SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report
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Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 28, 1998
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Applied Magnetics Corporation
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(Exact name of registrant as specified in its charter)
Delaware 95-1950506
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(State of incorporation or organization) (I.R.S. Employer Identification No.)
75 Robin Hill Road, Goleta, CA 93117
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (805) 683-5353
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Exhibit Index on page 9
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Item 5. Other Events.
Amendment and Restatement of Shareholder Rights Agreement
On October 19, 1988, the Board of Directors of Applied Magnetics
Corporation (the "Company") declared a dividend distribution of one Right for
each outstanding share of common stock, $.10 par value (the "Common Stock"), of
the Company to stockholders of record at the close of business on November 1,
1988. The terms and conditions relating to the Rights were initially described
in that certain Rights Agreement (the "Rights Agreement"), dated October 19,
1988, between the Company and First Interstate Bank of California (the "Rights
Agent") pursuant to which the Rights were issued. The Rights were registered by
the Company on a Form 8-A, filed with the Securities and Exchange Commission on
October 25, 1988.
On August 7, 1998, the Board of Directors of the Company adopted
amendments to the Rights Agreement. The amendments are set forth in an Amended
and Restated Rights Agreement (the "Amended Rights Agreement") dated as of
October 28, 1998 between the Company and the Rights Agent, which supersedes the
Rights Agreement. A copy of the Amended Rights Agreement is attached as an
exhibit hereto and is incorporated by reference. The following summary of Rights
is qualified in its entirety by reference to the Amended Rights Agreement.
As of the date of this Form 8-A/A, there is associated with each
outstanding share of Common Stock one Right which, except as set forth below,
when exercisable, entitles the registered holder to purchase from the Company
one one-hundredth share of a new series of preferred stock, designated as Series
A Participating Preferred Stock, $.10 par value (the "Preferred Stock"), at a
price of $20 per share (the "Purchase Price"), subject to adjustment. The
description and terms of the Rights are summarized below and are set forth in
an Amended Certificate of Designation attached as Exhibit A to the Amended
Rights Plan.
Until the earlier to occur of (i) a public announcement that,
without the prior consent of the Company, a person or group of affiliated or
associated persons (an "Acquiring Person") has acquired, or obtained the right
to acquire beneficial ownership of securities having 20% or more of the voting
power of all outstanding voting securities of the Company or (ii) ten days
(unless such date is extended by the Board of Directors) following the
commencement of (or a public announcement of an intention to make) a tender
offer or exchange offer which would result in any person or group and related
persons becoming an Acquiring Person (the earlier of such dates being called the
"Distribution Date"), the Rights will be evidenced, with respect to any of the
Common Stock certificates outstanding as of the Record Date, by such Common
Stock certificate together with this Summary of Rights. The Amended Rights
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Agreement provides that, until the Distribution Date, the Rights will be
transferred with and only with Common Stock certificates. From as soon as
practicable after the Record Date and until the Distribution Date (or
earlier redemption or expiration of the Rights), new Common Stock
certificates issued
after the Record Date upon transfer or new issuance of the Common Stock will
contain a notation incorporating the Amended Rights Agreement by reference.
Until the Distribution Date (or earlier redemption or expiration of the Rights),
the surrender for transfer of any certificates for Common Stock outstanding as
of the Record Date, (with or without this Summary of Rights attached) will also
constitute the transfer of the Rights associated with the Common Stock
represented by such certificate. As soon as practicable following the
Distribution Date, separate certificates evidencing the Rights ("Rights
Certificates") will be mailed to holders of record of the Common Stock as of the
close of business on the Distribution Date, and the separate Rights Certificates
alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date. The
Rights will expire on the earliest of (i) November 4, 2008, (ii) consummation of
a merger transaction with a person or group who acquired Common Stock pursuant
to a Permitted Offer (as defined below), and is offering in the merger the same
price per share and form of consideration paid in the Permitted Offer, or (iii)
redemption by the Company as described below.
The Purchase Price payable, and the number of shares of Preferred
Stock or other securities or property issuable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution (i) in the event of
a stock dividend on, or a subdivision, combination or reclassification of the
Preferred Stock, (ii) upon the grant to holders of the Preferred Stock of
certain rights or warrants to subscribe for Preferred Stock, certain convertible
securities or securities having the same or more favorable rights, privileges
and preferences as the Preferred Stock at less than the current market price of
the Preferred Stock or (iii) upon the distribution to holders of the Preferred
Stock of evidences of indebtedness or assets (excluding regular quarterly cash
dividends out of earnings or retained earnings) or of subscription rights or
warrants (other than those referred to above).
In the event that, after the first date of public announcement by
the Company or an Acquiring Person that an Acquiring Person has become such, the
Company is involved in a merger or other business combination transaction in
which the Common Stock is exchanged or changed, or 50% or more of the Company's
assets or earning power are sold (in one transaction or a series of
transactions), proper provision shall be made so that each holder of a Right
(other than such Acquiring Person) shall thereafter have the right to receive,
upon the exercise thereof at the then current exercise price of the Right, that
number of shares of common stock of the acquiring company (or, in the event
there is more than one acquiring company, the acquiring company receiving the
greater portion of the assets or earning power transferred) which at the time of
such transaction would have a market value of two times the exercise price of
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the Right (such right being called the "Merger Right"). In the event that an
Acquiring Person becomes such (unless pursuant to a tender offer or 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 Board of Directors who
are not officers of the Company to be both adequate and otherwise in the best
interests of the Company and its stockholders (a "Permitted Offer")), proper
provision shall be made so that each holder of a Right will for a 60 day period
thereafter have the right to receive upon exercise that number of shares of
Common Stock having a market value of two times the exercise price of the Right,
to the extent available, and then (after all authorized and unreserved shares of
Common Stock have been issued) a common stock equivalent (such as Preferred
Stock or another equity security with at least the same economic value as the
Common Stock) having a market value of two times the exercise price of the
Right, with Common Stock to the extent available being issued first (such right
being called the "Subscription Right"). The holder of a Right will continue to
have the Merger Right whether or not such holder exercises the Subscription
Right. Upon the occurrence of any of the events giving rise to the
exercisability of the Merger Right or the Subscription Right, any Rights that
are or were at any time owned by an Acquiring Person shall become void insofar
as they relate to the Merger Right or the Subscription Right.
With certain exceptions, no adjustments in the Purchase Price will
be required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractions of shares will be issued and, in lieu thereof,
an adjustment in cash will be made based on the market price of the Common Stock
on the last trading date prior to the date of exercise.
At any time prior to the earlier to occur of (i) a person becoming
an Acquiring Person or (ii) the expiration of the Rights, the Company may redeem
the Rights in whole, but not in part, at a price of $.01 per Right (the
"Redemption Price"), which redemption shall be effective upon the action of the
Board of Directors. Additionally, the Company may thereafter redeem the then
outstanding Rights in whole, but not in part, at the Redemption Price provided
that such redemption is (i) incidental to a merger or other business combination
transaction or series of transactions involving the Company but not involving an
Acquiring Person or any person who was an Acquiring Person or (ii) following an
event giving rise to, and the expiration of the exercise period for, the
Subscription Right and for as long as an Acquiring Person beneficially owns
securities representing less than 20% of the voting power of the Company's
voting securities. The redemption of Rights described in the preceding sentence
shall be effective only as of such time when the Subscription Right is not
exercisable, and in any event, only after 10 business days prior notice. Upon
the effective date of the redemption of the Rights, the right to exercise the
Rights will terminate and the only right of the holders of Rights will be to
receive the Redemption Price.
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Notwithstanding the foregoing, in the event that a majority of the
Board of Directors of the Company is elected by stockholder action by written
consent, then for a period of 180 days following the effectiveness of such
action: (i) the Company may not consent to an acquisition of shares by an
Interested Person (as defined below) or an affiliate or associate thereof for
the purpose of causing such person not to fall within the definition of
Acquiring Person; (ii) no offer by an Interested Person or an affiliate or
associate thereof shall be deemed a Permitted Offer; (iii) the Rights shall not
be redeemed if such redemption is reasonably likely to have the purpose or
effect of facilitating a transaction with an Interested Person; and (iv) the
Amended Rights Agreement shall not be amended or supplemented in any manner
reasonably likely to have the purpose or effect of facilitating a transaction
with an Interested Person. "Interested Person" with respect to a transaction is
defined as any person who (i) is or will become an Acquiring Person if the
transaction were to be consummated without regard to any required approval of
the Company, or an affiliate or associate of such a person, and (ii) directly or
indirectly proposed or nominated a director of the Company in office at the time
of consideration of the transaction in question who was elected by written
consent of stockholders, or an affiliate or associate of such a person.
The Preferred Stock purchasable upon exercise of the Rights will be
nonredeemable and junior to any other series of preferred stock the Company may
issue (unless otherwise provided in the terms of such stock). Each share of
Preferred Stock will have a preferential quarterly dividend in an amount equal
to 100 times the dividend declared on each share of Common Stock, but in no
event less than $1.00. In the event of liquidation, the holders of Preferred
Stock will receive a preferred liquidation payment equal to the greater of 100
times $20 or 100 times the payment made per each share of Common Stock. Each
share of Preferred Stock will have 100 votes, voting together with the shares of
Common Stock. In the event of any merger, consolidation or other transaction in
which shares of Common Stock are exchanged, each share of Preferred Stock will
be entitled to receive 100 times the amount and type of consideration received
per share of Common Stock. The rights of the Preferred Stock as to dividends,
liquidation and voting, and in the event of mergers and consolidations, are
protected by customary anti-dilution provisions. Fractional shares of Preferred
Stock will be issuable; however, the Company may elect to distribute depositary
receipts in lieu of such fractional shares. In lieu of fractional shares other
than fractions that are multiples of one one-hundredth of a shares, an
adjustment in cash will be made based on the market price of the Preferred Stock
on the last trading date prior to the date of exercise.
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.
As of October 28, 1998 there were 24,103,294 shares of Common Stock
outstanding (including 130,552 shares in the treasury). In addition, a total of
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3,390,391 unissued shares were reserved for issuance under the Company's
employee stock option and incentive plans. Further 6,199,947 unissued shares
were reserved for issuance upon conversion of the Company's 7% Convertible
Subordinated Debenture due 2006. Each outstanding share of Common Stock on the
Record Date will receive one Right. As long as the Rights are attached to the
shares of Common Stock, the Company will issue on Right with each new share of
Common Stock so that all such shares will have attached rights. 200,000 shares
of Preferred Stock have been reserved for issuance upon exercise of the Rights.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
without conditioning the offer on the Rights being redeemed or a substantial
number of Rights being acquired. However, the Rights should not interfere with
any merger or other business combination approved by the Company because the
Rights are redeemable under certain circumstances.
Attached hereto as Exhibit 1 and incorporated herein by reference
are a copy of the Amended and Restated Rights Agreement between the Company and
ChaseMellon Shareholder Services, L.L.C., as Rights Agent, specifying the terms
of the Rights, and the exhibits thereto, as follows: Exhibit A -- Amended
Certificate of Designation, Preferences and Rights of Series A Participating
Preferred Stock; Exhibit B -- The Form of Rights Certificate; and
Exhibit C -- the Summary of Rights to Purchase Preferred Stock. The foregoing
description of the Rights is qualified by reference to the Amended Rights
Agreement.
The Company's Bylaws presently contain provisions which could have
the effect of discouraging takeovers or changes in control. The Company's
Bylaws, as amended by the Board of Directors on October 19, 1988 (i) establish
procedures for the nomination of persons to the Board of Directors and the
introduction of new business at annual meetings of stockholders, (ii) eliminate
the power of stockholders to call special meetings, and (iii) specify procedures
for a ministerial review of and the setting of a record date for stockholder
action by written consent. These provisions could after changes in control by
delaying the presentation to stockholders of any proposals relating to or
facilitating any transaction involving a change in control, as well as limiting
the ability of stockholders to remove or replace directors prior to an annual
meeting. They may also have the effect of precluding stockholder proposals or
contests for election of directors if the established procedures are not
followed, and may discourage or deter any third party from conducting a
solicitation of proxies or consents, and thus may assist the Board of Directors
in retaining their present positions.
In addition, after adjusting for shares of Preferred Stock reserved
for issuance upon exercise of the Rights, the Company has approximately
6,306,368, shares of Common Stock and 4,800,000 shares of preferred stock
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authorized, unissued and unreserved. The existence of authorized but unissued
securities could serve in a variety of ways to make more difficult and,
therefore, less likely a takeover of the Company. For example, in response to an
unsolicited offer to acquire control, the Company could issue shares of Common
Stock to a third party which would have the effect of diluting the stock
ownership interest of all stockholders, including the person seeking to acquire
control. The Board could also create a new series of preferred stock with
special voting rights that might impede a change in control which the Board
considers not to be in the best interests of stockholders. Such a change in
control could be discouraged through the issuance of additional preferred stock
or rights to purchase preferred stock, even though the change in control may be
viewed favorable by stockholders.
Item 7. Financial Statements and Exhibits.
