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COMMISSION FILE NO. 022972
FORM 8-A
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(B) OR (G) OF THE
SECURITIES EXCHANGE ACT OF 1934
CELLSTAR CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 75-2479727
(STATE OF INCORPORATION) (IRS EMPLOYER IDENTIFICATION NO.)
1730 BRIERCROFT COURT, CARROLLTON, TEXAS 75006
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH
TO BE SO REGISTERED EACH CLASS IS TO BE REGISTERED
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NONE NONE
IF THIS FORM RELATES TO THE REGISTRATION OF A CLASS OF DEBT SECURITIES AND
IS EFFECTIVE UPON FILING PURSUANT TO GENERAL INSTRUCTION A.(C)(1), PLEASE CHECK
THE FOLLOWING BOX. [_]
IF THIS FORM RELATES TO THE REGISTRATION OF A CLASS OF DEBT SECURITIES AND
IS TO BECOME EFFECTIVE SIMULTANEOUSLY WITH THE EFFECTIVENESS OF A CONCURRENT
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 PURSUANT TO GENERAL
INSTRUCTION A.(C)(2), PLEASE CHECK THE FOLLOWING BOX. [_]
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
RIGHTS TO PURCHASE
SERIES A PREFERRED STOCK
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(TITLE OF CLASS)
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ITEM 1. DESCRIPTION OF SECURITIES TO BE REGISTERED
On December 30, 1996, the Board of Directors of CellStar Corporation (the
"Company") declared a dividend distribution of one Right for each outstanding
share of the Company's common stock, $0.01 par value (the "Common Stock"), to
stockholders of record at the close of business on January 9, 1997. Each Right
entitles the registered holder to purchase from the Company one one-thousandth
(1/1,000) of a share of Series A Preferred Stock, par value $10.00 per share
(the "Preferred Stock"), at a Purchase Price of $80.00 per one one-thousandth
(1/1,000) of a share, subject to adjustment. The description and terms of the
Rights are set forth in a Rights Agreement (the "Rights Agreement") between the
Company and ChaseMellon Shareholder Services, L.L.C., as Rights Agent (the
"Rights Agent").
Initially, the Rights will be attached to all Common Stock certificates
representing shares then outstanding, and no separate Rights Certificates will
be distributed. The Rights will separate from the Common Stock upon the earlier
of (i) ten (10) business days following a public announcement that a person
(other than Alan H. Goldfield, the Company's founder, Chairman of the Board and
Chief Executive Officer) or group of affiliated or associated persons (an
"Acquiring Person") has acquired, or obtained the right to acquire, beneficial
ownership of fifteen percent (15%) or more of the outstanding shares of Common
Stock (the "Stock Acquisition Date"), or (ii) ten (10) business days (or such
later date as the Board of Directors shall determine) following the commencement
of a tender or exchange offer that would result in a person or group
beneficially owning fifteen percent (15%) or more of such outstanding shares of
Common Stock. The date the Rights separate is referred to as the "Distribution
Date."
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 January 9, 1997
will contain a notation incorporating the Rights Agreement by reference, and
(iii) the surrender for transfer of any certificates for Common Stock
outstanding will also constitute the transfer of the Rights associated with the
Common Stock represented by such certificates. Pursuant to the Rights
Agreement, the Company reserves the right to require prior to the occurrence of
a Triggering Event (as defined below) that, upon any exercise of Rights, a
number of Rights be exercised so that only whole shares of Preferred Stock will
be issued.
The Rights are not exercisable until the Distribution Date and will expire
at the close of business on January 9, 2007, 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 will represent the Rights. Except in connection with shares of
Common Stock issued or sold pursuant
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to the exercise of stock options or under any employee plan or arrangement, or
upon the exercise, conversion or exchange of securities hereafter issued by the
Company, or as otherwise determined by the Board of Directors, only shares of
Common Stock issued prior to the Distribution Date will be issued with Rights.
In the event that (i) the Company is the surviving corporation in a merger
or other business combination with an Acquiring Person (or any associate or
affiliate thereof) and its Common Stock remains outstanding and unchanged, (ii)
any person shall acquire beneficial ownership of more than fifteen percent (15%)
of the outstanding shares of Common Stock (except pursuant to (A) certain
consolidations or mergers involving the Company or sales or transfers of the
combined assets, cash flow or earning power of the Company and its subsidiaries
or (B) an offer for all outstanding shares of Common Stock at a price and upon
terms and conditions which a majority of the Disinterested Directors (as defined
below) determines to be in the best interests of the Company and its
stockholders), or (iii) there occurs a reclassification of securities, a
recapitalization of the Company or any of certain business combinations or other
transactions (other than certain consolidations and mergers involving the
Company and sales or transfers of the combined assets, cash flow or earning
power of the Company and its subsidiaries) involving the Company or any of its
subsidiaries which has the effect of increasing by more than one percent (1%)
the proportionate share of any class of the outstanding equity securities of the
Company or any of its subsidiaries beneficially owned by an Acquiring Person (or
any associate or affiliate thereof), each holder of a Right (other than the
Acquiring Person and certain related parties) 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 Purchase Price of the Right. However, Rights are not exercisable following
the occurrence of any of the events described above until such time as the
Rights are no longer redeemable by the Company as described below.
Notwithstanding any of the foregoing, following the occurrence of any of the
events described in this paragraph, 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.
For example, at a Purchase Price of $80 per Right, each Right not owned by
an Acquiring Person (or by certain related parties or transferees) following an
event set forth in the preceding paragraph would entitle its holder to purchase
$160 worth of Common Stock (or other consideration, as noted above) for $80.
Assuming that the Common Stock had a per share market price of $40 at such
time, the holder of each valid Right would be entitled to purchase four shares
of Common Stock for $80.
In the event that, at any time following the Stock Acquisition Date, (i)
the Company shall enter into a merger or other business combination transaction
in which the Company is not the surviving corporation, (ii) the Company is the
surviving corporation in a consolidation, merger or similar transaction pursuant
to which all or part of the outstanding shares of Common Stock are changed into
or exchanged for stock or other securities of any other person or cash or any
other
2
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property or (iii) more than fifty percent (50%) of the combined assets, cash
flow or earning power of the Company and its subsidiaries is sold or transferred
(in each case other than certain consolidations with, mergers with and into, or
sales of assets, cash flow or earning power by or to subsidiaries of the Company
as specified in the Rights Agreement), each holder of a Right (except Rights
which previously have been 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 Purchase Price of the Right. The events described
in this paragraph and in the second preceding paragraph are referred to as the
"Triggering Events."
The Purchase Price payable, the number and kind of shares covered by each
Right and the number of Rights outstanding 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, options or warrants
to subscribe for Preferred Stock or securities convertible into Preferred Stock
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,
cash (excluding regular quarterly cash dividends), assets (other than dividends
payable in Preferred Stock) or subscription rights or warrants (other than those
referred to in (ii) immediately above).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least one percent (1%) of the
Purchase Price. No fractional shares of Preferred Stock are required to be
issued (other than fractions which are integral multiples of one one-thousandth
(1/1,000) of a share of Preferred Stock) and, in lieu thereof, the Company may
make an adjustment in cash based on the market price of the Preferred Stock on
the trading date immediately prior to the date of exercise.
At any time after any person or group becomes an Acquiring Person and prior
to the acquisition by such person or group of fifty percent (50%) or more of the
outstanding shares of Common Stock, the Board of Directors of the Company may,
without payment of the Purchase Price by the holder, exchange the Rights (other
than Rights owned by such person or group, which will become void), in whole or
in part, for shares of Common Stock at an exchange ratio of one-half (1/2) the
number of shares of Common Stock (or in certain circumstances Preferred Stock)
for which a Right is exercisable immediately prior to the time of the Company's
decision to exchange the Rights (subject to adjustment).
At any time until ten (10) business days following the Stock Acquisition
Date, the Company may redeem the Rights in whole, but not in part, at a price of
$0.001 per Right (payable in cash, shares of Common Stock or other consideration
deemed appropriate by the Board of Directors). Immediately upon the action of
the Board of Directors ordering redemption of the Rights, the Rights will
terminate and the only right of the holders of Rights will be to receive the
$0.001 redemption price.
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The term "Disinterested Director" means any member of the Board of
Directors of the Company who was a member of the Board prior to the date of the
Rights Agreement, and any person who is subsequently elected to the Board if
such person is recommended or approved by a majority of the Disinterested
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 in the event that the Rights become
exercisable for Common Stock (or other consideration) of the Company or for
common stock of an acquiring company as set forth above or in the event that the
Rights are redeemed.
Other than those provisions relating to the principal economic terms of the
Rights, any of the provisions of the Rights Agreement may be amended by the
Board of Directors of the Company prior to the Distribution Date; provided, that
--------
any amendments after the Stock Acquisition Date must be approved by a majority
of the Disinterested Directors. After the Distribution Date, the provisions of
the Rights Agreement may be amended by the Board in order to cure any ambiguity,
inconsistency or defect, to make changes which do not adversely affect the
interest of holders of Rights (excluding the interest of any Acquiring Person)
or to shorten or lengthen any time period under the Rights Agreement; provided,
--------
however, that no amendment to adjust the time period governing redemption shall
be made at such time as the Rights are not redeemable; and, provided, that any
--------
amendments after the Stock Acquisition Date must be approved by a majority of
the Disinterested Directors.
A copy of the Rights Agreement specifying the terms of the Rights, the form
of Certificate of Designation, Preferences and Rights of Series A Preferred
Stock, and the form of Rights Certificate are filed herewith as Exhibits and are
incorporated herein by reference. Copies of the Rights Agreement are also
available free of charge from the Rights Agent. The foregoing description of the
Rights does not purport to be complete and is qualified in its entirety by
reference to the Rights Agreement.
ITEM 2. EXHIBITS
1 Rights Agreement, dated as of December 30, 1996, by and between CellStar
Corporation and ChaseMellon Shareholder Services, L.L.C., as Rights Agent,
including exhibits thereto.
2 Form of Certificate of Designation, Preferences and Rights of Series A
Preferred Stock of CellStar Corporation (attached as Exhibit 1 to the
Rights Agreement filed as Exhibit 1 hereto).
4
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3 Form of Rights Certificate (attached as Exhibit 2 to the Rights Agreement
filed as Exhibit 1 hereto).
5
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SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, as amended, the Registrant has duly caused this registration statement to
be signed on its behalf by the undersigned, thereunto duly authorized.
CELLSTAR CORPORATION
December 30, 1996 By /s/ Richard M. Gozia
-------------------------------------
Richard M. Gozia
President and Chief Operating Officer
6
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EXHIBIT 1
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CELLSTAR CORPORATION
AND
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
RIGHTS AGENT
RIGHTS AGREEMENT
DATED AS OF DECEMBER 30, 1996
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
Section 1. Certain Definitions..................................................................... 1
Section 2. Appointment of Rights Agent............................................................. 6
Section 3. Issuance of Rights Certificates......................................................... 7
(a) Distribution Date; Rights Certificates............................................. 7
(b) Common Stock Certificates; Summary of Rights....................................... 7
(c) Legend............................................................................. 8
Section 4. Form of Rights Certificates............................................................. 9
(a) Form; Date......................................................................... 9
(b) Acquiring Person Legend............................................................ 9
Section 5. Countersignature and Registration....................................................... 10
(a) Signatures......................................................................... 10
(b) Registration and Transfer.......................................................... 10
Section 6. Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates............. 11
(a) Procedure.......................................................................... 11
(b) Issuance of New Rights Certificates................................................ 11
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights........................... 12
(a) Exercise........................................................................... 12
(b) Purchase Price..................................................................... 12
(c) Rights Agent Actions............................................................... 13
(d) Partial Exercise................................................................... 13
(e) Termination of Acquiring Person's Rights........................................... 13
(f) Surrender of Rights Certificates; Identity of Beneficial Owner..................... 14
Section 8. Cancellation and Destruction of Rights Certificates..................................... 14
Section 9. Reservation and Availability of Capital Stock........................................... 14
(a) Reservation of Capital Stock...................................................... 14
(b) Listing........................................................................... 15
(c) Registration under the Act........................................................ 15
(d) Covenant Regarding Capital Stock.................................................. 15
(e) Transfer Taxes and Charges........................................................ 16
Section 10. Preferred Stock Record Date............................................................. 16
</TABLE>
(i)
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<TABLE>
<S> <C>
Section 11. Adjustment of Purchase Price; Number and Kind of Shares or
Number of Rights..................................................................... 16
(a) Certain Adjustments.................................................................. 17
(b) Purchase Price Adjustment -- Capital Stock........................................... 21
(c) Purchase Price Adjustment -- Cash, Assets, etc....................................... 21
(d) Current Market Price................................................................. 22
(e) Purchase Price Adjustment Threshold.................................................. 23
(f) Equivalent Adjustments............................................................... 24
(g) Post-Adjustment Rights Issuances..................................................... 24
(h) Preferred Stock Anti-Dilution........................................................ 24
(i) Adjustment of Number of Rights....................................................... 24
(j) Rights Certificates.................................................................. 25
(k) Adjustment Below Par Value........................................................... 25
(l) Adjustment Effective as of Future Date; Exercise..................................... 25
(m) Tax Adjustments...................................................................... 26
(n) Restriction on Certain Transactions.................................................. 26
(o) Restriction Against Diminishing Benefits of the Rights............................... 27
(p) Common Stock Adjustments............................................................. 27
Section 12. Certificate of Adjusted Purchase Price or Number of Shares................................ 27
Section 13. Consolidation, Merger or Sale or Transfer of
Assets or Earning Power.............................................................. 27
(a) Flip-over Event...................................................................... 27
(b) Principal Party...................................................................... 29
(c) Supplemental Agreement............................................................... 29
(d) Exceptions........................................................................... 30
Section 14. Fractional Rights and Fractional Shares................................................... 30
(a) Fractional Rights.................................................................... 30
(b) Fractional Shares of Preferred Stock................................................. 31
(c) Fractional Shares of Common Stock.................................................... 32
(d) Waiver of Fractional Rights and Shares............................................... 32
Section 15. Rights of Action.......................................................................... 32
Section 16. Agreement of Rights Holders............................................................... 32
Section 17. Rights Certificate Holder Not Deemed a Stockholder........................................ 33
Section 18. Concerning the Rights Agent............................................................... 34
(a) Compensation......................................................................... 34
(b) Reliance............................................................................. 34
</TABLE>
(ii)
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<TABLE>
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Section 19. Merger or Consolidation or Change of Name of Rights Agent................................. 34
(a) Successor............................................................................ 34
(b) Prior Countersignatures.............................................................. 35
Section 20. Duties of Rights Agent.................................................................... 35
(a) Legal Counsel........................................................................ 35
(b) Certification by the Company......................................................... 35
(c) Liability for Negligence, etc........................................................ 35
(d) Statements of Fact or Recitals....................................................... 35
(e) Agreement; Adjustments............................................................... 35
(f) Further Assurances................................................................... 36
(g) Instructions......................................................................... 36
(h) Dealing in Rights.................................................................... 36
(i) Agents; Reasonable Care.............................................................. 36
(j) Expenses; Repayment Assurances....................................................... 36
(k) Exercise of Rights; Consultation with Company........................................ 37
Section 21. Change of Rights Agent.................................................................... 37
Section 22. Issuance of New Rights Certificates....................................................... 38
Section 23. Redemption and Termination................................................................ 38
(a) Redemption........................................................................... 38
(b) Effect of Redemption; Procedure...................................................... 39
Section 24. Exchange.................................................................................. 39
(a) Right to Exchange.................................................................... 39
(b) Effect of Exchange; Procedure........................................................ 40
(c) Common Stock Equivalent.............................................................. 40
(d) Insufficient Common Stock............................................................ 40
(e) Fractional Shares.................................................................... 40
Section 25. Notice of Certain Events.................................................................. 41
(a) Preferred Stock Transactions, etc.................................................... 41
(b) Other Transactions................................................................... 42
Section 26. Notices................................................................................... 42
Section 27. Supplements and Amendments................................................................ 43
Section 28. Successors................................................................................ 43
Section 29. Determinations and Actions by the Board of Directors,
Disinterested Directors, etc......................................................... 44
Section 30. Benefits of this Agreement................................................................ 44
</TABLE>
(iii)
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<TABLE>
<S> <C>
Section 31. Severability.............................................................................. 44
Section 32. Governing Law............................................................................. 45
Section 33. Counterparts.............................................................................. 45
Section 34. Descriptive Headings...................................................................... 45
Exhibit 1 Certificate of Designation, Preferences And Rights Of
Series A Preferred Stock............................................................. 47
Exhibit 2 Form of Rights Certificate................................................................ 56
Exhibit 3 Summary of Rights......................................................................... 63
Exhibit 4 Press Release............................................................................. 68
</TABLE>
(iv)
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RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of December 30, 1996, between CellStar
Corporation, a Delaware corporation (the "Company"), and ChaseMellon Shareholder
Services, L.L.C. (the "Rights Agent").
RECITALS
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On December 30, 1996 (the "Rights Dividend Declaration Date"), the Board of
Directors of the Company authorized and declared a dividend distribution of one
Right for each share of Common Stock (as hereinafter defined) of the Company
outstanding at the close of business on January 9, 1997 (the "Record Date"),
and has authorized the issuance of one Right (as such number may hereafter be
adjusted pursuant to the provisions of Section 11(p) (Adjustment of Purchase
----------------------
Price; Number and Kind of Shares or Number of Rights -- Common Stock
- ---------------------------------------------------- ------------
Adjustments)) for each share of Common Stock of the Company issued between the
- -----------
Record Date (whether originally issued or delivered from the Company's treasury)
and the Distribution Date, each Right initially representing the right to
purchase one one-thousandth of a share of Series A Preferred Stock of the
Company having the rights, powers and preferences set forth in the form of
Certificate of Designation, Preferences and Rights attached hereto as Exhibit 1,
upon the terms and subject to the conditions hereinafter set forth (the
"Rights");
AGREEMENT
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In consideration of the premises and the mutual agreements herein set
forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
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following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or which, together
with all Affiliates and Associates of such Person, shall be the Beneficial Owner
(as such term is hereinafter defined) of 15% or more of the shares of Common
Stock then outstanding, but shall not include (i) the Company, (ii) any
Subsidiary of the Company, (iii) any employee benefit plan of the Company or of
any Subsidiary of the Company, or any Person or entity organized, appointed or
established by the Company for or pursuant to the terms of any such plan, (iv)
any Exempt Person, or (v) any Person who becomes an Acquiring Person solely as a
result of a reduction in the number of shares of Common Stock outstanding due to
the repurchase of shares of Common Stock by the Company, unless and until such
Person shall purchase or otherwise become (as a result of actions taken by such
Person or its Affiliates or Associates) the Beneficial Owner of additional
shares of Common Stock constituting 1% or more of the then outstanding shares of
Common Stock.
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(b) "Act" shall mean the Securities Act of 1933, as amended and in
effect from time to time.
(c) "Adjustment Shares" shall have the meaning set forth in Section
11(a)(ii) (Adjustment of Purchase Price; Number and Kind of Shares or Number of
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Rights -- Certain Adjustments)
- ------ -------------------
(d) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Exchange Act.
(e) "Agreement" shall mean this Rights Agreement as originally
executed or as it may from time to time be supplemented or amended pursuant to
the applicable provisions hereof.
