SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 5, 1998
WILD OATS MARKETS, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-21577 84-1100630
(State or other jurisdiction of (Commission (I.R.S. Employer
Incorporation or Organization) File Number) Identification No.)
1645 Broadway
Boulder, Colorado 80302
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 440-5220
<PAGE>
Item 5. Other Events.
Rights. On May 5, 1998, the Board of Directors of Wild Oats Markets, Inc.
(the "Company"), declared a dividend distribution of one Right for each
outstanding share of the Company's Common Stock to stockholders of record at the
close of business on May 22, 1998 (the "Record Date"). Each Right entitles the
registered holder to purchase from the Company a unit consisting of one
one-thousandth of a share (a "Unit") of Series A Junior Participating Preferred
Stock, par value $.001 per share (the "Preferred Stock"), at a Purchase Price of
$145.00 per Unit, subject to adjustment. The description and terms of the Rights
are set forth in a Rights Agreement (the "Rights Agreement") between the Company
and Norwest Bank Minneapolis, 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. In general, 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,
subject to certain exceptions (an "Acquiring Person"), has acquired, or obtained
the right to acquire, beneficial ownership of 15% or more of the outstanding
shares of Common Stock (the "Stock Acquisition Date"), or (ii) 10 business days
following the commencement of a tender offer or exchange offer that would result
in such a person or group beneficially owning 15% or more of such outstanding
shares of Common Stock. 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 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 May 5, 2008, unless earlier redeemed by the Company
as described below.
As soon as practicable after the Distribution Date, Rights Certificates
will be mailed to holders of record of the Common Stock as of the close of
business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights. Shares of Common Stock issued
after the Distribution Date will be issued with Rights only upon exercise or
conversion of securities issued prior thereto unless the Board of Directors
determines otherwise.
If, at any time after the Distribution Date, any person becomes an
Acquiring Person each holder of a Right will thereafter have the right to
receive, upon exercise, Common Stock (or, in certain circumstances, cash,
property or other securities of the Company) having a value equal to two times
the exercise price of the Right.
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Notwithstanding any of the foregoing, all Rights that are, or (under certain
circumstances specified in the Rights Agreement) were, beneficially owned by any
Acquiring Person will be null and void. However, Rights are not exercisable in
any event until such time as the Rights are no longer redeemable by the Company
as set forth below.
For example, at an exercise price of $145 per Right, each Right not owned
by an Acquiring Person (or by certain related parties) following an event set
forth in the immediately preceding paragraph would entitle its holder to
purchase $290 worth of Common Stock (or other consideration, as noted above) for
$145. Assuming that the Common Stock had a per share value of $72.50 at such
time, the holder of each valid Right would be entitled to purchase four shares
of Common Stock for $145.
If at any time following the Stock Acquisition Date (i) the Company is
acquired in a merger or other business combination transaction in which the
Common Stock is changed or exchanged or in which the Company is not the
surviving corporation, or (ii) 50% or more of the Company's assets or earning
power is sold or transferred, each holder of a Right (except those Rights owned
by an Acquiring Person and voided as set forth above) shall thereafter have the
right to receive, upon exercise, common stock of the acquiring company having a
value equal to two times the exercise price of the Right. The events set forth
in this paragraph and in the second preceding paragraph are referred to as the
"Triggering Events."
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 (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).
At any time after any person or group becomes an Acquiring Person and prior
to the acquisition by the Acquiring Person of 50% or more of the outstanding
Common Stock, the Board of Directors of the Company may exchange the Rights
(other than Rights owned by the Acquiring Person, which will have become void),
in whole or in part, at an exchange ratio of one share of Common Stock per Right
(subject to adjustment).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. No fractional Units will be issued and, in lieu thereof, an adjustment in
cash will be made based on the market price of the Preferred Stock on the last
trading date prior to the date of exercise.
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At any time until ten days following the Stock Acquisition Date, the
Company may redeem the Rights in whole, but not in part, at a price of $.001 per
Right. Under certain circumstances set forth in the Rights Agreement, the
decision to redeem shall require the concurrence of a majority of the Continuing
Directors. Immediately upon the action of the Board of Directors ordering
redemption of the Rights or at such other time as may be specified by the Board
when it orders redemption, with, where required, the concurrence of the
Continuing Directors, the Rights will terminate and the only right of the
holders of Rights will be to receive the $.001 redemption price.
The term "Continuing Directors" means any member of the Board of Directors
of the Company who was a member of the Board prior to the Stock Acquisition
Date, and any person who is subsequently elected to the Board if such person is
recommended or approved by a majority of the Continuing Directors, but shall not
include an Acquiring Person, or an affiliate or associate of an Acquiring
Person, or any representative of the foregoing entities.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends. While the distribution of the Rights will not
be taxable to stockholders or to the Company, stockholders may, depending upon
the circumstances, recognize taxable income if the Rights become exercisable for
Common Stock (or other consideration) of the Company or for common stock of the
acquiring company as set forth above.
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 Rights Agreement may be amended by the Board (in certain
circumstances, with the concurrence of the Continuing Directors) in order to
cure any ambiguity, to make other changes that do not adversely affect the basic
economic terms of the Rights, or to shorten or lengthen any time period under
the Rights Agreement; provided, however, that no amendment to adjust the time
period governing redemption shall be made at a time when the Rights are not
redeemable.
Preferred Stock. The Preferred Stock will have a liquidation preference of
$1.00 per hundredth of a share. Dividends on the Preferred Stock will be payable
quarterly in an amount for each one-hundredth of a share of Preferred Stock
equal to the greater of $.01 or the amount per share of any dividend paid on the
Company's Common Stock for such quarter. Unpaid dividends will cumulate. The
Preferred Stock will not be redeemable. Each one-hundredth share of Preferred
Stock will have the same voting rights as one share of Common Stock.
Pursuant to the Rights Agreement, the purchase price payable, and the
number of Units of Preferred Stock or other securities or property issuable,
upon the exercise of the Rights are subject to adjustment from time to time to
prevent dilution (i) in the event of a stock dividend on, or a subdivision,
combination or reclassification of the Preferred Stock, (ii) if holders of the
Preferred Stock are granted certain rights or
<PAGE>
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 the holders of the Preferred Stock of evidences of indebtedness or assets
(excluding regular quarterly cash dividends), assets or subscription rights or
warrants (other than those referred to above).
The Preferred Stock may be issued in fractions that are integral multiples
of one one-hundredth of a share. No fractional Units will be issued upon any
exercise of Rights, and in lieu thereof, an adjustment in cash will be made
based on the market price of the Preferred Stock on the then-current market
price of such shares.
Rights Agreement. The terms of the Rights are set forth in the Rights
Agreement. The form of Rights Agreement, which includes, as Exhibit A, the form
of Certificate of Designations of the Preferred Stock and, as Exhibit B, the
form of Rights Certificate, is included as Exhibit 1 to this Current Report on
Form 8-K and is 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 the Rights Agreement.
Item 7. Financial Statements and Exhibits.
Exhibit 1. Rights Agreement dated as of May 22, 1998 between the
Company and Norwest Bank Minneapolis, N.A., as Rights Agent.
(incorporated by reference from the Company's Registration
Statement on Form 8-A dated May 21, 1998).
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereto duly authorized.
WILD OATS MARKETS, INC.
By: /s/ Mary Beth Lewis
Mary Beth Lewis
Vice President of Finance, Treasurer
and Chief Financial Officer
Date: May 21, 1998
<PAGE>
RIGHTS AGREEMENT
DATED AS OF MAY 22, 1998
BETWEEN
WILD OATS MARKETS, INC.
AND
NORWEST BANK MINNEAPOLIS, N.A.
AS RIGHTS AGENT
<PAGE>
-ii-
TABLE OF CONTENTS
Section 1. Certain Definitions............................................1
Section 2. Appointment of Rights Agent....................................7
Section 3. Issuance of Rights Certificates................................8
Section 4. Form of Rights Certificates...................................10
Section 5. Countersignature and Registration.............................11
Section 6. Transfer, Split Up, Combination and Exchange of
Rights Certificates; Mutilated, Destroyed, Lost
or Stolen Rights Certificates.................................12
Section 7. Exercise of Rights; Purchase Price; Expiration
Date of Rights................................................13
Section 8. Cancellation and Destruction of Rights Certificates...........17
Section 9. Reservation and Availability of Capital Stock.................18
Section 10. Preferred Stock Record Date...................................20
Section 11. Adjustment of Purchase Price, Number and Kind of Shares
or Number of Rights...........................................21
Section 12. Certificate of Adjusted Purchase Price or Number of Shares....35
Section 13. Consolidation, Merger or Sale or Transfer of Assets
or Earning Power..............................................36
Section 14. Fractional Rights and Fractional Shares.......................40
Section 15. Rights of Action..............................................42
Section 16. Agreement of Rights Holders...................................42
Section 17. Rights Certificate Holder Not Deemed a Stockholder............44
Section 18. Concerning the Rights Agent...................................44
Section 19. Merger or Consolidation or Change of Name of Rights Agent.....45
Section 20. Duties of Rights Agent........................................46
<PAGE>
Section 21. Change of Rights Agent........................................50
Section 22. Issuance of New Rights Certificates...........................52
Section 23. Redemption and Termination....................................53
Section 24. Exchange......................................................55
Section 25. Notice of Certain Events......................................57
Section 26. Notices.......................................................59
Section 27. Supplements and Amendments....................................59
Section 28. Successors....................................................61
Section 29. Determinations and Actions by the Board of Directors, etc.....61
Section 30. Benefits of this Agreement....................................62
Section 31. Severability..................................................62
Section 32. Governing Law.................................................63
Section 33. Counterparts..................................................63
Section 34. Descriptive Headings..........................................63
Exhibit A Form of Certificate of Designation of Series A
Junior Participating Preferred Stock of Wild
Oats Markets, Inc. ..........................................A-1
Exhibit B Form of Rights Certificate...................................B-1
Exhibit C Summary Of Rights To Purchase Preferred Stock................C-1
<PAGE>
RIGHTS AGREEMENT
This Rights Agreement is entered into as of May 22, 1998, between Wild Oats
Markets, Inc., a Delaware corporation (the "Company"), and Norwest Bank
Minneapolis, N.A. (the "Rights Agent").
RECITALS
On May 5, 1998 (the "Declaration Date"), the Board of Directors of the
Company authorized and declared a dividend distribution of one right
(individually, a "Right" and collectively, the "Rights") for each share of
common stock, par value $.001 per share, of the Company outstanding at the close
of business on May 22, 1998 (the "Record Date"), and has authorized the issuance
of one Right (subject to adjustment pursuant to Section 11(p) of this Agreement)
for each share of common stock of the Company issued between the Record Date
(whether originally issued or from the Company's treasury) and the Distribution
Date (as defined below). This Agreement sets forth the terms of the Rights.
