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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 8-A
For Registration of Certain Classes of Securities
Pursuant to Section 12(b) or (g) of the
Securities Exchange Act of 1934
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VIRTUALFUND.COM, INC.
(Exact name of registrant issuer as specified in its charter)
Minnesota 41-1612861
(State of incorporation or organization) (I.R.S. Employer Identification No.)
7090 Shady Oak Road
Eden Prairie, Minnesota 55344
(Address of principal executive offices) (Zip Code)
-----------------------------
Securities to be registered pursuant to Section 12(b) of the Act:
None.
If this Form relates to the registration of a class of securities pursuant to
Section 12(b) of the Exchange Act and is effective pursuant to General
Instruction A.(c), check the following box. [ ]
If this Form relates to the registration of a class of securities pursuant to
Section 12(g) of the Exchange Act and is effective pursuant to General
Instruction A.(d), check the following box. [X]
Securities to be registered pursuant to Section 12(g) of the Act:
Preferred Share Purchase Rights
(Title of class)
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Item 1. Description of Registrant's Securities to be Registered.
On October 8, 1998, the Board of Directors of VirtualFund.com, Inc.
(the "Company"), declared a dividend distribution of one preferred share
purchase right (a "Right") for each outstanding share of the Company's Common
Stock, par value $.01 per share (the "Common Shares"), payable to shareholders
of record at the close of business on October 30, 1998 (the "Record Date"). Each
Right entitles the registered holder to purchase from the Company at any time
following the Distribution Date (as defined below) one one-hundredth of a share
(a "Preferred Share Fraction") of the Company's Series A Junior Participating
Preferred Stock, par value $.01 per share (the "Preferred Shares"), at a
purchase price of $22.00 per Preferred Share Fraction (the "Purchase Price"),
subject to adjustment. The description and terms of the Rights are set forth in
a Rights Agreement (the "Rights Agreement") dated effective as of October 9,
1998, between the Company and Norwest Bank Minnesota, N.A., as Rights Agent (the
"Rights Agent").
As of October 1, 1998, the Company had 15,778,866 Common Shares
outstanding. Each outstanding Common Share on October 30, 1998 will receive one
Right. So long as the Rights Agreement remains in effect and the Rights continue
to remain attached to and trade with the Common Shares, the Company will issue
one Right for each Common Share issued between the Record Date and any
Distribution Date (as defined below), so that all outstanding shares will have
attached Rights. Assuming 15,778,866 shares of Common Stock are outstanding on
the Record Date, the Company will have initially reserved for issuance upon
exercise of the Rights 100,000 Preferred Shares.
Until the Distribution Date (as defined below), the Rights will be
evidenced, with respect to any of the Common Share certificates outstanding as
of the Record Date, by such Common Share certificates registered in the names of
the holders on the Record Date, and no separate Rights Certificates will be
distributed. The Rights will be transferred with and only with such Common Share
Certificates. The Rights will separate from the Common Shares and will be
distributed to the holders thereof in the form of a Rights Certificate on the
"Distribution Date," which shall be the first to occur of the following: (i) ten
days after the first date of a public announcement that a Person, individually
or together with a group of Affiliates or Associates of such Person, but not
including any Person exempted under the Rights Agreement (an "Exempt Person"),
has become the beneficial owner of 15% (20% for certain shareholders specified
in the Rights Agreement) or more of the outstanding Common Shares, other than as
a result of a Permitted Offer, as defined below (an "Acquiring Person") (the
"Shares Acquisition Date"), (ii) the tenth day (or such later date as the Board
of Directors may determine) following the commencement by any Person, or the
first public announcement of the intention of any Person to commence, a tender
or exchange offer that would result in any Person becoming an Acquiring Person,
or (iii) the tenth day after a determination by the Board of Directors that a
Person is an Adverse Person, which shall occur upon a finding that such Person,
alone or together with its Affiliates and Associates, has become the beneficial
owner of a substantial amount of Common Shares (which amount shall in no event
be less than 10% of the Common Shares then outstanding) and (a) such beneficial
ownership by such Person is intended to cause the Company to repurchase the
Common Shares beneficially owned by such Person or to cause pressure on the
Company to take action or enter into a transaction or series of transactions
intended to provide such Person with short-term financial gain under
circumstances where the Board of Directors determines that the best long-term
interests of the Company and its shareholders would not be served by taking such
action or entering into such transaction or series of transactions at that time
or (b) such beneficial ownership is causing or reasonably likely to cause a
material adverse impact (including, but not limited to, impairment of
relationships with customers or impairment of the Company's ability to maintain
its competitive position).
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A "Permitted Offer" means a tender or exchange offer which is for all
outstanding Common Shares at a price and on terms determined, prior to the
purchase of shares under such tender or exchange offer, by the Board of
Directors, to be (i) fair to shareholders of the Company and (ii) in the best
interests of the Company, its shareholders, and other Persons with whom, and the
communities in which, the Company does business, and which the Board of
Directors determines to recommend to the shareholders of the Company.
Until the Distribution Date (or the Redemption or Final Expiration
Dates, as such terms are defined below, if either date is earlier than the
Distribution Date), (i) new Common Share certificates issued after October 30,
1998 will contain a legend incorporating the Rights Agreement by reference and
(ii) the surrender for transfer of any certificate for Common Shares outstanding
will also constitute the transfer of the Rights associated with the Common
Shares represented by such certificate.
The Rights are not exercisable until the Distribution Date and will
expire at the close of business on October 9, 2008 (the "Final Expiration
Date"), unless earlier redeemed or exchanged by the Company as described below.
As soon as practical after the Distribution Date, Rights Certificates
will be mailed to each record holder of Common Shares as of the close of
business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights. All Common Shares issued prior to
the earlier of the Distribution Date and the Expiration Date will be issued with
Rights. The Company may, if deemed necessary and appropriate by the Board of
Directors, issue Rights Certificates for an appropriate number of Rights in
connection with any Common Shares issued after the Distribution Date, but prior
to the Redemption or Final Expiration Dates, upon the exercise of employee stock
options, issuances under other employee stock benefit plans or the conversion of
convertible securities issued by the Company.
The Purchase Price, the number of Preferred Shares Fractions or other
securities or property issuable upon exercise of the Rights, and the number of
Rights outstanding, are subject to adjustment from time to time to prevent
dilution: (i) in the event of a stock dividend on, or a subdivision, split,
combination or reclassification of, the Preferred Shares, (ii) upon the grant to
holders of the Preferred Shares of certain rights, options or warrants to
subscribe for or purchase Preferred Shares or convertible securities at less
than the then current market price for the Preferred Shares or (iii) upon the
distribution to holders of the Preferred Shares of evidence of indebtedness or
assets (excluding regular periodic cash dividends or dividends payable in
Preferred Shares) or of subscription rights or warrants (other than those
described in clause (ii) of this paragraph). With certain exceptions, no
adjustment in the Purchase Price will be required until cumulative adjustments
require an adjustment of at least 1% in the Purchase Price.
In the event that (i) any Person, with certain exceptions, becomes an
Acquiring Person, other than pursuant to a Permitted Offering or (ii) the Board
of Directors determines that a Person is an Adverse Person, then each holder of
a Right, with certain exceptions, will thereafter have the right to receive,
upon exercise at the then current Purchase Price and in lieu of Preferred
Shares, such number of Common Shares having a market value equal to two times
the exercise price of the Right. The events set forth in this paragraph are
referred to as the "Section 11(a)(ii) Events."
In the event that, at any time following the Shares Acquisition Date,
or during the pendency of a 180 Day Period (as defined below), other than
pursuant to a Permitted Offer, (i) the Company is acquired in certain mergers or
other business combination transactions in which the Company is not the
surviving
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corporation or the Common Shares are changed or exchanged or (ii) 50% or more of
the Company's assets or earning power is sold or transferred, each holder of a
Right, with certain exceptions, shall thereafter have the right to receive, upon
exercise at the then current Purchase Price and in lieu of Preferred Shares,
such number of shares of common stock of the acquiring company having a market
value equal to two times the exercise price of the Right. The events set forth
in this paragraph are referred to as "Section 13 Events," and the Section
11(a)(ii) Event and the Section 13 Events are collectively referred to as the
"Triggering Events."
At any time after the occurrence of a Section 11(a)(ii) Event (subject
to certain exceptions) and prior to the acquisition of such Person of 50% or
more of the outstanding Common Shares, the Board of Directors may exchange all
or a part of the then outstanding Rights (other than Rights which have become
void), for Common Shares at an exchange ratio per Right equal to the result
obtained by dividing the Purchase Price by the current per share market price of
the Common Share (subject to adjustment).
The Company will not be required to issue fractions of Preferred Shares
(other than fractions which are integral multiples of Preferred Share Fractions)
and, in lieu of such fractions of Preferred Shares, an adjustment in cash will
be made based on the closing price of a Preferred Share on the last trading date
prior to the date of exercise.
In general, the Board of Directors may, at any time prior to the first
to occur of (i) ten days after a Shares Acquisition Date, (ii) ten days after a
Person is determined to be an Adverse Person or (iii) the Final Expiration Date,
redeem the Rights in whole, but not in part, at a price of $.001 per Right
(payable in cash, stock or other consideration deemed appropriate by the Board
of Directors), subject to appropriate adjustment (the "Redemption Price"). The
redemption of the Rights may be made effective at such time, on such basis and
with such conditions as the Board in its sole discretion may establish.
Notwithstanding anything to the contrary, however, in the event that a majority
of the Board is elected by written consent of the shareholders, or is comprised
of persons elected at a shareholder meeting who were not nominated by the Board
in office immediately prior to such meeting, then for a period of 180 days
following the effectiveness of such election (the "180 Day Period"), the Rights
may not be redeemed. Immediately upon redemption of the Rights, the Rights will
terminate and the only right of the holders of the Rights will be to receive the
Redemption Price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including, without limitation, the
rights to vote, receive notice, and receive dividends or subscription rights.
The creation of the Rights should not be taxable to the shareholders.
Shareholders may, however, depending upon the circumstances, recognize taxable
income in the event that the holder of the Right transfers or delivers the Right
Certificate to a Person other than that of the registered holder of the Right
Certificate.
Any of the provisions of the Rights Agreement, including the
definitions of Acquiring Person, Adverse Person or the Purchase Price, may be
amended by the Board of Directors prior to the Distribution Date. After the
Distribution Date, the provisions of the Rights Agreement may be amended by the
Board only to cure any ambiguity, to make changes which do not adversely affect
the interests of holders of Rights (excluding the interests of any Acquiring
Person, Adverse Person or an Affiliate or Associate of any such Person), or to
shorten or lengthen any time period under the Rights Agreement. Notwithstanding
anything to the contrary, however, during the pendency of any 180 Day Period no
supplement or amendment shall be made to the Rights Agreement, other than to
cure any ambiguity or to correct any provision inconsistent with any other
provision of the Rights Agreement.
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The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
on terms not approved by the Company's Board of Directors. The Rights should not
interfere with any merger or other business combination approved by the Board of
Directors of the Company because the Board may, at its option, either (i)
declare the transaction to be a "Permitted Offer," or (b) redeem the then
outstanding Rights at the Redemption Price, if possible.
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Item 2. Exhibits.
List below all exhibits filed as part of the registration statement:
1. Rights Agreement, dated as of October 9, 1998, between
VirtualFund.com, Inc. and Norwest Bank Minnesota, N.A. (which
includes as Exhibit A thereto the Form of Certificate of
Designation of Series A Junior Participating Preferred Stock,
and Exhibit B thereto the Form of Right Certificate).
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SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, as amended, the Registrant has duly caused this registration statement to
be signed on its behalf by the undersigned, thereunto duly authorized.
VIRTUALFUND.COM, INC.
Dated: October 26, 1998 By /s/ Melvin L. Masters
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Melvin L. Masters
Its Chief Executive Officer
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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EXHIBIT INDEX
to
FORM 8-A
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VIRTUALFUND.COM, INC.
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<TABLE>
<CAPTION>
Exhibit Method of Filing
- ------- ----------------
<S> <C>
1. Rights Agreement, dated as of October 9, 1998,
between VirtualFund.com, Inc. and Norwest Bank
Minnesota, N.A., which includes Exhibit A thereto the
Form of Certificate of Designation of Series A Junior
Participating Preferred Stock, and Exhibit B thereto
the Form of Right Certificate.............................Filed electronically herewith
</TABLE>
8
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EXHIBIT 1
VIRTUALFUND.COM, INC.
and
NORWEST BANK MINNESOTA, N.A.
RIGHTS AGREEMENT
Dated effective as of October 9, 1998
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TABLE OF CONTENTS
Page
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Section 1. Certain Definitions.................................................1
Section 2. Appointment of Rights Agent.........................................6
Section 3. Issue of Right Certificates.........................................6
Section 4. Form of Right Certificates..........................................8
Section 5. Countersignature and Registration...................................9
Section 6. Transfer, Split Up, Combination and Exchange of Right Certificates;
Mutilated, Destroyed, Lost or Stolen Right Certificates........................9
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights......10
Section 8. Cancellation and Destruction of Right Certificates.................11
Section 9. Availability of Preferred Shares...................................12
Section 10. Preferred Shares Record Date......................................13
Section 11. Adjustment of Purchase Price, Number of Shares or Number of
Rights........................................................................13
Section 12. Certificate of Adjusted Purchase Price or Number of Shares........21
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning
Power.........................................................................21
Section 14. Fractional Rights and Fractional Shares...........................24
Section 15. Rights of Action..................................................25
Section 16. Agreement of Right Holders........................................26
Section 17. Right Certificate Holder Not Deemed a Shareholder.................26
Section 18. Concerning the Rights Agent.......................................26
Section 19. Merger or Consolidation or Change of Name of Rights Agent.........27
Section 20. Duties of Rights Agent............................................28
Section 21. Change of Rights Agent............................................29
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Section 22. Issuance of New Right Certificates................................30
Section 23. Redemption........................................................30
Section 24. Exchange..........................................................31
Section 25. Notice of Certain Events..........................................33
Section 26. Notices...........................................................33
Section 27. Supplements and Amendments........................................34
Section 28. Successors........................................................34
Section 29. Benefits of this Agreement........................................34
Section 30. Severability......................................................35
Section 31. Governing Law.....................................................35
Section 32. Counterparts......................................................35
Section 33. Descriptive Headings..............................................35
Signatures....................................................................36
Exhibit A = Certificate of Designation of Series A Junior Participating
Preferred Stock
Exhibit B = Form of Right Certificates
Exhibit C = Summary of Rights to Purchase Preferred Shares
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RIGHTS AGREEMENT
AGREEMENT, dated effective as of October 9, 1998, between
VirtualFund.com, Inc., a Minnesota corporation (the "Company"), and Norwest Bank
Minnesota, N.A. (the "Rights Agent").
