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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 12(g) OF THE
SECURITIES EXCHANGE ACT OF 1934
Gateway, Inc.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware 42-1249184
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(State of Incorporation or Organization) (IRS Employer
Identification No.)
4545 Towne Centre Court, San Diego, California 92121
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(Address of Principal Executive Offices) (Zip Code)
Securities to be registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which
to be so Registered Each Class is to be Registered
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Preferred Stock Purchase Rights New York Stock Exchange
Securities to be registered pursuant to Section 12(g) of the Act:
None
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(Title of Class)
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Item 1. Description of Securities to be Registered.
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On January 19, 2000 (the "Rights Dividend Declaration Date"), the Board of
Directors of Gateway, Inc. (the "Company") declared a dividend of one Right for
each outstanding share of the Company's Common Stock, par value $.01 per share
(the "Common Stock"), to stockholders of record at the close of business on
February 4, 2000 (the "Record Date"). Each Right entitles the registered holder
to purchase from the Company one one-thousandth of a share of Series B Junior
Participating Preferred Stock, par value $.01 per share (the "Preferred Stock"),
at a Purchase Price of $350 per unit of one one-thousandth of a share of
preferred stock, subject to adjustment (the "Purchase Price"). The description
and terms of the Rights are set forth in a Rights Agreement, dated as of January
19, 2000 (the "Rights Agreement"), between the Company and UMB Bank, N.A., as
Rights Agent.
Initially, the Rights will be attached to all Common Stock certificates
representing shares then outstanding, and no separate Rights Certificates will
be distributed. The Rights will separate from the Common Stock and a
Distribution Date will occur upon the earlier of (i) 10 days following a public
announcement that a person or group of affiliated or associated persons (an
"Acquiring Person") has acquired, or obtained the right to acquire, beneficial
ownership of 15% or more of the shares of Common Stock then outstanding (the
"Stock Acquisition Date"), other than (A) as a result of repurchases of stock by
the Company, (B) a person who beneficially owns less than 20% of the outstanding
Common Stock and who has reported or is required to report such ownership on
Schedule 13G under the Securities Exchange Act of 1934 and who does not have any
intention to and has not reserved the right to control or influence the
management or policies of the Company and (C) Theodore W. Waitt, his affiliates
and associates, his heirs and any trust or foundation to which he has
transferred or may transfer shares of Common Stock; provided they do not
beneficially own shares of stock representing a percentage that is 5% or more
than the percentage held on the date of the Rights Agreement (except solely by a
reason of reduction of the number of shares outstanding), or (ii) 10 business
days (or such later date as the Board shall determine) following the
commencement of a tender offer or exchange offer that would result in a person
or group becoming an Acquiring Person (unless such tender offer or exchange
offer is an offer for all outstanding shares of Common Stock which at least a
majority of independent directors determine to be fair to and not inadequate and
otherwise in the best interests of the Company and its stockholders (a
"Qualified Offer")). Until the Distribution Date, (i) the Rights will be
evidenced by the Common Stock certificates and will be transferred with and only
with such Common Stock certificates, (ii) new Common Stock certificates issued
after the Record Date will contain a notation incorporating the Rights Agreement
by reference and (iii) the surrender for transfer of any certificates for
outstanding Common Stock will also constitute the transfer of the Rights
associated with the Common Stock represented by such certificate.
The Rights are not exercisable until the Distribution Date and will expire
at the close of business on January 18, 2010 unless earlier redeemed or
exchanged by the Company as provided in the Rights Agreement.
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As soon as practicable after the Distribution Date, Rights Certificates
will be mailed to holders of record of the Common Stock as of the close of
business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights. Except as otherwise determined by
the Board of Directors or provided by the Rights Agreement, only shares of
Common Stock issued prior to the Distribution Date will be issued with Rights.
In the event that a person or group becomes an Acquiring Person, except
pursuant to a Qualified Offer (a "Flip-in Event"), each holder of a Right will
thereafter have the right to receive, upon payment of the applicable Purchase
Price, Common Stock (or, in certain circumstances, at the option of the Board of
Directors, cash, property or other securities of the Company) having a value
(determined pursuant to a formula set forth in the Rights Agreement) equal to
two times the then current Purchase Price multiplied by the number of one
one-thousandths of a share of Preferred Stock for which a Right was exercisable
(the "applicable Purchase Price"). Notwithstanding any of the foregoing,
following the occurrence of a Flip-in Event, all Rights that are, or (under
certain circumstances specified in the Rights Agreement) were, beneficially
owned by any Acquiring Person (or by certain related parties) will be null and
void.
For example, assuming an applicable Purchase Price per Right of $350, each
Right not owned by an Acquiring Person (or by certain related parties) following
a Flip-in Event would entitle its holder to purchase $700 worth of Common Stock
(or other consideration, as noted above) determined pursuant to a formula set
forth in the Rights Agreement, for $350. Assuming that the Common Stock had a
per share value of $70 at such time (as determined pursuant to such formula),
the holder of each valid Right would be entitled to purchase 10 shares of Common
Stock for $350.
In the event that, at any time following the Stock Acquisition Date, (i)
the Company is acquired in a merger or consolidation transaction in which the
Company is not the surviving corporation (other than with a subsidiary of the
Company or an entity which acquired the shares pursuant to a Qualified Offer) or
(ii) the Company engages in a merger or consolidation transaction (other than
with a subsidiary of the Company or an entity which acquired the shares pursuant
to a Qualified Offer) in which the Company is the surviving corporation and the
Common Stock of the Company is changed or exchanged for other securities or
assets, or (iii) 50% or more of the Company's assets, cash flow or earning power
is sold or transferred (other than to the Company or a subsidiary of the
Company), each holder of a Right (except Rights which previously have been
voided as set forth above) shall thereafter have the right to receive, upon
payment of the Purchase Price, common stock of the acquiring company having a
value equal to two times the applicable Purchase Price. The events set forth in
this paragraph and in the second preceding paragraph are referred to as
"Triggering Events."
At any time after a person or group becomes an Acquiring Person and prior
to the acquisition by such person or group of fifty percent (50%) or more of the
outstanding Common Stock, the Board of Directors may exchange the Rights (other
than Rights owned by such person or group which have become void), in whole or
in part, at an exchange ratio of one share of Common Stock, or one
one-thousandth of a share of Preferred Stock (or of a share of a class or
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series of the Company's preferred stock having equivalent rights, preferences
and privileges), per Right (subject to adjustment).
The Purchase Price payable, and the number of units of Preferred Stock or
other securities or property issuable, upon exercise of the Rights are subject
to adjustment from time to time to prevent dilution to holders of the Rights (i)
in the event of a stock dividend on, or a subdivision, combination or
reclassification of, the Preferred Stock, (ii) if holders of the Preferred Stock
are granted certain rights or warrants to subscribe for Preferred Stock or
convertible securities at less than the current market price of the Preferred
Stock, or (iii) upon the distribution to holders of the Preferred Stock of
evidences of indebtedness or assets (excluding regular quarterly cash dividends)
or of subscription rights or warrants (other than those referred to above).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. No fractional units of one one-thousandths of a share of Preferred Stock
will generally be issued and, in lieu thereof, an adjustment in cash will be
made based on the market price of the Preferred Stock on the last trading date
prior to the date of exercise.
At any time until the tenth day following the Stock Acquisition Date, the
Company may redeem the Rights in whole, but not in part, at a price of $.001 per
Right (payable in cash, Common Stock or other consideration deemed appropriate
by the Board of Directors). Immediately upon the action of the Board of
Directors ordering redemption of the Rights, the Rights will terminate and the
only right of the holders of Rights will be to receive the $.001 redemption
price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends. While the distribution of the Rights should not
be taxable to stockholders or to the Company, stockholders may, depending upon
the circumstances, recognize taxable income in the event that the Rights become
exercisable for Common Stock or Preferred Stock (or other consideration) of the
Company or for common stock of the acquiring company as set forth above, or in
the event of a redemption or exchange as provided above.
Any of the provisions of the Rights Agreement may be amended by the Board
of Directors of the Company prior to the Distribution Date. After the
Distribution Date, the provisions of the Rights Agreement may be amended by the
Board of Directors in order to cure any ambiguity, to make changes which do not
adversely affect the interests of holders of Rights (excluding the interests of
any Acquiring Person), or to shorten or lengthen any time period under the
Rights Agreement; provided, however, that no amendment shall be made to lengthen
the redemption period at such time as the Rights are not redeemable.
The Rights Agreement between the Company and the Rights Agent specifying
the terms of the Rights, which includes as Exhibit B the Form of Rights
Certificate, the press release announcing the declaration of the Rights and a
form of letter to the holders of the Company's Common Stock (together with a
Summary of the Rights attached thereto) are attached hereto as
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exhibits and are incorporated herein by reference. The foregoing description of
the Rights does not purport to be complete and is qualified in its entirety by
reference to such exhibits.
Item 2. Exhibits.
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1 Rights Agreement, dated as of January 19, 2000, between
Gateway, Inc. and UMB Bank, N.A., as Rights Agent, including
the form of the Certificate of Designation, Preferences and
Rights of the Series B Junior Participating Preferred Stock
setting forth the terms of the Series A Junior Participating
Preferred Stock, par value $.01 per share, as Exhibit A, the
form of Rights Certificate as Exhibit B and the Summary of
Rights to Purchase Preferred Stock as Exhibit C. Pursuant to
the Rights Agreement, printed Rights Certificates will not be
mailed until after the Distribution Date (as such term is
defined in the Rights Agreement).
2 Press Release of the Company dated January 28, 2000
3 Form of letter to the Company's stockholders describing the
Rights.
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SIGNATURE
Pursuant to the requirements of Section 12 of the Securities and Exchange
Act of 1934, the Registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereto duly authorized.
Date: February 4, 2000
GATEWAY, INC.
By: /s/ William M. Elliott
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William M. Elliott
Senior Vice President,
General Counsel and Secretary
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EXHIBIT INDEX
Exhibit Number Description
1 Rights Agreement, dated as of January 19, 2000, between
Gateway, Inc. and UMB Bank, N.A., as Rights Agent, including
the form of the Certificate of Designation, Preferences and
Rights of the Series B Junior Participating Preferred Stock
setting forth the terms of the Series A Junior Participating
Preferred Stock, par value $.01 per share, as Exhibit A, the
form of Rights Certificate as Exhibit B and the Summary of
Rights to Purchase Preferred Stock as Exhibit C. Pursuant to
the Rights Agreement, printed Rights Certificates will not
be mailed until after the Distribution Date (as such term is
defined in the Rights Agreement)
2 Press Release of the Company dated January 28, 2000
3 Form of letter to the Company's stockholders describing the
Rights.
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Exhibit 1
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RIGHTS AGREEMENT
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RIGHTS AGREEMENT, dated as of January 19, 2000 (the "Agreement"),
between Gateway, Inc. a Delaware corporation (the "Company"), and UMB Bank,
N.A., as Rights Agent, (the "Rights Agent").
W I T N E S S E T H
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WHEREAS, on January 19, 2000 (the "Rights Dividend Declaration Date"),
the Board of Directors of the Company authorized and declared a dividend
distribution of one Right (as hereinafter defined, and as such number may
hereinafter be adjusted) for each share of common stock, par value $.01 per
share, of the Company (the "Common Stock") outstanding at the close of business
on January 31, 2000 (the "Record Date"), and has authorized the issuance of one
Right (as such number may hereinafter be adjusted pursuant to the provisions
hereof) for each share of Common Stock of the Company issued between the Record
Date (whether originally issued or delivered from the Company's treasury) and
the Distribution Date (as hereinafter defined), each Right initially
representing the right to purchase one one-thousandth of a share of Series B
Junior Participating Preferred Stock of the Company (the "Preferred Stock")
having the rights, powers and preferences set forth in the form of Certificate
of Designation, Preferences and Rights attached hereto as Exhibit A, upon the
terms and subject to the conditions hereinafter set forth (the "Rights");
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
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following terms have the meanings indicated:
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(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 shares of Common Stock then outstanding, but shall not
include (i) the Company, (ii) any Subsidiary of the Company, (iii) 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 to the extent acting pursuant to the terms of such
plan, (iv) Theodore W. Waitt ("Waitt") or his Affiliates and Associates, his
heirs and any trust or foundation to which he has transferred or may transfer
shares of Common Stock ("Waitt Transferees"); provided that Waitt and the Waitt
Transferees do not Beneficially Own shares of Common Stock representing a
percentage that is 5% or more than the percentage held on the date hereof except
solely by reason of a reduction of the number of shares of Common Stock
outstanding, (v) any Person who becomes the Beneficial Owner of fifteen percent
(15%) or more of the shares of Common Stock then outstanding as a result of a
reduction in the number of shares of Common Stock outstanding due to the
repurchase of shares of Common Stock by the Company unless and until such
Person, after becoming aware that such Person has become the Beneficial Owner of
fifteen percent (15%) or more of the then outstanding shares of Common Stock,
acquires beneficial ownership of additional shares of Common Stock representing
one percent (1%) or more of the shares of Common Stock then outstanding or (vi)
any Person who is the Beneficial Owner of less than 20% of the Common Stock then
outstanding and who has reported or is required to report such ownership on
Schedule 13G under the Exchange Act, as in effect on the date of the Agreement
(or any comparable or successor report), but only if and for so long as such
person does not state or have any intention to or reserve the right to control
or influence the management or policies of the Company or engage in any of the
actions specified
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in Item 4 of such schedule (other than the disposition of the
Common Stock). Notwithstanding the foregoing, if the Board of Directors of the
Company determines in good faith that a Person who would otherwise be an
"Acquiring Person", as defined pursuant to the foregoing provisions of this
paragraph (a), has become such inadvertently, and such Person divests as
promptly as practicable a sufficient number of shares of Common Stock 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 an "Acquiring Person" for any purposes of this Agreement.
(b) "Act" shall mean the Securities Act of 1933, as amended.
(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, provided, however, that no director or officer of the Company
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shall be deemed an Affiliate or Associate of any other director or officer of
the Company solely as a result of his or her being a director or officer of the
Company.
(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
Associate s, directly or indirectly, has the right to acquire (whether such
right is exercisable immediately or only after the passage of time)
pursuant to any agreement, arrangement or understanding (whether or not in
writing) or upon the exercise of conversion rights, exchange rights,
rights, warrants or options, or otherwise; provided, however, that a Person
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shall not be deemed the "Beneficial Owner" of, or to "beneficially own,"
(A) securities tendered pursuant to a tender or exchange offer made by such
Person
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or any of such Person's Affiliates or Associates until such tendered
securities are accepted for purchase or exchange, (B) securities issuable
upon exercise of Rights at any time prior to the occurrence of a Triggering
Event (as hereinafter defined), or (C) securities issuable upon exercise of
Rights from and after the occurrence of a Triggering Event which Rights
were acquired by such Person or any of such Person's Affiliates or
Associates prior to the Distribution Date (as hereinafter defined) or
pursuant to Section 3(a) or Section 22 hereof (the "Original Rights") or
pursuant to Section 11(i) hereof in connection with an adjustment made with
respect to any Original Rights;
(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or dispose of or
has "beneficial ownership" of (as determined, except as otherwise provided
in Section 1(d)(i) above, pursuant to Rule 13d-3 of the General Rules and
Regulations under the Exchange Act), including pursuant to any agreement,
arrangement or understanding, whether or not in writing; provided, however,
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that a Person shall not be deemed the "Beneficial Owner" of, or to
"beneficially own," any security under this subparagraph (ii) as a result
of an agreement, arrangement or understanding to vote such security if such
agreement, arrangement or understanding: (A) arises solely from a
revocable proxy or consent given in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the applicable
provisions of the General Rules and Regulations under the Exchange Act, and
(B) is not reportable by such Person on Schedule 13D under the Exchange Act
(or any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by
any other Person (or any Affiliate or Associate thereof) with which such
Person (or any of
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such Person's Affiliates or Associates) has any agreement, arrangement or
understanding (whether or not in writing), for the purpose of acquiring,
holding, voting (except pursuant to a revocable proxy or consent as
described in the proviso to subparagraph (ii) of this paragraph (d)) or
disposing of any voting securities of the Company;
provided, however, that nothing in this paragraph (d) shall cause a Person
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engaged in business as an underwriter of securities to be the "Beneficial Owner"
of, or to "beneficially own," any securities acquired through such Person's
participation in good faith in a firm commitment underwriting until the
expiration of forty days after the date of such acquisition, and then only if
such securities continue to be owned by such Person at such expiration of forty
days, and provided further, however, that any stockholder of the Company, with
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Affiliate(s), Associate(s) or other Person(s) who may be deemed representatives
of it serving as director(s) of the Company, shall not be deemed to beneficially
own securities held by other Persons as a result of (i) persons affiliated or
otherwise associated with such stockholder serving as directors or taking any
action in connection therewith, (ii) discussing the status of its shares with
the Company or other stockholders of the Company similarly situated or (iii)
voting or acting in a manner similar to other stockholders similarly situated,
absent a specific finding by the Board of Directors of an express agreement
among such stockholders to act in concert with one another as stockholders so as
to cause, in the good faith judgment of the Board of Directors, each such
stockholder to be the Beneficial Owner of the shares held by the other
stockholder(s).
(e) "Business Day" shall mean any day other than a Saturday, Sunday or
a day on which banking institutions in the State of New York are authorized or
obligated by law or executive order to close.
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(f) "Close of Business" on any given date shall mean 5:00 P.M., New
York City time, on such date; provided, however, that if such date is not a
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Business Day, it shall mean 5:00 P.M., New York City time, on the next
succeeding Business Day.
