<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-A
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934
NETWORKS ASSOCIATES, INC.
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(Exact name of Registrant as specified in its charter)
DELAWARE 77-0316593
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(State of incorporation or organization) (IRS Employer Identification No.)
3965 Freedom Circle
Santa Clara, California 95054
(Address of principal executive offices) (Zip Code)
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Securities to be registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH
TO BE SO REGISTERED EACH CLASS IS TO BE REGISTERED
------------------- ------------------------------
<S> <C>
None None
</TABLE>
Securities to be registered pursuant to Section 12(g) of the Act:
PREFERRED SHARE PURCHASE RIGHTS
-------------------------------
(Title of Class)
<PAGE> 2
Item 1. DESCRIPTION OF SECURITIES TO BE REGISTERED.
On October 19, 1998, pursuant to a Preferred Shares Rights Agreement
(the "Rights Agreement") between the Company and BankBoston, N.A. as Rights
Agent (the "Rights Agent"), the Company's Board of Directors declared a dividend
of one right (a "Right") to purchase one one-thousandth share of the Company's
Series B Participating Preferred Stock, $0.01 par value per share ("Series B
Preferred"), for each outstanding share of Common Stock, $0.01 par value per
share, ("Common Shares"), of the Company. The dividend is payable on November 3,
1998 (the "Record Date") to stockholders of record as of the close of business
on that day. Each Right entitles the registered holder to purchase from the
Company one one-thousandth of a share of Series B Preferred at an exercise price
of $200.00 (the "Purchase Price"), subject to adjustment.
The following summary of the principal terms of the Rights Agreement is
a general description only and is subject to the detailed terms and conditions
of the Rights Agreement. A copy of the Rights Agreement is attached as Exhibit 1
to this Form 8-A and is incorporated herein by reference.
Rights Evidenced by Common Share Certificates
The Rights will not be exercisable until the Distribution Date (defined
below). Certificates for the Rights ("Rights Certificates") will not be sent to
stockholders and the Rights will attach to and trade only together with the
Common Shares. Accordingly, Common Share certificates outstanding on the Record
Date will evidence the Rights related thereto, and Common Share certificates
issued after the Record Date will contain a notation incorporating the Rights
Agreement by reference. Until the Distribution Date (or earlier redemption or
expiration of the Rights), the surrender or transfer of any certificates for
Common Shares, outstanding as of the Record Date, even without notation or a
copy of the Summary of Rights being attached thereto, will also constitute the
transfer of the Rights associated with the Common Shares represented by such
certificate.
Distribution Date
The Rights will separate from the Common Shares, Rights Certificates
will be issued and the Rights will become exercisable upon the earlier of: (i)
ten days following the first date a public announcement by the Company or an
Acquiring Person (as defined below) that an Acquiring Person has become such
(the "Shares Acquisition Date") and (ii) ten business days (or such later date
as may be determined by the Board of Directors) following the commencement of,
or announcement of an intention to make, a tender offer or exchange offer, the
consummation of which would result in a person or group becoming an Acquiring
Person. The earlier of such dates is referred to as the "Distribution Date." A
person or group of affiliated or associated persons that beneficially owns, or
has the right to acquire beneficial ownership of, 15% or more of the outstanding
Common Shares is referred to as an "Acquiring Person."
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<PAGE> 3
Issuance of Rights Certificates; Expiration of Rights
As soon as practicable following the Distribution Date, separate Rights
Certificates will be mailed to holders of record of the Common Shares as of the
close of business on the Distribution Date and such separate Rights Certificates
alone will evidence the Rights from and after the Distribution Date. The Rights
will expire on the earliest of (i) October 20, 2008 (the "Final Expiration
Date") or (ii) redemption or exchange of the Rights as described below.
Initial Exercise of the Rights
Following the Distribution Date, and until one of the further events
described below, holders of the Rights will be entitled to receive, upon
exercise and the payment of the Purchase Price, one one-thousandth of a share of
the Series B Preferred.
Right to Buy Company Common Shares
Unless the Rights are earlier redeemed, in the event that a person
becomes an Acquiring Person (a "Triggering Event"), then proper provision will
be made so that each holder of a Right that has not theretofore been exercised
(other than Rights beneficially owned by the Acquiring Person or any affiliate
of the Acquiring Person, which will thereafter be void) will thereafter have the
right to receive, upon exercise, Common Shares having a value equal to two times
the Purchase Price. In the event that the Company does not have sufficient
Common Shares available for all Rights to be exercised, or the Board decides
that such action is necessary and not contrary to the interests of Rights
holders, the Company may instead substitute cash, assets or other securities for
the Common Shares for which the Rights would have been exercisable.
Right to Buy Acquiring Company Stock
Similarly, unless the Rights are earlier redeemed, in the event that,
after a Triggering Event, (i) the Company is acquired in a merger or other
business combination transaction, or (ii) 50% or more of the Company's
consolidated assets or earning power are sold (other than in transactions in the
ordinary course of business), proper provision must be made so that each holder
of a Right that has not theretofore been exercised (other than Rights
beneficially owned by the Acquiring Person or any affiliate of the Acquiring
Person, which will thereafter be void) will thereafter have the right to
receive, upon exercise, shares of common stock of the acquiring company having a
value equal to two times the Purchase Price.
Exchange Provision
At any time after a Triggering Event and prior to the acquisition by any
person or entity of beneficial ownership of 50% or more of the Company's
outstanding Common Shares, the Board of Directors of the Company may exchange
the Rights (other than Rights owned by the Acquiring Person), in whole or in
part, at an exchange ratio of one Common Share per Right.
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<PAGE> 4
Redemption
At any time on or prior to the close of business on the earlier of (i)
the Distribution Date and (ii) the Final Expiration Date of the Rights, the
Company may redeem the Rights in whole, but not in part, at a price of $0.01 per
Right.
Adjustments to Prevent Dilution
The Purchase Price payable, the number of Rights, and the number of
Series B Preferred or Common Shares or other securities or property issuable
upon exercise of the Rights are subject to adjustment from time to time in
connection with the dilutive issuances by the Company as set forth in the Rights
Agreement. With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price.
Cash Paid Instead of Issuing Fractional Shares
No fractional portion less than integral multiples of one Common Share
or one one-thousandth of a share of Series B Preferred will be issued upon
exercise of a Right and in lieu thereof, an adjustment in cash will be made
based on the market price of the security to be so issued on the last trading
date prior to the date of exercise.
No Stockholders' Rights Prior to Exercise
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company (other than any rights resulting from
such holder's ownership of Common Shares), including, without limitation, the
right to vote or to receive dividends.
Amendment of Rights Agreement
The provisions of the Rights Agreement may be supplemented or amended by
the Board of Directors in any manner prior to the Distribution Date. After such
date, the provisions of the Rights Agreement may be amended by the Board in
order to cure any ambiguity, defect or inconsistency, to make changes that do
not adversely affect the interests of holders of Rights (excluding the interests
of any Acquiring Person), or to shorten or lengthen any time period under the
Rights Agreement; provided, however, that no amendment to adjust the time period
governing redemption shall be made at such time as the Rights are not
redeemable.
Rights and Preferences of the Series B Preferred
Series B Preferred purchasable upon exercise of the Rights will not be
redeemable. Each share of Series B Preferred will be entitled to an aggregate
dividend of 1,000 times the dividend declared per Common Share. In the event of
liquidation, the holders of the Series B Preferred will be entitled to 1,000
times the amount paid per Common Share plus an amount equal to accrued and
unpaid dividends and distributions thereon, whether or not declared, to the date
of such payment. Each share of Series B
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<PAGE> 5
Preferred will have 1,000 votes, voting together with the Common Shares. These
rights are protected by customary anti-dilution provisions.
Because of the nature of the dividend, liquidation and voting rights of
the shares of Series B Preferred, the value of the one one-thousandth interest
in a share of Series B Preferred purchasable upon exercise of each Right should
approximate the value of one Common Share.
Certain Anti-takeover Effects
The Rights approved by the Board are designed to protect and maximize
the value of the outstanding equity interests in the Company in the event of an
unsolicited attempt by an acquiror to take over the Company, in a manner or on
terms not approved by the Board of Directors. Takeover attempts frequently
include coercive tactics to deprive the Company's Board of Directors and its
stockholders of any real opportunity to determine the destiny of the Company.
The Rights have been declared by the Board in order to deter such tactics,
including a gradual accumulation of shares in the open market of a 15% or
greater position to be followed by a merger or a partial or two-tier tender
offer that does not treat all stockholders equally. These tactics unfairly
pressure stockholders, squeeze them out of their investment without giving them
any real choice and deprive them of the full value of their shares.
The Rights are not intended to prevent a takeover of the Company and
will not do so. The Rights may be redeemed by the Company at $0.01 per Right
within ten days after the accumulation of 15% or more of the Company's shares by
a single acquiror or group. Accordingly, the Rights should not interfere with
any merger or business combination approved by the Board of Directors.
Issuance of the Rights does not in any way weaken the financial strength
of the Company or interfere with its business plans. The issuance of the Rights
themselves has no dilutive effect, will not affect reported earnings per share,
should not be taxable to the Company or to its stockholders, and will not change
the way in which the Company's shares are presently traded. The Company's Board
of Directors believes that the Rights represent a sound and reasonable means of
addressing the complex issues of corporate policy created by the current
takeover environment.
However, the Rights may have the effect of rendering more difficult or
discouraging an acquisition of the Company deemed undesirable by the Board of
Directors. The Rights may cause substantial dilution to a person or group that
attempts to acquire the Company on terms or in a manner not approved by the
Company's Board of Directors, except pursuant to an offer conditioned upon the
negation, purchase or redemption of the Rights.
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<PAGE> 6
Item 2. EXHIBITS.
1. Preferred Shares Rights Agreement, dated as of October 20,
1998 between Networks Associates, Inc. and BankBoston,
N.A., including the Certificate of Designation, the form
of Rights Certificate and the Summary of Rights attached
thereto as Exhibits A, B and C, respectively.
2. Second Restated Certificate of Incorporation of Networks
Associates, Inc., as amended December 1, 1997.(1)
3. Bylaws of Networks Associates, Inc., as amended.(1)
4. Certificate of Designations of Rights Preferences and
Privileges of Series A Preferred Stock of Networks
Associates, Inc.(2)
5. Certificate of Designation of Rights, Preferences and
Privileges of Series B Participating Preferred Stock of
Networks Associates, Inc.
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(1) Incorporated by reference to the exhibits filed with the Registrant's
Registration Statement on Form S-4, filed with the Securities and
Exchange Commission on March 25, 1998.
(2) Incorporated by reference to the exhibits filed with the Registrant's
Report on Form 10-Q for the Quarter ended September 30, 1996.
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<PAGE> 7
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the Registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereto duly authorized.
NETWORKS ASSOCIATES, INC.
Date: October 22, 1998 /s/ Prabhat K. Goyal
-----------------------------------
Signature of Authorized Signatory
Prabhat K. Goyal, C.F.O.
-----------------------------------
Print Name and Title
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<PAGE> 8
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
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<S> <C>
1 Preferred Shares Rights Agreement, dated as of October 20, 1998
between Networks Associates, Inc. and BankBoston, N.A., including
the Certificate of Designations, the form of Rights Certificate
and the Summary of Rights attached thereto as Exhibits A, B and C,
respectively.
2 Second Restated Certificate of Incorporation of Networks
Associates, Inc., as amended December 1, 1997.(1)
3 Bylaws of Networks Associates, Inc., as amended.(1)
4 Certificate of Designations of Rights, Preferences and Privileges
of Series A Preferred Stock of Networks Associates, Inc.(2)
5 Certificate of Designation of Rights, Preferences and Privileges
of Series B Participating Preferred Stock of Networks Associates,
Inc.
</TABLE>
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(1) Incorporated by reference to the exhibits filed with the Registrant's
Registration Statement on Form S-4, filed with the Securities and
Exchange Commission on March 25, 1998.
(2) Incorporated by reference to the exhibits filed with the Registrant's
Report on Form 10-Q for the Quarter ended September 30, 1996.
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<PAGE> 1
Exhibit 1
NETWORKS ASSOCIATES, INC.
AND
BANKBOSTON, N.A.
RIGHTS AGENT
PREFERRED SHARES RIGHTS AGREEMENT
DATED AS OF OCTOBER 20, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C> <C>
Section 1. Certain Definitions.....................................................................1
Section 2. Appointment of Rights Agent.............................................................7
Section 3. Issuance of Rights Certificates.........................................................7
Section 4. Form of Rights Certificates.............................................................9
Section 5. Countersignature and Registration......................................................10
Section 6. Transfer, Split Up, Combination and Exchange of Rights Certificates; Mutilated,
Destroyed, Lost or Stolen Rights Certificates..........................................10
Section 7. Exercise of Rights; Exercise Price; Expiration Date of Rights..........................11
Section 8. Cancellation and Destruction of Rights Certificates....................................13
Section 9. Reservation and Availability of Preferred Shares.......................................13
Section 10. Record Date............................................................................14
Section 11. Adjustment of Exercise Price, Number of Shares or Number of Rights.....................15
Section 12. Certificate of Adjusted Exercise Price or Number of Shares.............................21
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power...................21
Section 14. Fractional Rights and Fractional Shares................................................25
Section 15. Rights of Action.......................................................................26
Section 16. Agreement of Rights Holders............................................................26
Section 17. Rights Certificate Holder Not Deemed a Stockholder.....................................27
Section 18. Concerning the Rights Agent............................................................27
Section 19. Merger or Consolidation or Change of Name of Rights Agent..............................28
Section 20. Duties of Rights Agent.................................................................28
Section 21. Change of Rights Agent.................................................................30
</TABLE>
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<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
Section 22. Issuance of New Rights Certificates....................................................31
Section 23. Redemption.............................................................................31
Section 24. Exchange...............................................................................32
Section 25. Notice of Certain Events...............................................................34
Section 26. Notices................................................................................34
Section 27. Supplements and Amendments.............................................................35
Section 28. Successors.............................................................................35
Section 29. Determinations and Actions by the Board of Directors, etc..............................36
Section 30. Benefits of this Agreement.............................................................36
Section 31. Severability...........................................................................36
Section 32. Governing Law..........................................................................36
Section 33. Counterparts...........................................................................36
Section 34. Descriptive Headings...................................................................37
EXHIBITS
Exhibit A Form of Certificate of Designation
Exhibit B Form of Rights Certificate
Exhibit C Summary of Rights
</TABLE>
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<PAGE> 4
RIGHTS AGREEMENT
Agreement, dated as of October 20, 1998, between Networks Associates,
Inc., a Delaware corporation, and BankBoston, N.A.
On October 20, 1998 (the "RIGHTS DIVIDEND DECLARATION DATE"), the Board
of Directors of the Company authorized and declared a dividend of one Preferred
Share Purchase Right (a "RIGHT") for each Common Share (as hereinafter defined)
of the Company outstanding as of the Close of Business (as hereinafter defined)
on November 3, 1998 (the "RECORD DATE"), each Right representing the right to
purchase one one-thousandth of a share of Series B Participating Preferred Stock
(as such number may be adjusted pursuant to the provisions of this Agreement),
having the rights, preferences and privileges set forth in the form of
Certificate of Designations of Rights, Preferences and Privileges of Series B
Participating Preferred Stock attached hereto as Exhibit A, upon the terms and
subject to the conditions herein set forth, and further authorized and directed
the issuance of one Right (as such number may be adjusted pursuant to the
provisions of this Agreement) with respect to each Common Share that shall
become outstanding between the Record Date and the earlier of the Distribution
Date and the Expiration Date (as such terms are hereinafter defined), and in
certain circumstances after the Distribution Date.
