SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 22, 1999
WHOLE FOODS MARKET, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Texas 0-19797 74-1989366
(State or other jurisdiction (Commission File Number) (IRS Employer Identification No.)
of incorporation)
</TABLE>
601 North Lamar, #300
Austin, Texas 78703
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 512/477-4455
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Item 5. Other Events
On September 22, 1999, the Board of Directors of Whole Foods Market, Inc.
(the "Company") declared a dividend of one right to purchase preferred stock
("Right") for each outstanding share of the Company's Common Stock, with no par
value ("Common Stock"), to shareholders of record at the close of business on
October 4, 1999. Each Right entitles the registered holder to purchase from the
Company a unit consisting of one one-thousandth of a share (a "Fractional
Share") of Series A Junior Participating Preferred Stock, par value $.01 per
share (the "Preferred Stock"), at a purchase price of $225 per Fractional Share,
subject to adjustment (the "Purchase Price"). The description and terms of the
Rights are set forth in a Rights Agreement dated as of September 22, 1999 as it
may from time to time be supplemented or amended (the "Rights Agreement")
between the Company and Securities Transfer Corporation, as Rights Agent.
Initially, the Rights will be attached to all certificates representing
outstanding shares of Common Stock, and no separate certificates for the Rights
("Rights Certificates") will be distributed. The Rights will separate from the
Common Stock and a "Distribution Date" will occur, with certain exceptions, upon
the earlier of (i) ten days following a public announcement that a person or
group of affiliated or associated persons (an "Acquiring Person") has acquired,
or obtained the right to acquire, beneficial ownership of 15% or more of the
outstanding shares of Common Stock (the date of the announcement being the
"Stock Acquisition Date"), or (ii) ten business days following the commencement
of a tender offer or exchange offer that would result in a person's becoming an
Acquiring Person. In certain circumstances, the Distribution Date may be
deferred by the Board of Directors. Certain inadvertent acquisitions will not
result in a person's becoming an Acquiring Person if the person promptly divests
itself of sufficient Common Stock. If at the time of the adoption of the Rights
Agreement, any person or group of affiliated or associated persons is the
beneficial owner of 15% or more of the outstanding shares of Common Stock, such
person shall not become an Acquiring Person unless and until certain increases
in such person's beneficial ownership occur or are deemed to occur. Until the
Distribution Date, (a) the Rights will be evidenced by the Common Stock
certificates (together with a copy of the Summary of Rights included as an
exhibit to the Rights Agreement or bearing the notation referred to below) and
will be transferred with and only with such Common Stock certificates, (b) new
Common Stock certificates issued after October 4, 1999 will contain a notation
incorporating the Rights Agreement by reference and (c) the surrender for
transfer of any certificate for Common Stock (with or without a copy of the
Summary of Rights) will also constitute the transfer of the Rights associated
with the Common Stock represented by such certificate.
The Rights are not exercisable until the Distribution Date and will expire
at the close of business on September 22, 2009, unless earlier redeemed or
exchanged by the Company as described below.
As soon as practicable after the Distribution Date, Rights Certificates
will be mailed to holders of record of Common Stock as of the close of business
on the Distribution Date and, from and after the Distribution Date, the separate
Rights Certificates alone will represent the Rights. All shares of Common Stock
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issued prior to the Distribution Date will be issued with Rights. Shares of
Common Stock issued after the Distribution Date in connection with certain
employee benefit plans or upon conversion of certain securities will be issued
with Rights. Except as otherwise determined by the Board of Directors, no other
shares of Common Stock issued after the Distribution Date will be issued with
Rights.
In the event (a "Flip-In Event") that a person becomes an Acquiring Person
(except pursuant to a tender or exchange offer for all outstanding shares of
Common Stock at a price and on terms that the Board of Directors (during such
time as a majority thereof is composed of directors independent of the offeror
or any Acquiring Person) determines to be fair to and otherwise in the best
interests of the Company and its shareholders (a "Permitted Offer")), each
holder of a Right will thereafter have the right to receive, upon exercise of
such Right, a number of shares of Common Stock (or, in certain circumstances,
cash, property or other securities of the Company) having a Current Market Price
(as defined in the Rights Agreement) equal to two times the exercise price of
the Right. Notwithstanding the foregoing, following the occurrence of any
Triggering Event, all Rights that are, or (under certain circumstances specified
in the Rights Agreement) were, beneficially owned by or transferred to an
Acquiring Person (or by certain related parties) will be null and void in the
circumstances set forth in the Rights Agreement. However, Rights are not
exercisable following the occurrence of any Flip-In Event until such time as the
Rights are no longer redeemable by the Company as set forth below.
In the event (a "Flip-Over Event") that, at any time from and after the
time an Acquiring Person becomes such, (i) the Company is acquired in a merger
or other business combination transaction (other than certain mergers that
follow a Permitted Offer), or (ii) 50% or more of the Company's assets or
earning power is sold or transferred, each holder of a Right (except Rights that
are voided as set forth above) shall thereafter have the right to receive, upon
exercise, a number of shares of common stock of the acquiring company having a
Current Market Price equal to two times the exercise price of the Right. Flip-In
Events and Flip-Over Events are collectively referred to as "Triggering Events."
The number of outstanding Rights associated with a share of Common Stock,
or the number of Fractional Shares of Preferred Stock issuable upon exercise of
a Right and the Purchase Price, are subject to adjustment in the event of a
stock dividend on, or a subdivision, combination or reclassification of, the
Common Stock occurring prior to the Distribution Date. The Purchase Price
payable, and the number of Fractional Shares of Preferred Stock or other
securities or property issuable, upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution in the event of certain
transactions affecting the Preferred Stock.
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. No fractional shares of Preferred Stock that are not integral multiples
of a Fractional Share are required to be issued and, in lieu thereof, an
adjustment in cash may be made based on the market price of the Preferred Stock
on the last trading date prior to the date of exercise. Pursuant to the Rights
Agreement, the Company reserves the right to require prior to the occurrence of
a Triggering Event that, upon any exercise of Rights, a number of Rights be
exercised so that only whole shares of Preferred Stock will be issued.
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At any time until ten days following the first date of public announcement
of the occurrence of a Flip-In Event, the Company may redeem the Rights in
whole, but not in part, at a price of $0.01 per Right, payable, at the option of
the Company, in cash, shares of Common Stock or such other consideration as the
Board of Directors may determine. Under certain circumstances set forth in the
Rights Agreement, redemption may only be made if a majority of the Board of
Directors is composed of directors that are independent of any Acquiring Person.
Immediately upon the effectiveness of the action of the Board of Directors
ordering redemption of the Rights, the Rights will terminate and the only right
of the holders of Rights will be to receive the $0.01 redemption price.
At any time after the occurrence of a Flip-In Event and prior to a person's
becoming the beneficial owner of 50% or more of the shares of Common Stock then
outstanding or the occurrence of a Flip-Over Event, the Company (if a majority
of the Board is composed of directors independent of any Acquiring Person) may
exchange the Rights (other than Rights owned by an Acquiring Person or an
affiliate or an associate of an Acquiring Person, which will have become void),
in whole or in part, at an exchange ratio of one share of Common Stock, and/or
other equity securities deemed to have the same value as one share of Common
Stock, per Right, subject to adjustment.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including, without limitation, the right
to vote or to receive dividends. While the distribution of the Rights should not
be taxable to shareholders or to the Company, shareholders may, depending upon
the circumstances, recognize taxable income in the event that the Rights become
exercisable for Common Stock (or other consideration) of the Company or for the
common stock of the acquiring company as set forth above or are exchanged as
provided in the preceding paragraph.
Other than the redemption price, any of the provisions of the Rights
Agreement may be amended by the Board of Directors of the Company (if a majority
of the Board is composed of directors independent of any Acquiring Person) as
long as the Rights are redeemable. Thereafter, the provisions of the Rights
Agreement other than the redemption price may be amended by the Board of
Directors (if a majority of the Board is composed of directors independent of
any Acquiring Person) in order to cure any ambiguity, defect or inconsistency,
to make changes that do not materially adversely affect the interests of holders
of Rights (excluding the interests of any Acquiring Person), or to shorten or
lengthen any time period under the Rights Agreement; provided, however, that no
amendment to lengthen the time period governing redemption shall be made at such
time as the Rights are not redeemable.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an exhibit to this Report on Form 8-K. This summary
description of the Rights does not purport to be complete and is qualified in
its entirety by reference to the Rights Agreement, which is incorporated herein
by reference.
The Rights will have certain anti-takeover effects. The Rights
will cause substantial dilution to any person or group that attempts to acquire
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the Company without the approval of the Company's Board of Directors. As a
result, the overall effect of the Rights may be to render more difficult or
discourage any attempt to acquire the Company even if such acquisition may be
favorable to the interests of the Company's stockholders. Because the Company's
Board of Directors can redeem the Rights or approve a Permitted Offer, the
Rights should not interfere with a merger or other business combination approved
by the Board of Directors of the Company.
Item 7. Financial Statements and Exhibits.
(c) Exhibits
1. Rights Agreement dated as of September 22, 1999 between Whole
Foods Market, Inc. and Securities Transfer Corporation, as Rights
Agent, which includes as Exhibit A the form of Certificate of
Designations of Series A Junior Participating Preferred Stock
setting forth the terms of the Preferred Stock, as Exhibit B the
form of Rights Certificate and as Exhibit C the Summary of Rights
to Purchase Preferred Stock. Pursuant to the Rights Agreement,
Rights Certificates will not be mailed until after the
Distribution Date (as defined in the Rights Agreement).
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
WHOLE FOODS MARKET, INC.
Date: September 27, 1999 By: /s/ Glenda Flanagan
-----------------------
Name: Glenda Flanagan
Title: Chief Financial Officer
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<PAGE>
RIGHTS AGREEMENT
This Rights Agreement, dated as of September 22, 1999 (the "Agreement"),
between Whole Foods Market, Inc., a Texas corporation (the "Company"), and
Securities Transfer Corporation (the "Rights Agent"),
W I T N E S S E T H:
WHEREAS, on September 22, 1999 (the "Rights Dividend Declaration Date"),
the Board of Directors of the Company authorized and declared a dividend of one
Right for each share of common stock, with no par value, of the Company (the
"Common Stock") outstanding at the close of business on October 4, 1999 (the
"Record Date"), and has authorized the issuance of one Right (as such number may
hereinafter be adjusted pursuant to the provisions of Section 11(p) hereof) for
each share of Common Stock of the Company issued (whether originally issued or
delivered from the Company's treasury) between the Record Date and the earlier
of the Distribution Date (as hereinafter defined) and the Expiration Date (as
hereinafter defined), and, in certain circumstances provided for in Section 22
hereof, after the Distribution Date, each Right initially representing the right
to purchase one Fractional Share (as hereinafter defined) of Series A Junior
Participating Preferred Stock of the Company, upon the terms and subject to the
conditions hereinafter set forth (the "Rights");
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms shall have the meanings indicated:
"Acquiring Person" shall mean any Person who or which, together with all
Affiliates and Associates of such Person, shall be the Beneficial Owner of 15%
or more of the shares of Common Stock then outstanding, but shall not include
any Exempt Person; provided, however, that a Person shall not be or become an
Acquiring Person if such Person, together with its Affiliates and Associates,
shall become the Beneficial Owner of 15% or more of the shares of Common Stock
then outstanding solely as a result of a reduction in the number of shares of
Common Stock outstanding due to the repurchase of Common Stock by the Company,
unless and until such time as such Person or any Affiliate or Associate of such
Person shall purchase or otherwise become the Beneficial Owner of additional
shares of Common Stock constituting 1% or more of the then outstanding shares of
Common Stock or any other Person (or Persons) who is (or collectively are) the
Beneficial Owner of shares of Common Stock constituting 1% or more of the then
outstanding shares of Common Stock shall become an Affiliate or Associate of
such Person, unless, in either such case, such Person, together with all
Affiliates and Associates of such Person, is not then the Beneficial Owner of
15% or more of the shares of Common Stock then outstanding; and provided,
further, that if the Board of Directors, during such time as a majority thereof
is composed of Independent Directors, determines in good faith that a Person
that would otherwise be an "Acquiring Person" has become such inadvertently
(including, without limitation, because (i) such Person was unaware that it
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beneficially owned a percentage of Common Stock that would otherwise cause such
Person to be an "Acquiring Person" or (ii) such Person was aware of the extent
of its Beneficial Ownership of Common Stock but had no actual knowledge of the
consequences of such Beneficial Ownership under this Agreement) and without any
intention of changing control of the Company, and if such Person as promptly as
practicable divested or divests itself of Beneficial Ownership of a sufficient
number of shares of Common Stock so that such Person would no longer be an
"Acquiring Person," then such Person shall not be deemed to be or to have become
an "Acquiring Person" for any purposes of this Agreement.
Notwithstanding anything in this definition of "Acquiring Person" to the
contrary, if, as of the date hereof, any Person, together with all Affiliates or
Associates of such Person, is the Beneficial Owner of a number of shares of
Common Stock that would otherwise cause such Person to be an Acquiring Person,
such Person shall not be or become an Acquiring Person unless and until such
time as such Person or any Affiliate or Associate of such Person shall purchase
or otherwise become the Beneficial Owner of additional shares of Common Stock
constituting 1% or more of the then outstanding shares of Common Stock or any
other Person (or Persons) who is (or collectively are) the Beneficial Owner of
shares of Common Stock constituting 1% or more of the then outstanding shares of
Common Stock shall become an Affiliate or Associate of such Person unless, in
either such case, such Person, together with all Affiliates and Associates of
such Person, is not then the Beneficial Owner of a number of shares that would
otherwise cause such Person to be an Acquiring Person.
At any time that the Rights are redeemable, the Board of Directors, if a
majority thereof is then composed of Independent Directors, may, generally or
with respect to any specified Person or Persons, determine to increase to a
specified percentage greater than that set forth herein or decrease to a
specified percentage lower than that set forth herein or determine a number of
shares to be (but in no event less than or equal to the percentage or number of
shares of Common Stock then beneficially owned by such Person), the level of
Beneficial Ownership of Common Stock at which a Person or such Person or Persons
becomes an Acquiring Person.
"Adjustment Shares" shall have the meaning set forth in Section 11(a)(ii)
hereof.
"Affiliate" shall have the meaning ascribed to such term in Rule 12b-2 of
the General Rules and Regulations under the Exchange Act, as in effect on the
date of this Agreement.
"Associate" shall mean, with reference to any Person, (1) any corporation,
firm, partnership, association, unincorporated organization or other entity
(other than the Company or a Subsidiary of the Company) of which such Person is
an officer or general partner (or officer or general partner of a general
partner) or is, directly or indirectly, the Beneficial Owner of 10% or more of
any class of equity securities, (2) any trust or other estate in which such
Person has a substantial beneficial interest or as to which such Person serves
as trustee or in a similar fiduciary capacity and (3) any relative or spouse of
such Person, or any relative of such spouse, who has the same home as such
Person.
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A Person shall be deemed the "Beneficial Owner" of, and shall be deemed to
"beneficially own," any securities:
(i) that such Person or any of such Person's Affiliates or
Associates, directly or indirectly, is the "beneficial owner" of (as
determined pursuant to Rule 13d-3 of the General Rules and Regulations
under the Exchange Act as in effect on the date of this Agreement) or
otherwise has the right to vote or dispose of, including pursuant to
any agreement, arrangement or understanding (whether or not in
writing); provided, however, that a Person shall not be deemed the
"Beneficial Owner" of, or to "beneficially own," any security under
this subparagraph (i) as a result of an agreement, arrangement or
understanding to vote such security if such agreement, arrangement or
understanding: (A) arises solely from a revocable proxy or consent
given in response to a public (i.e., not including a solicitation
exempted by Rule 14a-2(b)(2) of the General Rules and Regulations under
the Exchange Act as in effect on the date of this Agreement) proxy or
consent solicitation made pursuant to, and in accordance with, the
applicable provisions of the General Rules and Regulations under the
Exchange Act and (B) is not then reportable by such Person on Schedule
13D under the Exchange Act (or any comparable or successor report);
(ii) that such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right or obligation to
acquire (whether such right or obligation is exercisable or effective
immediately or only after the passage of time or the occurrence of an
event) pursuant to any agreement, arrangement or understanding (whether
or not in writing) or upon the exercise of conversion rights, exchange
rights, other rights, warrants or options, or otherwise; provided,
however, that a Person shall not be deemed the "Beneficial Owner" of,
or to "beneficially own," (A) securities tendered pursuant to a tender
or exchange offer made by such Person or any of such Person's
Affiliates or Associates until such tendered securities are accepted
for purchase or exchange, (B) securities issuable upon exercise of
Rights at any time 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 hereof (the
"Original Rights") or pursuant to Section 11(i) or (p) hereof in
connection with an adjustment made with respect to any Original Rights;
or
(iii) that are beneficially owned, directly or indirectly, by
(A) any other Person (or any Affiliate or Associate thereof) with which
such Person or any of such Person's Affiliates or Associates has any
agreement, arrangement or understanding (whether or not in writing) for
the purpose of acquiring, holding, voting (except pursuant to a
revocable proxy or consent as described in the proviso to subparagraph
(i) of this definition) or disposing of any voting securities of the
Company or (B) any group (as that term is used in Rule 13d-5(b) of the
General Rules and Regulations under the Exchange Act) of which such
Person is a member;
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provided, however, that nothing in this definition shall cause a Person engaged
in business as an underwriter of securities to be the "Beneficial Owner" of, or
to "beneficially own," any securities acquired through such Person's
participation in good faith in a firm commitment underwriting (including,
without limitation, securities acquired pursuant to stabilizing transactions to
facilitate a public offering in accordance with Regulation M promulgated under
the Exchange Act, or to cover overallotments created in connection with a public
offering) until the expiration of forty days after the date of such acquisition.
