<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________
FORM 8-A/A
AMENDMENT NO. 1
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934
NETFRAME SYSTEMS INCORPORATED
-----------------------------
(Exact name of Registrant as specified in its charter)
Delaware 77-0081278
- ---------------------------------------- ----------
(State of incorporation or organization) (IRS Employer Identification No.)
1545 Barber Lane
Milpitas, California 95035
(Address of principal executive offices) (Zip Code)
__________
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
------------------- ------------------------------
None None
Securities to be registered pursuant to Section 12(g) of the Act:
Preferred Share Purchase Rights
-------------------------------
(Title of Class)
<PAGE>
The undersigned registrant hereby amends the Registration Statement on
Form 8-A dated October 29, 1996, and the exhibits thereto, and amends and
restates Item 1. Description of Securities to be Registered and Item 2.
------------------------------------------
Exhibits in their entirety as set forth below:
- --------
Item 1. Description of Securities to be Registered.
------------------------------------------
On October 24, 1996, pursuant to a Preferred Shares Rights Agreement (the
"Rights Agreement") between NetFRAME Systems Incorporated (the "Company") and
The First National Bank of Boston, as Rights Agent (the "Rights Agent"), the
Company's Board of Directors declared a dividend of one right (a "Right") to
purchase one one -thousandth share of the Company's Series A Participating
Preferred Stock ("Series A Preferred") for each outstanding share of Common
Stock, $.001 par value ("Common Shares"), of the Company. The dividend is
payable on November 15, 1996 (the "Record Date") to stockholders of record as of
the close of business on that date. Each Right entitles the registered holder
to purchase from the Company one one-thousandth of a share of Series A Preferred
at an exercise price of $20.00 (the "Purchase Price"), subject to adjustment.
The following summary of the principal terms of the Rights Agreement is a
general description only and is subject to the detailed terms and conditions of
the Rights Agreement. A copy of the Rights Agreement is attached as Exhibit 1
to this Registration Statement and is hereby incorporated by reference.
On June 10, 1997, the Company amended the Rights Agreement, which
amendment is described under the caption "First Amendment to Rights
Agreements" below. A copy of the First Amendment to Rights Agreement is
attached as Exhibit 2 to this Registration Statement and is hereby
incorporated by reference.
-2-
<PAGE>
Rights Evidenced by Common Share Certificates
- ---------------------------------------------
The Rights will not be exercisable until the Distribution Date (defined
below). Certificates for the Rights ("Rights Certificates") will not be sent to
stockholders and the Rights will attach to and trade only together with the
Common Shares. Accordingly, Common Share certificates outstanding on the Record
Date will evidence the Rights related thereto, and Common Share certificates
issued after the Record Date will contain a notation incorporating the Rights
Agreement by reference. Until the Distribution Date (or earlier redemption or
expiration of the Rights), the surrender or transfer of any certificates for
Common Shares outstanding as of the Record Date, even without notation or a copy
of the Summary of Rights being attached thereto, will also constitute the
transfer of the Rights associated with the Common Shares represented by such
certificate.
Distribution Date
- -----------------
The Rights will separate from the Common Shares, Rights Certificates will
be issued and the Rights will become exercisable upon such date (the
"Distribution Date") which is the earlier of: (i) the close of business on the
tenth day (or such later date as may be determined by action of a majority of
the Continuing Directors (as defined in Section 1(g) of the Rights Agreement)
then in office) after the Shares Acquisition Date (as defined in Section 1(u) of
the Rights Agreement) or, if the tenth day after the Shares Acquisition Date
occurs before the Record Date, the close of business on the Record Date or (ii)
the close of business on the tenth day (or such later date as may be determined
by action of a majority of Continuing Directors then in office) after the date
that a tender or exchange offer by any Person (as defined in Section 1(m) of the
Rights Agreement) is first published or sent or given within the meaning of Rule
14d-2(a) of the General Rules and Regulations under the Securities Exchange Act
of 1934, if, assuming the successful consummation thereof, such Person would be
the Beneficial Owner of 15% or more of the Common Shares then outstanding,
subject to Section 1(a) of the Rights Agreement.
Issuance of Rights Certificates; Expiration of Rights
- -----------------------------------------------------
As soon as practicable following the Distribution Date, separate Rights
Certificates will be mailed to holders of record of the Common Shares as of the
close of business on the Distribution Date and such separate Rights Certificates
alone will evidence the Rights from and after the Distribution Date. All Common
Shares issued prior to the Distribution Date will be issued with Rights. Common
Shares issued after the Distribution Date may be issued with Rights if such
shares are issued (i) upon the conversion of outstanding convertible debentures
or any other convertible securities issued after adoption of the Rights
Agreement or (ii) pursuant to the exercise of stock options or under employee
benefit plans or arrangements unless as a result of such issuance such options,
plans or arrangements would not qualify (or would be made at risk for not
qualifying) for otherwise available special tax treatment. Except as otherwise
determined by the Board of Directors, no other Common Shares issued after the
Distribution Date will be issued with Rights. The Rights will expire on the
earliest of (i) October 24, 2006 (the "Final Expiration Date") or (ii)
redemption or exchange of the Rights as described below.
-3-
<PAGE>
Initial Exercise of the Rights
- ------------------------------
Following the Distribution Date, and until one of the further events
described below, holders of the Rights will be entitled to receive, upon
exercise and the payment of $20.00 per Right, one one-thousandth share of the
Series A Preferred. In the event that the Company does not have sufficient
Common Shares authorized and available for issuance upon conversion of the
Series A Preferred issuable upon exercise of the Rights such that all of the
Rights may be exercised, or the Board decides that such action is necessary and
not contrary to the interests of Rights holders, the Company may instead
substitute cash, a reduction in the Purchase Price, other assets or other
securities of the Company for the Common Shares issuable upon conversion of the
Series A Preferred for which the Rights would have been exercisable.
Right to Buy Company Common Shares
- ----------------------------------
Unless the Rights are earlier redeemed, in the event that an Acquiring
Person becomes the beneficial owner of 15% or more of the Company's Common
Shares then outstanding, then proper provision will be made so that each holder
of a Right which has not theretofore been exercised (other than Rights
beneficially owned by the Acquiring Person, which will thereafter be void) will
thereafter have the right to receive, upon exercise, Common Shares having a
value equal to two times the Purchase Price. Rights are not exercisable
following the occurrence of an event as described above until such time as the
Rights are no longer redeemable by the Company as set forth below.
Right to Buy Acquiring Company Stock
- ------------------------------------
Similarly, unless the Rights are earlier redeemed, in the event that, after
an Acquiring Person becomes the beneficial owner of 15% or more of the Company's
Common Shares then outstanding, (i) the Company is acquired in a merger or other
business combination transaction, or (ii) 50% or more of the Company's
consolidated assets or earning power are sold (other than in transactions in the
ordinary course of business), proper provision must be made so that each holder
of a Right which has not theretofore been exercised (other than Rights
beneficially owned by the Acquiring Person, which will thereafter be void) will
thereafter have the right to receive, upon exercise, shares of common stock of
the acquiring company having a value equal to two times the Purchase Price.
Exchange Provision
- ------------------
At any time after the acquisition by an Acquiring Person of 15% or more of
the Company's outstanding Common Shares and prior to the acquisition by such
Acquiring Person of 50% or more of the Company's outstanding Common Shares, the
Board of Directors of the Company may exchange the Rights (other than Rights
owned by the Acquiring Person), in whole or in part, at an exchange ratio of one
Common Share per Right.
-4-
<PAGE>
Redemption
- ----------
At any time on or prior to the close of business on the earlier of (i) the
10th day following the acquisition by an Acquiring Person (the "Share
Acquisition Date") or such later date as may be determined by a majority of the
Continuing Directors and publicly announced by the Company, or (ii) the Final
Expiration Date of the Rights, the Company may redeem the Rights in whole, but
not in part, at a price of $0.01 per Right.
Adjustments to Prevent Dilution
- -------------------------------
The Purchase Price payable, the number of Rights, and the number of Series
A Preferred or Common Shares or other securities or property issuable upon
exercise of the Rights are subject to adjustment from time to time in connection
with the dilutive issuances by the Company as set forth in the Rights Agreement.
With certain exceptions, no adjustment in the Purchase Price will be required
until cumulative adjustments require an adjustment of at least 1% in such
Purchase Price.
Cash Paid Instead of Issuing Fractional Shares
- ----------------------------------------------
No fractional portion less than integral multiples of one Common Share will
be issued upon exercise of a Right and in lieu thereof, an adjustment in cash
will be made based on the market price of the Common Shares on the last trading
date immediately prior to the date of exercise.
No Stockholders' Rights Prior to Exercise
- -----------------------------------------
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company (other than any rights resulting from
such holder's ownership of Common Shares), including, without limitation, the
right to vote or to receive dividends.
Amendment of Rights Agreement
- -----------------------------
The provisions of the Rights Agreement may be supplemented or amended by
the Board of Directors in any manner prior to the close of business on the date
an Acquiring Person becomes the beneficial owner of 15% or more of the Company's
Common Shares then outstanding without the approval of Rights holders. After
such date, the provisions of the Rights Agreement may be amended by the Board in
order to cure any ambiguity, defect or inconsistency, to make changes which do
not adversely affect the interests of holders of Rights (excluding the interests
of any Acquiring Person), or to shorten or lengthen any time period under the
Rights Agreement; provided, however, that no amendment to adjust the time period
governing redemption shall be made once the Rights are no longer redeemable.
Rights and Preferences of the Series A Preferred
- ------------------------------------------------
-5-
<PAGE>
Series A Preferred purchasable upon exercise of the Rights will not be
redeemable. Each share of Series A Preferred will be entitled to an aggregate
dividend of 1,000 times the dividend declared per Common Share. In the event of
liquidation, the holders of the Series A Preferred will be entitled to a minimum
preferential liquidation payment equal to $20,000 per share, plus an amount
equal to accrued and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment. Following the payment of such amount, no
additional distributions shall be made to the holders of shares of Series A
Preferred unless, prior thereto, the holders of Common Shares shall have
received an amount per share equal to the quotient obtained by dividing the
amount paid to holders of Series A Preferred by 1,000. Following the payment
of each of these amounts, holders of Series A Preferred and holders of Common
Shares shall receive their ratable and proportionate share of the remaining
assets to be distributed in the ratio of 1000 to 1 with respect to such Series A
Preferred and Common Shares, on a per share basis, respectively. Each share of
Series A Preferred will have 1,000 votes, voting together with the Common
Shares. These rights are protected by customary anti-dilution provisions.
Because of the nature of the dividend, liquidation and voting rights of the
shares of Series A Preferred, the value of the one one-thousandth interest in a
share of Series A Preferred purchasable upon exercise of each Right should
approximate the value of one Common Share.
Certain Anti-takeover Effects
- -----------------------------
The Rights approved by the Board are designed to protect and maximize the
value of the outstanding equity interests in the Company in the event of an
unsolicited attempt by an acquiror to take over the Company, in a manner or on
terms not approved by the Board of Directors. Takeover attempts frequently
include coercive tactics to deprive the Company's Board of Directors and its
stockholders of any real opportunity to determine the future of the Company.
The Rights have been declared by the Board in order to deter such tactics,
including a gradual accumulation of shares in the open market of a 15% or
greater position to be followed by a merger or a partial or two-tier tender
offer that does not treat all stockholders equally. These tactics unfairly
pressure stockholders, force them out of their investment without giving them
meaningful choices and deprive them of the full value of their shares.
The Rights are not intended to prevent a takeover of the Company and will
not do so. The Rights may be redeemed by the Company at $0.01 per Right within
ten days (or such later date as may be determined by a majority of the
Continuing Directors) after the accumulation of 15% or more of the Company's
shares by a single acquiror or group. Accordingly, the Rights should not
interfere with any merger or business combination approved by the Board of
Directors.
Issuance of the Rights does not in any way weaken the financial strength of
the Company or interfere with its business plans. The issuance of the Rights
themselves has no dilutive effect, will not affect reported earnings per share,
should not be taxable to the Company or to its stockholders, and will not change
the way in which the Company's shares are presently traded. The Company's Board
of Directors believes that the Rights represent a sound and reasonable means of
addressing the complex issues of corporate policy created by the current
takeover environment.
However, the Rights may have the effect of rendering more difficult or
discouraging an acquisition of the Company deemed undesirable by the Board of
Directors. The Rights may cause substantial dilution to a person or group that
attempts to acquire the Company on terms or in a manner
-6-
<PAGE>
not approved by the Company's Board of Directors, except pursuant to an offer
conditioned upon the negation, purchase or redemption of the Rights
First Amendment to Rights Agreement
- -----------------------------------
The Rights Agreement was amended by the First Amendment to Rights
Agreement dated June 10, 1997 between the Company and the Rights Agent (the
"Amendment"). The Amendment provides an exception to the definition of
"Acquiring Person" for Micron Electronics, Inc. ("Micron") Payette Acquisition
Corporation, its wholly-owned subsidiary ("Purchaser"), and any Affiliates and
Associates (as such terms are defined in the Rights Agreement) of Micron and
Purchaser solely by virtue of their acquisition or right to acquire Common
Stock of the Company pursuant to an Agreement and Plan of Merger dated June
10, 1997 among Micron, Purchaser and the Company (the "Merger Agreement") or
the Stock Option Agreement dated June 10, 1997 between the Company and Micron
(the "Option Agreement") or the consummation of the transactions contemplated
by the Merger Agreement or Option Agreement. The Amendment also provides that,
in each case, a Distribution Event, Share Acquisition Date or a Triggering
Event shall not occur by reason of the execution of the Merger Agreement or
the Option Agreement, the consummation of the Offer or the Merger (as each
term is defined in the Merger Agreement), or any other transaction
contemplated by the Merger Agreement. Finally, the term "Final Expiration
Date" has been amended to mean the earlier of the Effective Time (as defined
in the Merger Agreement) of the Merger or (ii) October 24, 2006. The Merger
Agreement and the Option Agreement have been filed as Exhibits (c)(1) and
(c)(5), respectively, to the Schedule 14D-9 filed by the Company with the
Securities and Exchange Commission on June 16, 1997.
Item 2. Exhibits.
--------
1. Preferred Shares Rights Agreement, dated as of October 24, 1996
between NetFRAME Systems Incorporated and The First National Bank
of Boston, including the Certificate of Designation, the form of
Rights Certificate and the Summary of Rights attached thereto as
Exhibits A, B and C, respectively.
2. First Amendment to Rights Agreement, dated as of June 10, 1997
between NetFRAME Systems Incorporated and The First National Bank
of Boston.
-7-
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the Registrant has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereto duly authorized.
