SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-A
For Registration of Certain Classes of Securities
Pursuant to Section 12(b) or (g) of the
Securities Exchange Act of 1934
CHS ELECTRONICS, INC.
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(Exact name of registrant as specified in its charter)
FLORIDA 65-0263022
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(State of incorporation) (I.R.S. Employer
or organization) Identification No.)
2000 N.W. 84TH AVENUE
MIAMI, FLORIDA 33122
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(Address of principal executive offices)
Securities to be registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH EACH CLASS
TO BE SO REGISTERED IS TO BE REGISTERED
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NONE NONE
Securities to be registered pursuant to Section 12(g) of the Act:
PREFERRED STOCK
PURCHASE RIGHTS
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(Title of class)
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ITEM 1. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED.
On January 21, 1998, the Board of Directors (the "Board") of CHS
Electronics, Inc. (the "Company") announced a dividend distribution (approved by
the Board on January 16, 1998) of one Right (each "Right" and collectively the
"Rights") for each outstanding share of common stock, $.001 par value per share
(the "Common Stock"), of the Company to stockholders of record at the close of
business on January 30, 1998. Each Right entitles the registered holder to
purchase from the Company one-one thousandth of a share of a new series of
preferred stock, $.001 par value of the Company designated as Series A Junior
Participating Preferred Stock (the "Series A Preferred Stock") at a price of
$100 per one-one thousandth of a share (the "Purchase Price"), subject to
certain adjustments. The Purchase Price shall be paid in cash. The description
and terms of the Rights are set forth in a Rights Agreement (the "Rights
Agreement") between the Company and Interwest Transfer Company, as Rights Agent,
dated January 16, 1998. The material terms of the Rights Agreement are
summarized below.
Initially, the Rights will be represented by the Common Stock
certificates representing shares then outstanding, and no separate Rights
certificates will be distributed. The Rights will separate from the Common Stock
and a distribution of the Rights certificates will occur upon the earlier of (i)
ten business days following a public announcement that a person or group of
affiliated or associated persons (an "Acquiring Person") has acquired, or
obtained the right to acquire, beneficial ownership of 15% or more of the
outstanding shares of Common Stock, (ii) ten business days after a person or
group of affiliated or associated persons has (x) become the direct or indirect
beneficial owner of at least 10% of the Company's outstanding Common Stock, and
(y) whose ownership interest is deemed by the Board to cause a material adverse
impact on the business or prospects of the Company or its shareholders (such
persons or group hereinafter called an "Adverse Person"), or (iii) ten business
days following the commencement of a tender offer or exchange offer that would
result in a person or group becoming an Acquiring Persons or an Adverse Person.
Until the date that the Rights certificates are distributed (the "Distribution
Date"), (i) the Rights will be evidenced by the Common Stock certificates and
will be transferred with and only with such Common Stock certificates, (ii) new
Common Stock certificates issued after the date that the Rights Plan is adopted
will contain a notation incorporating the Rights Agreement by reference and
(iii) the surrender for transfer of any certificates for Common Stock
outstanding also will constitute the transfer of the Rights associated with the
Common Stock represented by such certificates.
The Rights are not exercisable until the Distribution Date and will
expire ten years after the adoption of the Rights Agreement, unless earlier
redeemed by the Company as described below.
Upon a triggering event and as soon as practicable after the
Distribution Date, Rights certificates will be mailed to holders of record of
the Common Stock as of the close of business on the Distribution Date and,
thereafter, the separate Rights certificates alone will represent the Rights.
Except as otherwise determined by the Board, only shares of Common Stock issued
prior to the Distribution Date will be issued with Rights.
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In the event a person or group of affiliated or associated persons
becomes an Acquiring Person or an Adverse Person (except pursuant to an offer
for all outstanding shares of Common Stock that is determined by the Board to be
fair to and otherwise in the best interest of the Company and its shareholders,
a "Qualifying Tender Offer"), each Right then outstanding would "flip-in" and
become a right to buy that number of shares of Common Stock of the Company which
at the time of such acquisition would have a market value of two times the
exercise price of the Right. The acquiror who triggered the Rights would be
excluded from the "flip-in" because his Rights would have become null and void
upon his triggering acquisition.
In the event that the "flip-in" is triggered, if there is not
sufficient authorized Common Stock available for issuance upon the exercise of
each Right, the Company shall take all such action as may be necessary to
authorize additional shares of Common Stock. In the event that the Company shall
be unable to take all such action, the Company shall substitute, for each share
of Common Stock that would be otherwise issuable upon exercise of a Right, a
number of shares of Series A Preferred Stock or fraction thereof having a
current market value equal to one share of Common Stock.
If, following a person or group of affiliated or associated persons
becoming an Acquiring Person or an Adverse Person, (i) the Company shall
consolidate with or merge into any other person or entity in which the Company
is not the surviving corporation, (ii) any other person or entity shall merge
into the Company and all or part of the outstanding Common Stock shall be
changed into or exchanged for securities of any other person or entity, or cash
or any other property, or (iii) the Company sells 50% or more of its assets or
earning power, each Right then outstanding would "flip-over" and thereby would
become a right to buy that number of shares of Common Stock of the acquiring
company which at the time of such transaction has a market value of two times
the exercise price of the Right.
At any time after a person or group of affiliated or associated persons
becomes an Acquiring Person or an Adverse Person and before the acquisition by
such person or group of 50% or more of the outstanding Common Stock of the
Company, the Board may exchange the Rights (other than Rights owned by such
person or group which have become void), in whole or in part, for Common Stock
at an exchange ratio of 1.0 shares of the Company's Common Stock per Right,
subject to adjustment.
At any time until ten days following the public announcement that a
person or group of affiliated or associated persons has become an Acquiring
Person or an Adverse Person, the Company may redeem the Rights at a price of
$.000001 per Right, payable in cash. Under certain circumstances set forth in
the Rights Agreement, the decision to redeem shall require the concurrence of a
majority of the Continuing Directors (as hereinafter defined). After the
redemption period has expired, the Company's rights of redemption may be
reinstated if the Acquiring Person or Adverse Person reduces his or her
beneficial ownership to less than 10% of the outstanding shares of Common Stock
in a transaction or series of transactions not involving the Company.
Immediately upon the action of the Board ordering redemption of the Rights,
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with, where required, the concurrence of the Continuing Directors, the Rights
will terminate and the only right which the holders of Rights will thereafter
have will be to receive the $.000001 redemption price.
