<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM 8-A
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
VTEL CORPORATION
________________________________________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 74-2415696
________________________________________________________________________________
(State of incorporation or (IRS Employer
organization) Identification No.)
108 Wild Basin Road, Austin, Texas 78746
________________________________________________________________________________
(Address of principal executive offices) (Zip Code)
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
------------------- ------------------------------
None
Securities to be registered pursuant to Section 12(g) of the Act:
Preferred Share Purchase Rights
________________________________________________________________________________
Title of Class
<PAGE>
ITEM I. DESCRIPTION OF SECURITIES TO BE REGISTERED.
------------------------------------------
On July 10, 1996, the Board of Directors of VTEL Corporation (the
"Company") authorized the issuance of one preferred share purchase right (a
"Right") with respect to (i) each outstanding share of the Company's common
stock, $.01 par value ("Common Shares"), on July 22, 1996 (the "Rights Record
Date"), (ii) each Common Share that becomes outstanding after the Rights Record
Date, but prior to the Distribution Date (as hereinafter defined) or redemption
or expiration of the Rights and (iii) each Common Share issued under employee
plans or arrangements after the Distribution Date (as hereinafter defined), but
prior to redemption or expiration of the Rights. The Rights will be issued on
the Rights Record Date to the holders of record of Common Shares on that date.
Each Right relates to one one-thousandth (1/1000) of a share of Series A
Preferred Stock, $.01 par value (the "Preferred Shares"), subject to
adjustment. The description and terms of the Rights are set forth in a Rights
Agreement (the "Rights Agreement") dated July 10, 1996, between the Company and
First National Bank of Boston, as Rights Agent (the "Rights Agent").
DETACHMENT OF RIGHTS. Initially, the Rights will attach to all
--------------------
certificates representing outstanding Common Shares, and no separate Right
Certificates will be distributed. The Rights will separate from the Common
Shares and a "Distribution Date" will occur upon the earlier of (i) 10 days
following a public announcement that a person or group of affiliated or
associated persons (an "Acquiring Person") has acquired beneficial ownership of
10% or more of the Company's outstanding Common Shares (unless such acquisition
is an Approved Acquisition (as defined in the Rights Agreement)), or (ii) 10
business days following the commencement or announcement of an intention to
commence a tender offer or exchange offer, the consummation of which would
result in the beneficial ownership by a person or group of 10% or more of such
outstanding Common Shares.
Until the Distribution Date, (i) the Rights will be evidenced, with respect
to any of the Common Shares outstanding, by the certificates representing such
Common Shares with a copy of the Summary of Rights (Exhibit C to the Rights
Agreement) attached thereto, (ii) the rights will be transferred with and only
with the Common Shares, (iii) new Common Share certificates issued after the
Rights Record Date, upon transfer or new issuance of the Common Shares will
contain a notation incorporating the Rights Agreement by reference, and (iv) the
surrender for transfer of any certificates for Common Shares outstanding as of
the Rights Record Date, even without such notation or a copy of the Summary of
Rights being attached thereto, will also constitute the transfer of the Rights
associated with the Common Shares represented by such certificate.
As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights (the "Right Certificates") will be mailed to
holders of record of the Common Shares as of the close of Business on the
Distribution Date and such separate Right Certificates alone will thereafter
evidence the Rights.
2
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The Rights are not exercisable until the Distribution Date. The Rights
will expire on December 31, 2005 (the "Final Expiration Date"), unless the Final
Expiration Date is extended or the Rights are earlier redeemed by the Company as
described below.
Ten business days (or such later date as the Board may determine from time
to time) after any person or group announces a tender offer for 10% or more of
the Company's outstanding Common Stock, the rights will become exercisable.
Thereafter, the Rights will trade separately from the Company's Common Stock and
separate certificates representing the Rights will be issued, each which Right
will entitle the holder to purchase from the Company one one-thousandth of a
share of Preferred Stock for $55.
In addition, if any person or group acquires 10% or more of the Common
Stock, each Right not owned by the acquiror would become exercisable for the
number of shares of the Company's Common Stock that at the time have a market
value of two times the $55 exercise price of the Right. If, after any person or
group acquires 10% or more of the Common Stock, the Company is acquired in a
merger or other business transaction in which the Company is not the surviving
corporation or the Common Stock is converted into cash or securities of another
person or group, the Rights, under certain circumstances will be modified so as
to entitle the holder to buy a number of the acquiring company's common shares
having a market value of two times the $55 exercise price of each Right.
PREFERRED SHARES. The dividend, voting and liquidation rights of the
----------------
Preferred Shares are designed so that the value of one-thousandth of a Preferred
Share purchasable upon exercise of each Right will approximate the economic
value of one Common Share. Each whole Preferred Share issuable upon exercise of
the Rights will be entitled to receive, when, as and if declared, a quarterly
preferential dividend in an amount per share equal to 1000 times the dividend
declared on each Common Share. In the event of liquidation, each whole
Preferred Share will be entitled to receive a preferential liquidation payment
in an amount per share equal to $10 plus accrued and unpaid dividends and
distributions thereon. In the event of any merger, consolidation or other
transaction in which Common Shares are exchanged for or changed into other stock
or securities, cash or other property, each whole Preferred Share will be
entitled to receive 1000 times the amount received per each Common Share. Each
one one-thousandth of a Preferred Share will be entitled to one vote on all
matters submitted to a vote of the stockholders of the Company, and Preferred
Shares will generally vote together as one class with the Common Shares and any
other voting capital stock of the Company on all matters submitted to a vote of
stockholders of the Company.
The offer and sale of the Preferred Shares or Common Share issuable upon
exercise of the rights will be registered pursuant to the Securities Act of
1933, as amended; such registration will not become effective until the Rights
become exercisable.
3
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ANTIDILUTION AND OTHER ADJUSTMENTS. The number of one one-thousandths of a
----------------------------------
Preferred Share or other securities or property issuable upon exercise of the
Rights, and the Purchase Price payable, are subject to customary adjustments
from time to time to prevent dilution.
REDEMPTION OF RIGHTS. At any time prior to the earlier of (i) the close of
--------------------
business on the tenth day following the first public announcement that a person
or group has become the beneficial owner of 10% or more of the outstanding
Common Shares (except pursuant to an Approved Transaction, as defined in the
Rights Agreement) or (ii) the Final Expiration Date, the Board of Directors of
the Company may redeem all but not less than all of the then outstanding rights
at a price of $0.01 per Right (the "Redemption Price"). The Company may, at its
option, pay the Redemption Price in Common Shares (based on the market value of
the Common Shares at the time of redemption), cash or any other form of
consideration deemed appropriate by the Board of Directors. The redemption of
the Rights may be made effective at such time, on such basis and with such
conditions as the Board of Directors in its sole discretion may establish. At
the effective time of such redemption, the right to exercise the Rights will
terminate and the only right of the holders of Rights will be to receive the
Redemption Price.
NO RIGHTS AS STOCKHOLDERS. Until a Right is exercised, the holder thereof,
-------------------------
as such, will have no rights as a stockholder of the Company, including, without
limitation, the right to vote or to receive dividends.
AMENDMENT OF RIGHTS. The terms of the rights may be amended by the Board
-------------------
of Directors of the Company without the consent of the holders of the Rights,
including an amendment to extend the Final Expiration Date, and, subject to
certain restrictions, to extend the period during which the Rights may be
redeemed, except that after the Distribution Date no such amendment may
materially and adversely affect the interests of the holders of the Rights.
This summary description of the Rights does not purport to be complete and
is qualified in its entirety by reference to the Rights Agreement filed herewith
as Exhibit 1, which is hereby incorporated by reference.
4
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ITEM 2. EXHIBITS.
--------
1. Rights Agreement dated as of July 10, 1996, between VTEL Corporation
and First National Bank of Boston, which includes the form of the
Series A Preferred Stock, $0.01 par value, as Exhibit A, the form of
Rights Certificate as Exhibit B, and the Summary of Rights as Exhibit
C.
2. Form of Rights Certificate (included as Exhibit B to Rights Agreement
filed as Exhibit 1 hereto). Pursuant to the Rights Agreement, printed
Right Certificates will not be mailed until as soon as practicable
after the Distribution Date.
3. Form of Summary of Rights (included as Exhibit C to Rights Agreement
filed as Exhibit A hereto) that, together with certificates
representing the outstanding Common Shares of the Company, shall
represent the Rights until the Distribution Date.
4. Specimen of legend to be placed, pursuant to Section 3(c) of the
Rights Agreement, on all new Common Share certificates issued after
July 22, 1996 and prior to the Distribution Date upon transfer,
exchange or new issuance (included in Section 3(c) of the Rights
Agreement filed as Exhibit 1 hereto).
5
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
Dated: July 12, 1996.
--
VTEL CORPORATION
By: /s/Rodney S. Bond
-----------------------------------
Name: Rodney S. Bond
Title: Vice President-Finance
6
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT DESCRIPTION
- ------- -------------------
<S> <C>
1 Rights Agreement dated as of July 10, 1996, between
VTEL Corporation and First National Bank of Boston,
which includes the form of Certificate of Designations of
the Series A Preferred Stock, $0.01 par value, as
Exhibit A, the form of Rights Certificate as Exhibit B,
and the Summary of Rights as Exhibit C.
2 Form of Rights Certificate (included as Exhibit B to
Rights Agreement filed as Exhibit 1 hereto). Pursuant to
the Rights Agreement, printed Right Certificates will not
be mailed until as soon as practicable after the
Distribution Date.
3 Form of Summary of Rights (included as Exhibit C to
Rights Agreement filed as Exhibit 1 hereto) that, together
with certificates representing the outstanding Common
Shares of the Company, shall represent the Rights until
the Distribution Date.
4 Specimen of legend to be placed, pursuant to
Section 3(c) of the Rights Agreement, on all new
Common Share certificates issued after July 22, 1996
and prior to the Distribution Date upon transfer,
exchange or new issuance (included in Section 3(c) of the
Rights Agreement filed as Exhibit 1 hereto).
</TABLE>
7
<PAGE>
EXHIBIT 1
RIGHTS AGREEMENT
DATED AS OF JULY 10, 1996
BETWEEN
VTEL CORPORATION
AND
THE FIRST NATIONAL BANK OF BOSTON
AS RIGHTS AGENT
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Section 1. Certain Definitions.......................................................... 1
Section 2. Appointment of Rights Agent.................................................. 4
Section 3. Issue of Rights Certificates................................................. 4
Section 4. Form of Rights Certificates.................................................. 7
Section 5. Countersignature and Registration............................................ 8
Section 6. Transfer, Split Up, Combination and Exchange of Rights Certificates;
Mutilated, Destroyed, Lost or Stolen Rights Certificates................... 8
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights................ 9
Section 8. Cancellation and Destruction of Rights Certificate...........................11
Section 9. Reservation and Availability of Capital Stock................................12
Section 10. Preferred Stock Record Date..................................................13
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or Number
of Rights..................................................................14
Section 12. Certificate of Adjusted Purchase Price or Number of Shares...................22
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earnings 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
</TABLE>
i
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<TABLE>
<S> <C> <C>
Section 20. Duties of Rights Agent.......................................................29
Section 21. Change of Rights Agent.......................................................32
Section 22. Issuance of New Rights Certificates..........................................32
Section 23. Redemption and Termination...................................................33
Section 24. Notice of Certain Events.....................................................34
Section 25. Notices......................................................................35
Section 26. Supplements and Amendments...................................................35
Section 27. Successors...................................................................36
Section 28. Determinations and Actions by the Board of Directors, Etc....................36
Section 29. Benefits of this Agreement...................................................36
Section 30. Severability.................................................................37
Section 31. Governing Law................................................................37
Section 32. Counterparts.................................................................37
Section 33. Descriptive Headings.........................................................37
Signature Page..............................................................................38
</TABLE>
ii
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EXHIBITS
--------
Exhibit A - Certificate of Designations
Exhibit B - Form of Rights Certificate
Exhibit C - Form of Summary of Rights
iii
<PAGE>
RIGHTS AGREEMENT
----------------
RIGHTS AGREEMENT, dated as of July 10, 1996 (the "Agreement"), between VTEL
Corporation, a Delaware corporation (the "Company"), and First National Bank of
Boston, a national banking firm (the "Rights Agent").