(C) Exhibits
(4) Amended and Restated Rights Agreement ("Amended Rights
Agreement"), dated as of October 28, 1998, between Applied
Magnetics Corporation and ChaseMellon Shareholder Services,
L.L.C., as Rights Agent, which includes, as Exhibit A thereto,
Amended Certificate of Designation, Preferences and
Rights of Series A Participating Preferred Stock, as
Exhibit B thereto, the Form of Rights Certificate and as
Exhibit C thereto, the Summary of Rights to Purchase Preferred
Stock. Pursuant to the Amended Rights Agreement, Rights
Certificates will not be mailed until after a Stock
Acquisition Date (as defined in the Amended Rights Agreement)
or (unless postponed by the Board of Directors) ten days after
a person commences or announces its intention to commence an
offer if, upon consummation thereof, such person would become
an Acquiring Person (as defined in the Amended Rights
Agreement).
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SIGNATURE
Pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, the registrant has duly caused this registration statement
to be signed on its behalf by the undersigned, thereto duly authorized.
APPLIED MAGNETICS CORPORATION
By: /s/ Craig D. Crisman
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Name: Craig D. Crisman
Title: Chief Executive Officer
Date: November 12, 1998
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EXHIBIT INDEX
Exhibit Description Page
------- ----------- ----
(4) Amended and Restated Rights Agreement, dated as of 10
October 28, 1998, between Applied Magnetics
Corporation and ChaseMellon Shareholder Services,
L.L.C., as Rights Agent, which includes, as Exhibit
A thereto, Amended Certificate of Designation,
Preferences and Rights of Series A Participating
Preferred Stock filed November 4, 1998, as Exhibit
B thereto, the form of Rights Certificate, and, as
Exhibit C thereto, the form of Summary of Rights.
Pursuant to the Amended Rights Agreement, Rights
Certificates will not be mailed until after a Stock
Acquisition Date (as defined in the Amended Rights
Agreement) or (unless postponed by the Board) 10
days after a person announces or commences its
intention to commence an offer if, upon
consummation thereof, such person would become an
Acquiring Person (as defined in the Amended Rights
Agreement).
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Exhibit (4)
APPLIED MAGNETICS CORPORATION
and
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
Rights Agent
AMENDED AND RESTATED RIGHTS AGREEMENT
Dated as of October 28, 1998
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TABLE OF CONTENTS
Page
Section 1. Certain Definitions............................................1
Section 2. Appointment of Rights Agent....................................4
Section 3. Issue of Rights Certificates...................................4
Section 4. Form of Rights Certificates....................................6
Section 5. Countersignature and Registration..............................7
Section 6. Transfer, Split Up, Combination and
Exchange of Rights Certificates: Mutilated,
Destroyed, Lost or Stolen Rights
Certificates...................................................8
Section 7. Exercise of Rights: Purchase Price;
Expiration Date of Rights......................................8
Section 8. Cancellation and Destruction of Rights
Certificates..................................................10
Section 9. Reservation and Availability of Preferred
Stock.........................................................11
Section 10. Preferred Stock Record Date...................................12
Section 11. Adjustment of Purchase Price, Number and
Kind of Shares or Number of Rights............................12
Section 12. Certificate of Adjusted Purchase Price or
Number of Shares..............................................21
Section 13. Consolidation, Merger or Sale or Transfer
of Assets or Earning Power....................................21
Section 14. Additional Covenants..........................................24
Section 15. Fractional Rights and Fractional Shares.......................24
Section 16. Rights of Action..............................................26
Section 17. Agreement of Rights Holders...................................26
Section 18. Rights Certificate Holder Not Deemed a
Stockholder...................................................27
Section 19. Concerning the Rights Agent...................................27
Section 20. Merger or Consolidation or Change of Name
of Rights Agent...............................................28
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Section 21. Duties of Rights Agent........................................28
Section 22. Change of Rights Agent........................................31
Section 23. Issuance of New Rights Certificate............................31
Section 24. Redemption and Termination....................................32
Section 25. Notice of Certain Events......................................33
Section 26. Notices.......................................................34
Section 27. Supplements and Amendments....................................35
Section 28. Determination and Actions by the Board of
Directors, etc................................................35
Section 29. Successors....................................................36
Section 30. Benefits of this Agreement....................................36
Section 31. Severability..................................................36
Section 32. Governing Law.................................................36
Section 33. Counterparts..................................................36
Section 34. Descriptive Headings..........................................36
EXHIBIT A Form of Amended Certificate of Designation of
Series A Participating Preferred Stock
EXHIBIT B Form of Rights Certificate
EXHIBIT C Form of Summary of Rights
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AMENDED AND RESTATED RIGHTS AGREEMENT
This Amended and Restated Agreement, dated as of
October 28, 1998, between Applied Magnetics Corporation, a
Delaware corporation (the "Company"), and ChaseMellon Shareholder
Services, L.L.C. (the "Rights Agent").
W I T N E S S E T H
WHEREAS, on October 19, 1989, 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, $0.10 par value per share, of the Company (the "Common
Stock") outstanding on November 4, 1988 (the "Record Date"), and
contemplates the issuance of one Right (subject to adjustment as
provided herein) for each share of Common Stock of the Company
issued between the Record Date and the earliest of the
Distribution Date and the Expiration Date (as such terms are
hereinafter defined), each Right representing the right to
purchase one one-hundredths of a share of Series A Participating
Preferred Stock of the Company having the right, powers and
preferences set forth in the form of Amended Certificate of
Designation attached hereto as Exhibit A, upon the terms and
subject to the conditions hereinafter set forth (the "Rights");
and
WHEREAS, the description and terms of the Rights were
set forth in that certain Rights Agreement between the Company
and the Rights Agent, dated October 19, 1988 (the "Rights
Agreement"); and
WHEREAS, pursuant to the Section 7 of the Rights
Agreement, the Rights are scheduled to expire on November 4,
1998; and
WHEREAS, the Board of Directors deems it to be in the
best interest of the Company to amend and restate the Rights
Agreement, in accordance with Section 27 thereof, in the form
hereof (the "Amended Rights Agreement" or, the "Agreement") to
extend the Expiration Date (as defined herein) of the Rights to
November 4, 2008 and to reflect a revision to the Purchase Price
(as defined herein) for the Rights;
NOW, THEREFORE, in consideration of the premises and
the mutual agreements herein set forth, the parties hereto hereby
agree as follows:
Section 1. Certain Definitions. For purposes of
this Agreement, the following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person (as
such term is hereinafter defined) who or which, together with all
Affiliates (as such term is hereinafter defined) of such Person,
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without the prior approval of the Company, shall be the
Beneficial Owner (as such term is hereinafter defined) of
securities representing 20% or more of the shares of Common Stock
then outstanding or who was such a Beneficial Owner at any time
after the date hereof, whether or not such Person continues to be
the Beneficial Owner of securities representing 20% or more of
the outstanding shares of Common Stock, provided, however, that
in no event shall a Person who or which, together with all
Affiliates and Associates of such Person, is the Beneficial Owner
of less than 20% of the Company's outstanding shares of Common
Stock become an Acquiring Person solely as a result of a
reduction of the number of shares of outstanding Common Stock,
including repurchases of outstanding shares of Common Stock by
the Company, which reduction increases the percentage of
outstanding shares of Common Stock beneficially owned by such
Person; provided, further, that Acquiring Person shall not mean
(i) the Company, (ii) any subsidiary of the company (as such term
is hereinafter defined), (iii) any employee benefit plan of the
Company or any of its subsidiaries or (iv) any entity holding
securities of the Company organized, appointed or established by
the Company or any of its subsidiaries for or pursuant to the
terms of any such plan, and, provided, further, that in the event
that a majority of the Board of Directors of the Company is
elected by stockholder action by written consent, then for a
period of 180 days following the effectiveness of such action the
Company shall not grant any approval referred to in this
paragraph to any Interested Person or any Affiliate or Associate
of an Interested Person.
(b) "Affiliate" and "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 of the
General Rules and Regulations under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), as in effect on the
date of this Agreement.
(c) 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 beneficially owns,
directly or indirectly;
(ii) which such Person or any of such
Person's Affiliates or Associates has (A) the right or
obligation to acquire (whether such right or obligation
is exercisable or effective 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 (other than the Rights),
warrants or options, or otherwise; provided, however,
that a Person shall not be deemed the "Beneficial
Owner" of, or to "beneficially own," securities
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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 payment or exchange; or (B) the right to vote
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 clause
(B) if the agreement, arrangement or understanding to
vote such security (1) 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 rules and regulations of the Exchange
Act and (2) is not also then reportable by such person
on Schedule 13D under the Exchange Act (or any
comparable or successor report); or
(iii) which are beneficially owned, directly
or indirectly, by any other Person (or any Affiliate or
Associate thereof) with which such Person or any of
such Person's Affiliates or Associates has any
agreement, arrangement or understanding (whether or not
in writing) or with which such Person or any of such
Person's Affiliates have otherwise formed a group, for
the purpose of acquiring, holding, voting (except
pursuant to a revocable proxy as described in
clause (B) of subparagraph (ii) of this paragraph (c))
or disposing of any securities of the company.
(d) "Business Day" shall mean any day other than
a Saturday, Sunday, or a day on which banking institutions in the
State of California are authorized or obligated by law or
executive order to close.
(e) "Close of business" on any given date shall
mean 5.:00 P.M.. Los Angeles time on such date; provided,
however, that if such date is not a Business Day it shall mean
5:00 P.M., Los Angeles time, on the next succeeding Business Day.
(f) "Common Stock" shall mean the Common Stock,
$0.10 par value, of the Company, except that "Common Stock", when
used with reference to stock issued by any Person other than the
Company shall mean the capital stock with the greatest voting
power, or the equity securities or other equity interest having
power to control or direct the management, of such Person or, if
such Person is a subsidiary of another Person, of the Person
which ultimately controls such first-mentioned Person and which
has issued and outstanding such capital stock, equity securities
or equity interests.
(g) "Interested Person" with respect to a
Transaction shall mean any Person who (i) is or will become an
Acquiring Person if the Transaction were to be consummated
without regard to any required approval of the Company, or an
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Affiliate or Associate of such a Person, and (ii) directly or
indirectly proposed or nominated a director of the Company in
office at the time of consideration of the Transaction in
question who was elected by written consent of stockholders, or
an Affiliate or Associate of such a Person.
(h) "Person" shall mean any individual, firm,
corporation, partnership, joint venture, association, trust or
other entity.
(i) "Preferred Stock" shall mean the Series A
Participating Preferred Stock, $0.10 par value, of the Company.
(j) "Stock Acquisition Date" shall mean the first
date of public announcement by the Company or an Acquiring Person
that an Acquiring Person has become such.
(k) A "subsidiary" of any Person shall mean any
corporation or other entity of which a majority of the voting
power of the voting equity securities or voting interests is
owned, directly or indirectly, by such Person, or which is
otherwise controlled by such Person.
(l) "Transaction" shall mean any merger,
consolidation or sale of assets described in Section 13(a) hereof
or any acquisition of shares of Common Stock which, without
regard to any required approval of the Company, would result in
a Person becoming an Acquiring Person.
(m) "Voting Power" shall mean the voting power of
all securities of the Company then outstanding and generally
entitled to vote for the election of directors of the Company.
Section 2. Appointment of Rights Agent. The
Company hereby appoints the Rights Agent to act as agent for the
Company in accordance with the terms and conditions hereof, and
the Rights Agent hereby accepts such appointment. The Company
may from time to time appoint such Co-Rights Agents as it may
deem necessary or desirable. In the event the Company appoints
one or more Co-Rights Agents, the respective duties of the Rights
Agents and any Co-Rights Agents shall be as the Company shall
determine.
Section 3. Issue of Rights Certificates.
(a) Until the earlier of (i) the Stock
Acquisition Date or (ii) the tenth day after the date of the
commencement of, or first public announcement of the intent of
any Person (other than the Company, any subsidiary of the
Company, or any employee benefit plan of the Company or any of
its subsidiaries) to commence (which intention to commence
remains in effect for five business days after such
announcement), a tender or exchange offer which would result in
such Person becoming an Acquiring Person, unless such date is
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extended by the Board of Directors of the Company (including any
such date which is on or after the date of this Agreement and
prior to the issuance of the Rights; the earlier of such dates
being herein referred to as the "Distribution Date"), (x) the
Rights shall be evidenced (subject to the provisions of
paragraph (b) of this Section 3) by the certificates for 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 (and the right to receive certificates therefor)
shall be transferable only in connection with the transfer of the
underlying shares of Common Stock. As soon as practicable after
the Distribution Date, the Rights Agent shall 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, a certificate for Rights, in substantially the form of
Exhibit B hereto (the "Right Certificates"), evidencing one Right
for each share of Common Stock so hold. As of and after the
Distribution Date, the Rights shall be evidenced solely by such
Rights Certificates.
As soon as practicable following the Record Date, the
Company shall send a copy of a Summary of Rights, in
substantially the form attached hereto as Exhibit C (the "Summary
of Rights"), by first-class, postage prepaid mail, to each record
holder of the Common Stock as of the close of business on the
Record Date, at the address of such holder shown on the records
of the Company. With respect to certificates for the Common Stock
outstanding as of the Record Date, until the Distribution Date
(or earlier redemption, expiration or termination of the Rights),
the Rights shall be evidenced by such certificates for the Common
Stock together with the Summary of Rights and the registered
holders of the Common Stock shall also be the registered holders
of the associated Rights. Until the Distribution Date (or
earlier redemption, expiration or termination of the Rights), the
surrender for transfer of any of the certificates for the Common
Stock outstanding on the Record Date, even without a copy of the
Summary of Rights attached thereto, shall also constitute the
transfer of the Rights associated with the Common Stock
represented by such certificate.