(g) "Common Stock" shall mean the common stock, par value $.01 per
share, of the Company, except that "Common Stock" when used with reference to
any Person other than the Company shall mean the capital stock of such Person
with the greatest voting power, or the equity securities or other equity
interest having power to control or direct the management, of such Person.
(h) "Common Stock Equivalents" shall have the meaning set forth
in Section 11(a)(iii) hereof.
(i) "Current Market Price" shall have the meaning set forth in
Section 11(d)(i) hereof.
(j) "Current Value" shall have the meaning set forth in Section
11(a)(iii) hereof.
(k) "Distribution Date" shall have the meaning set forth in
Section 3(a) hereof.
(l) "Equivalent Preferred Stock" shall have the meaning set forth
in Section 11(b) hereof.
(m) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(n) "Exchange Ratio" shall have the meaning set forth in Section
24 hereof.
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(o) "Expiration Date" shall have the meaning set forth in Section
7(a) hereof.
(p) "Final Expiration Date" shall have the meaning set forth in
Section 7(a) hereof.
(q) "Person" shall mean any individual, firm, corporation,
partnership or other entity.
(r) "Preferred Stock" shall mean shares of Series B Junior
Participating Preferred Stock, par value $.001 per share, of the Company, and,
to the extent that there are not a sufficient number of shares of Series B
Junior Participating Preferred Stock authorized to permit the full exercise of
the Rights, any other series of preferred stock of the Company designated for
such purpose containing terms substantially similar to the terms of the Series B
Junior Participating Preferred Stock.
(s) "Principal Party" shall have the meaning set forth in Section
13(b) hereof.
(t) "Purchase Price" shall have the meaning set forth in Section
4(a) hereof.
(u) "Qualified Offer" shall have the meaning set forth in Section
11(a)(ii) hereof.
(v) "Record Date" shall have the meaning set forth in the WHEREAS
clause at the beginning of this Agreement.
(w) "Rights" shall have the meaning set forth in the WHEREAS
clause at the beginning of this Agreement.
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(x) "Rights Agent" shall have the meaning set forth in the
parties clause at the beginning of this Agreement.
(y) "Rights Certificate" shall have the meaning set forth in
Section 3(a) hereof.
(z) "Rights Dividend Declaration Date" shall have the meaning set
forth in the WHEREAS clause at the beginning of this Agreement.
(aa) "Section 11(a)(ii) Event" shall have the meaning set forth
in Section 11(a)(ii) hereof.
(bb) "Section 13 Event" shall have the meaning set forth in
Section 13(a) hereof.
(cc) "Spread" shall have the meaning set forth in Section
11(a)(iii) hereof.
(dd) "Stock Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed or amended pursuant to Section 13(d) under the
Exchange Act) by the Company or an Acquiring Person that an Acquiring Person has
become such other than pursuant to a Qualified Offer.
(ee) "Subsidiary" shall mean, with reference to any Person, any
corporation or other entity of which an amount of voting securities sufficient
to elect at least a majority of the directors of such corporation or persons
serving in a comparable management capacity of such other entity (or, if such
entity shall have no comparable management body, a majority of the voting
securities of such entity) is beneficially owned, directly or indirectly, by
such Person, or otherwise controlled by such Person.
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(ff) "Substitution Period" shall have the meaning set forth in
Section 11(a)(iii) hereof.
(gg) "Summary of Rights" shall have the meaning set forth in
Section 3(b) hereof.
(hh) "Trading Day" shall have the meaning set forth in Section
11(d)(i) hereof.
(ii) "Triggering Event" shall mean any Section 11(a)(ii) Event or
any Section 13 Event.
Section 2. Appointment of Rights Agent. The Company hereby appoints
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the Rights Agent to act as agent for the Company in accordance with the terms
and conditions hereof, and the Rights Agent hereby accepts such appointment.
The Company may from time to time appoint such co-rights agents as it may deem
necessary or desirable.
Section 3. Issuance of Rights Certificates.
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(a) Until the earlier of (i) the Close of Business on the tenth
day after the Stock Acquisition Date (or, if the tenth day after the Stock
Acquisition Date occurs before the Record Date, the Close of Business on the
Record Date), or (ii) the Close of Business on the tenth Business Day (or such
later date as the Board shall determine) after the date that a tender or
exchange offer by any Person is first published or sent or given within the
meaning of Rule 14d-2(a) of the General Rules and Regulations under the Exchange
Act, if upon consummation thereof, such Person would become an Acquiring Person,
in either instance other than pursuant to a Qualified Offer (the earlier of (i)
and (ii) being herein referred to as the "Distribution Date"), (x) the Rights
will be evidenced (subject to the provisions of paragraph (b) of this Section 3)
by the certificates for the Common Stock registered in the names of the holders
of the Common
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Stock (which certificates for Common Stock shall be deemed also to be
certificates for Rights) and not by separate certificates, and (y) the Rights
will be transferable only in connection with the transfer of the underlying
shares of Common Stock (including a transfer to the Company). As soon as
practicable after the Distribution Date, the Rights Agent will send by first-
class, insured, postage-prepaid mail, to each record holder of the Common Stock
as of the close of business on the Distribution Date, at the address of such
holder shown on the Common Stock records of the Company, one or more right
certificates, in substantially the form of Exhibit B hereto (the "Rights
Certificates"), evidencing one Right for each share of Common Stock so held,
subject to adjustment as provided herein. In the event that an adjustment in the
number of Rights per share of Common Stock has been made pursuant to Section 11
hereof, at the time of distribution of the Rights Certificates, the Company
shall make the necessary and appropriate rounding adjustments (in accordance
with Section 14(a) hereof) so that Rights Certificates representing only whole
numbers of Rights are distributed and cash is paid in lieu of any fractional
Rights. As of and after the Distribution Date, the Rights will be evidenced
solely by such Rights Certificates.
(b) The Company will make available, as promptly as practicable
following the Record Date, a copy of a Summary of Rights, in substantially the
form attached hereto as Exhibit C (the "Summary of Rights") to any holder of
Rights who may so request from time to time prior to the Expiration Date. With
respect to certificates for the Common Stock outstanding as of the Record Date,
until the Distribution Date, the Rights will be evidenced by such certificates
for the Common Stock and the registered holders of the Common Stock shall also
be the registered holders of the associated Rights. Until the earlier of the
Distribution Date or the Expiration Date, the transfer of any certificates
representing shares of Common Stock in
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respect of which Rights have been issued shall also constitute the transfer of
the Rights associated with such shares of Common Stock. The Company shall use
all reasonable efforts to insure that the provisions of this Section 3(b) are
complied with.
(c) Rights shall be issued in respect of all shares of Common Stock
which are issued (whether originally issued or from the Company's treasury)
after the Record Date but prior to the earlier of the Distribution Date or the
Expiration Date. Certificates representing such shares of Common Stock shall
also be deemed to be certificates for Rights, and shall bear the following
legend:
This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in the Rights Agreement dated as of January 19,
2000 (as amended from time to time) between Gateway, Inc. (the "Company")
and the Rights Agent thereunder (the "Rights Agreement"), the terms of
which are hereby incorporated herein by reference and a copy of which is on
file at the principal offices of the Company. However, under certain
circumstances, as set forth in the Rights Agreement, such Rights will
instead be evidenced by separate certificates and will no longer be
evidenced by this certificate. The Company will mail to the holder of this
certificate a copy of the Rights Agreement, as in effect on the date of
mailing, without charge, promptly after receipt of a written request
therefor. Under certain circumstances set forth in the Rights Agreement,
Rights issued to, or held by, any Person who is, was or becomes an
Acquiring Person or any Affiliate or Associate thereof (as such terms are
defined in the Rights Agreement), whether currently held by or on behalf of
such Person or by any subsequent holder, may become null and void.
In addition, if, after the Record Date but prior to the earlier of the
Distribution Date and the Expiration Date, new certificates representing shares
of Common Stock are issued in connection with the transfer, split-up,
combination or exchange of certificates representing shares of Common Stock or
if new certificates representing shares of Common Stock are issued to replace
any certificates that have been mutilated, destroyed, lost or stolen, then such
new certificates shall bear the foregoing legend. With respect to such
certificates containing the foregoing legend, until the earlier of (i) the
Distribution Date or (ii) the Expiration Date, the Rights
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<PAGE>
associated with the Common Stock represented by such certificates shall be
evidenced by such certificates alone and registered holders of Common Stock
shall also be the registered holders of the associated Rights, and the transfer
of any of such certificates shall also constitute the transfer of the Rights
associated with the Common Stock represented by such certificates.
Section 4. Form of Rights Certificates.
---------------------------
(a) The Rights Certificates (and the forms of election to
purchase and of assignment to be printed on the reverse thereof) shall each be
substantially in the form set forth in Exhibit B hereto and may have such marks
of identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange on which the Rights may from time to
time be listed, or to conform to usage. Subject to the provisions hereof, the
Rights Certificates, whenever distributed, shall be dated as of the Record Date
and on their face shall entitle the holders thereof to purchase such number of
one one-thousandths of a share of Preferred Stock as shall be set forth therein
at the price set forth therein (such exercise price per one one-thousandth of a
share, the "Purchase Price"), but the amount and type of securities purchasable
upon the exercise of each Right and the Purchase Price thereof shall be subject
to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(a),
Section 11(i) 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
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<PAGE>
becomes a transferee prior to or concurrently with the Acquiring person becoming
such and receives such Rights pursuant to either (A) a transfer (whether or not
for consideration) from the Acquiring Person to holders of equity interests in
such Acquiring Person or to any Person with whom such Acquiring Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which the Board of Directors of the Company has
determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect 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 be null and void as provided in Section 7(e) of the
Rights Agreement.
Section 5. Countersignature and Registration.
---------------------------------
(a) The Rights Certificates shall be executed on behalf of the
Company by its Chairman of the Board, its Chief Executive Officer, its President
or any Executive Vice President or Senior Vice President, either manually or by
facsimile signature, and shall have affixed thereto the Company's seal or a
facsimile thereof which shall be attested by the Secretary or an Assistant
Secretary of the Company, either manually or by facsimile signature. The Rights
Certificates shall be countersigned by the Rights Agent, either manually or by
facsimile signature, and shall not be valid for any purpose unless so
countersigned. In case any officer of the Company who shall have signed any of
the Rights Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Rights Certificates, nevertheless, may be countersigned by the
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<PAGE>
Rights Agent and issued and delivered by the Company with the same force and
effect as though the person who signed such Rights Certificates had not ceased
to be such officer of the Company; and any Rights Certificates 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 such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep, or
cause to be kept, at its principal office or offices designated as the
appropriate place for surrender of Rights Certificates upon exercise or
transfer, books for registration and transfer of the Rights Certificates issued
hereunder. Such books shall show the names and addresses of the respective
holders of the Rights Certificates, the number of Rights evidenced on its face
by each of the Rights Certificates and the date of each of the Rights
Certificates.
Section 6. Transfer, Split-Up, Combination and Exchange of Rights
------------------------------------------------------
Certificates; Mutilated, Destroyed, Lost . or Stolen Rights Certificates.
- ------------------------------------------------------------------------
(a) Subject to the provisions of Section 4(b), Section 7(e) and
Section 14 hereof, at any time after the Close of Business on the Distribution
Date, and at or prior to the Close of Business on the Expiration Date, any
Rights Certificate or Certificates (other than Rights Certificates representing
Rights that may have been exchanged pursuant to Section 24 hereof) may be
transferred, split up, combined or exchanged for another Rights Certificate or
Certificates, entitling the registered holder to purchase a like number of one
one-thousandths of a share of Preferred Stock (or, following a Triggering Event,
Common Stock, other securities, cash or other assets, as the case may be) as the
Rights Certificate or Certificates surrendered then entitles such holder (or
former holder in the case of a transfer) to purchase. Any registered
14
<PAGE>
holder desiring to transfer, split up, combine or exchange any Rights
Certificate or Certificates shall make such request in writing delivered to the
Rights Agent, and shall surrender the Rights Certificate or Certificates to be
transferred, split up, combined or exchanged at the principal office or offices
of the Rights Agent designated for such purpose. Neither the Rights Agent nor
the Company shall be obligated to take any action whatsoever with respect to the
transfer of any such surrendered Rights Certificate until the registered holder
shall have completed and signed the certificate contained in the form of
assignment on the reverse side of such Rights Certificate and shall have
provided such additional evidence of the identity of the Beneficial Owner (or
former Beneficial Owner) or Affiliates or Associates thereof as the Company
shall reasonably request. Thereupon the Rights Agent shall, subject to Section
4(b), Section 7(e), Section 14 hereof and Section 24 hereof, countersign and
deliver to the Person entitled thereto a Rights Certificate or Rights
Certificates, as the case may be, as so requested. The Company or the Rights
Agent may require payment of a sum sufficient to cover any tax or governmental
charge that may be imposed in connection with any transfer, split up,
combination or exchange of Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Rights Certificate, and, in case of loss, theft or destruction, of indemnity
or security reasonably satisfactory to them, and reimbursement to the Company
and the Rights Agent of all reasonable expenses incidental thereto, and upon
surrender to the Rights Agent and cancellation of the Rights Certificate if
mutilated, the Company will execute and deliver a new Rights Certificate of like
tenor to the Rights Agent for countersignature and delivery to the registered
owner in lieu of the Rights Certificate so lost, stolen, destroyed or mutilated.
15
<PAGE>
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.
-------------------------------------------------------------
(a) Subject to Section 7(e) hereof, at any time after the
Distribution Date the registered holder of any Rights Certificate may exercise
the Rights evidenced thereby (except as otherwise provided herein including,
without limitation, the restrictions on exercisability set forth in Section
9(c), Section 11(a)(iii) and Section 23(a) hereof) in whole or in part upon
surrender of the Rights Certificate, with the form of election to purchase and
the certificate on the reverse side thereof duly executed, to the Rights Agent
at the principal office or offices of the Rights Agent designated for such
purpose, together with payment of the aggregate Purchase Price with respect to
the total number of one one-thousandths of a share (or other securities, cash or
other assets, as the case may be) as to which such surrendered Rights are then
exercisable, at or prior to the earlier of (i) 5:00 P.M., New York City time, on
January 18, 2010, or such later date as may be established by the Board of
Directors prior to the expiration of the Rights (such date, as it may be
extended by the Board, the "Final Expiration Date"), or (ii) the time at which
the Rights are redeemed or exchanged as provided in Section 23 and Section 24
hereof (the earlier of (i) and (ii) being herein referred to as the "Expiration
Date").
(b) The Purchase Price for each one one-thousandth of a share of
Preferred Stock pursuant to the exercise of a Right shall initially be $350, and
shall be subject to adjustment from time to time as provided in Section 11 and
Section 13(a) hereof and shall be payable in accordance with paragraph (c)
below.
(c) Upon receipt of a Rights Certificate representing exercisable
Rights, with the form of election to purchase and the certificate duly executed,
accompanied by payment, with respect to each Right so exercised, of the Purchase
Price per one one-thousandth of a share of Preferred Stock (or other shares,
securities, cash or other assets, as the case may be)
16
<PAGE>
to be purchased as set forth below and an amount equal to any applicable
transfer tax, the Rights Agent shall, subject to Section 20(k) hereof, thereupon
promptly (i) (A) requisition from any transfer agent of the shares of Preferred
Stock (or make available, if the Rights Agent is the transfer agent for such
shares) certificates for the total number of one one-thousandths of a share of
Preferred Stock to be purchased and the Company hereby irrevocably authorizes
its transfer agent to comply with all such requests, or (B) if the Company shall
have elected to deposit the total number of shares of Preferred Stock issuable
upon exercise of the Rights hereunder with a depositary agent, requisition from
the depositary agent depositary receipts representing such number of one one-
thousandths of a share of Preferred Stock as are to be purchased (in which case
certificates for the shares of Preferred Stock represented by such receipts
shall be deposited by the transfer agent with the depositary agent) and the
Company will direct the depositary agent to comply with such request, (ii)
requisition from the Company the amount of cash, if any, to be paid in lieu of
fractional shares in accordance with Section 14 hereof, (iii) after receipt of
such certificates or depositary receipts, cause the same to be delivered to or,
upon the order of the registered holder of such Rights Certificate, registered
in such name or names as may be designated by such holder, and (iv) after
receipt thereof, deliver such cash, if any, to or upon the order of the
registered holder of such Rights Certificate. The payment of the Purchase Price
(as such amount may be reduced pursuant to Section 11(a)(iii) hereof) shall be
made in cash or by certified bank check or bank draft payable to the order of
the Company. In the event that the Company is obligated to issue other
securities (including Common Stock) of the Company, pay cash and/or distribute
other property pursuant to Section 11(a) hereof, the Company will make all
arrangements necessary so that such other securities, cash and/or other property
are available for distribution by the Rights Agent, if and when appropriate. The
Company reserves the right to
17
<PAGE>
require prior to the occurrence of a Triggering Event that, upon any exercise of
Rights, a number of Rights be exercised so that only whole shares of Preferred
Stock would be issued.