NOW, THEREFORE, in consideration of the promises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "ACQUIRING PERSON" shall mean any Person who or which,
together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of 15% or more of the Common Shares then outstanding, but shall
not include the Company, any Subsidiary of the Company or any employee benefit
plan of the Company or of any Subsidiary of the Company, or any entity holding
Common Shares for or pursuant to the terms of any such plan. Notwithstanding the
foregoing, no Person shall be deemed to be an Acquiring Person as the result of
an acquisition of Common Shares by the Company which, by reducing the number of
shares outstanding, increases the proportionate number of shares beneficially
owned by such Person to 15% or more of the Common Shares of the Company then
outstanding; provided, however, that if a Person shall become the Beneficial
Owner of 15% or more of the Common Shares of the Company then outstanding by
reason of share purchases by the Company and shall, after such share purchases
by the Company, become the Beneficial Owner of any additional Common Shares of
the Company (other than pursuant to a dividend or distribution paid or made by
the Company on the outstanding Common Shares in Common Shares or pursuant to a
split or subdivision of the outstanding Common Shares), then such Person shall
be deemed to be an Acquiring Person unless upon becoming the Beneficial Owner of
such additional Common Shares of the Company such Person does not beneficially
own 15% or more of the Common
<PAGE> 5
Shares of the Company then outstanding. Notwithstanding the foregoing, (i) if
the Company's Board of Directors determines in good faith that a Person who
would otherwise be an "Acquiring Person," as defined pursuant to the foregoing
provisions of this paragraph (a), has become such inadvertently (including,
without limitation, because (A) such Person was unaware that it beneficially
owned a percentage of the Common Shares that would otherwise cause such Person
to be an "Acquiring Person," as defined pursuant to the foregoing provisions of
this paragraph (a), or (B) such Person was aware of the extent of the Common
Shares it beneficially owned but had no actual knowledge of the consequences of
such beneficial ownership under this Agreement) and without any intention of
changing or influencing control of the Company, and if such Person divested or
divests as promptly as practicable a sufficient number of Common Shares so that
such Person would no longer be an "Acquiring Person," as defined pursuant to the
foregoing provisions of this paragraph (a), then such Person shall not be deemed
to be or to have become an "Acquiring Person" for any purposes of this
Agreement; and (ii) if, as of the date hereof, any Person is the Beneficial
Owner of 15% or more of the Common Shares outstanding, such Person shall not be
or become an "Acquiring Person," as defined pursuant to the foregoing provisions
of this paragraph (a), unless and until such time as such Person shall become
the Beneficial Owner of additional Common Shares (other than pursuant to a
dividend or distribution paid or made by the Company on the outstanding Common
Shares in Common Shares or pursuant to a split or subdivision of the outstanding
Common Shares), unless, upon becoming the Beneficial Owner of such additional
Common Shares, such Person is not then the Beneficial Owner of 15% or more of
the Common Shares then outstanding.
(b) "ADJUSTMENT FRACTION" shall have the meaning set forth in
Section 11(a)(i) hereof.
(c) "AFFILIATE" and "ASSOCIATE" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act, as in effect on the date of this Agreement.
(d) A Person shall be deemed the "BENEFICIAL OWNER" of and shall
be deemed to "BENEFICIALLY OWN" any securities:
(i) which such Person or any of such Person's Affiliates
or Associates beneficially owns, directly or indirectly, for purposes of Section
13(d) of the Exchange Act and Rule 13d-3 thereunder (or any comparable or
successor law or regulation);
(ii) which such Person or any of such Person's Affiliates
or Associates has (A) the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding (other than customary agreements with and between
underwriters and selling group members with respect to a bona fide public
offering of securities), or upon the exercise of conversion rights, exchange
rights, rights (other than the Rights), warrants or options, or otherwise;
provided, however, that a Person shall not be deemed pursuant to this Section
1(d)(ii)(A) to be the Beneficial Owner of, or to beneficially own, (1)
securities tendered pursuant to a tender or exchange offer made by or on behalf
of such Person or any of such
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<PAGE> 6
Person's Affiliates or Associates until such tendered securities are accepted
for purchase or exchange, or (2) securities which a Person or any of such
Person's Affiliates or Associates may be deemed to have the right to acquire
pursuant to any merger or other acquisition agreement between the Company and
such Person (or one or more of its Affiliates or Associates) if such agreement
has been approved by the Board of Directors of the Company prior to there being
an Acquiring Person; or (B) the right to vote pursuant to any agreement,
arrangement or understanding; provided, however, that a Person shall not be
deemed the Beneficial Owner of, or to beneficially own, any security under this
Section 1(d)(ii)(B) if the agreement, arrangement or understanding to vote such
security (1) arises solely from a revocable proxy or consent given to such
Person in response to a public proxy or consent solicitation made pursuant to,
and in accordance with, the applicable rules and regulations of the Exchange Act
and (2) is not also then reportable on Schedule 13D under the Exchange Act (or
any comparable or successor report); or
(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 (other than
customary agreements with and between underwriters and selling group members
with respect to a bona fide public offering of securities) for the purpose of
acquiring, holding, voting (except to the extent contemplated by the proviso to
Section 1(d)(ii)(B)) or disposing of any securities of the Company; provided,
however, that in no case shall an officer or director of the Company be deemed
(x) the Beneficial Owner of any securities beneficially owned by another officer
or director of the Company solely by reason of actions undertaken by such
persons in their capacity as officers or directors of the Company or (y) the
Beneficial Owner of securities held of record by the trustee of any employee
benefit plan of the Company or any Subsidiary of the Company for the benefit of
any employee of the Company or any Subsidiary of the Company, other than the
officer or director, by reason of any influence that such officer or director
may have over the voting of the securities held in the plan.
(e) "BUSINESS DAY" shall mean any day other than a Saturday,
Sunday or a day on which banking institutions in New York are authorized or
obligated by law or executive order to close.
(f) "CLOSE OF BUSINESS" on any given date shall mean 5:00 P.M.,
New York time, on such date; provided, however, that if such date is not a
Business Day it shall mean 5:00 P.M., New York time, on the next succeeding
Business Day.
(g) "COMMON SHARES" when used with reference to the Company shall
mean the shares of Common Stock of the Company, $0.01 par value. Common Shares
when used with reference to any Person other than the Company shall mean the
capital stock (or equity interest) with the greatest voting power of such other
Person or, if such other Person is a Subsidiary of another Person, the Person or
Persons which ultimately control such first-mentioned Person.
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<PAGE> 7
(h) "COMMON STOCK EQUIVALENTS" shall have the meaning set forth
in Section 11(a)(iii) hereof.
(i) "COMPANY" shall mean Networks Associates, Inc., a Delaware
corporation, subject to the terms of Section 13(a)(iii)(C) hereof.
(j) "CURRENT PER SHARE MARKET PRICE" of any security (a
"Security" for purposes of this definition), for all computations other than
those made pursuant to Section 11(a)(iii) hereof, shall mean the average of the
daily closing prices per share of such Security for the thirty (30) consecutive
Trading Days immediately prior to such date, and for purposes of computations
made pursuant to Section 11(a)(iii) hereof, the Current Per Share Market Price
of any Security on any date shall be deemed to be the average of the daily
closing prices per share of such Security for the ten (10) consecutive Trading
Days immediately prior to such date; provided, however, that in the event that
the Current Per Share Market Price of the Security is determined during a period
following the announcement by the issuer of such Security of (i) a dividend or
distribution on such Security payable in shares of such Security or securities
convertible into such shares or (ii) any subdivision, combination or
reclassification of such Security, and prior to the expiration of the applicable
thirty (30) Trading Day or ten (10) Trading Day period, after the ex-dividend
date for such dividend or distribution, or the record date for such subdivision,
combination or reclassification, then, and in each such case, the Current Per
Share Market Price shall be appropriately adjusted to reflect the current market
price per share equivalent of such Security. The closing price for each day
shall be the last sale price, regular way, or, in case no such sale takes place
on such day, the average of the closing bid and asked prices, regular way, in
either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the New York
Stock Exchange or, if the Security is not listed or admitted to trading on the
New York Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the Security is listed or admitted to trading or,
if the Security is not listed or admitted to trading on any national securities
exchange, the last sale price or, if such last sale price is not reported, the
average of the high bid and low asked prices in the over-the-counter market, as
reported by Nasdaq or such other system then in use, or, if on any such date the
Security is not quoted by any such organization, the average of the closing bid
and asked prices as furnished by a professional market maker making a market in
the Security selected by the Board of Directors of the Company. If on any such
date no market maker is making a market in the Security, 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. If the Preferred Shares are not publicly traded, the
Current Per Share Market Price of the Preferred Shares shall be conclusively
deemed to be the Current Per Share Market Price of the Common Shares as
determined pursuant to this Section 1(j), as appropriately adjusted to reflect
any stock split, stock dividend or similar transaction occurring after the date
hereof, multiplied by 1000. If the Security is not publicly held or so listed or
traded, Current Per Share Market Price shall mean the fair value per share as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent and
shall be conclusive for all purposes.
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<PAGE> 8
(k) "CURRENT VALUE" shall have the meaning set forth in Section
11(a)(iii) hereof.
(l) "DISTRIBUTION DATE" shall mean the earlier of (i) the Close
of Business on the tenth day after the Shares Acquisition Date (or, if the tenth
day after the Shares Acquisition Date occurs before the Record Date, the Close
of Business on the Record Date) or (ii) the Close of Business on the tenth
Business Day (or such later date as may be determined by action of the Company's
Board of Directors) 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,
assuming the successful consummation thereof, such Person would be an Acquiring
Person.
(m) "EQUIVALENT SHARES" shall mean Preferred Shares and any other
class or series of capital stock of the Company which is entitled to the same
rights, privileges and preferences as the Preferred Shares.
(n) "EXCHANGE ACT" shall mean the Securities Exchange Act of
1934, as amended.
(o) "EXCHANGE RATIO" shall have the meaning set forth in Section
24(a) hereof.
(p) "EXERCISE PRICE" shall have the meaning set forth in Section
4(a) hereof.
(q) "EXPIRATION DATE" shall mean the earliest to occur of: (i)
the Close of Business on the Final Expiration Date, (ii) the Redemption Date, or
(iii) the time at which the Board of Directors orders the exchange of the Rights
as provided in Section 24 hereof.
(r) "FINAL EXPIRATION DATE" shall mean October 20, 2008.
(s) "INTERESTED PERSON" with respect to a Transaction shall mean
any Person who (i) is or will become an Acquiring Person if the Transaction were
to be consummated or an Affiliate or Associate of such a Person, and (ii) is, or
directly or indirectly proposed, nominated or financially supported a director
of the Company in office at the time of consideration of the Transaction in
question who was elected by written consent of stockholders.
(t) "NASDAQ" shall mean the National Association of Securities
Dealers, Inc. Automated Quotations System.
(u) "PERSON" shall mean any individual, firm, corporation or
other entity, and shall include any successor (by merger or otherwise) of such
entity.
(v) "POST-EVENT TRANSFEREE" shall have the meaning set forth in
Section 7(e) hereof.
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(w) "PREFERRED SHARES" shall mean shares of Series B
Participating Preferred Stock, $1.00 par value per share, of the Company.
(x) "PRE-EVENT TRANSFEREE" shall have the meaning set forth in
Section 7(e) hereof.
(y) "PRINCIPAL PARTY" shall have the meaning set forth in Section
13(b) hereof.
(z) "RECORD DATE" shall have the meaning set forth in the
recitals at the beginning of this Agreement.
(aa) "REDEMPTION DATE"shall have the meaning set forth in Section
23(a) hereof.
(bb) "REDEMPTION PRICE" shall have the meaning set forth in
Section 23(a) hereof.
(cc) "RIGHTS AGENT" shall mean BankBoston, N.A. or its successor
or replacement as provided in Sections 19 and 21 hereof.
(dd) "RIGHTS CERTIFICATE" shall mean a certificate substantially
in the form attached hereto as Exhibit B.
(ee) "RIGHTS DIVIDEND DECLARATION DATE" shall have the meaning
set forth in the recitals at the beginning of this Agreement.
(ff) "SECTION 11(a)(ii) TRIGGER DATE" shall have the meaning set
forth in Section 11(a)(iii) hereof.
(gg) "SECTION 13 EVENT" shall mean any event described in clause
(i), (ii) or (iii) of Section 13(a) hereof.
(hh) "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
(ii) "SHARES ACQUISITION DATE" shall mean the first date of
public announcement (which, for purposes of this definition, shall include,
without limitation, a report filed pursuant to Section 13(d) under the Exchange
Act) by the Company or an Acquiring Person that an Acquiring Person has become
such; provided that, if such Person is determined not to have become an
Acquiring Person pursuant to Section 1(a) hereof, then no Shares Acquisition
Date shall be deemed to have occurred.
(jj) "SPREAD" shall have the meaning set forth in Section
11(a)(iii) hereof.
(kk) "SUBSIDIARY" of any Person shall mean any corporation or
other entity of which an amount of voting securities sufficient to elect a
majority of the directors or Persons having similar
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<PAGE> 10
authority of such corporation or other entity is beneficially owned, directly or
indirectly, by such Person, or any corporation or other entity otherwise
controlled by such Person.
(ll) "SUBSTITUTION PERIOD" shall have the meaning set forth in
Section 11(a)(iii) hereof.
(mm) "SUMMARY OF RIGHTS" shall mean a summary of this Agreement
substantially in the form attached hereto as Exhibit C.
(nn) "TOTAL EXERCISE PRICE" shall have the meaning set forth in
Section 4(a) hereof.
(oo) "TRADING DAY" shall mean a day on which the principal
national securities exchange on which a referenced security is listed or
admitted to trading is open for the transaction of business or, if a referenced
security is not listed or admitted to trading on any national securities
exchange, a Business Day.
(pp) A "TRIGGERING EVENT" shall be deemed to have occurred upon
any Person, becoming an Acquiring Person.
Section 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company and the holders of the Rights (who,
in accordance with Section 3 hereof, shall prior to the Distribution Date also
be the holders of the Common Shares) in accordance with the terms and conditions
hereof, and the Rights Agent hereby accepts such appointment. The Company may
from time to time appoint such co-Rights Agents as it may deem necessary or
desirable upon ten (10) days prior written notice to the Rights Agent. The
Rights Agent shall have no duty to supervise, and shall in no event be liable
for, the acts or omissions of such co-Rights Agent.
Section 3. Issuance of Rights Certificates.
(a) Until the Distribution Date, (i) the Rights will be evidenced
(subject to the provisions of Sections 3(b) and 3(c) hereof) by the certificates
for Common Shares registered in the names of the holders thereof (which
certificates shall also be deemed to be Rights Certificates) and not by separate
Rights Certificates and (ii) the right to receive Rights Certificates will be
transferable only in connection with the transfer of Common Shares. Until the
earlier of the Distribution Date or the Expiration Date, the surrender for
transfer of certificates for Common Shares shall also constitute the surrender
for transfer of the Rights associated with the Common Shares represented
thereby. As soon as practicable after the Distribution Date, the Company will
prepare and execute, the Rights Agent will countersign, and the Company will
send or cause to be sent (and the Rights Agent will, if requested, send) by
first-class, postage-prepaid mail, to each record holder of Common Shares as of
the Close of Business on the Distribution Date, at the address of such holder
shown on the records of the Company, a Rights Certificate evidencing one Right
for each Common Share so held, subject to adjustment as provided herein. In the
event that an adjustment in the number of Rights per Common Share has been made
pursuant to Section 11 hereof, then at the time of distribution of the
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<PAGE> 11
Rights Certificates, the Company shall make the necessary and appropriate
rounding adjustments (in accordance with Section 14(a) hereof) so that Rights
Certificates representing only whole numbers of Rights are distributed and cash
is paid in lieu of any fractional Rights. As of the Distribution Date, the
Rights will be evidenced solely by such Rights Certificates and may be
transferred by the transfer of the Rights Certificates as permitted hereby,
separately and apart from any transfer of Common Shares, and the holders of such
Rights Certificates as listed in the records of the Company or any transfer
agent or registrar for the Rights shall be the record holders thereof.
(b) On the Record Date or as soon as practicable thereafter, the
Company will send a copy of the Summary of Rights by first-class,
postage-prepaid mail, to each record holder of Common Shares as of the Close of
Business on the Record Date, at the address of such holder shown on the records
of the Company's transfer agent and registrar. With respect to certificates for
Common Shares outstanding as of the Record Date, until the Distribution Date,
the Rights will be evidenced by such certificates registered in the names of the
holders thereof together with the Summary of Rights. Until the Distribution Date
(or, if earlier, the Expiration Date), the surrender for transfer of any
certificate for Common Shares outstanding on the Record Date, with or without a
copy of the Summary of Rights, shall also constitute the transfer of the Rights
associated with the Common Shares represented thereby.