(b) Certificates issued for Common Stock
(including, without limitation, certificates issued upon transfer
or exchange of Common Stock) after the Record Date, but prior to
the earlier of the Distribution Date or the Expiration Date (as
such term is hereinafter defined), shall be deemed also to be
certificates for Rights, and shall have impressed, printed,
stamped, written or otherwise affixed onto them the following
legend:
This certificate also evidences and entitles the
holder hereof to certain Rights as set forth in a
Rights Agreement between Applied Magnetics Corporation
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and ChaseMellon Shareholder Services, L.L.C. (the
"Rights Agent") dated as of October 28, 1998 (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 Applied Magnetics
Corporation. Under certain circumstances, asset forth
in the Rights Agreement, such Rights may be redeemed,
may expire, or may be evidenced by separate
certificates and will no longer be evidenced by this
certificate. Applied Magnetics Corporation will mail
to the holder of this certificate a copy of the Rights
Agreement without charge within five days after receipt
of a written request therefor. Under certain
circumstances, Rights issued to Acquiring Persons (as
defined in the Rights Agreement) or certain related
persons and any subsequent holder of such Rights may
become null and void with respect to certain rights set
forth in Sections 11(a)(ii) and Section 13(a) of the
Rights Agreement.
With respect to such certificates containing the foregoing
legend, until the Distribution Date, the Rights associated with
the Common Stock represented by such certificates shall be
evidenced by such certificates alone and the surrender for
transfer of any of such certificates shall also constitute the
transfer of the Rights associated with the Common Stock
represented by such certificate.
Section 4. Form of Rights Certificates
(a) The Rights Certificates (and the forms of
election to purchase shares and of assignment to be printed or
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, 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 which the Rights may
from time to time be listed, or to conform to usage. Subject to
the provisions of Section 11 and Section 23 hereof, the Rights
Certificates, whenever distributed, shall be dated as of the
Record Date, and on the face shall entitle the holders thereof to
purchase such number of one one-hundredth of a share of Preferred
Stock as shall be set forth therein at the price per one one-
hundredth of a share set forth therein (the "Purchase Price"),
but the number of such shares and the Purchase Price shall be
subject to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to
Section 3(a) hereof that represents Rights beneficially owned by
an Acquiring Person or any associate or Affiliate thereof and any
Rights Certificate issued at any time upon the transfer of any
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<PAGE>
Rights to such an Acquiring Person or any Associate or Affiliate
thereof or to any nominee of such Acquiring Person, Associate or
Affiliate, and any Rights Certificate issued pursuant to
Section 6 or Section 11 upon transfer, exchange, replacement or
adjustment of any other Rights Certificate referred to in this
sentence, shall contain the following legend:
The Rights represented by this Rights Certificate
were issued to a Person who was an Acquiring
Person or an Affiliate or on Associate of an
Acquiring Person. This Rights Certificate and
the Rights represented hereby may become void to
the extent provided by, and under certain
circumstances as specified in, Section 7(e) of
the Rights Agreement.
The provisions of Section 7(e) of this Rights Agreement shall be
operative whether or not the foregoing legend is contained on any
such Rights Certificate.
Section 5. Countersignature and Registration. The
Rights Certificates shall be executed on behalf of the Company by
its Chairman of the Board, any Vice Chairman of the Board, any
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 either manually or by facsimile signature.
The Rights Certificates shall be manually countersigned by the
Rights Agent and shall not be valid for any purpose unless so
countersigned. In case any officer of the Company who shall have
signed any of the Rights Certificates shall cease to be such
officer of the Company before countersignature by the Rights
Agent and issuance and delivery by the Company, such Rights
Certificates, nevertheless, may be countersigned by the Rights
Agent, and issued and delivered by the Company with the same
force and effect as though the person who signed such Rights
Certificates had not ceased to be such officer of the Company;
and any Rights Certificates may be signed on behalf of the
Company by any person who, at the actual date of the execution of
such Rights Certificate, shall be a proper officer of the Company
to sign such Rights Certificate, although at the date of the
execution of this Rights Agreement any such person was not such
an officer.
Following the Distribution Date, the Rights Agent will
keep or cause to be kept, at one of its offices in Los Angeles,
California, 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.
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Section 6. Transfer, Split Up, Combination and
Exchange of Rights Certificates: Mutilated, Destroyed, Lost or
Stolen Rights Certificates. Subject to the provisions of
Section 15 hereof, at any time after the close of business on the
Distribution Date, and at or prior to the close of business on
the Expiration Date, any Rights Certificate or Certificates may
be transferred, split up, combined or exchanged for another
Rights Certificate or Rights Certificates, entitling the
registered holder to purchase a like number of shares of
Preferred Stock as the Rights Certificate or Rights Certificates
surrendered then entitled such holder to purchase. Any
registered holder desiring to transfer, split up, combine or
exchange any Rights Certificate shall make such request in
writing delivered to the Rights Agent, and shall surrender the
Rights Certificate or Rights Certificates to be transferred,
split up, combined or exchanged at the principal office of the
Rights Agent. Thereupon the Rights Agent shall countersign and
deliver to the Person entitled thereto a Rights Certificate or
Rights Certificates, as the case may be, as so requested. The
Company may require payment 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.
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 shall 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) The registered holder of any Rights
Certificate may exercise the Rights evidenced thereby (except as
otherwise provided herein) in whole or in part at any time after
the Distribution Date upon presentation of the Rights
Certificate, with the appropriate form of election to purchase on
the reverse side thereof duly executed, to the rights Agent at
the principal office of the Rights Agent, together with payment
of the Purchase Price for each one one-hundredth of a share of
Preferred Stock (or such other number of shares or other
securities) as to which the Rights are exercised, at or prior to
the earlier of (i) the close of business on November 4, 2008 (the
"Final Expiration Date"), or (ii) the time at which the Rights
are redeemed as provided in Section 24 hereof or (iii) the
consummation of a transaction contemplated by Section 13(d)
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hereof (such earlier time being herein referred to as the
"Expiration Date"). Notwithstanding any other provision of this
Agreement, any Person who prior to the Distribution Date becomes
a record holder of shares of Common Stock may exercise all of the
rights of a registered holder of a Rights Certificate with
respect to the rights associated with such shares of Common Stock
in accordance with and subject to the provisions of this
Agreement, including the provisions of Section 7(e) hereof, as of
the date such Person becomes a record holder of shares of Common
Stock.
(b) The Purchase Price for each one one-
hundredths share of Preferred Stock pursuant to the exercise of
a Right shall initially be $20, shall be subject to adjustment
from time to time as provided in Sections 11 and 23 hereof and
shall be payable in lawful money of the United States of America
in accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate
representing exercisable Rights, with the appropriate form of
election to purchase duly executed, accompanied by payment of the
Purchase Price for the shares (or other securities or property)
to be purchased and an amount equal to any applicable transfer
tax (as determined by the Rights Agent) in cash, or by certified
check or bank draft payable to the order of the Company, the
Rights Agent shall, subject to Section 21(k), 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) certificates for the number of shares 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, in its sole discretion, shall
have elected to deposit the shares of Preferred Stock issuable
upon exercise of the Rights hereunder into a depositary,
requisition from the depositary agent depositary receipts
representing such number of one one-hundredths 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 shall direct the depositary
agent to comply with such request, (ii) when appropriate,
requisition from the Company the amount of cash, if any, to be
paid in lieu of issuance of fractional shares in accordance with
Section 15, (iii) promptly 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) when appropriate, after receipt promptly deliver
such cask to or upon the order of the registered holder of such
Rights Certificate. In the event that the Company is obligated
to issue other securities of the Company, and/or distribute other
property pursuant to Section 11(a), the Company shall make all
arrangements necessary so that such other securities and/or
property are available for distribution by the Rights Agent, if
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<PAGE>
and when appropriate. In addition, in the case of an exercise of
the Rights by a holder pursuant to Section 11(a)(ii), the Rights
Agent shall return such Rights Certificate to the registered
holder thereof after imprinting, stamping or otherwise indicating
thereon that the rights represented by such Rights Certificate no
longer include the rights provided by Section 11(a)(ii) of the
Rights Agreement and if less than all the Rights represented by
such Rights Certificate were so exercised, the Rights Agent shall
indicate on the Rights Certificate the number of Rights
represented thereby which continue to include the rights provided
by Section 11(a)(ii).
(d) In case the registered holder of any Rights
Certificate shall exercise (except pursuant to Section 11(a)(ii))
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
the registered holder of such Rights Certificate or to his duly
authorized assigns, subject to the provisions of Section 15
hereof.
(e) Notwithstanding anything in this Agreement to
the contrary, if there occurs the transaction set forth in
Section 11(a)(ii) or Section 13(a) then any Rights that are or
were on or after the earlier of the Distribution Date or the
stock Acquisition Date beneficially owned by an Acquiring Person
or any Associate or Affiliate shall become void with respect to
the rights provided under Section 11(a)(ii) and Section 13(a) and
any holder of such Rights shall thereafter have no right to
exercise such Rights under the provisions of Section 11(a)(ii)
and Section 13(a).
(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 the certificate contained in the
appropriate form of election to purchase set forth on the reverse
side of the Rights Certificate surrendered for such exercise
shall have been properly completed and duly executed by the
registered holder thereof and the Company shall have been
provided with such additional evidence of the identity of the
Beneficial owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Rights
Certificates. All Rights Certificates surrendered for the
purpose of exercise, transfer, split up, combination or exchange
shall, if surrendered to the Company or any of its agents, be
delivered to the Rights Agent for cancellation or in canceled
form, or, if surrendered to the Rights Agent, shall be canceled
by it, and no Rights Certificates shall be issued in lieu thereof
except as expressly permitted by any of the provisions of this
Rights Agreement. The Company shall deliver to the Rights Agent
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<PAGE>
for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any other Rights Certificate purchased or
acquired by the Company otherwise than upon the exercise thereof.
The Rights Agent shall deliver all canceled Rights certificates
to the Company, or shall, at the written request of the Company
destroy such canceled Rights Certificates, and in such case shall
deliver a certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of
Preferred Stock. The Company covenants and agrees that it shall
cause to be reserved and kept available out of its authorized and
unissued shares of Preferred Stock, or any authorized and issued
shares of Preferred Stock hold in its treasury, the number of
shares of Preferred Stock that will be sufficient to permit the
exercise in full of all outstanding Rights and, after the
occurrence of an event specified in Section 11, shall so reserve
and keep available a sufficient number of shares of Preferred
Stock (and/or other securities) which may be required to permit
the exercise in full of the Rights pursuant to this Agreement.
So long as the shares of Preferred Stock (and, after
the occurrence of an event specified in Section 11, any other
securities) issuable upon the exercise of the Rights may be
listed on any national securities exchange, the Company shall use
its best efforts to cause, from and after such time as the Rights
become exercisable, all shares (or other securities) reserved for
such issuance to be listed on such exchange upon official notice
of issuance upon such exercise.
The Company covenants and agrees that it shall take all
such action as may be necessary to ensure that all shares of
Preferred Stock and/or other securities delivered upon exercise
of Rights shall, at the time of delivery of the certificates for
such shares or other securities (subject to payment of the
Purchase Price), be duly and validly authorized and issued fully
paid and nonassessable shares or securities.
The Company further covenants and agrees that it shall
pay when due and payable any and all federal and state transfer
taxes and charges which may be payable in respect of the issuance
or delivery of the Rights Certificates or of any certificates for
shares of Preferred Stock and/or other securities upon the
exercise of Rights. The Company shall not, however, be required
to pay any transfer tax which may be payable in respect of any
transfer or delivery of Rights Certificates to a person other
than, or in respect of the issuance or delivery of the shares of
Preferred Stock and/or other securities in 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 shares of Preferred Stock, and/or other
securities in a name other than that of the registered holder
upon the exercise of any Rights until such tax shall, have been
paid (any such tax being payable by the holder of such Rights
Certificate at the time of surrender) or until it has been
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<PAGE>
established to the Company's satisfaction that no such tax is
due.
The Company shall use its best efforts to (i) file, as
soon as practicable following the Distribution Date, a
registration statement under the Securities Act of 1933, as
amended (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 and the rules and regulations
thereunder) until the date of the expiration of the rights
provided by Section 11(a)(ii). The Company will also take such
action as may be appropriate under the blue sky laws of the
various states.