(f) A Person shall be deemed the "Beneficial Owner" of, and shall be
deemed to "beneficially own," any securities:
(i) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to acquire (whether such right
is exercisable immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding (whether or not in writing) or upon the
exercise of conversion rights, exchange rights, rights, warrants or options, or
otherwise; provided, however, that a Person shall not, for purposes of this
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paragraph (i), 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) (Issuance of Rights Certificates --Distribution Date; Rights
------------------------------- -------------------------
Certificates) or Section 22 (Issuance of New Rights Certificates) (the "Original
- ------------ -----------------------------------
Rights") or pursuant to Section 11(i) (Adjustment of Purchase Price; Number and
----------------------------------------
Kind of Shares or Number of Rights -- Adjustment of Number of Rights) in
- ---------------------------------- ------------------------------
connection with an adjustment made with respect to any Original Rights;
(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or dispose of or has
"beneficial ownership" of (as determined pursuant to Rule 13d-3 of the General
Rules and Regulations under the Exchange Act), including pursuant to any
agreement, arrangement or understanding, whether or not in writing; provided,
--------
however, that a Person shall not be deemed the "Beneficial Owner" of, or to
- -------
"beneficially own," any security under this subparagraph (ii) as a result of an
agreement, arrangement or understanding to vote such security if such agreement,
arrangement or
2
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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 a Schedule
13D under the Exchange Act (or any comparable or successor report); or
(iii) which are "beneficially owned," directly or indirectly, by
any other Person (or any Affiliate or Associate thereof) with which such Person
(or any of such Person's Affiliates or Associates) has any agreement,
arrangement or understanding (whether or not in writing), for the purpose of
acquiring, holding, voting (except pursuant to a revocable proxy as described in
the proviso to subparagraph (ii) of this paragraph (f)) or disposing of any
voting securities of the Company;
provided, however, that nothing in this paragraph (f) 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 (40) calendar days after the date of such acquisition.
(g) "Board" means the Board of Directors of the Company.
(h) "Business Day" shall mean any day other than a Saturday, Sunday
or a day on which banking institutions in the State of Texas are authorized or
obligated by law or executive order to close.
(i) "Close of Business" on any given date shall mean 5:00 P.M.,
Dallas, Texas time, on such date; provided, however, that if such date is not a
-------- -------
Business Day it shall mean 5:00 P.M., Dallas, Texas time, on the next succeeding
Business Day.
(j) "Common Stock" shall mean the common stock, par value $0.01 per
share, of the Company, except that "Common Stock" when used with reference to
any Person other than the Company shall mean the capital stock of such Person
with the greatest voting power, or the equity securities or other equity
interest having power to control or direct the management, of such Person.
(k) "Common Stock Equivalents" shall have the meaning set forth in
Section 11(a)(iii) (Adjustment of Purchase Price; Number and Kind of Shares or
----------------------------------------------------------
Number of Rights -- Certain Adjustments).
- ---------------- -------------------
(l) "Company" shall mean the Person named as the "Company" in the
first paragraph of this Agreement until a successor corporation shall have
become such, or until a Principal Party shall assume, and thereafter be liable
for, all obligations and duties of the Company hereunder, pursuant to the
applicable
3
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provisions of this Agreement, and thereafter "Company" shall mean such successor
corporation or Principal Party.
(m) "Current Market Price" shall have the meaning set forth in
Section 11(d) (Adjustment of Purchase Price; Number and Kind of Shares or Number
----------------------------------------------------------------
of Rights -- Current Market Price).
- ------ --------------------
(n) "Current Value" shall have the meaning set forth in Section
11(a)(iii) (Adjustment of Purchase Price; Number and Kind of Shares or Number of
--------------------------------------------------------------------
Rights -- Certain Adjustments).
- ------ -------------------
(o) "Disinterested Director" shall mean (i) any member of the Board,
while such Person is a member of the Board, who is not an Acquiring Person, or
an Affiliate or Associate of an Acquiring Person, or a representative or nominee
of an Acquiring Person or of any such Affiliate or Associate, and was a member
of the Board prior to the date of this Agreement, or (ii) any Person who
subsequently becomes a member of the Board, while such Person is a member of the
Board, who is not an Acquiring Person, or an Affiliate or Associate of an
Acquiring Person, or a representative or nominee of an Acquiring Person or of
any such Affiliate or Associate, if such Person's nomination for election or
election to the Board is recommended or approved by a majority of the
Disinterested Directors.
(p) "Distribution Date" shall have the meaning set forth in Section
3(a) (Issuance of Rights Certificates -- Distribution Date; Rights
------------------------------- -------------------------
Certificates).
- ------------
(q) "Equivalent Preferred Stock" shall have the meaning set forth in
Section 11(b) (Adjustment of Purchase Price; Number and Kind of Shares or Number
-----------------------------------------------------------------
of Rights -- Purchase Price Adjustment -- Capital Stock).
- --------- ------------------------------------------
(r) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended and in effect on the date of this Agreement.
(s) "Exchange Number" shall mean one-half of the number of shares of
Common Stock, one-thousandths of a share of Preferred Stock, or shares or other
units of other property for which a Right is exercisable immediately prior to
the time of the action of the Board to exchange the Rights.
(t) "Exempt Person" shall mean Alan H. Goldfield or his Affiliates.
(u) "Expiration Date" shall have the meaning set forth in Section 7(a)
(Exercise of Rights; Purchase Price; Expiration Date of Rights -- Exercise).
------------------------------------------------------------- --------
(v) "Final Expiration Date" shall mean the Close of Business on
January 9, 2007.
4
<PAGE>
(w) "Flip-in Event" shall mean any event described in Section
11(a)(ii) (A) or (B) (Adjustment of Purchase Price; Number and Kind of Shares or
----------------------------------------------------------
Number of Rights -- Certain Adjustments).
- ---------------- -------------------
(x) "Flip-in Trigger Date" shall have the meaning set forth in
Section 11(a)(iii) (Adjustment of Purchase Price; Number and Kind of Shares or
----------------------------------------------------------
Number of Rights -- Certain Adjustments).
- ---------------- -------------------
(y) "Flip-over Event" shall mean any event described in clauses (x),
(y) or (z) of Section 13(a) (Consolidation, Merger or Sale or Transfer of Assets
---------------------------------------------------
or Earning Power -- Flip-over Event).
- ---------------- ---------------
(z) "Original Rights" shall have the meaning set forth in Section 1
(f)(i) (Certain Definitions).
-------------------
(aa) "Person" shall mean any individual, firm, corporation,
partnership or other entity.
(bb) "Preferred Stock" shall mean shares of Preferred Stock, Series A,
par value $10.00, of the Company, and, to the extent that there is not a
sufficient number of shares of Series A Preferred Stock authorized to permit the
full exercise of the Rights, any other series of Preferred Stock, par value
$10.00, of the Company designated for such purpose containing terms
substantially similar to the terms of the Series A Preferred Stock.
(cc) "Principal Party" shall have the meaning set forth in Section
13(b) (Consolidation, Merger or Sale or Transfer of Assets or Earning Power --
--------------------------------------------------------------------
Principal Party).
- ---------------
(dd) "Purchase Price" shall have the meaning set forth in Section 4
(a) (Form of Rights Certificates -- Form; Date).
--------------------------- ----------
(ee) "Record Date" shall have the meaning set forth in the Recitals
at the beginning of the Agreement.
(ff) "Redemption Date" shall have the meaning set forth in Section 23
(a) (Redemption and Termination -- Redemption).
-------------------------- ----------
(gg) "Redemption Price" shall have the meaning set forth in Section
23(a) (Redemption and Termination -- Redemption).
-------------------------- ----------
(hh) "Rights" shall have the meaning set forth in the Recitals at the
beginning of the Agreement.
(hh) "Rights Agent" shall mean the Person named as the "Rights Agent"
in the first paragraph of this Agreement until a successor Rights Agent shall
have
5
<PAGE>
become such pursuant to the applicable provisions hereof and thereafter "Rights
Agent" shall mean such successor Rights Agent. If at any time there is more than
one Person appointed by the Company as Rights Agent pursuant to the applicable
provisions of this Agreement, "Rights Agent" shall mean and include each such
Person.
(ii) "Rights Certificates" shall have the meaning set forth in Section
3(a) (Issuance of Rights Certificates -- Distribution Date; Rights
------------------------------- -------------------------
Certificates).
- ------------
(jj) "Rights Dividend Declaration Date" shall have the meaning set
forth in the WHEREAS clause at the beginning of the Agreement.
(kk) "Spread" shall have the meaning set forth in Section 11(a)(iii)
(Adjustment of Purchase Price; Number and Kind of Shares or Number of Rights --
- ----------------------------------------------------------------------------
Certain Adjustments).
- -------------------
(ll) "Stock Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to Section 13(d) under the Exchange Act) by
the Company or an Acquiring Person that an Acquiring Person has become such.
(mm) "Subsidiary" shall mean, with reference to any Person, any
corporation or other entity of which a majority of the voting power of equity
securities or majority of the equity interest is beneficially owned, directly or
indirectly, by such Person, or otherwise controlled by such Person.
(nn) "Substitution Period" shall have the meaning set forth in Section
11(a)(iii) (Adjustment of Purchase Price; Number and Kind of Shares or Number of
--------------------------------------------------------------------
Rights -- Certain Adjustments).
- ------ -------------------
(oo) "Trading Day" shall have the meaning set forth in Section
11(d)(i) (Adjustment of Purchase Price; Number and Kind of Shares or Number of
--------------------------------------------------------------------
Rights --Current Market Price).
- ------ --------------------
(pp) "Triggering Event" shall mean any Flip-in Event or any Flip-over
Event .
Section 2. Appointment of Rights Agent. The Company hereby appoints the
---------------------------
Rights Agent to act as agent for the Company in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such Co-Rights Agents as it may deem
necessary or desirable.
6
<PAGE>
Section 3. Issuance of Rights Certificates.
-------------------------------
(a) Distribution Date; Rights Certificates. Until the earlier of
--------------------------------------
(i) the Close of Business on the tenth Business Day after the Stock Acquisition
Date (or, if the tenth Business Day after the Stock Acquisition Date occurs
before the Record Date, the Close of Business on the Record Date), or (ii) the
Close of Business on the tenth Business Day (or such later date as the Board
shall determine prior to such time as any Person becomes an Acquiring Person)
after the date that a tender or exchange offer by any Person (other than the
Company, any Subsidiary of the Company, any employee benefit plan of the Company
or of any Subsidiary of the Company, or any Person or entity organized,
appointed or established by the Company for or pursuant to the terms of any such
plan) is first published or sent or given within the meaning of Rule 14d-2(a) of
the General Rules and Regulations under the Exchange Act, if upon consummation
thereof such Person would be the Beneficial Owner of 15% or more of the shares
of Common Stock then outstanding (the earlier of (i) and (ii) being herein
referred to as the "Distribution Date"), (x) the Rights will be evidenced
(subject to the provisions of paragraph (b) of this Section 3) by the
certificates for the Common Stock registered in the names of the holders of the
Common Stock (which certificates for Common Stock shall be deemed also to be
certificates for Rights) and not by separate certificates, and (y) the Rights
will be transferable only in connection with the transfer of the underlying
shares of Common Stock (including a transfer to the Company, except pursuant to
the provision of Section 23 (Redemption and Termination)). As soon as
---------------------------
practicable after the Distribution Date, the Rights Agent will send by first-
class, insured, postage prepaid mail, to each record holder of the Common Stock
as of the Close of Business on the Distribution Date, at the address of such
holder shown on the records of the Company, one or more rights certificates, in
substantially the form of Exhibit 2 hereto (the "Rights Certificates"),
evidencing one Right for each share of Common Stock so held, subject to
adjustment as provided herein. In the event that an adjustment in the number of
Rights per share of Common Stock has been made pursuant to Section 11(p)
(Adjustment of Purchase Price; Number and Kind of Shares or Number of Rights --
- ----------------------------------------------------------------------------
Common Stock Adjustments) at the time of distribution of the Rights
- ------------------------
Certificates, the Company shall make the necessary and appropriate rounding
adjustments (in accordance with Section 14(a) (Fractional Rights and Fractional
--------------------------------
Shares -- Fractional Rights)) so that Rights Certificates representing only
- ------ -----------------
whole numbers of Rights are distributed and cash is paid in lieu of any
fractional Rights. As of and after the Distribution Date, the Rights will be
evidenced solely by such Rights Certificates.
(b) Common Stock Certificates; Summary of Rights. With respect to
--------------------------------------------
certificates for the Common Stock outstanding as of the Record Date, until the
Distribution Date, the Rights associated with the Common Stock represented by
such certificates will be evidenced by such certificates alone and the
registered holders of such Common Stock shall also be the registered holders of
the associated Rights. Until the earlier of the Distribution Date or the
Expiration Date, the transfer of any certificates representing shares of Common
Stock in respect of which Rights have
7
<PAGE>
been issued shall also constitute the transfer of the Rights associated with
such shares of Common Stock. On the Record Date, or as soon as practicable
thereafter, the Company will send a copy of a Summary of Rights to Purchase
Preferred Stock, in substantially the form of Exhibit 3 hereto (the "Summary of
Rights"), by first-class, postage-prepaid mail, to each record holder of shares
of Common Stock as of the close of business of the Record Date, at the address
of such holder shown on the records of the Company.
(c) Legend. Rights shall be issued in respect of all certificates for
------
shares of Common Stock which are issued (whether originally issued or from the
Company's treasury) after the Record Date but prior to the earliest of the (i)
Distribution Date, (ii) the Expiration Date, or (iii) the Redemption Date, or,
in certain circumstances provided in Section 22 (Issuance of New Rights
----------------------
Certificates) 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 dated as of December 30, 1996, by and between
CellStar Corporation (the "Company") and ChaseMellon
Shareholder Services, L.L.C., as Rights Agent (the
"Rights Agreement"), the terms of which are hereby
incorporated herein by reference and a copy of which is
on file at the principal offices of the Company. Under
certain circumstances, as set forth in the Rights
Agreement, such Rights 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.
With respect to such certificates containing the foregoing legend, until the
earliest of (i) the Distribution Date, (ii) the Expiration Date, and (iii) the
Redemption Date, (x) the Rights associated with the Common Stock represented by
such certificates shall be evidenced by such certificates alone, (y) the
registered holders of such Common Stock shall also be the registered holders of
the associated Rights, and (z) the transfer of any of such certificates shall
also constitute the transfer of the
8
<PAGE>
Rights associated with such shares of Common Stock. In the event that the
Company purchases, or acquires any shares of Common Stock after the Record Date
but prior to the Distribution Date, any rights associated with such shares of
Common Stock shall be deemed canceled and retired so that the Company shall not
be entitled to exercise any Rights associated with shares of Common Stock which
are no longer outstanding.
Section 4. Form of Rights Certificates.
---------------------------
(a) Form; Date. 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 2 hereto and may
have such marks of identification or designation and such legends, summaries or
endorsements printed thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange on which the Rights
may from time to time be listed or any securities association on whose
interdealer quotation system the Rights may be from time to time authorized for
quotation, or to conform to usage. Subject to the provisions of Section 11
(Adjustment of Purchase Price; Number and Kind of Shares or Number of Rights)
---------------------------------------------------------------------------
and Section 22 (Issuance of New Rights Certificates), the Rights Certificates,
-----------------------------------
whenever distributed, shall be dated as of the Record Date and on their face
shall entitle the holders thereof to purchase such number of one one-thousandths
of a share of Preferred Stock as shall be set forth therein at the price set
forth therein (such exercise price per one one-thousandth of a share is referred
to herein as the "Purchase Price"), but the amount and type of securities
purchasable upon the exercise of each Right and the Purchase Price thereof shall
be subject to adjustment as provided herein.
(b) Acquiring Person Legend. Any Rights Certificate issued
-----------------------
pursuant to Section 3(a) (Issuance of Rights Certificates -- Distribution Date;
------------------------------- -----------------
Rights Certificates) or Section 22 (Issuance of New Rights Certificates) that
- ------------------- -----------------------------------
represents Rights beneficially owned by (i) an Acquiring Person or any Associate
or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person
(or of any such Associate or Affiliate) who becomes a transferee after the
Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person (or
of any such Associate or Affiliate) who becomes a transferee prior to or
concurrently with the Acquiring Person becoming such and receives such Rights
pursuant to either (A) a transfer (whether or not for consideration) from the
Acquiring Person to holders of equity interests in such Acquiring Person or to
any Person with whom such Acquiring Person has any continuing agreement,
arrangement or understanding regarding the transferred Rights or (B) a transfer
which the Disinterested Directors have determined is part of a plan, arrangement
or understanding which has as a primary purpose or effect avoidance of Section
7(e) (Exercise of Rights; Purchase Price; Expiration Date of Rights --
-------------------------------------------------------------
Termination of Acquiring Person's Rights) and any Rights Certificate issued
- ----------------------------------------
pursuant to Section 6 (Transfer, Split Up, Combination and Exchange of Rights
------------------------------------------------------
9
<PAGE>
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates), Section
- ----------------------------------------------------------------------
11 (Adjustment of Purchase Price; Number and Kind of Shares or Number of Rights)
---------------------------------------------------------------------------
or Section 22 (Issuance of New Rights Certificates) 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 dated as of December 30, 1996, by and between CellStar
Corporation and ChaseMellon Shareholder Services, L.L.C., as Rights Agent).
Accordingly, this Rights Certificate and the Rights represented hereby may
become null and void in the circumstances specified in Section 7(e)
(Exercise of Rights; Purchase Price; Expiration Date of Rights --
--------------------------------------------------------------
Termination of Acquiring Person's Rights) of such Agreement.
----------------------------------------
Section 5. Countersignature and Registration.
---------------------------------
(a) Signatures. The Rights Certificates shall be executed on
----------
behalf of the Company by its Chairman of the Board, its President or any Vice
President, either manually or by facsimile signature, and shall have affixed
thereto the Company's seal or a facsimile thereof which shall be attested to by
the Secretary or an Assistant Secretary of the Company, either manually or by
facsimile signature. The Rights Certificates shall be countersigned by the
Rights Agent, either manually or by facsimile signature, and shall not be valid
for any purpose unless so countersigned. In case any officer of the Company who
shall have signed any of the Rights Certificates shall cease to be such officer
of the Company before countersignature by the Rights Agent and issuance and
delivery by the Company, such Rights Certificates, nevertheless, may be
countersigned by the Rights Agent and issued and delivered by the Company with
the same force and effect as though the person who signed such Rights
Certificates had not ceased to be such officer of the Company; and any Rights
Certificates may be signed on behalf of the Company by any person who, at the
actual date of the execution of such Rights Certificate, shall be a proper
officer of the Company to sign such Rights Certificate, although at the date of
the execution of this Rights Agreement any such person was not such an officer.
(b) Registration and Transfer. 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.
10
<PAGE>
Section 6. Transfer, Split Up, Combination and Exchange of Rights
------------------------------------------------------
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.
- ----------------------------------------------------------------------
(a) Procedure. Subject to the provisions of Section 4(b) (Form of
--------- -------
Rights Certificates -- Acquiring Person Legend), Section 7(e) (Exercise of
- ------------------- ----------------------- -----------
Rights; Purchase Price; Expiration Date of Rights -- Termination of Acquiring
- ------------------------------------------------- ------------------------
Person's Rights) and Section 14 (Fractional Rights and Fractional Shares), at
- --------------- ---------------------------------------
any time after the Close of Business on the Distribution Date, and at or prior
to the Close of Business on the Expiration Date, any Rights Certificate or
Certificates may be transferred, split up, combined or exchanged for another
Rights Certificate or Certificates, entitling the registered holder to purchase
a like number of one one-thousandths of a share of Preferred Stock (or,
following a Triggering Event, Common Stock, other securities, cash or other
assets, as the case may be) as the Rights Certificate or Certificates
surrendered then entitled such holder (or former holder in the case of a
transfer) to purchase. Any registered holder desiring to transfer, split up,
combine or exchange any Rights Certificate or Certificates shall make such
request in writing delivered to the Rights Agent, and shall surrender the Rights
Certificate or Certificates to be transferred, split up, combined or exchanged
at the principal office or offices of the Rights Agent designated for such
purpose. Neither the Rights Agent nor the Company shall be obligated to take any
action whatsoever with respect to the transfer of any such surrendered Rights
Certificate until the registered holder shall have completed and signed the
certificate contained in the form of assignment on the reverse side of such
Rights Certificate and shall have provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request. Thereupon, the
Rights Agent shall, subject to Section 4(b), Section 7(e) and Section 14,
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) Issuance of New Rights Certificates. 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.