For purposes of this Agreement, "voting" a security shall include voting,
granting a proxy, acting by consent, making a request or demand relating to
corporate action (including, without limitation, calling a shareholder meeting)
or otherwise giving an authorization (within the meaning of Section 14(a) of the
Exchange Act as in effect on the date of this Agreement) in respect of such
security.
"Business Day" shall mean any day other than a Saturday, Sunday or a day on
which banking institutions in the State of Texas are authorized or obligated by
law or executive order to close.
"close of business" on any given date shall mean 5:00 p.m., Austin, Texas
time, on such date; provided, however, that if such date is not a Business Day,
it shall mean 5:00 p.m., Austin, Texas time, on the next succeeding Business
Day.
"Closing Price" of a security for any day shall mean the last sales price,
regular way, on such day or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, on such day, in either
case as reported in the principal transaction reporting system with respect to
securities listed or admitted to trading on the New York Stock Exchange, or, if
such security is not listed or admitted to trading on the New York Stock
Exchange, on the principal national securities exchange on which such security
is listed or admitted to trading, or, if such security is not listed or admitted
to trading on any national securities exchange but sales price information is
reported for such security, as reported by NASDAQ or such other self-regulatory
organization or registered securities information processor (as such terms are
used under the Exchange Act) that then reports information concerning such
security, or, if sales price information is not so reported, the average of the
high bid and low asked prices in the over-the-counter market on such day, as
reported by NASDAQ or such other entity, or, if on such day such security is not
quoted by any such entity, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in such security
selected by the Board of Directors of the Company. If on such day no market
maker is making a market in such security, the fair value of such security on
such day as determined in good faith by the Board of Directors of the Company
shall be used.
"Common Stock" shall mean the common stock, with no par value, of the
Company, except that "Common Stock" when used with reference to equity interests
issued by any Person other than the Company shall mean the capital stock of such
Person with the greatest voting power, or the equity securities or other equity
interest having power to control or direct the management, of such Person.
"Common Stock Equivalents" shall have the meaning set forth in Section
11(a)(iii) hereof.
"Company" shall mean the Person named as the "Company" in the preamble of
this Agreement until a successor Person shall have become such or until a
Principal Party shall assume, and thereafter be liable for, all obligations and
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duties of the Company hereunder, pursuant to the applicable provisions of this
Agreement, and thereafter "Company" shall mean such successor Person or
Principal Party.
"Current Market Price" shall have the meaning set forth in Section 11(d)
hereof.
"Current Value" shall have the meaning set forth in Section 11(a)(iii)
hereof.
"Distribution Date" shall mean the earlier of (i) the close of business on
the tenth day (or, if such Stock Acquisition Date results from the consummation
of a Permitted Offer, such later date as may be determined by the Company's
Board of Directors as set forth below before the Distribution Date occurs) after
the Stock Acquisition Date (or, if the tenth day after the Stock Acquisition
Date occurs before the Record Date, the close of business on the Record Date) or
(ii) the close of business on the tenth Business Day (or such later date as may
be determined by the Company's Board of Directors as set forth below before the
Distribution Date occurs) after the date that a tender offer or exchange offer
by any Person (other than any Exempt Person) is first published or sent or given
within the meaning of Rule 14d-2(a) of the General Rules and Regulations under
the Exchange Act as then in effect, if upon consummation thereof, such Person
would be an Acquiring Person, other than a tender or exchange offer that is
determined before the Distribution Date occurs to be a Permitted Offer. The
Board of Directors of the Company, if a majority thereof is then composed of
Independent Directors, may, to the extent set forth in the preceding sentence,
defer the date set forth in clause (i) or (ii) of the preceding sentence to a
specified later date or to an unspecified later date to be determined by a
subsequent action or event (but in no event to a date later than the close of
business on the tenth day after the first occurrence of a Triggering Event).
"Equivalent Preferred Stock" shall have the meaning set forth in Section
11(b) hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Exchange Ratio" shall have the meaning set forth in Section 24 hereof.
"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 or for the purpose of funding any such plan or
funding other employee benefits for employees of the Company or any Subsidiary
of the Company.
"Expiration Date" shall mean the earliest of (i) the Final Expiration Date,
(ii) the time at which the Rights are redeemed as provided in Section 23 hereof,
(iii) the time at which the Rights expire pursuant to Section 13(d) hereof and
(iv) the time at which all Rights then outstanding and exercisable are exchanged
pursuant to Section 24 hereof.
"Final Expiration Date" shall mean the close of business on September 22,
2009.
"Flip-In Event" shall mean an event described in Section 11(a)(ii) hereof.
"Flip-In Trigger Date" shall have the meaning set forth in Section
11(a)(iii) hereof.
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"Flip-Over Event" shall mean any event described in clause (x), (y) or (z)
of Section 13(a) hereof, but excluding any transaction described in Section
13(d) hereof that causes the Rights to expire.
"Fractional Share" with respect to the Preferred Stock shall mean one
one-thousandth of a share of Preferred Stock.
"Independent Directors" means members of the Board of Directors who are
not, and are not representatives, nominees, Affiliates or Associates of, an
Acquiring Person nor appointed by action of the Board of Directors at a time
when a majority of the Board of Directors were not Independent Directors.
"NASDAQ" shall mean the National Association of Securities Dealers, Inc.
Automated Quotations System.
"Original Rights" shall have the meaning set forth in the definition of
"Beneficial Owner."
"Permitted Offer" shall mean a tender offer or an exchange offer for all
outstanding shares of Common Stock at a price and on terms determined by the
Board of Directors, if a majority thereof is then composed of Independent
Directors, who are also not representatives, nominees, Affiliates or Associates
of, the person making the offer, after receiving advice from one or more
investment banking firms, to be (a) at a price and on terms that are fair to
shareholders (taking into account all factors that such members of the Board
deem relevant including, without limitation, prices that could reasonably be
achieved if the Company or its assets were sold on an orderly basis designed to
realize maximum value) and (b) otherwise in the best interests of the Company
and its shareholders.
"Person" shall mean any individual, firm, corporation, partnership, limited
liability company, association, trust, unincorporated organization or other
entity.
"Preferred Stock" shall mean shares of Series A Junior Participating
Preferred Stock, par value $0.01 per share, of the Company having the rights,
powers and preferences set forth in the form of Statement of Resolution
Establishing Series of Shares attached hereto as Exhibit A and, to the extent
that there is not a sufficient number of shares of Series A Junior Participating
Preferred Stock authorized to permit the full exercise of the Rights, any other
series of Preferred Stock, par value $0.01 per share, of the Company designated
for such purpose containing terms substantially similar to the terms of the
Series A Junior Participating Preferred Stock.
"Principal Party" shall have the meaning set forth in Section 13(b) hereof.
"Purchase Price" shall have the meaning set forth in Section 4(a) hereof.
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"Record Date" shall have the meaning set forth in the recitals clause at
the beginning of this Agreement.
"Redemption Price" shall have the meaning set forth in Section 23(a)
hereof.
"Rights" shall have the meaning set forth in the recitals clause at the
beginning of this Agreement.
"Rights Agent" shall mean the Person named as the "Rights Agent" in the
preamble of this Agreement until a successor Rights Agent shall have become such
pursuant to the applicable provisions hereof, 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 applicable
provisions of this Agreement, "Rights Agent" shall mean and include each such
Person.
"Rights Certificates" shall mean the certificates evidencing the Rights.
"Rights Dividend Declaration Date" shall have the meaning set forth in the
recitals clause at the beginning of this Agreement.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Spread" shall have the meaning set forth in Section 11(a)(iii) hereof.
"Stock Acquisition Date" shall mean the first date of public announcement
(which, for purposes of this definition and Section 23, shall include, without
limitation, a report filed pursuant to Section 13(d) of the Exchange Act) by the
Company or an Acquiring Person that an Acquiring Person has become such.
"Subsidiary" shall mean, with reference to any Person, any corporation or
other Person of which an amount of voting securities sufficient to elect at
least a majority of the directors or other persons performing similar functions
is beneficially owned, directly or indirectly, by such Person, or otherwise
controlled by such Person.
"Substitution Period" shall have the meaning set forth in Section
11(a)(iii) hereof.
"Summary of Rights" shall mean the Summary of Rights to Purchase Preferred
Stock sent pursuant to Section 3(b) hereof.
"Trading Day" with respect to a security shall mean a day on which the
principal national securities exchange on which such security is listed or
admitted to trading is open for the transaction of business, or, if such
security is not listed or admitted to trading on any national securities
exchange but is quoted by NASDAQ, a day on which NASDAQ reports trades, or, if
such security is not so quoted, a Business Day.
"Triggering Event" shall mean any Flip-In Event or any Flip-Over Event.
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Section 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent (i) to act as agent for the Company and (ii) to take certain
actions in respect of the holders of the Rights (who, in accordance with Section
3 hereof, shall prior to the Distribution Date also be the holders of the Common
Stock) (although it is expressly agreed that the Rights Agent shall not act as
agent for such holders) in accordance with the terms and conditions hereof, and
the Rights Agent hereby accepts such appointment. The Company may from time to
time appoint such Co- Rights Agents as it may deem necessary or desirable.
Section 3. Issue of Rights Certificates.
(a) Until the Distribution Date, (x) the Rights will be evidenced (subject
to the provisions of paragraph (b) of this Section 3) by the certificates for
Common Stock registered in the names of the holders of the Common Stock and not
by separate certificates, and (y) the Rights will be transferable only in
connection with the transfer of the underlying shares of Common Stock (including
a transfer to the Company). As soon as practicable after the Distribution Date,
the Rights Agent will send by first-class, insured, postage prepaid mail, to
each record holder of the Common Stock as of the close of business on the
Distribution Date (other than any Person referred to in the first sentence of
Section 7(e)), at the address of such holder shown on the records of the
Company, one or more Rights Certificates, evidencing one Right for each share of
Common Stock so held, subject to adjustment as provided herein. In the event
that an adjustment in the number of Rights per share of Common Stock has been
made pursuant to Section 11(p) hereof, at the time of distribution of the Rights
Certificates, the Company shall make the necessary and appropriate rounding
adjustments (in accordance with Section 14(a) hereof) so that Rights
Certificates representing only whole numbers of Rights are distributed and cash
is paid in lieu of any fractional Rights. As of and after the Distribution Date,
the Rights will be evidenced solely by such Rights Certificates.
(b) As promptly as practicable following the Record Date, the Company will
send a copy of a Summary of Rights to Purchase Preferred Stock, in substantially
the form attached hereto as Exhibit C, by first-class, postage prepaid mail, to
each record holder of Common Stock as of the close of business on the Record
Date, at the address of such holder shown on the records of the Company. With
respect to certificates for Common Stock outstanding as of the Record Date,
until the Distribution Date or the earlier surrender for transfer thereof or the
Expiration Date, the Rights associated with the shares of Common Stock
represented by such certificates shall be evidenced by such certificates for
Common Stock together with the Summary of Rights, and the registered holders of
the Common Stock shall also be the registered holders of the associated Rights.
Until the earlier of the Distribution Date or the Expiration Date, the transfer
of any of the certificates for Common Stock outstanding on the Record Date, with
or without a copy of the Summary of Rights, shall also constitute the transfer
of the Rights associated with the Common Stock represented by such certificates.
(c) Rights shall be issued in respect of all shares of Common
Stock that are issued (whether originally issued or delivered from the Company's
treasury) after the Record Date but prior to the earlier of the Distribution
Date or the Expiration Date or, in certain circumstances provided in Section 22
hereof, after the Distribution Date. Certificates issued for shares of Common
Stock that shall so become outstanding or shall be transferred or exchanged
after the Record Date but prior to the earlier of the Distribution Date or the
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Expiration Date shall also be deemed to be certificates for Rights, and shall
bear the following legend:
This certificate also evidences and entitles the holder hereof
to certain Rights as set forth in the Rights Agreement between Whole
Foods Market, Inc. (the "Company") and Securities Transfer Corporation
(the "Rights Agent") dated as of September 22, 1999 as it may from time
to time be supplemented or amended (the "Rights Agreement"), the terms
of which are hereby incorporated herein by reference and a copy of
which is on file at the principal offices of the Company. Under certain
circumstances, as set forth in the Rights Agreement, such Rights may be
redeemed, may be exchanged, may expire or may be evidenced by separate
certificates and will no longer be evidenced by this certificate. The
Company or the Rights Agent will mail to the holder of this certificate
a copy of the Rights Agreement, as in effect on the date of mailing,
without charge promptly after receipt of a written request therefor.
Under certain circumstances set forth in the Rights Agreement, Rights
beneficially owned by or transferred to any Person who is, was or
becomes an Acquiring Person or an Affiliate or Associate thereof (as
such terms are defined in the Rights Agreement), and certain
transferees thereof, will become null and void and will no longer be
transferable.
With respect to such certificates containing the foregoing legend, until the
earlier of the Distribution Date or the Expiration Date, the Rights associated
with the Common Stock represented by such certificates shall be evidenced by
such certificates alone, and registered holders of Common Stock shall also be
the registered holders of the associated Rights, and the transfer of any of such
certificates shall also constitute the transfer of the Rights associated with
the Common Stock represented by such certificates.
Section 4. Form of Rights Certificates.
(a) The Rights Certificates (and the forms of election to purchase and of
assignment to be printed on the reverse thereof), when, as and if issued, shall
be substantially in the form set forth in Exhibit B hereto and may have such
marks of identification or designation and such legends, summaries or
endorsements printed thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange or quotation system
on which the Rights may from time to time be listed or quoted, or to conform to
usage. Subject to the provisions of Section 11 and Section 22 hereof, the Rights
Certificates, whenever issued, shall be dated as of the Record Date and on their
face shall entitle the holders thereof to purchase such number of Fractional
Shares of Preferred Stock as shall be set forth therein at the price set forth
therein (such exercise price per Fractional Share (or, as set forth in this
Agreement, for other securities), the "Purchase Price"), but the amount and type
of securities purchasable upon the exercise of each Right and the Purchase Price
thereof shall be subject to adjustment as provided herein.
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(b) Any Rights Certificate issued pursuant to Section 3(a) or Section 22
hereof that represents Rights beneficially owned by a Person described in the
first sentence of Section 7(e), and any Rights Certificate issued pursuant to
Section 6 or Section 11 hereof upon transfer, exchange, replacement or
adjustment of any such Rights, shall contain (to the extent feasible) the
following legend, modified as applicable to apply to such Person:
The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became an Acquiring Person or
an Affiliate or Associate of an Acquiring Person (as such terms are
defined in the Rights Agreement). Accordingly, this Rights Certificate
and the Rights represented hereby [will] [have] become null and void in
the circumstances and with the effect specified in Section 7(e) of such
Agreement.
The provisions of Section 7(e) of this Agreement shall be operative whether or
not the foregoing legend is contained on any such Rights Certificate. The
Company shall give notice to the Rights Agent promptly after it becomes aware of
the existence of any Acquiring Person or any Associate or Affiliate thereof.
Section 5. Countersignature and Registration.
(a) The Rights Certificates shall be executed on behalf of the Company by
its Chairman of the Board, its President or any Vice President, either manually
or by facsimile signature, and shall have affixed thereto the Company's seal or
a facsimile thereof, which shall be attested by the Secretary or an Assistant
Secretary of the Company, either manually or by facsimile signature. The Rights
Certificates shall be countersigned by the Rights Agent, either manually or by
facsimile signature, and shall not be valid for any purpose unless so
countersigned. In case any officer of the Company who shall have signed any of
the Rights Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Rights Certificates, nevertheless, may be countersigned by the Rights Agent
and issued and delivered by the Company with the same force and effect as though
the person who signed such Rights Certificates had not ceased to be such officer
of the Company; and any Rights Certificate may be signed on behalf of the
Company by any person who, at the actual date of the execution of such Rights
Certificate, shall be a proper officer of the Company to sign such Rights
Certificate, although at the date of the execution of this Rights Agreement any
such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or cause to
be kept, at its principal office or offices designated as the appropriate place
for surrender of Rights Certificates upon exercise or transfer, books for
registration and transfer of the Rights Certificates issued hereunder. Such
books shall show the names and addresses of the respective holders of the Rights
Certificates, the number of Rights evidenced on its face by each of the Rights
Certificates and the certificate number and the date of each of the Rights
Certificates.
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Section 6. Transfer, Split-Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.