Section 10. Preferred Stock Record Date. Each
person in whose name any certificate for shares of Preferred
Stock (or other securities) is issued upon the exercise of Rights
shall for all purposes be deemed to have become the holder of
record of the shares of Preferred Stock (or other securities)
represented thereby on, and such certificate shall be dated, the
date upon which the Rights Certificate evidencing such Rights was
duly presented and payment of the Purchase Price (and any
applicable transfer taxes) was made; provided, however, that if
the date of such presentation and payment is a date upon which
the Preferred Stock (or other securities) transfer books of the
Company are closed, such person shall be deemed to have become
the record holder of such shares on, and such certificate shall
be dated, the next succeeding Business Day on which the Preferred
Stock (or other securities) transfer books of the Company are
open. Prior to the exercise of the rights evidenced thereby, the
holder of a Rights Certificate, as such, shall not be entitled to
any rights of a shareholder of the Company with respect to shares
for which the Rights shall be exercisable, including, without
limitation, the right to vote, to receive dividends or other
distributions or to exercise any preemptive rights, and shall not
be entitled to receive any notice of any proceedings of the
Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number and
Kind of Shares or Number of Rights. The Purchase Price, the
number 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
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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 in Section 7(e), 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 capital
stock issuable on such date, shall be proportionately adjusted so
that the holder of any Right exercised after such time shall be
entitled to receive the aggregate number and kind of shares of
capital stock and other securities which, if such Right had been
exercised immediately prior to such date and at a time when the
Preferred Stock transfer books of the Company were open, he would
have owned upon such exercise and been entitled to receive by
virtue of such dividend, subdivision, combination or
reclassification. If an event occurs which would require an
adjustment under both Section 11(a)(i) and Section 11(a)(ii), the
adjustment provided for in this Section 11(a)(i) shall be in
addition to, and shall be made prior to, any adjustment required
pursuant to Section 11(a)(ii).
(ii) In the event that any Person (other than
the Company, any subsidiary of the Company, any employee benefit
plan of the Company or any of its subsidiaries or any entity
holding securities of the Company organized, appointed or
established by the Company or any of its subsidiaries for or
pursuant to the terms of any such plan), alone or together with
its Affiliates and Associates, shall become an Acquiring Person
(except pursuant to a tender or 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 Board of
Directors who are not officers of the Company to be both adequate
and otherwise in the best interests of the Company and its
shareholders (other than the Person or an Affiliate or Associate
thereof on whose behalf the offer is being made) (a "Permitted
Offer")), then proper Provision shall be made so that each holder
of a Right, except as provided in Section 7(e) hereof, shall, for
a period of 60 days after the later of the occurrence of any such
event and the effective date of an appropriate registration
statement pursuant to Section 9, have a right to receive, upon
exercise thereof at the then current Purchase Price in accordance
with the terms of this Agreement, in lieu of shares 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-hundredths
of a share of Preferred Stock for which a Right is then
exercisable and (y) dividing that product by 50% of the current
market price per one share of Common Stock (determined pursuant
to Section 11(d)) on the date of the occurrence of the event set
forth in this subparagraph (ii) (such number of shares being
referred to as the "number of Adjustment Shares"); provided,
however, that if the transaction that would otherwise give rise
to the foregoing adjustment is also subject to the provisions of
Section 13 hereof shall apply and no adjustment shall be made
pursuant to this Section 11(a)(ii); and, provided, further, that
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in the event that a majority of the Board of Directors of the
Company is elected by stockholder action by written consent, then
for a period of 180 days following the effectiveness of such
action no offer by an Interested Person or Affiliate or Associate
of an Interested Person may be deemed a Permitted Offer.
(iii) In the event that there shall not
be sufficient treasury shares or authorized but unissued shares
of Common Stock to permit the exercise in full of the Rights in
accordance with the foregoing subparagraph (ii) and the Rights
become so exercisable, notwithstanding any other provision of
this Agreement, to the extent necessary and permitted by
applicable law and any agreements in effect on the date hereof to
which it is a party, each Right shall thereafter represent the
right to receive, upon exercise thereof at the then current
Purchase Price in accordance with the terms of this Agreement, a
number of shares, or units of shares, of (x) Common Stock (up to
the maximum number of shares of Common Stock which may
permissibly be issued using the allocation procedure specified in
the second sentence of Section 11(k)) and (y) preferred stock (or
other equity securities) of the Company, including, but not
limited to Preferred Stock, equal in the aggregate to the number
of Adjustment Shares where the Board of Directors of the Company
shall have deemed such shares or units, other than the shares of
Common Stock, to have at least the same economic value and voting
rights as the Common Stock (a "common stock equivalent') (one
one-hundredth of a share of Preferred Stock shall be deemed to be
a common stock equivalent); provided, however, if there are
unavailable sufficient shares (or fractions of shares) of Common
Stock and/or common stock equivalents, then the Company shall
take all such action as may be necessary to authorize additional
shares of Common Stock or common stock equivalents for issuance
upon exercise of the Rights, including the calling of a meeting
of shareholders; and provided, further, that the Company shall
issue no common stock equivalent upon exercise of the Rights
until the Company has first issued all authorized and unreserved
shares of Common Stock; and provided, further, that if the
Company is unable to cause sufficient shares of Common Stock
and/or common stock equivalents to be available for issuance upon
exercise in full of the Rights, then each Right shall thereafter
represent the right to receive the Adjusted Number of Common
Shares upon exercise at the Adjusted Purchase Price (as such
terms are hereinafter defined). As used herein, the term
Adjusted Number of Common Shares shall be equal to that number of
shares (or fractions of shares) of Common Stock (and/or shares or
units of common stock equivalents) equal to the product of
(z) the number of Adjustment Shares and (y) a fraction, the
numerator of which is the number of shares of Common Stock
(and/or shares or units of common stock equivalents) available
for issuance upon exercise of the Rights and the denominator of
which is the aggregate number of Adjustment Shares otherwise
issuable upon exercise in full of all Rights (assuming there were
sufficient shares of Common Stock available) (such fraction being
referred to as the "Proration Factor"). The Adjusted Purchase
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Price shall mean the product of the Purchase Price and the
Proration Factor. The Board of Directors may, but shall not be
required to, establish procedures to allocate the right to
receive Common Stock and common stock equivalents upon exercise
of the Rights among holders of Rights.
(b) If the Company shall fix a record date for
the issuance of rights, options or warrants to all holders of
Preferred Stock entitling them (for a period expiring within 45
calendar days after such record date) to subscribe for or
purchase Preferred Stock (or shares having the same or more
favorable rights, privileges and preferences as the 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 defined in Section 11(d))
per share of Preferred Stock on such record date, the Purchase
Price to be in effect after such record date shall be determined
by multiplying the Purchase Price in effect immediately prior to
such record date by a fraction, the numerator of which shall be
the 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 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 in a consideration part or all of which shall
be in a form other than cash, the value of such consideration
shall be determined reasonably and with good faith to the holders
of Rights 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. Shares of
Preferred Stock owned by or held for the account of the Company
shall not be deemed outstanding for the purpose of any such
computation. Such adjustment shall be made successively whenever
such a record date is fixed; and in the event that such rights or
warrants are not so issued, the Purchase Price shall be adjusted
to be the Purchase Price which would then be in effect if such
record date had not been fixed.
(c) If the Company shall fix a record date for
the making of 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
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earnings of the Company), assets (other than a dividend payable
in Preferred Stock, but including any dividend payable in stock
other than Preferred Stock) or subscription rights or warrants
(excluding those referred to in Section 11(b)), the Purchase
Price to be in effect after such record date shall be determined
by multiplying the Purchase Price in effect immediately prior to
such record date by a fraction, the numerator of which shall be
the current market price (as defined in Section 11(d)) per share
of Preferred Stock on such record date, less the fair market
value (as determined reasonably and with good faith to the
holders of Rights 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) of the
portion of the cash, assets or evidences of indebtedness so to be
distributed or of such subscription rights or warrants
distributable in respect of one share of Preferred Stock and the
denominator of which shall be the current market price per share
of the Preferred Stock. Such adjustments shall be made
successively whenever such a record date is fixed; and in the
event that such distribution is not so made, the Purchase Price
shall again be adjusted to be the Purchase Price which would be
in effect if such record date had not been fixed.
(d) (i) For the purpose of any computation
hereunder, other than in Section 11(a)(iii), the "current market
price" per share of Common Stock on any date shall be deemed to
be the average of the daily closing prices per share of such
Common Stock for the 30 consecutive Trading Days (as such term is
hereinafter defined) immediately prior to such date; provided,
however, that in the event that the current per share market
price of the Common Stock is determined during a period following
the announcement, by the issuer of such of 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 or (B) any subdivision, combination or
reclassification of such Common Stock, and prior to the
expiration of 30 Trading Days after the ex-dividend date for such
dividend or distribution, or the record date for such
subdivision, combination or reclassification, then, and in each
such case, the "current market price" 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,
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the average of the high bid and low asked prices in the over-the-
counter market, as reported by the National Association of
Securities Dealers, Inc. Automated 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 of Directors of the Company. If on such
date no market maker is making a market the Common Stock, the
fair value of such share on such date as determined reasonably
and with good faith by the Board of Directors of the Company
shall be used and shall be binding on Rights Agent. The term
"Trading Day" shall a day on which the principal national
security exchange on which the shares of Common Stock 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 an 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 fair value per share
determined reasonably a with good faith to the holders of Rights
by 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.
(ii) For the purpose of any computation
hereunder, the "current market price" per share (or one one-
hundredth of a 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 (or one one-hundredth of a
share) of Preferred Stock cannot be determined in the manner
provided above or if the Preferred Stock is not publicly held or
listed or traded in a manner described in clause (i) of this
Section 11(d), the "current market price" per share of Preferred
Stock shall be conclusively deemed to be an amount equal to 100
(as such number may be appropriately adjusted for such events as
stock splits, stock dividends and recapitalizations with respect
to the Common Stock occurring after the date of this Agreement)
multiplied by the current market price per share of the Common
Stock and the "current market price" per one one-hundredth of a
share of Preferred Stock shall be equal to the current market
price per share of the Common Stock (as appropriately adjusted).
If neither the Common Stock nor the Preferred Stock is publicly
held or so listed or traded, "current market price" per share
shall mean the fair value per share as determined in good faith
by the Board of Directors of the Company, whose determination
shall be described in a statement filed with the Rights Agent and
shall be conclusive for all purposes.
(e) Anything herein to the contrary
notwithstanding, no adjustment in the Purchase Price shall be
required unless such adjustment would require an increase or
decrease of at least 1% in the Purchase Price; provided, however,
that any adjustments which by reason of this Section 11(e) are
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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-hundred-thousandth of a share of Preferred Stock, as the
case may be. Notwithstanding the first sentence of this
Section 11(e), any adjustment required by this Section 11 shall
be made no later than the earlier of (i) three years from the
date of the transaction which mandates such adjustment or
(ii) the Expiration Date.
(f) If as a result of any provision of
Section 11(a), the holder of any Right thereafter exercised shall
become entitled to receive any shares of capital stock of the
Company other than Preferred Stock, thereafter the number of such
other shares so receivable upon exercise of any Right 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 shares contained in Section 11(a) through (c),
inclusive, and the provisions of Sections 7, 9, 10, 13 and 15
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 shares 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
Section 11(b) and (c), each Right outstanding immediately prior
to the making of such adjustment shall thereafter evidence the
right to purchase, at the adjusted Purchase Price, that number of
one one-hundredths of a share of Preferred Stock (calculated to
the nearest one-hundred-thousandth) obtained by (i) multiplying
(x) the number of one one-hundredths of a share of Preferred
Stock covered by a Right immediately prior to this adjustment by
(y) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price and (ii) dividing the product so
obtained by the Purchase Price in effect immediately after such
adjustment of the Purchase Price.
(i) The Company may elect on or after the date of
any adjustment of the Purchase Price to adjust the number of
Rights, in substitution for any adjustment in the number of
shares 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-hundredths of a share of Preferred Stock for which a Right
was exercisable immediately prior to such adjustment. Each Right
held of record prior to such adjustment of the number of Rights
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shall become that number of rights (calculated to the nearest
ten-thousandth) obtained by dividing the Purchase Price in effect
immediately prior to adjustment of the Purchase Price by the
Purchase Price in effect immediately after adjustment of the
Purchase Price. The Company shall make a public announcement of
its election to adjust the number of Rights, indicating the
record date for the adjustment, and, if known at the time, the
amount of the adjustment to be made. This record date may be the
date on which the Purchase Price is adjusted or any day
thereafter, but if the Rights Certificates have been issued,
shall be at least 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 15 hereof, the additional Rights to which such
holders shall be entitled as a result of such adjustment, or, at
the option of the Company, shall cause to be distributed to such
holders of record in substitution and replacement for the Rights
Certificates held by such holders prior to the date of
adjustment, and upon surrender thereof, if required by the
Company, new Rights Certificates evidencing all the Rights to
which such holders shall be entitled after such adjustment.
Rights Certificates so to be distributed shall be issued,
executed and countersigned in the manner provided for herein (and
may bear, at the option of the Company, the adjusted Purchase
Price) and shall be registered in the names of the holders of
record of Rights Certificates on the record date specified in the
public announcement.
(j) Irrespective of any adjustment or change in
the Purchase Price or the number of shares 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 share and the number of shares which were
expressed in the initial Rights Certificates issued hereunder.
(k) Before taking any action that would cause art
adjustment reducing the Purchase Price below the then par value,
if any, of the shares of Preferred Stock, Common Stock or other
securities 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 shares of Preferred
Stock, Common Stock or other securities at such adjusted Purchase
Price. If upon any exercise of the Rights, a holder is to
receive a combination of Common Stock and common stock
equivalents, a portion of the consideration paid upon such
exercise, equal to at least the then par value of a share of
Common Stock of the Company, shall be allocated as the payment
for each share of Common Stock of the Company so received.