NetFRAME Systems Incorporated
Date: June 12, 1997
By:/s/ ROBERT L. PUETTE
-----------------------------------------
Robert L. Puette,
President and Chief Executive Officer
-8-
<PAGE>
EXHIBIT INDEX
Exhibit
No. Exhibit
----- -------
1 Preferred Shares Rights Agreement dated as of October
24, 1996, between NetFRAME Systems Incorporated and
The First National Bank of Boston, including the form
of Rights Certificate and the Certificate of
Designation, the Summary of Rights Attached thereto
as Exhibits A, B and C, respectively.
2 First Amendment to Rights Agreement dated as of June 10, 1997
between NetFRAME Systems Incorporated and The First National Bank
of Boston.
<PAGE>
EXHIBIT 1
NETFRAME SYSTEMS INCORPORATED
AND
THE FIRST NATIONAL BANK OF BOSTON
RIGHTS AGENT
PREFERRED SHARES RIGHTS AGREEMENT
DATED AS OF OCTOBER 24, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 1. Certain Definitions.................................................. 1
Section 2. Appointment of Rights Agent.......................................... 5
Section 3. Issuance of Rights Certificates...................................... 5
Section 4. Form of Rights Certificates.......................................... 7
Section 5. Countersignature and Registration.................................... 8
Section 6. Transfer, Split Up, Combination and Exchange of Rights Certificates;
Mutilated, Destroyed, Lost or Stolen Rights Certificates............. 8
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights........ 9
Section 8. Cancellation and Destruction of Rights Certificates.................. 10
Section 9. Reservation and Availability of Preferred Shares..................... 11
Section 10. Preferred Shares Record Date......................................... 12
Section 11. Adjustment of Purchase Price, Number of Shares or Number of Rights... 12
Section 12. Certificate of Adjusted Purchase Price or Number of Shares........... 20
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power. 20
Section 14. Fractional Rights and Fractional Shares.............................. 23
Section 15. Rights of Action..................................................... 23
Section 16. Agreement of Rights Holders.......................................... 23
Section 17. Rights Certificate Holder Not Deemed a Shareholder................... 24
Section 18. Concerning the Rights Agent.......................................... 24
Section 19. Merger or Consolidation or Change of Name of Rights Agent............ 25
Section 20. Duties of Rights Agent............................................... 25
</TABLE>
-i-
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 21. Change of Rights Agent.............................................. 27
Section 22. Issuance of New Rights Certificates................................. 28
Section 23. Redemption.......................................................... 28
Section 24. Exchange............................................................ 29
Section 25. Notice of Certain Events............................................ 31
Section 26. Notices............................................................. 31
Section 27. Supplements and Amendments.......................................... 32
Section 28. Successors.......................................................... 32
Section 29. Determinations and Actions by the Board of Directors, etc........... 32
Section 30. Benefits of this Agreement.......................................... 33
Section 31. Severability........................................................ 33
Section 32. Governing Law....................................................... 33
Section 33. Counterparts........................................................ 33
Section 34. Descriptive Headings................................................ 33
</TABLE>
EXHIBITS
Exhibit A Form of Certificate of Designation
Exhibit B Form of Rights Certificate
Exhibit C Summary of Rights
-ii-
<PAGE>
RIGHTS AGREEMENT
Agreement, dated as of October 24, 1996, between NetFRAME Systems
Incorporated, a Delaware corporation (the "Company"), and The First National
Bank of Boston, a national banking association (the "Rights Agent").
On October 24, 1996 (the "Rights Dividend Declaration Date"), the Board of
Directors of the Company authorized and declared a dividend of one Preferred
Share purchase right (a "Right") for each Common Share (as hereinafter defined)
of the Company outstanding as of the Close of Business (as hereinafter defined)
on November 15, 1996 (the "Record Date"), each Right representing the right to
purchase one one-thousandth of a share of Series A Participating Preferred Stock
(as such number may be adjusted pursuant to the provisions of this Agreement),
having the rights, preferences and privileges set forth in the form of
Certificate of Designation of Rights, Preferences and Privileges of Series A
Participating Preferred Stock attached hereto as Exhibit A, upon the terms and
subject to the conditions herein set forth, and further authorized and directed
the issuance of one Right (as such number may be adjusted pursuant to the
provisions of this Agreement) with respect to each Common Share that shall
become outstanding between the Record Date and the earlier of the Distribution
Date and the Expiration Date (as such terms are hereinafter defined), and in
certain circumstances after the Distribution Date.
NOW, THEREFORE, in consideration of the promises and the mutual agreements
herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
-------------------
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or which, together
with all Affiliates and Associates of such Person, shall be the Beneficial Owner
of 15% or more of the Common Shares then outstanding, but shall not include the
Company, any subsidiary of the Company or any employee benefit plan of the
Company or of any Subsidiary of the Company, or any entity holding Common Shares
for or pursuant to the terms of any such plan. Notwithstanding the foregoing,
no Person shall be deemed to be an Acquiring Person (i) as the result of an
acquisition of Common Shares by the Company which, by reducing the number of
shares outstanding, increases the proportionate number of shares beneficially
owned by such Person to 15% or more of the Common Shares of the Company then
outstanding; provided, however, that if a Person shall become the Beneficial
Owner of 15% or more of the Common Shares of the Company then outstanding by
reason of share purchases of the Company and shall, after such share purchases
of the Company, become the Beneficial Owner of any additional Common Shares of
the Company, then such Person shall be deemed to be an Acquiring Person, or (ii)
if the Board of Directors of the Company determines in good faith that a Person
who would otherwise be an "Acquiring Person", as defined pursuant to the
provisions of this paragraph (a), has become such inadvertently (including,
without limitation, because (A) such Person was unaware that it beneficially
owned a percentage of the Common Shares that would otherwise cause such Person
to be an "Acquiring Person", as defined pursuant to the provisions of this
paragraph (a), or (B) such Person was aware of the extent of the Common Shares
it beneficially owned but had no actual knowledge of the consequences
<PAGE>
of such beneficial ownership under this Agreement) and without any intention of
changing or influencing control of the Company, and if such Person divested or
divests as promptly as practicable a sufficient number of Common Shares so that
such Person would no longer be an "Acquiring Person", as defined pursuant to the
provisions of this paragraph (a), then such Person shall not be deemed to be or
to have become an "Acquiring Person" for any purposes of this Agreement; or
(iii) such Person reports Beneficial Ownership of Common Shares on Schedule 13G
under the Securities Exchange Act of 1934, as amended, representing more than
15% but less than 20% of the Common Shares of the Company then outstanding and
utilizes said Schedule 13G in lieu of a Schedule 13D for such reporting on the
basis that such Person has no intention of changing or influencing control of
the Company; provided, further, however, that if such Person who reports
Beneficial Ownership on Schedule 13G in accordance with the foregoing
subsequently files a Schedule 13D on the basis that such Person intends to
change or influence control of the Company, such Person shall be deemed an
Acquiring Person as of the date such Person files such Schedule 13D.
(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, for purposes of Section
13(d) of the Exchange Act and Rule 13d-3 thereunder (or any comparable or
successor law or regulation);
(ii) which such Person or any of such Person's Affiliates or
Associates has (A) the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding (other than customary agreements with and between
underwriters and selling group members with respect to a bona fide public
offering of securities), 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 pursuant to this Section
- -------- -------
1(c)(ii)(A) to be the Beneficial Owner of, or to beneficially own, (1)
securities tendered pursuant to a tender or exchange offer made by or on behalf
of such Person or any of such Person's Affiliates or Associates until such
tendered securities are accepted for purchase or exchange, or (2) securities
which a Person or any of such Person's Affiliates or Associates may be deemed to
have the right to acquire pursuant to any merger or other acquisition agreement
between the Company and such Person (or one or more of its Affiliates or
Associates) if such agreement has been approved by the Board of Directors of the
Company prior to there being an Acquiring Person; or (B) the right to vote
pursuant to any agreement, arrangement or understanding; provided, however, that
-------- -------
a Person shall not be deemed the Beneficial Owner of, or to beneficially own,
any security under this Section 1(c)(ii)(B) if the agreement, arrangement or
understanding to vote such security (1) arises solely from a revocable proxy or
consent given to such Person 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 on Schedule
13D under the Exchange Act (or any comparable or successor report); or
-2-
<PAGE>
(ii) 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 (other than customary agreements
with and between underwriters and selling group members with respect to a bona
fide public offering of securities) for the purpose of acquiring, holding,
voting (except to the extent contemplated by the proviso to Section 1(c)(ii)(B))
or disposing of any securities of the Company; provided, however, that in no
--------- --------
case shall an officer or director of the Company be deemed (x) the Beneficial
Owner of any securities beneficially owned by another officer or director of the
Company solely by reason of actions undertaken by such persons in their capacity
as officers or directors of the Company or (y) the Beneficial Owner of
securities held of record by the trustee of any employee benefit plan of the
Company or any Subsidiary of the Company for the benefit of any employee of the
Company or any Subsidiary of the Company, other than the officer or director, by
reason of any influence that such officer or director may have over the voting
of the securities held in the plan.
(d) "Business Day" shall mean any day other than a Saturday, Sunday or
a day on which banking institutions in 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.,
California time, on such date; provided, however, that if such date is not a
-------- -------
Business Day it shall mean 5:00 P.M., California time, on the next succeeding
Business Day.
(f) "Common Shares" when used with reference to the Company shall mean
the Common Shares the Company, par value $.001. "Common Shares" when used with
reference to any Person other than the Company shall mean the capital stock (or
equity interest) with the greatest voting power of such other Person or, if such
other Person is a Subsidiary of another Person, the Person or Persons which
ultimately control such first-mentioned Person.
(g) "Continuing Director" shall mean (i) any member of the Board of
Directors of the Company, while a member of the Board, who is not an Acquiring
Person, or an Affiliate or Associate of an Acquiring Person, or a representative
of an Acquiring Person or of any such Affiliate or Associate, and who was a
member of the Board prior to there being an Acquiring Person, or (ii) any Person
who subsequently becomes a member of the Board, while a member of the Board, who
is not an Acquiring Person, or an Affiliate or Associate of an Acquiring Person,
or a representative of an Acquiring Person or of any such Affiliate or
Associate, if such Person's nomination for election or election to the Board is
recommended or approved by a majority of the Continuing Directors.
(h) "Distribution Date" shall mean the earlier of (i) the Close of
Business on the tenth day (or such later date as may be determined by action of
a majority of Continuing Directors then in office) after the Shares Acquisition
Date (or, if the tenth day after the Shares Acquisition Date occurs before the
Record Date, the Close of Business on the Record Date) or (ii) the Close of
Business on the tenth day (or such later date as may be determined by action of
a majority of Continuing Directors then in office) after the date that a tender
or exchange offer by any Person (other than the Company, any Subsidiary of the
Company, any employee benefit plan of the Company or of any Subsidiary of the
Company, or any Person or entity organized, appointed or established by the
Company for or pursuant
-3-
<PAGE>
to the terms of any such plan) is first published or sent or given within the
meaning of Rule 14d-2(a) of the General Rules and Regulations under the Exchange
Act, if, assuming the successful consummation thereof, such Person would be the
Beneficial Owner of 15% or more of the shares of Common Stock then outstanding,
subject to Section 1(a).
(i) "Equivalent Shares" shall mean Preferred Shares and any other
class or series of capital stock of the Company which is entitled to participate
in dividends and other distributions, including distributions upon the
liquidation, dissolution or winding up of the Company, on a proportional basis
with the Common Shares. In calculating the number of any class or series of
Equivalent Shares for purposes of Section 11 of this Rights Agreement, the
number of shares, or fractions of a share, of such class or series of capital
stock that is entitled to the same dividend or distribution as a whole Common
Share shall be deemed to be one share.
(j) "Expiration Date" shall mean the earliest of (i) the Close of
Business on the Final Expiration Date, (ii) the Redemption Date, (iii) the time
at which the Board of Directors orders the exchange of the Rights as provided in
Section 24 hereof or (iv) the consummation of a transaction contemplated by
Section 13(d) hereof.
(k) "Final Expiration Date" shall mean October 24, 2006.
(l) "Permitted Offer" shall mean a tender offer for all outstanding
Common Shares made in the manner prescribed by Section 14(d) of the Exchange Act
and the rules and regulations promulgated thereunder; provided, however, that
-------- -------
such tender offer occurs at a time when Continuing Directors are in office and a
majority of the Continuing Directors then in office has determined that the
offer is both adequate and otherwise in the best interests of the Company and
its shareholders (taking into account all factors that such Continuing Directors
deem relevant).
(m) "Person" shall mean any individual, firm, corporation or other
entity, and shall include any successor (by merger or otherwise) of such entity.
(n) "Preferred Shares" shall mean shares of Series A Participating
Preferred Stock of the Company.
(o) "Purchase Price" shall have the meaning set forth in Section 4(a)
hereof.
(p) "Record Date" shall have the meaning set forth in the recitals at
the beginning of this Agreement.
(q) "Redemption Date" shall mean the time at which the Board of
Directors of the Company orders redemption of the Rights as provided in Section
23 hereof.
(r) "Redemption Price" shall have the meaning set forth in Section
23(a) hereof.
-4-
<PAGE>
(s) "Rights Dividend Declaration Date" shall have the meaning set
forth in the recitals at the beginning of this Agreement.
(t) "Section 13 Event" shall mean any event described in clause (i),
(ii) or (iii) of Section 13(a) hereof.
(u) "Shares Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to Section 13(d) under the Exchange Act) by
the Company or an Acquiring Person that an Acquiring Person has become such;
provided that, if such person is determined not to have become an Acquiring
- -------------
Person pursuant to Section 1(a)(ii) hereof, then no Shares Acquisition Date
shall be deemed to have occurred.
(v) "Subsidiary" of any Person shall mean any corporation or other
entity of which an amount of voting securities sufficient to elect a majority of
the directors or Persons having similar authority of such corporation or other
entity is beneficially owned, directly or indirectly, by such Person, or any
corporation or other entity otherwise controlled by such Person.
(w) "Total Exercise Price" shall have the meaning set forth in Section
4(a) hereof.
(x) "Trading Day" shall have the meaning set forth in Section 11(d)
hereof.
(y) A "Triggering Event" shall be deemed to have occurred upon any
Person (other than the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or any Subsidiary of the Company, or any entity
holding Common Shares for or pursuant to the terms of any such plan), together
with all Affiliates and Associates of such Person, becoming an Acquiring Person.
Section 2. Appointment of Rights Agent. The Company hereby appoints the
---------------------------
Rights Agent to act as agent for the Company and the holders of the Rights (who,
in accordance with Section 3 hereof, shall prior to the Distribution Date also
be the holders of the Common Shares) 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 upon ten days prior written notice to the Rights Agent. The Rights
Agent shall have no duty to supervise, and shall in no event be liable for, the
acts or omissions of any such co-Rights Agent.