The Board of Directors of the Company (the "Board") has authorized and
declared a dividend distribution of one preferred share purchase right (a
"Right") for each Common Share of the Company outstanding at the Close of
Business on October 30, 1998 (the "Record Date"), each Right initially
representing the right to purchase one one-thousandth of a Preferred Share of
the Company having the rights, powers and preferences set forth in the form of
Certificate of Designation attached hereto as Exhibit A, upon the terms and
subject to the conditions herein set forth, and has further authorized and
directed the issuance of one Right with respect to each Common Share that shall
become outstanding between the Record Date and the earliest of the Distribution
Date, the Redemption Date or the Final Expiration Date (as such terms are
hereinafter defined); provided, however, that Rights may be issued with respect
to Common Shares that shall become outstanding after the Distribution Date and
prior to the earlier of the Redemption Date and the Final Expiration Date in
accordance with the provisions of Section 22 of this Agreement.
Accordingly, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the following
terms have the meanings indicated:
"Acquiring Person" shall mean any Person who or which, alone
or together with all Affiliates and Associates of such Person, shall be
the Beneficial Owner of the Threshold Percentage or more of the Common
Shares then outstanding, other than pursuant to a Permitted Offer, but
shall not include any Exempt Person. Notwithstanding the foregoing, no
Person shall become an "Acquiring Person" (i) as the result of an
acquisition of Common Shares by the Company which, by reducing the
number of Common Shares outstanding, increases the proportionate number
of Common Shares beneficially owned by such Person to the Threshold
Percentage or more of the Common Shares of the Company then
outstanding; provided, however, that if a Person shall become the
Beneficial Owner of the Threshold Percentage or more of the Common
Shares of the Company then outstanding by reason of Common Share
purchases by the Company and shall, after such Common Share purchases
by the Company, increase the number of Common Shares of the Company
beneficially owned by such Person above the number of Common Shares of
the Company beneficially owned by such Person at the time of the last
such Common Share purchase by the Company, other than pursuant to the
receipt of stock dividends or stock splits on a pro rata basis of
Common Shares already beneficially owned by such Person, then such
Person shall be deemed to be an "Acquiring Person;" or (ii) who
beneficially owns Common Shares consisting solely of one or more (A)
Common Shares beneficially owned pursuant to the grant for exercise of
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an option granted to such Person by the Company in connection with an
agreement to merge with, or acquire, the Company entered into prior to
a Section 11(a)(ii) Event, (B) Common Shares (or securities convertible
into, exchangeable into or exercisable for Common Shares), beneficially
owned by such Person or its Affiliates or Associates at the time of
grant of such option or (C) Common Shares (or securities convertible
into, exchangeable into or exercisable for Common Shares) acquired by
Affiliates or Associates of such Person after the time of such grant
which, in the aggregate, amount to less than 1% of the outstanding
Common Shares. Notwithstanding the foregoing, if the Board determines
in good faith that a Person who would otherwise be an "Acquiring
Person," as defined pursuant to the foregoing provisions of this
paragraph, has become such inadvertently, and such Person 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 foregoing provisions of this paragraph, then such
Person shall not be deemed to be an "Acquiring Person" for any purposes
of this Agreement.
"Act" shall mean the Securities Act of 1993, as amended.
"Adjustment Shares" shall have the meaning set forth in
Section 11(a)(ii).
"Adverse Person" shall mean any Person determined to be an
Adverse Person pursuant to the criteria set forth in Section
11(a)(ii)(B).
"Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act, as in effect on the date of this
Agreement.
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, including without
limitation securities with respect to which such Person or any such
Person's Affiliates or Associates has "beneficial ownership" pursuant
to Rule 13d-3 of the General Rules and Regulations under the Exchange
Act, as in effect on the date of this Agreement;
(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
these Rights), warrants or options, or otherwise; provided, however,
that a Person shall not be deemed the Beneficial Owner of, or to
beneficially own, (A) securities tendered pursuant to a tender or
exchange offer made by 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 (B) securities issuable upon
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exercise of Rights at any time prior to the occurrence of a Triggering
Event or (C) securities issuable upon exercise of Rights from and after
the occurrence of a Triggering Event which Rights were acquired by such
Person or any of such Person's Affiliates or Associates prior to the
Distribution Date or pursuant to Section 3(a) or Section 22 (the
"Original Rights") or pursuant to Section 11(a)(i) in connection with
an adjustment made with respect to any Original Rights; or (D) the
right (sole or shared) 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 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
promulgated under the Exchange Act and (2) is not also then reportable
on Schedule 13D under the Exchange Act (or any comparable or successor
report); or
(iii) which are beneficially owned, directly or indirectly, by
any other Person (or any Affiliate or Associate thereof) with which
such Person or any of such Person's Affiliates or Associates has any
agreement, arrangement or understanding (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 clause (ii)(D) above) or disposing of any securities of the
Company.
Notwithstanding anything in this definition of Beneficial Ownership to
the contrary, the phrase "then outstanding," when used with reference
to a Person's Beneficial Ownership of securities of the Company, shall
mean the number of such securities then issued and outstanding together
with the number of such securities not then actually issued and
outstanding which such Person would be deemed to own beneficially
hereunder.
"Board" shall have the meaning set forth in the recital clause
at the beginning of this Agreement.
"Business Day" shall mean any day other than a Saturday, a
Sunday or a day on which banking institutions in the State of Minnesota
are authorized or obligated by law or executive order to close.
"Close of Business" on any given date shall mean 5:00 P.M.,
prevailing Minneapolis, Minnesota time, on such date; provided,
however, that if such date is not a Business Day, it shall mean 5:00
P.M., prevailing Minneapolis, Minnesota time, on the next succeeding
Business Day.
"Common Shares," when used with reference to the Company,
shall mean the shares of Common Stock, par value $.01 per share, of the
Company. "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
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other Person is a Subsidiary of any other Person, the Person or Persons
which ultimately control such first mentioned Person.
"Common Share Equivalents" shall have the meaning set forth in
Section 11(a)(iii).
"Current Value" shall have the meaning set forth in Section
11(a)(iii).
"Distribution Date" shall have the meaning set forth in
Section 3.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"Exchange Date" shall have the meaning set forth in Section 7.
"Exchange Ratio" shall have the meaning set forth in Section
24(a).
"Exempt Person" shall mean the Company, any Subsidiary of the
Company, any employee benefit plan of the Company or of any Subsidiary
of the Company, and any Person organized, appointed or established by
the Company for or pursuant to the terms of any such plan, Sihl-Zurich
Paper Mill on Sihl AG ("Sihl"), the Masters Group, and any Person who
or which, together with all Affiliates and Associates of such Person,
shall become the Beneficial Owner of the Threshold Percentage or more
of the then outstanding Common Shares as the result of acquisitions of
Common Shares directly from the Company; provided, however, that if
Sihl becomes a Beneficial Owner of an aggregate of 20% or more or the
Common Shares of the Company then outstanding, or if the Masters Group
becomes a Beneficial Owner of an aggregate of 20% or more of the Common
Shares of the Company then outstanding, then Sihl or the Masters Group,
as the case may be, shall be deemed to be an "Acquiring Person," or,
following the death of Masters, any Person directly receiving Common
Shares from Masters or the Masters Group (a) pursuant to the last will
and testament of Masters or if no such will exists at the time of his
death, then pursuant to the laws of descent and distribution as may be
applicable to his estate upon his death, or (b) pursuant to the terms
of any agreements between members of the Masters Group (such Persons
directly receiving Common Shares from Masters or the Masters Group in
the manner described in either clause (a) or (b) above, are herein
referred to as the "Masters Beneficiary"), who because of the receipt
of such Common Shares from Masters or the Masters Group would otherwise
be an "Acquiring Person"; provided, however, that if any such Masters
Beneficiary shall thereafter become the Beneficial Owner of any
additional Common Shares (other than directly from Masters or the
Masters Group, following the death of Masters in the manner described
above) such Person shall be deemed to be an Acquiring Person; provided,
however, that if a Person shall become the Beneficial Owner of the
Threshold Percentage or more of the Common Shares of the Company then
outstanding by reason of acquisitions of Common Shares directly from
the Company and shall, after such share acquisitions from the Company,
increase the number of Common Shares of the Company beneficially owned
by such Person above the number of Common Shares of the Company
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beneficially owned by such Person at the time of the last such share
acquisitions from the Company, then such Person shall be deemed to be
an "Acquiring Person."
"Final Expiration Date" shall have the meaning set forth in
Section 7.
"Master" shall mean Melvin L. Masters, an individual.
"Masters Group" shall mean Masters, together with all
Associates and Affiliates of Masters, TimeMasters, Inc., a Minnesota
corporation wholly-owned by Masters, Grandchildrens' Realty Management
Program I, L.P., a Minnesota Limited Partnership of which TimeMasters,
Inc. is the general partner, and Grandchildrens' Realty Management
Program #2, L.P., a Minnesota Limited Partnership of which TimeMasters,
Inc. is the general partner.
"Person" shall mean any individual, firm, corporation or other
entity, and shall include any successor (by merger or otherwise) of
such entity.
"Permitted Offer" shall mean a tender offer or an exchange
offer for all outstanding Common Shares of the Company, or a merger or
other acquisition transaction involving the Company, at a price and on
terms determined by the Board, prior to the purchase of shares under
such tender or exchange offer, or a merger or other acquisition, and
after receiving advice from one or more investment banking firms, to be
(a) fair to shareholders of the Company (taking into account all
factors which the Board deems relevant) and (b) otherwise in the best
interests of the Company, its shareholders, employees, customers,
suppliers and creditors and the communities in which the Company does
business, and which the Board determines to recommend to the
shareholders of the Company.
"Preferred Share(s)" shall mean shares of Series A Junior
Participating Preferred Stock, par value $.01 per share, of the Company
having the rights and preferences set forth in the form of Certificate
of Designations attached to this Agreement as Exhibit A.
"Preferred Share Equivalents" shall have the meaning set forth
in Section 11(b).
"Principal Party" shall have the meaning set forth in Section
13(b).
"Record Date" shall have the meaning set forth in the recital
clause at the beginning of this Agreement.
"Redemption Date" shall have the meaning set forth in Section
7.
"Redemption Price" shall have the meaning set forth in Section
23(a) of this Agreement.
"Rights" shall have the meaning set forth in the recital
clause at the beginning of this Agreement.
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"Rights Agent" shall have the meaning set forth in the
preamble clause at the beginning of this Agreement until a successor
Rights Agent shall have become such pursuant to the applicable
provisions of this Agreement, and thereafter "Rights Agent" shall mean
such successor Rights Agent. If at any time there is more than one
Person appointed by the Company as Rights Agent pursuant to the
provisions of this Agreement, "Rights Agent" shall mean and include
each such Person.
"Section 11(a)(ii) Event" shall mean any event described in
Section 11(a)(ii)(A) or (B).
"Section 13 Event" shall mean any event described in clauses
(i), (ii), (iii) or (iv) of Section 13(a).
"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) of the
Exchange Act) by the Company or any Person that such Person has become
an Acquiring Person.
"Spread" shall have the meaning set forth in Section
11(a)(iii).
"Subsidiary" of any Person shall mean any corporation or other
entity of which a majority of the voting power of the voting equity
securities or equity interest is owned, directly or indirectly, by such
Person.
"Substitution Period" shall have the meaning set forth in
Section 11(a)(iii).
"Threshold Percentage" shall mean 15% for all Persons except
for the Masters Group and Sihl for which this term shall mean 20%.
"Trading Day" shall have the meaning set forth in Section
11(d)(i).
"Triggering Event" shall mean any Section 11(a)(ii) Event or
any Section 13 Event.
Section 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company and the holders of the Rights (who,
in accordance with Section 3, 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.
Section 3. Issue of Right Certificates.
(a) Until the earlier of (i) the Close of Business on the tenth
Business Day after the Shares Acquisition Date (or, if the tenth Business Day
after the Shares Acquisition Date occurs before the Record Date, the Close of
Business on the Record Date), (ii) the Close of Business on the tenth Business
Day after a determination, pursuant to Section 11(a)(ii)(B), that a Person is an
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Adverse Person, or (iii) the Close of Business on the tenth Business Day (or
such later date as may be determined by action of the Board prior to such time
as any Person becomes an Acquiring Person) after the date of the commencement by
any Person of, or of the first public announcement of the intention of any
Person to commence, a tender or exchange offer the consummation of which would
result in any Person becoming an Acquiring Person (the earlier of such dates
being referred to herein as the "Distribution Date"), (A) the Rights will be
evidenced (subject to the provisions of Section 3(b)) by the certificates for
Common Shares registered in the names of the holders thereof (which certificates
shall also be deemed to be Right Certificates) and not by separate Right
Certificates, and (B) the right to receive Right Certificates will be
transferable only in connection with the transfer of Common Shares. As 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 Right Certificate, in substantially the form of Exhibit B (a "Right
Certificate"), evidencing one Right for each Common Share so held, subject to
adjustments as provided herein. As of the Distribution Date, the Rights will be
evidenced solely by such Right Certificates.