11
<PAGE>
Section 7. Exercise of Rights; Purchase Price; Expiration Date of
------------------------------------------------------
Rights.
- ------
(a) Exercise. Subject to Section 7(e) (Exercise of Rights; Purchase
-------- ----------------------------
Price; Expiration Date of Rights -- Termination of Acquiring Person's Rights),
- -------------------------------- ----------------------------------------
the registered holder of any Rights Certificate may exercise the Rights
evidenced thereby (except as otherwise provided herein, including, without
limitation, the restrictions on exercisability set forth in Section 9(c)
(Reservation and Availability of Capital Stock -- Registration under the Act),
- ---------------------------------------------- --------------------------
Section 11(a)(iii) (Adjustment of Purchase Price; Number and Kind of Shares or
----------------------------------------------------------
Number of Rights -- Certain Adjustments), Section 23(a) (Redemption and
- ---------------- ------------------- --------------
Termination -- Redemption), and Section 24(b) (Exchange -- Effect of Exchange;
- ----------- ---------- -------- -------------------
Procedure)) in whole or in part at any time after the Distribution Date upon
- ---------
surrender of the Rights Certificate, with the form of election to purchase and
the certificate on the reverse side thereof duly executed, to the Rights Agent
at the principal office or offices of the Rights Agent designated for such
purpose, together with payment of the aggregate Purchase Price with respect to
the total number of one one-thousandths of a share of Preferred Stock (or other
securities, cash or other assets, as the case may be) as to which such
surrendered Rights are then exercisable and an amount equal to any applicable
transfer tax, at or prior to the earliest of (i) the Final Expiration Date, (ii)
the Redemption Date, or (iii) the expiration of the Rights pursuant to Section
13(d) (Consolidation, Merger or Sale or Transfer of Assets or Earning Power --
--------------------------------------------------------------------
Exceptions) (the earliest of (i), (ii) and (iii) being herein referred to as the
- ----------
"Expiration Date"). The payment of the Purchase Price and the applicable
transfer tax, if any (as such amount may be reduced pursuant to Section
11(a)(iii) (Adjustment of Purchase Price; Number and Kind of Shares or Number of
--------------------------------------------------------------------
Rights -- Certain Adjustments)), may be made (x) in cash, (y) by certified
- ------ -------------------
check, cashier's check or money order payable to the order of the Company, or
(z) by delivery of a certificate or certificates (with appropriate stock powers
executed in blank attached thereto) evidencing a number of shares of Common
Stock equal to the then Purchase Price divided by the closing price (as
determined pursuant to Section 11(d) (Adjustment of Purchase Price; Number and
----------------------------------------
Kind of Shares or Number of Rights -- Current Market Price) per share of Common
- ---------------------------------- --------------------
Stock on the Trading Day immediately preceding the date of such exercise. In
the event that the Company is obligated to issue other securities (including
Common Stock) of the Company, pay cash and/or distribute other property pursuant
to Section 11(a) the Company will make all arrangements necessary so that such
other securities, cash and/or other property are available for distribution by
the Rights Agent, if and when appropriate. The Company reserves the right to
require prior to the occurrence of a Triggering Event that upon any exercise of
Rights, a number of Rights be exercised so that only whole shares of Preferred
Stock would be issued.
(b) Purchase Price. The Purchase Price for each one one-thousandth of
--------------
a share of Preferred Stock pursuant to the exercise of a Right shall initially
be $80.00, and shall be subject to adjustment from time to time as provided in
Section 11 (Adjustment of Purchase Price; Number and Kind of Shares or Number of
--------------------------------------------------------------------
Rights) and Section 13(a) (Consolidation, Merger or Sale or Transfer of Assets
- ------ ---------------------------------------------------
or
- --
12
<PAGE>
Earning Power -- Flip-over Event) and shall be payable in accordance with
- ------------- ---------------
paragraph (a) of this Section 7.
(c) Rights Agent Actions. Upon receipt of a Rights Certificate
--------------------
representing exercisable Rights and the compliance by the holder of such Rights
Certificate with paragraph (a) of this Section 7, the Rights Agent shall,
subject to Section 20(k) (Duties of Rights Agent -- Exercise of Rights;
---------------------- -------------------
Consultation with Company), thereupon promptly (i) (A) requisition from any
- -------------------------
transfer agent of the shares of Preferred Stock (or make available, if the
Rights Agent is the transfer agent for such shares) certificates for the total
number of one one-thousandths of a share of Preferred Stock to be purchased and
the Company hereby irrevocably authorizes its transfer agent to comply with all
such requests, or (B) if the Company shall have elected to deposit the total
number of shares of Preferred Stock issuable upon exercise of the Rights
hereunder with a depositary agent, requisition from the depositary agent
depositary receipts representing such number of one one-thousandths of a share
of Preferred Stock as are to be purchased (in which case certificates for the
shares of Preferred Stock represented by such receipts shall be deposited by the
transfer agent with the depositary agent) and the Company will direct the
depositary agent to comply with such request, (ii) requisition from the Company
the amount of cash, if any, to be paid in lieu of fractional shares in
accordance with Section 14 (Fractional Rights and Fractional Shares), (iii)
---------------------------------------
after receipt thereof, deliver such certificates or depositary receipts 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.
(d) Partial Exercise. In case the registered holder of any Rights
----------------
Certificate shall exercise less than all the Rights evidenced thereby, a new
Rights Certificate evidencing Rights equivalent to the Rights remaining
unexercised shall be issued by the Rights Agent and delivered to, or upon the
order of the registered holder of such Rights Certificate, registered in such
name or names as may be designated by such holder, subject to the provisions of
Section 14 (Fractional Rights and Fractional Shares).
---------------------------------------
(e) Termination of Acquiring Person's Rights. Notwithstanding
----------------------------------------
anything in this Agreement to the contrary, from and after the first occurrence
of a Flip-in 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 such Acquiring Person becomes such, or (iii) a transferee of an
Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee prior to or concurrently with the Acquiring Person becoming such and
receives such Rights pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person to holders of equity interests in such
Acquiring Person or to any Person with whom the Acquiring Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which the Disinterested Directors have
13
<PAGE>
determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect the avoidance of this Section 7(e), shall become null
and void without any further action and no holder of such Rights shall have any
rights whatsoever with respect to such Rights, whether under any provision of
this Agreement or otherwise. The Company shall use all reasonable efforts to
ensure that the provisions of this Section 7(e) and Section 4(b) (Form of Rights
--------------
Certificates --Acquiring Person Legend) 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
any of its respective Affiliates, Associates or transferees hereunder.
(f) Surrender of Rights Certificates; Identity of Beneficial Owner.
--------------------------------------------------------------
Notwithstanding anything in this Agreement to the contrary, neither the Rights
Agent nor the Company shall be obligated to undertake any action with respect to
a registered holder upon the occurrence of any purported exercise as set forth
in this Section 7 unless such registered holder shall have (i) completed and
signed the certificate contained in the form of election to purchase set forth
on the reverse side of the Rights Certificate surrendered for such exercise, and
(ii) provided such additional evidence of the identity of the Beneficial Owner
(or former Beneficial Owner) or Affiliates or Associates thereof as the Company
shall reasonably request.
Section 8. Cancellation and Destruction of Rights Certificates. All
---------------------------------------------------
Rights Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be canceled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Rights Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
canceled Rights Certificates to the Company, or shall, at the written request of
the Company, destroy such canceled Rights Certificates, and in such case shall
deliver a certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of Capital Stock.
---------------------------------------------
(a) Reservation of Capital Stock. The Company 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 of Common Stock 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 the rights of the Company under Section 11(a)(iii)
(Adjustment of Purchase Price; Number and Kind of Shares or Number of Rights --
- ----------------------------------------------------------------------------
Certain Adjustments) to otherwise fulfill its obligations, will be sufficient to
- -------------------
permit the exercise in full of all outstanding Rights.
14
<PAGE>
(b) Listing. 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 may be listed on any
national securities exchange or authorized for quotation on any interdealer
quotation system of any securities association, the Company shall use its best
efforts to cause, from and after such time as the Rights become exercisable, all
shares reserved for such issuance to be listed on such exchange or quoted on
such system upon official notice of issuance upon such exercise.
(c) Registration under the Act. The Company will use its best efforts
--------------------------
to (i) file, as soon as practicable following the earliest date after the first
occurrence of a Flip-in Event on which the consideration to be delivered by the
Company upon exercise of the Rights has been determined in accordance with
Section 11(a)(iii) (Adjustment of Purchase Price; Number and Kind of Shares or
----------------------------------------------------------
Number of Rights --Certain Adjustments), or as soon as is required by law
- ---------------- -------------------
following the Distribution Date, as the case may be, a registration statement on
an appropriate form under the Act with respect to the securities purchasable
upon exercise of the Rights, (ii) cause such registration statement to become
effective as soon as practicable after such filing, and (iii) cause such
registration statement to remain effective (with a prospectus at all times
meeting the requirements of the Act) until the earlier of (A) the date as of
which the Rights are no longer exercisable for such securities, and (B) the
Expiration Date. The Company will also take such action as may be appropriate
under, or to ensure compliance with, the securities or "blue sky" laws of the
various states in connection with the exercisability of the Rights. The Company
may temporarily suspend, for a period of time not to exceed ninety (90) calendar
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. Notwithstanding any provision of this Agreement to the
contrary, the Rights shall not be exercisable in any jurisdiction if the
requisite qualification in such jurisdiction shall not have been obtained, the
exercise thereof shall not be permitted under applicable law or a registration
statement shall not have been declared effective.
(d) Covenant Regarding Capital Stock. The Company will take all such
--------------------------------
action as may be necessary to ensure that all one one-thousandths of a share of
Preferred Stock (and, following the occurrence of a Triggering Event, Common
Stock and/or other securities) delivered upon exercise of Rights shall, at the
time of delivery of the certificates for such shares (subject to payment of the
Purchase Price), be duly and validly authorized and issued and fully paid and
nonassessable.
15
<PAGE>
(e) Transfer Taxes and Charges. The Company will pay when due and
--------------------------
payable any and all federal and state transfer taxes and charges which may be
payable in respect of the issuance or delivery of the Rights Certificates and of
any certificates for a number of one one-thousandths of a share of Preferred
Stock (or Common Stock and/or other securities, as the case may be) upon the
exercise of Rights. The Company shall not, however, be required to pay any
transfer tax which may be payable in respect of any transfer or delivery of
Rights Certificates to a Person other than, or the issuance or delivery of a
number of one one-thousandths of a share of Preferred Stock (or Common Stock
and/or other securities, as the case may be) in respect of a name other than,
that of the registered holder of the Rights Certificates evidencing Rights
surrendered for exercise or to issue or deliver any certificates for a number of
one one-thousandths of a share of Preferred Stock (or Common Stock and/or other
securities, as the case may be) in a name other than that of the registered
holder upon the exercise of any Rights until such tax shall have been paid (any
such tax being payable by the holder of such Rights Certificate at the time of
surrender) or until it has been established to the Company's satisfaction that
no such tax is due.
Section 10. Preferred Stock Record Date. Each Person in whose name any
---------------------------
certificate for a number of one one-thousandths of a share of Preferred Stock
(or Common Stock and/or other securities, as the case may be) is issued upon the
exercise of Rights shall for all purposes be deemed to have become the holder of
record of such fractional shares of Preferred Stock (or Common Stock and/or
other securities, as the case may be) represented thereby on, and such
certificate shall be dated as of, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and all applicable transfer taxes) was made; provided, however, that if the
-------- -------
date of such surrender and payment is a date upon which the Preferred Stock (or
Common Stock and/or other securities, as the case may be) transfer books of the
Company are closed, such Person shall be deemed to have become the record holder
of such shares (fractional or otherwise) on, and such certificate shall be
dated, the next succeeding Business Day on which the Preferred Stock (or Common
Stock and/or other securities, as the case may be) transfer books of the Company
are open. Prior to the exercise of the Rights evidenced thereby, the holder of a
Rights Certificate shall not be entitled to any rights of a stockholder of the
Company with respect to shares for which the Rights shall be exercisable,
including, without limitation, the right to vote, to receive dividends or other
distributions or to exercise any preemptive rights, and shall not be entitled to
receive any notice of any proceedings of the Company, except as provided herein.
Section 11. Adjustment of Purchase Price; Number and Kind of Shares or
----------------------------------------------------------
Number of Rights. The Purchase Price, the number and kind of shares covered by
- ----------------
each Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.
16
<PAGE>
(a) Certain Adjustments.
-------------------
(i) In the event the Company shall at any time after the date
of this Agreement (A) declare a dividend on the Preferred Stock payable in
shares of Preferred Stock, (B) subdivide or split the outstanding Preferred
Stock, (C) combine the outstanding Preferred Stock into a smaller number of
shares, or (D) issue any shares of its capital stock in a reclassification
of the Preferred Stock (including any such reclassification in connection
with a consolidation or merger in which the Company is the continuing or
surviving corporation), except as otherwise provided in this Section 11(a)
and Section 7(e) (Exercise of Rights; Purchase Price; Expiration Date of
------------------------------------------------------
Rights -- Termination of Acquiring Person's Rights), the Purchase Price in
------ ----------------------------------------
effect at the time of the record date for such dividend or of the effective
date of such subdivision, split, combination or reclassification, and the
number and kind of shares of Preferred Stock or capital stock, as the case
may be, issuable on such date, shall be proportionately adjusted so that
the holder of any Right exercised after such time shall be entitled to
receive, upon payment of the aggregate adjusted Purchase Price then in
effect necessary to exercise a Right in full, the aggregate number and kind
of shares of Preferred Stock or capital stock, as the case may be, which,
if such Right had been exercised immediately prior to such date and at a
time when the Preferred Stock (or other capital stock, as the case may be)
transfer books of the Company were open, such holder would have owned upon
such exercise and been entitled to receive by virtue of such dividend,
subdivision, split, combination or reclassification. If an event occurs
which would require an adjustment under both this Section 11(a)(i) and
Section 11(a)(ii) the adjustment provided for in this Section 11(a)(i)
shall be in addition to, and shall be made prior to, any adjustment
required pursuant to Section 11(a)(ii).
(ii) In the event:
(A) (1) any Acquiring Person or any Associate or Affiliate
of any Acquiring Person, at any time after the date of this Agreement,
directly or indirectly, shall merge into the Company or otherwise
combine with the Company and the Company shall be the continuing or
surviving corporation of such merger or combination and the Common
Stock of the Company shall remain outstanding and unchanged, or (2)
subject to Section 23 (Redemption and Termination), any Person (other
--------------------------
than the Company, any Subsidiary of the Company, any employee benefit
plan of the Company or of any Subsidiary of the Company, or any Person
or entity organized, appointed or established by the Company for or
pursuant to the terms of any such plan), alone or together with its
Affiliates and Associates, shall, at any time after the Rights
Dividend Declaration Date, become an Acquiring Person, unless the
event causing such Person to become an Acquiring Person is a Flip-over
Event, or is an acquisition of shares of Common Stock pursuant to
17
<PAGE>
a tender offer or an exchange offer for all outstanding shares of
Common Stock at a price and on terms determined by a majority of the
Disinterested Directors after receiving advice from one or more
investment banking firms selected by the Disinterested Directors, to
be (a) at a price which is fair to the stockholders of the Company
(taking into account all factors which the Disinterested Directors
deem relevant including, without limitation, prices which could
reasonably be achieved if the Company or its assets were sold on an
orderly basis designed to realize maximum value) and (b) otherwise in
the best interests of the Company and its stockholders, other than
such Acquiring Person, its Affiliates and its Associates; or
(B) during such time as there is an Acquiring Person, there
shall be any reclassification of securities (including any reverse
stock split), or recapitalization of the Company, or any merger or
consolidation of the Company with any of its Subsidiaries or any other
transaction or series of transactions involving the Company or any of
its Subsidiaries, other than a transaction or transactions to which
the provisions of Section 13(a) (Consolidation, Merger or Sale or
--------------------------------
Transfer of Assets or Earning Power -- Flip-over Event) apply (whether
----------------------------------- ---------------
or not with or into or otherwise involving an Acquiring Person) which
has the effect, directly or indirectly, of increasing by more than 1%
the proportionate share of the outstanding shares of any class of
equity securities of the Company or any of its subsidiaries which is
directly or indirectly beneficially owned by any Acquiring Person or
any Associate or Affiliate of any Acquiring Person,
then, promptly following the occurrence of any such Flip-in Event (whether
described in Section 11(a)(ii)(A) or (B)), proper provision shall be made
so that each holder of a Right (except as provided below and in Section
7(e) (Exercise of Rights; Purchase Price; Expiration Date of Rights --
-------------------------------------------------------------
Termination of Acquiring Person's Rights)) shall thereafter have the right
----------------------------------------
to receive, upon exercise thereof at the then current Purchase Price in
accordance with the terms of this Agreement, in lieu of the number of one
one-thousandths of a share of Preferred Stock, such number of shares of
Common Stock of the Company as shall equal the result obtained by (x)
multiplying the then current Purchase Price by the then number of one one-
thousandths of a share of Preferred Stock for which a Right was exercisable
immediately prior to the first occurrence of a Flip-in Event, and (y)
dividing that product (which, following such first occurrence, shall
thereafter be referred to as the "Purchase Price" for each Right and for
all purposes of this Agreement) by 50% of the Current Market Price per
share of Common Stock on the date of such first occurrence (such number of
shares being referred to as the "Adjustment Shares").
18
<PAGE>
(iii) In the event that the number of shares of Common Stock
that are authorized by the Company's Certificate of Incorporation but not
outstanding or reserved for issuance for purposes other than upon exercise
of the Rights is not sufficient to permit the exercise in full of the
Rights in accordance with the foregoing subparagraph (ii) of this Section
11(a), the Company shall: (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, subject to Section 7(e)(Exercise of Rights;
-------------------
Purchase Price; Expiration Date of Rights -- Termination of Acquiring
----------------------------------------- ------------------------
Person's Rights), 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 which the Board has deemed to have
essentially the same value or economic rights as shares of Common Stock
(such shares of preferred stock being referred to as "Common Stock
Equivalents")), (4) debt securities of the Company, (5) other assets, or
(6) any combination of the foregoing, having an aggregate value equal to
the Current Value (less the amount of any reduction in the Purchase Price),
where such aggregate value has been determined by the Board based upon the
advice of a nationally recognized investment banking firm selected by the
Board; provided, however, that if the Company shall not have made adequate
-------- -------
provision to deliver value pursuant to clause (B) above within thirty (30)
calendar days following the later of (x) the first occurrence of a Flip-in
Event and (y) the date on which the Company's right of redemption pursuant
to Section 23(a) (Redemption and Termination -- Redemption) expires (the
-------------------------- ----------
later of (x) and (y) being referred to herein as the "Flip-in Trigger
Date"), then the Company shall be obligated to deliver, upon the surrender
for exercise of a Right and without requiring payment of the Purchase
Price, shares of Common Stock (to the extent available) and then, if
necessary, cash, which shares and/or cash have an aggregate value equal to
the Spread. If the Board shall determine in good faith that it is likely
that sufficient additional shares of Common Stock could be authorized for
issuance upon exercise in full of the Rights, the thirty (30) calendar day
period set forth above may be extended to the extent necessary, but not
more than ninety (90) calendar days after the Flip-in Trigger Date, in
order that the Company may seek stockholder approval for the authorization
of such additional shares (such period, 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), 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
19
<PAGE>
the Rights has been temporarily suspended, as well as a public announcement
at such time as the suspension is no longer in effect. For purposes of this
Section 11(a)(iii), the value of the Common Stock shall be the Current
Market Price per share of the Common Stock on the Flip-in Trigger Date and
the value of any Common Stock Equivalent shall be deemed to have the same
value as the Common Stock on such date.
