<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported): June 25, 1998
NORTHWEST AIRLINES CORPORATION
(Exact Name of Registrant as Specified in Charter)
Delaware
(State or Other Jurisdiction of Incorporation)
0-23642
(Commission File Number)
95-4205287
(IRS Employer Identification No.)
2700 Lone Oak Parkway, Eagan Minnesota 55121
(Address of Principal Executive Offices) (Zip Code)
(612) 726-2111
(Registrants' Telephone Number, Including Area Code)
<PAGE>
Item 5. Other Events.
On November 16, 1995, the Board of Directors of Northwest Airlines
Corporation (the "Company") authorized and declared a dividend of one preferred
share purchase right (an "Original Right") for each outstanding share of Class A
Common Stock, par value $.01 per share, of the Company and Class B Common Stock,
par value $.01 per share, of the Company. The dividend was paid to the
stockholders of record as of the close of business on November 27, 1995. On
June 25, 1998 the Board of Directors amended the Original Rights in their
entirety to represent a right (a "Right") to purchase one one-hundredth of a
share of Series D Junior Participating Preferred Stock, par value $.01 per share
(the "Preferred Stock") of the Company at a price of $150 per one one-hundredth
of a share of Preferred Stock (as the same may be adjusted, the "Purchase
Price"). The description and terms of the Rights are set forth in an Amended
and Restated Rights Agreement dated as of June 25, 1998, as the same may be
amended from time to time (the "Rights Agreement"), between the Company and
Norwest Bank Minnesota, N.A., as Rights Agent (the "Rights Agent").
Until the earlier to occur of (i) 10 days following a public
announcement that a person or group of affiliated or associated persons (an
"Acquiring Person") have acquired beneficial ownership of a number of Common
Shares equal to 19% or more (25% or more in the case of certain Institutional
Investors (as such term is defined in the Rights Agreement) of the sum of (a)
the Common Shares then issued and outstanding, (b) all Common Shares issuable
pursuant to the Northwest Airlines Employee Stock Plan (the "Plan") to trusts
established pursuant to the Plan (the "Trusts"), (c) all Common Shares issuable
upon conversion of all the shares of Series C Preferred Stock, par value $.01
per share, issued or issuable to the Trusts pursuant to the Plan, (d) all Common
Shares issuable upon the exercise of all employee stock options issued and
outstanding as of the date of this Agreement and (e) any other Common Shares not
then actually issued and outstanding but which such Person would be deemed to
beneficially own hereunder (together, the "outstanding Common Shares") or (ii)
10 business days (or such later date as may be determined by action of the Board
of Directors prior to such time as any person or group of affiliated persons
becomes an Acquiring Person) following the commencement of, or announcement of
an intention to make, a tender offer or exchange offer the consummation of which
would result in the beneficial ownership by a person or group of a number of
Common Shares equal to 19% or more of the number of outstanding Common Shares
(the earlier of such dates being called the "Distribution Date"), the Rights
will be evidenced, with respect to any of the Common Share certificates
outstanding as of the Record Date, by such Common Share certificate together
with a copy of the Summary of Rights.
The Rights Agreement provides that, until the Distribution Date (or
earlier redemption or expiration of the Rights), the Rights will be transferred
with and only with the Common Shares. Until the Distribution Date (or earlier
redemption or expiration of the Rights), new Common Share certificates issued
after the Record Date upon transfer or new issuances of Common Shares (including
pursuant to the conversion of Series C Preferred Stock) will contain a notation
incorporating the Rights Agreement by reference. Until the Distribution Date
(or earlier redemption or expiration of the Rights), the surrender for transfer
<PAGE>
of any certificates for Common Shares outstanding as of the Record Date, even
without such notation or a copy of this Summary of Rights, will also constitute
the transfer of the Rights associated with the Common Shares represented by such
certificate. As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights ("Right 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 Right Certificates alone will evidence the
Rights.
The Rights are not exercisable until the Distribution Date. The
Rights will expire on November 16, 2005 (the "Final Expiration Date"), unless
the Final Expiration Date is extended or unless the Rights are earlier redeemed
or exchanged by the Company, in each case as described below.
The Purchase Price payable, and the number of shares of Preferred
Stock or other securities or property issuable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution (i) in the event of
a stock dividend on, or a subdivision, combination or reclassification of, the
Preferred Stock, (ii) upon the grant to holders of the Preferred Stock of
certain rights or warrants to subscribe for or purchase Preferred Stock at a
price, or securities convertible into Preferred Stock with a conversion price,
less than the then-current market price of the Preferred Stock or (iii) upon the
distribution to holders of the Preferred Stock of evidences of indebtedness or
assets (excluding regular periodic cash dividends or dividends payable in
Preferred Stock) or of subscription rights or warrants (other than those
referred to above).
The number of outstanding Rights are also subject to adjustment in the
event of a stock split of the Common Shares or a stock dividend on the Common
Shares payable in Common Shares or subdivisions, consolidations or combinations
of the Common Shares occurring, in any such case, prior to the Distribution
Date.
Shares of Preferred Stock purchasable upon exercise of the Rights will
not be redeemable. Each share of Preferred Stock will be entitled, when, as and
if declared, to a minimum preferential quarterly dividend payment of $1 per
share but will be entitled to an aggregate dividend of 100 times the dividend
declared per share of Common Stock. In the event of liquidation, the holders of
the Preferred Stock will be entitled to a minimum preferential liquidation
payment of $100 per share (plus any accrued but unpaid dividends) but will be
entitled to an aggregate payment of 100 times the payment made per share of
Common Stock. Each share of Preferred Stock will have 100 votes, voting
together with the Common Stock. Finally, in the event of any merger,
consolidation or other transaction in which shares of Common Stock are converted
or exchanged, each share of Preferred Stock will be entitled to receive 100
times the amount received per share of Common Stock. These rights are protected
by customary antidilution provisions.
In the event that any person or group of affiliated or associated
persons becomes an Acquiring Person, each holder of a Right, other than Rights
beneficially owned by the Acquiring Person (which will thereupon become void),
will thereafter have the right to receive upon exercise of a Right at the then
current exercise price of the Right, that number
2
<PAGE>
of Common Shares (or one one-hundredths of a share of Preferred Stock) having a
market value of two times the exercise price of the Right.
In the event that, after a person or group has become an Acquiring
Person, the Company is acquired in a merger or other business combination
transaction or 50% or more of its consolidated assets or earning power are sold,
proper provision will be made so that each holder of a Right (other than Rights
beneficially owned by an Acquiring Person which will have become void) will
thereafter have the right to receive, upon the exercise thereof at the then
current exercise price of the Right, that number of shares of common stock of
the person with whom the Company has engaged in the foregoing transaction (or
its parent), which number of shares at the time of such transaction will have a
market value of two times the exercise price of the Right.
At any time after any person or group becomes an Acquiring Person and
prior to the acquisition by such person or group of beneficial ownership of a
number of Common Shares equal to 50% or more of the number of outstanding Common
Shares, the Board of Directors of the Company may exchange the Rights (other
than Rights owned by such person or group which will have become void), in whole
or in part, at an exchange ratio of one Common Share, or one one-hundredth of a
share of Preferred Stock (or of a share of a class or series of the Company's
preferred stock having equivalent rights, preferences and privileges), per Right
(subject to adjustment).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional shares of Preferred Stock will be issued
(other than fractions which are integral multiples of one one-hundredth of a
share of Preferred Stock, which may, at the election of the Company, be
evidenced by depositary receipts) and in lieu thereof, an adjustment in cash
will be made based on the market price of the Preferred Stock on the last
trading day prior to the date of exercise.
At any time prior to the time an Acquiring Person becomes such, the
Board of Directors of the Company may redeem the Rights in whole, but not in
part, at a price of $.01 per Right (the "Redemption Price"). Immediately upon
any redemption of the Rights, the right to exercise the Rights will terminate
and the only right of the holders of Rights will be to receive the Redemption
Price.
For so long as the Rights are then redeemable, the Company may, except
with respect to the redemption price, amend the Rights in any manner. After the
Rights are no longer redeemable the Company may, except with respect to the
redemption price, amend the Rights in any manner that does not adversely affect
the interests of holders of the Rights.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends.
3
<PAGE>
A copy of the Rights Agreement is available free of charge from the
Company. This summary description of the Rights does not purport to be complete
and is qualified in its entirety by reference to the Rights Agreement, as the
same may be amended from time to time.
Item 7. Exhibits.
1. Amended and Restated Rights Agreement, dated as of June 25, 1998,
between the Company and Norwest Bank Minnesota, N.A.
4
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereto duly authorized.
NORTHWEST AIRLINES CORPORATION
DATED: July 14, 1998 By: /s/ Douglas M. Steenland
-------------------------------
Name: Douglas M. Steenland
Title: Executive Vice President,
General Counsel and Secretary
5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
<S> <C>
1 Amended and Restated Rights Agreement, dated as of June 25,
1998, between the Company and Norwest Bank Minnesota, N.A.
</TABLE>
6
<PAGE>
NORTHWEST AIRLINES CORPORATION
and
NORWEST BANK MINNESOTA, N.A.,
as Rights Agent
Amended and Restated Rights Agreement
Dated as of June 25, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Section 1. Certain Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2. Appointment of Rights Agent. . . . . . . . . . . . . . . . . . . . . . 10
Section 3. Issue of Right Certificates. . . . . . . . . . . . . . . . . . . . . . 10
Section 4. Form of Right Certificates . . . . . . . . . . . . . . . . . . . . . . 13
Section 5. Countersignature and Registration. . . . . . . . . . . . . . . . . . . 13
Section 6. Transfer, Split Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 7. Exercise of Rights, Purchase Price; Expiration Date of Rights. . . . . 15
Section 8. Cancellation and Destruction of Right Certificates . . . . . . . . . . 18
Section 9. Availability of Shares of Preferred Stock. . . . . . . . . . . . . . . 18
Section 10. Preferred Stock Record Date . . . . . . . . . . . . . . . . . . . . . 20
Section 11. Adjustment of Purchase Price, Number of Shares and Number of
Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 12. Certificate of Adjusted Purchase Price or Number of Shares. . . . . . 36
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earnings Power. . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 14. Fractional Rights and Fractional Shares . . . . . . . . . . . . . . . 43
Section 15. Rights of Action. . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 16. Agreement of Right Holders. . . . . . . . . . . . . . . . . . . . . . 46
Section 17. Right Certificate Holder Not Deemed a Stockholder . . . . . . . . . . 46
Section 18. Concerning the Rights Agent . . . . . . . . . . . . . . . . . . . . . 47
Section 19. Merger or Consolidation or Change of Name of Rights Agent . . . . . . 48
Section 20. Duties of Rights Agent. . . . . . . . . . . . . . . . . . . . . . . . 49
Section 21. Change of Rights Agent. . . . . . . . . . . . . . . . . . . . . . . . 53
Section 22. Issuance of New Right Certificates. . . . . . . . . . . . . . . . . . 54
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C>
Section 23. Redemption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 24. Exchange. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 25. Notice of Certain Events. . . . . . . . . . . . . . . . . . . . . . . 58
Section 26. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 27. Supplements and Amendments. . . . . . . . . . . . . . . . . . . . . . 60
Section 28. Successors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 29. Benefits of this Agreement. . . . . . . . . . . . . . . . . . . . . . 61
Section 30. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 31. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 32. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 33. Descriptive Headings. . . . . . . . . . . . . . . . . . . . . . . . . 62
</TABLE>
ii
<PAGE>
AMENDED AND RESTATED RIGHTS AGREEMENT
Amended and Restated Rights Agreement, dated as of June 25, 1998,
between Northwest Airlines Corporation, a Delaware corporation (the "Company"),
and Norwest Bank Minnesota, N.A., a New York corporation (the "Rights Agent").
The Company and the Rights Agent have heretofore entered into a Rights
Agreement dated as of November 16, 1995 (the "Original Rights Agreement"). In
connection therewith, the Board of Directors of the Company authorized and
declared a dividend of one preferred share purchase right (the "Original Right")
for each share of Common Stock (as hereinafter defined) of the Company
outstanding as of the close of business on November 27, 1995 (the "Record
Date"), and the Board of Directors further authorized and directed the issuance
of one Original Right (subject to adjustment as provided herein) with respect to
each share of Common Stock that shall become outstanding between the Record Date
and the earliest of the Distribution Date, the Redemption Date and the Final
Expiration Date (as such terms are hereinafter defined), with each Original
Right having the rights assigned to it under the Original Rights Agreement.
Pursuant to Section 27 of the Original Rights Agreement, the parties hereto
hereby amend and restate the Original Rights Agreement to read in its entirety
in the form hereof (as amended and restated, the "Agreement"). The Board of
Directors of the Company has approved the amendment and restatement such that
each Original Right shall be deemed to be a preferred share purchase right (a
"Right") having the rights assigned to it pursuant to this Agreement. The Board
of Directors has also authorized the issuance of one Right (as such number may
be adjusted hereafter pursuant to the terms of this Agreement) with respect to
each Common Share that shall become outstanding between the date of this
Agreement and the earliest to occur of the Distribution Date, the Redemption
<PAGE>
Date or the Final Expiration Date. Each Right shall represent the right to
purchase one one-hundredth (1/100) of a share of Preferred Stock.