The term "Continuing Directors" means any member of the Board of
Directors of the Company who was a member of the Board prior to the date of the
Rights Agreement, and any person who is subsequently elected to the Board if
such person is recommended or approved by a majority of the Continuing
Directors, but shall not include an Acquiring Person or an Adverse Person, or an
affiliate or associate of an Acquiring Person or an Adverse Person, or any
representative or designee of the foregoing.
The Purchase Price payable, and the number of shares of Series A
Preferred Stock 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 Series A Preferred
Stock, (ii) if holders of the Series A Preferred Stock are granted certain
rights or warrants to subscribe for Series A Preferred Stock or convertible
securities at less than the current market price of the Series A Preferred
Stock, or (iii) upon the distribution to holders of the Series A Preferred Stock
of evidences of indebtedness or assets (excluding regular quarterly cash
dividends) or of subscription rights or warrants (other than those referred to
above).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. No fractional shares of Series A Preferred Stock will be issued and, in
lieu thereof, an adjustment in cash will be made based on the market price of
the Series A Preferred Stock on the last trading date prior to the date of
exercise.
The shares of Series A Preferred Stock purchasable upon exercise of the
Rights will not be redeemable. Each share of Series A Preferred Stock will be
entitled 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
Series A Preferred Stock will be entitled to a minimum preferential liquidation
payment of $100 per share but will be entitled to an aggregate payment of 100
times the payment made per share of Common Stock. Each share of Series A
Preferred Stock will have one vote, voting together with the Common Stock.
Finally, in the event of any merger, consolidation or other transaction in which
shares of Common Stock are exchanged, each share of Series A 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.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including, without limitation, the right
to vote or to receive dividends.
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The implementation of the Rights Agreement will not interfere with the
day-to-day operations of the Company. The Rights Agreement provides that the
Company may not enter into any transaction of the sort enumerated in the
"flip-in/flip-over" provisions if, in connection therewith, there are
outstanding securities or there are agreements or arrangements intended to
counteract the protective provisions of the Rights. For example, the Company may
not merge with an acquiring corporation if the acquiring corporation has granted
its shareholders rights to purchase its Common Stock at less than fair market
value upon the triggering of flip-over rights in one of its acquisition targets.
Any of the provisions of the Rights Agreement may be amended by the Board as
long as the Rights are then redeemable. When the Rights are not redeemable, the
provisions of the Rights Agreement may be amended by the Board only in order to
cure any ambiguity, to correct or supplement any provision which may be
inconsistent with any other provision or make changes which do not affect
adversely the interests of holders of Rights; PROVIDED, HOWEVER, that no
amendment may change the redemption price or the expiration date of the Rights,
and amendments after a person or group of affiliated or associated persons
becomes an Acquiring Person or an Adverse Person (other than pursuant to a
Qualifying Tender Offer) may be made only if approved by a majority of the
Independent Directors and at least two thirds of the Board.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to this Registration Statement on Form 8-A. A
copy of the Rights Agreement is available free of charge from the Rights Agent.
This summary description of the Rights does not purport to be complete and is
qualified in its entirety by reference to the Rights Agreement, which is
incorporated herein by reference.
ITEM 2. EXHIBITS.
4.1 Form of Preferred Stock Purchase Rights Agreement, dated as of
January 16, 1998, between the Company and Interwest Transfer
Company.
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SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereto duly authorized.
January 20, 1998 CHS ELECTRONICS, INC.
By: /S/CRAIG TOLL
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Craig Toll, Vice President-Finance,
Treasurer and Chief Financial Officer
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EXHIBIT INDEX
EXHIBIT DESCRIPTION
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4.1 Form of Preferred Stock Purchase Rights Agreement, dated as of
January 16, 1998, between the Company and Interwest Transfer
Company.
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CHS ELECTRONICS, INC.
AND
INTERWEST TRANSFER COMPANY
RIGHTS AGENT
1998 PREFERRED STOCK PURCHASE RIGHTS AGREEMENT
DATED AS OF JANUARY 16, 1998
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TABLE OF CONTENTS
PAGE
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Section 1 Certain Definitions ..............................................1
Section 2 Appointment of Rights Agent ......................................5
Section 3 Issuance of Rights Certificates ..................................5
Section 4 Form of Rights Certificates ......................................6
Section 5 Countersignature and Registration ................................7
Section 6 Transfer, Split Up, Combination and Exchange of
Rights Certificates; Mutilated, Destroyed, Lost or
Stolen Rights Certificates .......................................8
Section 7 Exercise of Rights; Purchase Price; Expiration Date of Rights ....8
Section 8 Cancellation and Destruction of Rights Certificates .............10
Section 9 Reservation and Availability of Preferred Stock; Registration ...10
Section 10 Preferred Stock Record Date .....................................11
Section 11 Adjustment of Purchase Price, Number and Kind of Shares
or Number of Rights; Exchange of Rights for Shares
of Capital Stock ................................................12
Section 12 Certificate of Adjusted Purchase Price or Number of Shares ......19
Section 13 Consolidation, Merger or Sale or Transfer of Assets or
Earning Power ...................................................20
Section 14 Fractional Rights and Fractional Shares .........................22
Section 15 Rights of Action ................................................23
Section 16 Agreement of Rights Holders .....................................23
Section 17 Rights Certificate Holder Not Deemed a Shareholder ..............24
Section 18 Concerning the Rights Agent .....................................24
Section 19 Merger or Consolidation or Change of Name of Rights Agent .......24
Section 20 Duties of Rights Agent ..........................................25
Section 21 Change of Rights Agent ..........................................27
Section 22 Issuance of New Rights Certificates .............................27
Section 23 Redemption and Termination ......................................28
Section 24 Notice of Certain Events ........................................29
Section 25 Notices .........................................................30
Section 26 Supplements and Amendments ......................................30
Section 27 Successors ......................................................31
Section 28 Determinations and Actions by the Board of Directors, etc. ......31
Section 29 Benefits of this Agreement ......................................31
Section 30 Severability ....................................................31
Section 31 Governing Law ...................................................32
Section 32 Consent to Jurisdiction; Service of Process .....................32
Section 33 Counterparts ....................................................32
Section 34 Descriptive Headings ............................................32
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RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of January 16, 1998 (the "Agreement"),
between CHS ELECTRONICS, INC., a Florida corporation (the "Company"), and
INTERWEST TRANSFER COMPANY (the "Rights Agent").