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(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 issuing
to the holder of any Right exercised after such record date the
shares of Preferred Stock and other capital stock or securities
of the Company, if any, issuable upon such exercise over and
above the shares of Preferred Stock and other capital stock or
securities of the Company, if any, issuable upon such exercise on
the basis of the Purchase Price in effect prior to such
adjustment; provided, however, that the Company shall deliver to
such holder a due bill or other appropriate instrument evidencing
such holder's right to receive such additional shares upon the
occurrence of the event requiring such adjustment.
(m) (i) Anything to the contrary in this
Section 11 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 it in its sole discretion shall determine to be
advisable in order that any consolidation or subdivision of the
Preferred Stock, issuance wholly for cash of any shares of
Preferred Stock at less than the current market price, 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, stock dividends or issuance of rights, options
or warrants referred to hereinabove in this Section 11, hereafter
made by the Company to holders of its Preferred Stock shall not
be taxable to such shareholders.
(ii) Anything to the contrary in this
Section 11 notwithstanding, the Company shall also be permitted
to make such reductions in the Purchase Price, in addition to
those adjustments required by this Section 11, as and to the
extent that it in its sole discretion shall determine to be
advisable in order to reflect the Board of Directors' informed
prediction as to the likely market price of the Company's Common
Stock at the end of the term of the Agreement in the event that
the Expiration Date is extended.
(n) Anything in this Agreement to the contrary
notwithstanding, in the event that the Company shall at any. time
after the date of this Agreement and prior to the Distribution
Date (i) declare a dividend on the outstanding shares of Common
Stock payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock, (iii) combine the outstanding Common
Stock into a smaller number of shares, or (iv) issue any shares
of its capital stock in a reclassification of the outstanding
Common Stock, the number of Rights associated with each share of
Common Stock then outstanding, or issued or delivered thereafter
but prior to the Distribution Date, shall be proportionately
adjusted so that the number of Rights thereafter associated with
each share of Common Stock following any such event shall equal
the result obtained by multiplying the number of Rights
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associated with each share of Common Stock immediately prior to
such event by a fraction the numerator of which shall be the
total number of shares of Common Stock outstanding immediately
prior to the occurrence of the event and the denominator of which
shall be the total number of shares of Common Stock outstanding
immediately following the occurrence of such event.
(o) The exercise of Rights under Section
11(a)(ii) shall only result in the loss of rights under
Section 11(a)(ii) to the extent so exercised and shall not
otherwise affect the rights represented by the Rights under this
Rights Agreement, including the rights represented by Section 13.
Section 12. Certificate of Adjusted Purchase Price
or Number of Shares. Whenever an adjustment is made as provided
in Sections 11 and 13 hereof, the Company shall (a) promptly
prepare a certificate setting forth such adjustment and a brief
statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent and with each transfer
agent for the Preferred Stock and the Common Stock a copy of such
certificate and (c) mail a brief summary thereof to each holder
of a Rights Certificate in accordance with Section 26 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 or Earning Power.
(a) In the event that, following the Stock
Acquisition Date, directly or indirectly, (x) the Company shall
consolidate with, or merge with and into, any other Person,
(y) any Person shall consolidate with the Company, or merge with
and into the Company and the Company shall be the continuing or
surviving corporation of such merger (other than, in the case of
either transaction described in (x) or (y), a merger or
consolidation which would result in all of the Voting Power
represented by the securities of the Company outstanding
immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into securities of
the surviving entity) all of the Voting Power represented by the
securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation and the holders of
such securities not having changed as a result of such merger or
consolidation), or (z) the Company shall sell, mortgage or
otherwise transfer (or one or more of its subsidiaries shall
sell, mortgage or otherwise transfer), in one or more
transactions, assets or earning power aggregating more than 50%
of the assets or earning power of the Company and its
subsidiaries (taken as a whole) to any other Person, then, and in
each such case, proper provision shall be made so that
(i) following the Distribution Date, each holder of a Right,
shall 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 shares of freely tradeable Common Stock
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of the Principal Party (as hereinafter defined), free and clear
of liens, rights of call or first refusal, encumbrances or other
adverse claims, as shall be equal to the result obtained by (x)
multiplying the then current Purchase Price by the number of one
one-hundredths of a share of Preferred Stock for which a Right is
then exercisable (without taking into account any adjustment
previously made pursuant to Section 11(a)(ii) hereof) and
(y) dividing that product by 50% of the current market price per
share of the Common Stock of such Principal Party (determined
pursuant to Section 11(d) hereof) on the date of consummation of
such consolidation, merger, sale or transfer; (ii) such Principal
Party shall thereafter be liable for, and shall assume, by virtue
of such consolidation, merger, sale or transfer, 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 to such Principal
Party; and (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 accordance with Section 9
hereof) in connection with such consummation 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.
(b) "Principal Party" shall mean:
(i) in the case of any transaction described
in (x) or (y) of the first sentence of this Section 13,
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 the merger or consolidation (including, if
applicable, the Company, if it is the surviving
corporation); and
(ii) in the case of any transaction described
in (z) of the first sentence in this Section 13, the
Person that is the party receiving the greatest portion
of the assets or earning power transferred pursuant to
such transaction or transactions;
provided, however, that in any such case, (1) if the Common Stock
of such Person is not at such time and has not been continuously
over the preceding 12-month period registered under Section 12 of
the Exchange Act, and such Person is a direct or indirect
subsidiary or Affiliate of another Person, "Principal Party"
shall refer to such other Person; (2) in case such Person is a
subsidiary, directly or indirectly, or Affiliate of more than on
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; and (3) in case such Person is
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owned, directly or indirectly, by a joint venture formed by two
or more Persons that are not owned, directly or indirectly, by
the same Person, the rules set forth in (1) and (2) above shall
apply to each of the chains of ownership having an interest in
such joint venture as if such party were a "Subsidiary" of both
or all of such joint ventures and the Principal Parties in each
such chain shall bear the obligations set forth in this
Section 13 in the same ratio as their direct or indirect
interests in such Person bear to the total of such Interests.
(c) The Company shall not consummate any such
consolidation, merger, sale or transfer unless the Principal
Party shall have a sufficient number of authorized shares of its
Common Stock that have not been issued or reserved for issuance
to permit the exercise in full of the Rights in accordance with
this Section 13 and unless prior thereto the Company and each
Principal Party and each other Person who may become a Principal
Party as a result of such consolidation, merger, sale or transfer
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,
sale or transfer of assets mentioned in paragraph (a) of this
Section 13, the Principal Party at its own expense shall:
(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, will use its best efforts to
cause such registration statement to become effective
as soon as practicable after such filing and will use
its best efforts to cause such registration statement
to remain effective (with a prospectus at all times
meeting the requirements of the Act) until the
Expiration Date;
(ii) use its best efforts to qualify or
register the Rights and the securities purchasable upon
exercise of the Rights under the blue sky laws of such
jurisdictions as may be necessary or appropriate; and
(iii) deliver to holders of the Rights
historical financial statements for the Principal Party
and each of its Affiliates which comply in all material
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.
The rights under this Section 13 shall be in addition to the
rights to exercise Rights and adjustments under Section 11(a)(ii)
and shall survive any exercise thereunder.
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(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 Permitted Offer (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 Common Share paid to
all holders of Common Stock whose shares were purchased pursuant
to such Permitted Offer and (iii) the form of consideration being
offered to the remaining holders of Common Stock pursuant to such
transaction is the same as the form of consideration paid
pursuant to such Permitted Offer. Upon consummation of any such
transaction contemplated by this subsection (d), all Rights
hereunder shall expire.
Section 14. Additional Covenants.
(a) After the Stock Acquisition Date, the Company
covenants and agrees that it shall not (i) consolidate with,
(ii) merge with or into, or (iii) sell or transfer to, in one or
more transactions, assets or earning power aggregating more than
50% of the assets or earning power of the Company and its
subsidiaries taken as a whole, any other Person if at the time of
or after such consolidation merger or sale there are any charter
or by-law provisions or any rights, warrants or other instruments
outstanding or any other action taken which would diminish or
otherwise eliminate the benefits intended to be afforded by the
Rights. The Company shall not consummate any such consolidation,
merger or sale unless prior thereto the Company and such other
Person shall have executed and delivered to the Rights Agent a
supplemental agreement evidencing compliance with this
subsection.
(b) The Company covenants and agrees that, after
the Stock Acquisition Date, it will not, except as permitted by
Section 24 hereof, take any action the purpose or effect of which
is to diminish or otherwise eliminate the benefits intended to be
afforded by the Rights.
Section 15. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue
fractions of Rights, except prior to the Distribution Date as
provided in Section 11(n), or to distribute Rights Certificates
which evidence fractional Rights. In lieu of such fractional
Rights, there shall be paid to the registered holders of the
Rights Certificates with regard to which such fractional Rights
would otherwise be issuable, an amount in cash equal to the same
fraction of the current market value of a whole Right. For the
purposes of this Section 15(a), the current market value of a
whole Right shall be the closing price of the Rights for the
Trading Day immediately prior to the date on which such
fractional Rights would have been otherwise issuable. The
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closing price of the Rights for any day shall be the last sale
price, 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
reasonably and with good faith to the holders of Rights by the
Board of Directors of the Company shall be used and shall be
binding on the Rights Agent.
(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-hundredth 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-
hundredth of a share of Preferred Stock). Fractions of shares of
Preferred Stock in integral multiples of one one-hundredth of a
share of Preferred Stock may at the election of the Company, be
evidenced by depositary receipts, pursuant to an appropriate
agreement between the Company and a depositary selected by it,
provided that such agreement shall provide that the holders of
such depositary receipts shall have all the rights, privileges
and preferences to which they are entitled as beneficial owners
of the shares of Preferred Stock represented by such depositary
receipts. In lieu of fractional shares of Preferred Stock that
are not integral multiples of one one-hundredth of a share of
Preferred Stock, the Company may pay to the registered holders of
Right Certificates at the time such Rights are exercised as
herein provided an amount in cash equal to the same fraction of
the current market value of one one-hundredth of a share of
Preferred Stock. For purposes of this Section 15(b), the current
market value of one one-hundredth of a share of Preferred Stock
shall, be one one-hundredth of the closing price of a share of
Preferred Stock (as determined pursuant to Section 11(d)(ii)
hereof) for the Trading Day immediately prior to the date of such
exercise.
(c) Following the occurrence of one of the
transactions or events specified in Section 11 giving rise to the
right to receive common stock equivalents (other than Preferred
Stock) or other securities upon the exercise of a Right, the
Company shall not be required to issue fractions of shares or
units of such common stock equivalents or other securities upon
exercise of the Rights or to distribute certificates which
evidence fractional shares of such common stock equivalents or
other securities. In lieu of fractional shares or units of such
common stock equivalents or other securities, the Company may pay
to the registered holders of Right Certificates at the time such
Rights are exercised as herein provided an amount in cash equal
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to the same fraction of the current market value of a share or
unit of such common stock equivalent or other securities. For
purposes of this Section 15(c), the current market value shall be
determined in the manner set forth in Section 11(d) hereof for
the Trading Day immediately prior to the date of such exercise
and, if such common stock equivalent is not traded, each such
common stock equivalent shall have the value of one one-hundredth
of a share of Preferred Stock.
(d) Except as otherwise expressly provided
herein, 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.
Section 16. Rights of Action. All rights of action
in respect of this Agreement are vested in the respective
registered holders of the Rights Certificates and, prior to the
Distribution Date, the registered holders of the Common Stock);
and any registered holder of any Rights Certificate (or, prior to
the Distribution Date, of the Common Stock), without the consent
of the Rights Agent or of the holder of any other Rights
Certificate (or, prior to the Distribution Date, of the Common
Stock), may, in his 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. Holders of Rights shall be entitled to recover the
reasonable costs and expenses, including attorneys' fees,
incurred by them in any action to enforce the provisions of this
Agreement.
Section 17. Agreement of Rights Holders. Every
holder of a Right by accepting the same consents and agrees with
the Company and the Rights Agent and with every other holder of
a Right that:
(a) prior to the Distribution Date, the Rights
will be transferable only in connection with the transfer of
Common Stock;
(b) after the Distribution Date, the Rights
Certificates are transferable only on the registry books of the
Rights Agent if surrendered at the principal office of the Rights
Agent, duly endorsed or accompanied by a proper instrument of
transfer; and
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(c) the Company and the Rights Agent may deem and
treat the person in whose name a Rights Certificate (or, prior to
the Distribution Date, the associated Common Stock certificate)
is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or
writing on the Rights Certificates or the associated Common Stock
certificate made by anyone other than the Company or the Rights
Agent) for all purposes whatsoever, and neither the Company nor
the Rights Agent shall be affected by any notice to the contrary.
Section 18. 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 shares of Preferred Stock, Common Stock
or any other securities of the Company which may at any time be
issuable on the exercise of the Rights represented thereby, nor
shall anything contained herein or in any Rights Certificate be
construed to confer upon the holder of any Rights Certificate, as
such, any of the rights of a shareholder of the Company or any
right to vote for the election of directors or upon any matter
submitted to shareholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive notice of
meetings or other actions affecting shareholders (except as
provided in Section 25 hereof), or to receive dividends, or
subscription rights, or otherwise, until the Right or Rights
evidenced by such Rights Certificate shall have been exercised in
accordance with the provisions thereof.
