<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________
FORM 8-A
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934
TELCOM SEMICONDUCTOR, INC.
-----------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 94-3186995
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(IRS Employer Identification No.) (State of incorporation or organization)
1300 Terra Bella Avenue
Mountain View, CA 94039
(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
Securities to be registered pursuant to Section 12(g) of the Act:
Preferred Share Purchase Rights
-------------------------------
(Title of Class)
<PAGE>
Item 1. Description of Securities to be Registered.
------------------------------------------
On November 12, 1998, the Board of Directors of TelCom Semiconductor,
Inc. (the "Company") declared a dividend of one right (a "Right") to purchase
one share of the Company's Series A Participating Preferred Stock ("Series A
Preferred"), for each outstanding share of Common Stock ("Common Shares") of the
Company. The Rights are being issued pursuant to a Rights Agreement (the
"Rights Agreement") between the Company and ChaseMellon Shareholder Services,
LLC, as Rights Agent (the "Rights Agent"). The dividend is payable on December
1, 1998 (the "Record Date") to stockholders of record as of the close of
business on that date. Each Right entitles the registered holder to purchase
from the Company one share of Series A Preferred at an exercise price of Thirty
Dollars ($30.00) (the "Purchase Price"), subject to adjustment.
The following summary of the principal terms of the Rights Agreement is a
general description only and is subject to the detailed terms and conditions of
the Rights Agreement. A copy of the Rights Agreement is attached as Exhibit 3
to this Registration Statement and is incorporated herein by reference.
Rights Evidenced by Common Share Certificates
- ---------------------------------------------
The Rights will not be exercisable until the Distribution Date (defined
below). Certificates for the Rights ("Rights Certificates") will not be sent to
stockholders and the Rights will attach to and trade only together with the
Common Shares. Accordingly, Common Share certificates outstanding on the Record
Date will evidence the Rights related thereto, and Common Share certificates
issued after the Record Date will contain a notation incorporating the Rights
Agreement by reference. Until the
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<PAGE>
Distribution Date (or earlier redemption or expiration of the Rights), the
surrender or transfer of any cer tificates for Common Shares, outstanding as of
the Record Date, even without notation or a copy of the Summary of Rights being
attached thereto, will also constitute the transfer of the Rights associated
with the Common Shares represented by such certificate.
Distribution Date
- -----------------
The Rights will separate from the Common Shares, Rights Certificates will
be issued and the Rights will become exercisable upon the earlier of: (i) 10
days following a public announcement that a person or group of affiliated or
associated persons (an "Acquiring Person") has acquired, or obtained the right
to acquire, beneficial ownership of 15% or more of the outstanding Common
Shares, or (ii) 10 business days (or such later date as may be determined by the
Company's Board of Directors) following the commencement of, or announcement of
a tender offer or exchange offer the consummation of which would result in the
beneficial ownership by a person or group of 15% or more of the outstand ing
Common Shares. The earlier of such dates is referred to as the "Distribution
Date."
Issuance of Rights Certificates; Expiration of Rights
- -----------------------------------------------------
As soon as practicable following the Distribution Date, separate Rights
Certificates will be mailed to holders of record of the Common Shares as of the
close of business on the Distribution Date and such separate Rights Certificates
alone will evidence the Rights from and after the Distribution Date. All Common
Shares issued prior to the Distribution Date will be issued with Rights. The
Rights will expire on the earliest of (i) November 19, 2008 (the "Final
Expiration Date") or (ii) redemption or exchange of the Rights as described
below.
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<PAGE>
Initial Exercise of the Rights
- ------------------------------
Following the Distribution Date, and until one of the further events
described below, holders of the Rights will be entitled to receive, upon
exercise and the payment of the Purchase Price, one one-thousandth (0.001) of a
share of the Series A Preferred. In the event that the Company does not have
sufficient Series A Preferred available for all Rights to be exercised, or the
Board decides that such action is necessary and not contrary to the interests of
Rights holders, the Company may instead substi tute cash, assets or other
securities for the Series A Preferred for which the Rights would have been exer
cisable under this provision or as described below.
Right to Buy Company Common Shares
- ----------------------------------
Unless the Rights are earlier redeemed, in the event that an Acquiring
Person becomes the benefi cial owner of 15% or more of the Company's Common
Shares then outstanding, then each holder of a Right which has not theretofore
been exercised (other than Rights beneficially owned by the Acquiring Person,
which will thereafter be void) will thereafter have the right to receive, upon
exercise, Common Shares having a value equal to two times the Purchase Price.
Rights are not exercisable following the occurrence of an event as described
above until such time as the Rights are no longer redeemable by the Company as
set forth below.
Right to Buy Acquiring Company Stock
- ------------------------------------
Similarly, unless the Rights are earlier redeemed, in the event that, after
an Acquiring Person becomes the beneficial owner of 15% or more of the Company's
Common Shares then outstanding, (i) the Company is acquired in a merger or other
business combination transaction, or (ii) 50% or more
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<PAGE>
of the Company's consolidated assets or earning power are sold (other than in
transactions in the ordinary course of business), proper provision must be made
so that each holder of a Right which has not thereto fore been exercised (other
than Rights beneficially owned by the Acquiring Person, which will thereafter be
void) will thereafter have the right to receive, upon exercise, shares of common
stock of the acquiring company having a value equal to two times the Purchase
Price.
Exchange Provision
- ------------------
At any time after the acquisition by an Acquiring Person of 15% or more of
the Company's outstanding Common Shares and prior to the acquisition by such
Acquiring Person of 50% or more of the Company's outstanding Common Shares, the
Board of Directors of the Company may exchange the Rights (other than Rights
owned by the Acquiring Person), in whole or in part, at an exchange ratio of one
Common Share per Right. However, if a majority of the Company's Board of
Directors is elected by stockholder action by written consent, then for a period
of 180 days following such election the Rights cannot be exchanged if such
exchange is reasonably likely to have the purpose or effect of facilitating an
acquisition of the Company by a person or entity who proposed, nominated or
supported a director of the Company so elected by written consent (an
"Interested Person").
Redemption
- ----------
At any time on or prior to the close of business on the earlier of (i) the
Distribution Date, or (ii) the Final Expiration Date of the Rights, the Company
may redeem the Rights in whole, but not in part, at a price of $0.01 per Right.
However, if a majority of the Company's Board of Directors is elected by
stockholder action by written consent, then for a period of 180 days following
such election the
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<PAGE>
Rights cannot be redeemed if such redemption is reasonably likely to have the
purpose or effect of facilitating an acquisition of the Company by an Interested
Person.
Adjustments to Prevent Dilution
- -------------------------------
The Purchase Price payable, the number of Rights, and the number of shares
of Series A Preferred or Common Shares or other securities or property issuable
upon exercise of the Rights are subject to adjustment from time to time in
connection with the dilutive issuances by the Company as set forth in the Rights
Agreement.
Cash Paid Instead of Issuing Fractional Shares
- ----------------------------------------------
No fractional portion less than integral multiples of one Common Share will
be issued upon exercise of a Right and in lieu thereof, an adjustment in cash
will be made based on the market price of the Common Shares on the last trading
date prior to the date of exercise.
No Stockholders' Rights Prior to Exercise
- -----------------------------------------
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company (other than any rights resulting from
such holder's ownership of Common Shares), including, without limitation, the
right to vote or to receive dividends.
Amendment of Rights Agreement
- -----------------------------
The terms of the Rights and the Rights Agreement may be amended in any
respect without the consent of the Rights holders on or prior to the
Distribution Date; thereafter, the terms of the Rights and
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<PAGE>
the Rights Agreement may be amended without the consent of the Rights holders in
order (i) to cure any ambiguities, (ii) to correct or supplement any provision
contained therein which may be defective or inconsistent with any other
provisions therein, (iii) to shorten or lengthen any time period thereunder or
(iv) to make changes which do not adversely affect the interests of Rights
holders (other than the Acquiring Person). However, if a majority of the
Company's Board of Directors is elected by stockholder action by written
consent, then for a period of 180 days following such election the Rights
Agreement cannot be amended in any manner reasonably likely to have the purpose
or effect of facilitating an acquisition of the Company by an Interested Person.
The Rights Agreement may not be supplemented or amended to lengthen, pursuant to
clause (iii) of the prior sentence, (A) the 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, an/or the benefits to, the holders of
Rights (other than an Acquiring Person or an affiliate or associate of an
Acquiring Person).
Rights and Preferences of Series A Preferred
- --------------------------------------------
The shares of Series A Preferred purchasable upon exercise of the Rights
will not be redeemable. Each share of Series A Preferred will be entitled to an
aggregate dividend of 1,000 times the dividend declared per Common Share. In
the event of liquidation, the holders of the Series A Preferred will be entitled
to a minimum preferential liquidation payment equal to 1,000 times the aggregate
amount to be distributed per share to holders of Common Shares plus an amount
equal to any accrued and unpaid dividends on the Series A Preferred. Each share
of Series A Preferred will have 1,000 votes, and will vote together with the
Common Shares. In the event of any merger, consolidation or other transaction
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<PAGE>
in which the Common Shares are changed or exchanged, each share of Series A
Preferred will be entitled to receive 1,000 times the amount received per Common
Share.
Because of the nature of the dividend, liquidation and voting rights of the
shares of Series A Preferred, the value of the one one-thousandth interest in a
share of Series A Preferred purchasable upon exercise of each Right should
approximate the value of one Common Share.
Certain Anti-takeover Effects
- -----------------------------
The Rights approved by the Board are designed to protect and maximize the
value of the outstanding equity interests in the Company in the event of an
unsolicited attempt by an acquiror to take over the Company, in a manner or on
terms not approved by the Board of Directors. Takeover attempts frequently
include coercive tactics to deprive the Company's Board of Directors and its
stockholders of any real opportunity to determine the destiny of the Company.
The Rights have been declared by the Board in order to deter such tactics,
including a gradual accumulation of shares in the open market of a 15% or
greater position to be followed by a merger or a partial or two-tier tender
offer that does not treat all stockholders equally. These tactics unfairly
pressure stockholders, squeeze them out of their investment without giving them
any real choice and deprive them of the full value of their shares.
The Rights are not intended to prevent a takeover of the Company and will
not do so. Subject to the restrictions described above, the Rights may be
redeemed by the Company at $0.01 per Right at any time prior to the Distribution
Date. Accordingly, the Rights should not interfere with any merger or business
combination approved by the Board of Directors.
Issuance of the Rights does not in any way weaken the financial strength of
the Company or interfere with its business plans. The issuance of the Rights
themselves has no dilutive effect, will not
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<PAGE>
affect reported earnings per share, should not be taxable to the Company or to
its stockholders, and will not change the way in which the Company's shares are
presently traded. The Company's Board of Directors believes that the Rights
represent a sound and reasonable means of addressing the complex issues of
corporate policy created by the current takeover environment.
However, the Rights may have the effect of rendering more difficult or
discouraging an acquisition of the Company deemed undesirable by the Board of
Directors. The Rights may cause substantial dilution to a person or group that
attempts to acquire the Company on terms or in a manner not approved by the
Company's Board of Directors, except pursuant to an offer conditioned upon the
negation, purchase or redemption of the Rights.
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<PAGE>
Item 2. Exhibits.
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1. Specimen certificate for the Company's Common Stock.*
2. Certificate of Incorporation.*
3. Preferred Shares Rights Agreement dated as of November 19, 1998
between TelCom Semiconductor, Inc. and ChaseMellon Shareholder
Services, LLC, including the Certificate of Designation of Series
A Participating Preferred Stock, Rights Certifi cate and the
Summary of Rights attached thereto as Exhibits A, B and C,
respectively.
________________________________
* Incorporated by reference to the Company's Registration Statement on
Form SB-2 (file no. 33-93840-LA) declared effective by the Securities and
Exchange Commission on July 27, 1995.
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<PAGE>
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the Registrant has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereto duly authorized.
TELCOM SEMICONDUCTOR, INC.
Date: November 19, 1998
By: /s/ Phillip M. Drayer
----------------------
Phillip M. Drayer,
Chief Executive Officer
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<PAGE>
EXHIBIT 3
TELCOM SEMICONDUCTOR, INC.
AND
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
RIGHTS AGENT
PREFERRED SHARES RIGHTS AGREEMENT
DATED AS OF NOVEMBER 19, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 1. Certain Definitions.............................................................................. 1
Section 2. Appointment of Rights Agent...................................................................... 7
Section 3. Issuance of Rights Certificates.................................................................. 7
Section 4. Form of Rights Certificates...................................................................... 9
Section 5. Countersignature and Registration................................................................ 10
Section 6. Transfer, Split Up, Combination and Exchange of Rights Certificates; Mutilated, Destroyed, Lost
or Stolen Rights Certificates.................................................................... 10
Section 7. Exercise of Rights; Exercise Price; Expiration Date of Rights.................................... 11
Section 8. Cancellation and Destruction of Rights Certificates.............................................. 13
Section 9. Reservation and Availability of Preferred Shares................................................. 13
Section 10. Record Date...................................................................................... 14
Section 11. Adjustment of Exercise Price, Number of Shares or Number of Rights............................... 15
Section 12. Certificate of Adjusted Exercise Price or Number of Shares....................................... 21
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power............................. 21
Section 14. Fractional Rights and Fractional Shares.......................................................... 25
Section 15. Rights of Action................................................................................. 26
Section 16. Agreement of Rights Holders...................................................................... 27
Section 17. Rights Certificate Holder Not Deemed a Stockholder............................................... 27
Section 18. Concerning the Rights Agent...................................................................... 27
Section 19. Merger or Consolidation or Change of Name of Rights Agent........................................ 28
Section 20. Duties of Rights Agent........................................................................... 28
</TABLE>
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<PAGE>
TABLE OF CONTENTS
(CONTINUTED)
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Section 21. Change of Rights Agent........................................................................... 31
Section 22. Issuance of New Rights Certificates.............................................................. 31
Section 23. Redemption....................................................................................... 32
Section 24. Exchange......................................................................................... 33
Section 25. Notice of Certain Events......................................................................... 35
Section 26. Notices.......................................................................................... 35
Section 27. Supplements and Amendments....................................................................... 36
Section 28. Successors....................................................................................... 36
Section 29. Determinations and Actions by the Board of Directors, etc........................................ 36
Section 30. Benefits of this Agreement....................................................................... 37
Section 31. Severability..................................................................................... 37
Section 32. Governing Law.................................................................................... 37
Section 33. Counterparts..................................................................................... 37
Section 34. Descriptive Headings............................................................................. 37
</TABLE>
EXHIBITS
Exhibit A Form of Certificate of Designation
Exhibit B Form of Rights Certificate
Exhibit C Summary of Rights
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<PAGE>
RIGHTS AGREEMENT
Agreement, dated as of November 19, 1998, between TelCom Semiconductor,
Inc., a Delaware corporation, and ChaseMellon Shareholder Services, L.L.C., a
New Jersey limited liability company.
On November 12, 1998 (the "RIGHTS DIVIDEND DECLARATION DATE"), the Board of
Directors of the Company authorized and declared a dividend of one Preferred
Share Purchase Right (a "RIGHT") for each Common Share (as hereinafter defined)
of the Company outstanding as of the Close of Business (as hereinafter defined)
on December 1, 1998 (the "RECORD DATE"), each Right representing the right to
purchase one one-thousandth of a share of Series A Participating Preferred Stock
(as such number may be adjusted pursuant to the provisions of this Agreement),
having the rights, preferences and privileges set forth in the form of
Certificate of Designations of Rights, Preferences and Privileges of Series A
Participating Preferred Stock attached hereto as Exhibit A, upon the terms and
--------
subject to the conditions herein set forth, and further authorized and directed
the issuance of one Right (as such number may be adjusted pursuant to the
provisions of this Agreement) with respect to each Common Share that shall
become outstanding between the Record Date and the earlier of the Distribution
Date and the Expiration Date (as such terms are hereinafter defined), and in
certain circumstances after the Distribution Date.
NOW, THEREFORE, in consideration of the promises and the mutual agreements
herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
-------------------
following terms have the meanings indicated:
(a) "ACQUIRING PERSON" shall mean any Person who or which, together
with all Affiliates and Associates of such Person, shall be the Beneficial Owner
of Fifteen Percent (15%) or more of the Common Shares then outstanding, but
shall not include the Company, any Subsidiary of the Company or any employee
benefit plan of the Company or of any Subsidiary of the Company, or any entity
holding Common Shares for or pursuant to the terms of any such plan or
Institutional Venture Partners ("IVP") or any Affiliate or Associate of IVP.