On July 10, 1996 (the "Rights Dividend Declaration Date"), the Board of
Directors of the Company authorized and declared a dividend distribution of one
Right (as hereinafter defined) for each share of common stock, par value $.01
per share, of the Company (the "Common Stock") outstanding at the close of
business on July 22, 1996 (the "Record Date"), and has authorized the issuance
of one Right (as such number may hereinafter be adjusted pursuant to the
provisions of SECTION 11(P) hereof) for each share of Common Stock of the
Company issued between the Record Date (whether originally issued or delivered
from the Company's treasury) and the Distribution Date (as hereinafter defined),
each Right initially representing the right to purchase one one-thousandth of a
share of Series A Preferred Stock of the Company having the rights, powers and
preferences set forth in the form of Certificate of Designations for Series A
Preferred Stock attached hereto as EXHIBIT A, upon the terms and subject to the
---------
conditions hereinafter set forth (singularly, a "Right," collectively "Rights").
In consideration of the premises and the mutual agreements herein set
forth, the parties hereby agree as follows:
SECTION 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the
-------------------
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or which, together
with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of 10% or more of the shares of Common Stock then
outstanding, but shall not include (i) the Company, any Subsidiary of
the Company, any employee benefit plan of the Company or of any
Subsidiary of the Company, or any Person or entity organized,
appointed or established by the Company for or pursuant to the terms
of any such plan, and (ii) any Person, who alone or together with its
Affiliates and Associates, shall become the Beneficial Owner of 10% 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(s) 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 its Affiliates and
Associates, is not then the Beneficial Owner of 10% or more of the
shares of Common Stock then outstanding; provided, that if a majority
of the Continuing Directors then in office determine in good faith
that any
<PAGE>
Person that would otherwise be an "Acquiring Person" has become such
inadvertently (including, without limitation, because (i) such Person
was unaware that it 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 or influencing control of the Company, and if
any 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.
(b) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended and
in effect on the date of this Agreement (the "Exchange Act").
(c) A Person shall be deemed the "Beneficial Owner" of, and shall
be deemed to "beneficially own," any securities:
(i) which such Person or any of such Person's
Affiliates or Associates, directly or indirectly, has the right
to acquire (whether such right is exercisable immediately or
only after the passage of time) pursuant to any agreement,
arrangement or understanding (whether or not in writing) or
upon the exercise of conversion rights, exchange rights,
rights, warrants or options, or otherwise; provided, however,
-------- -------
that a Person shall not be deemed the "Beneficial Owner" of, or
to "beneficially own," (A) securities tendered pursuant to a
tender or exchange offer made by such Person or any of such
Person's Affiliates or Associates until such tendered
securities are accepted for purchase or exchange, or (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)
hereof in connection with an adjustment made with respect to
any Original Rights;
(ii) which such Person or any of such Person's
Affiliates or Associates, directly or indirectly, has the right
to vote or dispose of or has "beneficial ownership" of (as
determined pursuant to Rule 13d-3 of the General Rules and
Regulations under the Exchange Act), including pursuant to any
agreement, arrangement or understanding, whether or not in
writing; provided, however, that a Person shall not be deemed
-------- -------
the "Beneficial
2
<PAGE>
Owner"of, or to "beneficially own," any security under this
subparagraph (ii) as a result of an agreement, arrangement or
understanding to vote such security if such agreement,
arrangement or understanding (A) arises solely from a revocable
proxy given in response to a public proxy or consent
solicitation made pursuant to, and in accordance with the
applicable provisions of the General Rules and Regulations
under the Exchange Act and (B) is not also then reportable by
such Person on Schedule 13D under the Exchange Act (or any
comparable or successor report); or
(iii) which are beneficially owned, directly or
indirectly, by any other Person (or any Affiliate or Associate
thereof) with which such Person (or any of such Person's
Affiliates or Associates) has any agreement, arrangement or
understanding (whether or not in writing), for the purpose of
acquiring, holding, voting (except pursuant to a revocable
proxy as described in the proviso to subparagraph (ii) of this
PARAGRAPH (D)), or disposing of any voting securities of the
Company; provided, however, that nothing in this PARAGRAPH (D)
-------- -------
shall cause a person engaged in business as an underwriter of
securities to be the "Beneficial Owner" of, or to "beneficially
own," any securities acquired through such person's
participation in good faith in a firm commitment underwriting
until the expiration of forty days after the date of such
acquisition.
(e) "Business Day" shall mean any day other than a Saturday, Sunday
or a day on which banking institutions in the State of Texas or in the
state of the Rights Agent's principal place of business are authorized
or obligated by law or executive order to close.
(f) "Close of Business" on any given date shall mean 4:00 p.m.,
Dallas time, on such date; provided, however, that if such date is not
-------- -------
a Business Day it shall mean 4:00 p.m., Dallas time, on the next
succeeding Business Day.
(g) "Common Stock" shall mean the common stock, par value $.01 per
share, of the Company except that "Common Stock" when used with
reference to any Person other than the Company shall mean the capital
stock of such Person with the greatest voting power, or the equity
securities or other equity interest having power to control or direct
the management, of such Person.
(h) "Continuing Director" shall mean (i) any member of the Board of
Directors of the Company who is not an Acquiring Person, or an
Affiliate or Associate of an Acquiring Person, or a representative of
an Acquiring Person or of any such Affiliate or Associate, and was a
member of the Board prior to the date of this Agreement, or (ii) any
Person who subsequently becomes a member of the Board who is not an
Acquiring Person, or an Affiliate or Associate of an Acquiring Person,
or a representative of an Acquiring Person or of any such Affiliate or
3
<PAGE>
Associate, if such Person's nomination for election or election to the
Board is recommended or approved by a majority of the Continuing
Directors.
(i) "Flip-in Event" shall mean any event described in SECTION
11(A)(II).
(j) "Flip-over Event" shall mean any event described in CLAUSES
(X), (Y) or (Z) of SECTION 13(A) hereof.
(k) "Person" shall mean any individual, firm, corporation,
partnership, association, group or other entity.
(l) "Preferred Stock" shall mean shares of Series A Preferred
Stock, $0.01 par value, of the Company and, to the extent that there
are not a sufficient number of shares of Series A Preferred Stock
authorized to permit the full exercise of the Rights, any other series
of Preferred Stock, $0.01 par value, of the Company designated for
such purpose containing terms substantially similar to the terms of
the Series A Preferred Stock.
(m) "Stock Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include,
without limitation, a report filed pursuant to Section 13(d) under the
Exchange Act) by the Company or an Acquiring Person that an Acquiring
Person has become such.
(n) "Subsidiary" shall mean, with reference to any Person, any
corporation or other entity of which a majority of the voting power of
the equity securities or a majority of the equity interest is
beneficially owned, directly or indirectly by such Person, or
otherwise controlled by such Person.
(o) "Triggering Event" shall mean any Flip-in Event or any Flip-
over Event.
SECTION 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints the
---------------------------
Rights Agent to act as agent for the Company in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such Co-Rights Agents as it may deem
necessary or desirable.
SECTION 3. ISSUE OF RIGHTS CERTIFICATES.
-----------------------------
(a) Until the earlier of (i) the close of business on the tenth day
after the Stock Acquisition Date or (ii) the close of business on the
tenth business day after the date that a tender or exchange offer by
any Person (other than the Company, any Subsidiary of the Company, any
employee benefit plan of the Company or of any Subsidiary of the
Company, or any Person or entity organized, appointed or established
by the Company for or pursuant to the terms of any such plan) is first
published or sent or given within the meaning of Rule 14d-2(a) of the
General Rules and Regulations under the Exchange Act, if upon
consummation thereof,
4
<PAGE>
such Person would be an Acquiring Person (the earlier of (i) and (ii)
being herein referred to as the "Distribution Date"), (x) the Rights
will be evidenced (subject to the provisions of Subsection (b) of this
SECTION 3) by the certificates for the 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); provided that, if the foregoing
results in a Distribution Date being prior to the Record Date, the
Distribution Date shall be the Record Date and provided further that
if any tender or exchange offer referred to in CLAUSE (II) of this
SECTION 3(A) is canceled, terminated or otherwise withdrawn prior to
the Distribution Date, such offer shall be deemed, for purposes of
this SECTION 3(A), never to have been made. 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, at
the address of such holder shown on the records of the Company, one or
more rights certificates, in substantially the form of EXHIBIT B
---------
hereto (the "Rights Certificates"), evidencing one Right for each
share of Common Stock so held, subject to adjustment as provided
herein. 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, in substantially the
form attached hereto as EXHIBIT C (the "Summary of Rights"), by first-
---------
class, postage prepaid mail, to each record holder of the Common Stock
as of the close of business on the Record Date, at the address of such
holder shown on the records of the Company. With respect to
certificates for the Common Stock outstanding as of the Record Date,
until the Distribution Date or the earlier transfer or exchange
thereof, the Rights associated with the shares of Common Stock
represented by such certificates shall be evidenced by such
certificates for the Common Stock together with a copy of 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 (as such term is defined
in SECTION 7 hereof), the transfer of any of the certificates for the
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 become outstanding (whether originally issued or from the Company
treasury) after the
5
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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 become outstanding or shall be transferred or
exchanged after the Record Date but prior to the earlier of the
Distribution Date or the 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 VTEL CORPORATION (THE "COMPANY") AND FIRST
NATIONAL BANK OF BOSTON, DATED AS OF JULY 10, 1996 (THE
"RIGHTS AGREEMENT"), THE TERMS OF WHICH ARE 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 WILL BE EVIDENCED BY SEPARATE CERTIFICATES AND WILL
NO LONGER BE EVIDENCED BY THIS CERTIFICATE. THE COMPANY WILL
MAIL TO THE REGISTERED 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 MAY BE REDEEMED. RIGHTS ISSUED TO,
OR HELD BY, ANY PERSON WHO IS, WAS OR BECOMES AN ACQUIRING
PERSON OR ANY AFFILIATE OR ASSOCIATE THEREOF (AS DEFINED IN
THE RIGHTS AGREEMENT), WHETHER CURRENTLY HELD BY OR ON
BEHALF OF SUCH PERSON OR BY ANY SUBSEQUENT HOLDER, MAY
BECOME NULL AND VOID.
With respect to such certificates containing the foregoing legend,
until the earlier of (i) the Distribution Date or (ii) the Expiration
Date, the Rights associated with the Common Stock represented by such
certificates shall be evidenced by such certificates alone and
registered holders of Common Stock shall also be the registered
holders of the associated Rights, and the transfer of any of such
certifi cates shall also constitute the transfer of the Rights
associated with the Common Stock represented by such certificates.
6
<PAGE>
SECTION 4. FORM OF RIGHTS CERTIFICATES.
---------------------------
(a) The Rights Certificates (and the forms of election to purchase
and of assignment to be printed on the reverse thereof) shall each be
substantially in the form set forth in EXHIBIT B hereto and may have
---------
such marks of identification or designation and such legends,
summaries or endorsements printed thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this
Agreement, 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 inter-dealer quotation system of a
registered national securities association on which the Rights may
from time to time be listed, traded or quoted or to conform to usage.
Subject to the provisions of SECTION 11 and SECTION 22 hereof, the
Rights Certificates, whenever distributed, shall be dated as of the
Record Date and on their face shall entitle the holders thereof to
purchase such number of one one-thousandths of a share of Preferred
Stock as shall be set forth therein at the price set forth therein
(such exercise price per one one-thousandth of a share, 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.
(b) Any Rights Certificate issued pursuant to SECTION 3(A) or
SECTION 22 hereof that represents Rights beneficially owned by (i) an
Acquiring Person or any Associate or Affiliate of an Acquiring Person,
(ii) a transferee of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee after the Acquiring Person becomes
such, or (iii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee prior to or
concurrently with the Acquiring Person's becoming such and receives
such Rights pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person to holders of equity
interests in such Acquiring Person or to any Person with whom such
Acquiring Person has any continuing agreement, arrangement or
understanding regarding the transferred Rights or (B) a transfer which
the Board of Directors of the Company has determined is part of a
plan, arrangement or understanding which has as a primary purpose or
effect avoidance of SECTION 7(E) hereof, and any Rights Certificate
issued pursuant to SECTION 6, SECTION 11 or SECTION 22 hereof upon
transfer, exchange, replacement or adjustment of any other Rights
Certificate referred to in this sentence, shall contain (to the extent
feasible) the following legend:
THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR
WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN
ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN
ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS
AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE
RIGHTS REPRESENTED HEREBY
7
<PAGE>
MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED
IN SECTION 7(E) OF SUCH AGREEMENT.
SECTION 5. COUNTERSIGNATURE AND REGISTRATION.