Section 3. Issuance of Rights Certificates.
-------------------------------
(a) Until the Distribution Date, (i) the Rights will be evidenced
(subject to the provisions of Sections 3(b) and 3(c) hereof) by the certificates
for Common Shares registered in the names of the holders thereof (which
certificates shall also be deemed to be Rights Certificates) and not by separate
Rights Certificates and (ii) the right to receive Rights Certificates will be
transferable only in connection with the transfer of Common Shares. Until the
earlier of the Distribution Date or the Expiration Date, the surrender for
transfer of such certificates for Common Shares shall also constitute the
surrender for transfer of the Rights associated with the Common Shares
represented thereby. As
-5-
<PAGE>
soon as practicable after the Distribution Date, the Company will prepare and
execute, the Rights Agent will countersign, and the Company will send or cause
to be sent (and the Rights Agent will, if requested, send) by first-class,
postage-prepaid mail, to each record holder of Common Shares as of the close of
business on the Distribution Date, at the address of such holder shown on the
records of the Company, a Rights Certificate, in substantially the form of
Exhibit B hereto (a "Rights Certificate"), evidencing one Right for each Common
Share so held, subject to adjustment as provided herein. In the event that an
adjustment in the number of Rights per Common Share has been made pursuant to
Section 11(a)(i), Section 11(i) or Section 11(p) hereof, then at the time of
distribution of the Rights Certificates, the Company shall make the necessary
and appropriate rounding adjustments (in accordance with Section 14(a) hereof)
so that Rights Certificates representing only whole numbers of Rights are
distributed and cash is paid in lieu of any fractional Rights. As of the
Distribution Date, the Rights will be evidenced solely by such Rights
Certificates and may be transferred by the transfer of the Rights Certificates
as permitted hereby, separately and apart from any transfer of one or more
Common Shares, and the holders of such Rights Certificates as listed in the
records of the Company or any transfer agent or registrar for the Rights shall
be the record holders thereof.
(b) On the Record Date or as soon as practicable thereafter, the
Company will send a copy of a Summary of Rights in substantially the form of
Exhibit C hereto (the "Summary of Rights"), by first-class, postage-prepaid
mail, to each record holder of Common Shares as of the close of business on the
Record Date, at the address of such holder shown on the records of the Company.
(c) Unless the Board of Directors by resolution adopted at or before
the time of the issuance (including pursuant to the exercise of rights under the
Company's benefit plans) of any Common Shares specifies to the contrary, Rights
shall be issued in respect of all Common Shares that are issued after the Record
Date but prior to the earlier of the Distribution Date or the Expiration Date
or, in certain circumstances provided in Section 22 hereof, after the
Distribution Date. Certificates representing such Common Shares shall also be
deemed to be certificates for Rights, and shall bear the following legend:
This certificate also evidences and entitles the holder hereof to certain
rights as set forth in a Rights Agreement between NetFRAME Systems
Incorporated and The First National Bank of Boston, as the Rights Agent,
dated as of October 24, 1996, as it may be amended from time to time, (the
"Rights Agreement"), the terms of which are hereby incorporated herein by
reference and a copy of which is on file at the principal executive offices
of NetFRAME Systems Incorporated. Under certain circumstances, as set
forth in the Rights Agreement, such Rights will be evidenced by separate
certificates and will no longer be evidenced by this certificate. NetFRAME
Systems Incorporated will mail to the holder of this certificate a copy of
the Rights Agreement without charge after receipt of a written request
therefor. Under certain circumstances set forth in the Rights Agreement,
Rights issued to, or held by, any Person who is, was or becomes an
Acquiring Person or any Affiliate or Associate thereof (as such terms are
defined in the Rights Agreement), whether currently held by or on behalf of
such Person or by any subsequent holder, may become null and void.
-6-
<PAGE>
With respect to such certificates containing the foregoing legend, until the
earlier of (i) the Distribution Date or (ii) the Expiration Date, the Rights
associated with the Common Shares represented by such certificates shall be
evidenced by such certificates alone, and the surrender for transfer of any such
certificate shall also constitute the transfer of the Rights associated with the
Common Shares represented thereby. In the event that the Company purchases or
acquires any Common Shares after the Record Date but prior to the Distribution
Date, any Rights associated with such Common Shares shall be deemed canceled and
retired so that the Company shall not be entitled to exercise any Rights
associated with the Common Shares which are no longer outstanding.
Section 4. Form of Rights Certificates.
---------------------------
(a) The Rights Certificates (and the forms of election to purchase
Common Shares and of assignment to be printed on the reverse thereof) shall be
substantially in the form of Exhibit A hereto and may have such marks of
identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange or a national market system, on which
the Rights may from time to time be listed or included, or to conform to usage.
Subject to the provisions of Section 11 and Section 22 hereof, the Rights
Certificates, whenever distributed, shall be dated as of the Record Date (or in
the case of Rights issued with respect to Common Shares issued by the Company
after the Record Date, as of the date of issuance of such Common Shares) and on
their face shall entitle the holders thereof to purchase such number of one-
thousandths of a Preferred Share as shall be set forth therein at the price set
forth therein (such exercise price per one one-thousandth of a Preferred Share
being hereinafter referred to as the "Purchase Price" and the aggregate exercise
price of all Preferred Shares issuable upon exercise of one Right being
hereinafter referred to as the "Total Exercise Price"), but the number and type
of securities purchasable upon the exercise of each Right and the Purchase Price
shall be subject to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(a) or Section
22 hereof that represents Rights beneficially owned by: (i) an Acquiring Person
or any Associate or Affiliate of an Acquiring Person, (ii) a transferee of an
Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee after the Acquiring Person becomes such or (iii) a transferee of an
Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee prior to or concurrently with the Acquiring Person becoming such and
receives such Rights pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person to holders of equity interests in such
Acquiring Person or to any Person with whom such Acquiring Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which the Board of Directors of the Company has
determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect the avoidance of Section 7(e) hereof, and any Rights
Certificate issued pursuant to Section 6 or Section 11 hereof upon transfer,
exchange, replacement or adjustment of any other Rights Certificate referred to
in this sentence, shall contain (to the extent feasible) the following legend:
The Rights represented by this Rights Certificate are or were beneficially
owned by a Person who was or became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person (as such
-7-
<PAGE>
terms are defined in the Rights Agreement). Accordingly, this Rights
Certificate and the Rights represented hereby may become null and void in
the circumstances specified in Section 7(e) of the Rights Agreement.
Section 5. Countersignature and Registration.
---------------------------------
(a) The Rights Certificates shall be executed on behalf of the Company
by its Chairman of the Board, its Chief Executive Officer, its President or any
Vice President, either manually or by facsimile signature, and by the Secretary
or an Assistant Secretary of the Company, either manually or by facsimile
signature, and shall have affixed thereto the Company's seal (if any) or a
facsimile thereof. The Rights Certificates shall be manually countersigned by
the Rights Agent and shall not be valid for any purpose unless 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 Certificate 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.
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its office designated for such purposes, books for
registration and transfer of the Rights Certificates issued hereunder. Such
books shall show the names and addresses of the respective holders of the Rights
Certificates, the number of Rights evidenced on its face by each of the Rights
Certificates and the date of each of the Rights Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Rights
------------------------------------------------------
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.
- ----------------------------------------------------------------------
(a) Subject to the provisions of Sections 7(e), 14 and 24 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
Rights 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 one-thousandths of a Preferred Share (or,
following a Triggering Event, other securities, cash or other assets, as the
case may be) 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 or Rights Certificates
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 office of the Rights Agent designated for
such purpose. Neither the Rights Agent nor the Company shall be obligated to
take any action whatsoever with respect to the transfer of any such surrendered
Rights Certificate until the registered holder shall have completed and signed
the certificate contained in the form of assignment on the reverse side of such
Rights Certificate
-8-
<PAGE>
and shall have provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request. Thereupon the Rights Agent
shall, subject to Sections 7(e), 14 and 24 hereof, countersign and deliver to
the person entitled thereto a Rights Certificate or Rights Certificates, as the
case may be, as so requested. The Company may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer, split up, combination or exchange of Rights
Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Rights Certificate, and, in case of loss, theft or destruction, of indemnity
or security reasonably satisfactory to them, and, at the Company's request,
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Rights Certificate if mutilated, the Company will make and deliver a new
Rights Certificate of like tenor to the Rights Agent for delivery to the
registered holder in lieu of the Rights Certificate so lost, stolen, destroyed
or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.
-------------------------------------------------------------
(a) Subject to Sections 7(e), 23(b) and 24(b) hereof, 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 surrender of the Rights Certificate, with the form of
election to purchase on the reverse side thereof duly executed, to the Rights
Agent at the office of the Rights Agent designated for such purpose, together
with payment of the Purchase Price for each one-thousandth of a Preferred Share
as to which the Rights are exercised, at or prior to the Expiration Date.
(b) The Purchase Price for each one-thousandth of a Preferred Share
issuable pursuant to the exercise of a Right shall initially be Twenty Dollars
($20.00), shall be subject to adjustment from time to time as provided in
Sections 11 and 13 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 form of election to purchase duly executed, accompanied by
payment of the Purchase Price for the number of one-thousandths of a Preferred
Share (or other securities or property, as the case may be) to be purchased and
an amount equal to any applicable transfer tax required to be paid by the holder
of such Rights Certificate in accordance with Section 9 hereof in cash, or by
certified check or cashier's check payable to the order of the Company, the
Rights Agent shall, subject to Section 20(k) hereof, thereupon promptly (i) (A)
requisition from any transfer agent of the Preferred Shares (or make available,
if the Rights Agent is the transfer agent for the Preferred Shares) a
certificate or certificates for the number of one-thousandths of a Preferred
Share to be purchased and the Company hereby irrevocably authorizes its transfer
agent to comply with all such requests or (B) if the Company shall have elected
to deposit the total number of one-thousandths of a Preferred Share issuable
upon exercise of the Rights hereunder with a depositary agent, requisition from
the depositary agent of depositary receipts representing such number of one-
thousandths of a Preferred Share as are to be purchased (in which case
certificates for
-9-
<PAGE>
the Preferred Shares represented by such receipts shall be deposited by the
transfer agent with the depositary agent) and the Company hereby directs the
depositary agent to comply with such request, (ii) when appropriate, requisition
from the Company the amount of cash to be paid in lieu of issuance of fractional
shares in accordance with Section 14 hereof, (iii) after receipt of such
certificates or depositary receipts, cause the same to be delivered to or upon
the order of the registered holder of such Rights Certificate, registered in
such name or names as may be designated by such holder and (iv) when
appropriate, after receipt thereof, deliver such cash to or upon the order of
the registered holder of such Rights Certificate. The payment of the Purchase
Price (as such amount may be reduced (including to zero) pursuant to Section
11(a)(iv) hereof) may be made in cash or by certified bank check or bank draft
payable to the order of the Company. In the event that the Company is obligated
to issue other securities of the Company, pay cash and/or distribute other
property pursuant to Section 11(a) hereof, the Company will make all
arrangements necessary so that such other securities, cash and/or other property
are available for distribution by the Rights Agent, if and when appropriate.
(d) In case the registered holder of any Rights Certificate shall
exercise less than all the Rights evidenced thereby, a new Rights Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent to the registered holder of such Rights Certificate or to
his or her duly authorized assigns, subject to the provisions of Section 14
hereof.
(e) Notwithstanding anything in this Agreement to the contrary, from
and after the first occurrence of a Triggering Event or a Section 13 Event, any
Rights beneficially owned by (i) an Acquiring Person or an Associate or
Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or
of any such Associate or Affiliate) who becomes a transferee after the Acquiring
Person becomes such (a "Post Transferee"), (iii) a transferee of an Acquiring
Person (or of any such Associate or Affiliate) who becomes a transferee prior to
or concurrently with the Acquiring Person becoming such and receives such Rights
pursuant to either (A) a transfer (whether or not for consideration) from the
Acquiring Person to holders of equity interests in such Acquiring Person or to
any Person with whom the Acquiring Person has any continuing agreement,
arrangement or understanding regarding the transferred Rights or (B) a transfer
which the Board of Directors of the Company has determined is part of a plan,
arrangement or understanding which has as a primary purpose or effect the
avoidance of this Section 7(e) (a "Prior Transferee") or (iv) any subsequent
transferee receiving transferred Rights from a Post Transferee or a Prior
Transferee, either directly or through one or more intermediate transferees,
shall become null and void without any further action and no holder of such
Rights shall have any rights whatsoever with respect to such Rights, whether
under any provision of this Agreement or otherwise. The Company shall use all
reasonable efforts to insure that the provisions of this Section 7(e) and
Section 4(b) hereof are complied with, but shall have no liability to any holder
of Rights Certificates or to any other Person as a result of its failure to make
any determinations with respect to an Acquiring Person or any of such Acquiring
Person's Affiliates, Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a registered holder upon the occurrence of any purported
exercise as set forth in this Section 7 unless such registered holder shall have
(i) completed and signed the certificate contained in the form of election to
purchase set forth on the reverse side of the Rights Certificate surrendered for
such exercise and (ii) provided such
-10-
<PAGE>
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 to any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be canceled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the
Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any other Rights Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall
deliver all canceled Rights Certificates to the Company, or shall, at the
written request of the Company, destroy such canceled Rights Certificates, and
in such case shall deliver a certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of Preferred Shares.
------------------------------------------------
(a) The Company covenants and agrees that it will use its best efforts
to cause to be reserved and kept available out of and to the extent of its
authorized and unissued shares of Preferred Stock not reserved for another
purpose (and, following the occurrence of a Triggering Event, out of its
authorized and unissued shares of Common Stock and/or other securities), the
number of Preferred Shares (and, following the occurrence of the Triggering
Event, Common Stock and/or other securities) that will be sufficient to permit
the exercise in full of all outstanding Rights.
(b) If the Company shall hereafter list any of its Preferred Shares on
a national securities exchange, then so long as the Preferred Shares (and,
following the occurrence of a Triggering Event, Common Shares and/or other
securities) issuable and deliverable upon exercise of the Rights may be listed
on such exchange, the Company shall use its best efforts to cause, from and
after such time as the Rights become exercisable (but only to the extent that it
is reasonably likely that the Rights will be exercised), all shares reserved for
such issuance to be listed on such exchange upon official notice of issuance
upon such exercise.