Accordingly, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meaning indicated:
(a) "Acquiring Person" shall mean any Person (as such term is
hereinafter defined) who or which shall be the Beneficial Owner (as such
term is hereinafter defined) of a number of Common Shares equal to 19% or
more of the number of Common Shares (as such term is hereinafter defined)
then outstanding (or, if such Person is an Institutional Investor (as such
term is hereinafter defined), 25% or more of the Common Shares then
outstanding), but shall not include an Exempt Person (as such term is
hereinafter defined); provided, however, that if the Board of Directors of
the Company determines in good faith that a Person who would otherwise be
an "Acquiring Person" has become such inadvertently (including, without
limitation, because (i) such Person was unaware that it beneficially owned
a number of Common Shares that would otherwise cause such Person to be a
"Acquiring Person" or (ii) such Person was aware of the extent of its
Beneficial Ownership of Common Shares but had no actual knowledge of the
consequences of such Beneficial Ownership under this Rights Agreement) and
without any intention of changing or influencing control of the Company,
and such Person, as promptly as practicable divested or divests himself or
itself of Beneficial Ownership of a sufficient number of Common Shares so
that such Person would no longer be an Acquiring Person, then such Person
shall not be deemed
2
<PAGE>
to be or to have become an "Acquiring Person" for any purposes of this
Agreement. Notwithstanding the foregoing, (i) if a Person would otherwise
be deemed an Acquiring Person upon the adoption of this Agreement, such
Person will not be deemed an Acquiring Person for any purposes of this
Agreement unless and until such Person acquires Beneficial Ownership of any
additional Common Shares after the adoption of this Agreement, unless upon
the consummation of the acquisition of such additional Common Shares such
Person does not beneficially own a number of Common Shares equal to 19% or
more (25% or more in the case of an Institutional Investor) of the number
of Common Shares then outstanding, and (ii) no Person shall become 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 Common Shares beneficially owned by such Person to
19% or more (25% or more in the case of an Institutional Investor) of the
number of Common Shares then outstanding, provided, however, that if a
Person shall become the Beneficial Owner of a number of Common Shares equal
to 19% or more (25% or more in the case of an Institutional Investor) of
the number of Common Shares then outstanding by reason of such share
acquisitions by the Company and thereafter become the Beneficial Owner of
any additional Common Shares, then such Person shall be deemed to be an
"Acquiring Person" unless upon the consummation of the acquisition of such
additional Common Shares such Person does not beneficially own a number of
Common Shares equal to 19% or more (25% or more in the case of an
Institutional Investor) of the number of Common Shares then outstanding.
Notwithstanding any of the foregoing, in the event that an Institutional
Investor (who
3
<PAGE>
is the Beneficial Owner of more than 19% of the Common Shares then
outstanding at any time after the date hereof) no longer satisfies the
requirements set forth in the definition of "Institutional Investor" set
forth below, then such Person shall promptly as practicable, but in no
event later than 5 Business Days after the Board of Directors determines in
good faith that such Person no longer meets the requirements set forth in
the definition of "Institutional Investor", divest itself of a sufficient
number of Common Shares so that such Person no longer beneficially owns
more than 19% of the Common Shares then outstanding. If such Person does
not divest itself of Common Shares in accordance with the requirements set
forth in the prior sentence, then such Person shall be deemed to be or to
have become an "Acquiring Person" for any purposes of this Agreement. The
phrase "then outstanding", when used with reference to a Person's
Beneficial Ownership of Common Shares of the Company, shall mean the number
of Common Shares then issued and outstanding together with the sum of (i)
all Common Shares issuable pursuant to the Northwest Airlines Employee
Stock Plan (the "Plan") to trusts established pursuant to the Plan (the
"Trusts"), (ii) all Common Shares issuable upon conversion of all the
shares of Series C Preferred Stock, par value $.01 per share, issued or
issuable to the Trusts pursuant to the Plan, (iii) all Common Shares
issuable upon the exercise of all employee stock options issued and
outstanding as of the date of this Agreement and (iv) any other Common
Shares not then actually issued and outstanding but which such Person would
be deemed to beneficially own hereunder.
(b) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations
under the Securities
4
<PAGE>
Exchange Act of 1934, as amended (the "Exchange Act"), as in effect on the
date of this Agreement.
(c) A Person shall be deemed the "Beneficial Owner" of, shall be
deemed to have "Beneficial Ownership" of and shall be deemed to
"beneficially own":
(i) any securities which such Person or any of such Person's
Affiliates or Associates is deemed to beneficially own, directly or
indirectly within the meaning of Rule 13d-3 of the General Rules and
Regulations under the Exchange Act as in effect on the date of this
Agreement;
(ii) any securities 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,
warrants or options, or otherwise; provided, however, that a Person
shall not be deemed the Beneficial Owner of, or to beneficially own,
(x) securities tendered pursuant to a tender or exchange offer made by
or on behalf of such Person or any of such Person's
5
<PAGE>
Affiliates or Associates until such tendered securities are accepted
for purchase, (y) securities which such Person has a right to acquire
on the exercise of Rights at any time prior to the time a Person
becomes an Acquiring Person or (z) securities issuable upon exercise
of Rights from and after the time a Person becomes an Acquiring Person
if such Rights were acquired by such Person or any of such Person's
Affiliates or Associates prior to the Distribution Date or pursuant
to Section 3(a) or Section 22 hereof ("original Rights") or pursuant
to Section 11(i) or Section 11(n) with respect to an adjustment to
original Rights; or (B) the right to vote pursuant to any agreement,
arrangement or understanding; provided, however, that a Person shall
not be deemed the Beneficial Owner of, or to beneficially own, any
security by reason of such agreement, arrangement or understanding 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
promulgated under the Exchange Act and (2) is not also then reportable
on Schedule 13D under the Exchange Act (or any comparable or successor
report);
(iii) any securities which are beneficially owned, directly or
indirectly, by any other Person with which such Person or any of such
Person's Affiliates or Associates has 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) for the purpose of acquiring, holding,
voting (except to the extent contemplated by the proviso to Section
1(c)(ii)(B)) or disposing of any securities of the Company; and
(iv) any securities of the Company convertible into Common Shares
held by such Person.
6
<PAGE>
Notwithstanding any of the foregoing, no Person shall be deemed the
Beneficial Owner of any securities (including any Common Shares) by virtue
of the agreements, arrangements (including any voting arrangements) and
understandings set forth in the Stockholders' Agreement; provided, however,
that a Person will be deemed the Beneficial Owner of any securities
acquired pursuant to any options or rights granted in the Stockholders'
Agreement.
(d) "Business Day" shall mean any day other than a Saturday, a
Sunday, or a day on which banking institutions in the State of New York, or
the State in which the principal office of the Rights Agent is located, are
authorized or obligated by law or executive order to close.
(e) "Class A Common Stock" shall mean the Class A Common Stock, par
value $.01 per share, of the Company.
(f) "Class B Common Stock" shall mean the Class B Common Stock, par
value $.01 per share, of the Company.
(g) "close of business" on any given date shall mean 5:00 P.M., New
York City time, on such date; provided, however, that if such date is not a
Business Day it shall mean 5:00 P.M., New York City time, on the next
succeeding Business Day.
(h) "Common Shares" shall mean the Company's Common Stock, par value
$.01 per share (into which the shares of Class A Common Stock and the
shares of Class B Common Stock have been reclassified on a share for share
basis).
(i) "Common Stock" when used with reference to any Person other than
the Company shall mean the capital stock (or, in the case of an
unincorporated entity, the equivalent equity interest) with the greatest
voting power of such other Person or, if
7
<PAGE>
such other Person is a subsidiary of another Person, the Person or Persons
which ultimately control such first-mentioned Person.
(j) "Distribution Date" shall have the meaning set forth in Section 3
hereof.
(k) "Exempt Person" shall mean (i) the Company, (ii) any Subsidiary
(as such term is hereinafter defined) of the Company, (iii) any employee
benefit plan of the Company or of any Subsidiary of the Company or any
entity or trustee holding Common Shares for or pursuant to the terms of any
such plan or for the purpose of funding any such plan or funding other
employee benefits for employees of the Company or of any Subsidiary of the
Company and (iv) KLM so long as KLM is not the Beneficial Owner of any
Common Shares other than Common Shares which KLM has the option to purchase
pursuant to the Option Agreement. In the event that KLM becomes the
Beneficial Owner of any Common Shares in any manner other than pursuant to
the Option Agreement, KLM shall no longer be deemed an "Exempt Person" for
purposes of this Agreement.
(l) "Final Expiration Date" shall have the meaning set forth in
Section 7 hereof.
(m) "Institutional Investor" shall mean a Person who, as of May 1,
1998, was the Beneficial Owner of 10% or more of the Common Shares then
outstanding and had a Schedule 13G on file with the Securities and Exchange
Commission pursuant to the requirements of Rule 13d-1 under the Exchange
Act with respect to such holdings, so long as such Person (i) is
principally engaged in the business of managing investment funds for
unaffiliated securities investors and, as part of such Person's duties as
agent for fully managed accounts, holds or exercises voting or
8
<PAGE>
dispositive power over shares of Common Stock of the Company, (ii) such
Person acquires Beneficial Ownership of shares of Common Stock of the
Company pursuant to trading activities undertaken in the ordinary course of
such Person's business and not with the purpose nor the effect, either
alone or in concert with any Person, of exercising the power to direct or
cause the direction of the management and policies of the Company or of
otherwise changing or influencing the control of the Company, nor in
connection with or as a participant in any transaction having such purpose
or effect, including any transaction subject to Rule 13d-3(b) of the
Exchange Act, and (iii) if such Person is a Person included in Rule
13d-1(b)(ii) of the Exchange Act, such Person is not obligated to, and does
not, file a Schedule 13D with respect to the securities of the Company.
(n) "KLM" shall mean Koninklijke Luchtvaart Maatschappij N.V., a
Netherlands corporation.
(o) "NASDAQ Stock Market" shall mean the stock market operated by the
National Association of Securities Dealers, Inc.
(p) "Option Agreement" shall mean the Northwest Airlines Corporation
Common Stock Option Agreement, dated as of May 1, 1998, between the Company
and KLM.
(q) "Person" shall mean any individual, firm, corporation or other
entity, and shall include any successor (by merger or otherwise) of such
entity.
(r) "Preferred Stock" shall mean the Series D Junior Participating
Preferred Stock, par value $.01 per share, of the Company having the rights
and preferences set
9
<PAGE>
forth in the Form of Certificate of Designations attached to this Agreement
as Exhibit A.
(s) "Redemption Date" shall have the meaning set forth in Section 7
hereof.
(t) "Securities Act" shall mean the Securities Act of 1933, as
amended.
(u) "Stock Acquisition Date" shall mean the first date of public
announcement (which for purposes of this definition, shall include, without
limitation, a report filed pursuant to Section 13(d) of the Exchange Act)
by the Company or an Acquiring Person that an Acquiring Person has become
such or such earlier date as a majority of the Board of Directors shall
become aware of the existence of an Acquiring Person.
(v) "Stockholders Agreement" shall mean the Second Amended and
Restated Investor Stockholders' Agreement, dated as of December 23, 1993,
as in effect on the date of this Agreement.
(w) "Subsidiary" of any Person shall mean any corporation or other
entity of which securities or other ownership interests having ordinary
voting power sufficient to elect a majority of the board of directors or
other persons performing similar functions are beneficially owned, directly
or indirectly, by such Person, and any corporation or other entity that is
otherwise controlled by such Person.
Section 2. Appointment of Rights Agent. The Company hereby appoints
the Rights Agent to act as agent for the Company and the holders of the Rights
(who, in accordance with Section 3 hereof, shall prior to the Distribution Date
also be the holders of the Common Shares) in accordance with the terms and
conditions hereof, and the Rights
10
<PAGE>
Agent hereby accepts such appointment. The Company may from time to time
appoint such co-Rights Agents as it may deem necessary or desirable.
Section 3. Issue of Right Certificates. (a) Until the earlier of (i)
the tenth day after the Stock Acquisition Date or (ii) the tenth business day
(or such later date as may be determined by action of the Board of Directors
prior to such time as any Person becomes an Acquiring Person) after the date of
the commencement by any Person (other than an Exempt Person) of, or of the first
public announcement of the intention of such Person (other than an Exempt
Person) to commence, a tender or exchange offer the consummation of which would
result in any Person becoming the Beneficial Owner of a number of Common Shares
equal to 19% or more of the number of Common Shares then outstanding (including
any such date which is after the date of this Agreement and prior to the
issuance of the Rights; the earlier of such dates being herein referred to as
the "Distribution Date"), (x) the Rights will be evidenced (subject to the
provisions of Section 3(b) hereof) by the certificates for Common Shares
registered in the names of the holders thereof and not by separate Right
Certificates, and (y) the Rights will be transferable only in connection with
the transfer of the Common Shares. As soon as practicable after the
Distribution Date, the Company will prepare and execute, the Rights Agent will
countersign, and the Company will send or cause to be sent (and the Rights Agent
will, if requested, send) by first-class, insured, postage-prepaid mail, to each
record holder of Common Shares as of the close of business on the Distribution
Date (other than any Acquiring Person or any Associate or Affiliate of an
Acquiring Person), at the address of such holder shown on the records of the
Company, a Right Certificate, in substantially the form of Exhibit B hereto (a
"Right Certificate"), evidencing one Right
11
<PAGE>
(subject to adjustment as provided herein) for each Common Share so held. As of
the Distribution Date, the Rights will be evidenced solely by such Right
Certificates.
(b) Following the Record Date, the Company sent a copy of a Summary
of Rights to Purchase Shares of Preferred Stock (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 (other than any Acquiring Person or any
Associate or Affiliate of any Acquiring Person), at the address of such holder
shown on the records of the Company. 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 the earlier of the Redemption Date or the Final 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) Certificates issued for Common Shares (including, without
limitation, upon conversion of the Series C Preferred Stock, disposition of
Common Shares out of treasury stock or issuance or reissuance of Common Shares
out of authorized but unissued shares) after the date hereof but prior to the
earliest of the Distribution Date, the Redemption Date or the Final Expiration
Date shall have impressed on, printed on, written on or otherwise affixed to
them the following legend:
This certificate also evidences and entitles the holder hereof to
certain rights as set forth in an Amended and Restated Rights
Agreement between Northwest Airlines Corporation and Norwest Bank
Minnesota, N.A., dated as of June 25, 1998 as the same may be
amended from time to time (the "Rights Agreement"), the terms of
which are hereby incorporated herein by reference
12
<PAGE>
and a copy of which is on file at the principal executive offices of
Northwest Airlines Corporation. 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. Northwest Airlines Corporation 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, as set forth in the Rights Agreement, Rights owned by
or transferred to any Person who becomes an Acquiring Person (as
defined in the Rights Agreement) and certain transferees thereof will
become null and void and will no longer be transferable.