---------------------------------
(a) The Rights Certificates shall be executed on behalf of the
Company by its Chairman of the Board, its President or any Vice
President, either manually or by facsimile signature, and shall have
affixed thereto the Company's seal or a facsimile thereof which shall
be attested by the Secretary or an Assistant Secretary of the Company,
either manually or by facsimile signature. The Rights Certificates
shall be manually countersigned by the Rights Agent and shall not be
valid for any purpose unless so countersigned. In case any officer of
the Company who shall have signed any of the Rights Certificates shall
cease to be such officer of the Company before countersignature by the
Rights Agent and issuance and delivery by the Company, such Rights
Certificates, nevertheless, may be countersigned by the Rights Agent
and issued and delivered by the Company with the same force and effect
as though the person who signed such Rights Certificates had not
ceased to be such officer of the Company; and any Rights 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 holders of the Rights Certificates, the number of
Rights evidenced on its face by each of the Rights Certificates and
the date of each of the Rights Certificates.
SECTION 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHTS
------------------------------------------------------
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHTS CERTIFICATES.
- ----------------------------------------------------------------------
(a) Subject to the provisions of SECTION 4(B), SECTION 7(E) and
SECTION 14 hereof, at any time after the close of business on the
Distribution Date, and at or prior to the close of business on the
Expiration Date, any Rights Certificate or Certificates may be
transferred, split up, combined or exchanged for another Rights
Certificate or other Rights Certificates, entitling the registered
holder to purchase a like number of one one-thousandths of a share of
Preferred Stock (or, following a Triggering Event, Common Stock, other
securities, cash or other assets, as the case may be) as the Rights
Certificate or Certificates surrendered then 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 Certificates shall make such request in writing
delivered to the Rights Agent,
8
<PAGE>
and shall surrender the Rights Certificate or 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) or Affiliates or Associates thereof as the Company
shall reasonably request. Thereupon the Rights Agent shall, subject to
SECTION 4(B), SECTION 7(E) and SECTION 14 hereof, countersign and
deliver to the Person entitled thereto a Rights Certificate or Rights
Certificates, as the case may be, as so requested. The Company may
require payment of a sum sufficient to cover any tax or governmental
charge that may be imposed in connection with any transfer, split up,
combination or exchange of Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or
mutilation of a Rights Certificate, and, in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to them,
and reimbursement to the Company and the Rights Agent of all
reasonable expenses incidental thereto, and upon surrender to the
Rights Agent and cancellation of the Rights Certificate if mutilated,
the Company will execute and deliver a new Rights Certificate of like
tenor to the Rights Agent for countersignature and delivery to the
registered owner in lieu of the Rights Certificate so lost, stolen,
destroyed or mutilated.
SECTION 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS.
-------------------------------------------------------------
(a) Subject to SECTION 7(E) hereof, 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 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 one one-thousandths of a share (or
other securities, cash or other assets, as the case may be) as to
which such surrendered Rights are then exercisable, at or prior to the
earlier of (i) the close of business on December 31, 2005 (the "Final
Expiration Date"), or (ii) the time at which the Rights are redeemed
as provided in SECTION 23 hereof (the earlier of (i) and (ii) being
herein referred to as the "Expiration Date").
(b) The Purchase Price for each one one-thousandth of a share of
Preferred Stock pursuant to the exercise of a Right shall initially be
$55 and shall be subject
9
<PAGE>
to adjustment from time to time as provided in SECTIONS 11 and 13(A)
hereof and shall be payable in accordance with SECTION 7(C) below.
(c) Upon receipt of a Rights Certificate representing exercisable
Rights, with the form of election to purchase and the certificate duly
executed, accompanied by payment, with respect to each Right so
exercised, of the Purchase Price per one one-thousandth of a share of
Preferred Stock (or other shares, securities, cash or other assets, as
the case may be) to be purchased as set forth below and an amount
equal to any applicable transfer taxes, the Rights Agent shall,
subject to SECTION 20(K) hereof, thereupon promptly (i) (A)
requisition from any transfer agent of the shares of Preferred Stock
(or make available, if the Rights Agent is the transfer agent for such
shares) certificates for the total number of one one-thousandths of a
share of Preferred Stock to be purchased, and the Company hereby
irrevocably authorizes its transfer agent to comply with all such
requests, or (B) if the Company shall have elected to deposit the
total number of shares of Preferred Stock issuable upon exercise of
the Rights hereunder with a depository agent, requisition from the
depository agent depository receipts representing such number of one
one-thousandths of a share of Preferred Stock as are to be purchased
(in which case certificates for the shares of Preferred Stock
represented by such receipts shall be deposited by the transfer agent
with the depository agent), and the Company will direct the depository
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 depository 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 bank
check or money order payable to the order of the Company. 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) hereof, the Company will make all
arrangements necessary so that such other securities, cash and/or
other property are available for distribution by the Rights Agent, if
and when appropriate.
(d) In case the registered holder of any Rights Certificate shall
exercise less than all the Rights evidenced thereby, a new Rights
Certificate evidencing Rights equivalent to the Rights remaining
unexercised shall be issued by the Rights Agent and delivered to, or
upon the order of, the registered holder of such Rights Certificate,
registered in such name or names as may be designated by such holder,
subject to the provisions of SECTION 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary,
from and after the first occurrence of a Triggering Event, any Rights
beneficially owned by (i) an
10
<PAGE>
Acquiring Person or an Associate or Affiliate of an Acquiring Person,
(ii) a transferee of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee after the Acquiring Person becomes
such, or (iii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee prior to or
concurrently with the Acquiring Person's becoming such and receives
such Rights pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person to holders of equity
interests in such Acquiring Person or to any Person with whom the
Acquiring Person has any continuing agreement, arrangement or
understanding regarding the transferred Rights or (B) a transfer which
the Board of Directors of the Company has determined is part of the
plan, arrangement or understanding which has as a primary purpose or
effect the avoidance of this SECTION 7(E), shall become null and void
without any further action and no holder of such Rights shall have any
rights whatsoever with respect to such Rights, whether under any
provision of this Agreement or otherwise. The Company shall use all
reasonable efforts to 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 CERTIFICATE. 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 either such case
shall deliver a certificate of destruction or a certificate of cancellation, as
may be appropriate, thereof to the Company.
11
<PAGE>
SECTION 9. RESERVATION AND AVAILABILITY OF CAPITAL STOCK.
---------------------------------------------
(a) The Company covenants and agrees that it will use reasonable
efforts to cause to be reserved and kept available out of its
authorized and unissued shares of Preferred Stock (and, following the
occurrence of a Triggering Event, out of its authorized and unissued
shares of Common Stock and/or other securities or out of its
authorized and issued shares held in its treasury), the number of
shares of Preferred Stock (and, following the occurrence of a
Triggering Event, Common Stock and/or other securities) that, as
provided in this Agreement including SECTION 11(A)(III) hereof will be
sufficient to permit the exercise in full of all outstanding Rights.
(b) So long as the shares of Preferred Stock (and, following the
occurrence of a Triggering Event, Common Stock and/or securities)
issuable and deliverable upon the exercise of the Rights may be listed
on any national securities exchange or inter-dealer quotation system
of a registered national securities association on which the Preferred
Stock may from time to time be listed, traded or quoted, 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 quotation system upon official notice of
issuance upon such exercise.
(c) The Company shall use its best efforts to (i) file, as soon as
practicable following the earliest date after the first occurrence of
a 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 under the Securities Act of 1933, as
amended (the "Act"), with respect to the securities purchasable upon
exercise of the Rights on an appropriate form, (ii) cause such
registration statement to become effective as soon as practicable
after such filing, and (iii) cause such registration statement to
remain effective (with a prospectus at all times meeting the
requirements of the Act) until the earlier of (A) the date as of which
the Rights are no longer exercisable for such securities, and (B) the
date of the expiration of the Rights. The Company will also take such
action as may be appropriate under, or to ensure compliance with, the
securities or "blue sky" laws of the various states in connection with
the exercisability of the Rights. The Company may temporarily suspend,
for a period of time not to exceed 120 days after the date set forth
in CLAUSE (I) of the first sentence of this SECTION 9(C), the
exercisability of the Rights in order to prepare and file such
registration statement and permit it to become effective. Upon any
such suspension, the Company shall issue a public announcement stating
that the exercisability of the Rights has been temporarily suspended,
as well as a public announcement at such time as the suspension is no
longer in effect that the Rights are currently exercisable. In
addition, if the Company shall determine that a registration statement
is required following the Distribution Date, the Company may
temporarily suspend the exercisability of the Rights until such time
as a registration statement has been declared effective.
12
<PAGE>
Notwithstanding any provision of this Agreement to the contrary, the
Rights shall not be exercisable in any jurisdiction if the requisite
qualification in such jurisdiction shall not have been obtained or the
exercise thereof shall not be permitted under applicable law.
(d) The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all one one-thousandths of a
share of Preferred Stock (and, following the occurrence of a
Triggering Event, Common Stock and/or other securities) delivered upon
exercise of Rights shall, at the time of delivery of the certificates
for such shares (subject to payment of the Purchase Price), be duly
and validly authorized and issued and fully paid and nonassessable.
(e) The Company further covenants and agrees that it will pay when
due and payable any and all federal and state transfer taxes and
charges which may be payable in respect of the issuance or delivery of
the Rights Certificates and of any certificates for a number of one
one-thousandths of a share of Preferred Stock (or Common Stock and/or
other securities, as the case may be) upon the exercise of Rights. The
Company shall not, however, be required to pay any transfer tax which
may be payable in respect of any transfer or delivery of Rights
Certificates to a Person other than, or the issuance or delivery of a
number of one one-thousandths of a share of Preferred Stock (or Common
Stock and/or other securities, as the case may be) in respect of a
name other than that of, the registered holder of the Rights
Certificates evidencing Rights surrendered for exercise or to issue or
deliver any certificates for a number of one one-thousandths of a
share of Preferred Stock (or Common Stock and/or other securities, as
the case may be) in a name other than that of the registered holder
upon the exercise of any Rights until such tax 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 one one-thousandths of a share of Preferred Stock
(or Common Stock and/or other securities, as the case may be) is issued upon the
exercise of Rights shall for all purposes be deemed to have become the holder of
record of such fractional shares of Preferred Stock (or Common Stock and/or
other securities, as the case may be) represented thereby on, and such
certificate shall be dated, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and all applicable 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 shall not be entitled to any rights of a shareholder of the
Company with respect to shares for which the Rights shall be exercisable,
including, without
13
<PAGE>
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 covered by
- ----------------
each Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this SECTION 11.
(a) (i) In the event the Company shall at any time after the
date of this Agreement (A) declare a dividend on the Preferred Stock
payable in shares of Preferred Stock (or other capital stock), (B)
subdivide the outstanding Preferred Stock, (C) combine the outstanding
Preferred Stock into a smaller number of shares, or (D) issue any
shares of its capital stock in a reclassification of the Preferred
Stock (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing or
surviving corporation), except as otherwise provided in this SECTION
11(A) and SECTION 7(E) hereof, the Purchase Price in effect at the
time of the record date for such dividend or of the effective date of
such subdivision, combination or reclassification, and the number and
kind of shares of Preferred Stock or capital stock, as the case may
be, issuable on such date, shall be proportionately adjusted so that
the holder of any Right exercised after such time shall be entitled to
receive, upon payment of the Purchase Price then in effect, the
aggregate number and kind of shares of Preferred Stock or capital
stock, as the case may be, which, if such Right had been exercised
immediately prior to such date and at a time when the Preferred Stock
transfer books of the Company were open he would have owned upon such
exercise and been entitled to receive by virtue of such dividend,
subdivision, combination or reclassification. If an event occurs which
would require an adjustment under both 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) In the event any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or
of any Subsidiary of the Company, or any Person or entity organized,
appointed or established by the Company for or pursuant to the terms
of any such plan), alone or together with its Affiliates and
Associates, shall, on or after the Rights Dividend Declaration Date,
be or become the Beneficial Owner of 10% or more of the shares of
Common Stock then outstanding, unless the event causing the 10%
threshold to be crossed is (x) a Flip-over Event or (y) an acquisition
of shares of Common Stock which, in any such instance, occurs at a
time when Continuing Directors are in office and a majority of the
Continuing Directors then in office has determined to be (a) at a
price and on terms which are fair to shareholders (taking into account
all factors which such members of the Board deem relevant) and (b)
otherwise in the best interests of the Company and its shareholders
(any transaction described in this
14
<PAGE>
CLAUSE (Y) being hereafter referred to as an "Approved Transaction"),
then each holder of a Right (except as provided below and in SECTION
7(E) hereof) shall thereafter have the right to receive, upon exercise
thereof at the then current Purchase Price in accordance with the
terms of this Agreement, in lieu of the number of one one-thousandths
of a share of Preferred Stock, such number of shares of Common Stock
of the Company as shall equal the result obtained by (x) multiplying
the then current Purchase Price by the then number of one one-
thousandths of a share of Preferred Stock for which a Right was
exercisable immediately prior to the first occurrence of a Flip-in
Event, and (y) dividing that product (which, following such first
occurrence, shall thereafter be referred to as the "Purchase Price"
for each Right and for all purposes of this Agreement) by 50% of the
current market price determined pursuant to SECTION 11(D) hereof per
share of Common Stock on the date of such first occurrence (such
number of shares, the "Adjustment Shares").