W I T N E S S E T H:
WHEREAS, on January 16, 1998 (the "Rights Dividend Declaration Date"),
the Board of Directors of the Company authorized and declared a dividend
distribution of one Right for each share of common stock, $.001 par value, of
the Company (the "Common Stock") outstanding at the close of business on January
30, 1998 (the "Record Date") and has authorized the issuance of one Right (as
such number may hereinafter be adjusted pursuant to the provisions of Section
11(i) hereof) for each share of Common Stock issued between the Record Date
(whether originally issued or delivered from the Company's treasury) and the
Distribution Date (as defined below). Each Right shall initially represent the
right to purchase one one-thousandth of a share of Series A Junior Participating
Preferred Stock, $.001 par value (the "Series A Preferred Stock"), of the
Company, having the rights and preferences set forth in the Form of Certificate
of Designation attached hereto as Exhibit A, upon the terms and subject to the
conditions hereinafter set forth (the "Rights");
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
SECTION 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or which,
together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of 15% or more of the shares of Common Stock then outstanding.
Notwithstanding the foregoing, the term "Acquiring Person" shall not include (i)
the Company, any Subsidiary of the Company, any employee benefit plan of the
Company or of any Subsidiary of the Company, or any Person or entity organized,
appointed or established by the Company for or pursuant to the terms of any such
plan, or (ii) any Person who or which, together with all Affiliates and
Associates of such Person, would be an Acquiring Person solely by reason of a
reduction in the number of issued and outstanding shares of Common Stock of the
Company pursuant to a transaction or a series of related transactions approved
by the Board of Directors (provided that at the time of such approval of the
Board of Directors there are then in office not less than five Continuing
Directors and such transaction or series of related transactions are approved by
a majority of the Continuing Directors then in office); provided, further,
however, that in the event that such Person described in the foregoing clause
(ii) does not become an Acquiring Person by reason of a reduction in the number
of issued and outstanding shares of Common Stock of the Company, such Person
shall nonetheless become an Acquiring Person in the event such Person thereafter
acquires Beneficial Ownership of an additional 1% of the Common Stock of the
Company, unless the acquisition of such additional
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Common Stock would not result in such Person becoming an Acquiring Person by
reason of a reduction in the number of issued and outstanding shares of Common
Stock of the Company.
(b) (i) "Act" shall mean the Securities Act of 1933, as amended.
(ii) "Adverse Person" shall mean any Person who or which,
together with all Affiliates and Associates of such Person, shall
become the direct or indirect Beneficial Owner of 10% or more of the
shares of Common Stock and is deemed by a majority of the Board of
Directors of the Company to be a Person whose ownership interest would
cause a material adverse impact on the business or prospects of the
Company or its shareholders (provided that at the time of such
determination of the Board of Directors there are then in office not
less than five Continuing Directors and such determination is approved
by a majority of the Continuing Directors then in office).
(c) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended (the "Exchange Act").
(d) A Person shall be deemed the "Beneficial Owner" of, and shall be
deemed to "beneficially own," any securities:
(i) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to acquire (whether
such right is exercisable immediately or only after the passage of
time) pursuant to any agreement, arrangement or understanding (whether
or not in writing) or upon the exercise of conversion rights, exchange
rights, rights, warrants or options, or otherwise; PROVIDED, HOWEVER,
that a Person shall not be deemed the "Beneficial Owner" of, or to
"beneficially own," (A) securities tendered pursuant to a tender or
exchange offer made by such Person or any of such Person's Affiliates
or Associates until such tendered securities are accepted for purchase
or exchange, or (B) securities issuable upon exercise of Rights at any
time prior to the occurrence of a Triggering Event, or (C) securities
issuable upon exercise of Rights from and after the occurrence of a
Triggering Event which Rights were acquired by such Person or any of
such Person's Affiliates or Associates prior to the Distribution Date
or pursuant to Section 3(a) or Section 22 hereof (the "Original
Rights") or pursuant to Section 11(i) hereof in connection with an
adjustment made with respect to any Original Rights;
(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or dispose of
or has "beneficial ownership" of (as determined pursuant to Rule 13d-3
of the General Rules and Regulations under the Exchange Act), including
pursuant to any agreement, arrangement or understanding, whether or not
in writing; PROVIDED, HOWEVER, that a Person shall not be deemed the
"Beneficial Owner" of, or to "beneficially own," any security under
this subparagraph (ii) as a result of an agreement, arrangement or
understanding to vote such security if such agreement, arrangement or
understanding: (A) arises solely from a revocable proxy given in
response to a public proxy or consent solicitation made pursuant to,
and in accordance with, the applicable provisions of the General Rules
and Regulations under the Exchange Act,
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and (B) is not also then reportable by such Person on Schedule 13D
under the Exchange Act (or any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by
any other Person (or any Affiliate or Associate thereof) with which
such Person (or any of such Person's Affiliates or Associates) has any
agreement, arrangement or understanding (whether or not in writing),
for the purpose of acquiring, holding, voting (except pursuant to a
revocable proxy as described in proviso (A) to subparagraph (ii) of
this paragraph (d)) or disposing of any voting securities of the
Company; PROVIDED, HOWEVER, that nothing in this paragraph (d) shall
cause a person engaged in business as an underwriter of securities to
be the "Beneficial Owner" of, or to "beneficially own," any securities
acquired through such person's participation in good faith in a firm
commitment underwriting until the expiration of forty days after the
date of such acquisition.
Notwithstanding anything in this Section 1(d) to the contrary, a Person
engaged in the business of underwriting securities shall not be deemed a
"Beneficial Owner" of, or to "beneficially own", any securities acquired in good
faith in a firm commitment underwriting until the expiration of 40 days after
the date of such acquisition.
(e) "Business Day" shall mean any day other than a Saturday, Sunday or
a day on which banking institutions in the State of New York are authorized or
obligated by law or executive order to close.
(f) "Close of business" on any given date shall mean 5:00 P.M., New
York time, on such date; PROVIDED, HOWEVER, that if such date if not a Business
Day it shall mean 5:00 P.M., New York time, on the next succeeding day which is
a Business Day.
(g) "Common Stock" shall mean the common stock, $.001 par value, of the
Company, except that "Common Stock" when used with reference to any Person other
than the Company shall mean the capital stock of such Person with the greatest
voting power, or the equity securities or other equity interest having power to
control or direct the management, of such Person.