(a) Subject to the provisions of Section 4(b), Section 7(e), Section 13(d),
Section 14 and Section 24 hereof, at any time after the close of business on the
Distribution Date, and at or prior to the close of business on the Expiration
Date, any Rights Certificate or Rights Certificates may be transferred, split
up, combined or exchanged for another Rights Certificate or Rights Certificates,
entitling the registered holder to purchase a like number of Fractional Shares
of Preferred Stock (or, following a Triggering Event, Common Stock, other
securities, cash or other assets, as the case may be) as the Rights Certificate
or Rights Certificates surrendered then entitled such holder (or former holder
in the case of a transfer) to purchase. Any registered holder desiring to
transfer, split up, combine or exchange any Rights Certificate or Rights
Certificates shall make such request in writing delivered to the Rights Agent,
and shall surrender the Rights Certificate or Rights Certificates to be
transferred, split up, combined or exchanged at the principal office or offices
of the Rights Agent designated for such purpose. Neither the Rights Agent nor
the Company shall be obligated to take any action whatsoever with respect to the
transfer of any such surrendered Rights Certificate until the registered holder
shall have completed and signed the certificate contained in the form of
assignment on the reverse side of such Rights Certificate and shall have
provided such additional evidence of the identity of the Beneficial Owner (or
former Beneficial Owner) thereof or of the Affiliates or Associates thereof as
the Company shall reasonably request. Thereupon the Rights Agent shall, subject
to Section 4(b), Section 7(e), Section 13(d), Section 14 and Section 24 hereof,
countersign and deliver to the Person entitled thereto a Rights Certificate or
Rights Certificates, as the case may be, as so requested. The Company may
require payment by the holder of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer,
split-up, combination or exchange of Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a Rights
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and reimbursement to the Company and
the Rights Agent of all reasonable expenses incidental thereto, and upon
surrender to the Rights Agent and cancellation of the Rights Certificate if
mutilated, the Company will, subject to Section 4(b), Section 7(e), Section
13(d), Section 14 and Section 24, execute and deliver a new Rights Certificate
of like tenor to the Rights Agent for countersignature and delivery to the
registered owner in lieu of the Rights Certificate so lost, stolen, destroyed or
mutilated.
Section 7. Exercise of Rights; Purchase Price.
(a) Subject to Section 7(e) hereof, the registered holder of any Rights
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein including, without limitation, the restrictions on
exercisability set forth in Section 9(c), Section 11(a)(iii) and Section 23(a)
hereof) in whole or in part at any time after the Distribution Date upon
surrender of the Rights Certificate, with the form of election to purchase and
the certificate on the reverse side thereof duly completed and executed, to the
Rights Agent at the principal office or offices of the Rights Agent designated
for such purpose, together with payment of the aggregate Purchase Price with
respect to the total number of Fractional Shares of Preferred Stock (or other
securities, cash or other assets, as the case may be) as to which such
surrendered Rights are then exercisable, at or prior to the Expiration Date.
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(b) The Purchase Price for each Fractional Share of Preferred Stock
pursuant to the exercise of a Right shall initially be $225, and shall be
subject to adjustment from time to time as provided in Sections 11 and 13(a)
hereof and shall be payable in accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing exercisable Rights,
with the form of election to purchase and the certificate on the reverse side
thereof duly executed, accompanied by payment, with respect to each Right so
exercised, of the Purchase Price per Fractional Share of Preferred Stock (or
other shares, securities, cash or other assets, as the case may be) to be
purchased as set forth below and an amount equal to any applicable transfer tax,
the Rights Agent shall, subject to Section 20(k) hereof, thereupon promptly
(i)(A) requisition from any transfer agent of the shares of Preferred Stock (or
make available, if the Rights Agent is the transfer agent for such shares)
certificates for the total number of Fractional Shares of Preferred Stock to be
purchased, and the Company hereby irrevocably authorizes its transfer agent to
comply with all such requests, or (B) if the Company, in its sole discretion,
shall have elected to deposit the shares of Preferred Stock issuable upon
exercise of the Rights hereunder with a depositary agent, requisition from the
depositary agent depositary receipts representing interests in such number of
Fractional Shares of Preferred Stock as are to be purchased (in which case
certificates for the shares of Preferred Stock represented by such receipts
shall be deposited by the transfer agent with the depositary agent) and the
Company will direct the depositary agent to comply with such request, (ii)
requisition from the Company the amount of cash, if any, to be paid in lieu of
fractional shares in accordance with Section 14 hereof, (iii) after receipt of
such certificates or depositary receipts, cause the same to be delivered to or
upon the order of the registered holder of such Rights Certificate, registered
in such name or names as may be designated by such holder and (iv) after receipt
thereof, deliver such cash, if any, to or upon the order of the registered
holder of such Rights Certificate. The payment of the Purchase Price (as such
amount may be reduced pursuant to Section 11(a)(iii) hereof) may be made in cash
or by certified check, cashier's or official bank check or bank draft payable to
the order of the Company or the Rights Agent. In the event that the Company is
obligated to issue other securities (including Common Stock) of the Company, pay
cash and/or distribute other property pursuant to Section 11(a) or Section 13(a)
hereof, the Company will make all arrangements necessary so that such other
securities, cash and/or other property are available for distribution by the
Rights Agent, if and when appropriate. The Company reserves the right to require
prior to the occurrence of a Triggering Event that, upon exercise of Rights, a
number of Rights be exercised so that only whole shares of Preferred Stock would
be issued.
(d) In case the registered holder of any Rights Certificate shall exercise
fewer than all the Rights evidenced thereby, a new Rights Certificate evidencing
Rights equivalent to the Rights remaining unexercised shall be issued by the
Rights Agent and delivered to, or upon the order of, the registered holder of
such Rights Certificate, registered in such name or names as may be designated
by such holder, subject to the provisions of Section 14 hereof.
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(e) Notwithstanding anything in this Agreement to the contrary, from and
after the first occurrence of a Triggering Event, any Rights beneficially owned
by or transferred to (i) an Acquiring Person or an Associate or Affiliate of an
Acquiring Person other than any such Person that became such pursuant to a
Permitted Offer and the Board of Directors, if a majority thereof is then
composed of Independent Directors, in good faith determines was not involved in
and did not cause or facilitate, directly or indirectly, such Triggering Event,
(ii) a direct or indirect transferee of such Rights from such Acquiring Person
(or any such Associate or Affiliate) who becomes a transferee after such
Triggering Event or (iii) a direct or indirect transferee of such Acquiring
Person (or of any such Associate or Affiliate) who becomes a transferee prior to
or concurrently with such Triggering Event and receives such Rights pursuant to
either (A) a transfer (whether or not for consideration) from such Acquiring
Person (or such Affiliate or Associate) to holders of equity interests in such
Acquiring Person (or such Affiliate or Associate) or to any Person with whom
such Acquiring Person (or such Affiliate or Associate) has any continuing
agreement, arrangement or understanding regarding the transferred Rights or (B)
a transfer that the Board of Directors of the Company determines is part of a
plan, arrangement or understanding that has as a primary purpose or effect the
avoidance of this Section 7(e), shall become null and void without any further
action, no holder of such Rights shall have any rights whatsoever with respect
to such Rights, whether under any provision of this Agreement or otherwise, and
such Rights shall not be transferable. The Company shall use all reasonable
efforts to ensure that the provisions of this Section 7(e) and Section 4(b)
hereof are complied with, but shall have no liability to any holder of Rights
Certificates or other Person as a result of its failure to make any
determinations with respect to an Acquiring Person or its Affiliates, Associates
or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the contrary, neither the
Rights Agent nor the Company shall be obligated to undertake any action with
respect to a registered holder upon the occurrence of any purported exercise as
set forth in this Section 7 unless such registered holder shall have (i)
completed and signed the certificate contained in the form of election to
purchase set forth on the reverse side of the Rights Certificate surrendered for
such exercise and (ii) provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Rights Certificates. All Rights
Certificates surrendered for the purpose of exercise, transfer, split-up,
combination or exchange shall, if surrendered to the Company or any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be canceled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Rights Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
canceled Rights Certificates to the Company, or shall, at the written request of
the Company, destroy such canceled Rights Certificates, and in such case shall
deliver a certificate of destruction thereof to the Company.
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Section 9. Reservation and Availability of Capital Stock.
(a) The Company covenants and agrees that it will cause to be reserved and
kept available out of its authorized and unissued shares of Preferred Stock
(and, following the occurrence of a Triggering Event, out of its authorized and
unissued shares of Common Stock and/or other securities or out of its authorized
and issued shares held in its treasury), the number of shares of Preferred Stock
(and, following the occurrence of a Triggering Event, Common Stock and/or other
securities) that, as provided in this Agreement, including Section 11(a)(iii)
hereof, will be sufficient to permit the exercise in full of all outstanding
Rights.
(b) So long as any shares of Preferred Stock (and, following the occurrence
of a Triggering Event, Common Stock and/or other securities) issuable and
deliverable upon the exercise of the Rights are listed on any national
securities exchange or quoted on any trading system, the Company shall use its
best efforts to cause, from and after such time as the Rights become
exercisable, all shares reserved for such issuance to be listed on such
exchange, or quoted on such system, upon official notice of issuance upon such
exercise. Following the occurrence of a Triggering Event, the Company will use
its best efforts to list (or continue the listing of) the Rights and the
securities issuable and deliverable upon the exercise of the Rights on one or
more national securities exchanges or to cause the Rights and the securities
purchasable upon exercise of the Rights to be reported by NASDAQ or such other
transaction reporting system then in use.
(c) The Company shall use its best efforts to (i) prepare and file, as soon
as practicable following the first occurrence of a Flip-In Event or, if
applicable, as soon as practicable following the earliest date after the first
occurrence of a Flip-In Event on which the consideration to be delivered by the
Company upon exercise of the Rights has been determined pursuant to this
Agreement (including in accordance with Section 11(a)(iii) hereof), a
registration statement on an appropriate form under the Securities Act with
respect to the securities purchasable upon exercise of the Rights, (ii) cause
such registration statement to become effective as soon as practicable after
such filing, and (iii) cause such registration statement to remain effective
(with a prospectus at all times meeting the requirements of the Securities Act)
until the earlier of (A) the date as of which the Rights are no longer
exercisable for such securities and (B) the 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 set forth in clause (i) of the
first sentence of this Section 9(c), the exercisability of the Rights in order
to prepare and file such registration statement and permit it to become
effective. In addition, if the Company shall determine that the Securities Act
requires an effective registration statement under the Securities Act following
the Distribution Date, the Company may temporarily suspend the exercisability of
the Rights until such time as such a registration statement has been declared
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, the
exercise thereof shall not be permitted under applicable law or any required
registration statement shall not have been declared effective.
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(d) The Company covenants and agrees that it will take all such action as
may be necessary to ensure that all Fractional Shares of Preferred Stock (and,
following the occurrence of a Triggering Event, Common Stock and/or other
securities) delivered upon exercise of Rights shall, at the time of delivery of
the certificates for such shares (subject to payment of the Purchase Price), be
duly and validly authorized and issued and fully paid and nonassessable.
(e) The Company further covenants and agrees that it will pay when due and
payable any and all federal and state transfer taxes and charges that may be
payable in respect of the issuance or delivery of the Rights Certificates and of
any certificates for a number of Fractional Shares of Preferred Stock (or Common
Stock and/or other securities, as the case may be) upon the exercise of Rights.
The Company shall not, however, be required to pay any transfer tax that may be
payable in respect of any transfer or delivery of Rights Certificates to a
Person other than, or the issuance or delivery of a number of Fractional Shares
of Preferred Stock (or Common Stock and/or other securities, as the case may be)
in respect of a name other than that of, the registered holder of the Rights
Certificates evidencing Rights surrendered for exercise or to issue or deliver
any certificates for a number of Fractional Shares of Preferred Stock (or Common
Stock and/or other securities, as the case may be) in a name other than that of
the registered holder upon the exercise of any Rights until such tax shall have
been paid (any such tax being payable by the holder of such Rights Certificate
at the time of surrender) or until it has been established to the Company's
satisfaction that no such tax is due.
Section 10. Preferred Stock Record Date. Each Person in whose name any
certificate for a number of Fractional Shares of Preferred Stock (or Common
Stock and/or other securities, as the case may be) is issued upon the exercise
of Rights shall for all purposes be deemed to have become the holder of record
of such shares (fractional or otherwise) of Preferred Stock (or Common Stock
and/or other securities, as the case may be) represented thereby on, and such
certificate shall be dated, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and all applicable transfer taxes) was made; provided, however, that if the
date of such surrender and payment is a date upon which the Preferred Stock (or
Common Stock and/or other securities, as the case may be) transfer books of the
Company are closed, such Person shall be deemed to have become the record holder
of such shares (fractional or otherwise) on, and such certificate shall be
dated, the next succeeding Business Day on which the Preferred Stock (or Common
Stock and/or other securities, as the case may be) transfer books of the Company
are open. Prior to the exercise of the Rights evidenced thereby, the holder of a
Rights Certificate, as such, shall not be entitled to any rights of a
shareholder with respect to shares for which the Rights shall be exercisable,
including, without limitation, the right to vote, to receive dividends or other
distributions or to exercise any preemptive rights, and shall not be entitled to
receive any notice of any proceedings of the Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or
Number of Rights. The Purchase Price, the number and kind of shares or other
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securities subject to purchase upon exercise of 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 Rights
Dividend Declaration Date (A) declare a dividend on the outstanding shares
of Preferred Stock payable in shares of Preferred Stock, (B) subdivide the
outstanding shares of Preferred Stock, (C) combine the outstanding shares
of Preferred Stock into a smaller number of shares or (D) otherwise
reclassify the outstanding shares of Preferred Stock (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation), except as otherwise
provided in this Section 11(a) and Section 7(e) hereof, the Purchase Price
in effect at the time of the record date for such dividend or of the
effective date of such subdivision, combination or reclassification, and
the number and kind of shares of Preferred Stock or capital stock, as the
case may be, issuable on such date, shall be proportionately adjusted so
that the holder of any Right exercised after such time shall be entitled to
receive, upon payment of the Purchase Price then in effect, the aggregate
number and kind of shares of Preferred Stock or capital stock, as the case
may be, which, if such Right had been exercised immediately prior to such
date and at a time when the Preferred Stock transfer books of the Company
were open, he would have owned upon such exercise and been entitled to
receive by virtue of such dividend, subdivision, combination or
reclassification. If an event occurs that would require an adjustment under
both this Section 11(a)(i) and Section 11(a)(ii) hereof, the adjustment
provided for in this Section 11(a)(i) shall be in addition to, and shall be
made prior to, any adjustment required pursuant to Section 11(a)(ii)
hereof.
(ii) Subject to Sections 23 and 24 of this Agreement, in the event any
Person shall, at any time after the Rights Dividend Declaration Date,
become an Acquiring Person, unless the event causing such Person to become
an Acquiring Person is (1) a Flip- Over Event or (2) an acquisition of
shares of Common Stock pursuant to a Permitted Offer (provided that this
clause (2) shall cease to apply if such Acquiring Person thereafter becomes
the Beneficial Owner of any additional shares of Common Stock other than
pursuant to such Permitted Offer or a transaction set forth in Section
13(a) or 13(d) hereof), then, (x) the Purchase Price shall be adjusted to
be the Purchase Price immediately prior to the first occurrence of a
Flip-In Event multiplied by the number of Fractional Shares of Preferred
Stock for which a Right was exercisable immediately prior to such first
occurrence and (y) each holder of a Right (except as provided below in
Section 11(a)(iii) and in Section 7(e) hereof) shall thereafter have the
right to receive, upon exercise thereof at a price equal to the Purchase
Price in accordance with the terms of this Agreement, in lieu of shares of
Preferred Stock, such number of shares of Common Stock of the Company as
shall equal the result obtained by dividing the Purchase Price by 50% of
the Current Market Price per share of Common Stock on the date of such
first occurrence (such number of shares, the "Adjustment Shares"); provided
that the Purchase Price and the number of Adjustment Shares shall be
further adjusted as provided in this Agreement to reflect any events
occurring after the date of such first occurrence.
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(iii) In the event that the number of shares of Common Stock that are
authorized by the Company's certificate of incorporation but not
outstanding or reserved for issuance for purposes other than upon exercise
of the Rights is 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, to the extent permitted by applicable law and
regulation, (A) determine the excess of (1) the value of the Adjustment
Shares issuable upon the exercise of a Right (computed using the Current
Market Price used to determine the number of Adjustment Shares) (the
"Current Value") over (2) the Purchase Price (such excess is herein
referred to as the "Spread"), and (B) with respect to each Right, make
adequate provision to substitute for the Adjustment Shares, upon the
exercise of the Rights and payment of the applicable Purchase Price, (1)
cash, (2) a reduction in the Purchase Price, (3) Common Stock or other
equity securities of the Company (including, without limitation, shares, or
units of shares, of preferred stock (including, without limitation, the
Preferred Stock) that the Board of Directors of the Company has determined
to have the same value as shares of Common Stock (such shares of preferred
stock are herein referred to as "Common Stock Equivalents")), (4) debt
securities of the Company, (5) other assets or (6) any combination of the
foregoing, having an aggregate value equal to the Current Value, where such
aggregate value has been determined by the Board of Directors of the
Company based upon the advice of a nationally recognized investment banking
firm selected by the Board of Directors of the Company; provided, however,
if the Company shall not have made adequate provision to deliver value
pursuant to clause (B) above within 30 days following the later of (x) the
first occurrence of a Flip-In Event and (y) the date on which the Company's
right of redemption pursuant to Section 23(a) expires (the later of (x) and
(y) being referred to herein as the "Flip-In Trigger Date"), then the
Company shall be obligated to deliver, upon the surrender for exercise of a
Right and without requiring payment of the Purchase Price, shares of Common
Stock (to the extent available) and then, if necessary, cash, which shares
and/or cash have an aggregate value equal to the Spread. If the Board of
Directors of the Company shall determine in good faith that it is likely
that sufficient additional shares of Common Stock could be authorized for
issuance upon exercise in full of the Rights, the 30-day period set forth
above may be extended to the extent necessary, but not more than 90 days
after the Flip-In Trigger Date, in order that the Company may seek
shareholder approval for the authorization of such additional shares (such
period, as it may be extended, the "Substitution Period"). To the extent
that the Company or the Board of Directors determines that some action need
be taken pursuant to the first and/or second sentences of this Section
11(a)(iii), the Company (x) shall provide, subject to Section 7(e) hereof,
that such action shall apply uniformly to all outstanding Rights, and (y)
may suspend the exercisability of the Rights until the expiration of the
Substitution Period in order to seek any authorization of additional shares
and/or to decide the appropriate form of distribution to be made pursuant
to such first sentence and to determine the value thereof. In the event of
any such suspension, the Company shall issue a public announcement stating
that the exercisability of the Rights has been temporarily suspended, as
well as a public announcement at such time as the suspension is no longer
in effect. For purposes of this Section 11(a)(iii), the value of the Common
Stock shall be the Current Market Price per share of the Common Stock on
the Flip-In Trigger Date and the value of any Common Stock Equivalent shall
be deemed to have the same value as the Common Stock 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 Stock entitling them to
subscribe for or purchase (for a period expiring within 45 calendar days after
such record date) Preferred Stock (or shares having the same rights, privileges
and preferences as the shares of Preferred Stock ("Equivalent Preferred Stock"))
or securities convertible into Preferred Stock or Equivalent Preferred Stock at
a price per share of Preferred Stock or per share of Equivalent Preferred Stock
(or having a conversion price per share, if a security convertible into
Preferred Stock or Equivalent Preferred Stock) less than the Current Market
Price per share of Preferred Stock on such record date, the Purchase Price to be
in effect after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the number of shares of Preferred Stock outstanding
on such record date, plus the number of shares of Preferred Stock that the
aggregate offering price of the total number of shares of Preferred Stock and/or
Equivalent Preferred Stock so to be offered (and/or the aggregate initial
conversion price of the convertible securities so to be offered) would purchase
at such Current Market Price, and the denominator of which shall be the number
of shares of Preferred Stock outstanding on such record date, plus the number of
additional shares of Preferred Stock and/or Equivalent Preferred Stock to be
offered for subscription or purchase (or into which the convertible securities
so to be offered are initially convertible). In case such subscription price may
be paid by delivery of consideration, part or all of which may be in a form
other than cash, the value of such consideration shall be as determined in good
faith by the Board of Directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent and shall be binding on the
Rights Agent and the holders of the Rights. Shares of Preferred Stock owned by
or held for the account of the Company shall not be deemed outstanding for the
purpose of any such computation. Such adjustment shall be made successively
whenever such a record date is fixed, and in the event that such rights or
warrants are not so issued, the Purchase Price shall be adjusted to be the
Purchase Price that would then be in effect if such record date had not been
fixed.