The parties agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" means any Person that, together with all
Affiliates and Associates of such Person, is the Beneficial Owner of 15% or more
of the shares of Common Stock then outstanding, but shall not include (i) the
Company, any Subsidiary of the Company, any employee benefit plan of the Company
or of any Subsidiary of the Company, or any Person or entity organized,
appointed or established by the Company
<PAGE>
for or pursuant to the terms of any such plan; (ii) any Person who would
otherwise become an Acquiring Person solely as a result of a reduction in the
number of shares of Common Stock outstanding due to the acquisition of shares of
Common Stock by the Company or a Subsidiary of the Company, unless and until
such Person shall thereafter purchase or otherwise become the Beneficial Owner
of additional shares of Common Stock constituting one percent or more of the
then outstanding shares of Common Stock; or (iii) any of the following: David L.
Ferguson, Chase Venture Capital Associates, L.P., Chase Capital Partners,
Michael C. Gilliland, Elizabeth C. Cook or any Person controlled by Mr.
Gilliland or Ms. Cook. 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), such Person shall not be deemed to
be an "Acquiring Person" for any purposes of this Agreement.
(b) "Act" means the Securities Act of 1933, as amended.
(c) "Affiliate" and "Associate" have the respective meanings ascribed
to such terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934 (the "Exchange Act"), as in effect on the date
of this Agreement.
(d) A Person shall be deemed the "Beneficial Owner" of, and shall be
deemed to "beneficially own," any securities:
<PAGE>
(i) that such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to acquire (whether
such right is exercisable immediately or only after the passage of
time) pursuant to any agreement, arrangement or understanding (whether
or not in writing) or upon the exercise of conversion rights, exchange
rights, rights, warrants or options, or otherwise; provided, however,
that a Person shall not be deemed the "Beneficial Owner" of, or to
"beneficially own," (A) securities tendered pursuant to a tender or
exchange offer made by such Person or any of such Person's Affiliates
or Associates until such tendered securities are accepted for purchase
or exchange, or (B) securities issuable upon exercise of Rights at any
time prior to the occurrence of a Triggering Event, or (C) securities
issuable upon exercise of Rights from and after the occurrence of a
Triggering Event which Rights were acquired by such Person or any of
such Person's Affiliates or Associates prior to the Distribution Date
or pursuant to Section 3(a) or Section 22 hereof (the "Original
Rights") or pursuant to Section 11(i) hereof in connection with an
adjustment made with respect to any Original Rights;
(ii) that such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or dispose
of or has "beneficial ownership" of (as determined pursuant to Rule
13d-3 or any successor regulation of the General Rules and Regulations
under the Exchange Act), including pursuant to any agreement,
arrangement or understanding, whether or not in writing; provided,
however, that a Person shall not be deemed the "Beneficial Owner" of,
or to "beneficially own," any security under this subparagraph (ii) as
a result of an agreement, arrangement or
<PAGE>
understanding to vote such security if such agreement, arrangement or
understanding: (A) arises solely from a revocable proxy given in
response to a public proxy or consent solicitation made pursuant to,
and in accordance with, the applicable provisions of the General Rules
and Regulations under the Exchange Act, and (B) is not also then
reportable by such Person on Schedule 13D under the Exchange Act (or
any comparable or successor report); or
(iii) that are beneficially owned, directly or indirectly, by any
other Person (or any Affiliate or Associate thereof) with which such
Person (or any of such Person's Affiliates or Associates) has any
agreement, arrangement or understanding (whether or not in writing),
for the purpose of acquiring, holding, voting (except pursuant to a
revocable proxy as described in the proviso to subparagraph (ii) of
this paragraph (d)) or disposing of any voting securities of the
Company; provided, however, that nothing in this paragraph (d) shall
cause a person engaged in business as an underwriter of securities to
be the "Beneficial Owner" of, or to "beneficially own," any securities
acquired through such person's participation in good faith in a firm
commitment underwriting until the expiration of forty days after the
date of such acquisition.
Notwithstanding the foregoing, (A) a Person shall be deemed the "Beneficial
Owner" of, or to "beneficially own," securities subject to the Amended and
Restated Stockholders Agreement dated August 1996 among the Company and certain
of its stockholders, as now in effect or as hereafter amended, or to any
successor agreement, only to the extent that such Person would be considered the
Beneficial Owner of such securities if such agreement were not in effect;
<PAGE>
and (B) no Person shall be deemed the "Beneficial Owner" of, or to "beneficially
own," securities beneficially owned by Chase Venture Capital Associates, L.P.,
Chase Capital Partners or any successor of either that is controlled by The
Chase Manhattan Corporation as a result of controlling either of them or such
successor.
(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.
(f) "Close of business" on a date shall mean 5:00 P.M., New York City
time, on such date; provided, however, that if such date is not a 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 $.001 per
share, of the Company, except that "Common Stock" when used with reference to
any Person other than the Company shall mean the capital stock of such Person
with the greatest voting power, or the equity securities or other equity
interest having power to control or direct the management, of such Person.
(h) "Continuing Director" shall mean any member of the Board of
Directors of the Company who is not an Acquiring Person or an Affiliate or
Associate of an Acquiring Person or a nominee or representative of any Acquiring
Person or any such Affiliate or Associate and who was a member of the Board of
Directors of the Company before the Stock Acquisition Date, and any successor to
a Continuing Director who is not an Acquiring Person or an Affiliate or
Associate of an Acquiring Person or nominee or representative of an Acquiring
Person or of any such Affiliate or Associate and who was
<PAGE>
recommended for election or elected to succeed the Continuing Director by a
majority of the Continuing Directors then on the Board of Directors of the
Company.
(i) "Distribution Date" shall mean the earlier of the following: (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 after the date that a tender or exchange offer by any Person
(other than the Company, any Subsidiary of the Company, any employee benefit
plan of the Company or of any Subsidiary of the Company, or any Person or entity
organized, appointed or established by the Company for or pursuant to any such
plan) is first published or sent or given within the meaning of Rule 14d-2(a) of
the General Rules and Regulations under the Exchange Act, if upon consummation
thereof, such Person would be the Beneficial Owner of 15% or more of the shares
of Common Stock then outstanding.
(j) "Person" means any individual, firm, corporation, partnership or
other entity.
(k) "Preferred Stock" means shares of the Company's Series A Junior
Participating Preferred Stock, par value $.001 per share and, to the extent that
there are not enough shares authorized to permit the full exercise of the
Rights, any other series of Preferred Stock, par value $.001 per share, of the
Company designated for such purpose containing terms substantially similar to
the terms of the Series A Junior Participating Preferred Stock.
(l) "Purchase Price" means the exercise price at which a holder of a
Right may purchase one one-thousandth of a share of Preferred Stock upon
exercise of a
<PAGE>
Right. The Purchase Price shall initially be $145.00, and shall be subject to
adjustment from time to time as provided in this Agreement.
(m) "Section 11(a)(ii) Event" means any event described in Section
11(a)(ii) of this Agreement.
(n) "Section 13 Event" means any event described in clauses (x), (y)
or (z) of Section 13(a) of this Agreement.
(o) "Stock Acquisition Date" means the first date of public
announcement (which, for purposes of this definition, includes, without
limitation, a report filed pursuant to Section 13(d) under the Exchange Act) by
the Company or an Acquiring Person that an Acquiring Person has become such.
(p) "Subsidiary" means, with reference to any Person, any corporation
of which an amount of voting securities sufficient to elect at least a majority
of the directors of such corporation is beneficially owned, directly or
indirectly, by such Person, or otherwise controlled by such Person.
(q) "Triggering Event" means any Section 11(a)(ii) Event or Section 13
Event.
Section 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company and the holders of the Rights (who,
in accordance with Section 3 hereof, shall prior to the Distribution Date also
be the holders of the Common Stock) in accordance with the terms of this
Agreement, and the Rights Agent hereby accepts such appointment. The Company may
from time to time appoint such Co-Rights Agents as it deems necessary or
desirable.
<PAGE>
Section 3. Issuance of Rights Certificates
(a) Until the Distribution Date, (i) the Rights will be evidenced
(subject to paragraph (b) of this Section 3) by the certificates for the Common
Stock registered in the names of the holders of the Common Stock (which
certificates for Common Stock shall be deemed also to be certificates for
Rights) and not by separate certificates, and (ii) 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
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. If an
adjustment in the number of Rights per share of Common Stock has been made
pursuant to Section 11(p) hereof at the time of distribution of the Right
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. On and after the Distribution Date,
the Rights will be evidenced solely by such Rights Certificates.
(b) As promptly as practicable following the Record Date, the Company
will send a copy of a Summary of Rights, in substantially the form attached
hereto as Exhibit C (the "Summary of Rights"), by first-class, postage prepaid
mail, to each record holder of the Common Stock as of the close of business on
the Record Date, at the address of
<PAGE>
such holder shown on the records of the Company. With respect to certificates
for the Common Stock outstanding as of the Record Date, until the Distribution
Date, 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 (as defined in Section 7 hereof), the transfer of any
certificates representing shares of Common Stock in respect of which Rights have
been issued shall also constitute the transfer of the Rights associated with
such shares of Common Stock.
(c) Rights shall be issued in respect of all shares of Common Stock
that 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 and, in certain circumstances as provided in Section 22 of this
Agreement, after the Distribution 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
between Wild Oats Markets, Inc. (the "Company") and Norwest Bank
Minneapolis, N.A. (the "Rights Agent") dated as of May 22, 1998
(the "Rights Agreement"), the terms of which are incorporated
herein by this reference and a copy of which is on file at the
principal offices of the Company. Under certain circumstances, as
set forth in the Rights Agreement, such Rights will be evidenced
by separate certificates and will no longer be evidenced by this
certificate. The Company will mail to the 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.
<PAGE>
With respect to such certificates containing the foregoing legend, until the
earlier of (i) the Distribution Date or (ii) the Expiration Date, the Rights
associated with the Common Stock represented by such certificates shall be
evidenced by such certificates alone and registered holders of Common Stock
shall also be the registered holders of the associated Rights, and the transfer
of any of such certificates shall also constitute the transfer of the Rights
associated with the Common Stock represented by such certificates. If the
Company acquires any Common Stock after the Record Date but before the
Distribution Date, any Rights associated with such Common Stock shall be deemed
canceled and retired so that the Company shall not be entitled to exercise any
rights associated with Common Stock that is no longer outstanding.