With respect to such certificates containing the foregoing legend, until the
Distribution Date, the Rights associated with the Common Shares represented by
such certificates shall be evidenced by such certificates alone, and the
surrender for transfer of any such certificate, except as otherwise provided
herein, shall also constitute the transfer of the Rights associated with the
Common Shares represented thereby. In the event that the Company purchases or
otherwise acquires any Common Shares after the Record Date but prior to the
Distribution Date (including pursuant to the conversion of shares), any Rights
associated with such Common Shares shall be deemed cancelled and retired so that
the Company shall not be entitled to exercise any Rights associated with the
Common Shares which are no longer outstanding.
Notwithstanding this paragraph (c), the omission of a legend shall not
affect the enforceability of any part of this Agreement or the rights of any
holder of the Rights.
Section 4. Form of Right Certificates. The Right Certificates (and
the forms of election to purchase shares and of assignment to be printed on the
reverse thereof) shall be substantially in the form set forth in Exhibit B
hereto and may have such marks of identification or designation and such
legends, summaries or endorsements printed thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this
13
<PAGE>
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 the
NASDAQ Stock Market or of any other stock exchange or automated quotation system
on which the Rights may from time to time be listed, or to conform to usage.
Subject to the provisions of Sections 11, 13 and 22 hereof, the Right
Certificates shall entitle the holders thereof to purchase such number of one
one-hundredths of a share of Preferred Stock as shall be set forth therein at
the price per one one-hundredth of a share of Preferred Stock set forth therein
(the "Purchase Price"), but the number of such one one-hundredths of a share of
Preferred Stock and the Purchase Price shall be subject to adjustment as
provided herein.
Section 5. Countersignature and Registration. (a) The Right
Certificates shall be executed on behalf of the Company by the President, any
of the Vice Presidents, the Treasurer or the Controller of the Company,
either manually or by facsimile signature, shall have affixed thereto the
Company's seal or a facsimile thereof, and shall be attested by the Secretary
or an Assistant Secretary of the Company, either manually or by facsimile
signature. The Right 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 Right
Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the
Company, such Right 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 Right Certificates had not ceased
to be such officer of the Company; and any Right Certificate may be signed on
behalf of the Company by any Person who, at the actual date of the execution
of such Right
14
<PAGE>
Certificate, shall be a proper officer of the Company to sign such Right
Certificate, although at the date of the execution of this 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 an office or agency designated for such purpose, books for
registration and transfer of the Right Certificates issued hereunder. Such
books shall show the names and addresses of the respective holders of the Right
Certificates, the number of Rights evidenced on its face by each of the Right
Certificates and the date of each of the Right Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates. (a)
Subject to the provisions of Sections 7(e), 11(a)(ii) and 14 hereof, at any time
after the close of business on the Distribution Date, and prior to the close of
business on the earlier of the Redemption Date or the Final Expiration Date, any
Right Certificate or Right Certificates may be transferred, split up, combined
or exchanged for another Right Certificate or Right Certificates, entitling the
registered holder to purchase a like number of one one-hundredths of a share of
Preferred Stock as the Right Certificate or Right Certificates surrendered then
entitled such holder to purchase. Any registered holder desiring to transfer,
split up, combine or exchange any Right Certificate or Right Certificates shall
make such request in writing delivered to the Rights Agent, and shall surrender
the Right Certificate or Right Certificates to be transferred, split up,
combined or exchanged at the office or agency of the Rights Agent designated for
such purpose. Thereupon the Rights Agent shall countersign and deliver to the
Person entitled thereto a Right Certificate or Right 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
15
<PAGE>
that may be imposed in connection with any transfer, split up, combination or
exchange of Right Certificates.
(b) Subject to the provisions of Section 11(a)(ii) hereof, at any
time after the Distribution Date and prior to the close of business on the
earlier of the Redemption Date or the Final Expiration Date, upon receipt by the
Company and the Rights Agent of evidence reasonably satisfactory to them of the
loss, theft, destruction or mutilation of a Right Certificate, and, in case of
loss, theft or destruction, of indemnity or security reasonably satisfactory to
them, and, at the Company's request, reimbursement to the Company and the Rights
Agent of all reasonable expenses incidental thereto, and upon surrender to the
Rights Agent and cancellation of the Right Certificate if mutilated, the Company
will make and deliver a new Right Certificate of like tenor to the Rights Agent
for delivery to the registered holder in lieu of the Right Certificate so lost,
stolen, destroyed or mutilated.
Section 7. Exercise of Rights, Purchase Price; Expiration Date of
Rights. (a) Except as otherwise provided herein, the Rights shall become
exercisable on the Distribution Date, and thereafter the registered holder of
any Right Certificate may, subject to Section 11(a)(ii) hereof and except as
otherwise provided herein, exercise the Rights evidenced thereby in whole or in
part upon surrender of the Right Certificate, with the form of election to
purchase on the reverse side thereof duly executed, to the Rights Agent at the
office or agency of the Rights Agent designated for such purpose, together with
payment of the Purchase Price for each one one-hundredth of a share of Preferred
Stock as to which the Rights are exercised, at any time which is both after the
Distribution Date and prior to the earliest of (i) the close of business on
November 16, 2005 (the "Final Expiration Date"), (ii)
16
<PAGE>
the time at which the Rights are redeemed as provided in Section 23 hereof (the
"Redemption Date") or (iii) the time at which such Rights are exchanged as
provided in Section 24 hereof.
(b) The Purchase Price shall be initially $150 for each one
one-hundredth of a share of Preferred Stock purchasable upon the exercise of a
Right. The Purchase Price and the number of one one-hundredths of a share of
Preferred Stock or other securities or property to be acquired upon exercise of
a Right 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) of this Section 7.
(c) Except as otherwise provided herein, upon receipt of a Right
Certificate representing exercisable Rights, with the form of election to
purchase duly executed, accompanied by payment of the aggregate Purchase Price
for the shares of Preferred Stock to be purchased and an amount equal to any
applicable transfer tax required to be paid by the holder of such Right
Certificate in accordance with Section 9 hereof, in cash or by certified check,
cashier's check or money order payable to the order of the Company, the Rights
Agent shall thereupon promptly (i) (A) requisition from any transfer agent of
the Preferred Stock certificates for the number of shares of Preferred Stock to
be purchased and the Company hereby irrevocably authorizes its transfer agent to
comply with all such requests, or (B) requisition from the depositary agent
depositary receipts representing interests in such number of one one-hundredths
of a share of Preferred Stock as are to be purchased (in which case certificates
for the Preferred Stock 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
17
<PAGE>
hereof, (iii) promptly 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 Right Certificate, registered in such name or names as may be
designated by such holder and (iv) when appropriate, after receipt, promptly
deliver such cash to or upon the order of the registered holder of such Right
Certificate.
(d) Except as otherwise provided herein, in case the registered
holder of any Right Certificate shall exercise less than all the Rights
evidenced thereby, a new Right Certificate evidencing Rights equivalent to the
exercisable Rights remaining unexercised shall be issued by the Rights Agent to
the registered holder of such Right Certificate or to his duly authorized
assigns, subject to the provisions of Section 14 hereof.
(e) 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 of Rights upon the occurrence of any
purported transfer or exercise of Rights pursuant to Section 6 hereof or this
Section 7 unless such registered holder shall have (i) completed and signed the
certificate contained in the form of assignment or election to purchase set
forth on the reverse side of the Rights Certificate surrendered for such
transfer or exercise and (ii) provided such additional evidence of the identity
of the Beneficial Owner (or former Beneficial Owner) thereof as the Company
shall reasonably request.
Section 8. Cancellation and Destruction of Right Certificates. All
Right 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 cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Right
Certificates shall be issued in lieu thereof except as expressly
18
<PAGE>
permitted by any of the provisions of this Agreement. The Company shall deliver
to the Rights Agent for cancellation and retirement, and the Rights Agent shall
so cancel and retire, any other Right Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall
deliver all cancelled Right Certificates to the Company.
Section 9. Availability of Shares of Preferred Stock. (a) The
Company covenants and agrees that it will cause to be reserved and kept
available out of its authorized and unissued shares of Preferred Stock or any
shares of Preferred Stock held in its treasury, the number of shares of
Preferred Stock that will be sufficient to permit the exercise in full of all
outstanding Rights.
(b) So long as the shares of Preferred Stock (and, following the time
that a Person becomes an Acquiring Person, Common Shares and other securities)
issuable upon the exercise of Rights may be listed or admitted to trading on the
NASDAQ Stock Market or listed on any other national securities exchange or
quotation system, the Company shall use its best efforts to cause, from and
after such time as the Rights become exercisable, all shares reserved for such
issuance to be listed or admitted to trading on the NASDAQ Stock Market or
listed on any other exchange or quotation system upon official notice of
issuance upon such exercise.
(c) From and after such time as the Rights become exercisable, the
Company shall use its best efforts, if then necessary to permit the issuance of
shares of Preferred Stock (and following the time that a Person first becomes an
Acquiring
19
<PAGE>
Person, Common Shares and other securities) upon the exercise of Rights, to
register and qualify such shares of Preferred Stock (and following the time that
a Person first becomes an Acquiring Person, Common Shares and other securities)
under the Securities Act and any applicable state securities or "Blue Sky" laws
(to the extent exemptions therefrom are not available), cause such registration
statement and qualifications to become effective as soon as possible after such
filing and keep such registration and qualifications effective until the earlier
of the date as of which the Rights are no longer exercisable for such securities
and the Final Expiration Date. The Company may temporarily suspend, for a
period of time not to exceed 90 days, the exercisability of the Rights in order
to prepare and file a registration statement under the Securities Act and permit
it to become effective. Upon any such suspension, the Company shall issue a
public announcement stating that the exercisability of the Rights has been
temporarily suspended, as well as a public announcement at such time as the
suspension is no longer in effect. 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 and until a registration statement under the Securities Act (if
required) shall have been declared effective.
(d) The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all shares of Preferred Stock (and,
following the time that a Person becomes an Acquiring Person, Common Shares and
other securities) delivered upon exercise of Rights shall, at the time of
delivery of the certificates therefor (subject to payment of the Purchase
Price), be duly and validly authorized and issued and fully paid and
nonassessable shares.
(e) The Company further covenants and agrees that it will pay when
due and payable any and all federal and state transfer taxes and charges which
may be payable in respect of the issuance or delivery of the Right Certificates
or of any shares of Preferred
20
<PAGE>
Stock (or Common Shares or other securities) upon the exercise of Rights. The
Company shall not, however, be required to pay any transfer tax which may be
payable in respect of any transfer or delivery of Right Certificates to a Person
other than, or the issuance or delivery of certificates or depositary receipts
for the Preferred Stock (or Common Shares or other securities) in a name other
than that of, the registered holder of the Right Certificate evidencing Rights
surrendered for exercise or to issue or deliver any certificates or depositary
receipts for Preferred Stock (or Common Shares or other securities) upon the
exercise of any Rights until any such tax shall have been paid (any such tax
being payable by that holder of such Right Certificate at the time of surrender)
or until it has been established to the Company's reasonable satisfaction that
no such tax is due.
Section 10. Preferred Stock Record Date. Each Person in whose name
any certificate for Preferred Stock is issued upon the exercise of Rights shall
for all purposes be deemed to have become the holder of record of the shares of
Preferred Stock represented thereby on, and such certificate shall be dated, the
date upon which the Right Certificate evidencing such Rights was duly
surrendered and payment of the Purchase Price (and any applicable transfer
taxes) was made; provided, however, that if the date of such surrender and
payment is a date upon which the Preferred Stock 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 Preferred Stock transfer books of the Company are open. Prior to
the exercise of the Rights evidenced thereby, the holder of a Right Certificate
shall not be entitled to any rights of a holder of Preferred Stock for which the
Rights shall be exercisable, including, without limitation, the
21
<PAGE>
right to vote or to receive dividends or other distributions, and shall not be
entitled to receive any notice of any proceedings of the Company, except as
provided herein.
Section 11. Adjustment of Purchase Price, Number of Shares and Number
of Rights. The Purchase Price, the number of shares of Preferred Stock or other
securities or property purchasable upon exercise of each Right and the number of
Rights outstanding are subject to adjustment from time to time as provided in
this Section 11.
(a)(i) In the event the Company shall at any time after the date of
this Agreement (A) declare a dividend on the Preferred Stock payable
in shares of Preferred Stock, (B) subdivide the outstanding Preferred
Stock, (C) combine the outstanding Preferred Stock into a smaller
number of Preferred Stock or (D) issue any shares of its capital stock
in a reclassification of the Preferred Stock (including any such
reclassification in connection with a consolidation or merger in which
the Company is the continuing or surviving corporation), except as
otherwise provided in this Section 11(a), the Purchase Price in effect
at the time of the record date for such dividend or of the effective
date of such subdivision, combination or reclassification, and the
number and kind of shares of capital stock issuable on such date,
shall be proportionately adjusted so that the holder of any Right
exercised after such time shall be entitled to receive the aggregate
number and kind of shares of capital stock which, if such Right had
been exercised immediately prior to such date and at a time when the
Preferred Stock transfer books of the Company were open, the holder
would have owned upon such exercise and been entitled to receive by
virtue of such dividend, subdivision, combination or reclassification;
provided, however, that in no
22
<PAGE>
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.