(c) In case the Company shall fix a record date for a distribution to all
holders of Preferred Stock (including any such distribution made in connection
with a consolidation or merger in which the Company is the continuing or
surviving corporation) of evidences of indebtedness, cash (other than a regular
quarterly cash dividend out of the earnings or retained earnings of the
Company), assets (other than a dividend payable in Preferred Stock, but
including any dividend payable in stock other than Preferred Stock) or
subscription rights or warrants (excluding those referred to in Section 11(b)
hereof), the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the Current Market
Price per share of Preferred Stock on such record date, less the fair market
value (as determined in good faith by the Board of Directors of the Company,
whose determination shall be described in a statement filed with the Rights
Agent and shall be binding on the Rights Agent) of the portion of the cash,
assets or evidences of indebtedness so to be distributed or of such subscription
rights or warrants applicable to a share of Preferred Stock and the denominator
of which shall be such Current Market Price per share of Preferred Stock. Such
adjustments shall be made successively whenever such a record date is fixed, and
in the event that such distribution is not so made, the Purchase Price shall be
adjusted to be the Purchase Price that would have been in effect if such record
date had not been fixed.
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(d)(i) For the purpose of any computation hereunder, other than
computations made pursuant to Section 11(a)(iii) hereof, the "Current
Market Price" per share of Common Stock of a Person on any date shall be
deemed to be the average of the daily Closing Prices per share of such
Common Stock for the 30 consecutive Trading Days immediately prior to such
date, and for purposes of computations made pursuant to Section 11(a)(iii)
hereof, the "Current Market Price" per share of Common Stock on any date
shall be deemed to be the average of the daily Closing Prices per share of
such Common Stock for the 10 consecutive Trading Days immediately following
such date; provided, however, that in the event that the Current Market
Price per share of Common Stock is determined during a period following the
announcement of (A) a dividend or distribution on such Common Stock other
than a regular quarterly cash dividend or the dividend of the Rights, or
(B) any subdivision, combination or reclassification of such Common Stock,
and the ex-dividend date for such dividend or distribution, or the record
date for such subdivision, combination or reclassification, shall not have
occurred prior to the commencement of the requisite 30 Trading Day or 10
Trading Day period, as set forth above, then, and in each such case, the
Current Market Price shall be properly adjusted to take into account
ex-dividend trading. If the Common Stock is not publicly held or not so
listed or traded, "Current Market Price" per share shall mean the fair
value per share as determined in good faith by the Board of Directors of
the Company, whose determination shall be described in a statement filed
with the Rights Agent and shall be conclusive for all purposes.
(ii) For the purpose of any computation hereunder, the "Current Market
Price" per share (or Fractional Share) of Preferred Stock shall be
determined in the same manner as set forth above for the Common Stock in
clause (i) of this Section 11(d) (other than the last sentence thereof). If
the Current Market Price per share (or Fractional Share) of Preferred Stock
cannot be determined in the manner provided above or if the Preferred Stock
is not publicly held or listed or traded in a manner described in clause
(i) of this Section 11(d), the "Current Market Price" per share of
Preferred Stock shall be conclusively deemed to be an amount equal to 1000
(as such number may be appropriately adjusted for such events as stock
splits, stock dividends and recapitalizations with respect to the Common
Stock occurring after the date of this Agreement) multiplied by the Current
Market Price per share of the Common Stock. If neither the Common Stock nor
the Preferred Stock is publicly held or so listed or traded, Current Market
Price per share of the Preferred Stock shall mean the fair value per share
as determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent
and shall be conclusive for all purposes. For all purposes of this
Agreement, the Current Market Price of a Fractional Share of Preferred
Stock shall be equal to the Current Market Price of one share of Preferred
Stock divided by 1000.
(e) Anything herein to the contrary notwithstanding, no adjustment in the
Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least 1% in the Purchase Price; provided, however,
that any adjustments that by reason of this Section 11(e) are not required to be
made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 11 shall be made to the nearest
cent or to the nearest ten-thousandth of a share of Common Stock or other share
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or to the nearest ten-thousandth of a Fractional Share of Preferred Stock, as
the case may be. Notwithstanding the first sentence of this Section 11(e), any
adjustment required by this Section 11 shall be made no later than the earlier
of (i) three years from the date of the transaction which mandates such
adjustment or (ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section 11(a) or
Section 13(a) hereof, the holder of any Right thereafter exercised shall become
entitled to receive in respect of such Right any shares of capital stock other
than Preferred Stock, thereafter the number of such other shares so receivable
upon exercise of any Right and the Purchase Price thereof shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Preferred Stock contained in
Sections 11(a), (b), (c), (e), (f), (g), (h), (i), (j), (k) and (m) hereof, and
the provisions of Sections 7, 9, 10, 13 and 14 hereof with respect to the
Preferred Stock shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of Fractional Shares of
Preferred Stock purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided in
Section 11(i), upon each adjustment of the Purchase Price as a result of the
calculations made in 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 Fractional Shares of
Preferred Stock (calculated to the nearest one ten-thousandth of a Fractional
Share) obtained by (i) multiplying (x) the number of Fractional Shares of
Preferred Stock covered by a Right immediately prior to this adjustment by (y)
the Purchase Price in effect immediately prior to such adjustment of the
Purchase Price, and (ii) dividing the product so obtained by the Purchase Price
in effect immediately after such adjustment of the Purchase Price.
(i) The Company may elect, on or after the date of any adjustment of the
Purchase Price, to adjust the number of Rights in lieu of any adjustment in the
number of Fractional Shares of Preferred Stock purchasable upon the exercise of
a Right. Each of the Rights outstanding after the adjustment in the number of
Rights shall be exercisable for the number of Fractional Shares of Preferred
Stock for which a Right was exercisable immediately prior to such adjustment.
Each Right held of record prior to such adjustment of the number of Rights shall
become that number of Rights (calculated to the nearest ten-thousandth) obtained
by dividing the Purchase Price in effect immediately prior to adjustment of the
Purchase Price by the Purchase Price in effect immediately after adjustment of
the Purchase Price. The Company shall make a public announcement of its election
to adjust the number of Rights, indicating the record date for the adjustment,
and, if known at the time, the amount of the adjustment to be made. This record
date may be the date on which the Purchase Price is adjusted or any day
thereafter, but, if the Rights Certificates have been issued, shall be at least
10 days later than the date of the public announcement. If Rights Certificates
have been issued, upon each adjustment of the number of Rights pursuant to this
Section 11(i), the Company shall, as promptly as practicable, cause to be
distributed to holders of record of Rights Certificates on such record date
Rights Certificates evidencing, subject to Section 14 hereof, the additional
Rights to which such holders shall be entitled as a result of such adjustment,
or, at the option of the Company, shall cause to be distributed to such holders
of record in substitution and replacement for the Rights Certificates held by
such holders prior to the date of adjustment, and upon surrender thereof, if
required by the Company, new Rights Certificates evidencing all the Rights to
which such holders shall be entitled after such adjustment. Rights Certificates
so to be distributed shall be issued, executed and countersigned in the manner
provided for herein (and may bear, at the option of the Company, the adjusted
Purchase Price) and shall be registered in the names of the holders of record of
Rights Certificates on the record date specified in the public announcement.
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(j) Irrespective of any adjustment or change in the Purchase Price or the
number of Fractional Shares of Preferred Stock issuable upon the exercise of the
Rights, the Rights Certificates theretofore and thereafter issued may continue
to express the Purchase Price per Fractional Share and the number of Fractional
Shares that were expressed in the initial Rights Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing the
Purchase Price below the then par value, if any, or the stated capital of the
number of Fractional Shares of Preferred Stock or of the number of shares of
Common Stock or other securities issuable upon exercise of a Right, the Company
shall take any corporate action that may, in the opinion of its counsel, be
necessary in order that the Company may validly and legally issue fully paid and
nonassessable such number of Fractional Shares of Preferred Stock or such number
of shares of Common Stock or other securities at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an adjustment
in the Purchase Price be made effective as of a record date for a specified
event, the Company may elect to defer until the occurrence of such event the
issuance to the holder of any Right exercised after such record date the number
of Fractional Shares of Preferred Stock and other capital stock or securities of
the Company, if any, issuable upon such exercise over and above the number of
Fractional Shares of Preferred Stock and other capital stock or securities of
the Company, if any, issuable upon such exercise on the basis of the Purchase
Price in effect prior to such adjustment; provided, however, that the Company
shall deliver to such holder a due bill or other appropriate instrument
evidencing such holder's right to receive such additional shares (fractional or
otherwise) or securities 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 good faith judgment the Board of Directors of the
Company shall determine to be advisable in order that any (i) consolidation or
subdivision of the Preferred Stock, (ii) issuance wholly for cash of any shares
of Preferred Stock at less than the current market price, (iii) issuance wholly
for cash of shares of Preferred Stock or securities that by their terms are
convertible into or exchangeable for shares of Preferred Stock, (iv) stock
dividends or (v) issuance of rights, options or warrants referred to in this
Section 11 hereafter made by the Company to holders of its Preferred Stock shall
not be taxable to such shareholders.
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(n) The Company covenants and agrees that it shall not, at any time that
there is an Acquiring Person, (i) consolidate with any other Person, (ii) merge
with or into, convert into or be acquired pursuant to a share exchange by any
other Person, or (iii) sell, lease or transfer (or permit one or more
Subsidiaries to sell, lease 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, if (x) at the time of or immediately after such
consolidation, merger, conversion, share exchange, sale, lease or transfer there
are any rights, warrants or other instruments or securities of the Company or
any other Person outstanding or agreements, arrangements or understandings in
effect that would substantially diminish or otherwise eliminate the benefits
intended to be afforded by the Rights, (y) prior to, simultaneously with or
immediately after such consolidation, merger, conversion, share exchange, sale,
lease or transfer, the shareholders or other equity owners of the Person who
constitutes, or would constitute, the "Principal Party" for purposes of Section
13(a) hereof shall have received a distribution of Rights previously owned by
such Person or any of its Affiliates or Associates, or (z) the identity, form or
nature of organization of the Principal Party (including, without limitation,
the selection of the Person that will be the Principal Party as a result of the
Company's entering into one or more consolidations, mergers, conversions, share
exchanges, sales, leases, transfers or transactions with more than one party)
would preclude or limit the exercise of Rights or otherwise diminish
substantially or eliminate the benefits intended to be afforded by the Rights.
(o) The Company covenants and agrees that, after the Distribution Date, it
will not, except as permitted by Section 23, Section 24 or Section 27 hereof,
take (or permit any Subsidiary to take) any action if the purpose of such action
is to, or if at the time such action is taken it is reasonably foreseeable that
such action will, diminish substantially or eliminate the benefits intended to
be afforded by the Rights.
(p) Notwithstanding Section 3(c) hereof or any other provision of this
Agreement to the contrary, in the event that the Company shall at any time after
the Rights Dividend Declaration Date and prior to the Distribution Date (i)
declare a dividend on the outstanding shares of Common Stock payable in shares
of Common Stock, (ii) subdivide the outstanding shares of Common Stock, (iii)
combine the outstanding shares of Common Stock into a smaller number of shares
or (iv) otherwise reclassify the outstanding shares of Common Stock (including
any such reclassification in connection with a consolidation or merger in which
the Company is the continuing or surviving corporation), the number of Rights
associated with each share of Common Stock then outstanding, or issued or
delivered thereafter but prior to the Distribution Date, shall be
proportionately adjusted so that the number of Rights thereafter associated with
each share of Common Stock following any such event shall equal the result
obtained by multiplying the number of Rights associated with each share of
Common Stock immediately prior to such event by a fraction (the "Adjustment
Fraction") the numerator of which shall be the total number of shares of Common
Stock outstanding immediately prior to the occurrence of the event and the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately following the occurrence of such event. In lieu of such
adjustment in the number of Rights associated with one share of Common Stock,
the Company may elect to adjust the number of Fractional Shares of Preferred
Stock purchasable upon the exercise of one Right and the Purchase Price. If the
Company makes such election, the number of Rights associated with one share of
Common Stock shall remain unchanged, and the number of Fractional Shares of
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Preferred Stock purchasable upon exercise of one Right and the Purchase Price
shall be proportionately adjusted so that (i) the number of Fractional Shares of
Preferred Stock purchasable upon exercise of a Right following such adjustment
shall equal the product of the number of Fractional Shares of Preferred Stock
purchasable upon exercise of a Right immediately prior to such adjustment
multiplied by the Adjustment Fraction and (ii) the Purchase Price following such
adjustment shall equal the product of the Purchase Price immediately prior to
such adjustment multiplied by the Adjustment Fraction.
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Section 11 or Section 13 hereof,
the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent, and with each transfer agent for the
Preferred Stock and the Common Stock, a copy of such certificate and (c) mail a
brief summary thereof to each registered holder of a Rights Certificate (or, if
prior to the Distribution Date, to each registered holder of a certificate
representing shares of Common Stock) in accordance with Section 26 hereof. The
Rights Agent shall be fully protected in relying on any such certificate and on
any adjustment therein contained.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning
Power.
(a) In the event that, from and after the time an Acquiring Person has
become such, directly or indirectly, (x) the Company shall consolidate with, or
merge with and into, convert into, any other Person, and the Company shall not
be the continuing or surviving corporation of such consolidation, merger or
conversion, (y) any Person shall consolidate with, merge with or into, or
convert into the Company, and the Company shall be the continuing or surviving
corporation of such consolidation, merger or conversion, or the Company shall be
party to a share exchange, and, in connection with such consolidation, merger,
conversion or share exchange, all or part of the outstanding shares of Common
Stock shall be changed into or exchanged for stock or other securities of the
Company or any other Person or cash or any other property, or (z) the Company
shall sell, lease or otherwise transfer (or one or more of its Subsidiaries
shall sell, lease or otherwise transfer), in one transaction or a series of
related transactions, assets or earning power aggregating more than 50% of the
assets or earning power of the Company and its Subsidiaries (taken as a whole)
to any Person or Persons (other than the Company or any wholly owned Subsidiary
of the Company or any combination thereof in one or more transactions each of
which complies (and all of which together comply) with Section 11(o) hereof),
then, and in each such case (except as may be contemplated by Section 13(d)
hereof), proper provision shall be made so that: (i) the Purchase Price shall be
adjusted to be the Purchase Price immediately prior to the first occurrence of a
Triggering Event multiplied by the number of Fractional Shares of Preferred
Stock for which a Right was exercisable immediately prior to such first
occurrence; (ii) on and after the Distribution Date, each holder of a Right,
except as provided in Section 7(e) hereof, shall thereafter have the right to
receive, upon the exercise thereof at the Purchase Price in accordance with the
terms of this Agreement, in lieu of shares of Preferred Stock or Common Stock of
the Company, such number of validly authorized and issued, fully paid,
nonassessable and freely tradeable shares of Common Stock of the Principal Party
(as such term is hereinafter defined), not subject to any liens, encumbrances,
rights of first refusal or other adverse claims, as shall be equal to the result
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obtained by dividing the Purchase Price by 50% of the Current Market Price per
share of the Common Stock of such Principal Party on the date of consummation of
such Flip-Over Event; provided that the Purchase Price and the number of shares
of Common Stock of such Principal Party issuable upon exercise of each Right
shall be further adjusted as provided in this Agreement to reflect any events
occurring after the date of such first occurrence of a Triggering Event or after
the date of such Flip-Over Event, as applicable; (iii) such Principal Party
shall thereafter be liable for, and shall assume, by virtue of such Flip-Over
Event, all the obligations and duties of the Company pursuant to this Agreement;
(iv) the term "Company" shall thereafter be deemed to refer to such Principal
Party, it being specifically intended that the provisions of Section 11 hereof
shall apply only to such Principal Party following the first occurrence of a
Flip-Over Event; (v) such Principal Party shall take such steps (including, but
not limited to, the reservation of a sufficient number of shares of its Common
Stock) in connection with the consummation of any such transaction as may be
necessary to assure that the provisions hereof shall thereafter be applicable,
as nearly as reasonably may be, in relation to its shares of Common Stock
thereafter deliverable upon the exercise of the Rights; and (vi) the provisions
of Section 11(a)(ii) hereof shall be of no effect following the occurrence of
any Flip-Over Event.