(iii) In the event that the number of shares of Common Stock
that is authorized by the Company's Certificate of Incorporation but
not outstanding or not reserved for issuance for purposes other than
upon exercise of the Rights is insufficient to permit the exercise in
full of the Rights in accordance with the foregoing subparagraph (ii)
of this SECTION 11(A), the Company shall (A) determine the 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, the "Spread"), and (B) with respect to
each Right, make adequate provision to substitute for the Adjustment
Shares, upon payment of the applicable Purchase Price, (1) Preferred
Stock, (2) cash, (3) a reduction in the Purchase Price, (4) Common
Stock or other equity securities of the Company that the Board of
Directors of the Company has deemed to have the same economic value as
shares of Common Stock (such equity securities, "common stock
equivalents")), (5) debt securities of the Company, (6) other assets,
or (7) 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; provided,
--------
however, if the Company shall not have made adequate provisions 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 120 days after the Flip-in Trigger Date, in order that
the Company may
15
<PAGE>
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 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 to be received pursuant to the proviso above shall be the
current market price (as determined pursuant to SECTION 11(D) hereof)
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.
(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 (as determined
pursuant to SECTION 11(D) hereof) per share of Preferred Stock on such
record date, the Purchase Price to be in effect after such record date
shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of
which shall be the number of shares of Preferred Stock outstanding on
such record date, plus the number of shares of Preferred Stock which
the aggregate offering price of the total number of shares of
Preferred Stock and/or equivalent preferred stock so to be offered
(and/or the aggregate initial conversion price of the convertible
securities so to be offered, including the price required to be paid
to purchase such convertible security) 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
16
<PAGE>
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 which would then be in
effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for a distribution
to all holders of Preferred Stock (including any such distribution
made in connection with a consolidation or merger in which the Company
is the continuing corporation) of evidences of indebtedness, cash
(other than a regular quarterly cash dividend out of the earnings or
retained earnings of the Company), 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 (as determined pursuant to SECTION 11(D) hereof) per
share of Preferred Stock on such record date, less the fair market
value (as determined in good faith by the Board of Directors of the
Company, whose determination shall be described in a statement filed
with the Rights Agent) of the portion of the cash, assets or evidences
of indebtedness so to be distributed or of such subscription rights or
warrants applicable to a share of Preferred Stock and the denominator
of which shall be such current market price (as determined pursuant to
SECTION 11(D) hereof) per share of Preferred Stock. Such adjustments
shall be made successively whenever such a record date is fixed, and
in the event that such distribution is not so made, the Purchase Price
shall be adjusted to be the Purchase Price which would have been in
effect if such record date had not been fixed.
(d) (i) For the purpose of any computation hereunder, other than
computations made pursuant to SECTION 11(A)(III) hereof, the "current
market price" per share of Common Stock on any date shall be deemed to
be the average of the daily closing prices per share of such Common
Stock for the 30 consecutive Trading Days (as such term is hereinafter
defined) immediately prior to such date, and for purposes of
computations made pursuant to SECTION 11(A)(III) hereof, the current
market price per share of Common Stock on any date shall be deemed to
be the average of the daily closing prices per share of such Common
Stock for the ten consecutive Trading Days immediately following such
date; provided, however, that in the event that the current market
-------- -------
price per share of the Common Stock is determined during a period
following the announcement by the issuer of such Common Stock of (A) a
dividend or distribution on such Common Stock payable in shares of
such Common Stock or securities convertible into shares of such Common
Stock (other than the Rights), or (B) any subdivision, combination or
reclassification of such Common Stock, and prior to the expiration of
the requisite 30-Trading-Day or ten-Trading-Day period, as set forth
above, after the
17
<PAGE>
ex-dividend date for such dividend or distribution, or the record date
for such subdivision, combination or reclassification, then, and in
each such case, the "current market price" shall be properly adjusted
to take into account ex-dividend trading. The closing price for each
day shall be the last sale price, regular way, or, in case no such
sale takes place on such day, the average of the closing bid and asked
prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities
listed or admitted to trading on the New York Stock Exchange or, if
the shares of Common stock are not listed or admitted to trading on
the New York Stock Exchange, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the
principal national securities exchange or Nasdaq National Market
System on which the shares of Common stock are listed or admitted to
trading or, if the shares of Common Stock are not listed or admitted
to trading on any national securities exchange or Nasdaq National
Market System, the last quoted price or, if not so quoted, the average
of the high bid and low asked prices in the over-the-counter market as
reported by the National Association of Securities Dealers, Inc.
Automated Quotation System ("NASDAQ") or such other system then in
use, or, if on any such date the shares of Common Stock are not quoted
by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in
the Common Stock selected by the Board of Directors of the Company. If
on any such date no market maker is making a market in the Common
Stock, the fair value of such shares on such date as determined in
good faith by the Board of Directors of the Company shall be used. The
term "Trading Day" shall mean a day on which the shares of Common
Stock are listed or admitted to trading is open for the transaction of
business or, if the shares of Common Stock are not listed or admitted
to trading on any national securities exchange, a Business Day. If the
Common Stock is not publicly held or not so listed or traded, "current
market price" per share shall mean the fair value per share as
determined in good faith by the Board 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 of Preferred Stock shall be
determined in the same manner as set forth above for the Common Stock
in CLAUSE (I) of this SECTION 11(D) (other than the last sentence
thereof). If the current market price per share of Preferred Stock
cannot be determined in the manner provided above or if the Preferred
Stock is not publicly held or listed or traded in a manner described
in CLAUSE (I) of this SECTION 11(D), the "current market price" per
share of Preferred Stock shall be conclusively deemed to be an amount
equal to 1,000 (as such number may be appropriately adjusted for such
events as stock splits, stock dividends and recapitalizations with
respect to the Common Stock occurring after the date of this
Agreement) multiplied by the current market price per share of the
Common Stock. If neither the Common Stock nor the Preferred Stock is
publicly held or so listed or traded, "current market price" per share
of the Preferred Stock shall mean the fair value
18
<PAGE>
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 one one-
thousandth of a share of Preferred Stock shall be equal to the
"current market price" of one share of Preferred Stock divided by
1,000.
(e) Anything herein to the contrary notwithstanding, no adjustment
in the Purchase Price shall be required unless such adjustment would
require an increase or decrease of at least one percent (1%) in the
Purchase Price; provided, however, that any adjustments which by
-------- -------
reason of this SECTION 11(E) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment.
All calculations under this SECTION 11 shall be made to the nearest
cent or to the nearest ten thousandth of a share of Common Stock or
other share or one-millionth of a share of Preferred Stock, as the
case may be. Notwithstanding the first sentence of this SECTION 11(E)
any adjustment required by this SECTION 11 shall be made no later than
the earlier of (i) three 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)(II) or SECTION 13(A) hereof, the holder of any Right thereafter
exercised shall become entitled to receive any shares of capital stock
other than Preferred Stock, thereafter the number of such other shares
so receivable upon exercise of any Right and the Purchase Price
thereof shall be subject to adjustment from time to time in a manner
and on terms as nearly equivalent as practicable to the provisions
with respect to the Preferred Stock contained in SECTIONS 11(A), (B),
(C), (E), (G), (H), (I), (J), (K) and (M), and the provisions of
SECTIONS 7, 9, 10, 13 and 14 hereof with respect to the Preferred
Stock shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the
right to purchase, at the adjusted Purchase Price, the number of one
one-thousandths of a share of Preferred Stock purchasable from time to
time hereunder upon exercise of the Rights, all subject to further
adjustment as provided herein.
(h) Unless the Company shall have exercised its election as
provided in SECTION (11)(I), upon each adjustment of the Purchase
Price as a result of the calculations made in SECTIONS 11(B) and (C),
each Right outstanding immediately prior to the making of such
adjustment shall thereafter evidence the right to purchase, at the
adjusted Purchase Price, that number of one one-thousandths of a share
of Preferred Stock (calculated to the nearest one-millionth) obtained
by (i) multiplying (x) the number of one one-thousandths of a share
covered by a Right immediately prior to this adjustment, by (y) the
Purchase Price in effect immediately prior to such adjustment of the
Purchase Price, and (ii) dividing the
19
<PAGE>
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 one one-thousandths of a share of
Preferred Stock purchasable upon the exercise of a Right. Each of the
Rights outstanding after the adjustment in the number of Rights shall
be exercisable for the number of one one-thousandths of a share of
Preferred Stock for which a Right was exercisable immediately prior to
such adjustment. Each Right held of record prior to such adjustment of
the number of Rights shall become that number of Rights (calculated to
the nearest one ten-thousandth) obtained by dividing the Purchase
Price in effect immediately prior to adjustment of the Purchase Price
by the Purchase Price in effect immediately after adjustment of the
Purchase Price. The Company shall make a public announcement of its
election to adjust the number of Rights, indicating the record date
for the adjustment, and, if known at the time, the amount of the
adjustment to be made. This record date may be the date on which the
Purchase Price is adjusted or any day thereafter, but, if the Rights
Certificates have been issued, shall be at least ten 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 holder shall be entitled
as a result of such adjustment, or, at the option of the Company,
shall cause to be distributed to such holders of record in
substitution and replacement for the Rights Certificates held by such
holders prior to the date of adjustment, and upon surrender thereof,
if required by the Company, new Rights Certificates evidencing all the
Rights to which such holders shall be entitled after such adjustment.
Rights Certificates so to be distributed shall be issued, executed and
countersigned in the manner provided for herein (and may bear, at the
option of the Company, the adjusted Purchase Price) and shall be
registered in the names of the holders of record of Rights
Certificates on the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price
or the number of one one-thousandths of a share of Preferred Stock
issuable upon the exercise of the Rights, the Rights Certificates
theretofore and thereafter issued may continue to express the Purchase
Price per one one-thousandth of a share and the number of one one-
thousandths of a share which were expressed in the initial Rights
Certificates issued hereunder.
(k) Before taking any action that would cause any adjustment
reducing the Purchase Price below the then stated value, if any, of
the number of one one-thousandths of a share of Preferred Stock
issuable upon exercise of the Rights, the Company shall take any
corporate action which may, in the opinion of its
20
<PAGE>
counsel, be necessary in order that the Company may validly and
legally issue fully paid and nonassessable such number of one one-
thousandths of a share of Preferred Stock at such adjusted Purchase
Price.
(l) In any case in which this SECTION 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date
for a specified event, the Company may elect to defer until the
occurrence of such event the issuance to the holder of any Right
exercised after such record date the number of one one-thousandths of
a share of Preferred Stock and other capital stock or securities of
the Company, if any, issuable upon such exercise over and above the
number of one one-thousandths of a share of Preferred Stock and other
capital stock or securities of the Company, if any, issuable upon such
exercise on the basis of the Purchase Price in effect 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 which by their terms are
convertible into or exchangeable for shares of Preferred Stock, (iv)
stock dividends or (v) issuance of rights, options or warrants
referred to in this SECTION 11, hereafter made by the Company to
holders of its Preferred Stock shall not be taxable to such
shareholders.
(n) The Company covenants and agrees that it shall not, at any time
after the Distribution Date, (i) consolidate with any other Person
(other than a Subsidiary of the Company in a transaction which
complies with SECTION 11(O) hereof), (ii) merge with or into any other
Person (other than a Subsidiary of the Company in a transaction which
complies with SECTION 11(O) hereof), or (iii) sell, lease or transfer
(or permit any Subsidiary to sell, lease or transfer), in one
transaction, or a series of related transactions, assets aggregating
more than 50% of the assets (measured by either book value or fair
market value) or generating more than 50% of the operating income or
cash flow of the Company and its Subsidiaries (taken as a whole) to
any other Person or Persons (other than the Company and/or any of its
Subsidiaries in one or more transactions each of which complies with
SECTION 11(O) hereof), if (x) at the time of or immediately after such
consolidation, merger, sale or lease there are any rights, warrants or
other instruments or securities outstanding or agreements in effect
that would substantially diminish or otherwise eliminate the benefits
intended to be afforded by the Rights, (y) prior to,
21
<PAGE>
simultaneously with or immediately after such consolidation, merger,
sale or lease, the shareholders of the Person who constitutes, or
would constitute, the "Principal Party" for purposes of SECTION 13(A)
hereof shall have received a distribution of Rights previously owned
by such Person or any of its Affiliates and Associates or (z) the form
or nature of organization of the Principal Party would preclude or
limit the exercise of Rights.