(b) As soon as practicable after the Record Date, the Company will send
a copy of a Summary of Rights to purchase Preferred Shares, in substantially the
form of Exhibit C (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.
With respect to certificates for Common Shares outstanding as of the Close of
Business on the Record Date, until the Distribution Date, the Rights will be
evidenced by such certificates registered in the names of the holders thereof
together with a copy of the Summary of Rights. Until the Distribution Date (or
the earlier of the Redemption Date or the Final Expiration Date if occurring
prior to the Distribution Date), the surrender for transfer of any certificate
for Common Shares outstanding on the Record Date, with or without a copy of the
Summary of Rights attached thereto, shall also constitute the transfer of the
Rights associated with the Common Shares represented thereby.
(c) Certificates for Common Shares which become outstanding after the
Record Date but prior to the earliest of the Distribution Date, the Redemption
Date or the Final Expiration Date shall have impressed on, printed on, written
on or otherwise affixed to them the following legend:
This certificate also evidences and entitles the holder hereof to
certain rights as set forth in a Rights Agreement between
VirtualFund.com, Inc. and Norwest Bank Minnesota, N.A., dated effective
as of October 9, 1998 (the "Rights Agreement"), the terms of which are
hereby incorporated herein by reference and a copy of which is on file
at the principal executive offices of VirtualFund.com, Inc. 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. VirtualFund.com, Inc. will mail to the
holder of this certificate a copy of the Rights Agreement without
charge after receipt of a written request therefor.
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Under certain circumstances, as set forth in the Rights Agreement,
Rights issued to, or held by, any Person who is, was or becomes an
Acquiring Person, an Adverse Person or any Associate or Affiliate
thereof (as defined in the Rights Agreement), or certain transferees of
such Person, may become null and void.
With respect to such certificates containing the foregoing legend, until the
Distribution 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.
Section 4. Form of Right Certificates.
(a) The Right Certificates (and the forms of election to purchase
Preferred Shares and of assignment to be printed on the reverse thereof) shall
be substantially the same as Exhibit B and may have such marks of identification
or designation and such legends, summaries or endorsements printed thereon as
the Company may deem appropriate and as are not inconsistent with the provisions
of this Agreement, or as may be required to comply with any applicable law or
with any rule or regulation made pursuant thereto or with any rule or regulation
of any stock exchange or automated quotations system on which the Rights may
from time to time be listed, or to conform to usage. Subject to the provisions
of Section 11 and Section 22, the Right Certificates shall entitle the holders
thereof to purchase such number of one one-thousandths of a Preferred Share as
shall be set forth therein at the price per one one-thousandth of a Preferred
Share set forth therein (the "Purchase Price"), but the number of such one one-
thousandths of a Preferred Share 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,
an Adverse Person or any Associate or Affiliate of any such Person, (ii) a
transferee of an Acquiring Person, or an Adverse Person (or of any such
Associate or Affiliate) who becomes a transferee after the Acquiring Person or
Adverse Person becomes such, or (iii) a transferee of an Acquiring Person, or an
Adverse Person (or of any such Associate or Affiliate) who becomes a transferee
prior to or concurrently with the Acquiring Person or Adverse Person becoming
such and receives such Rights pursuant to either (A) a transfer (whether or not
for consideration) from the Acquiring Person or Adverse Person (or from any such
Associate or Affiliate) to holders of equity interests in such Acquiring Person
or Adverse Person (or of any such Associate or Affiliate) or to any Person with
whom such Acquiring Person or Adverse Person (or of any such Associate or
Affiliate) has any continuing agreement, arrangement or understanding regarding
the transferred Rights or (B) a transfer which the Board 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 Right Certificate issued pursuant
to Section 6 or Section 11 hereof upon transfer, exchange, replacement or
adjustment of any other Right Certificate referred to in this sentence, shall
contain (to the extent feasible) the following legend:
The Rights represented by this Right Certificate are or were
beneficially owned by a Person who was or became an [Acquiring]
[Adverse] Person or an Affiliate or Associate
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of an [Acquiring] [Adverse] Person (as such terms are defined in the
Rights Agreement). Accordingly, this Right Certificate and the Rights
represented hereby may become null and void in the circumstances
specified in Section 7(e) of such Agreement.
Section 5. Countersignature and Registration.
(a) The Right Certificates shall be executed on behalf of the Company
by its Chairman of the Board, its President, any of its Vice Presidents or its
Treasurer either manually or by facsimile signature and shall be attested by the
Secretary or an Assistant Secretary of the Company, either manually or by
facsimile signature. The Right Certificates shall be manually countersigned by
the Rights Agent for purposes of authorization only and shall not be valid for
any purpose unless countersigned. In case any officer of the Company who shall
have signed any of the Right Certificates shall cease to be such officer of the
Company before countersignature by the Rights Agent and issuance and delivery by
the Company, such Right 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 Right Certificates had not ceased to
be such officer of the Company; and any Right Certificate may be signed on
behalf of the Company by any Person who, at the actual date of the execution of
such Right Certificate, shall be a proper officer of the Company to sign such
Right Certificate, although at the date of the execution of this Rights
Agreement any such Person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its principal office, books for registration and transfer
of the Right Certificates issued hereunder. Such books shall show the names and
addresses of the respective holders of the Right Certificates, the number of
Rights evidenced on its face by each of the Right Certificates and the date of
each of the Right Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates.
(a) Subject to the provisions of Section 4(b), Section 7(e) and Section
14, at any time after the Close of Business on the Distribution Date, and at or
prior to the Close of Business on the earlier of the Redemption Date or the
Final Expiration Date, any Right Certificate or Right Certificates may be
transferred, split up, combined or exchanged for another Right Certificate or
Right Certificates, entitling the registered holder to purchase a like number of
one one-thousandths of a Preferred Share (or, following a Triggering Event,
Common Shares, other securities, cash or other assets, as the case may be) as
the Right Certificate or Right Certificates surrendered then entitled such
holder to purchase. Any registered holder desiring to transfer, split up,
combine or exchange any Right Certificate or Right Certificates shall make such
request in writing delivered to the Rights Agent, and shall surrender the Right
Certificate or Right Certificates to be transferred, split up, combined or
exchanged at the principal office of the Rights Agent. Thereupon, the Rights
Agent shall, subject to Section 4(b), Section 7(e), Section 14 and Section 24,
countersign and deliver to the Person entitled thereto a Right Certificate or
Right Certificates, as the case may be, as so requested. The Company may require
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<PAGE>
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
Right 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 Right 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 Right Certificate if mutilated, the Company will issue, execute and deliver
a new Right Certificate of like tenor to the Rights Agent for countersignature
and delivery to the registered holder in lieu of the Right Certificate so lost,
stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of
Rights.
(a) Subject to Section 7(e), the registered holder of any Right
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 Right Certificate, with the form of election to purchase
on the reverse side thereof duly executed, to the Rights Agent at the office or
offices of the Rights Agent designated for such purpose, together with payment
of the Purchase Price for each one one-thousandth of a Preferred Share as to
which the Rights are exercised, at or prior to the earliest of (i) the Close of
Business on October 9, 2008 (the "Final Expiration Date"), (ii) the time at
which the Rights are redeemed as provided in Section 23 (the "Redemption Date")
or (iii) the time at which such Rights are exchanged as provided in Section 24
(the "Exchange Date").
(b) The Purchase Price for each one one-thousandth of a Preferred Share
purchasable pursuant to the exercise of a Right shall initially be Twenty Two
Dollars ($22.00), shall be subject to adjustment from time to time as provided
in Sections 11 and 13 and shall be payable in lawful money of the United States
of America in accordance with paragraph (c) below.
(c) Upon receipt of a Right Certificate representing exercisable
Rights, with the form of election to purchase duly executed, accompanied by
payment of the Purchase Price for the Preferred Shares (or other shares,
securities, cash or other assets, 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 Right Certificate in accordance with Section 9 by certified check,
cashier's check or money order payable to the order of the Company, the Rights
Agent shall thereupon promptly (i) (A) requisition from any transfer agent for
the Preferred Shares (or make available, if the Rights Agent is the transfer
agent for such shares) certificates for the number of Preferred Shares 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 with a depository agent the total number of Preferred Shares issuable
upon exercise of the Rights hereunder, requisition from the depositary agent
depositary receipts representing such number of one one-thousandths of a
Preferred Share as are to be purchased (in which case certificates for 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
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appropriate, requisition from the Company the amount of cash to be paid in lieu
of issuance of fractional shares in accordance with Section 14, (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 Right
Certificate, registered in such name or names as may be designated by such
holder, and (iv) when appropriate, after receipt, deliver such cash to or upon
the order of the registered holder of such Right Certificate.
(d) In case the registered holder of any Right Certificate shall
exercise less than all of the Rights evidenced thereby, a new Right Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent to the registered holder of such Right Certificate or to
such holder's duly authorized assigns, subject to the provisions of Section 14.
(e) Notwithstanding anything in this Agreement to the contrary, from
and after the first occurrence of a Section 11(a)(ii) Event, any Rights
beneficially owned by (i) an Acquiring Person, an Adverse Person or an Associate
or Affiliate of any such Person, (ii) a transferee of an Acquiring Person or an
Adverse Person (or of any such Associate or Affiliate) who becomes a transferee
after the Acquiring Person or Adverse Person becomes such, or (iii) a transferee
of an Acquiring Person or Adverse Person (or of any such Associate or Affiliate)
who becomes a transferee prior to or concurrently with the Acquiring Person or
Adverse Person becoming such and receives such Rights pursuant to either (A) a
transfer (whether or not for consideration) from the Acquiring Person or Adverse
Person (or from any such Affiliate or Associate) to holders of equity interests
in such Acquiring Person or Adverse Person (or any such Affiliate or Associate)
or to any Person with whom the Acquiring Person or Adverse Person (or any such
Affiliate or Associate) has any continuing agreement, arrangement or
understanding regarding the transferred Rights, or (B) a transfer which the
Board has determined is part of a plan, arrangement or understanding which has
as a primary purpose or effect the avoidance of this Section 7(e), shall become
null and void without any further action and no holder of such Rights shall have
any rights whatsoever with respect to such Rights, whether under any provision
of this Agreement or otherwise. The Company shall use all reasonable efforts to
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 Right Certificates
or other Person as a result of its failure to make any determinations with
respect to an Acquiring Person or Adverse Person or any of their respective
Affiliates, Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the contrary, neither
the Rights Agent nor the Company shall be obligated to undertake any action with
respect to a registered holder upon the occurrence of any purported exercise as
set forth in this Section unless such registered holder shall have (i) duly
completed and executed the form of election to purchase set forth on the reverse
side of the Right Certificate surrendered for such exercise and (ii) provided
such additional evidence of the identity of the Beneficial Owner (or former
Beneficial Owner) of such Right Certificate or Affiliates or Associates thereof
as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Right Certificates. All
Right Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if
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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 Right Certificates shall be issued in
lieu thereof except as expressly permitted by any of the provisions of this
Rights Agreement. The Company shall deliver to the Rights Agent for cancellation
and retirement, and the Rights Agent shall so cancel and retire, any other Right
Certificate purchased or acquired by the Company otherwise than upon the
exercise thereof. The Rights Agent shall deliver all canceled Right Certificates
to the Company.
Section 9. Availability of Preferred Shares.
(a) The Company covenants and agrees that it will cause to be reserved
and kept available out of its authorized and unissued Preferred Shares, the
number of Preferred Shares that will be sufficient to permit the exercise in
full of all outstanding Rights.
(b) At such time, if any, as the Preferred Shares issuable upon the
exercise of Rights may be listed on any national securities exchange, the
Company shall use its best efforts to cause, from and after such time as the
Rights become exercisable (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 will prepare and file, as soon as practicable after the
Distribution Date, a registration statement under the Act, with respect to the
Rights and the securities purchasable upon exercise of the Rights on an
appropriate form, and use its best efforts to cause such registration statement
to (i) become effective as soon as practicable after such filing, and (ii)
remain effective (with a prospectus at all times meeting the requirements of the
Act) until the earlier of (A) the date as of which the Rights are no longer
exercisable for such securities, or (B) the Final Expiration Date. The Company
will also take such action as may be appropriate under, or to ensure compliance
with, the securities or "blue sky" laws of the various states in connection with
the exercisability of the Rights. The Company may temporarily suspend, for a
period of time not to exceed 90 days after the date the registration statement
is filed, the exercisability of the Rights in order to permit the registration
statement to become effective. Upon any such suspension, the Company shall issue
a public announcement stating that the exercisability of the Rights has been
temporarily suspended, as well as a public announcement at such time as the
suspension is no longer in effect. Notwithstanding any provision of this
Agreement to the contrary, the Rights shall not be exercisable in any
jurisdiction if the requisite qualification in such jurisdiction shall not have
been obtained or the exercise thereof is not permitted under applicable law.
