person who, after such transfer, became an
Acquiring Person, or an Affiliate or Associate of an Acquiring Person, such
Rights shall become null and void and no holder hereof shall have any right
with respect to such Rights from and after the occurrence of such Section
11(a)(ii) Event.
As provided in the Rights Agreement, the Purchase Price and the
number and kind of shares of Preferred Stock or other securities which may be
purchased upon the exercise of the Rights evidenced by this Rights Certificate
are subject to modification and adjustment upon the happening of certain
events, including Triggering Events.
This Rights Certificate is subject to all of the terms, provisions
and conditions of the Rights Agreement, which terms, provisions and conditions
are hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the above-mentioned office of the
Rights Agent and are also available upon written request to the Rights Agent.
<PAGE>
This Rights Certificate, with or without other Rights Certificates,
upon surrender at the principal office or offices of the Rights Agent
designated for such purpose, may be exchanged for another Rights Certificate or
Rights Certificates of like tenor and date evidencing Rights entitling the
holder to purchase a like aggregate number of one one- thousandths of a share
of Preferred Stock as the Rights evidenced by the Rights Certificate or Rights
Certificates surrendered shall have entitled such holder to purchase. If this
Rights Certificate shall be exercised in part, the holder shall be entitled to
receive upon surrender hereof another Rights Certificate or Rights Certificates
for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may be redeemed by the Company at its option at a
redemption price of $.01 per Right at any time before the earlier of the close
of business on (i) the tenth Business Day following the Stock Acquisition Date
(as such time period may be extended pursuant to the Rights Agreement), and
(ii) the Final Expiration Date. In addition, under certain circumstances
following the Stock Acquisition Date, the Rights may be exchanged, in whole or
in part, for shares of the Common Stock, or shares of preferred stock of the
Company having essentially the same value or economic rights as such shares.
Immediately upon the action of the Board of Directors of the Company
authorizing any such exchange, and without any further action or any notice,
the Rights (other than Rights which are not subject to such exchange) will
terminate and the Rights will only enable holders to receive the shares
issuable upon such exchange.
No fractional shares of Preferred Stock will be issued upon the
exercise of any Right or Rights evidenced hereby (other than fractions which
are integral multiples of one one-thousandth of a share of Preferred Stock,
which may, at the election of the Company, be evidenced by depositary
receipts), 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 which may at any time
be issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give consent to or withhold consent from any corporate
action, or, to receive notice of meetings or other actions affecting
stockholders (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.
<PAGE>
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal.
Dated as of _______________________
ATTEST: HomeServices.Com Inc.
________________________ By___________________________
Secretary Title:
Countersigned:
ChaseMellon Shareholder Services, L.L.C.
By _____________________________
Authorized Signature
<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 HomeServices.Com
Inc., with full power of substitution.
Dated: ______________________
------------------------
Signature
Signature Guaranteed:
<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 Guaranteed:
<PAGE>
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.
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise Rights represented by
the Rights Certificate.)
To: HomeServices.Com 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 which may be issuable upon the
exercise of the Rights) and requests that certificates for such shares be
issued in the name of and delivered to:
Please insert social security
or other identifying number
---------------------------------------------------------------------------
(Please print name and address)
---------------------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced by
this Rights Certificate, a new Rights Certificate for the balance of such
Rights shall be registered in the name of and delivered to:
<PAGE>
Please insert social security
or other identifying number
---------------------------------------------------------------------------
(Please print name and address)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Dated: ___________________
------------------------------
Signature
Signature Guaranteed:
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);
<PAGE>
(2) after due inquiry and to the best knowledge of the undersigned,
it [ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate
from any Person who is, was or became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.
Dated:____________ _______________________
Signature
Signature Guaranteed:
<PAGE>
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.
<PAGE>
Exhibit C
SUMMARY OF RIGHTS TO PURCHASE
SERIES A PREFERRED STOCK
On October 6, 1999 , the Board of Directors of HomeServices.Com Inc.
(the "Company") declared a dividend distribution of one Right for each
outstanding share of Company Common Stock to stockholders of record at the
close of business on October 14, 1999 (the date of the consummation of the
initial public offering of the Common Stock ) (the "Record Date"). Each Right
entitles the registered holder to purchase from the Company a unit consisting
of one one-thousandth of a share (a "Unit") of Series A Junior Participating
Preferred Stock, par value $0.01 per share (the "Series A Preferred Stock") at
a Purchase Price equal to the product of four times the average daily closing
price of the Common Stock for the first five days of trading subsequent to the
consummation of the initial public offering of the Common Stock, subject to
adjustment. The description and terms of the Rights are set forth in a Rights
Agreement (the "Rights Agreement") between the Company and ChaseMellon
Shareholder Services, L.L.C., as Rights Agent.
Initially, the Rights will be attached to all Common Stock
certificates representing shares then outstanding, and no separate Rights
Certificates will be distributed. Subject to certain exceptions specified in
the Rights Agreement, the Rights will separate from the Common Stock and a
Distribution Date will occur upon the earlier of (i) 10 business days following
a public announcement that a person or group of affiliated or associated
persons (an "Acquiring Person") has acquired beneficial ownership of 15% or
more of the outstanding shares of Common Stock (the "Stock Acquisition Date")
and (ii) 10 business days (or such later date as the Board shall determine)
following the commencement of a tender offer or exchange offer that would
result in a person or group becoming an Acquiring Person. An Acquiring Person
shall not, however, include any of the following: (A) the Company, (B) any
subsidiary of the Company, (C) any employee benefit plan of the Company or any
subsidiary of the Company, or any person or entity organized, appointed or
established by the Company for or pursuant to the terms of any such plan, (D)
MidAmerican Energy Holdings Company and its affiliates and any successors
thereof, (E) persons who acquire 15% beneficial ownership as a result of
repurchases of stock by the Company or certain inadvertent actions by
institutional or certain other stockholders, except in certain circumstances
specified in the Rights Plan, (F) in certain circumstances, persons who acquire
shares of Common Stock from the beneficial owner of at least 15% or more of the
shares of Common Stock that were outstanding immediately upon consummation of
the initial public offering of the Common Stock of the Company, and as a result
of such acquisition such acquiring person also becomes the Beneficial Owner of
15% or more of the then outstanding shares of Common Stock or (G) in certain
circumstances, persons who inadvertently purchase more than 14.9% but less than
20% beneficial ownership and who report or are required to report such
ownership on Schedule 13G or Schedule 13D under the Securities and Exchange Act
of 1934, as amended and in effect on the date of the Rights Agreement, and
which Schedule does not state any intention to or reserve the right to control
or influence the management or policies of the Company or engage in any of the
actions specified in Item 4 of such Schedule (other than the disposition of the
Common Stock).
<PAGE>
Until the Distribution Date, (i) the Rights will be evidenced by the
Common Stock certificates and will be transferred with and only with such
Common Stock certificates, (ii) new Common Stock certificates issued after the
Record Date 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 certificate. Pursuant to the Rights
Agreement, the Company reserves the right to require before the occurrence of a
Triggering Event (as defined below) that, upon any exercise of Rights, a number
of Rights be exercised so that only whole shares of Preferred Stock will be
issued.
The Rights are not exercisable until the Distribution Date and will
expire at 5:00 p.m. (New York City time) on October 14, 2009, (the tenth
anniversary of the date of the consummation of the initial public offering of
the Common Stock) unless such date is extended or the Rights are earlier
redeemed or exchanged by the Company as described below.
<PAGE>
As soon as practicable after the Distribution Date, Rights
Certificates will be mailed to holders of record of the Common Stock as of the
close of business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights. Except as otherwise determined by
the Board of Directors, only shares of Common Stock issued before the
Distribution Date will be issued with Rights.
If a Person becomes an Acquiring Person, except pursuant to an offer
for all outstanding shares of Common Stock which the independent directors
determine to be fair and not inadequate to and to otherwise be in the best
interests of the Company and its stockholders, after receiving advice from one
or more investment banking firms (a "Qualified Offer"), each holder of a Right
will thereafter have the right to receive, upon exercise, Common Stock (or, in
certain circumstances, cash, property or other securities of the Company)
having a value equal to two times the exercise price of the Right.
Notwithstanding any of the foregoing, following the occurrence of the event set
forth in this paragraph, all Rights that are, or (under certain circumstances
specified in the Rights Agreement) were, beneficially owned by any Acquiring
Person will be null and void. However, Rights are not exercisable following the
occurrence of the event set forth above until such time as the Rights are no
longer redeemable by the Company as set forth below.
<PAGE>
If, at any time following the Stock Acquisition Date, (i) the Company
engages in a merger or other business combination transaction in which the
Company is not the surviving corporation (other than with an entity which
acquired the shares pursuant to a Qualified Offer), (ii) the Company engages in
a merger or other business combination transaction in which the Company is the
surviving corporation and the Common Stock of the Company is changed or
exchanged, or (iii) 50% or more of the Company's assets, cash flow or earning
power is sold or transferred, each holder of a Right (except Rights which have
previously been voided as set forth above) shall thereafter have the right to
receive, upon exercise, common stock of the acquiring company having a value
equal to two times the exercise price of the Right. The events set forth in
this paragraph and in the second preceding paragraph are referred to as the
"Triggering Events."
At any time after a person becomes an Acquiring Person and before the
acquisition by such person or group of fifty percent (50%) or more of the
outstanding Common Stock, the Board may exchange the Rights (other than Rights
owned by such person or group which have become void), in whole or in part, at
an exchange ratio of one share of Common Stock, or one one-thousandth of a
share of Preferred Stock (or of a share of a class or series of the Company's
preferred stock having equivalent rights, preferences and privileges), per
Right (subject to adjustment).
At any time until ten business 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 (payable in cash, Common Stock or other consideration deemed
appropriate by the Board of Directors). Immediately upon the action of the
Board of Directors ordering redemption of the Rights, the Rights will terminate
and the only right of the holders of Rights will be to receive the $.01
redemption price.
<PAGE>
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the
right to vote or to receive dividends. While the distribution of the Rights
will not be taxable to stockholders or to the Company, stockholders may,
depending upon the circumstances, recognize taxable income if the Rights become
exercisable for Common Stock (or other consideration) of the Company or for
common stock of the acquiring company or in the event of the redemption of the
Rights as set forth above.
Any of the provisions of the Rights Agreement may be amended by the
Board of Directors of the Company before the Distribution Date. After the
Distribution Date, the provisions of the Rights Agreement may be amended by the
Board in order to cure any ambiguity, to make changes which do not adversely
affect the interests of holders of Rights, or to shorten or lengthen any time
period under the Rights Agreement. The foregoing notwithstanding, no amendment
may be made at such time as the Rights are not redeemable.
A form of the Rights Agreement will be filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form S-1
(Registration No. 333-82997). A copy of the Rights Agreement is available free
of charge from the Rights Agent. This summary description of the Rights does
not purport to be complete and is qualified in its entirety by reference to the
Rights Agreement, which is incorporated herein by reference.
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT dated as of October 14, 1999 between
MidAmerican Energy Holdings Company ("MidAmerican Holdings") and
HomeServices.Com Inc. (the "Company").
WHEREAS, as of the date of this Agreement, MidAmerican Holdings owns
7,841,600 shares of the Company's Common Stock, par value $.01 per share (the
"Common Stock");
WHEREAS, the Company is consummating on the date hereof an initial
public offering (the "Offering") in which it is selling 2,187,500 shares of the
Company's Common Stock and MidAmerican Holdings is selling 1,062,500 shares of
the Company's Common Stock;
WHEREAS, the Board of Directors of the Company has authorized the
officers of the Company to execute and deliver this Agreement in the name and
on behalf of the Company;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties to this Agreement hereby agree as
follows:
1. Definitions. As used in this Agreement, the following terms
shall have the following meanings:
"days" means calendar days.
"Holder" means MidAmerican Holdings, including its successors and
assigns who acquire Registrable Securities, directly or indirectly, from
MidAmerican Holdings; provided, however, that for purposes of exercising the
demand and incidental registration rights set forth in Sections 2 and 3 of this
Agreement, a "Holder" means MidAmerican Holdings or its successors and assigns
so long as it holds Registrable Securities constituting at least 5.0% of the
total number of shares of Common Stock then outstanding. For purposes of this
Agreement, the Company may deem and treat the registered holder of a
Registrable Security as the Holder and absolute owner thereof, and the Company
shall not be affected by any notice to the contrary.
<PAGE>
"Registrable Securities" means (a) the Common Stock owned by (i)
MidAmerican Holdings upon completion of the Offering, (ii) any pledgee of
Common Stock under a bona fide pledge arrangement with MidAmerican Holdings (or
its successors and assigns) or (iii) any transferee that receives Registrable
Securities from MidAmerican Holdings (or its successors and assigns) to the
extent that MidAmerican Holdings (or its successors and assigns) assigns to
such transferee registration rights in writing relating to the Registrable
Securities transferred to such transferee (a "Permitted Transferee")), (b) any
Common Stock acquired by MidAmerican Holdings in the open market at a time when
MidAmerican Holdings is deemed to be an Affiliate (as such term is defined
under Rule 144 under the Securities Act) of the Company so long as MidAmerican
Holdings continues to be deemed an Affiliate of the Company, (c) any debt,
equity or other securities (including without limitation any options, rights,
warrants or similar securities) issued by MidAmerican Holdings or any other
person that are or may be exchangeable or exercisable for or convertible into
the Common Stock and (d) any securities issued or issuable in respect of the
Common Stock referred to in clauses (a) and (b) above, by way of stock dividend
or stock split or in connection with a combination of shares, recapitalization,
reclassification, merger or consolidation, and any other securities issued
pursuant to any other pro rata distribution with respect to such Common Stock.
For purposes of this Agreement, a Registrable Security ceases to be a
Registrable Security when (1) a registration statement with respect to the sale
of such security shall have become effective under the Securities Act and such
security shall have been sold or distributed to the public in accordance with
such registration statement (and has not been reacquired in the manner
described in clause (b) above), (2) such security is sold or distributed to the
public pursuant to Rule 144 (or any successor or similar provision) under the
Securities Act, (3) such security shall have been otherwise transferred, a new
certificate for it not bearing a legend restricting further transfer shall have
been delivered by the Company and the subsequent disposition of it shall, in
the opinion of MidAmerican Holdings' counsel, not require registration or
qualification of it under the Securities Act or any similar state law then in
force or (4) it shall have ceased to be outstanding.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended from
time to time.