(d) In case the registered holder of any Rights Certificate shall
exercise less than all the Rights evidenced thereby, a new Rights Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent and delivered to, or upon the order of, the registered
holder of such Rights Certificate, registered in such name or names as may be
designated by such holder, subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary, from
and after the first occurrence of a Section 11(a)(ii) 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, 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
the Acquiring Person has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer which the Board of Directors
of the Company has determined is part of a plan, arrangement or understanding
which has as a primary purpose or effect the avoidance of this Section 7(e),
shall become null and void without any further action and no holder of such
Rights shall have any rights whatsoever with respect to such Rights, whether
under any provision of this Agreement or otherwise. The Company shall use all
reasonable efforts to insure that the provisions of this Section 7(e) and
Section 4(b) hereof are complied with, but shall have no liability to any holder
18
<PAGE>
of Rights Certificates or any other Person as a result of its failure to make
any determinations with respect to an Acquiring Person or its Affiliates,
Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a registered holder upon the occurrence of any purported
exercise as set forth in this Section 7 unless such registered holder shall have
(i) completed and signed the certificate contained in the form of election to
purchase set forth on the reverse side of the Rights Certificate surrendered for
such exercise, and (ii) provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Rights Certificates. All
---------------------------------------------------
Rights Certificates surrendered for the purpose of exercise, transfer, split-up,
combination or exchange shall, if surrendered to the Company or any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be canceled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall promptly deliver to
the Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any other Rights Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof, and the Company shall at no
time be entitled to exercise the Rights evidenced by any such Rights
Certificates. The Rights Agent shall destroy such canceled Rights Certificates
in accordance with applicable laws and regulations, and in such case shall
deliver a certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of Capital Stock.
---------------------------------------------
19
<PAGE>
(a) The Company covenants and agrees that it will cause to be reserved
and kept available out of its authorized and unissued shares of Preferred Stock
(and, following the occurrence of a Triggering Event, out of its authorized and
unissued shares of Common Stock and/or other securities or out of its authorized
and issued shares held in its treasury), the number of shares of Preferred Stock
(and, following the occurrence of a Triggering Event, Common Stock and/or other
securities) that, as provided in this Agreement including Section 11(a)(iii)
hereof, will be sufficient to permit the exercise in full of all outstanding
Rights.
(b) So long as the shares of Preferred Stock (and, following the
occurrence of a Triggering Event, Common Stock and/or other securities) issuable
and deliverable upon the exercise of the Rights are listed on any national
securities exchange, the Company shall use its reasonable best efforts to cause,
from and after such time as the Rights become exercisable, all shares reserved
for such issuance to be listed on such exchange upon official notice of issuance
upon such exercise.
(c) The Company shall use its reasonable best efforts to (i) file, as
soon as practicable following the earliest date after the first occurrence of a
Section 11(a)(ii) Event on which the consideration to be delivered by the
Company upon exercise of the Rights has been determined in accordance with
Section 11(a)(iii) hereof, a registration statement under the Act, with respect
to the securities purchasable upon exercise of the Rights on an appropriate
form, (ii) cause such registration statement to become effective as soon as
practicable after such filing, and (iii) cause such registration statement to
remain effective (with a prospectus at all times meeting the requirements of the
Act) until the earlier of (A) the date as of which the Rights are no longer
exercisable for such securities, and (B) the date of the expiration of the
Rights. The Company will also take such action as may be appropriate under, or
to ensure compliance with,
20
<PAGE>
the securities or "blue sky" laws of the various states in connection with the
exercisability of the Rights. The Company may temporarily suspend, for a period
of time not to exceed 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 that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement at such time as the suspension has
been rescinded. In addition, if the Company shall determine that a registration
statement is required following the Distribution Date, the Company may
temporarily suspend the exercisability of the Rights until such time as a
registration statement has been declared effective. Notwithstanding any
provision of this Agreement to the contrary, the Rights shall not be exercisable
in any jurisdiction if the requisite qualification in such jurisdiction shall
not have been obtained, the exercise thereof shall not be permitted under
applicable law, or a registration statement shall not have been declared
effective, except to the extent that any such lack of qualification or
ineffectiveness shall be part of a plan or arrangement of any Acquiring Person
which has as a primary purpose or effect the avoidance of Section 11.
(d) The Company covenants and agrees that it will take all such action
as may be reasonably necessary to ensure that all one one-thousandths of a share
of Preferred Stock (and, following the occurrence of a Triggering Event, Common
Stock and/or other securities) delivered upon exercise of Rights shall, at the
time of delivery of the certificates for such shares (subject to payment of the
Purchase Price), be duly and validly authorized and issued and fully paid and
nonassessable.
21
<PAGE>
(e) The Company further covenants and agrees that it will pay when due
and payable any and all federal and state transfer taxes and charges which may
be payable in respect of the issuance or delivery of the Rights Certificates and
of any certificates for a number of one one-thousandths of a share of Preferred
Stock (or Common Stock and/or other securities, as the case may be) upon the
exercise of Rights. The Company shall not, however, be required to pay any
transfer tax which may be payable in respect of any transfer or delivery of
Rights Certificates to a Person other than, or the issuance or delivery of a
number of one one-thousandths of a share of Preferred Stock (or Common Stock
and/or other securities, as the case may be) in respect of a name other than
that of, the registered holder of the Rights Certificates evidencing Rights
surrendered for exercise or to issue or deliver any certificates for a number of
one one-thousandths of a share of Preferred Stock (or Common Stock and/or other
securities, as the case may be) in a name other than that of the registered
holder upon the exercise of any Rights until such tax shall have been paid (any
such tax being payable by the holder of such Rights Certificate at the time of
surrender) or until it has been established to the Company's satisfaction that
no such tax is due.
(f) The Company agrees to provide to the Rights Agent, immediately
following the later to occur of an event described in Section 11(a)(i)(B) or
Section 13 hereof or the Distribution Date, an opinion of counsel reasonably
acceptable to the Rights Agent that the Common Stock underlying the Rights have
been or are being registered or qualified under the Securities Act and all
securities or "blue sky" laws of the various states, as applicable, or in the
alternative, the Rights are not subject to registration or qualification under
the Securities Act and/or any securities or "blue sky" laws of the various
states.
22
<PAGE>
Section 10. Preferred Stock Record Date. Each person in whose name
---------------------------
any certificate for a number of one one-thousandths of a share of Preferred
Stock (or Common Stock and/or other securities, as the case may be) is issued
upon the exercise of Rights shall for all purposes be deemed to have become the
holder of record of such fractional shares of Preferred Stock (or Common Stock
and/or other securities, as the case may be) represented thereby on, and such
certificate shall be dated, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and all applicable transfer taxes) was made; provided, however, that if the
-------- -------
date of such surrender and payment is a date upon which the Preferred Stock (or
Common Stock and/or other securities, as the case may be) transfer books of the
Company are closed, such Person shall be deemed to have become the record holder
of such shares (fractional or otherwise) on, and such certificate shall be
dated, the next succeeding Business Day on which the Preferred Stock (or Common
Stock and/or other securities, as the case may be) transfer books of the Company
are open. Prior to the exercise of the Rights evidenced thereby, the holder of
a Rights Certificate shall not be entitled to any rights of a stockholder of the
Company with respect to shares for which the Rights shall be exercisable,
including, without limitation, the right to vote, to receive dividends or other
distributions or to exercise any preemptive rights, and shall not be entitled to
receive any notice of any proceedings of the Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind of Shares
-------------------------------------------------------
or Number of Rights. The Purchase Price, the number and kind of shares covered
- -------------------
by each Right and the number of Rights outstanding are subject to adjustment
from time to time as provided in this Section 11.
23
<PAGE>
(a)(i) In the event the Company shall at any time after the date
of this Agreement (A) declare a dividend on the Preferred Stock payable in
shares of Preferred Stock, (B) subdivide the outstanding Preferred Stock,
(C) combine the outstanding Preferred Stock into a smaller number of
shares, or (D) issue any shares of its capital stock in a reclassification
of the Preferred Stock (including any such reclassification in connection
with a consolidation or merger in which the Company is the continuing or
surviving corporation), except as otherwise provided in this Section 11(a)
and Section 7(e) hereof, the Purchase Price in effect at the time of the
record date for such dividend or of the effective date of such subdivision,
combination or reclassification, and the number and kind of shares of
Preferred Stock or capital stock, as the case may be, issuable on such
date, shall be proportionately adjusted so that the holder of any Right
exercised after such time shall be entitled to receive, upon payment of the
Purchase Price then in effect, the aggregate number and kind of shares of
Preferred Stock or capital stock, as the case may be, which, if such Right
had been exercised immediately prior to such date and at a time when the
Preferred Stock transfer books of the Company were open, such holder would
have owned upon such exercise and been entitled to receive by virtue of
such dividend, subdivision, combination or reclassification. If an event
occurs which would require an adjustment under both this Section 11(a)(i)
and Section 11(a)(ii) hereof, the adjustment provided for in this Section
11(a)(i) shall be in addition to, and shall be made prior to, any
adjustment required pursuant to Section 11(a)(ii) hereof.
(ii) Subject to Section 24 of this Agreement, in the event any
Person shall, at any time after the Rights Dividend Declaration Date,
become an
24
<PAGE>
Acquiring Person, unless the event causing such Person to become an
Acquiring Person is (I) a transaction set forth in Section 13(a) hereof, or
(II) an acquisition of shares of Common Stock pursuant to a tender offer or
an exchange offer for all outstanding shares of Common Stock at a price and
on terms determined prior to consummation of such tender offer or exchange
offer by at least a majority of the members of the Board of Directors who
are not officers of the Company and who are not representatives, nominees,
Affiliates or Associates of an Acquiring Person or Person making the tender
offer or exchange offer, after receiving advice from one or more investment
banking firms, to be (a) at a price which is fair to stockholders and not
inadequate (taking into account all factors which such members of the Board
deem relevant, including, without limitation, prices which could reasonably
be achieved if the Company or its assets were sold on an orderly basis
designed to realize maximum value) and (b) otherwise in the best interests
of the Company and its stockholders (a "Qualified Offer") then, promptly
following the occurrence of such event (a "Section 11(a)(ii) Event"),
proper provision shall be made so that each holder of a Right (except as
provided below and in Section 7(e) hereof) shall thereafter have the right
to receive, upon exercise thereof at the then current Purchase Price
multiplied by the number of one one-thousandths of a share of Preferred
Stock for which a Right was exercisable immediately prior to the first
occurrence of a Section 11(a)(ii) Event, in accordance with the terms of
this Agreement, in lieu of a number of one one-thousandths of a share of
Preferred Stock, such number of shares of Common Stock of the Company as
shall equal the result obtained by (x) multiplying the then current
Purchase Price by the then number of one one-thousandths of a share of
Preferred Stock for which a Right was exercisable immediately prior to the
first
25
<PAGE>
occurrence of a Section 11(a)(ii) Event, and (y) dividing that product
(which, following such first occurrence, shall thereafter be referred to as
the "Purchase Price" for each Right and for all purposes of this Agreement)
by 50% of the Current Market Price (determined pursuant to Section 11(d)
hereof) per share of Common Stock on the date of such first occurrence
(such number of shares, the "Adjustment Shares").
(iii) In the event that the number of shares of Common Stock
which are authorized by the Company's Restated Certificate of
Incorporation, but which are not outstanding or reserved for issuance for
purposes other than upon exercise of the Rights, are not sufficient to
permit the exercise in full of the Rights in accordance with the foregoing
subparagraph (ii) of this Section 11(a), the Company shall (A) determine
the value of the Adjustment Shares issuable upon the exercise of a Right
(the "Current Value"), and (B) with respect to each Right (subject to
Section 7(e) hereof), make adequate provision to substitute for the
Adjustment Shares, upon the exercise of a Right and payment of the
applicable Purchase Price, (1) cash, (2) a reduction in the amount payable
upon exercise of the Right, (3) Common Stock or other equity securities of
the Company (including, without limitation, shares, or units of shares, of
preferred stock, such as the Preferred Stock, which the Board has deemed to
have essentially the same value or economic rights as shares of Common
Stock (such shares of preferred stock being referred to as "Common Stock
Equivalents")), (4) debt securities of the Company, (5) other assets, or
(6) any combination of the foregoing, having an aggregate value equal to
the Current Value, where such aggregate value has been determined by the
Board based upon the advice of a nationally recognized investment banking
firm selected by the
26
<PAGE>
Board; provided, however, that if the Company shall not have made adequate
-------- -------
provision to deliver value pursuant to clause (B) above within thirty (30)
days following the later of (x) the first occurrence of a Section 11(a)(ii)
Event and (y) the date on which the Company's right of redemption pursuant
to Section 23(a) expires (the later of (x) and (y) being referred to herein
as the "Section 11(a)(ii) Trigger Date"), then the Company shall be
obligated to deliver, upon the surrender for exercise of a Right and
without requiring payment of the Purchase Price, shares of Common Stock (to
the extent available) and then, if necessary, cash, which shares and/or
cash have an aggregate value equal to the Spread. For purposes of the
preceding sentence, the term "Spread" shall mean the excess of (i) the
Current Value over (ii) the Purchase Price. If the Board determines in good
faith that it is likely that sufficient additional shares of Common Stock
could be authorized for issuance upon exercise in full of the Rights, the
thirty (30) day period set forth above may be extended to the extent
necessary, but not more than ninety (90) days after the Section 11(a)(ii)
Trigger Date, in order that the Company may seek stockholder approval for
the authorization of such additional shares (such thirty (30) day period,
as it may be extended, is herein called the "Substitution Period"). To the
extent that action is to be taken pursuant to the first and/or third
sentences of this Section 11(a)(iii), the Company (1) shall provide,
subject to Section 7(e) hereof, that such action shall apply uniformly to
all outstanding Rights, and (2) may suspend the exercisability of the
Rights until the expiration of the Substitution Period in order to seek
such stockholder approval for such authorization of additional shares
and/or to decide the appropriate form of distribution to be made pursuant
to such first sentence and to determine the value thereof. In the event of
any such suspension, the Company shall issue a public announcement
27
<PAGE>
stating that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement at such time as the suspension
is no longer in effect. For purposes of this Section 11(a)(iii), the value
of each Adjustment Share shall be the Current Market Price per share of the
Common Stock on the Section 11(a)(ii) Trigger Date and the per share or per
unit value of any Common Stock Equivalent shall be deemed to equal the
Current Market Price per share of the Common Stock on such date.
(b) In case the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Preferred Stock entitling them to
subscribe for or purchase (for a period expiring within forty-five (45)
calendar days after such record date) Preferred Stock (or shares having the same
rights, privileges and preferences as the shares of Preferred Stock ("Equivalent
Preferred Stock")) or securities convertible into Preferred Stock or Equivalent
Preferred Stock at a price per share of Preferred Stock or per share of
Equivalent Preferred Stock (or having a conversion price per share, if a
security convertible into Preferred Stock or Equivalent Preferred Stock) less
than the Current Market Price (as determined pursuant to Section 11(d) hereof)
per share of Preferred Stock on such record date, the Purchase Price to be in
effect after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the number of shares of Preferred Stock outstanding
on such record date, plus the number of shares of Preferred Stock which the
aggregate offering price of the total number of shares of Preferred Stock and/or
Equivalent Preferred Stock so to be offered (and/or the aggregate initial
conversion price of the convertible securities so to be offered) would purchase
at such Current Market Price, and the denominator of which shall be the number
of shares of Preferred Stock outstanding on such record date, plus the number of
additional shares of Preferred Stock and/or Equivalent
28
<PAGE>
Preferred Stock to be offered for subscription or purchase (or into which the
convertible securities so to be offered are initially convertible). In case such
subscription price may be paid by delivery of consideration, part or all of
which may be in a form other than cash, the value of such consideration shall be
as determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent and
shall be binding on the Rights Agent and the holders of the Rights. Shares of
Preferred Stock owned by or held for the account of the Company shall not be
deemed outstanding for the purpose of any such computation. Such adjustment
shall be made successively whenever such a record date is fixed, and in the
event that such rights or warrants are not so issued, the Purchase Price shall
be adjusted to be the Purchase Price which would then be in effect if such
record date had not been fixed.
(c) In case the Company shall fix a record date for a distribution to
all holders of Preferred Stock (including any such distribution made in
connection with a consolidation or merger in which the Company is the continuing
corporation) of evidences of indebtedness, cash (other than a regular quarterly
cash dividend out of the earnings or retained earnings of the Company) or assets
(other than a dividend payable in Preferred Stock, but including any dividend
payable in stock other than Preferred Stock), or of subscription rights or
warrants (excluding those referred to in Section 11(b) hereof), the Purchase
Price to be in effect after such record date shall be determined by multiplying
the Purchase Price in effect immediately prior to such record date by a
fraction, the numerator of which shall be the Current Market Price (as
determined pursuant to Section 11(d) hereof) per share of Preferred Stock on
such record date, less the fair market value (as determined in good faith by the
Board of Directors of the Company, whose determination shall be described in a
statement filed with the
29
<PAGE>
Rights Agent) of the portion of the cash, assets or evidences of indebtedness so
to be distributed or of such subscription rights or warrants applicable to a
share of Preferred Stock, and the denominator of which shall be such Current
Market Price (as determined pursuant to Section 11(d) hereof) per share of
Preferred Stock. Such adjustments shall be made successively whenever such a
record date is fixed, and in the event that such distribution is not so made,
the Purchase Price shall be adjusted to be the Purchase Price which would have
been in effect if such record date had not been fixed.