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 this Agreement, or as may be required to comply with any applicable law,
rule or regulation, including any rule or regulation of any stock exchange or
other trading facility on which the Rights may from time to time be listed or
traded, or to conform to usage. Subject to Section 11 and Section 22 of this
Agreement, 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-thousandths of a share of Preferred Stock as shall be set
forth therein at the Purchase Price, but the amount and type of securities
<PAGE>
purchasable upon the exercise of each Right and the Purchase Price thereof shall
be subject to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(a) or Section
22 hereof that represents Rights beneficially owned by a Person described in
Section 7(e) hereof, and any Rights Certificate issued pursuant to Section 6 or
Section 11 hereof upon transfer, exchange, replacement or adjustment of any
other Rights Certificate referred to in this sentence, shall contain (to the
extent feasible) the following legend:
The Rights represented by this Rights Certificate are
or were beneficially owned by a Person who was or became an
Acquiring Person or an Affiliate or Associate of an
Acquiring Person (as such terms are defined in the Rights
Agreement). Accordingly, this Rights Certificate and the
Rights represented hereby may become null and void in the
circumstances specified in Section 7(e) of such Agreement.
Section 5. Countersignature and Registration
(a) The Rights Certificates shall be executed on behalf of the Company
by its Chief Executive Officer, its President or any Vice President, either
manually or by facsimile signature, and shall have affixed thereto the Company's
seal or a facsimile thereof which shall be attested by the Secretary or an
Assistant Secretary of the Company, either manually or by facsimile signature.
The Rights Certificates shall be manually countersigned by the Rights Agent and
shall not be valid for any purpose unless so countersigned. If any officer of
the Company who has signed any of the Rights Certificates ceases to be such
officer of the Company before countersignature by the Rights Agent and issuance
and delivery by the Company, such Rights Certificates, nevertheless, may be
countersigned by the Rights Agent and issued and delivered by the Company with
the same force and effect as though the person who signed such Rights
Certificates had not ceased to be
<PAGE>
such officer of the Company. Any Rights Certificate may be signed on behalf of
the Company by any person who, at the actual date of the execution of such
Rights Certificate, is a proper officer of the Company to sign such Rights
Certificate, although at the date of the execution of this Rights Agreement any
such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its principal office or offices designated as the
appropriate place for surrender of Rights Certificates upon exercise or
transfer, books for registration and transfer of the Rights Certificates issued
hereunder. Such books shall show the names and addresses of the respective
holders of the Rights Certificates, the number of Rights evidenced on its face
by each of the Rights Certificates and the date of each of the Rights
Certificates.
Section 6. Transfer, Split Up, Combsination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates
(a) Subject to Sections 4(b), 7(e) and 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 9Rights Certificate or Certificates 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-thousandths of a share of Preferred Stock (or, following a Triggering Event,
Common Stock, other securities, cash or other assets, as the case may be) as the
Rights Certificate or Certificates surrendered then entitled such holder (or
former holder in the case of a transfer) to purchase. Any registered holder
desiring to transfer, split up, combine or exchange any Rights Certificate or
Certificates shall make such request in writing delivered to the Rights Agent,
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
<PAGE>
Agent designated for such purpose. Neither the Rights Agent nor the Company
shall be obligated to take any action with respect to the transfer of any such
surrendered Rights Certificate until the registered holder shall have completed
and signed the certificate contained in the form of assignment on the reverse
side of such Rights Certificate and shall have provided such additional evidence
of the identity of the Beneficial Owner (or former Beneficial Owner) or
Affiliates or Associates thereof as the Company shall reasonably request.
Thereupon the Rights Agent shall, subject to Sections 4(b), 7(e) and 14 hereof,
countersign and deliver to the Person entitled thereto a Rights Certificate or
Rights Certificates, as the case may be, as so requested. The Company may
require payment of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer, split up, combination or
exchange of Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Rights Certificate, and, in case of loss, theft or destruction, of indemnity
or security reasonably satisfactory to them, and reimbursement to the Company
and the Rights Agent of all reasonable expenses incidental thereto, and upon
surrender to the Rights Agent and cancellation of the Rights Certificate if
mutilated, the Company will execute and deliver a new Rights Certificate of like
tenor to the Rights Agent for countersignature and delivery to the registered
owner in lieu of the Rights Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights
(a) Subject to Section 7(e) hereof, the registered holder of any
Rights Certificate may exercise the Rights evidenced thereby (except as
otherwise provided herein)
<PAGE>
in whole or in part at any time after the Distribution Date upon surrender of
the Rights Certificate, with the form of election to purchase and the
certificate on the reverse side thereof duly executed, to the Rights Agent at
the principal office or offices of the Rights Agent designated for such purpose,
together with payment of the aggregate Purchase Price with respect to the total
number of one-thousandths of a share (or other securities, cash or other assets,
as the case may be) as to which such surrendered Rights are then exercisable, at
or prior to the earlier of (i) the close of business on May 5, 2008 (the "Final
Expiration Date") or (ii) the time at which the Rights are redeemed as provided
in Section 23 hereof (the earlier of (i) and (ii) being herein referred to as
the "Expiration Date").
(b) The Purchase Price for each one-thousandth of a share of Preferred
Stock pursuant to the exercise of a Right shall initially be $145.00 and shall
be subject to adjustment from time to time as provided in Sections 11 and 13(a)
hereof and shall be payable in accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing exercisable
Rights, with the form of election to purchase and the certificate duly executed,
accompanied by payment, with respect to each Right so exercised, of the Purchase
Price per one-thousandth of a share of Preferred Stock (or other shares,
securities, cash or other assets, as the case may be) to be purchased as set
forth below and an amount equal to any applicable transfer 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-thousandths of a share of Preferred Stock to be purchased
and the Company hereby irrevocably authorizes
<PAGE>
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-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. If the Company is obligated to issue other securities (including
Common Stock) of the Company, to pay cash and/or to distribute other property
pursuant to Section 11(a) hereof, the Company will make all arrangements
necessary so that such other securities, cash and/or other property are
available for distribution by the Rights Agent, if and when appropriate.
(d) If the registered holder of any Rights Certificate exercises fewer
than all the Rights evidenced thereby, a new Rights Certificate evidencing
Rights equivalent to the Rights remaining unexercised shall be issued by the
Rights Agent and delivered to, or
<PAGE>
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 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 that a majority of the
Continuing Directors has determined is part of a plan, arrangement or
understanding that has as a primary purpose or effect the avoidance of this
Section 7(e), shall become null and void without any further action and no
holder of such Rights shall have any rights whatsoever with respect to such
Rights, whether under this Agreement or otherwise. The Company shall use all
reasonable efforts to insure that this Section 7(e) and Section 4(b) hereof are
complied with, but shall have no liability to any holder of Rights Certificates
or other Person as a result of its failure to make any determinations with
respect to an Acquiring Person or its Affiliates, Associates or transferees
hereunder.
(f) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with
<PAGE>
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) of such Rights or Affiliates or
Associates thereof as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Rights Certificates. All Rights
Certificates surrendered for 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 this Agreement. The
Company shall deliver to the Rights Agent for cancellation and retirement, and
the Rights Agent shall so cancel and retire, any other Rights Certificate
purchased or acquired by the Company otherwise than upon the exercise thereof.
The Rights Agent shall deliver all canceled Rights Certificates to the Company,
or shall, at the written request of the Company and after any retention period
required by the Securities and Exchange Commission, destroy such canceled Rights
Certificates, and in such case shall deliver a certificate of destruction
thereof to the Company.
<PAGE>
Section 9. Reservation and Availability of Capital Stock.
(a) The Company covenants and agrees that it will cause to be reserved
and kept available out of its authorized and unissued shares of Preferred Stock
(and, following the occurrence of a Triggering Event, out of its authorized and
unissued shares of Common Stock and/or other securities or out of its authorized
and issued shares held in its treasury), the number of shares of Preferred Stock
(and, following the occurrence of a Triggering Event, Common Stock and/or other
securities) that, as provided in this Agreement, including Section 11(a)(iii)
hereof, will be sufficient to permit the exercise in full of all outstanding
Rights.
(b) So long as 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 shall be listed on any national
securities exchange or authorized for quotation on The Nasdaq Stock Market
("Nasdaq"), the Company shall use its best efforts to cause, from and after such
time as the Rights become exercisable, all shares reserved for such issuance to
be authorized for such quotation or to be listed on such exchange upon official
notice of issuance upon such exercise.
(c) The Company shall use its best efforts to (i) file, as soon as
practicable following the earliest date after the first occurrence of a Section
11(a)(ii) Event, 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
<PAGE>
earlier of (A) the date as of which the Rights are no longer exercisable for
such securities, and (B) the Expiration Date. The Company will also take such
action as may be appropriate under, or to ensure compliance with, the securities
or "blue sky" laws of the various states in connection with the exercisability
of the Rights. The Company may temporarily suspend, for up to 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 is no longer in effect. 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 so long as the
Company uses good faith efforts to that end. 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 has not been
obtained, the exercise thereof is not permitted under applicable law or a
registration statement has not been declared effective.
(d) The Company will take all such action as may be necessary to
ensure that all 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.
<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 that may be
payable in respect of the issuance or delivery of the Rights Certificates and of
any certificates for a number of 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
payable in respect of any transfer or delivery of Rights Certificates to a
Person other than, or the issuance or delivery 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 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 reasonable satisfaction that no such tax is due.
Section 10. Preferred Stock Record Date. Each person in whose name any
certificate for 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 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
<PAGE>
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. Adjustment of Purchase Price, Number and Kind of Shares or
Number of Rights. The Purchase Price, the number and kind of shares covered by
each Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.
(a)(i) If the Company at any time after the date of this Agreement (A)
declares a dividend on the Preferred Stock payable in shares of Preferred Stock,
(B) subdivides the outstanding Preferred Stock, (C) combines the outstanding
Preferred Stock into a smaller number of shares, or (D) issues 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 number and kind of
shares of Preferred Stock or capital stock, as the
<PAGE>
case may be, issuable on the record date for such dividend or of
the effective date of such subdivision, combination or reclassification,
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, that, if such Right had been
exercised immediately prior to such date and at a time when the Preferred
Stock transfer books of the Company were open, he would have owned upon
such exercise and been entitled to receive by virtue of such dividend,
subdivision, combination or reclassification.
(ii) If any Person becomes an Acquiring Person other than
pursuant to a transaction subject to Section 13(a) of this Agreement and
the Distribution Date occurs, then, promptly following the Distribution
Date, 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
in accordance with this Agreement, in lieu 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 number of
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, 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
<PAGE>
Common Stock on the date of such first occurrence (such number of shares,
the "Adjustment Shares").