Section 19. Concerning the Rights Agent. The
Company agrees to pay to the Rights Agent reasonable compensation
for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and
counsel fees and disbursements and other disbursements incurred
in the administration and execution of this Agreement and the
exercise and performance of its duties hereunder. The Company
also agrees to indemnify the Rights Agent for, and to hold
harmless against, any loss, liability, or expense, incurred
without negligence, bad faith or willful misconduct on the part
of the Rights Agent, for anything done or omitted by the Rights
Agent in connection with the acceptance and administration of
this Agreement, including the costs and expenses of defending
against any claim of liability arising therefrom, directly or
indirectly.
The Rights Agent shall be protected and shall incur no
liability for or in respect of any action taken, suffered or
omitted by it in connection with its administration of this
Agreement in reliance upon any Rights Certificate or certificate
for 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.
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<PAGE>
Section 20. Merger or Consolidation or Change of
Name of Rights Agent. Any corporation into which the Rights
Agent or any successor Rights Agent may be merged or with which
it may be consolidated, or any corporation resulting from any
merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any corporation
succeeding to the corporate trust business of the Rights Agent or
any successor Rights Agent, shall be the successor to the Rights
Agent under this Agreement without the execution or filing of any
paper or any further act an the part of any of the parties
hereto, provided that such corporation would be eligible for
appointment as a successor Rights Agent under the provisions of
Section 22 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 the 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 in this Agreement.
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 21. Duties of Rights Agent. The Rights
Agent undertakes the duties and obligations imposed by this
Agreement upon the following terms and conditions, by all of
which the Company and the holders of Rights Certificates, by
their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal
counsel selected by it (who may be legal counsel for the
Company), and the opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to
any action taken or omitted by it in good faith and in accordance
with such opinion.
(b) Whenever in the performance of its duties
under this Agreement the Rights Agent shall deem it necessary or
desirable that any fact or matter (including, without limitation,
the identity of any Acquiring Person) be proved or established by
the Company prior to taking or suffering any action hereunder,
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<PAGE>
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, any Vice Chairman of the Board, any 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 to the Rights Agent for any action taken or
suffered in good faith by it under the provisions of this
Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder
only for its own negligence, bad faith or willful misconduct.
Anything to the contrary notwithstanding, in no event shall the
Rights Agent be liable for special, indirect, incidental or
consequential loss or damage of any kind whatsoever, even if the
Rights Agent has been advised of the likelihood of such loss or
damage.
(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 (except as to the
fact that it has countersigned the Rights Certificates) or be
required to verify the same, but all such statements and recitals
are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any
responsibility in respect of the validity of this Agreement or
the execution and delivery hereof (except the due execution
hereof by the Rights Agent) or in respect of the validity or
execution of any Rights Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the
Company of any covenant or condition contained in this Agreement
or in any Rights Certificate; nor shall it be responsible for any
adjustment required under the provisions of Section 11 or 13
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 be
responsible for any determination by the Board of Directors of
the Company of the current market value of the Rights or
Preferred Stock or Common Stock pursuant to the provisions of
Section 15 hereof; nor shall it by any act hereunder be deemed to
make any representation or warranty as to the authorization or
reservation of any shares of Preferred Stock or other securities
to be issued pursuant to this Agreement or any Rights Certificate
or as to whether any shares of Preferred Stock or other
securities will, when so issued, be validly authorized and
issued, fully paid and nonassessable.
(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
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<PAGE>
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 and certificates delivered pursuant to
any provision hereof from the Chairman of the Board, any Vice
Chairman of the Board, any President, any vice President, the
Secretary, any Assistant Secretary, the Treasurer or any
Assistant Treasurer of the Company, and is authorized to apply to
such officers for advice or instructions in connection with its
duties, and it shall not be liable for any action taken or
suffered to be taken by it in good faith in accordance with
instructions of any such officer.
(h) The Rights Agent and any shareholder,
director, officer or employee of the Rights Agent may buy, sell
or deal in any of the Rights or other securities of the Company
or become pecuniarily interested in any transaction in which the
company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were
not Rights Agent under this Agreement. Nothing herein shall
preclude the Rights Agent from acting in any other capacity for
the Company or for any other legal entity.
(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, omission, default, neglect or misconduct of any such
attorneys or agents or for any loss to the Company or to the
holders of the Rights resulting from any such act, omission,
default, neglect or misconduct, provided reasonable care was
exercised in the selection and continued employment thereof.
(j) No provision of this Agreement shall require
the Rights Agent to expend or risk its own funds or otherwise
incur any financial liability in the performance of any of its
duties hereunder or in the exercise of its rights if there shall
be reasonable grounds for believing that repayment of such funds
or adequate indemnification against such risk or liability is not
reasonably assured to it.
(k) If, with respect to any Rights Certificate
surrendered to the Rights Agent for exercise or transfer, the
certificate attached to the form of assignment or form of
election to purchase, as the case may be, has either not been
completed or indicates an affirmative response to clause 1 and/or
2 thereof, the Rights Agent shall not take any further action
with respect to such requested exercise of transfer without first
consulting with the Company.
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Section 22. Change of Rights Agent. The Rights
Agent or any successor Rights Agent may resign and be discharged
from its duties under this Agreement upon 30 days' notice in
writing mailed to the Company and to each transfer agent of the
Common Stock and Preferred Stock by registered or certified mail,
and to holders of the Rights Certificates by first-class mail.
The Company may remove the Rights Agent or any successor Rights
Agent upon 30 days' notice in writing, mailed to the Rights Agent
or successor Rights Agent, as the case may be, and to each
transfer agent of the Common Stock and Preferred Stock by
registered or certified mail, and to the holders of the Rights
Certificates by first-class mail. If the Rights Agent shall
resign or be removed or shall otherwise become incapable of
acting, the Company shall appoint a successor to the Rights
Agent. If the Company shall fail to make such appointment within
a period of 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 the
registered holder of any Rights Certificate may apply to any
court of competent jurisdiction for the appointment of a new
Rights Agent. Any successor Rights Agent, whether appointed by
the Company or by such a court, shall be (a) a corporation
organized and doing business under the laws of the United States
or of the State of California (or of any other state of the
United States so long as such corporation is authorized to do
business as a banking institution in the State of California), in
good standing, having a principal office in the State of
California, which is authorized under such laws to exercise
corporate trust powers and is subject to supervision or
examination by federal or state authority and which has at the
time of its appointment as Rights Agent a combined capital and
surplus of at least $50,000,000 or (b) an affiliate of a
corporation described in clause (a) of this sentence. After
appointment, the successor Rights Agent shall be vested with 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 Preferred Stock,
and mail a notice thereof in writing to the registered holders of
the Rights Certificates. Failure to give any notice provided for
in this Section 22, however, or any defect therein, shall not
affect the legality or validity of the resignation or removal of
the Rights Agent or the appointment of the successor Rights
Agent, as the case may be.
Section 23. Issuance of New Rights Certificate.
Notwithstanding any of the provisions of this Agreement or of the
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Rights to the contrary, the Company may, at its option, issue new
Rights Certificates evidencing Rights in such form as may be
approved by its Board of Directors to reflect any adjustment or
change in the Purchase Price per share 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.
Section 24. Redemption and Termination.
(a) (i) The Board of Directors of the Company
may, at its option, at any time prior to the earlier of (x) the
time that any person becomes an Acquiring Person or (y) 5:00
P.M., Los Angeles time, 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, 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").
(ii) In addition, the Board of Directors of
the Company may redeem all but not less than all of the
then outstanding Rights at the Redemption Price
following the occurrence of a Stock Acquisition Date
but prior to any event described in Section 13(a)
either (x) in connection with any event specified in
Section 13(a) in which all holders of Common Stock are
treated alike and not involving (other than as a holder
of Common Stock being treated like all other such
holders) an Acquiring Person or an Affiliate or
Associate of an Acquiring Person or any other Person in
which such Acquiring Person, Affiliate or such
Associate has any interest, or any other Person acting
directly or indirectly on behalf of or in association
with any such Acquiring Person, Affiliate or Associate,
or (y) following the occurrence of an event set forth
in, and the expiration of any period during which the
holder of Rights may exercise the rights under,
Section 11(a)(ii) if and for as long as the Acquiring
Person is rot thereafter the Beneficial Owner of
securities representing 20% or more of the outstanding
shares of the Voting Power, and at the time of
redemption there are no other persons who are Acquiring
Persons.
(b) In the case of a redemption permitted under
Section 24(a)(i), immediately upon the action of the Board of
Directors of the Company ordering the redemption of the Rights,
evidence of which shall have been filed with the Rights Agent and
without any further action and without any notice, the right to
exercise the Rights will terminate and the only right thereafter
of the holders of Rights shall be to receive the Redemption
Price. In the case of a redemption permitted only under
Section 24(a)(ii), evidence of which shall have been filed with
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the Rights Agent, the right to exercise the Rights will terminate
and represent only the right to receive the Redemption Price only
after ten Business Days following the giving of notice of such
redemption to the holders of such Rights if no event set forth in
Section 11(a)(ii) shall have occurred, and, if such event shall
have occurred, upon the later of ten Business Days following the
giving of such notice or the expiration of any period during
which the rights under Section 11(a)(ii) may be exercised.
Within ten days after the action of the Board of Directors
ordering any such 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
the Rights Agent and to all such holders at their last addresses
as they appear upon the registry books of the Rights Agent or,
prior to the Distribution Date, on the registry books of the
Transfer Agent for the Common Stock. Any notice which is mailed
in the manner herein provided shall be deemed given, whether or
not the holder receives the notice. Each such notice of
redemption will state the method by which the payment of the
Redemption Price will be made.
In the case of a redemption permitted under
Section 24(a)(i) or (ii), the Company may, at its option,
discharge all of its obligations with respect to the Rights
(i) issuing a press release announcing the manner of redemption
of the Rights and (ii) mailing payment of the Redemption Price to
the registered holders of the Rights at their last addresses as
they appear on the registry books of the Rights Agent or, prior
to the Distribution Date, on the registry books of the Transfer
Agent of the Common Stock, and upon such action, all outstanding
Rights Certificates shall be null and void without any further
action by the Company.
(c) Notwithstanding the provisions of Section 24
(a), in the event that a majority of the Board of Directors of
the Company is elected by stockholder action by written consent,
then for a period of 180 days following the effectiveness of such
action the Rights shall not be redeemed if such redemption is
reasonably likely to have the purpose or effect of facilitating
a Transaction with an Interested Person.
Section 25. Notice of Certain Events. In case the
Company shall propose (a) 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 (b) 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
(c) to effect any reclassification of its Preferred Stock (other
than a reclassification involving only the subdivision of
outstanding shares of Preferred Stock), or (d) to effect any
consolidation or merger into or with, or to effect any sale or
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other transfer (or to permit one or more of its subsidiaries to
effect any sale or other transfer), in one or more transactions,
of more than 50% of the assets or earning power of the Company
and its subsidiaries (taken as a whole) to, any other Person, or
(e) 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, 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 (a)
or (b) above at least 20 days prior to the record date for
determining holders of the shares of Preferred Stock for purposes
of such Action, and in the case of any such other action, at
least 20 days prior to the date of the taking of such proposed
action or the date of participation therein by the holders of the
shares of Preferred Stock whichever shall be the earlier.
In case any of the events set forth in
Section 11(a)(ii) of this Agreement shall occur, then, in any
such case, the Company shall as soon as practicable thereafter
give to each holder of a Rights Certificate, 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.
Section 26. Notices. Notices or demands authorized
by this Agreement to be given or made by the Rights Agent or by
the holder of any Rights Certificate to or on the Company shall
be sufficiently given or made if sent by first-class mail,
postage prepaid, addressed (until another address is filed in
writing with the Rights Agent) as follows:
Applied Magnetics Corporation
75 Robin Hill Road
Goleta, California 93117
Attention: Secretary
Subject to the provisions of Section 22, 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 Right
Agent shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed
in writing with the Company) as follows:
ChaseMellon Shareholder Services, L.L.C.
85 Challenger Road
Ridgefield Park, New Jersey 07660
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Notices or demands authorized by this Agreement to be given made
by the Company or the Rights Agent to the holder of any Rights
Certificate 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 the
Company.
Section 27. Supplements and Amendments. The Company
and the Rights Agent may from time to time supplement or amend
this Agreement without approval of any holders of Right
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) prior to the Distribution Date, to change or supplement the
provisions hereunder which the Company may deem necessary or
desirable or (iv) following the Distribution Date, 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. Notwithstanding the preceding sentence, in the
event that a majority of the Board of Directors of the Company is
elected by stockholder action by written consent, then for a
period of 180 days following the effectiveness of such action
this Agreement shall not be amended or supplemented in any manner
reasonably likely to have the purpose or effect of facilitating
a Transaction with an Interested Person. Upon the delivery of a
certificate from an appropriate officer of the Company which
states that the proposed supplement or amendment is in compliance
with the terms of this Section 27, the Rights Agent shall execute
such supplement or amendment unless the Rights Agent shall have
determined in good faith that such supplement or amendment would
adversely affect its interests under this Agreement. Prior to
this Distribution Date, the interests of the holders of Rights
shall be deemed coincident with the interests of the holders of
Common Stock.
Section 28. Determination 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
or any other securities 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 as in effect on the date of this Agreement. 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 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
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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 Certificates and all other parties, and (y) not subject
the Board to any liability to the holders of the Rights
Certificates.