(c) Unless the Board of Directors by resolution adopted at or
before the time of the issuance of any Common Shares specifies to the contrary,
Rights shall be issued in respect of all Common Shares that are issued after the
Record Date but prior to the earlier of the Distribution Date or the Expiration
Date or, in certain circumstances provided in Section 22 hereof, after the
Distribution Date. Certificates representing such Common Shares shall also be
deemed to be certificates for Rights, and shall bear the following legend:
THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER HEREOF
TO CERTAIN RIGHTS AS SET FORTH IN A RIGHTS AGREEMENT BETWEEN
NETWORKS ASSOCIATES, INC. AND BANKBOSTON, N.A., AS THE RIGHTS
AGENT, DATED AS OF OCTOBER 20, 1998, (THE "RIGHTS AGREEMENT"),
THE TERMS OF WHICH ARE HEREBY INCORPORATED HEREIN BY REFERENCE
AND A COPY OF WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE
OFFICES OF NETWORKS ASSOCIATES, INC. UNDER CERTAIN
CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT, SUCH
RIGHTS WILL BE EVIDENCED BY SEPARATE CERTIFICATES AND WILL NO
LONGER BE EVIDENCED BY THIS CERTIFICATE. NETWORKS ASSOCIATES,
INC. WILL MAIL TO THE HOLDER OF THIS CERTIFICATE A COPY OF THE
RIGHTS AGREEMENT WITHOUT CHARGE AFTER RECEIPT OF A WRITTEN
REQUEST THEREFOR. UNDER CERTAIN CIRCUMSTANCES SET FORTH IN THE
RIGHTS AGREEMENT, RIGHTS ISSUED TO, OR HELD BY, ANY PERSON WHO
IS, WAS OR BECOMES AN ACQUIRING PERSON OR ANY AFFILIATE OR
ASSOCIATE THEREOF (AS SUCH TERMS ARE DEFINED IN THE RIGHTS
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<PAGE> 12
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 Shares represented by such certificates shall be
evidenced by such certificates alone, and the surrender for transfer of any such
certificate shall also constitute the transfer of the Rights associated with the
Common Shares represented thereby.
(d) In the event that the Company purchases or acquires any
Common Shares after the Record Date but prior to the Distribution Date, any
Rights associated with such Common Shares shall be deemed canceled and retired
so that the Company shall not be entitled to exercise any Rights associated with
the Common Shares which are no longer outstanding.
Section 4. Form of Rights Certificates.
(a) The Rights Certificates (and the forms of election to
purchase Common Shares and of assignment to be printed on the reverse thereof)
shall be substantially in the form of Exhibit 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 automated quotation system, on which
the Rights may from time to time be listed or included, or to conform to usage.
Subject to the provisions of Section 11 and Section 22 hereof, the Rights
Certificates, whenever distributed, shall be dated as of the Record Date (or in
the case of Rights issued with respect to Common Shares issued by the Company
after the Record Date, as of the date of issuance of such Common Shares) and on
their face shall entitle the holders thereof to purchase such number of
one-thousandths of a Preferred Share as shall be set forth therein at the price
set forth therein (such exercise price per one one-thousandth of a Preferred
Share being hereinafter referred to as the "EXERCISE PRICE" and the aggregate
Exercise Price of all Preferred Shares issuable upon exercise of one Right being
hereinafter referred to as the "TOTAL EXERCISE PRICE"), but the number and type
of securities purchasable upon the exercise of each Right and the Exercise Price
shall be subject to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(a) or
Section 22 hereof that represents Rights beneficially owned by: (i) an Acquiring
Person or any Associate or Affiliate of an Acquiring Person, (ii) a transferee
of an Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee after the Acquiring Person becomes such or (iii) a transferee of an
Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee prior to or concurrently with the Acquiring Person becoming such and
receives such Rights pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person to holders of equity interests in such
Acquiring Person or to any Person with whom such Acquiring Person has any
continuing agreement,
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<PAGE> 13
arrangement or understanding regarding the transferred Rights or (B) a transfer
which the Company's Board of Directors 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
or Section 11 hereof upon transfer, exchange, replacement or adjustment of any
other Rights Certificate referred to in this sentence, shall contain (to the
extent feasible) the following legend:
THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE
BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING
PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS
SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY,
THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY
BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION
7(e) OF THE RIGHTS AGREEMENT.
Section 5. Countersignature and Registration.
(a) The Rights Certificates shall be executed on behalf of the
Company by its Chairman of the Board, its Chief Executive Officer, its Chief
Financial Officer, its President or any Vice President, either manually or by
facsimile signature, and by the Secretary or an Assistant Secretary of the
Company, either manually or by facsimile signature, and shall have affixed
thereto the Company's seal (if any) or a facsimile thereof. The Rights
Certificates shall be manually countersigned by the Rights Agent and shall not
be valid for any purpose unless countersigned. In case any officer of the
Company who shall have signed any of the Rights Certificates shall cease to be
such officer of the Company before countersignature by the Rights Agent and
issuance and delivery by the Company, such Rights Certificates, nevertheless,
may be countersigned by the Rights Agent and issued and delivered by the Company
with the same force and effect as though the person who signed such Rights
Certificates on behalf of the Company had not ceased to be such officer of the
Company; and any Rights Certificate may be signed on behalf of the Company by
any person who, at the actual date of the execution of such Rights Certificate,
shall be a proper officer of the Company to sign such Rights Certificate,
although at the date of the execution of this Rights Agreement any such person
was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep
or cause to be kept, at its office designated for such purposes, books for
registration and transfer of the Rights Certificates issued hereunder. Such
books shall show the names and addresses of the respective holders of the Rights
Certificates, the number of Rights evidenced on its face by each of the Rights
Certificates and the date of each of the Rights Certificates.
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<PAGE> 14
Section 6. Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.
(a) Subject to the provisions of Sections 7(e), 14 and 24 hereof,
at any time after the Close of Business on the Distribution Date, and at or
prior to the Close of Business on the Expiration Date, any Rights Certificate or
Rights Certificates may be transferred, split up, combined or exchanged for
another Rights Certificate or Rights Certificates, entitling the registered
holder to purchase a like number of one-thousandths of a Preferred Share (or,
following a Triggering Event, other securities, cash or other assets, as the
case may be) as the Rights Certificate or Rights Certificates surrendered then
entitled such holder to purchase. Any registered holder desiring to transfer,
split up, combine or exchange any Rights Certificate or Rights Certificates
shall make such request in writing delivered to the Rights Agent, and shall
surrender the Rights Certificate or Rights Certificates to be transferred, split
up, combined or exchanged at the principal office of the Rights Agent. 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 Sections 7(e), 14 and 24 hereof, countersign and deliver
to the person entitled thereto a Rights Certificate or Rights Certificates, as
the case may be, as so requested. The Company may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer, split up, combination or exchange of Rights
Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Rights Certificate, and, in case of loss, theft or destruction, of indemnity
or security reasonably satisfactory to them, and, at the Company's request,
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Rights Certificate if mutilated, the Company will make and deliver a new
Rights Certificate of like tenor to the Rights Agent for delivery to the
registered holder in lieu of the Rights Certificate so lost, stolen, destroyed
or mutilated.
Section 7. Exercise of Rights; Exercise Price; Expiration Date of
Rights.
(a) Subject to Sections 7(e), 23(b) and 24(b) hereof, the
registered holder of any Rights Certificate may exercise the Rights evidenced
thereby (except as otherwise provided herein) in whole or in part at any time
after the Distribution Date and prior to the Close of Business on the Expiration
Date by surrender of the Rights Certificate, with the form of election to
purchase on the reverse side thereof duly executed, to the Rights Agent at the
principal office of the Rights Agent, together with payment of the Exercise
Price for each one-thousandth of a Preferred Share (or, following a Triggering
Event, other securities, cash or other assets as the case may be) as to which
the Rights are exercised.
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<PAGE> 15
(b) The Exercise Price for each one-thousandth of a Preferred
Share issuable pursuant to the exercise of a Right shall initially be Two
Hundred Dollars ($200.00), shall be subject to adjustment from time to time as
provided in Sections 11 and 13 hereof and shall be payable in lawful money of
the United States of America in accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing exercisable
Rights, with the form of election to purchase duly executed, accompanied by
payment of the Exercise Price for the number of one-thousandths of a Preferred
Share (or, following a Triggering Event, other securities, cash or other assets
as the case may be) to be purchased and an amount equal to any applicable
transfer tax required to be paid by the holder of such Rights Certificate in
accordance with Section 9(e) hereof, the Rights Agent shall, subject to Section
20(k) hereof, thereupon promptly (i) (A) requisition from any transfer agent of
the Preferred Shares (or make available, if the Rights Agent is the transfer
agent for the Preferred Shares) a certificate or certificates for the number of
one-thousandths of a Preferred Share (or, following a Triggering Event, other
securities, cash or other assets as the case may be) to be purchased and the
Company hereby irrevocably authorizes its transfer agent to comply with all such
requests or (B) if the Company shall have elected to deposit the total number of
one-thousandths of a Preferred Share (or, following a Triggering Event, other
securities, cash or other assets as the case may be) issuable upon exercise of
the Rights hereunder with a depositary agent, requisition from the depositary
agent depositary receipts representing such number of one-thousandths of a
Preferred Share (or, following a Triggering Event, other securities, cash or
other assets as the case may be) as are to be purchased (in which case
certificates for the Preferred Shares (or, following a Triggering Event, other
securities, cash or other assets as the case may be) represented by such
receipts shall be deposited by the transfer agent with the depositary agent) and
the Company hereby directs the depositary agent to comply with such request,
(ii) when appropriate, requisition from the Company the amount of cash to be
paid in lieu of issuance of fractional shares in accordance with Section 14
hereof, (iii) after receipt of such certificates or depositary receipts, cause
the same to be delivered to or upon the order of the registered holder of such
Rights Certificate, registered in such name or names as may be designated by
such holder and (iv) when appropriate, after receipt thereof, deliver such cash
to or upon the order of the registered holder of such Rights Certificate. The
payment of the Exercise Price (as such amount may be reduced (including to zero)
pursuant to Section 11(a)(iii) hereof) and an amount equal to any applicable
transfer tax required to be paid by the holder of such Rights Certificate in
accordance with Section 9(e) hereof, may be made in cash or by certified bank
check, cashier's check or bank draft payable to the order of the Company. In the
event that the Company is obligated to issue securities of the Company other
than Preferred Shares, pay cash and/or distribute other property pursuant to
Section 11(a) hereof, the Company will make all arrangements necessary so that
such other securities, cash and/or other property are available for distribution
by the Rights Agent, if and when appropriate.
(d) In case the registered holder of any Rights Certificate shall
exercise less than all the Rights evidenced thereby, a new Rights Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be
issued by the Rights Agent to the registered holder of such Rights Certificate
or to his or her duly authorized assigns, subject to the provisions of Section
14 hereof.
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<PAGE> 16
(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 Acquiring Person or an Associate or Affiliate of an
Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee after the Acquiring Person
becomes such (a "POST-EVENT TRANSFEREE"), (iii) a transferee of an Acquiring
Person (or of any such Associate or Affiliate) who becomes a transferee prior to
or concurrently with the Acquiring Person becoming such and receives such Rights
pursuant to either (A) a transfer (whether or not for consideration) from the
Acquiring Person to holders of equity interests in such Acquiring Person or to
any Person with whom the Acquiring Person has any continuing agreement,
arrangement or understanding regarding the transferred Rights or (B) a transfer
which the Company's Board of Directors has determined is part of a plan,
arrangement or understanding which has as a primary purpose or effect the
avoidance of this Section 7(e) (a "PRE-EVENT TRANSFEREE") or (iv) any subsequent
transferee receiving transferred Rights from a Post-Event Transferee or a
Pre-Event Transferee, either directly or through one or more intermediate
transferees, shall become null and void without any further action and no holder
of such Rights shall have any rights whatsoever with respect to such Rights,
whether under any provision of this Agreement or otherwise. The Company shall
use all reasonable efforts to 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 to any other Person as a result of its failure
to make any determinations with respect to an Acquiring Person or any of such
Acquiring Person's Affiliates, Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a registered holder upon the occurrence of any purported
exercise as set forth in this Section 7 unless such registered holder shall, in
addition to having complied with the requirements of Section 7(a), have (i)
completed and signed the certificate contained in the form of election to
purchase set forth on the reverse side of the Rights Certificate surrendered for
such exercise and (ii) provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Rights Certificates. All
Rights Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be canceled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any Rights Certificate purchased or acquired by the Company otherwise
than upon the exercise thereof. The Rights Agent shall deliver all canceled
Rights Certificates to the Company, or shall, at the written request of the
Company, destroy such canceled Rights Certificates, and in such case shall
deliver a certificate of destruction thereof to the Company.
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<PAGE> 17
Section 9. Reservation and Availability of Preferred Shares.
(a) The Company covenants and agrees that it will use its best
efforts to cause to be reserved and kept available out of its authorized and
unissued Preferred Shares not reserved for another purpose (and, following the
occurrence of a Triggering Event, out of its authorized and unissued Common
Shares and/or other securities), the number of Preferred Shares (and, following
the occurrence of the Triggering Event, Common Shares and/or other securities)
that will be sufficient to permit the exercise in full of all outstanding
Rights.
(b) If the Company shall hereafter list any of its Preferred
Shares on a national securities exchange, then so long as the Preferred Shares
(and, following the occurrence of a Triggering Event, Common Shares and/or other
securities) issuable and deliverable upon exercise of the Rights may be listed
on such exchange, the Company shall use its best efforts to cause, from and
after such time as the Rights become exercisable (but only to the extent that it
is reasonably likely that the Rights will be exercised), all shares reserved for
such issuance to be listed on such exchange upon official notice of issuance
upon such exercise.
(c) The Company shall use its best efforts to (i) file, as soon
as practicable following the earliest date after the first occurrence of a
Triggering Event in which the consideration to be delivered by the Company upon
exercise of the Rights is described in Section 11(a)(ii) or Section 11(a)(iii)
hereof, or as soon as is required by law following the Distribution Date, as the
case may be, a registration statement under the Securities Act with respect to
the securities purchasable upon exercise of the Rights on an appropriate form,
(ii) cause such registration statement to become effective as soon as
practicable after such filing and (iii) cause such registration statement to
remain effective (with a prospectus at all times meeting the requirements of the
Securities Act) until the earlier of (A) the date as of which the Rights are no
longer exercisable for such securities and (B) the date of expiration of the
Rights. The Company may temporarily suspend, for a period not to exceed ninety
(90) days after the date set forth in clause (i) of the first sentence of this
Section 9(c), the exercisability of the Rights in order to prepare and file such
registration statement and permit it to become effective. Upon any such
suspension, the Company shall issue a public announcement stating, and notify
the Rights Agent, that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement and notification to the Rights Agent
at such time as the suspension is no longer in effect. The Company will also
take such action as may be appropriate under, or to ensure compliance with, the
securities or "blue sky" laws of the various states in connection with the
exercisability of the Rights. Notwithstanding any provision of this Agreement to
the contrary, the Rights shall not be exercisable in any jurisdiction, unless
the requisite qualification in such jurisdiction shall have been obtained, or an
exemption therefrom shall be available, and until a registration statement has
been declared effective.
(d) The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all Preferred Shares (or other
securities of the Company) delivered upon exercise of Rights shall, at the time
of delivery of the certificates for such securities (subject to
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<PAGE> 18
payment of the Exercise Price), be duly and validly authorized and issued and
fully paid and nonassessable shares.
(e) The Company further covenants and agrees that it will pay
when due and payable any and all federal and state transfer taxes and charges
which may be payable in respect of the original issuance or delivery of the
Rights Certificates or of any Preferred Shares (or other securities of the
Company) upon the exercise of Rights. The Company shall not, however, be
required to pay any transfer tax which may be payable in respect of any transfer
or delivery of Rights Certificates to a person other than, or the issuance or
delivery of certificates or depositary receipts for the Preferred Shares (or
other securities of the Company) in a name other than that of, the registered
holder of the Rights Certificate evidencing Rights surrendered for exercise or
to issue or to deliver any certificates or depositary receipts for Preferred
Shares (or other securities of the Company) upon the exercise of any Rights
until any such tax shall have been paid (any such tax being payable by the
holder of such Rights Certificate at the time of surrender) or until it has been
established to the Company's satisfaction that no such tax is due.
Section 10. Record Date. Each Person in whose name any certificate for a
number of one-thousandths of a Preferred Share (or other securities of the
Company) is issued upon the exercise of Rights shall for all purposes be deemed
to have become the holder of record of the Preferred Shares (or other securities
of the Company) 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 Exercise Price with respect to which the Rights
have been exercised (and any applicable transfer taxes) was made; provided,
however, that if the date of such surrender and payment is a date upon which the
transfer books of the Company are closed, such Person shall be deemed to have
become the record holder of such shares on, and such certificate shall be dated,
the next succeeding Business Day on which the transfer books of the Company are
open. Prior to the exercise of the Rights evidenced thereby, the holder of a
Rights Certificate shall not be entitled to any rights of a holder of Preferred
Shares (or other securities of the Company) for which the Rights shall be
exercisable, including, without limitation, the right to vote, to receive
dividends or other distributions or to exercise any preemptive rights, and shall
not be entitled to receive any notice of any proceedings of the Company, except
as provided herein.