(iv) If the rules of the national securities exchange,
registered as such pursuant to Section 6 of the Exchange Act, or of the
national securities association, registered as such pursuant to Section 15A
of the Exchange Act, on which the Common Stock is principally traded would
prohibit such exchange or association from listing or continuing to list,
or from authorizing for or continuing quotation and/or transaction
reporting through an inter-dealer quotation system, the Common Stock or
other equity securities of the Company if the Rights were to be exercised
for shares of Common Stock in accordance with subparagraph (ii) of this
Section 11(a) because such issuance would nullify, restrict or disparately
reduce the per share voting rights of holders of Common Stock, the Company
shall: (A) determine 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) equity securities of the Company, including, without limitation,
Common Stock Equivalents, other than securities which would have the effect
of nullifying, restricting or disparately reducing the per share voting
rights of holders of Common Stock, (4) debt securities of the Company, (5)
other assets, or (6) any combination of the foregoing, having an aggregate
value equal to the Current Value, where such aggregate value has been
determined by the Board based upon the advice of a recognized investment
banking firm selected by the Board; provided, however, if the Company shall
-------- -------
not have made adequate provision to deliver value pursuant to clause (B)
above within thirty (30) calendar days following the Flip-in Trigger Date,
then the Company shall be obligated to deliver, upon the surrender for
exercise of a Right and without requiring payment of the Purchase Price,
cash having an aggregate value equal to the Spread. To the extent that the
Company determines that some action need be taken pursuant to the first
sentence of this Section 11(a)(iv), the Company (x) shall provide, subject
to Section 7(e) (Exercise of Rights; Purchase Price; Expiration Date of
------------------------------------------------------
Rights -- Termination of Acquiring Person's Rights), that such action shall
------ ----------------------------------------
apply uniformly to all outstanding Rights and (y) may suspend the
exercisability of the Rights, but not longer than ninety (90) calendar days
after the Flip-in Trigger Date, in order 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)(iv), the value of the Common Stock shall be the Current Market Price
per
20
<PAGE>
share of the Common Stock on the Flip-in Trigger Date and the value of any
Common Stock Equivalent shall be deemed to have the same value as the
Common Stock on such date.
(b) Purchase Price Adjustment -- Capital Stock. In case the Company
------------------------------------------
shall fix a record date for the issuance of rights, options or warrants to all
holders of Preferred Stock entitling them to subscribe for or purchase (for a
period expiring within forty-five (45) calendar days after such record date)
Preferred Stock (or shares having the same rights, privileges and preferences as
the shares of Preferred Stock ("Equivalent Preferred Stock")) or securities
convertible into Preferred Stock or Equivalent Preferred Stock at a price per
share of Preferred Stock or per share of Equivalent Preferred Stock (or having a
conversion price per share, if a security convertible into Preferred Stock or
Equivalent Preferred Stock) less than the Current Market Price per share of
Preferred Stock on such record date, the Purchase Price to be in effect after
such record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the number of shares of Preferred Stock outstanding on such record
date, plus the number of shares of Preferred Stock which the aggregate offering
price of the total number of shares of Preferred Stock and/or Equivalent
Preferred Stock so to be offered (and/or the aggregate initial conversion price
of the convertible securities so to be offered) would purchase at such Current
Market Price, and the denominator of which shall be the number of shares of
Preferred Stock outstanding on such record date, plus the number of additional
shares of Preferred Stock and/or Equivalent Preferred Stock to be offered for
subscription or purchase (or into which the convertible securities so to be
offered are initially convertible). In case such subscription price may be paid
by delivery of consideration part or all of which may be in a form other than
cash, the value of such consideration shall be as determined in good faith by
the Board, whose determination shall be described in a statement filed with the
Rights Agent and shall be binding on the Rights Agent and the holders of the
Rights. Shares of Preferred Stock owned by or held for the account of the
Company shall not be deemed outstanding for the purpose of any such computation.
Such adjustment shall be made successively whenever such a record date is fixed,
and in the event that such rights or warrants are not so issued, the Purchase
Price shall be adjusted to be the Purchase Price which would then be in effect
if such record date had not been fixed.
(c) Purchase Price Adjustment -- Cash, Assets, etc. In case the
----------------------------------------------
Company shall fix a record date for a distribution to all holders of Preferred
Stock (including any such distribution made in connection with a consolidation
or merger in which the Company is the continuing corporation) of evidences of
indebtedness, cash (other than a regular quarterly cash dividend out of the
earnings or retained earnings of the Company), assets (other than a dividend
payable in Preferred Stock, but including any dividend payable in stock other
than Preferred Stock) or subscription rights or warrants (excluding those
referred to in Section 11(b) (Adjustment of Purchase Price; Number and Kind of
------------------------------------------------
Shares or Number of Rights Purchase Price Adjustment -- Capital Stock)), the
- ---------------------------------------------------------------------
Purchase Price to be in effect after
21
<PAGE>
such record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the Current Market Price per share of Preferred Stock on such record
date, less the fair market value (as determined in good faith by the Board,
whose determination shall be described in a statement filed with the Rights
Agent) of the portion of the cash, assets or evidences of indebtedness so to be
distributed or of such subscription rights or warrants applicable to a share of
Preferred Stock and the denominator of which shall be such Current Market Price
per share of Preferred Stock. Such adjustments shall be made successively
whenever such a record date is fixed, and in the event that such distribution is
not so made, the Purchase Price shall be adjusted to be the Purchase Price which
would have been in effect if such record date had not been fixed.
(d) Current Market Price.
--------------------
(i) For the purpose of any computation hereunder, other than
computations made pursuant to Section 11(a)(iii) (Adjustment of Purchase Price;
-----------------------------
Number and Kind of Shares or Number of Rights -- Certain Adjustments) the
- --------------------------------------------- -------------------
Current Market Price per share of Common Stock on any date shall be deemed to be
the average of the daily closing prices per share of such Common Stock for the
thirty (30) consecutive Trading Days immediately prior to such date, and for
purposes of computations made pursuant to Section 11(a)(iii) the Current Market
Price per share of Common Stock on any date shall be deemed to be the average of
the daily closing prices per share of such Common Stock for the ten (10)
consecutive Trading Days immediately following such date; provided, however,
-------- -------
that in the event that the Current Market Price per share of the Common Stock is
determined during a period following the announcement by the issuer of such
Common Stock of (A) a dividend or distribution on such Common Stock payable in
shares of such Common Stock or securities convertible into shares of such Common
Stock (other than the Rights), or (B) any subdivision, combination or
reclassification of such Common Stock and the ex-dividend date for such dividend
or distribution, or the record date for such subdivision, combination or
reclassification shall not have occurred prior to the commencement of the
requisite thirty (30) Trading Day or ten (10) Trading Day period, as set forth
above, then, and in each such case, the Current Market Price shall be properly
adjusted to take into account ex-dividend trading. The closing price for each
Trading Day shall be the last sale price, regular way, or, in case no such sale
takes place on such Trading 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
22
<PAGE>
reported by the National Association of Securities Dealers, Inc. Automated
Quotation System 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. If on any such date
no market maker is making a market in the Common Stock, the fair value of such
shares on such date as determined in good faith by the Board shall be used. The
term "Trading Day" shall mean a day on which the principal national securities
exchange on which the shares of Common Stock are listed or admitted to trading
is open for the transaction of business or, if the shares of Common Stock are
not listed or admitted to trading on any national securities exchange, a
Business Day. If the Common Stock is not publicly held or not so listed or
traded, Current Market Price per share shall mean the fair value per share as
determined in good faith by the Board, whose determination shall be described in
a statement filed with the Rights Agent and shall be conclusive for all
purposes.
(ii) For the purpose of any computation hereunder, the Current
Market Price per share of Preferred Stock shall be determined in the same manner
as set forth above for the Common Stock in clause (i) of this Section 11(d)
(other than the last sentence thereof). If the Current Market Price per share of
Preferred Stock cannot be determined in the manner provided above or if the
Preferred Stock is not publicly held or listed or traded in a manner described
in clause (i) of this Section 11(d), the Current Market Price per share of
Preferred Stock shall be conclusively deemed to be an amount equal to 1,000 (as
such number may be appropriately adjusted for such events as stock splits, stock
dividends and recapitalizations with respect to the Common Stock occurring after
the date of this Agreement) multiplied by the Current Market Price per share of
the Common Stock. If neither the Common Stock nor the Preferred Stock is
publicly held or so listed or traded, Current Market Price per share of the
Preferred Stock shall mean the fair value per share as determined in good faith
by the Board, whose determination shall be described in a statement filed with
the Rights Agent and shall be conclusive for all purposes. For all purposes of
this Agreement, the Current Market Price of one one-thousandth of a share of
Preferred Stock shall be equal to the Current Market Price of one share of
Preferred Stock divided by 1,000.
(e) Purchase Price Adjustment Threshold. Anything herein to the
-----------------------------------
contrary notwithstanding, no adjustment in the Purchase Price shall be required
unless such adjustment would require an increase or decrease of at least one
percent (1%) in the Purchase Price; provided however, that any adjustments which
-------- -------
by reason of this Section 11(e) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Section 11 (Adjustment of Purchase Price; Number and Kind of Shares
-------------------------------------------------------
or Number of Rights) shall be made to the nearest cent or to the nearest
- -------------------
thousandth of a share of Common Stock or other share or one-millionth of a share
of Preferred Stock, as the case may be. Notwithstanding the first sentence of
this Section 11(e), any adjustment required by this Section 11 shall be made no
later than the earlier of (i) three (3) years from
23
<PAGE>
the date of the transaction which mandates such adjustment, or (ii) the
Expiration Date.
(f) Equivalent Adjustments. If as a result of an adjustment made
----------------------
pursuant to Section 11(a)(ii) (Adjustment of Purchase Price; Number and Kind of
------------------------------------------------
Shares or Number of Rights -- Certain Adjustments) or Section 13(a)
- -------------------------- -------------------
(Consolidation Merger or Sale or Transfer of Assets or Earning Power -- Flip-
- -------------------------------------------------------------------- ----
over Event) the holder of any Right thereafter exercised shall become entitled
- ----------
to receive any shares of capital stock other than Preferred Stock, thereafter
the number of such other shares so receivable upon exercise of any Right and the
Purchase Price thereof shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Preferred Stock contained in Sections 11(a), (b), (c), (e), (g),
(h), (i), (j), (k) and (m), and the provisions of Sections 7, 9, 10, 13 and 14
with respect to the Preferred Stock shall apply on like terms to any such other
shares.
(g) Post-Adjustment Rights Issuances. All Rights originally issued
--------------------------------
by the Company subsequent to any adjustment made to the Purchase Price hereunder
shall evidence the right to purchase, at the adjusted Purchase Price, the number
of one one-thousandths of a share of Preferred Stock purchasable from time to
time hereunder upon exercise of the Rights, all subject to further adjustment as
provided herein.
(h) Preferred Stock Anti-Dilution. Unless the Company shall have
-----------------------------
exercised its election as provided in Section 11(i) (Adjustment of Purchase
----------------------
Price; Number and Kind of Shares or Number of Rights -- Adjustment of Number of
- ---------------------------------------------------- -----------------------
Rights), upon each adjustment of the Purchase Price as a result of the
- ------
calculations made in Section 11(b) (Adjustment of Purchase Price; Number and
----------------------------------------
Kind of Shares or Number of Rights -- Purchase Price Adjustment -- Capital
- ---------------------------------- ------------------------------------
Stock) and Section 11(c) (Adjustment of Purchase Price; Number and Kind of
------------------------------------------------
Shares or Number of Rights --Purchase Price Adjustment -- Cash, Assets, etc.),
- -------------------------- -----------------------------------------------
each Right outstanding immediately prior to the making of such adjustment shall
thereafter evidence the right to purchase, at the adjusted Purchase Price, that
number of one one-thousandths of a share of Preferred Stock (calculated to the
nearest one-millionth) obtained by (i) multiplying (x) the number of one one-
thousandths of a share covered by a Right immediately prior to this adjustment,
by (y) the Purchase Price in effect immediately prior to such adjustment of the
Purchase Price, and (ii) dividing the product so obtained by the Purchase Price
in effect immediately after such adjustment of the Purchase Price.
(i) Adjustment of Number of Rights. The Company may elect on or
------------------------------
after the date of any adjustment of the Purchase Price to adjust the number of
Rights, in lieu of any adjustment in the number of one one-thousandths of a
share of Preferred Stock purchasable upon the exercise of a Right. Each of the
Rights outstanding after the adjustment in the number of Rights shall be
exercisable for the number of one one-thousandths of a share of Preferred Stock
for which a Right was
24
<PAGE>
exercisable immediately prior to such adjustment. Each Right held of record
prior to such adjustment of the number of Rights shall become that number of
Rights (calculated to the nearest one-ten-thousandth) obtained by dividing the
Purchase Price in effect immediately prior to adjustment of the Purchase Price
by the Purchase Price in effect immediately after adjustment of the Purchase
Price. The Company shall make a public announcement of its election to adjust
the number of Rights, indicating the record date for the adjustment, and, if
known at the time, the amount of the adjustment to be made. This record date may
be the date on which the Purchase Price is adjusted or any day thereafter, but,
if the Rights Certificates have been issued, shall be at least ten (10) calendar
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 (Fractional Rights and
---------------------
Fractional Shares) 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) Rights Certificates. Irrespective of any adjustment or change in
-------------------
the Purchase Price or the number of one one-thousandths of a share of Preferred
Stock issuable upon the exercise of the Rights, the Rights Certificates
theretofore and thereafter issued may continue to express the Purchase Price per
one one-thousandth of a share and the number of one one-thousandths of a share
which were expressed in the initial Rights Certificates issued hereunder.
(k) Adjustment Below Par Value. Before taking any action that would
--------------------------
cause an adjustment reducing the Purchase Price below the then par or stated
value, if any, of the number of one one-thousandths of a share of Preferred
Stock issuable upon exercise of the Rights, the Company shall take any corporate
action which is or may, in the opinion of its counsel, be necessary in order
that the Company may validly and legally issue fully paid and nonassessable such
number of one one-thousandths of a share of Preferred Stock at such adjusted
Purchase Price.
(l) Adjustment Effective as of Future Date; Exercise. In any case in
------------------------------------------------
which this Section 11 (Adjustment of Purchase Price; Number and Kind of Shares
-------------------------------------------------------
or Number of Rights) shall require that an adjustment in the Purchase Price be
- -------------------
made effective as of a record date for a specified event, the Company may elect
to defer until the occurrence of such event the issuance to the holder of any
Right exercised after such record date the number of one one-thousandths of a
share of Preferred
25
<PAGE>
Stock and other capital stock or securities of the Company, if any, issuable
upon such exercise over and above the number of one one-thousandths of a share
of Preferred Stock and other capital stock or securities of the Company, if any,
issuable upon such exercise on the basis of the Purchase Price in effect prior
to such adjustment; provided, however, that the Company shall deliver to such
-------- -------
holder a due bill or other appropriate instrument evidencing such holder's right
to receive such additional shares (fractional or otherwise) or securities upon
the occurrence of the event requiring such adjustment.
(m) Tax Adjustments. Anything in this Section 11 (Adjustment of
--------------- -------------
Purchase Price; Number and Kind of Shares or Number of Rights) 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 its good faith judgment the Board shall
determine to be advisable in order that any (i) consolidation or subdivision of
the Preferred Stock, (ii) issuance wholly for cash of any shares of Preferred
Stock at less than the Current Market Price, (iii) issuance wholly for cash of
shares of Preferred Stock or securities which by their terms are convertible
into or exchangeable for shares of Preferred Stock, (iv) stock dividends or (v)
issuance of rights, options or warrants referred to in this Section 11,
hereafter made by the Company to holders of its Preferred Stock shall not be
taxable to such stockholders.
(n) Restriction on Certain Transactions. The Company shall not, at
-----------------------------------
any time after the Distribution Date, (i) consolidate with any other Person
(other than a Subsidiary of the Company in a transaction which complies with
Section 11(o) (Adjustment of Purchase Price; Number and Kind of Shares or Number
-----------------------------------------------------------------
of Rights --Restriction Against Diminishing Benefits of the Rights)), (ii) merge
- --------- ------------------------------------------------------
with or into any other Person (other than a Subsidiary of the Company in a
transaction which complies with Section 11(o)), (iii) enter into a statutory
share exchange or similar transaction with any other Person (other than a
Subsidiary of the Company in a transaction which complies with Section 11(o)),
or (iv) sell or transfer (or permit any Subsidiary to sell or transfer), in one
transaction, or a series of related transactions, assets, cash flow or earning
power aggregating more than 50% of the assets, cash flow or earning power of the
Company and its Subsidiaries (taken as a whole) to any other Person or Persons
(other than the Company and/or any of its Subsidiaries in one or more
transactions each of which complies with Section 11(o)), if (x) at the time of
or immediately after such consolidation, merger, statutory share exchange or
similar transaction, or sale there are any rights, warrants or other instruments
or securities outstanding or agreements in effect which would substantially
diminish or otherwise eliminate the benefits intended to be afforded by the
Rights or (y) prior to, simultaneously with or immediately after such
consolidation, merger, statutory share exchange or similar transaction, or sale,
the stockholders of the Person who constitutes, or would constitute, the
"Principal Party" for purposes of Section 13(a) (Consolidation, Merger or Sale
-----------------------------
or Transfer of Assets or Earning Power -- Flip-over Event) shall have received a
- -------------------------------------- ---------------
distribution of Rights previously owned by such Person or any of its Affiliates
and Associates.
26
<PAGE>
(o) Restriction Against Diminishing Benefits of the Rights. The
------------------------------------------------------
Company covenants and agrees that, after the Distribution Date, it will not,
except as permitted by Section 23 (Redemption and Termination) or Section 27
--------------------------
(Supplements and Amendments) take (or permit any Subsidiary to take) any action
- ---------------------------
if at the time such action is taken it is reasonably foreseeable that such
action will diminish substantially or otherwise eliminate the benefits intended
to be afforded by the Rights.
(p) Common Stock Adjustments. Anything in this Agreement to the
------------------------
contrary notwithstanding, in the event that the Company shall at any time after
the Rights Dividend Declaration Date and prior to the Distribution Date (i)
declare a dividend on the outstanding shares of Common Stock payable in shares
of Common Stock, (ii) subdivide or split the outstanding shares of Common Stock,
or (iii) combine the outstanding shares of Common Stock into a smaller number of
shares, the number of Rights associated with each share of Common Stock then
outstanding, or issued or delivered thereafter but prior to the Distribution
Date, shall be proportionately adjusted so that the number of Rights thereafter
associated with each share of Common Stock following any such event shall equal
the result obtained by multiplying the number of Rights associated with each
share of Common Stock immediately prior to such event by a fraction, the
numerator of which shall be the total number of shares of Common Stock
outstanding immediately prior to the occurrence of the event and the denominator
of which shall be the total number of shares of Common Stock outstanding
immediately following the occurrence of such event. The adjustments provided
for in this Section 11(p) shall be made successively whenever such a dividend is
declared or paid or such subdivision, combination or consolidation is effected.