Section 29. 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 30. Benefits of this Agreement. Nothing in
this Agreement shall be construed to give to any person or
corporation other than the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the
Distribution Date, the Common Stock) any legal or equitable
right, remedy or claim under this Agreement; but this Agreement
shall be for the sole and exclusive benefit of the Company, the
Rights Agent and the registered holders of the Rights
Certificates (and, prior to the Distribution Date, 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.
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
to be made and to be performed entirely within such State.
Section 33. Counterparts. This Agreement may be
executed in any number of counterparts and each of such
counterparts shall for all purposes be deemed to be an original,
and all such counterparts shall together constitute but one and
the same instrument.
Section 34. Descriptive Headings. Descriptive
headings of the several Sections of this Agreement are inserted
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for convenience only and shall not control or affect the meaning
or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and their respective corporate
seals to be hereunto affixed and attested, all as of the day and
year first above written.
Attest: APPLIED MAGNETICS CORPORATION
/s/ Peter T. Altavilla By /s/ Craig D. Crisman
- ------------------------- ------------------------
Name: Peter T. Altavilla Name: Craig D. Crisman
Title: Secretary Title: Chief Executive Officer
Attest: CHASEMELLON SHAREHOLDER
SERVICES, L.L.C.
/s/ Ronald Lug By /s/ Sharon Knepper
- ------------------------ --------------------------
Name: Ronald Lug Name: Sharon Knepper
Title: Vice President Title: Administrator
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EXHIBIT A
---------
AMENDED CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
OF SERIES A PARTICIPATING PREFERRED STOCK
of
APPLIED MAGNETICS CORPORATION
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
We, Craig D. Crisman, Chief Executive Officer, and Peter T.
Altavilla, Secretary, of Applied Magnetics Corporation, a corporation organized
and existing under the General Corporation Law of the State of Delaware, in
accordance with the provisions of Section 3 thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors
by the Certificate of Incorporation of the said Corporation, the said Board of
Directors on October 19, 1988, adopted the following resolution creating a
series of 200,000 shares of Preferred Stock designated as Series A Participating
Preferred Stock:
RESOLVED, that pursuant to the authority vested in the Board of
Directors of this Company in accordance with the provisions of its Certificate
of Incorporation, a series of Preferred Stock of the Company be and it hereby is
created, and that the designation and amount thereof and the 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 Participating Preferred Stock" $0.10 par value per
share, and the number of shares constituting such series shall be 200,000. Such
number of shares may be increased or decreased by resolution of the Board of
Directors; provided, that no decrease shall reduce the number of shares of
Series A Participating Preferred Stock to a number less than that of the shares
then outstanding plus the number of shares issuable upon exercise of outstanding
rights, options or warrants or upon conversion of outstanding securities issued
by the Corporation.
Exhibit A
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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 Participating Preferred Stock with respect to dividends, the holders
of shares of Series A Participating Preferred Stock in preference to the holders
of shares of Common Stock, par value $.10 per share (the "Common Stock"), of the
Corporation and any other junior stock, shall be entitled to receive, when, as
and if declared by the Board of Directors out of funds legally available for the
purpose, quarterly dividends payable in cash on the first day of March, June,
September and December in each year (each such date being referred to herein as
a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or fraction of a share of
Series A Participating Preferred Stock in an amount per share (rounded to the
nearest cent) equal to the greater of (a) $1.00, or (b) subject to the provision
for adjustment hereinafter set forth, 100 times the aggregate per share amount
of all cash dividends, and 100 times the aggregate per share amount (payable in
kind) of all non-cash dividends or other distributions other than a dividend
payable in shares of Common Stock or a subdivision of the outstanding shares of
Common Stock (by reclassification or otherwise), declared on the Common Stock,
since the immediately preceding Quarterly Dividend Payment Date, or, with
respect to the first Quarterly Dividend Payment Date, since the first issuance
of any share or fraction of a share of Series A Participating Preferred Stock.
In the event the Corporation shall at any time after November 4, 1988 (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 Participating
Preferred Stock were entitled immediately prior to such event under clause (b)
of the preceding sentence shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
(B) The Corporation shall declare a dividend or distribution on the
Series A 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 $1.00 per share on the
Series A Participating Preferred Stock shall nevertheless be payable on such
subsequent Quarterly Dividend Payment Date.
Exhibit A
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<PAGE>
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Participating Preferred Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares of Series A
Participating Preferred Stock unless the date of issue of such shares is prior
to the record date for the first Quarterly Dividend Payment Date, in which case
dividends on such shares shall begin to accrue from the date of issue of such
shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a
date after the record date for the determination of holders of shares of Series
A 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 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 Participating Preferred Stock
entitled to receive payment of a dividend or distribution declared thereon,
which record date shall be no more than 30 days prior to the date fixed for the
payment thereof.
Section 3. Voting Rights. The holders of shares of Series A
Participating Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth,
each share of Series A Participating Preferred Stock shall entitle the holder
thereof to 100 votes on all matters submitted to a vote of the shareholders of
the Corporation.
(B) Except as otherwise provided herein or by law, the holders of
shares of Series A 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 shareholders of the Corporation.
(C) (i) If at any time dividends on any Series A 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
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 Participating Preferred Stock) with
Exhibit A
-3-
Page 52 of 71
<PAGE>
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 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 shareholders, and thereafter at annual meetings of
shareholders, 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 Participating
Preferred Stock.
(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 shareholder or shareholders
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 Corporate
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 10 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 shareholder or
shareholders owning in the aggregate not less than ten percent (10%) of the
Exhibit A
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Page 53 of 71
<PAGE>
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 shareholders.
(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.
(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, or pursuant to, the Restated 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 Restated
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, even though
less than a quorum.
(D) Except as set forth herein, holders of Series A 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 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 Participating
Preferred Stock outstanding shall have been paid in full, the Corporation shall
not
Exhibit A
-5-
Page 54 of 71
<PAGE>
(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 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 Participating Preferred Stock except dividends paid
ratably on the Series A 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 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
Participating Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any
shares of Series A Participating Preferred Stock or any shares of
stock ranking on a parity with the Series A 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 Participating
Preferred Stock purchased or otherwise acquired by the Corporation in any manner
Exhibit A
-6-
Page 55 of 71
<PAGE>
whatsoever shall be retired and canceled promptly after the acquisition thereof.
All such shares shall upon their cancellation become authorized but unissued
shares of Preferred Stock and may be reissued as part of a new series of
Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein.
Section 6. Liquidation, Dissolution or Winding Up.
(A) Upon any liquidation (voluntary or otherwise), dissolution or
winding up of the Corporation, no distribution shall be made to the holders of
shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Participating Preferred Stock unless,
prior thereto, the holders of shares of Series A Participating Preferred Stock
shall have received per share, the greater of 100 times $20 or 100 times the
payment made per share of Common 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 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)
100 (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
Participating Preferred Stock and Common Stock, respectively, holders of Series
A 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.
(B) In the event there are not sufficient assets available to permit
payment in full of the Series A Liquidation Preference and the liquidation
preference of all other series of Preferred Stock, if any, which rank on a
parity with the Series A 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 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.
Exhibit A
-7-
Page 56 of 71
<PAGE>
(C) In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the Adjustment Number in effect immediately prior to such event shall be
adjusted by multiplying such Adjustment Number by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
Series A 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 100 times the aggregate amount of
stock, securities, cash and/or any other property (payable in kind), as the case
may be, into which or for which each share of Common Stock is changed or
exchanged. In the event the Corporation shall at any time 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 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 are
outstanding immediately prior to such event.
Section 8. Redemption. The shares of Series A Participating
Preferred Stock shall not be redeemable.
Section 9. Ranking. The Series A 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. The Restated Certificate of Incorporation of
the Corporation shall not be further amended in any manner which would
materially alter or change the powers, preferences or special rights of the
Series A Participating Preferred Stock so as to affect them adversely without
Exhibit A
-8-
Page 57 of 71
<PAGE>
the affirmative vote of the holders of a majority or more of the outstanding
shares of Series A Participating Preferred Stock voting separately as a class.
Section 11. Fractional Shares. Series A Participating Preferred
Stock may be issued in fractions of a share which shall entitle the holder, in
proportion to such holders 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 Participating Preferred Stock.
RESOLVED FURTHER, that the proper officers of the Corporation be,
and each of them hereby is, authorized to execute a Certificate of Designation
with respect to the Series A Participating Preferred Stock pursuant to Section
151 of the General Corporation Law of the State of Delaware and to take all
appropriate action to cause such Certificate to become effective, including, but
not limited to, the filing and recording of such Certificate with and/or by the
Secretary of State of the State of Delaware.
IN WITNESS WHEREOF, we have executed and subscribed this Certificate
and do affirm the foregoing as true under the penalties of perjury as of October
28, 1998.
/s/ Craig D. Crisman
----------------------------------------
Name: Craig D. Crisman
Title: Chief Executive Officer
Attest:
/s/ Peter T. Altavilla
- -------------------------------
Name: Peter T. Altavilla
Title: Secretary
Exhibit A
-9-
Page 58 of 71
<PAGE>
Exhibit B
[Form of Rights Certificate]
Certificate No. R-________________ _______________ Rights
NOT EXERCISABLE AFTER NOVEMBER 4, 2008 OR EARLIER IF NOTICE OF
REDEMPTION IS GIVEN. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE
OPTION OF THE COMPANY, AT $.01 PER RIGHT ON THE TERMS SET FORTH IN
THE AMENDED RIGHTS AGREEMENT. [THE RIGHTS REPRESENTED BY THIS
CERTIFICATE WERE ISSUED TO A PERSON WHO WAS AN ACQUIRING PERSON OR
AN ASSOCIATE OR AFFILIATE OF AN ACQUIRING PERSON. THIS RIGHT
CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME VOID TO THE
EXTENT PROVIDED IN AND UNDER THE CIRCUMSTANCES SPECIFIED IN SECTION
7(e) OF THE AMENDED RIGHTS AGREEMENT.]*/
Rights Certificate
APPLIED MAGNETICS CORPORATION
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 that certain Amended Rights Agreement dated as of October 28, 1998
- --------
*/ The portion of the legend in bracket shall be inserted only if applicable.
Exhibit B
-1-
Page 59 of 71
<PAGE>
(the "Amended Rights Agreement") between Applied Magnetics Corporation, a
Delaware corporation (the "Company") and ChaseMellon Shareholder Services,
L.L.C. (the "Rights Agent"), to purchase from the Company at any time after the
Distribution Date (as such term is defined in the Amended Rights Agreement) and
prior to 5:00 P.M. (Los Angeles time) on November 4, 2008 at the principal
office of the Rights Agent in Los Angeles, California, one one-hundredth of a
fully paid, nonassessable share of Series A Participating Preferred Stock (the
"Preferred Stock") of the Company, at a purchase price of $20 per one
one-hundredth of a share (the "Purchase Price"), upon presentation and surrender
of this Rights Certificate with the appropriate Form of Election to Purchase
duly executed. The number of Rights evidenced by this Rights Certificate (and
the number of shares which may be purchased upon exercise thereof) set forth
above, and the Purchase Price set forth above, are the number and Purchase Price
as of October 28, 1998, based on the Preferred Stock as constituted at such
date.
As provided in the Amended Rights Agreement, the Purchase Price and
the number 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.
This Rights Certificate is subject to all of the terms, provisions
and conditions of the Amended Rights Agreement, which terms, provisions and
conditions are hereby incorporated herein by reference and made a part hereof
and to which Amended Rights Agreement reference is hereby made for a full
description of the rights, limitations of rights, obligations, duties and
immunities hereunder of the Rights Agent, the Company and the holders of the
Rights Certificates. Copies of the Amended Rights Agreement are on file at the
principal office of the Company and are also available upon written request to
the Company.
This Rights Certificate, with or without other Rights Certificates,
upon surrender at the principal office of the Rights Agent, may be exercised for
another Rights Certificate or Rights Certificates of like tenor and date
evidencing Rights entitling the holder to purchase a like aggregate number of
shares of 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 (other than pursuant to Section
11(a)(ii) of the Amended Rights Agreement) 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. If this Rights
Certificate shall be exercised in whole or in part pursuant to Section 11(a)(ii)
of the Amended Rights Agreement, the holder shall be entitled to receive this
Rights Certificate duly marked to indicate that such exercise has occurred as
set forth in the Amended Rights Agreement.
Subject to the provisions of the Amended 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. Subject to the provisions of the
Amended Rights Agreement, the Company, at its option, may elect to mail payment
Exhibit B
-2-
Page 60 of 71
<PAGE>
of the redemption price to the registered holder of the Right at the time of
redemption, in which event this certificate may become void without any further
action by the Company.
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-hundredth 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 Amended Rights
Agreement.
No holder of this Rights Certificate, as such, shall be entitled to
vote or receive dividends or be deemed for any purpose the holder of 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 Amended
Rights Agreement or herein be construed to confer upon the holder hereof, as
such, any of the rights of a shareholder of the Company or any right to vote for
the election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action, or, to
receive notice of meetings or other actions affecting shareholders (except as
provided in the Amended 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 Amended Rights
Agreement.
This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the
Company and its corporate seal. Dated as of ____________________________.