(h) "Continuing Director" shall mean (i) any member of the Board of
Directors of the Company, while such Person is a member of the Board, who is not
an Acquiring Person or an Affiliate or Associate of an Acquiring Person, or a
representative of an Acquiring Person or of any such Affiliate or Associate, and
was a member of the Board prior to the date of this Agreement, or (ii) any
Person who subsequently becomes a member of the Board, while such Person is a
member of the Board, who is not an Acquiring Person or an Affiliate or Associate
of an Acquiring Person or a representative of an Acquiring Person or any such
Affiliate or Associate, if such Person's nomination for election or election to
the Board is recommended or approved by a majority of the Continuing Directors.
(i) "Current market price" shall have the meaning set forth in Section
11(d) hereof.
(j) "Distribution Date" shall have the meaning set forth in Section
3(a) hereof.
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(k) "Exchange Act" shall have the meaning set forth in Section 1(c)
hereof.
(l) "Expiration Date" shall have the meaning set forth in Section 7(a)
hereof.
(m) "Final Expiration Date" shall have the meaning set forth in Section
7(a) hereof.
(n) "Person" shall mean any individual, firm, corporation, partnership
or other entity.
(o) "Principal Party" shall have the meaning set forth in Section 13(b)
hereof.
(p) "Purchase Price" shall have the meaning set forth in Section 4(a)
hereof.
(q) "Redemption Price" shall have the meaning set forth in Section
23(a) hereof.
(r) "Rights" shall have the meaning set forth in the WHEREAS clause at
the beginning of this Agreement.
(s) "Rights Certificates" shall have the meaning set forth in Section
3(a) hereof.
(t) "Section 11(a)(ii) Event" shall mean any event described in Section
11(a)(ii) hereof.
(u) "Section 13 Event" shall mean any event described in clauses (x),
(y) or (z) of Section 13(a) hereof.
(v) "Series A Preferred Stock" shall have the meaning set forth in the
WHEREAS clause at the beginning of this Agreement.
(w) "Stock Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include, a report
filed pursuant to the Exchange Act) by the Company, an Acquiring Person or an
Adverse Party that an Acquiring Person and/or an Adverse Party has become such.
(x) "Subsidiary" shall mean, with reference to any Person, any
corporation of which an amount of voting securities sufficient to elect at least
a majority of the directors of such corporation is beneficially owned, directly
or indirectly, by such Person, or otherwise controlled by such Person.
(y) "Trading Day" shall have the meaning set forth in Section 11(d)
hereof.
(z) "Triggering Event" shall mean any Section 11(a)(ii) Event or any
Section 13 Event.
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SECTION 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints the
Rights Agent to act as agent for the Company in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such Co-Rights Agents as it may deem
necessary or desirable.
SECTION 3. ISSUANCE OF RIGHTS CERTIFICATES.
(a) Until the earlier of (i) the close of business on the
tenth day after the Stock Acquisition Date (or, if the tenth day after the Stock
Acquisition Date occurs before the Record Date, the close of business on the
Record Date), or (ii) the close of business on the tenth business day (or such
later date as may be determined by action of the Board of Directors (but only if
at the time of such determination by the Board of Directors there are then in
office not less than five Continuing Directors and such action is approved by a
majority of the Continuing Directors then in office) prior to such time as any
Person becomes an Acquiring Person or an Adverse Party) after the date that a
tender or exchange offer by any Person (other than the Company, any Subsidiary
of the Company, any employee benefit plan of the Company or of any Subsidiary of
the Company, or any Person or entity organized, appointed or established by the
Company for or pursuant to the terms of any such plan) is first published or
sent or given within the meaning of Rule 14d-2(a) of the General Rules and
Regulations under the Exchange Act, if upon consummation thereof, such Person
would be an Acquiring Person or an Adverse Party (the earlier of (i) or (ii)
being herein referred to as the "Distribution Date"), (x) the Rights will be
evidenced (subject to the provisions of paragraph (b) of this Section 3) by the
certificates for the Common Stock registered in the names of the holders of the
Common Stock (which certificates for Common Stock shall be deemed also to be
certificates for Rights) and not by separate certificates, and (y) the Rights
will be transferable only in connection with the transfer of the underlying
shares of Common Stock (including a transfer to the Company). As soon as
practicable after the Distribution Date, the Rights Agent will send by
first-class, insured, postage prepaid mail, to each record holder of the Common
Stock as of the close of business on the Distribution Date, at the address of
such holder shown on the records of the Company, one or more rights
certificates, in substantially the form attached hereto as Exhibit B (the
"Rights Certificates"), evidencing one Right for each share of Common Stock so
held, subject to adjustment as provided herein. In the event that an adjustment
in the number of Rights per share of Common Stock has been made pursuant to
Section 11(i) hereof, at the time of distribution of the Rights Certificates,
the Company shall make the necessary and appropriate rounding adjustments (in
accordance with Section 14(a) hereof) so that Rights Certificates representing
only whole numbers of Rights are distributed and cash is paid in lieu of any
fractional Rights. As of and after the Distribution Date, the Rights will be
evidenced solely by such Rights Certificates.
(b) As promptly as practicable following the Record Date, the
Company will send a copy of a Summary of Rights, in substantially the form
attached hereto as Exhibit C (the "Summary of Rights"), by first-class, postage
prepaid mail, to each record holder of the Common Stock as of the close of
business on the Record Date, at the address of such holder shown on the records
of the Company. With respect to certificates for the Common Stock outstanding as
of the Record Date, until the Distribution Date, the Rights will be evidenced by
such certificates for the Common Stock and the registered holders of the Common
Stock shall also be the registered holders of the associated Rights. Until the
earlier of the Distribution Date or the Expiration Date, the transfer of any
certificates representing shares of Common Stock in respect of which Rights have
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been issued shall also constitute the transfer of the Rights associated with
such shares of Common Stock.