Notwithstanding the foregoing, no Person shall be deemed to be an Acquiring
Person as the result of an acquisition of Common Shares by the Company which, by
reducing the number of shares outstanding, increases the proportionate number of
shares beneficially owned by such Person to Fifteen Percent (15%) or more of the
Common Shares of the Company then outstanding; provided, however, that if a
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Person shall become the Beneficial Owner of Fifteen Percent (15%) or more of the
Common Shares of the Company then outstanding by reason of share purchases by
the Company and shall, after such share purchases by the Company, become the
Beneficial Owner of any additional Common Shares of the Company (other than
pursuant to a dividend or distribution paid or made by the Company on the
outstanding Common Shares in Common Shares or pursuant to a split or subdivision
of the outstanding Common Shares), then such Person shall be deemed to be an
Acquiring Person unless upon becoming the Beneficial Owner of such additional
Common Shares of the Company such Person does not beneficially own Fifteen
Percent (15%) or more of the Common Shares of the Company then outstanding.
Notwithstanding the foregoing, (i) if the
<PAGE>
Company's Board of Directors determines in good faith that a Person who would
otherwise be an "Acquiring Person," as defined pursuant to the foregoing
provisions of this paragraph (a), has become such inadvertently (including,
without limitation, because (A) such Person was unaware that it beneficially
owned a percentage of the Common Shares that would otherwise cause such Person
to be an "Acquiring Person," as defined pursuant to the foregoing provisions of
this paragraph (a), or (B) such Person was aware of the extent of the Common
Shares it beneficially owned but had no actual knowledge of the consequences of
such beneficial ownership under this Agreement) and without any intention of
changing or influencing control of the Company, and if such Person divested or
divests as promptly as practicable a sufficient number of Common Shares so that
such Person would no longer be an "Acquiring Person," as defined pursuant to the
foregoing provisions of this paragraph (a), then such Person shall not be deemed
to be or to have become an "Acquiring Person" for any purposes of this
Agreement; and (ii) if, as of the date hereof, any Person is the Beneficial
Owner of Fifteen Percent (15%) or more of the Common Shares outstanding, such
Person shall not be or become an "Acquiring Person," as defined pursuant to the
foregoing provisions of this paragraph (a), unless and until such time as such
Person shall become the Beneficial Owner of additional Common Shares (other than
pursuant to a dividend or distribution paid or made by the Company on the
outstanding Common Shares in Common Shares or pursuant to a split or subdivision
of the outstanding Common Shares), unless, upon becoming the Beneficial Owner of
such additional Common Shares, such Person is not then the Beneficial Owner of
Fifteen Percent (15%) or more of the Common Shares then outstanding.
(b) "ADJUSTMENT FRACTION" shall have the meaning set forth in Section
11(a)(i) hereof.
(c) "AFFILIATE" and "ASSOCIATE" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Exchange Act, as in effect on the date of this Agreement.
(d) A Person shall be deemed the "BENEFICIAL OWNER" of and shall be
deemed to "BENEFICIALLY OWN" any securities:
(i) which such Person or any of such Person's Affiliates or
Associates beneficially owns, directly or indirectly, for purposes of Section
13(d) of the Exchange Act and Rule 13d-3 thereunder (or any comparable or
successor law or regulation);
(ii) which such Person or any of such Person's Affiliates or
Associates has (A) the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding (other than customary agreements with and between
underwriters and selling group members with respect to a bona fide public
offering of securities), or upon the exercise of conversion rights, exchange
rights, rights (other than the Rights), warrants or options, or otherwise;
provided, however, that a Person shall not be deemed pursuant to this Section
- -------- -------
1(d)(ii)(A) to be the Beneficial Owner of, or to beneficially own, (1)
securities tendered pursuant to a tender or exchange offer made by or on behalf
of such Person or any of such Person's Affiliates or Associates until such
tendered securities are accepted for purchase or exchange, or (2) securities
which a Person or any of such Person's Affiliates or Associates may be deemed to
have the right to acquire
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pursuant to any merger or other acquisition agreement between the Company and
such Person (or one or more of its Affiliates or Associates) if such agreement
has been approved by the Board of Directors of the Company prior to there being
an Acquiring Person; or (B) the right to vote pursuant to any agreement,
arrangement or understanding (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 Section 1(d)(ii)(B) if the agreement, arrangement
or understanding to vote such security (1) arises solely from a revocable proxy
or consent given to such Person in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the applicable rules and
regulations of the Exchange Act and (2) is not also then reportable on Schedule
13D under the Exchange Act (or any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by
any other Person (or any Affiliate or Associate thereof) with which such Person
or any of such Person's Affiliates or Associates has any agreement, arrangement
or understanding, whether or not in writing (other than customary agreements
with and between underwriters and selling group members with respect to a bona
fide public offering of securities) for the purpose of acquiring, holding,
voting (except to the extent contemplated by the proviso to Section 1(d)(ii)(B))
or disposing of any securities of the Company; provided, however, that in no
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case shall an officer or director of the Company be deemed (x) the Beneficial
Owner of any securities beneficially owned by another officer or director of the
Company solely by reason of actions undertaken by such persons in their capacity
as officers or directors of the Company or (y) the Beneficial Owner of
securities held of record by the trustee of any employee benefit plan of the
Company or any Subsidiary of the Company for the benefit of any employee of the
Company or any Subsidiary of the Company, other than the officer or director, by
reason of any influence that such officer or director may have over the voting
of the securities held in the plan.
(e) "BUSINESS DAY" shall mean any day other than a Saturday, Sunday or
a day on which banking institutions in New York are authorized or obligated by
law or executive order to close.
(f) "CLOSE OF BUSINESS" on any given date shall mean 5:00 P.M., New
York time, on such date; provided, however, that if such date is not a Business
-------- -------
Day it shall mean 5:00 P.M., New York time, on the next succeeding Business Day.
(g) "COMMON SHARES" when used with reference to the Company shall mean
the shares of Common Stock of the Company, $.001 par value. Common Shares when
used with reference to any Person other than the Company shall mean the capital
stock (or equity interest) with the greatest voting power of such other Person
or, if such other Person is a Subsidiary of another Person, the Person or
Persons which ultimately control such first-mentioned Person.
(h) "COMMON STOCK EQUIVALENTS" shall have the meaning set forth in
Section 11(a)(iii) hereof.
(i) "COMPANY" shall mean TelCom Semiconductor, Inc., a Delaware
corporation, subject to the terms of Section 13(a)(iii)(C) hereof.
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(j) "CURRENT PER SHARE MARKET PRICE" of any security (a "SECURITY" for
purposes of this definition), for all computations other than those made
pursuant to Section 11(a)(iii) hereof, shall mean the average of the daily
closing prices per share of such Security for the thirty (30) consecutive
Trading Days immediately prior to but not including such date, and for purposes
of computations made pursuant to Section 11(a)(iii) hereof, the Current Per
Share Market Price of any Security on any date shall be deemed to be the average
of the daily closing prices per share of such Security for the ten (10)
consecutive Trading Days immediately prior to but not including such date;
provided, however, that in the event that the Current Per Share Market Price of
- -------- -------
the Security is determined during a period following the announcement by the
issuer of such Security of (i) a dividend or distribution on such Security
payable in shares of such Security or securities convertible into such shares or
(ii) any subdivision, combination or reclassification of such Security, and
prior to the expiration of the applicable thirty (30) Trading Day or ten (10)
Trading Day period, after the ex-dividend date for such dividend or
distribution, or the record date for such subdivision, combination or
reclassification, then, and in each such case, the Current Per Share Market
Price shall be appropriately adjusted to reflect the current market price per
share equivalent of such Security. The closing price for each day shall be the
last sale price, regular way, or, in case no such sale takes place on such day,
the average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the Security is not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the Security is listed or admitted to trading or, if the Security is
not listed or admitted to trading on any national securities exchange, the last
sale price or, if such last sale price is not reported, the average of the high
bid and low asked prices in the over-the-counter market, as reported by Nasdaq
or such other system then in use, or, if on any such date the Security is not
quoted by any such organization, the average of the closing bid and asked prices
as furnished by a professional market maker making a market in the Security
selected by the Board of Directors of the Company. If on any such date no
market maker is making a market in the Security, the fair value of such shares
on such date as determined in good faith by the Board of Directors of the
Company shall be used. If the Preferred Shares are not publicly traded, the
Current Per Share Market Price of the Preferred Shares shall be conclusively
deemed to be the Current Per Share Market Price of the Common Shares as
determined pursuant to this Section 1(j), as appropriately adjusted to reflect
any stock split, stock dividend or similar transaction occurring after the date
hereof, multiplied by 1000. If the Security is not publicly held or so listed
or traded, Current Per Share Market Price shall mean the fair value per share as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent and
shall be conclusive for all purposes.
(k) "CURRENT VALUE" shall have the meaning set forth in Section
11(a)(iii) hereof.
(l) "DISTRIBUTION DATE" shall mean the earlier of (i) the Close of
Business on the tenth day (or such later date as maybe determined by the
Company's Board of Directors) after the Shares Acquisition Date (or, if the
tenth day after the Shares Acquisition Date occurs before the Record Date, the
Close of Business on the Record Date) or (ii) the Close of Business on the tenth
Business Day (or such later date as may be determined by the Company's Board of
Directors) after the date that a tender or exchange offer by any Person (other
than the Company, any Subsidiary of the Company, any
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<PAGE>
employee benefit plan of the Company or of any Subsidiary of the Company, or any
Person or entity organized, appointed or established by the Company for or
pursuant to the terms of any such plan) is first published or sent or given
within the meaning of Rule 14d-2(a) of the General Rules and Regulations under
the Exchange Act, if, assuming the successful consummation thereof, such Person
would be an Acquiring Person.
(m) "EQUIVALENT SHARES" shall mean Preferred Shares and any other
class or series of capital stock of the Company which is entitled to the same
rights, privileges and preferences as the Preferred Shares.
(n) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
(o) "EXCHANGE RATIO" shall have the meaning set forth in Section
24(a) hereof.
(p) "EXERCISE PRICE" shall have the meaning set forth in Section
24(a) hereof.
(q) "EXPIRATION DATE" shall mean the earliest to occur of: (i) the
Close of Business on the Final Expiration Date, (ii) the Redemption Date, (iii)
consummation of any transaction contemplated by Section 13(f) hereof, or (iv)
the time at which the Board of Directors orders the exchange of the Rights as
provided in Section 24 hereof.
(r) "FINAL EXPIRATION DATE" shall mean November 19, 2008.
(s) "INTERESTED PERSON" with respect to a Transaction shall mean any
Person who (i) is or will become an Acquiring Person if the Transaction were to
be consummated or an Affiliate or Associate of such a Person, and (ii) is, or
directly or indirectly proposed, nominated or financially supported a director
of the Company in office at the time of consideration of the Transaction in
question who was elected by written consent of stockholders.
(t) "NASDAQ" shall mean the National Association of Securities
Dealers, Inc. Automated Quotations System.
(u) "PERMITTED OFFER" shall mean a tender offer for all outstanding
Common Shares made in the manner prescribed by Section 14(d) of the Exchange Act
and the rules and regulations promulgated thereunder; provided that the Board of
Directors has determined that the offer is both fair and of otherwise in the
best interests of the Company and its stockholders.
(v) "PERSON" shall mean any individual, firm, corporation,
partnership, limited liability company or other entity, and shall include any
successor (by merger or otherwise) of such entity.
(w) "POST-EVENT TRANSFEREE" shall have the meaning set forth in
Section 7(e) hereof.
(x) "PREFERRED SHARES" shall mean shares of Series A Participating
Preferred Stock, $.001 par value, of the Company.
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<PAGE>
(y) "PRE-EVENT TRANSFEREE" shall have the meaning set forth in
Section 7(e) hereof.
(z) "PRINCIPAL PARTY" shall have the meaning set forth in Section
13(b) hereof.
(aa) "RECORD DATE" shall have the meaning set forth in the recitals at
the beginning of this Agreement.
(bb) "REDEMPTION DATE"shall have the meaning set forth in Section
23(a) hereof.
(cc) "REDEMPTION PRICE" shall have the meaning set forth in Section
23(a) hereof.
(dd) "RIGHTS AGENT" shall mean ChaseMellon Shareholder Services,
L.L.C. or its successor or replacement as provided in Sections 19 and 21 hereof.
(ee) "RIGHTS CERTIFICATE" shall mean a certificate substantially in
the form attached hereto as Exhibit B.
---------
(ff) "RIGHTS DIVIDEND DECLARATION DATE" shall have the meaning set
forth in the recitals at the beginning of this Agreement.
(gg) "SECTION 11(A)(III) TRIGGER DATE" shall have the meaning set
forth in Section 11(a)(iii) hereof.
(hh) "SECTION 13 EVENT" shall mean any event described in clause (i),
(ii) or (iii) of Section 13(a) hereof.
(ii) "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
(jj) "SHARES ACQUISITION DATE" shall mean the first date of public
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to Section 13(d) under the Exchange Act) by
the Company or an Acquiring Person that an Acquiring Person has become such;
provided that, if such Person is determined not to have become an Acquiring
- -------------
Person pursuant to Section 1(a) hereof, then no Shares Acquisition Date shall be
deemed to have occurred.
(kk) "SPREAD" shall have the meaning set forth in Section 11(a)(iii)
hereof.
(ll) "SUBSIDIARY" of any Person shall mean any corporation or other
entity of which an amount of voting securities sufficient to elect a majority of
the directors or Persons having similar authority of such corporation or other
entity is beneficially owned, directly or indirectly, by such Person, or any
corporation or other entity otherwise controlled by such Person.
(mm) "SUBSTITUTION PERIOD" shall have the meaning set forth in Section
11(a)(iii) hereof.
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<PAGE>
(nn) "SUMMARY OF RIGHTS" shall mean a summary of this Agreement
substantially in the form attached hereto as Exhibit C.
---------
(oo) "TOTAL EXERCISE PRICE" shall have the meaning set forth in
Section 4(a) hereof.
(pp) "TRADING DAY" shall mean a day on which the principal national
securities exchange on which a referenced security is listed or admitted to
trading is open for the transaction of business or, if a referenced security is
not listed or admitted to trading on any national securities exchange, a
Business Day.
(qq) "TRANSACTION" shall mean any merger, consolidation or sale of
assets described in Section 13(a) hereof or any acquisition of Common Shares
which would result in a Person becoming an Acquiring Person.
(rr) A "TRIGGERING EVENT" shall be deemed to have occurred upon any
Person becoming an Acquiring Person.
Section 2. Appointment of Rights Agent. The Company hereby appoints the
---------------------------
Rights Agent to act as agent for the Company in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such co-Rights Agents as it may deem
necessary or desirable upon ten (10) days prior written notice to the Rights
Agent. The Rights Agent shall have no duty to supervise, and shall in no event
be liable for, the acts or omissions of any such co-Rights Agent.
Section 3. Issuance of Rights Certificates.
-------------------------------
(a) Until the Distribution Date, (i) the Rights will be evidenced
(subject to the provisions of Sections 3(b) and 3(c) hereof) by the certificates
for Common Shares registered in the names of the holders thereof (which
certificates shall also be deemed to be Rights Certificates) and not by separate
Rights Certificates and (ii) the right to receive Rights Certificates will be
transferable only in connection with the transfer of Common Shares. Until the
earlier of the Distribution Date or the Expiration Date, the surrender for
transfer of certificates for Common Shares shall also constitute the surrender
for transfer of the Rights associated with the Common Shares represented
thereby. As soon as practicable after the Distribution Date, the Company will
prepare and execute, the Rights Agent will countersign, and the Company will
send or cause to be sent (and the Rights Agent will, if requested, and provided
with the necessary information send) by first-class, postage-prepaid mail, to
each record holder of Common Shares as of the Close of Business on the
Distribution Date, at the address of such holder shown on the records of the
Company, a Rights Certificate evidencing one Right for each Common Share so
held, subject to adjustment as provided herein. In the event that an adjustment
in the number of Rights per Common Share has been made pursuant to Section 11
hereof, then at the time of distribution of the Rights Certificates, the Company
shall make the necessary and appropriate rounding adjustments (in accordance
with Section 14(a) hereof) so that Rights Certificates representing only whole
numbers of Rights are distributed and cash is paid in lieu of any fractional
Rights. As of the Distribution Date, the Rights will be evidenced solely by
such Rights Certificates and may be transferred by the
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<PAGE>
transfer of the Rights Certificates as permitted hereby, separately and apart
from any transfer of Common Shares, and the holders of such Rights Certificates
as listed in the records of the Company or any transfer agent or registrar for
the Rights shall be the record holders thereof.
(b) On the Record Date or as soon as practicable thereafter, the
Company will send a copy of the Summary of Rights by first-class, postage-
prepaid mail, to each record holder of Common Shares as of the Close of Business
on the Record Date, at the address of such holder shown on the records of the
Company's transfer agent and registrar. With respect to certificates for Common
Shares outstanding as of the Record Date, until the Distribution Date, the
Rights will be evidenced by such certificates registered in the names of the
holders thereof together with the Summary of Rights. Until the Distribution
Date (or, if earlier, the Expiration Date), the surrender for transfer of any
certificate for Common Shares outstanding on the Record Date, with or without a
copy of the Summary of Rights, shall also constitute the transfer of the Rights
associated with the Common Shares represented thereby.