<PAGE>
2. Demand Registration. (a) Subject to Section 5 hereof, if at any
time any Holder shall request the Company in writing to register under the
Securities Act all or a part of the Registrable Securities held by such Holder
(a "Demand Registration"), the Company shall use its best efforts to cause to
be filed and declared effective as soon as reasonably practicable (but in no
event filed later than the 60th day after such Holder's request is made) a
registration statement, on such appropriate form as the Company shall
reasonably determine, providing for the sale of all such Registrable Securities
by such Holder. The Company agrees to use its best efforts to keep any such
registration statement continuously effective and usable for resale of
Registrable Securities until the earlier of (a) the date the Holder whose
Registrable Securities are included therein shall request and (b) the
expiration of 180 days after such registration statement becomes effective,
subject to extension as provided in Section 4(d). The Company shall be
obligated to file registration statements pursuant to this Section 2(a) until
all Registrable Securities have ceased to be Registrable Securities. Each
registration statement filed pursuant to this Section 2(a) is hereinafter
referred to as a "Demand Registration Statement." Holders shall be entitled to
two effective Demand Registration Statements per year.
(b) The Company agrees (i) not to effect any public or private sale,
distribution or purchase of any of its securities which are the same as or
similar to the Registrable Securities, including a sale pursuant to Regulation
D or Regulation S under the Securities Act, during the 60-day period prior to
(or shorter if the Holder's notice precedes the offering by less than 60 days),
and during the 90-day period beginning on, the closing date of each
underwritten offering under any Demand Registration Statement, and (ii) to use
reasonable best efforts to cause each holder of its securities purchased from
the Company, at any time on or after the date of this Agreement (other than in
a registered public offering) to agree not to effect any public sale or
distribution of any such securities during such period, including a sale
pursuant to Rule 144 under the Securities Act; it being understood that the
registration rights granted hereunder are intended to take precedence over any
other registration or distribution rights granted to any other purchasers of
the Company's securities.
(c) The Company may postpone for a reasonable period of time, not to
exceed 30 days, the filing or the effectiveness of any Demand Registration
Statement if the Board of Directors of the Company in good faith determines
that (A) such registration might have a material adverse effect on any plan or
proposal by the Company with respect to any financing, acquisition,
recapitalization, reorganization or other material transaction, or (B) the
Company is in possession of material non-public information that, if publicly
disclosed, could result in a material disruption of a major corporate
development or transaction then pending or in progress or in other material
adverse consequences to the Company.
<PAGE>
(d) If at any time any Holder of Registrable Securities to be covered
by a Demand Registration Statement desires to sell Registrable Securities in an
underwritten offering, such Holder shall have the right to select any
nationally recognized investment banking firm(s) to manage the offering,
subject to the approval of the Company, which approval shall not be
unreasonably withheld, and the Company shall enter into underwriting agreements
with the underwriter(s) of such offering, which agreements shall contain such
representations and warranties by the Company, and such other terms, conditions
and indemnities as are similar to those of the Company contained in the
underwriting agreement dated October 7, 1999 relating to the Offering or
otherwise are at the time customarily contained in underwriting agreements for
similar offerings.
(e) A Demand Registration Statement requested pursuant to Section
2(a) shall not be deemed to have been effected (i) if such Demand Registration
Statement has not become effective, (ii) if, after it has become effective,
such Demand Registration Statement becomes subject to any stop order,
injunction or other order of the SEC or other governmental agency or court for
any reason or (iii) if the conditions to closing specified in the purchase
agreement or underwriting agreement entered into in connection with such
registration are not satisfied, other than solely by reason of some act or
omission by the Holders.
3. Incidental Registration. Subject to Section 5 hereof and the other
terms and conditions set forth in this Section 3, if the Company proposes at
any time to register any shares of Common Stock (the "Initially Proposed
Shares") under the Securities Act for sale, whether or not for its own account,
pursuant to an underwritten offering, the Company will promptly give written
notice to the Holders of the Company's intention to effect such registration
(such notice to specify, among other things, the proposed offering price, the
kind and number of securities proposed to be registered and the proposed lead
distribution arrangements, including identification of the proposed lead
underwriter(s)). The Holders shall be entitled to include in such registration
statements, as a part of such underwritten offering, such number of shares (the
"Holder Shares") to be sold for the account of the Holders (on the same terms
and conditions as the Initially Proposed Shares) as shall be specified in a
request in writing delivered to the Company within 20 days after the date upon
which the Company gave the aforementioned notice and to designate a co-lead
managing underwriter of the offering who shall be compensated on the same basis
as the Company's designated co-lead managing underwriter.
The Company agrees to use its reasonable efforts to keep any such
registration statement continuously effective and usable for resale of
Registrable Securities for a period of 90 days after such registration
statement becomes effective.
The Company's obligations to include Holder Shares in a registration
statement pursuant to this Section 3 is subject to each of the following
limitations, conditions and qualifications:
(i) If, at any time after giving written notice of its intention
to effect a registration of any of its shares of Common Stock and prior to
the effective date of any registration statement filed in connection with
such registration, the Company shall reasonably determine not to register
any of such shares, the Company may, at its election, give written notice
of such determination to the Holders and thereupon it shall be relieved of
its obligation to use any efforts to register any Holder Shares in
connection with such aborted registration.
(ii) If the offering is underwritten and the co-lead managing
underwriter of such offering designated by the Company shall inform the
Company and the Holders of the Holder Shares by letter of its belief that
the distribution of all or a specified portion of the Holder Shares would
materially interfere with the registration and sale in accordance with the
intended method thereof of the Initially Proposed Shares (such letter to
state the bases of belief and the approximate number of shares of Common
Stock which may be included for such offering without having such
interference), then the number of Holder Shares to be included in such
registration statement and the number of Initially Proposed Shares shall
each be reduced to such number, if any, that is 50%, respectively, of the
number that such co- lead managing underwriter has stated in the letter
that can be marketed successfully. If, as a result of the cutback
provisions of the preceding sentence, the Holders are not entitled to
include all of the Holder Shares in such registration, such Holders may
elect to withdraw their request to include Holder Shares in such
registration (a "Withdrawal Election").
<PAGE>
4. Registration Procedures. (a) Whenever the Company is required to
effect the registration of any Registrable Securities under the Securities Act
pursuant to the terms and conditions of Section 2(a) or 3 (such Registrable
Securities being hereinafter referred to as "Subject Shares"), the Company will
use its best efforts, in the case of a registration pursuant to Section 2(a),
and all reasonable efforts, in the case of a registration pursuant to Section
3, to effect the registration and sale of the Subject Shares in accordance with
the intended method of disposition thereof. Without limiting the generality of
the foregoing, the Company will as soon as practicable:
(i) prepare and file with the SEC a registration statement with
respect to the Subject Shares in form and substance satisfactory to the
Holders of the Subject Shares, and use all reasonable or best efforts, as
the case may be, to cause such registration statement to become effective
as soon as possible;
(ii) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for the applicable period and to comply with the
provisions of the Securities Act with respect to the disposition of all
Subject Shares and other securities covered by such registration
statement;
(iii) furnish the Holders covered by such registration
statement, without charge, such number of conformed copies of such
registration statement and of each such amendment and supplement thereto
(in each case including all exhibits), such number of copies of the
prospectus included in such registration statement (including each
preliminary prospectus), such documents incorporated by reference in such
registration statement or prospectus, and such other documents, as such
Holders may reasonably request in order to facilitate the public sale or
other disposition of the Registrable Securities;
(iv) use all reasonable efforts to register or qualify the
Subject Shares covered by such registration statement under the securities
or blue sky laws of such jurisdictions as the managing underwriter(s)
shall reasonably recommend, and do any and all other acts and things which
may be reasonably necessary or advisable to enable the Holders to
consummate the disposition in such jurisdictions of the Subject Shares
covered by such registration statement;
<PAGE>
(v) otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC;
(vi) cause its President, Chief Financial Officer and other
senior officers reasonably requested by the Holders or managing
underwriters to participate in "roadshow" meetings with prospective buyers
and other sales and marketing efforts, consistent, with the
recommendations of the managing underwriter designated by the Holders
(with respect to a Demand Registration Statement filed pursuant to Section
2 of this Agreement) or the co-lead managing underwriters designated by
the Company and the Holders (with respect to a registration statement
filed pursuant to Section 3 of this Agreement);
(vii) furnish, at the Company's expense, unlegended certificates
representing ownership of the securities being sold in such denominations
as shall be requested and instruct the transfer agent to release any stop
transfer orders with respect to the Subject Shares being sold;
(viii) notify in writing each Holder promptly at any time when a
prospectus relating to the Subject Shares is required to be delivered
under the Securities Act of the happening of any event as a result of
which the prospectus included in such Registration Statement contains any
untrue statement of a material fact or omits to state a material fact
necessary to make the statements therein (in the case of the prospectus or
any preliminary prospectus, in light of the circumstances under which they
were made) not misleading, and the Company will, as promptly as
practicable thereafter, prepare and file with the SEC and furnish a
supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of Subject Shares such prospectus will not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading;
(ix) notify in writing each Holder and the managing
underwriter(s), promptly of (A) the issuance by the SEC of any stop order
suspending the effectiveness of the Registration Statement or the
initiation or threat of any proceedings by any person for that purpose and
(B) the receipt by the Company of any notification with respect to the
suspension of the qualifications of any Subject Shares for sale under the
securities or blue sky laws of any jurisdiction or the initiation or
threat of any proceeding for such purpose;
<PAGE>
(x) enter into customary agreements (including an underwriting
agreement in customary form in the case of an underwritten offering) and
make such representations and warranties and indemnities to the sellers
and underwriter(s) as in form and substance and scope are customarily made
by issuers to underwriters in underwritten offerings and take such other
actions as the Holders or the managing underwriter(s) or agent, if any,
reasonably require in order to expedite or facilitate the disposition of
such Subject Shares;
(xi) make available for inspection by the Holders, any
underwriter or agent participating in any disposition pursuant to such
Registration Statement, and any attorney, accountant or other similar
professional advisor retained by any such holders or underwriter
(collectively the "Inspectors"), all pertinent financial and other
records, pertinent corporate documents and properties of the Company
(collectively, the "Records"), as shall be reasonably necessary to enable
them to exercise their due diligence responsibility, and cause the
Company's officers, directors and employees to supply all information
reasonably requested by any such Inspector in connection with such
Registration Statement. The Holders agree that Records and other
information which the Company determines, in good faith, to be
confidential or privileged and of which determination the Inspectors are
so notified shall not be disclosed by the Inspectors unless (i) the
disclosure of such Records is necessary to avoid or correct a misstatement
or omission in the Registration Statement, (ii) the release of such
Records is ordered pursuant to a subpoena, court order or regulatory or
agency request or (iii) the information in such Records has been generally
disseminated to the public. Each Holder agrees that it will, upon learning
that disclosure of such Record is sought in a court of competent
jurisdiction or by a governmental agency, give notice to the Company and
allow the Company, at the Company's expense, to undertake appropriate
action to prevent disclosure of the Records deemed confidential;
(xii) make available for "due diligence" questions its
President, Chief Financial Officer and other senior officers reasonably
requested by the Holders or managing underwriters;
(xiii) obtain for delivery to the Company, the underwriter(s) or
their agent, with copies to the Holders, a "cold comfort" letter from the
Company's independent public accountants in customary form and covering
such matters of the type customarily covered by "cold comfort" letters as
the Holders or the managing underwriter(s) reasonably request;
<PAGE>
(xiv) obtain for delivery to the Holders and the underwriter(s)
or their agent an opinion or opinions from in-house and special outside
counsel for the Company in customary form and reasonably satisfactory to
the Holder, underwriters or agents and their counsel;
(xv) make available to its security holders earnings statements,
which need not be audited, satisfying the provisions of Section 11(a) of
the Securities Act no later than 90 days after the end of the 12-month
period beginning with the first month of the Company's first quarter
commencing after the effective date of the Registration Statement, which
earnings statements shall cover said 12-month period;
(xvi) make every reasonable effort to prevent the issuance of
any stop order suspending the effectiveness of the registration statement
or of any order preventing or suspending the effectiveness of such
registration statement at the earliest possible moment;
(xvii) cause the Subject Shares to be registered with or
approved by such other governmental agencies or authorities within the
United States as may be necessary to enable the sellers thereof or the
underwriter(s), if any, to consummate the disposition of such Subject
Shares;
(xviii) cooperate with the Holders and the managing
underwriter(s), if any, or any other interested party (including any
interested broker-dealer) in making any filings or submission required
to be made, and the furnishing of all appropriate information in
connection therewith, with the National Association of Securities
Dealers, Inc. ("NASD");
(xix) cause its subsidiaries to take action necessary to effect
the registration of the Subject Shares contemplated hereby, including
filing any required financial information;
(xx) effect the listing of the Subject Shares on The Nasdaq
Stock Market's National Market or such other national securities exchange
or over-the-counter market on which shares of the Common Stock shall then
be listed; and
<PAGE>
(xviii) take all other steps necessary to effect the
registration of the Subject Shares contemplated hereby.
(b) The Holders shall provide (in writing and signed by the
Holders and stated to be specifically for use in the related registration
statement, preliminary prospectus, prospectus or other document incident
thereto) the information regarding registered ownership and the number of
shares being sold as is customarily contained in a "Principal and Selling
Securityholders" table in a prospectus.
(c) The Holders shall, if requested by the Company and the
managing underwriters designated by the Company and the Holders in connection
with any proposed registration and distribution pursuant to this Agreement, (i)
agree to sell the Subject Shares on the basis provided in any underwriting
arrangements entered into in connection therewith and (ii) complete and execute
all questionnaires, powers of attorney, indemnities, underwriting agreements
and other documents similar to those executed in the Offering or otherwise
customary in similar offerings.
(d) Upon receipt of any notice from the Company that the Company
has become aware that the prospectus (including any preliminary prospectus)
included in any registration statement filed pursuant to Section 2(a) or 3, as
then in effect, contains any untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading, the Holders shall forthwith discontinue
disposition of Subject Shares pursuant to the registration statement covering
the same until the Holders' receipt of copies of a supplemented or amended
prospectus and, if so directed by the Company, deliver to the Company (at the
Company's expense) all copies other than permanent file copies then in the
Holder's possession, of the prospectus covering the Subject Shares that was in
effect prior to such amendment or supplement. If the Company provides such
notice, the periods mentioned in Sections 2(a) or 3 of this Agreement for
maintaining the effectiveness of the Registration Statement shall be extended
by the length of the period from and including the date when the Holders shall
have received such notice to the date on which such Holders have received the
copies of the supplemented or amended prospectus required to be delivered by
the Company under Section 4(a)(vii) of this Agreement.