(ii) Subject to Section 24 of this Agreement and except as
otherwise provided in this Section 11(a)(ii), in the event any Person
becomes an Acquiring Person, each holder of a Right shall thereafter
have the right to receive, upon exercise thereof at a price equal to
the then current Purchase Price multiplied by the number of one
one-hundredths of a share of Preferred Stock for which a Right is then
exercisable, in accordance with the terms of this Agreement and in
lieu of shares of Preferred Stock, such number of Common Shares (or at
the option of the Company, such number of one one-hundredths of shares
of Preferred Stock) as shall equal the result obtained by (x)
multiplying the then current Purchase Price by the number of one
one-hundredths of a share of Preferred Stock for which a Right is then
exercisable and dividing that product by (y) 50% of the then current
per share market price of the Company's Common Shares (determined
pursuant to Section 11(d) hereof) on the date of the occurrence of
such event; provided, however, that the Purchase Price and the number
of Common Shares so receivable upon exercise of a Right shall
thereafter be subject to further adjustment as appropriate in
accordance with Section 11(f) hereof. Notwithstanding anything in
this Agreement to the contrary, however, from and after the time (the
"invalidation time") when any Person first becomes an Acquiring
Person, any Rights that are beneficially owned by (x) any Acquiring
23
<PAGE>
Person (or any Affiliate or Associate of any Acquiring Person), (y) a
transferee of any Acquiring Person (or any such Affiliate or
Associate) who becomes a transferee after the invalidation time or (z)
a transferee of any Acquiring Person (or any such Affiliate or
Associate) who became a transferee prior to or concurrently with the
invalidation time pursuant to either (I) a transfer from the Acquiring
Person to holders of its equity securities or to any Person with whom
it has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (II) a transfer which the Board of
Directors has determined is part of a plan, arrangement or
understanding which has the purpose or effect of avoiding the
provisions of this paragraph, and subsequent transferees of such
Persons, shall be void without any further action and any holder of
such Rights shall thereafter have no rights whatsoever with respect to
such Rights under any provision of this Agreement. The Company shall
use all reasonable efforts to ensure that the provisions of this
Section 11(a)(ii) are complied with, but shall have no liability to
any holder of Right Certificates or other Person as a result of its
failure to make any determinations with respect to an Acquiring Person
or its Affiliates, Associates or transferees hereunder. From and
after the invalidation time, no Right Certificate shall be issued
pursuant to Section 3 or Section 6 hereof that represents Rights that
are or have become void pursuant to the provisions of this paragraph,
and any Right Certificate delivered to the Rights Agent that
represents Rights that are or have become void pursuant to the
provisions of this paragraph shall be cancelled. From and after the
occurrence of an event specified in Section 13(a) hereof,
24
<PAGE>
any Rights that theretofore have not been exercised pursuant to this
Section 11(a)(ii) shall thereafter be exercisable only in accordance
with Section 13 and not pursuant to this Section 11(a)(ii).
(iii) The Company may at its option substitute for a Common
Share issuable upon the exercise of Rights in accordance with the
foregoing subparagraph (ii) such number or fractions of shares of
Preferred Stock having an aggregate current market value equal to the
current per share market price of Common Shares. In the event that
there shall not be sufficient Common Shares issued but not outstanding
or authorized but unissued to permit the exercise in full of the
Rights in accordance with the foregoing subparagraph (ii), the Board
of Directors shall, to the extent permitted by applicable law and any
material agreements then in effect to which the Company is a party (A)
determine the excess of (1) the value of the Common Shares issuable
upon the exercise of a Right in accordance with the foregoing
subparagraph (ii) (the "Current Value") over (2) the then current
Purchase Price multiplied by the number of one one-hundredths of
shares of Preferred Stock for which a Right was exercisable
immediately prior to the time that the Acquiring Person became such
(such excess, the "Spread"), and (B) with respect to each Right (other
than Rights which have become void pursuant to Section 11(a)(ii)),
make adequate provision to substitute for the Common Shares issuable
in accordance with subparagraph (ii) upon exercise of the Right and
payment of the applicable Purchase Price, (1) cash, (2) a reduction in
the Purchase Price, (3) shares of Preferred Stock or other equity
securities of the Company (including,
25
<PAGE>
without limitation, shares or fractions of shares of preferred stock
which, by virtue of having dividend, voting and liquidation rights
substantially comparable to those of the Common Shares, are deemed in
good faith by the Board of Directors to have substantially the same
value as the Common Shares (such shares of preferred stock and shares
or fractions of shares of preferred stock are hereinafter referred to
as "Common Share equivalents"), (4) debt securities of the Company,
(5) other assets, or (6) any combination of the foregoing, having a
value which, when added to the value of the Common Shares actually
issued upon exercise of such Right, shall have an aggregate value
equal to the Current Value (less the amount of any reduction in the
Purchase Price), where such aggregate value has been determined by the
Board of Directors upon the advice of a nationally recognized
investment banking firm selected in good faith by the Board of
Directors; provided, however, if the Company shall not make adequate
provision to deliver value pursuant to clause (B) above within thirty
(30) days following the date that the Acquiring Person became such
(the "Section 11(a)(ii) Trigger Date"), then the Company shall be
obligated to deliver, to the extent permitted by applicable law and
any material agreements then in effect to which the Company is a
party, upon the surrender for exercise of a Right and without
requiring payment of the Purchase Price, Common Shares (to the extent
available), and then, if necessary, such number or fractions of shares
of Preferred Stock (to the extent available) and then, if necessary,
cash, which shares and/or cash have an aggregate value equal to the
Spread. If, upon the date any Person becomes an Acquiring Person, the
Board
26
<PAGE>
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, then, if the Board of Directors
so elects, the thirty (30) day period set forth above may be extended
to the extent necessary, but not more than ninety (90) days after the
Section 11(a)(ii) Trigger Date, in order that the Company may seek
stockholder approval for the authorization of such additional shares
(such thirty (30) day period, as it may be extended, is herein called
the "Substitution Period"). To the extent that the Company determines
that some action need be taken pursuant to the second and/or third
sentence of this Section 11(a)(iii), the Company (x) shall provide,
subject to Section 11(a)(ii) hereof and the last sentence of this
Section 11(a)(iii) hereof, that such action shall apply uniformly to
all outstanding Rights and (y) may suspend the exercisability of the
Rights until the expiration of the Substitution Period in order to
seek any authorization of additional shares and/or to decide the
appropriate form of distribution to be made pursuant to such second
sentence and to determine the value thereof. In the event of any such
suspension, the Company shall issue a public announcement stating that
the exercisability of the Rights has been temporarily suspended, as
well as a public announcement at such time as the suspension is no
longer in effect. For purposes of this Section 11(a)(iii), the value
of the Common Shares shall be the current per share market price (as
determined pursuant to Section 11(d)(i)) on the Section 11(a)(ii)
Trigger Date and the per share or fractional value of any "Common
Share equivalent" shall be deemed to equal the current per share
market price
27
<PAGE>
of the Common Shares. The Board of Directors of the Company may, but
shall not be required to, establish procedures to allocate the right
to receive Common Shares upon the exercise of the Rights among holders
of Rights pursuant to this Section 11(a)(iii).
(b) In case the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Preferred Stock entitling
them (for a period expiring within 45 calendar days after such record date)
to subscribe for or purchase Preferred Stock (or shares having the same
rights, privileges and preferences as the Preferred Stock ("equivalent
preferred shares")) or securities convertible into Preferred Stock or
equivalent preferred shares at a price per share of Preferred Stock or
equivalent preferred shares (or having a conversion price per share, if a
security convertible into shares of Preferred Stock or equivalent preferred
shares) less than the then current per share market price of the Preferred
Stock (determined pursuant to Section 11(d) hereof) on such record date,
the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to
such record date by a fraction, the numerator of which shall be the number
of shares of Preferred Stock and equivalent preferred shares outstanding on
such record date plus
28
<PAGE>
the number of shares of Preferred Stock and equivalent preferred shares
which the aggregate offering price of the total number of shares of
Preferred Stock and/or equivalent preferred shares so to be offered (and/or
the aggregate initial conversion price of the convertible securities so to
be offered) would purchase at such current market price, and the
denominator of which shall be the number of shares of Preferred Stock and
equivalent preferred shares outstanding on such record date plus the number
of additional shares of Preferred Stock and/or equivalent preferred shares
to be offered for subscription or purchase (or into which the convertible
securities so to be offered are initially convertible); provided, however,
that in no event shall the consideration to be paid upon the exercise of
one Right be less than the aggregate par value of the shares of capital
stock of the Company issuable upon exercise of one Right. In case such
subscription price may be paid in a consideration part or all of which
shall be in a form other than cash, the value of such consideration shall
be as determined in good faith by the Board of Directors of the Company,
whose determination shall be described in a statement filed with the Rights
Agent. Shares of Preferred Stock and equivalent preferred 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 Purchase Price
shall be adjusted to be the Purchase Price which would then be in effect if
such record date had not been fixed.
(c) In case the Company shall fix a record date for the making of a
distribution to all holders of the Preferred Stock (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 or a
dividend payable in Preferred Stock) or subscription rights or warrants
(excluding those referred to in Section 11(b) hereof), the Purchase Price
to be in effect after such record date shall be determined by multiplying
the Purchase Price in effect immediately prior to such record date by a
fraction, the numerator of
29
<PAGE>
which shall be the then current per share market price of the Preferred
Stock (determined pursuant to Section 11(d) hereof) on such record date,
less the fair market value (as determined in good faith by the Board of
Directors of the Company whose determination shall be described in a
statement filed with the Rights Agent) of the portion of the assets or
evidences of indebtedness so to be distributed or of such subscription
rights or warrants applicable to one share of Preferred Stock, and the
denominator of which shall be such current per share market price
(determined pursuant to Section 11(d) hereof) of the Preferred Stock;
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 to be issued 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
Purchase Price shall again be adjusted to be the Purchase Price which would
then be in effect if such record date had not been fixed.
(d)(i) Except as otherwise provided herein, for the purpose of any
computation hereunder, the "current per share market price" of any security
(a "Security" for the purpose of this Section 11(d)(i)) on any date shall
be deemed to be the average of the daily closing prices per share of such
Security for the 30 consecutive Trading Days (as such term is hereinafter
defined) immediately prior to such date; provided, however, that in the
event that the current per share market price of the Security is determined
during a period following the announcement by the issuer of such Security
of (A) a dividend or distribution on such Security payable in shares of
such Security or securities convertible into such shares, or (B) any
30
<PAGE>
subdivision, combination or reclassification of such Security, and prior to
the expiration of 30 Trading Days 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 by the principal
consolidated transaction reporting system with respect to securities listed
or admitted to trading on the NASDAQ Stock Market or, if the Security is
not listed or admitted to trading on the NASDAQ Stock Market, 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
quoted price or, if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market or such other system then in
use, or, if on any such date the Security is not quoted by any organization
in the over-the-counter market, 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. The term
"Trading Day" shall mean a day on which the principal national securities
exchange on which the Security is listed or admitted to trading is open for
the transaction of business or, if the Security is not listed or admitted
to trading on any national securities exchange, a Business Day.
31
<PAGE>
(ii) For the purpose of any computation hereunder, if the Preferred
Stock is publicly traded, the "current per share market price" of the
Preferred Stock shall be determined in accordance with the method set forth
in Section 11(d)(i). If the Preferred Stock is not publicly traded but the
Common Shares are publicly traded, the "current per share market price" of
the Preferred Stock shall be conclusively deemed to be the current per
share market price of the Common Shares as determined pursuant to Section
11(d)(i) multiplied by one hundred (appropriately adjusted to reflect any
stock split, stock dividend or similar transaction occurring after the date
hereof). If neither the Common Shares nor the Preferred Stock is publicly
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.
(e) No adjustment in the Purchase Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in the
Purchase Price; provided, however, that any adjustments which by reason of
this Section 11(e) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under
this Section 11 shall be made to the nearest cent or to the nearest one
ten-thousandth of a share of Preferred Stock or Common Share or other share
or security as the case may be. Notwithstanding the first sentence of this
Section 11(e), any adjustment required by this Section 11 shall be made no
later than the earlier of (i) three years from the date of the transaction
which requires such adjustment or (ii) the date of the expiration of the
right to exercise any Rights.
32
<PAGE>
(f) If as a result of an adjustment made pursuant to Section 11(a)
hereof, the holder of any Right thereafter exercised shall become entitled
to receive any shares of capital stock of the Company other than the
Preferred Stock, thereafter the Purchase Price and the number of such other
shares so receivable upon exercise of a Right shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent
as practicable to the provisions with respect to the Preferred Stock
contained in Sections 11(a), 11(b), 11(c), 11(e), 11(h), 11(i) and 11(m)
and the provisions of Sections 7, 9, 10, 13 and 14 hereof with respect to
the Preferred Stock shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-hundredths
of a share of Preferred Stock purchasable from time to time hereunder upon
exercise of the Rights, all subject to further adjustment as provided
herein.