(c) Unless the Board of Directors by resolution adopted at or before
the time of the issuance of any Common Shares specifies to the contrary, Rights
shall be issued in respect of all Common Shares that are issued after the Record
Date but prior to the earlier of the Distribution Date or the Expiration Date
or, in certain circumstances provided in Section 22 hereof, after the
Distribution Date. Certificates representing such Common Shares shall also be
deemed to be certificates for Rights, and shall bear the following legend:
THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER HEREOF TO
CERTAIN RIGHTS AS SET FORTH IN A RIGHTS AGREEMENT BETWEEN TELCOM
SEMICONDUCTOR, INC. AND CHASEMELLON SHAREHOLDER SERVICES, L.L.C.,
AS THE RIGHTS AGENT, DATED AS OF NOVEMBER 19, 1998, (THE "RIGHTS
AGREEMENT"), THE TERMS OF WHICH ARE HEREBY INCORPORATED HEREIN BY
REFERENCE AND A COPY OF WHICH IS ON FILE AT THE PRINCIPAL
EXECUTIVE OFFICES OF TELCOM SEMICONDUCTOR, INC. UNDER CERTAIN
CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT, SUCH RIGHTS
WILL BE EVIDENCED BY SEPARATE CERTIFICATES AND WILL NO LONGER BE
EVIDENCED BY THIS CERTIFICATE. TELCOM SEMICONDUCTOR, INC. WILL
MAIL TO THE HOLDER OF THIS CERTIFICATE A COPY OF THE RIGHTS
AGREEMENT WITHOUT CHARGE AFTER RECEIPT OF A WRITTEN REQUEST
THEREFOR. UNDER CERTAIN CIRCUMSTANCES SET FORTH IN THE RIGHTS
AGREEMENT, RIGHTS ISSUED TO, OR HELD BY, ANY PERSON WHO IS, WAS
OR BECOMES AN ACQUIRING PERSON OR ANY AFFILIATE OR ASSOCIATE
THEREOF (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT),
WHETHER CURRENTLY HELD BY OR ON BEHALF OF SUCH PERSON OR BY ANY
SUBSEQUENT HOLDER, MAY BECOME NULL AND VOID.
With respect to such certificates containing the foregoing legend, until the
earlier of (i) the Distribution Date or (ii) the Expiration Date, the Rights
associated with the Common Shares represented by such certificates shall be
evidenced by such certificates alone, and the surrender for transfer of any such
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<PAGE>
certificate shall also constitute the transfer of the Rights associated with the
Common Shares represented thereby.
(d) In the event that the Company purchases or acquires any Common
Shares after the Record Date but prior to the Distribution Date, any Rights
associated with such Common Shares shall be deemed canceled and retired so that
the Company shall not be entitled to exercise any Rights associated with the
Common Shares which are no longer outstanding.
Section 4. Form of Rights Certificates.
---------------------------
(a) The Rights Certificates (and the forms of election to purchase
Common Shares and of assignment to be printed on the reverse thereof) shall be
substantially in the form of Exhibit B hereto and may have such marks of
---------
identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate (and which do not materially
affect the duties and responsibilities of the Rights Agent hereunder) and as are
not inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange or a national
market system, on which the Rights may from time to time be listed or included,
or to conform to usage. Subject to the provisions of Section 11 and Section 22
hereof, the Rights Certificates, whenever distributed, shall be dated as of the
Record Date (or in the case of Rights issued with respect to Common Shares
issued by the Company after the Record Date, as of the date of issuance of such
Common Shares) and on their face shall entitle the holders thereof to purchase
such number of one-thousandths of a Preferred Share as shall be set forth
therein at the price set forth therein (such exercise price per on one-
thousandth of a Preferred Share being hereinafter referred to as the "EXERCISE
PRICE" and the aggregate Exercise Price of all Preferred Shares issuable upon
exercise of one Right being hereinafter referred to as the "TOTAL EXERCISE
PRICE"), but the number and type of securities purchasable upon the exercise of
each Right and the Exercise Price shall be subject to adjustment as provided
herein.
(b) Any Rights Certificate issued pursuant to Section 3(a) or
Section 22 hereof that represents Rights beneficially owned by: (i) an Acquiring
Person or any Associate or Affiliate of an Acquiring Person, (ii) a transferee
of an Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee after the Acquiring Person becomes such or (iii) a transferee of an
Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee prior to or concurrently with the Acquiring Person becoming such and
receives such Rights pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person to holders of equity interests in such
Acquiring Person or to any Person with whom such Acquiring Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which the Company's Board of Directors has determined
is part of a plan, arrangement or understanding which has as a primary purpose
or effect avoidance of Section 7(e) hereof, and any Rights Certificate issued
pursuant to Section 6 or Section 11 hereof upon transfer, exchange, replacement
or adjustment of any other Rights Certificate referred to in this sentence,
shall contain (to the extent feasible) the following legend and the Company
shall notify the Rights Agent that this Section 4(b) applies:
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<PAGE>
THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE
BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING
PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS
SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY,
THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY
BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION
7(e) OF THE RIGHTS AGREEMENT.
Section 5. Countersignature and Registration.
---------------------------------
(a) The Rights Certificates shall be executed on behalf of the
Company by its Chairman of the Board, its Chief Executive Officer, its Chief
Financial Officer, its President or any Vice President, either manually or by
facsimile signature, and by the Secretary or an Assistant Secretary of the
Company, either manually or by facsimile signature, and shall have affixed
thereto the Company's seal (if any) or a facsimile thereof. The Rights
Certificates shall be manually countersigned by the Rights Agent and shall not
be valid for any purpose unless countersigned. In case any officer of the
Company who shall have signed any of the Rights Certificates shall cease to be
such officer of the Company before countersignature by the Rights Agent and
issuance and delivery by the Company, such Rights Certificates, nevertheless,
may be countersigned by the Rights Agent and issued and delivered by the Company
with the same force and effect as though the person who signed such Rights
Certificates on behalf of the Company had not ceased to be such officer of the
Company; and any Rights Certificate may be signed on behalf of the Company by
any person who, at the actual date of the execution of such Rights Certificate,
shall be a proper officer of the Company to sign such Rights Certificate,
although at the date of the execution of this Rights Agreement any such person
was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its office designated for such purposes, books for
registration and transfer of the Rights Certificates issued hereunder and the
Company shall provide the Rights Agent with the information it needs to
undertake such action. Such books shall show the names and addresses of the
respective holders of the Rights Certificates, the number of Rights evidenced on
its face by each of the Rights Certificates and the date of each of the Rights
Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Rights
------------------------------------------------------
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.
- ----------------------------------------------------------------------
(a) Subject to the provisions of Sections 7(e), 14 and 24 hereof,
at any time after the Close of Business on the Distribution Date, and at or
prior to the Close of Business on the Expiration Date, any Rights Certificate or
Rights Certificates may be transferred, split up, combined or exchanged for
another Rights Certificate or Rights Certificates, entitling the registered
holder to purchase a like number of one-thousandths of a Preferred Share (or,
following a Triggering Event, other securities, cash or other assets, as the
case may be) as the Rights Certificate or Rights Certificates surrendered then
entitled such holder to purchase. Any registered holder desiring to transfer,
split up, combine or exchange any Rights Certificate or Rights Certificates
shall make such request in writing delivered to the Rights Agent, and shall
surrender the Rights Certificate or Rights Certificates to be transferred, split
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<PAGE>
up, combined or exchanged at the office 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 or the Rights Agent shall reasonably request.
Thereupon the Rights Agent shall, subject to Sections 7(e), 14 and 24 hereof,
countersign and deliver to the person entitled thereto a Rights Certificate or
Rights Certificates, as the case may be, as so requested. The Company may
require payment of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer, split up, combination or
exchange of Rights Certificates and the Rights Agent shall not be required to
countersign or deliver Rights Certificate(s) until it is satisfied that such
taxes and charges have been paid.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Rights Certificate, and, in case of loss, theft or destruction, of indemnity
or security satisfactory to them, and, at the Company's request, reimbursement
to the Company and the Rights Agent of all reasonable expenses incidental
thereto, and upon surrender to the Rights Agent and cancellation of the Rights
Certificate if mutilated, the Company will make and deliver a new Rights
Certificate of like tenor to the Rights Agent for delivery to the registered
holder in lieu of the Rights Certificate so lost, stolen, destroyed or
mutilated.
Section 7. Exercise of Rights; Exercise Price; Expiration Date of Rights.
-------------------------------------------------------------
(a) Subject to Sections 7(e), 23(b), 23(c), 24(g) and 24(b) hereof,
the registered holder of any Rights Certificate may exercise the Rights
evidenced thereby (except as otherwise provided herein) in whole or in part at
any time after the Distribution Date and prior to the Close of Business on the
Expiration Date by surrender of the Rights Certificate, with the form of
election to purchase on the reverse side thereof duly executed, to the Rights
Agent at the office of the Rights Agent designated for such purpose, together
with payment of the Exercise Price for each one-thousandth of a Preferred Share
(or, following a Triggering Event, other securities, cash or other assets as the
case may be) as to which the Rights are exercised.
(b) The Exercise Price for each one-thousandth of a Preferred Share
issuable pursuant to the exercise of a Right shall initially be Thirty Dollars
($30.00), shall be subject to adjustment from time to time as provided in
Sections 11 and 13 hereof and shall be payable in lawful money of the United
States of America in accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing exercisable
Rights, with the form of election to purchase duly executed, accompanied by
payment of the Exercise Price for the number of one-thousandths of a Preferred
Share (or, following a Triggering Event, other securities, cash or other assets
as the case may be) to be purchased and an amount equal to any applicable tax or
charge required to be paid by the holder of such Rights Certificate in
accordance with Section 9(e) hereof, the Rights Agent shall, subject to Section
20(k) hereof, thereupon promptly (i) (A) requisition from any transfer
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<PAGE>
agent of the Preferred Shares (or make available, if the Rights Agent is the
transfer agent for the Preferred Shares) a certificate or certificates for the
number of one-thousandths of a Preferred Share (or, following a Triggering
Event, other securities, cash or other assets as the case may be) to be
purchased and the Company hereby irrevocably authorizes its transfer agent to
comply with all such requests or (B) if the Company shall have elected to
deposit the total number of one-thousandths of a Preferred Share (or, following
a Triggering Event, other securities, cash or other assets as the case may be)
issuable upon exercise of the Rights hereunder with a depositary agent,
requisition from the depositary agent depositary receipts representing such
number of one-thousandths of a Preferred Share (or, following a Triggering
Event, other securities, cash or other assets as the case may be) as are to be
purchased (in which case certificates for the Preferred Shares (or, following a
Triggering Event, other securities, cash or other assets as the case may be)
represented by such receipts shall be deposited by the transfer agent with the
depositary agent) and the Company hereby directs the depositary agent to comply
with such request, (ii) when appropriate, requisition from the Company the
amount of cash to be paid in lieu of issuance of fractional shares in accordance
with Section 14 hereof, (iii) after receipt of such certificates or depositary
receipts, cause the same to be delivered to or upon the order of the registered
holder of such Rights Certificate, registered in such name or names as may be
designated by such holder and (iv) when appropriate, after receipt thereof,
deliver such cash to or upon the order of the registered holder of such Rights
Certificate. The payment of the Exercise Price (as such amount may be reduced
(including to zero) pursuant to Section 11(a)(iii) hereof) and an amount equal
to any applicable tax or charge required to be paid by the holder of such Rights
Certificate in accordance with Section 9(e) hereof, may be made in cash or by
certified bank check, cashier's check or bank draft payable to the order of the
Company. In the event that the Company is obligated to issue securities of the
Company other than Preferred Shares, pay cash and/or distribute other property
pursuant to Section 11(a) hereof, the Company will make all arrangements
necessary so that such other securities, cash and/or other property are
available for distribution by the Rights Agent, if and when necessary to comply
with this Agreement.
(d) In case the registered holder of any Rights Certificate shall
exercise less than all the Rights evidenced thereby, a new Rights Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent to the registered holder of such Rights Certificate or to
his or her duly authorized assigns, subject to the provisions of Section 14
hereof.
(e) Notwithstanding anything in this Agreement to the contrary,
from and after the first occurrence of a Triggering Event, any Rights
beneficially owned by (i) an Acquiring Person or an Associate or Affiliate of an
Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee after the Acquiring Person
becomes such (a "POST-EVENT TRANSFEREE"), (iii) a transferee of an Acquiring
Person (or of any such Associate or Affiliate) who becomes a transferee prior to
or concurrently with the Acquiring Person becoming such and receives such Rights
pursuant to either (A) a transfer (whether or not for consideration) from the
Acquiring Person to holders of equity interests in such Acquiring Person or to
any Person with whom the Acquiring Person has any continuing agreement,
arrangement or understanding regarding the transferred Rights or (B) a transfer
which the Company's Board of Directors has determined is part of a plan,
arrangement or understanding which has as a primary purpose or effect the
avoidance of this Section 7(e) (a "PRE-EVENT TRANSFEREE") or (iv) any subsequent
transferee receiving transferred Rights from a Post-Event Transferee or a Pre-
Event Transferee, either directly or through one or more intermediate
transferees,
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<PAGE>
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 notify the
Rights Agent when this Section 7(e) applies and shall use all reasonable efforts
to ensure that the provisions of this Section 7(e) and Section 4(b) hereof are
complied with, but neither the Company nor the Rights Agreement shall have any
liability to any holder of Rights Certificates or to any other Person as a
result of the Company's failure to make any determinations with respect to an
Acquiring Person or any of such Acquiring Person's Affiliates, Associates or
transferees hereunder.
(f) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a registered holder upon the occurrence of any purported
exercise as set forth in this Section 7 unless such registered holder shall, in
addition to having complied with the requirements of Section 7(a), have (i)
properly 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 or the Rights Agent shall reasonably request.
Section 8. Cancellation and Destruction of Rights Certificates. All
---------------------------------------------------
Rights Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be canceled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the
Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any Rights Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
canceled Rights Certificates to the Company, or shall, at the written request of
the Company, destroy such canceled Rights Certificates, and in such case shall
deliver a certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of Preferred Shares.
------------------------------------------------
(a) The Company covenants and agrees that it will use its best
efforts to cause to be reserved and kept available out of its authorized and
unissued Preferred Shares not reserved for another purpose (and, following the
occurrence of a Triggering Event, out of its authorized and unissued Common
Shares and/or other securities), the number of Preferred Shares (and, following
the occurrence of the Triggering Event, Common Shares and/or other securities)
that will be sufficient to permit the exercise in full of all outstanding
Rights.
(b) If the Company shall hereafter list any of its Preferred Shares
on a national securities exchange, then so long as the Preferred Shares (and,
following the occurrence of a Triggering Event, Common Shares and/or other
securities) issuable and deliverable upon exercise of the Rights may be listed
on such exchange, the Company shall use its best efforts to cause, from and
after such time as the Rights become exercisable (but only to the extent that it
is reasonably likely that the Rights will be
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<PAGE>
exercised), all shares reserved for such issuance to be listed on such exchange
upon official notice of issuance upon such exercise.
(c) The Company shall use its best efforts to (i) file, as soon as
practicable following the earliest date after the first occurrence of a
Triggering Event in which the consideration to be delivered by the Company upon
exercise of the Rights is described in Section 11(a)(ii) or Section 11(a)(iii)
hereof, or as soon as is required by law following the Distribution Date, as the
case may be, a registration statement under the Securities Act with respect to
the securities purchasable upon exercise of the Rights on an appropriate form,
(ii) cause such registration statement to become effective as soon as
practicable after such filing and (iii) cause such registration statement to
remain effective (with a prospectus at all times meeting the requirements of the
Securities Act) until the earlier of (A) the date as of which the Rights are no
longer exercisable for such securities and (B) the date of expiration of the
Rights. The Company may temporarily suspend, for a period not to exceed ninety
(90) days after the date set forth in clause (i) of the first sentence of this
Section 9(c), the exercisability of the Rights in order to prepare and file such
registration statement and permit it to become effective. Upon any such
suspension, the Company shall issue a public announcement stating, and notify
the Rights Agent, that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement and notification to the Rights Agent
at such time as the suspension is no longer in effect. The Company will also
take such action as may be appropriate under, or to ensure compliance with, the
securities or "blue sky" laws of the various states in connection with the
exercisability of the Rights. Notwithstanding any provision of this Agreement
to the contrary, the Rights shall not be exercisable in any jurisdiction, unless
the requisite qualification in such jurisdiction shall have been obtained, or an
exemption therefrom shall be available, and until a registration statement has
been declared effective.
(d) The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all Preferred Shares (or other
securities of the Company) delivered upon exercise of Rights shall, at the time
of delivery of the certificates for such securities (subject to payment of the
Exercise Price), be duly and validly authorized and issued and fully paid and
nonassessable shares.