(c) Rights shall be issued in respect of all shares of Common Stock
which are issued after the Record Date but prior to the earlier of the
Distribution Date or the Expiration Date. Certificates representing such shares
of Common Stock issued after the date hereof and prior to the earlier of the
Distribution Date or the Expiration Date shall also be deemed to be certificates
for Rights, and shall bear the following legend:
"This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in the Rights Agreement between CHS
Electronics, Inc. (the "Company") and Interwest Transfer Company, as
Rights Agent (the "Rights Agent"), dated as of January 16, 1998 (the
"Rights Agreement"), the terms of which are hereby incorporated herein
by reference and a copy of which is on file at the principal offices of
the Company. Under certain circumstances, as set forth in the Rights
Agreement, such Rights will be evidenced by separate certificates and
will no longer be evidenced by this certificate. The Rights Agent will
mail to the holder of this certificate a copy of the Rights Agreement,
as in effect on the date of mailing, without charge promptly after the
receipt of a written request therefor. UNDER CERTAIN CIRCUMSTANCES SET
FORTH IN THE RIGHTS AGREEMENT, RIGHTS ISSUED TO, OR HELD BY, ANY PERSON
WHO IS, WAS OR BECOMES AN ACQUIRING PERSON, AN ADVERSE PARTY OR ANY
AFFILIATE OR ASSOCIATE THEREOF (AS SUCH TERMS ARE DEFINED IN THE RIGHTS
AGREEMENT), WHETHER CURRENTLY HELD BY OR ON BEHALF OF SUCH PERSON OR BY
ANY SUBSEQUENT HOLDER, MAY BECOME NULL AND VOID."
SECTION 4. FORM OF RIGHTS CERTIFICATES.
(a) The Rights Certificates (and the forms of election to
purchase and of assignment to be printed on the reverse thereof) shall each be
in substantially the form attached hereto as Exhibit B and may have such marks
of identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange on which the Rights may from time to
time be listed, or to conform to usage. Subject to the provisions of Section 11
and Section 22 hereof, the Rights Certificates, whenever distributed, shall be
dated as of the Record Date and on their face shall entitle the holders thereof
to purchase such number of one one-thousandths of a share of Series A Preferred
Stock as shall be set forth therein at the price per one one-thousandths of a
share of Series A Preferred Stock set forth therein (such exercise price per
share being hereinafter referred to as the "Purchase Price"), but the amount and
type of securities purchasable upon the exercise of each Right and the Purchase
Price thereof shall be subject to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(a) or
Section 22 hereof that represents Rights beneficially owned by: (i) an Acquiring
Person, an Adverse Person or any Associate or Affiliate thereof, (ii) a
transferee of an Acquiring Person or an Adverse Person (or of any such Associate
or Affiliate) who becomes a transferee after the Acquiring Person or Adverse
Person becomes such or (iii) a transferee of an Acquiring Person or an Adverse
Person (or of any
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such Associate or Affiliate) who becomes a transferee prior to or concurrently
with the Acquiring Person or the Adverse Person becoming such and receives such
Rights pursuant to either (A) a transfer (whether or not for consideration) from
the Acquiring Person or the Adverse Person to holders of equity interests in
such Acquiring Person or Adverse Person or to any Person with whom such
Acquiring Person or Adverse Person has any continuing agreement, arrangement or
understanding regarding the transferred Rights or (B) a transfer which the Board
of Directors of the Company has determined is part of a plan, arrangement or
understanding which has as a primary purpose or effect avoidance of Section 7(e)
hereof, and any Rights Certificate issued pursuant to Section 6 or Section 11
hereof upon transfer, exchange, replacement or adjustment of any other Rights
Certificate referred to in this sentence, shall contain (to the extent feasible)
the following legend:
"The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became an Acquiring Person,
an Adverse Person or an Affiliate or Associate thereof (as such terms
are defined in the Rights Agreement between CHS Electronics, Inc. and
Interwest Transfer Company, as Rights Agent (the "Rights Agreement").
Accordingly, this Rights Certificate and the Rights represented hereby
may become null and void in the circumstances specified in Section 7(e)
of the Rights Agreement."
SECTION 5. COUNTERSIGNATURE AND REGISTRATION.
(a) The Rights Certificates shall be executed on behalf of the
Company by its Chairman of the Board, its President or any Vice President,
either manually or by facsimile signature, and shall be attested by the
Secretary or an Assistant Secretary of the Company, either manually or by
facsimile signature. The Rights Certificates shall be manually or by facsimile
signature countersigned by the Rights Agent and shall not be valid for any
purpose unless so countersigned. In case any officer of the Company who shall
have signed any of the Rights Certificates shall cease to be such officer of the
Company before countersignature by the Rights Agent and issuance and delivery by
the Company, such Rights Certificates, nevertheless, may be countersigned by the
Rights Agent and issued and delivered by the Company with the same force and
effect as though the person who signed such Rights Certificates had not ceased
to be such officer of the Company; and any Rights Certificates may be signed on
behalf of the Company by any person who, at the actual date of the execution of
such Rights Certificate, shall be a proper officer of the Company authorized to
sign such Rights Certificate, although at the date of the execution of this
Rights Agreement any such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will
keep or cause to be kept, at its principal office or offices designated as the
appropriate place for surrender of Rights Certificates upon exercise or
transfer, books for registration and transfer of the Rights Certificates issued
hereunder. Such books shall show the name and addresses of the respective
holders of the Rights Certificates, the number of Rights evidenced on its face
by each of the Rights Certificates and the date of each of the Rights
Certificates.
SECTION 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHTS
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHTS CERTIFICATES.
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(a) Subject to the provisions of Section 4(b), Section 7(e) and Section
14 hereof, at any time after the close of business on the Distribution Date, and
at or prior to the close of business on the Expiration Date, any Rights
Certificate or Certificates may be transferred, split up, combined or exchanged
for another Rights Certificate or Certificates, entitling the registered holder
thereof to purchase a like number of one one-thousandths of a share of Series A
Preferred Stock as the Rights Certificate or Certificates surrendered then
entitled such holder (or former holder in the case of a transfer) to purchase.
Any registered holder desiring to transfer, split up, combine or exchange any
Rights Certificate or Certificates shall make such request in writing delivered
to the Rights Agent and shall surrender the Rights Certificate or Certificates
to be transferred, split up, combined or exchanged at the principal office or
offices of the Rights Agent designated for such purpose. Neither the Rights
Agent nor the Company shall be obligated to take any action whatsoever with
respect to the transfer of any such surrendered Rights Certificate until the
registered holder shall have completed and signed the certificate contained in
the form of assignment on the reverse side of such Rights Certificate and shall
have provided such additional evidence of the identity of the Beneficial Owner
(or former Beneficial Owner) or Affiliates or Associates thereof as the Company
shall reasonably request. Thereupon the Rights Agent shall, subject to Section
4(b), Section 7(e) and Section 14 hereof, countersign and deliver to the Person
entitled thereto a Rights Certificate or Rights Certificates, as the case may
be, as so requested. The Company may require payment of a sum sufficient to
cover any tax or governmental charge that may be imposed in connection with any
transfer, split up, combination or exchange of Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Rights Certificate, and, in case of loss, theft or destruction, of indemnity
or security reasonably satisfactory to them, and reimbursement to the Company
and the Rights Agent of all reasonable expenses incidental thereto, and upon
surrender to the Rights Agent and cancellation of the Rights Certificate if
mutilated, the Company will execute and deliver a new Rights Certificate of like
tenor to the Rights Agent for countersignature and delivery to the registered
owner in lieu of the Rights Certificate so lost, stolen, destroyed or mutilated.