Section 11. Adjustment of Exercise Price, Number of Shares or Number of
Rights. The Exercise Price, the number and kind of shares or other property
covered by each Right and the number of Rights outstanding are subject to
adjustment from time to time as provided in this Section 11.
(a) (i) Anything in this Agreement to the contrary
notwithstanding, in the event the Company shall at any time after the date of
this Agreement (A) declare a dividend on the Preferred Shares payable in
Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C) combine
the outstanding Preferred Shares (by reverse stock split or otherwise) into a
smaller number of Preferred Shares, or (D) issue any shares of its capital stock
in a reclassification of the Preferred Shares (including any such
reclassification in connection with a consolidation or merger in which the
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<PAGE> 19
Company is the continuing or surviving corporation), then, in each such event,
except as otherwise provided in this Section 11 and Section 7(e) hereof: (1) the
Exercise Price in effect at the time of the record date for such dividend or of
the effective date of such subdivision, combination or reclassification shall be
adjusted so that the Exercise Price thereafter shall equal the result obtained
by dividing the Exercise Price in effect immediately prior to such time by a
fraction (the "ADJUSTMENT FRACTION"), the numerator of which shall be the total
number of Preferred Shares (or shares of capital stock issued in such
reclassification of the Preferred Shares) outstanding immediately following such
time and the denominator of which shall be the total number of Preferred Shares
outstanding immediately prior to such time; provided, however, that in no event
shall the consideration to be paid upon the exercise of one Right be less than
the aggregate par value of the shares of capital stock of the Company issuable
upon exercise of such Right; and (2) the number of one-thousandths of a
Preferred Share (or share of such other capital stock) issuable upon the
exercise of each Right shall equal the number of one-thousandths of a Preferred
Share (or share of such other capital stock) as was issuable upon exercise of a
Right immediately prior to the occurrence of the event described in clauses
(A)-(D) of this Section 11(a)(i), multiplied by the Adjustment Fraction;
provided, however, that, no such adjustment shall be made pursuant to this
Section 11(a)(i) to the extent that there shall have simultaneously occurred an
event described in clause (A), (B), (C) or (D) of Section 11(n) with a
proportionate adjustment being made thereunder. Each Common Share that shall
become outstanding after an adjustment has been made pursuant to this Section
11(a)(i) shall have associated with it the number of Rights, exercisable at the
Exercise Price and for the number of one-thousandths of a Preferred Share (or
shares of such other capital stock) as one Common Share has associated with it
immediately following the adjustment made pursuant to this Section 11(a)(i).
(ii) Subject to Section 24 of this Agreement, in the event
a Triggering Event shall have occurred, then promptly following such Triggering
Event each holder of a Right, except as provided in Section 7(e) hereof, shall
thereafter have the right to receive for each Right, upon exercise thereof in
accordance with the terms of this Agreement and payment of the Exercise Price in
effect immediately prior to the occurrence of the Triggering Event, in lieu of a
number of one-thousandths of a Preferred Share, such number of Common Shares of
the Company as shall equal the result obtained by multiplying the Exercise Price
in effect immediately prior to the occurrence of the Triggering Event by the
number of one-thousandths of a Preferred Share for which a Right was exercisable
(or would have been exercisable if the Distribution Date had occurred)
immediately prior to the first occurrence of a Triggering Event, and dividing
that product by 50% of the Current Per Share Market Price for Common Shares on
the date of occurrence of the Triggering Event; provided, however, that the
Exercise Price and the number of Common Shares of the Company so receivable upon
exercise of a Right shall be subject to further adjustment as appropriate in
accordance with Section 11(e) hereof to reflect any events occurring in respect
of the Common Shares of the Company after the occurrence of the Triggering
Event.
(iii) In lieu of issuing Common Shares in accordance with
Section 11(a)(ii) hereof, the Company may, if the Company's Board of Directors
determines that such action is necessary or appropriate and not contrary to the
interest of holders of Rights and, in the event that the number of Common Shares
which are authorized by the Company's Certificate of Incorporation but
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<PAGE> 20
not outstanding or reserved for issuance for purposes other than upon exercise
of the Rights are not sufficient to permit the exercise in full of the Rights,
or if any necessary regulatory approval for such issuance has not been obtained
by the Company, the Company shall: (A) determine the excess of (1) the value of
the Common Shares issuable upon the exercise of a Right (the "CURRENT VALUE")
over (2) the Exercise Price (such excess, the "SPREAD") and (B) with respect to
each Right, make adequate provision to substitute for such Common Shares, upon
exercise of the Rights, (1) cash, (2) a reduction in the Exercise Price, (3)
other equity securities of the Company (including, without limitation, shares or
units of shares of any series of preferred stock which the Company's Board of
Directors has deemed to have the same value as Common Shares (such shares or
units of shares of preferred stock are herein called "COMMON STOCK
EQUIVALENTS")), except to the extent that the Company has not obtained any
necessary stockholder or regulatory approval for such issuance, (4) debt
securities of the Company, except to the extent that the Company has not
obtained any necessary stockholder or regulatory approval for such issuance, (5)
other assets or (6) any combination of the foregoing, having an aggregate value
equal to the Current Value, where such aggregate value has been determined by
the Company's Board of Directors based upon the advice of a nationally
recognized investment banking firm selected by the Company's Board of Directors;
provided, however, if the Company shall not have made adequate provision to
deliver value pursuant to clause (B) above within thirty (30) days following the
later of (x) the first occurrence of a Triggering Event and (y) the date on
which the Company's right of redemption pursuant to Section 23(a) expires (the
later of (x) and (y) being referred to herein as the "SECTION 11(a)(ii) TRIGGER
DATE"), then the Company shall be obligated to deliver, upon the surrender for
exercise of a Right and without requiring payment of the Exercise Price, Common
Shares (to the extent available), except to the extent that the Company has not
obtained any necessary stockholder or regulatory approval for such issuance, and
then, if necessary, cash, which shares and/or cash have an aggregate value equal
to the Spread. If the Company's Board of Directors shall determine in good faith
that it is likely that sufficient additional Common Shares could be authorized
for issuance upon exercise in full of the Rights or that any necessary
regulatory approval for such issuance will be obtained, the thirty (30) day
period set forth above may be extended to the extent necessary, but not more
than ninety (90) days after the Section 11(a)(ii) Trigger Date, in order that
the Company may seek stockholder approval for the authorization of such
additional shares or take action to obtain such regulatory approval (such
period, as it may be extended, the "SUBSTITUTION PERIOD"). To the extent that
the Company determines that some action need be taken pursuant to the first
and/or second sentences of this Section 11(a)(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, to take any action to obtain any required
regulatory approval and/or to decide the appropriate form of distribution to be
made pursuant to such first sentence and to determine the value thereof. In the
event of any such suspension, the Company shall 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 Shares
shall be the Current Per Share Market Price of the Common Shares on the Section
11(a)(ii) Trigger Date and the value of any Common Stock Equivalent shall be
deemed to have the same value as the Common Shares on such date.
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<PAGE> 21
(b) In case the Company shall, at any time after the date of this
Agreement, fix a record date for the issuance of rights, options or warrants to
all holders of Preferred Shares entitling such holders (for a period expiring
within forty-five (45) calendar days after such record date) to subscribe for or
purchase Preferred Shares or Equivalent Shares or securities convertible into
Preferred Shares or Equivalent Shares at a price per share (or having a
conversion price per share, if a security convertible into Preferred Shares or
Equivalent Shares) less than the then Current Per Share Market Price of the
Preferred Shares or Equivalent Shares on such record date, then, in each such
case, the Exercise Price to be in effect after such record date shall be
determined by multiplying the Exercise Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the number of
Preferred Shares and Equivalent Shares (if any) outstanding on such record date,
plus the number of Preferred Shares or Equivalent Shares, as the case may be,
which the aggregate offering price of the total number of Preferred Shares or
Equivalent Shares, as the case may be, to be offered or issued (and/or the
aggregate initial conversion price of the convertible securities to be offered
or issued) would purchase at such current market price, and the denominator of
which shall be the number of Preferred Shares and Equivalent Shares (if any)
outstanding on such record date, plus the number of additional Preferred Shares
or Equivalent Shares, as the case may be, to be offered for subscription or
purchase (or into which the convertible securities so to be offered are
initially convertible); provided, however, that in no event shall the
consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Company issuable upon
exercise of one Right. In case such subscription price may be paid in a
consideration part or all of which shall be in a form other than cash, the value
of such consideration shall be as determined in good faith by the Company's
Board of Directors, whose determination shall be described in a statement filed
with the Rights Agent and shall be binding on the Rights Agent and the holders
of the Rights. Preferred Shares and Equivalent Shares owned by or held for the
account of the Company shall not be deemed outstanding for the purpose of any
such computation. Such adjustment shall be made successively whenever such a
record date is fixed, and in the event that such rights, options or warrants are
not so issued, the Exercise Price shall be adjusted to be the Exercise Price
which would then be in effect if such record date had not been fixed.
(c) In case the Company shall, at any time after the date of this
Agreement, fix a record date for the making of a distribution to all holders of
the Preferred Shares or of any class or series of Equivalent Shares (including
any such distribution made in connection with a consolidation or merger in which
the Company is the continuing or surviving corporation) of evidences of
indebtedness or assets (other than a regular quarterly cash dividend, if any, or
a dividend payable in Preferred Shares) or subscription rights, options or
warrants (excluding those referred to in Section 11(b)), then, in each such
case, the Exercise Price to be in effect after such record date shall be
determined by multiplying the Exercise Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the Current Per Share
Market Price of a Preferred Share or an Equivalent Share on such record date,
less the fair market value per Preferred Share or Equivalent 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) 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 Preferred
Share or Equivalent Share, as the case may be, and the denominator of which
shall be such Current
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<PAGE> 22
Per Share Market Price of a Preferred Share or Equivalent Share on such record
date; provided, however, that in no event shall the consideration to be paid
upon the exercise of one Right be less than the aggregate par value of the
shares of capital stock of the Company issuable upon exercise of one Right. 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 Exercise Price shall be
adjusted to be the Exercise Price which would have been in effect if such record
date had not been fixed.
(d) Anything herein to the contrary notwithstanding, no
adjustment in the Exercise Price shall be required unless such adjustment would
require an increase or decrease of at least 1% in the Exercise Price; provided,
however, that any adjustments which by reason of this Section 11(d) are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section 11 shall be made to
the nearest cent or to the nearest ten-thousandth of a Common Share or other
share or one hundred-thousandth of a Preferred Share, as the case may be.
Notwithstanding the first sentence of this Section 11(d), any adjustment
required by this Section 11 shall be made no later than the earlier of (i) three
(3) years from the date of the transaction which requires such adjustment or
(ii) the Expiration Date.
(e) If as a result of an adjustment made pursuant to Section
11(a) or 13(a) hereof, the holder of any Right thereafter exercised shall become
entitled to receive any shares of capital stock other than Preferred Shares,
thereafter the number of such other shares so receivable upon exercise of any
Right and, if required, the Exercise 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 Shares contained in
Sections 11(a), 11(b), 11(c), 11(d), 11(g), 11(h), 11(i), 11(j), 11(k) and
11(l), and the provisions of Sections 7, 9, 10, 13 and 14 with respect to the
Preferred Shares shall apply on like terms to any such other shares.
(f) All Rights originally issued by the Company subsequent to any
adjustment made to the Exercise Price hereunder shall evidence the right to
purchase, at the adjusted Exercise Price, the number of one-thousandths of a
Preferred Share purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
(g) Unless the Company shall have exercised its election as
provided in Section 11(h), upon each adjustment of the Exercise Price as a
result of the calculations made in Section 11(b) and (c), each Right outstanding
immediately prior to the making of such adjustment shall thereafter evidence the
right to purchase, at the adjusted Exercise Price, that number of Preferred
Shares (calculated to the nearest one hundred-thousandth of a share) obtained by
(i) multiplying (x) the number of Preferred Shares covered by a Right
immediately prior to this adjustment, by (y) the Exercise Price in effect
immediately prior to such adjustment of the Exercise Price, and (ii) dividing
the product so obtained by the Exercise Price in effect immediately after such
adjustment of the Exercise Price.
(h) The Company may elect on or after the date of any adjustment
of the Exercise Price as a result of the calculations made in Section 11(b) or
(c) to adjust the number of Rights, in
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<PAGE> 23
substitution for any adjustment in the number of Preferred Shares purchasable
upon the exercise of a Right. Each of the Rights outstanding after such
adjustment of the number of Rights shall be exercisable for the number of
one-thousandths of a Preferred Share for which a Right was exercisable
immediately prior to such adjustment. Each Right held of record prior to such
adjustment of the number of Rights shall become that number of Rights
(calculated to the nearest one hundred-thousandth) obtained by dividing the
Exercise Price in effect immediately prior to adjustment of the Exercise Price
by the Exercise Price in effect immediately after adjustment of the Exercise
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 Exercise Price is adjusted or any day thereafter, but,
if the Rights Certificates have been issued, shall be at least ten (10) days
later than the date of the public announcement. If Rights Certificates have been
issued, upon each adjustment of the number of Rights pursuant to this Section
11(h), the Company shall, as promptly as practicable, cause to be distributed to
holders of record of Rights Certificates on such record date Rights Certificates
evidencing, subject to Section 14 hereof, the additional Rights to which such
holders shall be entitled as a result of such adjustment, or, at the option of
the Company, shall cause to be distributed to such holders of record in
substitution and replacement for the Rights Certificates held by such holders
prior to the date of adjustment, and upon surrender thereof, if required by the
Company, new Rights Certificates evidencing all the Rights to which such holders
shall be entitled after such adjustment. Rights Certificates so to be
distributed shall be issued, executed and countersigned in the manner provided
for herein (and may bear, at the option of the Company, the adjusted Exercise
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.
(i) Irrespective of any adjustment or change in the Exercise
Price or the number of Preferred Shares issuable upon the exercise of the
Rights, the Rights Certificates theretofore and thereafter issued may continue
to express the Exercise Price per one one-thousandth of a Preferred Share and
the number of one-thousandths of a Preferred Share which were expressed in the
initial Rights Certificates issued hereunder.
(j) Before taking any action that would cause an adjustment
reducing the Exercise Price below the par or stated value, if any, of the number
of one-thousandths of a Preferred Share issuable upon exercise of the Rights,
the Company shall take any corporate action which may, in the opinion of its
counsel, be necessary in order that the Company may validly and legally issue as
fully paid and nonassessable shares such number of one-thousandths of a
Preferred Share at such adjusted Exercise Price.
(k) In any case in which this Section 11 shall require that an
adjustment in the Exercise Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuing to the holder of any Right exercised after such record date of
the number of one-thousandths of a Preferred Share and other capital stock or
securities of the Company, if any, issuable upon such exercise over and above
the number of one-thousandths of a Preferred Share and other capital stock or
securities of the Company, if any, issuable upon such
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<PAGE> 24
exercise on the basis of the Exercise Price in effect prior to such adjustment;
provided, however, that the Company shall deliver to such holder a due bill or
other appropriate instrument evidencing such holder's right to receive such
additional shares (fractional or otherwise) upon the occurrence of the event
requiring such adjustment.
(l) Anything in this Section 11 to the contrary notwithstanding,
prior to the Distribution Date, the Company shall be entitled to make such
reductions in the Exercise Price, in addition to those adjustments expressly
required by this Section 11, as and to the extent that it in its sole discretion
shall determine to be advisable in order that any (i) consolidation or
subdivision of the Preferred or Common Shares, (ii) issuance wholly for cash of
any Preferred or Common Shares at less than the current market price, (iii)
issuance wholly for cash of Preferred or Common Shares or securities which by
their terms are convertible into or exchangeable for Preferred or Common Shares,
(iv) stock dividends or (v) issuance of rights, options or warrants referred to
in this Section 11, hereafter made by the Company to holders of its Preferred or
Common Shares shall not be taxable to such stockholders.
(m) The Company covenants and agrees that, after the Distribution
Date, it will not, except as permitted by Sections 23, 24 or 27 hereof, take (or
permit to be taken) any action if at the time such action is taken it is
reasonably foreseeable that such action will diminish substantially or otherwise
eliminate the benefits intended to be afforded by the Rights.