(iii) If the number of shares of Common Stock authorized by the
Company's certificate of incorporation but not outstanding or reserved for
issuance for purposes other than upon exercise of the Rights is not
sufficient to permit the exercise in full of the Rights in accordance with
the foregoing subparagraph (ii) of this Section 11(a), the Company shall:
(A) determine the excess of (1) the value of the Adjustment Shares issuable
upon the exercise of a Right (the "Current Value") over (2) the Purchase
Price (such excess, the "Spread"), and (B) with respect to each Right, make
adequate provision to substitute for the Adjustment Shares, upon payment of
the applicable Purchase Price, (1) cash, (2) a reduction in the Purchase
Price, (3) Common Stock or other equity securities of the Company
(including, without limitation, shares, or units of shares, of preferred
stock that the Board of Directors of the Company has deemed to have the
same value as shares of Common Stock (such shares of preferred stock,
"common stock equivalents")), (4) debt securities of the Company, (5) other
assets, or (6) any combination of the foregoing, having an aggregate value
equal to the Current Value, where such aggregate value has been determined
by the Board of Directors of the Company based upon the advice of a
nationally recognized investment banking firm selected by the Board of
Directors; provided, however, if the Company shall not have made adequate
provision to deliver value pursuant to clause (B) above within 30 days
following the later of (x) the first occurrence of a Section 11(a)(ii)
Event and (y) the date on which the Company's right of redemption pursuant
to Section 23(a)
<PAGE>
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. If the Board of Directors of the Company 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 30-day period set forth above may be extended to the extent necessary,
but not more than 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 period, as it may be extended, the
"Substitution Period"). To the extent that the Company determines that some
action need be taken pursuant to the first and/or second sentences of this
Section 11(a)(iii), the Company (x) shall provide, subject to Section 7(e)
hereof, that such action shall apply uniformly to all outstanding Rights,
and (y) may suspend the exercisability of the Rights until the expiration
of the Substitution Period in order to seek any authorization of additional
shares and/or to decide the appropriate form of distribution to be made
pursuant to such first sentence and to determine the value thereof. In the
event of any such suspension, the Company shall issue a public announcement
stating that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement at such time as the suspension
is no longer in effect. For purposes of this Section 11(a)(iii), the value
of the Common Stock shall be the current market price (as determined
pursuant to Section 11(d) hereof) per share of
<PAGE>
the Common Stock on the Section 11(a)(ii) Trigger Date and the value of any
"common stock equivalent" shall be deemed to have the same value as the
Common Stock on such date.
(b) If the Company fixes 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 before such record date by a fraction, the numerator
of which is the number of shares of Preferred Stock outstanding on such record
date, plus the number of shares of Preferred Stock that the aggregate offering
price of the total number of shares of Preferred Stock and/or equivalent
preferred stock so to be offered (and/or the aggregate initial conversion price
of the convertible securities so to be offered) would purchase at such current
market price, and the denominator of which shall be the number of shares of
Preferred Stock outstanding on such record date, plus the number of additional
shares of Preferred Stock and/or equivalent preferred stock to be offered for
subscription or purchase (or into which the convertible securities so to be
offered are initially convertible). If such subscription price may
<PAGE>
be paid by delivery of consideration part or all of which may be in a form other
than cash, the value of such consideration shall be as determined in good faith
by the Board of Directors of the Company, whose determination shall be described
in a statement filed with the Rights Agent and shall be binding on the Rights
Agent and the holders of the Rights. Shares of Preferred Stock owned by or held
for the account of the Company shall not be deemed outstanding for the purpose
of any such computation. Such adjustment shall be made successively whenever
such a record date is fixed, and in the event that such rights or warrants are
not so issued, the Purchase Price shall be adjusted to be the Purchase Price
that would then be in effect if such record date had not been fixed.
(c) If the Company fixes 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 surviving or
continuing corporation) of evidences of indebtedness, cash (other than a regular
quarterly cash dividend out of the earnings or retained earnings of the
Company), assets (other than a dividend payable in Preferred Stock, but
including any dividend payable in stock other than Preferred Stock) or rights,
options or warrants (excluding those referred to in Section 11(b) hereof), the
Purchase Price to be in effect after such record date shall be determined by
multiplying the Purchase Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the current market price (as
determined pursuant to Section 11(d) hereof) per share of Preferred Stock on
such record date, less the fair market value (as determined in good faith by the
Board of Directors of the Company, whose determination shall be described in a
statement filed with the Rights Agent) of the portion of the cash, assets or
evidences of indebtedness so to be
<PAGE>
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 if such distribution is not so made, the Purchase Price shall be
adjusted to be the Purchase Price that would have been in effect if such record
date had not been fixed.
(d)(i) For the purpose of any computation hereunder, other than
computations made pursuant to Section 11(a)(iii) hereof, the "current
market price" per share of Common Stock on any date shall be deemed to be
the average of the daily closing prices per share of such Common Stock for
the 30 consecutive Trading Days (as defined below) immediately prior to
such date, and for purposes of computations made pursuant to Section
11(a)(iii) hereof, the "current market price" per share of Common Stock on
any date shall be deemed to be the average of the daily closing prices per
share of such Common Stock for the 10 consecutive Trading Days immediately
following such date; provided, however, that if the current market price
per share of the Common Stock is determined during a period following the
announcement by the issuer of such Common Stock of (A) a dividend or
distribution on such Common Stock payable in shares of such Common Stock or
securities convertible into shares of such Common Stock (other than the
Rights), or (B) any subdivision, combination or reclassification of such
Common Stock, and prior to the expiration of the requisite 30 Trading Day
or 10 Trading Day period, as set forth above, after the ex-dividend date
for such dividend or distribution, or the record date for such subdivision,
combination or reclassification,
<PAGE>
then, and in each such case, the "current market price" shall be properly
adjusted to take into account ex-dividend trading. The closing price for
each day shall be the last sale price, regular way, or, in case no such
sale takes place on such day, the average of the closing bid and asked
prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed
or admitted to trading on the New York Stock Exchange or, if the shares of
Common Stock are not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting
system with respect to securities listed on the principal national
securities exchange on which the shares of Common Stock are listed or
admitted to trading or, if the shares of Common Stock are not listed or
admitted to trading on any national securities exchange, 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 shares of Common Stock are
not quoted by any such organization, the average of the closing bid and
asked prices as furnished by a professional market maker making a market in
the Common Stock selected by the Board of Directors of the Company. If on
any such date no market maker is making a market in the Common Stock, the
fair value of such shares on such date as determined in good faith by the
Board of Directors of the Company shall be used. The term "Trading Day"
shall mean a day on which the 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 national securities exchange,
<PAGE>
a Business Day. If the Common Stock is not publicly held or not so listed
or traded, "current market price" per share shall mean the fair value per
share as determined in good faith by the Board of Directors of the Company,
whose determination shall be described in a statement filed with the Rights
Agent and shall be conclusive for all purposes.
(ii) For the purpose of any computation hereunder, the "current market
price" per share of Preferred Stock shall be determined in the same manner
as set forth above for the Common Stock in clause (i) of this Section 11(d)
(other than the last sentence thereof). If the current market price per
share of Preferred Stock cannot be determined in the manner provided above
or if the Preferred Stock is not publicly held or listed or traded in a
manner described in clause (i) of this Section 11(d), the "current market
price" per share of Preferred Stock shall be conclusively deemed to be an
amount equal to 100 (as such number may be appropriately adjusted for such
events as stock splits, stock dividends and recapitalizations with respect
to the Common Stock occurring after the date of this Agreement) multiplied
by the current market price per share of the Common Stock. If neither the
Common Stock nor the Preferred Stock is publicly held or so listed or
traded, "current market price" per share of the Preferred Stock shall mean
the fair value per share as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a
statement filed with the Rights Agent and shall be conclusive for all
purposes. For all purposes of this Agreement, the "current market price" of
one-thousandth of a share of
<PAGE>
Preferred Stock shall equal the "current market price" of one share of
Preferred Stock divided by 100.
(e) Notwithstanding anything in this Agreement to the contrary,
no adjustment in the Purchase Price shall be required unless such adjustment
would require an increase or decrease of at least one percent in the Purchase
Price; provided, however, that any adjustments that by reason of this Section
11(e) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Section 11
shall be made to the nearest cent or to the nearest ten-thousandth of a share of
Common Stock or other share or millionth of a share of Preferred Stock, as the
case may be. Notwithstanding the first sentence of this Section 11(e), any
adjustment required by this Section 11 shall be made no later than the earlier
of (i) three years from the date of the transaction that 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
becomes entitled to receive any shares of capital stock other than Preferred
Stock, 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 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 after any
adjustment of the Purchase Price hereunder shall evidence the right to purchase,
at the adjusted Purchase Price, the number of one-thousandths of a share of
Preferred Stock purchasable from time to
<PAGE>
time hereunder upon exercise of the Rights, all subject to further adjustment as
provided herein.
(h) Unless the Company shall have exercised its election as
provided in Section 11(i), upon each adjustment of the Purchase Price as a
result of the calculations made in Sections 11(b) and (c), each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of
one-thousandths of a share of Preferred Stock (calculated to the nearest
one-millionth) obtained by (i) multiplying (x) the number of 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-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-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
ten-thousandth) obtained by dividing the Purchase Price in effect immediately
prior to adjustment of the Purchase Price by the Purchase Price in effect
immediately after adjustment of the Purchase Price. The Company shall make a
public announcement of its election to
<PAGE>
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 eleven (11)
days later than the date of the public announcement. If Rights Certificates have
been issued, upon each adjustment of the number of Rights pursuant to this
Section 11(i), the Company shall, as promptly as practicable, cause to be
distributed to holders of record of Rights Certificates on such record date
Rights Certificates evidencing, subject to Section 14 hereof, the additional
Rights to which such holders shall be entitled as a result of such adjustment,
or, at the option of the Company, shall cause to be distributed to such holders
of record in substitution and replacement for the Rights Certificates held by
such holders prior to the date of adjustment, and upon surrender thereof, if
required by the Company, new Rights Certificates evidencing all the Rights to
which such holders shall be entitled after such adjustment. Rights Certificates
so to be distributed shall be issued, executed and countersigned in the manner
provided for herein (and may bear, at the option of the Company, the adjusted
Purchase Price) and shall be registered in the names of the holders of record of
Rights Certificates on the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase
Price or the number of 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-thousandth
of a share and the number of one-thousandths of a share that were expressed in
the initial Rights Certificates issued hereunder.
<PAGE>
(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-thousandths of a share of Preferred Stock issuable upon exercise of the
Rights, the Company shall take any corporate action that may, in the opinion of
its counsel, be necessary for the Company validly to issue fully paid and
nonassessable such number of one-thousandths of a share of Preferred Stock at
such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised after such record date
the number of one-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-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
<PAGE>
any shares
of Preferred Stock at less than the current market price, (iii) issuance wholly
for cash of shares of Preferred Stock or securities that by their terms are
convertible into or exchangeable for shares of Preferred Stock, (iv) stock
dividends or (v) issuance of rights, options or warrants referred to in this
Section 11, hereafter made by the Company to holders of its Preferred Stock
shall not be taxable to such stockholders.