(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 and any applicable transfer
taxes), 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
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issuance or delivery of the Right 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
Right 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 Right 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 Right Certificate at the time of surrender) or until it has been
established to the Company's reasonable 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 one-thousandths of a Preferred Share (or Common
Shares and/or other securities, as the case may be) is issued upon the exercise
of Rights shall for all purposes be deemed to have become the holder of record
of the Preferred Shares (or Common Shares and/or other securities, as the case
may be) represented thereby on, and such certificate shall be dated, the date
upon which the Right Certificate evidencing such Rights was duly surrendered and
payment of the Purchase Price (and any applicable transfer taxes) was made;
provided, however, that if the date of such surrender and payment is a date upon
which the transfer books of the Company for the Preferred Shares 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
such transfer books are open. Prior to the exercise of the Rights evidenced
thereby, the holder of a Right 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 covered by each Right
and the number of Rights outstanding are subject to adjustment from time to time
as provided in this Section 11:
(a)(i) In the event the Company shall at any time after the
date of this Agreement (A) declare a dividend on the Preferred Shares
payable in Preferred Shares, (B) subdivide or split the outstanding
Preferred Shares, (C) combine or consolidate the outstanding Preferred
Shares 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), except as otherwise provided in this Section
11(a) and Section 7(e), the Purchase Price in effect at the time of the
record date for such dividend or of the effective date of such
subdivision, split, combination, consolidation or reclassification, and
the number and kind of shares of capital stock issuable on such date,
shall be proportionately adjusted so that the holder of any Right
exercised after such time shall be entitled to receive the aggregate
number and kind of shares of capital stock which, if such Right had
been exercised immediately prior to such date and at a time when the
Preferred Shares transfer books of the Company were open, such holder
would
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have owned upon such exercise and been entitled to receive by virtue of
such dividend, subdivision, combination or reclassification; provided,
however, that in no event shall the consideration to be paid upon the
exercise of one Right be less than the aggregate par value of the
shares of capital stock of the Company issuable upon exercise of one
Right. If an event occurs which would require an adjustment under both
Section 11(a)(i) and Section 11(a)(ii), the adjustment provided for in
this Section 11(a)(i) shall be in addition to, and shall be made prior
to, any adjustment required pursuant to Section 11(a)(ii).
(ii) Subject to Section 24 of this Agreement, in the event
(A) any Person becomes an Acquiring Person, other
than pursuant to any transaction set forth in Section 13(a),
or
(B) the Board shall declare any Person to be an
Adverse Person upon a finding that such Person, alone or
together with its Affiliates or Associates, has become the
Beneficial Owner of a substantial amount of Common Shares
(which amount shall in no event be less than 10% of the Common
Shares then outstanding) and a determination by the Board,
after reasonable inquiry and investigation, including
consultation with such Persons as such directors shall deem
appropriate, that (1) such beneficial ownership by such Person
is intended to cause the Company to repurchase the Common
Shares beneficially owned by such Person or to cause pressure
on the Company to take action or enter into a transaction or
series of transactions intended to provide such Person or its
Affiliates or Associates with short-term financial gain under
circumstances where the Board determines that the best
long-term interests of the Company and its shareholders would
not be served by taking such action or entering into such
transaction or series of transactions at that time or (2) such
beneficial ownership is causing or reasonably likely to cause
a material adverse impact (including, but not limited to,
impairment of relationships with customers or impairment of
the Company's ability to maintain its competitive position) on
the business or prospects of the Company, then, proper
provision shall be made so that each holder of a Right (except
as otherwise provided below and in Section 7(e)) shall
thereafter have a right to receive, upon exercise thereof at
the then current Purchase Price in accordance with the terms
of this Agreement and in lieu of Preferred Shares, such number
of Common Shares of the Company as shall equal the result
obtained by (A) multiplying the then current Purchase Price by
the number of one one-thousandths of a Preferred Share for
which a Right was exercisable immediately prior to the first
occurrence of a Section 11(a)(ii) Event and dividing that
product by (B) 50% of the then current per share market price
of the Company's Common Shares (determined pursuant to Section
11(d)) on the date of the occurrence of such event (such
number of shares being referred to as the "Adjustment
Shares"). In the event that any Person shall become an
Acquiring Person or an Adverse Person and the Rights shall
then be outstanding, the Company shall not take any action
which would eliminate or diminish the benefits intended to be
afforded by the Rights.
(iii) In the event that the number of Common Shares which are
authorized by the
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Company's Articles 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 in accordance
with the foregoing subparagraph (ii) of this Section 11(a), the Company
shall (A) determine the value of the Adjustment Shares issuable upon
the exercise of a Right (the "Current Value"), and (B) with respect to
each Right (subject to Section 7(e) hereof), make adequate provision to
substitute for the Adjustment Shares, upon the exercise of a Right and
payment of the applicable Purchase Price, (1) cash, (2) a reduction in
the Purchase Price, (3) Common Shares or other equity securities of the
Company (including, without limitations, shares, or units of shares, of
preferred stock, such as the Preferred Shares, which the Board has
deemed to have essentially the same value or economic rights as Common
Shares (such shares of preferred stock being referred to as "Common
Share Equivalents")), (4) debt securities of the Company, (5) other
assets, or (6) any combination of the foregoing, having an aggregate
value equal to the Current Value (less the amount of any reduction in
the Purchase Price), where such aggregate value has been determined by
the Board based upon the advice of an investment banking firm selected
by the Board; provided, however, that if the Company shall not have
made adequate provision to deliver value pursuant to clause (B) above
within thirty (30) days following the first occurrence of a Section
11(a)(ii) Event, then the Company shall be obligated to deliver, upon
the surrender for exercise of a Right and without requiring payment of
the Purchase Price, Common Shares (to the extent available) and then,
if necessary, cash, which shares and/or cash have an aggregate value
equal to the Spread. For purposes of the preceding sentence, the term
"Spread" shall mean the excess of (i) the Current Value over (ii) the
Purchase Price. If the Board determines in good faith that it is likely
that sufficient additional Common Shares could be authorized for
issuance upon exercise in full of the Rights, the thirty (30) day
period set forth above may be extended to the extent necessary, but not
more than ninety (90) days after the Section 11(a)(ii) Event, in order
that the Company may seek shareholder approval for the authorization of
such additional shares (such thirty (30) day period, as it may be
extended, is herein called the "Substitution Period"). To the extent
that action is to be taken pursuant to the first and/or third sentences
of this Section 11(a)(iii), the Company (1) shall provide, subject to
Section 7(e) hereof, that such action shall apply uniformly to all
outstanding Rights, and (2) may suspend the exercisability of the
Rights until the expiration of the Substitution Period in order to seek
such shareholder approval for such authorization of additional shares
and/or to decide the appropriate form of distribution to be made
pursuant to such first sentence and to determine the value thereof. In
the event of any such suspension, the Company shall issue a public
announcement stating that the exercisability of the Rights has been
temporarily suspended, as well as a public announcement at such time as
the suspension is no longer in effect. For purposes of this Section
11(a)(iii), the value of each Adjustment Share shall be the "current
per share market price" (as determined pursuant to Section 11(d)(i))
per Common Share on the date of the first occurrence of Section
11(a)(ii) Event and the per share or per unit value of any Common Share
Equivalent shall be deemed to equal the "current market price" per
Common Share on such date.
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(b) In case the Company shall fix a record date for the
issuance of rights, options or warrants to all holders of Preferred
Shares entitling them to subscribe for or purchase Preferred Shares (or
shares having the same rights, privileges and preferences as the
Preferred Shares (such shares are herein called "Preferred Share
Equivalents")) or securities convertible into Preferred Shares or
Preferred Share Equivalents at a price per Preferred Share or Preferred
Share Equivalent (or having a conversion price per share, if a security
convertible into Preferred Shares or Preferred Share Equivalents) less
than the then current per share market price (as such term is defined
in Section 11(d)) of the Preferred Shares on such record date, the
Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately
prior to such record date by a fraction, the numerator of which shall
be the number of Preferred Shares outstanding on such record date plus
the number of Preferred Shares which the aggregate offering price of
the total number of Preferred Shares and/or Preferred Share Equivalents
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
Preferred Shares outstanding on such record date plus the number of
additional Preferred Shares and/or Preferred Share Equivalents to be
offered for subscription or purchase (or into which the convertible
securities so to be offered are initially convertible); provided,
however, that in no event shall the consideration to be paid upon the
exercise of one Right be less than the aggregate par value of the
shares of capital stock of the Company issuable upon exercise of one
Right. In case such subscription price may be paid in a consideration
part or all of which shall be in a form other than cash, the value of
such consideration shall be determined in good faith by the Board,
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. Preferred Shares held for the account of the Company
shall not be deemed outstanding for the purpose of any such
computation. Such adjustment shall be made successively whenever such a
record date is fixed; and in the event that such rights, options or
warrants are not so issued, the Purchase Price shall be adjusted to be
the Purchase Price which would then be in effect if such record date
had not been fixed.
(c) In case the Company shall fix a record date for the making
of a distribution to all holders of the Preferred 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 indebtedness or assets (other than a regular quarterly
cash dividend or a dividend payable in Preferred Shares) or
subscription rights or warrants (excluding those referred to in Section
11(b)), the Purchase Price to be in effect after such record date shall
be determined by multiplying the Purchase Price in effect immediately
prior to such record date by a fraction, the numerator of which shall
be the then current per share market price of the Preferred Shares on
such record date, less the fair market value (as determined in good
faith by the Board, whose determination shall be described in a
statement filed with the Rights Agent) of the portion of the assets or
evidences of indebtedness so to be distributed or of such subscription
rights or warrants applicable to one Preferred Share, and the
denominator of which shall be such current per share market price of
the Preferred Shares; provided, however, that in no event shall the
consideration
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to be paid upon the exercise of one Right be less than the aggregate
par value of the shares of capital stock of the Company to be issued
upon exercise of one Right. Such adjustments shall be made successively
whenever such a record date is fixed; and in the event that such
distribution is not so made, the Purchase Price shall again be adjusted
to be the Purchase Price which would then be in effect if such record
date had not been fixed.
(d) (i) For the purpose of any computation hereunder, the
"current per share market price" of any security (a "Security" for the
purpose of this Section 11(d)(i)) on any date shall be deemed to be the
average of the daily closing prices per share of such Security for the
30 consecutive Trading Days (as defined below) 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 (A) a
dividend or distribution on such Security payable in shares of such
Security or securities convertible into such shares, or (B) any
subdivision, combination or reclassification of such Security and prior
to the expiration of 30 Trading Days after the ex-dividend date for
such dividend or distribution, or the record date for such subdivision,
combination or reclassification, then, and in each such case, the
current 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 Nasdaq
National Market or, if the Security is not listed or admitted to
trading on the Nasdaq National Market, as reported in the principal
consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the
Security is listed or admitted to trading or, if the Security is not
listed or admitted to trading on any national securities exchange, the
last quoted price or, if not so quoted, the average of the high bid and
low asked prices in the over-the-counter market, as reported by the
National Association of Securities Dealers, Inc. Automated Quotations
System ("NASDAQ") or such other system then in use, or, if on any such
date the Security is not quoted by any such organization, the average
of the closing bid and asked prices as furnished by a professional
market maker making a market in the Security selected by the Board. If
on any such day no market maker is making a market in the Common
Shares, the fair value of such share on such day as determined in good
faith by the Board shall be used in lieu of the closing price for such
day. 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.
(ii) For the purpose of any computation hereunder, the
"current per share market price" of the Preferred Shares shall be
determined in accordance with the method set forth in Section 11(d)(i).
If the Preferred Shares are not publicly traded, the "current per share
market price" of the Preferred Shares shall be conclusively deemed to
be the current per
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share market price of the Common Shares as determined pursuant to
Section 11(d)(i) (appropriately adjusted to reflect any stock split,
stock dividend or similar transaction occurring after the date hereof),
multiplied by one thousand. If neither the Common Shares nor the
Preferred Shares are publicly held or so listed or traded, "current per
share market price" of the Preferred Shares shall mean the fair value
per share as determined in good faith by the Board, whose determination
shall be described in a statement filed with the Rights Agent.
(e) 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 one one-millionth of a Preferred Share or one
ten-thousandth of any other share or security as the case may be.
Notwithstanding the first sentence of this Section 11(e), any
adjustment required by this Section 11 shall be made no later than the
earlier of (i) three years from the date of the transaction which
requires such adjustment or (ii) the date of the expiration of the
right to exercise any Rights.
(f) If as a result of an adjustment made pursuant to Section
11(a) and 13(a), the holder of any Right thereafter exercised shall
become entitled to receive any shares of capital stock of the Company
other than Preferred Shares, thereafter the number of such other shares
so receivable upon exercise of any Right shall be subject to adjustment
from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Preferred Shares
contained in Section 11(a) through (c), inclusive, 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
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) below, subject to the provisions of Sections
11(a) and 13, upon each adjustment of the Purchase Price as a result of
the calculations made in Sections 11(b) and (c), each Right outstanding
immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that
number of one one-thousandths of a Preferred Share (calculated to the
nearest one one-millionth of a Preferred Share) obtained by (i)
multiplying (A) the number of one one-thousandths of a share covered by
a Right immediately prior to this adjustment by (B) 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.
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<PAGE>
(i) The Company may elect on or after the date of any
adjustment of the Purchase Price to adjust the number of Rights, in
substitution for any adjustment in the number of one one-thousandths of
a Preferred Share 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 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 ten-thousandth) obtained by dividing the Purchase Price in
effect immediately prior to adjustment of the Purchase Price by the
Purchase Price in effect immediately after adjustment of the Purchase
Price. The Company shall make a public announcement of its election to
adjust the number of Rights, indicating the record date for the
adjustment, and, if known at the time, the amount of the adjustment to
be made. This record date may be the date on which the Purchase Price
is adjusted or any day thereafter, but, if the Right Certificates have
been issued, shall be at least ten days later than the date of the
public announcement. If Right 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 Right Certificates on such record date Right
Certificates evidencing, subject to Section 14, 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 Right
Certificates held by such holders prior to the date of adjustment, and
upon surrender thereof, if required by the Company, new Right
Certificates evidencing all the Rights to which such holders shall be
entitled after such adjustment. Right Certificates so to be distributed
shall be issued, executed and countersigned in the manner provided for
herein, 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
Right Certificates on the record date specified in the public
announcement.
(j) Irrespective of any adjustment or change in the Purchase
Price or the number of one one-thousandths of a Preferred Share
issuable upon the exercise of the Rights, the Right Certificates
theretofore and thereafter issued may continue to express the Purchase
Price and the number of one one-thousandths of a Preferred Share which
were expressed in the initial Right Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment
reducing the Purchase Price below one one-thousandth of the then par
value, if any, of the Preferred Shares issuable upon exercise of the
Rights, the Company shall take any corporate action which may, in the
opinion of its counsel, be necessary in order that the Company may
validly and legally issue fully paid and nonassessable Preferred Shares
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 Preferred Shares and other
capital stock or
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securities of the Company, if any, issuable upon such exercise over and
above the Preferred Shares and other capital stock or securities of the
Company, if any, issuable upon such exercise on the basis of the
Purchase Price in effect prior to such adjustment; provided, however,
that the Company shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such
additional shares upon the occurrence of the event requiring such
adjustment.