<PAGE>
(e) The Company shall pay all reasonable out-of-pocket expenses
incurred in connection with any Demand Registration Statements filed pursuant
to Section 2(a) of this Agreement and any registration statement filed pursuant
to Section 3 of this Agreement, including, without limitation, all (i) SEC and
blue sky registration and filing fees (including NASD fees), (ii) printing
expenses, (iii) transfer agents and registrars' fees, (iv) fees and
disbursements of the Company's counsel and accountants, (v) fees and
disbursements of experts used by the Company in connection with such
registration statement, (vi) the Company's internal expenses (including without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties, the expense of any annual audits of the Company or
its subsidiaries and the expense of any additional liability insurance), (vii)
reasonable fees and disbursements of one counsel, other than the Company's
counsel, selected to represent all Holders by Holders owning a majority in
number of the Registrable Securities being registered, (viii) fees and expenses
associated with "roadshows" or otherwise customarily reimbursed or paid by
issuers on behalf of underwriters in underwritten offerings; provided, however,
that the Holders shall pay all underwriting discounts and commissions
attributable to securities sold for the account of the Holders pursuant to such
Demand Registration Statement or other registration statement filed pursuant to
Section 3 of this Agreement.
5. Indemnification.
(a) In the event of any registration of any securities of the
Company under the Securities Act, the Company will, and hereby does, indemnify
and hold harmless (i) in the case of any registration statement filed pursuant
to Sections 2 or 3, the Holder of any Common Stock covered by such registration
statement, its directors and officers, each broker who participates in such
offering or sale on behalf of a holder, each other person who participates as
an underwriter in the offering or sale of such securities, its directors and
officers and each other person, if any, who controls such Holder or any such
underwriter within the meaning of the Securities Act, against any losses,
claims, damages or liabilities, joint or several, to which such Holder or any
such director or officer or underwriter or controlling person may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any
registration statement under which such securities were registered under the
Securities Act, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
the Company will reimburse such Holder and each such director, officer,
underwriter and controlling person for any legal or any other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, liability, action or proceeding; provided that the Company
shall not be liable in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or expense
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in such registration statement, any such
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement in reliance upon and in conformity with written information
furnished to the Company by any Holder or any underwriter participating in the
offering specifically for use in the registration statement, and provided
further that the Company shall not be liable to any person who participates as
an underwriter in the offering or sale of Common Stock or to any other person,
if any, who controls such underwriter within the meaning of the Securities Act,
in any such case to the extent that any such loss, claim, damage, liability (or
action or proceeding in respect thereof) or expense arises out of such person's
failure to send or give a copy of the final prospectus, as the same may be then
supplemented or amended, within the time required by the Securities Act to the
person asserting an untrue statement or alleged untrue statement or omission or
alleged omission at or prior to the written confirmation of the sale of Common
Stock to such person if such statement or omission was corrected in such final
prospectus. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such Holder or any such director,
officer, underwriter or controlling person and shall survive the transfer of
such securities by such Holder.
<PAGE>
(b) Unless the Company otherwise notifies the Holders as a
condition to including the Subject Shares in a registration statement, each
Holder agrees to indemnify and hold harmless (in the same manner and to the
same extent as set forth in subdivision (a) of this Section 5) the Company,
each director of the Company, each officer of the Company and each other
person, if any, who controls the Company within the meaning of the Securities
Act and each other person who participates as an underwriter in the offering or
sale of such securities, its directors and officers and each other person, if
any, who controls any such underwriter within the meaning of the Securities
Act, with respect to any statement or alleged statement in or omission or
alleged omission from such registration statement, any preliminary prospectus,
final prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, if such statement or alleged statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company by such seller specifically for use in the
registration statement. Any such indemnity shall remain in full force and
effect, regardless of any investigation made by or on behalf of the Company or
any such director, officer or controlling person and shall survive the transfer
of such securities by such seller. Such indemnity shall be limited to the net
proceeds from such offering received by such indemnifying party. The parties
expressly agree that for purposes of this Agreement, the only information
furnished to the Company by the Holders selling Registrable Securities
specifically for use in the registration statement will be the information
concerning such seller contained in the Prospectus under the caption,
"Principal and Selling Securityholders" (or substantially similar caption).
<PAGE>
(c) Promptly after receipt by an indemnified party of notice of
the commencement of any action or proceeding involving a claim referred to in
the preceding subdivisions of this Section 5, such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party, give
written notice to the latter of the commencement of such action, provided that
the failure of any indemnified party to give notice as provided herein shall
not relieve the indemnifying party of its obligations under the preceding
subdivisions of this Section 5, except to the extent that the indemnifying
party has been materially prejudiced by such failure to give notice. In case
any such action is brought against an indemnified party, and it notifies an
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate in and to assume the defense thereof, jointly with any
other indemnifying party similarly notified, to the extent that the
indemnifying party may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation; provided,
however, that the indemnified party shall have the right to employ counsel to
represent the indemnified party and its controlling persons who may be subject
to liability arising out of any claim in respect of which indemnity may be
sought by the indemnified party against the indemnifying party under this
Section 5 if the employment of such counsel shall have been authorized in
writing by the indemnifying party in connection with the defense of such action
or, if in the written opinion of counsel to either the indemnifying party or
the indemnified party, representation of both parties by the same counsel would
be inappropriate due to actual or likely conflicts of interest between them,
and in that event the fees and expenses of one firm of separate counsel (in
addition to the fees and expenses of local counsel) for the indemnified parties
shall be paid as incurred by the indemnifying party. No indemnifying party
shall, without the prior written consent of the indemnified party, which
consent shall not be unreasonably withheld, effect any settlement of any
pending or threatened action in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party unless such settlement includes an unconditional release of
such indemnified party from all liability on any claims that are the subject
matter of such action.
(d) If the indemnification provided for in the preceding
subdivisions of this Section 5 is unavailable to an indemnified party in
respect of any expense, loss, claim, damage or liability referred to therein,
then each indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such expense, loss, claim, damage or liability. In determining the
amount of contribution to which an indemnified party is entitled, there shall
be considered such indemnified party's relative knowledge and access to
information concerning the matter with respect to which the claim was asserted,
the opportunity to correct and prevent any statement or omission, and other
equitable considerations appropriate under the circumstances. It is hereby
agreed that it would not necessarily be equitable if the amount of such
contribution were determined by pro rata or per capita allocation.
Notwithstanding the foregoing, no Holder of Registrable Securities shall be
required to contribute any amount in excess of the net proceeds received by
such Holder (net of underwriting discounts and commissions) from the sale of
such Registrable Securities in the offering which forms the basis for such
action or proceeding. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not found guilty of such fraudulent
misrepresentation.
<PAGE>
6. Condition to Company's Obligations. Notwithstanding any other
provision in this Agreement to the contrary, the Company shall have no
obligation to effect any registration of Registrable Securities pursuant to
this Agreement within 180 days of the date of the prospectus for the Offerings,
unless U.S. Bancorp Piper Jaffray Inc. on behalf of the underwriters in the
Offering shall have given its prior written consent to such filing.
7. Notices. Any notice or other communication required or permitted
to be given hereunder shall be in writing and shall be effective (a) upon hand
delivery or delivery by telex (with correct answerback received), telecopy or
facsimile at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received)
or (b) on the third business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
service, fully prepaid, addressed to such address, or upon actual receipt of
such mailing, whichever shall first occur. The addresses for such
communications shall be:
If to the Company, to:
HomeServices.Com Inc.
6800 France Avenue South, Suite 600
Edina, Minnesota 55435
Attn: Ronald Peltier
Telecopy: (612) 928-5900
If to MidAmerican Holdings, to:
MidAmerican Energy Holdings Company
306 South 36th Street, Suite 400
Omaha, Nebraska 68131
Attn: Senior Vice President, Mergers and Acquisitions
Telecopy: (402) 341-4500
If to any other Holder,
to such name at such address as such Holder shall have indicated in a
written notice delivered to the other parties to this Agreement.
Any party hereto may from time to time change its address for notices under
this Section 7 by giving at least 10 days' notice of such changes to the other
parties hereto.
<PAGE>
8. Waivers. No waiver by any party of any default with respect to any
provision, condition or requirement hereof shall be deemed to be a continuing
waiver in the future thereof or a waiver of any other provision, condition or
requirement hereof; nor shall any delay or omission of any party to exercise
any right hereunder in any manner impair the exercise of any such right
accruing to it thereafter.
9. Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
10. Successors and Assigns; Amendments. (a) This Agreement shall be
binding upon and inure to the benefit of the parties and their successors and
assigns, including for the benefit of those persons specified in Section 11
hereof. If the Company is a party to a merger, consolidation or other
transaction in which all or part of the Registrable Securities are converted or
changed into securities of any other person, the Company shall make appropriate
provision for such other person to become a party to this Agreement and to
provide the registration and other rights with respect to the securities of
such other person. Except as provided in this Section 10, the Company shall not
assign this Agreement without the prior written consent of the other parties
hereto.
(b) This Agreement may not be amended except by a written instrument
executed by the parties hereto.
11. Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other person other than a Permitted Transferee.
12. Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the internal laws of the State of Delaware
without regard to the principles of conflicts of laws.
13. Entire Agreement. This Agreement contains the entire agreement of
the parties hereto in respect of the subject matter hereof and supersedes all
prior agreements and understandings between the parties with respect to the
subject matter hereof.
14. Execution. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the date hereof.
HOMESERVICES.COM INC.
By: /s/ Steven A. McArthur
----------------------------
Name: Steven A. McArthur
Title: Senior Vice President
MIDAMERICAN ENERGY HOLDINGS COMPANY
By: /s/ Steven A. McArthur
----------------------------
Name: Steven A. McArthur
Title: Senior Vice President
SERVICES AGREEMENT
SERVICES AGREEMENT dated as of October 14, 1999 between
HomeServices.Com Inc. (the "Company") and MidAmerican Energy Holdings
Company (the "MidAmerican Holdings").
WHEREAS, the Company and MidAmerican Holdings desire that MidAmerican
Holdings assume and perform the Services (as defined below).
NOW THEREFORE, MidAmerican Holdings and the Company hereby agree as
follows:
1. Defined Terms.
"Commencement Date" shall mean the first date after the
consummation of the Initial Public Offering.
"Losses" shall have the meaning given to it in Section 5 of
this Agreement.
"Material Adverse Effect" shall mean, with respect to any person,
any loss or interference that could, individually or in the aggregate, have a
material adverse effect on the condition (financial or other), business,
properties, prospects or results of operations of such person and its
subsidiaries, taken as a whole.
"person" shall mean an individual, partnership, corporation,
business trust, joint stock company, trust, unincorporated association, joint
venture, governmental authority or other entity of whatever nature.
"Services" shall have the meaning given to it in Section 3 of
this Agreement.
"Termination Date" shall mean the earlier of (a) the 180th day
following notice provided to the Company by MidAmerican Holdings that
MidAmerican Holdings is no longer a holder of at least 5% of the Common Stock
of the Company and (b) the date both parties mutually agree that this Agreement
is terminated.
<PAGE>
2. Retention.
(a) The Company hereby retains MidAmerican Holdings to provide
Services to the Company beginning on the Commencement Date.
(b) MidAmerican Holdings hereby agrees that it shall provide
Services to the Company until the Termination Date.
3. Duties and Rights of MidAmerican Holdings.
(a) Beginning on the Commencement Date and until the Termination
Date, MidAmerican Holdings shall provide management, advisory, financial,
accounting, legal, employee benefit plan and insurance administration and other
services (the "Services"), as mutually agreed upon between the Company and
MidAmerican Holdings, for the benefit of the Company.
(b) To the extent necessary or appropriate to perform any of the
Services, MidAmerican Holdings shall have the power to execute and deliver all
necessary and appropriate documents and instruments on behalf of the Company
with respect to Services.
(c) Notwithstanding any other provision of this Agreement,
MidAmerican Holdings need not make available any service agreed to be provided
herein to the extent doing so would unreasonably and materially interfere with
the use of or access to any personnel, equipment, office space or facility by
MidAmerican Holdings or otherwise cause an unreasonable burden to MidAmerican
Holdings.
4. Compensation and Reimbursement.
(a) Beginning on the Commencement Date and until the Termination
Date, the Company shall pay to MidAmerican Holdings monthly, ten days following
the end of each month, a fee in an amount equal to $50,000.
(b) In addition, the Company shall reimburse MidAmerican Holdings
for all reasonable employee and out-of-pocket costs and expenses (including,
without limitation, payments made to third parties) incurred by MidAmerican
Holdings in connection with providing the Services to the Company. MidAmerican
Holdings shall provide the Company with a detailed invoice which invoice or a
schedule thereto sets forth in reasonable detail on an itemized basis the
out-of-pocket costs and expenses to be reimbursed by the Company pursuant to
this Section 4(b). Payment shall be due within 30 days following the receipt of
each such invoice. Invoices may be provided on a monthly or quarterly basis.
<PAGE>
(c) It is expressly agreed that the out-of-pocket costs and
expenses that are to be reimbursed by the Company pursuant to Section 4(b)
shall not include any mark-up or profit factor for MidAmerican Holdings but
shall include all indirect costs and an appropriate allocation for overhead
costs associated with performing the Services.
5. Nonliability of Advisor. MidAmerican Holdings shall perform on behalf
of the Company only the duties that have been specifically delegated to
MidAmerican Holdings in this Agreement and MidAmerican Holdings shall have no
implied covenants or obligations to perform any other duties under this
Agreement. MidAmerican Holdings shall not be responsible for any losses,
liabilities, damages, claims or expenses (collectively, the "Losses") incurred
by the Company arising from any acts or omissions by MidAmerican Holdings in
connection with the performance of its duties under this Agreement other than
Losses resulting solely from its gross negligence or willful misconduct.
6. Notice. Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be effective (a) upon hand
delivery or delivery by telex (with correct answerback received), telecopy or
facsimile at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received)
or (b) on the third business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
service, fully prepaid, addressed to such address, or upon actual receipt of
such mailing, whichever shall first occur. The addresses for such
communications shall be:
If to the Company, to:
HomeServices.Com Inc.