(d)(i) For the purpose of any computation hereunder, other than
computations made pursuant to Section 11(a)(iii) hereof, the "Current
Market Price" per share of Common Stock on any date shall be deemed to be
the average of the daily closing prices per share of such Common Stock for
the 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 Market Price per share of Common Stock on any date
shall be deemed to be the average of the daily closing prices per share of
such Common Stock for the ten (10) consecutive Trading Days immediately
following such date; provided, however, that in the event that the Current
-------- -------
Market Price per share of the Common Stock is determined during a period
following the announcement by the issuer of such Common Stock of (A) a
dividend or distribution on such Common Stock payable in shares of such
Common Stock or securities convertible into shares of such Common Stock
(other than the Rights), or (B) any subdivision, combination or
reclassification of such Common Stock, and the ex-dividend date for such
dividend or distribution, or the record date for such subdivision,
combination or reclassification shall not have occurred
30
<PAGE>
prior to the commencement of the requisite thirty (30) Trading Day or ten
(10) Trading Day period, as set forth above, then, and in each such case,
the Current Market Price shall be properly adjusted to take into account
ex-dividend trading. The closing price for each day shall be the last sale
price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange or, if the shares of Common Stock are not then 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 shares of Common
Stock are listed or admitted to trading or, if the shares of Common Stock
are not then listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the
high bid and low asked prices in the over-the-counter market, as reported
by the National Association of Securities Dealers Automated Quotation
System ("NASDAQ") or such other system then in use, or, if on any such date
the shares of Common Stock are not then quoted by any such organization,
the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Common Stock selected by
the Board. If on any such date no market maker is making a market in the
Common Stock, the fair value of such shares on such date as determined in
good faith by the Board shall be used. The term "Trading Day" shall mean a
day on which the principal national securities exchange on which the shares
of Common Stock are listed or admitted to trading is open for the
transaction of business or, if the shares of Common Stock are not listed or
admitted to trading on any
31
<PAGE>
national securities exchange, a Business Day. If the Common Stock is not
publicly held or not so listed or traded, Current Market Price per share
shall mean the fair value per share as determined in good faith by the
Board, whose determination shall be described in a statement filed with the
Rights Agent and shall be conclusive for all purposes.
(ii) For the purpose of any computation hereunder, the Current
Market Price per share of Preferred Stock shall be determined in the same
manner as set forth above for the Common Stock in clause (i) of this
Section 11(d) (other than the last sentence thereof). If the Current
Market Price per share of Preferred Stock cannot be determined in the
manner provided above or if the Preferred Stock is not publicly held or
listed or traded in a manner described in clause (i) of this Section 11(d),
the Current Market Price per share of Preferred Stock shall be conclusively
deemed to be an amount equal to 1000 (as such number may be appropriately
adjusted for such events as stock splits, stock dividends and
recapitalizations with respect to the Common Stock occurring after the date
of this Agreement) multiplied by the Current Market Price per share of the
Common Stock. If neither the Common Stock nor the Preferred Stock is
publicly held or so listed or traded, Current Market Price per share of the
Preferred Stock shall mean the fair value per share as determined in good
faith by the Board, whose determination shall be described in a statement
filed with the Rights Agent and shall be conclusive for all purposes. For
all purposes of this Agreement, the Current Market Price of a Unit of
1/1000 of a share of Preferred Stock shall be equal to the Current Market
Price of one share of Preferred Stock divided by 1000.
(e) Anything herein to the contrary notwithstanding, no adjustment in
the Purchase Price shall be required unless such adjustment would require an
increase or
32
<PAGE>
decrease of at least one percent (1%) in the Purchase Price; provided, however,
-------- -------
that any adjustments which by reason of this Section 11(e) are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 11 shall be made to the nearest
cent or to the nearest ten-thousandth of a share of Common Stock or other share
or ten-millionth of a share of Preferred Stock, as the case may be.
Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than the earlier of (i) three
(3) years from the date of the transaction which mandates such adjustment, or
(ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section 11(a)(ii)
or Section 13(a) hereof, the holder of any Right thereafter exercised shall
become entitled to receive any shares of capital stock other than Preferred
Stock, thereafter the number of such other shares so receivable upon exercise of
any Right and the Purchase Price thereof shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Preferred Stock contained in Sections 11(a), (b),
(c), (e), (g), (h), (i), (j), (k) and (m), and the provisions of Sections 7, 9,
10, 13 and 14 hereof with respect to the Preferred Stock shall apply on like
terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-thousandths of a
share of Preferred Stock purchasable from time to time hereunder upon exercise
of the Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided
in Section 11(i), upon each adjustment of the Purchase Price as a result of the
calculations made
33
<PAGE>
in Sections 11(b) and (c), each Right outstanding immediately prior to the
making of such adjustment shall thereafter evidence the right to purchase, at
the adjusted Purchase Price, that number of one one-thousandths of a share of
Preferred Stock (calculated to the nearest ten-millionth) obtained by (i)
multiplying (x) the number of one one-thousandths of a share covered by a Right
immediately prior to this adjustment, by (y) the Purchase Price in effect
immediately prior to such adjustment of the Purchase Price, and (ii) dividing
the product so obtained by the Purchase Price in effect immediately after such
adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment of
the Purchase Price to adjust the number of Rights, in lieu of any adjustment in
the number of one one-thousandths of a share of Preferred Stock purchasable upon
the exercise of a Right. Each of the Rights outstanding after the adjustment in
the number of Rights shall be exercisable for the number of one one-thousandths
of a share of Preferred Stock for which a Right was exercisable immediately
prior to such adjustment. Each Right held of record prior to such adjustment of
the number of Rights shall become that number of Rights (calculated to the
nearest one-hundred-thousandth) obtained by dividing the Purchase Price in
effect immediately prior to adjustment of the Purchase Price by the Purchase
Price in effect immediately after adjustment of the Purchase Price. The Company
shall make a public announcement of its election to adjust the number of Rights,
indicating the record date for the adjustment, and, if known at the time, the
amount of the adjustment to be made. This record date may be the date on which
the Purchase Price is adjusted or any day thereafter, but, if the Rights
Certificates have been issued, shall be at least ten (10) days later than the
date of the public announcement. If Rights Certificates have been issued, upon
each adjustment of the number of Rights pursuant to this Section 11(i), the
Company shall, as promptly as practicable, cause to be distributed to holders of
record of Rights Certificates on
34
<PAGE>
such record date Rights Certificates evidencing, subject to Section 14 hereof,
the additional Rights to which such holders shall be entitled as a result of
such adjustment, or, at the option of the Company, shall cause to be distributed
to such holders of record in substitution and replacement for the Rights
Certificates held by such holders prior to the date of adjustment, and upon
surrender thereof, if required by the Company, new Rights Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment. Rights Certificates so to be distributed shall be issued, executed
and countersigned in the manner provided for herein (and may bear, at the option
of the Company, the adjusted Purchase Price) and shall be registered in the
names of the holders of record of Rights Certificates on the record date
specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or
the number of one one-thousandths of a share of Preferred Stock issuable upon
the exercise of the Rights, the Rights Certificates theretofore and thereafter
issued may continue to express the Purchase Price per one one-thousandth of a
share and the number of one one-thousandths of a share which were expressed in
the initial Rights Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below the then stated value, if any, of the number of one
one-thousandths of a share of Preferred Stock issuable upon exercise of the
Rights, the Company shall take any corporate action which may, in the opinion of
its counsel, be necessary in order that the Company may validly and legally
issue fully paid and nonassessable such number of one one-thousandths of a share
of Preferred Stock at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the
35
<PAGE>
Company may elect to defer until the occurrence of such event the issuance to
the holder of any Right exercised after such record date of the number of one
one-thousandths of a share of Preferred Stock and other capital stock or
securities of the Company, if any, issuable upon such exercise over and above
the number of one one-thousandths of a share of Preferred Stock and other
capital stock or securities of the Company, if any, issuable upon such exercise
on the basis of the Purchase Price in effect prior to such adjustment;
provided, however, that the Company shall deliver to such holder a due bill or
- -------- -------
other appropriate instrument evidencing such holder's right to receive such
additional shares (fractional or otherwise) or securities upon the occurrence of
the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that in their good faith judgment the Board of Directors of the
Company shall determine to be advisable in order that any (i) consolidation or
subdivision of the Preferred Stock, (ii) issuance wholly for cash of any shares
of Preferred Stock at less than the Current Market Price, (iii) issuance wholly
for cash of shares of Preferred Stock or securities which by their terms are
convertible into or exchangeable for shares of Preferred Stock, (iv) stock
dividends or (v) issuance of rights, options or warrants referred to in this
Section 11, hereafter made by the Company to holders of its Preferred Stock
shall not be taxable to such stockholders.
(n) The Company covenants and agrees that it shall not, at any time
after the Distribution Date, (i) consolidate with any other Person (other than a
Subsidiary of the Company in a transaction which complies with Section 11(o)
hereof), (ii) merge with or into any other Person (other than a Subsidiary of
the Company in a transaction which complies with
36
<PAGE>
Section 11(o) hereof), or (iii) sell or transfer (or permit any Subsidiary to
sell or transfer), in one transaction, or a series of related transactions,
assets, cash flow or earning power aggregating more than 50% of the assets, cash
flow or earning power of the Company and its Subsidiaries (taken as a whole) to
any other Person or Persons (other than the Company and/or any of its
Subsidiaries in one or more transactions each of which complies with Section
11(o) hereof), if (x) at the time of or immediately after such consolidation,
merger or sale there are any rights, warrants or other instruments or securities
outstanding or agreements in effect which would substantially diminish or
otherwise eliminate the benefits intended to be afforded by the Rights or (y)
prior to, simultaneously with or immediately after such consolidation, merger or
sale, the shareholders of or other holders of an equity or other beneficial
ownership interest in the Person who constitutes, or would constitute, the
"Principal Party" for purposes of Section 13(a) hereof shall have received a
distribution of Rights previously owned by such Person or any of its Affiliates
and Associates.
(o) The Company covenants and agrees that, after the Distribution
Date, it will not, except as permitted by Section 23 or Section 27 hereof, take
(or permit any Subsidiary to take) any action if at the time such action is
taken it is reasonably foreseeable that such action will diminish substantially
or otherwise eliminate the benefits intended to be afforded by the Rights.
(p) Anything in this Agreement to the contrary notwithstanding, in the
event that the Company shall at any time after the Rights Dividend Declaration
Date and prior to the Distribution Date (i) declare a dividend on the
outstanding shares of Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding shares of Common Stock, or (iii) combine the
outstanding shares of Common Stock into a smaller number of shares, the number
37
<PAGE>
of Rights associated with each share of Common Stock then outstanding, or issued
or delivered thereafter but prior to the Distribution Date, shall be
proportionately adjusted so that the number of Rights thereafter associated with
each share of Common Stock following any such event shall equal the result
obtained by multiplying the number of Rights associated with each share of
Common Stock immediately prior to such event by a fraction the numerator which
shall be the total number of shares of Common Stock outstanding immediately
prior to the occurrence of the event and the denominator of which shall be the
total number of shares of Common Stock outstanding immediately following the
occurrence of such event.
Section 12. Certificate of Adjusted Purchase Price or Number of
---------------------------------------------------
Shares. Whenever an adjustment is made as provided in Section 11 and Section 13
- ------
hereof, the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent, and with each transfer agent for the
Preferred Stock and the Common Stock, a copy of such certificate and (c) if a
Distribution Date has occurred, mail a brief summary thereof to each holder of a
Rights Certificate in accordance with Section 27 hereof. The Rights Agent shall
be fully protected in relying on any such certificate and on any adjustment
therein contained and shall not be deemed to have knowledge of any such
adjustment unless and until it shall have received such certification nor shall
it be obligated or responsible for calculating any such adjustment..
Section 13. Consolidation, Merger or Sale or Transfer of Assets, Cash
---------------------------------------------------------
Flow or Earning Power.
- ---------------------
(a) In the event that, following the Stock Acquisition Date, directly
or indirectly, (x) the Company shall consolidate with, or merge with and into,
any other Person
38
<PAGE>
(other than a Subsidiary of the Company in a transaction which complies with
Section 11(o) hereof), and the Company shall not be the continuing or surviving
corporation of such consolidation or merger, (y) any Person (other than a
Subsidiary of the Company in a transaction which complies with Section 11(o)
hereof) shall consolidate with, or merge with or into, the Company, and the
Company shall be the continuing or surviving corporation of such consolidation
or merger and, in connection with such consolidation or merger, all or part of
the outstanding shares of Common Stock shall be changed into or exchanged for
stock or other securities of any other Person or cash or any other property, or
(z) the Company shall sell or otherwise transfer (or one or more of its
Subsidiaries shall sell or otherwise transfer), in one transaction or a series
of related transactions, assets, cash flow or earning power aggregating more
than 50% of the assets, cash flow or earning power of the Company and its
Subsidiaries (taken as a whole) to any Person or Persons (other than the Company
or any Subsidiary of the Company in one or more transactions each of which
complies with Section 11(o) hereof) (each of (x), (y) and (z), a "Section 13
Event"), then, and in each such case (except as may be contemplated by Section
13(d) hereof), proper provision shall be made so that: (i) each holder of a
Right, except as provided in Section 7(e) hereof, shall thereafter have the
right to receive, upon the exercise thereof at the then current Purchase Price
multiplied by the number of one one-thousandths of a share of Preferred Stock
for which a Right was exercisable immediately prior to the first occurrence of a
Section 13 Event (or , if a Section 11(a)(ii) Event has occurred prior to the
first occurrence of a Section 13 Event, multiplying the number of such one one-
thousandths of a share for which a Right was exercisable immediately prior to
the first occurrence of a Section 11(a)(ii) Event by the Purchase Price in
effect immediately prior to such occurrence), in accordance with the terms of
this Agreement, such number of validly authorized and issued, fully
39
<PAGE>
paid, non-assessable and freely tradeable shares of Common Stock of the
Principal Party (as such term is hereinafter defined), not subject to any liens,
encumbrances, rights of first refusal or other adverse claims, as shall be equal
to the result obtained by (1) multiplying the then current Purchase Price by the
number of one one-thousandths of a share of Preferred Stock for which a Right
was exercisable immediately prior to the first occurrence of a Section 13 Event
(or, if a Section 11(a)(ii) Event has occurred prior to the first occurrence of
a Section 13 Event, multiplying the number of such one one-thousandths of a
share for which a Right was exercisable immediately prior to the first
occurrence of a Section 11(a)(ii) Event by the Purchase Price in effect
immediately prior to such first occurrence), and dividing that product (which,
following the first occurrence of a Section 13 Event, shall be referred to as
the "Purchase Price" for each Right and for all purposes of this Agreement) by
(2) 50% of the Current Market Price (determined pursuant to Section 11(d)(i)
hereof) per share of the Common Stock of such Principal Party on the date of
consummation of such Section 13 Event; (ii) 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; (iii)
the term "Company" shall thereafter be deemed to refer to such Principal Party,
it being specifically intended that the provisions of Section 11 hereof shall
apply only to such Principal Party following the first occurrence of a Section
13 Event; (iv) such Principal Party shall take such steps (including, but not
limited to, the reservation of a sufficient number of shares of its Common
Stock) in connection with the consummation of any such transaction as may be
necessary to assure that the provisions hereof shall thereafter be applicable,
as nearly as reasonably may be, in relation to its shares of Common Stock
thereafter deliverable upon the exercise of the Rights; and (v) the
40
<PAGE>
provisions of Section 11(a)(ii) hereof shall be of no effect following the first
occurrence of any Section 13 Event.
(b) "Principal Party" shall mean:
(i) in the case of any transaction described in clause (x) or
(y) of the first sentence of Section 13(a), the Person that is the issuer
of any securities into which shares of Common Stock of the Company are
converted in such merger or consolidation, and if no securities are so
issued, the Person that is the other party to such merger or consolidation;
and
(ii) in the case of any transaction described in clause (z) of
the first sentence of Section 13(a), the Person that is the party receiving
the greatest portion of the assets, cash flow or earning power transferred
pursuant to such transaction or transactions;
provided, however, that in any such case, (1) if the Common Stock of such Person
- -------- -------
is not at such time and has not been continuously over the preceding twelve (12)
month period registered under Section 12 of the Exchange Act, and such Person is
a direct or indirect Subsidiary of another Person the Common Stock of which is
and has been so registered, "Principal Party" shall refer to such other Person;
and (2) in case such Person is a Subsidiary, directly or indirectly, of more
than one Person, the Common Stocks of two or more of which are and have been so
registered, "Principal Party" shall refer to whichever of such Persons is the
issuer of the Common Stock having the greatest aggregate market value.
(c) The Company shall not consummate any such consolidation, merger,
sale or transfer unless the Principal Party shall have a sufficient number of
authorized shares of its Common Stock which have not been issued or reserved for
issuance to permit the
41
<PAGE>
exercise in full of the Rights in accordance with this Section 13 and unless
prior thereto the Company and such Principal Party shall have executed and
delivered to the Rights Agent a supplemental agreement providing for the terms
set forth in paragraphs (a) and (b) of this Section 13 and further providing
that, as soon as practicable after the date of any consolidation, merger or sale
of assets mentioned in paragraph (a) of this Section 13, the Principal Party
will
(i) prepare and file a registration statement under the Act,
with respect to the Rights and the securities purchasable upon exercise of
the Rights on an appropriate form, and will use its best efforts to cause
such registration statement to (A) become effective as soon as practicable
after such filing and (B) remain effective (with a prospectus at all times
meeting the requirements of the Act) until the Expiration Date; and
(ii) take all such other action as may be necessary to enable
the Principal Party to issue the securities purchasable upon exercise of
the Rights, including but not limited to the registration or qualification
of such securities under all requisite securities laws of jurisdictions of
the various states and the listing of such securities on such exchanges and
trading markets as may be necessary or appropriate; and
(iii) will deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates which comply
in all respects with the requirements for registration on Form 10 under the
Exchange Act.