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
----------------------------------------------------------
Whenever an adjustment is made as provided in Section 11 (Adjustment of Purchase
----------------------
Price; Number and Kind of Shares or Number of Rights) and Section 13
- ----------------------------------------------------
(Consolidation, Merger or Sale or Transfer of Assets or Earning Power) 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 or cause the
Rights Agent to mail a brief summary thereof to each holder of a Rights
Certificate (or, if prior to the Distribution Date, to each holder of a
certificate representing shares of Common Stock) in accordance with Section 26
(Notices). The Rights Agent shall be fully protected in relying on any such
- --------
certificate and on any adjustment therein contained.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
------------------------------------------------------
Earning Power.
- -------------
(a) Flip-over Event. In the event that, following the Stock
---------------
Acquisition Date, directly or indirectly, (x) the Company shall consolidate
with, or merge with and into, or enter into a statutory stock exchange or
similar transaction with, any
27
<PAGE>
other Person (other than a Subsidiary of the Company in a transaction which
complies with Section 11(o)(Adjustment of Purchase Price; Number and Kind of
------------------------------------------------
Shares or Number of Rights -- Restriction Against Diminishing Benefits of the
- -------------------------- -----------------------------------------------
Rights)), and the Company shall not be the continuing or surviving corporation
- ------
of such consolidation, merger or statutory share exchange or similar
transaction, (y) any Person (other than a Subsidiary of the Company in a
transaction which complies with Section 11(o)) shall consolidate with, or merge
with or into, or enter into a statutory stock exchange or similar transaction
with, the Company, and the Company shall be the continuing or surviving
corporation of such consolidation, merger or statutory share exchange or similar
transaction and, in connection with such consolidation, merger or statutory
share exchange or similar transaction, all or part of the outstanding shares of
Common Stock shall be changed into or exchanged for stock or other securities of
any other Person or cash or any other property, or (z) the Company shall sell or
otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise
transfer), in one transaction or a series of related transactions, assets, cash
flow or earning power aggregating more than 50% of the assets, cash flow or
earning power of the Company and its Subsidiaries (taken as a whole) to any
Person or Persons (other than the Company or any Subsidiary of the Company in
one or more transactions each of which complies with Section 11(o)), then, and
in each such case (except as may be contemplated by Section 13(d)
(Consolidation, Merger or Sale or Transfer of Assets or Earning Power --
- ---------------------------------------------------------------------
Exceptions)), (i) proper provision shall be made so that: each holder of a
- ----------
Right, except as provided in Section 7(e) (Exercise of Rights; Purchase Price;
-----------------------------------
Expiration Date of Rights -- Termination of Acquiring Person's Rights) shall
- ------------------------- ----------------------------------------
thereafter have the right to receive, upon the exercise thereof at the then
current Purchase Price in accordance with the terms of this Agreement, such
number of validly authorized and issued, fully paid, nonassessable and freely
tradeable shares of Common Stock of the Principal Party, not subject to any
liens, encumbrances, rights of first refusal or other adverse claims, as shall
be equal to the result obtained by (A) multiplying the then current Purchase
Price by the number of one one-thousandths of a share of Preferred Stock for
which a Right is exercisable immediately prior to the first occurrence of a
Flip-over Event (or, if a Flip-in Event has occurred prior to the first
occurrence of a Flip-over Event, multiplying the number of such one one-
thousandths of a share for which a Right was exercisable immediately prior to
the first occurrence of a Flip-in Event by the Purchase Price in effect
immediately prior to such first occurrence), and (B) dividing that product
(which, following the first occurrence of a Flip-over Event, shall be referred
to as the "Purchase Price" for each Right and for all purposes of this
Agreement) by 50% of the Current Market Price per share of the Common Stock of
such Principal Party on the date of consummation of such Flip-over Event; (ii)
such Principal Party shall thereafter be liable for, and shall assume, by virtue
of such Flip-over Event, all the obligations and duties of the Company pursuant
to this Agreement; (iii) the term "Company" shall thereafter be deemed to refer
to such Principal Party, it being specifically intended that the provisions of
Section 11 (Adjustment of Purchase Price; Number and Kind of Shares or Number of
--------------------------------------------------------------------
Rights) shall apply only to such Principal Party following the first occurrence
- ------
of a Flip-over Event; (iv) such Principal Party shall take such steps
(including, but not limited to, the reservation of a sufficient
28
<PAGE>
number of shares of its Common Stock) in connection with the consummation of any
such transaction as may be necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in relation to its
shares of Common Stock thereafter deliverable upon the exercise of the Rights;
and (v) the provisions of Section 11(a)(ii) (Adjustment of Purchase Price;
-----------------------------
Number and Kind of Shares or Number of Rights -- Certain Adjustments) hereof
- --------------------------------------------- -------------------
shall be of no effect following the first occurrence of any Flip-over Event.
(b) Principal Party. "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) (Consolidation, Merger or Sale
-----------------------------
or Transfer of Assets or Earning Power -- Flip-over Event), the Person that
-------------------------------------- ---------------
is the issuer of any securities into which shares of Common Stock of the
Company are converted in such consolidation, merger or statutory share
exchange or similar transaction, and if no securities are so issued, the
Person that is the other party to such consolidation, merger or statutory
share exchange or similar transaction, and
(ii) in the case of any transaction described in clause (z) of
the first sentence of Section 13(a) (Consolidation, Merger or Sale or
--------------------------------
Transfer of Assets or Earning Power -- Flip-over Event), the Person that is
----------------------------------- ---------------
the party receiving the greatest portion of the assets, cash flow or
earning power transferred pursuant to such transaction or transactions;
provided, however, that in any such case, (1) if the Common Stock of such Person
- -------- -------
is not at such time and has not been continuously over the preceding twelve (12)
month period registered under Section 12 of the Exchange Act, and such Person is
a direct or indirect Subsidiary of another Person the Common Stock of which is
and has been so registered, "Principal Party" shall refer to such other Person;
and (2) in case such Person is a Subsidiary, directly or indirectly, of more
than one Person, the Common Stocks of two or more of which are and have been so
registered, "Principal Party" shall refer to whichever of such Persons is the
issuer of the total outstanding Common Stock having the greatest aggregate
market value.
(c) Supplemental Agreement. The Company shall not consummate a Flip-
----------------------
over Event unless the Principal Party shall have a sufficient number of
authorized shares of its Common Stock which have not been issued or reserved for
issuance to permit the exercise in full of the Rights in accordance with this
Section 13 (Consolidation, Merger or Sale or Transfer of Assets or Earning
--------------------------------------------------------------
Power) 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 such Flip-over Event,
the Principal Party will
29
<PAGE>
(i) prepare and file a registration statement under the Act,
with respect to the Rights and the securities purchasable upon exercise of
the Rights on an appropriate form, and will use its best efforts to cause
such registration statement to (A) become effective as soon as practicable
after such filing and (B) remain effective (with a prospectus at all times
meeting the requirements of the Act) until the Expiration Date; and
(ii) will deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates which comply
in all respects with the requirements for registration on Form 10 under the
Exchange Act.
The provisions of this Section 13 (Consolidation, Merger or Sale or Transfer of
--------------------------------------------
Assets or Earning Power) shall similarly apply to successive consolidation,
- -----------------------
mergers or statutory share exchanges or similar transactions or sales or other
transfers. In the event that a Flip-over Event shall occur at any time after the
occurrence of a Flip-in Event, the Rights which have not theretofore been
exercised shall thereafter become exercisable in the manner described in Section
13(a) (Consolidation, Merger or Sale or Transfer of Assets or Earning Power --
--------------------------------------------------------------------
Flip-over Event).
- ---------------
(d) Exceptions. Notwithstanding anything in this Agreement to the
----------
contrary, Section 13 (Consolidation, Merger or Sale or Transfer of Assets or
------------------------------------------------------
Earning Power) shall not be applicable to a transaction described in
- -------------
subparagraphs (x) and (y) of Section 13(a) (Consolidation, Merger or Sale or
--------------------------------
Transfer of Assets or Earning Power -- Flip-over Event) if (i) such transaction
- ----------------------------------- ---------------
is consummated with a Person or Persons who acquired shares of Common Stock
pursuant to a tender offer or exchange offer for all outstanding shares of
Common Stock which complies with the provisions of Section 11(a)(ii)(B)
(Adjustment of Purchase Price; Number and Kind of Shares or Number of Rights --
- -----------------------------------------------------------------------------
Certain Adjustments) (or a wholly-owned subsidiary of any such Person or
- -------------------
Persons), (ii) the price per share of Common Stock offered in such transaction
is not less than the price per share of Common Stock paid to all holders of
shares of Common Stock whose shares were purchased pursuant to such tender or
exchange offer and (iii) the form of consideration being offered in such
transaction is the same as the form of consideration paid to all holders of
shares of Common Stock whose shares were purchased pursuant to such tender offer
or exchange offer. Upon consummation of any such transaction contemplated by
this Section 13(d), all Rights hereunder shall expire.
Section 14. Fractional Rights and Fractional Shares.
---------------------------------------
(a) Fractional Rights. The Company shall not be required to issue
-----------------
fractions of Rights, except prior to the Distribution Date as provided in
Section 11(p) (Adjustment of Purchase Price; Number and Kind of Shares or
-----------------------------------------------------------
Number of Rights --Common Stock Adjustments), or to distribute Rights
- ---------------- ------------------------
Certificates which evidence fractional Rights. In lieu of such fractional
Rights, there shall be paid to the registered holders of the Rights Certificates
with regard to which such fractional
30
<PAGE>
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 Trading Day shall be the last sale price, regular way, or, in
case no such sale takes place on such Trading 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 the National Association of Securities Dealers, Inc.
Automated Quotation System 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. If on any such date no such
market maker is making a market in the Rights, the fair value of the Rights on
such date as determined in good faith by the Board shall be used.
(b) Fractional Shares of Preferred Stock. The Company shall not be
------------------------------------
required to issue fractions of shares of Preferred Stock (other than fractions
which are integral multiples of one one-thousandth of a share of Preferred Stock
which may at the option of the Company, be evidenced by depositary receipts)
upon exercise of the Rights or to distribute certificates which evidence
fractional shares of Preferred Stock (other than fractions which are integral
multiples of one one-thousandth of a share of Preferred Stock). Interests in
fractions of Preferred Stock in integral multiples of one one-thousandth of a
share of Preferred Stock may, at the election of the Company, be evidenced by
depositary receipts, pursuant to an appropriate agreement between the Company
and a depositary selected by it; provided, however, that such agreement shall
-------- -------
provide that the holders of such depositary receipts shall have all the rights,
privileges and preferences to which they are entitled as beneficial owners of
the Preferred Stock represented by such depositary receipts. In lieu of
fractional shares of Preferred Stock that are not integral multiples of one one-
thousandth of a share of Preferred Stock, the Company may pay to the registered
holders of Rights Certificates at the time such Rights are exercised as herein
provided an amount in cash equal to the same fraction of the current market
value of one one-thousandth of a share of Preferred Stock. For purposes of this
Section 14(b), the current market value of one one-thousandth of a share of
Preferred Stock shall be one one-thousandth of the closing price of a share of
Preferred Stock (as determined pursuant to Section 11(d)(ii) (Adjustment of
-------------
Purchase Price; Number and Kind of Shares or Number of Rights -- Current Market
- ------------------------------------------------------------- --------------
Price) for the Trading Day immediately prior to the date of such exercise.
- -----
31
<PAGE>
(c) Fractional Shares of Common Stock. Following the occurrence of a
---------------------------------
Triggering Event, the Company shall not be required to issue fractions of shares
of Common Stock upon exercise of the Rights or to distribute certificates which
evidence fractional shares of Common Stock. In lieu of fractional shares of
Common Stock, the Company may pay to the registered holders of Rights
Certificates at the time such Rights are exercised as herein provided an amount
in cash equal to the same fraction of the current market value of one (1) share
of Common Stock. For purposes of this Section 14(c), the current market value
of one share of Common Stock shall be the closing price of one share of Common
Stock (as determined pursuant to Section 11(d)(i) (Adjustment of Purchase Price;
-----------------------------
Number and Kind of Shares or Number of Rights -- Current Market Price) for the
- --------------------------------------------- --------------------
Trading Day immediately prior to the date of such exercise.
(d) Waiver of Fractional Rights and Shares. The holder of a Right by
--------------------------------------
the acceptance of the Right expressly waives his or her right to receive any
fractional Rights or any fractional shares upon exercise of a Right, except as
permitted by this Section 14 (Fractional Rights and Fractional Shares).
---------------------------------------
Section 15. Rights of Action. All rights of action in respect of this
----------------
Agreement are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock); and any registered holder of any Rights Certificate (or, prior to
the Distribution Date, of the Common Stock), without the consent of the Rights
Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of the Common Stock), may, in his or her own behalf and for
his or her own benefit, enforce, and may institute and maintain any suit, action
or proceeding against the Company to enforce, or otherwise act in respect of,
his or her right to exercise the Rights evidenced by such Rights Certificate in
the manner provided in such Rights Certificate and in this Agreement. Without
limiting the foregoing or any remedies available to the holders of Rights, it is
specifically acknowledged that the holders of Rights would not have an adequate
remedy at law for any breach of this Agreement and shall be entitled to specific
performance of the obligations hereunder and injunctive relief against actual or
threatened violations of the obligations hereunder of any Person subject to this
Agreement.
Section 16. Agreement of Rights Holders. Every holder of a Right by
---------------------------
accepting the same consents and agrees with the Company and the Rights Agent and
with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of Common Stock;
(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office or offices of the Rights Agent designated for such
purposes, duly
32
<PAGE>
endorsed or accompanied by a proper instrument of transfer and with the
appropriate forms and certificates fully executed;
(c) subject to Section 6(a) (Transfer, Split Up, Combination and
-----------------------------------
Exchange of Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights
- ----------------------------------------------------------------------------
Certificates -- Procedure) and Section 7(f) (Exercise of Rights; Purchase Price;
- ------------ --------- -----------------------------------
Expiration Date of Rights -- Surrender of Rights Certificates; Identity of
- ------------------------- ---------------------------------------------
Beneficial Owner), the Company and the Rights Agent may deem and treat the
- ----------------
person in whose name a Rights Certificate (or, prior to the Distribution Date,
the associated Common Stock certificate) is registered as the absolute owner
thereof and of the Rights evidenced thereby (notwithstanding any notations of
ownership or writing on the Rights Certificates or the associated Common Stock
certificate made by anyone other than the Company or the Rights Agent) for all
purposes whatsoever, and neither the Company nor the Rights Agent, subject to
the last sentence of Section 7(e) (Exercise of Rights; Purchase Price;
-----------------------------------
Expiration Date of Rights -- Termination of Acquiring Person's Rights), shall be
- ------------------------- ----------------------------------------
required to be affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Rights Agent shall have any liability to any holder
of a Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, the Company must use its best
-------- -------
efforts to have any such order, decree or ruling lifted or otherwise overturned
as soon as possible.
Section 17. Rights Certificate Holder Not Deemed a Stockholder. No
--------------------------------------------------
holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the number of one one-
thousandths of a share of Preferred Stock or any other securities of the Company
which may at any time be issuable on the exercise of the Rights represented
thereby, nor shall anything contained herein or in any Rights Certificate be
construed to confer upon the holder of any Rights Certificate, as such, any of
the rights of a stockholder of the Company or any right to vote for the election
of directors or upon any matter submitted to stockholders at any meeting
thereof, or to give or withhold consent to any corporate action, or to receive
notice of meetings or other actions affecting stockholders (except as provided
in Section 25 (Notice of Certain Events)), or to receive dividends or
------------------------
subscription rights, or otherwise, until the Right or Rights evidenced by such
Rights Certificate shall have been exercised in accordance with the provisions
hereof.
33
<PAGE>
Section 18. Concerning the Rights Agent.
---------------------------
(a) Compensation. The Company shall pay to the Rights Agent
------------
reasonable compensation for all services rendered by it hereunder and, from time
to time, on demand of the Rights Agent, its reasonable expenses and counsel fees
and other disbursements incurred in the administration and execution of this
Agreement and the exercise and performance of its duties hereunder. The Company
agrees to indemnify the Rights Agent for, and to hold it harmless against, any
loss, liability or expense, incurred without negligence, bad faith or willful
misconduct on the part of the Rights Agent, for anything done or omitted to be
done by the Rights Agent in connection with the acceptance and administration of
this Agreement, including the costs and expenses of defending against or
investigating any claim of liability in the premises.
(b) Reliance. The Rights Agent shall be protected and shall incur no
--------
liability for or in respect of any action taken, suffered or omitted to be taken
by it in connection with its administration of this Agreement in reliance upon
any Rights Certificate or certificate for Common Stock or for other securities
of the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement or other paper or document believed by it to be genuine and to be
signed, executed and, where necessary, verified or acknowledged, by the proper
Person or Persons, or otherwise upon the advice of counsel as set forth in
Section 20 (Duties of Rights Agent).
-----------------------
Section 19. Merger or Consolidation or Change of Name of Rights Agent.
---------------------------------------------------------
(a) Successor. Any corporation into which the Rights Agent or any
---------
successor Rights Agent may be merged or with which it may be consolidated, or
any corporation resulting from any merger or consolidation to which the Rights
Agent or any successor Rights Agent shall be a party, or any corporation
succeeding to the corporate trust or stock transfer business of the Rights Agent
or any successor Rights Agent, shall be the successor to the Rights Agent under
this Agreement without the execution or filing of any paper or any further act
on the part of any of the parties hereto; provided, however, that such
-------- -------
corporation would be eligible for appointment as a successor Rights Agent under
the provisions of Section 21 (Change of Rights Agent). In case at the time such
----------------------
successor Rights Agent shall succeed to the agency created by this Agreement,
any of the Rights Certificates shall have been countersigned but not delivered,
any such successor Rights Agent may adopt the countersignature of a predecessor
Rights Agent and deliver such Rights Certificates so countersigned; and in case
at that time any of the Rights Certificates shall not have been countersigned,
any successor Rights Agent may countersign such Rights Certificates either in
the name of the predecessor or in the name of the successor Rights Agent; and in
all such cases such Rights Certificates shall have the full force provided in
the Rights Certificates and in this Agreement.
34
<PAGE>
(b) Prior Countersignatures. In case at any time the name of the
-----------------------
Rights Agent shall be changed and at such time any of the Rights Certificates
shall have been countersigned but not delivered, the Rights Agent may adopt the
countersignature under its prior name and deliver Rights Certificates so
countersigned; and in case at that time any of the Rights Certificates shall not
have been countersigned, the Rights Agent may countersign such Rights
Certificates either in its prior name or in its changed name; and in all such
cases such Rights Certificates shall have the full force provided in the Rights
Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the
----------------------
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Rights Certificates,
by their acceptance thereof, shall be bound:
(a) Legal Counsel. The Rights Agent may consult with legal counsel
-------------
(who may be legal counsel for the Company), and the opinion of such counsel
shall be full and complete authorization and protection to the Rights Agent as
to any action taken or omitted to be taken by it in good faith and in accordance
with such opinion.
(b) Certification by the Company. Whenever in the performance of its
----------------------------
duties under this Agreement the Rights Agent shall deem it necessary or
desirable that any fact or matter (including, without limitation, the identity
of any Acquiring Person and the determination of Current Market Price) be proved
or established by the Company prior to taking or suffering any action hereunder,
such fact or matter (unless other evidence in respect thereof be herein
specifically prescribed) may be deemed to be conclusively proved and established
by a certificate signed by the President, any Vice President, the Secretary, any
Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company and
delivered to the Rights Agent; and such certificate shall be full authorization
to the Rights Agent for any action taken or suffered in good faith by it under
the provisions of this Agreement in reliance upon such certificate.