6800 France Avenue South, Suite 600
Edina, Minnesota 55435
Attn: Ronald Peltier
Telecopy: (612) 928-5900
If to MidAmerican Holdings, to:
MidAmerican Energy Holdings Company
306 South 36th Street, Suite 400
Omaha, Nebraska 68131
Attn: Senior Vice President, Mergers and Acquisitions
Telecopy: (402) 341-4500
<PAGE>
Either party hereto may from time to time change its address for notices under
this Section 6 by giving at least 10 days' notice of such changes to the other
party hereto.
7. Section Headings. The section headings used in this Agreement are
inserted for convenience of reference only and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement.
8. Multiple Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9. Invalidity. In the event that any one or more of the provisions
contained in this Agreement or in any other instrument referred to herein,
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, then to the maximum extent permitted by law, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument.
10. Successors and Assigns. This Agreement shall be binding upon and
inure solely to the benefit of the parties hereto and their respective
successors, endorsees, transferees and assigns, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person or
persons any rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement. Further, it is expressly agreed that any of the
Services to be provided by MidAmerican Holdings may be provided to the Company
by any subsidiary of MidAmerican Holdings (other than the Company or its
subsidiaries) and in such case, such subsidiary of MidAmerican Holdings shall
be entitled to the same rights, benefits and remedies hereunder as MidAmerican
Holdings.
11. Entire Agreement; Amendment and Waiver. This Agreement constitutes
the entire agreement among the parties pertaining to the subject matter hereof
and supersedes all prior agreements, understandings, negotiations and
discussions, whether oral or written, of the parties. No amendment, supplement,
modification or waiver of this Agreement shall be binding unless executed in
writing by the party to be bound thereby. No waiver of any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of any other
provision hereof (whether or not similar), nor shall such waiver constitute a
continuing waiver unless otherwise expressly provided.
12. Governing Law. This Agreement shall be construed, interpreted and
the rights of the parties determined in accordance with the laws of the State
of Delaware, regardless of the laws that might otherwise govern under
applicable principles of conflicts of laws thereof.
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
duly executed and delivered as of the date first above written.
HomeServices.Com Inc.
By: /s/ Steven A. McArthur
-----------------------------
Name: Steven A. McArthur
Title: Senior Vice President
MidAmerican Energy Holdings Company
By: /s/ Steven A. McArthur
-------------------------------
Name: Steven A. McArthur
Title: Senior Vice President
HOMESERVICES.COM INC.
1999 EQUITY INCENTIVE PLAN
1. Establishment and Purpose.
There is hereby adopted the HomeServices.Com Inc. 1999 Equity Incentive
Plan (the "Plan"). The Plan is intended to promote the interests of
HomeServices.Com Inc. (the "Company") by providing employees of the Company with
appropriate incentives and rewards to encourage them to enter into and continue
in the employ of the Company and to acquire a proprietary interest in the
long-term success of the Company; and to reward the performance of individual
officers, other employees, consultants and directors in fulfilling their
responsibilities for long-range achievements.
2. Definitions.
As used in the Plan, the following definitions apply to the terms indicated
below:
(1) "Affiliate" shall mean an affiliate of the Company, as defined in Rule
12b-2 promulgated under Section 12 of the Exchange Act.
(2) "Agreement" shall mean the written agreement between the Company and a
Participant evidencing an Award.
(3) "Award" shall mean any Option, Restricted Stock or Other Stock-Based
Award granted under the Plan.
(4) "Beneficial Owner" shall have the meaning set forth in Rule 13d-3
under the Exchange Act.
(5) "Board" shall mean the Board of Directors of the Company.
(6) "Cause" shall mean (1) the willful and continued failure by the
Participant substantially to perform his or her duties and obligations
to the Company (other than any such failure resulting from his or her
incapacity due to physical or mental illness); (2) the willful
engaging by the Participant in misconduct which is materially
injurious to the Company; (3) the commission by the Participant of a
felony; or (4) the commission by the Participant of a crime against
the Company which is materially injurious to the Company. For purposes
of this Section 2(f), no act, or failure to act, on a Participant's
part shall be considered "willful" unless done, or omitted to be done,
by the Participant in bad faith and without reasonable belief that
<PAGE>
his or her action or omission was in the best interest of the
Company. Determination of Cause shall be made by the Committee in its
discretion.
(7) "Change in Control" shall mean the occurrence, following the Initial
Public Offering, of any one of the following events:
(i) any Person (other than Parent) is or becomes the Beneficial
Owner, directly or indirectly, of securities of the Company (not
including in the securities beneficially owned by such person any
securities acquired directly from the Company or its Affiliates)
representing 25% or more of the combined voting power of the
Company's then outstanding voting securities;
(ii) the following individuals cease for any reason to constitute a
majority of the number of directors then serving: individuals
who, on the Effective Date, constitute the Board and any new
director (other than a director whose initial assumption of
office is in connection with an actual or threatened election
contest, including but not limited to a consent solicitation,
relating to the election of directors of the Company) whose
appointment or election by the Board or nomination for election
by the Company's stockholders was approved or recommended by a
vote of at least two-thirds (2/3) of the directors then still in
office who either were directors on the Effective Date or whose
appointment, election or nomination for election was previously
so approved or recommended;
(iii)there is consummated a merger or consolidation of the Company or
any direct or indirect subsidiary of the Company with any other
corporation, other than (A) a merger or consolidation which
results in the directors of the Company immediately prior to such
merger or consolidation continuing to constitute at least a
majority of the board of directors of the Company, the surviving
entity or any parent thereof or (B) a merger or consolidation
effected to implement a recapitalization of the Company (or
similar transaction) in which no Person (other than Parent),
directly or indirectly, acquired 25% or more of the combined
voting power of the Company's then outstanding securities (not
including in the securities beneficially owned by such person any
securities acquired directly from the Company or its Affiliates);
or
(iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or there is consummated an agreement
-2-
<PAGE>
for the sale or disposition by the Company of all or
substantially all of the Company's assets (or any transaction
having a similar effect), other than a sale or disposition by the
Company of all or substantially all of the Company's assets to an
entity, at least 50% of the combined voting power of the voting
securities of which are owned by stockholders of the Company in
substantially the same proportions as their ownership of the
Company immediately prior to such sale.
Notwithstanding the foregoing, a "Change in Control" shall not
include any transaction or series of transactions pursuant to
which Parent sells, exchanges or otherwise disposes of all or any
portion of the shares of Stock then beneficially owned by Parent,
including, but not limited to any public offering of Stock by
Parent, or a disposition of Stock by Parent by means of a
spin-off or other distribution to the Company's stockholders,
excluding for these purposes any transaction or series of
transactions pursuant to which the Company's other stockholders
also are selling, exchanging or otherwise disposing of (or are
entitled to sell, exchange or otherwise dispose of) all or any
portion of the shares of Stock then beneficially owned by such
stockholders.
(8) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and any regulations promulgated thereunder.
(9) "Committee" shall mean the committee established by the Board to
administer the Plan. Following the Initial Public Offering, to the
extent permitted by Rule 16b-3 and Section 162(m) of the Code, the
Committee may establish a sub-committee to make grants and otherwise
administer the Plan with respect to the Executive Officers of the
Company, the composition of which sub-committee shall satisfy the
provisions of Rule 16b-3 and Section 162(m) of the Code, and for all
applicable purposes hereof, such sub-committee shall be treated as the
Committee.
(10) "Company" shall mean HomeServices.Com Inc., a corporation organized
under the laws of the State of Delaware, or any successor corporation.
(11) "Director" shall mean a member of the Board.
(12) "Disability" shall mean: (1) any physical or mental condition that
would qualify a Participant for a disability benefit under the
long-term disability plan maintained by the Company and applicable to
him or her; (2) when used in connection with the exercise of an
Incentive Stock Option follow-
-3-
<PAGE>
ing termination of employment, disability within the meaning of
Section 22(e)(3) of the Code, or (3) such other condition as may be
determined in the sole discretion of the Committee to constitute
Disability.
(13) "Effective Date" shall mean the date on which the Plan is approved by
Parent, as sole stockholder of the Company.
(14) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
(15) "Executive Officer" shall have the meaning set forth in Rule 3b-7
promulgated under the Exchange Act.
(16) The "Fair Market Value" of a share of Stock as of a particular date
shall mean (i) as of any date and time occurring prior to the Initial
Public Offering, the book value per share of the Stock, as determined
by the Committee or (ii) from and after the date and time of the
Initial Public Offering, the average of the high and low sales prices
per share of Stock on the national securities exchange on which the
Stock is principally traded, for the last preceding date on which
there was a sale of such Stock on such exchange.
(17) "Incentive Stock Option" shall mean an Option that is an "incentive
stock option" within the meaning of Section 422 of the Code, or any
successor provision, and that is designated by the Committee as an
Incentive Stock Option.
(18) "Initial Public Offering" shall mean the initial public offering of
shares of Stock of the Company, as registered with the Securities and
Exchange Commission.
(19) "Issue Date" shall mean the date established by the Committee on which
certificates representing Restricted Stock shall be issued by the
Company pursuant to the terms of Section 8(e).
(20) "Non-Employee Director" shall mean a member of the Board who is not
and has never been an employee of the Company.
(21) "Non-Qualified Option" shall mean an Option other than an Incentive
Stock Option.
-4-
<PAGE>
(22) "Option" shall mean an option to purchase a number of shares of Stock
granted pursuant to Section 7.
(23) "Other Stock-Based Award" shall mean an award granted pursuant to
Section 9.
(24) "Parent" shall mean Mid-American Energy Holdings, Inc. and its
successors and assigns.
(25) "Partial Exercise" shall mean an exercise of an Award for less than
the full extent permitted at the time of such exercise.
(26) "Participant" shall mean (1) a director, employee or consultant of the
Company to whom an Award is granted pursuant to the Plan and (2) upon
the death of an individual described in (1), his or her successors,
heirs, executors and administrators, as the case may be.
(27) "Performance Goals" shall mean performance goals based on one or
more of the following criteria: (i) pre-tax income or after-tax
income, (ii) operating profit, (iii) return on equity, assets, capital
or investment, (iv) earnings or book value per share, (v) sales or
revenues, (vi) operating expenses, (vii) Stock price appreciation and
(viii) implementation or completion of critical projects or processes.
Where applicable, the Performance Goals may be expressed in terms of
attaining a specified level of the particular criteria or the
attainment of a percentage increase or decrease in the particular
criteria, and may be applied to one or more of the Company, a
Subsidiary or Affiliate, or a division or strategic business unit of
the Company, or may be applied to the performance of the Company
relative to a market index, a group of other companies or a
combination thereof, all as determined by the Committee. The
Performance Goals may include a threshold level of performance below
which no vesting will occur, levels of performance at which specified
vesting will occur, and a maximum level of performance at which full
vesting will occur. Each of the foregoing Performance Goals shall be
determined in accordance with generally accepted accounting principles
and shall be subject to certification by the Committee; provided that
the Committee shall have the authority to make equitable adjustments
to the Performance Goals in recognition of unusual or non-recurring
events affecting the Company or any Subsidiary or Affiliate or the
financial statements of the Company or any Subsidiary or Affiliate, in
response to changes in applicable laws or regulations, or to account
for items of gain, loss or expense determined to be extraordinary
-5-
<PAGE>
or unusual in nature or infrequent in occurrence or related to the
disposal of a segment of a business or related to a change in
accounting principles.
(28) "Person" shall have the meaning set forth in Section 3(a)(9) of the
Exchange Act, as modified and used in Sections 13(d) and 14(d)
thereof, except that such term shall not include (1) the Company, (2)
a trustee or other fiduciary holding securities under an employee
benefit plan of the Company, (3) an underwriter temporarily holding
securities pursuant to an offering of such securities or (4) a
corporation owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of
shares of Stock of the Company.
(29) "Plan" shall mean the HomeServices.Com Inc. 1999 Equity Incentive
Plan, as amended from time to time.
(30) "Reload Option" shall mean a Non-Qualified Stock Option granted
pursuant to Section 7(c)(5).
(31) "Restricted Stock" shall mean a share of Stock which is granted
pursuant to the terms of Section 8 and which is subject to the
restrictions set forth in Section 8(c).
(32) "Rule 16b-3" shall mean the Rule 16b-3 promulgated under the Exchange
Act, as amended from time to time.
(33) "Securities Act" shall mean the Securities Act of 1933, as amended
from time to time.
(34) "Shareholders Agreement" shall mean an agreement that each Participant
shall have executed prior to the exercise of any Option or issuance of
shares of Stock under any other Award granted hereunder, provided that
such Option exercise or Stock issuance occurs prior to the Initial
Public Offering.
(35) "Stock" shall mean shares of the common stock, par value $.01 per
share, of the Company.
(36) "Subsidiary" shall mean any corporation in an unbroken chain of
corporations beginning with the Company if, at the time of granting of
an Award, each of the corporations (other than the last corporation in
the unbroken chain) owns stock possessing 50% or more of the total
combined voting power of all classes of stock in one of the other
corporations in the chain.
-6-
<PAGE>
(37) "Vesting Date" shall mean the date established by the Committee on
which Restricted Stock may vest.
3. Stock Subject to the Plan.
The maximum number of shares of Stock reserved for the grant or settlement
of Awards under the Plan shall be 3,000,000, subject to adjustment as provided
herein. No more than 3,000,000 shares of Stock may be awarded in respect of
Options, no more than 3,000,000 shares of Stock may be awarded in respect of
Restricted Stock and no more than 3,000,000 shares of Stock may be awarded in
respect of Other Stock-Based Awards to a single individual, in any case, in any
given year during the life of the Plan, which amounts shall be subject to
adjustment as provided herein. Determinations made in respect of the limitation
set forth in the preceding sentence shall be made in a manner consistent with
Section 162(m) of the Code. Such shares may, in whole or in part, be authorized
but unissued shares or shares that shall have been or may be reacquired by the
Company in the open market, in private transactions or otherwise. If any shares
subject to an Award are forfeited, cancelled, exchanged or surrendered or if an
Award otherwise terminates or expires without a distribution of shares to the
holder of such Award, the shares of Stock with respect to such Award shall, to
the extent of any such forfeiture, cancellation, exchange, surrender,
termination or expiration, again be available for Awards under the Plan.