SECTION 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF
RIGHTS.
(a) Subject to Section 7(e) hereof, the registered holder of any Rights
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein including, without limitation, the restrictions on
exercisability set forth in Section 9(c) and Section 23(a) hereof) in whole or
in part at any time after the Distribution Date upon surrender of the Rights
Certificate, with the form of election to purchase and the certificate on the
reverse side thereof duly executed, to the Rights Agent at the principal office
or offices of the Rights Agent designated for such purpose, together with
payment of the Purchase Price for each one one-thousandths of a share of Series
A Preferred Stock as to which such surrendered Rights are then exercisable, at
or prior to the earlier of (i) the close of business on January 15, 2008 earlier
of (i) and (ii) being herein referred to as the "Expiration Date").
(b) The Purchase Price for each one one-thousandth of a share of Series
A Preferred Stock pursuant to the exercise of a Right shall initially be $100,
and shall be subject to
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adjustment from time to time as provided in Sections 11 and 13(a) hereof and
shall be payable in accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing exercisable
Rights, with the form of election to purchase and the certificate duly executed,
accompanied by payment, with respect to each Right so exercised, of the Purchase
Price per one one-thousandth of a share of Series A Preferred Stock to be
purchased, as set forth below and an amount equal to any applicable transfer
tax, the Rights Agent shall, subject to Section 20(j) hereof, thereupon promptly
(i) (A) requisition from any transfer agent of the shares of Series A Preferred
Stock (or make available, if the Rights Agent is the transfer agent for such
shares) certificates for the total number of shares of Series A Preferred Stock
to be purchased and the Company hereby irrevocably authorizes its transfer agent
to comply with all such requests or (B) if the Company shall have elected to
deposit the total number of shares of Series A Preferred Stock issuable upon
exercise of the Rights hereunder with a depositary agent, requisition from the
depositary agent depositary receipts representing such number of shares of
Series A Preferred Stock as are to be purchased (in which case certificates for
the shares of Series A Preferred Stock represented by such receipts shall be
deposited by the transfer agent with the depositary agent) and the Company will
direct the depositary agent to comply with such request, (ii) requisition from
the Company the amount of cash, if any, to be paid in lieu of fractional shares
in accordance with Section 14 hereof, (iii) after receipt of such certificates
or depositary receipts, cause the same to be delivered to or upon the order of
the registered holder of such Rights Certificate, registered in such name or
names as may be designated by such holder and (iv) after receipt thereof,
deliver such cash, if any, to or upon the order of the registered holder of such
Rights Certificate. The payment of the Purchase Price shall be made in cash or
by certified or cashier's check payable to the Company.
(d) In case the registered holder of any Rights Certificate shall
exercise less than all the Rights evidenced thereby, a new Rights Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent and delivered to, or upon the order of, the registered
holder of such Rights Certificate, registered in such name or names as may be
designated by such holder, subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary, from
and after the first occurrence of a Section 11(a)(ii) Event, any Rights
beneficially owned by (i) an Acquiring Person, an Adverse Person or an Associate
or Affiliate thereof, (ii) a transferee of an Acquiring Person or an Adverse
Person (or of any such Associate or Affiliate) who becomes a transferee after
the Acquiring Person or Adverse Person becomes such or (iii) a transferee of an
Acquiring Person or an Adverse Person (or of any such Associate or Affiliate)
who becomes a transferee prior to or concurrently with the Acquiring Person or
Adverse Person becoming such and receives such Rights pursuant to either (A) a
transfer (whether or not for consideration) from the Acquiring Person or the
Adverse Person to holders of equity interests in such Acquiring Person or
Adverse Person or to any Person with whom the Acquiring Person or the Adverse
Person has any continuing agreement, arrangement or understanding regarding the
transferred Rights or (B) a transfer which the Board of Directors of the Company
has determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect the avoidance of this Section 7(e), shall become null
and void without any further action and no holder of such Rights shall have any
rights whatsoever with respect to such Rights, whether under any provision of
this Agreement or otherwise. The Company
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shall use all reasonable efforts to ensure that the provisions of this Section
7(e) and Section 4(b) hereof are complied with, but shall have no liability to
any holder of Rights Certificates or other Person as a result of its failure to
make any determinations with respect to an Acquiring Person, an Adverse Person
or their respective Affiliates, Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the contrary, neither
the Rights Agent nor the Company shall be obligated to undertake any action with
respect to a registered holder upon the occurrence of any purported exercise as
set forth in this Section 7 unless such registered holder shall have (i)
completed and signed the certificate contained in the form of election to
purchase set forth on the reverse side of the Rights Certificate surrendered for
such exercise and (ii) provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request.
SECTION 8. CANCELLATION AND DESTRUCTION OF RIGHTS CERTIFICATES. All
Rights Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Rights Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
cancelled Rights Certificates to the Company, or shall, at the written request
of the Company, destroy such cancelled Rights Certificates, and in such case
shall deliver a certificate of destruction thereof to the Company.
SECTION 9. RESERVATION AND AVAILABILITY OF PREFERRED STOCK;
REGISTRATION.
(a) The Company covenants and agrees that, from and after the
Distribution Date, it will cause to be reserved and kept available out of its
authorized and unissued shares of Series A Preferred Stock not reserved for
another purpose the number of shares of Series A Preferred Stock that, as
provided in this Agreement, will be sufficient to permit the exercise in full of
all outstanding Rights in accordance with Section 7 hereof.
(b) So long as the shares of Series A Preferred Stock issuable and
deliverable upon the exercise of the Rights may be listed on any national
securities exchange, the Company shall use its best efforts to cause, from and
after such time as the Rights become exercisable, all shares reserved for such
issuance to be listed on such exchange upon official notice of issuance upon
such exercise.