(c) Liability for Negligence, etc. The Rights Agent shall be liable
-----------------------------
hereunder only for its own negligence, bad faith or willful misconduct.
(d) Statements of Fact or Recitals. The Rights Agent shall not be
------------------------------
liable for or by reason of any of the statements of fact or recitals contained
in this Agreement or in the Rights Certificates or be required to verify the
same (except as to its countersignature on such Rights Certificates), but all
such statements and recitals are and shall be deemed to have been made by the
Company only.
(e) Agreement; Adjustments. The Rights Agent shall not be under any
----------------------
responsibility in respect of the validity of this Agreement or the execution and
delivery hereof (except the due execution hereof by the Rights Agent) or in
respect of the validity or execution of any Rights Certificate (except its
countersignature); nor
35
<PAGE>
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Rights Certificate; nor shall it
be responsible for any adjustment required under the provisions of Section 11
(Adjustment of Purchase Price; Number and Kind of Shares or Number of Rights) or
- ----------------------------------------------------------------------------
Section 13 (Consolidation, Merger or Sale or Transfer of Assets or Earning
--------------------------------------------------------------
Power) or responsible for the manner, method or amount of any such adjustment or
the ascertaining of the existence of facts that would require any such
adjustment (except with respect to the exercise of Rights evidenced by Rights
Certificates after actual notice of any such adjustment); nor shall it by any
act hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any shares of Common Stock or Preferred Stock to
be issued pursuant to this Agreement or any Rights Certificate or as to whether
any shares of Common Stock or Preferred Stock will, when so issued, be validly
authorized and issued, fully paid and nonassessable.
(f) Further Assurances. The Company 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) Instructions. The Rights Agent is hereby authorized and directed
------------
to accept instructions with respect to the performance of its duties hereunder
from the President, any Vice President, the Secretary, any Assistant Secretary,
the Treasurer or any Assistant Treasurer of the Company and to apply to such
persons for advice or instructions in connection with its duties, and it shall
not be liable for any action taken or suffered to be taken by it in good faith
in accordance with the instructions of any such person.
(h) Dealing in Rights. The Rights Agent and any stockholder,
-----------------
director, officer or employee of the Rights Agent may buy, sell or deal in any
of the Rights or other securities of the Company or become pecuniarily
interested in any transaction in which the Company may be interested, or
contract with or lend money to the Company or otherwise act as fully and freely
as though it were not Rights Agent under this Agreement. Nothing herein shall
preclude the Rights Agent from acting in any other capacity for the Company or
for any other legal entity.
(i) Agents; Reasonable Care. The Rights Agent may execute and
-----------------------
exercise any of the rights or powers hereby vested in it or perform any duty
hereunder either itself or by or through its attorneys or agents, and the Rights
Agent shall not be answerable or accountable for any act, default, neglect or
misconduct of any such attorneys or agents or for any loss to the Company
resulting from any such act, default, neglect or misconduct; provided, however,
-------- -------
reasonable care was exercised in the selection and continued employment thereof.
(j) Expenses; Repayment Assurances. No provision of this Agreement
------------------------------
shall require the Rights Agent to expend or risk its own funds or otherwise
incur any
36
<PAGE>
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) Exercise of Rights; Consultation with Company. If, with respect
---------------------------------------------
to any Rights Certificate surrendered to the Rights Agent for exercise or
transfer, the certificate attached to the form of assignment or form of election
to purchase, as the case may be, has either not been completed or indicates an
affirmative response to clause 1 and/or 2 thereof, the Rights Agent shall not
take any further action with respect to such requested exercise of transfer
without first consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any successor
----------------------
Rights Agent may resign and be discharged from its duties under this Agreement
upon thirty (30) calendar 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 thirty (30) calendar 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, the
Company shall appoint a successor to the Rights Agent. If the Company shall
fail to make such appointment within a period of thirty (30) calendar 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 the registered holder of
any Rights Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether
appointed by the Company or by such a court, shall be (a) a corporation
organized and doing business under the laws of the United States or of any State
of the United States, in good standing, which is authorized under such laws to
exercise stock transfer or corporate trust powers, is subject to supervision or
examination by federal or state authority and has at the time of its appointment
as Rights Agent a combined capital and surplus of at least $50,000,000 or (b) an
Affiliate of a corporation described in clause (a) of this sentence. After
appointment, the successor Rights Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as Rights
Agent without further act or deed; but the predecessor Rights Agent shall
deliver and transfer to the successor Rights Agent any property at the time held
by it hereunder, and execute and deliver any further assurance, conveyance, act
or deed necessary for the purpose. Not later than the effective date of any
such appointment, the Company shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Common Stock and the
Preferred Stock, and mail a notice thereof in writing to the registered
37
<PAGE>
holders of the Rights Certificates. Failure to give any notice provided for in
this Section 21 (Change of Rights Agent), or any defect therein, shall not
----------------------
affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.
Section 22. Issuance of New Rights Certificates. Notwithstanding any of
-----------------------------------
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Rights Certificates evidencing Rights in such form
as may be approved by the Board to reflect any adjustment or change in the
Purchase Price and the number or kind or class of shares or other securities or
property purchasable under the Rights Certificates made in accordance with the
provisions of this Agreement. In addition, in connection with the issuance or
sale of shares of Common Stock following the Distribution Date and prior to the
redemption or expiration of the Rights, the Company (a) shall, with respect to
shares of Common Stock so issued or sold pursuant to the exercise of stock
options or under any employee plan or arrangement, or upon the exercise,
conversion or exchange of securities hereafter issued by the Company, in either
case outstanding as of the Distribution Date, and (b) may, in any other case, if
deemed necessary or appropriate by the Board, issue Rights Certificates
representing the appropriate number of Rights in connection with such issuance
or sale; provided, however, that (i) no such Rights Certificate shall be issued
-------- -------
if, and to the extent that, the Company shall be advised by counsel that such
issuance would create a significant risk of material, adverse tax consequences
to the Company or the Person to whom such Rights Certificate would be issued,
and (ii) no such Rights Certificate shall be issued if, and to the extent that,
appropriate adjustment shall otherwise have been made in lieu of the issuance
thereof.
Section 23. Redemption and Termination.
--------------------------
(a) Redemption. The Company may, at its option, at any time prior to
----------
the earlier of (i) the Close of Business on the tenth Business Day following the
Stock Acquisition Date (or, if the Stock Acquisition Date shall have occurred
prior to the Record Date, the Close of Business on the tenth Business Day
following the Record Date), or (ii) the Final Expiration Date, redeem (the date
of such redemption being referred to herein as the "Redemption Date") all but
not less than all of the then outstanding Rights at a redemption price of $0.001
per Right, as such amount may be appropriately adjusted to reflect any stock
split, stock dividend or similar transaction occurring after the date hereof
(such redemption price being hereinafter referred to as the "Redemption Price");
provided, however, that any redemption after the Stock Acquisition Date must be
- -------- -------
authorized by a majority of the Disinterested Directors; provided further,
----------------
however, that if, following the occurrence of a Stock Acquisition Date and
- -------
following the expiration of the right of redemption hereunder but prior to any
Triggering Event, (i) a Person who is an Acquiring Person shall have transferred
or otherwise disposed of a number of shares of Common Stock in one transaction
or series of transactions, not directly or indirectly involving the Company or
any of its Subsidiaries, which did not result in the occurrence of a Triggering
Event such that such Person is thereafter a Beneficial Owner of 10% or less of
the
38
<PAGE>
outstanding shares of Common Stock, and (ii) there are not other Persons,
immediately following the occurrence of the event described in clause (i), who
are Acquiring Persons, then the right of redemption shall be reinstated and
thereafter be subject to the provisions of this Section 23. Notwithstanding
anything contained in this Agreement to the contrary, the Rights shall not be
exercisable after the first occurrence of a Flip-in Event until such time as the
Company's right of redemption hereunder has expired. The redemption of the
Rights by the Company may be made effective at such time, on such basis and with
such conditions as the Board in its sole discretion or the Disinterested
Directors in their sole discretion, as applicable, may establish. The Company
may, at its option, pay the Redemption Price in cash, shares of Common Stock
(based on the Current Market Price of the Common Stock at the time of
redemption) or any other form of consideration deemed appropriate by Board or
the Disinterested Directors, as applicable.
(b) Effect of Redemption; Procedure. Immediately upon the action of
-------------------------------
the Company ordering the redemption of the Rights 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 Redemption Date,
the Company shall (i) give notice of such redemption to the Rights Agent, (ii)
give public notice of such redemption; provided, however, that the failure to
-------- -------
give, or any defect in, such notice shall not affect the validity of such
redemption, and (iii) mail notice of such redemption to the holders of the then
outstanding Rights at their last addresses as they appear upon the registry
books of the Rights Agent or, prior to the Distribution Date, on the registry
books of the Transfer Agent for the Common Stock. Any notice which is mailed in
the manner herein provided shall be deemed given, whether or not the holder
receives the notice. Each such notice of redemption will state the method by
which the payment of the Redemption Price will be made. Amounts payable shall be
rounded down to the nearest $0.01.
Section 24. Exchange.
---------
(a) Right to Exchange. The Company may, at its option, at any time
-----------------
and from time to time after the first occurrence of a Flip-in Event, exchange
all or part of the then outstanding and exercisable Rights (other than Rights
which have become void as provided in Section 7(e) (Exercise of Rights; Purchase
----------------------------
Price; Expiration Date of Rights -- Termination of Acquiring Person's Rights))
- -------------------------------- ----------------------------------------
for the Exchange Number of shares of Common Stock, shares or units of Preferred
Stock which the Board has determined to be a Common Stock Equivalent, units of
other property or any combination thereof as determined by the Board.
Notwithstanding the foregoing, the Company 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 shares of Common Stock for or pursuant to any such plan),
together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of 50% or more of the shares of Common Stock then outstanding.
The exchange of the Rights by the
39
<PAGE>
Company may be made effective at such time, on such basis and with such
conditions as the Board in its sole discretion may establish.
(b) Effect of Exchange; Procedure. Immediately upon the action of the
-----------------------------
Company ordering the exchange of any Rights pursuant to paragraph (a) of this
Section 24, evidence of which shall have been filed with the Rights Agent and
without any further action and without any notice, the right to exercise such
Rights will terminate and the only right thereafter of a holder of such Rights
shall be to receive that number of shares of Common Stock, Common Stock
Equivalents or units of other property equal to the number of such Rights held
by such holder multiplied by the Exchange Number. Promptly after the action of
the Company ordering the exchange of the Rights, the Company shall (i) file
evidence of such action with the Rights Agent, (ii) give public notice of such
exchange; provided, however, that the failure to give, or any defect in, such
-------- -------
notice shall not affect the validity of such exchange, and (iii) mail notice of
such exchange to 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 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
as provided in Section 7(e) (Exercise of Rights; Purchase Price; Expiration
-----------------------------------------------
Date of Rights -- Termination of Acquiring Person's Rights)) held by each holder
- -------------- ----------------------------------------
of Rights.
(c) Common Stock Equivalents. In any exchange pursuant to this
------------------------
Section 24, the Company, at its option, may substitute Common Stock Equivalents
for Common Stock exchangeable for Rights, at the initial rate of one share of
Common Stock Equivalent for each share of Common Stock, as appropriately
adjusted to reflect adjustments in the voting rights of the Common Stock
pursuant to the Company's Certificate of Incorporation, so that the share of
Common Stock Equivalent delivered in lieu of each share of Common Stock shall
have the same voting rights as one share of Common Stock.
(d) Insufficient Common Stock. In the event that the number of
-------------------------
shares of Common Stock which are authorized by the Company's Certificate of
Incorporation but not outstanding or reserved for issuance for purposes other
than upon exercise of the Rights is not sufficient to permit any exchange of
Rights in accordance with this Section 24, the Company may, at its option, take
all such action as may be necessary to authorize additional shares of Common
Stock for issuance upon such exchange.
(e) Fractional Shares. Upon the action of the Company ordering the
-----------------
exchange of any Rights pursuant to paragraph (a) of this Section 24, the Company
shall not be required to issue fractions of shares or to distribute certificates
which evidence fractional shares. In lieu of such fractional shares, the Company
may pay to the registered holders of the Rights Certificates with regard to
which such
40
<PAGE>
fractional shares would otherwise be issuable 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 24, the current market value of one share of Common
Stock shall be the closing price of one share of Common Stock (as determined
pursuant to Section 11(d)(i) (Adjustment of Purchase Price; Number and Kind of
------------------------------------------------
Shares or Number of Rights -- Current Market Price)) for the Trading Day
- -------------------------- --------------------
immediately prior to the date of exchange pursuant to this Section 24, and the
value of any Common Stock Equivalent shall be deemed to have the same current
market value as the Common Stock on such date.
Section 25. Notice of Certain Events.
------------------------
(a) Preferred Stock Transactions, etc. 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);
(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; (iii) to effect any
reclassification of its Preferred Stock (other than a reclassification involving
only the subdivision of outstanding shares of Preferred Stock); (iv) to effect
any consolidation with, merger into or with, or statutory share exchange or
similar transaction with, any other Person (other than a Subsidiary of the
Company in a transaction which complies with Section 11(o) (Adjustment of
-------------
Purchase Price; Number and Kind of Shares or Number of Rights -- Restriction
- ------------------------------------------------------------- -----------
against Diminishing Benefits of the Rights)), or to effect any sale or other
- ------------------------------------------
transfer (or to permit one or more of its Subsidiaries to effect any sale or
other transfer), in one transaction or a series of related transactions, of more
than 50% of the assets, cash flow or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person or Persons (other than the
Company and/or any of its Subsidiaries in one or more transactions each of which
complies with Section 11(o)); (v) to effect the liquidation, dissolution or
winding up of the Company, or (vi) to declare or pay any dividend on the shares
of Common Stock payable in Common Stock or to effect a subdivision, combination
or consolidation of the shares of Common Stock (by reclassification or otherwise
than by payment of dividends in Common Stock), 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 (Notices), 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, statutory share exchange or similar
transaction, sale, transfer, liquidation, dissolution, or winding up is to take
place and the date of participation therein by the holders of the shares of
Preferred Stock, if any such date is to be fixed, and such notice shall be so
given in the case of any action covered by clause (i) or (ii) above at least
twenty (20) calendar days prior to the record date for determining holders of
the shares of Preferred Stock for purposes of such action, and in the case of
any such other action, at least twenty (20) calendar
41
<PAGE>
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) Other Transactions. In case any of the events set forth in
------------------
Section 11(a)(ii) (Adjustment of Purchase Price; Number and Kind of Shares or
----------------------------------------------------------
Number of Rights -- Certain Adjustments) 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
(Notices), a notice of the occurrence of such event, which shall specify the
- --------
event and the consequences of the event to holders of Rights under Section
11(a)(ii), and (ii) all references in the preceding paragraph to Preferred Stock
shall be deemed thereafter to refer to Common Stock and/or, if appropriate,
other securities.
Section 26. Notices. Notices or demands authorized by this Agreement to
-------
be given or made by the Rights Agent or by the holder of any Rights Certificate
to or on the Company shall be sufficiently given or made if sent by telecopier
(with receipt confirmed) or by first-class mail, postage prepaid, addressed
(until another address is filed in writing with the Rights Agent) as follows:
CellStar Corporation
1730 Briercroft Court
Carrollton, Texas 75006
Attention: President
Telecopier: (972) 466-0288
Subject to the provisions of Section 21 (Change of Rights Agent), any notice or
----------------------
demand authorized by this Agreement to be given or made by the Company or by the
holder of any Rights Certificate to or on the Rights Agent shall be sufficiently
given or made if sent by telecopier (with receipt confirmed) or by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Company) as follows:
ChaseMellon Shareholder Services, L.L.C.
85 Challenger Road
Overpeck Centre
Ridgefield Park, NJ 07660
Attention: Stacey Tankel
Telecopier: (201) 296-4004
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Common Stock) shall be sufficiently given or made if sent by first-
class mail, postage prepaid, addressed to such holder at the address of such
holder as shown on the registry books of the Company.
42
<PAGE>
Section 27. Supplements and Amendments. Prior to the Distribution Date
--------------------------
and subject to the penultimate sentence of this Section 27, the Company and the
Rights Agent shall, if the Company so directs, supplement or amend any provision
of this Agreement without the approval of any holders of certificates
representing shares of Common Stock; provided, however, that any supplement or
-------- -------
amendment of this Agreement after the Stock Acquisition Date must be approved by
a majority of the Disinterested Directors. From and after the Distribution Date
and subject to the penultimate sentence of this Section 27, the Company and the
Rights Agent shall, if the Company so directs, supplement or amend this
Agreement without the approval of any holders of Rights Certificates in order
(i) to cure any ambiguity, (ii) to correct or supplement any provision contained
herein which may be defective or inconsistent with any other provisions herein,
(iii) to shorten or lengthen any time period hereunder or (iv) to change or
supplement the provisions hereunder in any manner which the Company may deem
necessary or desirable and which shall not adversely affect the interests of the
holders of Rights Certificates (other than an Acquiring Person or an Affiliate
or Associate of any such Person); provided, however, this Agreement may not be
-------- -------
supplemented or amended to lengthen, pursuant to clause (iii) of this sentence,
(A) a time period relating to when the Rights may be redeemed at such time as
the Rights are not then redeemable, or (B) any other time period unless such
lengthening is for the purpose of protecting, enhancing or clarifying the rights
of, and/or the benefits to, the holders of Rights; provided further, that any
----------------
supplement or amendment of this Agreement after the Stock Acquisition Date must
be approved by a majority of the Disinterested Directors. Upon the delivery of
a certificate from an appropriate officer of the Company which states that the
proposed supplement or amendment is in compliance with the terms of this Section
27, the Rights Agent shall execute such supplement or amendment. Notwithstanding
anything contained in this Agreement to the contrary, no supplement or amendment
shall be made which changes the Redemption Price, the Final Expiration Date, the
Purchase Price, or the number of one one-thousandths of a share of Preferred
Stock for which a right is exercisable; provided, however, that at any time
-------- -------
prior to (i) the existence of an Acquiring Person or (ii) 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 any Subsidiary of the
Company, or any Person or entity organized, appointed or established by the
Company for or pursuant to the terms of any such plan) is first published or
sent or given within the meaning of Rule 14d-2(a) of the General Rules and
Regulations under the Exchange Act, if upon consummation thereof, such Person
would be the Beneficial Owner of 15% or more of the shares of Common Stock then
outstanding, the Board may amend this Agreement to increase the Purchase Price
or extend the Final Expiration Date. Prior to the Distribution Date, the
interests of the holders of Rights shall be deemed coincident with the interests
of the holders of Common Stock.
Section 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.
43
<PAGE>
Section 29. Determinations and Actions by the Board of Directors,
-----------------------------------------------------
Disinterested 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. The Board (with,
where specifically provided for herein, the concurrence or approval of the
Disinterested 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 or approval of the Disinterested Directors) or to the Company, or as
may be necessary or advisable in the administration of this Agreement,
including, without limitation, the right and power to (i) interpret the
provisions of this Agreement, and (ii) make all determinations deemed necessary
or advisable for the administration of this Agreement (including a determination
to redeem or not redeem the Rights or to amend the Agreement). All such actions,
calculations, interpretations and determinations (including, for purposes of
clause (y) below, all omissions with respect to the foregoing) which are done or
made by the Board (with, where specifically provided for herein, the concurrence
or approval of the Disinterested 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 (y) not subject the Board or the Disinterested
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, provision, covenant or
------------
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
- -------- -------
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board determines
in its good faith judgment that severing the invalid language from this
Agreement would adversely affect the purpose or effect of this Agreement, the
right of redemption set forth in Section 23 (Redemption and Termination) shall
--------------------------
be reinstated and shall not expire until the Close of Business on the tenth
Business Day following the date of such determination by the Board. Without
limiting the foregoing, if any provision requiring a majority of the Board to be
Disinterested
44
<PAGE>
Directors to act is held by any court of competent jurisdiction or other
authority to be invalid, void or unenforceable, such determination shall then be
made by the Board in accordance with applicable law and the Company's
Certificate of Incorporation and By-Laws.