In the event that the Committee shall determine that any dividend or other
distribution (whether in the form of cash, Stock, or other property),
recapitalization, Stock split, reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, or share exchange, or other
similar corporate transaction or event, affects the Stock such that an
adjustment is appropriate in order to prevent dilution or enlargement of the
rights of holders of Awards under the Plan, then the Committee shall make such
equitable changes or adjustments as it deems necessary or appropriate to any or
all of (i) the number and kind of shares of Stock or other property (including
cash) that may thereafter be issued in connection with Awards, (ii) the number
and kind of shares of Stock or other property (including cash) issued or
issuable in respect of outstanding Awards, (iii) the exercise price, grant
price, or purchase price relating to any Award; provided that, with respect to
Incentive Stock Options, such adjustment shall be made in accordance with
Section 424(h) of the Code, (iv) the Performance Goals and (v) the individual
limitations applicable to Awards.
4. Administration of the Plan.
The Plan shall be administered by the Committee. The Committee shall have
the authority in its sole discretion, subject to and not inconsistent with the
express provisions
-7-
<PAGE>
of the Plan, to administer the Plan and to exercise all the powers and
authorities either specifically granted to it under the Plan or necessary or
advisable in the administration of the Plan, including, without limitation, the
authority to grant Awards; to determine the persons to whom and the time or
times at which Awards shall be granted; to determine the type and number of
Awards to be granted, the number of shares of Stock to which an Award may relate
and the terms, conditions, restrictions and Performance Goals relating to any
Award; to determine whether, to what extent, and under what circumstances an
Award may be settled, canceled, forfeited, exchanged, or surrendered; to make
adjustments in the Performance Goals in recognition of unusual or non-recurring
events affecting the Company or the financial statements of the Company (to the
extent not inconsistent with Section 162(m) of the Code, if applicable), or in
response to changes in applicable laws, regulations, or accounting principles;
to construe and interpret the Plan and any Award; to prescribe, amend and
rescind rules and regulations relating to the Plan; to determine the terms and
provisions of Agreements; and to make all other determinations deemed necessary
or advisable for the administration of the Plan.
The Committee may, in its absolute discretion, without amendment to the
Plan, (a) accelerate the date on which any Option granted under the Plan becomes
exercisable, waive or amend the operation of Plan provisions respecting the
exercise of such Option (whether before or after termination of employment), or
otherwise adjust any of the terms of such Option, (b) accelerate the Vesting
Date or waive any condition imposed hereunder with respect to any Restricted
Stock and (c) otherwise adjust any of the terms applicable to any Award;
PROVIDED, HOWEVER, in each case, that in the event of the occurrence of a Change
in Control, the provisions of Section 10 shall govern the vesting and
exercisability schedule of any Award granted hereunder.
No member of the Committee shall be liable for any action, omission or
determination relating to the Plan, and the Company shall indemnify (to the
extent permitted under Delaware law) and hold harmless each member of the
Committee and each other director or employee of the Company to whom any duty or
power relating to the administration or interpretation of the Plan has been
delegated against any cost or expense (including counsel fees) or liability
(including any sum paid in settlement of a claim with the approval of the
Committee) arising out of any action, omission or determination relating to the
Plan, unless, in either case, such action, omission or determination was taken
or made by such member, director or employee in bad faith and without reasonable
belief that it was in the best interests of the Company.
5. Eligibility.
Incentive Stock Options shall be granted only to key employees (including
officers and directors who are also employees) of the Company, its parent or any
of its Subsidiaries. All other Awards may be granted to officers, independent
contractors, key
-8-
<PAGE>
employees and non-employee directors of the Company or of any of its
Subsidiaries and Affiliates.
6. Awards Under the Plan; Agreement.
The Committee may grant Options, Restricted Stock and Other Stock-Based
Awards in such amounts and with such terms and conditions as the Committee shall
determine, subject to the provisions of the Plan.
Each Award granted under the Plan shall be evidenced by an Agreement which
shall contain such provisions as the Committee may in its sole discretion deem
necessary or desirable. By accepting an Award, a Participant thereby agrees that
the award shall be subject to all of the terms and provisions of the Plan and
the applicable Agreement.
7. Options.
(1) Identification of Options. Each Option shall be clearly identified in
the applicable Agreement as either an Incentive Stock Option or a
Non-Qualified Option.
(2) Exercise Price. Each Agreement with respect to an Option shall set
forth the exercise price per share of Stock payable by the grantee to
the Company upon exercise of the Option. The exercise price per share
of Stock shall be no less than 100% of the Fair Market Value of a
share of Stock as of the date and time the Option is granted, unless
otherwise determined by the Committee.
(3) Term and Exercise of Options.
(1) At the time of the grant of an Option, the Committee may impose
such restrictions or conditions to the exercisability of such
Option as it, in its absolute discretion, deems appropriate,
including the attainment of Performance Goals. The Committee
shall determine the expiration date of each Option; PROVIDED,
HOWEVER, that no Option shall be exercisable more than 10 years
after the date of grant.
(2) An Option may be exercised for all or any portion of the Stock as
to which it is exercisable, provided that no Partial Exercise of
an Option shall be for an aggregate exercise price of less than
$100.00. The Partial Exercise of an Option shall not cause the
-9-
<PAGE>
expiration, termination or cancellation of the remaining portion
thereof.
(3) An Option shall be exercised by delivering notice to the
Company's principal office, to the attention of its Secretary.
Such notice shall be accompanied by the applicable Agreement,
shall specify the number of shares of Stock with respect to which
the Option is being exercised and the effective date of the
proposed exercise and shall be signed by the Participant or other
person then having the right to exercise the Option. Payment for
Stock purchased upon the exercise of an Option shall be made on
the effective date of such exercise by one or a combination of
the following means: (i) in cash or by personal check, certified
check, bank cashier's check or wire transfer; (ii) subject to the
approval of the Committee, in Stock owned by the Participant for
at least six months prior to the date of exercise and valued at
their Fair Market Value on the effective date of such exercise;
or (iii) subject to the approval of the Committee, by such other
provision as the Committee may from time to time authorize.
(4) Certificates for Stock purchased upon the exercise of an Option
shall be issued in the name of the Participant or other person
entitled to receive such Stock, and delivered to the Participant
or such other person as soon as practicable following the
effective date on which the Option is exercised.
(5) The Committee shall have the authority to specify, at the time of
grant or, with respect to Non-Qualified Options, at or after the
time of grant, that a Participant shall be granted a new
Non-Qualified Option (a "Reload Option") for a number of shares
of Stock equal to the number of shares of Stock surrendered by
the Participant upon exercise of all or a part of an Option in
the manner described in Section 7(c)(3)(ii) above, subject to the
availability of Stock under the Plan at the time of such
exercise. Reload Options shall be subject to such conditions as
may be specified by the Committee in its discretion, subject to
the terms of the Plan.
(6) Prior to the Initial Public Offering, no portion of an Option may
be exercised until the holder thereof shall have executed a
Shareholders Agreement in such form as shall be prescribed by the
Committee in its discretion.
-10-
<PAGE>
(4) Limitations on Incentive Stock Options.
(1) To the extent that the aggregate Fair Market Value of Stock of
the Company with respect to which Incentive Stock Options are
exercisable for the first time by a Participant during any
calendar year under the Plan and any other option plan of the
Company (or any Subsidiary) shall exceed $100,000, such Options
shall be treated as Non-Qualified Options. Such Fair Market Value
shall be determined as of the date on which each such Incentive
Stock Option is granted.
(2) No Incentive Stock Option may be granted to an individual if, at
the time of the proposed grant, such individual owns (or is
attributed to own by virtue of the Code) Stock possessing more
than ten (10) percent of the total combined voting power of all
classes of stock of the Company or any Subsidiary unless (i) the
exercise price per share of such Incentive Stock Option is at
least 110 percent of the Fair Market Value of a share of Stock at
the time such Incentive Stock Option is granted and (ii) such
Incentive Stock Option is not exercisable after the expiration of
five years from the date such Incentive Stock Option is granted.
(5) Effect of Termination of Employment.
(1) Unless the applicable Agreement provides otherwise, in the event
that the employment, directorship or consultancy (together,
hereinafter referred to as "employment") of a Participant with
the Company shall be terminated for any reason other than (i) by
the Company for Cause or (ii) voluntarily by the Participant, (x)
Options granted to such Participant, to the extent that they were
not exercisable as of the last day of the month in which such
termination occurs, shall expire as of the close of business on
the last day of such month and (y) Options granted to such
Participant, to the extent that they are exercisable as of the
last day of the month in which such termination occurs, shall
remain exercisable until the expiration of their respective
terms.
(2) Unless the applicable Agreement provides otherwise, in the event
that a Participant shall voluntarily terminate his or her
employment with the Company, (i) Options granted to such
Participant, to the extent that they are not exercisable at the
time of such termination, shall expire at the close of business
on the date of such termination
-11-
<PAGE>
and (y) Options granted to such Participant, to the extent that they
are exercisable at the time of such termination, shall remain
exercisable until the date which is 90 days following such
termination, on which date they shall expire if unexercised; provided,
however, that no Option shall be exercisable after the expiration of
its term.
(3) In the event of the termination of a Participant's employment for
Cause, all outstanding Options granted to such Participant shall
expire as of the commencement of business on the date of such
termination.
8. Restricted Stock.
(1) Issue Date and Vesting Date. At the time of the grant of
Restricted Stock, the Committee shall establish an Issue Date or
Issue Dates and a Vesting Date or Vesting Dates with respect to
such shares of Restricted Stock. The Committee may divide such
shares of Restricted Stock into classes and assign a different
Issue Date and/or Vesting Date for each class. If the grantee is
employed by the Company on an Issue Date (which may be the date
of grant), the specified number of shares of Restricted Stock
shall be issued in accordance with the provisions of Section
8(f). Provided that all conditions to the vesting of Restricted
Stock imposed pursuant to Section 8(c) are satisfied, and except
as provided in Section 8(h), upon the occurrence of the Vesting
Date with respect to Restricted Stock, such Restricted Stock
shall vest and the restrictions of Section 8(d) shall lapse.
(2) Condition to Issuance. Prior to the Initial Public Offering, no
shares of Restricted Stock may be issued until the holder thereof
shall have executed a Shareholders Agreement in such form as
shall be prescribed by the Committee in its discretion.
(3) Conditions to Vesting. At the time of the grant of Restricted
Stock, the Committee may impose such restrictions or conditions
to the vesting of such Restricted Stock as it, in its absolute
discretion, deems appropriate, including the attainment of
Performance Goals.
(4) Restrictions on Transfer Prior to Vesting. Prior to the vesting
of any Restricted Stock, no transfer of a Participant's rights
with respect to such Restricted Stock, whether voluntary or
involuntary, by operation of law or otherwise, shall be
permitted. Immediately upon any attempt to transfer such rights,
such Restricted Stock, and all of the rights related thereto,
shall be forfeited by the Participant.
-12-
<PAGE>
(5) Dividends on Restricted Stock. The Committee in its discretion
may require that any dividends or distributions paid on
Restricted Stock be held in escrow until all restrictions on such
Restricted Stock has lapsed.
(6) Issuance of Certificates.
(1) Reasonably promptly after the Issue Date with respect to
Restricted Stock (and if such issuance occurs prior to the
Initial Public offering, provided the condition of Section
8(b) has been satisfied), the Company shall cause to be
issued a certificate, registered in the name of the
Participant to whom such shares of Restricted Stock were
granted, evidencing such shares of Restricted Stock;
provided that the Company shall not cause such a certificate
to be issued unless it has received a power of attorney duly
endorsed in blank with respect to such shares of Restricted
Stock. Each such certificate shall bear the following
legend:
THE TRANSFERABILITY OF THIS CERTIFICATE AND THE STOCK
REPRESENTED HEREBY ARE SUBJECT TO THE RESTRICTIONS, TERMS
AND CONDITIONS (INCLUDING FORFEITURE PROVISIONS AND
RESTRICTIONS AGAINST TRANSFER) CONTAINED IN THE
HOMESERVICES.COM INC. 1999 EQUITY INCENTIVE PLAN AND AN
AGREEMENT ENTERED INTO BETWEEN THE REGISTERED OWNER OF SUCH
STOCK AND HOMESERVICES.COM INC. A COPY OF THE 1999 EQUITY
INCENTIVE PLAN AND AGREEMENT IS ON FILE WITH THE SECRETARY
OF THE COMPANY.
Such legend shall not be removed until such Stock vests
pursuant to the terms hereof.
(2) Each certificate issued pursuant to this Section 8(f),
together with the powers relating to the Restricted Stock
evidenced by such certificate, shall be held by the Company
unless the Committee determines otherwise.
(7) Consequences of Vesting. Upon the vesting of any Restricted Stock
pursuant to the terms hereof, the restrictions of Section 8(d) shall
lapse with respect to such Restricted Stock. Reasonably promptly after
any Restricted Stock vests, the Company shall cause to be delivered to
the Participant to whom such shares of Restricted Stock were granted a
certificate evidencing such Stock, free of the legend set forth in
Section 8(f).
-13-
<PAGE>
(8) Effect of Termination of Employment.
(1) Unless the applicable Agreement provides otherwise, in the event
that the employment, directorship or consultancy (together,
hereinafter referred to as "employment") of a Participant with
the Company shall be terminated for any reason other than (i) by
the Company for Cause or (ii) voluntarily by the Participant, any
and all Stock to which restrictions on transferability apply
shall become immediately vested and free of all restrictions.
(2) In the event that the employment of a Participant with the
Company shall be terminated (i) by the Company for Cause or (ii)
voluntarily by the Participant, all shares of Restricted Stock
granted to such Participant which are not vested as of the date
of such termination shall immediately be returned to the Company,
together with any dividends or distributions paid on such shares
of Stock, in return for which the Company shall repay to the
Participant any amount paid by the Participant for such shares of
Stock.
9. Other Stock-Based Awards.
Other forms of Awards valued in whole or in part by reference to, or
otherwise based on, shares of Stock ("Other Stock-Based Awards") may be granted
either alone or in addition to other Awards under the Plan. Subject to the
provisions of the Plan, the Committee shall have sole and complete authority to
determine the persons to whom and the time or times at which such Other
Stock-Based Awards shall be granted, the number of shares of Stock to be granted
pursuant to such Other Stock-Based Awards and all other conditions of such Other
Stock-Based Awards, including the attainment of Performance Goals. Prior to the
Initial Public Offering, no shares of Stock may be issued pursuant to any Other
Stock-Based Award until the holder thereof shall have executed a Shareholders
Agreement in such form as shall be prescribed by the Committee in its
discretion.