(c) The Company shall use its best efforts to (i) file, as soon as
practicable following the earliest date after the first occurrence of a
Triggering Event in which the consideration to be delivered by the Company upon
exercise of the Rights has been determined in accordance with Section 11(a)(iv)
hereof, or as soon as is required by law following the Distribution Date, as the
case may be, a registration statement under the Securities Act of 1933, as
amended (the "Securities 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 Securities Act) until the earlier of (A)
the date as of which the Rights are no longer exercisable for such securities
and (B) the date of expiration of the Rights. The Company may temporarily
suspend, for a period not to exceed ninety (90) days after the date set forth in
clause (i) of the first sentence of this Section 9(c), the exercisability of the
Rights in order to prepare and file such registration statement and permit it to
become effective. Upon any such suspension, the Company shall issue a public
-11-
<PAGE>
announcement stating, and notify the Rights Agent, that the exercisability of
the Rights has been temporarily suspended, as well as a public announcement and
notification to the Rights Agent at such time as the suspension is no longer in
effect. The Company will also take such action as may be appropriate under, or
to ensure compliance with, the securities or "blue sky" laws of the various
states in connection with the exercisability of the Rights. Notwithstanding any
provision of this Agreement to the contrary, the Rights shall not be exercisable
in any jurisdiction, unless the requisite qualification in such jurisdiction
shall have been obtained, or an exemption therefrom shall be available, and
until a registration statement has been declared effective.
(d) The Company covenants and agrees that it will take all such action
as may be necessary to ensure that all Preferred Shares delivered upon exercise
of Rights shall, at the time of delivery of the certificates for such Preferred
Shares (subject to payment of the Purchase Price), be duly and validly
authorized and issued and fully paid and nonassessable shares.
(e) The Company further covenants and agrees that it will pay when due
and payable any and all federal and state transfer taxes and charges which may
be payable in respect of the original issuance or delivery of the Rights
Certificates or of any Preferred Shares upon the exercise of Rights. The
Company shall not, however, be required to pay any transfer tax which may be
payable in respect of any transfer or delivery of Rights Certificates to a
person other than, or the issuance or delivery of certificates or depositary
receipts for the Preferred Shares in a name other than that of, the registered
holder of the Rights Certificate evidencing Rights surrendered for exercise or
to issue or to deliver any certificates or depositary receipts for Preferred
Shares upon the exercise of any Rights until any such tax shall have been paid
(any such tax being payable by the holder of such Rights Certificate at the time
of surrender) or until it has been established to the Company's satisfaction
that no such tax is due.
Section 10. Preferred Shares Record Date. Each person in whose name any
----------------------------
certificate for a number of one-thousandths of a Preferred Share is issued upon
the exercise of Rights shall for all purposes be deemed to have become the
holder of record of Preferred Shares represented thereby on, and such
certificate shall be dated, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
multiplied by the number of one-thousandths of a Preferred Share with respect to
which the Rights have been exercised (and any applicable transfer taxes) was
made; provided, however, that if the date of such surrender and payment is a
-------- -------
date upon which the Preferred Shares 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 Shares transfer books of the Company are open. Prior to the
exercise of the Rights evidenced thereby, the holder of a Rights Certificate
shall not be entitled to any rights of a holder of Preferred 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 of Shares or Number of
-----------------------------------------------------------
Rights. The Purchase Price, the number and kind of shares or other property
- ------
covered by each Right and the number of Rights outstanding are subject to
adjustment from time to time as provided in this Section 11.
-12-
<PAGE>
(a) (i) In the event the Company shall at any time after the date
of this Agreement (A) declare a dividend on the Common Shares payable in Common
Shares, (B) subdivide the outstanding Common Shares, (C) combine the outstanding
Common Shares (by reverse stock split or otherwise) into a smaller number of
Common Shares, or (D) issue any shares of its capital stock in a
reclassification of the Common Shares (including any such reclassification in
connection with a consolidation or merger in which the Company is the continuing
or surviving corporation), then, in each such event, except as otherwise
provided in this Section 11(a) and Section 7(e) hereof: (1) each of the Rights
outstanding at the time of the record date for such dividend or the effective
date of such subdivision, combination or reclassification shall be
proportionately adjusted to that number of Rights (calculated to the nearest one
ten-thousandth (1/10,000) of a Right) equal to a fraction (the "Exchange
Ratio"), the numerator of which shall be the total number of Common Shares or
shares of capital stock issued in such reclassification of the Common Shares
outstanding immediately following such time and the denominator of which shall
be the total number of Common Shares outstanding immediately prior to such time,
and the number of Rights that shall thereafter be issued with respect to each
Common Share or share of such other capital stock that shall become outstanding
thereafter prior to the Distribution Date shall be equal to the total number of
outstanding Rights immediately after such event (as adjusted pursuant to this
clause (1)) divided by the total number of outstanding Common Shares or shares
of such other capital stock immediately after such event (subject to further
adjustment pursuant to the provisions of this Agreement); (2) 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 shall be adjusted so
that the Purchase Price thereafter shall equal the result obtained by dividing
the Purchase Price in effect immediately prior to such time by the Exchange
Ratio; provided, however, that in no event shall the consideration to be paid
-------- -------
upon the exercise of one Right be less than the aggregate par value of the
shares of capital stock of the Company issuable upon exercise of such Right; and
(3) the number of Common Shares or shares of such other capital stock issuable
upon the exercise of each Right shall remain unchanged immediately after such
event, but, in the event of a reclassification, the kind of shares issuable upon
the exercise of each Right immediately after such reclassification shall be
adjusted to be the kind of shares of such other capital stock issued in such
reclassification, rather than Common Shares. If an event occurs which would
require an adjustment under both this Section 11(a)(i) and Section 11(a)(ii)
hereof, the adjustment provided for in this Section 11(a)(i) shall be in
addition to, and shall be made prior to, any adjustment required pursuant to
Section 11(a)(ii) hereof.
(ii) Subject to Section 24 of this Agreement, in the event a
Triggering Event shall have occurred, then promptly following such Triggering
Event, proper provision shall be made so that each holder of a Right, except as
provided in Section 7(e) hereof, shall thereafter have the right to receive for
each Right, upon exercise thereof in accordance with the terms of this Agreement
and payment of the then-current Total Exercise Price, in lieu of a number of
one-thousandths of a Preferred Share, such number of Common Shares of the
Company as shall equal the result obtained by multiplying the then-current
Purchase Price by the then number of one-thousandths of a Preferred Share for
which a Right was exercisable (or would have been exercisable if the
Distribution Date had occurred) immediately prior to the first occurrence of a
Triggering Event, and dividing that product by 50% of the current per share
market price (determined pursuant to Section 11(d) hereof) for Common Shares on
the date of occurrence of the Triggering Event (such number of shares being
hereinafter referred to as the "Adjustment Shares").
-13-
<PAGE>
(iii) The right to buy Common Shares of the Company pursuant
to Section 11(a)(ii) hereof shall not arise as a result of any Person becoming
an Acquiring Person through an acquisition of Common Shares pursuant to a
Permitted Offer.
(iv) In lieu of issuing Common Shares in accordance with
Section 11(a)(ii) hereof, the Company may, if the Board of Directors determines
that such action is necessary or appropriate and not contrary to the interest of
holders of Rights (and, in the event that the number of Common Shares which are
authorized by the Company's Certificate of Incorporation but not outstanding or
reserved for issuance for purposes other than upon exercise of the Rights are
not sufficient to permit the exercise in full of the Rights, or if any necessary
regulatory approval for such issuance has not been obtained by the Company, the
Company shall): (A) determine the excess of (1) the value of the Common Shares
issuable upon the exercise of a Right (the "Current Value") over (2) the
Purchase Price (such excess, the "Spread") and (B) with respect to each Right,
make adequate provision to substitute for such Common Shares, upon exercise of
the Rights, (1) cash, (2) a reduction in the Purchase Price, (3) other equity
securities of the Company (including, without limitation, shares or units of
shares of any series of preferred stock which the Board of Directors of the
Company has deemed to have the same value as Common Shares (such shares or units
of shares of preferred stock are herein called "common stock equivalents")),
except to the extent that the Company has not obtained any necessary shareholder
or regulatory approval for such issuance, (4) debt securities of the Company,
except to the extent that the Company has not obtained any necessary shareholder
or regulatory approval for such issuance, (5) other assets or (6) any
combination of the foregoing, having an aggregate value equal to the Current
Value, where such aggregate value has been determined by the Board of Directors
of the Company based upon the advice of a nationally recognized investment
banking firm selected by the Board of Directors of the Company; provided,
--------
however, if the Company shall not have made adequate provision to deliver value
- -------
pursuant to clause (B) above within thirty (30) days following the later of (x)
the first occurrence of a Triggering Event and (y) the date on which the
Company's right of redemption pursuant to Section 23(a) expires (the later of
(x) and (y) being referred to herein as the "Section 11(a)(ii) Trigger Date"),
then the Company shall be obligated to deliver, upon the surrender for exercise
of a Right and without requiring payment of the Purchase Price, Common Shares
(to the extent available), except to the extent that the Company has not
obtained any necessary shareholder or regulatory approval for such issuance, and
then, if necessary, cash, which shares and/or cash have an aggregate value equal
to the Spread. If the Board of Directors of the Company shall determine in good
faith that it is likely that sufficient additional Common Shares could be
authorized for issuance upon exercise in full of the Rights or that any
necessary regulatory approval for such issuance will be obtained, the thirty
(30) day period set forth above may be extended to the extent necessary, but not
more than ninety (90) days after the Section 11(a)(ii) Trigger Date, in order
that the Company may seek shareholder approval for the authorization of such
additional shares or take action to obtain such regulatory approval (such
period, as it may be extended, the "Substitution Period"). To the extent that
the Company determines that some action need be taken pursuant to the first
and/or second sentences of this Section 11(a)(iv), the Company (x) shall
provide, subject to Section 7(e) hereof, that such action shall apply uniformly
to all outstanding Rights and (y) may suspend the exercisability of the Rights
until the expiration of the Substitution Period in order to seek any
authorization of additional shares, to take any action to obtain any required
regulatory approval and/or to decide the appropriate form of distribution to be
made pursuant to such first sentence and to determine the value thereof. In the
event of any such suspension, the Company shall
-14-
<PAGE>
issue a public announcement stating that the exercisability of the Rights has
been temporarily suspended, as well as a public announcement at such time as the
suspension is no longer in effect. For purposes of this Section 11(a)(iv), the
value of the Common Shares shall be the current per share market price (as
determined pursuant to Section 11(d) hereof) of the Common Shares on the Section
11(a)(ii) Trigger Date and the value of any "common stock equivalent" shall be
deemed to have the same value as the Common Shares on such date.
(b) In case the Company shall, at any time after the date of this
Agreement, fix a record date for the issuance of rights, options or warrants to
all holders of Common Shares or of any class or series of Equivalent Shares
entitling such holders (for a period expiring within forty-five (45) calendar
days after such record date) to subscribe for or purchase Common Shares or
Equivalent Shares or securities convertible into Common Shares or Equivalent
Shares at a price per share (or having a conversion price per share, if a
security convertible into Common Shares or Equivalent Shares) less than the then
current per share market price of the Common Shares or Equivalent Shares (as
defined in Section 11(d)) on such record date, then, in each such case, 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 Common Shares and
Equivalent Shares (if any) outstanding on such record date, plus the number of
Common Shares or Equivalent Shares, as the case may be, which the aggregate
offering price of the total number of Common Shares or Equivalent Shares, as the
case may be, so to be offered (and/or the aggregate initial conversion price of
the convertible securities so to be offered) would purchase at such current
market price, and the denominator of which shall be the number of Common Shares
and Equivalent Shares (if any) outstanding on such record date, plus the number
of additional Common Shares or Equivalent Shares, as the case may be, 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 as determined in good faith
by the Board of Directors of the Company, whose determination shall be described
in a statement filed with the Rights Agent and shall be binding on the Rights
Agent and the holders of the Rights. Common Shares and Equivalent Shares owned
by or held for the account of the Company shall not be deemed outstanding for
the purpose of any such computation. Such adjustment shall be made successively
whenever such a record date is fixed, and in the event that such rights, options
or warrants are not so issued, the Purchase Price shall be adjusted to be the
Purchase Price which would then be in effect if such record date had not been
fixed.
(c) In case the Company shall, at any time after the date of this
Agreement, fix a record date for the making of a distribution to all holders of
the Common Shares or of any class or series of Equivalent Shares (including any
such distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) of evidences of indebted
ness or assets (other than a regular quarterly cash dividend, if any, or a
dividend payable in Common Shares) or subscription rights, options or warrants
(excluding those referred to in Section 11(b)), then, in each such case, 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
determined pursuant to Section 11(d) hereof) of a Common Share or an Equivalent
Share on such record date, less the fair market value (as determined in good
faith by the
-15-
<PAGE>
Board of Directors of the Company, whose determination shall be described in a
statement filed with the Rights Agent) of the portion of the cash, assets or
evidences of indebtedness so to be distributed or of such subscription rights or
warrants applicable to a Common Share or Equivalent Share, as the case may be,
and the denominator of which shall be such current market price (as determined
pursuant to Section 11(d) hereof) of a Common Share or Equivalent Share on such
record date. Such adjustments shall be made successively whenever such a record
date is fixed, and in the event that such distribution is not so made, the
Purchase Price shall be adjusted to be the Purchase Price which would have been
in effect if such record date had not been fixed.
(d) For the purpose of any computation hereunder, other than
computations made pursuant to Section 11(a)(iv) hereof, the "current per share
market price" of any security (a "Security" for the purpose of this Section
11(d)) on any date shall be deemed to be the average of the daily closing prices
per share of such Security for the thirty (30) consecutive Trading Days (as such
term is hereinafter defined) immediately prior to such date, and for purposes of
computations made pursuant to Section 11(a)(iv) hereof, the "current per share
market price" of any Security on any date shall be deemed to be the average of
the daily closing prices per share of such Security for the ten (10) consecutive
Trading Days immediately prior to such date; provided, however, that in the
-------- -------
event that the current per share market price of the Security is determined
during a period following the announcement by the issuer of such Security of (i)
a dividend or distribution on such Security payable in shares of such Security
or securities convertible into such shares or (ii) any subdivision, combination
or reclassification of such Security, and prior to the expiration of the
requisite thirty (30) Trading Day or ten (10) Trading Day period, 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 per share market price shall be appropriately adjusted to reflect the
current market price per share equivalent of such Security. The closing price
for each day shall be the last sale price, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Security is not listed or
admitted to trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Security is listed or
admitted to trading or, if the Security is not listed or admitted to trading on
any national securities exchange, the last sale price or, if such last sale
price is not reported, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotations ("Nasdaq") System or such other system then
in use, or, if on any such date the Security is not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Security selected by the Board
of Directors of the Company. If on any such date no market maker is making a
market in the Common Shares, the fair value of such shares on such date as
determined in good faith by the Board of Directors of the Company shall be used.