(n) The Company covenants and agrees that it shall not, at any
time after the Distribution Date, (i) consolidate with or merge with or into any
other Person (other than a Subsidiary of the Company in a transaction that
complies with Section 11(o) hereof), or (ii) sell or transfer (or permit any
Subsidiary to sell or transfer), in one transaction, or a series of related
transactions, assets or earning power aggregating more than 50% of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to any
other Person or Persons (other than the Company and/or any of its Subsidiaries
in one or more 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 that 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 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
<PAGE>
Subsidiary to take) any action if at the time such action is taken it is
reasonably foreseeable that such action will diminish substantially or eliminate
the benefits intended to be afforded by the Rights.
(p) Notwithstanding anything in this Agreement to the contrary,
if the Company at any time after the Declaration Date and before the
Distribution Date (i) declares a dividend on the outstanding shares of Common
Stock payable in shares of Common Stock, (ii) subdivides the outstanding shares
of Common Stock, or (iii) combines the outstanding shares of Common Stock into a
smaller number of shares, the number of Rights associated with each share of
Common Stock then outstanding, or issued or delivered thereafter but prior to
the Distribution Date, shall be proportionately adjusted so that the number of
Rights associated with each share of Common Stock following any such event shall
equal the result obtained by multiplying the number of Rights associated with
each share of Common Stock immediately prior to such event by a fraction, the
numerator of which shall be the total number of shares of Common Stock
outstanding immediately prior to the occurrence of the event and the denominator
of which shall be the total number of shares of Common Stock outstanding
immediately following the occurrence of such event.
Section 12. Certificate of Adjusted Purchase Price or Number of
Shares.Whenever an adjustment is made as provided in Section 11 or Section 13
hereof (other than adjustments occurring prior to the Distribution Date), the
Company shall (a) promptly prepare a certificate setting forth such adjustment
and a brief statement of the facts accounting for such adjustment, (b) promptly
file with the Rights Agent, and with each transfer agent for the Preferred Stock
and the Common Stock, a copy of such certificate, and (c) mail a brief
<PAGE>
summary thereof to each holder of a Rights Certificate in accordance with
Section 26 hereof. Promptly after the Distribution Date, the Company shall
comply with the foregoing for any adjustment that occurred prior to the
Distribution Date. The Rights Agent shall be fully protected in relying on any
certificate delivered by the Company pursuant to this Section 12 and on any
adjustment therein contained.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning
Power.
(a) If, following the Stock Acquisition Date, directly or
indirectly, (x) the Company shall consolidate with, or merge into, any other
Person (other than a Subsidiary of the Company in a transaction that 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 that 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 or earning power aggregating more than
50% of the assets or earning power of the Company and its Subsidiaries (taken as
a whole) to any Person or Persons (other than the Company or any Subsidiary of
the Company in one or more transactions each of which complies with Section
11(o) hereof), then, and in each such case (except as contemplated by Section
13(d) hereof), proper provision shall be made so that: (i)
<PAGE>
each holder of a Right, except as provided in Section 7(e) hereof, shall
thereafter have the right to receive, upon the exercise thereof at the then
current Purchase Price in accordance with the terms of this Agreement, such
number of validly authorized and issued, fully paid, non-assessable and freely
tradeable shares of Common Stock of the Principal Party (as defined below), 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-thousandths of a share of Preferred
Stock for which a Right is 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-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
<PAGE>
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) 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 receives the
greatest portion of the assets 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 or 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.
<PAGE>
(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 that have not been issued or
reserved for issuance to permit the exercise in full of the Rights in accordance
with this Section 13 and unless prior thereto the Company and such 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) deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates that
comply in all respects with the requirements for registration on Form
10 under the Exchange Act. This Section 13 shall similarly apply to
successive mergers or consolidations or sales or other transfers. If a
Section 13 Event occurs at any time after the occurrence of a Section
11(a)(ii) Event, the Rights that have not theretofore been exercised
shall thereafter become exercisable in the manner described in Section
13(a), subject to Section 7(e).
<PAGE>
Section 14. Fractional Rights and Fractional Shares
(a) The Company shall not be required to issue fractions of Rights,
except prior to the Distribution Date as provided in Section 11(p) hereof, or to
distribute Rights Certificates that evidence fractional Rights. After the
Distribution Date, in lieu of such fractional Rights, there shall be paid to the
registered holders of the Rights Certificates with regard to which such
fractional Rights would otherwise be issuable, an amount in cash equal to the
same fraction of the current market value of a whole Right. For purposes of this
Section 14(a), the current market value of a whole Right shall be the closing
price of the Rights for the Trading Day immediately prior to the date on which
such fractional Rights would have been otherwise issuable. The closing price of
the Rights for any day shall be the last sale price, regular way, or, in case no
such sale takes place on such day, the average of the closing bid and asked
prices, regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Rights are not listed or
admitted to trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange 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
<PAGE>
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 shall be as determined in
good faith by the Board of Directors of the Company.
(b) The Company shall not be required to issue fractions of shares of
Preferred Stock (other than integral multiples of one-thousandths of a share of
Preferred Stock) upon exercise of the Rights or to distribute certificates that
evidence fractional shares of Preferred Stock (other than integral multiples of
one-thousandths of a share). In lieu of fractional shares of Preferred Stock
that are not integral multiples of one-thousandths of a share, 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-thousandths of a share of Preferred Stock. For
purposes of this Section 14(b), the current market value of one-thousandths of a
share of Preferred Stock shall be 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 that evidence fractional shares of
Common Stock. In lieu of fractional shares of Common Stock, the Company may pay
to the registered holders of Rights Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same fraction of the
current market value of one share of Common Stock. For purposes of this Section
14(c), the current market value of one share of Common Stock shall be the
<PAGE>
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) Each 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). 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, on his own behalf and for his own benefit,
enforce, and may institute and maintain any suit, action or proceeding against
the Company to enforce, or otherwise act in respect of, his right to exercise
the Rights evidenced by such Rights Certificate in the manner provided in such
Rights Certificate and in this Agreement. Without limiting the foregoing or any
remedies available to the holders of Rights, it is specifically acknowledged
that the holders of Rights would not have an adequate remedy at law for any
breach of this Agreement and shall be entitled to specific performance of the
obligations hereunder and injunctive relief against actual or threatened
violations of 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:
<PAGE>
(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 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, and neither the
Company nor the Rights Agent, subject to the last sentence of Section 7(e)
hereof, shall be affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Rights Agent shall have any liability to any holder
of a Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority, prohibiting or otherwise restraining
performance of such
<PAGE>
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-thousandths of a
share of Preferred Stock or any other securities of the Company that 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 have been exercised in accordance
with the provisions hereof.
Section 18. Concerning the Rights Agent.
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
disbursements and other 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, suit, action, proceeding or
expense, incurred without negligence, bad faith or willful misconduct on the
part of the Rights
<PAGE>
Agent, for any action taken or suffered by the Rights Agent in connection with
the acceptance and administration of this Agreement and the exercise and
performance of its duties hereunder, including the costs and expenses of
defending against and appealing any claim of liability arising therefrom,
directly or indirectly.
(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 acceptance and administration of this Agreement or the exercise and
performance of its duties hereunder in reliance upon any Rights Certificate or
certificate for Preferred Stock, 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,
instruction or other paper or document believed by it to be genuine and to be
signed, executed and, where necessary, verified or acknowledged, by the proper
Person or Persons, or otherwise upon the advice of counsel as set forth in
Section 21 hereof.
Section 19. Merger or Consolidation or Change of Name of Rights Agent
(a) Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Rights Agent
or any successor Rights Agent shall be a party, or any corporation succeeding to
the corporate trust or stockholder 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, provided that such corporation would be
eligible for appointment as a successor Rights Agent under the provisions of
Section 22
<PAGE>
hereof. In case at the time such successor Rights Agent shall succeed to the
agency created by this Agreement, any of the Rights Certificates shall have been
countersigned but not delivered, any such successor Rights Agent may adopt the
countersignature of the predecessor Rights Agent and deliver such Rights
Certificates so countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor or in
the name of the successor Rights Agent; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates in
this Agreement.
(b) In case at any time the name of the Rights Agent shall be changed
and at such time any of the Rights Certificates shall have been countersigned
but not delivered, the Rights Agent may adopt the countersignature under its
prior name and deliver Rights Certificates so countersigned; and in case at that
time any of the Rights Certificates shall not have been countersigned, the
Rights Agent may countersign such Rights Certificates either in its prior name
or in its changed name; and in all such cases such Rights Certificates shall
have the full force provided in the Rights Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent shall have only the
duties and obligations expressly set forth in this Agreement. There shall be no
implied duties or obligations of the 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 selected by it
(who may be legal counsel for the Company), and the advice of such counsel shall
be full and
<PAGE>
complete authorization and protection to the Rights Agent as to any action
taken, suffered or omitted by it in good faith and in accordance with such
advice.
(b) Whenever in the administration, exercise and 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, suffering or omitting any
action hereunder, such fact or matter (unless other evidence in respect thereof
be herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the Chairman of the Board, the
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 any such certificate shall be full
authorization and protection to the Rights Agent for any action taken, suffered
or omitted in good faith by it under the provisions of this Agreement in
reliance upon such certificate.
(c) The Rights Agent shall not be liable or responsible hereunder to
the Company except for its own negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable or responsible for or by
reason of any of the representations, warranties, statements of fact or recitals
contained in this Agreement or in the Rights Certificates (except as to the fact
that it has countersigned the Rights Certificates) or be required to verify the
same, but all such representations, warranties, statements and recitals are and
shall be deemed to have been made by the Company only.
<PAGE>
(e) The Rights Agent shall not have any liability or responsibility in
respect of the legality, validity or enforceability of this Agreement or the
execution and delivery hereof (except the due execution hereof by the Rights
Agent) or in respect of the legality, validity, enforceability or execution of
any Rights Certificate (except its countersignature thereof); nor shall it be
liable or 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 liable
or responsible for any adjustment including, without limitation, as required
under the provisions of Section 11 or 13 hereof (including any adjustment which
results in the Rights becoming void) or liable or responsible for the manner,
method or amount of any such adjustment or the ascertaining of the existence of
facts that would require any such adjustment (except with respect to the
exercise of Rights evidenced by Rights Certificates after receipt of a notice or
certificate pursuant to Section 12 describing any such adjustment); nor shall it
by any act hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any shares of Preferred Stock or other
securities to be issued pursuant to this Agreement or any Rights Certificate or
as to whether any shares of Preferred Stock or other securities will, when so
issued, be validly authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions or directions with respect to the administration of this Agreement
and the
<PAGE>
execution and performance of its duties hereunder and certificates delivered
pursuant to any provision hereof from 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
is authorized to apply to such officers for advice or instructions in connection
with its duties, and it shall not be liable or responsible for any action taken,
suffered or omitted 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
such instructions.