(b) "Principal Party" shall mean
(i) in the case of any transaction described in clause (x) or (y) of
the first sentence of Section 13(a), (A) the Person that is the issuer of
any securities into which shares of Common Stock of the Company are
converted in such merger, consolidation, conversion or share exchange, or,
if there is more than one such issuer, the issuer the Common Stock of which
has the greatest aggregate market value, or (B) if no securities are so
issued, (x) the Person that survives such consolidation or is the other
party to the merger and survives such merger, or, if there is more than one
such Person, the Person the Common Stock of which
has the greatest aggregate market value or (y) if the Person that is the
other party to the merger does not survive the merger, the Person that does
survive the merger (including the Company if it survives); and
(ii) in the case of any transaction described in clause (z) of the
first sentence of Section 13(a), the Person that is the party receiving the
greatest portion of the assets or earning power transferred pursuant to
such transaction or transactions, or, if each Person that is a party to
such transaction or transactions receives the same portion of the assets or
earning power so transferred, or if the Person receiving the greatest
portion of the assets or earning power cannot be determined, the Person the
Common Stock of which has the greatest aggregate market value;
provided, however, that in any such case, if the Common Stock of such Person is
not at such time and has not been continuously over the preceding twelve-month
period registered under Section 12 of the Exchange Act, and if (1) such Person
is a direct or indirect Subsidiary of another Person the Common Stock of which
is and has been so registered, "Principal Party" shall refer to such other
Person; (2) such Person is a Subsidiary, directly or indirectly, of more than
one Person, the Common Stocks of all of which are and have been so registered,
"Principal Party" shall refer to whichever of such Persons is the issuer of the
Common Stock having the greatest aggregate market value; and (3) such Person is
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owned, directly or indirectly, by a joint venture formed by two or more Persons
that are not owned, directly or indirectly, by the same Person, the rules set
forth in (1) and (2) above shall apply to each of the chains of ownership having
an interest in such joint venture as if such party were a "Subsidiary" of both
or all of such joint venturers and the Principal Parties in each such chain
shall bear the obligations set forth in this Section 13 in the same ratio as
their direct or indirect interests in such Person bear to the total of such
interests.
(c) The Company shall not consummate any Flip-Over Event unless each
Principal Party (or Person that may become a Principal Party as a result of such
Flip-Over Event) shall have a sufficient number of authorized shares of its
Common Stock that have not been issued or reserved for issuance to permit the
exercise in full of the Rights in accordance with this Section 13 and unless
prior thereto the Company and each 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 such Flip-Over Event, the
Principal Party at its own expense will
(i) prepare and file a registration statement under the Securities Act
with respect to the Rights and the securities purchasable upon exercise of
the Rights on an appropriate form, and will use its best efforts to cause
such registration statement to (A) become effective as soon as practicable
after such filing and (B) remain effective (with a prospectus at all times
meeting the requirements of the Securities Act) until the Expiration Date;
(ii) use its best efforts to qualify or register the Rights and the
securities purchasable upon exercise of the Rights under the "blue sky"
laws of such jurisdictions as may be necessary or appropriate;
(iii) use its best efforts, if the Common Stock of the Principal Party
is or shall become listed on a national securities exchange, to list (or
continue the listing of) the Rights and the securities purchasable upon
exercise of the Rights on such securities exchange and, if the Common Stock
of the Principal Party shall not be listed on a national securities
exchange, to cause the Rights and the securities purchasable upon exercise
of the Rights to be reported by NASDAQ or such other transaction reporting
system then in use; and
(iv) deliver to holders of the Rights historical financial statements
for the Principal Party and each of its Affiliates that comply in all
respects with the requirements for registration on Form 10 under the
Exchange Act.
The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. In the event that a Flip-Over Event
shall occur at any time after the occurrence of a Flip-In Event, the Rights that
have not theretofore been exercised shall thereafter become exercisable in the
manner described in Section 13(a).
(d) Notwithstanding anything in this Agreement to the contrary, Section 13
shall not be applicable to a transaction described in subparagraphs (x) and (y)
of Section 13(a) if (i) such transaction is consummated with a Person or Persons
who acquired shares of Common Stock pursuant to a Permitted Offer (or a wholly
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owned subsidiary of any such Person or Persons), (ii) the price per share of
Common Stock offered in such transaction is not less than the price per share of
Common Stock paid to all holders of Common Stock whose shares were purchased
pursuant to such Permitted Offer, and (iii) the form of consideration being
offered to the remaining holders of shares of Common Stock pursuant to such
transaction is the same as the form of consideration paid pursuant to such
Permitted Offer. Upon consummation of any such transaction contemplated by this
Section 13(d), all Rights hereunder shall expire.
Section 14. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue fractions of Rights, except
prior to the Distribution Date as provided in Section 11(p) hereof, or to
distribute Rights Certificates or scrip evidencing fractional Rights. In lieu of
such fractional Rights, there shall be paid to the registered holders of the
Rights Certificates with regard to which such fractional Rights would otherwise
be issuable, an amount in cash equal to the same fraction of the Closing Price
of one Right for the Trading Day immediately prior to the date on which such
fractional Rights would have been otherwise issuable.
(b) The Company shall not be required to issue fractions of shares of
Preferred Stock (other than, except as provided in Section 7(c) hereof,
fractions that are integral multiples of a Fractional Share of Preferred Stock)
upon exercise of the Rights or to distribute certificates or scrip evidencing
fractional shares of Preferred Stock (other than, except as provided in Section
7(c) hereof, fractions that are integral multiples of a Fractional Share of
Preferred Stock). Interests in fractions of shares of Preferred Stock in
integral multiples of a Fractional Share of Preferred Stock may, at the election
of the Company in its sole discretion, be evidenced by depositary receipts,
pursuant to an appropriate agreement between the Company and a depositary
selected by it, provided that such agreement shall provide that the holders of
such depositary receipts shall have all the rights, privileges and preferences
to which they are entitled as beneficial owners of the shares of Preferred Stock
represented by such depositary receipts. In lieu of fractional shares of
Preferred Stock that are not integral multiples of a Fractional Share of
Preferred Stock, the Company may pay to the registered holders of Rights
Certificates at the time such Rights are exercised as herein provided an amount
in cash equal to the same fraction of one one-thousandth of the Closing Price of
a share of Preferred Stock for the Trading Day immediately prior to the date of
such exercise.
(c) Following the occurrence of a Triggering Event, the Company shall not
be required to issue fractions of shares of Common Stock upon exercise of the
Rights or to distribute certificates or scrip evidencing fractional shares of
Common Stock. In lieu of fractional shares of Common Stock, the Company may pay
to the registered holders of Rights Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same fraction of the
Closing Price of one share of Common Stock for the Trading Day immediately prior
to the date of such exercise.
(d) The holder of a Right by the acceptance of the Right expressly waives
his right to receive any fractional Rights or any fractional shares upon
exercise of a Right, except as permitted by this Section 14.
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Section 15. Rights of Action. All rights of action in respect of this
Agreement, other than rights of action vested in the Rights Agent pursuant to
Section 18 hereof, are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock) and, where applicable, the Company; and any registered holder of
any Rights Certificate (or, prior to the Distribution Date, of the Common
Stock), without the consent of the Rights Agent or of the holder of any other
Rights Certificate (or, prior to the Distribution Date, of the Common Stock),
may, in his own behalf and for his own benefit, enforce, and may institute and
maintain any suit, action or proceeding against the Company to enforce, or
otherwise act in respect of, his right to exercise the Rights evidenced by such
Rights Certificate in the manner provided in such Rights Certificate and in this
Agreement. Without limiting the foregoing or any remedies available to the
holders of Rights, it is specifically acknowledged that the holders of Rights
would not have an adequate remedy at law for any breach of this Agreement and
shall be entitled to specific performance of the obligations hereunder and
injunctive relief against actual or threatened violations of the obligations
hereunder of any Person subject to this Agreement. After a Triggering Event,
holders of Rights shall be entitled to recover the reasonable costs and
expenses, including attorneys' fees, incurred by them in any action to enforce
the provisions of this Agreement.
Section 16. Agreement of Rights Holders. Every holder of a Right by
accepting the same consents and agrees with the Company and the Rights Agent and
with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will not be evidenced by
Rights Certificates and will be transferable only in connection with the
transfer of Common Stock;
(b) after the Distribution Date, the Rights Certificates will be
transferable only on the registry books of the Rights Agent if surrendered at
the principal office or offices of the Rights Agent designated for such
purposes, duly endorsed or accompanied by a proper instrument of transfer and
with the form of assignment set forth on the reverse side thereof and the
certificate contained therein duly completed and fully executed;
(c) subject to Section 6(a) and Section 7(f) hereof, the Company and the
Rights Agent may deem and treat the Person in whose name a Rights Certificate
(or, prior to the Distribution Date, the associated Common Stock certificate) is
registered as the absolute owner thereof and of the Rights evidenced thereby
(notwithstanding any notations of ownership or writing on the Rights
Certificates or the associated Common Stock certificate made by anyone other
than the Company or the Rights Agent) for all purposes whatsoever, and neither
the Company nor the Rights Agent shall be affected by any notice to the
contrary; 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
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obligation; provided, however, the Company must use its best efforts to have any
such order, decree or ruling lifted or otherwise overturned as soon as possible.
Section 17. Rights Certificate Holder Not Deemed a Shareholder. No holder,
as such, of any Rights Certificate shall be entitled to vote, receive dividends
or be deemed for any purpose the holder of the number of Fractional Shares of
Preferred Stock or any other securities of the Company that may at any time be
issuable upon the exercise of the Rights represented thereby, nor shall anything
contained herein or in any Rights Certificate be construed to confer upon the
holder of any Rights Certificate, as such, any of the rights of a shareholder of
the Company or any right to vote for the election of directors or upon any
matter submitted to shareholders at any meeting thereof, or to give or withhold
consent to any corporate action, or to receive notice of meetings or other
actions affecting shareholders (except as provided in Section 25 hereof), or to
receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by such Rights Certificate shall have been exercised in
accordance with the provisions hereof.
Section 18. Concerning the Rights Agent.
(a) The Company agrees to pay to the Rights Agent reasonable compensation
for all services rendered by it hereunder and, from time to time, on demand of
the Rights Agent, its reasonable expenses and counsel fees and disbursements and
other reasonable disbursements incurred in the administration and execution of
this Agreement and the exercise and performance of its duties hereunder. The
Company also agrees to indemnify the Rights Agent for, and to hold it harmless
against, any loss, liability or expense, incurred without 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 Rights Certificate or
certificate for Common Stock or for other securities of the Company, instrument
of assignment or transfer, power of attorney, endorsement, affidavit, letter,
notice, direction, consent, certificate, statement or other paper or document
believed by it, after proper inquiry or examination, to be genuine and to be
signed, executed and, where necessary, guaranteed, verified or acknowledged, by
the proper Person or Persons.
Section 19. Merger or Consolidation or Change of Name of Rights Agent.
(a) Any corporation into which the Rights Agent or any successor Rights
Agent may be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any corporation succeeding to the
corporate trust or stock transfer business of the Rights Agent or any successor
Rights Agent, shall be the successor to the Rights Agent under this Agreement
without the execution or filing of any paper or any further act on the part of
any of the parties hereto; provided, however, that such corporation would be
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eligible for appointment as a successor Rights Agent under the provisions of
Section 21 hereof. In case at the time such successor Rights Agent shall succeed
to the agency created by this Agreement, any of the Rights Certificates shall
have been countersigned but not delivered, any such successor Rights Agent may
adopt the countersignature of a predecessor Rights Agent and deliver such Rights
Certificates so countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor or in
the name of the successor Rights Agent; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.
(b) In case at any time the name of the Rights Agent shall be changed and
at such time any of the Rights Certificates shall have been countersigned but
not delivered, the Rights Agent may adopt the countersignature under its prior
name and deliver Rights Certificates so countersigned; and in case at that time
any of the Rights Certificates shall not have been countersigned, the Rights
Agent may countersign such Rights Certificates either in its prior name or in
its changed name; and in all such cases such Rights Certificates shall have the
full force provided in the Rights Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the duties
and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Rights Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action taken
or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person and the
determination of "Current Market Price") be proved or established by the Company
prior to taking or suffering any action hereunder, such fact or matter (unless
other evidence in respect thereof be herein specifically prescribed) may be
deemed to be conclusively proved and established by a certificate signed by the
Chairman of the Board, the President, any Vice President, the Treasurer, any
Assistant Treasurer, the Secretary or any Assistant Secretary of the Company and
delivered to the Rights Agent; and such certificate shall be full authorization
to the Rights Agent for any action taken or suffered in good faith by it under
the provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its own negligence,
bad faith or willful misconduct. In no event shall the Rights Agent be liable
for special, indirect or consequential loss or damage of any kind whatsoever
(including but not limited to lost profits), even if the Rights Agent has been
advised of the likelihood of such loss or damage and regardless of the form of
action.
(d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Rights
Certificates or be required to verify the same (except as to its
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countersignature on such Rights Certificates), but all such statements and
recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect of
the validity of this Agreement or the execution and delivery hereof (except the
due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Rights Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Rights Certificate; nor shall it
be responsible for any adjustment required under the provisions of Section 11 or
Section 13 hereof or responsible for the manner, method or amount of any such
adjustment or the ascertaining of the existence of facts that would require any
such adjustment (except with respect to the exercise of Rights evidenced by
Rights Certificates after receipt of actual knowledge of any such adjustment);
nor shall it by any act hereunder be deemed to make any representation or
warranty as to the authorization or reservation of any shares of Preferred Stock
or Common Stock or other securities to be issued pursuant to this Agreement or
any Rights Certificate or as to whether any shares of Preferred Stock or Common
Stock or other securities will, when so issued, be validly authorized and
issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
Chairman of the Board, the President, any Vice President, the Secretary, any
Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company,
and to apply to such officers for advice or instructions in connection with its
duties, and it shall not be liable for any action taken or suffered to be taken
by it in good faith in accordance with instructions of any such officer.
(h) The Rights Agent and any shareholder, director, officer or employee of
the Rights Agent may buy, sell or deal in any of the Rights or other securities
of the Company or become pecuniarily interested in any transaction in which the
Company may be interested, or contract with or lend money to the Company or
otherwise act as fully and freely as though it were not Rights Agent under this
Agreement. Nothing herein shall preclude the Rights Agent from acting in any
other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by or through
its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, omission, default, neglect or misconduct of any such
attorneys or agents or for any loss to the Company resulting from any such act,
omission, default, neglect or misconduct; provided, however, that reasonable
care was exercised in the selection and continued employment thereof.
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(j) No provision of this Agreement shall require the Rights Agent to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
there shall be reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.
(k) If, with respect to any Rights Certificate surrendered to the Rights
Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise or transfer without first consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days' notice in writing mailed to the Company, and to each transfer
agent of the Common Stock and the Preferred Stock, by registered or certified
mail, and to the registered holders, if any, of the Rights Certificates by
first-class mail. The Company may remove the Rights Agent or any successor
Rights Agent (with or without cause) upon 30 days' notice in writing, mailed to
the Rights Agent or successor Rights Agent, as the case may be, and to each
transfer agent of the Common Stock and the Preferred Stock, by registered or
certified mail, and to the registered holders of the Rights Certificates, if
any, 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. Notwithstanding the foregoing provisions of this
Section 21, in no event shall the resignation or removal of a Rights Agent be
effective until a successor Rights Agent shall have been appointed and have
accepted such appointment. 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 registered holder of a Rights Certificate
(who shall, with such notice, submit his Rights Certificate for inspection by
the Company), then the Rights Agent or the registered holder of any Rights
Certificate may apply to any court of competent jurisdiction for the appointment
of a new Rights Agent. Any successor Rights Agent, whether appointed by the
Company or by such a court, shall be (a) a corporation organized and doing
business under the laws of the United States or of the State of Texas (or of any
other state of the United States so long as such corporation is authorized to
conduct a stock transfer or corporate trust business in the State of Texas), in
good standing, 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 at the time of its appointment as Rights Agent
a combined capital and surplus of at least $100,000,000 or (b) an affiliate of a
corporation described in clause (a) of this sentence. After appointment, the
successor Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and transfer
to the successor Rights Agent any property at the time held by it hereunder, and
execute and deliver any further assurance, conveyance, act or deed necessary for
the purpose. Not later than the effective date of any such appointment, the
Company shall file notice thereof in writing with the predecessor Rights Agent
and each transfer agent of the Common Stock and the Preferred Stock, and mail a
notice thereof in writing to the registered holders of the Rights Certificates.