The term "Trading Day" shall mean a day on which the principal national
securities exchange on which the Security is listed or admitted to trading is
open for the transaction of business or, if the Security is not listed or
admitted to trading on any national securities exchange, a Business Day. If the
Common Shares are not publicly held or so listed or traded, "current per share
market price" shall mean the fair value per share as determined in good faith by
the Board of
-16-
<PAGE>
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 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 Common Share or other share or one
hundred-thousandth of a Preferred Share, as the case may be. Notwithstanding the
first sentence of this Section 11(e), any adjustment required by this Section 11
shall be made no later than the earlier of (i) three (3) years from the date of
the transaction which requires such adjustment or (ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section 11(a) or
13(a) hereof, the holder of any Right thereafter exercised shall become entitled
to receive any shares of capital stock other than Preferred Shares, thereafter
the number of such other shares so receivable upon exercise of any Right and if
required, the Purchase Price thereof, shall be subject to adjustment from time
to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Common Shares contained in Sections 11(a), (b),
(c), (e), (h), (i), (j), (k), (l) and (m), and the provisions of Sections 7, 9,
10, 13 and 14 with respect to the Preferred Shares shall apply on like terms to
any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one-thousandths of a
Preferred Share 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), 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 Preferred Shares (calculated to
the nearest one hundred-thousandth of a share) obtained by (i) multiplying (x)
the number of Preferred Shares 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 as a result of the calculations made in Section 11(b) to
adjust the number of Rights, in substitution for any adjustment in the number
of Preferred Shares purchasable upon the exercise of a Right. Each of the Rights
outstanding after such adjustment of the number of Rights shall be exercisable
for the number of one-thousandths of a Preferred Share for which a Right was
exercisable immediately prior to such adjustment. Each Right held of record
prior to such adjustment of the number of Rights shall become that number of
Rights (calculated to the nearest one hundred-thousandth) obtained by dividing
the Purchase Price in effect immediately prior to adjustment of the Purchase
Price by the Purchase Price
-17-
<PAGE>
in effect immediately after adjustment of the Purchase Price. The Company shall
make a public announcement of its election to adjust the number of Rights,
indicating the record date for the adjustment, and, if known at the time, the
amount of the adjustment to be made. This record date may be the date on which
the Purchase Price is adjusted or any day thereafter, but, if the Rights
Certificates have been issued, shall be at least ten (10) days later than the
date of the public announcement. If Rights Certificates have been issued, upon
each adjustment of the number of Rights pursuant to this Section 11(i), the
Company shall, as promptly as practicable, cause to be distributed to holders of
record of Rights Certificates on such record date Rights Certificates
evidencing, subject to Section 14 hereof, the additional Rights to which such
holders shall be entitled as a result of such adjustment, or, at the option of
the Company, shall cause to be distributed to such holders of record in
substitution and replacement for the Rights Certificates held by such holders
prior to the date of adjustment, and upon surrender thereof, if required by the
Company, new Rights Certificates evidencing all the Rights to which such holders
shall be entitled after such adjustment. Rights Certificates so to be
distributed shall be issued, executed and countersigned in the manner provided
for herein (and may bear, at the option of the Company, the adjusted Purchase
Price) and shall be registered in the names of the holders of record of Rights
Certificates on the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or
the number of Preferred Shares issuable upon the exercise of the Rights, the
Rights Certificates theretofore and thereafter issued may continue to express
the Purchase Price per one one-thousandth of a Preferred Share and the number of
one-thousandths of a Preferred Share which were expressed in the initial Rights
Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below the par or stated value, if any, of the number of
one-thousandths of a Preferred Share 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 as
fully paid and nonassessable shares such number of one-thousandths of a
Preferred Share at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuing to the holder of any Right exercised after such record date of
the number of one-thousandths of a Preferred Share and other capital stock or
securities of the Company, if any, issuable upon such exercise over and above
the number of one-thousandths of a Preferred Share 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
(fractional or otherwise) upon the occurrence of the event requiring such
adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding,
prior to the Distribution Date, 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
-18-
<PAGE>
discretion shall determine to be advisable in order that any (i) consolidation
or subdivision of the Preferred or Common Shares, (ii) issuance wholly for cash
of any Preferred or Common Shares at less than the current market price, (iii)
issuance wholly for cash of Preferred or Common Shares or securities which by
their terms are convertible into or exchangeable for Preferred or Common Shares,
(iv) stock dividends or (v) issuance of rights, options or warrants referred to
in this Section 11, hereafter made by the Company to holders of its Preferred or
Common Shares shall not be taxable to such shareholders.
(n) The Company covenants and agrees that it shall not, at any time
after the Distribution Date, effect or permit to occur any Triggering Event or
Section 13 Event, if (i) at the time or immediately after such Triggering Event
or Section 13 Event there are any rights, warrants or other instruments or
securities outstanding or agreements in effect which would substantially
diminish or otherwise eliminate the benefits intended to be afforded by the
Rights or (ii) prior to, simultaneously with or immediately after such Section
13 Event, the shareholders of the Person who constitutes, or would constitute,
the "Principal Party" for purposes of Section 13(b) hereof shall have received a
distribution of Rights previously owned by such Person or any of its Affiliates
and Associates.
(o) The Company covenants and agrees that, after the Distribution
Date, it will not, except as permitted by Sections 23, 24 or 27 hereof, take (or
permit to be taken) any action if at the time such action is taken it is
reasonably foreseeable that such action will diminish substantially or otherwise
eliminate the benefits intended to be afforded by the Rights.
(p) Anything in this Agreement to the contrary notwithstanding, in
the event the Company shall at any time after the date of this Agreement (A)
declare a dividend on the Preferred Shares payable in Preferred Shares, (B)
subdivide the outstanding Preferred Shares, (C) combine the outstanding
Preferred Shares (by reverse stock split or otherwise) into a smaller number of
Preferred Shares, or (D) issue any shares of its capital stock in a
reclassification of the Preferred Shares (including any such reclassification in
connection with a consolidation or merger in which the Company is the continuing
or surviving corporation), then, in each such event, except as otherwise
provided in this Section 11 and Section 7(e) hereof: (1) each of the Rights
outstanding at the time of the record date for such dividend or the effective
date of such subdivision, combination or reclassification shall be
proportionately adjusted to that number of Rights (calculated to the nearest one
ten-thousandth (1/10,000) of a Right) equal to a fraction (the "Exchange
Fraction"), the numerator of which shall be the total number of Preferred Shares
or shares of capital stock issued in such reclassification of the Preferred
Shares outstanding immediately following such time and the denominator of which
shall be the total number of Preferred Shares outstanding immediately prior to
such time, and the number of Rights that shall thereafter be issued with respect
to each Common Share or share of other capital stock that shall be issued in a
reclassification of the Common Shares prior to the Distribution Date shall be
equal to the total number of outstanding Rights immediately after such event (as
adjusted pursuant to this clause (1)) divided by the total number of outstanding
Common Shares or shares of such other capital stock immediately after such event
(subject to further adjustment pursuant to the provisions of this Agreement);
(2) 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 shall be adjusted so that the Purchase Price thereafter shall
equal the result obtained by dividing the Purchase Price in effect immediately
prior to such time by the Exchange Fraction; provided, however, that in no event
-------- -------
shall the consideration to
-19-
<PAGE>
be paid upon the exercise of one Right be less than the aggregate par value of
the shares of capital stock of the Company issuable upon exercise of such Right;
and (3) the number of one-thousandths of a Preferred Share or share of such
other capital stock issuable upon the exercise of each Right shall remain
unchanged immediately after such event, but, in the event of a reclassification,
the kind of shares issuable upon the exercise of each Right immediately after
such reclassification shall be adjusted to be the kind of shares of such other
capital stock issued in such reclassification, rather than Preferred Shares.
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 promptly (a) prepare a certificate setting forth such adjustment
and a brief statement of the facts accounting for such adjustment, (b) file with
the Rights Agent and with each transfer agent for the Preferred Shares 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. Notwithstanding the foregoing
sentence, the failure of the Company to make such certification or give such
notice shall not affect the validity of such adjustment or the force or effect
of the requirement for such adjustment. The Rights Agent shall be fully
protected in relying on any such certificate and on any adjustment contained
therein and shall not be deemed to have knowledge of such adjustment unless and
until it shall have received such certificate.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
------------------------------------------------------
Earning Power.
- -------------
(a) In the event that, following the Shares Acquisition Date,
directly or indirectly:
(i) the Company shall consolidate with, or merge with and
into, any other Person (other than a Subsidiary of the Company in a transaction
the principal purpose of which is to change the state of incorporation of the
Company or which complies with Section 11(o) hereof);
(ii) any Person (other than a Subsidiary of the Company in a
transaction that complies with Section 11(o) hereof) shall consolidate with the
Company, or merge with and into the Company and the Company shall be the
continuing or surviving corporation of such consolidation or merger; or
(iii) the Company shall sell or otherwise transfer (or one or
more of its Subsidiaries shall sell or otherwise transfer), in one or more
transactions, assets or earning power aggregating 50% or more of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to any
other Person or Persons (other than the Company or one or more of its wholly
owned Subsidiaries in one or more transactions, each of which complies with
Section 11(o) hereof),
then, and in each such case, proper provision shall be
made so that
(A) each holder of a Right (except as otherwise provided
herein) shall thereafter have the right to receive, upon the exercise thereof in
accordance with the terms of this Agreement, such number of validly authorized
and issued, fully paid and nonassessable Common Shares of the Principal Party
(as hereinafter defined), free of any liens, encumbrances, rights of first
refusal or other adverse claims, as shall be equal to the result obtained by (1)
multiplying the then current Purchase
-20-
<PAGE>
Price by the number of one-thousandths of a Preferred Share for which a Right
was exercisable immediately prior to the first occurrence of a Section 13 Event
(or, if a Triggering Event has occurred prior to the first occurrence of a
Section 13 Event, multiplying the number of such one-thousandths of a Preferred
Share for which a Right was exercisable immediately prior to the first
occurrence of a Triggering Event by the Purchase Price in effect immediately
prior to such first occurrence) and (2) dividing that product (which, following
the first occurrence of a Section 13 Event, shall be referred to as the "Total
Exercise Price" for each Right and for all purposes of this Agreement) by 50% of
the current per share market price (determined pursuant to Section 11(d) hereof)
of the Common Shares of such Principal Party on the date of consummation of such
Section 13 Event;
(B) such Principal Party shall thereafter be liable for,
and shall assume, by virtue of such Section 13 Event, all the obligations and
duties of the Company pursuant to this Agreement;
(C) the term "Company" shall thereafter be deemed to
refer to such Principal Party, it being specifically intended that the
provisions of Section 11 hereof shall apply only to such Principal Party
following the first occurrence of a Section 13 Event;
(D) such Principal Party shall take such steps
(including, but not limited to, the reservation of a sufficient number of its
Common Shares) in connection with the consummation of any such transaction as
may be necessary to assure that the provisions hereof shall thereafter be
applicable, as nearly as reasonably may be, in relation to its Common Shares
thereafter deliverable upon the exercise of the Rights.
(b) "Principal Party" shall mean, in the case of any transaction
described in clause (i), (ii) or (iii) of Section 13(a), the Person or Acquiring
Person referred to therein (or such Person's or Acquiring Person's successor,
including, if applicable, the Company, if it is the surviving corporation),
provided, however, that in any such case, (i) if such Person is a direct or
- -------- -------
indirect Subsidiary of another Person, "Principal Party" shall refer to such
other Person and (ii) in case such Person is a Subsidiary, directly or
indirectly, of more than one Person, "Principal Party" shall refer to whichever
of such Persons is the issuer of the Common Shares having the greatest aggregate
value, and provided, further, that for purposes of transactions described in
-------- -------
clause (iii) hereof, "Principal Party" shall refer to that Person receiving the
greatest portion of the assets or earning power transferred pursuant to such
transaction or transactions.
(c) If, for any reason, the Rights cannot be exercised for Common
Shares of such Principal Party as provided in Section 13(a), then each holder of
Rights shall have the right to exchange its Rights for cash from such Principal
Party in an amount equal to the number of Common Shares that it would otherwise
be entitled to purchase times 50% of the current per share market price, as
determined pursuant to Section 11(d) hereof, of such Common Shares of such
Principal Party. If, for any reason, the foregoing formulation cannot be applied
to determine the cash amount into which the Rights are exchangeable, then the
Board of Directors, based upon the advice of one or more nationally recognized
investment banking firms, and based upon the total value of the Company, shall
determine such amount
-21-
<PAGE>
reasonably and with good faith to the holders of Rights. Any such determination
shall be final and binding on the Rights Agent.
(d) Notwithstanding anything in this Agreement to the contrary,
Section 13 shall not be applicable to a transaction described in clauses (i) and
(ii) of Section 13(a) if: (i) such transaction is consummated with a Person or
Persons who acquired Common Shares pursuant to a Permitted Offer (or a wholly-
owned Subsidiary of any such Person or Persons); (ii) the price per share of
Common Shares offered in such transaction is not less than the price per share
of Common Shares paid to all holders of Common Shares whose shares were
purchased pursuant to such Permitted Offer; and (iii) the form of consideration
being offered to the remaining holders of Common Shares pursuant to such
transaction is the same form as the form of consideration paid pursuant to such
Permitted Offer. Upon consummation of any such transaction contemplated by this
Section 13(d), all Rights hereunder shall expire.
(e) The Company shall not consummate any Section 13 Event unless the
Principal Party shall have a sufficient number of authorized Common Shares 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 such issuer shall have executed and delivered to the Rights Agent a
supplemental agreement confirming that such Principal Party shall, upon
consummation of such Section 13 Event, assume this Agreement in accordance with
Sections 13(a) and (b) hereof, that all rights of first refusal or preemptive
rights in respect of the issuance of Common Shares of such Principal Party upon
exercise of outstanding Rights have been waived, that there are no rights,
warrants, instruments or securities outstanding or any agreements or
arrangements which, as a result of the consummation of such transaction, would
eliminate or substantially diminish the benefits intended to be afforded by the
Rights and that such transaction shall not result in a default by such Principal
Party under this Agreement, and further providing that, as soon as practicable
after the date of such Section 13 Event, such Principal Party will:
(i) prepare and file a registration statement under the
Securities Act with respect to the Rights and the securities purchasable upon
exercise of the Rights on an appropriate form, use its best efforts to cause
such registration statement to become effective as soon as practicable after
such filing and use its best efforts to cause such registration statement to
remain effective (with a prospectus at all times meeting the requirements of the
Securities Act) until the Expiration Date, and similarly comply with applicable
state securities laws;
(ii) use its best efforts to list (or continue the listing of)
the Rights and the securities purchasable upon exercise of the Rights on a
national securities exchange or to meet the eligibility requirements for
quotation on the Nasdaq National Market; and
(iii) deliver to holders of the Rights historical financial
statements for such Principal Party which comply in all respects with the
requirements for registration on Form 10 (or any successor form) under the
Exchange Act.