(h) Unless the Company shall have exercised its election as provided
in Section 11(i), upon each adjustment of the Purchase Price as a result of
the calculations made in Sections 11(b) and (c), each Right outstanding
immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number
of one one-hundredths of a share of Preferred Stock (calculated to the
nearest one ten- thousandth of a share of Preferred Stock) obtained by (i)
multiplying (x) the number of one one-hundredths of a share covered by a
Right immediately prior to such adjustment by (y) the Purchase Price in
effect immediately prior to such adjustment of the Purchase Price and (ii)
dividing the
33
<PAGE>
product so obtained by the Purchase Price in effect immediately after such
adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment of
the Purchase Price to adjust the number of Rights, in substitution for any
adjustment in the number of one one-hundredths of a share of Preferred
Stock 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 one-hundredths of a share of Preferred
Stock for which a Right was exercisable immediately prior to such
adjustment. Each Right held of record prior to such adjustment of the
number of Rights shall become that number of Rights (calculated to the
nearest one ten-thousandth) obtained by dividing the Purchase Price in
effect immediately prior to adjustment of the Purchase Price by the
Purchase Price in effect immediately after adjustment of the Purchase
Price. The Company shall make a public announcement of its election to
adjust the number of Rights, indicating the record date for the adjustment,
and, if known at the time, the amount of the adjustment to be made. This
record date may be the date on which the Purchase Price is adjusted or any
day thereafter, but, if the Right Certificates have been issued, shall be
at least 10 days later than the date of the public announcement. If Right
Certificates have been issued, upon each adjustment of the number of Rights
pursuant to this Section 11(i), the Company may, as promptly as
practicable, cause to be distributed to holders of record of Right
Certificates on such record date Right 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
34
<PAGE>
distributed to such holders of record in substitution and replacement for
the Right Certificates held by such holders prior to the date of
adjustment, and upon surrender thereof, if required by the Company, new
Right Certificates evidencing all the Rights to which such holders shall be
entitled after such adjustment. Right Certificates so to be distributed
shall be issued, executed and countersigned in the manner provided for
herein and shall be registered in the names of the holders of record of
Right Certificates on the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or
the number of one one-hundredths of a share of Preferred Stock issuable
upon the exercise of the Rights, the Right Certificates theretofore and
thereafter issued may continue to express the Purchase Price and the number
of one one-hundredths of a share of Preferred Stock which were expressed in
the initial Right Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below the then par value, if any, of the Preferred Stock
or other shares of capital stock issuable upon exercise of the Rights, the
Company shall take any corporate action which may, in the opinion of its
counsel, be necessary in order that the Company may validly and legally
issue fully paid and nonassessable shares of Preferred Stock or other such
shares at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for
a specified event, the Company may elect to defer until the occurrence of
such event the issuing to the holder of any Right exercised after such
record date of the Preferred Stock and other capital stock or securities of
the Company, if any, issuable upon such exercise over
35
<PAGE>
and above the Preferred Stock and other capital stock or securities of the
Company, if any, issuable upon such exercise on the basis of the Purchase
Price in effect prior to such adjustment; provided, however, that the
Company shall deliver to such holder a due bill or other appropriate
instrument evidencing such holder's right to receive such additional shares
upon the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and
to the extent that it in its sole discretion shall determine to be
advisable in order that any consolidation or subdivision of the Preferred
Stock, issuance wholly for cash of any shares of Preferred Stock at less
than the current market price, issuance wholly for cash or Preferred Stock
or securities which by their terms are convertible into or exchangeable for
Preferred Stock, dividends on Preferred Stock payable in shares of
Preferred Stock or issuance of rights, options or warrants referred to
hereinabove in Section 11(b), hereafter made by the Company to holders of
its Preferred Stock shall not be taxable to such stockholders.
(n) Anything in this Agreement to the contrary notwithstanding, in
the event that at any time after the date of this Agreement and prior to
the Distribution Date, the Company shall (i) declare or pay any dividend on
the Common Shares payable in Common Shares or (ii) effect a subdivision,
combination or consolidation of the Common Shares (by reclassification or
otherwise than by payment of a dividend payable in Common Shares) into a
greater or lesser number of Common Shares, then in any such case, the
number of Rights associated with each Common Share then
36
<PAGE>
outstanding, or issued or delivered thereafter, shall be proportionately
adjusted so that the number of Rights thereafter associated with each
Common Share following any such event shall equal the result obtained by
multiplying the number of Rights associated with each Common Share
immediately prior to such event by a fraction the numerator of which shall
be the total number of Common Shares outstanding immediately prior to the
occurrence of the event and the denominator of which shall be the total
number of Common Shares outstanding immediately following the occurrence of
such event.
(o) The Company agrees that, after the earlier of the Distribution
Date or the Stock Acquisition Date, it will not, except as permitted by
Sections 23, 24 or 27 hereof, take (or permit any Subsidiary to take) any
action if at the time such action is taken it is reasonably foreseeable
that such action will diminish substantially or eliminate the benefits
intended to be afforded by the Rights.
Section 12. Certificate of Adjusted Purchase Price or Number of
Shares. Whenever an adjustment is made as provided in Section 11 or 13 hereof,
the Company shall promptly (a) prepare a certificate setting forth such
adjustment, and a brief statement of the facts accounting for such adjustment,
(b) file with the Rights Agent and with each transfer agent for the Common
Shares or the Preferred Stock a copy of such certificate and (c) mail a brief
summary thereof to each holder of a Right Certificate in accordance with Section
25 hereof (if so required under Section 25 hereof). The Rights Agent shall be
fully protected in relying on any such certificate and on any adjustment therein
contained and shall not be deemed to have knowledge of any such adjustment
unless and until it shall have received such certificate.
37
<PAGE>
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earnings Power. (a) In the event, directly or indirectly, at any time after any
Person has become an Acquiring Person, (i) the Company shall merge with and into
any other Person, (ii) any Person shall consolidate with the Company, or any
Person shall merge with and into the Company and the Company shall be the
continuing or surviving corporation of such 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 of the Company) or cash or any
other property, 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 (other than the Company or one or more of its wholly-owned
Subsidiaries), then upon the first occurrence of such event, proper provision
shall be made so that: (A) each holder of record of a Right (other than Rights
which have become void pursuant to Section 11(a)(ii)) shall thereafter have the
right to receive, upon the exercise thereof at a price equal to the then current
Purchase Price multiplied by the number of one one-hundredths of a share of
Preferred Stock for which a Right was exercisable (whether or not such Right was
then exercisable) immediately prior to the time that any Person first became an
Acquiring Person (each as subsequently adjusted thereafter pursuant to Sections
11(a)(i), 11(b), 11(c), 11(h), 11(i) and 11(m)), in accordance with the terms of
this Agreement and in lieu of Preferred Stock, such number of validly issued,
fully paid and non-assessable and freely tradeable shares of Common Stock of the
Principal Party (as defined herein) not subject to any liens, encumbrances,
rights of first refusal or other adverse claims, as shall be equal to the result
obtained by (1) multiplying the
38
<PAGE>
then current Purchase Price by the number of one one-hundredths of a share of
Preferred Stock for which a Right was exercisable immediately prior to the time
that any Person first became an Acquiring Person (as subsequently adjusted
thereafter pursuant to Sections 11(a)(i), 11(b), 11(c), 11(h), 11(i) and 11(m))
and (2) dividing that product by 50% of the then current per share market price
of the Common Stock of such Principal Party (determined pursuant to Section
11(d)(i) hereof) on the date of consummation of such consolidation, merger, sale
or transfer; provided that the Purchase Price and the number of shares of Common
Stock of such Principal Party issuable upon exercise of each Right shall be
further adjusted as provided in Section 11(f) of this Agreement to reflect any
events occurring in respect of such Principal Party after the date of the such
consolidation, merger, sale or transfer; (B) such Principal Party shall
thereafter be liable for, and shall assume, by virtue of such consolidation,
merger, sale or transfer, 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; and (D) such Principal Party shall take such steps
(including, but not limited to, the reservation of a sufficient number of its
shares of Common Stock in accordance with Section 9 hereof) in connection with
such consummation of any such transaction as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably may
be, in relation to the shares of its Common Stock thereafter deliverable upon
the exercise of the Rights; provided that, 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
Purchase 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
39
<PAGE>
time of such transaction, owned the Common Stock of the Principal Party
receivable upon the exercise of a 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.
(b) "Principal Party" shall mean
(i) in the case of any transaction described in (i) or (ii) of
the first sentence of Section 13(a) hereof: (A) the Person that is the
issuer of the securities into which the shares of Common Shares are
converted in such merger or consolidation, or, if there is more than one
such issuer, the issuer the shares of Common Stock 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 shares of Common Stock 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 (iii) of the
first sentence in 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 each Person that is a
party to such transaction or transactions receives the same 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,
40
<PAGE>
whichever of such Persons as is the issuer of Common Stock 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 Stock of such Person is not at such time or has
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 Stock of which is and has 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
and the Common Stocks of all of such Persons have been so registered, the term
"Principal Party" shall refer to whichever of such Persons is the issuer of
Common Stock 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 consolidation, merger, sale
or transfer referred to in Section 13(a) hereof unless prior thereto the Company
and the Principal Party involved therein shall have executed and delivered to
the Rights Agent an agreement confirming that the requirements of Sections 13(a)
and (b) hereof shall promptly be performed in accordance with their terms and
that such consolidation, merger, sale or transfer of assets shall not result in
a default by the Principal Party under this Agreement as the same shall
41
<PAGE>
have been assumed by the Principal Party pursuant to Sections 13(a) and (b)
hereof and providing that, as soon as practicable after executing such agreement
pursuant to this Section 13, the Principal Party will:
(i) prepare and file a registration statement under the
Securities Act, if necessary, 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 Final
Expiration Date, and similarly comply with applicable state securities
laws;
(ii) use its best efforts, if the Common Stock of the Principal
Party shall be listed or admitted to trading on the NASDAQ Stock Market or
on another national securities exchange, to list or admit to trading (or
continue the listing of) the Rights and the securities purchasable upon
exercise of the Rights on the NASDAQ Stock Market or such securities
exchange, or, if the Common Stock of the Principal Party shall not be
listed or admitted to trading on the NASDAQ Stock Market or a national
securities exchange, to cause the Rights and the securities receivable upon
exercise of the Rights to be reported by such other system then in use;
(iii) deliver to holders of the Rights historical financial
statements for the Principal Party which comply in all respects with the
requirements for registration on Form 10 (or any successor form) under the
Exchange Act; and
42
<PAGE>
(iv) obtain waivers of any rights of first refusal or preemptive
rights in respect of the Common Stock of the Principal Party subject to
purchase upon exercise of outstanding Rights.
(d) In case the Principal Party 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 this Section 13), in connection with, or as a consequence of,
the consummation of a transaction referred to in this Section 13, shares of
Common Stock of such Principal Party at less than the then current market price
per share thereof (determined pursuant to Section 11(d) hereof) or securities
exercisable for, or convertible into, Common Stock of such Principal Party at
less than such then current market price, or (ii) providing for any special
payment, tax or similar provision in connection with the issuance of the Common
Stock of such Principal Party pursuant to the provisions of Section 13, 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 cancelled, 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 a Person first becomes an Acquiring Person, enter into any transaction of
the type contemplated by (i) - (iii) of Section 13(a) hereof if (x) at the time
of or immediately after such
43
<PAGE>
consolidation, merger, sale, transfer or other transaction 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, (y) prior to, simultaneously with or immediately
after such consolidation, merger, sale, transfer of other transaction, the
stockholders of the Person who constitutes, or would constitute, the Principal
Party for purposes of Section 13(a) hereof shall have received a distribution of
Rights previously owned by such Person or any of its Affiliates or Associates or
(z) the form or nature of organization of the Principal Party would preclude or
limit the exercisability of the Rights.
Section 14. Fractional Rights and Fractional Shares. (a) The Company
shall not be required to issue fractions of Rights or to distribute Right
Certificates which evidence fractional Rights. In lieu of such fractional
Rights, there shall be paid to the registered holders of the Right 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. The closing price for any day shall be the last sale price,
regular way, or, in case no such sale takes place on such day, the average of
the closing bid and asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect to securities
listed or admitted to trading on the NASDAQ Stock Market or, if the Rights are
not listed or admitted to trading on the NASDAQ Stock Market, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national secu-
44
<PAGE>
rities exchange on which the Rights are listed or admitted to trading or, if the
Rights are not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by any
system then in use or, if on any such date the Rights are not quoted by any
organization in the over-the-counter market, the average of the closing bid and
asked prices as furnished by a professional market maker making a market in the
Rights selected by the Board of Directors of the Company. If on any such date
no such market maker is making a market in the Rights, the fair value of the
Rights on such date as determined in good faith by the Board of Directors of the
Company shall be used.
(b) The Company shall not be required to issue fractions of Preferred
Stock (other than fractions which are integral multiples of one one-hundredth of
a share of Preferred Stock) upon exercise of the Rights or to distribute
certificates which evidence fractional shares of Preferred Stock (other than
fractions which are integral multiples of one one-hundredth of a share of
Preferred Stock). Interests in fractions of Preferred Stock in integral
multiples of one one-hundredth of a share of Preferred Stock may, at the
election of the Company, be evidenced by depositary receipts, pursuant to an
appropriate agreement between the Company and a depositary selected by it;
provided, that such agreement shall provide that the holders of such depositary
receipts shall have all the rights, privileges and preferences to which they are
entitled as beneficial owners of the Preferred Stock represented by such
depositary receipts. In lieu of fractional shares of Preferred Stock that are
not integral multiples of one one-hundredth of a share of Preferred Stock, the
Company shall pay to the registered holders of Right Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market value of one
45
<PAGE>
share of Preferred Stock. For the purposes of this Section 14(b), the current
market value of a share of Preferred Stock shall be the closing price of a share
of Preferred Stock (as determined pursuant to Section 11(d)(i) hereof) for the
Trading Day immediately prior to the date of such exercise.
(c) The holder of a Right by the acceptance of the Right expressly
waives his right to receive any fractional Rights or any fractional shares upon
exercise of a Right (except as provided above).
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 Right
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares); and any registered holder of any Right 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 Right Certificate (or, prior to the
Distribution Date, of the Common Shares), on his own behalf and for his own
benefit, may enforce, and may institute and maintain any suit, action or
proceeding against the Company to enforce, or otherwise act in respect of, his
right to exercise the Rights evidenced by such Right Certificate (or, prior to
the Distribution Date, such Common Shares) in the manner provided in such Right
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.