(h) The Rights Agent and any affiliate, 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 the Rights
Agent were not Rights Agent under this Agreement. Nothing herein shall preclude
the Rights Agent or any such affiliate, stockholder, director, officer or
employee 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 liable or
responsible for any act, omission, default, neglect or misconduct of any such
attorneys or agents or for any loss or damages to the Company or to the holders
of the Rights resulting from any such act, omission, default, neglect or
misconduct, provided reasonable care was exercised in the selection and
continued employment thereof. The Rights Agent shall not be under any duty or
<PAGE>
responsibility to insure compliance with any applicable federal or state
securities laws in connection with the issuance, transfer or exchange of the
Rights Certificates.
(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, transfer, split up, combination or exchange, 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, transfer, split up,
combination or exchange without first consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days' notice in writing mailed to the Company, and to each transfer
agent of the Common Stock and Preferred Stock, by registered or certified mail,
and to the holders of the Rights Certificates by first-class mail. The Company
may remove the Rights Agent or any successor Rights Agent upon 30 days' notice
in writing, mailed to the Rights Agent or successor Rights Agent, as the case
may be, and to each transfer agent of the Common Stock and Preferred Stock, by
registered or certified mail, and to the holders of the Rights Certificates by
first-class mail. If the Rights Agent shall resign or be removed or shall
otherwise become incapable of acting,
<PAGE>
the Company shall appoint a successor to the Rights Agent. If the Company shall
fail to make such appointment within 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 may apply to any court of competent jurisdiction for the appointment
of a new Rights Agent. Any successor Rights Agent, whether appointed by the
Company or by such a court, shall be a corporation organized and doing business
under the laws of the United States or of the State of Colorado, in good
standing, having a principal office in the State of Colorado, which is
authorized under such laws to exercise corporate trust powers and is subject to
supervision or examination by federal or state authority and which has at the
time of its appointment as Rights Agent a combined capital and surplus of at
least $100,000,000. After appointment, the successor Rights Agent shall be
vested with the same powers, rights, duties and responsibilities as if it had
been originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment, the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Stock and the Preferred Stock, and mail a notice thereof in writing
to the registered holders of the Rights Certificates. Failure to give any notice
provided for in this Section 21, however, or any defect therein, shall
<PAGE>
not affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.
Section 22. Issuance of New Rights Certificates. Notwithstanding any of the
provisions of this Agreement or of the Rights to the contrary, the Company may,
at its option, issue new Rights Certificates evidencing Rights in such form as
may be approved by its Board of Directors to reflect any adjustment or change in
the Purchase Price and the number or kind or class of shares or other securities
or property purchasable under the Rights Certificates made in accordance with
this Agreement. In addition, in connection with the issuance or sale of shares
of Common Stock following the Distribution Date and prior to the redemption or
expiration of the Rights, the Company (a) shall, with respect to shares of
Common Stock so issued or sold pursuant to the exercise of stock options or
warrants or under any employee plan or arrangement, or upon the exercise,
conversion or exchange of securities hereafter issued by the Company, and (b)
may, in any other case, if deemed necessary or appropriate by the Board of
Directors of the Company, issue Rights Certificates representing the appropriate
number of Rights in connection with such issuance or sale; provided, however,
that (i) no such Rights Certificate shall be issued 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.
<PAGE>
Section 23. Redemption and Termination
(a) The Board of Directors of the Company may, at its option, at any
time before the earlier of (i) the close of business on the tenth day following
the Stock Acquisition Date (or, if the Stock Acquisition Date occurs before the
Record Date, the close of business on the tenth day after the Record Date), or
(ii) the Final Expiration Date, redeem all but not less than all the then
outstanding Rights at a redemption price of $.001 per Right (such redemption
price being hereinafter referred to as the "Redemption Price"). Notwithstanding
the foregoing, if the Board of Directors of the Company authorizes redemption of
the Rights in either of the circumstances set forth in clauses (i) or (ii)
below, then there must be Continuing Directors then in office and such
authorization shall require the concurrence of a majority of such Continuing
Directors: (i) such authorization occurs on or after the time a Person becomes
an Acquiring Person, or (ii) such authorization occurs on or after the date of a
change (resulting from a proxy or consent solicitation) in a majority of the
directors in office at the commencement of such solicitation if any Person who
is a participant in such solicitation has stated (or, if upon the commencement
of such solicitation, a majority of the Board of Directors of the Company has
determined in good faith) that such Person (or any of its Affiliates or
Associates) intends to take, or may consider taking, any action that would
result in such Person becoming an Acquiring Person or that would cause the
occurrence of a Triggering Event. Notwithstanding anything in this Agreement to
the contrary, the Rights shall not be exercisable at any time when the Company
may redeem them pursuant to this Section 23. 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
<PAGE>
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.
Notwithstanding anything herein to the contrary, the Rights shall not be
exercisable pursuant to Section 11(a)(ii) prior to the expiration of the
Company's right of redemption hereunder.
(b) At such time as specified in the resolution of the Board of
Directors ordering redemption of the Rights (or at such time as is determined by
a committee of the Board of Directors authorized by the Board of Directors to
specify such time at the time of the Board's adoption of such resolution or
immediately upon such action of the Board of Directors if the Board does not
specify a date or so empower a committee) 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 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.
Any failure to give or inadequacy of such notice shall not affect the validity
of the redemption. The Redemption Price shall be payable to those Persons who
are record holders of the Rights at the close of business on a date
<PAGE>
determined by the Board of Directors, which date shall be at least eleven days
after the Board of Directors orders redemption of the Rights.
Section 24. Exchange
(a) The Board of Directors of the Company may, at its option, at
anytime 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 11(a)(ii) 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 to as the "Exchange Ratio"). Notwithstanding the foregoing,
the Board of Directors shall not be empowered to effect such exchange at any
time after any Person (other than the Company, any Subsidiary of the Company,
any employee benefit plan of the Company or any such Subsidiary, or any entity
holding Common Stock for or pursuant to the terms of any such plan), together
with all Affiliates and Associates of such Person, becomes the Beneficial Owner
of a majority 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 share 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
<PAGE>
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 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
11(a)(ii) 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 common stock equivalents for shares of
Common Stock exchangeable for Rights, at the initial rate of one one-thousandth
of a share of Preferred Stock (or an appropriate number of common stock
equivalents) for each share of Common Stock, as appropriately adjusted to
reflect adjustments in the voting rights of the Preferred Stock pursuant to the
terms thereof, so that the fraction of a Preferred Stock delivered in lieu of
each share of Common Stock shall have the same voting rights as one share of
Common Stock.
(d) In the event that there shall not be sufficient shares of Common
Stock, Preferred Stock or common stock equivalents authorized by the Company's
certificate of incorporation and not outstanding or subscribed for, or reserved
or otherwise committed for issuance for purposes other than upon exercise of
Rights, to permit any exchange of Rights as contemplated in accordance with this
Section 24, the Company shall take all such action as
<PAGE>
may be necessary to authorize additional shares of Common Stock, Preferred Stock
or common stock equivalents for issuance upon exchange of the Rights.
(e) The Company shall not be required to issue fractions of a share of
Common Stock or to distribute certificates which evidence fractional shares of
Common Stock. In lieu of such fractional shares of Common Stock, the Company
shall pay to the registered holders of the Right 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 per share market value
of a whole share of Common Stock. For the purposes of this paragraph (e), the
current per share 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, 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
<PAGE>
Subsidiary of the Company in a transaction that 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 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 20 days prior to the record date for
determining holders of the shares of Preferred Stock for purposes of such
action, and in the case of any such other action, at least 20 days prior to the
date of the taking of such proposed action or the date of participation therein
by the holders of the shares of Preferred Stock, whichever shall be the earlier.
(b) In case any 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 occurrence of such event, which shall specify
the event and the consequences of the event to
<PAGE>
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 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 and when sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Rights Agent) as follows:
Wild Oats Markets, Inc.
1645 Broadway
Boulder, Colorado 80302
Attn: Secretary
Subject to Section 21, any notice or demand authorized by this Agreement to be
given or made by the Company or by the holder of any Rights Certificate to or on
the Rights Agent shall be sufficiently given or made if and when sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Company) as follows:
Norwest Bank Minneapolis, N.A.
161 North Concord Exchange
South St. Paul, Minnesota 55075-0738
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
before the Distribution Date, to the holder of certificates representing shares
of Common Stock) shall be sufficiently given or made if and when 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, the
Company from time to time may, in its sole and absolute discretion, and the
Rights Agent
<PAGE>
shall if the Company so directs, supplement or amend any provision of this
Agreement without the approval of any holder of Rights. From and after the
Distribution Date and subject to the penultimate sentence of this Section 27,
the Company may, and the Rights Agent shall if the Company so directs,
supplement or amend this Agreement without the approval of any holders of Rights
(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,
or (iii) to shorten or lengthen any time period hereunder (which lengthening or
shortening, following the first occurrence of an event set forth in clauses (i)
or (ii) of the second sentence of Section 23(a) hereof, shall be effective only
if there are Continuing Directors and shall require the concurrence of a
majority of such Continuing Directors); provided, however, that this Agreement
may not be supplemented or amended to lengthen, pursuant to clause (iii) of this
sentence, (A) a time period relating to when the Rights may be redeemed at such
time as the Rights are not then redeemable, or (B) any other time period unless
such lengthening is for the purpose of protecting, enhancing or clarifying the
rights of holders of the Rights. Upon the delivery of a certificate from an
appropriate officer of the Company stating that the proposed supplement or
amendment is in compliance with this Section 27, the Rights Agent shall execute
such supplement or amendment. Notwithstanding anything herein to the contrary,
no supplement or amendment shall be made after the Distribution Date that would
adversely affect the basic economic terms of the Rights or would have the effect
of making the Rights redeemable. 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.
<PAGE>
Section 28. Successors. All the covenants and provisions of this Agreement
by or for the benefit of the Company or the Rights Agent shall bind and inure to
the benefit of their respective successors and assigns hereunder.