(o) The Company covenants and agrees that, after the Distribution
Date, it will not, except as permitted by SECTION 23 or SECTION 26
hereof, take (or permit any Subsidiary to take) any action if at the
time such action is taken it is reasonably foreseeable that such
action will diminish substantially or otherwise eliminate the benefits
intended to be afforded by the Rights.
(p) Anything in this Agreement to the contrary notwithstanding, 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, or (iii) combine the outstanding shares of Common Stock into a
smaller number of shares, the number of Rights associated with each
share of Common Stock then outstanding, or issued or delivered
thereafter but 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 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.
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 holder of a Rights Certificate (or, if prior to
the Distribution Date, to each holder of a certificate representing shares of
Common Stock) in accordance with SECTION 25 hereof. The Rights Agent shall be
fully protected in relying on any such certificate and on any adjustment therein
contained.
22
<PAGE>
SECTION 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR EARNINGS
---------------------------------------------------------------
POWER.
- ------
(a) In the event that, on or after the Stock Acquisition Date,
directly or indirectly, (x) the Company shall consolidate with, or
merge with and into, any other Person (other than a Subsidiary of the
Company in a transaction which complies with SECTION 11(O) hereof),
and the Company shall not be the continuing or surviving corporation
of such consolidation or merger, (y) any Person (other than a
Subsidiary of the Company in a transaction which complies with SECTION
11(O) hereof) shall consolidate with, or merge with and into, the
Company, and the Company shall be the continuing or surviving
corporation of such consolidation or merger and, in connection with
such consolidation or merger, all or part of the 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 aggregating more than 50% of the assets (measured by either
book value or fair market value) or generating more than 50% of the
operating income or cash flow of the Company and its Subsidiaries
(taken as a whole) to any Person or Persons (other than the Company or
any Subsidiary of the Company in one or more transactions each of
which complies with SECTION 11(O) hereof), then, and in each such case
(except as may be contemplated by SECTION 13(D) hereof), proper
provision shall be made so that (i) each holder of a Right, except as
provided in SECTION 7(E) hereof, shall thereafter have the right to
receive, upon the exercise thereof at the then current Purchase Price
in accordance with the terms of this Agreement, such number of validly
authorized and issued, fully paid, 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 obtained by (1) multiplying the then current Purchase Price by
the number of one one-thousandths of a share of Preferred Stock for
which a Right is exercisable immediately prior to the first occurrence
of a Flip-over Event (or, if a Flip-in Event has occurred prior to the
first occurrence of a Flip-over Event, multiplying the number of such
one one-thousandths of a share for which a Right was exercisable
immediately prior to the first occurrence of a Flip-in Event by the
Purchase Price in effect immediately prior to such first occurrence),
and dividing the product (which, following the first occurrence of a
Flip-over Event, shall be referred to as the "Purchase Price" for each
Right and for all purposes of this Agreement) by (2) 50% of the
current market price (determined pursuant to SECTION 11(D)(I) hereof)
per share of the Common Stock of such Principal Party on the date of
consummation of such Flip-over Event; (ii) 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; (iii) the term "Company" shall thereafter be deemed to
refer to such Principal Party, it being specifically intended that the
provisions of SECTION 11 hereof shall apply only to such Principal
Party following the first occurrence of a
23
<PAGE>
Flip-over Event; (iv) such Principal Party shall take such steps
(including, but not limited to, the reservation of a sufficient number
of shares of its Common Stock) in connection with the consummation of
any such transaction as may be necessary to assure that the provisions
hereof shall thereafter be applicable, as nearly as reasonably may be,
in relation to its shares of Common Stock thereafter deliverable upon
the exercise of the Rights; and (v) the provisions of SECTION
11(A)(II) hereof shall be of no effect following the first occurrence
of any 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 or
consolidation, or, if there is more than one such issuer, the
issuer of 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,
operating income or cash flow 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, operating income or cash flow so transferred,
or, if the Person receiving the greatest portion of the assets,
operating income or cash flow 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 12-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 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
24
<PAGE>
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 such consolidation,
merger, sale, lease or transfer unless the Principal Party shall have
a sufficient number of authorized shares of its Common Stock which
have not been issued or reserved for issuance to permit the exercise
in full of the Rights in accordance with this SECTION 13 and unless
prior thereto the Company and such Principal Party shall have executed
and delivered to the Rights Agent a supplemental agreement providing
for the terms set forth in Subsections (a) and (b) of this SECTION 13
and further providing that, as soon as practicable after the date of
any consolidation, merger, sale or lease of assets mentioned in
Subsection (a) of this SECTION 13, the Principal Party will
(i) prepare and file a registration statement under
the Act, with respect to the Rights and the securities
purchasable upon exercise of the Rights on an appropriate form,
and will use its best efforts to cause such registration
statement to (A) become effective as soon as practicable after
such filing and (B) remain effective (with a prospectus at all
times meeting the requirements of the Act) until the Expiration
Date; and
(ii) will deliver to holders of the Rights historical
financial statements for the Principal Party and each of its
Affiliates which comply in all respects with the requirements
for registration on Form 10 under the Exchange Act.
The provisions of this SECTION 13 shall similarly apply to successive
mergers, consolidations, sales, leases 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 which have not theretofore
been exercised shall thereafter become exercisable in the manner
described in SECTION 13(A).
(d) Notwithstanding anything in this Agreement to the contrary,
SECTION 13 shall not be applicable to a transaction described in
subparagraphs (x) and (y) of SECTION 13(A) if (i) such transaction is
consummated with a Person or Persons who acquired shares of Common
Stock pursuant to an Approved Transaction (or a wholly owned
subsidiary of any such Person or Persons), (ii) the price per share of
Common Stock offered in such transaction is not less than the price
per share of Common Stock paid to all holders of shares of Common
Stock whose shares were purchased pursuant to such Approved
Transaction, 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
25
<PAGE>
to such Approved Transaction. 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 which evidence fractional
Rights. In lieu of such fractional Rights, there shall be paid to the
registered holders of the Rights Certificates with regard to which
such fractional Rights would otherwise be issuable, an amount in cash
equal to the same fraction of the current market value of a whole
Right. For purposes of this SECTION 14(A), the current market value of
a whole Right shall be the closing price of the Rights for the Trading
Day immediately prior to the date on which such fractional Rights
would have been otherwise issuable. The closing price of the Rights
for any day shall be the last sale price, regular way, or, in case no
such sale takes place on such day, the average of the closing bid and
asked prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities
listed or admitted to trading on the New York Stock Exchange or, if
the Rights are not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal
national securities exchange or the Nasdaq National Market System on
which the Rights are listed or admitted to trading, or if the Rights
are not listed or admitted to trading on any national securities
exchange or the Nasdaq National Market System, the last quoted price
or, if not so quoted, the average of the high bid and low asked prices
in the over-the-counter market, as reported by NASDAQ or such other
system then in use or, if on any such date the Rights are not quoted
by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in
the Rights selected by the Board of Directors of the Company. If on
any such date no such market maker is making a market in the Rights
the fair value of the Rights on such date as determined in good faith
by the Board of Directors of the Company shall be used.
(b) The Company shall not be required to issue fractions of shares
of Preferred Stock (other than fractions that are integral multiples
of one one-thousandth of a share of Preferred Stock) upon exercise of
the Rights or to distribute certificates that evidence fractional
shares of Preferred Stock (other than fractions that are integral
multiples of one one-thousandth of a share of Preferred Stock). In
lieu of fractional shares of Preferred Stock that are not integral
multiples of one one-thousandth of a share of Preferred Stock the
Company may pay to the registered holders of Rights Certificates at
the time such Rights are exercised as herein provided an amount in
cash equal to the same fraction of the current market value of one
one-thousandth of a share of Preferred Stock. For purposes of this
SECTION 14(B), the current market value of one one-thousandth of a
share of Preferred Stock shall be one one-thousandth of the closing
price of a share of
26
<PAGE>
Preferred Stock (as determined pursuant to SECTION 11(D)(II) hereof)
for the Trading Day immediately prior to the date of such exercise.
(c) Following the occurrence of 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 that
evidence fractional shares of Common Stock. In lieu of fractional
shares of Common Stock, the Company may pay to the registered holders
of Rights Certificates at the time such Rights are exercised as herein
provided an amount in cash equal to the same fraction of the current
market value of one (1) share of Common Stock. For purposes of this
SECTION 14(C), the current market value of one share of Common Stock
shall be the closing price of one share of Common Stock (as determined
pursuant to SECTION 11(D)(I) hereof) for the Trading Day immediately
prior to the date of such exercise.
(d) The holder of a Right by the acceptance of the Rights expressly
waives his right to receive any fractional Rights or any fractional
shares upon exercise of a Right, except as permitted by this SECTION
14.
SECTION 15. RIGHTS OF ACTION. All rights of action in respect of this
----------------
Agreement are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock); and any registered holder of any Rights Certificate (or, prior to
the Distribution Date, of the Common Stock), without the consent of the Rights
Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of the Common Stock), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Rights Certificate in the manner provided
in such Rights Certificate and in this Agreement. Without limiting the foregoing
or any remedies available to the holders of Rights it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and shall be entitled to specific performance
of the obligations hereunder and injunctive relief against actual or threatened
violations of the obligations hereunder of any person subject to this Agreement.
SECTION 16. AGREEMENT OF RIGHTS HOLDERS. Every holder of a Right by
---------------------------
accepting the same consents and agrees with the Company and the Rights Agent and
with every other holder of a Right that
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of Common Stock;
(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if
surrendered at the principal office or offices of the Rights Agent
designated for such purposes duly endorsed or accompanied by a proper
instrument of transfer and with the appropriate forms and certificates
fully executed;
27
<PAGE>
(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, subject to the last sentence of SECTION 7(E) hereof,
shall be required to be affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Rights Agent shall have any liability to
any holder of a Right or other Person as a result of its inability to
perform any of its obligations under this Agreement by reason of any
preliminary or permanent injunction or other order, decree or ruling
issued by a court of competent jurisdiction or by a governmental,
regulatory or administrative agency or commission, or any statute,
rule, regulation or executive order promulgated or enacted by any
governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, the Company must
-------- -------
use its best efforts to have any such order, decree or ruling lifted
or otherwise overturned as soon as possible.
SECTION 17. 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 one one-thousandth of a
share of Preferred Stock or any other securities of the Company which may at any
time be issuable on the exercise of the Rights represented thereby, nor shall
anything contained herein or in any Rights Certificate be construed to confer
upon the holder of any Rights Certificate, as such, any of the rights of a
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 24 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 pursuant to a schedule provided to the Company for all
services rendered by it hereunder and, from time to time, on demand of
the Rights Agent, its reasonable expenses and counsel fees and
disbursements and other disbursements incurred in the administration
and execution of this Agreement and the exercise and performance of
its duties hereunder. The Company also agrees to indemnify the Rights
Agent for, and to hold 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
28
<PAGE>
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 admini stration of this Agreement in
reliance upon any Rights Certificate or certificate for Common Stock
or for other securities of the Company, instrument of assignment or
transfer, power of attorney, endorsement, affidavit, letter, notice,
direction, consent, certificate, statement or other paper or document
believed by it to be genuine and to be signed, executed and where
necessary, verified or acknowledged, by the proper Person or Persons.
SECTION 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT.
---------------------------------------------------------
(a) Any entity into which the Rights Agent or any successor Rights
Agent may be merged or with which it may be consolidated, or any
entity resulting from any merger or consolidation to which the Rights
Agent or any successor Rights Agent shall be a party, or any entity
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 entity would be eligible for
-------- -------
appointment as a successor Rights Agent under the provisions of
SECTION 21 hereof. In case at the time such successor Rights Agent
shall succeed to the agency created by this Agreement any of the
Rights Certificates shall have been countersigned but not delivered,
any such successor Rights Agent may adopt the countersignature of the
predecessor Rights Agent and deliver such Rights Certificates so
countersigned; and in case at that time any of the Rights Certificates
shall not have been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the
predecessor Rights Agent or in the name of the successor Rights Agent;
and in all such cases such Rights Certificates shall have the full
force provided in the Rights Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be
changed and at such time any of the Rights Certificates shall have
been countersigned but not delivered, the Rights Agent may adopt the
countersignature under its prior name and deliver Rights Certificates
so countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, the Rights Agent may
countersign such Rights Certificates either in its prior name or in
its changed name; and in all such cases such Rights Certificates shall
have the full force provided in the Rights Certificates and in this
Agreement.