46
<PAGE>
Section 16. Agreement of Right 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 Right Certificates are
transferable only on the registry books of the Rights Agent if surrendered
at the office or agency of the Rights Agent designated for such purpose,
duly endorsed or accompanied by a proper instrument of transfer; and
(c) the Company and the Rights Agent may deem and treat the Person in
whose name the Right Certificate (or, prior to the Distribution Date, the
Common Share certificate) is registered as the absolute owner thereof and
of the Rights evidenced thereby (notwithstanding any notations of ownership
or writing on the Right Certificates or the Common Share 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. Right Certificate Holder Not Deemed a Stockholder. No
holder, as such, of any Right Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the Preferred Stock or any
other securities of the Company which may at any time be issuable on the
exercise of the Rights represented thereby, nor shall anything contained herein
or in any Right Certificate be construed to confer upon the holder of any Right
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
47
<PAGE>
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 this Agreement), or to receive dividends or subscription rights, or
otherwise, until the Rights evidenced by such Right Certificate shall have been
exercised in accordance with the provisions hereof.
Section 18. Concerning the Rights Agent. (a) The Company agrees to
pay to the Rights Agent reasonable compensation for all services rendered by it
hereunder and, from time to time, on demand of the Rights Agent, its reasonable
expenses and counsel fees and other disbursements incurred in the administration
and execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability or expense, incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection with the acceptance
and administration of this Agreement, including the costs and expenses of
defending against any claim of liability arising therefrom, directly or
indirectly.
(b) The Rights Agent shall be protected and shall incur no liability
for, or in respect of any action taken, suffered or omitted by it in connection
with, its administration of this Agreement in reliance upon any Right
Certificate or certificate for the Preferred Stock 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 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.
48
<PAGE>
Section 19. Merger or Consolidation or Change of Name of Rights
Agent. (a) Any corporation into which the Rights Agent or any successor Rights
Agent may be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any corporation succeeding to the
stock transfer or corporate trust powers of the Rights Agent or any successor
Rights Agent, shall be the successor to the Rights Agent under this Agreement
without the execution or filing of any paper or any further act on the part of
any of the parties hereto; provided, that such corporation would be eligible for
appointment as a successor Rights Agent under the provisions of Section 21
hereof. In case at the time such successor Rights Agent shall succeed to the
agency created by this Agreement, any of the Right 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 Right
Certificates so countersigned; and in case at that time any of the Right
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Right 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
Right Certificates shall have the full force provided in the Right 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 Right Certificates shall have been countersigned but
not delivered the Rights Agent may adopt the countersignature under its prior
name and deliver Right Certificates so countersigned; and in case at that time
any of the Right Certificates shall not have been countersigned, the Rights
Agent may countersign such Right Certificates either in
49
<PAGE>
its prior name or in its changed name and in all such cases such Right
Certificates shall have the full force provided in the Right 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 Right Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action
taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement
the Rights Agent shall deem it necessary or desirable that any fact or
matter 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 President,
the Chief Financial Officer or the Secretary of the Company and delivered
to the Rights Agent; and such certificate shall be full authorization to
the Rights Agent for any action taken or suffered in good faith by it under
the provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the Company and any
other Person only for its own negligence, bad faith or wilful 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
Right Certificates
50
<PAGE>
(except its countersignature thereof) or be required to verify the same,
but all such statements and recitals are and shall be deemed to have been
made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect
of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Right 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 Right
Certificate; nor shall it be responsible for any change in the
exercisability of the Rights (including the Rights becoming void pursuant
to Section 11(a)(ii) hereof) or any adjustment in the terms of the Rights
(including the manner, method or amount thereof) provided for in Sections
3, 11, 13, 23 and 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 Right Certificates after receipt 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
shares of Preferred Stock or other securities to be issued pursuant to this
Agreement or any Right Certificate or as to whether any shares of Preferred
Stock or other securities 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
51
<PAGE>
the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from
any person reasonably believed by the Rights Agent to be one of the
President, the Chief Financial Officer or the Secretary of the Company, and
to apply to such officers for advice or instructions in connection with its
duties, and it shall not be liable for any action taken or suffered by it
in good faith in accordance with instructions of any such officer or for
any delay in acting while waiting for those instructions. Any application
by the Rights Agent for written instructions from the Company may, at the
option of the Rights Agent, set forth in writing any action proposed to be
taken or omitted by the Rights Agent under this Agreement and the date on
and/or after which such action shall be taken or such omission shall be
effective. The Rights Agent shall not be liable for any action taken by,
or omission of, the Rights Agent in accordance with a proposal included in
any such application on or after the date specified in such application
(which date shall not be less than five Business Days after the date 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 or omitted.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or
other securities of the Company or become pecuniarily interested in any
transaction in which the Company
52
<PAGE>
may be interested, or contract with or lend money to the Company or
otherwise act as fully and freely as though it were not Rights Agent under
this Agreement. Nothing herein shall preclude the Rights Agent from acting
in any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or
by or through its attorneys or agents, and the Rights Agent shall not be
answerable or accountable for any act, default, neglect or misconduct of
any such attorneys or agents or for any loss to the Company resulting from
any such act, default, neglect or misconduct, provided reasonable care was
exercised in the selection and continued employment thereof.
(j) If, with respect to any Rights Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate contained in the
form of assignment or the form of election to purchase set forth on the
reverse thereof, as the case may be, has not been completed to certify the
holder is not an Acquiring Person (or an Affiliate or Associate thereof),
the Rights Agent shall not take any further action with respect to such
requested exercise or transfer without first consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon 30 days' notice in writing mailed to the Company and to each
transfer agent of the Common Shares or Preferred Stock by registered or
certified mail, and, following the Distribution Date, to the holders of the
Right Certificates by first-class mail. The Company may remove the Rights Agent
or any successor Rights Agent upon 30 days' notice in writing, mailed to the
53
<PAGE>
Rights Agent or successor Rights Agent, as the case may be, and to each transfer
agent of the Common Shares or Preferred Stock by registered or certified mail,
and, following the Distribution Date, to the holders of the Right 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 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 Right Certificate (who shall,
with such notice, submit his Right Certificate for inspection by the Company),
then the registered holder of any Right Certificate may apply to any court of
competent jurisdiction for the appointment of a new Rights Agent. Any successor
Rights Agent, whether appointed by the Company or by such a court, shall be a
corporation organized and doing business under the laws of the United States or
any State thereof, which is authorized under such laws to exercise corporate
trust or stock transfer 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. After
appointment, the successor Rights Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as Rights
Agent without further act or deed; but the predecessor Rights Agent shall
deliver and transfer to the successor Rights Agent any property at the time held
by it hereunder, and execute and deliver any further assurance, conveyance, act
or deed necessary for the purpose. Not later than the effective date of any
such appointment the Company shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Common Shares or
Preferred Stock, and, following the Distribution Date, mail a notice thereof in
writing to the
54
<PAGE>
registered holders of the Right 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 Right Certificates. Notwithstanding any
of the provisions of this Agreement or of the Rights to the contrary, the
Company may, at its option, issue new Right Certificates evidencing Rights in
such forms as may be approved by its Board of Directors to reflect any
adjustment or change in the Purchase Price and the number or kind or class of
shares or other securities or property purchasable under the Right 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 earlier of the Redemption Date and the Final Expiration
Date, the Company may with respect to such Common Shares so issued or sold
pursuant to (i) the exercise of stock options, (ii) under any employee plan or
arrangement, (iii) upon the exercise, conversion or exchange of securities,
notes or debentures issued by the Company or (iv) a contractual obligation of
the Company in each case existing prior to the Distribution Date, issue Rights
Certificates representing the appropriate number of Rights in connection with
such issuance or sale.
Section 23. Redemption. (a) The Board of Directors of the Company
may, at any time prior to such time as any Person first becomes an Acquiring
Person, redeem all but not less than all the then outstanding Rights at a
redemption price of $.01 per Right, appropriately adjusted to reflect any stock
split, stock dividend or similar transaction occurring after the date hereof
(the redemption price being hereinafter referred to as the "Redemption
55
<PAGE>
Price"). The redemption of the Rights 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 Company may, at its option, pay the Redemption
Price in cash, Common Shares (based on the current market price of the Common
Shares at the time of redemption) or any other form of consideration deemed
appropriate by the Board of Directors.
(b) Immediately upon the action of the Board of Directors ordering
the redemption of the Rights pursuant to paragraph (a) of this Section 23 (or at
such later time as the Board of Directors may establish for the effectiveness of
such redemption), and without any further action and without any notice, the
right to exercise the Rights will terminate and the only right thereafter of the
holders of Rights shall be to receive the Redemption Price. The Company shall
promptly give public notice of any such redemption; provided, however, that the
failure to give, or any defect in, any such notice shall not affect the validity
of such redemption. Within 10 days after such action of the Board of Directors
ordering the redemption of the Rights (or such later time as the Board of
Directors may establish for the effectiveness of such redemption), the Company
shall mail a notice of redemption to all the holders of the then outstanding
Rights at their last addresses as they appear upon the registry books of the
Rights Agent or, prior to the Distribution Date, on the registry books of the
transfer agent for the Common 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 shall state the method by which the
payment of the Redemption Price will be made.
Section 24. Exchange. (a) The Board of Directors of the Company,
may, at its option, at any time after any Person first becomes an Acquiring
Person, exchange all or
56
<PAGE>
part of the then outstanding and exercisable Rights (which shall not include
Rights that have become void pursuant to the provisions of Section 11(a)(ii)
hereof) for Common Shares (or, at the Company's option, Preferred Stock) at an
exchange ratio of one Common Share (or one one-hundredth of a share of Preferred
Stock) per Right, (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 (1) after any Person (other
than an Exempt Person), together with all Affiliates and Associates of such
Person, becomes the Beneficial Owner of a number of Common Shares equal to 50%
or more of the number of Common Shares then outstanding or (2) after the
occurrence of an event specified in Section 13(a) hereof.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the exchange of any Rights pursuant to paragraph (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 promptly give public notice of any such exchange; provided,
however, that the failure to give, or any defect in, such notice shall not
affect the validity of such exchange. The Company shall promptly mail a notice
of any such exchange to all of the holders of the Rights so exchanged 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
57
<PAGE>
will be exchanged. Any partial exchange shall be effected pro rata based on the
number of Rights (other than Rights which have become void pursuant to the
provisions of Section 11(a)(ii) hereof) held by each holder of Rights.
(c) In 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 this Section 24, the Company may, in
its discretion, take such action as may be necessary to authorize additional
Common Shares for issuance upon exchange of the Rights. In the event that the
Company shall determine not to take such action or shall, after good faith
effort, be unable to take such action as may be necessary to authorize such
additional Common Shares, the Company shall substitute, to the extent of such
insufficiency, for each Common Share that would otherwise be issuable upon
exchange of a Right, a number of shares of Preferred Stock or fractions thereof
(or equivalent preferred shares as such term is defined in Section 11(b)) having
an aggregate current per share market price (determined pursuant to Section
11(d) hereof) equal to the current per share market price of Common Shares
(determined pursuant to Section 11(d) hereof) as of the date of issuance of such
shares of Preferred Stock or fractions thereof (or equivalent preferred shares).
(d) The Company shall not, in connection with any exchange pursuant
to this Section 24, be required to issue fractions of Common Shares or to
distribute certificates which evidence fractional Common Shares. In lieu of
such fractional Common Shares, the Company shall pay to the registered holders
of the Right 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. For the purposes of this
paragraph (d), the current market value of a whole Common Share shall be the
closing
58
<PAGE>
price of a Common Share (as determined pursuant to the second sentence of
Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of
exchange pursuant to this Section 24.
Section 25. Notice of Certain Events. (a) In case the Company shall
at any time after the earlier of the Distribution Date or the Stock Acquisition
Date propose (i) to pay any dividend payable in stock of any class to the
holders of its Preferred Stock or to make any other distribution to the holders
of its Preferred Stock (other than a regular quarterly cash dividend), (ii) to
offer to the holders of its Preferred Stock rights or warrants to subscribe for
or to purchase any additional shares of Preferred Stock or shares of stock of
any class or any other securities, rights or options, (iii) to effect any
reclassification of its Preferred Stock (other than a reclassification involving
only the subdivision of outstanding Preferred Stock), (iv) to effect the
liquidation, dissolution or winding up of the Company, or (v) to declare or pay
any dividend on the Common Shares payable in Common Shares or to effect a
subdivision, combination or consolidation of the Common Shares (by
reclassification or otherwise than by payment of dividends in Common Shares),
then, in each such case, the Company shall give to each holder of a Right
Certificate, in accordance with Section 26 hereof, a notice of such proposed
action, which shall specify the record date for the purposes of such stock
dividend, or distribution of rights or warrants, or the date on which such
liquidation, dissolution or winding up is to take place and the date of
participation therein by the holders of the Common Shares and/or Preferred
Stock, if any such date is to be fixed, and such notice shall be so given in the
case of any action covered by clause (i) or (ii) above at least 10 days prior to
the record date for determining holders of the Preferred Stock for purposes of
such action, and in the case of any such other action, at least 10 days prior to
the
59
<PAGE>
date of the taking of such proposed action or the date of participation therein
by the holders of the Common Shares and/or Preferred Stock, whichever shall be
the earlier.
(b) In case any event described in Section 11(a)(ii) or Section 13
shall occur then the Company shall as soon as practicable thereafter give to
each holder of a Right Certificate (or if occurring prior to the Distribution
Date, the holders of the Common Shares) in accordance with Section 26 hereof, a
notice of the occurrence of such event, which notice shall describe such event
and the consequences of such event to holders of Rights under Section 11(a)(ii)
and Section 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 Right
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:
Northwest Airlines Corporation
2700 Lone Oak Parkway
Eagan, Minnesota 55121
Attention: Secretary
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
Right 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:
Norwest Bank Minnesota, N.A.