(m) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make such reductions
in the Purchase Price, in addition to those adjustments expressly
required by this Section 11, as and to the extent that in their sole
discretion the Board shall determine to be advisable in order that any
(i) consolidation or subdivision of the Preferred Shares, (ii) issuance
wholly for cash of any Preferred Shares at less than the current market
price, (iii) issuance wholly for cash of Preferred Shares or securities
which by their terms are convertible into or exchangeable for Preferred
Shares, (iv) dividends on Preferred Shares payable in Preferred Shares,
or (v) issuance of rights, options or warrants referred to hereinabove
in Section 11(b), hereafter made by the Company to holders of its
Preferred 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, (i) consolidate with any other Person
(other than a Subsidiary of the Company in a transaction which complies
with Section 11(o) hereof), (ii) merge with or into any other Person
(other than a Subsidiary of the Company in a transaction which complies
with Section 11(o) hereof), or (iii) sell or transfer (or permit any
Subsidiary to sell or transfer), in one transaction, or a series of
related transactions, assets or earning power aggregating more than 50%
of the assets or earning power of the Company and its Subsidiaries
(taken as a whole) to any other Person or Persons (other than the
Company and/or any of its subsidiaries in one or more transaction each
of which complies with Section 11(o) hereof), if (A) at the time of or
immediately after such consolidation, merger or sale there are any
rights, warrants or other instruments or securities outstanding or
agreements in effect which would substantially diminish or otherwise
eliminate the benefits intended to be afforded by the Rights or (B)
prior to, simultaneously with or immediately after such consolidation,
merger or sale, the shareholders of the Person who constitute, or would
constitute, the "Principal Party" (as defined below) for purposes of
Section 13(a) hereof shall have received a distribution of Rights
previously owned by such Person or any of its Affiliates and
Associates.
(o) The Company covenants and agrees that, after the
Distribution Date, it will not, except as permitted by Section 23, 24
or 27, take (or permit any Subsidiary of the Company to take) any
action if at the time such action is taken it is reasonably foreseeable
that such action will diminish substantially or otherwise eliminate the
benefits intended to be afforded by the Rights unless such action is
approved by the Board.
(p) Anything in this Agreement or the Rights to the contrary
notwithstanding, in the event that at any time after the date of this
Agreement and prior to the Distribution Date, the Company shall (i)
declare or pay any dividend on the Common Shares payable
20
<PAGE>
in Common Shares or (ii) effect a subdivision, combination or
consolidation of the Common Shares (by reclassification or otherwise
than by payment of dividends in Common Shares) into a greater or lesser
number of Common Shares, then in any such case (A) the number of one
one-thousandths of a Preferred Share purchasable after such event upon
proper exercise of each Right shall be determined by multiplying the
number of one one-thousandths of a Preferred Share so purchasable
immediately prior to such event by a fraction, the numerator of which
is the number of Common Shares outstanding immediately before such
event and the denominator of which is the number of Common Shares
outstanding immediately after such event, and (B) each Common Share
outstanding immediately after such event shall have issued with respect
to it that number of Rights which each Common Share outstanding
immediately prior to such event had issued with respect to it. The
adjustments provided for in this Section 11(p) shall be made
successively whenever such a dividend is declared or paid or such a
subdivision, combination or consolidation is effected. If an event
occurs which would require an adjustment under Section 11(a)(ii) and
this Section 11(p), the adjustments provided for in this Section 11(p)
shall be in addition and prior to any adjustment required pursuant to
Section 11(a)(ii).
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Sections 11 and 13, 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 Common Shares or the Preferred
Shares a copy of such certificate and (c) mail a brief summary thereof to each
holder of a Right Certificate in accordance with Section 25.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power.
(a) In the event that, on or following the Shares Acquisition Date or
during the pendency of a 180 Day Period (as defined in Section 23(c)), 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 which complies with Section 11(o)) and the Company shall
not be the continuing or surviving corporation of such consolidation or
merger,
(ii) any Person (other than a Subsidiary of the Company in a
transaction which complies with Section 11(o)) shall consolidate with,
or merge with and into, the Company, and the Company shall be the
continuing or surviving corporation of such consolidation or merger
and, in connection with such consolidation or merger, all or part of
the Common Shares shall be changed into or exchanged for stock or other
securities of any other Person or cash or any other property,
(iii) the Company shall effect a statutory share exchange with
the outstanding Common Shares of the Company being exchanged for stock
or other securities of any other Person, cash or property, or
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<PAGE>
(iv) 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 (other than the Company or one or more
of its wholly owned Subsidiaries in a transaction which complies with
Section 11(o)),
then, and in each such case, except as contemplated by Section 13(e), proper
provision shall be made so that (i) each holder of a Right (except as otherwise
provided in Section 7(e)) shall thereafter have the right to receive, upon the
exercise thereof at the then current Purchase Price, in accordance with the
terms of this Agreement and in lieu of Preferred Shares, such number of validly
authorized and issued, fully paid, nonassessable and freely tradable Common
Shares of the Principal Party, not subject to any liens, encumbrances, rights of
first refusal or adverse claims, as shall be equal to the result obtained by (A)
multiplying the then current Purchase Price by the number of one one-thousandths
of a Preferred Share for which a Right is, immediately prior to the first
occurrence of a Section 13 Event (or, if a Section 11(a)(ii) Event has occurred
prior to the first occurrence of a Section 13 Event, multiplying the number of
such one one-thousandths of a shares for which a Right was exercisable
immediately prior to the first occurrence of the Section 11(a)(ii) Event by the
Purchase Price in effect immediately prior to the first occurrence), exercisable
and (B) dividing that product by 50% of the current per share market price of
the Common Shares of such Principal Party (determined pursuant to Section 11(d))
on the date of consummation of such Section 13 Event; (ii) such Principal Party
shall thereafter be liable for, and shall assume, by virtue of such merger,
consolidation, statutory share exchange, sale or transfer, all the obligations
and duties of the Company pursuant to this Agreement; (iii) the term "Company"
shall thereafter be deemed to refer to such Principal Party, it being
specifically intended that the provisions of Section 11 shall apply only to such
Principal Party following the first occurrence of a Section 13 Event; and (iv)
such Principal Party shall take such steps (including, but not limited to, the
reservation of a sufficient number of its Common Shares to permit the exercise
of all outstanding Rights) in connection with the consummation of any such
transaction as may be necessary to assure that the provisions of this Agreement
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:
(i) in the case of any transaction described in clauses (i),
(ii) or (iii) of the first sentence of Section 13(a), the Person that
is the issuer of any securities into which Common Shares of the Company
are converted in such merger, consolidation or exchange, or if no
securities are so issued, the Person that is the other party to such
merger, consolidation or exchange; and
(ii) in the case of any transaction described in clause (iv)
of the first sentence of Section 13(a), the Person that is the party
receiving the greatest portion of the assets or earning power
transferred pursuant to such transaction or transactions;
22
<PAGE>
provided, however, that in any such case, (1) if the Common Shares of such
Person are not at such time or have not been continuously over the preceding
12-month period registered under Section 12 of the Exchange Act, and such Person
is a direct or indirect Subsidiary of another Person the Common Shares of which
are and have been so registered, "Principal Party" shall refer to such other
Person, and (2) in case such Person is a Subsidiary, directly or indirectly, of
more than one Person, the Common Shares of two or more of which are and have
been so registered, "Principal Party" shall refer to whichever of such Persons
is the issuer of the Common Shares having the greatest aggregate market value.
(c) The Company shall not consummate any Section 13 Event unless the
Principal Party shall have a sufficient number of authorized, unreserved Common
Shares which have not been issued or are held in treasury to permit the exercise
in full of the Rights in accordance with this Section 13 and unless prior
thereto the Company and such Principal Party shall have executed and delivered
to the Rights Agent a supplemental agreement providing for the terms set forth
in paragraphs (a) and (b) of this Section 13 and further providing that, as soon
as practicable after the date of any Section 13 Event, the Principal Party will:
(i) prepare and file a registration statement under the Act,
with respect to the Rights and the securities purchasable upon exercise
of the Rights, on an appropriate form, and use its best efforts to
cause such registration statement to (A) become effective as soon as
practicable after such filing and (B) remain effective (with a
prospectus at all times meeting the requirements of the Act) until the
earlier of (1) the date as of which the Rights are no longer
exercisable for such securities or (2) the Final Expiration Date;
(ii) 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; and
(iii) deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates which
comply in all respects with the requirements for registration on Form
10 under the Exchange Act.
(d) The Company shall not enter into any transaction of the kind
referred to in this Section 13 if at the time of such transaction there are any
rights, warrants, instruments or securities outstanding or any agreements or
arrangements which, as a result of the consummation of such transaction, would
substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights. Without limiting the generality of the preceding
sentence, in case the Principal Party which is to be a party to a transaction of
the kind referred to in this Section 13 has a provision in any of its authorized
securities or in its articles of incorporation or bylaws or other instrument
governing its corporate affairs, which provision would have the effect of (i)
causing such Principal Party to issue, in connection with, or as a consequence
of, the consummation of a transaction of the kind referred to in this Section
13, Common Shares of such Principal Party at less than the then current per
share market price (determined pursuant to Section 11(d)) or securities
exercisable for or convertible into Common Shares of such Principal Party at
less than such then current market price (other than to holders of Rights
pursuant to this Section 13) or
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<PAGE>
(ii) providing for any special payment, tax or similar provisions in connection
with the issuance of Common Shares of such Principal Party pursuant to the
provisions of Section 13; then, in such event, the Company shall not consummate
any such transaction unless prior thereto the provision in question of such
Principal Party shall have been canceled, waived or amended so as to avoid any
of the effects referred to in clauses (i) and (ii) of this paragraph, or the
authorized securities shall have been redeemed, so that the applicable provision
will have no effect in connection with, or as a consequence of, the consummation
of the proposed transaction.
(e) Notwithstanding anything in this Agreement to the contrary, Section
13 shall not be applicable to a transaction described in clauses (i), (ii) or
(iii) 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
Common Share offered in such transaction is not less than the price per Common
Share paid to all holders of Common Shares whose shares were purchased pursuant
to such tender offer or exchange offer and (iii) the form of consideration being
offered to the remaining holders of Common Shares pursuant to such transaction
is the same as the form of consideration paid pursuant to such tender offer or
exchange offer. Upon consummation of any such transaction contemplated by this
Section 13(e), all Rights hereunder shall expire.
(f) Notwithstanding anything contained in this Agreement to the
contrary, upon the consummation of any merger or other acquisition transaction
involving the Company, pursuant to a merger or other acquisition agreement
between the Company and any Person (or one or more of such Person's Affiliates
or Associates), which agreement has been approved by the Board at a time other
than during a 180 Day Period (as defined in Section 23(c) of this Agreement) and
prior to any Person becoming an Acquiring Person or an Adverse Person, all
Rights hereunder shall expire.
(g) The provisions of this Section 13 shall similarly apply to
successive mergers, consolidations, statutory share exchanges or sale 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 Right Certificates which evidence fractional Rights. In lieu of
such fractional Rights, there shall be paid to the registered holders of the
Right 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. The closing price for any day shall be the last
sale price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the Nasdaq National Market or, if
the Rights are not listed or admitted to trading on the Nasdaq National Market,
as reported in the principal consolidated transaction reporting system with
respect to securities listed on the principal national securities exchange on
which the
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Rights are listed or admitted to trading or, if the Rights are not listed or
admitted to trading on any national securities exchange, the last quoted price
or, if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by NASDAQ or such other system then in use
or, if on any such date the Rights are not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a professional
market maker making a market in the Rights selected by the Board. If on any such
date no such market maker is making a market in the Rights, the fair value of
the Rights on such date as determined in good faith by the Board shall be used.
(b) The Company shall not be required to issue fractions of Preferred
Shares (other than fractions which 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 which are
integral multiples of one one-thousandth of a Preferred Share). Fractions of
Preferred Shares in integral multiples of one one-thousandth of a Preferred
Share may, at the election of the Company, be evidenced by depositary receipts
pursuant to an appropriate agreement between the Company and a depositary
selected by it; provided, however, that if the Company issues depositary
receipts pursuant to any such agreement, such agreement shall provide that the
holders of such depositary receipts shall have all the rights, privileges and
preferences to which they are entitled as Beneficial Owners of the Preferred
Shares represented by such depositary receipts. 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 Right Certificates at
the time such Rights are exercised as herein provided an amount in cash equal to
the same fraction of the current market value of one Preferred Share. For the
purposes of this Section 14(b), the current market value of a Preferred Share
shall be the closing price of a Preferred Share (as determined pursuant to
Section 11(d)) 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 such holder's right to receive any fractional Rights or any fractional
shares upon exercise of a Right (except as provided above).
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, are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares); and any registered holder of any Right 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 Right Certificate (or, prior to the
Distribution Date, of the Common Shares), may, in such holder's own behalf and
for such holder's own benefit, enforce, and may institute and maintain any suit,
action or proceeding against the Company to enforce, or otherwise act in respect
of, such holder's right to exercise the Rights evidenced by such Right
Certificate in the manner provided in such Right Certificate and in this
Agreement. Without limiting the foregoing or any remedies available to the
holders of Rights, it is specifically acknowledged that the holders of Rights
would not have an adequate remedy at law for any breach of this Agreement and
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.
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<PAGE>
Section 16. Agreement of Right 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 Right Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office of the Rights Agent, duly endorsed or accompanied by a
proper instrument of transfer;
(c) subject to Section 6(a) and Section 7(f), the Company and the
Rights Agent may deem and treat the Person in whose name the Right 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 Right 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;
and
(d) notwithstanding anything in this Agreement to the contrary, neither
the Company nor the Rights Agent shall have any liability to any holder of a
Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, the Company must use its best
efforts to have any such order, decree or ruling lifted or otherwise overturned
as soon as possible.