(e) The Company further covenants and agrees that it will pay when
due and payable any and all taxes and charges which may be payable in respect of
the original issuance or delivery of the Rights Certificates or of any Preferred
Shares (or other securities of the Company) upon the exercise of Rights. The
Company shall not, however, be required to pay any transfer tax or charge which
may be payable in respect of any transfer or delivery of Rights Certificates to
a person other than, or the issuance or delivery of certificates or depositary
receipts for the Preferred Shares (or other securities of the Company) in a name
other than that of, the registered holder of the Rights Certificate evidencing
Rights surrendered for exercise or to issue or to deliver any certificates or
depositary receipts for Preferred Shares (or other securities of the Company)
upon the exercise of any Rights until any such tax or charge shall have been
paid (any such tax or charge 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 or charge is due.
Section 10. Record Date. Each Person in whose name any certificate for
-----------
a number of one-thousandths of a Preferred Share (or other securities of the
Company) is issued upon the exercise of
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<PAGE>
Rights shall for all purposes be deemed to have become the holder of record of
Preferred Shares (or other securities of the Company) represented thereby on,
and such certificate shall be dated, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered and payment of the Total Exercise
Price with respect to which the Rights have been exercised (and any applicable
taxes or charges) was made; provided, however, that if the date of such
-------- -------
surrender and payment is a date upon which the transfer books of the Company are
closed, such Person shall be deemed to have become the record holder of such
shares on, and such certificate shall be dated, the next succeeding Business Day
on which the transfer books of the Company are open. Prior to the exercise of
the Rights evidenced thereby, the holder of a Rights Certificate shall not be
entitled to any rights of a holder of Preferred Shares (or other securities of
the Company) for which the Rights shall be exercisable, including, without
limitation, the right to vote, to receive dividends or other distributions or to
exercise any preemptive rights, and shall not be entitled to receive any notice
of any proceedings of the Company, except as provided herein.
Section 11. Adjustment of Exercise Price, Number of Shares or Number of
-----------------------------------------------------------
Rights. The Exercise Price, the number and kind of shares or other property
- ------
covered by each Right and the number of Rights outstanding are subject to
adjustment from time to time as provided in this Section 11.
(a) (i) Anything in this Agreement to the contrary
notwithstanding, in the event the Company shall at any time after the date of
this Agreement (A) declare a dividend on the Preferred Shares payable in
Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C) combine
the outstanding Preferred Shares (by reverse stock split or otherwise) into a
smaller number of Preferred Shares, or (D) issue any shares of its capital stock
in a reclassification of the Preferred Shares (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation), then, in each such event,
except as otherwise provided in this Section 11 and Section 7(e) hereof: (1) the
Exercise Price in effect at the time of the record date for such dividend or of
the effective date of such subdivision, combination or reclassification shall be
adjusted so that the Exercise Price thereafter shall equal the result obtained
by dividing the Exercise Price in effect immediately prior to such time by a
fraction (the "ADJUSTMENT FRACTION"), the numerator of which shall be the total
number of Preferred Shares (or shares of capital stock issued in such
reclassification of the Preferred Shares) outstanding immediately following such
time and the denominator of which shall be the total number of Preferred Shares
outstanding immediately prior to such time; provided, however, that in no event
-------- -------
shall the consideration to be paid upon the exercise of one Right be less than
the aggregate par value of the shares of capital stock of the Company issuable
upon exercise of such Right; and (2) the number of one-thousandths of a
Preferred Share (or share of such other capital stock) issuable upon the
exercise of each Right shall equal the number of one-thousandths of a Preferred
Share (or share of such other capital stock) as was issuable upon exercise of a
Right immediately prior to the occurrence of the event described in clauses (A)-
(D) of this Section 11(a)(i), multiplied by the Adjustment Fraction; provided,
however, that, no such adjustment shall be made pursuant to this Section
11(a)(i) to the extent that there shall have simultaneously occurred an event
described in clause (A), (B), (C) or (D) of Section 11(n) with a proportionate
adjustment being made thereunder. Each Common Share that shall become
outstanding after an adjustment has been made pursuant to this Section 11(a)(i)
shall have associated with it the number of Rights, exercisable at the Exercise
Price and for the number
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<PAGE>
of one-thousandths of a Preferred Share (or shares of such other capital stock)
as one Common Share has associated with it immediately following the adjustment
made pursuant to this Section 11(a)(i).
(ii) Subject to Section 24 of this Agreement, in the event a
Triggering Event shall have occurred, then promptly following such Triggering
Event each holder of a Right, except as provided in Section 7(e) hereof, shall
thereafter have the right to receive for each Right, upon exercise thereof in
accordance with the terms of this Agreement and payment of the Exercise Price in
effect immediately prior to the occurrence of the Triggering Event, in lieu of a
number of one-thousandths of a Preferred Share, such number of Common Shares of
the Company as shall equal the result obtained by multiplying the Exercise
Price in effect immediately prior to the occurrence of the Triggering Event by
the number of one-thousandths of a Preferred Share for which a Right was
exercisable (or would have been exercisable if the Distribution Date had
occurred) immediately prior to the first occurrence of a Triggering Event, and
dividing that product by 50% of the Current Per Share Market Price for Common
Shares on the date of occurrence of the Triggering Event; provided, however,
that the Exercise Price and the number of Common Shares of the Company so
receivable upon exercise of a Right shall be subject to further adjustment as
appropriate in accordance with Section 11(e) hereof to reflect any events
occurring in respect of the Common Shares of the Company after the occurrence of
the Triggering Event. Notwithstanding the foregoing provisions of this Section
11(a)(ii), the right to buy Common Shares of the Company pursuant to Section
11(a)(ii) hereof shall not arise as a result of any Person becoming an Acquiring
Person through an acquisition of Common Shares pursuant to a Permitted Offer.
(iii) In lieu of issuing Common Shares in accordance with Section
11(a)(ii) hereof, the Company may, if the Company's Board of Directors
determines that such action is necessary or appropriate and not contrary to the
interest of holders of Rights and, in the event that the number of Common Shares
which are authorized by the Company's Certificate of Incorporation but not
outstanding or reserved for issuance for purposes other than upon exercise of
the Rights are not sufficient to permit the exercise in full of the Rights, or
if any necessary regulatory approval for such issuance has not been obtained by
the Company, the Company shall: (A) determine the excess of (1) the value of
the Common Shares issuable upon the exercise of a Right (the "CURRENT VALUE")
over (2) the Exercise Price (such excess, the "SPREAD") and (B) with respect to
each Right, make adequate provision to substitute for such Common Shares, upon
exercise of the Rights, (1) cash, (2) a reduction in the Exercise Price, (3)
other equity securities of the Company (including, without limitation, shares or
units of shares of any series of preferred stock which the Company's Board of
Directors has deemed to have the same value as Common Shares (such shares or
units of shares of preferred stock are herein called "COMMON STOCK
EQUIVALENTS")), except to the extent that the Company has not obtained any
necessary stockholder or regulatory approval for such issuance, (4) debt
securities of the Company, except to the extent that the Company has not
obtained any necessary stockholder or regulatory approval for such issuance, (5)
other assets or (6) any combination of the foregoing, having an aggregate value
equal to the Current Value, where such aggregate value has been determined by
the Company's Board of Directors based upon the advice of a nationally
recognized investment banking firm selected by the Company's Board of Directors;
provided, however, if the Company shall not have made adequate provision to
- -------- -------
deliver value pursuant to clause (B) above within thirty (30) days following the
later of (x) the first occurrence of a Triggering Event and (y) the date on
which the Company's right of redemption pursuant to Section 23(a) expires (the
later of (x) and (y) being referred to herein as the "SECTION 11(A)(III) TRIGGER
DATE"), then
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<PAGE>
the Company shall be obligated to deliver, upon the surrender for exercise of a
Right and without requiring payment of the Exercise Price, Common Shares (to the
extent available), except to the extent that the Company has not obtained any
necessary stockholder or regulatory approval for such issuance, and then, if
necessary, cash, which shares and/or cash have an aggregate value equal to the
Spread. If the Company's Board of Directors shall determine in good faith that
it is likely that sufficient additional Common Shares could be authorized for
issuance upon exercise in full of the Rights or that any necessary regulatory
approval for such issuance will be obtained, the thirty (30) day period set
forth above may be extended to the extent necessary, but not more than ninety
(90) days after the Section 11(a)(iii) Trigger Date, in order that the Company
may seek stockholder approval for the authorization of such additional shares or
take action to obtain such regulatory approval (such period, as it may be
extended, the "SUBSTITUTION PERIOD"). To the extent that the Company determines
that some action need be taken pursuant to the first and/or second sentences of
this Section 11(a)(iii), the Company (x) shall provide, subject to Section 7(e)
hereof, that such action shall apply uniformly to all outstanding Rights and (y)
may suspend the exercisability of the Rights until the expiration of the
Substitution Period in order to seek any authorization of additional shares, to
take any action to obtain any required regulatory approval and/or to decide the
appropriate form of distribution to be made pursuant to such first sentence and
to determine the value thereof. In the event of any such suspension, the Company
shall issue a public announcement stating that the exercisability of the Rights
has been temporarily suspended, as well as a public announcement at such time as
the suspension is no longer in effect in each case with prompt notice thereof to
the Rights Agent. For purposes of this Section 11(a)(iii), the value of the
Common Shares shall be the Current Per Share Market Price of the Common Shares
on the Section 11(a)(iii) Trigger Date and the value of any Common Stock
Equivalent shall be deemed to have the same value as the Common Shares on such
date.
(b) In case the Company shall, at any time after the date of this
Agreement, fix a record date for the issuance of rights, options or warrants to
all holders of Preferred Shares entitling such holders (for a period expiring
within forty-five (45) calendar days after such record date) to subscribe for or
purchase Preferred Shares or Equivalent Shares or securities convertible into
Preferred Shares or Equivalent Shares at a price per share (or having a
conversion price per share, if a security convertible into Preferred Shares or
Equivalent Shares) less than the then Current Per Share Market Price of the
Preferred Shares or Equivalent Shares on such record date, then, in each such
case, the Exercise Price to be in effect after such record date shall be
determined by multiplying the Exercise Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the number of
Preferred Shares and Equivalent Shares (if any) outstanding on such record date,
plus the number of Preferred Shares or Equivalent Shares, as the case may be,
which the aggregate offering price of the total number of Preferred Shares or
Equivalent Shares, as the case may be, to be offered or issued (and/or the
aggregate initial conversion price of the convertible securities to be offered
or issued) would purchase at such current market price, and the denominator of
which shall be the number of Preferred Shares and Equivalent Shares (if any)
outstanding on such record date, plus the number of additional Preferred Shares
or Equivalent Shares, as the case may be, to be offered for subscription or
purchase (or into which the convertible securities so to be offered are
initially convertible); provided, however, that in no event shall the
-------- -------
consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Company issuable upon
exercise of one Right. In case such subscription price may be paid in a
consideration part or all of which shall be in a form other than cash,
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<PAGE>
the value of such consideration shall be as determined in good faith by the
Company's Board of Directors, whose determination shall be described in a
statement filed with the Rights Agent and shall be binding on the Rights Agent
and the holders of the Rights. Preferred Shares and Equivalent Shares owned by
or held for the account of the Company shall not be deemed outstanding for the
purpose of any such computation. Such adjustment shall be made successively
whenever such a record date is fixed, and in the event that such rights, options
or warrants are not so issued, the Exercise Price shall be adjusted to be the
Exercise Price which would then be in effect if such record date had not been
fixed.
(c) In case the Company shall, at any time after the date of this
Agreement, fix a record date for the making of a distribution to all holders of
the Preferred Shares or of any class or series of Equivalent Shares (including
any such distribution made in connection with a consolidation or merger in which
the Company is the continuing or surviving corporation) of evidences of
indebtedness or assets (other than a regular quarterly cash dividend, if any, or
a dividend payable in Preferred Shares) or subscription rights, options or
warrants (excluding those referred to in Section 11(b)), then, in each such
case, the Exercise Price to be in effect after such record date shall be
determined by multiplying the Exercise Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the Current Per Share
Market Price of a Preferred Share or an Equivalent Share on such record date,
less the fair market value per Preferred Share or Equivalent Share (as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent) of
the portion of the cash, assets or evidences of indebtedness so to be
distributed or of such subscription rights or warrants applicable to a Preferred
Share or Equivalent Share, as the case may be, and the denominator of which
shall be such Current Per Share Market Price of a Preferred Share or Equivalent
Share on such record date; provided, however, that in no event shall the
-------- -------
consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Company issuable upon
exercise of one Right. Such adjustments shall be made successively whenever
such a record date is fixed, and in the event that such distribution is not so
made, the Exercise Price shall be adjusted to be the Exercise Price which would
have been in effect if such record date had not been fixed.
(d) Anything herein to the contrary notwithstanding, no adjustment in
the Exercise Price shall be required unless such adjustment would require an
increase or decrease of at least 1% in the Exercise Price; provided, however,
-------- -------
that any adjustments which by reason of this Section 11(d) are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 11 shall be made to the nearest
cent or to the nearest ten-thousandth of a Common Share or other share or one
hundred-thousandth of a Preferred Share, as the case may be. Notwithstanding
the first sentence of this Section 11(d), any adjustment required by this
Section 11 shall be made no later than the earlier of (i) three (3) years from
the date of the transaction which requires such adjustment or (ii) the
Expiration Date.
(e) If as a result of an adjustment made pursuant to Section 11(a) or
13(a) hereof, the holder of any Right thereafter exercised shall become entitled
to receive any shares of capital stock other than Preferred Shares, thereafter
the number of such other shares so receivable upon exercise of any Right and, if
required, the Exercise Price thereof, shall be subject to adjustment from time
to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Preferred
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<PAGE>
Shares contained in Sections 11(a), 11(b), 11(c), 11(d), 11(g), 11(h), 11(i),
11(j), 11(k) and 11(l), and the provisions of Sections 7, 9, 10, 13 and 14 with
respect to the Preferred Shares shall apply on like terms to any such other
shares.
(f) All Rights originally issued by the Company subsequent to any
adjustment made to the Exercise Price hereunder shall evidence the right to
purchase, at the adjusted Exercise Price, the number of one-thousandths of a
Preferred Share purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
(g) Unless the Company shall have exercised its election as provided
in Section 11(h), upon each adjustment of the Exercise Price as a result of the
calculations made in Section 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Exercise Price, that number of Preferred Shares
(calculated to the nearest one hundred-thousandth of a share) obtained by (i)
multiplying (x) the number of Preferred Shares covered by a Right immediately
prior to this adjustment, by (y) the Exercise Price in effect immediately prior
to such adjustment of the Exercise Price, and (ii) dividing the product so
obtained by the Exercise Price in effect immediately after such adjustment of
the Exercise Price.
(h) The Company may elect on or after the date of any adjustment of
the Exercise Price as a result of the calculations made in Section 11(b) or (c)
to adjust the number of Rights, in substitution for any adjustment in the number
of Preferred Shares purchasable upon the exercise of a Right. Each of the
Rights outstanding after such adjustment of the number of Rights shall be
exercisable for the number of one-thousandths of a Preferred Share for which a
Right was exercisable immediately prior to such adjustment. Each Right held of
record prior to such adjustment of the number of Rights shall become that number
of Rights (calculated to the nearest one hundred-thousandth) obtained by
dividing the Exercise Price in effect immediately prior to adjustment of the
Exercise Price by the Exercise Price in effect immediately after adjustment of
the Exercise Price. The Company shall make a public announcement of its
election to adjust the number of Rights, indicating the record date for the
adjustment, and, if known at the time, the amount of the adjustment to be made
and shall give prompt notice thereof to the Rights Agent. This record date may
be the date on which the Exercise Price is adjusted or any day thereafter, but,
if the Rights Certificates have been issued, shall be at least ten (10) days
later than the date of the public announcement. If Rights Certificates have
been issued, upon each adjustment of the number of Rights pursuant to this
Section 11(h), the Company shall, as promptly as practicable, cause to be
distributed to holders of record of Rights Certificates on such record date
Rights Certificates evidencing, subject to Section 14 hereof, the additional
Rights to which such holders shall be entitled as a result of such adjustment,
or, at the option of the Company, shall cause to be distributed to such holders
of record in substitution and replacement for the Rights Certificates held by
such holders prior to the date of adjustment, and upon surrender thereof, if
required by the Company, new Rights Certificates evidencing all the Rights to
which such holders shall be entitled after such adjustment. Rights Certificates
so to be distributed shall be issued, executed and countersigned in the manner
provided for herein (and may bear, at the option of the Company, the adjusted
Exercise Price) and shall be registered in the names of the holders of record of
Rights Certificates on the record date specified in the public announcement.
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<PAGE>
(i) Irrespective of any adjustment or change in the Exercise Price or
the number of Preferred Shares issuable upon the exercise of the Rights, the
Rights Certificates theretofore and thereafter issued may continue to express
the Exercise Price per one one-thousandth of a Preferred Share and the number of
one-thousandths of a Preferred Share which were expressed in the initial Rights
Certificates issued hereunder.
(j) Before taking any action that would cause an adjustment reducing
the Exercise Price below the par or stated value, if any, of the number of one-
thousandths of a Preferred Share issuable upon exercise of the Rights, the
Company shall take any corporate action which may, in the opinion of its
counsel, be necessary in order that the Company may validly and legally issue as
fully paid and nonassessable shares such number of one-thousandths of a
Preferred Share at such adjusted Exercise Price.