-14-
<PAGE>
10. Change in Control.
Notwithstanding anything in this Plan to the contrary, upon the occurrence
of a Change in Control, any Option that was not previously exercisable and
vested shall become fully exercisable and vested and the restrictions and
forfeiture conditions applicable to any other Award granted under the Plan shall
lapse and such Award shall be deemed fully vested.
Upon dissolution or liquidation of the Company, all Options and other
Awards granted under this Plan shall terminate, but each holder of an Option
shall have the right, immediately prior to such dissolution or liquidation, to
exercise his or her Option to the extent then exercisable.
11. Rights as a Stockholder.
No person shall have any rights as a stockholder with respect to any shares
of Stock covered by or relating to any Award until the date of issuance of a
certificate with respect to such shares of Stock. Except as otherwise expressly
provided in Section 3(b), no adjustment to any Award shall be made for dividends
or other rights prior to the date such certificate is issued.
12. No Special Employment Rights; No Right to Award.
Nothing contained in the Plan or any Agreement shall confer upon any
Participant any right with respect to the continuation of employment by the
Company or interfere in any way with the right of the Company, subject to the
terms of any separate employment agreement to the contrary, at any time to
terminate such employment or to increase or decrease the compensation of the
Participant.
No person shall have any claim or right to receive an Award hereunder.
The Committee's granting of an Award to a Participant at any time shall neither
require the Committee to grant any other Award to such Participant or other
person at any time or preclude the Committee from making subsequent grants to
such Participant or any other person.
13. Securities Matters.
(1) The Company shall be under no obligation to effect the registration
pursuant to the Securities Act of any interests in the Plan or any
Stock to be issued hereunder or to effect similar compliance under any
state laws. Notwithstanding anything herein to the contrary, the
Company shall not be
-15-
<PAGE>
obligated to cause to be issued or delivered any certificates
evidencing Stock pursuant to the Plan unless and until the Company is
advised by its counsel that the issuance and delivery of such
certificates is in compliance with all applicable laws, regulations of
governmental authority and the requirements of any securities exchange
on which shares of Stock are traded. The Committee may require, as a
condition of the issuance and delivery of certificates evidencing
shares of Stock pursuant to the terms hereof, that the recipient of
such shares of Stock make such agreements and representations, and
that such certificates bear such legends, as the Committee, in its
sole discretion, deems necessary or desirable.
(2) The transfer of any shares of Stock hereunder shall be effective only
at such time as counsel to the Company shall have determined that the
issuance and delivery of such shares of Stock is in compliance with
all applicable laws, regulations of governmental authority, the
requirements of any securities exchange on which shares of Stock are
traded. The Committee may, in its sole discretion, defer the
effectiveness of any transfer of Stock hereunder in order to allow the
issuance of such Stock to be made pursuant to registration or an
exemption from registration or other methods for compliance available
under federal or state securities laws. The Committee shall inform the
Participant in writing of its decision to defer the effectiveness of a
transfer. During the period of such deferral in connection with the
exercise of an Option, the Participant may, by written notice,
withdraw such exercise and obtain the refund of any amount paid with
respect thereto.
14. Withholding Taxes.
Whenever shares of Stock are to be delivered pursuant to an Award, the
Company shall have the right to require the Participant to remit to the Company
in cash an amount sufficient to satisfy any federal, state and local withholding
tax requirements related thereto. With the approval of the Committee, a
Participant may satisfy the foregoing requirement by electing to have the
Company withhold from delivery shares of Stock having a value equal to the
amount of tax to be withheld; PROVIDED, HOWEVER, that the number of shares so
withheld shall not have an aggregate Fair Market Value in excess of the minimum
federal and state withholding obligation. Such shares of Stock shall be valued
at their Fair Market Value on the date of which the amount of tax to be withheld
is determined. Fractional shares of Stock amounts shall be settled in cash. With
the Committee's consent, such a withholding election may be made with respect to
all or any portion of the Stock to be delivered pursuant to an Award.
-16-
<PAGE>
15. Notification of Election Under Section 83(b) of the Code.
If any Participant shall, in connection with the acquisition of Stock under
the Plan, make the election permitted under Section 83(b) of the Code (i.e., an
election to include in gross income in the year of transfer the amounts
specified in Section 83(b)), such Participant shall notify the Company of such
election within 10 days of filing notice of the election with the Internal
Revenue Service, in addition to any filing and a notification required pursuant
to regulation issued under the authority of Section 83(b) of the Code.
16. Notification Upon Disqualifying Disposition Under Section 421(b) of the
Code.
Each Participant shall notify the Company of any disposition of Stock
issued pursuant to the exercise of an Incentive Stock Option under the
circumstances described in Section 421(b) of the Code (relating to certain
disqualifying dispositions), within 10 days of such disposition.
17. Amendment or Termination of the Plan.
The Board or the Committee may, at any time, suspend or terminate the Plan
or revise or amend it in any respect whatsoever; provided, however, that
stockholder approval shall be required if and to the extent the Board determines
that such approval is appropriate for purposes of satisfying Section 162(m) or
422 of the Code or is otherwise required by law or applicable stock exchange
requirements. Awards may be granted under the Plan prior to the receipt of such
approval but each such grant shall be subject in its entirety to such approval
and no award may be exercised, vested or otherwise satisfied prior to the
receipt of such approval. Nothing herein shall restrict the Committee's ability
to exercise its discretionary authority pursuant to Section 4, which discretion
may be exercised without amendment to the Plan. No action hereunder may, without
the consent of a Participant, reduce the Participant's rights under any
outstanding Award.
18. Transfers Upon Death; Nonassignability.
Upon the death of a Participant, outstanding Awards granted to such
Participant may be exercised only by the executor or administrator of the
Participant's estate or by a person who shall have acquired the right to such
exercise by will or by the laws of descent and distribution. No transfer of an
Award by will or the laws of descent and distribution shall be effective to bind
the Company unless the Committee shall have been furnished with (a) written
notice thereof and with a copy of the will and/or such evidence as the Committee
may deem necessary to establish the validity of the transfer and (b) an
agreement by the transferee to comply with all the terms and conditions of the
Award that are or would have been applicable to the Participant and to be bound
by the acknowledg-
-17-
<PAGE>
ments made by the Participant in connection with the grant of the Award and/or
any Shareholders Agreement to which the Participant was a party.
During a Participant's lifetime, the Committee may permit the transfer,
assignment or other encumbrance of an outstanding Option unless such Option is
an Incentive Stock Option and the Committee and the Participant intend that it
shall retain such status. Subject to any conditions as the Committee may
prescribe, a Participant may, upon providing written notice to the Secretary of
the Company, elect to transfer any or all Options granted to such Participant
pursuant to the Plan to members of his or her immediate family, including, but
not limited to, children, grandchildren and spouse or to trusts for the benefit
of such immediate family members or to partnerships in which such family members
are the only partners; provided, however, that no such transfer by any
Participant may be made in exchange for consideration.
19. Expenses and Receipts.
The expenses of the Plan shall be paid by the Company. Any proceeds
received by the Company in connection with any Award will be used for general
corporate purposes.
20. Failure to Comply.
In addition to the remedies of the Company elsewhere provided for herein,
failure by a Participant (or beneficiary) to comply with any of the terms and
conditions of the Plan or the applicable Agreement, unless such failure is
remedied by such Participant (or beneficiary) within ten days after notice of
such failure by the Committee, shall be grounds for the cancellation and
forfeiture of such Award, in whole or in part, as the Committee, in its
discretion, may determine.
21. Effective Date and Term of Plan.
The Plan became effective on the Effective Date and, unless earlier
terminated by the Board, the right to grant Awards under the Plan will terminate
on the tenth anniversary of the Effective Date. Awards outstanding at Plan
termination will remain in effect according to their terms and the provisions of
the Plan.
22. Applicable Law.
Except to the extent preempted by any applicable federal law, the Plan will
be construed and administered in accordance with the laws of the State of
Delaware, without reference to its principles of conflicts of law.
-18-
<PAGE>
23. Participant Rights.
No Participant shall have any claim to be granted any award under the Plan,
and there is no obligation for uniformity of treatment for Participants. Except
as provided specifically herein, a Participant or a transferee of an Award shall
have no rights as a stockholder with respect to any shares of Stock covered by
any award until the date of the issuance of a certificate or certificates to him
or her for such shares of Stock.
24. Unfunded Status of Awards.
The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a
Participant pursuant to an Award, nothing contained in the Plan or any Agreement
shall give any such Participant any rights that are greater than those of a
general creditor of the Company.
25. Beneficiary.
A Participant may file with the Committee a written designation of a
beneficiary on such form as may be prescribed by the Committee and may, from
time to time, amend or revoke such designation. If no designated beneficiary
survives the Participant, the executor or administrator of the Participant's
estate shall be deemed to be the grantee's beneficiary.
26. Interpretation.
The Plan is designed and intended to comply with Rule l6b-3 and, to the
extent applicable, with Section 162(m) of the Code, and all provisions hereof
shall be construed in a manner to so comply.
27. Severability.
If any provision of the Plan is held to be invalid or unenforceable, the
other provisions of the Plan shall not be affected but shall be applied as if
the invalid or unenforceable provision had not been included in the Plan.
-19-
<PAGE>
28. Execution.
To record the 1999 Equity Incentive Plan effected through the adoption of
this Plan by the Board of Directors, the Company has caused its authorized
officer to execute the same.
HomeServices.com Inc.
By: /s/ Steven A. McArthur
-------------------------
Steven A. McArthur
Senior Vice President
-20-
TAX INDEMNITY AGREEMENT
This Tax Indemnity Agreement (the "Agreement') is made and entered into this
14th day of October 1999, by and between MidAmerican Energy Holdings Company, an
Iowa corporation ("MidAmerican"), and HomeServices.Com Inc., a Delaware
corporation ("HMSV").
RECITALS
- --------
1. As of the date of this Agreement, MidAmerican owns 95.22% of the
common stock of HMSV and MidAmerican and HMSV are members of the same
consolidated group for federal income tax purposes.
2. On October 7, 1999 HMSV merged with MidAmerican Realty Services
Company ("MRSC"), an Iowa corporation, with HMSV surviving and
becoming, by reasons of such merger, the successor to MRSC.
Immediately following the merger, HMSV made an initial public offering
of its equity securities (the "Offering") which upon the date of the
closing of such Offering (the "Closing Date") will reduce
MidAmerican's ownership of HMSV to less than 80% and will further
result in HMSV (and, by reason of the merger, MRSC) no longer being a
member of the same consolidated group for federal income tax purposes
as MidAmerican.
3. MidAmerican and HMSV desire to set forth their intentions with respect
to certain matters relating to (i) determining and computing tax
liability for the time periods prior to the Closing Date, (ii)
procedures the parties will follow with respect to tax proceedings and
(iii) other matters relating to taxes.
In consideration of the mutual covenants and agreements herein contained,
MidAmerican and HMSV agree as follows:
1. MIDAMERICAN AND HMSV TAX SHARING.
A. HMSV Obligation.
-----------------
From and after the Closing Date, HMSV shall pay MidAmerican the dollar
value as calculated in Section 1.C. below of any federal, state or
local income tax liability (including without limitation deficiencies,
interest, and penalties) relating to the HMSV Group (as defined below)
with respect to (1) any items of income, deduction, and credit
accruing to the HMSV Group on or before the Closing Date, and (2) any
taxes of the HMSV Group for any taxable year or period ending prior
to, or on the Closing Date. For purposes of this Agreement, the "HMSV
Group" means HMSV, its subsidiaries and their respective businesses
and operations; and the "MidAmerican Group" means MidAmerican, its
subsidiaries (other than the HMSV Group) and their respective
businesses and operations.
B. MidAmerican Obligation.
------------------------
From and after the Closing Date, MidAmerican shall pay HMSV for the
dollar value as calculated in Section 1.C. below of any federal, state
or
<PAGE>
local income tax benefits (including without limitation the tax
benefits related to deductions, credits, losses, and carryovers)
relating to the HMSV Group with respect to (1) any items of income,
deduction, and credit accruing to the HMSV Group on or before the
Closing Date, and (2) any tax refunds of the HMSV Group for any
taxable year or period ending on or before the Closing Date.
C. Tax Payment Computation.
------------------------
1. Method of Calculation.
-----------------------
For purposes of computing and allocating taxes pertaining to the
filing, amendment, or audit of tax returns for all taxable
periods ending on or before the Closing Date, MidAmerican shall
compute the tax liability of the MidAmerican Group as if it and
the HMSV Group were separate consolidated tax groups (the
resulting amount being hereinafter referred to as the
"MidAmerican Group Stand-Alone Tax Liability"). MidAmerican will
then compute the tax liability of the MidAmerican Group as if it
and the HMSV Group were one consolidated group (the resulting
amount being hereinafter referred to as the "MidAmerican Group
Consolidated Tax Liability"). The arithmetic difference between
the MidAmerican Group Stand-Alone Tax Liability and the
MidAmerican Group Consolidated Tax Liability is hereinafter
referred to as the "Tax Allowance". HMSV shall be entitled to, or
responsible for, as the case may be, all Tax Allowances resulting
from taxable events occurring on or before the Closing Date.
2. MidAmerican Payment.
--------------------
In accordance with Section 1.C.1. above, if the MidAmerican Group
Consolidated Tax Liability is less than the MidAmerican
Group-Stand-Alone Tax Liability, MidAmerican shall pay an amount
equal to the Tax Allowance to HMSV pursuant to Section 1.D.
below.
3. HMSV Payment.
--------------
In accordance with Section 1.C.l. above, if the MidAmerican Group
Consolidated Tax Liability is greater than the MidAmerican Group
Stand-Alone Tax Liability, HMSV shall pay an amount equal to the
Tax Allowance to MidAmerican pursuant to Section 1.D. below.
D. Tax Payments.
-------------
MidAmerican shall make quarterly estimated payments of taxes for the
MidAmerican Group during each tax year and then make one or more
adjustments relating to such tax payments after each respective tax
year. The date upon which MidAmerican makes such estimated payment of
taxes or the date upon which MidAmerican makes such adjustment shall
be referred to as a "Tax Determination Date". Prior to each Tax
Determination Date, MidAmerican shall make the computations required
by Section 1.C. of this Agreement. Within 10 days after the Tax
Determination Date, MidAmerican shall (i) provide HMSV with notice
setting forth a summary of the computations required by this Section
(the "Tax Determination Notice") and (ii) make any payment to HMSV
required to be made by MidAmerican pursuant to Section 1.C. HMSV shall
make any payment to MidAmerican required by Section 1.C. within 10
days of receipt of the Tax Determination Notice.