Failure to give any notice provided for in this Section 21, however, or any
defect therein, shall not affect the legality or validity of the resignation or
removal of the Rights Agent or the appointment of the successor Rights Agent, as
the case may be.
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Section 22. Issuance of New Rights Certificates. Notwithstanding any of the
provisions of this Agreement or of the Rights to the contrary, the Company may,
at its option, issue new Rights Certificates evidencing Rights in such form as
may be approved by its Board of Directors to reflect any adjustment or change in
the Purchase Price and the number or kind or class of shares or other securities
or property purchasable under the Rights Certificates made in accordance with
the provisions of this Agreement. In addition, in connection with the issuance
or sale of shares of Common Stock following the Distribution Date and prior to
the Expiration Date, the Company (a) shall, with respect to shares of Common
Stock so issued or sold pursuant to the exercise of stock options or under any
employee plan or arrangement granted or awarded on or prior to the Distribution
Date, or upon the exercise, conversion or exchange of securities issued by the
Company on or prior to the Distribution Date, and (b) may, in any other case, if
deemed necessary or appropriate by the Board of Directors of the Company, issue
Rights Certificates representing the appropriate number of Rights in connection
with such issuance or sale; provided, however, that (i) no such Rights
Certificate shall be issued if, and to the extent that, the Company shall be
advised by counsel that such issuance would create a significant risk of
material adverse tax consequences to the Company or the Person to whom such
Rights Certificate would be issued, and (ii) no such Rights Certificate shall be
issued if, and to the extent that, appropriate adjustment shall otherwise have
been made in lieu of the issuance thereof.
Section 23. Redemption and Termination.
(a) The Board of Directors of the Company may, at its option, at any time
prior to the earlier of (i) the close of business on the tenth day following the
first date of public announcement of the occurrence of a Flip-In Event (or, if
such date shall have occurred prior to the Record Date, the close of business on
the tenth day following the Record Date) and (ii) the Expiration Date, cause the
Company to redeem all but not less than all the then outstanding Rights at a
redemption price of $0.01 per Right, as such amount may be appropriately
adjusted, if necessary, to reflect any stock split, stock dividend or similar
transaction occurring after the Rights Dividend Declaration Date (such
redemption price being hereinafter referred to as the "Redemption Price");
provided, however, that if there is an Acquiring Person the Rights may not be
redeemed (i) if a majority of the Board is not composed of Independent Directors
nor (ii) following any merger to which the Company is a party, which merger was
not approved by the Board of Directors of the Company and by the shareholders of
the Company at a shareholders' meeting. Notwithstanding anything contained in
this Agreement to the contrary, the Rights shall not be exercisable after the
first occurrence of a Flip-In 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 of the Common Stock at the time of redemption) or any other form of
consideration deemed appropriate by the Board of Directors.
(b) Immediately upon the effectiveness of the action of the Board of
Directors of the Company ordering the redemption of the Rights (the
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effectiveness of which action may be conditioned on the occurrence of one or
more events or on the existence of one or more facts or may be effective at some
future time), evidence of which shall be filed with the Rights Agent and without
any further action and without any notice, the right to exercise the Rights will
terminate and the only right thereafter of the holders of Rights shall be to
receive the Redemption Price for each Right so held. Promptly after the
effectiveness of the action of the Board of Directors ordering the redemption of
the Rights, the Company shall give notice of such redemption to the Rights Agent
and the registered holders of the then outstanding Rights by mailing such notice
to all such holders at each holder's last address as it appears upon the
registry books of the Rights Agent or, prior to the Distribution Date, on the
registry books of the Company for the Common Stock. Any notice that is mailed in
the manner herein provided shall be deemed given, whether or not the holder
receives the notice. Each such notice of redemption shall state the method by
which the payment of the Redemption Price will be made.
Section 24. Exchange.
(a) The Board of Directors of the Company, if a majority thereof is
composed of Independent Directors, may, at its option, at any time and from time
to time after the occurrence of a Flip-In Event, exchange all or part of the
then outstanding and exercisable Rights (which shall not include Rights that
have become void pursuant to the provisions of Section 7(e) hereof) for shares
of Common Stock or Common Stock Equivalents or any combination thereof, at an
exchange ratio of one share of Common Stock, or such number of Common Stock
Equivalents or units representing fractions thereof as would be deemed to have
the same value as one share of Common Stock, per Right, appropriately adjusted,
if necessary, to reflect any stock split, stock dividend or similar transaction
occurring after the Rights Dividend Declaration Date (such exchange ratio being
hereinafter referred to as the "Exchange Ratio"). Notwithstanding the foregoing,
the Board of Directors may not effect such exchange at any time after (i) 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
shares of Common Stock then outstanding or (ii) the occurrence of a Flip- Over
Event.
(b) Immediately upon the effectiveness of the action of the Board of
Directors of the Company ordering the exchange of any Rights pursuant to and in
accordance with subsection (a) of this Section 24 (the effectiveness of which
action may be conditioned on the occurrence of one or more events or on the
existence of one or more facts or may be effective at some future time) 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 shares of Common Stock and/or Common Stock
Equivalents 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 registered 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 shares of Common
Stock and/or Common Stock Equivalents for Rights will be effected and, in the
event of any partial exchange, the number of Rights that will be exchanged. Any
partial exchange shall be effected as nearly pro rata as possible based on the
number of Rights (other than Rights that have become void pursuant to the
provisions of Section 7(e) hereof) held by each holder of Rights.
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(c) In the event that the number of shares of Common Stock that are
authorized by the Company's certificate of incorporation but not outstanding or
reserved for issuance for purposes other than upon exercise of the Rights is not
sufficient to permit an exchange of Rights as contemplated in accordance with
this Section 24, the Company may, at its option, take all such action as may be
necessary to authorize additional shares of Common Stock for issuance upon
exchange of the Rights.
(d) The Company shall not be required to issue fractions of shares of
Common Stock or to distribute certificates or scrip evidencing fractional shares
of Common Stock. In lieu of such fractional shares of Common Stock, the Company
shall pay to the registered holders of Rights with regard to which such
fractional shares of Common Stock would otherwise be issuable an amount in cash
equal to the same fraction of the value of a whole share of Common Stock. For
purposes of this Section 24, the value of a whole share of Common Stock shall be
the Closing Price per share of Common Stock for the Trading Day immediately
prior to the date of exchange pursuant to this Section 24, and the value of any
Common Stock Equivalent shall be deemed to have the same value as the Common
Stock on such date.
Section 25. Notice of Certain Events.
(a) In case the Company shall propose, at any time after the Distribution
Date, (i) to pay any dividend payable in stock of any class to the holders of
Preferred Stock or to make any other distribution to the holders of Preferred
Stock (other than a regular quarterly cash dividend out of earnings or retained
earnings of the Company), or (ii) to offer to the holders of Preferred Stock
rights or warrants to subscribe for or to purchase any additional shares of
Preferred Stock or shares of stock of any class or any other securities, rights
or options, or (iii) to effect any reclassification of its Preferred Stock
(other than a reclassification involving only the subdivision of outstanding
shares of Preferred Stock), or (iv) to effect any consolidation, conversion or
merger into or with any other Person (other than a wholly owned Subsidiary of
the Company in a transaction that complies with Section 11(o) hereof), or to
effect any sale, lease or other transfer of all or substantially all the
Company's assets to any other Person or Persons (other than a wholly owned
Subsidiary of the Company in a transaction that complies with Section 11(o)
hereof), or (v) to effect the liquidation, dissolution or winding up of the
Company, or (vi) to be acquired pursuant to a share exchange, then, in each such
case, the Company shall give to each holder of record of a Rights Certificate,
to the extent feasible and in accordance with Section 26 hereof, a notice of
such proposed action, which shall specify the record date for the purposes of
such stock dividend, distribution of rights or warrants, or the date on which
such reclassification, consolidation, merger, sale, lease, transfer,
liquidation, dissolution or winding up is to take place and the date of
participation therein by the holders of the shares of Preferred Stock, if any
such date is to be fixed, and such notice shall be so given in the case of any
action covered by clause (i) or (ii) above at least 20 days prior to the record
date for determining holders of the shares of Preferred Stock for purposes of
such action, and in the case of any such other action, at least 20 days prior to
the date of the taking of such proposed action or the date of participation
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therein by the holders of the shares of Preferred Stock, whichever shall be the
earlier. The failure to give notice required by this Section 25 or any defect
therein shall not affect the legality or validity of the action taken by the
Company or the vote upon any such action.
(b) In case any Flip-In Event or Flip-Over Event shall occur, then (i) the
Company shall as soon as practicable thereafter give to each registered holder
of a Rights Certificate (or if occurring prior to the Distribution Date, the
registered holders of Common Stock), in accordance with Section 26 hereof, a
notice of the occurrence of such event, which shall specify the event and the
consequences of the event to holders of Rights under Section 11(a)(ii) or
Section 13(a) hereof, and (ii) all references in the preceding paragraph to
Preferred Stock shall be deemed thereafter to refer to Common Stock and/or, if
appropriate, other securities.
Section 26. Notices. Notices or demands authorized by this Agreement to be
given or made by the Rights Agent or by the holder of any Rights Certificate to
or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:
Whole Foods Market, Inc.
601 North Lamar, #300
Austin, Texas 78703
Attention: Chief Financial Officer
Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Company) as follows:
Securities Transfer Corporation
16910 Dallas Parkway, Suite 100
Dallas, Texas 75248
Attention: Kevin V. Halter, President
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Common Stock) shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed to such holder at the address of
such holder as shown on the registry books of the Company.
Section 27. Supplements and Amendments. Except as provided in the last
sentence of this Section 27, at any time when the Rights are then redeemable,
the Company may in its sole and absolute discretion and the Rights Agent shall,
if the Company so directs, supplement or amend any provision of this Agreement
in any respect without the approval of any holders of Rights or holders of
Common Stock. At any time when the Rights are not redeemable, except as provided
in the last sentence of this Section 27, the Company may and the Rights Agent
shall, if the Company so directs, supplement or amend this Agreement without the
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approval of any holders of Rights in order (i) to cure any ambiguity, (ii) to
correct or supplement any provision contained herein that may be defective or
inconsistent with any other provisions herein, (iii) to shorten or lengthen any
time period hereunder or (iv) to change or supplement the provisions hereunder
in any manner that the Company may deem necessary or desirable; provided that no
such amendment or supplement shall materially adversely affect the interests of
the holders of Rights (other than an Acquiring Person or an Affiliate or
Associate of an Acquiring Person); and further provided that this Agreement may
not be supplemented or amended pursuant to this sentence to lengthen (A) a time
period relating to when the Rights may be redeemed or (B) any other time period
unless the lengthening of such other time period is for the purpose of
protecting, enhancing or clarifying the rights of, and/or the benefits to, the
holders of Rights (other than any Acquiring Person and its Affiliates and
Associates). Upon the delivery of a certificate from an appropriate officer of
the Company which states that the proposed supplement or amendment is in
compliance with the terms of this Section 27, the Rights Agent shall execute
such supplement or amendment; provided, however, that the Rights Agent may, but
shall not be obligated to, enter into any such supplement or amendment that
affects the Rights Agent's own rights, duties or immunities under this
Agreement. Notwithstanding anything contained in this Agreement to the contrary,
(1) at any time after the time a Person becomes an Acquiring Person, this
Agreement may be supplemented or amended only if (A) a majority of the Board of
Directors are Independent Directors and (B) the Board of Directors determines
that such supplement or amendment is, in their judgment, in the best interests
of the Company and its stockholders, and (2) no supplement or amendment shall be
made that decreases the Redemption Price.
Section 28. Successors. All the covenants and provisions of this Agreement
by or for the benefit of the Company or the Rights Agent shall bind and inure to
the benefit of their respective successors and assigns hereunder.
Section 29. Determinations and Actions by the Board of Directors, etc. For
all purposes of this Agreement, any calculation of the number of shares of
Common Stock outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding shares of Common Stock
of which any Person is the Beneficial Owner, shall be made in accordance with
the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations
under the Exchange Act as in effect on the date of this Agreement. The Board of
Directors of the Company (or, as set forth herein, certain specified members
thereof) shall have the exclusive power and authority to administer this
Agreement and to exercise all rights and powers specifically granted to the
Board of Directors of the Company or to the Company, or as may be necessary or
advisable in the administration of this Agreement, including, without
limitation, the right and power to (i) interpret the provisions of this
Agreement and (ii) make all determinations deemed necessary or advisable for the
administration of this Agreement (including, without limitation, a determination
to redeem or not redeem the Rights or to amend this Agreement). All such
actions, calculations, interpretations and determinations (including, for
purposes of clause (y) below, all omissions with respect to the foregoing) that
are done or made by the Board of Directors of the Company in good faith, shall
(x) be final, conclusive and binding on the Company, the Rights Agent, the
holders of the Rights, as such, and all other parties, and (y) not subject the
Board of Directors to any liability to the holders of the Rights.
-36-
<PAGE>
Section 30. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any Person other than the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the Distribution
Date, registered holders of the Common Stock) any legal or equitable right,
remedy or claim under this Agreement; but this Agreement shall be for the sole
and exclusive benefit of the Company, the Rights Agent and the registered
holders of the Rights Certificates (and, prior to the Distribution Date,
registered holders of the Common Stock).
Section 31. Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board of
Directors of the Company, if a majority thereof is composed of Independent
Directors, determines in its good faith judgment that severing the invalid
language from this Agreement would adversely affect the purpose or effect of
this Agreement, then, unless there has occurred any merger referred to in the
proviso to the first sentence of Section 23(a), the right of redemption set
forth in Section 23 hereof shall be reinstated and shall not expire until the
close of business on the tenth day following the date of such determination by
the Board of Directors of the Company or, if earlier, immediately prior to any
such merger. Without limiting the foregoing, if any provision requiring that a
determination be made by less than the entire Board of Directors of the Company
or only if the Board of Directors is composed of a majority of Independent
Directors, respectively, is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, such determination shall then be
made by the entire Board of Directors of the Company or be made by the Board of
Directors without regard to whether it is so composed of a majority of
Independent Directors, as the case may be.
Section 32. Governing Law. This Agreement, each Right and each Rights
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts made
and to be performed entirely within such State.
Section 33. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
Section 34. Descriptive Headings. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
-37-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
WHOLE FOODS MARKET, INC.
By /s/ Glenda Flanagan
----------------------------
Name: Glenda Flanagan
Title: Chief Financial Officer
SECURITIES TRANSFER CORPORATION
By /s/ Kevin B. Halter, Jr.
---------------------------
Name: Kevin B. Halter, Jr.
Title: President
-38-
<PAGE>
- --------------------------------------------------------------------------------
WHOLE FOODS MARKET, INC.
and
SECURITIES TRANSFER CORPORATION,
Rights Agent
----------------
Rights Agreement
Dated as of September 22, 1999
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C>
Section 1. Certain Definitions..........................................................1
Section 2. Appointment of Rights Agent..................................................8
Section 3. Issue of Rights Certificates.................................................8
Section 4. Form of Rights Certificates..................................................9
Section 5. Countersignature and Registration...........................................10
Section 6. Transfer, Split-Up, Combination and Exchange of Rights Certificates;
Mutilated, Destroyed, Lost or Stolen Rights Certificates....................11
Section 7. Exercise of Rights; Purchase Price..........................................12
Section 8. Cancellation and Destruction of Rights Certificates.........................14
Section 9. Reservation and Availability of Capital Stock...............................14
Section 10. Preferred Stock Record Date.................................................15
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or
Number of Rights ...........................................................16
Section 12. Certificate of Adjusted Purchase Price or Number of Shares..................23
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power........23
Section 14. Fractional Rights and Fractional Shares.....................................26
Section 15. Rights of Action............................................................27
Section 16. Agreement of Rights Holders.................................................27
Section 17. Rights Certificate Holder Not Deemed a Shareholder..........................28
Section 18. Concerning the Rights Agent.................................................28
Section 19. Merger or Consolidation or Change of Name of Rights Agent...................29
Section 20. Duties of Rights Agent......................................................29
-i-
<PAGE>
Section 21. Change of Rights Agent......................................................31
Section 22. Issuance of New Rights Certificates.........................................32
Section 23. Redemption and Termination..................................................33
Section 24. Exchange....................................................................33
Section 25. Notice of Certain Events....................................................35
Section 26. Notices.....................................................................35
Section 27. Supplements and Amendments..................................................36
Section 28. Successors..................................................................37
Section 29. Determinations and Actions by the Board of Directors, etc...................37
Section 30. Benefits of this Agreement..................................................37
Section 31. Severability................................................................37
Section 32. Governing Law...............................................................38
Section 33. Counterparts................................................................38
Section 34. Descriptive Headings........................................................38
Exhibit A - Form of Certificate of Designations of Series A Junior Participating Preferred Stock
Exhibit B - Form of Rights Certificate
Exhibit C - Summary of Rights to Purchase Preferred Stock
</TABLE>
-ii-
<PAGE>
Exhibit A
FORM OF
STATEMENT OF RESOLUTION ESTABLISHING SERIES OF SHARES
designated
SERIES B JUNIOR PARTICIPATING PREFERRED STOCK
of
WHOLE FOODS MARKET, INC.
Pursuant to Article 2.13D of the
Texas Business Corporation Act
Pursuant to the provisions of Article 2.13D of the Texas Business
Corporation Act, the undersigned corporation submits the following statement for
the purpose of establishing and designating a series of shares of its Preferred
Stock, par value $0.01 per share, designated "Series A Junior Participating
Preferred Stock" and fixing and determining the relative rights and preferences
thereof:
1. The name of the corporation is Whole Foods Market, Inc. (the
"Corporation").