The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. In the event that a Section 13
Event shall occur at any time after the
42
<PAGE>
occurrence of a Section 11(a)(ii) Event, the Rights which have not theretofore
been exercised shall thereafter become exercisable in the manner described in
Section 13(a).
(d) Notwithstanding anything in this Agreement to the contrary, a
Section 13 Event shall not include a transaction described in subparagraphs (x)
and (y) of Section 13(a) if (i) such transaction is consummated with a Person or
Persons who acquired shares of Common Stock pursuant to a tender offer or
exchange offer for all outstanding shares of Common Stock which is a Qualified
Offer (or a wholly owned subsidiary of any such Person or Persons), (ii) the
price per share of Common Stock offered in such transaction is not less than the
price per share of Common Stock paid to all holders of shares of Common Stock
whose shares were purchased pursuant to such tender offer or exchange offer and
(iii) the form of consideration being offered to the remaining holders of shares
of Common Stock pursuant to such transaction is the same as the form of
consideration paid pursuant to such tender offer or exchange offer. Upon
consummation of any such transaction contemplated by this Section 13(d), all
Rights hereunder shall expire.
Section 14. Fractional Rights and Fractional Shares.
---------------------------------------
(a) Except as otherwise provided in Section 11(p) hereof, 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, the Company shall pay to the registered holders of the Rights
Certificates with regard to which such fractional Rights would otherwise be
issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right. For purposes of this Section 14(a), the current market
value of a whole Right shall be the closing price of the Rights for the Trading
Day immediately prior to the date on which such fractional Rights would have
been otherwise issuable. The closing price of the
43
<PAGE>
Rights for any day shall be the last sale price, regular way, or, in case no
such sale takes place on such day, the average of the closing bid and asked
prices, regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Rights are not listed or
admitted to trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Rights are listed or
admitted to trading, or if the Rights are not listed or admitted to trading on
any national securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter market,
as reported by NASDAQ or such other system then in use or, if on any such date
the Rights are not quoted by any such organization, the average of the closing
bid and asked prices as furnished by a professional market maker making a market
in the Rights, selected by the Board of Directors of the Company. If on any such
date no such market maker is making a market in the Rights, the fair value of
the Rights on such date as determined in good faith by the Board of Directors of
the Company shall be used.
(b) The Company shall not be required to issue fractions of shares of
Preferred Stock (other than fractions which are integral multiples of one one-
thousandth of a share of Preferred Stock) upon exercise of the Rights or to
distribute certificates which evidence fractional shares of Preferred Stock
(other than fractions which are integral multiples of one one-thousandth of a
share of Preferred Stock). In lieu of fractional shares of Preferred Stock that
are not integral multiples of one one-thousandth of a share of Preferred Stock,
the Company may pay to the registered holders of Rights Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market value of one one-thousandth of a share of
Preferred Stock. For purposes of this Section 14(b), the current market value
of one one-
44
<PAGE>
thousandth of a share of Preferred Stock shall be one one-thousandth of the
closing price of a share of Preferred Stock (as determined pursuant to Section
11(d)(ii) hereof) for the Trading Day immediately prior to the date of such
exercise.
(c) Following the occurrence of a Triggering Event, the Company shall
not be required to issue fractions of shares of Common Stock upon exercise of
the Rights or to distribute certificates which evidence fractional shares of
Common Stock. In lieu of fractional shares of Common Stock, the Company may pay
to the registered holders of Rights Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same fraction of the
current market value of one (1) share of Common Stock. For purposes of this
Section 14(c), the current market value of one share of Common Stock shall be
the closing price of one share of Common Stock (as determined pursuant to
Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of
such exercise.
(d) The holder of a Right by the acceptance of the Rights expressly
waives his right to receive any fractional Rights or any fractional shares upon
exercise of a Right, except as permitted by this Section 14.
Section 15. Rights of Action. All rights of action in respect of this
----------------
Agreement are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock); and any registered holder of any Rights Certificate (or, prior to
the Distribution Date, of the Common Stock), without the consent of the Rights
Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of the Common Stock), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or
45
<PAGE>
otherwise act in respect of, his right to exercise the Rights evidenced by such
Rights Certificate in the manner provided in such Rights Certificate and in this
Agreement. Without limiting the foregoing or any remedies available to the
holders of Rights, it is specifically acknowledged that the holders of Rights
would not have an adequate remedy at law for any breach of this Agreement and
shall be entitled to specific performance of the obligations hereunder and
injunctive relief against actual or threatened violations of the obligations
hereunder of any Person subject to this Agreement.
Section 16. Agreement of Rights Holders. Every holder of a Right by
---------------------------
accepting the same consents and agrees with the Company and the Rights Agent and
with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of Common Stock;
(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office or offices of the Rights Agent designated for such
purposes, duly endorsed or accompanied by a proper instrument of transfer and
with the appropriate forms and certificates fully executed;
(c) subject to Section 6(a) and Section 7(f) hereof, the Company and
the Rights Agent may deem and treat the person in whose name a Rights
Certificate (or, prior to the Distribution Date, the associated Common Stock
certificate) is registered on the registration books of the Company as the
absolute owner thereof and of the Rights evidenced thereby (notwithstanding any
notations of ownership or writing on the Rights Certificates or the associated
Common Stock certificate made by anyone other than the Company or the Rights
Agent) for all purposes whatsoever, and neither the Company nor the Rights
Agent, subject to
46
<PAGE>
the last sentence of Section 7(e) hereof, shall be required to be affected by
any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Rights Agent shall have any liability to any holder
of a Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, the Company must use its best
-------- -------
efforts to have any such order, decree or ruling lifted or otherwise overturned
as soon as possible.
Section 17. Rights Certificate Holder Not Deemed a Stockholder. No
--------------------------------------------------
holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the number of one one-
thousandths of a share of Preferred Stock or any other securities of the Company
which may at any time be issuable on the exercise of the Rights represented
thereby, nor shall anything contained herein or in any Rights Certificate be
construed to confer upon the holder of any Rights Certificate, as such, any of
the rights of a 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.
47
<PAGE>
Section 18. Concerning the Rights Agent.
---------------------------
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
disbursements and other 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.
(b) The Rights Agent shall be protected and shall incur no liability
for or in respect of any action taken, suffered or omitted by it in connection
with its administration of this Agreement in reliance upon any Rights
Certificate or certificate for Common Stock or for other securities of the
Company, instrument of assignment or transfer, power of attorney, endorsement,
affidavit, letter, notice, direction, consent, certificate, statement, or other
paper or document believed by it to be genuine and to be signed, executed and,
where necessary, verified or acknowledged, by the proper Person or Persons.
(c) Anything in this Agreement to the contrary notwithstanding, in no
event shall the Rights Agent be liable for special, indirect or consequential
loss or damage of any kind whatsoever (including but not limited to lost
profits), even if the Rights Agent has been advised of the likelihood of such
loss or damage and regardless of the form of action.
Section 19. Merger or Consolidation or Change of Name of Rights
---------------------------------------------------
Agent.
- -----
48
<PAGE>
(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, stock transfer or other shareholder services 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; but only if 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 a predecessor Rights Agent and
deliver such Rights Certificates so countersigned; and in case at that time any
of the Rights Certificates shall not have been countersigned, any successor
Rights Agent may countersign such Rights Certificates in its name as 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.
49
<PAGE>
Section 20. Duties of Rights Agent. The Rights Agent undertakes the
----------------------
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Rights Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action taken
or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person and the
determination of Current Market Price) be proved or established by the Company
prior to taking or suffering any action hereunder, such fact or matter (unless
other evidence in respect thereof be herein specifically prescribed) may be
deemed to be conclusively proved and established by a certificate signed by the
Chairman of the Board, the Chief Executive Officer, the President, any Vice
President, the Treasurer, any Assistant Treasurer, the Secretary or any
Assistant Secretary of the Company and delivered to the Rights Agent; and such
certificate shall be full authorization to the Rights Agent for any action taken
or suffered in good faith by it under the provisions of this Agreement in
reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its own 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 or be
50
<PAGE>
required to verify the same (except as to its countersignature on such Rights
Certificates), but all such statements and recitals are and shall be deemed to
have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect
of the validity of this Agreement or the execution and delivery hereof (except
the due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Rights Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Rights Certificate; nor shall it
be responsible for any adjustment required under the provisions of Section 11,
Section 13 or Section 24 hereof or responsible for the manner, method or amount
of any such adjustment or the ascertaining of the existence of facts that would
require any such adjustment (except with respect to the exercise of Rights
evidenced by Rights Certificates after actual notice of any such adjustment);
nor shall it by any act hereunder be deemed to make any representation or
warranty as to the authorization or reservation of any shares of Common Stock or
Preferred Stock to be issued pursuant to this Agreement or any Rights
Certificate or as to whether any shares of Common Stock or Preferred Stock will,
when so issued, be validly authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
Chairman of the Board, the Chief Executive Officer, the President, any Vice
President, the Secretary, any
51
<PAGE>
Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company,
and to apply to such officers for advice or instructions in connection with its
duties, and it shall not be liable for any action taken or suffered to be taken
by it in good faith in accordance with instructions of any such officer 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 Business
Days after the date of such application or such earlier date as any officer
shall have consented to in writing) 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 or not taken or not 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,
52
<PAGE>
default, neglect or misconduct of any such attorneys or agents or for any loss
to the Company resulting from any such act, default, neglect or misconduct;
provided, however, reasonable care was exercised in the selection and continued
- -------- -------
employment thereof.
(j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
there shall be reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.
(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 receiving written instructions from the
Company.
(l) The Rights Agent shall have no responsibility to the Company, any
holders of Rights, any holders of Common Stock or any holders of Preferred Stock
for interest or earnings on any monies held by the Rights Agent pursuant to this
Agreement.
(m) The Rights Agent shall not be required to take notice or be
deemed to have notice of any fact, event or determination (including, without
limitation, any dates or events defined in this Agreement or the designation of
any Person as an Acquiring Person, Affiliate or Associate) under this Agreement
unless and until the Rights Agent shall be specifically notified in writing by
the Company of such fact, event or determination, and all
53
<PAGE>
notices shall be effective if given in accordance with Section 25 hereof, and in
the absence of such notice the Rights Agent may conclusively assume that no such
event or condition exists.
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 Common Stock and Preferred Stock, by registered or
certified mail, and, if such resignation occurs after the Distribution Date, to
the registered 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 Common Stock and
Preferred Stock, by registered or certified mail, and, if such removal occurs
after the Distribution Date, to the holders of the Rights Certificates by first-
class mail. If the Rights Agent shall resign or be removed or shall otherwise
become incapable of acting, the Company shall appoint a successor to the Rights
Agent. If the Company shall fail to make such appointment within a period of
thirty (30) days after giving notice of such removal or after it has been
notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Rights Certificate (who shall,
with such notice, submit his Rights Certificate for inspection by the Company),
then any registered holder of any Rights Certificate or the then retiring Rights
Agent 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 legal business entity organized and doing
business under the laws of the United States or of the State of New York or of
any other state of the United States, in good standing, having an office in the
State of New York, which is
54
<PAGE>
authorized under such laws to exercise corporate trust or stock transfer or
shareholder services powers and which has at the time of its appointment as
Rights Agent a combined capital and surplus of at least $50,000,000 or (b) an
affiliate of a legal business entity described in clause (a) of this sentence.
After appointment, the successor Rights Agent shall be vested with the same
powers, rights, duties and responsibilities as if it had been originally named
as Rights Agent without further act or deed and the further duties and
obligations of the retiring Rights Agent shall cease and terminate; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment, the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Stock and the Preferred Stock, and, if such appointment occurs after
the Distribution Date, 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 the Board of Directors to reflect any adjustment
or change in the Purchase Price and the number or kind or class of shares or
other securities or property purchasable under the Rights Certificates made in
accordance with the provisions of this Agreement. In addition, in connection
with the issuance or sale of shares of Common Stock following the Distribution
Date and prior to the redemption
55
<PAGE>
or expiration of the Rights, the Company (a) shall, with respect to shares of
Common Stock so issued or sold pursuant to the exercise of stock options or
under any employee plan or arrangement, granted or awarded as of the
Distribution Date, or upon the exercise, conversion or exchange of securities
hereinafter issued by the Company but prior to the Distribution Date, and (b)
may, in any other case, if deemed necessary or appropriate by the Board of
Directors of the Company, issue Rights Certificates representing the appropriate
number of Rights in connection with such issuance or sale; provided, however,
-------- -------
that (i) no such Rights Certificate shall be issued if, and to the extent that,
the Company shall be advised by counsel that such issuance would create a
significant risk of material adverse tax consequences to the Company or the
Person to whom such Rights Certificate would be issued, and (ii) no such Rights
Certificate shall be issued if, and to the extent that, appropriate adjustment
shall otherwise have been made in lieu of the issuance thereof.
Section 23. Redemption and Termination.
--------------------------
(a) The Board of Directors of the Company may, at its option, at any
time prior to the earlier of (i) the Close of Business on the tenth day
following the Stock Acquisition Date (or, if the Stock Acquisition Date shall
have occurred prior to the Record Date, the close of business on the tenth day
following the Record Date), or (ii) the Final Expiration Date, redeem all but
not less than all of the then outstanding Rights at a redemption price of $.001
per Right, as such amount may be appropriately adjusted to reflect any stock
split, stock dividend or similar transaction occurring after the date hereof
(such redemption price being hereinafter referred to as the "Redemption Price").
Notwithstanding anything contained in this Agreement to the contrary, the Rights
shall not be exercisable after the first occurrence of a Section 11(a)(ii) Event
until such time as the Company's right of redemption hereunder has
56
<PAGE>
expired. The Company may, at its option, pay the Redemption Price in cash,
shares of Common Stock (based on the Current Market Price, as defined in Section
11(d)(i) hereof, of the Common Stock at the time of redemption) or any other
form of consideration deemed appropriate by the Board of Directors.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights, evidence of which shall have been
filed with the Rights Agent and without any further action and without any
notice, the right to exercise the Rights will terminate and the only right
thereafter of the holders of Rights shall be to receive the Redemption Price for
each Right so held. Promptly 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 each holder's last address as it
appears upon the registry books of the Rights Agent or, prior to the
Distribution Date, on the registry books of the transfer agent for the Common
Stock. Any notice which is mailed in the manner herein provided shall be deemed
given, whether or not the holder receives the notice. Each such notice of
redemption will state the method by which the payment of the Redemption Price
will be made.
Section 24. Exchange.
--------
(a) The Board of Directors of the Company may, at its option, at any
time after any Person becomes an Acquiring Person, exchange all or part of the
then outstanding and exercisable Rights (which shall not include Rights that
have become void pursuant to the provisions of Section 7(e) hereof) for Common
Stock at an exchange ratio of one share of Common Stock 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
57
<PAGE>
to as the "Exchange Ratio"). Notwithstanding the foregoing, the Board of
Directors of the Company shall not be empowered to effect such exchange at any
time from and after such time as any Acquiring Person, together with all
Affiliates and Associates of such Acquiring Person, becomes the Beneficial Owner
of 50% or more of the Common Stock then outstanding.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the exchange of any Rights pursuant to subsection (a) of this
Section 24 and without any further action and without any notice, the right to
exercise such Rights shall terminate and the only right thereafter of a holder
of such Rights shall be to receive that number of shares of Common Stock equal
to the number of such Rights held by such holder multiplied by the Exchange
Ratio. The Company shall promptly give public notice of any such exchange;
provided, however, that the failure to give, or any defect in, such notice shall
- -------- -------
not affect the validity of such exchange. The Company promptly shall mail a
notice of any such exchange to all of the holders of such Rights at their last
addresses as they appear upon the registry books of the Rights Agent. Any
notice which is mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice. Each such notice of exchange
will state the method by which the exchange of the Common Stock 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 any exchange pursuant to this Section 24, the Company, at its
option, may substitute Preferred Stock (or Equivalent Preferred Stock) for
Common Stock exchangeable for Rights, at the initial rate of one one-thousandth
of a share of Preferred Stock (or
58
<PAGE>
Equivalent Preferred Stock) for each share of Common Stock, as appropriately
adjusted to reflect stock splits, stock dividends and other similar transactions
after the date hereof.
(d) Subject to Section 24(c), in the event that there shall not be
sufficient shares of Common Stock issued but not outstanding or authorized but
unissued to permit any exchange of Rights as contemplated in accordance with
this Section 24, the Company shall take all such action as may be necessary to
authorize additional shares of Common Stock for issuance upon exchange of the
Rights.
(e) The Company shall not be required to issue fractions of shares of
Common Stock or to distribute certificates which evidence fractional shares of
Common Stock. In lieu of such fractional shares of Common Stock, there shall be
paid to the registered holders of the Rights Certificates with regard to which
such fractional shares of Common Stock would otherwise be issuable, an amount in
cash equal to the same fraction of the current market value of a whole share of
Common Stock. For the purposes of this subsection (e), the current market value
of a whole share of Common Stock shall be the closing price of a share of Common
Stock (as determined pursuant to the second sentence of Section 11(d)(i) hereof)
for the Trading Day immediately prior to the date of exchange pursuant to this
Section 24.
Section 25. Notice of Certain Events.