(k) In any case in which this Section 11 shall require that an
adjustment in the Exercise Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuing to the holder of any Right exercised after such record date of
the number of one-thousandths of a Preferred Share and other capital stock or
securities of the Company, if any, issuable upon such exercise over and above
the number of one-thousandths of a Preferred Share and other capital stock or
securities of the Company, if any, issuable upon such exercise on the basis of
the Exercise Price in effect prior to such adjustment; provided, however, that
-------- -------
the Company shall deliver to such holder a due bill or other appropriate
instrument evidencing such holder's right to receive such additional shares
(fractional or otherwise) upon the occurrence of the event requiring such
adjustment. In such event, the Company shall also give notice of such action to
the Rights Agent.
(l) Anything in this Section 11 to the contrary notwithstanding, prior
to the Distribution Date, the Company shall be entitled to make such reductions
in the Exercise Price, in addition to those adjustments expressly required by
this Section 11, as and to the extent that it in its sole discretion shall
determine to be advisable in order that any (i) consolidation or subdivision of
the Preferred or Common Shares, (ii) issuance wholly for cash of any Preferred
or Common Shares at less than the current market price, (iii) issuance wholly
for cash of Preferred or Common Shares or securities which by their terms are
convertible into or exchangeable for Preferred or Common Shares, (iv) stock
dividends or (v) issuance of rights, options or warrants referred to in this
Section 11, hereafter made by the Company to holders of its Preferred or Common
Shares shall not be taxable to such stockholders.
(m) The Company covenants and agrees that, after the Distribution
Date, it will not, except as permitted by Sections 23, 24 or 27 hereof, take (or
permit to be taken) any action if at the time such action is taken it is
reasonably foreseeable that such action will diminish substantially or otherwise
eliminate the benefits intended to be afforded by the Rights.
(n) In the event the Company shall at any time after the date of this
Agreement (A) declare a dividend on the Common Shares payable in Common Shares,
(B) subdivide the outstanding Common Shares, (C) combine the outstanding Common
Shares (by reverse stock split or otherwise) into a smaller number of Common
Shares, or (D) issue any shares of its capital stock in a
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<PAGE>
reclassification of the Common Shares (including any such reclassification in
connection with a consolidation or merger in which the Company is the continuing
or surviving corporation), then, in each such event, except as otherwise
provided in this Section 11(n) and Section 7(e) hereof: (1) each Common Share
(or shares of capital stock issued in such reclassification of the Common
Shares) outstanding immediately following such time shall have associated with
it the number of Rights as were associated with one Common Share immediately
prior to the occurrence of the event described in clauses (A)-(D) above; (2) the
Exercise Price in effect at the time of the record date for such dividend or of
the effective date of such subdivision, combination or reclassification shall be
adjusted so that the Exercise Price thereafter shall equal the result obtained
by multiplying the Exercise Price in effect immediately prior to such time by a
fraction, the numerator of which shall be the total number of Common Shares
outstanding immediately prior to the event described in clauses (A)-(D) above,
and the denominator of which shall be the total number of Common Shares
outstanding immediately after such event; provided, however, that in no event
-------- -------
shall the consideration to be paid upon the exercise of one Right be less than
the aggregate par value of the shares of capital stock of the Company issuable
upon exercise of such Right; and (3) the number of one-thousandths of a
Preferred Share (or shares of such other capital stock) issuable upon the
exercise of each Right outstanding after such event shall equal the number of
one-thousandths of a Preferred Share (or shares of such other capital stock) as
were issuable with respect to one Right immediately prior to such event. Each
Common Share that shall become outstanding after an adjustment has been made
pursuant to this Section 11(n) shall have associated with it the number of
Rights, exercisable at the Exercise Price and for the number of one-thousandths
of a Preferred Share (or shares of such other capital stock) as one Common Share
has associated with it immediately following the adjustment made pursuant to
this Section 11(n). If an event occurs which would require an adjustment under
both this Section 11(n) and Section 11(a)(ii) hereof, the adjustment provided
for in this Section 11(n) shall be in addition to, and shall be made prior to,
any adjustment required pursuant to Section 11(a)(ii) hereof.
Section 12. Certificate of Adjusted Exercise Price or Number of Shares.
----------------------------------------------------------
Whenever an adjustment is made as provided in Sections 11 or 13 hereof, the
Company shall promptly (a) prepare a certificate setting forth such adjustment
and a brief statement of the facts and computation accounting for such
adjustment, (b) file with the Rights Agent and with each transfer agent for the
Preferred Shares a copy of such certificate and (c) mail a brief summary thereof
to each holder of a Rights Certificate in accordance with Section 26 hereof.
Notwithstanding the foregoing sentence, the failure of the Company to make such
certification or give such notice shall not affect the validity of such
adjustment or the force or effect of the requirement for such adjustment. The
Rights Agent shall be fully protected in relying on any such certificate and on
any adjustment contained therein and shall have no duty with respect to and
shall not be deemed to have knowledge of such adjustment unless and until it
shall have received such certificate.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning
--------------------------------------------------------------
Power.
- -----
(a) In the event that, following a Triggering Event, directly or
indirectly:
(i) the Company shall consolidate with, or merge with and
into, any other Person (other than a wholly-owned Subsidiary of the Company in a
transaction the principal purpose of
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<PAGE>
which is to change the state of incorporation of the Company and which complies
with Section 11(m) hereof);
(ii) any Person shall consolidate with the Company, or merge with and
into the Company and the Company shall be the continuing or surviving
corporation of such consolidation or merger and, in connection with such merger,
all or part of the Common Shares shall be changed into or exchanged for stock or
other securities of any other person (or the Company); or
(iii) the Company shall sell or otherwise transfer (or one or more of
its Subsidiaries shall sell or otherwise transfer), in one or more transactions,
assets or earning power aggregating 50% or more of the assets or earning power
of the Company and its Subsidiaries (taken as a whole) to any other Person or
Persons (other than the Company or one or more of its wholly owned Subsidiaries
in one or more transactions, each of which individually (and together) complies
with Section 11(m) hereof) (such events being hereinafter referred to as a
"SECTION 13 EVENT?"),
then, concurrent with and in each such case,
(A) each holder of a Right (except as provided in Section 7(e)
hereof) shall thereafter have the right to receive, upon the exercise thereof at
a price equal to the Total Exercise Price applicable immediately prior to the
occurrence of the Section 13 Event in accordance with the terms of this
Agreement, such number of validly authorized and issued, fully paid,
nonassessable and freely tradeable Common Shares of the Principal Party (as
hereinafter defined), free of any liens, encumbrances, rights of first refusal
or other adverse claims, as shall be equal to the result obtained by dividing
such Total Exercise Price by 50% of the Current Per Share Market Price of the
Common Shares of such Principal Party on the date of consummation of such
Section 13 Event, provided, however, that the Exercise Price and the number of
------------------
of Common Shares of such Principal Party so receivable upon exercise of a Right
shall be subject to further adjustment as appropriate in accordance with Section
11(e) hereof;
(B) such Principal Party shall thereafter be liable for, and
shall assume, by virtue of such Section 13 Event, all the obligations and duties
of the Company pursuant to this Agreement;
(C) the term "COMPANY" shall thereafter be deemed to refer to
such Principal Party, it being specifically intended that the provisions of
Section 11 hereof shall apply only to such Principal Party following the first
occurrence of a Section 13 Event;
(D) such Principal Party shall take such steps (including, but
not limited to, the reservation of a sufficient number of its Common Shares) in
connection with the consummation of any such transaction as may be necessary to
ensure that the provisions hereof shall thereafter be applicable, as nearly as
reasonably may be, in relation to its Common Shares thereafter deliverable upon
the exercise of the Rights; and
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<PAGE>
(E) upon the subsequent occurrence of any consolidation, merger,
sale or transfer of assets or other extraordinary transaction in respect of such
Principal Party, each holder of a Right shall thereupon be entitled to receive,
upon exercise of a Right and payment of the Total Exercise Price as provided in
this Section 13(a), such cash, shares, rights, warrants and other property which
such holder would have been entitled to receive had such holder, at the time of
such transaction, owned the Common Shares of the Principal Party receivable upon
the exercise of such Right pursuant to this Section 13(a), and such Principal
Party shall take such steps (including, but not limited to, reservation of
shares of stock) as may be necessary to permit the subsequent exercise of the
Rights in accordance with the terms hereof for such cash, shares, rights,
warrants and other property.
(F) For purposes hereof, the "earning power" of the Company and
its Subsidiaries shall be determined in good faith by the Company's Board of
Directors on the basis of the operating earnings of each business operated by
the Company and its Subsidiaries during the three fiscal years preceding the
date of such determination (or, in the case of any business not operated by the
Company or any Subsidiary during three full fiscal years preceding such date,
during the period such business was operated by the Company or any Subsidiary).
(b) For purposes of this Agreement, the term "PRINCIPAL PARTY" shall mean:
(i) in the case of any transaction described in clause (i) or (ii) of
Section 13(a) hereof: (A) the Person that is the issuer of the securities into
which the Common Shares are converted in such merger or consolidation, or, if
there is more than one such issuer, the issuer of the Common Shares of which
have the greatest aggregate market value of shares outstanding, or (B) if no
securities are so issued, (x) the Person that is the other party to the merger,
if such Person survives said merger, or, if there is more than one such Person,
the Person the Common Shares of which have the greatest aggregate market value
of shares outstanding or (y) if the Person that is the other party to the merger
does not survive the merger, the Person that does survive the merger (including
the Company if it survives) or (z) the Person resulting from the consolidation;
and
(ii) in the case of any transaction described in clause (iii) of
Section 13(a) hereof, the Person that is the party receiving the greatest
portion of the assets or earning power transferred pursuant to such transaction
or transactions, or, if more than one Person that is a party to such transaction
or transactions receives the same portion of the assets or earning power so
transferred and each such portion would, were it not for the other equal
portions, constitute the greatest portion of the assets or earning power so
transferred, or if the Person receiving the greatest portion of the assets or
earning power cannot be determined, whichever of such Persons is the issuer of
Common Shares having the greatest aggregate market value of shares outstanding;
provided, however, that in any such case described in the foregoing clause
- ------------------
(b)(i) or (b)(ii), if the Common Shares of such Person are not at such time or
have not been continuously over the preceding 12-month period registered under
Section 12 of the Exchange Act, then (1) if such Person is a direct or indirect
Subsidiary of another Person the Common Shares of which are and have been so
registered, the term "Principal Party" shall refer to such other Person, or (2)
if such Person is a Subsidiary, directly or indirectly, of more than one Person,
the Common Shares of which are and have been so registered, the
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<PAGE>
term "Principal Party" shall refer to whichever of such Persons is the issuer of
Common Shares having the greatest aggregate market value of shares outstanding,
or (3) if such Person is owned, directly or indirectly, by a joint venture
formed by two or more Persons that are not owned, directly or indirectly by the
same Person, the rules set forth in clauses (1) and (2) above shall apply to
each of the owners having an interest in the venture as if the Person owned by
the joint venture was a Subsidiary of both or all of such joint venturers, and
the Principal Party in each such case shall bear the obligations set forth in
this Section 13 in the same ratio as its interest in such Person bears to the
total of such interests.
(c) The Company shall not consummate any Section 13 Event unless the
Principal Party shall have a sufficient number of authorized Common Shares that
have not been issued or reserved for issuance to permit the exercise in full of
the Rights in accordance with this Section 13 and unless prior thereto the
Company and such issuer shall have executed and delivered to the Rights Agent a
supplemental agreement confirming that such Principal Party shall, upon
consummation of such Section 13 Event, assume this Agreement in accordance with
Sections 13(a) and 13(b) hereof, that all rights of first refusal or preemptive
rights in respect of the issuance of Common Shares of such Principal Party upon
exercise of outstanding Rights have been waived, that there are no rights,
warrants, instruments or securities outstanding or any agreements or
arrangements which, as a result of the consummation of such transaction, would
eliminate or substantially diminish the benefits intended to be afforded by the
Rights and that such transaction shall not result in a default by such Principal
Party under this Agreement, and further providing that, as soon as practicable
after the date of such Section 13 Event, such Principal Party will:
(i) prepare and file a registration statement under the
Securities Act with respect to the Rights and the securities purchasable upon
exercise of the Rights on an appropriate form, use its best efforts to cause
such registration statement to become effective as soon as practicable after
such filing and use its best efforts to cause such registration statement to
remain effective (with a prospectus at all times meeting the requirements of the
Securities Act) until the Expiration Date, and similarly comply with applicable
state securities laws;
(ii) use its best efforts to list (or continue the listing of)
the Rights and the securities purchasable upon exercise of the Rights on a
national securities exchange or to meet the eligibility requirements for
quotation on Nasdaq and list (or continue the listing of) the Rights and the
securities purchasable upon exercise of the Rights on Nasdaq; and
(iii) deliver to holders of the Rights historical financial
statements for such Principal Party which comply in all respects with the
requirements for registration on Form 10 (or any successor form) under the
Exchange Act.
In the event that at any time after the occurrence of a Triggering Event
some or all of the Rights shall not have been exercised at the time of a
transaction described in this Section 13, the Rights which have not theretofore
been exercised shall thereafter be exercisable in the manner described in
Section 13(a) (without taking into account any prior adjustment required by
Section 11(a)(ii)).
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<PAGE>
(d) In case the "Principal Party" for purposes of Section 13(b)
hereof has provision in any of its authorized securities or in its certificate
of incorporation or by-laws or other instrument governing its corporate affairs,
which provision would have the effect of (i) causing such Principal Party to
issue (other than to holders of Rights pursuant to Section 13 hereof), in
connection with, or as a consequence of, the consummation of a Section 13 Event,
Common Shares or Equivalent Shares of such Principal Party at less than the then
Current Per Share Market Price thereof or securities exercisable for, or
convertible into, Common Shares or Equivalent Shares of such Principal Party at
less than such then Current Per Share Market Price, or (ii) providing for any
special payment, tax, charge or similar provision in connection with the
issuance of the Common Shares of such Principal Party pursuant to the provisions
of Section 13 hereof, then, in such event, the Company hereby agrees with each
holder of Rights that it shall not consummate any such transaction unless prior
thereto the Company and such Principal Party shall have executed and delivered
to the Rights Agent a supplemental agreement providing that the provision in
question of such Principal Party shall have been canceled, waived or amended, or
that the authorized securities shall be redeemed, so that the applicable
provision will have no effect in connection with or as a consequence of, the
consummation of the proposed transaction.
(e) The Company covenants and agrees that it shall not, at any time
after the Distribution Date, effect or permit to occur any Section 13 Event, if
(i) at the time or immediately after such Section 13 Event there are any rights,
warrants or other instruments or securities outstanding or agreements in effect
which would substantially diminish or otherwise eliminate the benefits intended
to be afforded by the Rights, (ii) prior to, simultaneously with or immediately
after such Section 13 Event, the stockholders of the Person who constitutes, or
would constitute, the "Principal Party" for purposes of Section 13(b) hereof
shall have received a distribution of Rights previously owned by such Person or
any of its Affiliates or Associates or (iii) the form or nature of organization
of the Principal Party would preclude or limit the exercisability of the Rights.
(f) Notwithstanding anything in this Agreement to the contrary,
Section 13 shall not be applicable to a transaction described in clauses (i) and
(ii) of Section 13(a) if: (i) such transaction is consummated with a Person or
Persons who acquired Common Shares pursuant to a Permitted Offer (or a wholly-
owned Subsidiary of any such Person or Persons); (ii) the price per share of
Common Shares offered in such transaction is not less than the price per share
of Common Shares paid to all holders of Common Shares whose shares were
purchased pursuant to such Permitted Offer; and (iii) the form of consideration
being offered to the remaining holders of Common Shares pursuant to such
transaction is the same form as the form of consideration paid pursuant to such
Permitted Offer. Upon consummation of any such transaction contemplated by this
Section 13(f), all Rights hereunder shall expire.
(g) The provisions of this Section 13 shall similarly apply to
successive mergers or consolidations or sales or other transfers.
Section 14. Fractional Rights and Fractional Shares.
---------------------------------------
(a) The Company shall not be required to issue fractions of Rights
or to distribute Rights Certificates which evidence fractional Rights. In lieu
of such fractional Rights, there shall be paid
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<PAGE>
to the registered holders of the Rights Certificates with regard to which such
fractional Rights would otherwise be issuable, an amount in cash equal to the
same fraction of the current market value of a whole Right. For the purposes of
this Section 14(a), the current market value of a whole Right shall be the
closing price of the Rights for the Trading Day immediately prior to the date on
which such fractional Rights would have been otherwise issuable, as determined
pursuant to the second sentence of Section 1(j) hereof.
(b) The Company shall not be required to issue fractions of
Preferred Shares (other than fractions that are integral multiples of one one-
thousandth of a Preferred Share) upon exercise of the Rights or to distribute
certificates which evidence fractional Preferred Shares (other than fractions
that are integral multiples of one one-thousandth of a Preferred Share).