Section 32. Governing Law. This Agreement, each Right and each Rights
-------------
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts made
and to be performed entirely within such State.
Section 33. Counterparts. This Agreement may be executed in any number
------------
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
Section 34. Descriptive Headings. Descriptive headings of the several
--------------------
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
45
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
Attest: CELLSTAR CORPORATION
By: /s/ Alan H. Goldfield
By: /s/ Elaine Flud Rodriguez ------------------------------------
--------------------------------- Alan H. Goldfield, Chairman of the
Name: Elaine Flud Rodriguez Board and Chief Executive Officer
Title: Vice President
CHASEMELLON SHAREHOLDER
By: /s/ Sam A. Sellers SERVICES, L.L.C.
---------------------------------
Name: Sam A. Sellers By: /s/ David Cary
Title: Assistant Vice President --------------------------------
Name: David Cary
Title: Relationship Manager
46
<PAGE>
Exhibit 1
---------
CERTIFICATE OF
DESIGNATION, PREFERENCES AND RIGHTS OF
SERIES A PREFERRED STOCK
OF
CELLSTAR CORPORATION
Pursuant to Section 151 of the General Corporation Law of the State of
Delaware
We, Alan H. Goldfield, Chairman of the Board, and Elaine F. Rodriguez,
Secretary, of CellStar Corporation (the "Corporation"), a corporation organized
and existing under the General Corporation Law of the State of Delaware (the
"GCL"), in accordance with the provisions of Section 103 of the GCL, DO HEREBY
CERTIFY:
That pursuant to the authority conferred upon the Board of Directors (the
"Board") by the Amended and Restated Certificate of Incorporation of the
Corporation, the said Board on December 30, 1996, adopted the following
resolutions creating a series of 45,000 shares of Preferred Stock, par value
$10.00 per share, designated as Series A Preferred Stock:
RESOLVED, that, pursuant to the authority vested in the Board in accordance
with the provisions of its Amended and Restated Certificate of Incorporation,
the Board does hereby create, authorize and provide for the issuance upon the
exercise of the Corporation's Preferred Stock Purchase Rights, of a series of
Preferred Stock of the Corporation, and does hereby fix and state that the
designations, amounts, powers, preferences and relative and other special rights
and the qualifications, limitations or restrictions thereof are as follows:
Series A Preferred Stock
- ------------------------
Section 1. Designation and Amount. The shares of such series shall be
----------------------
designated as Series A Preferred Stock and the number of shares constituting
such series shall be 45,000.
Section 2. Dividends and Distributions.
---------------------------
(A) Subject to the prior and superior rights of the holders of any
shares of any series of Preferred Stock ranking prior and superior to the shares
of Series A Preferred Stock with respect to dividends, the holders of shares of
Series A Preferred Stock shall be entitled to receive, when, as and if declared
by the Board of Directors out of funds legally available for that purpose,
quarterly dividends
1
<PAGE>
payable in cash on the 1st day of March, June, September and December in each
year commencing March 1, 1997 (each such date being referred to herein as a
"Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or fraction of a share of
Series A Preferred Stock, in an amount per share (rounded to the nearest cent)
equal to the greater of (a) $0.01 or (b) subject to the provision for adjustment
hereinafter set forth, one thousand (1,000) times the aggregate per share amount
of all cash dividends, and one thousand (1,000) times the aggregate per share
amount (payable in kind) of all non-cash dividends or other distributions other
than a dividend payable in shares of the common stock of the Corporation, par
value $0.01 per share ("the Common Stock"), or a subdivision of the outstanding
shares of Common Stock (by reclassification or otherwise), declared on the
Common Stock, since the immediately preceding Quarterly Dividend Payment Date,
or, with respect to the first Quarterly Dividend Payment Date, since the first
issuance of any share or fraction of a share of Series A Preferred Stock. In the
event the Corporation shall at any time after December 30, 1996 (the "Rights
Declaration Date") (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the amount to which holders of shares of Series A Preferred Stock were entitled
immediately prior to such event under clause (b) of the preceding sentence shall
be adjusted by multiplying such amount by a fraction the numerator of which is
the number of shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the
Series A Preferred Stock as provided in paragraph (A) above immediately after it
declares a dividend or distribution on the Common Stock (other than a dividend
payable in shares of Common Stock); provided that, in the event no dividend or
distribution shall have been declared on the Common Stock during the period
between any Quarterly Dividend Payment Date and the next subsequent Quarterly
Dividend Payment Date, a dividend of $0.01 per share on the Series A Preferred
Stock shall nevertheless be payable on such subsequent Quarterly Dividend
Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Series A Preferred Stock, unless
the date of issue of such shares is prior to the record date for the first
Quarterly Dividend Payment Date, in which case dividends on such shares shall
begin to accrue from the date of issue of such shares, or unless the date of
issue is a Quarterly Dividend Payment Date or is a date after the record date
for the determination of holders of shares of Series A Preferred Stock entitled
to receive a quarterly dividend and before such Quarterly Dividend Payment Date,
in either of which events such dividends shall begin to accrue and be cumulative
from such Quarterly Dividend Payment Date.
2
<PAGE>
Accrued but unpaid dividends shall not bear interest. Dividends paid on the
shares of Series A Preferred Stock in an amount less than the total amount of
such dividends at the time accrued and payable on such shares shall be allocated
pro rata on a share-by-share basis among all such shares at the time
outstanding. The Board of Directors may fix a record date for the determination
of holders of shares of Series A Preferred Stock entitled to receive payment of
a dividend or distribution declared thereon, which record date shall be no more
than thirty (30) days prior to the date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series A Preferred
-------------
Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth,
each share of Series A Preferred Stock shall entitle the holder thereof to one
thousand (1,000) votes on all matters submitted to a vote of the stockholders of
the Corporation. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the number of votes per share to which holders of shares of Series A Preferred
Stock were entitled immediately prior to such event shall be adjusted by
multiplying such number by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) Except as otherwise provided herein or by law, the holders of
shares of Series A Preferred Stock and the holders of shares of Common Stock
shall vote together as one class on all matters submitted to a vote of
stockholders of the Corporation. Except as otherwise provided herein or by law,
the holders of the shares of Series A Preferred Stock shall not be entitled to
vote as a separate class on any matters submitted to a vote of the stockholders.
(C) (i) If at any time dividends on any Series A Preferred Stock
shall be in arrears in an amount equal to six (6) quarterly dividends thereon,
the occurrence of such contingency shall mark the beginning of a period (herein
called a "default period") which shall extend until such time when all accrued
and unpaid dividends for all previous quarterly dividend periods and for the
current quarterly dividend period on all shares of Series A Preferred Stock then
outstanding shall have been declared and paid or set apart for payment. During
each default period, all holders of Series A Preferred Stock, voting as a class,
shall have the right to elect two (2) Directors to the Board of Directors of the
Corporation.
(ii) During any default period, such voting right of the
holders of Series A Preferred Stock may be exercised initially at a special
meeting called pursuant to subparagraph (iii) of this Section 3(C) or at any
annual meeting of
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<PAGE>
stockholders of the Corporation, and thereafter at annual meetings of
stockholders of the Corporation, provided that such voting right shall not be
exercised unless the holders of one-third (1/3) in number of shares of Series A
Preferred Stock outstanding shall be present in person or by proxy. The absence
of a quorum of the holders of Common Stock shall not affect the exercise by the
holders of Series A Preferred Stock of such voting right. At any meeting at
which the holders of Series A Preferred Stock shall exercise such voting right
initially during an existing default period, they shall have the right, voting
as a class, to elect Directors to fill such vacancies, if any, in the Board of
Directors as may then exist up to two (2) Directors or, if such right is
exercised at an annual meeting, to elect two (2) Directors. If the number which
may be so elected at any special meeting does not amount to the required number,
the holders of the Series A Preferred Stock shall have the right to make such
increase in the number of Directors constituting the whole Board of Directors as
shall be necessary to permit the election by them of the required number. After
the holders of the Series A Preferred Stock shall have exercised their right to
elect Directors in any default period and during the continuance of such period,
the number of Directors constituting the whole Board of Directors shall not be
increased or decreased except by vote of the holders of Series A Preferred Stock
as herein provided or pursuant to the rights of any equity securities ranking
senior to or pari passu with the Series A Preferred Stock.
---- -----
(iii) Unless the holders of Series A Preferred Stock shall,
during an existing default period, have previously exercised their right to
elect Directors, the Board of Directors may order, or any stockholder or
stockholders owning in the aggregate not less than ten percent (10%) of the
total number of shares of Series A Preferred Stock outstanding may request, the
calling of a special meeting of the holders of Series A Preferred Stock, which
meeting shall thereupon be called by the President, a Vice President or the
Secretary of the Corporation. Notice of such meeting and of any annual meeting
at which holders of Series A Preferred Stock are entitled to vote pursuant to
this subparagraph (C)(iii) shall be given to each holder of record of Series A
Preferred Stock by mailing a copy of such notice to him at his last address as
the same appears on the books of the Corporation. Such meeting shall be called
for a time not earlier than twenty (20) days and not later than sixty (60) days
after such order or request or in default of the calling of such meeting within
sixty (60) days after such order or request, such meeting may be called on
similar notice by any stockholder or stockholders owning in the aggregate not
less than ten percent (10%) of the total number of shares of Series A Preferred
Stock outstanding. Notwithstanding the provisions of this subparagraph (C)(iii),
no such special meeting shall be called during the period within sixty (60) days
immediately preceding the date fixed for the next annual meeting of the
stockholders of the Corporation.
(iv) In any default period, the holders of Common Stock, and
other classes of stock of the Corporation if applicable, shall continue to be
entitled to elect the whole number of Directors until the holders of the Series
A Preferred Stock shall have exercised their right to elect two (2) Directors
voting as a class, after the
4
<PAGE>
exercise of which right (x) the Directors so elected by the holders of the
Series A Preferred Stock shall continue in office until their successors shall
have been elected by such holders or until the expiration of the default period,
and (y) any vacancy in the Board of Directors may (except as provided in
subparagraph (C)(ii) of this Section 3) be filled by vote of a majority of the
remaining Directors theretofore elected by the holders of the class of stock
which elected the Director whose office shall have become vacant. References in
this paragraph (C) to Directors elected by the holders of a particular class of
stock shall include Directors elected by such Directors to fill vacancies as
provided in clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default period, (x) the
right of the holders of the Series A Preferred Stock as a class to elect
Directors shall cease, (y) the term of any Directors elected by the holders of
Series A Preferred Stock as a class shall terminate and (z) the number of
Directors constituting the whole Board of Directors shall be such number as may
be provided for in the Corporation's Amended and Restated Certificate of
Incorporation or bylaws irrespective of any increase made pursuant to the
provisions of subparagraph (C)(ii) of this Section 3 (such number being subject,
however, to change thereafter in any manner provided by law or in the
Corporation's Amended and Restated Certificate of Incorporation or bylaws). Any
vacancies in the Board of Directors effected by the provisions of clauses (y)
and (z) in the preceding sentence may be filled as provided in the Corporation's
Amended and Restated Certificate of Incorporation.
(D) Except as set forth herein, holders of Series A Preferred Stock
shall have no special voting rights and their consent shall not be required
(except to the extent they are entitled to vote with holders of Common Stock as
set forth herein) for taking any corporate action.
Section 4. Certain Restrictions.
--------------------
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Series A Preferred Stock outstanding shall have
been paid in full, the Corporation shall not:
(i) declare or pay dividends on, make any other distributions
on, or redeem or purchase or otherwise acquire for consideration any shares of
stock ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to, the Series A Preferred Stock;
(ii) declare or pay dividends on, or make any other
distributions on, any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series A
Preferred Stock, except dividends paid ratably on the Series A Preferred Stock
and all such parity stock on
5
<PAGE>
which dividends are payable or in arrears in proportion to the total amounts to
which the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Stock,
provided that the Corporation may at any time redeem, purchase or otherwise
acquire shares of any such parity stock in exchange for shares of any stock of
the Corporation ranking junior (either as to dividends or upon dissolution,
liquidation or winding up) to the Series A Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any shares
of Series A Preferred Stock, or any shares of stock ranking on a parity with the
Series A Preferred Stock, except in accordance with a purchase offer made in
writing or by publication (as determined by the Board of Directors) to all
holders of such shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other relative rights
and preferences of the respective series and classes, shall determine in good
faith will result in fair and equitable treatment among the respective series or
classes.
(B) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series A Preferred Stock
-----------------
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
to be created by resolution or resolutions of the Board of Directors, subject to
the conditions and restrictions on issuance set forth herein.
Section 6. Liquidation, Dissolution or Winding Up.
--------------------------------------
(A) Upon any liquidation (voluntary or otherwise), dissolution or
winding up of the Corporation, no distribution shall be made to the holders of
shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock unless, prior
thereto, the holders of shares of Series A Preferred Stock shall have received
$250 per share, plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such payment (the
"Series A Liquidation Preference"). Following the payment of the full amount of
the Series A Liquidation Preference, no additional distributions shall be made
to the holders of shares of Series A Preferred Stock unless, prior thereto, the
holders of shares of Common Stock shall have received an amount per share (the
"Common Adjustment") equal to the quotient
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<PAGE>
obtained by dividing (i) the Series A Liquidation Preference by (ii) one
thousand (1,000) (as appropriately adjusted as set forth in paragraph (C) of
this Section to reflect such events as stock splits, stock dividends and
recapitalizations with respect to the Common Stock) (such number in clause (ii)
immediately above being referred to as the "Adjustment Number"). Following the
payment of the full amount of the Series A Liquidation Preference and the Common
Adjustment in respect of all outstanding shares of Series A Preferred Stock and
Common Stock, respectively, holders of Series A Preferred Stock and holders of
shares of Common Stock shall receive their ratable and proportionate share of
the remaining assets to be distributed in the ratio of the Adjustment Number to
one (1) with respect to such Preferred Stock and Common Stock, on a per share
basis, respectively.
(B) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series A Liquidation Preference and
the liquidation preferences of all other series of preferred stock, if any,
which rank on a parity with the Series A Preferred Stock, then such remaining
assets shall be distributed ratably to the holders of such parity shares in
proportion to their respective liquidation preferences. In the event, however,
that there are not sufficient assets available to permit payment in full of the
Common Adjustment, then such remaining assets shall be distributed ratably to
the holders of Common Stock.
(C) In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the Adjustment Number in effect immediately prior to such event shall be
adjusted by multiplying such Adjustment Number by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the Corporation shall
--------------------------
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock,
securities, cash or any other property, then in any such case the shares of
Series A Preferred Stock shall at the same time be similarly exchanged or
changed in an amount per share (subject to the provision for adjustment
hereinafter set forth) equal to one thousand (1,000) times the aggregate amount
of stock, securities, cash and/or any other property (payable in kind), as the
case may be, into which or for which each share of Common Stock is changed or
exchanged. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (ii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the amount set forth in the preceding sentence with respect to the exchange or
change of shares of Series A Preferred Stock shall be adjusted by multiplying
such amount by a fraction the numerator of which is the number of
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<PAGE>
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 8. Redemption. The outstanding shares of Series A Preferred Stock
----------
may be redeemed at the option of the Board of Directors as a whole, but not in
part, at any time, or from to time to time, at a cash price per share equal to
one hundred five percent (105%) of (i) the product of the Adjustment Number
times the Average Market Value (as such term is hereinafter defined) of the
Common Stock, plus (ii) all dividends which on the redemption date have accrued
on the shares to be redeemed and have not been paid, or declared and a sum
sufficient for the payment thereof set apart, without interest. The "Average
Market Value" is the average of the closing sale prices of the Common Stock
during the thirty (30) day period immediately preceding the date before the
redemption date on the Composite Tape for New York Stock Exchange Listed Stocks,
or, if such stock is not quoted on the Composite Tape, on the New York Stock
Exchange, or, if such stock is not listed on such Exchange, on the principal
United States securities exchange registered under the Securities Exchange Act
of 1934, as amended, on which such stock is listed, or, if such stock is not
listed on any such exchange, the average of the closing sale prices with respect
to a share of Common Stock during such thirty (30) day period, as quoted on the
National Association of Securities Dealers, Inc. Automated Quotations System or
any system then in use, or if no such quotations are available, the fair market
value of the Common Stock as determined by the Board of Directors in good faith.
Section 9. Ranking. The Series A Preferred Stock shall rank junior to all
-------
other series of the Corporation's Preferred Stock as to the payment of dividends
and the distribution of assets, unless the terms of any such series shall
provide otherwise.
Section 10. Amendment. The Amended and Restated Certificate of
---------
Incorporation of the Corporation shall not be further amended in any manner
which would materially alter or change the powers, preferences or special rights
of the Series A Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of a majority or more of the outstanding shares
of Series A Preferred Stock, voting separately as a class.
Section 11. Fractional Shares. At the Corporation's sole discretion,
-----------------
Series A Preferred Stock may be issued in fractions of a share which shall
entitle the holder, in proportion to such holder's fractional shares, to
exercise voting rights, receive dividends, participate in distributions and to
have the benefit of all other rights of holders of Series A Preferred Stock.
* * * * *
8
<PAGE>
IN WITNESS WHEREOF, we have executed and subscribed this Certificate and do
affirm the foregoing as true as of December 30, 1996.
____________________________________________
Alan H. Goldfield, Chairman of the Board and
Chief Executive Officer
Attest:
______________________________
Elaine F. Rodriguez, Secretary
9
<PAGE>
Exhibit 2
---------
[FORM OF RIGHTS CERTIFICATE]
Certificate No. R____ ______ Rights
NOT EXERCISABLE AFTER THE EARLIER OF JANUARY 9, 2007, OR SUCH DATE AS THE RIGHTS
REPRESENTED HEREBY ARE REDEEMED BY CELLSTAR CORPORATION (THE "CORPORATION").
THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE SUBJECT TO REDEMPTION, AT
THE OPTION OF THE CORPORATION, AT $0.001 PER RIGHT ON THE TERMS SET FORTH IN THE
RIGHTS AGREEMENT DATED AS OF DECEMBER 30, 1996, BY AND BETWEEN THE CORPORATION
AND CHASEMELLON SHAREHOLDER SERVICES, L.L.C., AS RIGHTS AGENT (THE "RIGHTS
AGREEMENT"). UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN
ACQUIRING PERSON (AS SUCH TERM IS DEFINED IN THE RIGHTS AGREEMENT) AND ANY
SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS
REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A
PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN
ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT).
ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY
BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) (EXERCISE OF
-----------
RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS -- TERMINATION OF ACQUIRING
- ------------------------------------------------- ------------------------
PERSON'S RIGHTS) OF SUCH AGREEMENT.]
- ---------------
RIGHTS CERTIFICATE
CELLSTAR CORPORATION
This certifies that_____________________________________________ its, his
or her registered assigns, is the registered owner of the number of rights set
forth above, each of which entitles the owner thereof, subject to the terms,
provisions and conditions of the Rights Agreement, dated as of December 30, 1996
(the "Rights Agreement"), between CellStar Corporation, a Delaware corporation
(the "Corporation"), and ChaseMellon Shareholder Services, L.L.C. (the "Rights
Agent"), to purchase from the Corporation at any time prior to 5:00 P.M.