(n) In the event the Company shall at any time after the date of
this Agreement (A) declare a dividend on the Common Shares payable in Common
Shares, (B) subdivide the outstanding Common Shares, (C) combine the outstanding
Common Shares (by reverse stock split or otherwise) into a smaller number of
Common Shares, or (D) issue any shares of its capital stock in a
reclassification of the Common Shares (including any such reclassification in
connection with a consolidation or merger in which the Company is the continuing
or surviving corporation), then, in each such event, except as otherwise
provided in this Section 11(a) and Section 7(e) hereof: (1) each Common Share
(or shares of capital stock issued in such reclassification of the Common
Shares) outstanding immediately following such time shall have associated with
it the number of Rights as were associated with one Common Share immediately
prior to the occurrence of the event described in clauses (A)-(D) above; (2) the
Exercise Price in effect at the time of the record date for such dividend or of
the effective date of such subdivision, combination or reclassification shall be
adjusted so that the Exercise Price thereafter shall equal the result obtained
by multiplying the Exercise Price in effect immediately prior to such time by a
fraction, the numerator of which shall be the total number of Common Shares
outstanding immediately prior to the event described in clauses (A)-(D) above,
and the denominator of which shall be the total number of Common Shares
outstanding immediately after such event; provided, however, that in no event
shall the consideration to be paid upon the exercise of one Right be less than
the aggregate par value of the shares of capital stock of the Company issuable
upon exercise of such Right; and (3) the number of one-thousandths of a
Preferred Share (or shares of such other capital stock) issuable upon the
exercise of each Right outstanding after such event shall equal the number of
one-thousandths of a Preferred Share (or shares of such other capital stock) as
were issuable with respect to one Right immediately prior to such event.
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<PAGE> 25
Each Common Share that shall become outstanding after an adjustment has been
made pursuant to this Section 11(n) shall have associated with it the number of
Rights, exercisable at the Exercise Price and for the number of one-thousandths
of a Preferred Share (or shares of such other capital stock) as one Common Share
has associated with it immediately following the adjustment made pursuant to
this Section 11(n). If an event occurs which would require an adjustment under
both this Section 11(n) and Section 11(a)(ii) hereof, the adjustment provided
for in this Section 11(n) shall be in addition to, and shall be made prior to,
any adjustment required pursuant to Section 11(a)(ii) hereof.
Section 12. Certificate of Adjusted Exercise Price or Number of
Shares. Whenever an adjustment is made as provided in Sections 11 and 13 hereof,
the Company shall promptly (a) prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment,
(b) file with the Rights Agent and with each transfer agent for the Preferred
Shares a copy of such certificate and (c) mail a brief summary thereof to each
holder of a Rights Certificate in accordance with Section 26 hereof.
Notwithstanding the foregoing sentence, the failure of the Company to make such
certification or give such notice shall not affect the validity of such
adjustment or the force or effect of the requirement for such adjustment. The
Rights Agent shall be fully protected in relying on any such certificate and on
any adjustment contained therein and shall not be deemed to have knowledge of
such adjustment unless and until it shall have received such certificate.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power.
(a) In the event that, following a Triggering Event, directly or
indirectly:
(i) the Company shall consolidate with, or merge with and
into, any other Person (other than a wholly-owned Subsidiary of the Company in a
transaction the principal purpose of which is to change the state of
incorporation of the Company and which complies with Section 11(m) hereof);
(ii) any Person shall consolidate with the Company, or
merge with and into the Company and the Company shall be the continuing or
surviving corporation of such consolidation or merger and, in connection with
such merger, all or part of the Common Shares shall be changed into or exchanged
for stock or other securities of any other person (or the Company); or
(iii) the Company shall sell or otherwise transfer (or one
or more of its Subsidiaries shall sell or otherwise transfer), in one or more
transactions, assets or earning power aggregating 50% or more of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to any
other Person or Persons (other than the Company or one or more of its wholly
owned Subsidiaries in one or more transactions, each of which individually (and
together) complies with Section 11(m) hereof),
then, concurrent with and in each such case,
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<PAGE> 26
(A) 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 a price equal to the Total Exercise Price applicable
immediately prior to the occurrence of the Section 13 Event in accordance with
the terms of this Agreement, such number of validly authorized and issued, fully
paid, nonassessable and freely tradeable Common Shares of the Principal Party
(as hereinafter defined), free of any liens, encumbrances, rights of first
refusal or other adverse claims, as shall be equal to the result obtained by
dividing such Total Exercise Price by 50% of the Current Per Share Market Price
of the Common Shares of such Principal Party on the date of consummation of such
Section 13 Event, provided, however, that the Exercise Price and the number of
Common Shares of such Principal Party so receivable upon exercise of a Right
shall be subject to further adjustment as appropriate in accordance with Section
11(e) hereof;
(B) such Principal Party shall thereafter be liable
for, and shall assume, by virtue of such Section 13 Event, all the obligations
and duties of the Company pursuant to this Agreement;
(C) the term "Company" shall thereafter be deemed to
refer to such Principal Party, it being specifically intended that the
provisions of Section 11 hereof shall apply only to such Principal Party
following the first occurrence of a Section 13 Event;
(D) such Principal Party shall take such steps
(including, but not limited to, the reservation of a sufficient number of its
Common Shares) in connection with the consummation of any such transaction as
may be necessary to ensure that the provisions hereof shall thereafter be
applicable, as nearly as reasonably may be, in relation to its Common Shares
thereafter deliverable upon the exercise of the Rights; and
(E) upon the subsequent occurrence of any
consolidation, merger, sale or transfer of assets or other extraordinary
transaction in respect of such Principal Party, each holder of a Right shall
thereupon be entitled to receive, upon exercise of a Right and payment of the
Total Exercise Price as provided in this Section 13(a), such cash, shares,
rights, warrants and other property which such holder would have been entitled
to receive had such holder, at the time of such transaction, owned the Common
Shares of the Principal Party receivable upon the exercise of such Right
pursuant to this Section 13(a), and such Principal Party shall take such steps
(including, but not limited to, reservation of shares of stock) as may be
necessary to permit the subsequent exercise of the Rights in accordance with the
terms hereof for such cash, shares, rights, warrants and other property.
(F) For purposes hereof, the "earning power" of the
Company and its Subsidiaries shall be determined in good faith by the Company's
Board of Directors on the basis of the operating earnings of each business
operated by the Company and its Subsidiaries during the three fiscal years
preceding the date of such determination (or, in the case of any business not
operated by the Company or any Subsidiary during three full fiscal years
preceding such date, during the period such business was operated by the Company
or any Subsidiary).
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<PAGE> 27
(b) For purposes of this Agreement, the term "PRINCIPAL PARTY"
shall mean:
(i) in the case of any transaction described in clause (i)
or (ii) of Section 13(a) hereof: (A) the Person that is the issuer of the
securities into which the Common Shares are converted in such merger or
consolidation, or, if there is more than one such issuer, the issuer the Common
Shares of which have the greatest aggregate market value of shares outstanding,
or (B) if no securities are so issued, (x) the Person that is the other party to
the merger, if such Person survives said merger, or, if there is more than one
such Person, the Person the Common Shares of which have the greatest aggregate
market value of shares outstanding 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) or (z) the Person resulting from
the consolidation; and
(ii) in the case of any transaction described in clause
(iii) of Section 13(a) hereof, the Person that is the party receiving the
greatest portion of the assets or earning power transferred pursuant to such
transaction or transactions, or, if more than one Person that is a party to such
transaction or transactions receives the same portion of the assets or earning
power so transferred and each such portion would, were it not for the other
equal portions, constitute the greatest portion of the assets or earning power
so transferred, or if the Person receiving the greatest portion of the assets or
earning power cannot be determined, whichever of such Persons is the issuer of
Common Shares having the greatest aggregate market value of shares outstanding;
provided, however, that in any such case described in the foregoing clause
(b)(i) or (b)(ii), if the Common Shares of such Person are not at such time or
have not been continuously over the preceding 12-month period registered under
Section 12 of the Exchange Act, then (1) if such Person is a direct or indirect
Subsidiary of another Person the Common Shares of which are and have been so
registered, the term "Principal Party" shall refer to such other Person, or (2)
if such Person is a Subsidiary, directly or indirectly, of more than one Person,
the Common Shares of which are and have been so registered, the term "Principal
Party" shall refer to whichever of such Persons is the issuer of Common Shares
having the greatest aggregate market value of shares outstanding, or (3) if 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 clauses (1) and (2) above shall apply to each of the owners
having an interest in the venture as if the Person owned by the joint venture
was a Subsidiary of both or all of such joint venturers, and the Principal Party
in each such case shall bear the obligations set forth in this Section 13 in the
same ratio as its interest in such Person bears to the total of such interests.
(c) The Company shall not consummate any Section 13 Event unless
the Principal Party shall have a sufficient number of authorized Common Shares
that have not been issued or reserved for issuance to permit the exercise in
full of the Rights in accordance with this Section 13 and unless prior thereto
the Company and such issuer shall have executed and delivered to the Rights
Agent a supplemental agreement confirming that such Principal Party shall, upon
consummation of such Section 13 Event, assume this Agreement in accordance with
Sections 13(a) and 13(b) hereof, that all rights of first refusal or preemptive
rights in respect of the issuance of Common Shares of such
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Principal Party upon exercise of outstanding Rights have been waived, that there
are no rights, warrants, instruments or securities outstanding or any agreements
or arrangements which, as a result of the consummation of such transaction,
would eliminate or substantially diminish the benefits intended to be afforded
by the Rights and that such transaction shall not result in a default by such
Principal Party under this Agreement, and further providing that, as soon as
practicable after the date of such Section 13 Event, such Principal Party will:
(i) prepare and file a registration statement under the
Securities Act with respect to the Rights and the securities purchasable upon
exercise of the Rights on an appropriate form, use its best efforts to cause
such registration statement to become effective as soon as practicable after
such filing and use its best efforts to cause such registration statement to
remain effective (with a prospectus at all times meeting the requirements of the
Securities Act) until the Expiration Date, and similarly comply with applicable
state securities laws;
(ii) use its best efforts to list (or continue the listing
of) the Rights and the securities purchasable upon exercise of the Rights on a
national securities exchange or to meet the eligibility requirements for
quotation on Nasdaq and list (or continue the listing of) the Rights and the
securities purchasable upon exercise of the Rights on Nasdaq; and
(iii) deliver to holders of the Rights historical
financial statements for such Principal Party which comply in all respects with
the requirements for registration on Form 10 (or any successor form) under the
Exchange Act.
In the event that at any time after the occurrence of a Triggering Event
some or all of the Rights shall not have been exercised at the time of a
transaction described in this Section 13, the Rights which have not theretofore
been exercised shall thereafter be exercisable in the manner described in
Section 13(a) (without taking into account any prior adjustment required by
Section 11(a)(ii)).
(d) In case the "Principal Party" for purposes of Section 13(b)
hereof has provision in any of its authorized securities or in its certificate
of incorporation or by-laws or other instrument governing its corporate affairs,
which provision would have the effect of (i) causing such Principal Party to
issue (other than to holders of Rights pursuant to Section 13 hereof), in
connection with, or as a consequence of, the consummation of a Section 13 Event,
Common Shares or Equivalent Shares of such Principal Party at less than the then
Current Per Share Market Price thereof or securities exercisable for, or
convertible into, Common Shares or Equivalent Shares of such Principal Party at
less than such then Current Per Share Market Price, or (ii) providing for any
special payment, tax or similar provision in connection with the issuance of the
Common Shares of such Principal Party pursuant to the provisions of Section 13
hereof, then, in such event, the Company hereby agrees with each holder of
Rights that it shall not consummate any such transaction unless prior thereto
the Company and such Principal Party shall have executed and delivered to the
Rights Agent a supplemental agreement providing that the provision in question
of such Principal Party shall have been canceled, waived or amended, or that the
authorized securities shall be redeemed, so that the
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applicable provision will have no effect in connection with or as a consequence
of, the consummation of the proposed transaction.
(e) The Company covenants and agrees that it shall not, at any
time after the Distribution Date, effect or permit to occur any Section 13
Event, if (i) at the time or immediately after such Section 13 Event there are
any rights, warrants or other instruments or securities outstanding or
agreements in effect which would substantially diminish or otherwise eliminate
the benefits intended to be afforded by the Rights, (ii) prior to,
simultaneously with or immediately after such Section 13 Event, the stockholders
of the Person who constitutes, or would constitute, the "Principal Party" for
purposes of Section 13(b) hereof shall have received a distribution of Rights
previously owned by such Person or any of its Affiliates or Associates or (iii)
the form or nature of organization of the Principal Party would preclude or
limit the exercisability of the Rights.
(f) The provisions of this Section 13 shall similarly apply to
successive mergers or consolidations or sales or other transfers.
Section 14. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue fractions of
Rights or to distribute Rights Certificates which evidence fractional Rights. In
lieu of such fractional Rights, there shall be paid to the registered holders of
the Rights Certificates with regard to which such fractional Rights would
otherwise be issuable, an amount in cash equal to the same fraction of the
current market value of a whole Right. For the purposes of this Section 14(a),
the current market value of a whole Right shall be the closing price of the
Rights for the Trading Day immediately prior to the date on which such
fractional Rights would have been otherwise issuable, as determined pursuant to
the second sentence of Section 1(j) hereof.
(b) The Company shall not be required to issue fractions of
Preferred Shares (other than fractions that are integral multiples of one
one-thousandth of a Preferred Share) upon exercise of the Rights or to
distribute certificates which evidence fractional Preferred Shares (other than
fractions that are integral multiples of one one-thousandth of a Preferred
Share). Interests in fractions of Preferred Shares in integral multiples of one
one-thousandth of a Preferred Share may, at the election of the Company, be
evidenced by depositary receipts, pursuant to an appropriate agreement between
the Company and a depositary selected by it; provided, that such agreement shall
provide that the holders of such depositary receipts shall have all the rights,
privileges and preferences to which they are entitled as beneficial owners of
the Preferred Shares represented by such depositary receipts. In lieu of
fractional Preferred Shares that are not integral multiples of one
one-thousandth of a Preferred Share, the Company shall pay to the registered
holders of Rights Certificates at the time such Rights are exercised as herein
provided an amount in cash equal to the same fraction of the current market
value of a Preferred Share. For purposes of this Section 14(b), the current
market value of a Preferred Share shall be one thousand times the closing price
of a Common Share (as determined pursuant to the second sentence of Section 1(j)
hereof) for the Trading Day immediately prior to the date of such exercise.
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(c) The Company shall not be required to issue fractions of
Common Shares or to distribute certificates which evidence fractional Common
Shares upon the exercise or exchange of Rights. In lieu of such fractional
Common Shares, the Company shall pay to the registered holders of Rights
Certificates at the time such Rights are exercised as herein provided an amount
in cash equal to the same fraction of the current market value of a Common
Share. For purposes of this Section 14(c), the current market value of a Common
Share shall be the closing price of a Common Share (as determined pursuant to
the second sentence of Section 1(j) hereof) for the Trading Day immediately
prior to the date of such exercise.
(d) The holder of a Right by the acceptance of the Right
expressly waives his or her right to receive any fractional Rights or any
fractional shares (other than fractions that are integral multiples of one
one-thousandth of a Preferred Share) upon exercise of a Right.
Section 15. Rights of Action. All rights of action in respect of this
Agreement, excepting the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares); and any registered holder of any Rights Certificate (or, prior
to the Distribution Date, of the Common Shares), without the consent of the
Rights Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of the Common Shares), may, in his or her own behalf and for
his or her own benefit, enforce, and may institute and maintain any suit, action
or proceeding against the Company to enforce, or otherwise act in respect of,
his or her right to exercise the Rights evidenced by such Rights Certificate in
the manner provided in such Rights Certificate and in this Agreement. Without
limiting the foregoing or any remedies available to the holders of Rights, it is
specifically acknowledged that the holders of Rights would not have an adequate
remedy at law for any breach of this Agreement and will be entitled to specific
performance of the obligations under, and injunctive relief against actual or
threatened violations of, the obligations of any Person subject to this
Agreement.
Section 16. Agreement of Rights Holders. Every holder of a Right, by
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of the Common Shares;
(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office of the Rights Agent, duly endorsed or accompanied by a
proper instrument of transfer and with the appropriate forms and certificates
fully executed; and
(c) subject to Sections 6(a) and 7(f) hereof, the Company and the
Rights Agent may deem and treat the person in whose name the Rights Certificate
(or, prior to the Distribution Date, the associated Common Shares certificate)
is registered as the absolute owner thereof and of the Rights
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<PAGE> 31
evidenced thereby (notwithstanding any notations of ownership or writing on the
Rights Certificates or the associated Common Shares certificate made by anyone
other than the Company or the Rights Agent) for all purposes whatsoever, and
neither the Company nor the Rights Agent shall be affected by any notice to the
contrary.