-22-
<PAGE>
In the event that at any time after the occurrence of a
Triggering Event some or all of the Rights shall not have been exercised at the
time of a transaction described in this Section 13, the Rights which have not
theretofore been exercised shall thereafter be exercisable in the manner
described in Section 13(a) (without taking into account any prior adjustment
required by Section 11(a)(ii)).
(f) The provisions of this Section 13 shall similarly apply to
successive mergers or consolidations or sales or other transfers.
Section 14. Fractional Rights and Fractional Shares.
---------------------------------------
(a) The Company shall not be required to issue fractions of Rights 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 14(a), the current
market value of a whole Right shall be the closing price of the Rights for the
Trading Day immediately prior to the date on which such fractional Rights would
have been otherwise issuable, as determined pursuant to the second sentence of
Section 11(d) hereof.
(b) The Company shall not be required to issue fractions of Preferred
Shares (other than fractions that are integral multiples of one one-thousandth
of a Preferred Share) upon exercise of the Rights or to distribute certificates
which evidence fractional Preferred Shares (other than fractions that are
integral multiples of one one-thousandth of a Preferred Share). In lieu of
fractional Preferred Shares that are not integral multiples of one one-
thousandth of a Preferred Share, the Company shall pay to the registered holders
of Rights Certificates at the time such Rights are exercised as herein provided
an amount in cash equal to the same fraction of the current market value of a
Common Share. For purposes of this Section 14(b), the current market value of a
Common Share shall be the closing price of a Common Share (as determined
pursuant to the second sentence of Section 11(d) hereof) for the Trading Day
immediately prior to the date of such exercise.
(c) The holder of a Right by the acceptance of the Right expressly
waives his or her right to receive any fractional Rights or any fractional
shares upon exercise of a Right.
Section 15. Rights of Action. All rights of action in respect of this
----------------
Agreement, excepting the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares); and any registered holder of any Rights Certificate (or, prior
to the Distribution Date, of the Common Shares), 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 Shares), may, in his or her own behalf and for
his or her 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 or her 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
-23-
<PAGE>
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and will be entitled to specific performance of
the obligations under, and injunctive relief against actual or threatened
violations of, the obligations of any Person subject to this Agreement.
Section 16. Agreement of Rights Holders. Every holder of a Right, by
---------------------------
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of the Common Shares;
(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office or offices of the Rights Agent designated for such
purposes, duly endorsed or accompanied by a proper instrument of transfer and
with the appropriate forms and certificates fully executed; and
(c) subject to Sections 6(a) and 7(f) hereof, the Company and the
Rights Agent may deem and treat the person in whose name the Rights Certificate
(or, prior to the Distribution Date, the associated Common Shares 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 Shares 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 17. Rights Certificate Holder Not Deemed a Shareholder. No
--------------------------------------------------
holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the Preferred Shares 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 hereof.
Section 18. Concerning the Rights Agent.
---------------------------
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
other disbursements incurred in the administration and execution of this
Agreement and the exercise and performance of its duties hereunder. The Company
also agrees to indemnify the Rights Agent for, and to hold it harmless against,
any loss, liability or expense, incurred without gross 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 in the premises.
-24-
<PAGE>
Anything in this Agreement to the contrary notwithstanding, in no event shall
the Rights Agent be liable for special, indirect or consequential loss or damage
of any kind whatsoever (including but not limited to lost profits), even if the
Rights Agent has been advised of the likelihood of such loss or damage and
regardless of the form of the action.
(b) The Rights Agent shall be protected and shall incur no liability
for, or in respect of any action taken, suffered or omitted by it in connection
with, its administration of this Agreement in reliance upon any Rights
Certificate or certificate for the Preferred Shares or Common Shares 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, or otherwise upon the advice of counsel as set
forth in Section 20 hereof.
Section 19. Merger or Consolidation or Change of Name of Rights Agent.
---------------------------------------------------------
(a) Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Rights Agent
or any successor Rights Agent shall be a party, or any corporation succeeding to
the corporate trust business of the Rights Agent or any successor Rights Agent,
shall be the successor to the Rights Agent under this Agreement without the
execution or filing of any paper or any further act on the part of any of the
parties hereto; provided, however, that such corporation would be eligible for
-----------------
appointment as a successor Rights Agent under the provisions of Section 21
hereof. In case at the time such successor Rights Agent shall succeed to the
agency created by this Agreement, any of the Rights Certificates shall have been
countersigned but not delivered, any such successor Rights Agent may adopt the
countersignature of 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
Rights Agent or in the name of the successor Rights Agent; and in all such cases
such Rights Certificates shall have the full force provided in the Rights
Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be
changed and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver Rights Certificates so countersigned; and in
case at that time any of the Rights Certificates shall not have been
countersigned, the Rights Agent may countersign such Rights Certificates either
in its prior name or in its changed name; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the
----------------------
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Rights Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be
legal counsel for the Company), and the opinion of such counsel shall be full
and complete authorization and protection
-25-
<PAGE>
to the Rights Agent as to any action taken or omitted by it in good faith and in
accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person and the
determination of "current per share market price") be proved or established by
the Company prior to taking or suffering any action hereunder, such fact or
matter (unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and established by a
certificate signed by any one of the Chairman of the Board, the Chief Executive
Officer, the President, any Vice President, the Chief Financial Officer, 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 to the Company and any
other Person only for its own gross negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement or in the Rights
Certificates (except its countersignature thereof) 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 change in the exercisability of the Rights or any
adjustment in the terms of the Rights (including the manner, method or amount
thereof) provided for in Sections 3, 11, 13, 23 or 24, or the ascertaining of
the existence of facts that would require any such change or adjustment (except
with respect to the exercise of Rights evidenced by Rights Certificates after
receipt by the Rights Agent of a certificate furnished pursuant to Section 12
describing such change or adjustment); nor shall it by any act hereunder be
deemed to make any representation or warranty as to the authorization or
reservation of any Preferred Shares to be issued pursuant to this Agreement or
any Rights Certificate or as to whether any Preferred Shares will, when 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 acts, instruments and assurances as may reasonably be
required by the Rights Agent for the carrying out or performing by the Rights
Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the Board, the Chief Executive Officer, the President,
any Vice President, the Chief Financial Officer, the Secretary or any
-26-
<PAGE>
Assistant Secretary of the Company, and to apply to such officers for advice or
instructions in connection with its duties, and it shall not be liable for any
action taken or suffered by it in good faith in accordance with instructions of
any such officer or for any delay in acting while waiting for those
instructions. Any application by the Rights Agent for written instructions from
the Company may, at the option of the Rights Agent, set forth in writing any
action proposed to be taken or omitted by the Rights Agent under this Rights
Agreement and the date on and/or after which such action shall be taken or such
omission shall be effective. The Rights Agent shall not be liable for any action
taken by, or omission of, the Rights Agent in accordance with a proposal
included in any such application on or after the date specified in such
application (which date shall not be less than five (5) Business Days after the
date any officer of the Company actually receives such application, unless any
such officer shall have consented in writing to an earlier date) unless, prior
to taking any such action (or the effective date in the case of an omission),
the Rights Agent shall have received written instructions in response to such
application specifying the action to be taken or omitted.
(h) The Rights Agent and any 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, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct, provided 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 or transfer without first consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any successor
----------------------
Rights Agent may resign and be discharged from its duties under this Agreement
upon thirty (30) days' notice in writing mailed to the Company and to each
transfer agent of the Preferred Shares and the Common Shares by registered or
certified mail, and to the holders of the Rights Certificates by first-class
mail. The Company may remove the Rights Agent or any successor Rights Agent
upon thirty (30) days' notice in writing, mailed to the Rights Agent or
successor Rights Agent, as the case may be, and to each transfer
-27-
<PAGE>
agent of the Preferred Shares and the Common Shares 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 thirty (30) days
after giving notice of such removal or after it has been notified in writing of
such resignation or incapacity by the resigning or incapacitated Rights Agent or
by the holder of a Rights Certificate (who shall, with such notice, submit his
or her 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
corporation organized and doing business under the laws of the United States or
of any state of the United States, in good standing, which is authorized under
such laws to exercise corporate trust or shareholder services 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 million. 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 Preferred Shares and the Common Shares, and mail a notice thereof in writing
to the registered holders of the Rights Certificates. Failure to give any notice
provided for in this Section 21, however, or any defect therein, shall not
affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.
Section 22. Issuance of New Rights Certificates. Notwithstanding any of
-----------------------------------
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Rights Certificates evidencing Rights in such form
as may be approved by its Board of Directors to reflect any adjustment or change
in the Purchase Price and the number or kind or class of shares or other
securities or property purchasable under the Rights Certificates made in
accordance with the provisions of this Agreement. In addition, in connection
with the issuance or sale of Common Shares following the Distribution Date and
prior to the redemption or expiration of the Rights, the Company (a) shall, with
respect to Common Shares so issued or sold pursuant to the exercise of stock
options or under any employee plan or arrangement or upon the exercise,
conversion or exchange of the convertible subordinated debentures of the Company
outstanding at the date hereof or upon the exercise, conversion or exchange of
securities hereinafter issued by the Company and (b) may, in any other case, if
deemed necessary or appropriate by the Board of Directors of the Company, issue
Rights Certificates representing the appropriate number of Rights in connection
with such issuance or sale; provided, however, that (i) no such Rights
-------- -------
Certificate shall be issued and this sentence shall be null and void ab initio
---------
if, and to the extent that, such issuance or this sentence would create a
significant risk of or result in material adverse tax consequences to the
Company or the Person to whom such Rights Certificate would be issued or would
create a significant risk of or result in such options' or employee plans' or
arrangements' failing to qualify for otherwise available special tax treatment
and (ii) no such Rights Certificate shall be issued if, and to the extent that,
appropriate adjustment shall otherwise have been made in lieu of the issuance
thereof.
-28-
<PAGE>
Section 23. Redemption.
----------
(a) The Company may, at its option and with the approval of the Board
------------------------------
of Directors, at any time prior to the Close of Business on the earlier of (i)
- ------------
the tenth day following the Shares Acquisition Date or such later date as may be
determined by action of a majority of Continuing Directors then in office and
publicly announced by the Company or (ii) the Final Expiration Date, redeem all
but not less than all the then outstanding Rights at a redemption price of $0.01
per Right, appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof (such redemption price being
herein referred to as the "Redemption Price") and the Company may, at its
option, pay the Redemption Price either in Common Shares (based on the current
per share market price thereof (as determined pursuant to Section 11(d) hereof)
at the time of redemption) or cash. Such redemption of the Rights by the
Company may be made effective at such time, on such basis and with such
conditions as the Board of Directors in its sole discretion may establish;
provided, however, if the Board of Directors of the Company authorizes
- -------- -------
redemption of the Rights on or after the time a Person becomes an Acquiring
Person, then there must be Continuing Directors then in office and such
authorization shall require the concurrence of a majority of such Continuing
Directors.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights, evidence of which shall have been
filed with the Rights Agent, and without any further action and without any
notice, the right to exercise the Rights will terminate and the only right
thereafter of the holders of Rights shall be to receive the Redemption Price.
The Company shall promptly give public notice of any such redemption; provided,
--------
however, that the failure to give or any defect in, any such notice shall not
- -------
effect the validity of such redemption. Within ten (10) days after the action of
the Board of Directors ordering the redemption of the Rights, the Company shall
give notice of such redemption to the Rights Agent and the holders of the then
outstanding Rights by mailing such notice to all such holders at 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 Shares. 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. Neither the Company nor any of its Affiliates or
Associates may redeem, acquire or purchase for value any Rights at any time in
any manner other than that specifically set forth in this Section 23 or in
Section 24 hereof, and other than in connection with the purchase of Common
Shares prior to the Distribution Date.
Section 24. Exchange.
--------
(a) Subject to applicable laws, rules and regulations, and subject to
subsection (c) below, the Company may, at its option, by majority vote of the
Board of Directors and a majority vote of the Continuing Directors, at any time
after the occurrence of a Triggering Event, exchange all or part of the then
outstanding and exercisable Rights (which shall not include Rights that have
become void pursuant to the provisions of Section 7(e) hereof) for Common Shares
at an exchange ratio of one Common Share per Right, appropriately adjusted to
reflect any stock split, stock dividend or similar transaction occurring after
the date hereof (such exchange ratio being hereinafter referred to as the "Ratio
of Exchange"). Notwithstanding the foregoing, the Board of Directors shall not
be empowered to effect
-29-
<PAGE>
such exchange at any time after any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or any such
Subsidiary, or any entity holding Common Shares for or pursuant to the terms of
any such plan), together with all Affiliates and Associates of such Person,
becomes the Beneficial Owner of 50% or more of the Common Shares then
outstanding.
(b) Immediately upon the action of the Board of Directors ordering the
exchange of any Rights pursuant to subsection (a) of this Section 24 and without
any further action and without any notice, the right to exercise such Rights
shall terminate and the only right thereafter of a holder of such Rights shall
be to receive that number of Common Shares equal to the number of such Rights
held by such holder multiplied by the Ratio of Exchange. The Company shall give
public notice of any such exchange; provided, however, that the failure to give,
-------- -------
or any defect in, such notice shall not affect the validity of such exchange.
The Company shall mail a notice of any such exchange to all of the holders of
such Rights at their last addresses as they appear upon the registry books of
the Rights Agent. Any notice which is mailed in the manner herein provided
shall be deemed given, whether or not the holder receives the notice. Each such
notice of exchange will state the method by which the exchange of the Common
Shares for Rights will be effected and, in the event of any partial exchange,
the number of Rights which will be exchanged. Any partial exchange shall be
effected pro rata based on the number of Rights (other than Rights which have
become void pursuant to the provisions of Section 7(e) hereof) held by each
holder of Rights.