Section 17. Right Certificate Holder Not Deemed a Shareholder. No
holder, as such, of any Right 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 Right Certificate be construed to confer upon the holder of any Right
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), or to receive dividends or
subscription rights, or otherwise, until the Right or Rights evidenced by such
Right Certificate shall have been exercised in accordance with the provisions of
this Agreement.
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
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<PAGE>
execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability, or expense, incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection with the acceptance
and administration of this Agreement, including the costs and expenses of
defending against any claim of liability in the premises.
(b) The Rights Agent shall be protected and shall incur no liability
for, or in respect of any action taken, suffered or omitted by it in connection
with, its administration of this Agreement in reliance upon any Right
Certificate or certificate for the Preferred Shares (or for depositary receipts
evidencing fractional interests in 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.
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
stock transfer or 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 to this Agreement, provided that such corporation would be
eligible for appointment as a successor Rights Agent under the provisions of
Section 21. In case at the time such successor Rights Agent shall succeed to the
agency created by this Agreement any of the Right 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 Right
Certificates so countersigned; and in case at that time any of the Right
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Right 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
Right Certificates shall have the full force provided in the Right 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 Right Certificates shall have been countersigned but
not delivered, the Rights Agent may adopt the countersignature under its prior
name and deliver Right Certificates so countersigned; and in case at that time
any of the Right Certificates shall not have been countersigned, the Rights
Agent may countersign such Right Certificates either in its prior name or in its
changed name; and in all such cases such Right Certificates shall have the full
force provided in the Right Certificates and in this Agreement.
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<PAGE>
Section 20. Duties of Rights Agent. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Right 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 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 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
President, any Vice President, the Treasurer or the Secretary of the Company and
delivered to the Rights Agent; and such certificate shall be full authorization
to the Rights Agent 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 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 Right
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 of this
Agreement (except the due execution of this Agreement by the Rights Agent) or in
respect of the validity or execution of any Right 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 Right
Certificate; nor shall it be responsible for any change in the exercisability of
the Rights (including the Rights becoming void pursuant to Section 11(a)(ii)) or
any adjustment in the terms of the Rights (including the manner, method or
amount thereof) provided for in Section 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 Right Certificates
after receipt of actual notice from the Company stating that a change or
adjustment is required and specifying the manner and amount thereof); 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 Right 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,
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<PAGE>
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 President, any Vice President, the
Secretary or the Treasurer of the Company, and to apply to such officers for
advice or instructions in connection with its duties, and it shall not be liable
for any action taken or suffered to be taken by it in good faith in accordance
with instructions of any such officer or for any delay in acting while waiting
for those instructions.
(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.
Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days' notice in writing mailed to the Company and to each transfer agent
of the Common Shares and Preferred Shares by registered or certified mail, and
to the holders of the Right Certificates by first-class mail. The Company may
remove the Rights Agent or any successor Rights Agent upon 30 days' notice in
writing, mailed to the Rights Agent or successor Rights Agent, as the case may
be, and to each transfer agent of the Common Shares and Preferred Shares by
registered or certified mail, and to the holders of the Right Certificates by
first-class mail. If the Rights Agent shall resign or be removed or shall
otherwise become incapable of acting, the Company shall appoint a successor to
the Rights Agent. If the Company shall fail to make such appointment within a
period of 30 days after giving notice of such removal or after it has been
notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Right Certificate (who shall,
with such notice, submit such holder's Right Certificate for inspection by the
Company), then the registered holder of any Right Certificate may apply to any
court of competent jurisdiction for the appointment of a new Rights Agent. Any
successor
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<PAGE>
Rights Agent, whether appointed by the Company or by such a court, shall be (a)
a corporation organized and doing business under the laws of the United States
or of the State of Minnesota (or of any other state of the United States so long
as such corporation is authorized to do business as a banking institution in the
State of Minnesota), in good standing, having an office in the State of
Minnesota, which is authorized under such laws to exercise corporate trust or
stock transfer powers and is subject to supervision or examination by federal or
state authority and which has or is a subsidiary of a corporation which has at
the time of its appointment as Rights Agent a combined capital and surplus of at
least $100 million, or (b) an affiliate of a corporation described in clause (a)
of this sentence. After appointment, the successor Rights Agent shall be vested
with the same powers, rights, duties and responsibilities as if it had been
originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Shares and Preferred Shares, and mail a notice thereof in writing to
the registered holders of the Right 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 Right Certificates. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Right Certificates evidencing Rights in such form
as may be approved by its Board 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 Right 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, granted or awarded as of the
Distribution Date, or upon the exercise, conversion or exchange of securities
hereinafter issued by the Company, and (b) may, in any other case, if deemed
necessary or appropriate by the Board, issue Right Certificates representing the
appropriate number of rights in connection with such issuance or sale; provided,
however, that (i) no such Rights Certificate shall be issued if, and to the
extent that, the Company shall be advised by counsel that such issuance would
create a significant risk of material adverse tax consequences to the Company or
the Person to whom such Rights Certificate would be issued, and (ii) no such
Rights Certificate shall be issued if, and to the extent that, appropriate
adjustment shall otherwise have been made in lieu of the issuance thereof.
Section 23. Redemption.
(a) The Board of Directors of the Company may, at its option, at any
time prior to the earlier of (i) the Close of Business on the tenth day
following the Shares Acquisition Date (or, if the Shares Acquisition Date shall
have occurred prior to the Record Date, the Close of Business on the tenth day
following the Record Date), (ii) the Close of Business on the tenth Business Day
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<PAGE>
after a determination, pursuant to Section 11(a)(ii)(B), that a Person is an
Adverse Person, or (iii) the Final Expiration Date, redeem all but not less than
all the then outstanding Rights at a redemption price of $.001 per Right, as
such amount may be appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date hereof (such redemption
price being hereinafter referred to as the "Redemption Price"). Notwithstanding
anything contained in this Agreement to the contrary, the Rights shall not be
exercisable after the first occurrence of a Section 11(a)(ii) Event until such
time as the Company's right of redemption hereunder has expired. The Company
may, at its option, pay the Redemption Price in cash, shares of Common Stock
(based on the Current Market Price, as defined in Section 11(d)(i), of the
Common Stock at the time of redemption) or any other form of consideration
deemed appropriate by the Board; provided, however, that if the Company elects
to pay the Redemption Price in Common ------- Shares, the Company shall not be
required to issue any fractional Common Shares, and the number of shares
issuable to each holder of Rights shall be rounded down to the next whole
number. The redemption of the Rights by the Board may be made effective at such
time, on such basis and with such conditions as the Board in its sole discretion
may establish.
(b) Immediately upon the action of the Board ordering the redemption of
the Rights pursuant to paragraph (a) of this Section 23, 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 affect the validity of such redemption. Within ten days
after such action of the Board ordering the redemption of the Rights, the
Company shall mail a notice of redemption to all the holders of the then
outstanding Rights 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, and other than in connection with the purchase
of Common Shares prior to the Distribution Date.
(c) Notwithstanding the provisions of Section 23(a), in the event that
a majority of the Board is elected by shareholder action by written consent, or
is comprised of persons elected at a meeting of shareholders who were not
nominated by the Board in office immediately prior to such meeting, then for a
period of one hundred eighty days (180) days following the effectiveness of such
election (the "180 Day Period"), the Rights may not be redeemed.
Section 24. Exchange.
(a) The Board of Directors may, at its option, at any time after any
Person becomes an Acquiring Person, exchange all or part of the then outstanding
and exercisable Rights (which shall not include Rights that have become void
pursuant to the provisions of Section 7(e)), for Common Shares, with each Right
to be exchanged for such number of Common Shares as shall
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<PAGE>
equal the result obtained by dividing (i) the Purchase Price by (ii) the current
market price of the Common Shares (determined pursuant to Section 11(d)) (such
number of shares being hereinafter referred to as the "Exchange Ratio"). The
Exchange Ratio shall be appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date of this Agreement.
Notwithstanding the foregoing, the Board shall not be empowered to effect such
exchange at any time after any Person (other than an Exempt Person) 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 ordering the exchange of
any Rights pursuant to paragraph (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 Exchange Ratio. The Company shall promptly give public
notice of any such exchange; provided, however, that the failure to give, or any
defect in, such notice shall not affect the validity of such exchange. The
Company promptly shall mail a notice of any such exchange to all of the holders
of such Rights at their last addresses as they appear upon the registry books of
the Rights Agent. Any notice which is mailed in the manner herein provided shall
be deemed given, whether or not the holder receives the notice. Each such notice
of exchange will state the method by which the exchange of the Common 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 outstanding and exercisable Rights (other than Rights
which have become void pursuant to the provisions of Section 11(a)(ii)) held by
each holder of Rights.
(c) In the event that there shall not be sufficient Common Shares
authorized but unissued and unreserved to permit any exchange of Rights as
contemplated in accordance with this Section 24, the Company shall take all such
action as may be necessary to authorize additional Common Shares for issuance
upon exchange of the Rights. In the event the Company shall, after good faith
effort, be unable to take all such action as may be necessary to authorize such
additional Common Shares, the Company shall substitute, for each Common Share
that would otherwise be issuable upon exchange of a Right, a number of Preferred
Shares or fraction thereof such that the current per share market price of one
Preferred Share multiplied by such number or fraction is equal to the current
per share market price of one Common Share as of the date of issuance of such
Preferred Shares or fraction thereof.
(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, the Company shall pay to the registered
holders of the Right 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 market value of a whole Common Share. For the purposes of this
paragraph (d), the current market value of a whole Common Share shall be the
closing price of a Common Share (as determined pursuant to the second sentence
of Section 11(d)(i)) for the Trading Day immediately prior to the date of
exchange pursuant to this Section 24.
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Section 25. Notice of Certain Events.
(a) In case the Company shall propose (i) to pay any dividend payable
in stock of any class to the holders of its Preferred Shares or to make any
other distribution to the holders of its Preferred Shares (other than a regular
quarterly cash dividend), (ii) to offer to the holders of its Preferred Shares
rights or warrants to subscribe for or to purchase any additional Preferred
Shares or shares of stock of any class or any other securities, rights or
options, (iii) to effect any reclassification of its Preferred Shares (other
than a reclassification involving only the subdivision of outstanding Preferred
Shares), (iv) to effect any consolidation or merger into or with, or to effect
any sale or other transfer (or to permit one or more of its Subsidiaries to
effect any sale or other transfer), in one or more transactions, of 50% or more
of the assets or earning power of the Company and its Subsidiaries (taken as a
whole) to, any other Person, (v) to effect any statutory share exchange with the
outstanding Common Shares of the Company being exchanged for stock or other
securities of any other corporation or cash or other property, (vi) to effect
the liquidation, dissolution or winding up of the Company, or (vii) to declare
or pay any dividend on the Common Shares payable in Common Shares or to effect a
subdivision, combination or consolidation of the Common Shares (by
reclassification or otherwise than by payment of dividends in Common Shares),
then, in each such case, the Company shall give to each holder of a Right
Certificate, in accordance with Section 26, a notice of such proposed action,
which shall specify the record date for the purposes of such stock dividend, or
distribution of rights or warrants, or the date on which such reclassification,
consolidation, merger, sale, transfer, liquidation, dissolution or winding up is
to take place and the date of participation therein by the holders of the Common
Shares and/or Preferred Shares, if any such date is to be fixed, and such notice
shall be so given in the case of any action covered by clause (i) or (ii) of
this paragraph at least ten days prior to the record date for determining
holders of the Preferred Shares for purposes of such action, and in the case of
any such other action, at least ten days prior to the date of the taking of such
proposed action or the date of participation therein by the holders of the
Common Shares and/or Preferred Shares, whichever shall be the earlier.
(b) In case the event set forth in Section 11(a)(ii) shall occur, then
the Company shall as soon as practicable thereafter give to each holder of a
Right Certificate, in accordance with Section 26, a notice of the occurrence of
such event, which notice shall describe such event and the consequences of such
event to holders of Rights under Section 11(a)(ii).
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 Right 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:
VirtualFund.com, Inc.
7090 Shady Oak Road
Eden Prairie, Minnesota 55344
Attn: General Counsel
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<PAGE>
Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Right
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:
Norwest Bank Minnesota, N.A.
Attention: Account Management
161 North Concord Exchange
South St. Paul, Minnesota 55075-1139
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right 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
and subject to the penultimate sentence of this Section 27, the Company and the
Rights Agent shall, if the Company so directs, supplement or amend any
provisions of this Agreement without the approval of any holders of certificates
representing shares of Common Stock. From and after the Distribution Date, the
Company and the Rights Agent shall, if the Company so directs, supplement or
amend this Agreement without the approval of any holders of Rights Certificates
in order (a) to cure any ambiguity, (b) to correct or supplement or amend any
provision contained herein which may be defective or inconsistent with any other
provisions herein, (c) to shorten or lengthen any time period hereunder or (d)
to change or supplement the provisions hereunder in any manner which the Company
may deem necessary or desirable and which shall not adversely affect the
interests of the holders of Rights Certificates (other than an Acquiring Person,
an Adverse Person or an Affiliate or Associate of any such Person).
Notwithstanding anything contained in this Agreement to the contrary, during the
pendency of any 180 Day Period, no supplement or amendment shall be made to this
Agreement, other than an amendment or supplement described in clause (a) or (b)
of the second sentence of this Section 27. Upon delivery of a certificate from
an appropriate officer of the Company which states that the proposed supplement
or amendment is in compliance with the terms of this Section 27, the Rights
Agent shall execute such supplement or amendment. 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. 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 Right 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
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<PAGE>
and exclusive benefit of the Company, the Rights Agent and the registered
holders of the Right Certificates (and, prior to the Distribution Date, the
Common Shares).