------------------------
(a) In case the Company shall propose, at any time after the
Distribution Date, (i) to pay any dividend payable in stock of any class to the
holders of Preferred Stock or to make any other distribution to the holders of
Preferred Stock (other than a regular quarterly cash dividend out of earnings or
retained earnings of the Company), or (ii) to offer to the holders of Preferred
Stock rights or warrants to subscribe for or to purchase any additional shares
of Preferred Stock or shares of stock of any class or any other securities,
rights or options,
59
<PAGE>
or (iii) to effect any reclassification of its Preferred Stock (other than a
reclassification involving only the subdivision of outstanding shares of
Preferred Stock), or (iv) to effect any consolidation or merger into or with any
other Person (other than a Subsidiary of the Company in a transaction which
complies with Section 11(o) hereof), or to effect any sale or other transfer (or
to permit one or more of its Subsidiaries to effect any sale or other transfer),
in one transaction or a series of related transactions, of more than 50% of the
assets, cash flow or earning power of the Company and its Subsidiaries (taken as
a whole) to any other Person or Persons (other than the Company and/or any of
its Subsidiaries in one or more transactions each of which complies with Section
11(o) hereof), or (v) to effect the liquidation, dissolution or winding up of
the Company, then, in each such case, the Company shall give to each holder of a
Rights Certificate, to the extent feasible and in accordance with Section 26
hereof, a notice of such proposed action, which shall specify the record date
for the purposes of such stock dividend, distribution of rights or warrants, or
the date on which such reclassification, consolidation, merger, sale, transfer,
liquidation, dissolution, or winding up is to take place and the date of
participation therein by the holders of the shares of Preferred Stock, if any
such date is to be fixed, and such notice shall be so given in the case of any
action covered by clause (i) or (ii) above at least twenty (20) days prior to
the record date for determining holders of the shares of Preferred Stock for
purposes of such action, and in the case of any such other action, at least
twenty (20) days prior to the date of the taking of such proposed action or the
date of participation therein by the holders of the shares of Preferred Stock
whichever shall be the earlier.
(b) In case any Section 11(a)(ii) Event shall occur, then, in any
such case, (i) the Company shall as soon as practicable thereafter give to each
holder of a Rights Certificate, to the extent feasible and in accordance with
Section 26 hereof, a notice of the
60
<PAGE>
occurrence of such event, which shall specify the event and the consequences of
the event to holders of Rights under Section 11(a)(ii) hereof, and (ii) all
references in the preceding paragraph to Preferred Stock shall be deemed
thereafter to refer to Common Stock and/or, if appropriate, other securities.
Section 26. Notices. Notices or demands authorized by this Agreement to
-------
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 by the Rights Agent with the Company) as follows:
Gateway, Inc.
4545 Towne Centre Court
San Diego, CA 92121
Attention: Corporate Secretary
Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent shall be sufficiently given or made upon
receipt if sent by registered or certified mail, postage prepaid, addressed
(until another address is filed in writing by the Rights Agent with the Company)
as follows:
UMB Bank, N.A., as Rights Agent
P.O. Box 419692
Kansas City, MO 64141-6692
Attention: Corporate Trust Department
[Stock Transfer 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 (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Common Stock) shall be
61
<PAGE>
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
Section 27. Supplements and Amendments. Prior to the Distribution
--------------------------
Date, and subject to the last sentence of this Section 27, the Company and the
Rights Agent shall, if the Company so directs, supplement or amend any provision
of this Agreement without the approval of any holders of certificates
representing shares of Common Stock. From and after the Distribution Date, the
Company and the Rights Agent shall, if the Company so directs, supplement or
amend this Agreement without the approval of any holders of Rights Certificates
in order (i) to cure any ambiguity, (ii) to correct or supplement any provision
contained herein which may be defective or inconsistent with any other
provisions herein, (iii) to shorten or lengthen any time period hereunder, or
(iv) to change or supplement the provisions hereunder in any manner which the
Company may deem necessary or desirable and which shall not adversely affect the
interests of the holders of Rights Certificates (other than an Acquiring Person
or an Affiliate or Associate of an Acquiring Person); provided, this Agreement
--------
may not be supplemented or amended to lengthen, pursuant to clause (iii) of this
sentence, (A) a time period hereunder relating to when the Rights may be
redeemed at such time as the Rights are not then redeemable, or (B) any other
time period hereunder 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 and, upon request by the Rights Agent, an opinion of
counsel reasonably acceptable to the Rights Agent, which states that the
proposed supplement or amendment is in compliance with the terms of this Section
27, the
62
<PAGE>
Rights Agent shall execute such supplement or amendment unless the Rights Agent
shall have determined in good faith that such supplement or amendment would
increase its duties or obligations or limit its rights or benefits under this
Agreement. Prior to the Distribution Date, the interests of the holders of
Rights shall be deemed coincident with the interests of the holders of Common
Stock. Notwithstanding anything herein to the contrary, this Agreement may not
be amended in any respect adverse to the holders of Rights Certificates (other
than an Acquiring Person) at a time when the Rights are not redeemable.
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, except as otherwise expressly provided
- ----
herein, any calculation of the number of shares of Common Stock outstanding at
any particular time, including for purposes of determining the particular
percentage of such outstanding shares of Common Stock of which any Person is the
Beneficial Owner, shall be made in accordance with the last sentence of Rule
13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act. 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 to the Company, or as may be necessary or advisable in
the administration of this Agreement, including, without limitation, the right
and power to (i) interpret the provisions of this Agreement, and (ii) make all
determinations deemed necessary or advisable for the administration of this
Agreement (including a determination to redeem or not redeem the Rights or to
amend the Agreement). All such actions, calculations, interpretations and
determinations (including, for purposes of clause
63
<PAGE>
(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 and all other parties, and
(y) not subject the Board, or any of the directors on 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, registered holders of the Common Stock) any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the Distribution
Date, registered holders of the Common Stock).
Section 31. Severability. If any term, provision, covenant or
------------
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
- -------- -------
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board of
Directors of the Company determines in its good faith judgment, acting in
accordance with the provisions of Section 144(a)(i) of the Delaware General
Corporation Law, 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. Without limiting the
64
<PAGE>
foregoing, if any provision requiring a specific group of Directors of the
Company to act is held by any court of competent jurisdiction or other authority
to be invalid, void or unenforceable, such determination shall then be made by
the Board of Directors of the Company in accordance with applicable law and the
Company's Restated Certificate of Incorporation and By-laws.
Section 32. Governing Law. This Agreement, each Right and each
-------------
Rights Certificate issued hereunder shall be deemed to be a contract made under
the laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts made
and to be performed entirely within such State, except for Sections 18, 19, 20
and 21 hereof and relating to rights, duties and obligations of the Rights
Agent, which shall be governed by the laws of the State of Missouri without
reference to its choice of law rules.
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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, all as of the day and year first above written.
Attest: GATEWAY, INC.
By /s/ STEPHANIE G. HEIM By /s/ WILLIAM M. ELLIOTT
--------------------- ------------------------
Name: Stephanie G. Heim Name: William M. Elliott
Title: Assistant Secretary Title: Senior Vice President,
General Counsel and
Secretary
65
<PAGE>
Attest: UMB BANK, N.A., as Right Agent
By: /s/ K. Scott Mathews By: /s/ R. William Bloemker
__________________________ _______________________________
Name: K. Scott Mathews Name: R. William Bloemker
Title: Assistant Secretary Title: Vice President
66
<PAGE>
Exhibit A
---------
FORM OF
CERTIFICATE OF DESIGNATION, PREFERENCES AND
RIGHTS OF SERIES B JUNIOR PARTICIPATING PREFERRED STOCK
of
GATEWAY, INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
We, William M. Elliott, Senior Vice President and Secretary, and
Stephanie G. Heim, Assistant Secretary, of Gateway, Inc., a corporation
organized and existing under the General Corporation Law of the State of
Delaware, in accordance with the provisions of Section 103 thereof, DO HEREBY
CERTIFY:
That pursuant to the authority conferred upon the Board of Directors
by the Restated Certificate of Incorporation of the said Corporation, the said
Board of Directors on January 19, 2000, adopted a resolution creating a series
of 1,000,000 shares of Preferred Stock designated as Series B Junior
Participating Preferred Stock, with voting powers, preferences and relative,
participating, optional and other special rights of the shares of such series,
and qualifications, limitations or restrictions thereof as follows:
Section 1. Designation and Amount. The shares of such series shall
----------------------
be designated as "Series B Junior Participating Preferred Stock" and the number
of shares constituting such series shall be 1,000,000.
Section 2. Dividends and Distributions.
---------------------------
(A) The holders of shares of Series B Junior Participating Preferred
Stock shall be entitled to receive, when, as and if declared by the Board of
Directors out of funds legally available for the purpose, quarterly dividends
payable in cash on the last day of March, June, September and December in each
year (each such date being referred to herein as a "Quarterly Dividend Payment
Date"), commencing on the first Quarterly Dividend Payment Date after the first
issuance of a share or fraction of a share of Series B Junior Participating
Preferred Stock, in an amount per share (rounded to the nearest cent) equal to
the greater of (a) $2.50 or (b) subject to the provision for adjustment
hereinafter set forth, 1,000 times the aggregate per share amount of all cash
dividends, and 1,000 times the aggregate per share amount (payable in kind) of
all non-cash dividends or other distributions other than a dividend payable in
shares of Common Stock or a subdivision of the outstanding shares of Common
Stock (by reclassification or
<PAGE>
otherwise), declared on the Common Stock, par value $.01 per share, of the
Corporation (the "Common Stock") since the immediately preceding Quarterly
Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment
Date, since the first issuance of any share or fraction of a share of Series B
Junior Participating Preferred Stock. In the event the Corporation shall at any
time after January 31, 2000 (the "Rights Declaration Date") (i) declare any
dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock, or (iii) combine the outstanding Common Stock into a
smaller number of shares, then in each such case the amount to which holders of
shares of Series B Junior Participating Preferred Stock were entitled
immediately prior to such event under clause (b) of the preceding sentence shall
be adjusted by multiplying such amount by a fraction the numerator of which is
the number of shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the
Series B Junior Participating Preferred Stock as provided in Paragraph (A) above
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock); provided that, in the
event no dividend or distribution shall have been declared on the Common Stock
during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $2.50 per share on the
Series B Junior Participating Preferred Stock shall nevertheless be payable on
such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series B Junior Participating Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares of Series
B Junior Participating Preferred Stock, unless the date of issue of such shares
is prior to the record date for the first Quarterly Dividend Payment Date, in
which case dividends on such shares shall begin to accrue from the date of issue
of such shares, or unless the date of issue is a Quarterly Dividend Payment Date
or is a date after the record date for the determination of holders of shares of
Series B Junior Participating Preferred Stock entitled to receive a quarterly
dividend and before such Quarterly Dividend Payment Date, in either of which
events such dividends shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear
interest. Dividends paid on the shares of Series B Junior Participating
Preferred Stock in an amount less than the total amount of such dividends at the
time accrued and payable on such shares shall be allocated pro rata on a share-
by-share basis among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders of shares of
Series B Junior Participating Preferred Stock entitled to receive payment of a
dividend or distribution declared thereon, which record date shall be no more
than 30 days prior to the date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series B Junior
-------------
Participating Preferred Stock shall have the following voting rights:
2
<PAGE>
(A) Subject to the provision for adjustment hereinafter set forth,
each share of Series B Junior Participating Preferred Stock shall entitle the
holder thereof to 1,000 votes on all matters submitted to a vote of the
stockholders of the Corporation. In the event the Corporation shall at any time
after the Rights Declaration Date (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock,
or (iii) combine the outstanding Common Stock into a smaller number of shares,
then in each such case the number of votes per share to which holders of shares
of Series B Junior Participating Preferred Stock were entitled immediately prior
to such event shall be adjusted by multiplying such number by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(B) Except as otherwise provided herein or by law, the holders of
shares of Series B Junior Participating Preferred Stock and the holders of
shares of Common Stock shall vote together as one class on all matters submitted
to a vote of stockholders of the Corporation.
(C) (i) If at any time dividends on any Series B Junior
Participating Preferred Stock shall be in arrears in an amount equal to six
(6) quarterly dividends thereon, the occurrence of such contingency shall
mark the beginning of a period (herein called a "default period") which
shall extend until such time when all accrued and unpaid dividends for all
previous quarterly dividend periods and for the current quarterly dividend
period on all shares of Series B Junior Participating Preferred Stock then
outstanding shall have been declared and paid or set apart for payment.
During each default period, all holders of Preferred Stock (including
holders of the Series B Junior Participating Preferred Stock) with
dividends in arrears in an amount equal to six (6) quarterly dividends
thereon, voting as a class, irrespective of series, shall have the right to
elect two (2) directors.
(ii) During any default period, such voting right of the holders
of Series B Junior Participating Preferred Stock may be exercised initially
at a special meeting called pursuant to subparagraph (iii) of this Section
3(C) or at any annual meeting of stockholders, and thereafter at annual
meetings of stockholders, provided that neither such voting right nor the
right of the holders of any other series of Preferred Stock, if any, to
increase, in certain cases, the authorized number of directors shall be
exercised unless the holders of ten percent (10%) in number of shares of
Preferred Stock outstanding shall be present in person or by proxy. The
absence of a quorum of the holders of Common Stock shall not affect the
exercise by the holders of Preferred Stock of such voting right. At any
meeting at which the holders of Preferred Stock shall exercise such voting
right initially during an existing default period, they shall have the
right, voting as a class, to elect directors to fill such vacancies, if
any, in the Board of Directors as may then exist up to two (2) directors
or, if such right is exercised at an annual meeting, to elect two (2)
directors. If the number which may be so elected at any special meeting
does not amount to the required number, the holders of the
3
<PAGE>
Preferred Stock shall have the right to make such increase in the number of
directors as shall be necessary to permit the election by them of the
required number. After the holders of the Preferred Stock shall have
exercised their right to elect directors in any default period and during
the continuance of such period, the number of directors shall not be
increased or decreased except by vote of the holders of Preferred Stock as
herein provided or pursuant to the rights of any equity securities ranking
senior to or pari passu with the Series B Junior Participating Preferred
---- -----
Stock.
(iii) Unless the holders of Preferred Stock shall, during an
existing default period, have previously exercised their right to elect
directors, the Board of Directors may order, or any stockholder or
stockholders owning in the aggregate not less than ten percent (10%) of the
total number of shares of Preferred Stock outstanding, irrespective of
series, may request, the calling of a special meeting of the holders of
Preferred Stock, which meeting shall thereupon be called by the Chairman
and Chief Executive Officer, the President, a Vice-President or the
Secretary of the Corporation. Notice of such meeting and of any annual
meeting at which holders of Preferred Stock are entitled to vote pursuant
to this Paragraph (C)(iii) shall be given to each holder of record of
Preferred Stock by mailing a copy of such notice to him at his last address
as the same appears on the books of the Corporation. Such meeting shall be
called for a time not earlier than 20 days and not later than 60 days after
such order or request or in default of the calling of such meeting within
60 days after such order or request, such meeting may be called on similar
notice by any stockholder or stockholders owning in the aggregate not less
than ten percent (10%) of the total number of shares of Preferred Stock
outstanding. Notwithstanding the provisions of this Paragraph (C)(iii), no
such special meeting shall be called during the period within 60 days
immediately preceding the date fixed for the next annual meeting of the
stockholders.
(iv) In any default period, the holders of Common Stock, and
other classes of stock of the Corporation if applicable, shall continue to
be entitled to elect the whole number of directors until the holders of
Preferred Stock shall have exercised their right to elect two (2) directors
voting as a class, after the exercise of which right (x) the directors so
elected by the holders of Preferred Stock shall continue in office until
their successors shall have been elected by such holders or until the
expiration of the default period, and (y) any vacancy in the Board of
Directors may (except as provided in Paragraph (C)(ii) of this Section 3)
be filled by vote of a majority of the remaining directors theretofore
elected by the holders of the class of stock which elected the director
whose office shall have become vacant. References in this Paragraph (C) to
directors elected by the holders of a particular class of stock shall
include directors elected by such directors to fill vacancies as provided
in clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default period, (x)
the right of the holders of Preferred Stock as a class to elect directors
shall cease,
4
<PAGE>
(y) the term of any directors elected by the holders of Preferred Stock as
a class shall terminate, and (z) the number of directors shall be such
number as may be provided for in the certificate of incorporation or by-
laws irrespective of any increase made pursuant to the provisions of
Paragraph (C)(ii) of this Section 3 (such number being subject, however, to
change thereafter in any manner provided by law or in the certificate of
incorporation or by-laws). Any vacancies in the Board of Directors effected
by the provisions of clauses (y) and (z) in the preceding sentence may be
filled by a majority of the remaining directors.
(D) Except as set forth herein, holders of Series B Junior
Participating Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for taking any corporate
action.
Section 4. Certain Restrictions.
--------------------
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series B Junior Participating Preferred Stock as provided in
Section 2 are in arrears, thereafter and until all accrued and unpaid dividends
and distributions, whether or not declared, on shares of Series B Junior
Participating Preferred Stock outstanding shall have been paid in full, the
Corporation shall not
(i) declare or pay dividends on, make any other distributions
on, or redeem or purchase or otherwise acquire for consideration any shares
of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series B Junior Participating Preferred
Stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series B
Junior Participating Preferred Stock, except dividends paid ratably on the
Series B Junior Participating Preferred Stock and all such parity stock on
which dividends are payable or in arrears in proportion to the total
amounts to which the holders of all such shares are then entitled;
(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 Junior
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 Junior Participating Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any shares
of Series B Junior Participating Preferred Stock, or any shares of stock
ranking on a parity with the Series B Junior Participating Preferred Stock,
except in
5
<PAGE>
accordance with a purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of such shares upon
such terms as the Board of Directors, after consideration of the respective
annual dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will result in
fair and equitable treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under Paragraph (A) of
this Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
Section 5. Reacquired Shares. Any shares of Series B Junior
-----------------
Participating Preferred Stock purchased or otherwise acquired by the Corporation
in any manner whatsoever shall be retired and canceled promptly after the
acquisition thereof. All such shares shall upon their cancellation become
authorized but unissued shares of Preferred Stock and may be reissued as part of
a new series of Preferred Stock to be created by resolution or resolutions of
the Board of Directors, subject to the conditions and restrictions on issuance
set forth herein.