(c) In the event that there shall not be sufficient Common Shares
issued but not outstanding or authorized but unissued to permit any exchange of
Rights as contemplated in accordance with Section 24(a), the Company shall
either take such action as may be necessary to authorize additional Common
Shares for issuance upon exchange of the Rights or alternatively, at the option
of a majority of the Board of Directors, with respect to each Right (i) pay cash
in an amount equal to the Current Value (as hereinafter defined), in lieu of
issuing Common Shares in exchange therefor, or (ii) issue debt or equity
securities or a combination thereof, having a value equal to the Current Value,
in lieu of issuing Common Shares in exchange for each such Right, where the
value of such securities shall be determined by a nationally recognized
investment banking firm selected by the Board of Directors by majority vote of
the Board of Directors, or (iii) deliver any combination of cash, property,
Common Shares and/or other securities having a value equal to the Current Value
in exchange for each Right. For purposes of this Section 24(c) only, the
Current Value shall mean the product of the current per share market price of
Common Shares (determined pursuant to Section 11(d) on the date of the
occurrence of the event described above in subparagraph (a)) multiplied by the
number of Common Shares for which the Right otherwise would be exchangeable if
there were sufficient shares available. To the extent that the Company
determines that some action need be taken pursuant to clauses (i), (ii) or (iii)
of this Section 24(c), the Board of Directors may temporarily suspend the
exercisability of the Rights for a period of up to sixty (60) days following the
date on which the event described in Section 24(a) shall have occurred, in order
to seek any authorization of additional Common Shares and/or to decide the
appropriate form of distribution to be made pursuant to the above provision and
to determine the value thereof. In the event of any such suspension, the
Company shall issue a public announcement stating that the exercisability of the
Rights has been temporarily suspended.
-30-
<PAGE>
(d) The Company shall not be required to issue fractions of Common
Shares or to distribute certificates which evidence fractional Common Shares.
In lieu of such fractional Common Shares, there shall be paid to the registered
holders of the Rights Certificates with regard to which such fractional Common
Shares would otherwise be issuable, an amount in cash equal to the same fraction
of the current per share market value of a whole Common Share (as determined
pursuant to the second sentence of Section 11(d) hereof).
(e) The Company may, at its option, by majority vote of the Board of
Directors, at any time before any Person has become an Acquiring Person,
exchange all or part of the then outstanding Rights for rights of substantially
equivalent value, as determined reasonably and with good faith by the Board of
Directors, based upon the advice of one or more nationally recognized investment
banking firms.
(f) Immediately upon the action of the Board of Directors ordering
the exchange of any Rights pursuant to subsection (e) of this Section 24 and
without any further action and without any notice, the right to exercise such
Rights shall terminate and the only right thereafter of a holder of such Rights
shall be to receive that number of rights in exchange therefor as has been
determined by the Board of Directors in accordance with subsection (e) above.
The Company shall give public notice of any such exchange; provided, however,
-------- -------
that the failure to give, or any defect in, such notice shall not affect the
validity of such exchange. The Company shall mail a notice of any such exchange
to all of the holders of such Rights at their last addresses as they appear upon
the registry books of the transfer agent for the Common Shares of the Company.
Any notice which is mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice. Each such notice of exchange
will state the method by which the exchange of the Rights will be effected.
Section 25. Notice of Certain Events.
------------------------
(a) In case the Company shall propose to effect or permit to occur any
Triggering Event described in Section 11(a)(ii)(A) or 11(a)(ii)(B) or a Section
13 Event, the Company shall give notice thereof to each holder of Rights in
accordance with Section 26 hereof at least twenty (20) days prior to occurrence
of such Triggering Event or such Section 13 Event.
(b) In case any Triggering Event or Section 13 Event 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 Sections 11(a)(ii) and 13
hereof.
-31-
<PAGE>
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:
NetFRAME Systems Incorporated
1545 Barber Lane
Milpitas, California 95035
Attention: President and/or Chief Executive Officer
Subject to the provisions of Section 21 hereof, any notice or demand
authorized by this Agreement to be given or made by the Company or by the holder
of any Rights Certificate to or on the
Rights Agent shall be sufficiently given or made if sent by first-class mail,
postage prepaid, addressed (until another address is filed in writing with the
Company) as follows:
The First National Bank of Boston
150 Royall Street
Canton, MA 02102
Attention: Paul Lyons
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
Section 27. Supplements and Amendments. Prior to the Distribution Date,
--------------------------
the Company may supplement or amend this Agreement in any respect (including an
increase or decrease in the stock ownership percentage at which a Beneficial
Owner of Common Shares outstanding becomes an Acquiring Person) without the
approval of any holders of Rights and the Rights Agent shall, if the Company so
directs, execute such supplement or amendment. From and after the Distribution
Date, the Company and the Rights Agent may from time to time supplement or amend
this Agreement without the approval of any holders of Rights in order to (i)
cure any ambiguity, (ii) correct or supplement any provision contained herein
which may be defective or inconsistent with any other provisions herein, (iii)
shorten or lengthen any time period hereunder (which lengthening or shortening,
following the first occurrence of an event set forth in the proviso to Section
23(a) hereof, shall be effective only if there are Continuing Directors and
shall require the concurrence of a majority of such Continuing Directors) or
(iv) to change or supplement the provisions hereunder in any manner that the
Company may deem necessary or desirable and that shall not adversely affect the
interests of the holders of Rights (other than an Acquiring Person or an
Affiliate or Associate of an Acquiring Person); provided, this Agreement may not
--------
be supplemented or amended to lengthen, pursuant to clause (iii) of this
sentence, (A) a time period relating to when the Rights may be redeemed at such
time as the Rights are not then redeemable or
-32-
<PAGE>
(B) any other time period unless such lengthening is for the purpose of
protecting, enhancing or clarifying the rights of, and/or the benefits to, the
holders of Rights (other than an Acquiring Person or an Affiliate or Associate
of an Acquiring Person). Upon the delivery of a certificate from an appropriate
officer of the Company that states that the proposed supplement or amendment is
in compliance with the terms of this Section 27, the Rights Agent shall execute
such supplement or amendment. Prior to the Distribution Date, the interests of
the holders of Rights shall be deemed coincident with the interests of the
holders of Common Shares.
Section 28. Successors. All the covenants and provisions of this
----------
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 29. Determinations and Actions by the Board of Directors, etc.
----------------------------------------------------------
For all purposes of this Agreement, any calculation of the number of Common
Shares outstanding at any particular time, including for purposes of determining
the particular percentage of such outstanding Common Shares of which any Person
is the Beneficial Owner, shall be made in accordance with the last sentence of
Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act.
The Board of Directors of the Company (and, where specifically provided for
herein, the Continuing Directors) shall have the exclusive power and authority
to administer this Agreement and to exercise all rights and powers specifically
granted to the Board, or the Company (or, where specifically provided for
herein, the Continuing Directors), or as may be necessary or advisable in the
administration of this Agreement, including, without limitation, the right and
power to (i) interpret the provisions of this Agreement and (ii) make all
determinations deemed necessary or advisable for the administration of this
Agreement (including a determination to redeem or not redeem the Rights or to
amend the Agreement). All such actions, calculations, interpretations and
determinations (including, for purposes of clause (y) below, all omissions with
respect to the foregoing) which are done or made by the Board (or, where
specifically provided for herein, by the Continuing Directors) in good faith,
shall (x) be final, conclusive and binding on the Company, the Rights Agent, the
holders of the Rights Certificates and all other parties and (y) not subject the
Board or the Continuing Directors to any liability to the holders of the Rights.
Section 30. Benefits of this Agreement. Nothing in this Agreement shall
--------------------------
be construed to give to any Person other than the Company, the Rights Agent and
the registered holders of the Rights Certificates (and, prior to the
Distribution Date, the Common Shares) 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
Shares).
Section 31. Severability. If any term, provision, covenant or
------------
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
- -------- -------
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board of
Directors of the Company determines in its good faith judgment that severing the
invalid language from this Agreement
-33-
<PAGE>
would adversely affect the purpose or effect of this Agreement, the right of
redemption set forth in Section 23 hereof shall be reinstated and shall not
expire until the close of business on the tenth day following the date of such
determination by the Board of Directors.
Section 32. Governing Law. This Agreement and 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 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 for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
-34-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
"COMPANY" NetFRAME Systems Incorporated
By:_________________________________________
Name: Robert L. Puette
Title: President and Chief Executive
Officer
"RIGHTS AGENT" THE FIRST NATIONAL BANK OF BOSTON
By:_________________________________________
Name: Gordon Stevenson
Title: Administrative Manager
-35-
<PAGE>
EXHIBIT A
---------
CERTIFICATE OF DESIGNATION OF RIGHTS, PREFERENCES
AND PRIVILEGES OF
SERIES A PARTICIPATING PREFERRED STOCK
OF NETFRAME SYSTEMS INCORPORATED
The undersigned, Robert L. Puette and Richard J. Char, do hereby certify:
1. That they are the duly elected and acting President and Secretary,
respectively, of NetFRAME Systems Incorporated, a Delaware corporation (the
"Corporation").
2. That pursuant to the authority conferred upon the Board of Directors
by the Restated Certificate of Incorporation of the said Corporation, the said
Board of Directors on October 24, 1996 adopted the following resolution creating
a series of 20,000 shares of Preferred Stock designated as Series A
Participating Preferred Stock:
"RESOLVED, that pursuant to the authority vested in the Board of Directors
of the corporation by the Restated Certificate of Incorporation, the Board of
Directors does hereby provide for the issue of a series of Preferred Stock of
the Corporation, to be designated "Series A Participating Preferred Stock,"
initially consisting of 20,000 shares and to the extent that the designations,
powers, preferences and relative and other special rights and the
qualifications, limitations and restrictions of the Series A Participating
Preferred Stock are not stated and expressed in the Restated Certificate of
Incorporation, does hereby fix and herein state and express such designations,
powers, preferences and relative and other special rights and the
qualifications, limitations and restrictions thereof, as follows (all terms used
herein which are defined in the Restated Certificate of Incorporation shall be
deemed to have the meanings provided therein):
Section 1. Designation and Amount. The shares of such series shall be
----------------------
designated as "Series A Participating Preferred Stock," and the number of shares
constituting such series shall be 20,000.
Section 2. Dividends and Distributions.
---------------------------
(A) Subject to the prior and superior right 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 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 last day
of September, December, March and June 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
<PAGE>
Series A Participating Preferred Stock, in an amount per share (rounded to the
nearest cent) equal to, subject to the provision for adjustment hereinafter set
forth, 1,000 times the aggregate per share amount of all cash dividends, and
1,000 times the aggregate per share amount (payable in kind) of all non-cash
dividends or other distributions other than a dividend payable in shares of
Common Stock or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock of the Corporation
(the "Common Stock") since the immediately preceding Quarterly Dividend Payment
Date, or, with respect to the first Quarterly Dividend Payment Date, since the
first issuance of any share or fraction of a share of Series A Participating
Preferred Stock. In the event the Corporation shall at any time after October
24, 1996 (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 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).
(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 1,000 votes on all matters submitted to a vote of the stockholders of
the Corporation. In the event the Corporation shall at any time after the
Rights Declaration Date (i) declare any dividend on Common Stock payable in
shares of
-2-
<PAGE>
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the number of votes per share to which holders of shares of Series A
Participating Preferred Stock were entitled immediately prior to such event
shall be adjusted by multiplying such number by a fraction, the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
(b) Except as otherwise provided herein 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 stockholders of the Corporation.
(c) Except as required by law, 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) The Corporation shall not declare any dividend on, make any
distribution on, or redeem or purchase or otherwise acquire for consideration
any shares of Common Stock after the first issuance of a share or fraction of a
share of Series A Participating Preferred Stock unless concurrently therewith it
shall declare a dividend on the Series A Participating Preferred Stock as
required by Section 2 hereof.
(b) 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
(A) 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;
(B) declare or pay dividends on, 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 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;
(C) 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
-3-
<PAGE>
Corporation ranking junior (either as to dividends or upon dissolution,
liquidation or winding up) to the Series A Participating Preferred Stock;
(D) 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.
(c) 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
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 twenty thousand dollars ($20,000.00) per share, 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) 1,000 (as appropriately adjusted as set forth in
subparagraph (C) below to reflect such events as stock splits, stock dividends
and recapitalization 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.
-4-
<PAGE>
(b) In the event, however, that there are not sufficient assets
available to permit payment in full to the Series A Liquidation Preference and
the liquidation preferences of all other series of Preferred Stock, if any,
which rank on a parity with the Series A Participating Preferred Stock, then
such remaining assets shall be distributed ratably to the holders of such parity
shares in proportion to their respective liquidation preferences. In the event,
however, that there are not sufficient assets available to permit payment in
full of the Common Adjustment, then such remaining assets shall be distributed
ratably to the holders of Common Stock.
(c) In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the Adjustment Number in effect immediately 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 1,000 times the aggregate amount of
stock, securities, cash and/or any other property (payable in kind), as the case
may be, into which or for which each share of Common Stock is changed or
exchanged. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the amount set forth in the preceding sentence with respect to the exchange or
change of shares of Series A Participating Preferred Stock shall be adjusted by
multiplying such amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 8. No 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, preference or special rights of the Series A
Participating Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of a majority or more of the outstanding shares
of Series A Participating Preferred Stock, voting separately as a class.
-5-
<PAGE>
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 holder's fractional shares, to exercise voting rights,
receive dividends, participate in distributions and to have the benefit of all
other rights of holders of Series A Participating Preferred Stock.
RESOLVED FURTHER, that the President or any Vice President and the
Secretary or any Assistant Secretary of this corporation be, and they hereby
are, authorized and directed to prepare and file a Certificate of Designation of
Rights, Preferences and Privileges in accordance with the foregoing resolution
and the provisions of Delaware law and to take such actions as they may deem
necessary or appropriate to carry out the intent of the foregoing resolution."
3. That the authorized number of shares of Preferred Stock of the
Corporation is 2,000,000 and that no such Preferred Stock has been issued.
[The remainder of this page is intentionally left blank.]
-6-
<PAGE>
We further declare under penalty of perjury that the matters set forth in
the foregoing Certificate of Designation are true and correct of our own
knowledge.
Executed at Palo Alto, California on October 28, 1996.
_______________________________________________________
Robert L. Puette, President and Chief Executive Officer
_______________________________________________________
Richard J. Char, Secretary
-7-
<PAGE>
EXHIBIT B
---------
FORM OF RIGHTS CERTIFICATE
Certificate No. R- _____ Rights
NOT EXERCISABLE AFTER OCTOBER 24, 2006 OR EARLIER IF TERMINATED BY THE
COMPANY OR IF THE COMPANY EXCHANGES THE RIGHTS PURSUANT TO THE RIGHTS
AGREEMENT. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE
COMPANY, AT $0.01 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS
AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY
AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING
PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND ANY
SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS
REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED
BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR
ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE
RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS
REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES
SPECIFIED IN SECTION 7(E) OF SUCH RIGHTS AGREEMENT.]/*/
RIGHTS CERTIFICATE
NETFRAME SYSTEMS INCORPORATED
This certifies that ______________, or registered assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions and conditions of the Rights
Agreement dated as of October 24, 1996 (the "Rights Agreement"), between
NetFRAME Systems Incorporated, a Delaware corporation (the "Company"), and The
First National Bank of Boston (the "Rights Agent"), to purchase from the Company
at any time after the Distribution Date (as such term is defined in the Rights
Agreement) and prior to 5:00 P.M., California time, on October 24, 2006 at the
office of the Rights Agent designated for such purpose, or at the office of its
successor as Rights Agent, one one-thousandth of a fully paid non-assessable
share of Series A Participating Preferred Stock, $0.001 par value (the
"Preferred Shares"), of the Company, at a purchase price of $20 per one-
thousandth of a Preferred Share (the "Purchase Price"), upon presentation and
surrender of this Rights Certificate with the Form of Election to Purchase and
related Certificate duly
_______________________________
/*/ The portion of the legend in bracket shall be inserted only if applicable
and shall replace the preceding sentence.