-2-
<PAGE>
2. FILING OF TAX RETURNS.
A. Tax Returns.
------------
The federal, state and local consolidated, combined, or separate
corporate income or franchise tax returns of the MidAmerican Group and
the HMSV Group for the period ended December 31, 1999 shall be
prepared and filed by MidAmerican. Such returns shall include the
results of operations of the MidAmerican Group for the periods ended
on or before December 31, 1999 and of the HMSV Group for the periods
ended on or before the Closing Date, except in cases where certain
states may require inclusion of the HMSV Group with the MidAmerican
Group on a combined basis for periods ending after the Closing Date.
With respect to all taxable periods including periods ending on or
before the Closing Date, MidAmerican in consultation with HMSV, shall
make all computations, allocations, determinations and elections
affecting the MidAmerican Group and the HMSV Group consistent with
prior period returns of the group consisting of the MidAmerican Group
and the HMSV Group in accordance with U.S. Treasury regulations
promulgated under Section 1502 of the Internal Revenue Code (the
"Code") and with state and local income tax laws and regulations.
Subject to the right to payment from HMSV as provided in this
Agreement, MidAmerican shall pay or discharge any and all federal,
state and local income or franchise taxes, assessments, interest,
penalties or deficiencies reflected on such returns.
B. Refunds and Amended Returns.
----------------------------
Only MidAmerican, after consulting with HMSV, may make, or cause to be
made, application for refunds, file original or amended reports and
returns and make other required filings for the periods ended on or
before the Closing Date for HMSV.
3. TAX PROCEEDINGS.
A. Notice of Adjustment.
---------------------
In the event the Internal Revenue Service or any State Department of
Revenue proposes in a letter or a notice of deficiency an adjustment
(a "Proposed Adjustment") to the federal or state income tax liability
of the HMSV Group, which adjustment, if sustained, could result in an
obligation on the part of HMSV to pay MidAmerican pursuant to the
terms of this Agreement, MidAmerican shall promptly upon receipt of
such letter or notice, but not later than 20 days thereafter, notify
HMSV in writing of such Proposed Adjustment and or any action taken or
proposed to be taken by the Internal Revenue Service or State
Department of Revenue with respect thereto (the "Notice of
Adjustment") and, if timely requested by HMSV in writing, request to
the extent so permitted by law an extension of time to file a formal
protest to such Proposed Adjustment. The omission by MidAmerican to so
notify HMSV shall not relieve HMSV of any payment obligation set forth
in this Agreement.
B. Notice of Contest.
-------------------
MidAmerican shall be required to protest such Proposed Adjustment only
upon receipt of a written request from HMSV (the "Notice of Contest")
to make such protest within 30 days of receipt by HMSV of the Notice
of Adjustment.
-3-
<PAGE>
C. Probable Threshold.
-------------------
Upon receipt of the Notice to Contest, MidAmerican shall request a
legal opinion from counsel (selected by MidAmerican) of the likelihood
of success in contesting the Proposed Adjustments set forth in the
Notice of Adjustment, unless MidAmerican in its sole discretion
determines the likelihood of success is probable and a legal opinion
is not necessary. The cost of such opinion shall be paid for by HMSV.
If such counsel provides MidAmerican with an opinion to the effect
that it is "probable" that such contest will be successful (the
"Probable Opinion"), then MidAmerican shall elect to either (i)
immediately contest such Proposed Adjustment in accordance with
Section 3.D. below or (ii) decline to contest such proposed
adjustment. MidAmerican shall notify HMSV in writing of its election
to contest or not to contest within 10 days of MidAmerican's receipt
of the Probable Opinion. MidAmerican may discontinue its protest of
such Proposed Adjustment at any time by providing HMSV with prompt
notice of such discontinuance. Upon MidAmerican's election not to
contest such proposed adjustment or the discontinuance of
MidAmerican's contest of such Proposed Adjustment, MidAmerican shall
promptly pay HMSV the amount HMSV would have been entitled to receive
if such contest would have been successful, such amount to be
determined in accordance with Section 1. MidAmerican agrees to
indemnify and hold HMSV harmless from and against any amount due and
owing from HMSV (as determined in accordance with Section #1) as a
result of the aforementioned failure by MidAmerican to protest, or the
discontinuance by MidAmerican of the protest, of such Proposed
Adjustment. If the opinion of the aforementioned counsel does not
constitute a Probable Opinion, then MidAmerican or HMSV may, after
consultation with the other party, contest such Proposed Adjustment
and take any and all other action it so elects; provided that the
costs, fees and expenses of such action shall be the responsibility of
the party electing to contest the Proposed Adjustment.
D. Administrative and Judicial Proceedings.
------------------------------------------
If MidAmerican elects to contest such Proposed Adjustment after
receiving a Probable Opinion or waiving such requirement, MidAmerican
shall select counsel to contest such Proposed Adjustment and shall be
entitled; subject to Section 3.C., to (i) forego any administrative
appeals, proceedings, hearings or conferences with the Internal
Revenue Service or any state or local tax authority, (ii) refrain from
paying any tax assessed and contest any deficiency, or (iii) pay any
tax assessed and claim a refund; provided, however, that if
MidAmerican pays such tax, HMSV shall reimburse MidAmerican for such
payment within 10 days of receipt by HMSV of an invoice therefore from
MidAmerican; and further provided that MidAmerican shall keep HMSV
fully informed in respect thereof and consult in good faith with HMSV
regarding the contest of such Proposed Adjustment including choice of
forum. MidAmerican shall, upon the conclusion of any administrative
proceedings, promptly notify HMSV of the outcome of such proceedings,
and shall notify HMSV at least 30 days in advance of the last date for
filing a petition in any court of competent jurisdiction with respect
thereto. In the event of an unfavorable resolution of administrative
proceedings, MidAmerican shall (x) contest any Proposed Adjustment
beyond the level of administrative proceedings upon receipt of HMSV's
written request therefore within 30 days of MidAmerican's receipt of
notice of such unfavorable resolution, (y) shall consider in good
faith any advice offered by HMSV concerning the court of competent
jurisdiction in which the adjustment is most likely to be favorably
resolved and (z) shall keep HMSV informed as to the progress of any
litigation and, if requested by HMSV, shall consult with HMSV and
consider in good
-4-
<PAGE>
faith (1) any recommendations by HMSV concerning the conduct of such
proceedings, and (2) HMSV's request for an opportunity to be present
and represented by HMSV's counsel at all formal and informal
proceedings before the judicial forum or with opposing counsel and
shall endeavor in good faith to permit HMSV's counsel an opportunity
to review and comment in advance on all submissions in connection with
such litigation. MidAmerican shall take such reasonable action during
the course of such proceedings as MidAmerican deems advisable after
good faith consultation with HMSV (whenever in MidAmerican's good
faith judgment such consultation is practicable) to preserve as a
basis for appeal any legal issue which HMSV or HMSV's counsel has
identified in writing. MidAmerican shall be required to appeal any
adverse judicial determination only if (A) an appeal is timely
requested in writing by HMSV and (B) MidAmerican is furnished with an
opinion from counsel selected by MidAmerican, at HMSV's expense, to
the effect that it is "probable" that the appeal will prevail.
E. Payment of Costs and Fees.
----------------------------
Except as otherwise expressly provided herein, for so long as
MidAmerican shall contest or continue to contest any claim or
assertion by the Internal Revenue Service or any state or local tax
authority under the terms of this Agreement, HMSV shall pay
MidAmerican, in addition to the tax if paid by MidAmerican in
accordance with 3.D., all fees, costs and expenses associated with
such contest. HMSV shall pay MidAmerican within 10 days of receipt by
HMSV of an invoice from MidAmerican. In the event HMSV does not pay
MidAmerican within such period, MidAmerican shall have no further
obligation to contest such Proposed Adjustment.
4. OTHER TAX MATTERS.
HMSV hereby covenants and agrees that except as set forth herein, HMSV
shall not make any elections or allocations, for federal, state, or local
income tax purposes which are permitted by law which would have an adverse
impact on MidAmerican or the MidAmerican Group without the prior written
consent of MidAmerican.
5. MISCELLANEOUS.
A. Cooperation.
------------
MidAmerican and HMSV shall cooperate with each other with respect to
the preparation of tax returns pursuant to Section 2 and proceedings
under Section 3 including access to all necessary personnel and
records and with respect to any other matter relating to this
Agreement as reasonably requested by a party. All charges for labor
and direct out-of-pocket expenses shall be in accordance with the
Administrative Services Agreement then in effect between the parties,
and if no such agreement is then in effect, as mutually agreed upon by
the parties.
B. Entire Agreement Amendments.
----------------------------
This Agreement constitutes the sole and entire agreement between the
parties with respect to the subject matter herein and supersedes all
previous oral or written proposals, commitments, agreements and all
other communications between the parties. This Agreement shall not be
amended,
-5-
<PAGE>
modified or supplemented except by a written instrument signed by an
authorized representative of each of the parties hereto.
C. Assignment.
-----------
This Agreement may not be assigned by either party without the prior
written consent of the other party.
D. Partial Invalidity.
-------------------
Wherever possible, each provision hereof shall be interpreted in such
a manner as to be effective and valid under applicable law, but in the
event any one or more of the provisions contained herein shall, for
any reason, be held invalid, illegal or unenforceable in any respect,
such provision shall be ineffective to the extent, but only to the
extent, of such invalidity, illegality or unenforceability without
invalidating the remaining provisions hereof or affecting the
validity, legality or enforceability of such provision in any other
jurisdiction.
E. Waiver.
-------
Failure by either party to insist upon the strict performance of any
term or condition herein shall not be deemed a waiver of any rights or
remedies that either party may have against the other nor in any way
affect the validity of this Agreement or any part hereof or the right
of any party thereafter to enforce each and every provision. No waiver
of any breach of this Agreement shall be held to constitute a waiver
of any other or subsequent breach.
F. Governing Law.
--------------
This Agreement shall be governed by, construed and interpreted
pursuant to the laws of the State of Iowa.
IN WITNESS WHEREOF, the parties have caused this Tax Indemnity Agreement to be
duly executed as of the day and year first above written.
MIDAMERICAN ENERGY HOLDINGS HOMESERVICES.COM
COMPANY INC.
By: /s/ P. J. Goodman By: /s/ Steven A. McArthur
-------------------------------- ------------------------------
Name: Patrick J. Goodman Name: Steven A. McArthur
Title: Senior V.P. & CFO Title: Senior Vice President
-6-
AMENDMENT, CONSENT AND WAIVER AGREEMENT
AMENDMENT, CONSENT AND WAIVER dated as of August 27, 1999, by MASSACHUSETTS
MUTUAL LIFE INSURANCE COMPANY, CM LIFE INSURANCE COMPANY AND THE GUARDIAN LIFE
INSURANCE COMPANY OF AMERICA (the "Purchasers") in favor of MIDAMERICAN REALTY
SERVICES COMPANY, an Iowa corporation (the "Company").
RECITALS:
WHEREAS, the Company and the Purchasers are parties to a Note Purchase
Agreement dated as of November 1, 1998 (the "Note Agreement"); and
WHEREAS, MidAmerican Energy Holdings Company ("MidAmerican Holdings"),
a 95% shareholder of the Company, has formed a new Delaware subsidiary,
HomeServices.Com Inc. ("HomeServices"), and proposes, pursuant to the terms of a
planned merger agreement (the "Merger Agreement"), to cause the Company to merge
with and into HomeServices (the "Merger"), with HomeServices as the surviving
corporation and succeeding to the business currently conducted by the Company;
and
WHEREAS, the Merger is being effected in connection with an initial
public offering of the common stock of HomeServices (the "IPO"), with the net
proceeds received by HomeServices to be used for general corporate purposes,
which are expected to include acquisitions and the continued development of
E-commerce operations; and
WHEREAS, the Merger is intended to facilitate the IPO by
reincorporating the Company's state of incorporation from Iowa to Delaware; and
WHEREAS, in connection with the Merger, HomeServices would assume all
of the Company's obligations, including the Company's obligations under the Note
Agreement; and
WHEREAS, in connection with the IPO, HomeServices, as successor to the
Company, and MidAmerican Holdings will enter into several agreements or
arrangements (the "Related Transactions"), as described in the Registration
Statement on Form S-1 (No. 333-82997) filed by HomeServices (the "Registration
Statement"), including, without limitation, (i) a Registration Rights Agreement
providing, in part, that HomeServices will grant to MidAmerican Holdings certain
"demand" and "piggyback" registration rights for the registration under the
Securities Act of 1933 of the shares of HomeServices' common stock that
MidAmerican Holdings owns, and (ii) a Services Agreement pursuant to which
MidAmerican Holdings will provide management, advisory, financial, accounting,
legal, employee benefit plan administration and other services to HomeServices
and HomeServices will pay MidAmerican Holdings a pre-determined monthly fee,
plus reimbursement of out-of-pocket costs; and
<PAGE>
WHEREAS, the Note Agreement contains certain covenants, including
Section 10.10 that would restrict the ability of the Company or HomeServices (as
the Company's successor) to effect the Merger, the IPO and Related Transactions
such as entering into the Registration Rights Agreement and the Services
Agreement; and
WHEREAS, the Company believes that the Merger, the IPO and the Related
Transactions would be mutually beneficial by enabling HomeServices (as the
successor to the Company) to raise equity capital through the public market to
finance its operations growth while improving its leverage ratio; and
WHEREAS, it is currently expected that the common stock of the
Company's existing and future subsidiaries will be pledged as collateral for the
benefit of the Lenders under a credit facility and, for so long as such credit
facility is outstanding, for the benefit of the holders of the Notes under the
Note Agreement on a pari passu basis; and
WHEREAS, the Company desires to amend the definition of "EBITDA" in
Schedule B to the Note Agreement to include non-cash expense from pending
receivable allocations attributable to an acquisition's purchase price; and
NOW, THEREFORE, in consideration of the foregoing, and other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
notwithstanding anything to the contrary in the Note Agreement, the Purchasers
hereby agree as follows:
AGREEMENT:
Section 1. AMENDED DEFINITION. The following definition from Schedule
B to the Note Agreement is hereby amended and restated in its entirety as of
such date to read as follows:
"EBITDA" means, with respect to any period, Consolidated Net Income
for such period plus all amounts deducted in the computation thereof on
account of all (a) Interest Charges during such period, (b) income taxes of
the Company and its Subsidiaries during such period, (c) amortization and
depreciation expense of the Company and its Subsidiaries during such period
and (d) non-cash expense from pending receivable allocations attributable
to an acquisition's purchase price during such period, all determined on a
consolidated basis in accordance with GAAP.