Section 17. Rights Certificate Holder Not Deemed a Stockholder. No
holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose to be the holder of the Preferred Shares
or any other securities of the Company which may at any time be issuable on the
exercise of the Rights represented thereby, nor shall anything contained herein
or in any Rights Certificate be construed to confer upon the holder of any
Rights Certificate, as such, any of the rights of a stockholder of the Company
or any right to vote for the election of directors or upon any matter submitted
to stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 25 hereof), or to receive dividends
or subscription rights, or otherwise, until the Right or Rights evidenced by
such Rights Certificate shall have been exercised in accordance with the
provisions hereof.
Section 18. Concerning the Rights Agent.
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
other disbursements incurred in the administration and execution of this
Agreement and the exercise and performance of its duties hereunder. The Company
also agrees to indemnify the Rights Agent for, and to hold it harmless against,
any loss, liability or expense, incurred without gross negligence, bad faith or
willful misconduct on the part of the Rights Agent, for anything done or omitted
by the Rights Agent in connection with the acceptance and administration of this
Agreement, including the costs and expenses of defending against any claim of
liability in the premises. In no event will the Rights Agent be liable for
special, indirect, incidental or consequential loss or damage of any kind
whatsoever, even if the Rights Agent has been advised of the possibility of such
loss or damage.
(b) The Rights Agent shall be protected and shall incur no
liability for, or in respect of any action taken, suffered or omitted by it in
connection with, its administration of this Agreement in reliance upon any
Rights Certificate or certificate for the Preferred Shares or Common Shares or
for other securities of the Company, instrument of assignment or transfer, power
of attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement or other paper or document reasonably believed by it to
be genuine and to be signed, executed and, where necessary, verified or
acknowledged, by the proper Person or Persons, or otherwise upon the advice of
counsel as set forth in Section 20 hereof.
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Section 19. Merger or Consolidation or Change of Name of Rights Agent.
(a) Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Rights Agent
or any successor Rights Agent shall be a party, or any corporation succeeding
to the corporate trust business of the Rights Agent or any successor Rights
Agent, shall be the successor to the Rights Agent under this Agreement without
the execution or filing of any paper or any further act on the part of any of
the parties hereto; provided, however, that such corporation would be eligible
for appointment as a successor Rights Agent under the provisions of Section 21
hereof. In case at the time such successor Rights Agent shall succeed to the
agency created by this Agreement, any of the Rights Certificates shall have been
countersigned but not delivered, any such successor Rights Agent may adopt the
countersignature of the predecessor Rights Agent and deliver such Rights
Certificates so countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor
Rights Agent or in the name of the successor Rights Agent; and in all such cases
such Rights Certificates shall have the full force provided in the Rights
Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be
changed and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver Rights Certificates so countersigned; and in
case at that time any of the Rights Certificates shall not have been
countersigned, the Rights Agent may countersign such Rights Certificates either
in its prior name or in its changed name; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Rights Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be
legal counsel for the Company), and the written advice or 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 written advice or opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable that any fact or
matter (including, without limitation, the identity of any Acquiring Person and
the determination of Current Per Share Market Price) be proved or established by
the Company prior to taking or suffering any action hereunder, such fact or
matter (unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and established by a
certificate signed by any one of the Chief Executive Officer, any Vice
President, the Chief Financial Officer, the Secretary or any Assistant Secretary
of the Company and delivered to the Rights Agent; and such certificate shall be
full authorization to the
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Rights Agent for any action taken or suffered in good faith by it under the
provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the Company and
any other Person only for its own gross negligence, bad faith or willful
misconduct.
(d) The Rights Agent shall not be liable for or by reason of any
of the statements of fact or recitals contained in this Agreement or in the
Rights Certificates (except its countersignature thereof) or be required to
verify the same, but all such statements and recitals are and shall be deemed to
have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Rights Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Rights Certificate;
nor shall it be responsible for any change in the exercisability of the Rights
or any adjustment in the terms of the Rights (including the manner, method or
amount thereof) provided for in Sections 3, 11, 13, 23 or 24, or the
ascertaining of the existence of facts that would require any such change or
adjustment (except with respect to the exercise of Rights evidenced by Rights
Certificates after receipt by the Rights Agent of a certificate furnished
pursuant to Section 12 describing such change or adjustment); nor shall it by
any act hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any Preferred Shares to be issued pursuant to
this Agreement or any Rights Certificate or as to whether any Preferred Shares
will, when issued, be validly authorized and issued, fully paid and
nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge
and deliver or cause to be performed, executed, acknowledged and delivered all
such further and other acts, instruments and assurances as may reasonably be
required by the Rights Agent for the carrying out or performing by the Rights
Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the Chief Executive Officer, any Vice President, the Chief Financial
Officer, the Secretary or any Assistant Secretary of the Company, and to apply
to such officers for advice or instructions in connection with its duties, and
it shall not be liable for any action taken or suffered by it in good faith in
accordance with instructions of any such officer or for any delay in acting
while waiting for those instructions. Any application by the Rights Agent for
written instructions from the Company may, at the option of the Rights Agent,
set forth in writing any action proposed to be taken or omitted by the Rights
Agent under this Rights Agreement and the date on and/or after which such action
shall be taken or such omission shall be effective. The Rights Agent shall not
be liable for any action taken by, or omission of, the Rights Agent in
accordance with a proposal included in any such application on or after the date
specified in such application (which date shall not be less than five (5)
Business Days after the date any officer of
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the Company actually receives such application, unless any such officer shall
have consented in writing to an earlier date) unless, prior to taking any such
action (or the effective date in the case of an omission), the Rights Agent
shall have received written instructions in response to such application
specifying the action to be taken or omitted.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from acting
in any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights
or powers hereby vested in it or perform any duty hereunder either itself or by
or through its attorneys or agents, and the Rights Agent shall not be answerable
or accountable for any act, default, neglect or misconduct of any such attorneys
or agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct, provided reasonable care was exercised in the selection
and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or in the exercise of its rights
if there shall be reasonable grounds for believing that repayment of such funds
or adequate indemnification against such risk or liability is not reasonably
assured to it.
(k) If, with respect to any Rights Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise or transfer without first consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon thirty (30) days' notice in writing mailed to the Company and to each
transfer agent of the Preferred Shares and the Common Shares by registered or
certified mail, and to the holders of the Rights Certificates by first-class
mail. The Company may remove the Rights Agent or any successor Rights Agent upon
thirty (30) days' notice in writing, mailed to the Rights Agent or successor
Rights Agent, as the case may be, and to each transfer agent of the Preferred
Shares and the Common Shares by registered or certified mail, and to the holders
of the Rights Certificates by first-class mail. If the Rights Agent shall resign
or be removed or shall otherwise become incapable of acting, the Company shall
appoint a successor to the Rights Agent. If the Company shall fail to make such
appointment within a period of thirty (30) days after giving notice of such
removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Rights Certificate (who
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shall, with such notice, submit his or her Rights Certificate for inspection by
the Company), then the registered holder of any Rights Certificate may apply to
any court of competent jurisdiction for the appointment of a new Rights Agent.
Any successor Rights Agent, whether appointed by the Company or by such a court,
shall be a corporation organized and doing business under the laws of the United
States or of any state of the United States, in good standing, which is
authorized under such laws to exercise corporate trust or stockholder services
powers and is subject to supervision or examination by federal or state
authority and which has at the time of its appointment as Rights Agent a
combined capital and surplus of at least $100 million. After appointment, the
successor Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and transfer
to the successor Rights Agent any property at the time held by it hereunder, and
execute and deliver any further assurance, conveyance, act or deed necessary for
the purpose. Not later than the effective date of any such appointment, the
Company shall file notice thereof in writing with the predecessor Rights Agent
and each transfer agent of the Preferred Shares and the Common Shares, and mail
a notice thereof in writing to the registered holders of the Rights
Certificates. Failure to give any notice provided for in this Section 21,
however, or any defect therein, shall not affect the legality or validity of the
resignation or removal of the Rights Agent or the appointment of the successor
Rights Agent, as the case may be.
Section 22. Issuance of New Rights Certificates. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Rights Certificates evidencing Rights in such form
as may be approved by its Board of Directors to reflect any adjustment or change
in the Exercise Price and the number or kind or class of shares or other
securities or property purchasable under the Rights Certificates made in
accordance with the provisions of this Agreement. In addition, in connection
with the issuance or sale of Common Shares following the Distribution Date and
prior to the redemption or expiration of the Rights, the Company (a) shall, with
respect to Common Shares so issued or sold pursuant to the exercise of stock
options or under any employee plan or arrangement or upon the exercise,
conversion or exchange of other securities of the Company outstanding at the
date hereof or upon the exercise, conversion or exchange of securities
hereinafter issued by the Company and (b) may, in any other case, if deemed
necessary or appropriate by the Board of Directors of the Company, issue Rights
Certificates representing the appropriate number of Rights in connection with
such issuance or sale; provided, however, that (i) no such Rights Certificate
shall be issued and this sentence shall be null and void ab initio if, and to
the extent that, such issuance or this sentence would create a significant risk
of or result in material adverse tax consequences to the Company or the Person
to whom such Rights Certificate would be issued or would create a significant
risk of or result in such options' or employee plans' or arrangements' failing
to qualify for otherwise available special tax treatment and (ii) no such Rights
Certificate shall be issued if, and to the extent that, appropriate adjustment
shall otherwise have been made in lieu of the issuance thereof.
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Section 23. Redemption.
(a) The Company may, at its option and with the approval of the
Board of Directors, at any time prior to the earlier of (i) the Distribution
Date or (ii) the Close of Business on the Final Expiration Date, redeem all but
not less than all the then outstanding Rights at a redemption price of $0.01 per
Right, appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof (such redemption price being
herein referred to as the "REDEMPTION PRICE") and the Company may, at its
option, pay the Redemption Price either in Common Shares (based on the Current
Per Share Market Price thereof at the time of redemption) or cash. Such
redemption of the Rights by the Company may be made effective at such time, on
such basis and with such conditions as the Board of Directors in its sole
discretion may establish. The date on which the Board of Directors elects to
make the redemption effective shall be referred to as the "REDEMPTION DATE."
(b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights, evidence of which shall have been
filed with the Rights Agent, and without any further action and without any
notice, the right to exercise the Rights will terminate and the only right
thereafter of the holders of Rights shall be to receive the Redemption Price.
The Company shall promptly give public notice of any such redemption; provided,
however, that the failure to give or any defect in, any such notice shall not
affect the validity of such redemption. Within ten (10) days after the action of
the Board of Directors ordering the redemption of the Rights, the Company shall
give notice of such redemption to the Rights Agent and the holders of the then
outstanding Rights by mailing such notice to all such holders at their last
addresses as they appear upon the registry books of the Rights Agent or, prior
to the Distribution Date, on the registry books of the transfer agent for the
Common Shares. Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each such notice of
redemption will state the method by which the payment of the Redemption Price
will be made. Neither the Company nor any of its Affiliates or Associates may
redeem, acquire or purchase for value any Rights at any time in any manner other
than that specifically set forth in this Section 23 or in Section 24 hereof, and
other than in connection with the purchase of Common Shares prior to the
Distribution Date.
Section 24. Exchange.
(a) Subject to applicable laws, rules and regulations, and
subject to subsection 24(c) below, the Company may, at its option, by action of
the Board of Directors, at any time after the occurrence of a Triggering Event,
exchange all or part of the then outstanding and exercisable Rights (which shall
not include Rights that have become void pursuant to the provisions of Section
7(e) hereof) for Common Shares at an exchange ratio of one Common Share per
Right, appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof (such exchange ratio being
hereinafter referred to as the "EXCHANGE RATIO"). Notwithstanding the foregoing,
the Board of Directors shall not be empowered to effect such exchange at any
time after any Person (other than the Company, any Subsidiary of the Company,
any employee benefit plan of
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the Company or any such Subsidiary, or any entity holding Common Shares for or
pursuant to the terms of any such plan), together with all Affiliates and
Associates of such Person, becomes the Beneficial Owner of 50% or more of the
Common Shares then outstanding.
(b) Immediately upon the action of the Board of Directors
ordering the exchange of any Rights pursuant to subsection 24(a) and without any
further action and without any notice, the right to exercise such Rights shall
terminate and the only right thereafter of a holder of such Rights shall be to
receive that number of Common Shares equal to the number of such Rights held by
such holder multiplied by the Exchange Ratio. The Company shall give public
notice of any such exchange; provided, however, that the failure to give, or any
defect in, such notice shall not affect the validity of such exchange. The
Company shall mail a notice of any such exchange to all of the holders of such
Rights at their last addresses as they appear upon the registry books of the
Rights Agent. Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each such notice of
exchange will state the method by which the exchange of the Common Shares for
Rights will be effected and, in the event of any partial exchange, the number of
Rights which will be exchanged. Any partial exchange shall be effected pro rata
based on the number of Rights (other than Rights which have become void pursuant
to the provisions of Section 7(e) hereof) held by each holder of Rights.
(c) In the event that there shall not be sufficient Common Shares
issued but not outstanding or authorized but unissued to permit any exchange of
Rights as contemplated in accordance with Section 24(a), the Company shall
either take such action as may be necessary to authorize additional Common
Shares for issuance upon exchange of the Rights or alternatively, at the option
of a majority of the Board of Directors, with respect to each Right (i) pay cash
in an amount equal to the Current Value (as hereinafter defined), in lieu of
issuing Common Shares in exchange therefor, or (ii) issue debt or equity
securities or a combination thereof, having a value equal to the Current Value,
in lieu of issuing Common Shares in exchange for each such Right, where the
value of such securities shall be determined by a nationally recognized
investment banking firm selected by majority vote of the Board of Directors, or
(iii) deliver any combination of cash, property, Common Shares and/or other
securities having a value equal to the Current Value in exchange for each Right.
For purposes of this Section 24(c) only, the Current Value shall mean the
product of the Current Per Share Market Price of Common Shares on the date of
the occurrence of the event described above in subparagraph (a), multiplied by
the number of Common Shares for which the Right otherwise would be exchangeable
if there were sufficient shares available. To the extent that the Company
determines that some action need be taken pursuant to clauses (i), (ii) or (iii)
of this Section 24(c), the Board of Directors may temporarily suspend the
exercisability of the Rights for a period of up to sixty (60) days following the
date on which the event described in Section 24(a) shall have occurred, in order
to seek any authorization of additional Common Shares and/or to decide the
appropriate form of distribution to be made pursuant to the above provision and
to determine the value thereof. In the event of any such suspension, the Company
shall issue a public announcement stating that the exercisability of the Rights
has been temporarily suspended.
(d) The Company shall not be required to issue fractions of
Common Shares or to distribute certificates which evidence fractional Common
Shares. In lieu of such fractional Common
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Shares, there shall be paid to the registered holders of the Rights Certificates
with regard to which such fractional Common Shares would otherwise be issuable,
an amount in cash equal to the same fraction of the current market value of a
whole Common Share (as determined pursuant to the second sentence of Section
1(j) hereof).
(e) The Company may, at its option, by majority vote of the Board
of Directors, at any time before any Person has become an Acquiring Person,
exchange all or part of the then outstanding Rights for rights of substantially
equivalent value, as determined reasonably and with good faith by the Board of
Directors, based upon the advice of one or more nationally recognized investment
banking firms.
(f) Immediately upon the action of the Board of Directors
ordering the exchange of any Rights pursuant to subsection 24(e) of this Section
24 and without any further action and without any notice, the right to exercise
such Rights shall terminate and the only right thereafter of a holder of such
Rights shall be to receive that number of rights in exchange therefor as has
been determined by the Board of Directors in accordance with subsection 24(e)
above. The Company shall give public notice of any such exchange; provided,
however, that the failure to give, or any defect in, such notice shall not
affect the validity of such exchange. The Company shall mail a notice of any
such exchange to all of the holders of such Rights at their last addresses as
they appear upon the registry books of the transfer agent for the Common Shares
of the Company. Any notice which is mailed in the manner herein provided shall
be deemed given, whether or not the holder receives the notice. Each such notice
of exchange will state the method by which the exchange of the Rights will be
effected.
Section 25. Notice of Certain Events.
(a) In case the Company shall propose to effect or permit to
occur any Triggering Event or Section 13 Event, the Company shall give notice
thereof to each holder of Rights in accordance with Section 26 hereof at least
twenty (20) days prior to occurrence of such Triggering Event or such Section 13
Event.
(b) In case any Triggering Event or Section 13 Event shall occur,
then, in any such case, the Company shall as soon as practicable thereafter give
to each holder of a Rights Certificate, in accordance with Section 26 hereof, a
notice of the occurrence of such event, which shall specify the event and the
consequences of the event to holders of Rights under Sections 11(a)(ii) and 13
hereof.