SECTION 20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the duties
----------------------
and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Rights Certificates,
by their acceptance thereof, shall be bound:
29
<PAGE>
(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. The Company shall
indemnify the Rights Agent for, and hold it harmless against, any
loss, liability or expense incurred without negligence or bad faith on
its part arising out of or in connection with its agency under this
Agreement, including the costs and expenses of defending itself
against any claim or liability in connection with its exercise or
performance of any of its duties under this Agreement. Anything in
this Agreement to the contrary notwithstanding, in no event shall the
Rights Agent be liable for special, indirect or consequential loss or
damage of any kind whatsoever (including but not limited to lost
profits), even if the Rights Agent has been advised of the likelihood
of such loss or damage and regardless of the form of the action.
(d) The Rights Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement or in
the Rights Certificates or be required to verify the same (except as
to its countersignature on such Rights Certificates), but all such
statements and recitals are and shall be deemed to have been made by
the Company only.
(e) The Rights Agent shall not 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
30
<PAGE>
(except with respect to the exercise of Rights evidenced by Rights
Certificates after actual notice of any such adjustment); nor shall it
by any act hereunder be deemed to make any representation or warranty
as to the authorization or reservation of any shares of Common Stock
or Preferred Stock to be issued pursuant to this Agreement or any
Rights Certificate or as to whether any shares of Common Stock or
Preferred Stock will, when so issued be validly authorized and issued,
fully paid and nonassessable.
(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 by
itself or by or through its attorneys or agents, and the Rights Agent
shall not be answerable or accountable for any act, default, neglect
or misconduct of any such attorneys or agents or for any loss to the
Company resulting from any such act, default, neglect or misconduct;
provided, however, reasonable care was exercised in the selection and
-------- -------
continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent
to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder or in the
exercise of its rights if there shall be reasonable grounds for
believing that repayment of such funds or adequate indemnification
against such risk or liability is not reasonably assured to it.
31
<PAGE>
(k) If, with respect to any Rights Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the
form of assignment or form of election to purchase, as the case may
be, has either not been completed or indicates an affirmative response
to CLAUSE 1 and/or 2 thereof, the Rights Agent shall not take any
further action with respect to such requested exercise of transfer
without first consulting with the Company.
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 advance notice in writing mailed to the Company and to each
transfer agent of the Common Stock and Preferred Stock, by registered or
certified mail, and to the holders of the Rights Certificates by first-class
mail. The Company may remove the Rights Agent or any successor Rights Agent upon
30 days advance notice in writing, mailed to the Rights Agent or successor
Rights Agent, as the case may be, and to each transfer agent of the Common Stock
and Preferred Stock, by registered or certified mail, and to the holders of the
Rights Certificates by first-class mail. If the Rights Agent shall resign or be
removed or shall otherwise become incapable of acting, the Company shall appoint
a successor to the Rights Agent. If the Company shall fail to make such
appointment within a period of 30 days after giving notice of such removal or
after it has been notified in writing of such resignation or incapacity by the
resigning or incapacitated Rights Agent or by the holder of a Rights Certificate
(who shall, with such notice, submit his Rights Certificate for inspection by
the Company), then any registered holder of any Rights Certificate may apply to
any court of competent jurisdiction for the appointment of a new Rights Agent.
Any successor Rights Agent, whether appointed by the Company or by such a court,
shall be (i) a corporation organized and doing business under the laws of the
United States or of the States of Texas or New York (or of any other state of
the United States so long as such corporation is authorized to do business as a
banking institution in the States of Texas or New York), 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 an equity
of at least $100,000,000, or (ii) an affiliate of a corporation described in
CLAUSE (I) 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.
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
32
<PAGE>
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 redemption or expiration of the
Rights the Company (a) shall, with respect to shares of Common Stock so issued
or sold under any employee plan or arrangement, or upon the exercise, conversion
or exchange of securities hereinafter issued by the Company and (b) may, in any
other case, if deemed necessary or appropriate by the Board of Directors of the
Company, issue Rights Certificates representing the appropriate number or 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 for the Company that such issuance more likely than not
would (a) cause any incentive stock option plan of the Company to not or to no
longer meet or satisfy the requirements of Section 422 of the Code or (b)
otherwise create a risk of material adverse tax consequences to the Company, to
the Person to whom such Rights Certificates would be issued, or to other
employees or former employees of the Company, 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 after the Stock Acquisition Date (or, if the Stock
Acquisition Date shall have occurred prior to the Record Date, the
close of business on the tenth day following the Record Date), or (ii)
the Final Expiration Date, redeem all but not less than all the then
outstanding Rights at a redemption price of $.01 per Right, as such
amount may be appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date hereof (such
redemption price being hereinafter referred to as the "Redemption
Price"), and the Company may, at its option, pay the Redemption Price
in shares of Common Stock (based on the "current market value," as
defined in SECTION 11(D)(I) hereof, of the shares of Common Stock at
the time of redemption), cash or any other form of consideration
deemed appropriate by the Board of Directors; provided, however, if
-------- -------
the Board of Directors of the Company authorizes redemption of the
Rights and such authorization occurs on or after the time a Person
becomes an Acquiring Person, then there must be Continuing Directors
then in office and such authorization shall require the concurrence of
a majority of such Continuing Directors.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights, evidence of which shall
have been filed with the Rights Agent and without any further action
and without any notice, the right to exercise the Rights will
terminate and the only right thereafter of the holders of Rights shall
be to receive the Redemption Price for each Right so held. Following
the action of the Board of Directors ordering the redemption of the
Rights, the Company shall give notice of such redemption to the Rights
Agent and the holders of the then outstanding Rights by mailing such
notice to all such holders at each
33
<PAGE>
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 Transfer Agent for the Common Stock. Any notice which is mailed
in the manner herein provided shall be deemed given, whether or not
the holder receives the notice. Each such notice of redemption will
state the method by which the payment of the Redemption Price will be
made.
SECTION 24. NOTICE OF CERTAIN EVENTS.
------------------------
(a) In case the Company shall propose, at any time after the
Distribution Date, (i) to pay any dividend payable in stock of any
class to the holders of Preferred Stock or to make any other
distribution to the holders of Preferred Stock (other than a regular
quarterly cash dividend out of earnings or retained earnings of the
Company), or (ii) to offer to the holders of Preferred Stock rights or
warrants to subscribe for or to purchase any additional shares of
Preferred Stock or shares of stock of any class or any other
securities, rights or options, or (iii) to effect any reclassification
of its Preferred Stock (other than a reclassification involving only
the subdivision of outstanding shares of Preferred Stock), or (iv) to
effect any consolidation or merger into or with any other Person
(other than a Subsidiary of the Company in a transaction which
complies with SECTION 11(O) hereof), or to effect any sale, lease or
other transfer (or to permit one or more of its Subsidiaries to effect
any sale, lease or other transfer), in one transaction or a series of
related transactions, of assets aggregating more than 50% of the
assets (measured by either book value or fair market value) or
generating more than 50% of the operating income or cash flow of the
Company and its Subsidiaries (taken as a whole) to any other Person or
Persons (other than the Company and/or any of its Subsidiaries in one
or more transactions each of which complies with SECTION 11(O)
hereof), or (v) to effect the liquidation, dissolution or winding up
of the Company then, in each such case, the Company shall give to each
holder of a Rights Certificate, to the extent feasible and in
accordance with SECTION 25 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 therein by
the holders of the shares of Preferred Stock whichever shall be the
earlier.
(b) In case any of the events set forth in SECTION 11(A)(II) hereof
shall occur, then, in any such case, (i) the Company shall as soon as
practicable thereafter give to each holder of a Rights Certificate, to
the extent feasible and in accordance
34
<PAGE>
with SECTION 25 hereof, a notice of the occurrence of such event,
which shall specify the event and the consequences of the event to
holders of Rights under SECTION 11(A)(II) hereof, and (ii) all
references in the preceding subsection to Preferred Stock shall be
deemed thereafter to refer to Common Stock and/or, if appropriate,
other securities.
SECTION 25. 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:
VTEL Corporation
108 Wild Basin Road
Austin, Texas 78746
Attn: President
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:
First National Bank of Boston
P.O. Box 1865
Mail Stop 45-02-62
Boston, MA 02105-1865
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 26. SUPPLEMENTS AND AMENDMENTS. Prior to the Distribution Date and
--------------------------
subject to the penultimate sentence of this SECTION 26, the Company and the
Rights Agent shall, if the Company so directs, supplement or amend any provision
of this Agreement without the approval of any holders of certificates
representing shares of Common Stock; provided, however, if the Board of
--------- -------
Directors authorizes a supplement or amendment to this Agreement on or after the
time a Person becomes an Acquiring Person, then there must be Continuing
Directors then in office and such amendment or supplement shall require the
concurrence of a majority of such Continuing Directors. From and after the
Distribution Date and subject to the penultimate sentence of this SECTION 26,
the Company and the Rights Agent shall, if the Company so directs, supplement or
amend this Agreement without the approval of any holders of Rights Certificates
in order (i) to cure any ambiguity, (ii) to correct or supplement any provision
contained herein which may be defective or inconsistent with any other
provisions herein, (iii) to shorten or lengthen any time period hereunder (which
lengthening or shortening shall be effective only if there are Continuing
35
<PAGE>
Directors in office and shall require the concurrence of a majority of such
Continuing Directors) or (iv) to change or supplement the provisions hereunder
in any manner which the Company may deem necessary or desirable and which shall
not adversely affect the interests of the holders of Rights Certificates (other
than an Acquiring Person or an Affiliate or Associate of an Acquiring Person);
provided, this Agreement may not be supplemented or amended to lengthen pursuant
- --------
to CLAUSE (III) of this sentence, (A) a time period relating to when the Rights
may be redeemed at such time as the Rights are not then redeemable, or (B) any
other time period unless lengthening 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. 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 26, the Rights Agent shall execute
such supplement or amendment. Notwithstanding anything contained in this
Agreement to the contrary, no supplement or amendment shall be made which
changes the Redemption Price, the Final Expiration Date, the Purchase Price or
the number of one one-thousandths of a share of Preferred Stock for which a
Right is exercisable. Prior to the Distribution Date, the interests of the
holders of Rights shall be deemed coincident with the interests of the holders
of Common Stock.
SECTION 27. 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 28. 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 in effect on the date hereof. The Board of Directors of
the Company (with, where specifically provided for herein, the concurrence of
the Continuing Directors) shall have the exclusive power and authority to
administer this Agreement and to exercise all rights and powers specifically
granted to the Board (with, where specifically provided for herein, the
concurrence of the Continuing Directors) or to the Company, or as may be
necessary or advisable in the administration of this Agreement, including,
without limitation, the right and power to (i) interpret the provisions of this
Agreement, and (ii) make all determinations deemed necessary or advisable for
the administration of this Agreement (including a determination to redeem or not
to redeem the Rights or to amend the Agreement). All such actions, cal
culations, interpretations and determinations (including, for purposes of CLAUSE
(Y) below, all omissions with respect to the foregoing) which are done or made
by the Board (with, where specifically provided for herein, the concurrence of
the Continuing Directors) in good faith, shall be final, conclusive and binding
on the Rights Agent and the holders of the Rights, and all other parties, and
(y) not subject the Board or the Continuing Directors to any liability to the
holders of the Rights.
SECTION 29. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be
--------------------------
construed to give to any Person other than the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the Distribution
Date, registered holders of the Common Stock)
36
<PAGE>
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 30. SEVERABILITY. If any term, provision, covenant or restriction
------------
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
- -------- -------
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board of
Directors of the Company determines in its good faith judgment that severing the
invalid language from this Agreement would adversely affect the purpose or
effect of this Agreement, the right of redemption set forth in SECTION 23 hereof
shall be reinstated and shall not expire until the close of business on the
tenth day following the date of such determination by the Board of Directors.