(c) The Company shall use its best efforts to (i) file, as soon as is
required by law following the Distribution Date, a registration statement under
the Act, with respect to the securities purchasable upon exercise of the Rights
on an appropriate form, (ii) cause such registration statement to become
effective as soon as practicable after such filing, and (iii) cause such
registration statement to remain effective (with a prospectus at all times
meeting the requirements of the Act) until the earlier of (A) the date as of
which the Rights are no longer exercisable for such securities, and (B) the date
of the expiration of the Rights. The Company will
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also take such action as may be appropriate under, or to ensure compliance with,
the securities or "blue sky" laws of the various states in connection with the
exercisability of the Rights. The Company may temporarily suspend, for a period
of time not to exceed ninety (90) days after the date set forth in clause (i) of
the first sentence of this Section 9(c), the exercisability of the Rights in
order to prepare and file such registration statement and permit it to become
effective. Upon any such suspension, the Company shall issue a public
announcement stating that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement at such time as the suspension is no
longer in effect. 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.
(d) The Company covenants and agrees that it will take all such action
as may be necessary to ensure that all shares of Series A Preferred Stock
delivered upon exercise of Rights shall, at the time of delivery of the
certificates for such shares (subject to payment of the Purchase Price), be duly
and validly authorized and issued and fully paid and nonassessable.
(e) The Company further covenants and agrees that it will pay when due
and payable any and all federal and state transfer taxes and charges which may
be payable in respect of the issuance or delivery of the Rights Certificates and
of any certificates for a number of shares of Series A Preferred Stock upon the
exercise of Rights. The Company shall not, however, be required to pay any
transfer tax which may be payable in respect of any transfer or delivery of
Rights Certificates to a Person other than, or the issuance or delivery of a
number of shares of Series A Preferred Stock in respect of a name other than
that of, the registered holder of the Rights Certificates evidencing Rights
surrendered for exercise or to issue or deliver any certificates for a number of
shares of Series A Preferred Stock in a name other than that of the registered
holder upon the exercise of any Rights until such tax shall have been paid (any
such tax being payable by the holder of such Rights Certificate at the time of
surrender) or until it has been established to the Company's satisfaction that
no such tax is due.
SECTION 10. PREFERRED STOCK RECORD DATE. Each person in whose name any
certificate for a number of shares of Series A Preferred Stock (or other
securities, as the case may be) is issued upon the exercise of Rights shall for
all purposes be deemed to have become the holder of record of such shares of
Series A Preferred Stock (or other securities) represented thereby on, and such
certificates shall be dated, the date upon which the Rights Certificate
evidenced such Rights was duly surrendered and payment of the Purchase Price
(and all applicable transfer taxes) was made; PROVIDED, HOWEVER, that if the
date of such surrender and payment is a date upon which the Series A 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 Series A Preferred Stock
transfer books of the Company are open. Prior to the exercise of the Rights
evidenced thereby, the holder of a Rights Certificate shall not be entitled to
any rights of a shareholder of the Company with respect to shares for which the
Rights shall be exercisable, including, without limitation, the right to vote,
to receive dividends or other distributions or to exercise any preemptive
rights, and shall not be entitled to receive any notice of any proceeding of the
Company except as provided herein.
SECTION 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER AND KIND OF SHARES OR
NUMBER OF RIGHTS; EXCHANGE OF RIGHTS FOR SHARES OF CAPITAL STOCK. The Purchase
Price, the number and
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kind of shares covered by each Right and the number of Rights outstanding are
subject to adjustment from time to time as provided in this Section 11.
(a) (i) In the event the Company shall at any time after the
date of this Agreement (A) declare a dividend on the Series A Preferred
Stock payable in shares of Series A Preferred Stock, (B) subdivide the
outstanding Series A Preferred Stock, (C) combine the outstanding
Series A Preferred Stock into a smaller number of shares, or (D) issue
any shares of its capital stock in a reclassification of the Series A
Preferred Stock (including any such reclassification in connection with
a consolidation or merger in which the Company is the continuing or
surviving corporation), except as otherwise provided in this Section
11(a) and Section 7(e) hereof, the Purchase Price in effect at the time
of the record date for such dividend or of the effective date of such
subdivision, combination or reclassification, and the number and kind
of shares of 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 Series A
Preferred Stock transfer books of the Company were open, he would have
owned upon such exercise and been entitled to receive by virtue of such
dividend, subdivision, combination or reclassification; 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. If an event occurs which would require an adjustment under both
this Section 11(a)(i) and Section 11(a)(ii) hereof, the adjustment
provided for in this Section 11(a)(i) shall be in addition to, and
shall be made prior to, any adjustment required pursuant to Section
11(a)(ii) hereof.
(ii) the event that any Person shall, at any time
after the Rights Dividend Declaration Date (as defined in the WHEREAS
clause at the beginning of this Agreement), become an Acquiring Person
or an Adverse Person, unless the event causing such Person to become an
Acquiring Person or an Adverse Person is an acquisition of shares of
Common Stock pursuant to a cash tender offer for all outstanding shares
of Common Stock at a price and on terms determined by at least a
majority of the members of the Board of Directors who are not officers
of the Company (provided that at the time of such determination of the
Board of Directors there are then in office not less than five
Continuing Directors and such determination is also made by a majority
of the Continuing Directors then in office), after receiving advice
from one or more investment banking firms, to be (a) at a price which
is fair to shareholders (taking into account all factors which such
members of the Board deem relevant including, without limitation,
prices which could reasonably be achieved if the Company or its assets
were sold on an orderly basis designed to realize maximum value) and
(b) otherwise in the best interests of the Company and its shareholders
(a "Qualifying Tender Offer"), then, subject to the last sentence of
Section 23(a) and except as otherwise provided in this Section 11, each
holder of a Right (except as provided in Section 7(e) hereof) 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-thousandths of a share of Series A Preferred Stock for which a
Right is then exercisable, in accordance with the terms of this
Agreement and in lieu of shares of Series A Preferred Stock, such
number of shares of the Common Stock as shall equal the result obtained
by (x) multiplying the then
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current Purchase Price by the number of one one-thousandths of a share
of Series A Preferred Stock for which a Right is then exercisable and
dividing that product by (y) 50% of the then current market price per
share of the Company's Common Stock (determined pursuant to Section
11(d) hereof) on the date of the occurrence of such 11(a)(ii) Event.
(iii) In the event that there shall not be sufficient shares
of Common Stock 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 Company shall take all such action as
may be necessary to authorize additional shares of Common Stock for
issuance upon exercise of the Rights. In the event that the Company
shall, after good faith effort, be unable to take all such action as
may be necessary to authorize such additional shares of Common Stock,
the Company shall substitute, for each share of Common Stock that would
otherwise be issuable upon exercise of a Right, a number of shares of
Series A Preferred Stock or fraction thereof such that the current
market price per share of one share of Series A Preferred Stock
multiplied by such number or fraction is equal to the current market
price per share of one share of Common Stock as of the date of issuance
of such shares of Series A Preferred Stock or fraction thereof.