<PAGE>
executed. The number of Rights evidenced by this Rights Certificate (and the
number of one-thousandths of a Preferred Share which may be purchased upon
exercise hereof) set forth above are the number and Purchase Price as of
November 15, 1996, based on the Preferred Shares as constituted at such date. As
provided in the Rights Agreement, the Purchase Price and the number and kind of
Common Shares 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 Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the principal executive offices of
the Company and the above-mentioned office of the Rights Agent.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Rights Certificate (i) may be redeemed by the Company, at its
option, at a redemption price of $0.01 per Right or (ii) may be exchanged by the
Company in whole or in part for Common Shares, substantially equivalent rights
or other consideration as determined by the Company.
This Rights Certificate, with or without other Rights Certificates,
upon surrender at the office of the Rights Agent designated for such purpose,
may be exchanged for another Rights Certificate or Rights Certificates of like
tenor and date evidencing Rights entitling the holder to purchase a like
aggregate amount of securities as the Rights evidenced by the Rights Certificate
or Rights Certificates surrendered shall have entitled such holder to purchase.
If this Rights Certificate shall be exercised in part, the holder shall be
entitled to receive upon surrender hereof another Rights Certificate or Rights
Certificates for the number of whole Rights not exercised.
No fractional portion of less than one one-thousandth of a Preferred
Share will be issued upon the exercise of any Right or Rights evidenced hereby
but in lieu thereof a cash payment will be made, as provided in the 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 the
Preferred Shares or of any other securities of the Company which may at any time
be issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a shareholder of the Company or any right to vote for the
election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting shareholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Rights
Certificate shall have been exercised as provided in the Rights Agreement.
<PAGE>
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 _______________, 19__.
ATTEST: NetFRAME Systems Incorporated
_________________________________________ By: _____________________________
Richard J. Char, Secretary Robert L. Puette, President
and Chief Executive Officer
Countersigned:
THE FIRST NATIONAL BANK OF BOSTON
as Rights Agent
By: ________________________________________
Gordon Stevenson, Administrative Manager
-3-
<PAGE>
FORM OF REVERSE SIDE OF RIGHTS CERTIFICATE
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate)
FOR VALUE RECEIVED ____________________ hereby sells, assigns and
transfers unto
________________________________________________________________________________
(Please print name and address of transferee)
________________________________________________________________________________
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint __________________________
Attorney, to transfer the within Rights Certificate on the books of the within-
named Company, with full power of substitution.
Dated: _______________, 19__
____________________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered
national securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States.
<PAGE>
CERTIFICATE
-----------
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Rights Certificate [ ] is [ ] is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person, or an
Affiliate or Associate of any such Person (as such terms are defined in the
Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate from
any Person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate of any such Person.
Dated: _______________, 19__
____________________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.
<PAGE>
FORM OF REVERSE SIDE OF RIGHTS CERTIFICATE -- CONTINUED
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if holder desires to
exercise the Rights Certificate)
To: _____________________
The undersigned hereby irrevocably elects to exercise
_________________________ Rights represented by this Rights Certificate to
purchase the number of one-thousandths of a Preferred Share issuable upon the
exercise of such Rights and requests that certificates for such number of one-
thousandths of a Preferred Share issued in the name of:
Please insert social security
or other identifying number
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
If such number of Rights shall not be all the Rights evidenced by this Rights
Certificate, a new Rights Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
Dated: ___________________ , 19__
____________________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered
national securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States.
<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 Person (as such terms are defined in the
Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it [ ]
did [ ] did not acquire the Rights evidenced by this Rights Certificate from any
Person who is, was or subsequently became an Acquiring Person or an Affiliate or
Associate of any such Person.
Dated: _______________, 19__
____________________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.
<PAGE>
FORM OF REVERSE SIDE OF RIGHTS CERTIFICATE -- CONTINUED
NOTICE
------
The signature in the foregoing Forms of Assignment and Election must
conform to the name as written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any change whatsoever.
<PAGE>
EXHIBIT C
---------
NETFRAME SYSTEMS INCORPORATED
SHAREHOLDER RIGHTS PLAN
Summary of Rights
-----------------
Distribution and The Board of Directors has declared a dividend of
- ----------------
Transfer of Rights; one Right for each share of NetFRAME Systems
- -------------------
Rights Certificate: Incorporated Common Stock outstanding. Prior to
- ------------------
the Distribution Date referred to below, the
Rights will be evidenced by and trade with the
certificates for the Common Stock. After the
Distribution Date, NetFRAME Systems Incorporated
(the "Company") will mail Rights certificates to
the Company's shareholders and the Rights will
become transferable apart from the Common Stock.
Distribution Date: Rights will separate from the Common Stock and
- -----------------
become exercisable following the tenth day (or
such later date as may be deter mined by a
majority of the Directors not affiliated with the
acquiring person or group (the "Continuing
Directors")) after a person or group (a) acquires
beneficial ownership of 15% or more of the
Company's Common Stock or (b) announces a tender
or exchange offer, the consummation of which would
result in ownership by a person or group of 15% or
more of the Company's Common Stock.
Preferred Stock After the Distribution Date, each Right will
- ---------------
Purchasable Upon entitle the holder to purchase, for $20 a fraction
- ----------------
Exercise of Rights: of a share of the Company's Preferred Stock with
- ------------------
economic terms similar to that of one share of the
Company's Common Stock.
Flip-In: If an acquiror (an "Acquiring Person") obtains 15%
- -------
or more of the Company's Common Stock (other than
pursuant to a tender offer deemed adequate and in
the best interests of the Company and its
shareholders by the Board of Directors (a
"Permitted Offer") and other than certain persons
who exceed such 15% threshold inadvertently or
without an intention to change or influence
control of the Company), then each Right (other
----
than Rights owned by an Acquiring Person or its
affiliates) will entitle the holder thereof to
purchase, for the exercise price, a number of
shares of the Company's Common Stock having a then
current market value of twice the exercise price.
Flip-Over: If, after the Shares Acquisition Date (defined
- ---------
below), (a) the Company merges into another
entity, (b) an acquiring entity merges into the
Company or (c) the Company sells more than 50% of
the
<PAGE>
Company's assets or earning power, then each Right
----
(other than Rights owned by an Acquiring Person or
its affiliates) will entitle the holder thereof to
purchase, for the exercise price, a number of
shares of Common Stock of the person engaging in
the transaction having a then current market value
of twice the exercise price (unless the
transaction satisfies certain conditions and is
consummated with a person who acquired shares
pursuant to a Permitted Offer, in which case the
Rights will expire).
Exchange Provision: At any time after an event triggering the flip-in
- ------------------
or flip-over rights and prior to the acquisition
by the Acquiring Person of 50% or more of the
outstanding Common Stock, the Board of Directors
of the Company may exchange the Rights (other than
Rights owned by the Acquiring Person or its
affiliates), in whole or in part, at an exchange
ratio of one Common Share per Right (subject to
adjustment).
Redemption of Rights will be redeemable at the Company's option
- -------------
the Rights: for $0.01 per Right at any time on or prior to the
- ---------- tenth day (or such later date as may be determined
by a majority of the Continuing Directors) after
public announcement that a person has acquired
beneficial ownership of 15% or more of the
Company's Common Stock (the "Shares Acquisition
Date").
Expiration of
- -------------
the Rights: The Rights expire on the earliest of (a) October
- ----------
24, 2006, (b) exchange or redemption of the Rights
as described above, or (c) consummation of a
merger or consolidation resulting in expiration of
the Rights as described above.
Amendment of The terms of the Rights and the Rights Agreement
- ------------
Terms of Rights: may be amended in any respect without the consent
- --------------- of the Rights holders on or prior to the
Distribution Date; thereafter, the terms of the
Rights and the Rights Agreement may be amended
without the consent of the Rights holders in order
to cure any ambiguities or to make changes which
do not adversely affect the interests of Rights
holders (other than the Acquiring Person).
Voting Rights: Rights will not have any voting rights.
- -------------
Anti-Dilution Rights will have the benefit of certain customary
- -------------
Provisions: anti-dilution provisions.
- ----------
Taxes: The Rights distribution should not be taxable for
- -----
federal income tax purposes. However, following an
event which renders the Rights exercisable or upon
redemption of the Rights, shareholders may
recognize taxable income.
-2-
<PAGE>
The foregoing is a summary of certain principal terms of the Shareholder Rights
Plan only and is qualified in its entirety by reference to the detailed terms of
the Rights Agreement dated as of October 24, 1996, between the Company and the
Rights Agent.
-3-
<PAGE>
DRAFT PRESS RELEASE
NETFRAME SYSTEMS INCORPORATED DECLARES DIVIDEND DISTRIBUTION
OF PREFERRED SHARES PURCHASE RIGHTS
Milpitas, California, ____________, 1996 -- The Board of Directors of
NetFRAME Systems Incorporated (the "Company") today announced that it has
declared a dividend distribution of one Preferred Shares Purchase Right on each
outstanding share of the Company's Common Stock. Each right will entitle
stockholders to buy 1/1000th of a share of the Company's Series A Participating
Preferred Stock at an exercise price of $20. The Rights will become exercisable
following the tenth day after a person or group announces acquisition of 15% or
more of the Company's Common Stock or announces commencement of a tender offer
the consummation of which would result in ownership by the person or group of
15% or more of the Common Stock. The Company will be entitled to redeem the
Rights at $.01 per Right at any time on or before the tenth day following
acquisition by a person or group of 15% or more of the Company's Common Stock.
If, prior to redemption of the Rights, a person or group acquires 15% or
more of the Company's Common Stock, each Right not owned by a holder of 15% or
more of the Common Stock will entitle its holder to purchase, at the Right's
then current exercise price, that number of shares of Common Stock of the
Company (or, in certain circumstances as determined by the Board, cash, other
property or other securities) having a market value at that time of twice the
Right's exercise price. If, after the tenth day following acquisition by a
person or group of 15% or more of the Company's Common Stock, the Company sells
more than 50% of its assets or earning power or is acquired in a merger or other
business combination transaction, the acquiring person must assume the
obligations under the Rights and the Rights will become exercisable to acquire
Common Stock of the acquiring person at the discounted price. At any time after
an event triggering exercisability of the Rights at a discounted price and prior
to the acquisition by the acquiring person of 50% or more of the out standing
Common Stock, the Board of Directors of the Company may exchange the Rights
(other than those owned by the acquiring person or its affiliates) for Common
Stock of the Company at an exchange ratio of one share of Common Stock per
Right.
<PAGE>
EXHIBIT 2
FIRST AMENDMENT TO RIGHTS AGREEMENT
Amendment dated as of June 10, 1997 ("Amendment") to Preferred Shares
Purchase Rights Agreement ("Agreement"), dated as of October 24, 1996, between
NetFRAME Systems Incorporated, a Delaware corporation (the "Company"), and The
First National Bank of Boston, a national banking association (the "Rights
Agent").
Pursuant to Section 27 of the Agreement, this Amendment is being executed
by the Company and the Rights Agent for the purpose of amending the Agreement as
set forth below:
The Agreement is hereby amended as follows:
1. Section 1(a) shall be amended by inserting the following at the end of
Section 1(a):
"Notwithstanding the foregoing or any provision to the contrary in
this Agreement, none of Micron Electronics, Inc. ("Parent"), its
subsidiaries Affiliates or Associates is an Acquiring Person pursuant
to this Agreement solely by virtue of their acquisition, or their
right to acquire, beneficial ownership of shares of the Company as a
result of their execution of the Agreement and Plan of Merger dated as
of June 10, 1997, among Parent, Payette Acquisition Corporation and
the Company (the "Merger Agreement"), and the Stock Option Agreement
of even date herewith between the Company and Parent (the "Option
Agreement") or the consummation of the Merger (as defined in the
Merger Agreement) or the other transactions contemplated by the Merger
Agreement including but not limited to the Offer (as defined in the
Merger Agreement), the Merger or the Option Agreement, or any other
agreement or transaction involving Parent, Payette Acquisition
Corporation and the Company."
2. Section 1(h) shall be amended by inserting the following at the end of
Section 1(h):
"Notwithstanding the foregoing or any provision to the contrary in
this Agreement, a Distribution Date shall not occur solely by reason
of the execution of the Merger Agreement or the Option Agreement, the
consummation of the Offer or the Merger, the Option Agreement or the
consummation of any other transaction contemplated by the Merger
Agreement."
3. Section 1(u) shall be amended by inserting the following at the end of
Section 1(u):
"Notwithstanding the foregoing or any provision to the contrary in
this Agreement, a Shares Acquisition Date shall not occur solely by
reason of the execution of the Merger Agreement or the Option
Agreement, the consummation of the Offer or the Merger, or the
consummation of any other transaction contemplated by the Merger
Agreement."
4. Section 1(y) shall be amended by inserting the following at the end of
Section 1(y):
1
<PAGE>
"Notwithstanding the foregoing or any provision to the contrary in
this Agreement, a Triggering Event shall not occur solely by reason
of the execution of the Merger Agreement or the Option Agreement, the
consummation of the Offer or the Merger, or the consummation of any
other transaction contemplated by the Merger Agreement."
5. Section 1(k) shall be amended and restated in its entirety to read as
follows:
"(k) 'Final Expiration Date' shall mean the earlier of (i) immediately
prior to the Effective Time (as defined in the Merger Agreement) of
the Merger or (ii) October 24, 2006."
6. (a) This Amendment may not be further amended without the prior
consent of Parent in its sole discretion.
(b) This Amendment shall be deemed to be entered into 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 performed entirely within
such State.
(c) This Amendment 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.
2
<PAGE>
7. As amended hereby, the Agreement shall remain in full force and
effect.
NETFRAME SYSTEMS INCORPORATED
/s/ Robert L. Puette
By:______________________________
Robert L. Puette, President
/s/ Daniel McCammon
Attest:_____________________
Daniel McCammon
Secretary
THE FIRST NATIONAL BANK OF BOSTON,
as Rights Agent
/s/ Liz Waterhouse
By:______________________________
Authorized Signature
3