Interests in fractions of Preferred Shares in integral multiples of one one-
thousandth of a Preferred Share may, at the election of the Company, be
evidenced by depositary receipts, pursuant to an appropriate agreement between
the Company and a depositary selected by it; provided, that such agreement shall
---------
provide that the holders of such depositary receipts shall have all the
rights, privileges and preferences to which they are entitled as beneficial
owners of the Preferred Shares represented by such depositary receipts. In lieu
of fractional Preferred Shares that are not integral multiples of one one-
thousandth of a Preferred Share, the Company shall pay to the registered holders
of Rights Certificates at the time such Rights are exercised as herein provided
an amount in cash equal to the same fraction of the current market value of a
Preferred Share. For purposes of this Section 14(b), the current market value of
a Preferred Share shall be one thousand times the closing price of a Common
Share (as determined pursuant to the second sentence of Section 1(j) hereof) for
the Trading Day immediately prior to the date of such exercise.
(c) The Company shall not be required to issue fractions of Common
Shares or to distribute certificates which evidence fractional Common Shares
upon the exercise or exchange of Rights. In lieu of such fractional Common
Shares, the Company shall pay to the registered holders of Rights Certificates
at the time such Rights are exercised as herein provided an amount in cash equal
to the same fraction of the current market value of a Common Share. For
purposes of this Section 14(c), the current market value of a Common Share shall
be the closing price of a Common Share (as determined pursuant to the second
sentence of Section 1(j) hereof) for the Trading Day immediately prior to the
date of such exercise.
(d) The holder of a Right by the acceptance of the Right expressly
waives his or her right to receive any fractional Rights or any fractional
shares (other than fractions that are integral multiples of one one-thousandth
of a Preferred Share) upon exercise of a Right.
Section 15. Rights of Action. All rights of action in respect of this
----------------
Agreement, excepting the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares); and any registered holder of any Rights Certificate (or, prior
to the Distribution Date, of the Common Shares), without the consent of the
Rights Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of the Common Shares), may, in his or her own behalf and for
his or her own benefit, enforce, and may institute and maintain any suit, action
or proceeding against the Company to enforce, or otherwise act in respect of,
his or her right to exercise the Rights evidenced
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<PAGE>
by such Rights Certificate in the manner provided in such Rights Certificate and
in this Agreement. Without limiting the foregoing or any remedies available to
the holders of Rights, it is specifically acknowledged that the holders of
Rights would not have an adequate remedy at law for any breach of this Agreement
and will be entitled to specific performance of the obligations under, and
injunctive relief against actual or threatened violations of, the obligations of
any Person subject to this Agreement.
Section 16. Agreement of Rights Holders. Every holder of a Right, by
---------------------------
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of the Common Shares;
(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the office of the Rights Agent designated for such purposes, duly endorsed or
accompanied by a proper instrument of transfer and with the appropriate forms
and certificates fully executed; and
(c) subject to Sections 6(a) and 7(f) hereof, the Company and the
Rights Agent may deem and treat the Person in whose name the Rights Certificate
(or, prior to the Distribution Date, the associated Common Shares certificate)
is registered as the absolute owner thereof and of the Rights evidenced thereby
(notwithstanding any notations of ownership or writing on the Rights
Certificates or the associated Common Shares certificate made by anyone other
than the Company or the Rights Agent) for all purposes whatsoever, and neither
the Company nor the Rights Agent shall be affected by any notice to the
contrary.
Section 17. Rights Certificate Holder Not Deemed a Stockholder. No
--------------------------------------------------
holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose to be the holder of the Preferred Shares
or any other securities of the Company which may at any time be issuable on the
exercise of the Rights represented thereby, nor shall anything contained herein
or in any Rights Certificate be construed to confer upon the holder of any
Rights Certificate, as such, any of the rights of a stockholder of the Company
or any right to vote for the election of directors or upon any matter submitted
to stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 25 hereof), or to receive dividends
or subscription rights, or otherwise, until the Right or Rights evidenced by
such Rights Certificate shall have been exercised in accordance with the
provisions hereof.
Section 18. Concerning the Rights Agent.
---------------------------
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
other disbursements incurred in the preparation, delivery, amendment,
administration and execution of this Agreement and the exercise and performance
of its duties hereunder. The Company also agrees to indemnify the Rights Agent
for, and to hold it harmless against, any loss, liability, damage, judgment,
fine, penalty, claim, settlement, cost or expense, incurred without
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<PAGE>
gross negligence, bad faith or willful misconduct on the part of the Rights
Agent, for any action taken, suffered or omitted by the Rights Agent in
connection with the acceptance and administration of this Agreement, including
the costs and expenses of defending against any claim of liability in the
premises. In no event will the Rights Agent be liable for special, indirect,
punitive, incidental or consequential loss or damage of any kind whatsoever,
even if the Rights Agent has been advised of the possibility of such loss or
damage.
(b) The Rights Agent shall be protected and shall incur no liability
for, or in respect of any action taken, suffered or omitted by it in connection
with the acceptance and administration of this Agreement in reliance upon any
Rights Certificate or certificate for the Preferred Shares or Common Shares or
for other securities of the Company, instrument of assignment or transfer, power
of attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement or other paper or document reasonably believed by it to
be genuine and to be signed, executed and, where necessary, verified or
acknowledged, by the proper Person or Persons, or otherwise upon the advice of
counsel as set forth in Section 20 hereof.
Section 19. Merger or Consolidation or Change of Name of Rights Agent.
---------------------------------------------------------
(a) Any Person into which the Rights Agent or any successor Rights
Agent may be merged or with which it may be consolidated, or any Person
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any Person succeeding to the
shareholder services business of the Rights Agent or any successor Rights Agent,
shall be the successor to the Rights Agent under this Agreement without the
execution or filing of any paper or any further act on the part of any of the
parties hereto; provided, however, that such Person would be eligible for
-----------------
appointment as a successor Rights Agent under the provisions of Section 21
hereof. In case at the time such successor Rights Agent shall succeed to the
agency created by this Agreement, any of the Rights Certificates shall have been
countersigned but not delivered, any such successor Rights Agent may adopt the
countersignature of the predecessor Rights Agent and deliver such Rights
Certificates so countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor
Rights Agent or in the name of the successor Rights Agent; and in all such cases
such Rights Certificates shall have the full force provided in the Rights
Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be
changed and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver Rights Certificates so countersigned; and in
case at that time any of the Rights Certificates shall not have been
countersigned, the Rights Agent may countersign such Rights Certificates either
in its prior name or in its changed name; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the
----------------------
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Rights Certificates,
by their acceptance thereof, shall be bound:
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<PAGE>
(a) The Rights Agent may consult with legal counsel (who may be
legal counsel for the Company), and the written advice or opinion of such
counsel shall be full and complete authorization and protection to the Rights
Agent and the Rights Agent shall incur no liability for or in respect of any
action taken, suffered or omitted by it in good faith and in accordance with
such written advice or opinion.
(b) Whenever in the performance of its duties under this Agreement
the Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person and the
determination of Current Per Share Market Price) be proved or established by the
Company prior to taking or suffering any action hereunder, such fact or matter
(unless other evidence in respect thereof be herein specifically prescribed) may
be deemed to be conclusively proved and established by a certificate signed by
any one of the Chairman of the Board, the Chief Executive Officer, the
President, any Vice President, the Chief Financial Officer, the Secretary or any
Assistant Secretary of the Company and delivered to the Rights Agent; and such
certificate shall be full authorization and protection to the Rights Agent and
the Rights Agent shall incur no liability for or in respect of any action taken,
suffered or omitted in good faith by it under the provisions of this Agreement
in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the Company and
any other Person only for its own gross negligence, bad faith or willful
misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement or in the Rights
Certificates (except its countersignature thereof) or be required to verify the
same, but all such statements and recitals are and shall be deemed to have been
made by the Company only.
(e) The Rights Agent shall not be under any liability or
responsibility in respect of the validity of this Agreement or the execution and
delivery hereof (except the due execution hereof by the Rights Agent) or in
respect of the validity or execution of any Rights Certificate (except its
countersignature thereof); nor shall it be responsible for any breach by the
Company of any covenant or condition contained in this Agreement or in any
Rights Certificate; nor shall it be responsible for any change in the
exercisability of the Rights or any adjustment in the terms of the Rights
(including the manner, method or amount thereof) provided for in Sections 3, 11,
13, 23 or 24, or the ascertaining of the existence of facts that would require
any such change or adjustment (except with respect to the exercise of Rights
evidenced by Rights Certificates after receipt by the Rights Agent of a
certificate furnished pursuant to Section 12 describing such change or
adjustment); nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any
Preferred Shares to be issued pursuant to this Agreement or any Rights
Certificate or as to whether any Preferred Shares will, when issued, be validly
authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge
and deliver or cause to be performed, executed, acknowledged and delivered all
such further and other acts, instruments and assurances as may reasonably be
required by the Rights Agent for the carrying out or performing by the Rights
Agent of the provisions of this Agreement.
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<PAGE>
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the Board, the Chief Executive Officer, the President,
any Vice President, the Chief Financial Officer, the Secretary or any Assistant
Secretary of the Company, and to apply to such officers for advice or
instructions in connection with its duties, and such instructions shall be full
authorization and protection to the Rights Agent and the Rights Agent shall
incur no liability for or in respect of any action taken, suffered or omitted by
it in good faith in accordance with instructions of any such officer or for any
delay in acting while waiting for those instructions. Any application by the
Rights Agent for written instructions from the Company may, at the option of the
Rights Agent, set forth in writing any action proposed to be taken, suffered or
omitted by the Rights Agent under this Rights Agreement and the date on and/or
after which such action shall be taken or suffered or such omission shall be
effective. The Rights Agent shall not be liable for any action taken or
suffered by, or omission of, the Rights Agent in accordance with a proposal
included in any such application on or after the date specified in such
application (which date shall not be less than five (5) Business Days after the
date any officer of the Company actually receives such application, unless any
such officer shall have consented in writing to an earlier date) unless, prior
to taking any such action (or the effective date in the case of an omission),
the Rights Agent shall have received written instructions in response to such
application specifying the action to be taken, suffered or omitted.
(h) The Rights Agent and any stockholder, director, affiliate,
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 Person
or legal entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company or any other Person resulting from any
such act, default, neglect or misconduct, provided reasonable care was exercised
in the selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
it believes that repayment of such funds or adequate indemnification against
such risk or liability is not reasonably assured to it.
(k) If, with respect to any Rights Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise or transfer without first consulting with the Company.
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<PAGE>
Section 21. Change of Rights Agent. The Rights Agent or any successor
-----------------------
Rights Agent may resign and be discharged from its duties under this Agreement
upon thirty (30) days' notice in writing mailed to the Company and to each
transfer agent of the Preferred Shares and the Common Shares by registered or
certified mail, and to the holders of the Rights Certificates by first-class
mail. The Company may remove the Rights Agent or any successor Rights Agent
upon thirty (30) days' notice in writing, mailed to the Rights Agent or
successor Rights Agent, as the case may be, and to each transfer agent of the
Preferred Shares and the Common Shares by registered or certified mail, and to
the holders of the Rights Certificates by first-class mail. If the Rights Agent
shall resign or be removed or shall otherwise become incapable of acting, the
Company shall appoint a successor to the Rights Agent. If the Company shall
fail to make such appointment within a period of thirty (30) days after giving
notice of such removal or after it has been notified in writing of such
resignation or incapacity by the resigning or incapacitated Rights Agent or by
the holder of a Rights Certificate (who shall, with such notice, submit his or
her Rights Certificate for inspection by the Company), then the registered
holder of any Rights Certificate may apply to any court of competent
jurisdiction for the appointment of a new Rights Agent. Any successor Rights
Agent, whether appointed by the Company or by such a court, shall be a Person
organized and doing business under the laws of the United States or of any state
of the United States, in good standing, which is authorized under such laws to
exercise corporate trust or stockholder services powers and is subject to
supervision or examination by federal or state authority and which has at the
time of its appointment as Rights Agent a combined capital and surplus of at
least $50 million or an Affiliate thereof. After appointment, the successor
Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and transfer
to the successor Rights Agent any property at the time held by it hereunder, and
execute and deliver any further assurance, conveyance, act or deed necessary for
the purpose. Not later than the effective date of any such appointment, the
Company shall file notice thereof in writing with the predecessor Rights Agent
and each transfer agent of the Preferred Shares and the Common Shares, and mail
a notice thereof in writing to the registered holders of the Rights
Certificates. Failure to give any notice provided for in this Section 21,
however, or any defect therein, shall not affect the legality or validity of the
resignation or removal of the Rights Agent or the appointment of the successor
Rights Agent, as the case may be.
Section 22. Issuance of New Rights Certificates. Notwithstanding any
-----------------------------------
of the provisions of this Agreement or of the Rights to the contrary, the
Company may, at its option, issue new Rights Certificates evidencing Rights in
such form as may be approved by its Board of Directors to reflect any adjustment
or change in the Exercise Price and the number or kind or class of shares or
other securities or property purchasable under the Rights Certificates made in
accordance with the provisions of this Agreement. In addition, in connection
with the issuance or sale of Common Shares following the Distribution Date and
prior to the redemption or expiration of the Rights, the Company (a) shall, with
respect to Common Shares so issued or sold pursuant to the exercise of stock
options or under any employee plan or arrangement or upon the exercise,
conversion or exchange of other securities of the Company outstanding at the
date hereof or upon the exercise, conversion or exchange of securities
hereinafter issued by the Company and (b) may, in any other case, if deemed
necessary or appropriate by the Board of Directors of the Company, issue Rights
Certificates representing the appropriate number of Rights in connection with
such issuance or sale; provided, however, that (i) no such Rights Certificate
-------- -------
shall be issued and this sentence shall be null and void ab initio if, and to
---------
the extent that, such issuance
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<PAGE>
or this sentence would create a significant risk of or result in material
adverse tax consequences to the Company or the Person to whom such Rights
Certificate would be issued or would create a significant risk of or result in
such options' or employee plans' or arrangements' failing to qualify for
otherwise available special tax treatment and (ii) no such Rights Certificate
shall be issued if, and to the extent that, appropriate adjustment shall
otherwise have been made in lieu of the issuance thereof.
Section 23. Redemption.
----------
(a) The Company may, at its option and with the approval of the
Board of Directors, at any time prior to the Close of Business on the earlier of
(i) the tenth day following the Shares Acquisition Date (or such later date as
may be determined by the Company's Board of Directors) and (ii) the Final
Expiration Date, redeem all but not less than all the then outstanding Rights at
a redemption price of $0.01 per Right, appropriately adjusted to reflect any
stock split, stock dividend or similar transaction occurring after the date
hereof (such redemption price being herein referred to as the "REDEMPTION
PRICE") and the Company may, at its option, pay the Redemption Price either in
Common Shares (based on the Current Per Share Market Price thereof at the time
of redemption) or cash. Such redemption of the Rights by the Company may be made
effective at such time, on such basis and with such conditions as the Board of
Directors in its sole discretion may establish. The date on which the Board of
Directors elects to make the redemption effective shall be referred to as the
"REDEMPTION DATE."
(b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights and without any further action and
without any notice, the right to exercise the Rights will terminate and the only
right thereafter of the holders of Rights shall be to receive the Redemption
Price. The Company shall promptly give public notice of any such redemption;
provide however, that the failure to give or any defect in, any such notice
- ------- -------
shall not affect the validity of such redemption. Within ten (10) days after the
action of the Board of Directors ordering the redemption of the Rights, the
Company shall give notice of such redemption to the Rights Agent and the holders
of the then outstanding Rights by (in the case of notice to the holders) mailing
such notice to all such holders at their last addresses as they appear upon the
registry books of the Rights Agent or, prior to the Distribution Date, on the
registry books of the transfer agent for the Common Shares. Any notice which is
mailed in the manner herein provided shall be deemed given, whether or not the
holder receives the notice. Each such notice of redemption will state the method
by which the payment of the Redemption Price will be made. Neither the Company
nor any of its Affiliates or Associates may redeem, acquire or purchase for
value any Rights at any time in any manner other than that specifically set
forth in this Section 23 or in Section 24 hereof, and other than in connection
with the purchase of Common Shares prior to the Distribution Date.
(c) Notwithstanding the provisions of Section 23(a), in the event
that a majority of the Board of Directors of the Company is elected by
stockholder action by written consent, then until the earlier to occur of (i)
the 180th day following the effectiveness of such election or (ii) the next
regular annual meeting of stockholders of the Company following the
effectiveness of such election (including any postponement or adjournment
thereof), the Rights shall not be redeemed if such
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redemption is reasonably likely to have the purpose or effect of facilitating a
Transaction with an Interested Person.
Section 24. Exchange.