ATTEST: ------------------------------
- ----------------------------- ------------------------------
By:
Name: Name:
Title: Title:
Countersigned:
- ----------------------------
Authorized Signature
Exhibit B
-3-
Page 61 of 71
<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 sell, assigns and transfers unto _______________________________________
_______________________________________________________________________________
(Please print name and address of transferee)
_______________________________________________________________________________
_______________________________________________________________________________
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _________________________
Attorney, to transfer the within Rights Certificate on the books of the
within-named Company, with full power of substitution.
Dated: _________________,______
________________________________
Signature
Signature(s) Guaranteed:
_________________________________
Exhibit B
-4-
Page 62 of 71
<PAGE>
Certificate
-----------
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are
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 Amended 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
NOTICE
------
The signature to the foregoing Assignment 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.
Exhibit B
-5-
Page 63 of 71
<PAGE>
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if holder desires to
exercise the Rights Certificate pursuant to
Section 11(a)(ii) of the Amended Rights Agreement.)
To ____________________________________:
The undersigned hereby irrevocably elects to exercise __________
Rights represented by this Rights Certificate to purchase the shares of Common
Stock (or such other securities of the Company) issuable upon the exercise of
the Rights and requests that certificates for such shares be issued in the name
of:
_______________________________________________________________________________
(Please insert social security or other identifying number)
_______________________________________________________________________________
(Please print name and address)
_______________________________________________________________________________
The Rights Certificate indicating the balance, if any, of such
Rights which may still be exercised other than pursuant to Section 11(a)(ii) of
the Amended Rights Agreement shall be returned to the undersigned unless such
person requests that the Rights Certificate be registered in the name of and
delivered to:
_______________________________________________________________________________
Please insert social security or other identifying number (complete only if
Rights Certificate is to be registered in a name other than the undersigned)
_______________________________________________________________________________
(Please print name and address)
Dated: ____________________, _____
_____________________________________
Signature
Signature Guaranteed:
_____________________________
Exhibit B
-6-
Page 64 of 71
<PAGE>
Certificate
-----------
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are
not being exercised by or on behalf of a Person who is or was an Acquiring
Person or an Affiliate or Associate of any such Acquiring Person (as such terms
are defined pursuant to the Amended Rights Agreement);
(2) 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 Amended Rights Agreement);
(3) 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
NOTICE
------
This signature to the foregoing Election to Purchase 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.
Exhibit B
-7-
Page 65 of 71
<PAGE>
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if holder desires to
exercise the Rights Certificate other than pursuant to
Section 11(a)(ii) of the Amended Rights Agreement.)
To ____________________________________:
The undersigned hereby irrevocably elects to exercise __________
Rights represented by this Rights Certificate to purchase the shares of
Preferred Stock (or such other securities of the Company or any other Person)
issuable upon the exercise of the Rights and requests that certificates for such
shares be issued in the name of:
_______________________________________________________________________________
(Please insert social security or other identifying number)
_______________________________________________________________________________
(Please print name and address)
_______________________________________________________________________________
The Rights Certificate indicating the balance, if any, of such
Rights which may still be exercised other than pursuant to Section 11(a)(ii) of
the Amended Rights Agreement shall be returned to the undersigned unless such
person requests that the Rights Certificate be registered in the name of and
delivered to:
_______________________________________________________________________________
Please insert social security or other identifying number (complete only if
Rights Certificate is to be registered in a name other than the undersigned)
_______________________________________________________________________________
(Please print name and address)
_______________________________________________________________________________
_______________________________________________________________________________
Dated: ____________________, ______
_____________________________________
Signature
Signature Guaranteed:
_______________________
Exhibit B
-8-
Page 66 of 71
<PAGE>
Certificate
-----------
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are
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 Amended 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
NOTICE
------
This signature to the foregoing Election to Purchase 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.
Exhibit B
-9-
Page 67 of 71
<PAGE>
Exhibit C
---------
SUMMARY OF RIGHTS
On October 19, 1988 the Board of Directors of Applied Magnetics
Corporation (the "Company") declared a dividend distribution of one Right for
each outstanding share of common stock, $.10 par value (the "Common Stock"), of
the Company to stockholders of record at the close of business on November 4,
1988 (the "Record Date"). Except as set forth below, each Right, when
exercisable, entitles the registered holder to purchase from the Company one
one-hundredth share of a new series of preferred stock, designated as Series A
Participating Preferred Stock, $0.10 par value (the "Preferred Stock"), at a
price of $20 per share (the "Purchase Price"), subject to adjustment. The
description and terms of the Rights were originally set forth in a Rights
Agreement (the "Rights Agreement") between the Company and First Interstate Bank
of California, as Rights Agent. The Rights Agreement was amended and restated in
the form of that certain Amended and Restated Rights Agreement (the "Amended
Rights Agreement") between the Company and ChaseMellon Shareholder Services,
L.L.C., as Rights Agent, to authorize an extension of the expiration date of the
Rights and to reflect an updated Purchase Price.
Initially, the Rights will be attached to all Common Stock
certificates representing shares then outstanding, and no separate Rights
certificates will be distributed. Until the earlier to occur of (i) a public
announcement that, without the prior consent of the Company, a person or group
of affiliated or associated persons (an "Acquiring Person") has acquired, or
obtained the right to acquire beneficial ownership of securities having 20% or
more of the voting power of all outstanding voting securities of the Company or
(ii) ten days (unless such date is extended by the Board of Directors) following
the commencement of (or a public announcement of an intention to make) a tender
offer or exchange offer which would result in any person or group and related
persons becoming an Acquiring Person (the earlier of such dates being called the
"Distribution Date"), the Rights will be evidenced, with respect to any of the
Common Stock certificates outstanding as of the Record Date, by such Common
Stock certificate together with this Summary of Rights. The Amended Rights
Agreement provides that, until the Distribution Date, the Rights will be
transferred with and only with Common Stock certificates. From as soon as
practicable after the Record Date and until the Distribution Date (or earlier
redemption or expiration of the Rights), new Common Stock certificates issued
after the Record Date upon transfer or new issuance of the Common Stock will
contain a notation incorporating the Amended Rights Agreement by reference.
Until the Distribution Date (or earlier redemption or expiration of the Rights),
Exhibit C
-1-
Page 68 of 71
<PAGE>
the surrender for transfer of any certificates for Common Stock outstanding as
of the Record Date (with or without this Summary of Rights attached) will also
constitute the transfer of the Rights associated with the Common Stock
represented by such certificate. As soon as practicable following the
Distribution Date, separate certificates evidencing the Rights ("Rights
Certificates") will be mailed to holders of record of the Common Stock as of the
close of business on the Distribution Date, and the separate Rights Certificates
alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date. The
Rights will expire on the earliest of (i) November 4, 2008, (ii) consummation of
a merger transaction with a person or group who acquired Common Stock pursuant
to a Permitted Offer (as defined below), and is offering in the merger the same
price per share and form of consideration paid in the Permitted Offer, or (iii)
redemption by the Company as described below.
The Purchase Price payable, and the number of shares of Preferred
Stock or other securities or property issuable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution (i) in the event of
a stock dividend on, or a subdivision, combination or reclassification of the
Preferred Stock, (ii) upon the grant to holders of the Preferred Stock of
certain rights or warrants to subscribe for Preferred Stock, certain convertible
securities or securities having the same or more favorable rights, privileges
and preferences as the Preferred Stock at less than the current market price of
the Preferred Stock or (iii) upon the distribution or assets (excluding regular
quarterly cash dividends out or earnings or retained earnings) or of
subscription rights or warrants (other than those referred to above).
In the event that, after the first date of public announcement by
the Company or an Acquiring Person that an Acquiring Person has become such, the
Company is involved in a merger or other business combination transaction in
which the Common Stock is exchanged or changed, or 50% or more of the Company's
assets or earning power are sold (in one transaction or a series of
transactions), proper provision shall be made so that each holder of a Right
(other than such Acquiring Person) shall thereafter have the right to receive,
upon the exercise thereof at the then current exercise price of the Right, that
number of shares of common stock of the acquiring company (or, in the event
there is more than one acquiring company, the acquiring company receiving the
greatest portion of the assets or earning power transferred) which at the time
of such transaction would have a market value of two times the exercise price of
the Right (such right being called the "Merger Right"). In the event that an
Acquiring Person becomes such (unless pursuant to a tender offer or 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 Board of Directors who
are not officers of the Company to be both adequate and otherwise in the best
interests of the Company and its stockholders (a "Permitted Offer")),
Exhibit C
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Page 69 of 71
<PAGE>
proper provision shall be made so that each holder of a Right will for a 60 day
period thereafter have the right to receive upon exercise that number of shares
of Common Stock having a market value of two times the exercise price of the
Right, to the extent available, and then (after all authorized and unreserved
shares of Common Stock have been issued) a common stock equivalent (such as
Preferred Stock or another equity security with at least the same economic value
as the Common Stock) having a market value of two times the exercise price of
the Right, with Common Stock to the extent available being issued first (such
right being called the "Subscription Right"). The holder of a Right will
continue to have the Merger Right whether or not such holder exercises the
Subscription Right. Upon the occurrence of any of the events giving rise to the
exercisability of the Merger Right or the Subscription Right, any Rights that
are or were at any time owned by an Acquiring Person shall become void insofar
as they relate to the Merger Right or the Subscription Right.
With certain exceptions, no adjustments in the Purchase Price will
be required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractions of shares will be issued and, in lieu thereof,
an adjustment in cash will be made based on the market price of the Common Stock
on the last trading date prior to the date of exercise.
At any time prior to the earlier to occur of (i) a person becoming
an Acquiring Person or (ii) the expiration of the Rights, the Company may redeem
the Rights in whole, but not in part, at a price of $.01 per Right (the
"Redemption Price"), which redemption shall be effective upon the action of the
Board of Directors. Additionally, the Company may thereafter redeem the then
outstanding Rights in whole, but not in part, at the Redemption Price provided
that such redemption is (i) incidental to a merger or other business combination
transaction or series of transactions involving the Company but not involving an
Acquiring Person or any person who was an Acquiring Person or (ii) following an
event giving rise to, and the expiration of the exercise period for, the
Subscription Right if and for as long as an Acquiring Person beneficially owns
securities representing less than 20% of the voting power of the Company's
voting securities. The redemption of Rights described in the preceding sentence
shall be effective only as of such time when the Subscription Right is not
exercisable, and in any event, only after 10 business days prior notice. Upon
the effective date of the redemption of the Rights, the right to exercise the
Rights will terminate and the only right of the holders of Rights will be to
receive the Redemption Price.
Notwithstanding the foregoing, in the event that a majority of the
Board of Directors of the Company is elected by stockholder action by written
consent, then for a period of 180 days following the effectiveness of such
action: (i) the Company may not approve an acquisition of shares by an
Interested Person (as defined below) or an affiliate or associate thereof if
such acquisition would otherwise result in a person becoming an Acquiring
Exhibit C
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Page 70 of 71
<PAGE>
Person; (ii) no offer by an Interested Person or an affiliate or associate
thereof shall be deemed a Permitted Offer; (iii) the Rights shall not be
redeemed if such redemption is reasonably likely to have the purpose or effect
of facilitating a transaction with an Interested Person; and (iv) the Amended
Rights Agreement shall not be amended or supplemented in any manner reasonably
likely to have the purpose or effect of facilitating a transaction with an
Interested Person. "Interested Person" with respect to a transaction is defined
as any person who (i) is or will become an Acquiring Person if the transaction
were to be consummated without regard to any required approval of the Company,
or an affiliate or associate of such a person, and (ii) directly or indirectly
proposed or nominated a director of the Company in office at the time of
consideration of the transaction in question who was elected by written consent
of stockholders, or an affiliate or associate of such a person.
The Preferred Stock purchasable upon exercise of the Rights will be
nonredeemable and junior to any other series of preferred stock the Company may
issue (unless otherwise provided in the terms of such stock). Each share of
Preferred Stock will have a preferential quarterly dividend in an amount equal
to 100 times the dividend declared on each share of Common Stock, but in no
event less than $1.00. In the event of liquidation, the holders of Preferred
Stock will receive a preferred liquidation payment equal to the greater of 100
times $20 or 100 times the payment made per each share of Common Stock. Each
share of Preferred Stock will have 100 votes, voting together with the shares of
Common Stock. In the event of any merger, consolidation or other transaction
which shares of Common Stock are exchanged, each share of Preferred Stock will
be entitled to receive 100 times the amount and type of consideration received
per share of Common stock. The rights of the Preferred Stock as to dividends,
liquidation and voting, and in the event of mergers and consolidations, are
protected by customary ant- dilution provisions. Fractional shares of Preferred
will be issuable; however, the Company may elect to distribute depositary
receipts in lieu of such fractional shares. In lieu of fractional shares other
than fractions that are multiples of one one-hundredth of a share, an adjustment
in cash will be made based on the market price of the Preferred Stock on the
last trading date prior to the date of exercise.
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.
A copy of the Amended Rights Agreement has been filed with the
Securities and Exchange Commission as an exhibit to an amendment to a
registration statement on Form 8-A. A copy of the Amended Rights Agreement is
available free of charge from the Company. This summary description of the
Rights does not purport to be complete and is qualified in its entirety by
reference to the Amended Rights Agreement, which is incorporated herein by
reference.
Exhibit C
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Page 71 of 71
<PAGE>