Section 30. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
Section 31. Governing Law. This Agreement and each Right Certificate
issued hereunder shall be deemed to be a contract made under the laws of the
State of Minnesota 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 32. 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 33. 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 of this
Agreement.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, all as of the day and year first above written.
VIRTUALFUND.COM, INC.
By /s/ Melvin L. Masters
--------------------------------------
Melvin L. Masters
President and Chief Executive Officer
NORWEST BANK MINNESOTA, N.A.
By /s/ John Baker
--------------------------------------
Its Account Manager
----------------------------------
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EXHIBIT A
FORM
OF
CERTIFICATE OF DESIGNATION
OF
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
OF
VIRTUALFUND.COM, INC.
----------
Pursuant to Section 302A.401 of the
Minnesota Business Corporations Act
of the State of Minnesota
----------
We, Melvin L. Masters, Chief Executive Officer, and James Horstmann,
Chief Financial Officer, of VirtualFund.com, Inc., a corporation organized and
existing under the Business Corporations Act of the State of Minnesota (the
"Corporation"), in accordance with the provisions thereof, DO HEREBY CERTIFY:
That pursuant to the authority vested in the Board of Directors by the
Articles of Incorporation of the Corporation, the said Board of Directors on
October 8, 1998, adopted the following resolution creating a series of one
hundred thousand (100,000) shares of Preferred Stock designated as Series A
Junior Participating Preferred Stock:
RESOLVED, that pursuant to the authority vested in the Board of
Directors of this Corporation in accordance with the provisions of its Articles
of Incorporation, a series of Preferred Stock of the Corporation be and it
hereby is created, and that the designation and amount thereof and the voting
powers, preferences and relative, participation, optional and other special
rights of the shares of such series, and the qualifications, limitation or
restrictions thereof are as follows:
Section 1. Designation and Amount. The shares of such series shall be
designated as Series A Junior Participating Preferred Stock, par value $.01 per
share (the "Series A Junior Preferred Shares"), and the number of shares
constituting such series shall be one hundred thousand (100,000).
Section 2. Dividends and Distributions.
(a) Subject to the prior and superior rights of the holders of any
shares of any series of Preferred Stock ranking prior and superior to Series A
Junior Preferred Shares with respect to
A-1
<PAGE>
dividends, the holders of Series A Junior Preferred Shares shall be entitled to
receive, when, as and if declared by the Board of Directors out of funds legally
available for the purpose, quarterly dividends payable in cash on the first day
of January, March, July and October in each year (each such date being referred
to herein as a "Quarterly Dividend Payment Date," commencing on the first
Quarterly Dividend Payment Date after the first issuance of a share or fraction
of a Series A Junior Preferred Share, 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, par value $.01 per
share, of the Corporation (the "Common Stock") since the immediately preceding
Quarterly Dividend Payment Date, or, with respect to the first Quarterly
Dividend Payment Date, since the first issuance of any share or fraction of a
Series A Junior Preferred Share. In the event the Corporation shall at any time
after October 8, 1998 (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
Series A Junior Preferred Shares were entitled immediately prior to such event
under clause (b) of the preceding sentence shall be adjusted by multiplying such
amount by a fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
(b) The Corporation shall declare a dividend or distribution on the
Series A Junior Preferred Shares 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
Series A Junior Preferred Shares from the Quarterly Dividend Payment Date next
preceding the date of issue of such Series A Junior Preferred Shares, unless the
date of issue of such shares is prior to the record date for the first Quarterly
Dividend Payment Date, in which case dividends on such shares shall begin to
accrue from the date of issue of such shares, or unless the date of issue is a
Quarterly Dividend Payment Date or is a date after the record date for the
determination of holders of Series A Junior Preferred Shares 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 Series A Junior Preferred Shares 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 Series A Junior Preferred Shares 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.
A-2
<PAGE>
Section 3. Voting Rights. In addition to any other voting rights
required by law, the holders of Series A Junior Preferred Shares shall have the
following voting rights:
(a) Subject to the provision for adjustment hereinafter set forth, each
Series A Junior Preferred Share shall entitle the holder thereof to 1,000 votes
on all matters submitted to a vote of the stockholders of the Corporation. In
the event the Corporation shall at any time after the Rights Declaration Date
(i) declare any dividend on Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding shares of Common Stock, or (iii) combine the
outstanding shares of Common Stock into a smaller number of shares, then in each
such case the number of votes per share to which holders of Series A Junior
Preferred Shares 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) If, on the date used to determine stockholders of record for any
meeting of stockholders for the election of directors, a default in dividends on
the Series A Junior Preferred Shares shall exist, the number of directors
constituting the Board of Directors of the Corporation shall be increased by
two, and the holders of the Series A Junior Preferred Shares shall have the
right at such meeting, voting together as a single class, to elect two directors
of the Corporation to fill such newly created directorships. Each director
elected by the holders of Series A Junior Preferred Shares (herein called a
"Series A Preferred Director") shall continue to serve as such director for the
full term for which he shall have been elected, notwithstanding that prior to
the end of such term a default in dividends shall cease to exist. Any Series A
Preferred Director may be removed by, and shall not be removed except by, the
vote of the holders of record of the outstanding Series A Junior Preferred
Shares, voting together as a single class, at a meeting of the stockholders, or
of the holders of Series A Junior Preferred Shares called for such purpose.
Thereafter, so long as a default in dividends on the Series A Preferred Shares
shall exist (i) any vacancy in the office of a Series A Preferred Director may
be filled (except as provided in the following clause (ii)) by an instrument in
writing signed by the remaining Series A Preferred Director and filed with the
Corporation and (ii) in the case of the removal of any Series A Preferred
Director, the vacancy may be filled by the vote of the holders of the
outstanding Series A Junior Preferred Shares, voting together as a class, at the
same meeting at which such removal shall be voted. Each director appointed as
aforesaid by the remaining Series A Preferred Director shall be deemed, for all
purposes hereof, to be a Series A Preferred Director. Whenever the term of
office of the Series A Preferred Directors shall end and no default in dividends
on the Series A Junior Preferred Shares shall exist, the number of directors
constituting the Board of Directors of the Corporation shall be reduced by two.
For the purposes of this Section 3(b), a "default in dividends" on the Series A
Junior Preferred Shares shall be deemed to have occurred whenever there shall be
an arrearage in the payment of any dividends to which the holders of the Series
A Junior Preferred Shares are entitled to receive, whether or not any such
dividends have been declared by the Board of Directors, for six consecutive
quarters, and, having so occurred, such default shall be deemed to exist
thereafter until, but only until, all accrued dividends on all shares of Series
A Junior Preferred Shares then outstanding shall have been paid through the last
Quarterly Dividend Payment Date.
A-3
<PAGE>
At any time when such right to elect directors separately as a class
shall have so vested, the Corporation may, and upon the written request of the
holders of record of not less than 20% of the then outstanding total number of
the Series A Junior Preferred Shares shall, call a special meeting of holders of
such Series A Junior Preferred Shares for the election of directors. In the case
of such a written request, such special meeting shall be held within 90 days
after the delivery of such request, and, in either case, at the place and upon
the notice provided by law and in the Bylaws of the Corporation; provided that
the Corporation shall not be required to call such a special meeting if such
request is received less than 120 days before the date fixed for the next
ensuing annual or special meeting of stockholders of the Corporation. After the
number of directors of the Corporation shall have been increased by two as
hereinabove provided, the number as so increased may thereafter be further
increased or decreased in such manner as may be permitted by the Articles of
Incorporation or By-laws, provided that no such action shall impair the right of
the holders of Series A Junior Preferred Shares to elect and to be represented
by two directors as herein provided.
(c) Except as otherwise provided herein, in the Articles of
Incorporation of the Corporation or by law, the holders of Series A Junior
Preferred Shares and the holders of Common Stock (and the holders of shares of
any other series or class entitled to vote thereon) shall vote together as one
class on all matters submitted to a vote of stockholders of the Corporation.
Section 4. Certain Restrictions.
(a) Whenever any dividends or other distributions payable on the Series
A Junior Preferred shares as provided in Section 2 are in arrears, thereafter
and until all accrued and unpaid dividends and distributions, whether or not
declared, on Series A Junior Preferred Shares outstanding shall have been paid
in full, the Corporation shall not:
(i) declare or pay dividends on, make any other distributions
on, or redeem or purchase or otherwise acquire for consideration any
share ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Junior Preferred Shares;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the
Series A Junior Preferred Shares, except dividends paid ratably on the
Series A Junior Preferred Shares and all such parity stock on which
dividends are payable or in arrears in proportion to the total amounts
to which the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the
Series A Junior Preferred Shares, provided that the Corporation may at
any time redeem, purchase or otherwise acquire shares of any such
parity stock
A-4
<PAGE>
in exchange for shares of any stock of the Corporation ranking junior
(either as to dividends or upon dissolution, liquidation or winding up)
to the Series A Junior Preferred Shares; or
(iv) purchase or otherwise acquire for consideration any
Series A Junior Preferred Shares, except in accordance with a purchase
offer made in writing or by publication (as determined by the Board of
Directors) to all holders of such shares upon such terms as the Board
of Directors, after consideration of the respective annual dividend
rates and other relative rights and preferences of the respective
series and classes, shall determine in good faith will result in fair
and equitable treatment among the respective series or classes.
(b) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (a) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any Series A Junior Preferred Shares
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 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.
Section 6. Liquidation, Dissolution or Winding Up. In the event of any
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, the holders of Series A Junior Preferred Shares shall be entitled
to receive the greater of (a) $1,000.00 per share, plus accrued dividends to the
date of distribution, whether or not earned or declared, or (b) an amount per
share, subject to the provision for adjustment hereinafter set forth, equal to
1,000 times the aggregate amount to be distributed per share to holders of
Common Stock. 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 shares of Common Stock, or (iii)
combine the outstanding shares of Common Stock into a smaller number of shares,
then in each such case the amount to which holders of Series A Junior Preferred
Shares were entitled immediately prior to such event pursuant to clause (b) of
the preceding sentence shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
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 Series A
Junior Preferred Shares 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
A-5
<PAGE>
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 shares of
Common Stock, or (iii) combine the outstanding shares of 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 Series A Junior
Preferred Shares 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 Series A Junior Preferred Shares shall
not be redeemable.
Section 9. Ranking. The Series A Junior 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. Fractional Shares. Series A Junior Preferred Shares may be
issued in fractions of a share which shall entitle the holder, in proportion to
such holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series A Junior Preferred Shares.
Section 11. Amendment. The Articles of Incorporation of the Corporation
shall not be further amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series A Junior
Preferred Shares so as to affect them adversely without the affirmative vote of
the holders of a majority or more of the outstanding Series A Junior Preferred
Shares, voting separately as a class.
IN WITNESS WHEREOF, the undersigned have executed and subscribed this
Certificate and do affirm the foregoing as true under penalties of perjury this
___ day of October, 1998.
VIRTUALFUND.COM, INC.
By:
-----------------------------------
Melvin L. Masters
Chief Executive Officer and President
ATTEST:
By:
-------------------------------
James Horstmann
Chief Financial Officer
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<PAGE>
Exhibit B
FORM OF RIGHT CERTIFICATES
Certificate No. R-______ _________________ Rights
NOT EXERCISABLE AFTER OCTOBER 9, 2008 OR EARLIER IF REDEMPTION OR EXCHANGE
OCCURS. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.001 PER RIGHT (SUBJECT TO
ADJUSTMENT) AND TO EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.
UNDER CERTAIN CIRCUMSTANCES SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS
BENEFICIALLY OWNED BY A PERSON WHO IS, WAS OR BECOMES AN ACQUIRING PERSON, AN
ADVERSE PERSON OR AN AFFILIATE OR ASSOCIATE OF SUCH PERSON (AS SUCH TERMS ARE
DEFINED IN THE RIGHTS AGREEMENT) AND SUBSEQUENT HOLDERS OF SUCH RIGHTS MAY
BECOME NULL AND VOID.
RIGHT CERTIFICATE
VIRTUALFUND.COM, INC.
This certifies that __________________________, or registered assigns,
is the registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Rights Agreement dated effective as of October 9, 1998 (the "Rights
Agreement"), between VirtualFund.com, Inc., a Minnesota corporation (the
"Company"), and Norwest Bank Minnesota, N.A. (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., Minneapolis time, on
October 9, 2008 at the office or offices of the Rights Agent designated for such
purpose, or of its successor as Rights Agent, one one-thousandth of a fully paid
non-assessable share of Series A Junior Participating Preferred Stock, par value
$.01 per share (the "Preferred Shares"), of the Company, at a purchase price of
$22.00 (the "Purchase Price"), upon presentation and surrender of this Right
Certificate with the Form of Election to Purchase duly executed. The number of
Rights evidenced by this Right Certificate (and the number of one
one-thousandths of a Preferred Share which may be purchased upon exercise
hereof) set forth above, and the Purchase Price set forth above, are the number
and Purchase Price as of October 30, 1998 based on the Preferred Shares as
constituted at such date. As provided in the Rights Agreement, the Purchase
Price and the number of one one-thousandths of a Preferred Share which may be
purchased upon the exercise of the Rights evidenced by this Right Certificate
are subject to modification and adjustment upon the happening of certain events.
B-1
<PAGE>
This Right 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 Right Certificates. Copies of
the Rights Agreement are on file at the principal executive offices of the
Company and the above-mentioned office or offices of the Rights Agent and will
be mailed without charge by the Company or the Rights Agent to the holder of
this certificate promptly following receipt by the Company or the Rights Agent
of a written request therefor.
From and after the occurrence of a Section 11(a)(ii) Event (as such
term is defined in the Rights Agreement), any Rights that are or were acquired
or beneficially owned by any Acquiring Person or Adverse Person (or any
Associate or Affiliate of such Person) (as such terms are defined in the Rights
Agreement) shall be void and any holder of such Rights shall thereafter have no
right to exercise such Rights under any provision of this Agreement.