2. The following resolution, establishing and designating a series of
shares and fixing and determining the relative rights and preferences thereof,
was duly adopted by all necessary action on the part of the Corporation,
consisting of due adoption by the Board of Directors of the Corporation at a
meeting duly held on September 22, 1999:
RESOLVED, that pursuant to the authority vested in the Board of
Directors of this Corporation in accordance with the provisions of the
Restated Articles of Incorporation, a series of Preferred Stock, par
value $0.01 per share, of the Corporation be and hereby is created,
and that the designation and number of shares thereof and the
preferences, limitations and relative rights, including voting rights
of the shares of such series and the qualifications, limitations and
restrictions thereof are as follows:
Series A Junior Participating Preferred Stock
1. Designation and Amount. There shall be a series of Preferred Stock that
shall be designated as "Series A Junior Participating Preferred Stock," and the
number of shares constituting such series shall be 100,000. Such number of
shares may be increased or decreased by resolution of the Board of Directors;
provided, however, that no decrease shall reduce the number of shares of Series
A Junior Participating Preferred Stock to less than the number of shares then
issued and outstanding plus the number of shares issuable upon exercise of
outstanding rights, options or warrants or upon conversion of outstanding
securities issued by the Corporation.
A-1
<PAGE>
2. Dividends and Distributions.
(A) Subject to the prior and superior rights of the holders of any shares
of any series of Preferred Stock ranking prior and superior to the shares of
Series A Junior Participating Preferred Stock with respect to dividends, the
holders of shares of Series A Junior Participating Preferred Stock, in
preference to the holders of shares of any class or series of stock of the
Corporation ranking junior to the Series A Junior Participating Preferred Stock,
shall be entitled to receive, when, as and if declared by the Board of Directors
out of funds legally available for the purpose, quarterly dividends payable in
cash on the 15th day of March, June, September and December in each year (each
such date being referred to herein as a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment Date after the first issuance
of a share or fraction of a share of Series A Junior Participating Preferred
Stock, in an amount per share (rounded to the nearest cent) equal to the greater
of (a) $20.00 or (b) the Adjustment Number (as defined below) times the
aggregate per share amount of all cash dividends, and the Adjustment Number
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, with no par value, of the
Corporation (the "Common Stock") since the immediately preceding Quarterly
Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment
Date, since the first issuance of any share or fraction of a share of Series A
Junior Participating Preferred Stock. The "Adjustment Number" shall initially be
1000. In the event the Corporation shall at any time after September 22, 1999
(the "Rights Declaration Date") (i) declare any dividend on Common Stock payable
in shares of Common Stock, (ii) subdivide the outstanding Common Stock or (iii)
combine the outstanding Common Stock into a smaller number of shares, then in
each such case the Adjustment Number in effect immediately prior to such event
shall be adjusted by multiplying such Adjustment Number by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the Series
A Junior Participating Preferred Stock as provided in paragraph (A) above
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock); provided that, in the
event no dividend or distribution shall have been declared on the Common Stock
during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $20.00 per share on
the Series A Junior Participating Preferred Stock shall nevertheless be payable
on such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding shares
of Series A Junior Participating Preferred Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares of Series A Junior
Participating Preferred Stock, unless the date of issue of such shares is 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
A-2
<PAGE>
date after the record date for the determination of holders of shares of Series
A Junior Participating Preferred Stock entitled to receive a quarterly dividend
and before such Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends
paid on the shares of Series A Junior Participating Preferred Stock in an amount
less than the total amount of such dividends at the time accrued and payable on
such shares shall be allocated pro rata on a share-by-share basis among all such
shares at the time outstanding. The Board of Directors may fix a record date for
the determination of holders of shares of Series A Junior Participating
Preferred Stock entitled to receive payment of a dividend or distribution
declared thereon, which record date shall be no more than 30 days prior to the
date fixed for the payment thereof.
3. Voting Rights. The holders of shares of Series A Junior Participating
Preferred Stock shall have the following voting rights:
(A) Each share of Series A Junior Participating Preferred Stock shall
entitle the holder thereof to a number of votes equal to the Adjustment Number
on all matters submitted to a vote of the shareholders of the Corporation.
(B) Except as otherwise provided herein, in the Restated Articles of
Incorporation or by law, the holders of shares of Series A Junior Participating
Preferred Stock, the holders of shares of any other class or series entitled to
vote with the Common Stock and the holders of shares of Common Stock shall vote
together as one class on all matters submitted to a vote of shareholders of the
Corporation.
(C)(i) If at any time dividends on any Series A Junior Participating
Preferred Stock shall be in arrears in an amount equal to six quarterly
dividends thereon, the occurrence of such contingency shall mark the beginning
of a period (herein called a "default period") that shall extend until such time
when all accrued and unpaid dividends for all previous quarterly dividend
periods and for the current quarterly dividend period on all shares of Series A
Junior Participating Preferred Stock then outstanding shall have been declared
and paid or set apart for payment. During each default period, (1) the number of
Directors shall be increased by two, effective as of the time of election of
such Directors as herein provided, and (2) the holders of Preferred Stock
(including holders of the Series A Junior Participating Preferred Stock) upon
which these or like voting rights have been conferred and are exercisable (the
"Voting Preferred Stock") with dividends in arrears in an amount equal to six
quarterly dividends thereon, voting as a class, irrespective of series, shall
have the right to elect such two Directors.
(ii) During any default period, such voting right of the holders of Series
A Junior Participating Preferred Stock may be exercised initially at a special
meeting called pursuant to subparagraph (iii) of this Section 3(C) or at any
annual meeting of shareholders, and thereafter at annual meetings of
shareholders, provided that such voting right shall not be exercised unless the
holders of at least one-third in number of the shares of Voting Preferred Stock
outstanding shall be present in person or by proxy. The absence of a quorum of
the holders of Common Stock shall not affect the exercise by the holders of
Voting Preferred Stock of such voting right.
A-3
<PAGE>
(iii) Unless the holders of Voting Preferred Stock shall, during an
existing default period, have previously exercised their right to elect
Directors, the Board of Directors may order, or any shareholder or shareholders
owning in the aggregate not less than ten percent of the total number of shares
of Voting Preferred Stock outstanding, irrespective of series, may request, the
calling of a special meeting of the holders of Voting Preferred Stock, which
meeting shall thereupon be called by the Chairman of the Board, the President, a
Vice President or the Secretary of the Corporation. Notice of such meeting and
of any annual meeting at which holders of Voting Preferred Stock are entitled to
vote pursuant to this paragraph (C)(iii) shall be given to each holder of record
of Voting Preferred Stock by mailing a copy of such notice to him at his last
address as the same appears on the books of the Corporation. Such meeting shall
be called for a time not earlier than 20 days and not later than 60 days after
such order or request or, in default of the calling of such meeting within 60
days after such order or request, such meeting may be called on similar notice
by any shareholder or shareholders owning in the aggregate not less than ten
percent of the total number of shares of Voting Preferred Stock outstanding.
Notwithstanding the provisions of this paragraph (C)(iii), no such special
meeting shall be called during the period within 60 days immediately preceding
the date fixed for the next annual meeting of the shareholders.
(iv) In any default period, after the holders of Voting Preferred Stock
shall have exercised their right to elect Directors voting as a class, (x) the
Directors so elected by the holders of Voting Preferred Stock shall continue in
office until their successors shall have been elected by such holders or until
the expiration of the default period, and (y) any vacancy in the Board of
Directors may be filled by vote of a majority of the remaining Directors
theretofore elected by the holders of the class or classes of stock which
elected the Director whose office shall have become vacant. References in this
paragraph (C) to Directors elected by the holders of a particular class or
classes of stock shall include Directors elected by such Directors to fill
vacancies as provided in clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default period, (x) the right of
the holders of Voting Preferred Stock as a class to elect Directors shall cease,
(y) the term of any Directors elected by the holders of Voting Preferred Stock
as a class shall terminate and (z) the number of Directors shall be such number
as may be provided for in the Restated Articles of Incorporation or By-Laws
irrespective of any increase made pursuant to the provisions of paragraph (C) of
this Section 3 (such number being subject, however, to change thereafter in any
manner provided by law or in the Restated Articles of Incorporation or By-Laws).
Any vacancies in the Board of Directors effected by the provisions of clauses
(y) and (z) in the preceding sentence may be filled by a majority of the
remaining Directors.
(D) Except as set forth herein, holders of Series A Junior Participating
Preferred Stock shall have no special voting rights and their consent shall not
be required (except to the extent they are entitled to vote with holders of
Common Stock as set forth herein) for taking any corporate action.
A-4
<PAGE>
4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Junior Participating Preferred Stock as provided in
Section 2 are in arrears, thereafter and until all accrued and unpaid dividends
and distributions, whether or not declared, on shares of Series A Junior
Participating Preferred Stock outstanding shall have been paid in full, the
Corporation shall not
(i) declare or pay dividends on, make any other distributions on, or
redeem or purchase or otherwise acquire for consideration any shares of
stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Junior Participating Preferred
Stock;
(ii) declare or pay dividends on or make any other distributions on
any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Junior
Participating Preferred Stock, except dividends paid ratably on the Series
A Junior Participating Preferred Stock and all such parity stock on which
dividends are payable or in arrears in proportion to the total amounts to
which the holders of all such shares are then entitled; or
(iii) redeem or purchase or otherwise acquire for consideration any
shares of Series A Junior Participating Preferred Stock, or any shares of
stock ranking on a parity with the Series A Junior Participating Preferred
Stock, except in accordance with a purchase offer made in writing or by
publication (as determined by the Board of Directors) to all holders of
Series A Junior Participating Preferred Stock, or to all such holders and
the holders of any such shares ranking on a parity therewith, 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.
5. Reacquired Shares. Any shares of Series A Junior Participating Preferred
Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition thereof.
All such shares shall upon their cancellation become authorized but unissued
shares of Preferred Stock and may be reissued as part of a new series of
Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to any conditions and restrictions on issuance set forth
herein.
6. Liquidation, Dissolution or Winding Up. (A) Upon any liquidation
(voluntary or otherwise), dissolution or winding up of the Corporation, no
distribution shall be made to the
A-5
<PAGE>
holders of shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Junior Participating
Preferred Stock unless, prior thereto, the holders of shares of Series A Junior
Participating Preferred Stock shall have received $1,000 per share, plus an
amount equal to accrued and unpaid dividends and distributions thereon, whether
or not declared, to the date of such payment (the "Series A Liquidation
Preference"). Following the payment of the full amount of the Series A
Liquidation Preference, no additional distributions shall be made to the holders
of shares of Series A Junior Participating Preferred Stock unless, prior
thereto, the holders of shares of Common Stock shall have received an amount per
share (the "Common Adjustment") equal to the quotient obtained by dividing (i)
the Series A Liquidation Preference by (ii) the Adjustment Number. Following the
payment of the full amount of the Series A Liquidation Preference and the Common
Adjustment in respect of all outstanding shares of Series A Junior Participating
Preferred Stock and Common Stock, respectively, holders of Series A Junior
Participating Preferred Stock and holders of shares of Common Stock shall,
subject to the prior rights of all other series of Preferred Stock, if any,
ranking prior thereto, receive their ratable and proportionate share of the
remaining assets to be distributed in the ratio of the Adjustment Number to 1
with respect to such Series A Junior Participating Preferred Stock and Common
Stock, on a per share basis, respectively.
(B) In the event, however, that there are not sufficient assets available
to permit payment in full of the Series A Liquidation Preference and the
liquidation preferences of all other series of Preferred Stock, if any, that
rank on a parity with the Series A Junior Participating Preferred Stock, then
such remaining assets shall be distributed ratably to the holders of such parity
shares in proportion to their respective liquidation preferences. In the event,
however, that there are not sufficient assets available to permit payment in
full of the Common Adjustment, then such remaining assets shall be distributed
ratably to the holders of Common Stock.
(C) Neither the merger or consolidation of the Corporation into or with
another corporation nor the merger or consolidation of any other corporation
into or with the Corporation shall be deemed to be a liquidation, dissolution or
winding up of the Corporation within the meaning of this Section 6, but the
sale, lease or conveyance of all or substantially all the Corporation's assets
shall be deemed to be a liquidation, dissolution or winding up of the
Corporation within the meaning of this Section 6.
7. Consolidation, Merger, etc. In case the Corporation shall enter into any
consolidation, merger, combination, share exchange, conversion 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 each share of Series A Junior Participating Preferred Stock shall at the
same time be similarly exchanged or changed in an amount per share equal to the
Adjustment Number times the aggregate amount of stock, securities, cash and/or
any other property (payable in kind), as the case may be, into which or for
which each share of Common Stock is changed or exchanged.
8. Redemption. (A) The Corporation, at its option, may redeem shares of the
Series A Junior Participating Preferred Stock in whole at any time and in part
A-6
<PAGE>
from time to time, at a redemption price equal to the Adjustment Number times
the current per share market price (as such term is hereinafter defined) of the
Common Stock on the date of the mailing of the notice of redemption, together
with unpaid accumulated dividends to the date of such redemption. The "current
per share market price" on any date shall be deemed to be the average of the
closing price per share of such Common Stock for the ten consecutive Trading
Days (as such term is hereinafter defined) immediately prior to such date;
provided, however, that in the event that the current per share market price of
the Common Stock is determined during a period following the announcement of (A)
a dividend or distribution on the Common Stock other than a regular quarterly
cash dividend or (B) any subdivision, combination or reclassification of such
Common Stock and the ex-dividend date for such dividend or distribution, or the
record date for such subdivision, combination or reclassification, shall not
have occurred prior to the commencement of such ten Trading Day period, then,
and in each such case, the current per share market price shall be properly
adjusted to take into account ex-dividend trading. The closing price for each
day shall be the last sales 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 transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange, or, if the Common Stock is not listed or admitted to trading on the
New York Stock Exchange, on the principal national securities exchange on which
the Common Stock is listed or admitted to trading, or, if the Common Stock is
not listed or admitted to trading on any national securities exchange but sales
price information is reported for such security, as reported by the National
Association of Securities Dealers, Inc. Automated Quotations System ("NASDAQ")
or such other self-regulatory organization or registered securities information
processor (as such terms are used under the Securities Exchange Act of 1934, as
amended) that then reports information concerning the Common Stock, or, if sales
price information is not so reported, the average of the high bid and low asked
prices in the over-the-counter market on such day, as reported by NASDAQ or such
other entity, or, if on any such date the Common Stock is not quoted by any such
entity, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Common Stock selected by the
Board of Directors of the Corporation. If on any such date no such market maker
is making a market in the Common Stock, the fair value of the Common Stock on
such date as determined in good faith by the Board of Directors of the
Corporation shall be used. The term "Trading Day" shall mean a day on which the
principal national securities exchange on which the Common Stock is listed or
admitted to trading is open for the transaction of business, or, if the Common
Stock is not listed or admitted to trading on any national securities exchange
but is quoted by NASDAQ, a day on which NASDAQ reports trades, or, if the Common
Stock is not so quoted, a Monday, Tuesday, Wednesday, Thursday or Friday on
which banking institutions in the State of Texas are not authorized or obligated
by law or executive order to close.
(B) In the event that fewer than all the outstanding shares of the Series A
Junior Participating Preferred Stock are to be redeemed, the number of shares to
be redeemed shall be determined by the Board of Directors and the shares to be
redeemed shall be determined by lot or pro rata as may be determined by the
Board of Directors or by any other method that may be determined by the Board of
Directors in its sole discretion to be equitable.
A-7
<PAGE>
(C) Notice of any such redemption shall be given by mailing to the holders
of the shares of Series A Junior Participating Preferred Stock to be redeemed a
notice of such redemption, first class postage prepaid, not later than the
fifteenth day and not earlier than the sixtieth day before the date fixed for
redemption, at their last address as the same shall appear upon the books of the
Corporation. Each such notice shall state: (i) the redemption date; (ii) the
number of shares to be redeemed and, if fewer than all the shares held by such
holder are to be redeemed, the number of such shares to be redeemed from such
holder; (iii) the redemption price; (iv) the place or places where certificates
for such shares are to be surrendered for payment of the redemption price; and
(v) that dividends on the shares to be redeemed will cease to accrue on the
close of business on such redemption date. Any notice that is mailed in the
manner herein provided shall be conclusively presumed to have been duly given,
whether or not the shareholder received such notice, and failure duly to give
such notice by mail, or any defect in such notice, to any holder of Series A
Junior Participating Preferred Stock shall not affect the validity of the
proceedings for the redemption of any other shares of Series A Junior
Participating Preferred Stock that are to be redeemed. On or after the date
fixed for redemption as stated in such notice, each holder of the shares called
for redemption shall surrender the certificate evidencing such shares to the
Corporation at the place designated in such notice and shall thereupon be
entitled to receive payment of the redemption price. If fewer than all the
shares represented by any such surrendered certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares.
(D) The shares of Series A Junior Participating Preferred Stock shall not
be subject to the operation of any purchase, retirement or sinking fund.
9. Ranking. The Series A Junior Participating Preferred Stock shall rank
junior to all other series of the Corporation's Preferred Stock as to the
payment of dividends and the distribution of assets, unless the terms of any
such series shall provide otherwise, and shall rank senior to the Common Stock
as to such matters.
10. Amendment. At any time that any shares of Series A Junior Participating
Preferred Stock are outstanding, the Restated Articles of Incorporation of the
Corporation shall not be amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series A Junior
Participating Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of two-thirds or more of the outstanding shares
of Series A Junior Participating Preferred Stock, voting separately as a class.