Section 6. Liquidation, Dissolution or Winding Up. (A) Upon any
--------------------------------------
liquidation (voluntary or otherwise), dissolution or winding up of the
Corporation, no distribution shall be made to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series B Junior Participating Preferred Stock unless, prior
thereto, the holders of shares of Series B Junior Participating Preferred Stock
shall have received an amount equal to $1,000 per share of Series B
Participating Preferred Stock, plus an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment (the "Series B Liquidation Preference"). Following the payment of
the full amount of the Series B Liquidation Preference, no additional
distributions shall be made to the holders of shares of Series B Junior
Participating Preferred Stock unless, prior thereto, the holders of shares of
Common Stock shall have received an amount per share (the "Common Adjustment")
equal to the quotient obtained by dividing (i) the Series B Liquidation
Preference by (ii) 1,000 (as appropriately adjusted as set forth in subparagraph
(C) below to reflect such events as stock splits, stock dividends and
recapitalizations with respect to the Common Stock) (such number in clause (ii),
the "Adjustment Number"). Following the payment of the full amount of the
Series B Liquidation Preference and the Common Adjustment in respect of all
outstanding shares of Series B Junior Participating Preferred Stock and Common
Stock, respectively, holders of Series B Junior Participating Preferred Stock
and holders of shares of Common Stock shall receive their ratable and
proportionate share of the remaining assets to be distributed in the ratio of
the Adjustment Number to 1 with respect to such Preferred Stock and Common
Stock, on a per share basis, respectively.
(B) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series B Liquidation Preference and
the liquidation preferences of all other series of preferred stock, if any,
which rank on a parity with the Series B Junior Participating Preferred Stock,
then such remaining assets shall be distributed ratably to the
6
<PAGE>
holders of such parity shares in proportion to their respective liquidation
preferences. In the event, however, that there are not sufficient assets
available to permit payment in full of the Common Adjustment, then such
remaining assets shall be distributed ratably to the holders of Common Stock.
(C) In the event the Corporation shall at any time after the Rights
Dividend Declaration Date (i) declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii)
combine the outstanding Common Stock into a smaller number of shares, then in
each such case the Adjustment Number in effect immediately prior to such event
shall be adjusted by multiplying such Adjustment Number by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the Corporation shall
--------------------------
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
Series B Junior Participating Preferred Stock shall at the same time be
similarly exchanged or changed in an amount per share (subject to the provision
for adjustment hereinafter set forth) equal to 1,000 times the aggregate amount
of stock, securities, cash and/or any other property (payable in kind), as the
case may be, into which or for which each share of Common Stock is changed or
exchanged. In the event the Corporation shall at any time after the Rights
Dividend Declaration Date (i) declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii)
combine the outstanding Common Stock into a smaller number of shares, then in
each such case the amount set forth in the preceding sentence with respect to
the exchange or change of shares of Series B Junior Participating Preferred
Stock shall be adjusted by multiplying such amount by a fraction the numerator
of which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
Section 8. No Redemption. The shares of Series B Junior
-------------
Participating Preferred Stock shall not be redeemable.
Section 9. Ranking. The Series B Junior Participating Preferred
-------
Stock shall rank junior to all other series of the Corporation's Preferred Stock
as to the payment of dividends and the distribution of assets, unless the terms
of any such series shall provide otherwise.
Section 10. Amendment. At any time when any shares of Series B
---------
Junior Participating Preferred Stock are outstanding, neither the Restated
Certificate of Incorporation of the Corporation nor this Certificate of
Designation shall be amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series B Junior
Participating Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of a majority or more of the outstanding shares
of Series B Junior Participating Preferred Stock, voting separately as a class.
7
<PAGE>
Section 11. Fractional Shares. Series B Junior 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 have the benefit of
all other rights of holders of Series B Junior Participating Preferred Stock.
IN WITNESS WHEREOF, we have executed and subscribed this Certificate
and do affirm the foregoing as true under the penalties of perjury as of this
19th day of January, 2000.
/s/ WILLIAM M. ELLIOTT
-------------------------------------
William M. Elliott
Senior Vice President and Secretary
Attest:
/s/ STEPHANIE G. HEIM
- ----------------------
Stephanie G. Heim
Assistant Secretary
8
<PAGE>
Exhibit B
---------
[Form of Rights Certificate]
Certificate No. R- ________ Rights
NOT EXERCISABLE AFTER JANUARY 18, 2010 UNLESS EXTENDED PRIOR THERETO BY THE
BOARD OF DIRECTORS OR EARLIER IF REDEEMED BY THE COMPANY. THE RIGHTS ARE
SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $.001 PER RIGHT ON THE
TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS
BENEFICIALLY OWNED BY AN ACQUIRING PERSON (AS SUCH TERM IS DEFINED IN THE RIGHTS
AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID.
[THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY
OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR
ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS
AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED
HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e)
OF SUCH AGREEMENT.]/1/
Rights Certificate
GATEWAY, INC.
- ---------------------
/1/ The portion of the legend in brackets shall be inserted only if applicable
and shall replace the preceding sentence.
<PAGE>
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 January 19, 2000 (the "Rights Agreement"),
between Gateway, Inc., a Delaware corporation (the "Company"), and UMB Bank,
N.A., as Rights Agent (the "Rights Agent"), to purchase from the Company at any
time prior to 5:00 P.M. (New York City time) on January 18, 2010 (unless such
date is extended prior thereto by the Board of Directors) at the office or
offices of the Rights Agent designated for such purpose, or its successors as
Rights Agent, one one-thousandth of a fully paid, non-assessable share of Series
B Junior Participating Preferred Stock (the "Preferred Stock") of the Company,
at a purchase price of $350 per one one-thousandth of a share (the "Purchase
Price"), upon presentation and surrender of this Rights Certificate with the
Form of Election to Purchase and related Certificate duly executed. The number
of Rights evidenced by this Rights Certificate (and the number of shares which
may be purchased upon exercise thereof) set forth above, and the Purchase Price
per share set forth above, are the number and Purchase Price as of January 19,
2000, based on the Preferred Stock as constituted at such date. The Company
reserves the right to require prior to the occurrence of a Triggering Event (as
such term is defined in the Rights Agreement) that a number of Rights be
exercised so that only whole shares of Preferred Stock will be issued.
Upon the occurrence of a Section 11(a)(ii) Event (as such term is
defined in the Rights Agreement), if the Rights evidenced by this Rights
Certificate are beneficially owned by (i) an Acquiring Person or an Affiliate or
Associate of any such Acquiring Person (as such terms are defined in the Rights
Agreement), (ii) a transferee of any such Acquiring Person, Associate or
Affiliate, or (iii) under certain circumstances specified in the Rights
Agreement, a transferee of a
2
<PAGE>
person who, after such transfer, became an Acquiring Person, or an Affiliate or
Associate of an Acquiring Person, such Rights shall become null and void and no
holder hereof shall have any right with respect to such Rights from and after
the occurrence of such Section 11(a)(ii) Event.
As provided in the Rights Agreement, the Purchase Price and the number
and kind of shares of Preferred Stock or other securities, which may be
purchased upon the exercise of the Rights evidenced by this Rights Certificate
are subject to modification and adjustment upon the happening of certain events,
including Triggering Events.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the above-mentioned office of the
Rights Agent and are also available upon written request to the Rights Agent.
This Rights Certificate, with or without other Rights Certificates,
upon surrender at the principal office or offices of the Rights Agent designated
for such purpose, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of one one-thousandths of a share of Preferred
Stock as the Rights evidenced by the Rights Certificate or Rights Certificates
surrendered shall have entitled such holder to purchase. If this Rights
Certificate shall be
3
<PAGE>
exercised in part, the holder shall be entitled to receive upon surrender hereof
another Rights Certificate or Rights Certificates for the number of whole Rights
not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may be redeemed by the Company at its option at a
redemption price of $.001 per Right at any time prior to the earlier of the
close of business on (i) the tenth day following the Stock Acquisition Date (as
such time period may be extended pursuant to the Rights Agreement), and (ii) the
Final Expiration Date. In addition, under certain circumstances following the
Stock Acquisition Date, the Rights may be exchanged, in whole or in part, for
shares of the Common Stock, or shares of preferred stock of the Company having
essentially the same value or economic rights as such shares. Immediately upon
the action of the Board of Directors of the Company authorizing any such
exchange, and without any further action or any notice, the Rights (other than
Rights which are not subject to such exchange) will terminate and the Rights
will only enable holders to receive the shares issuable upon such exchange.
No fractional shares of Preferred Stock will be issued upon the
exercise of any Right or Rights evidenced hereby (other than fractions which are
integral multiples of one one-thousandth of a share of Preferred Stock, which
may, at the election of the Company, be evidenced by depositary receipts), but
in lieu thereof a cash payment will be made, as provided in the Rights
Agreement. The Company, at its election, may require that a number of Rights be
exercised so that only whole shares of Preferred Stock would be issued.
No holder of this Rights Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of shares of Preferred
Stock or of any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as
4
<PAGE>
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 consent to or withhold consent from 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.
5
<PAGE>
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal.
Dated as of January 19, 2000
ATTEST: GATEWAY, INC.
_______________________________ By_____________________________
Secretary Title:
Countersigned:
UMB BANK, N.A., as Rights Agent
By____________________________________
Authorized Signature
6
<PAGE>
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED______________________________________________
hereby sells, assigns and transfers unto_______________________________________
_______________________________________________________________________________
(Please print name and address of transferee)
_______________________________________________________________________________
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint __________________ Attorney,
to transfer the within Rights Certificate on the books of the within named
Company, with full power of substitution.
Dated: __________________, _____
_____________________________________
Signature
Signature Guaranteed:
<PAGE>
Certificate
-----------
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) this Rights Certificate [ ] is [ ] is not being sold, assigned
and transferred by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of any such Acquiring Person (as such terms are
defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned,
it [ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate
from any Person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person.
Dated: _______________, _____ _______________________________________
Signature
Signature Guaranteed:
<PAGE>
NOTICE
------
The signature to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
<PAGE>
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if holder desires to exercise Rights represented by
the Rights Certificate.)
To: _____________CORPORATION:
The undersigned hereby irrevocably elects to exercise __________
Rights represented by this Rights Certificate to purchase the shares of
Preferred Stock issuable upon the exercise of the Rights (or such other
securities of the Company or of any other person which may be issuable upon the
exercise of the Rights) and requests that certificates for such shares be issued
in the name of and delivered to:
Please insert social security
or other identifying number
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
________________________________________________________________________________
Dated: _______________, _____
__________________________________________
Signature
Signature Guaranteed:
<PAGE>
Certificate
-----------
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are
not being exercised by or on behalf of a Person who is or was an Acquiring
Person or an Affiliate or Associate of any such Acquiring Person (as such terms
are defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate from
any Person who is, was or became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.
Dated: ______________, _____ ___________________________________________
Signature
Signature Guaranteed:
<PAGE>
NOTICE
------
The signature to the foregoing Election to Purchase and Certificate
must correspond to the name as written upon the face of this Rights Certificate
in every particular, without alteration or enlargement or any change whatsoever.
<PAGE>
Exhibit C
---------
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED STOCK
On January 19, 2000 (the "Rights Dividend Declaration Date"), the Board of
Directors of Gateway, Inc. (the "Company") declared a dividend of one Right for
each outstanding share of the Company's Common Stock, par value $.01 per share
(the "Common Stock"), to stockholders of record at the close of business on
February 4, 2000 (the "Record Date"). Each Right entitles the registered holder
to purchase from the Company one one-thousandth of a share of Series B Junior
Participating Preferred Stock, par value $.01 per share (the "Preferred Stock"),
at a Purchase Price of $350 per unit of one one-thousandth of a share of
preferred stock, subject to adjustment (the "Purchase Price"). The description
and terms of the Rights are set forth in a Rights Agreement, dated as of January
19, 2000 (the "Rights Agreement"), between the Company and UMB Bank, N.A., as
Rights Agent.
Initially, the Rights will be attached to all Common Stock certificates
representing shares then outstanding, and no separate Rights Certificates will
be distributed. The Rights will separate from the Common Stock and a
Distribution Date will occur upon the earlier of (i) 10 days following a public
announcement that a person or group of affiliated or associated persons (an
"Acquiring Person") has acquired, or obtained the right to acquire, beneficial
ownership of 15% or more of the shares of Common Stock then outstanding (the
"Stock Acquisition Date"), other than (A) as a result of repurchases of stock by
the Company, (B) a person who beneficially
<PAGE>
owns less than 20% of the outstanding Common Stock and who has reported or is
required to report such ownership on Schedule 13G under the Securities Exchange
Act of 1934 and who does not have any intention to and has not reserved the
right to control or influence the management or policies of the Company and (C)
Theodore W. Waitt, his affiliates and associates, his heirs and any trust or
foundation to which he has transferred or may transfer shares of Common Stock;
provided they do not beneficially own shares of stock representing a percentage
that is 5% or more than the percentage held on the date of the Rights Agreement
(except solely by a reason of reduction of the number of shares outstanding), or
(ii) 10 business days (or such later date as the Board shall determine)
following the commencement of a tender offer or exchange offer that would result
in a person or group becoming an Acquiring Person (unless such tender offer or
exchange offer is an offer for all outstanding shares of Common Stock which at
least a majority of independent directors determine to be fair to and not
inadequate and otherwise in the best interests of the Company and its
stockholders (a "Qualified Offer")). Until the Distribution Date, (i) the Rights
will be evidenced by the Common Stock certificates and will be transferred with
and only with such Common Stock certificates, (ii) new Common Stock certificates
issued after the Record Date will contain a notation incorporating the Rights
Agreement by reference and (iii) the surrender for transfer of any certificates
for outstanding Common Stock will also constitute the transfer of the Rights
associated with the Common Stock represented by such certificate.
The Rights are not exercisable until the Distribution Date and will expire
at the close of business on January 18, 2010 unless earlier redeemed or
exchanged by the Company as provided in the Rights Agreement.
2
<PAGE>
As soon as practicable after the Distribution Date, Rights Certificates
will be mailed to holders of record of the Common Stock as of the close of
business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights. Except as otherwise determined by
the Board of Directors or provided by the Rights Agreement, only shares of
Common Stock issued prior to the Distribution Date will be issued with Rights.
In the event that a person or group becomes an Acquiring Person, except
pursuant to a Qualified Offer (a "Flip-in Event"), each holder of a Right will
thereafter have the right to receive, upon payment of the applicable Purchase
Price, Common Stock (or, in certain circumstances, at the option of the Board of
Directors, cash, property or other securities of the Company) having a value
(determined pursuant to a formula set forth in the Rights Agreement) equal to
two times the then current Purchase Price multiplied by the number of one one-
thousandths of a share of Preferred Stock for which a Right was exercisable (the
"applicable Purchase Price"). Notwithstanding any of the foregoing, following
the occurrence of a Flip-in Event, all Rights that are, or (under certain
circumstances specified in the Rights Agreement) were, beneficially owned by any
Acquiring Person (or by certain related parties) will be null and void.
For example, assuming an applicable Purchase Price per Right of $350, each
Right not owned by an Acquiring Person (or by certain related parties) following
a Flip-in Event would entitle its holder to purchase $700 worth of Common Stock
(or other consideration, as noted above) determined pursuant to a formula set
forth in the Rights Agreement, for $350. Assuming that the Common Stock had a
per share value of $70 at such time (as determined pursuant to such
3
<PAGE>
formula), the holder of each valid Right would be entitled to purchase 10 shares
of Common Stock for $350.
In the event that, at any time following the Stock Acquisition Date, (i)
the Company is acquired in a merger or consolidation transaction in which the
Company is not the surviving corporation (other than with a subsidiary of the
Company or an entity which acquired the shares pursuant to a Qualified Offer) or
(ii) the Company engages in a merger or consolidation transaction (other than
with a subsidiary of the Company or an entity which acquired the shares pursuant
to a Qualified Offer) in which the Company is the surviving corporation and the
Common Stock of the Company is changed or exchanged for other securities or
assets, or (iii) 50% or more of the Company's assets, cash flow or earning power
is sold or transferred (other than to the Company or a subsidiary of the
Company), each holder of a Right (except Rights which previously have been
voided as set forth above) shall thereafter have the right to receive, upon
payment of the Purchase Price, common stock of the acquiring company having a
value equal to two times the applicable Purchase Price. The events set forth in
this paragraph and in the second preceding paragraph are referred to as
"Triggering Events."
At any time after a person or group becomes an Acquiring Person and prior
to the acquisition by such person or group of fifty percent (50%) or more of the
outstanding Common Stock, the Board of Directors may exchange the Rights (other
than Rights owned by such person or group which have become void), in whole or
in part, at an exchange ratio of one share of Common Stock, or one one-
thousandth of a share of Preferred Stock (or of a share of a class or
4
<PAGE>
series of the Company's preferred stock having equivalent rights, preferences
and privileges), per Right (subject to adjustment).