This Right Certificate, with or without other Right Certificates, upon
surrender at the office or offices of the Rights Agent designated for such
purpose, may be exchanged for another Right Certificate or Right Certificates of
like tenor and date evidencing Rights entitling the holder to purchase a like
aggregate number of Preferred Shares as the Rights evidenced by the Right
Certificate or Right Certificates surrendered shall have entitled such holder to
purchase. If this Right Certificate shall be exercised in part, the holder shall
be entitled to receive upon surrender hereof another Right Certificate or Right
Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced
by this certificate (a) may, but are not required to, be redeemed by the Company
at a redemption price of $.001 per Right, subject to adjustment as provided in
the Rights Agreement, and (b) may, but are not required to, be exchanged by the
Company in whole or in part for Common Shares. Under certain circumstances set
forth in the Rights Agreement, however, the Rights may not be redeemed for a
period of one hundred eighty (180) days.
No fractional Preferred Shares will be issued upon the exercise of any
Right or Rights evidenced hereby (other than fractions which are integral
multiples of one one-thousandth of a Preferred Share, which may, at the election
of the Company, be evidenced by depositary receipts), but in lieu thereof a cash
payment will be made, as provided in the Rights Agreement.
No holder of this Right Certificate 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
B-2
<PAGE>
otherwise, until the Right or Rights evidenced by this Right Certificate shall
have been exercised as provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the manual or facsimile signature of the proper officer of the
Company.
Dated: October ___, 1998
VIRTUALFUND.COM, INC.
By
---------------------------------
Melvin L. Masters
Its Chief Executive Officer and President
Countersigned for purposes
of authentication only:
NORWEST BANK MINNESOTA, N.A.
By
--------------------------------
Authorized Signature
B-3
<PAGE>
Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate.)
FOR VALUE RECEIVED, ___________ hereby sells, assigns and
transfers unto ______________________ (print name of transferee)
___________________ (print address of transferee) this Right Certificate,
together with all right, title and interest therein, and does hereby irrevocably
constitute and appoint _______________ Attorney, to transfer the within Right
Certificate on the books of the within-named Company, with full power of
substitution.
Please insert social security
number, taxpayer identification
number or other identifying number:
-------------------------------------------
Dated:
------------------------
Signature
Signature Guaranteed:
---------------------------------------------------------
The signature(s) should be guaranteed by an eligible guarantor
institution (banks, stockbrokers, savings and loan associations and credit
unions with membership in an approved signature guarantee medallion program),
pursuant to S.E.C. Rule 17Ad-15.
B-4
<PAGE>
Form of Reverse Side of Right Certificate Continued
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to
exercise the Right Certificate)
To: [Name]
The undersigned hereby irrevocably elects to exercise ________ Rights
represented by this Right Certificate to purchase the Preferred Shares issuable
upon the exercise of such Rights and requests that certificates for such
Preferred Shares be issued in the name of:
Please insert social security
number, taxpayer identification
number or other identifying number:
---------------------------------------------
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security number,
taxpayer identification number
or other identifying number:
---------------------------------------------
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
Dated:
----------------------------
----------------------------
Signature
Signature Guaranteed:
---------------------------------------------------------
The signature(s) should be guaranteed by an eligible guarantor
institution (banks, stockbrokers, savings and loan associations and credit
unions with membership in an approved signature guarantee medallion program),
pursuant to S.E.C. Rule 17Ad-15.
B-5
<PAGE>
Exhibit C
VIRTUALFUND.COM, INC.
SUMMARY OF RIGHTS AGREEMENT
On October 8, 1998, the Board of Directors of VirtualFund.com, Inc.
(the "Company"), declared a dividend distribution of one preferred share
purchase right (a "Right") for each outstanding share of the Company's Common
Stock, par value $.01 per share (the "Common Shares"), payable to shareholders
of record at the close of business on October 30, 1998 (the "Record Date"). Each
Right entitles the registered holder to purchase from the Company at any time
following the Distribution Date (as defined below) one one-hundredth of a share
(a "Preferred Share Fraction") of the Company's Series A Junior Participating
Preferred Stock, par value $.01 per share (the "Preferred Shares"), at a
purchase price of $22.00 per Preferred Share Fraction (the "Purchase Price"),
subject to adjustment. The description and terms of the Rights are set forth in
a Rights Agreement (the "Rights Agreement") dated effective as of October 9,
1998, between the Company and Norwest Bank Minnesota, N.A., as Rights Agent (the
"Rights Agent").
As of October 1, 1998, the Company had 15,778,866 Common Shares
outstanding. Each outstanding Common Share on October 30, 1998 will receive one
Right. So long as the Rights Agreement remains in effect and the Rights continue
to remain attached to and trade with the Common Shares, the Company will issue
one Right for each Common Share issued between the Record Date and any
Distribution Date (as defined below), so that all outstanding shares will have
attached Rights. Assuming 15,778,866 shares of Common Stock are outstanding on
the Record Date, the Company will have initially reserved for issuance upon
exercise of the Rights 100,000 Preferred Shares.
Until the Distribution Date (as defined below), the Rights will be
evidenced, with respect to any of the Common Share certificates outstanding as
of the Record Date, by such Common Share certificates registered in the names of
the holders on the Record Date, and no separate Rights Certificates will be
distributed. The Rights will be transferred with and only with such Common Share
Certificates. The Rights will separate from the Common Shares and will be
distributed to the holders thereof in the form of a Rights Certificate on the
"Distribution Date," which shall be the first to occur of the following: (i) ten
days after the first date of a public announcement that a Person, individually
or together with a group of Affiliates or Associates of such Person, but not
including any Person exempted under the Rights Agreement (an "Exempt Person"),
has become the beneficial owner of 15% (20% for certain shareholders specified
in the Rights Agreement) or more of the outstanding Common Shares, other than as
a result of a Permitted Offer, as defined below (an "Acquiring Person") (the
"Shares Acquisition Date"), (ii) the tenth day (or such later date as the Board
of Directors may determine) following the commencement by any Person, or the
first public announcement of the intention of any Person to commence, a tender
or exchange offer that would result in any Person becoming an Acquiring Person,
or (iii) the tenth day after a determination by the Board of Directors that a
Person is an
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<PAGE>
Adverse Person, which shall occur upon a finding that such Person, alone or
together with its Affiliates and Associates, has become the beneficial owner of
a substantial amount of Common Shares (which amount shall in no event be less
than 10% of the Common Shares then outstanding) and (a) such beneficial
ownership by such Person is intended to cause the Company to repurchase the
Common Shares beneficially owned by such Person or to cause pressure on the
Company to take action or enter into a transaction or series of transactions
intended to provide such Person with short-term financial gain under
circumstances where the Board of Directors determines that the best long-term
interests of the Company and its shareholders would not be served by taking such
action or entering into such transaction or series of transactions at that time
or (b) such beneficial ownership is causing or reasonably likely to cause a
material adverse impact (including, but not limited to, impairment of
relationships with customers or impairment of the Company's ability to maintain
its competitive position).
A "Permitted Offer" means a tender or exchange offer which is for all
outstanding Common Shares at a price and on terms determined, prior to the
purchase of shares under such tender or exchange offer, by the Board of
Directors, to be (i) fair to shareholders of the Company and (ii) in the best
interests of the Company, its shareholders, and other Persons with whom, and the
communities in which, the Company does business, and which the Board of
Directors determines to recommend to the shareholders of the Company.
Until the Distribution Date (or the Redemption or Final Expiration
Dates, as such terms are defined below, if either date is earlier than the
Distribution Date), (i) new Common Share certificates issued after October 30,
1998 will contain a legend incorporating the Rights Agreement by reference and
(ii) the surrender for transfer of any certificate for Common Shares outstanding
will also constitute the transfer of the Rights associated with the Common
Shares represented by such certificate.
The Rights are not exercisable until the Distribution Date and will
expire at the close of business on October 9, 2008 (the "Final Expiration
Date"), unless earlier redeemed or exchanged by the Company as described below.
As soon as practical after the Distribution Date, Rights Certificates
will be mailed to each record holder of Common Shares as of the close of
business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights. All Common Shares issued prior to
the earlier of the Distribution Date and the Expiration Date will be issued with
Rights. The Company may, if deemed necessary and appropriate by the Board of
Directors, issue Rights Certificates for an appropriate number of Rights in
connection with any Common Shares issued after the Distribution Date, but prior
to the Redemption or Final Expiration Dates, upon the exercise of employee stock
options, issuances under other employee stock benefit plans or the conversion of
convertible securities issued by the Company.
The Purchase Price, the number of Preferred Shares Fractions or other
securities or property issuable upon exercise of the Rights, and the number of
Rights outstanding, are subject to adjustment from time to time to prevent
dilution: (i) in the event of a stock dividend on, or a subdivision, split,
combination or reclassification of, the Preferred Shares, (ii) upon the grant to
C-2
<PAGE>
holders of the Preferred Shares of certain rights, options or warrants to
subscribe for or purchase Preferred Shares or convertible securities at less
than the then current market price for the Preferred Shares or (iii) upon the
distribution to holders of the Preferred Shares of evidence of indebtedness or
assets (excluding regular periodic cash dividends or dividends payable in
Preferred Shares) or of subscription rights or warrants (other than those
described in clause (ii) of this paragraph). With certain exceptions, no
adjustment in the Purchase Price will be required until cumulative adjustments
require an adjustment of at least 1% in the Purchase Price.
In the event that (i) any Person, with certain exceptions, becomes an
Acquiring Person, other than pursuant to a Permitted Offering or (ii) the Board
of Directors determines that a Person is an Adverse Person, then each holder of
a Right, with certain exceptions, will thereafter have the right to receive,
upon exercise at the then current Purchase Price and in lieu of Preferred
Shares, such number of Common Shares having a market value equal to two times
the exercise price of the Right. The events set forth in this paragraph are
referred to as the "Section 11(a)(ii) Events."
In the event that, at any time following the Shares Acquisition Date,
or during the pendency of a 180 Day Period (as defined below), other than
pursuant to a Permitted Offer (i) the Company is acquired in certain mergers or
other business combination transactions in which the Company is not the
surviving corporation or the Common Shares are changed or exchanged or (ii) 50%
or more of the Company's assets or earning power is sold or transferred, each
holder of a Right, with certain exceptions, shall thereafter have the right to
receive, upon exercise at the then current Purchase Price and in lieu of
Preferred Shares, such number of shares of common stock of the acquiring company
having a market value equal to two times the exercise price of the Right. The
events set forth in this paragraph are referred to as "Section 13 Events," and
the Section 11(a)(ii) Event and the Section 13 Events are collectively referred
to as the "Triggering Events."
At any time after the occurrence of a Section 11(a)(ii) Event (subject
to certain exceptions) and prior to the acquisition of such Person of 50% or
more of the outstanding Common Shares, the Board of Directors may exchange all
or a part of the then outstanding Rights (other than Rights which have become
void), for Common Shares at an exchange ratio per Right equal to the result
obtained by dividing the Purchase Price by the current per share market price of
the Common Share (subject to adjustment).
The Company will not be required to issue fractions of Preferred Shares
(other than fractions which are integral multiples of Preferred Share Fractions)
and, in lieu of such fractions of Preferred Shares, an adjustment in cash will
be made based on the closing price of a Preferred Share on the last trading date
prior to the date of exercise.
In general, the Board of Directors may, at any time prior to the first
to occur of (i) ten days after a Shares Acquisition Date, (ii) ten days after a
Person is determined to be an Adverse Person or (iii) the Final Expiration Date,
redeem the Rights in whole, but not in part, at a price of $.001 per Right
(payable in cash, stock or other consideration deemed appropriate by the Board
of Directors), subject to appropriate adjustment (the "Redemption Price"). The
redemption of
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the Rights may be made effective at such time, on such basis and with such
conditions as the Board in its sole discretion may establish. Notwithstanding
anything to the contrary, however, in the event that a majority of the Board is
elected by written consent of the shareholders, or is comprised of persons
elected at a shareholder meeting who were not nominated by the Board in office
immediately prior to such meeting, then for a period of 180 days following the
effectiveness of such election (the "180 Day Period"), the Rights may not be
redeemed. Immediately upon redemption of the Rights, the Rights will terminate
and the only right of the holders of the Rights will be to receive the
Redemption Price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including, without limitation, the
rights to vote, receive notice, and receive dividends or subscription rights.
The creation of the Rights should not be taxable to the shareholders.
Shareholders may, however, depending upon the circumstances, recognize taxable
income in the event that the holder of the Right transfers or delivers the Right
Certificate to a Person other than that of the registered holder of the Right
Certificate.
Any of the provisions of the Rights Agreement, including the
definitions of Acquiring Person, Adverse Person or the Purchase Price, may be
amended by the Board of Directors prior to the Distribution Date. After the
Distribution Date, the provisions of the Rights Agreement may be amended by the
Board only to cure any ambiguity, to make changes which do not adversely affect
the interests of holders of Rights (excluding the interests of any Acquiring
Person, Adverse Person or an Affiliate or Associate of any such Person), or to
shorten or lengthen any time period under the Rights Agreement. Notwithstanding
anything to the contrary, however, during the pendency of any 180 Day Period no
supplement or amendment shall be made to the Rights Agreement, other than to
cure any ambiguity or to correct any provision inconsistent with any other
provision of the Rights Agreement.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
on terms not approved by the Company's Board of Directors. The Rights should not
interfere with any merger or other business combination approved by the Board of
Directors of the Company because the Board may, at its option, either (i)
declare the transaction to be a "Permitted Offer," or (b) redeem the then
outstanding Rights at the Redemption Price, if possible.
A copy of the Rights Agreement will be filed with the Securities and
Exchange Commission as an exhibit to a Registration Statement on Form 8-A. A
copy of the Rights Agreement is available free of charge from the Company. This
summary description of the Rights does not purport to be a complete and is
qualified in its entirety by reference to the Rights Agreement.
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