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<PAGE> 39
Section 26. Notices. Notices or demands authorized by this Agreement to
be given or made by the Rights Agent or by the holder of any Rights Certificate
to or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:
Networks Associates, Inc.
3965 Freedom Circle
Santa Clara, California 95054
Attention: Prabhat K. Goyal
with a copy to:
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Jeffrey D. Saper, Esq.
Subject to the provisions of Section 21 hereof, any notice or demand
authorized by this Agreement to be given or made by the Company or by the holder
of any Rights Certificate to or on the Rights Agent shall be sufficiently given
or made if sent by first-class mail, postage prepaid, addressed (until another
address is filed in writing with the Company) as follows:
BankBoston, N.A.
c/o Boston EquiServe Limited Partnership
150 Royall Street
Canton, MA 02021
Attention: Client Administration
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
Section 27. Supplements and Amendments. Prior to the occurrence of a
Distribution Date, the Company may supplement or amend this Agreement in any
respect without the approval of any holders of Rights and the Rights Agent
shall, if the Company so directs, execute such supplement or amendment. From and
after the occurrence of a Distribution Date, the Company and the Rights Agent
may from time to time supplement or amend this Agreement without the approval of
any holders of Rights in order to (i) cure any ambiguity, (ii) correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provisions herein, (iii) shorten or lengthen any time period
hereunder or (iv) to change or supplement the provisions hereunder in any manner
that the Company may deem necessary or desirable and that shall not adversely
affect the interests of the
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<PAGE> 40
holders of Rights (other than an Acquiring Person or an Affiliate or Associate
of an Acquiring Person); provided, this Agreement may not be supplemented or
amended to lengthen, pursuant to clause (iii) of this sentence, (A) a time
period relating to when the Rights may be redeemed at such time as the Rights
are not then redeemable or (B) any other time period unless such lengthening is
for the purpose of protecting, enhancing or clarifying the rights of, and/or the
benefits to, the holders of Rights (other than an Acquiring Person or an
Affiliate or Associate of an Acquiring Person). Upon the delivery of a
certificate from an appropriate officer of the Company that states that the
proposed supplement or amendment is in compliance with the terms of this Section
27, the Rights Agent shall execute such supplement or amendment. Prior to the
Distribution Date, the interests of the holders of Rights shall be deemed
coincident with the interests of the holders of Common Shares.
Section 28. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 29. Determinations and Actions by the Board of Directors, etc.
For all purposes of this Agreement, any calculation of the number of Common
Shares outstanding at any particular time, including for purposes of determining
the particular percentage of such outstanding Common Shares of which any Person
is the Beneficial Owner, shall be made in accordance with the last sentence of
Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act.
The Board of Directors of the Company shall have the exclusive power and
authority to administer this Agreement and to exercise all rights and powers
specifically granted to the Board, or the Company, or as may be necessary or
advisable in the administration of this Agreement, including, without
limitation, the right and power to (i) interpret the provisions of this
Agreement and (ii) make all determinations deemed necessary or advisable for the
administration of this Agreement (including a determination to redeem or not
redeem the Rights or to amend the Agreement). All such actions, calculations,
interpretations and determinations (including, for purposes of clause (y) below,
all omissions with respect to the foregoing) which are done or made by the Board
in good faith, shall (x) be final, conclusive and binding on the Company, the
Rights Agent, the holders of the Rights Certificates and all other parties and
(y) not subject the Board to any liability to the holders of the Rights.
Section 30. Benefits of this Agreement. Nothing in this Agreement shall
be construed to give to any Person other than the Company, the Rights Agent and
the registered holders of the Rights Certificates (and, prior to the
Distribution Date, the Common Shares) any legal or equitable right, remedy or
claim under this Agreement; but this Agreement shall be for the sole and
exclusive benefit of the Company, the Rights Agent and the registered holders of
the Rights Certificates (and, prior to the Distribution Date, the Common
Shares).
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<PAGE> 41
Section 31. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board of
Directors of the Company determines in its good faith judgment that severing the
invalid language from this Agreement would adversely affect the purpose or
effect of this Agreement, the right of redemption set forth in Section 23 hereof
shall be reinstated and shall not expire until the Close of Business on the
tenth day following the date of such determination by the Board of Directors.
Section 32. Governing Law. This Agreement and each Right and each Rights
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts to
be made and performed entirely within such State.
Section 33. Counterparts. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
Section 34. Descriptive Headings. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
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<PAGE> 42
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
"COMPANY" NETWORKS ASSOCIATES, INC.
By: /s/ Prabhat K. Goyal
-----------------------------------
Name: Prabhat K. Goyal
---------------------------------
Title: Chief Financial Officer
--------------------------------
"RIGHTS AGENT" BANKBOSTON, N.A.
By: /s/ Margaret Prentice
-----------------------------------
Name: Margaret Prentice
---------------------------------
Title: Administrative Manager
--------------------------------
[Signature Page to Rights Agreement]
<PAGE> 43
EXHIBIT A
CERTIFICATE OF DESIGNATION OF RIGHTS, PREFERENCES
AND PRIVILEGES OF
SERIES B PARTICIPATING PREFERRED STOCK
OF NETWORKS ASSOCIATES, INC.
The undersigned, William L. Larson and Prabhat K. Goyal do hereby
certify:
1. That they are the duly elected and acting Chief Executive Officer and
Secretary, respectively, of Networks Associates, Inc., a Delaware corporation
(the "CORPORATION").
2. That pursuant to the authority conferred upon the Board of Directors
by the Second Restated Certificate of Incorporation of the said Corporation, the
said Board of Directors on October 19, 1998 adopted the following resolution
creating a series of 1,000,000 shares of Preferred Stock designated as Series B
Participating Preferred Stock:
"RESOLVED, that pursuant to the authority vested in the Board of
Directors of the corporation by the Second Restated Certificate of
Incorporation, the Board of Directors does hereby provide for the issue of a
series of Preferred Stock of the Corporation and does hereby fix and herein
state and express the designations, powers, preferences and relative and other
special rights and the qualifications, limitations and restrictions of such
series of Preferred Stock as follows:
Section 1. Designation and Amount. The shares of such series shall be
designated as "SERIES B PARTICIPATING PREFERRED STOCK." The Series B
Participating Preferred Stock shall have a par value of $0.01 per share, and the
number of shares constituting such series shall be 1,000,000.
Section 2. Proportional Adjustment. In the event the Corporation shall
at any time after the issuance of any share or shares of Series B Participating
Preferred Stock (i) declare any dividend on Common Stock of the Corporation, par
value $0.01 per share, ("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 Corporation
shall simultaneously effect a proportional adjustment to the number of
outstanding shares of Series B Participating Preferred Stock.
Section 3. Dividends and Distributions.
(a) Subject to the prior and superior right of the holders of any
shares of any series of Preferred Stock ranking prior and superior to the shares
of Series B Participating Preferred Stock with respect to dividends, the holders
of shares of Series B Participating Preferred Stock shall be entitled to receive
when, as and if declared by the Board of Directors out of funds
<PAGE> 44
legally available for the purpose, quarterly dividends payable in cash on the
last day of January, April, July and October in each year (each such date being
referred to herein as a "QUARTERLY DIVIDEND PAYMENT DATE"), commencing on the
first Quarterly Dividend Payment Date after the first issuance of a share or
fraction of a share of Series B Participating 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 share amount
(payable in kind) of all non-cash dividends or other distributions other than a
dividend payable in shares of Common Stock or a subdivision of the outstanding
shares of Common Stock (by reclassification or otherwise), declared on the
Common Stock since the immediately preceding Quarterly Dividend Payment Date,
or, with respect to the first Quarterly Dividend Payment Date, since the first
issuance of any share or fraction of a share of Series B Participating Preferred
Stock.
(b) The Corporation shall declare a dividend or distribution on
the Series B Participating Preferred Stock as provided in paragraph (a) above
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock).
(c) Dividends shall begin to accrue on outstanding shares of
Series B Participating Preferred Stock from the Quarterly Dividend Payment Date
next preceding the date of issue of such shares of Series B Participating
Preferred Stock, unless the date of issue of such shares is prior to the record
date for the first Quarterly Dividend Payment Date, in which case dividends on
such shares shall begin to accrue from the date of issue of such shares, or
unless the date of issue is a Quarterly Dividend Payment Date or is a date after
the record date for the determination of holders of shares of Series B
Participating Preferred Stock entitled to receive a quarterly dividend and
before such Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue from such Quarterly Dividend Payment Date.
Accrued but unpaid dividends shall not bear interest. Dividends paid on the
shares of Series B Participating Preferred Stock in an amount less than the
total amount of such dividends at the time accrued and payable on such shares
shall be allocated pro rata on a share-by-share basis among all such shares at
the time outstanding. The Board of Directors may fix a record date for the
determination of holders of shares of Series B Participating Preferred Stock
entitled to receive payment of a dividend or distribution declared thereon,
which record date shall be no more than 30 days prior to the date fixed for the
payment thereof.
Section 4. Voting Rights. The holders of shares of Series B
Participating Preferred Stock shall have the following voting rights:
(a) Each share of Series B Participating Preferred Stock shall
entitle the holder thereof to 1,000 votes on all matters submitted to a vote of
the stockholders of the Corporation.
(b) Except as otherwise provided herein or by law, the holders of
shares of Series B Participating Preferred Stock and the holders of shares of
Common Stock shall vote together as one class on all matters submitted to a vote
of stockholders of the Corporation.
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<PAGE> 45
(c) Except as required by law, holders of Series B Participating
Preferred Stock shall have no special voting rights and their consent shall not
be required (except to the extent they are entitled to vote with holders of
Common Stock as set forth herein) for taking any corporate action.
Section 5. Certain Restrictions.
(a) The Corporation shall not declare any dividend on, make any
distribution on, or redeem or purchase or otherwise acquire for consideration
any shares of Common Stock after the first issuance of a share or fraction of a
share of Series B Participating Preferred Stock unless concurrently therewith it
shall declare a dividend on the Series B Participating Preferred Stock as
required by Section 3 hereof.
(b) Whenever quarterly dividends or other dividends or
distributions payable on the Series B Participating Preferred Stock as provided
in Section 3 are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on shares of Series B
Participating Preferred Stock outstanding shall have been paid in full, the
Corporation shall not
(i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise acquire for consideration
any shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series B Participating Preferred Stock;
(ii) declare or pay dividends on, make any other
distributions on any shares of stock ranking on a parity (either as to dividends
or upon liquidation, dissolution or winding up) with Series B Participating
Preferred Stock, except dividends paid ratably on the Series B Participating
Preferred Stock and all such parity stock on which dividends are payable or in
arrears in proportion to the total amounts to which the holders of all such
shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series B Participating
Preferred Stock, provided that the Corporation may at any time redeem, purchase
or otherwise acquire shares of any such parity stock in exchange for shares of
any stock of the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series B Participating Preferred
Stock;
(iv) purchase or otherwise acquire for consideration any
shares of Series B Participating Preferred Stock, or any shares of stock ranking
on a parity with the Series B Participating Preferred Stock, except in
accordance with a purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of such shares upon such
terms as the Board of Directors, after consideration of the respective annual
dividend rates and other
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<PAGE> 46
relative rights and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable treatment among the
respective series or classes.
(c) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under paragraph (a) of
this Section 5, purchase or otherwise acquire such shares at such time and in
such manner.
Section 6. Reacquired Shares. Any shares of Series B Participating
Preferred Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition thereof.
All such shares shall upon their cancellation become authorized but unissued
shares of Preferred Stock and may be reissued as part of a new series of
Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein and, in the Second Restated Certificate of Incorporation, as then
amended.
Section 7. Liquidation, Dissolution or Winding Up. Upon any liquidation,
dissolution or winding up of the Corporation, the holders of shares of Series B
Participating Preferred Stock shall be entitled to receive an aggregate amount
per share equal to 1,000 times the aggregate amount to be distributed per share
to holders of shares of Common Stock plus an amount equal to any accrued and
unpaid dividends on such shares of Series B Participating Preferred Stock.
Section 8. 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 B Participating Preferred Stock shall at the same time be similarly
exchanged or changed in an amount per share 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.
Section 9. No Redemption. The shares of Series B Participating Preferred
Stock shall not be redeemable.
Section 10. Ranking. The Series B Participating Preferred Stock shall
rank junior to all other series of the Corporation's Preferred Stock as to the
payment of dividends and the distribution of assets, unless the terms of any
such series shall provide otherwise.
Section 11. Amendment. The Second Restated Certificate of Incorporation
of the Corporation shall not be further amended in any manner which would
materially alter or change the powers, preference or special rights of the
Series B Participating Preferred Stock so as to affect them adversely without
the affirmative vote of the holders of a majority of the outstanding shares of
Series B Participating Preferred Stock, voting separately as a class.
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<PAGE> 47
Section 12. Fractional Shares. Series B Participating Preferred Stock
may be issued in fractions of a share which shall entitle the holder, in
proportion to such holder's fractional shares, to exercise voting rights,
receive dividends, participate in distributions and to have the benefit of all
other rights of holders of Series B Participating Preferred Stock.
RESOLVED FURTHER, that the Chief Executive Officer or any Vice President
and the Secretary or any Assistant Secretary of this corporation be, and they
hereby are, authorized and directed to prepare and file a Certificate of
Designation of Rights, Preferences and Privileges in accordance with the
foregoing resolution and the provisions of Delaware law and to take such actions
as they may deem necessary or appropriate to carry out the intent of the
foregoing resolution."
We further declare under penalty of perjury that the matters set forth
in the foregoing Certificate of Designation are true and correct of our own
knowledge.
Executed at Santa Clara, California, on October 20, 1998.
_____________________________________________
William L. Larson, Chief Executive Officer
_____________________________________________
Prabhat K. Goyal, Secretary
-5-
<PAGE> 48
EXHIBIT B
FORM OF RIGHTS CERTIFICATE
Certificate No. R- _________ Rights
NOT EXERCISABLE AFTER THE EARLIER OF (i) OCTOBER 20, 2008 (ii)
THE DATE TERMINATED BY THE COMPANY OR (iii) THE DATE THE
COMPANY EXCHANGES THE RIGHTS PURSUANT TO THE RIGHTS AGREEMENT.
THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE
COMPANY, AT $0.01 PER RIGHT ON THE TERMS SET FORTH IN THE
RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS
BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN AFFILIATE OR
ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN
THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS
MAY BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS
RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON
WHO WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR
ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN
THE RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE
AND THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND VOID IN
THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF SUCH RIGHTS
AGREEMENT.]*
RIGHTS CERTIFICATE
NETWORKS ASSOCIATES, INC.
This certifies that ______________________________, or registered
assigns, is the registered owner of the number of Rights set forth above, each
of which entitles the owner thereof, subject to the terms, provisions and
conditions of the Rights Agreement dated as of October 20, 1998, (the "RIGHTS
AGREEMENT"), between Networks Associates, Inc., a Delaware corporation (the
"COMPANY"), and BankBoston, N.A. (the "RIGHTS AGENT"), to purchase from the
Company at any time after the Distribution Date (as such term is defined in the
Rights Agreement) and prior to 5:00 P.M., New York time, on October 20, 2008 at
the principal office of the Rights Agent, or at the office of its successor as
Rights Agent, one one-thousandth (1/1,000) of a fully paid non-assessable share
of Series B Participating Preferred Stock, $0.01 par value, (the "PREFERRED
- --------
* The portion of the legend in bracket shall be inserted only if applicable and
shall replace the preceding sentence.
<PAGE> 49
SHARES"), of the Company, at a Exercise Price of Two Hundred Dollars ($200.00)
per one-thousandth of a Preferred Share (the "EXERCISE PRICE"), upon
presentation and surrender of this Rights Certificate with the Form of Election
to Purchase and related Certificate duly executed. The number of Rights
evidenced by this Rights Certificate (and the number of one-thousandths of a
Preferred Share which may be purchased upon exercise hereof) set forth above are
the number and Exercise Price as of November 3, 1998 based on the Preferred
Shares as constituted at such date. As provided in the Rights Agreement, the
Exercise Price and the number and kind of Preferred Shares or other securities
which may be purchased upon the exercise of the Rights evidenced by this Rights
Certificate are subject to modification and adjustment upon the happening of
certain events.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the principal executive offices of
the Company and the above-mentioned office of the Rights Agent.
Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Rights Certificate (i) may be redeemed by the Company, at its option, at
a redemption price of $0.01 per Right or (ii) may be exchanged by the Company in
whole or in part for Common Shares, substantially equivalent rights or other
consideration as determined by the Company.
This Rights Certificate, with or without other Rights Certificates, upon
surrender at the principal office of the Rights Agent, may be exchanged for
another Rights Certificate or Rights Certificates of like tenor and date
evidencing Rights entitling the holder to purchase a like aggregate amount of
securities as the Rights evidenced by the Rights Certificate or Rights
Certificates surrendered shall have entitled such holder to purchase. If this
Rights Certificate shall be exercised in part, the holder shall be entitled to
receive upon surrender hereof another Rights Certificate or Rights Certificates
for the number of whole Rights not exercised.
No fractional portion of less than one one-thousandth of a Preferred
Share will be issued upon the exercise of any Right or Rights evidenced hereby
but in lieu thereof a cash payment will be made, as provided in the Rights
Agreement.
No holder of this Rights Certificate, as such, shall be entitled to vote
or receive dividends or be deemed for any purpose the holder of the Preferred
Shares or of any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
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<PAGE> 50
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Rights
Certificate shall have been exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal. Dated as of _______________, _____.
ATTEST: NETWORKS ASSOCIATES, INC.
__________________________________ By: ____________________________________
Prabhat K. Goyal, Secretary William L. Larson, Chief Executive
Officer
Countersigned:
BankBoston, N.A.
as Rights Agent
By: _____________________________
Its:______________________________
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<PAGE> 51
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: _______________, ______
___________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by an eligible guarantor institution (a
bank, stockbroker, savings and loan association or credit union with membership
in an approved signature guarantee medallion program) pursuant to Rule 17Ad-15
of the Securities Exchange Act of 1934.
<PAGE> 52
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Rights Certificate [ ] is [ ] is not being sold,
assigned and transferred by or on behalf of a Person who is or was an Acquiring
Person, or an Affiliate or Associate of any such Person (as such terms are
defined in the Rights Agreement);
(2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this Rights
Certificate from any Person who is, was or subsequently became an Acquiring
Person or an Affiliate or Associate of any such Person.
Dated: _______________, ______
___________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by an eligible guarantor institution (a
bank, stockbroker, savings and loan association or credit union with membership
in an approved signature guarantee medallion program) pursuant to Rule 17Ad-15
of the Securities Exchange Act of 1934.
<PAGE> 53
FORM OF REVERSE SIDE OF RIGHTS CERTIFICATE -- CONTINUED
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to
exercise the Rights Certificate)
To: ___________________________
The undersigned hereby irrevocably elects to exercise
_________________________ Rights represented by this Rights Certificate to
purchase the number of one-thousandths of a Preferred Share issuable upon the
exercise of such Rights and requests that certificates for such number of
one-thousandths of a Preferred Share issued in the name of:
Please insert social security
or other identifying number
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
If such number of Rights shall not be all the Rights evidenced by this Rights
Certificate, a new Rights Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
Dated: ___________________ , ______
___________________________________
Signature
Signature Guaranteed:
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<PAGE> 54
Signatures must be guaranteed by an eligible guarantor institution
(a bank, stockbroker, savings and loan association or credit union with
membership in an approved signature guarantee medallion program) pursuant to
Rule 17Ad-15 of the Securities Exchange Act of 1934.
-3-
<PAGE> 55
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Rights Certificate [ ] are
[ ] are not being exercised by or on behalf of a Person who is or was an
Acquiring Person or an Affiliate or Associate of any such Person (as such terms
are defined in the Rights Agreement);
(2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this Rights
Certificate from any Person who is, was or subsequently became an Acquiring
Person or an Affiliate or Associate of any such Person.
Dated: _______________, ______
___________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by an eligible guarantor institution
(a bank, stockbroker, savings and loan association or credit union with
membership in an approved signature guarantee medallion program) pursuant to
Rule 17Ad-15 of the Securities Exchange Act of 1934.
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<PAGE> 56
FORM OF REVERSE SIDE OF RIGHTS CERTIFICATE -- CONTINUED
NOTICE
The signature in the foregoing Forms of Assignment and Election must
conform to the name as written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any change whatsoever.
<PAGE> 57
EXHIBIT C
STOCKHOLDER RIGHTS PLAN
NETWORKS ASSOCIATES, INC.
Summary of Rights
Distribution and
Transfer of Rights;
Rights Certificate: The Board of Directors has declared a
dividend of one Right for each share of
Networks Associates, Inc. (the "COMPANY")
Common Stock outstanding. Prior to the
Distribution Date referred to below, the
Rights will be evidenced by and trade with
the certificates for the Common Stock. After
the Distribution Date, the Company will mail
Rights certificates to the Company's
stockholders and the Rights will become
transferable apart from the Common Stock.
Distribution Date: Rights will separate from the Common Stock
and become exercisable following the tenth
day after a person or group (a) acquires
beneficial ownership of 15% or more of the
Company's Common Stock or (b) announces a
tender or exchange offer, the consummation of
which would result in ownership by a person
or group of 15% or more of the Company's
Common Stock.
Series B Participating
Preferred Stock Purchasable
Upon Exercise of Rights: After the Distribution Date, each Right will
entitle the holder to purchase for $200.00
(the "EXERCISE PRICE"), a fraction of a share
of the Company's Series B Participating
Preferred Stock with economic terms similar
to that of one share of the Company's Common
Stock.
Flip-In: If an acquiror (an "ACQUIRING PERSON")
obtains 15% or more of the Company's Common
Stock then each Right (other than Rights
owned by an Acquiring Person or its
affiliates) will entitle the holder thereof
to purchase, for the Exercise Price, a number
of shares of the Company's Common Stock
having a then current market value of twice
the Exercise Price.
Flip-Over: If the date an Acquiring Person obtains 15%
or more of the Company's Common Stock, (a)
the Company merges into another entity, (b)
an acquiring entity merges into the Company
<PAGE> 58
or (c) the Company sells more than 50% of the
Company's assets or earning power, then each
Right (other than Rights owned by an
Acquiring Person or its affiliates) will
entitle the holder thereof to purchase, for
the Exercise Price, a number of shares of
Common Stock of the person engaging in the
transaction having a then current market
value of twice the Exercise Price
Exchange Provision: At any time after the date an Acquiring
Person obtains 15% or more of the Company's
Common Stock, and prior to the acquisition by
the Acquiring Person of 50% or more of the
outstanding Common Stock, the Board of
Directors of the Company may exchange the
Rights (other than Rights owned by the
Acquiring Person or its affiliates), in whole
or in part, for shares of Common Stock of the
Company at an exchange ratio of one share of
Common Stock per Right (subject to
adjustment).
Redemption of
the Rights: Rights will be redeemable at the Company's
option for $0.01 per Right at any time on or
prior to the earlier of the Distribution
Date and the expiration of the Right.
Expiration of
the Rights: The Rights expire on the earliest of (a) the
date that is 10 years from the date upon
which the Preferred Shares Rights Agreement
(the "RIGHTS AGREEMENT") by and between the
Company and BankBoston, N.A. (the "RIGHTS
AGENT") is executed, or (b) the date of
exchange or redemption of the Rights as
described above.
Amendment of
Terms of Rights: The terms of the Rights and the Rights
Agreement may be amended in any respect
without the consent of the Rights holders on
or prior to the Distribution Date;
thereafter, the terms of the Rights and the
Rights Agreement may be amended without the
consent of the Rights holders in order to
cure any ambiguities or to make changes which
do not adversely affect the interests of
Rights holders (other than the Acquiring
Person).
Voting Rights: Rights will not have any voting rights.
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Anti-Dilution
Provisions: Rights will have the benefit of certain
customary anti-dilution provisions.
Taxes: The Rights distribution should not be taxable
for federal income tax purposes. However,
following an event which renders the Rights
exercisable or upon redemption of the Rights,
stockholders may recognize taxable income.
The foregoing is a summary of certain principal terms of the Stockholder Rights
Plan only and is qualified in its entirety by reference to the detailed terms of
the Rights Agreement dated as of October 20, 1998, between the Company and the
Rights Agent.
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Exhibit 5
CERTIFICATE OF DESIGNATION OF RIGHTS, PREFERENCES
AND PRIVILEGES OF
SERIES B PARTICIPATING PREFERRED STOCK
OF NETWORKS ASSOCIATES, INC.
The undersigned, William L. Larson and Prabhat K. Goyal do hereby
certify:
1. That they are the duly elected and acting Chief Executive Officer and
Secretary, respectively, of Networks Associates, Inc., a Delaware corporation
(the "CORPORATION").
2. That pursuant to the authority conferred upon the Board of Directors
by the Second Restated Certificate of Incorporation of the said Corporation, the
said Board of Directors on October 19, 1998 adopted the following resolution
creating a series of 1,000,000 shares of Preferred Stock designated as Series B
Participating Preferred Stock:
"RESOLVED, that pursuant to the authority vested in the Board of
Directors of the corporation by the Second Restated Certificate of
Incorporation, the Board of Directors does hereby provide for the issue of a
series of Preferred Stock of the Corporation and does hereby fix and herein
state and express the designations, powers, preferences and relative and other
special rights and the qualifications, limitations and restrictions of such
series of Preferred Stock as follows:
Section 1. Designation and Amount. The shares of such series shall be
designated as "SERIES B PARTICIPATING PREFERRED STOCK." The Series B
Participating Preferred Stock shall have a par value of $0.01 per share, and the
number of shares constituting such series shall be 1,000,000.
Section 2. Proportional Adjustment. In the event the Corporation shall
at any time after the issuance of any share or shares of Series B Participating
Preferred Stock (i) declare any dividend on Common Stock of the Corporation, par
value $0.01 per share, ("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 Corporation
shall simultaneously effect a proportional adjustment to the number of
outstanding shares of Series B Participating Preferred Stock.
Section 3. Dividends and Distributions.
(a) Subject to the prior and superior right of the holders of any
shares of any series of Preferred Stock ranking prior and superior to the shares
of Series B Participating Preferred Stock with respect to dividends, the holders
of shares of Series B Participating Preferred Stock shall be entitled to receive
when, as and if declared by the Board of Directors out of funds legally
available for the purpose, quarterly dividends payable in cash on the last day
of January, April, July and October in each year (each such date being referred
to herein as a "QUARTERLY
<PAGE> 2
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 B
Participating 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 share amount (payable in kind) of all non-cash
dividends or other distributions other than a dividend payable in shares of
Common Stock or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date, or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series B Participating Preferred Stock.
(b) The Corporation shall declare a dividend or distribution on
the Series B Participating Preferred Stock as provided in paragraph (a) above
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock).
(c) Dividends shall begin to accrue on outstanding shares of
Series B Participating Preferred Stock from the Quarterly Dividend Payment Date
next preceding the date of issue of such shares of Series B Participating
Preferred Stock, unless the date of issue of such shares is prior to the record
date for the first Quarterly Dividend Payment Date, in which case dividends on
such shares shall begin to accrue from the date of issue of such shares, or
unless the date of issue is a Quarterly Dividend Payment Date or is a date after
the record date for the determination of holders of shares of Series B
Participating Preferred Stock entitled to receive a quarterly dividend and
before such Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue from such Quarterly Dividend Payment Date.
Accrued but unpaid dividends shall not bear interest. Dividends paid on the
shares of Series B Participating Preferred Stock in an amount less than the
total amount of such dividends at the time accrued and payable on such shares
shall be allocated pro rata on a share-by-share basis among all such shares at
the time outstanding. The Board of Directors may fix a record date for the
determination of holders of shares of Series B Participating Preferred Stock
entitled to receive payment of a dividend or distribution declared thereon,
which record date shall be no more than 30 days prior to the date fixed for the
payment thereof.
Section 4. Voting Rights. The holders of shares of Series B
Participating Preferred Stock shall have the following voting rights:
(a) Each share of Series B Participating Preferred Stock shall
entitle the holder thereof to 1,000 votes on all matters submitted to a vote of
the stockholders of the Corporation.
(b) Except as otherwise provided herein or by law, the holders of
shares of Series B Participating Preferred Stock and the holders of shares of
Common Stock shall vote together as one class on all matters submitted to a vote
of stockholders of the Corporation.
<PAGE> 3
(c) Except as required by law, holders of Series B Participating
Preferred Stock shall have no special voting rights and their consent shall not
be required (except to the extent they are entitled to vote with holders of
Common Stock as set forth herein) for taking any corporate action.
Section 5. Certain Restrictions.
(a) The Corporation shall not declare any dividend on, make any
distribution on, or redeem or purchase or otherwise acquire for consideration
any shares of Common Stock after the first issuance of a share or fraction of a
share of Series B Participating Preferred Stock unless concurrently therewith it
shall declare a dividend on the Series B Participating Preferred Stock as
required by Section 3 hereof.
(b) Whenever quarterly dividends or other dividends or
distributions payable on the Series B Participating Preferred Stock as provided
in Section 3 are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on shares of Series B
Participating Preferred Stock outstanding shall have been paid in full, the
Corporation shall not
(i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise acquire for consideration
any shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series B Participating Preferred Stock;
(ii) declare or pay dividends on, make any other
distributions on any shares of stock ranking on a parity (either as to dividends
or upon liquidation, dissolution or winding up) with Series B Participating
Preferred Stock, except dividends paid ratably on the Series B Participating
Preferred Stock and all such parity stock on which dividends are payable or in
arrears in proportion to the total amounts to which the holders of all such
shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series B Participating
Preferred Stock, provided that the Corporation may at any time redeem, purchase
or otherwise acquire shares of any such parity stock in exchange for shares of
any stock of the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series B Participating Preferred
Stock;
(iv) purchase or otherwise acquire for consideration any
shares of Series B Participating Preferred Stock, or any shares of stock ranking
on a parity with the Series B Participating Preferred Stock, except in
accordance with a purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of such shares upon such
terms as the Board of Directors, after consideration of the respective annual
dividend rates and other
<PAGE> 4
relative rights and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable treatment among the
respective series or classes.
(c) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under paragraph (a) of
this Section 5, purchase or otherwise acquire such shares at such time and in
such manner.
Section 6. Reacquired Shares. Any shares of Series B Participating
Preferred Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition thereof.
All such shares shall upon their cancellation become authorized but unissued
shares of Preferred Stock and may be reissued as part of a new series of
Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein and, in the Second Restated Certificate of Incorporation, as then
amended.
Section 7. Liquidation, Dissolution or Winding Up. Upon any liquidation,
dissolution or winding up of the Corporation, the holders of shares of Series B
Participating Preferred Stock shall be entitled to receive an aggregate amount
per share equal to 1,000 times the aggregate amount to be distributed per share
to holders of shares of Common Stock plus an amount equal to any accrued and
unpaid dividends on such shares of Series B Participating Preferred Stock.
Section 8. 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 B Participating Preferred Stock shall at the same time be similarly
exchanged or changed in an amount per share 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.
Section 9. No Redemption. The shares of Series B Participating Preferred
Stock shall not be redeemable.
Section 10. Ranking. The Series B Participating Preferred Stock shall
rank junior to all other series of the Corporation's Preferred Stock as to the
payment of dividends and the distribution of assets, unless the terms of any
such series shall provide otherwise.
Section 11. Amendment. The Second Restated Certificate of Incorporation
of the Corporation shall not be further amended in any manner which would
materially alter or change the powers, preference or special rights of the
Series B Participating Preferred Stock so as to affect them adversely without
the affirmative vote of the holders of a majority of the outstanding shares of
Series B Participating Preferred Stock, voting separately as a class.
<PAGE> 5
Section 12. Fractional Shares. Series B Participating Preferred Stock
may be issued in fractions of a share which shall entitle the holder, in
proportion to such holder's fractional shares, to exercise voting rights,
receive dividends, participate in distributions and to have the benefit of all
other rights of holders of Series B Participating Preferred Stock.
RESOLVED FURTHER, that the Chief Executive Officer or any Vice President
and the Secretary or any Assistant Secretary of this corporation be, and they
hereby are, authorized and directed to prepare and file a Certificate of
Designation of Rights, Preferences and Privileges in accordance with the
foregoing resolution and the provisions of Delaware law and to take such actions
as they may deem necessary or appropriate to carry out the intent of the
foregoing resolution."
We further declare under penalty of perjury that the matters set forth
in the foregoing Certificate of Designation are true and correct of our own
knowledge.
Executed at Santa Clara, California, on October 20, 1998.
/s/ William L. Larson
---------------------------------------------
William L. Larson, Chief Executive Officer
/s/ Prabhat K. Goyal
----------------------------------------------
Prabhat K. Goyal, Secretary