11. Fractional Shares. Series A Junior Participating Preferred Stock may be
issued in fractions of a share that shall entitle the holder, in proportion to
such holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series A Junior Participating Preferred Stock.
A-8
<PAGE>
IN WITNESS WHEREOF, Whole Foods Market, Inc. has caused this Statement to
be executed on its behalf by the undersigned officer on ______________, 1999.
WHOLE FOODS MARKET, INC.
[Vice] President
A-9
<PAGE>
Exhibit B
[Form of Rights Certificate]
Certificate No. R- ________ Rights
NOT EXERCISABLE AFTER SEPTEMBER 22, 2009 OR EARLIER IF REDEEMED OR EXCHANGED BY
THE COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY,
AT $0.01 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS BENEFICIALLY OWNED BY OR
TRANSFERRED TO ANY PERSON WHO IS, WAS OR BECOMES AN ACQUIRING PERSON OR AN
AFFILIATE OR ASSOCIATE THEREOF (AS SUCH TERMS ARE DEFINED IN THE RIGHTS
AGREEMENT) AND CERTAIN TRANSFEREES THEREOF WILL BECOME NULL AND VOID AND WILL NO
LONGER BE TRANSFERABLE.
Rights Certificate
WHOLE FOODS MARKET, INC.
This certifies that _____________________, or registered assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions and conditions of the Rights
Agreement, dated as of September 22, 1999 as it may from time to time be
supplemented or amended (the "Rights Agreement"), between Whole Foods Market,
Inc., a Texas corporation (the "Company"), and Securities Transfer Corporation,
(the "Rights Agent"), to purchase from the Company at any time prior to 5:00
p.m. (New York time) on September 22, 1999 at the principal office or offices of
the Rights Agent designated for such purpose, or its successors as Rights Agent,
one one-thousandth of a fully paid, nonassessable share (a "Fractional Share")
of Series A Junior Participating Preferred Stock (the "Preferred Stock") of the
Company, at a purchase price of $225 per one one-thousandth of a share (the
"Purchase Price"), upon presentation and surrender of this Rights Certificate
with the Form of Election to Purchase and related Certificate set forth on the
reverse hereof duly executed. The Purchase Price may be paid in cash or by
certified check, cashier's or official bank check or bank draft payable to the
order of the Company or the Rights Agent. The number of Rights evidenced by this
Rights Certificate (and the number of shares which may be purchased upon
exercise thereof) set forth above, and the Purchase Price per Fractional Share
set forth above, are the number and Purchase Price as of September 22, 1999,
based on the Preferred Stock as constituted at such date. The Company reserves
the right to require prior to the occurrence of a Triggering Event (as such term
is defined in the Rights Agreement) that a number of Rights be exercised so that
only whole shares of Preferred Stock will be issued.
B-1
<PAGE>
From and after the first occurrence of a Triggering Event (as such term is
defined in the Rights Agreement), if the Rights evidenced by this Rights
Certificate are beneficially owned by or transferred to (i) an Acquiring Person
or an Associate or Affiliate of an Acquiring Person (as such terms are defined
in the Rights Agreement), (ii) a transferee of any such Acquiring Person,
Associate or Affiliate, or (iii) under certain circumstances specified in the
Rights Agreement, a transferee of a person who, concurrently with or after such
transfer, became an Acquiring Person or an Affiliate or Associate of an
Acquiring Person, such Rights shall, with certain exceptions, become null and
void in the circumstances set forth in the Rights Agreement, and no holder
hereof shall have any rights whatsoever with respect to such Rights from and
after the occurrence of such Triggering Event.
As provided in the Rights Agreement, the Purchase Price and the number and
kind of shares of Preferred Stock or other securities or assets that may be
purchased upon the exercise of the Rights evidenced by this Rights Certificate
are subject to modification and adjustment upon the happening of certain events,
including Triggering Events.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the above-mentioned office of the
Rights Agent and are also available upon written request to the Company or the
Rights Agent.
This Rights Certificate, with or without other Rights Certificates, upon
surrender at the principal office or offices of the Rights Agent designated for
such purpose, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of Fractional Shares of Preferred Stock as the
Rights evidenced by the Rights Certificate or Rights Certificates surrendered
shall have entitled such holder to purchase. If this Rights Certificate shall be
exercised in part, the holder shall be entitled to receive upon surrender hereof
another Rights Certificate or Rights Certificates for the number of whole Rights
not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Certificate (i) may be redeemed by the Company at its option at a
redemption price of $0.01 per Right, payable, at the election of the Company, in
cash or shares of Common Stock or such other consideration as the Board of
Directors may determine, at any time prior to the earlier of the close of
business on (a) the tenth day following the first public announcement of the
occurrence of a Flip- In Event (as such time period may be extended or shortened
pursuant to the Rights Agreement) and (b) the Expiration Date (as such term is
defined in the Rights Agreement) or (ii) may be exchanged in whole or in part
for shares of the Company's Common Stock, with no par value, and/or other equity
securities of the Company deemed to have the same value as shares of Common
B-2
<PAGE>
Stock, at any time prior to a person's becoming the beneficial owner of 50% or
more of the shares of Common Stock outstanding or the occurrence of a Flip-Over
Event.
No fractional shares of Preferred Stock are required to be issued upon the
exercise of any Right or Rights evidenced hereby (other than, except as set
forth above, fractions that are integral multiples of a Fractional Share of
Preferred Stock, which may, at the election of the Company, be evidenced by
depositary receipts), but in lieu thereof a cash payment may be made, as
provided in the Rights Agreement.
No holder of this Rights Certificate, as such, shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of shares of Preferred
Stock or of any other securities of the Company that may at any time be issuable
on the exercise hereof, nor shall anything contained in the Rights Agreement or
herein be construed to confer upon the holder hereof, as such, any of the rights
of a shareholder of the Company or any right to vote for the election of
directors or upon any matter submitted to shareholders at any meeting thereof,
or to give or withhold consent to any corporate action, or to receive notice of
meetings or other actions affecting shareholders (except as provided in the
Rights Agreement), or to receive dividends or subscription rights, or otherwise,
until the Right or Rights evidenced by this Rights Certificate shall have been
exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal.
Dated as of October 4, 1999
ATTEST: WHOLE FOODS MARKET, INC.
________________________ By ________________________________
Secretary Title:
Countersigned:
SECURITIES TRANSFER CORPORATION
By ________________________________
Authorized Signature
B-3
<PAGE>
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder
desires to transfer any Rights evidenced by the Rights
Certificate.)
FOR VALUE RECEIVED _______________________________________ hereby sells, assigns
and transfers unto _____________________________________________________________
(Please print name and address of transferee)
_________ Rights evidenced by this Rights Certificate, together with all right,
title and interest therein, and does hereby irrevocably constitute and appoint
__________________ Attorney, to transfer the said Rights on the books of the
within-named Company, with full power of substitution.
Dated: _________________, 199__
----------------------------------
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a national securities
exchange, a member of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the United
States or another eligible guarantor institution (as defined pursuant to Rule
17Ad-15 under the Securities Exchange Act of 1934, as amended).
B-4
<PAGE>
Certificate
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not
being sold, assigned and transferred by or on behalf of a Person who is or was
an Acquiring Person or an Affiliate or Associate of an Acquiring Person (as such
terms are defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it [ ]
did [ ] did not acquire the Rights evidenced by this Rights Certificate from any
Person who is, was or subsequently became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person or who is a direct or indirect transferee of an
Acquiring Person or of an Affiliate or Associate of an Acquiring Person.
Dated: _____________, 199__
----------------------------------
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a national securities
exchange, a member of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the United
States or another eligible guarantor institution (as defined pursuant to Rule
17Ad-15 under the Securities Exchange Act of 1934, as amended).
NOTICE
The signatures to the foregoing Assignment and Certificate must correspond
to the name as written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any change whatsoever.
B-5
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise
Rights represented by the Rights Certificate.)
To: WHOLE FOODS MARKET, INC.
The undersigned hereby irrevocably elects to exercise _________ Rights
represented by this Rights Certificate to purchase the shares of Preferred Stock
issuable upon the exercise of the Rights (or such other securities of the
Company or of any other person that may be issuable upon the exercise of the
Rights) and requests that certificates for such shares (or other securities) be
issued in the name of and delivered to:
Please insert social security
or other identifying number
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
Dated: ____________, 199__
----------------------------------
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a national securities
exchange, a member of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the United
States or another eligible guarantor institution (as defined pursuant to Rule
17Ad-15 under the Securities Exchange Act of 1934, as amended).
B-6
<PAGE>
Certificate
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not
being exercised by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of an Acquiring Person (as such terms are defined
pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it [ ]
did [ ] did not acquire the Rights evidenced by this Rights Certificate from any
Person who is, was or became an Acquiring Person or an Affiliate or Associate of
an Acquiring Person or who is a direct or indirect transferee of an Acquiring
Person or of an Affiliate or Associate of an Acquiring Person.
Dated: _____________, 199__
----------------------------------
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a national securities
exchange, a member of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the United
States or another eligible guarantor institution (as defined pursuant to Rule
17Ad-15 under the Securities Exchange Act of 1934, as amended).
NOTICE
The signatures to the foregoing Election to Purchase and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
B-7
<PAGE>
Exhibit C
Under certain circumstances set forth in the Rights Agreement, Rights
beneficially owned by or transferred to any Person who is, was or becomes an
Acquiring Person or an Affiliate or Associate thereof (as such terms are defined
in the Rights Agreement), and certain transferees thereof, will become null and
void and will no longer be transferable.
SUMMARY OF RIGHTS TO PURCHASE PREFERRED STOCK
On September 22, 1999, the Board of Directors of Whole Foods Market, Inc.
(the "Company") declared a dividend of one right to purchase preferred stock
("Right") for each outstanding share of the Company's Common Stock, with no par
value ("Common Stock"), to shareholders of record at the close of business on
October 4, 1999. Each Right entitles the registered holder to purchase from the
Company a unit consisting of one one-thousandth of a share (a "Fractional
Share") of Series A Junior Participating Preferred Stock, par value $.01 per
share (the "Preferred Stock"), at a purchase price of $225 per Fractional Share,
subject to adjustment (the "Purchase Price"). The description and terms of the
Rights are set forth in a Rights Agreement dated as of September 22, 1999 as it
may from time to time be supplemented or amended (the "Rights Agreement")
between the Company and Securities Transfer Corporation, as Rights Agent.
Initially, the Rights will be attached to all certificates representing
outstanding shares of Common Stock, and no separate certificates for the Rights
("Rights Certificates") will be distributed. The Rights will separate from the
Common Stock and a "Distribution Date" will occur, with certain exceptions, upon
the earlier of (i) ten days following a public announcement that a person or
group of affiliated or associated persons (an "Acquiring Person") has acquired,
or obtained the right to acquire, beneficial ownership of 15% or more of the
outstanding shares of Common Stock (the date of the announcement being the
"Stock Acquisition Date"), or (ii) ten business days following the commencement
of a tender offer or exchange offer that would result in a person's becoming an
Acquiring Person. In certain circumstances, the Distribution Date may be
deferred by the Board of Directors. Certain inadvertent acquisitions will not
result in a person's becoming an Acquiring Person if the person promptly divests
itself of sufficient Common Stock. If at the time of the adoption of the Rights
Agreement, any person or group of affiliated or associated persons is the
beneficial owner of 15% or more of the outstanding shares of Common Stock, such
person shall not become an Acquiring Person unless and until certain increases
in such person's beneficial ownership occur or are deemed to occur. Until the
Distribution Date, (a) the Rights will be evidenced by the Common Stock
certificates (together with a copy of this Summary of Rights or bearing the
notation referred to below) and will be transferred with and only with such
Common Stock certificates, (b) new Common Stock certificates issued after
October 4, 1999 will contain a notation incorporating the Rights Agreement by
reference and (c) the surrender for transfer of any certificate for Common Stock
(with or without a copy of this Summary of Rights) will also constitute the
transfer of the Rights associated with the Common Stock represented by such
certificate.
The Rights are not exercisable until the Distribution Date and will expire
at the close of business on September 22, 2009, unless earlier redeemed or
exchanged by the Company as described below.
C-1
<PAGE>
As soon as practicable after the Distribution Date, Rights Certificates
will be mailed to holders of record of Common Stock as of the close of business
on the Distribution Date and, from and after the Distribution Date, the separate
Rights Certificates alone will represent the Rights. All shares of Common Stock
issued prior to the Distribution Date will be issued with Rights. Shares of
Common Stock issued after the Distribution Date in connection with certain
employee benefit plans or upon conversion of certain securities will be issued
with Rights. Except as otherwise determined by the Board of Directors, no other
shares of Common Stock issued after the Distribution Date will be issued with
Rights.
In the event (a "Flip-In Event") that a person becomes an Acquiring Person
(except pursuant to a tender or exchange offer for all outstanding shares of
Common Stock at a price and on terms that the Board of Directors (during such
time as a majority thereof is composed of directors independent of the offeror
or any Acquiring Person) determines to be fair to and otherwise in the best
interests of the Company and its shareholders (a "Permitted Offer")), each
holder of a Right will thereafter have the right to receive, upon exercise of
such Right, a number of shares of Common Stock (or, in certain circumstances,
cash, property or other securities of the Company) having a Current Market Price
(as defined in the Rights Agreement) equal to two times the exercise price of
the Right. Notwithstanding the foregoing, following the occurrence of any
Triggering Event, all Rights that are, or (under certain circumstances specified
in the Rights Agreement) were, beneficially owned by or transferred to an
Acquiring Person (or by certain related parties) will be null and void in the
circumstances set forth in the Rights Agreement. However, Rights are not
exercisable following the occurrence of any Flip-In Event until such time as the
Rights are no longer redeemable by the Company as set forth below.
In the event (a "Flip-Over Event") that, at any time from and after the
time an Acquiring Person becomes such, (i) the Company is acquired in a merger
or other business combination transaction (other than certain mergers that
follow a Permitted Offer), or (ii) 50% or more of the Company's assets or
earning power is sold or transferred, each holder of a Right (except Rights that
are voided as set forth above) shall thereafter have the right to receive, upon
exercise, a number of shares of common stock of the acquiring company having a
Current Market Price equal to two times the exercise price of the Right. Flip-In
Events and Flip-Over Events are collectively referred to as "Triggering Events."
The number of outstanding Rights associated with a share of Common Stock,
or the number of Fractional Shares of Preferred Stock issuable upon exercise of
a Right and the Purchase Price, are subject to adjustment in the event of a
stock dividend on, or a subdivision, combination or reclassification of, the
Common Stock occurring prior to the Distribution Date. The Purchase Price
payable, and the number of Fractional Shares of Preferred Stock or other
securities or property issuable, upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution in the event of certain
transactions affecting the Preferred Stock.
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
C-2
<PAGE>
Price. No fractional shares of Preferred Stock that are not integral multiples
of a Fractional Share are required to be issued and, in lieu thereof, an
adjustment in cash may be made based on the market price of the Preferred Stock
on the last trading date prior to the date of exercise. Pursuant to the Rights
Agreement, the Company reserves the right to require prior to the occurrence of
a Triggering Event that, upon any exercise of Rights, a number of Rights be
exercised so that only whole shares of Preferred Stock will be issued.
At any time until ten days following the first date of public announcement
of the occurrence of a Flip-In Event, the Company may redeem the Rights in
whole, but not in part, at a price of $0.01 per Right, payable, at the option of
the Company, in cash, shares of Common Stock or such other consideration as the
Board of Directors may determine. Under certain circumstances set forth in the
Rights Agreement, redemption may only be made if a majority of the Board of
Directors is composed of directors that are independent of any Acquiring Person.
Immediately upon the effectiveness of the action of the Board of Directors
ordering redemption of the Rights, the Rights will terminate and the only right
of the holders of Rights will be to receive the $0.01 redemption price.
At any time after the occurrence of a Flip-In Event and prior to a person's
becoming the beneficial owner of 50% or more of the shares of Common Stock then
outstanding or the occurrence of a Flip-Over Event, the Company (if a majority
of the Board is composed of directors independent of any Acquiring Person) may
exchange the Rights (other than Rights owned by an Acquiring Person or an
affiliate or an associate of an Acquiring Person, which will have become void),
in whole or in part, at an exchange ratio of one share of Common Stock, and/or
other equity securities deemed to have the same value as one share of Common
Stock, per Right, subject to adjustment.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including, without limitation, the right
to vote or to receive dividends. While the distribution of the Rights should not
be taxable to shareholders or to the Company, shareholders may, depending upon
the circumstances, recognize taxable income in the event that the Rights become
exercisable for Common Stock (or other consideration) of the Company or for the
common stock of the acquiring company as set forth above or are exchanged as
provided in the preceding paragraph.
Other than the redemption price, any of the provisions of the Rights
Agreement may be amended by the Board of Directors of the Company (if a majority
of the Board is composed of directors independent of any Acquiring Person) as
long as the Rights are redeemable. Thereafter, the provisions of the Rights
Agreement other than the redemption price may be amended by the Board of
Directors (if a majority of the Board is composed of directors independent of
any Acquiring Person) in order to cure any ambiguity, defect or inconsistency,
to make changes that do not materially adversely affect the interests of holders
of Rights (excluding the interests of any Acquiring Person), or to shorten or
lengthen any time period under the Rights Agreement; provided, however, that no
amendment to lengthen the time period governing redemption shall be made at such
time as the Rights are not redeemable.
C-3
<PAGE>
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an exhibit to a Current Report on Form 8-K. 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 complete and is qualified in
its entirety by reference to the Rights Agreement, which is incorporated herein
by reference.
C-4