--------
(a) Subject to applicable laws, rules and regulations, and subject
to subsection 24(c) below, the Company may, at its option, by action of the
Company's Board of Directors, at any time after the occurrence of a Triggering
Event, exchange all or part of the then outstanding and exercisable Rights
(which shall not include Rights that have become null and void pursuant to the
provisions of Section 7(e) hereof) for Common Shares at an exchange ratio of one
Common Share per Right, appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date hereof (such exchange
ratio being hereinafter referred to as the "EXCHANGE RATIO"). Notwithstanding
the foregoing, the Board of Directors shall not be empowered to effect such
exchange at any time after any Person (other than the Company, any Subsidiary of
the Company, any employee benefit plan of the Company or any such Subsidiary, or
any entity holding Common Shares for or pursuant to the terms of any such plan),
together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of 50% or more of the Common Shares then outstanding.
(b) Immediately upon the action of the Board of Directors ordering
the exchange of any Rights pursuant to subsection 24(a) of this Section 24 and
without any further action and without any notice, the right to exercise such
Rights shall terminate and the only right thereafter of a holder of such Rights
shall be to receive that number of Common Shares equal to the number of such
Rights held by such holder multiplied by the Exchange Ratio. The Company shall
give public notice of any such exchange (with prompt notice thereof to the
Rights Agent); provided, however, that the failure to give, or any defect in,
-------- -------
such notice shall not affect the validity of such exchange. The Company shall
mail a notice of any such exchange to all of the holders of such Rights at their
last addresses as they appear upon the registry books of the Rights Agent. Any
notice which is mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice. Each such notice of exchange
will state the method by which the exchange of the Common Shares for Rights will
be effected and, in the event of any partial exchange, the number of Rights
which will be exchanged. Any partial exchange shall be effected pro rata based
on the number of Rights (other than Rights which have become null and void
pursuant to the provisions of Section 7(e) hereof) held by each holder of
Rights.
(c) In the event that there shall not be sufficient Common Shares
issued but not outstanding or authorized but unissued to permit any exchange of
Rights as contemplated in accordance with Section 24(a), the Company shall
either take such action as may be necessary to authorize additional Common
Shares for issuance upon exchange of the Rights or alternatively, at the option
of a majority of the Board of Directors, with respect to each Right (i) pay cash
in an amount equal to the Current Value (as hereinafter defined), in lieu of
issuing Common Shares in exchange therefor, or (ii) issue debt or equity
securities or a combination thereof, having a value equal to the Current Value,
in lieu of issuing Common Shares in exchange for each such Right, where the
value of such securities shall be determined by a nationally recognized
investment banking firm selected by majority vote of the Board of Directors, or
(iii) deliver any combination of cash, property, Common Shares and/or other
securities having a value equal to the Current Value in exchange for each Right.
For purposes of this Section 24(c)
-33-
<PAGE>
only, the Current Value shall mean the product of the Current Per Share Market
Price of Common Shares on the date of the occurrence of the event described
above in subparagraph (a), multiplied by the number of Common Shares for which
the Right otherwise would be exchangeable if there were sufficient shares
available. To the extent that the Company determines that some action need be
taken pursuant to clauses (i), (ii) or (iii) of this Section 24(c), the Board of
Directors may temporarily suspend the exercisability of the Rights for a period
of up to sixty (60) days following the date on which the event described in
Section 24(a) shall have occurred, in order to seek any authorization of
additional Common Shares and/or to decide the appropriate form of distribution
to be made pursuant to the above provision and to determine the value thereof.
In the event of any such suspension, the Company shall issue a public
announcement (with prompt notice thereof to the Rights Agent) stating that the
exercisability of the Rights has been temporarily suspended.
(d) The Company shall not be required to issue fractions of Common
Shares or to distribute certificates which evidence fractional Common Shares.
In lieu of such fractional Common Shares, there shall be paid to the registered
holders of the Rights Certificates with regard to which such fractional Common
Shares would otherwise be issuable, an amount in cash equal to the same fraction
of the current market value of a whole Common Share (as determined pursuant to
the second sentence of Section 1(j) hereof).
(e) The Company may, at its option, by majority vote of the Board of
Directors, at any time before any Person has become an Acquiring Person,
exchange all or part of the then outstanding Rights for rights of substantially
equivalent value, as determined reasonably and with good faith by the Board of
Directors, based upon the advice of one or more nationally recognized investment
banking firms.
(f) Immediately upon the action of the Board of Directors ordering
the exchange of any Rights pursuant to subsection 24(e) of this Section 24 and
without any further action and without any notice, the right to exercise such
Rights shall terminate and the only right thereafter of a holder of such Rights
shall be to receive that number of rights in exchange therefor as has been
determined by the Board of Directors in accordance with subsection 24(e) above.
The Company shall give public notice of any such exchange (with prompt notice
thereof to the Rights Agent); provided, however, that the failure to give, or
-------- -------
any defect in, such notice shall not affect the validity of such exchange. The
Company shall mail a notice of any such exchange to all of the holders of such
Rights at their last addresses as they appear upon the registry books of the
transfer agent for the Common Shares of the Company. Any notice which is mailed
in the manner herein provided shall be deemed given, whether or not the holder
receives the notice. Each such notice of exchange will state the method by
which the exchange of the Rights will be effected.
(g) Notwithstanding the provisions of this Section 24, in the event
that a majority of the Board of Directors of the Company is elected by
stockholder action by written consent, then until the earlier to occur of (i)
the 180th day following the effectiveness of such election or (ii) the next
regular annual meeting of stockholders of the Company following the
effectiveness of such election (including any postponement or adjournment
thereof), this Rights shall not be exchanged pursuant hereto
-34-
<PAGE>
if such exchange would be reasonably likely to have the purpose or effect of
facilitating a Transaction with an Interested Person.
Section 25. Notice of Certain Events .
------------------------
(a) In case the Company shall propose to effect or permit to occur
any Triggering Event or Section 13 Event, the Company shall give notice thereof
to each holder of Rights and to the Rights Agent in accordance with Section 26
hereof at least twenty (20) days prior to occurrence of such Triggering Event or
such Section 13 Event.
(b) In case any Triggering Event or Section 13 Event shall occur,
then, in any such case, the Company shall as soon as practicable thereafter give
to each holder of a Rights Certificate and to the Rights Agent, in accordance
with Section 26 hereof, a notice of the occurrence of such event, which shall
specify the event and the consequences of the event to holders of Rights under
Sections 11(a)(ii) and 13 hereof.
Section 26. Notices. Notices or demands authorized by this Agreement
-------
to be given or made by the Rights Agent or by the holder of any Rights
Certificate to or on the Company shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Rights Agent) as follows:
TELCOM SEMICONDUCTOR, INC.
1300 Terra Bella Avenue
Mountain View, CA 94039
Attention: Chief Financial Officer
with a copy to:
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: J. Robert Suffoletta, Jr.
Subject to the provisions of Section 21 hereof, any notice or demand
authorized by this Agreement to be given or made by the Company or by the holder
of any Rights Certificate to or on the Rights Agent shall be sufficiently given
or made if sent by first-class mail, postage prepaid, addressed (until another
address is filed in writing with the Company) as follows:
ChaseMellon Shareholder Services, L.L.C.
235 Montgomery Street, 23rd Floor
San Francisco, CA 94104
Attention: Joseph Thatcher
-35-
<PAGE>
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
Section 27. Supplements and Amendments. Prior to the occurrence of a
--------------------------
Distribution Date, the Company may supplement or amend this Agreement in any
respect without the approval of any holders of Rights and the Rights Agent
shall, if the Company so directs, execute such supplement or amendment. From
and after the occurrence of a Distribution Date, the Company and the Rights
Agent may from time to time supplement or amend this Agreement without the
approval of any holders of Rights in order to (i) cure any ambiguity, (ii)
correct or supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein, (iii) shorten or lengthen any
time period hereunder or (iv) to change or supplement the provisions hereunder
in any manner that the Company may deem necessary or desirable and that shall
not adversely affect the interests of the holders of Rights (other than an
Acquiring Person or an Affiliate or Associate of an Acquiring Person); provided,
--------
this Agreement may not be supplemented or amended to lengthen, pursuant to
clause (iii) of this sentence, (A) a time period relating to when the Rights may
be redeemed at such time as the Rights are not then redeemable or (B) any other
time period unless such lengthening is for the purpose of protecting, enhancing
or clarifying the rights of, and/or the benefits to, the holders of Rights
(other than an Acquiring Person or an Affiliate or Associate of an Acquiring
Person). Notwithstanding the foregoing, the Rights Agent shall not be required
to execute a supplement or amendment to this Agreement that in the reasonable
judgment of the Rights Agent materially increases the duties, liabilities or
obligations of the Rights Agent. Upon the delivery of a certificate from an
appropriate officer of the Company that states that the proposed supplement or
amendment is in compliance with the terms of this Section 27, the Rights Agent
shall execute such supplement or amendment. Prior to the Distribution Date, the
interests of the holders of Rights shall be deemed coincident with the interests
of the holders of Common Shares.
Notwithstanding the provisions of Section 27, in the event that a majority
of the Board of Directors of the Company is elected by stockholder action by
written consent, then until the earlier to occur of (i) the 180th day following
the effectiveness of such election or (ii) the next regular annual meeting of
stockholders of the Company following the effectiveness of such election
(including any postponement or adjournment thereof), this Rights Agreement shall
not be supplemented or amended in any manner reasonably likely to have the
purpose or effect of facilitating a Transaction with an Interested Person.
Section 28. Successors. All the covenants and provisions of this
----------
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 29. Determinations and Actions by the Board of Directors, etc.
----------------------------------------------------------
For all purposes of this Agreement, any calculation of the number of Common
Shares outstanding at any particular time, including for purposes of determining
the particular percentage of such outstanding Common Shares of which any Person
is the Beneficial Owner, shall be made in accordance with the last sentence of
Rule
-36-
<PAGE>
13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act. The
Board of Directors of the Company shall have the exclusive power and authority
to administer this Agreement and to exercise all rights and powers specifically
granted to the Board, or the Company, or as may be necessary or advisable in the
administration of this Agreement, including, without limitation, the right and
power to (i) interpret the provisions of this Agreement and (ii) make all
determinations deemed necessary or advisable for the administration of this
Agreement (including a determination to redeem or not redeem the Rights or to
amend the Agreement). All such actions, calculations, interpretations and
determinations (including, for purposes of clause (y) below, all omissions with
respect to the foregoing) which are done or made by the Board in good faith,
shall (x) be final, conclusive and binding on the Company, the Rights Agent, the
holders of the Rights Certificates and all other parties and (y) not subject the
Board to any liability to the holders of the Rights. The Rights Agent shall be
entitled to assume that the Company's Board of Directors acted in good faith and
shall incur no liability for or in respect of any action taken, suffered or
omitted by it in good faith reliance thereon.
Section 30. Benefits of this Agreement. Nothing in this Agreement
--------------------------
shall be construed to give to any Person other than the Company, the Rights
Agent and the registered holders of the Rights Certificates (and, prior to the
Distribution Date, the Common Shares) any legal or equitable right, remedy or
claim under this Agreement; but this Agreement shall be for the sole and
exclusive benefit of the Company, the Rights Agent and the registered holders of
the Rights Certificates (and, prior to the Distribution Date, the Common
Shares).
Section 31. Severability. If any term, provision, covenant or
------------
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
- -------- -------
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board of
Directors of the Company determines in its good faith judgment that severing the
invalid language from this Agreement would adversely affect the purpose or
effect of this Agreement, the right of redemption set forth in Section 23 hereof
shall be reinstated (with prompt notice thereof to the Rights Agent) and shall
not expire until the Close of Business on the tenth day following the date of
such determination by the Board of Directors.
Section 32. Governing Law. This Agreement and each Right and each
-------------
Rights Certificate issued hereunder shall be deemed to be a contract made under
the laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts to
be made and performed entirely within such State.
Section 33. Counterparts. This Agreement may be executed in any number
------------
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
Section 34. Descriptive Headings. Descriptive headings of the several
--------------------
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
"COMPANY" TELCOM SEMICONDUCTOR, INC.
By: /s/ Phillip M. Drayer
-----------------------------------
Phillip M. Drayer,
Chief Executive Officer
"RIGHTS AGENT" CHASEMELLON SHAREHOLDER
SERVICES, L.L.C.
By: /s/ Paul Collins
------------------------------------
Paul Collins
Assistant Vice President
[Signatue page to Preferred Shares Rights Agreement]
<PAGE>
EXHIBIT A
---------
CERTIFICATE OF DESIGNATION OF RIGHTS, PREFERENCES
AND PRIVILEGES OF
SERIES A PARTICIPATING PREFERRED STOCK
OF TELCOM SEMICONDUCTOR, INC.
The undersigned, Phillip M. Drayer and Robert G. Gargus, do hereby certify:
1. That they are the duly elected and acting Chief Executive Officer and
Secretary, respectively, of TelCom Semiconductor, Inc., a Delaware corporation
(the "CORPORATION").
2. That pursuant to the authority conferred upon the Board of Directors by
the Certificate of Incorporation of the said Corporation, the said Board of
Directors on November 12, 1998 adopted the following resolution creating a
series of Thirty Thousand (30,000) shares of Preferred Stock designated as
Series A Participating Preferred Stock:
"RESOLVED, that pursuant to the authority vested in the Board of Directors
of the Corporation by the Restated Certificate of Incorporation, the Board of
Directors does hereby provide for the issue of a series of Preferred Stock of
the Corporation and does hereby fix and herein state and express the
designations, powers, preferences and relative and other special rights and the
qualifications, limitations and restrictions of such series of Preferred Stock
as follows:
Section 1. Designation and Amount. The shares of such series shall be
----------------------
designated as "SERIES A PARTICIPATING PREFERRED STOCK." The Series A
Participating Preferred Stock shall have a par value of $0.001 per share, and
the number of shares constituting such series shall be Thirty Thousand (30,000).
Section 2. Proportional Adjustment. In the event the Corporation shall at
-----------------------
any time after the issuance of any share or shares of Series A Participating
Preferred Stock (i) declare any dividend on Common Stock of the Corporation
("COMMON STOCK") payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock or (iii) combine the outstanding Common Stock into a
smaller number of shares, then in each such case the Corporation shall
simultaneously effect a proportional adjustment to the number of outstanding
shares of Series A Participating Preferred Stock.
Section 3. Dividends and Distributions.
---------------------------
(a) Subject to the prior and superior right of the holders of any
shares of any series of Preferred Stock ranking prior and superior to the shares
of Series A Participating Preferred Stock with respect to dividends, the holders
of shares of Series A Participating Preferred Stock shall be entitled to receive
when, as and if declared by the Board of Directors out of funds legally
available for the purpose, quarterly dividends payable in cash on the last day
of January, April, July and October in each year (each such date being referred
to herein as a "QUARTERLY DIVIDEND PAYMENT
-2-
<PAGE>
DATE"), commencing on the first Quarterly Dividend Payment Date after the first
issuance of a share or fraction of a share of Series A Participating Preferred
Stock, in an amount per share (rounded to the nearest cent) equal to 1,000 times
the aggregate per share amount of all cash dividends, and 1,000 times the
aggregate per share amount (payable in kind) of all non-cash dividends or other
distributions other than a dividend payable in shares of Common Stock or a
subdivision of the outstanding shares of Common Stock (by reclassification or
otherwise), declared on the Common Stock since the immediately preceding
Quarterly Dividend Payment Date, or, with respect to the first Quarterly
Dividend Payment Date, since the first issuance of any share or fraction of a
share of Series A Participating Preferred Stock.
(b) The Corporation shall declare a dividend or distribution on the
Series A Participating Preferred Stock as provided in paragraph (a) above
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock).
(c) Dividends shall begin to accrue on outstanding shares of Series
A Participating Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Series A Participating Preferred
Stock, unless the date of issue of such shares is prior to the record date for
the first Quarterly Dividend Payment Date, in which case dividends on such
shares shall begin to accrue from the date of issue of such shares, or unless
the date of issue is a Quarterly Dividend Payment Date or is a date after the
record date for the determination of holders of shares of Series A Participating
Preferred Stock entitled to receive a quarterly dividend and before such
Quarterly Dividend Payment Date, in either of which events such dividends shall
begin to accrue from such Quarterly Dividend Payment Date. Accrued but unpaid
dividends shall not bear interest. Dividends paid on the shares of Series A
Participating Preferred Stock in an amount less than the total amount of such
dividends at the time accrued and payable on such shares shall be allocated pro
rata on a share-by-share basis among all such shares at the time outstanding.
The Board of Directors may fix a record date for the determination of holders of
shares of Series A Participating Preferred Stock entitled to receive payment of
a dividend or distribution declared thereon, which record date shall be no more
than 30 days prior to the date fixed for the payment thereof.
Section 4. Voting Rights. The holders of shares of Series A Participating
-------------
Preferred Stock shall have the following voting rights:
(a) Each share of Series A Participating Preferred Stock shall
entitle the holder thereof to 1,000 votes on all matters submitted to a vote of
the stockholders of the Corporation.
(b) Except as otherwise provided herein or by law, the holders of
shares of Series A Participating Preferred Stock and the holders of shares of
Common Stock shall vote together as one class on all matters submitted to a vote
of stockholders of the Corporation.