161 North Concord Exchange
P.O. Box 738
Eagan, Minnesota 55121
Attention: Secretary
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate shall be
sufficiently given or made if
60
<PAGE>
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. Except as otherwise provided
in this Section 27, for so long as the Rights are then redeemable, the Company
may in its sole and absolute discretion, and the Rights Agent shall if the
Company so directs, supplement or amend any provision of this Agreement in any
respect without the approval of any holders of the Rights. At any time when the
Rights are no longer redeemable, except as otherwise provided in this Section
27, the Company may, and the Rights Agent shall, if the Company so directs,
supplement or amend this Agreement without the approval of any holders of Rights
Certificates 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)
change or supplement the provisions hereunder in any manner which the Company
may deem necessary or desirable; provided that no such supplement or amendment
shall adversely affect the interests of the holders of Rights as such (other
than an Acquiring Person or an Affiliate or Associate of an Acquiring Person),
and no such amendment may cause the rights again to become redeemable or cause
the Agreement again to become amendable other than in accordance with this
sentence. Notwithstanding anything contained in this Agreement to the contrary,
no supplement or amendment shall be made that decreases the Redemption Price.
Upon the delivery of a certificate from an appropriate officer of the Company
which states that the proposed supplement or amendment is in compliance with the
terms of this Section 27, the Rights Agent shall execute such supplement or
amendment.
61
<PAGE>
Section 28. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 29. 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 Right 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 Right Certificates (and, prior to the Distribution Date, the Common Shares).
Section 30. Severability. If any term, provision, covenant or
restriction of this Agreement or applicable to 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.
Section 31. Governing Law. This Agreement and each Right 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 32. 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.
62
<PAGE>
Section 33. 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.
63
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and attested, all as of the day and year first above written.
Attest: NORTHWEST AIRLINES CORPORATION
By /s/ Michael L. Miller By /s/ Douglas M. Steenland
------------------------ -------------------------------
Name: Michael L. Miller Name: Douglas M. Steenland
Title: Associate General Title: Executive Vice President,
Counsel and Asst. Secretary General Counsel and Secretary
NORWEST BANK MINNESOTA, N.A.
Attest:
By /s/ Susan Roeder By /s/ Kenneth P. Swanson
------------------------ -------------------------------
Name: Susan Roeder Name: Kenneth P. Swanson
Title: Asst. Secretary Title: Asst. Vice President
64
<PAGE>
Exhibit A
FORM
OF
CERTIFICATE OF DESIGNATIONS
OF
SERIES D JUNIOR PARTICIPATING PREFERRED STOCK
OF
NORTHWEST AIRLINES CORPORATION
(Pursuant to Section 151 of the
General Corporation Law of the State of Delaware)
___________________
Northwest Airlines Corporation, a corporation organized and existing
under the General Corporation Law of the State of Delaware (hereinafter called
the "Company"), hereby certifies that the following resolution was duly adopted
by the Board of Directors of the Company as required by Section 151 of the
General Corporation Law of the State of Delaware at a meeting duly called and
held on November 16, 1995:
RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of the Company (hereinafter called the "Board of Directors"
or the "Board") in accordance with the provisions of the Company's Certificate
of Incorporation, as amended to date (hereinafter called the "Certificate of
Incorporation"), the Board of Directors hereby creates a series of Preferred
Stock, par value $.01 per share (the "Preferred Stock"), of the Company and
hereby states the designation and number of shares, and fixes the relative
rights, powers and preferences thereof, and the limitations thereof, as follows:
Section 1. Designation and Amount. The shares of such series shall
be designated as "Series D Junior Participating Preferred Stock" (the "Series D
Preferred Stock") and the number of shares constituting the Series D Preferred
Stock shall be 3,000,000. Such number of shares may be increased or decreased
by resolution of the Board of Directors; provided, that no decrease shall reduce
the number of shares of Series D Preferred Stock to a number less than the
number of shares then outstanding plus the number of shares reserved for
issuance upon the exercise of outstanding options, rights or warrants or upon
the conversion of any outstanding securities issued by the Company convertible
into Series D Preferred Stock.
A-1
<PAGE>
Section 2. Dividends and Distributions.
(A) Subject to the rights of the holders of any shares of any series
of Preferred Stock of the Company (the "Preferred Stock") (or any similar stock)
ranking prior and superior to the Series D Preferred Stock with respect to
dividends, the holders of shares of Series D Preferred Stock, in preference to
the holders of Common Stock, par value $.01 per share of the Company (the
"Common Shares") and of any other stock of the Company ranking junior to the
Series D 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 "Dividend
Payment Date"), commencing on the first Dividend Payment Date after the first
issuance of a share or fraction of a share of Series D Preferred Stock, in an
amount per share (rounded to the nearest cent) equal to the greater of (a) $1 or
(b) subject to the provision for adjustment hereinafter set forth, 100 times the
aggregate per share amount of all cash dividends, and 100 times the aggregate
per share amount (payable in kind) of all non-cash dividends or other
distributions other than a dividend payable in Common Shares, declared on the
Common Shares since the immediately preceding Dividend Payment Date or, with
respect to the first Dividend Payment Date, since the first issuance of any
share or fraction of a share of Series D Preferred Stock. In the event the
Company shall at any time after November 16, 1995, declare or pay any dividend
on the Common Shares payable in Common Shares, or effect a subdivision or
combination or consolidation of the outstanding Common Shares (by
reclassification or otherwise than by payment of a dividend in Common Shares)
into a greater or lesser number of Common Shares, then in each such case the
amount to which holders of shares of Series D Preferred Stock were entitled
immediately prior to such event under clause (b) of the preceding sentence shall
be adjusted by multiplying such amount by a fraction, the numerator of which is
the number of Common Shares outstanding immediately after such event and the
denominator of which is the number of Common Shares that were outstanding
immediately prior to such event.
(B) The Company shall declare a dividend or distribution on the
Series D Preferred Stock as provided in paragraph (A) of this Section
immediately after it declares a dividend or distribution on the Common Shares
(other than a dividend payable in shares of Common Shares); provided that, in
the event no dividend or distribution shall have been declared on the Common
Shares during the period between any Dividend Payment Date and the next
subsequent Dividend Payment Date, a dividend of $1 per share on the Series D
Preferred Stock shall nevertheless be payable, when, as and if declared, on such
subsequent Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative, whether or not
earned or declared, on outstanding shares of Series D Preferred Stock from the
Dividend Payment Date next preceding the date of issue of such shares, unless
the date of issue of such shares is prior to the record date for the first
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
Dividend Payment Date or is a date after the record date for the determination
of
A-2
<PAGE>
holders of shares of Series D Preferred Stock entitled to receive a quarterly
dividend and before such Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such Dividend Payment
Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on
the shares of Series D 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 D Preferred Stock entitled to receive payment of
a dividend or distribution declared thereon, which record date shall be not more
than 60 days prior to the date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series D
Preferred Stock shall have the following voting rights;
(A) Subject to the provision for adjustment hereinafter set forth and
except as otherwise provided in the Certificate of Incorporation or
required by law, each share of Series D Preferred Stock shall entitle the
holder thereof to 100 votes on all matters upon which the holders of the
Common Shares of the Company are entitled to vote. In the event the
Company shall at any time after November 16, 1995, declare or pay any
dividend on the Common Shares payable in Common Shares, or effect a
subdivision or combination or consolidation of the outstanding Common
Shares (by reclassification or otherwise than by payment of a dividend in
Common Shares) into a greater or lesser number of Common Shares, then in
each such case the number of votes per share to which holders of shares of
Series D Preferred Stock were entitled immediately prior to such event
shall be adjusted by multiplying such number by a fraction, the numerator
of which is the number of Common Shares outstanding immediately after such
event and the denominator of which is the number of Common Shares that were
outstanding immediately prior to such event.
(B) Except as otherwise provided herein, in the Certificate of
Incorporation or in any other Certificate of Designations creating a series
of Preferred Stock or any similar stock, and except as otherwise required
by law, the holders of shares of Series D Preferred Stock and the holders
of Common Shares and any other capital stock of the Company having general
voting rights shall vote together as one class on all matters submitted to
a vote of stockholders of the Company.
(C) Except as set forth herein, or as otherwise provided by law,
holders of Series D Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent they are entitled
to vote with holders of Common Shares as set forth herein) for taking any
corporate action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series D Preferred Stock as provided in Section 2 are in
arrears, thereafter and
A-3
<PAGE>
until all accrued and unpaid dividends and distributions, whether or not
earned or declared, on shares of Series D Preferred Stock outstanding shall
have been paid in full, the Company shall not:
(i) declare or pay dividends, or make any other distributions, on
any shares of stock ranking junior (as to dividends) to the Series D
Preferred Stock;
(ii) declare or pay dividends, or make any other distributions,
on any shares of stock ranking on a parity (as to dividends) with the
Series D Preferred Stock, except dividends paid ratably on the Series
D 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 junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series D Preferred
Stock, provided that the Company may at any time redeem, purchase or
otherwise acquire shares of any such junior stock in exchange for
shares of any stock of the Company ranking junior (as to dividends and
upon dissolution, liquidation or winding up) to the Series D Preferred
Stock or rights, warrants or options to acquire such junior stock;
(iv) redeem or purchase or otherwise acquire for consideration
any shares of Series D Preferred Stock, or any shares of stock ranking
on a parity (either as to dividends or upon liquidation, dissolution
or winding up) with the Series D Preferred Stock, except in accordance
with a purchase offer made in writing or by publication (as determined
by the Board of Directors) to all holders of such shares upon such
terms as the Board of Directors, after consideration of the respective
annual dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will
result in fair and equitable treatment among the respective series or
classes.
(B) The Company shall not permit any subsidiary of the Company to
purchase or otherwise acquire for consideration any shares of stock of the
Company unless the Company could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series D Preferred Stock
purchased or otherwise acquired by the Company in any manner whatsoever shall be
retired and cancelled promptly after the acquisition thereof.
Section 6. Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the Company, no distribution shall be
made (A) to the holders of the Common Shares or of shares of any other stock of
the Company ranking junior, upon liquidation, dissolution or winding up, to the
Series D Preferred Stock unless, prior thereto, the holders of shares of Series
D Preferred Stock shall have received $100 per share, plus an
A-4
<PAGE>
amount equal to accrued and unpaid dividends and distributions thereon, whether
or not earned or declared, to the date of such payment, provided that the
holders of shares of Series D Preferred Stock shall be entitled to receive an
aggregate amount per share, subject to the provision for adjustment hereinafter
set forth, equal to 100 times the aggregate amount to be distributed per share
to holders of Common Shares, or (B) to the holders of shares of stock ranking on
a parity upon liquidation, dissolution or winding up with the Series D Preferred
Stock, except distributions made ratably on the Series D Preferred Stock and all
such parity stock in proportion to the total amounts to which the holders of all
such shares are entitled upon such liquidation, dissolution or winding up. In
the event the Company shall at any time after November 16, 1995 declare or pay
any dividend on the Common Shares payable in Common Shares, or effect a
subdivision or combination or consolidation of the outstanding Common Shares (by
reclassification or otherwise than by payment of a dividend in Common Shares)
into a greater or lesser number of Common Shares, then in each such case the
aggregate amount to which holders of shares of Series D Preferred Stock were
entitled immediately prior to such event under the proviso in clause (A) of the
preceding sentence shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of Common Shares outstanding immediately
after such event and the denominator of which is the number of Common Shares
that were outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the Company shall
enter into any consolidation, merger, combination or other transaction in which
the Common Shares are converted into, exchanged for or changed into other stock
or securities, cash and/or any other property, then in any such case each share
of Series D Preferred Stock shall at the same time be similarly converted into,
exchanged for or changed into an amount per share (subject to the provision for
adjustment hereinafter set forth) equal to 100 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 Common Share is converted, exchanged or
converted. In the event the Company shall at any time after November 16, 1995
declare or pay any dividend on the Common Shares payable in Common Shares, or
effect a subdivision or combination or consolidation of the outstanding Common
Shares (by reclassification or otherwise than by payment of a dividend in Common
Shares) into a greater or lesser number of Common Shares, then in each such case
the amount set forth in the preceding sentence with respect to the conversion,
exchange or change of shares of Series D Preferred Stock shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
Common Shares outstanding immediately after such event and the denominator of
which is the number of Common Shares that were outstanding immediately prior to
such event.
Section 8. No Redemption. The shares of Series D Preferred Stock
shall not be redeemable from any holder.
Section 9. Rank. The Series D Preferred Stock shall rank, with
respect to the payment of dividends and the distribution of assets upon
liquidation, dissolution or winding up of the Company, junior to all other
series of Preferred Stock and senior to the Common Shares.
A-5
<PAGE>
Section 10. Amendment. If any proposed amendment to the Certificate
of Incorporation (including this Certificate of Designations) would alter,
change or repeal any of the preferences, powers or special rights given to the
Series D Preferred Stock so as to affect the Series D Preferred Stock adversely,
then the holders of the Series D Preferred Stock shall be entitled to vote
separately as a class upon such amendment, and the affirmative vote of
two-thirds of the outstanding shares of the Series D Preferred Stock, voting
separately as a class, shall be necessary for the adoption thereof, in addition
to such other vote as may be required by the General Corporation Law of the
State of Delaware.
A-6
<PAGE>
IN WITNESS WHEREOF, this Certificate of Designations is executed on
behalf of the Company by its President and Chief Executive Officer and attested
by its Secretary this ___ day of _________, 1998.
________________________________________
President and Chief Executive Officer
Attest:
______________________
Secretary
A-7
<PAGE>
Exhibit B
Form of Right Certificate
Certificate No. R- ____ ___ Rights
NOT EXERCISABLE AFTER NOVEMBER 16, 2005 OR EARLIER IF
REDEMPTION OR EXCHANGE OCCURS. THE RIGHTS ARE
SUBJECT TO REDEMPTION AT $.01 PER RIGHT AND TO EXCHANGE
ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS OWNED BY OR
TRANSFERRED TO ANY PERSON WHO BECOMES AN ACQUIRING PERSON (AS DEFINED IN
THE RIGHTS AGREEMENT) AND CERTAIN TRANSFEREES THEREOF WILL BECOME NULL AND
VOID AND WILL NO LONGER BE TRANSFERABLE.