Section 29. Determinations and Actions by the Board of Directors, etc. For
all purposes of this Agreement, any calculation of the number of shares of
Common Stock outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding shares of Common Stock
of which any Person is the Beneficial Owner, shall be made in accordance with
the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations
under the Exchange Act as in effect on the date of this Agreement. The Board of
Directors of the Company (with, where specifically provided for herein, the
concurrence of the Continuing Directors) shall have the exclusive power and
authority to administer this Agreement and to exercise all rights and powers
specifically granted to the Board (with, where specifically provided for herein,
the concurrence of the Continuing Directors) or to the Company, or as may be
necessary or advisable in the administration of this Agreement, including,
without limitation, the right and power to (i) interpret this Agreement, and
(ii) make all determinations deemed necessary or advisable for the
administration of this Agreement (including a determination to redeem or not
redeem the Rights or to amend the Agreement). All such actions, calculations,
interpretations and determinations (including, for purposes of clause (y) below,
all omissions with respect to the foregoing) that are done or made by the Board
(with, where specifically provided for herein, the concurrence of the Continuing
Directors) 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
<PAGE>
(y) not subject the Board or the Continuing Directors 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 of this Agreement is held by a court
of competent jurisdiction or other authority to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated; provided, however, that
notwithstanding anything in this Agreement to the contrary, if any such term,
provision, covenant or restriction is held by such court or authority to be
invalid, void or unenforceable, and the Board of Directors of the Company
determines in its good faith judgment that severing the invalid language from
this Agreement would materially adversely affect the purpose or effect of this
Agreement, the right of redemption set forth in Section 23 hereof shall be
reinstated and shall not expire until the close of business on the tenth day
following the date of such determination by the Board of Directors.
Section 32. Governing Law. This Agreement, each Right and each Rights
Certificate issued hereunder shall be deemed to be a contract made under
Delaware law and
<PAGE>
for all purposes shall be governed by and construed in accordance with Delaware
law applicable to contracts made and to be performed entirely within such state.
Section 33. Counterparts. This Agreement may be executed in any number of
counterparts, each which shall be an original, and all of which shall together
constitute a single instrument.
Section 34. Descriptive Headings. Descriptive headings of the Sections of
this Agreement are inserted for convenience only and shall not affect the
meaning of this Agreement. IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
Attest: WILD OATS MARKETS, INC.
By: /s/______________________ By: /s/_____________________________
Name: Mary Beth Lewis Name: James W. Lee
Title: Assistant Secretary Title: President
NORWEST BANK MINNEAPOLIS, N.A.
By: /s/___________________________
Name: Karri L. Van Dell
Title: Officer
<PAGE>
EXHIBIT A
FORM OF
CERTIFICATE OF DESIGNATIONS
OF
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
OF
WILD OATS MARKETS, INC.
Pursuant to Section 151 of the Delaware General Corporation Law, the
undersigned President and Secretary of Wild Oats Markets, Inc., certify that the
Board of Directors of Wild Oats Markets, Inc., adopted the following resolution
at a meeting duly called and held on May 4, 1998:
"BE IT RESOLVED, that pursuant to the authority expressly granted by the
provisions of the Amended and Restated Certificate of Incorporation of the
Corporation, the Board of Directors hereby creates and authorizes the issuance
of a series of preferred stock, par value $.001 per share of the Corporation,
and hereby fixes the designation and amount thereof and the voting powers,
preferences and relative, participating, optional and other special rights of
the shares of such series, and the qualifications, limitations or restrictions
thereof are as follows:
Section 1. Designation and Amount. The shares of such series (the "Series A
Stock") shall be designated as "Series A Junior Participating Preferred Stock"
and the number of shares constituting such series shall be 20,000.
Section 2. Dividends and Distributions.
(A) Subject to the prior and superior rights of the holders of any series
of Preferred Stock ranking prior and superior to the Series A Stock with respect
to dividends, the holders of Series A Stock shall be entitled to receive, when,
as and if declared by the Board of Directors out of funds legally available for
such purpose, quarterly dividends payable in cash on the first day of March,
June, September, and December in each year (each such date being referred to
herein as a "Quarterly Dividend Payment Date"), commencing on the first
Quarterly Dividend Payment Date after the first issuance of a share or fraction
of a share of Series A Stock, in an amount per share (rounded to the nearest
cent) equal to the greater of (a)
<PAGE>
$1.00 or (b) the product of the Adjustment Number (defined below) multiplied by
the aggregate per share amount of all cash dividends, and the Adjustment Number
multiplied by the aggregate per share amount (payable in kind) of all non-cash
dividends or other distributions other than a dividend payable in shares of
common stock or a subdivision of the outstanding shares of common stock (by
reclassification or otherwise), declared on the common stock, par value $.001
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 A Stock. As used herein, the "Adjustment Number"
shall initially be 100, but if the Corporation at any time after May 4, 1998
(the "Declaration Date") (i) declares any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivides the outstanding Common Stock, or (iii)
combines the outstanding Common Stock into a smaller number of shares, then in
each such case the Adjustment Number immediately after such event shall equal
the Adjustment Number immediately before such event multiplied 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 before such event.
(B) The Corporation shall declare a dividend or distribution on the Series
A 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, if the total dividends declared on the
Common Stock during the period between any Quarterly Dividend Payment Date and
the next subsequent Quarterly Dividend Payment Date is less than $.01 per share,
a dividend equal $1.00 per share on the Series A Stock, minus an amount per
share equal to the dividends already paid on the Series A Stock during such
period, shall nevertheless be payable on such subsequent Quarterly Dividend
Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding shares
of Series A Stock from the Quarterly Dividend Payment Date next preceding the
date of issue of such shares, unless the date of issue of such shares is prior
to the record date for the first Quarterly Dividend Payment Date, in which case
dividends on such shares shall begin to accrue from the date of issue of such
shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a
date after the record date for a quarterly dividend and before such Quarterly
Dividend Payment Date, in either of which events such dividends shall begin to
accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but
unpaid dividends shall not bear interest. Dividends paid on the Series A Stock
in an amount less than the total amount of such dividends at the time accrued
and payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding. The Board of Directors may fix a
record date for the determination of holders of shares of Series A 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.
<PAGE>
Section 3. Voting Rights. The holders of the Series A Stock shall have the
following voting rights:
(A) Each share of Series A Stock shall entitle the holder thereof to a
number of votes equal to the Adjustment Number on each matter submitted to a
vote of the stockholders of the Corporation.
(B) Except as otherwise provided herein or by law, the holders of Series A
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) If at the time of any annual meeting of stockholders for the election
of directors a default in preference dividends on the shares of the Series A
Stock shall exist, the number of directors constituting the Board of Directors
shall be increased by two, and the holders of Series A Stock (whether or not the
holders of the Series A Stock would be entitled to vote for the election of
Directors if such default in preference dividends did not exist), shall have the
right at such meeting, voting together as a single class, to the exclusion of
the holders of Common Stock, to elect two directors of the Company to fill such
newly created directorships. Such right shall continue until there are no
dividends in arrears upon the Series A Stock. Each director elected by the
holders of shares of Series A Stock (herein called a "Preferred Director") shall
continue to serve as such director for the full term for which he shall have
been elected, notwithstanding that prior to the end of such term a default in
preference dividends shall cease to exist. Any Preferred Director may be removed
by, and shall not be removed except by, the vote of the holders of record of the
outstanding shares of Series A Stock, voting together as a single class, at a
meeting of the stockholders, or of the holders of shares of Series A Stock,
called for that purpose. So long as a default in any preference dividends on the
Series A Stock shall exist, (i) any vacancy in the office of a Preferred
Director may be filled (except as provided in the following clause (ii)) by an
instrument in writing signed by the remaining Preferred Director and filed with
the corporation and (ii) in the case of the removal of any Preferred Director,
the vacancy may be filled by the vote of the holders of the outstanding shares
of Series A Stock, voting together as a single class, at the same meeting at
which such removal shall be voted. Each director appointed as aforesaid by the
remaining Preferred Director shall be deemed, for all purposes hereof, to be a
Preferred Director. Whenever the term of office of the Preferred Directors shall
end and a default in preference dividends shall no longer exist, the number of
Directors constituting the Board of Directors of the Corporation shall be
reduced by two. For the purposes hereof, a "default in preference dividends on
the Series A Stock" shall be deemed to have occurred whenever the amount of
accrued dividends upon the Series A Stock shall be equivalent to six full
quarter-yearly dividends or more, and, having so occurred such default shall be
deemed to exist thereafter until, but only until, all accrued dividends on all
shares of Series A Stock shall have been paid, or declared and set aside for
payment, to the end of the last preceding quarterly dividend.
<PAGE>
(D) Except as set forth herein, holders of Series A 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 A Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Series A Stock outstanding have been paid in full,
the Corporation shall not
(i) declare or pay dividends on, make any other distributions on, or
redeem or purchase or otherwise acquire for consideration any shares of
stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Stock;
(ii) declare or pay dividends or make any other distributions on any
shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Stock, except
dividends paid ratably on the Series A Stock and all such parity stock on
which dividends are payable or in arrears in proportion to the total
amounts to which the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration shares
of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Stock, provided
that the Corporation may at any time redeem, purchase or otherwise acquire
shares of any such parity stock in exchange for shares of any stock of the
Corporation ranking junior (either as to dividends or upon dissolution,
liquidation or winding up) to the Series A Stock;
(iv) purchase or otherwise acquire for consideration any shares of
Series A Stock except in accordance with a purchase offer made in writing
or by publication (as determined by the Board of Directors) to all holders
of such shares upon such terms as the Board of Directors 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. Re-acquired Shares. Any shares of Series A Stock purchased or
otherwise acquired by the Corporation in any manner shall be retired and
canceled promptly after such acquisition. 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
<PAGE>
Stock to be created by resolution or resolutions of the Board of Directors,
subject to the conditions and restrictions on issuance set forth herein.
Section 6. Liquidation, Dissolution or Winding Up.
(A) Upon any liquidation (voluntary or otherwise), dissolution or winding
up of the Corporation, no distribution shall be made to the holders of shares of
stock ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Stock unless, prior thereto, the holders of Series A
Stock have received, for each such share, a number of dollars equal to the
Adjustment Number, plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such payment (the
"Series A Liquidation Preference"). Following the payment of the full amount of
the Series A Liquidation Preference, no additional distributions shall be made
to the holders of Series A Stock unless, prior thereto, the holders of Common
Stock shall have received an amount per share (the "Common Adjustment") equal to
the quotient obtained by dividing (i) the Series A Liquidation Preference by
(ii) the Adjustment Number. Following the payment of the full amount of the
Series A Liquidation Preference and the Common Adjustment in respect of all
outstanding shares of Series A Stock and Common Stock, respectively, holders of
Series A Stock and holders of Common Stock shall receive their ratable and
proportionate share of the remaining assets to be distributed to them in the
ratio of the Adjustment Number to one with respect to such Preferred Stock and
Common Stock, on a per share basis, respectively.
(B) If there are not sufficient assets available to permit payment in full
of the Series A Liquidation Preference and the liquidation preferences of all
other series of preferred stock, if any, that rank on a parity with the Series A
Stock, then such remaining assets shall be distributed ratably to the holders of
such parity shares in proportion to their respective liquidation preferences. If
thereafter 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 (subject to the rights of any Preferred
Stock other than the Series A Stock).