Section 2. CONSENT OF THE PURCHASERS. Notwithstanding anything to the
contrary in the Note Agreement, but subject to Section 3 hereof, the Purchasers
hereby consent to the proposed Merger, the Merger Agreement, the IPO, the
Related Transactions and the Amendment.
-2-
<PAGE>
Section 3. WAIVER. Subject to Section 8.7 of the Note Agreement and
provided that the Company complies with the provisions of Section 10.7 of the
Note Agreement within 10 business days following the month end of the month
during which the Merger is consummated, the Purchasers hereby waive any breach
of the covenants contained in the Note Agreement, including but not limited to
Section 10.10 of the Note Agreement, which may otherwise occur as a result of
the Merger, the Merger Agreement, the IPO, the Related Transactions and the
Amendment.
-3-
<PAGE>
IN WITNESS WHEREOF, the undersigned has duly executed and delivered this
AMENDMENT, CONSENT AND WAIVER effective as of the date first set forth above.
MidAmerican Realty Services Company
By: /s/ P. J. Goodman
------------------------------
Name: Patrick J. Goodman
Title: Senior Vice President, Chief Financial Officer &
Chief Accounting Officer
Massachusetts Mutual Life Insurance Company
By: /s/ Richard C. Morrison
------------------------------
Name: Richard C. Morrison
Title: Managing Director
CM Life Insurance Company
By: /s/ Richard C. Morrison
------------------------------
Name: Richard C. Morrison
Title: Investment Officer
The Guardian Life Insurance Company of America
By: /s/ Thomas M. Donohue
-------------------------------
Name: Thomas M. Donohue
Title: Vice President
- -------------------------------------------------------------------------------
MIDAMERICAN REALTY SERVICES COMPANY
----------------------------------
SECOND AMENDMENT
Dated as of September 15, 1999
to
NOTE PURCHASE AGREEMENT
Dated as of November 1, 1998
----------------------------------
Re: $35,000,000 7.12% Senior Notes
Due November 1, 2010
- -------------------------------------------------------------------------------
<PAGE>
SECOND AMENDMENT TO NOTE AGREEMENT
THIS SECOND AMENDMENT dated as of September 15, 1999 (the or this
"Second Amendment") to the Note Purchase Agreement dated as of November 1, 1998
is between MidAmerican Realty Services Company, an Iowa corporation (the
"Company"), and each of the institutions which is a signatory to this Second
Amendment (collectively, the "Noteholders").
RECITALS:
A. The Company and each of the Noteholders have heretofore entered
into the Note Purchase Agreement dated as of November 1, 1998, as amended by the
Amendment, Consent and Waiver dated as of August 27, 1999 (the "First
Amendment") ( as so amended the "Note Agreement"), pursuant to which the Company
issued its $35,000,000 7.12% Senior Notes Due November 1, 2010 (the "Notes").
B. The Company desires to enter into a Senior Secured Revolving Credit
Agreement (the "Credit Agreement") dated as of September 20, 1999 with various
banks or financial institutions from time to time party thereto (the "Bank
Lenders"), and as a condition precedent to entering into the Credit Agreement,
the Bank Lenders will require the Company to enter into a certain Pledge
Agreement dated as of September 20, 1999 (the "Pledge Agreement"), pursuant to
which the Company will pledge the capital stock of its Subsidiaries for the
ratable benefit of the Noteholders and the Bank Lenders.
C. The Company and the Noteholders now desire to amend the Note
Agreement in the respects, but only in the respects, hereinafter set forth.
D. Capitalized terms used herein shall have the respective meanings
ascribed thereto in the Note Agreement unless herein defined or the context
shall otherwise require.
E. All requirements of law have been fully complied with and all other
acts and things necessary to make this Second Amendment a valid, legal and
binding instrument according to its terms for the purposes herein expressed have
been done or performed.
NOW, THEREFORE, upon the full and complete satisfaction of the
conditions precedent to the effectiveness of this Second Amendment set forth in
Section 3.1 hereof, and in consideration of good and valuable consideration the
receipt and sufficiency of which is hereby acknowledged, the Company and the
Noteholders do hereby agree as follows:
SECTION 1. AMENDMENTS.
1.1. The Note Agreement is amended by amending and deleting all
references to "CM Life Insurance Company" contained in the Note Agreement and
Notes and substituting in lieu thereof "C.M. Life Insurance Company".
<PAGE>
Second Amendment to Note Purchase Agreement
1.2. Subparagraph (f) of Section 10.6 of the Note Agreement shall be
and is hereby amended by deleting the word "and" at the end of such subparagraph
and subparagraph (g) of Section 10.6 of the Note Agreement shall be and is
hereby amended in its entirety to read as follows:
(g) any Lien extending, renewing or replacing any Lien permitted
by the immediately preceding subparagraphs (a) through (f), inclusive,
and the immediately succeeding subparagraph (h) of this Section 10.6,
provided that (i) the aggregate principal amount of Debt secured by
such Lien immediately prior to such extension, renewal or replacement
is not increased or the maturity thereof reduced, (ii) such Lien is
not extended to any other property, except for the substitution of
property of a similar nature and equal or lesser value than the
property securing the Lien immediately prior to such extension,
renewal or replacement, and (iii) the aggregate principal amount of
Debt being extended, renewed or replaced is permitted by Sections 10.2
and 10.3; and
1.3. Section 10.6 of the Note Agreement shall be and is hereby amended
by adding a new subparagraph (h) thereto which shall read as follows:
(h) the Lien created by the Pledge Agreement.
1.4. Subparagraph (e) of Section 11 of the Note Agreement shall be and
is hereby amended in its entirety to read as follows:
(e) any representation or warranty made in writing by or on
behalf of the Company or any Subsidiary or by any officer of the
Company or any Subsidiary in this Agreement (or any amendment hereto)
or the Pledge Agreement (or any amendment thereto) or in any writing
furnished in connection with the transactions contemplated hereby or
thereby proves to have been false or incorrect in any material respect
on the date as of which made; or
1.5. Section 11 of the Note Agreement shall be and is hereby amended
by deleting the "." at the end of subparagraph (j) and substituting in lieu
thereof "; or" and by adding a new subparagraph (k) thereto which shall read as
follows:
(k) any default in the performance of or compliance with any term
contained in the Pledge Agreement or the Lien created by the Pledge
Agreement ceases to be or is not a valid first priority perfected Lien
(other than as a result of the termination of the Pledge Agreement in
accordance with the terms and provisions thereof).
-2-
<PAGE>
Second Amendment to Note Purchase Agreement
1.6. Schedule B of the Note Agreement shall be and is hereby amended
by amending the definition of "Priority Debt" in its entirety to read as
follows:
"Priority Debt" means, without duplication, the sum of (a) all
Debt of the Company secured by any Lien with respect to any property
owned by the Company or any of its Subsidiaries, and (b) all Debt of
Subsidiaries (except Debt owed to the Company or a Wholly-Owned
Subsidiary); provided that Debt secured by the Pledge Agreement shall
be excluded from the definition of Priority Debt.
1.7. The following shall be added as a new definition in alphabetical
order to Schedule B of the Note Agreement:
"Pledge Agreement" means the Pledge Agreement dated as of
September 20, 1999, among the Company, the holders of Notes and
certain banks or financial institutions party thereto, pursuant to
which the capital stock of certain direct and indirect Subsidiaries of
the Company shall be pledged as collateral to secure the obligations
of the Company under the Notes and this Agreement and the obligations
of the Company owing to certain other creditors from time to time.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
2.1. To induce the Noteholders to execute and deliver this Second
Amendment (which representations shall survive the execution and delivery of
this Second Amendment), the Company represents and warrants to the Noteholders
that:
(a) this Second Amendment has been duly authorized, executed and
delivered by it and this Second Amendment constitutes the legal, valid
and binding obligation, contract and agreement of the Company
enforceable against it in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws or equitable principles relating to or
limiting creditors' rights generally;
(b) the Note Agreement, as amended by the First Amendment and
this Second Amendment, constitutes the legal, valid and binding
obligation, contract and agreement of the Company enforceable against
it in accordance with their respective terms, except as enforcement
may be limited by bankruptcy, insolvency, reorganization, moratorium
or similar laws or equitable principles relating to or limiting
creditors' rights generally;
(c) the Pledge Agreement has been duly authorized, executed and
delivered by it and the Pledge Agreement constitutes the legal, valid
and binding obligation, contract and agreement of the Company
enforceable against it in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization,
-3-
<PAGE>
Second Amendment to Note Purchase Agreement
moratorium or similar laws or equitable principles relating to or
limiting creditors' rights generally;
(d) the pledge and assignment of capital stock pursuant to the
terms of the Pledge Agreement, together with the delivery of such
capital stock (which delivery has been made), creates a valid and
perfected security interest in such capital stock and the proceeds
thereof;
(e) the execution, delivery and performance by the Company of
this Second Amendment and the Pledge Agreement (i) has been duly
authorized by all requisite corporate action and, if required,
shareholder action, (ii) does not require the consent or approval of
any governmental or regulatory body or agency, and (iii) will not (A)
violate (1) any provision of law, statute, rule or regulation or its
certificate of incorporation or bylaws, (2) any order of any court or
any rule, regulation or order of any other agency or government
binding upon it, or (3) any provision of any material indenture,
agreement or other instrument to which it is a party or by which its
properties or assets are or may be bound, or (B) result in a breach or
constitute (alone or with due notice or lapse of time or both) a
default under any indenture, agreement or other instrument referred to
in clause (iii)(A)(3) of this Section 2.1(e);
(f) as of the date hereof and after giving effect to this Second
Amendment, no Default or Event of Default has occurred which is
continuing; and
(g) all the representations and warranties contained in the
Pledge Agreement are true and correct and are incorporated herein by
reference with the same force and effect as though they were set forth
in full herein.
SECTION 3. CONDITIONS TO EFFECTIVENESS OF THIS SECOND AMENDMENT.
3.1. This Second Amendment shall not become effective until, and shall
become effective when, each and every one of the following conditions shall have
been satisfied:
(a) executed counterparts of this Second Amendment, duly executed
by the Company and the holders of at least 51% of the outstanding
principal of the Notes, shall have been delivered to the Noteholders;
(b) executed counterparts of the Pledge Agreement, duly executed
by the Company, the Bank Lenders and the Noteholders, shall have been
delivered to the Noteholders;
(c) the representations and warranties of the Company set forth
in Section 2 hereof and in the Pledge Agreement are true and correct
on and with respect to the date hereof;
-4-
<PAGE>
Second Amendment to Note Purchase Purchase Agreement
(d) the Noteholders shall have received the favorable opinion of
counsel to the Company as to the matters set forth in Sections 2.1(a),
2.1(b), 2.1(c), 2.1(d) and 2.1(e) hereof, which opinion shall be in
form and substance satisfactory to the Noteholders;
(e) the reasonable fees and expenses of Chapman and Cutler,
counsel to the Noteholders, in connection with the negotiation,
preparation, approval, execution and delivery of this Second Amendment
and the Pledge Agreement, have been paid in full,
Upon receipt of all of the foregoing, this Second Amendment shall become
effective.
SECTION 4. MISCELLANEOUS.
4.1. This Second Amendment shall be construed in connection with and
as part of the Note Agreement, and except as modified and expressly amended by
this Second Amendment, all terms, conditions and covenants contained in the Note
Agreement and the Notes are hereby ratified and shall be and remain in full
force and effect.
4.2. Any and all notices, requests, certificates and other instruments
executed and delivered after the execution and delivery of this Second Amendment
may refer to the Note Agreement without making specific reference to this Second
Amendment but nevertheless all such references shall include this Second
Amendment unless the context otherwise requires.
4.3. The descriptive headings of the various Sections or parts of this
Second Amendment are for convenience only and shall not affect the meaning or
construction of any of the provisions hereof.
4.4. This Second Amendment shall be governed by and construed in
accordance with New York law.
-5-
<PAGE>
Second Amendment to Note Purchase Agreement
4.5. The execution hereof by you shall constitute a contract between
us for the uses and purposes hereinabove set forth, and this Second Amendment
may be executed in any number of counterparts, each executed counterpart
constituting an original, but all together only one agreement.
MIDAMERICAN REALTY SERVICES COMPANY
By /s/ P. J. Goodman
--------------------------------------------
Its Sr. Vice President & Chief Financial Officer
--------------------------------------------
-6-
<PAGE>
Accepted and Agreed to:
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By /s/ Mark A. Ahmed
-------------------
Its Managing Director
-----------------
-7-
<PAGE>
Accepted and Agreed to:
CM LIFE INSURANCE COMPANY
By /s/ Mark A. Ahmed
-----------------------------
Its Managing Director
-----------------------------
-8-
<PAGE>
Accepted and Agreed to:
THE GUARDIAN LIFE INSURANCE COMPANY OF AMERICA
By /s/ Thomas M. Donohue
-------------------------------
Its Vice President
-------------------------------
-9-
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001090445
<NAME> HOMESERVICES.COM.INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 9,896
<SECURITIES> 0
<RECEIVABLES> 9,961
<ALLOWANCES> (1,495)
<INVENTORY> 0
<CURRENT-ASSETS> 35,667
<PP&E> 28,371
<DEPRECIATION> (7,021)
<TOTAL-ASSETS> 159,204
<CURRENT-LIABILITIES> 31,633
<BONDS> 68,597
0
0
<COMMON> 82
<OTHER-SE> 53,188
<TOTAL-LIABILITY-AND-EQUITY> 159,204
<SALES> 0
<TOTAL-REVENUES> 291,097
<CGS> 0
<TOTAL-COSTS> 180,409
<OTHER-EXPENSES> 92,050
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,549
<INCOME-PRETAX> 16,089
<INCOME-TAX> 6,598
<INCOME-CONTINUING> 9,491
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,491
<EPS-BASIC> 1.32
<EPS-DILUTED> 1.32
</TABLE>