(c) Except as required by law, holders of Series A Participating
Preferred Stock shall have no special voting rights and their consent shall not
be required (except to the extent they
-3-
<PAGE>
are entitled to vote with holders of Common Stock as set forth herein) for
taking any corporate action.
Section 5. Certain Restrictions.
--------------------
(a) The Corporation shall not declare any dividend on, make any
distribution on, or redeem or purchase or otherwise acquire for consideration
any shares of Common Stock after the first issuance of a share or fraction of a
share of Series A Participating Preferred Stock unless concurrently therewith it
shall declare a dividend on the Series A Participating Preferred Stock as
required by Section 3 hereof.
(b) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Participating Preferred Stock as provided
in Section 3 are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on shares of Series A
Participating Preferred Stock outstanding shall have been paid in full, the
Corporation shall not:
(i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise acquire for consideration
any shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Participating Preferred Stock;
(ii) declare or pay dividends on, make any other
distributions on any shares of stock ranking on a parity (either as to dividends
or upon liquidation, dissolution or winding up) with Series A Participating
Preferred Stock, except dividends paid ratably on the Series A Participating
Preferred Stock and all such parity stock on which dividends are payable or in
arrears in proportion to the total amounts to which the holders of all such
shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series A Participating
Preferred Stock, provided that the Corporation may at any time redeem, purchase
or otherwise acquire shares of any such parity stock in exchange for shares of
any stock of the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A Participating Preferred
Stock;
(iv) purchase or otherwise acquire for consideration any
shares of Series A Participating Preferred Stock, or any shares of stock ranking
on a parity with the Series A Participating Preferred Stock, except in
accordance with a purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of such shares upon such
terms as the Board of Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of the respective
series and classes, shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.
(c) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the
-4-
<PAGE>
Corporation could, under paragraph (a) of this Section 5, purchase or otherwise
acquire such shares at such time and in such manner.
Section 6. Reacquired Shares. Any shares of Series A Participating
-----------------
Preferred Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition thereof.
All such shares shall upon their cancellation become authorized but unissued
shares of Preferred Stock and may be reissued as part of a new series of
Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein and, in the Restated Certificate of Incorporation, as then amended.
Section 7. Liquidation, Dissolution or Winding Up. Upon any liquidation,
--------------------------------------
dissolution or winding up of the Corporation, the holders of shares of Series A
Participating Preferred Stock shall be entitled to receive an aggregate amount
per share equal to 1,000 times the aggregate amount to be distributed per share
to holders of shares of Common Stock plus an amount equal to any accrued and
unpaid dividends on such shares of Series A Participating Preferred Stock.
Section 8. Consolidation, Merger, etc. In case the Corporation shall
--------------------------
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
Series A Participating Preferred Stock shall at the same time be similarly
exchanged or changed in an amount per share equal to 1,000 times the aggregate
amount of stock, securities, cash and/or any other property (payable in kind),
as the case may be, into which or for which each share of Common Stock is
changed or exchanged.
Section 9. No Redemption. The shares of Series A Participating Preferred
-------------
Stock shall not be redeemable.
Section 10. Ranking. The Series A Participating Preferred Stock shall
-------
rank junior to all other series of the Corporation's Preferred Stock as to the
payment of dividends and the distribution of assets, unless the terms of any
such series shall provide otherwise.
Section 11. Amendment. The Restated Certificate of Incorporation of the
---------
Corporation shall not be further amended in any manner which would materially
alter or change the powers, preference or special rights of the Series A
Participating Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of a majority of the outstanding shares of
Series A Participating Preferred Stock, voting separately as a class.
Section 12. Fractional Shares. Series A Participating Preferred Stock may
-----------------
be issued in fractions of a share which shall entitle the holder, in proportion
to such holder's fractional shares, to exercise voting rights, receive
dividends, participate in distributions and to have the benefit of all other
rights of holders of Series A Participating Preferred Stock.
-5-
<PAGE>
RESOLVED FURTHER, that the Chief Executive Officer or any Vice President
and the Secretary or any Assistant Secretary of this Corporation be, and they
hereby are, authorized and directed to prepare and file a Certificate of
Designation of Rights, Preferences and Privileges in accordance with the
foregoing resolution and the provisions of Delaware law and to take such actions
as they may deem necessary or appropriate to carry out the intent of the
foregoing resolution."
We further declare under penalty of perjury that the matters set forth in
the foregoing Certificate of Designation are true and correct of our own
knowledge.
Executed at San Jose, California on November __, 1998.
__________________________________________
Phillip M. Drayer,
Chief Executive Officer
__________________________________________
Robert G. Gargus, Secretary
<PAGE>
EXHIBIT B
---------
FORM OF RIGHTS CERTIFICATE
Certificate No. R- _________ Rights
NOT EXERCISABLE AFTER THE EARLIER OF (i) NOVEMBER 19, 2008 (ii)
THE DATE TERMINATED BY THE COMPANY OR (iii) THE DATE THE COMPANY
EXCHANGES THE RIGHTS PURSUANT TO THE RIGHTS AGREEMENT. THE RIGHTS
ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $0.01
PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER
CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING
PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS
SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND ANY
SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. [THE
RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE
BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING
PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON] (AS
SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY,
THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY
BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION
7(e) OF SUCH RIGHTS AGREEMENT.*
RIGHTS CERTIFICATE
TELCOM SEMICONDUCTOR, INC.
This certifies that ______________________________, or registered assigns,
is the registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Rights Agreement dated as of November 19, 1998, (the "RIGHTS AGREEMENT"),
between TelCom Semiconductor, Inc., a Delaware corporation (the "COMPANY"), and
ChaseMellon Shareholder Services, L.L.C., a New Jersey limited liability company
(the "RIGHTS AGENT"), to purchase from the Company at any time after the
Distribution Date (as such term is defined in the Rights Agreement) and prior to
5:00 P.M., New York time, on November 19, 2008 at the office of the Rights Agent
designated for such purpose, or at the office of its successor as Rights Agent,
one one-thousandth (1/1,000) of a fully paid non-assessable share of Series A
Participating Preferred Stock, $0.001 par value (the "PREFERRED
___________________
* The portion of the legend in bracket shall be inserted only if applicable and
shall replace the preceding sentence.
<PAGE>
SHARES"), of the Company, at an Exercise Price of Thirty Dollars ($30.00) per
one-thousandth of a Preferred Share (the "EXERCISE PRICE"), upon presentation
and surrender of this Rights Certificate with the Form of Election to Purchase
and related Certificate duly executed. The number of Rights evidenced by this
Rights Certificate (and the number of one-thousandths of a Preferred Share which
may be purchased upon exercise hereof) set forth above are the number and
Exercise Price as of November 19, 1998 based on the Preferred Shares as
constituted at such date. As provided in the Rights Agreement, the Exercise
Price and the number and kind of Preferred Shares or other securities which may
be purchased upon the exercise of the Rights evidenced by this Rights
Certificate are subject to modification and adjustment upon the happening of
certain events.
This Rights Certificate is subject to all of the terms, covenants and
restrictions of the Rights Agreement, which terms, covenants and restrictions
are hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the principal executive office of
the Company and the above-mentioned office of the Rights Agent.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Rights Certificate (i) may be redeemed by the Company, at its
option, at a redemption price of $0.01 per Right or (ii) may be exchanged by the
Company in whole or in part for shares of the Common Stock of the Company,
$0.001 par value, substantially equivalent rights or other consideration as
determined by the Company.
This Rights Certificate, with or without other Rights Certificates,
upon surrender at the office 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 amount of securities as the Rights evidenced by the Rights Certificate
or Rights Certificates surrendered shall have entitled such holder to purchase.
If this Rights Certificate shall be exercised in part, the holder shall be
entitled to receive upon surrender hereof another Rights Certificate or Rights
Certificates for the number of whole Rights not exercised.
No fractional portion of less than one one-thousandth of a Preferred
Share will be issued upon the exercise of any Right or Rights evidenced hereby
but in lieu thereof a cash payment will be made, as provided in the Rights
Agreement.
No holder of this Rights Certificate, as such, shall be entitled to
vote or receive dividends or be deemed for any purpose the holder of the
Preferred Shares or of any other securities of the Company which may at any time
be issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
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
-2-
<PAGE>
as provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Rights
Certificate shall have been exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal. Dated as of November ___, 1998.
ATTEST: TELCOM SEMICONDUCTOR, INC.
____________________________ By: _____________________________________
Robert G. Gargus, Secretary Phillip M. Drayer, Chief Executive Officer
Countersigned:
ChaseMellon Shareholder Services, L.L.C.
as Rights Agent
By:_________________________
Its:________________________
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<PAGE>
FORM OF REVERSE SIDE OF RIGHTS CERTIFICATE
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate)
FOR VALUE RECEIVED ____________________________________ hereby sells,
assigns and transfers unto
_______________________________________________________________________________
(Please print name and address of transferee)
_______________________________________________________________________________
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint __________________________
Attorney, to transfer the within Rights Certificate on the books of the within-
named Company, with full power of substitution.
Dated: _______________, 19____
_________________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by an eligible guarantor institution (a bank,
stockbroker, savings and loan association or credit union with membership in an
approved signature guarantee medallion program) pursuant to Rule 17Ad-15 of the
Securities Exchange Act of 1934.
The undersigned hereby certifies that the Rights evidenced by this Right
Certificate are not beneficially owned by an Acquiring Person or an affiliate or
associate thereof.
_________________________________________
Signature
<PAGE>
CERTIFICATE
-----------
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Rights Certificate [ ] is [ ] is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person, or an
Affiliate or Associate of any such Person (as such terms are defined in the
Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate from
any Person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate of any such Person.
Dated: _______________, 19____
______________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by an eligible guarantor institution (a bank,
stockbroker, savings and loan association or credit union with membership in an
approved signature guarantee medallion program) pursuant to Rule 17Ad-15 of the
Securities Exchange Act of 1934.
The undersigned hereby certifies that the Rights evidenced by this Right
Certificate are not beneficially owned by an Acquiring Person or an affiliate or
associate thereof.
______________________________________
Signature
<PAGE>
FORM OF REVERSE SIDE OF RIGHTS CERTIFICATE -- CONTINUED
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if holder desires to
exercise the Rights Certificate)
To: ChaseMellon Shareholder Services, L.L.C.
235 Montgomery Street, 23rd Floor
San Francisco, CA 94104
Attention: Joseph Thatcher
The undersigned hereby irrevocably elects to exercise
_________________________ Rights represented by this Rights Certificate to
purchase the number of one-thousandths of a Preferred Share issuable upon the
exercise of such Rights and requests that certificates for such number of one-
thousandths of a Preferred Share issued in the name of:
Please insert social security
or other identifying number
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
If such number of Rights shall not be all the Rights evidenced by this Rights
Certificate, a new Rights Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
Dated: ___________________ , 19____
____________________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by an eligible guarantor institution (a bank,
stockbroker, savings and loan association or credit union with membership in an
approved signature guarantee medallion program) pursuant to Rule 17Ad-15 of the
Securities Exchange Act of 1934.
<PAGE>
The undersigned hereby certifies that the Rights evidenced by this Right
Certificate are not beneficially owned by an Acquiring Person or an affiliate or
associate thereof.
____________________________________________
Signature
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<PAGE>
CERTIFICATE
-----------
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not
being exercised by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of any such Person (as such terms are defined in the
Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it [ ]
did [ ] did not acquire the Rights evidenced by this Rights Certificate from any
Person who is, was or subsequently became an Acquiring Person or an Affiliate or
Associate of any such Person.
Dated: _______________, 19____
____________________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by an eligible guarantor institution (a bank,
stockbroker, savings and loan association or credit union with membership in an
approved signature guarantee medallion program) pursuant to Rule 17Ad-15 of the
Securities Exchange Act of 1934.
The undersigned hereby certifies that the Rights evidenced by this Right
Certificate are not beneficially owned by an Acquiring Person or an affiliate or
associate thereof.
____________________________________________
Signature
<PAGE>
FORM OF REVERSE SIDE OF RIGHTS CERTIFICATE -- CONTINUED
NOTICE
------
The signature in the foregoing Forms of Assignment and Election must
conform to the name as written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any change whatsoever.
<PAGE>
EXHIBIT C
---------
STOCKHOLDER RIGHTS PLAN
TELCOM SEMICONDUCTOR, INC.
Summary of Rights
-----------------
Distribution and The Board of Directors has declared a dividend of one
- ----------------
Transfer of Rights; Right for each share of TelCom Semiconductor, Inc.
- -------------------
Rights Certificate: Common Stock outstanding. Prior to the Distribution
- ------------------
Date referred to below, the Rights will be evidenced by
and trade with the certificates for the Common Stock.
After the Distribution Date, TelCom Semiconductor, Inc.
(the "COMPANY") will mail Rights certificates to the
Company's stockholders and the Rights will become
transferable apart from the Common Stock.
Distribution Date: Rights will separate from the Common Stock and become
- -----------------
exercisable following (a) the tenth day (or such later
date as may be determined by the Board of Directors)
after a person or group acquires beneficial ownership of
Fifteen Percent (15%) or more of the Company's Common
Stock or (b) the tenth business day (or such later date
as may be determined by the Board of Directors) after a
person or group announces a tender or exchange offer,
the consummation of which would result in ownership by a
person or group of Fifteen Percent (15%) or more of the
Company's Common Stock.
Preferred Stock After the Distribution Date, each Right will entitle the
- ---------------
Purchasable Upon holder to purchase for Thirty Dollars ($30.00) (the
- ----------------
Exercise of Rights: "EXERCISE PRICE"), a fraction of a share of the
- ------------------
Company's Preferred Stock with economic terms similar to
that of one share of the Company's Common Stock.
Flip-In: If an acquiror (an "ACQUIRING PERSON") obtains Fifteen
- -------
Percent (15%) or more of the Company's Common Stock
(other than pursuant to a tender offer deemed adequate
and in the best interests of the Company and its
stockholders by the Board of Directors (a "PERMITTED
OFFER")), then each Right (other than Rights owned by an
----
Acquiring Person or its affiliates) will entitle the
holder thereof to purchase, for the Exercise Price, a
number of shares of the Company's Common Stock having a
then current market value of twice the Exercise Price.
Flip-Over: If, after an Acquiring Person obtains Fifteen Percent
- ---------
(15%) or more of the Company's Common Stock, (a) the
Company merges into another entity, (b) an acquiring
entity merges into the
<PAGE>
Company or (c) the Company sells more than 50% of the
Company's assets or earning power, then each Right
----
(other than Rights owned by an Acquiring Person or its
affiliates) will entitle the holder thereof to purchase,
for the Exercise Price, a number of shares of Common
Stock of the person engaging in the transaction having a
then current market value of twice the Exercise Price
(unless the transaction satisfies certain conditions and
is consummated with a person who acquired shares
pursuant to a Permitted Offer, in which case the Rights
will expire).
Exchange Provision: At any time after the date an Acquiring Person obtains
- ------------------
Fifteen Percent (15%) or more of the Company's Common
Stock and prior to the acquisition by the Acquiring
Person of 50% of the outstanding Common Stock, the Board
of Directors of the Company may exchange the Rights
(other than Rights owned by the Acquiring Person or its
affiliates), in whole or in part, for shares of Common
Stock of the Company at an exchange ratio of one share
of Common Stock per Right (subject to adjustment).
Redemption of Rights will be redeemable at the Company's option for
- -------------
the Rights: $0.01 per Right at any time on or prior to the tenth day
- ----------
(or such later date as may be determined by the Board of
Directors) after public announcement that a Person has
acquired beneficial ownership of Fifteen Percent (15%)
or more of the Company's Common Stock (the "SHARES
ACQUISITION DATE").
Expiration of The Rights expire on the earliest of (a) November 19,
- -------------
the Rights: 2008, (b) exchange or redemption of the Rights as
- ----------
described above, or (c) consummation of a merger,
consolidation or asset sale resulting in expiration of
the Rights as described above.
Amendment of The terms of the Rights and the Rights Agreement may be
- ------------
Terms of Rights: amended in any respect without the consent of the Rights
- ---------------
holders on or prior to the Distribution Date;
thereafter, the terms of the Rights and the Rights
Agreement may be amended without the consent of the
Rights holders in order to cure any ambiguities or to
make changes which do not adversely affect the interests
of Rights holders (other than the Acquiring Person).
Voting Rights: Rights will not have any voting rights.
- -------------
Anti-Dilution Rights will have the benefit of certain customary anti-
- -------------
Provisions: dilution provisions.
- ----------
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<PAGE>
Taxes: The Rights distribution should not be taxable for
- -----
federal income tax purposes. However, following an
event which renders the Rights exercisable or upon
redemption of the Rights, stockholders may recognize
taxable income.
The foregoing is a summary of certain principal terms of the Stockholder Rights
Plan only and is qualified in its entirety by reference to the detailed terms of
the Rights Agreement dated as of November 19, 1998, between the Company and the
Rights Agent.
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