SECTION 31. 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 32. COUNTERPARTS. This Agreement may be executed in any number of
------------
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
SECTION 33. DESCRIPTIVE HEADINGS. Descriptive headings of the several
--------------------
sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
37
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
Attest: VTEL CORPORATION
By: /s/ Lora J. Neans By: /s/ Rodney S. Bond
----------------------------- ------------------------------
Name: Lora J. Neans Name: Rodney S. Bond
Title: Executive Assistant, Title: Vice President
Paralegal
Attest: FIRST NATIONAL BANK OF BOSTON
By: /s/ Carol A. Mulvey By: /s/ Colleen Shea-Keating
----------------------------- ------------------------------
Name: Carol A. Mulvey Name: Colleen Shea-Keating
Title: Senior Account Manager Title: Administration Manager
38
<PAGE>
EXHIBIT A
---------
CERTIFICATE OF DESIGNATIONS
FOR DESIGNATING SERIES A
PREFERRED STOCK OF
VTEL CORPORATION
To the Secretary of State
of the State of Delaware:
Pursuant to the provisions of the Delaware General Corporation Law, the
undersigned corporation submits the following certificate for the purpose of
designating series of its preferred stock and fixing and determining the
relative rights and preferences thereof:
1. The name of the corporation is VTEL Corporation.
2. The following resolution establishing and designating the Series A
Preferred Stock and fixing and determining the relative rights and preferences
thereof was duly adopted by the Board of Directors of the Corporation on July
10, 1996:
RESOLVED, that pursuant to the authority vested in the Board of Directors
of this Company in accordance with the provisions of its Certificate of
Incorporation, a series of Preferred Stock of the Corporation be and it hereby
is created, and that the designation and amount thereof and the voting powers,
preferences and relative, participating, optional and other special rights of
the shares of such series, and the qualifications, limitations or restrictions
thereof are as follows:
SECTION 1. Designation and Amount. The shares of such series shall
----------------------
be designated as "Series A Preferred Stock," shall have $0.01 par value per
share, and the number of shares constituting such series shall be 150,000.
SECTION 2. Dividends and Distributions.
----------------------------
(A) Subject to the prior and superior rights of the holders of any
shares of any series of Preferred Stock ranking prior and superior to the
shares of Series A Preferred Stock with respect to dividends, if any, the
holders of shares of Series A Preferred Stock shall be entitled to receive,
when, as and if declared by the Board of Directors out of funds legally
available for the purpose, quarterly dividends payable in cash on the last
day of 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 Preferred Stock, in
an amount per share (rounded to the nearest cent) equal to 1,000 times the
aggregate per share amount of all cash dividends, and 1,000 times the
aggregate per
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share amount (payable in kind) of all non-cash dividends or other
distributions other than a dividend payable in shares of Common Stock or a
subdivision of the outstanding shares of Common Stock (by reclassification
or otherwise), declared on the Common Stock, par value $.01 per share, of
the Corporation (the "Common Stock") subject to the provision for
adjustment hereinafter set forth, 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 Preferred Stock. In the event the Corporation shall at any time
after July 10, 1996 (the "Rights Declaration Date"), (i) declare any
dividend on Common Stock payable in shares of Common Stock, (ii) subdivide
the outstanding Common Stock, or (iii) combine the outstanding Common Stock
into a smaller number of shares, then in each such case the amount to which
holders of shares of Series A Preferred Stock were entitled immediately
prior to such event shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately
prior to such event.
(B) The Corporation shall declare a dividend or distribution on the
Series A Preferred Stock as provided in paragraph (A) above immediately
after it declares a dividend or distribution on the Common Stock (other
than a dividend payable in shares of Common Stock).
(C) Dividends shall begin to accrue (if payable pursuant to PARAGRAPH
(A) above) and be cumulative on outstanding shares of Series A Preferred
Stock from the Quarterly Dividend Payment Date next preceding the date of
issue of such shares of Series A Preferred Stock, unless the date of issue
of such shares is prior to the record date for the first Quarterly Dividend
Payment Date, in which case dividends on such shares shall begin to accrue
from the date of issue of such shares, or unless the date of issue is a
Quarterly Dividend Payment Date or is a date after the record date for the
determination of holders of shares of Series A 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 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 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 Preferred Stock
-------------
shall have the following voting rights:
(A) Subject to the provisions for adjustment hereinafter set forth,
each one one-thousandth share of Series A Preferred Stock shall entitle the
holder thereof to one
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vote on all matters submitted to a vote of the shareholders of the
Corporation. In the event the Corporation shall at any time after the
Rights Declaration Date (i) declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock or
(iii) combine the outstanding Common Stock into a smaller number of shares,
then in each such case the number of votes per one one-thousandth of a
share to which holders of shares of Series A Preferred Stock were entitled
immediately prior to such event shall be adjusted by multiplying such
number by a fraction the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator
of which is the number of shares of Common Stock that were outstanding
immediately prior to such event.
(B) Except as otherwise provided herein or by law, the holders of
shares of Series A Preferred Stock and the holders 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 Preferred Stock
shall be in arrears in an amount equal to four (4) quarterly dividends
thereon (whether or not consecutive), the occurrence of such contingency
shall mark the beginning of a period (herein called a "default period")
which shall extend until such time when all accrued and unpaid dividends
for all previous quarterly dividend periods on all shares of Series A
Preferred Stock then outstanding shall have been declared and paid or set
apart for payment. During each default period, all holders of Preferred
Stock (including holders of the Series A Preferred Stock) with dividends in
arrears in an amount equal to four (4) quarterly dividends thereon, voting
as a class, irrespective of series, shall have the right to elect two (2)
Directors.
(ii) During any default period, such voting right of the
holders of Series A Preferred Stock may be exercised initially at a special
meeting called pursuant to subparagraph (iii) of this SECTION 3(C) or at
any annual meeting of shareholders, and thereafter at annual meetings of
shareholders provided that neither such voting right nor the right of the
holders of any other series of Preferred Stock, if any, to increase, in
certain cases, the authorized number of Directors shall be exercised unless
the holders of ten percent (10%) in number of shares of Preferred Stock
outstanding shall be present in person or by proxy. The absence of a quorum
of the holders of Common Stock shall not affect the exercise by the holders
of Preferred Stock of such voting right. At any meeting at which the
holders of Preferred Stock shall exercise such voting right initially
during an existing default period, they shall have the right, voting as a
class, to elect Directors to fill such vacancies, if any, in the Board of
Directors as may then exist up to two (2) Directors or, if such right is
exercised at an annual meeting, to elect two (2) Directors. If the number
which may be so elected at any special meeting does not amount to the
required number, the holders of the Preferred Stock shall have the right to
make such increase in the number of Directors as shall be necessary to
permit the election by them of the required number. After the holders of
the Preferred Stock shall have exercised their right to elect Directors in
any default period and during the continuance of such period, the number of
Directors shall not be increased or decreased except by vote of the holders
of
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Preferred Stock as herein provided or pursuant to the rights of any equity
securities ranking senior to or pari passu with the Series A Preferred
---- -----
Stock.
(iii) Notwithstanding anything to the contrary contained in the
Corporation's Certificate of Incorporation or Bylaws, unless the holders of
Preferred Stock shall, during an existing default period, have previously
exercised their right to elect Directors, the Board of Directors may order,
or any shareholder or shareholders owning in the aggregate not less than
ten percent (10%) of the total number of shares of Preferred Stock
outstanding, irrespective of series, may request, the calling of a special
meeting of the holders of Preferred Stock, which meeting shall thereupon be
called by the President, a Vice-President or the Secretary of the
Corporation. Notice of such meeting and of any annual meeting at which
holders of Preferred Stock are entitled to vote pursuant to this
subparagraph (C)(iii) shall be given to each holder of record of Preferred
Stock by mailing a copy of such notice to him at his last address as the
same appears on the books of the Corporation. Such meeting shall be called
for a time not earlier than 10 days and not later than 60 days after such
order or request or in default of the calling of such meeting within 60
days after such order or request, such meeting may be called on similar
notice by any shareholder or shareholders owning in the aggregate not less
than ten percent (10%) of the total number of shares of Preferred Stock
outstanding. Notwithstanding the provisions of this subparagraph (C)(iii),
no such special meeting shall be called during the period within 60 days
immediately preceding the date fixed for the next annual meeting of the
shareholders.
(iv) In any default period, the holders of Common Stock, and
other classes of stock of the Corporation, if applicable, shall continue to
be entitled to elect the whole number of Directors until the holders of
Preferred Stock shall have exercised their right to elect two (2) Directors
voting as a class, after the exercise of which right (x) the Directors so
elected by the holders of Preferred Stock shall continue in office until
their successors shall have been elected by such holders or until the
expiration of the default period, and (y) the Common Stock and Preferred
Stock, voting together as a class, shall be entitled to elect the remaining
directors.
(v) Immediately upon the expiration of a default period, (x)
the right of the holders of Preferred Stock as a class to elect directors
shall cease, (y) the term of any directors elected by the holders of
Preferred Stock as a class shall terminate, and (z) the number of Directors
shall be such number as may be provided for in the Certificate of
Incorporation or Bylaws irrespective of any increase made pursuant to the
provisions of subparagraph (C)(ii) of this SECTION 3 (such number being
subject, however, to change thereafter in any manner provided by law or in
the Certificate of Incorporation or Bylaws). 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 Preferred Stock
shall have no special voting rights and their consent shall not be required
(except to the extent they
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are entitled to vote with holders of Common Stock as set forth herein) for
taking any corporate action.
SECTION 4. Certain Restrictions.
---------------------
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock, as provided in SECTION 2 hereof,
are in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series A 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 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
Preferred Stock, except dividends paid ratably on the Series A Preferred
Stock and all such parity stock on which dividends are payable, or in
arrears in proportion to the total amounts to which the holders of all such
shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Stock,
provided that the Corporation may at any time redeem, purchase or otherwise
acquire shares of any such parity stock in exchange for shares of any stock
of the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any shares
of Series A Preferred Stock, or any shares of stock ranking on a parity
with the Series A Preferred Stock, except in accordance with a purchase
offer made in writing or by publication (as determined by the Board of
Directors) to all holders of such shares upon such terms as the Board of
Directors, after consideration of the respective annual dividend rates and
other relative rights and preferences of the respective series and classes,
shall determine in good faith will result in fair and equitable treatment
among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares
of stock of the Corporation unless the Corporation could, under subsection
(A) of this SECTION 4, purchase or otherwise acquire such shares at such
time and in such manner.
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SECTION 5. Reacquired Shares. Any shares of Series A Preferred
-----------------
Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition thereof.
All such shares shall upon their cancellation become authorized but unissued
shares of Preferred Stock and may be reissued as part of a new series of
Preferred Stock to be created by resolution or resolutions of the Board of
Directors subject to the conditions and restrictions on issuance set forth
herein.
SECTION 6. Liquidation, Dissolution or Winding-Up.
---------------------------------------
(A) Upon any liquidation (voluntary or otherwise), dissolution or
winding-up of the Corporation, no distribution shall be made to the holders
of shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding-up) to the Series A Preferred Stock
unless prior thereto, the holders of shares of Series A Preferred Stock
shall have received $10 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
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 absolute value of the
Series A Liquidation Preference by (ii) 1,000 (as appropriately adjusted as
set forth in subsection C below to reflect such events as stock splits,
stock dividends and recapitalizations with respect to the Common Stock)
(such number in CLAUSE (II), the "Adjustment Number"). Following the
payment of the full amount of the Series A Liquidation Preference and the
Common Adjustment in respect of all outstanding shares of Series A
Preferred Stock and Common Stock, respectively, holders of Series A
Preferred Stock and holders of shares of Common Stock shall receive their
ratable and proportionate share of the remaining assets to be distributed
in the ratio of the Adjustment Number to l with respect to such 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, which rank on a parity with the Series A Preferred Stock, then such
remaining assets shall be distributed ratably to the holders of such parity
shares in proportion to their respective liquidation preferences. In the
event, however, that there are not sufficient assets available to permit
payment in full of the Common Adjustment, then such remaining assets shall
be distributed ratably to the holders of Common Stock.
(C) In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares
of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii)
combine the outstanding Common Stock into a smaller number of shares, then
in each such case the Adjustment Number in effect immediately prior to such
event shall be adjusted by multiplying such Adjustment Number by a fraction
the numerator of which is the number of shares of Common Stock
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outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately
prior to such event.
SECTION 7. Consolidation, Merger, Etc. In case the Corporation
---------------------------
shall enter into any consolidation, merger, combination or other transaction in
which the shares of Common Stock are exchanged for or changed into other stock
or securities, cash and/or any other property, then in any such case the shares
of Series A Preferred Stock shall at the same time be similarly exchanged or
changed in an amount per share (subject to the provision for adjustment
hereinafter set forth) equal to 1,000 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time after the Rights Declaration Date
(i) declare any dividend on Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding Common Stock, or (iii) combine the outstanding Common
Stock into a smaller number of shares, then in each such case the amount set
forth in the preceding sentence with respect to the exchange or change of shares
of Series A Preferred Stock shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
SECTION 8. No Redemption. The shares of Series A Preferred Stock
-------------
shall not be redeemable.