The Purchase Price payable, and the number of units of Preferred Stock or
other securities or property issuable, upon exercise of the Rights are subject
to adjustment from time to time to prevent dilution to holders of the Rights (i)
in the event of a stock dividend on, or a subdivision, combination or
reclassification of, the Preferred Stock, (ii) if holders of the Preferred Stock
are granted certain rights or warrants to subscribe for Preferred Stock or
convertible securities at less than the current market price of the Preferred
Stock, or (iii) upon the distribution to holders of the Preferred Stock of
evidences of indebtedness or assets (excluding regular quarterly cash dividends)
or of subscription rights or warrants (other than those referred to above).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. No fractional units of one one-thousandths of a share of Preferred Stock
will generally be issued and, in lieu thereof, an adjustment in cash will be
made based on the market price of the Preferred Stock on the last trading date
prior to the date of exercise.
At any time until the tenth day following the Stock Acquisition Date, the
Company may redeem the Rights in whole, but not in part, at a price of $.001 per
Right (payable in cash, Common Stock or other consideration deemed appropriate
by the Board of Directors). Immediately upon the action of the Board of
Directors ordering redemption of the Rights, the
5
<PAGE>
Rights will terminate and the only right of the holders of Rights will be to
receive the $.001 redemption price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends. While the distribution of the Rights should
not be taxable to stockholders or to the Company, stockholders may, depending
upon the circumstances, recognize taxable income in the event that the Rights
become exercisable for Common Stock or Preferred Stock (or other consideration)
of the Company or for common stock of the acquiring company as set forth above,
or in the event of a redemption or exchange as provided above.
Any of the provisions of the Rights Agreement may be amended by the Board
of Directors of the Company prior to the Distribution Date. After the
Distribution Date, the provisions of the Rights Agreement may be amended by the
Board of Directors in order to cure any ambiguity, to make changes which do not
adversely affect the interests of holders of Rights (excluding the interests of
any Acquiring Person), or to shorten or lengthen any time period under the
Rights Agreement; provided, however, that no amendment shall be made to lengthen
--------
the redemption period at such time as the Rights are not redeemable.
A copy of the Rights Agreement between the Company and the Rights Agent
specifying the terms of the Rights, which includes as Exhibit B the Form of
Rights Certificate, has been filed with the Securities and Exchange Commission
as an exhibit to a Registration Statement on Form 8-A/Current Report on Form 8-K
dated February 4, 2000. A copy of the
6
<PAGE>
Rights Agreement is available free of charge from the Rights Agent. The
foregoing description of the Rights does not purport to be complete and is
qualified in its entirety by reference to the Rights Agreement, which is
incorporated herein by reference.
7
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 1. Certain Definitions........................................................................... 2
Section 2. Appointment of Rights Agent................................................................... 9
Section 3. Issuance of Rights Certificates............................................................... 10
Section 4. Form of Rights Certificates................................................................... 12
Section 5. Countersignature and Registration............................................................. 14
Section 6. Transfer, Split-Up, Combination and Exchange of Rights Certificates; Mutilated, Destroyed,
Lost or Stolen Rights Certificates............................................................ 15
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights................................. 16
Section 8. Cancellation and Destruction of Rights Certificates........................................... 20
Section 9. Reservation and Availability of Capital Stock................................................. 21
Section 10. Preferred Stock Record Date................................................................... 24
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights................... 24
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.................................... 40
Section 13. Consolidation, Merger or Sale or Transfer of Assets, Cash Flow or Earning Power............... 40
Section 14. Fractional Rights and Fractional Shares....................................................... 45
Section 15. Rights of Action.............................................................................. 47
Section 16. Agreement of Rights Holders................................................................... 48
Section 17. Rights Certificate Holder Not Deemed a Stockholder............................................ 49
Section 18. Concerning the Rights Agent................................................................... 50
Section 19. Merger or Consolidation or Change of Name of Rights Agent..................................... 51
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Section 20. Duties of Rights Agent........................................................................ 52
Section 21. Change of Rights Agent........................................................................ 56
Section 22. Issuance of New Rights Certificates........................................................... 58
Section 23. Redemption and Termination.................................................................... 59
Section 24. Exchange...................................................................................... 60
Section 25. Notice of Certain Events...................................................................... 62
Section 26. Notices....................................................................................... 63
Section 27. Supplements and Amendments.................................................................... 64
Section 28. Successors.................................................................................... 66
Section 29. Determinations and Actions by the Board of Directors, etc..................................... 66
Section 30. Benefits of this Agreement.................................................................... 67
Section 31. Severability.................................................................................. 67
Section 32. Governing Law................................................................................. 68
Section 33. Counterparts.................................................................................. 68
Section 34. Descriptive Headings.......................................................................... 68
</TABLE>
EXHIBITS
Exhibit B
Exhibit C
ii
<PAGE>
Exhibit 2
---------
FOR IMMEDIATE RELEASE
GATEWAY ADOPTS
SHAREHOLDERS RIGHTS PLAN
San Diego, CA. January 28, 2000. Gateway, Inc. announced today that its
Board of Directors has adopted a Shareholders Rights Plan under which Gateway
will issue a dividend of one Right for each share of common stock, par value
$0.01 per share, of the Company held by stockholders of record as of the close
of business on February 4, 2000. The Plan is designed to assure stockholders
fair value in the event of a future unsolicited business combination or similar
transaction involving the Company. The Company added that the Plan was not
adopted in response to any attempt to acquire the Company and that it is not
aware of any such efforts.
Each Right will initially entitle stockholders to purchase one one-
thousandth of a share of Series B Junior Participating Preferred Stock
(approximately equivalent to one share of Common Stock) for $350. However, the
Rights are not immediately exercisable and will become exercisable for Preferred
Stock only upon the occurrence of certain events. Upon certain triggering
events, unless redeemed for $.001 per Right, the Rights will become exercisable
by holders, other than Rights held by an unsolicited third party acquirer, for
shares of the Company or of the third party acquirer having a value of twice the
Right's then current exercise price. Further details of the Plan are outlined
in a letter that will be mailed after the record date to all stockholders.
Special Note
- ------------
The above statements include forward-looking statements based on current
management expectations. Factors that could cause future results to differ from
these expectations include the following: general economic conditions; growth
in the personal computer industry; competitive factors and pricing pressures;
component supply shortages; risks relating to new or acquired business and joint
ventures; and inventory risks due to shifts in market demand. Additional
factors are described in the Company's reports filed with the Securities and
Exchange Commission.
About Gateway
- -------------
Gateway (NYSE: GTW), a Fortune 250 company founded in 1985, focuses on
building lifelong relationships with consumers and businesses through complete
technology personalization. Gateway ranked number one in U.S. consumer PC
revenue in the second and
<PAGE>
third quarters of 1999(1) and was rated among the top ten best corporate
reputations in America according to a survey conducted in August of 1999 by
Harris Interactive and the Reputation Institute and published in The Wall Street
Journal. Gateway employees worldwide provide clients with services and built-to-
order computers that consistently win top awards from leading industry
publications. Gateway had total global revenue of $7.5 billion in 1998 and
shipped 3.54 million systems. For more information, visit our Web site at
www.gateway.com.
- ---------------
CONTACT: media, John W. Spelich, Public Relations, 858-799-2657,
[email protected], or investor relations, Marlys D. Johnson, Investor
Relations, 605-232-2709, [email protected], both for Gateway/
- ----------------
(1) According to GartnerGroup/Dataquest US PC Quarterly statistics.
2
<PAGE>
Exhibit 3
---------
[Letterhead of Gateway, Inc.]
Dear Fellow Stockholders:
Gateway's Board recently adopted a Shareholders Rights Plan. This letter
briefly describes the Plan and explains why we adopted it. The enclosed "Summary
of Rights to Purchase Preferred Stock" provides more information about the Plan.
We urge you to read it carefully.
The Plan is intended to protect our interests as stockholders if in the
future we are faced with an unfair takeover proposal. Fortunately, nothing like
that is going on now, but it's better to plan in advance. An unfair offer could
happen if someone, say a competitor, tries to buy some but not all of the
shares, or makes a low-ball offer for all the stock, putting pressure on
stockholders to sell or else. There is a whole slew of tactics to try to squeeze
stockholders out of the full value of their investment without affording them
any real choice or the opportunity to realize the benefit of their company's
business plan.
Many companies have Rights Plans similar to the one we have adopted. We
consider the Plan to be the best available means of protecting your equity
investment in Gateway.
The Plan is not intended to prevent a takeover of the Company if that is
the best way to go nor will the Plan interfere with a merger or other business
combination approved by your Board of Directors.
Issuance of the Rights by itself does not impact the financial strength of
the Company or our business plan. There is no effect on earnings per share. The
dividend is not taxable to the Company or to you when made, and it will not
change the way in which you can trade the Company's shares. As explained in the
Summary, the Rights will only be exercisable if an event occurs that triggers
their effectiveness. They are then designed to help protect you against being
deprived of your right to share in the full measure of the Company's long-term
potential.
<PAGE>
The Board was aware when it acted that some people argue that rights plans
of the type we adopted discourage legitimate acquisition proposals or are really
intended to entrench management. On balance, the Board adopted the Plan because
we believe it gives us the protections we need to ensure that we all share in
Gateway's potential.
Sincerely,
William M. Elliott
Senior Vice President, General Counsel and
Secretary
January 31, 2000
2
<PAGE>
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED STOCK
On January 19, 2000 (the "Rights Dividend Declaration Date"), the Board of
Directors of Gateway, Inc. (the "Company") declared a dividend of one Right for
each outstanding share of the Company's Common Stock, par value $.01 per share
(the "Common Stock"), to stockholders of record at the close of business on
February 4, 2000 (the "Record Date"). Each Right entitles the registered holder
to purchase from the Company one one-thousandth of a share of Series B Junior
Participating Preferred Stock, par value $.01 per share (the "Preferred Stock"),
at a Purchase Price of $350 per unit of one one-thousandth of a share of
preferred stock, subject to adjustment (the "Purchase Price"). The description
and terms of the Rights are set forth in a Rights Agreement, dated as of January
19, 2000 (the "Rights Agreement"), between the Company and UMB Bank, N.A., as
Rights Agent.
Initially, the Rights will be attached to all Common Stock certificates
representing shares then outstanding, and no separate Rights Certificates will
be distributed. The Rights will separate from the Common Stock and a
Distribution Date will occur upon the earlier of (i) 10 days following a public
announcement that a person or group of affiliated or associated persons (an
"Acquiring Person") has acquired, or obtained the right to acquire, beneficial
ownership of 15% or more of the shares of Common Stock then outstanding (the
"Stock Acquisition Date"), other than (A) as a result of repurchases of stock by
the Company, (B) a person who beneficially owns less than 20% of the outstanding
Common Stock and who has reported or is required to report such ownership on
Schedule 13G under the Securities Exchange Act of 1934 and who does not have any
intention to and has not reserved the right to control or influence the
management or policies of the Company and (C) Theodore W. Waitt, his affiliates
and associates, his heirs and any trust or foundation to which he has
transferred or may transfer shares of Common Stock; provided they do not
beneficially own shares of stock representing a percentage that is 5% or more
than the percentage held on the date of the Rights Agreement (except solely by a
reason of reduction of the number of shares outstanding), or (ii) 10 business
days (or such later date as the Board shall determine) following the
commencement of a tender offer or exchange offer that would result in a person
or group becoming an Acquiring Person (unless such tender offer or exchange
offer is an offer for all outstanding shares of Common Stock which at least a
majority of independent directors determine to be fair to and not inadequate and
otherwise in the best interests of the Company and its stockholders (a
"Qualified Offer")). Until the Distribution Date, (i) the Rights will be
evidenced by the Common Stock certificates and will be transferred with and only
with such Common Stock certificates, (ii) new Common Stock certificates issued
after the Record Date will contain a notation incorporating the Rights Agreement
by reference and (iii) the surrender for transfer of any certificates for
outstanding Common Stock will also constitute the transfer of the Rights
associated with the Common Stock represented by such certificate.
The Rights are not exercisable until the Distribution Date and will expire
at the close of business on January 18, 2010 unless earlier redeemed or
exchanged by the Company as provided in the Rights Agreement.
3
<PAGE>
As soon as practicable after the Distribution Date, Rights Certificates
will be mailed to holders of record of the Common Stock as of the close of
business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights. Except as otherwise determined by
the Board of Directors or provided by the Rights Agreement, only shares of
Common Stock issued prior to the Distribution Date will be issued with Rights.
In the event that a person or group becomes an Acquiring Person, except
pursuant to a Qualified Offer (a "Flip-in Event"), each holder of a Right will
thereafter have the right to receive, upon payment of the applicable Purchase
Price, Common Stock (or, in certain circumstances, at the option of the Board of
Directors, cash, property or other securities of the Company) having a value
(determined pursuant to a formula set forth in the Rights Agreement) equal to
two times the then current Purchase Price multiplied by the number of one
one-thousandths of a share of Preferred Stock for which a Right was exercisable
(the "applicable Purchase Price"). Notwithstanding any of the foregoing,
following the occurrence of a Flip-in Event, all Rights that are, or (under
certain circumstances specified in the Rights Agreement) were, beneficially
owned by any Acquiring Person (or by certain related parties) will be null and
void.
For example, assuming an applicable Purchase Price per Right of $350, each
Right not owned by an Acquiring Person (or by certain related parties) following
a Flip-in Event would entitle its holder to purchase $700 worth of Common Stock
(or other consideration, as noted above) determined pursuant to a formula set
forth in the Rights Agreement, for $350. Assuming that the Common Stock had a
per share value of $70 at such time (as determined pursuant to such formula),
the holder of each valid Right would be entitled to purchase 10 shares of Common
Stock for $350.
In the event that, at any time following the Stock Acquisition Date, (i)
the Company is acquired in a merger or consolidation transaction in which the
Company is not the surviving corporation (other than with a subsidiary of the
Company or an entity which acquired the shares pursuant to a Qualified Offer) or
(ii) the Company engages in a merger or consolidation transaction (other than
with a subsidiary of the Company or an entity which acquired the shares pursuant
to a Qualified Offer) in which the Company is the surviving corporation and the
Common Stock of the Company is changed or exchanged for other securities or
assets, or (iii) 50% or more of the Company's assets, cash flow or earning power
is sold or transferred (other than to the Company or a subsidiary of the
Company), each holder of a Right (except Rights which previously have been
voided as set forth above) shall thereafter have the right to receive, upon
payment of the Purchase Price, common stock of the acquiring company having a
value equal to two times the applicable Purchase Price. The events set forth in
this paragraph and in the second preceding paragraph are referred to as
"Triggering Events."
At any time after a person or group becomes an Acquiring Person and prior
to the acquisition by such person or group of fifty percent (50%) or more of the
outstanding Common Stock, the Board of Directors may exchange the Rights (other
than Rights owned by such person or group which have become void), in whole or
in part, at an exchange ratio of one share of
4
<PAGE>
Common Stock, or one one-thousandth of a share of Preferred Stock (or of a share
of a class or series of the Company's preferred stock having equivalent rights,
preferences and privileges), per Right (subject to adjustment).
The Purchase Price payable, and the number of units of Preferred Stock or
other securities or property issuable, upon exercise of the Rights are subject
to adjustment from time to time to prevent dilution to holders of the Rights (i)
in the event of a stock dividend on, or a subdivision, combination or
reclassification of, the Preferred Stock, (ii) if holders of the Preferred Stock
are granted certain rights or warrants to subscribe for Preferred Stock or
convertible securities at less than the current market price of the Preferred
Stock, or (iii) upon the distribution to holders of the Preferred Stock of
evidences of indebtedness or assets (excluding regular quarterly cash dividends)
or of subscription rights or warrants (other than those referred to above).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. No fractional units of one one-thousandths of a share of Preferred Stock
will generally be issued and, in lieu thereof, an adjustment in cash will be
made based on the market price of the Preferred Stock on the last trading date
prior to the date of exercise.
At any time until the tenth day following the Stock Acquisition Date, the
Company may redeem the Rights in whole, but not in part, at a price of $.001 per
Right (payable in cash, Common Stock or other consideration deemed appropriate
by the Board of Directors). Immediately upon the action of the Board of
Directors ordering redemption of the Rights, the Rights will terminate and the
only right of the holders of Rights will be to receive the $.001 redemption
price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends. While the distribution of the Rights should not
be taxable to stockholders or to the Company, stockholders may, depending upon
the circumstances, recognize taxable income in the event that the Rights become
exercisable for Common Stock or Preferred Stock (or other consideration) of the
Company or for common stock of the acquiring company as set forth above, or in
the event of a redemption or exchange as provided above.
Any of the provisions of the Rights Agreement may be amended by the Board
of Directors of the Company prior to the Distribution Date. After the
Distribution Date, the provisions of the Rights Agreement may be amended by the
Board of Directors in order to cure any ambiguity, to make changes which do not
adversely affect the interests of holders of Rights (excluding the interests of
any Acquiring Person), or to shorten or lengthen any time period under the
Rights Agreement; provided, however, that no amendment shall be made to lengthen
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the redemption period at such time as the Rights are not redeemable.
A copy of the Rights Agreement is being filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form
8-A/Current Report on Form 8-K. A copy of the Rights Agreement is available free
of charge from the Rights Agent.
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This summary description of the Rights does not purport to be complete and is
qualified in its entirety by reference to the Rights Agreement, which is
incorporated herein by reference.
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