Right Certificate
NORTHWEST AIRLINES CORPORATION
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
Amended and Restated Rights Agreement, dated as of June 25, 1998, as the same
may be amended from time to time (the "Rights Agreement"), between Northwest
Airlines Corporation, a Delaware corporation (the "Company"), and Norwest Bank
Minnesota, N.A. (the "Rights Agent"), to purchase from the Company at any time
after the Distribution Date (as such term is defined in the Rights Agreement)
and prior to 5:00 P.M., New York City time, on November 16, 2005 at the office
or agency of the Rights Agent designated for such purpose, or of its successor
as Rights Agent, one one-hundredth of a fully paid non-assessable share of
Series D Junior Participating Preferred Stock, par value $.01 per share (the
"Preferred Stock"), of the Company, at a purchase price of $150 per one
one-hundredth of a share of Preferred Stock (the "Purchase Price"), upon
presentation and surrender of this Right Certificate with the Form of Election
to Purchase duly executed. The number of Rights evidenced by this Rights
Certificate (and the number of one one-hundredths of a share of Preferred Stock
which may be purchased upon exercise hereof) set forth above, and the Purchase
Price set forth above, are the number and Purchase Price as of November 16,
1995, based on the Preferred Stock as constituted at such date. As provided in
the Rights Agreement, the Purchase Price, the number of one one-hundredths of a
share of Preferred Stock (or other securities or property) which may be
purchased upon the exercise of the Rights and the number of Rights evidenced by
this Right Certificate are subject to modification and adjustment upon the
happening of certain events.
This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Right Certificates. Copies of
the Rights Agreement are on file at the principal executive offices of
B-1
<PAGE>
the Company and the above-mentioned office or agency of the Rights Agent. The
Company will mail to the holder of this Right Certificate a copy of the Rights
Agreement without charge after receipt of a written request therefor.
This Right Certificate, with or without other Right Certificates, upon
surrender at the office or agency of the Rights Agent designated for such
purpose, may be exchanged for another Right Certificate or Right Certificates of
like tenor and date evidencing Rights entitling the holder to purchase a like
aggregate number of shares of Preferred Stock as the Rights evidenced by the
Right Certificate or Right Certificates surrendered shall have entitled such
holder to purchase. If this Right Certificate shall be exercised in part, the
holder shall be entitled to receive upon surrender hereof another Right
Certificate or Right Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate (i) may be redeemed by the Company at a redemption
price of $.01 per Right or (ii) may be exchanged in whole or in part for shares
of Preferred Stock or shares of the Company's Common Stock, par value $.01 per
share.
No fractional shares of Preferred Stock will be issued upon the
exercise of any Right or Rights evidenced hereby (other than fractions which are
integral multiples of one one-hundredth of a share of Preferred Stock, which
may, at the election of the Company, be evidenced by depositary receipts), but
in lieu thereof a cash payment will be made, as provided in the Rights
Agreement.
No holder of this Right Certificate, as such, shall be entitled to
vote or receive dividends or be deemed for any purpose the holder of the
Preferred Stock or of any other securities of the Company which may at any time
be issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement) or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Right
certificate shall have been exercised as provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
B-2
<PAGE>
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal.
Dated:
ATTEST: NORTHWEST AIRLINES
CORPORATION
By NORWEST BANK
MINNESOTA, N.A. By __________________
Countersigned:
_______________________,
as Rights Agent
By _________________________
Authorized Signature
B-3
<PAGE>
Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate)
FOR VALUE RECEIVED _________________________ hereby sells, assigns and
transfer unto ___________________________
____________________________________________________________
(Please print name and address of transferee)
____________________________________________________________
Rights represented by this Right Certificate, together with all right, title and
interest therein, and does hereby irrevocably constitute and appoint
___________________ Attorney, to transfer said Rights on the books of the
within-named Company, with full power of substitution.
Dated: _________________
______________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered
national securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States.
- ------------------------------------------------------------
(To be completed)
The undersigned hereby certifies that the Rights evidenced by this
Right Certificate are not beneficially owned by, were not acquired by the
undersigned from, and are not being assigned to, an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement).
________________________
Signature
B-4
<PAGE>
Form of Reverse Side of Right Certificate - continued
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise
Rights represented by the Rights Certificate)
To Northwest Airlines Corporation:
The undersigned hereby irrevocably elects to exercise
__________________ Rights represented by this Right Certificate to purchase the
shares of Preferred Stock (or other securities or property) issuable upon the
exercise of such Rights and requests that certificates for such shares of
Preferred Stock (or such other securities) be issued in the name of:
______________________________________________________________
(Please print name and address)
______________________________________________________________
If such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivery to:
Please insert social security
or other identifying number
______________________________________________________________
(Please print name and address)
______________________________________________________________
Dated: ____________________
________________________
Signature
(Signature must conform to holder specified on Right Certificate)
Signature Guaranteed:
Signature must be guaranteed by a member of firm of a registered
national securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States.
B-5
<PAGE>
Form of Reverse Side of Right Certificate -- continued
(To be completed)
___________________________________________________
The undersigned certifies that the Rights evidenced by this Right
Certificate are not beneficially owned by, and were not acquired by the
undersigned from, an Acquiring Person or an Affiliate or Associate thereof (as
defined in the Rights Agreement)
______________________
Signature
_________________________________________________________________
NOTICE
The signature in the Form of Assignment or Form of Election to
Purchase, as the case may be, must conform to the name as written upon the face
of this Right Certificate in every particular, without alteration or enlargement
or any change whatsoever.
In the event the certification set forth above in the Form of
Assignment or the Form of Election to Purchase, as the case may be, is not
completed, such Assignment or Election to Purchase will not be honored.
B-6
<PAGE>
UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS
OWNED BY OR TRANSFERRED TO ANY PERSON WHO BECOMES AN ACQUIRING PERSON (AS
DEFINED IN THE RIGHTS AGREEMENT) AND CERTAIN TRANSFEREES THEREOF WILL
BECOME NULL AND VOID AND WILL NO LONGER BE TRANSFERABLE.
SUMMARY OF RIGHTS TO PURCHASE
Shares of Preferred Stock
On November 16, 1995, the Board of Directors of Northwest Airlines
Corporation (the "Company") authorized and declared a dividend of one preferred
share purchase right (an "Original Right") for each outstanding share of Class A
Common Stock, par value $.01 per share, of the Company and Class B Common Stock,
par value $.01 per share, of the Company. The dividend was paid to the
stockholders of record as of the close of business on November 27, 1995. On
June 25, 1998 the Board of Directors amended the Original Rights in their
entirety to represent a right (a "Right") to purchase one one-hundredth of a
share of Series D Junior Participating Preferred Stock, par value $.01 per share
(the "Preferred Stock") of the Company at a price of $150 per one one-hundredth
of a share of Preferred Stock (as the same may be adjusted, the "Purchase
Price"). The description and terms of the Rights are set forth in an Amended
and Restated Rights Agreement dated as of June 25, 1998, as the same may be
amended from time to time (the "Rights Agreement"), between the Company and
Norwest Bank Minnesota, N.A., as Rights Agent (the "Rights Agent").
Until the earlier to occur of (i) 10 days following a public
announcement that a person or group of affiliated or associated persons (an
"Acquiring Person") have acquired beneficial ownership of a number of Common
Shares equal to 19% or more (25% or more in the case of certain Institutional
Investors (as such term is defined in the Rights Agreement) of the sum of (a)
the Common Shares then issued and outstanding, (b) all Common Shares issuable
pursuant to the Northwest Airlines Employee Stock Plan (the "Plan") to trusts
established pursuant to the Plan (the "Trusts"), (c) all Common Shares issuable
upon conversion of all the shares of Series C Preferred Stock, par value $.01
per share, issued or issuable to the Trusts pursuant to the Plan, (d) all Common
Shares issuable upon the exercise of all employee stock options issued and
outstanding as of the date of this Agreement and (e) any other Common Shares not
then actually issued and outstanding but which such Person would be deemed to
beneficially own hereunder (together, the "outstanding Common Shares") or (ii)
10 business days (or such later date as may be determined by action of the Board
of Directors prior to such time as any person or group of affiliated persons
becomes an Acquiring Person) following the commencement of, or announcement of
an intention to make, a tender offer or exchange offer the consummation of which
would result in the beneficial ownership by a person or group of a number of
Common Shares equal to 19% or more of the number of outstanding Common Shares
(the earlier of such dates being called the "Distribution Date"), the Rights
will be evidenced, with respect to any of the Common Share certificates
outstanding as of the Record Date, by such Common Share certificate together
with a copy of the Summary of Rights.
The Rights Agreement provides that, until the Distribution Date (or
earlier redemption or expiration of the Rights), the Rights will be transferred
with and only with the
C-1
<PAGE>
Common Shares. Until the Distribution Date (or earlier redemption or expiration
of the Rights), new Common Share certificates issued after the Record Date upon
transfer or new issuances of Common Shares (including pursuant to the conversion
of Series C Preferred Stock) will contain a notation incorporating the Rights
Agreement by reference. Until the Distribution Date (or earlier redemption or
expiration of the Rights), the surrender for transfer of any certificates for
Common Shares outstanding as of the Record Date, even without such notation or a
copy of this Summary of Rights, will also constitute the transfer of the Rights
associated with the Common Shares represented by such certificate. As soon as
practicable following the Distribution Date, separate certificates evidencing
the Rights ("Right 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 Right Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date. The
Rights will expire on November 16, 2005 (the "Final Expiration Date"), unless
the Final Expiration Date is extended or unless the Rights are earlier redeemed
or exchanged by the Company, in each case as described below.
The Purchase Price payable, and the number of shares of Preferred
Stock or other securities or property issuable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution (i) in the event of
a stock dividend on, or a subdivision, combination or reclassification of, the
Preferred Stock, (ii) upon the grant to holders of the Preferred Stock of
certain rights or warrants to subscribe for or purchase Preferred Stock at a
price, or securities convertible into Preferred Stock with a conversion price,
less than the then-current market price of the Preferred Stock or (iii) upon the
distribution to holders of the Preferred Stock of evidences of indebtedness or
assets (excluding regular periodic cash dividends or dividends payable in
Preferred Stock) or of subscription rights or warrants (other than those
referred to above).
The number of outstanding Rights are also subject to adjustment in the
event of a stock split of the Common Shares or a stock dividend on the Common
Shares payable in Common Shares or subdivisions, consolidations or combinations
of the Common Shares occurring, in any such case, prior to the Distribution
Date.
Shares of Preferred Stock purchasable upon exercise of the Rights
will not be redeemable. Each share of Preferred Stock will be entitled,
when, as and if declared, to a minimum preferential quarterly dividend
payment of $1 per share but will be entitled to an aggregate dividend of 100
times the dividend declared per share of Common Stock. In the event of
liquidation, the holders of the Preferred Stock will be entitled to a minimum
preferential liquidation payment of $100 per share (plus any accrued but
unpaid dividends) but will be entitled to an aggregate payment of 100 times
the payment made per share of Common Stock. Each share of Preferred Stock
will have 100 votes, voting together with the Common Stock. Finally, in the
event of any merger, consolidation or other transaction in which shares of
Common Stock are converted or exchanged, each share of Preferred Stock
C-2
<PAGE>
will be entitled to receive 100 times the amount received per share of Common
Stock. These rights are protected by customary antidilution provisions.
In the event that any person or group of affiliated or associated
persons becomes an Acquiring Person, each holder of a Right, other than Rights
beneficially owned by the Acquiring Person (which will thereupon become void),
will thereafter have the right to receive upon exercise of a Right at the then
current exercise price of the Right, that number of Common Shares (or one
one-hundredths of a share of Preferred Stock) having a market value of two times
the exercise price of the Right.
In the event that, after a person or group has become an Acquiring
Person, the Company is acquired in a merger or other business combination
transaction or 50% or more of its consolidated assets or earning power are sold,
proper provision will be made so that each holder of a Right (other than Rights
beneficially owned by an Acquiring Person which will have become void) will
thereafter have the right to receive, upon the exercise thereof at the then
current exercise price of the Right, that number of shares of common stock of
the person with whom the Company has engaged in the foregoing transaction (or
its parent), which number of shares at the time of such transaction will have a
market value of two times the exercise price of the Right.
At any time after any person or group becomes an Acquiring Person and
prior to the acquisition by such person or group of beneficial ownership of a
number of Common Shares equal to 50% or more of the number of outstanding Common
Shares, the Board of Directors of the Company may exchange the Rights (other
than Rights owned by such person or group which will have become void), in whole
or in part, at an exchange ratio of one Common Share, or one one-hundredth of a
share of Preferred Stock (or of a share of a class or series of the Company's
preferred stock having equivalent rights, preferences and privileges), per Right
(subject to adjustment).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional shares of Preferred Stock will be issued
(other than fractions which are integral multiples of one one-hundredth of a
share of Preferred Stock, which may, at the election of the Company, be
evidenced by depositary receipts) and in lieu thereof, an adjustment in cash
will be made based on the market price of the Preferred Stock on the last
trading day prior to the date of exercise.
At any time prior to the time an Acquiring Person becomes such, the
Board of Directors of the Company may redeem the Rights in whole, but not in
part, at a price of $.01 per Right (the "Redemption Price"). Immediately upon
any redemption of the Rights, the right to exercise the Rights will terminate
and the only right of the holders of Rights will be to receive the Redemption
Price.
For so long as the Rights are then redeemable, the Company may, except
with respect to the redemption price, amend the Rights in any manner. After the
Rights are no
C-3
<PAGE>
longer redeemable the Company may, except with respect to the redemption price,
amend the Rights in any manner that does not adversely affect the interests of
holders of the Rights.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends.
A copy of the Rights Agreement is available free of charge from the
Company. This summary description of the Rights does not purport to be complete
and is qualified in its entirety by reference to the Rights Agreement, as the
same may be amended from time to time, which is hereby incorporated herein by
reference.
C-4