SECTION 9. Ranking. The Series A Preferred Stock shall rank junior
-------
to all other series of the Corporation's Preferred Stock as to the payment of
dividends and the distribution of assets, unless the terms of any such series
shall provide otherwise.
SECTION 10. Amendment. The Certificate of Incorporation of the
---------
Corporation shall not be further amended in any manner which would materially
alter or change the powers, preferences or special rights of the Series A
Preferred Stock so as to affect them adversely without the affirmative vote of
the holders of a majority or more of the outstanding shares of Series A
Preferred Stock, voting separately as a class.
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SECTION 11. Fractional Shares. Series A Preferred Stock may be
-----------------
issued in fractions of a share which shall entitle the holder thereof, in
proportion to such holder's fractional shares, to exercise voting rights,
receive dividends, participate in distributions and to have the benefit of all
of the rights of holders of shares of Series A Preferred Stock.
Dated: ______________, 1996 VTEL CORPORATION
By: ___________________________________
________________________
By: ___________________________________
________________________
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EXHIBIT 2
EXHIBIT B
---------
[Form of Rights Certificate]
Certificate No. R- _______ Rights
NOT EXERCISABLE AFTER DECEMBER 31, 2005 OR EARLIER IF REDEEMED BY THE
COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE
COMPANY, AT $.01 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.
UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING
PERSON OR AN AFFILIATE OR ASSOCIATE THEREOF (AS SUCH TERMS ARE DEFINED IN
THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME
NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR
WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON
OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE
DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND
THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES
SPECIFIED IN SECTION 7(E) OF SUCH AGREEMENT.]/1/
Rights Certificate
VTEL Corporation
This certifies that ____________________, or registered assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof subject to the terms, provisions and conditions of the Rights
Agreement, dated as of July 10, 1996 (the "Rights Agreement"), between VTEL
Corporation, a Delaware corporation (the "Company"), and First National Bank of
Boston, a national banking firm (the "Rights Agent"), to purchase from the
Company at any time prior to 4:00 p.m. (Dallas time) on December 31, 2005 at the
office or offices of the Rights Agent, designated for such purposes or its
successors as Rights Agent, one one-thousandth of a fully paid, non-assessable
share of Series A Preferred Stock (the "Preferred Stock") of the Company, at a
purchase price of $55 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 duly executed. The Purchase Price
shall be paid in cash or by certified bank check or money order payable to the
order of the Company. The number of Rights evidenced by this Rights Certificate
(and the number of shares which may be purchased upon exercise thereof) set
forth above, and the Purchase Price per share set forth above, are the number
and Purchase Price as of July 10, 1996, based on the Preferred Stock as
constituted at such date.
______________________
/1/ [The portion of the legend in brackets shall be inserted only if
applicable]
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Upon the 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 (i) an Acquiring Person or an Affiliate or Associate of
any such Acquiring Person (as such terms are defined in the Rights Agreement),
(ii) a transferee of any such Acquiring Person, Associate or Affiliate, or (iii)
under certain circumstances specified in the Rights Agreement, a transferee of a
person who, after such transfer, became an Acquiring Person, or an Affiliate or
Associate of an Acquiring Person, such Rights shall become null and void and no
holder hereof shall have any right with respect to such Rights from and after
the occurrence of such Triggering Event.
As provided in the Rights Agreement, the Purchase Price and the number
and kind of shares of Preferred Stock or other securities which may be purchased
upon the exercise of the Rights evidenced by this Rights Certificate are subject
to modification and adjustment upon the happening of certain events, including
Triggering Events.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the office of the Company and are
also available upon written request to the Company.
This Rights Certificate, with or without other Rights Certificates,
upon surrender at the principal office or offices of the Rights Agent designated
for such purposes may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of one one-thousandths of a share of Preferred
Stock as the Rights evidenced by the Rights Certificate or Rights Certificates
surrendered shall have entitled such holder to purchase. If this Rights
Certificate shall be exercised in part, the holder shall be entitled to receive
upon surrender hereof another Rights Certificate or Rights Certificates for the
number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may be redeemed by the Company at its option at a
redemption price of $.01 per Right in cash or in shares of Common Stock or in
any other form of consideration deemed appropriate by the Board of Directors at
any time prior to the earlier of the close of business on (i) the tenth day
following the Stock Acquisition Date (or, if the Stock Acquisition Date shall
have occurred prior to the Record Date, the close of business on the tenth day
following the Record Date), and (ii) the Final Expiration Date. Under certain
circumstances set forth in the Rights Agreement, the decision to redeem shall
require the concurrence of a majority of the Continuing Directors.
No fractional shares of Preferred Stock will be issued upon the
exercise of any Right or Rights evidenced hereby (other than fractions which are
integral multiples of one one-thousandth of a share of Preferred Stock, which
may, at the election of the Company, be
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evidenced by depository receipts), but in lieu thereof a cash payment will be
made, as provided in the Rights Agreement
No holder of this Rights Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of shares of Preferred
Stock or of any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a 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.
ATTEST: VTEL CORPORATION
________________________________ By: ________________________________
Secretary Title: ________________________________
Countersigned:
________________________
By: ___________________________
Authorized Signature
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[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED ____________________ hereby sells, assigns and transfers
unto ______________________
_________________________________________________________________
(Please print name and address of transferee)
_________________________________________________________________
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ___________________ Attorney,
to transfer the within Rights Certificate on the books of the within-named
Company, with full power of substitution.
Dated: __________, 19____
________________________________________
Signature
Signature Guaranteed:
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<PAGE>
Certificate
-----------
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Rights Certificate [ ] is [ ] is not being sold, assigned
and transferred by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of any such Acquiring Person (as such terms are
defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it [
] did [ ] did not acquire the Rights evidenced by this Rights Certificate
from any Person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person.
Dated: ________, 19___ ___________________________________
Signature
Signature Guaranteed:
NOTICE
------
The signature to the foregoing Assignment and Certificate must correspond
to the name as written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any change whatsoever.
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FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if holder desires to
exercise Rights represented by the
Rights Certificate.)
To ______________:
The undersigned hereby irrevocably elects to exercise Rights represented by
this Rights Certificate to purchase the shares of Preferred Stock issuable upon
the exercise of the Rights (or such other securities of the Company or of any
other person which may be issuable upon the exercise of the Rights) and requests
that certificates for such shares be issued in the name of and delivered to:
Please insert social security
or other identifying number: ________________________
__________________________________________________________________________
(Please print name and address)
__________________________________________________________________________
If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number: ________________________
__________________________________________________________________________
(Please print name and address)
__________________________________________________________________________
Dated: _________, 19____ _____________________________
Signature
Signature Guaranteed:
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Certificate
-----------
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ]
are not being exercised by or on behalf of a Person who is or was an Acquiring
Person or an Affiliate or Associate of any such Acquiring Person (as such terms
are defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it [
] did [ ] did not acquire the Rights evidenced by this Rights Certificate
from any Person who is, was or became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.
Dated: _________, 19____ ___________________________________
Signature
Signature Guaranteed:
NOTICE
------
The signature to the foregoing Election to Purchase and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
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EXHIBIT 3
EXHIBIT C
---------
SUMMARY OF RIGHTS
To Purchase Series A Preferred Stock
On July 10, 1996, the Board of Directors of VTEL Corporation (the
"Company") declared a dividend distribution of one Right for each outstanding
share of the Company's Common Stock to shareholders of record at the close of
business on July 22, 1996. Each Right relates to one one-thousandth of a share
of Series A Preferred Stock, $.01 par value (the "Preferred Stock"), subject to
adjustment. The description and terms of the Rights are set forth in a Rights
Agreement (the "Rights Agreement") between the Company and First National Bank
of Boston, as Rights Agent.
Initially, the Rights will be attached to all Common Stock certificates
representing shares then outstanding, and no separate Rights Certificates will
be distributed. The Rights will separate from the Common Stock and a
distribution date (the "Distribution Date") will occur upon the earlier of (i)
10 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 10% or more of the outstanding shares of
Common Stock (the "Stock Acquisition Date") or (ii) 10 business days following
the commencement of a tender offer or exchange offer that would result in a
person or group beneficially owning 10% or more of such outstanding shares of
Common Stock. Until the Distribution Date, (i) 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, (ii) Common Stock certificates issued after
July 22, 1996 will contain a notation incorporating the Rights Agreement by
reference and (iii) the surrender for transfer of any certificate for Common
Stock outstanding (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 December 31, 2005, unless that date is extended or
the Rights are earlier redeemed by the Company as described below.
As soon as practicable after the Distribution Date, Rights Certificates
will be mailed to holders of record of the Common Stock as of the close of
business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights.
Ten business days after any person or group announces a tender offer for
10% or more of the Company's outstanding Common Stock, the rights will become
exercisable. Thereafter, the Rights will trade separately from the Company's
Common Stock and separate certificates representing the Rights will be issued,
which will entitle the holder of a Right to purchase from the Company one one-
thousandth of a share of Preferred Stock for $55 (the "Purchase Price").
In addition, if any person or group acquires 10% or more of the Common
Stock, each Right not owned by the acquiror would become exercisable for the
number of shares of the Company's Common Stock that at the time have a market
value of two times the $55 exercise price of the Right. If, after any person or
group acquires 10% or more of the Common Stock, the Company is acquired in a
merger or other business transaction in which the Company is not the surviving
corporation, the Rights, under certain circumstances
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will be modified so as to entitle the holder to buy a number of the acquiring
company's common shares having a market value of two times the $55 exercise
price of each Right.
For example, at an exercise price of $55 per Right, each Right not owned by
an Acquiring Person (or by certain related parties) following an event set forth
in the preceding paragraph would entitle its holder to purchase $110 worth of
Common Stock (or other consideration, as noted above) for $55. Assuming that the
Common Stock had a per share value of $10 at such time, the holder of each valid
Right would be entitled to purchase 11 shares of Common Stock for $55.
The Purchase Price payable, and the number of securities or property
issuable, upon exercise of the Rights are subject to adjustment from time to
time to prevent dilution (i) in the event of a stock dividend on, or a
subdivision, combination or reclassification of, the Common Stock or Preferred
Stock, (ii) if holders of the Common Stock or Preferred Stock are granted
certain rights or warrants to subscribe for shares or convertible securities at
less than the current market price, or (iii) upon the distribution to holders of
evidences of indebtedness or assets (excluding regular quarterly cash dividends)
or of subscription rights or warrants (other than those referred to above).
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 Units will be issued and, in lieu thereof, an adjustment in
cash will be made based on the market price of the Preferred Stock on the last
trading date prior to the date of exercise.
In general, at any time until 10 days after the Stock Acquisition Date, the
Company may redeem the Rights in whole, but not in part, at a price of $.01 per
Right in cash, shares of Common Stock or other consideration approved by the
Board. Under certain circumstances set forth in the Rights Agreement, the
decision to redeem shall require the concurrence of a majority of the Continuing
Directors. Immediately upon the action of the Board of Directors ordering
redemption of the Rights, with, where required, the concurrence of the
Continuing Directors, the Rights will terminate and the only right of the
holders of Rights will be to receive the $.01 redemption price.
The term "Continuing Directors" means any member of the Board of Directors
of the Company who was a member of the Board prior to the date of the Rights
Agreement, and any person who is subsequently elected to the Board if such
person is recommended or approved by a majority of the Continuing Directors, but
shall not include an Acquiring Person or an affiliate or associate of an
Acquiring Person, or any representative of the foregoing entities.
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 will 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
common stock of the acquiring company as set forth above.
Other than those provisions relating to the principal economic terms of the
Rights, any of the provisions of the Rights Agreement may be amended by the
Board of Directors of the Company prior to the Distribution Date. After the
Distribution Date, the provisions of the Rights Agreement may be amended by the
Board (in certain circumstances, with the concurrence of a majority of the
Continuing Directors) in order to cure any ambiguity to make changes which do
not adversely affect the interests of holders of Rights (excluding the interest
of any Acquiring Person), or to shorten or lengthen any time period under the
Right Agreement; provided, however, that no amendment to adjust the time period
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governing redemption shall be
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<PAGE>
made at such time as the Rights are not redeemable or, in certain circumstances,
without the concurrence of a majority of the Continuing Directors.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A, dated
___________, 1996. A copy of the Rights Agreement is available free of charge
from the Company for record holders of the Company's common stock. 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.
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