(Dallas, Texas time) on January 9, 2007 at the office or offices of the Rights
Agent designated for such purpose, or its successors as Rights Agent, one one-
thousandth (1/1,000) of a fully paid, nonassessable share of Series A Preferred
Stock (the "Preferred Stock") of the
_____________________________
/1/The Portion of the legend in brackets shall be inserted only if
applicable and shall replace the preceding sentence.
1
<PAGE>
Corporation, at a purchase price of $____ per one one-thousandth (1/1,000) of a
share (the "Purchase Price"), upon presentation and surrender of this Rights
Certificate with the Form of Election to Purchase and related Certificate duly
executed. The number of Rights evidenced by this Rights Certificate (and the
number of shares which may be purchased upon exercise thereof) set forth above,
and the Purchase Price set forth above, are the number and Purchase Price as of
_____________, ______, based on the Preferred Stock as constituted at such date.
The Corporation reserves the right to require prior to the occurrence of a
Triggering Event (as such term is defined in the Rights Agreement) that upon any
exercise of Rights, a number of Rights be exercised so that only whole shares of
Preferred Stock would be issued.
Upon the occurrence of a Flip-in Event (as such term is defined in the
Rights Agreement), if the Rights evidenced by this Rights Certificate are
beneficially owned by (i) an Acquiring Person or an Associate or Affiliate or
any such Person (as such terms are defined in the Rights Agreement), (ii) a
transferee of an Acquiring Person or its Associate or Affiliate who becomes a
transferee after such Acquiring Person or its Associate or Affiliate becomes
such, or (iii) under certain circumstances specified in the Rights Agreement, a
transferee of an Acquiring Person or its Associate or Affiliate who becomes a
transferee prior to or concurrently with the Acquiring Person becoming such,
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 Flip-in Event.
As provided in the Rights Agreement, the Purchase Price and the number and
kind of shares of Preferred Stock or other securities, which may be purchased
upon the exercise of the Rights evidenced by this Rights Certificate are subject
to modification and adjustment upon the happening of certain events, including
Triggering Events (as such term is defined in the Rights Agreement).
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Corporation and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the above-mentioned office of the
Rights Agent and are also available upon written request to the Rights Agent.
This Rights Certificate, with or without other Rights Certificates, upon
surrender at the principal office or offices of the Rights Agent designated for
such purpose, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of one one-thousandths of a share of Preferred
Stock as the Rights evidenced by the Rights Certificate or Rights Certificates
surrendered shall have
2
<PAGE>
entitled such holder to purchase. If this Rights Certificate shall be exercised
in part, the holder shall be entitled to receive upon surrender hereof another
Rights Certificate or Rights Certificates for the number of whole Rights for
which this Rights Certificate is not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Certificate (i) may be redeemed by the Corporation at its option at a
redemption price of $0.001 per Right at any time prior to the earlier of (a) the
Close of Business (as such term is defined in the Rights Agreement) on the tenth
(10th) Business Day (as such term is defined in the Rights Agreement) following
the Stock Acquisition Date (as such term is defined in the Rights Agreement) (as
such time period may be extended pursuant to the Rights Agreement) or (b) the
Final Expiration Date (as such term is defined in the Rights Agreement) and (ii)
may be exchanged in whole or in part for Preferred Stock, shares of the
Corporation's Common Stock, par value $0.01 per share, other property or any
combination thereof.
In addition, the Rights may be exchanged, in whole or in part, for shares
of the Common Stock, or shares of common stock equivalents of the Corporation
having essentially the same value or economic rights as such shares.
Immediately upon the action of the Board of Directors of the Corporation
authorizing any such exchange, and without any further action or any notice, the
Rights (other than Rights which are not subject to such exchange) will terminate
and the Rights will only enable holders to receive the shares issuable upon such
exchange.
No fractional shares of Preferred Stock will be issued upon the exercise of
any Right or Rights evidenced hereby (other than fractions which are integral
multiples of one one-thousandth (1/1,000) of a share of Preferred Stock, which
may, at the election of the Corporation, be evidenced by depositary receipts),
but a cash payment will be made in lieu thereof, as provided in the Rights
Agreement.
No holder of this Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of shares of Preferred Stock
or of any other securities of the Corporation which may at any time be issuable
on the exercise hereof, nor shall anything contained in the Rights Agreement or
herein be construed to confer upon the holder hereof, as such, any of the rights
of a stockholder of the Corporation or any right to vote for the election of
directors or upon any matter submitted to stockholders of the Corporation 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 of the
Corporation (except as provided in the Rights Agreement), or to receive
dividends or subscription rights, or otherwise, until the Right or Rights
evidenced by this Rights Certificate shall have been exercised as provided in
the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
3
<PAGE>
WITNESS the facsimile signature of the proper officers of the Corporation
and its corporate seal.
Dated as of _________________
ATTEST: CELLSTAR CORPORATION
_____________________________ By:________________________________
Secretary Title:__________________________
Countersigned:
TRANSFER AGENT
By: _________________________
Authorized Signature
4
<PAGE>
[FORM OF REVERSE SIDE OF RIGHTS CERTIFICATE]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED, ____________________________________________________________
hereby sells, assigns and transfers unto________________________________________
________________________________________________________________________________
(PLEASE PRINT NAME AND ADDRESS OF TRANSFEREE)
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _____________________
Attorney, to transfer the within Rights Certificate on the books of the within-
named Corporation, with full power of substitution.
Dated:________________________ ___________________________________
Signature
Signature Guaranteed:
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 an Acquiring Person (as such terms are defined in the
Rights Agreement); and
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate from
any Person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person.
Dated:_______________________ ___________________________________
Signature
Signature Guaranteed:
5
<PAGE>
NOTICE
The signature to the foregoing Assignment and Certificate must correspond
to the name as written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any change whatsoever.
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to
exercise Rights represented by the
Rights Certificate.)
To: CELLSTAR CORPORATION
The undersigned hereby irrevocably elects to exercise _______________
Rights represented by this Rights Certificate to purchase the shares of
Preferred Stock issuable upon the exercise of the Rights (or such other
securities of the Corporation or of any other person which may be issuable upon
the exercise of the Rights) and requests that certificates for such shares be
issued in the name of and delivered to:
Please insert social security or
other identifying number
________________________________________________________________________________
(PLEASE PRINT NAME AND ADDRESS)
________________________________________________________________________________
If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
Please insert social security or
other identifying number
________________________________________________________________________________
(PLEASE PRINT NAME AND ADDRESS)
________________________________________________________________________________
Dated:______________________ ___________________________________
Signature
Signature Guaranteed:
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CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are
not being acquired or exercised by or on behalf of a Person who is or was an
Acquiring Person or an Affiliate or Associate of an Acquiring Person (as such
terms are defined in the Rights Agreement); and
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate from
any Person who is, was or became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.
Dated:______________________ ___________________________________
Signature
Signature Guaranteed:
NOTICE
The signature to the foregoing Election to Purchase and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
7
<PAGE>
Exhibit 3
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[Letter to Stockholders]
January 10, 1997
Dear CellStar Stockholder:
On December 30, 1996, your Board of Directors adopted a Stockholder Rights
Plan designed to prevent a potential acquiror from gaining control of the
Company without fairly compensating all of the Company's stockholders.
The Rights will initially trade with shares of the Company's Common Stock and
will have no impact on the way in which the Company's shares are traded. There
are no separate certificates or market for the Rights.
The Rights will not become exercisable and trade separately from the Common
Stock until the earlier of (1) ten business days after a public announcement
that a person has acquired 15% or more of the Common Stock of the Company or (2)
ten business days (or any later date determined by the Company's Board of
Directors) after a person makes a tender or exchange offer for 15% or more of
the Company's Common Stock.
Many other public companies have adopted similar plans, indicating widespread
agreement that such plans can help Directors deflect coercive and inadequate
offers.
A summary of the terms of the Rights is included with this letter.
Sincerely,
Alan H. Goldfield,
Chairman of the Board and
Chief Executive Officer
<PAGE>
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED STOCK
On December 30, 1996, the Board of Directors of CellStar Corporation (the
"Company") declared a dividend distribution of one Right for each outstanding
share of the Company's common stock, $0.01 par value (the "Common Stock"), to
stockholders of record at the close of business on January 9, 1997. Each Right
entitles the registered holder to purchase from the Company one one-thousandth
(1/1,000) of a share of Series A Preferred Stock, par value $10.00 per share
(the "Preferred Stock"), at a Purchase Price of $80.00 per one one-thousandth
(1/1,000) of a share, subject to adjustment. The description and terms of the
Rights are set forth in a Rights Agreement (the "Rights Agreement") between the
Company and ChaseMellon Shareholder Services, L.L.C., as Rights Agent (the
"Rights Agent").
Initially, the Rights will be attached to all Common Stock certificates
representing shares then outstanding, and no separate Rights Certificates will
be distributed. The Rights will separate from the Common Stock upon the earlier
of (i) ten (10) business days following a public announcement that a person
(other than Alan H. Goldfield, the Company's founder, Chairman of the Board and
Chief Executive Officer) or group of affiliated or associated persons (an
"Acquiring Person") has acquired, or obtained the right to acquire, beneficial
ownership of fifteen percent (15%) or more of the outstanding shares of Common
Stock (the "Stock Acquisition Date"), or (ii) ten (10) business days (or such
later date as the Board of Directors shall determine) following the commencement
of a tender or exchange offer that would result in a person or group
beneficially owning fifteen percent (15%) or more of such outstanding shares of
Common Stock. The date the Rights separate is referred to as the "Distribution
Date."
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 December 30, 1996
will contain a notation incorporating the Rights Agreement by reference, and
(iii) the surrender for transfer of any certificates for Common Stock
outstanding will also constitute the transfer of the Rights associated with the
Common Stock represented by such certificates. Pursuant to the Rights
Agreement, the Company reserves the right to require prior to the occurrence of
a Triggering Event (as defined below) that, upon any exercise of Rights, a
number of Rights be exercised so that only whole shares of Preferred Stock will
be issued.
The Rights are not exercisable until the Distribution Date and will expire at
the close of business on January 9, 2007, 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 will
represent the
<PAGE>
Rights. Except in connection with shares of Common Stock issued or sold
pursuant to the exercise of stock options under any employee plan or
arrangements, or upon the exercise, conversion or exchange of securities
hereafter issued by the Company, or as otherwise determined by the Board of
Directors, only shares of Common Stock issued prior to the Distribution Date
will be issued with Rights.
In the event that (i) the Company is the surviving corporation in a merger or
other business combination with an Acquiring Person (or any associate or
affiliate thereof) and its Common Stock remains outstanding and unchanged, (ii)
any person shall acquire beneficial ownership of more than fifteen percent (15%)
of the outstanding shares of Common Stock (except pursuant to (A) certain
consolidations or mergers involving the Company or sales or transfers of the
combined assets, cash flow or earning power of the Company and its subsidiaries
or (B) an offer for all outstanding shares of Common Stock at a price and upon
terms and conditions which a majority of the Disinterested Directors (as defined
below) determines to be in the best interests of the Company and its
stockholders), or (iii) there occurs a reclassification of securities, a
recapitalization of the Company or any of certain business combinations or other
transactions (other than certain consolidations and mergers involving the
Company and sales or transfers of the combined assets, cash flow or earning
power of the Company and its subsidiaries) involving the Company or any of its
subsidiaries which has the effect of increasing by more than one percent (1%)
the proportionate share of any class of the outstanding equity securities of the
Company or any of its subsidiaries beneficially owned by an Acquiring Person (or
any associate or affiliate thereof), each holder of a Right (other than the
Acquiring Person and certain related parties) 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 Purchase Price of the Right. However, Rights are not exercisable following
the occurrence of either of the events described above until such time as the
Rights are no longer redeemable by the Company as described below.
Notwithstanding any of the foregoing, following the occurrence of any of the
events described in this paragraph, 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.
For example, at a Purchase Price of $80 per Right, each Right not owned by an
Acquiring Person (or by certain related parties or transferees) following an
event set forth in the preceding paragraph would entitled its holder to purchase
$160 worth of Common Stock (or other consideration, as noted above) for $80.
Assuming that the Common Stock had a per share market price of $40 at such
time, the holder of each valid Right would be entitled to purchase four shares
of Common Stock for $80.
In the event that, at any time following the Stock Acquisition Date, (i) the
Company shall enter into a merger or other business combination transaction in
which the Company is not the surviving corporation, (ii) the Company is the
surviving corporation in a consolidation, merger or similar transaction pursuant
to which all or part of the outstanding shares of Common Stock are changed into
or
2
<PAGE>
exchanged for stock or other securities of any other person or cash or any other
property or (iii) more than 50% of the combined assets, cash flow or earning
power of the Company and its subsidiaries is sold or transferred (in each case
other than certain consolidations with, mergers with and into, or sales of
assets, cash flow or earning power by or to subsidiaries of the Company as
specified in the Rights Agreement), each holder of a Right (except Rights which
previously have been 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 Purchase Price of the Right. The events described in
this paragraph and in the second preceding paragraph are referred to as the
"Triggering Events."
The Purchase Price payable, the number and kind of shares covered by each
Right and the number of Rights outstanding 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, options or warrants
to subscribe for Preferred Stock or securities convertible into Preferred Stock
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,
cash (excluding regular quarterly cash dividends), assets (other than dividends
payable in Preferred Stock) or subscription rights or warrants (other than those
referred to in (ii) immediately above).
With certain exceptions, no adjustment in the Purchase Price will be required
until cumulative adjustments amount to at least one percent (1%) of the Purchase
Price. No fractional shares of Preferred Stock are required to be issued (other
than fractions which are integral multiples of one one-thousandth (1/1,000) of a
share of Preferred Stock) and, in lieu thereof, the Company may make an
adjustment in cash based on the market price of the Preferred Stock on the
trading date immediately prior to the date of exercise.
At any time after any person or group becomes an Acquiring Person and prior
to the acquisition by such person or group of fifty percent (50%) or more of the
outstanding shares of Common Stock, the Board of Directors of the Company may,
without payment of the Purchase Price by the holder, exchange the Rights (other
than Rights owned by such person or group, which will become void), in whole or
in part, for shares of Common Stock at an exchange ratio of one-half (1/2) the
number of shares of Common Stock (or in certain circumstances Preferred Stock)
for which a Right is exercisable immediately prior to the time of the Company's
decision to exchange the Rights (subject to adjustment).
At any time until ten (10) business days following the Stock Acquisition
Date, the Company may redeem the Rights in whole, but not in part, at a price of
$0.001 per Right (payable in cash, shares of Common Stock or other consideration
deemed appropriate by the Board of Directors). Immediately upon the action of
the Board of Directors ordering redemption of the Rights, the Rights will
terminate and the only right of the holders of Rights will be to receive the
$0.001 redemption price.
3
<PAGE>
The term "Disinterested Director" means any member of the Board of Directors
of the Company who was a member of the Board prior to the date of the Rights
Agreement, and any person who is subsequently elected to the Board if such
person is recommended or approved by a majority of the Disinterested 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 in the event that the Rights become
exercisable for Common Stock (or other consideration) of the Company or for
common stock of an acquiring company as set forth above or in the event that the
Rights are redeemed.
Other than those provisions relating to the principal economic terms of the
Rights, any of the provisions of the Rights Agreement may be amended by the
Board of Directors of the Company prior to the Distribution Date; provided, that
--------
any amendments after the Stock Acquisition Date must be approved by a majority
of the Disinterested Directors. After the Distribution Date, the provisions of
the Rights Agreement may be amended by the Board in order to cure any ambiguity,
inconsistency or defect, to make changes which do not adversely affect the
interest of holders of Rights (excluding the interest of any Acquiring Person)
or to shorten or lengthen any time period under the Rights Agreement; provided,
--------
however, that no amendment to adjust the time period governing redemption shall
be made at such time as the Rights are not redeemable; and, provided, that any
--------
amendments after the Stock Acquisition Date must be approved by a majority of
the Disinterested Directors.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A filed
on January 3, 1997. A copy of the Rights Agreement is available free of charge
from the Rights Agent. 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.
4
<PAGE>
Exhibit 4
---------
For: CellStar Corporation
Media Contact: Krista Grossman -- (212) 484-7760
Investor Contact: Richard Gozia -- (972) 466-5018
CELLSTAR ADOPTS STOCKHOLDER RIGHTS PLAN
Carrollton, Texas, December 30, 1996 -- CellStar Corporation [Nasdaq:CLST] (the
"Company") today announced that its Board of Directors has adopted a Stockholder
Rights Plan (the "Plan").
The Plan is designed to protect the Company from unfair or coercive
takeover attempts and to prevent a potential acquirer from gaining control of
the Company without fairly compensating all of the Company's stockholders.
The Plan creates a dividend of one right for each outstanding share of the
Company's Common Stock. The rights are represented by and traded
with the Company's Common Stock. There are no separate certificates or
market for the rights.
The rights do not become exercisable or trade separately from the Common Stock
unless one or both of the following conditions are met: a public announcement
that a person has acquired 15% or more of the Common Stock of the Company, or a
tender or exchange offer is made for 15% or more of the Company's Common Stock.
Should either of the aforementioned conditions be met and the rights become
exercisable, each right will entitle the holder thereof to buy 1/1,000th of a
share of the Corporation's Series A Preferred Stock at an exercise price of
$80.00. Each share of the new Series A Preferred Stock will essentially be
the economic equivalent of one share of Common Stock.
1
<PAGE>
Under certain circumstances the rights entitle the holders to buy the Company's
stock at a 50% discount. In the event that (1) the Company is the surviving
corporation in a merger or other business combination with an entity that owns
15% or more of the Company's outstanding stock; (2) any person shall acquire
beneficial ownership of 15% of the Company's outstanding stock; or (3) there is
any type of recapitalization of the Company that results in an increase by more
than 1% the proportionate share of equity securities of the Company owner by a
person who owns 15% or more of the Company's outstanding stock, each right
holder will have the option to buy for the purchase price Common Stock of the
Company having a value equal to two times the purchase price of the right.
Under certain circumstances the rights entitle the holders to buy shares of the
acquirer's Common Stock at a 50% discount. In the event that, at any time after
a person has acquired 15% or more of the Company's common stock, (1) the Company
enters into a merger or other business combination transaction in which the
Company is not the surviving corporation; (2) the Company is the survivng
corporation in a transaction in which all or part of the Common Stock is
exchanged for cash, property or securities of any other person; or (3) more than
50% of the assets, cash flow or earning power of the Company is sold, each right
holder will have theoption to buy for the purchase price stock of the acquiring
company having a value equal to two times the purchase price of the right.
The rights may be redeemed by the Company for $0.001 per right at any time until
10 business days following the first public announcement of the acquisition of
beneficial ownership of 15% of the Company's Common Stock.
The distribution of the rights will be made to stockholders of record on January
9, 1997. A copy of the Stockholder Rights Plan containing all the provisions of
the new rights will be filed with the Securities and Exchange Commission by
January 3, 1997. The Company's Plan is similar to those adopted by many other
companies and is not in response to any known effort to acquire control of the
Company.
CellStar Corporation is an integrated wholesale distributor and retailer of
cellular telephones and related products, with operations in the United States,
the United Kingdom, Mexico, South America, Hong Kong, China, Singapore,
Malaysia, Taiwan and the Philippines. The Company wholesales a diverse line of
cellular products to cellular carriers, distributors, agents, mass
merchandisers, and automotive dealers and retails such products to end users
through approximately 15 stand alone retail sales locations and 21
Communications Centers located in Sam's Clubs. The Company is one of the largest
independent non-carrier distributors of Motorola, Nokia, NEC and Ericsson
cellular telephones and accessories throughout the world.
2