Section 7. Consolidation, Merger, etc. If the Corporation enters 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 each such case the Series A Stock shall at
the same time be similarly exchanged or changed in an amount per share equal to
the Adjustment Number multiplied by the aggregate amount of stock, securities,
cash and/or any other property (payable in kind), as the case may be, into which
or for which each share of Common Stock is changed or exchanged.
Section 8. No Redemption. The Series A Stock shall not be redeemable.
<PAGE>
Section 9. Ranking. The Series A 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 provide
otherwise.
Section 10. Amendment. Whenever any Series A Stock is outstanding, the
Certificate of Incorporation of the Corporation shall not be amended in any
manner that would materially adversely affect the powers, preferences or special
rights of the Series A Stock without the affirmative vote of the holders of a
majority of the outstanding shares of Series A Stock, voting separately as a
class.
Section 11. Fractional Shares. Series A Stock may be issued in fractions of
a share which shall entitle the holder, in proportion to such holder's
fractional shares, to exercise voting rights, receive dividends, participate in
distributions and to have the benefit of all other rights of holders of Series A
Stock.
WILD OATS MARKETS, INC.
By: ___________________________________
Name:
Title:
By: ___________________________________
Name:
Title:
<PAGE>
EXHIBIT B
[Form of Rights Certificate]
Certificate No. R- Rights
EXPIRES ON MAY 5, 2008 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 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.]<F1>
Rights Certificate
WILD OATS MARKETS, INC.
This certifies that __________________, or registered assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms of the Rights Agreement dated as of May
22, 1998 (the "Rights Agreement") between Wild Oats Markets, Inc. (the
"Company"), and Norwest Bank Minneapolis, N.A. (the "Rights Agent"), to purchase
from the Company at any time prior to 5:00 P.M. (New York City time) on May 5,
2008, at the office or offices of the Rights Agent designated for such
<F1>The portion of the legend in brackets shall be inserted in
place of the preceding sentence if applicable.
<PAGE>
purpose, or its successor as Rights Agent, one-thousandths of a fully paid,
non-assessable share of Series A Junior Participating Preferred Stock (the
"Preferred Stock") of the Company, at a purchase price of $145.00 per
one-thousandths 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 that 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 Distribution Date (as defined in the Rights
Agreement), based on the Preferred Stock as constituted at such date.
Upon the occurrence of a Section 11(a)(ii) Event (as 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 defined in the Rights Agreement), (ii) a transferee of any
such Acquiring Person, Associate or Affiliate, or (iii) under certain
circumstances specified in the Rights Agreement, a transferee of a person who,
after such transfer, became an Acquiring Person, or an Affiliate or Associate of
an Acquiring Person, such Rights shall become null and void and no holder hereof
shall have any right with respect to such Rights from and after the occurrence
of such 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 that may be purchased upon
exercise of
<PAGE>
the Rights evidenced by this Rights Certificate are subject to modification and
adjustment upon the occurrence of certain events.
This Rights Certificate is subject to the terms of the Rights Agreement,
which terms are hereby incorporated herein by reference and made a part hereof
and to which Rights Agreement reference is 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 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-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 is 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 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),
<PAGE>
and (ii) the Final Expiration Date. Under certain circumstances set forth in the
Rights Agreement, the decision to redeem shall require the concurrence of a
majority of the Continuing Directors (as defined in the Rights Agreement).
No fractional shares of Preferred Stock will be issued upon the exercise of
any Right or Rights evidenced hereby (other than 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.
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 issuable upon the exercise hereof, nor
shall anything contained in the Rights Agreement or herein be construed to
confer upon the holder hereof, as such, any of the rights of a stockholder of
the Company or any right to vote for the election of directors or upon any
matter submitted to stockholders at any meeting thereof, or to give or withhold
consent to any corporate action, or to receive notice of meetings or other
actions affecting stockholders (except as provided in the Rights Agreement), or
to receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by this Rights Certificate shall have been exercised as
provided in the Rights Agreement.
This Rights Certificate shall not be valid for any purpose unless
countersigned by the Rights Agent.
<PAGE>
WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal.
Dated as of __________________________.
ATTEST: WILD OATS MARKETS, INC.
_____________________________________ By:__________________________________
Countersigned:
NORWEST BANK MINNEAPOLIS, N.A.
By:__________________________________
Authorized Signature
<PAGE>
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder
to transfer the Rights Certificate.)
FOR VALUE RECEIVED, the undersigned 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
Medallion Signature Guarantee:
<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
in the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it [ ]
did [ ] did not acquire the Rights evidenced by this Rights Certificate from any
Person who is, was or subsequently became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.
Dated:______________________
__________________________________________
Signature
Medallion Signature Guarantee:
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.
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise
Rights represented by the Rights Certificate.)
To: Wild Oats Markets, Inc.:
The undersigned hereby irrevocably elects to exercise ________________
Rights represented by this Rights Certificate to purchase the shares of
Preferred Stock issuable upon the exercise of the Rights (or such other
securities of the Company or of any other person that may be issuable upon the
exercise of the Rights) and requests that certificates for such shares be issued
in the name of and delivered to:
Please insert social security
or other identifying number
_________________________________
(Please print name and address)
_________________________________
_________________________________
_________________________________
<PAGE>
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
Medallion Signature Guarantee:
<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 subsequently became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.
Dated:____________________
____________________________________________
Signature
Medallion Signature Guarantee:
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.
<PAGE>
DO NOT DESTROY. ATTACH TO
YOUR WILD OATS MARKETS, INC.
STOCK CERTIFICATE.
EXHIBIT C
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED STOCK
On May 5, 1998, the Board of Directors of Wild Oats Markets, Inc. (the
"Company"), declared a dividend distribution of one Right for each outstanding
share of the Company's Common Stock to stockholders of record at the close of
business on May 22, 1998 (the "Record Date"). Each Right entitles the registered
holder to purchase from the Company a unit consisting of one one-thousandth of a
share (a "Unit") of Series A Junior Participating Preferred Stock, par value
$.001 per share (the "Preferred Stock"), at a Purchase Price of $145.00 per
Unit, subject to adjustment. The description and terms of the Rights are set
forth in a Rights Agreement (the "Rights Agreement") between the Company and
Norwest Bank Minneapolis, 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. In general, 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, subject to certain exceptions (an "Acquiring Person"), has
acquired, or obtained the right to acquire, beneficial ownership of 15% or more
of the outstanding shares of Common Stock (the "Stock Acquisition Date"), or
(ii) 10 business days following the commencement of a tender offer or exchange
offer that would result in such a person or group beneficially owning 15% or
more of such outstanding shares of Common Stock. 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 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 May 5, 2008, unless earlier redeemed by the Company
as described below.
As soon as practicable after the Distribution Date, Rights Certificates
will be mailed to holders of record of the Common Stock as of the close of
business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the
<PAGE>
Rights. Shares of Common Stock issued after the Distribution Date will be issued
with Rights only upon exercise or conversion of securities issued prior thereto
unless the Board of Directors determines otherwise.
If, at any time after the Distribution Date, any person becomes an
Acquiring Person each holder of a Right will thereafter have the right to
receive, upon exercise, Common Stock (or, in certain circumstances, cash,
property or other securities of the Company) having a value equal to two times
the exercise price of the Right. Notwithstanding any of the foregoing, all
Rights that are, or (under certain circumstances specified in the Rights
Agreement) were, beneficially owned by any Acquiring Person will be null and
void. However, Rights are not exercisable in any event until such time as the
Rights are no longer redeemable by the Company as set forth below.
For example, at an exercise price of $145 per Right, each Right not owned
by an Acquiring Person (or by certain related parties) following an event set
forth in the immediately preceding paragraph would entitle its holder to
purchase $290 worth of Common Stock (or other consideration, as noted above) for
$145. Assuming that the Common Stock had a per share value of $72.50 at such
time, the holder of each valid Right would be entitled to purchase four shares
of Common Stock for $145.
If at any time following the Stock Acquisition Date (i) the Company is
acquired in a merger or other business combination transaction in which the
Common Stock is changed or exchanged or in which the Company is not the
surviving corporation, or (ii) 50% or more of the Company's assets or earning
power is sold or transferred, each holder of a Right (except those Rights owned
by an Acquiring Person and voided as set forth above) shall thereafter have the
right to receive, upon exercise, common stock of the acquiring company having a
value equal to two times the exercise price of the Right. The events set forth
in this paragraph and in the second preceding paragraph are referred to as the
"Triggering Events."
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 (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).
At any time after any person or group becomes an Acquiring Person and prior
to the acquisition by the Acquiring Person of 50% or more of the outstanding
Common Stock, the Board of Directors of the Company may exchange the Rights
(other than Rights owned by the Acquiring Person, which will have become void),
in whole or in part, at an exchange ratio of one share of Common Stock per Right
(subject to adjustment).
<PAGE>
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. No fractional Units will be issued and, in lieu thereof, an adjustment in
cash will be made based on the market price of the Preferred Stock on the last
trading date prior to the date of exercise.
At any time until ten days following the Stock Acquisition Date, the
Company may redeem the Rights in whole, but not in part, at a price of $.001 per
Right. Under certain circumstances set forth in the Rights Agreement, the
decision to redeem shall require the concurrence of a majority of the Continuing
Directors. Immediately upon the action of the Board of Directors ordering
redemption of the Rights or at such other time as may be specified by the Board
when it orders redemption, with, where required, the concurrence of the
Continuing Directors, the Rights will terminate and the only right of the
holders of Rights will be to receive the $.001 redemption price.
The term "Continuing Directors" means any member of the Board of Directors
of the Company who was a member of the Board prior to the Stock Acquisition
Date, and any person who is subsequently elected to the Board if such person is
recommended or approved by a majority of the Continuing Directors, but shall not
include an Acquiring Person, or an affiliate or associate of an Acquiring
Person, or any representative of the foregoing entities.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends. While the distribution of the Rights will not
be taxable to stockholders or to the Company, stockholders may, depending upon
the circumstances, recognize taxable income if the Rights become exercisable for
Common Stock (or other consideration) of the Company or for common stock of the
acquiring company as set forth above.
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 Rights Agreement may be amended by the Board (in certain
circumstances, with the concurrence of the Continuing Directors) in order to
cure any ambiguity, to make other changes that do not adversely affect the basic
economic terms of the Rights, or to shorten or lengthen any time period under
the Rights Agreement; provided, however, that no amendment to adjust the time
period governing redemption shall be made at a time when the Rights are not
redeemable.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A, dated
May 21, 1998. A copy of the Rights Agreement is available free of charge from
the Company. This summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement,
which is incorporated herein by reference.