(b) In case the Company shall fix a record date for the
issuance of rights, options or warrants to all holders of Series A Preferred
Stock entitling them to subscribe for or purchase (for a period expiring within
forty-five (45) calendar days after such record date) Series A Preferred Stock
(or shares having the same rights, privileges and preference as the shares of
Series A Preferred Stock ("equivalent preferred stock")) or securities
convertible into Series A Preferred Stock or equivalent preferred stock at a
price per share of Series A Preferred Stock or per share of equivalent preferred
stock (or having a conversion price per share, if a security convertible into
Series A Preferred Stock or equivalent preferred stock) less than the current
market price as determined pursuant to Section 11(d) hereof) per share of Series
A Preferred Stock on such record date, the Purchase Price to be in effect after
such record date, shall be determined by multiplying the Purchase Price in
effect immediately prior to such record date by a fraction, the numerator of
which shall be the number of shares of Series A Preferred Stock outstanding on
such record date, plus the number of shares of Series A Preferred Stock which
the aggregate offering price of the total number of shares of Series A Preferred
Stock and/or equivalent preferred stock so to be offered (and/or the aggregate
initial conversion price of the convertible securities so to be offered) would
purchase at such current market price, and the denominator of which shall be the
number of shares of Series A Preferred Stock outstanding on such record date,
plus the number of additional shares of Series A Preferred Stock and/or
equivalent preferred stock to be offered for subscription or purchase (or into
which the convertible securities so to be offered are initially convertible);
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 by delivery of consideration part or all of which
may be in a form other than cash, the value of such consideration shall be as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent and
shall be binding on the Rights Agent and the holders of the Rights. Shares of
Series A Preferred Stock owned by or held for the account of the Company shall
not be deemed outstanding for the purpose of any such computation. Such
adjustment shall be made successively whenever such a record date is fixed,
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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 a distribution to
all holders of Series A Preferred Stock (including any such distribution made in
connection with a consolidation or merger in which the Company is the continuing
corporation) of evidences of indebtedness, cash (other than a regular quarterly
cash dividend out of the earnings or retained earnings of the Company), assets
(other than a dividend payable in Series A Preferred Stock, but including any
dividend payable in stock other than Series A 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 which shall be the current market price (as
determined pursuant to Section 11(d) hereof) per share of Series A Preferred
Stock on such record date, less the fair market value (as determined in good
faith by the Board of Directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent) of the portion of the
cash, assets or evidences of indebtedness so to be distributed or of such
subscription rights or warrants applicable to a share of Series A Preferred
Stock and the denominator of which shall be such current market price (as
determined pursuant to Section 11(d) hereof) per share of Series A 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 be adjusted to be the Purchase Price which would have been in effect
if such record date had not been fixed.
(d) (i) For the purpose of any computation hereunder, the
"current market price" per share 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 market price per share 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 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 market price per share shall be appropriately
adjusted to reflect the current market price per share equivalent of
such Security. The closing price for each day shall be the last sale
price, regular way, or, in case no such sale takes place on such day,
the average of the closing bid and asked prices, regular way, in either
case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading
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on the New York Stock Exchange or, if the Security is not listed or
admitted to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on
which the Security is listed or admitted to trading or, if the Security
is not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of
the high bid and low asked prices in the over-the-counter market, as
reported by the National Association of Securities Dealers, Inc.
Automated Quotations System ("Nasdaq") or such other system then in
use, or, if on any such date the Security is not quoted by any such
organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the
Security selected by the Board of Directors of the Company. If on any
such date no market maker is making a market in the Security, the fair
value of such Security on such date as determined in good faith by the
Board of Directors of the Company shall be used. The term "Trading Day"
shall mean a day on which the principal national securities exchange on
which the 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.
(ii) For the purpose of any computation hereunder,
the "current market price per share" of the Series A Preferred Stock
shall be determined in accordance with the method set forth in Section
11(d)(i). If the Series A Preferred Stock is not publicly traded, the
"current market price per share" of the Series A Preferred Stock shall
be conclusively deemed to be the current market price per share of the
Common Stock as determined pursuant to Section 11(d))(i) (appropriately
adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof), multiplied by one
thousand. If neither the Common Stock nor the Series A Preferred Stock
is publicly held or so listed or traded, "current market price per
share" shall mean the fair value per share as determined in good faith
by the Board of Directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent.
(e) Anything herein to the contrary notwithstanding, no
adjustment in the Purchase Price shall be required unless such adjustment would
require an increase or decrease of at least one percent (1%) in the Purchase
Price; PROVIDED, HOWEVER, that any adjustments which by reason of this Section
11(e) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Section 11
shall be made to the nearest cent or to the nearest one-ten-thousandth of a
share of Series A Preferred Stock 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
(3) years from the date of the transaction which mandates such adjustment, or
(ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section
11(a)(ii) or Section 13(a) hereof, the holder of any Right thereafter exercised
shall become entitled to receive any shares or fraction of a share of capital
stock other than Series A Preferred Stock, thereafter the number or fraction of
such other shares so receivable upon exercise of any Right and the Purchase
Price thereof shall be subject to adjustment from time to time in a manner and
on terms as nearly equivalent as practicable to the provisions with respect to
the Series A Preferred Stock contained in Sections 11(a), (b), (c), (e), (g),
(h), (i), (j), (k) and (m), and the provisions of Sections 7, 9, 10, 13 and 14
hereof with respect to the Series A 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
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Price, the number of one one-thousandths of a share of Series A 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-thousandths of a share of Series A Preferred Stock (calculated to the
nearest one-ten-thousandth) obtained by (i) multiplying (x) the number of one
one-thousandths of a share covered by a Right immediately prior to this
adjustment, by (y) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price, and (ii) dividing the product so obtained by
the Purchase Price in effect immediately after such adjustment of the Purchase
Price.
(i) The Company may elect on or after the date of any
adjustment of the Purchase Price to adjust the number of Rights, in lieu of any
adjustment in the number of one one-thousandths of a share of Series A Preferred
Stock purchasable upon the exercise of a Right. Each of the Rights outstanding
after the adjustment in the number of Rights shall be exercisable for the number
of one one-thousandths of a share of Series A 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 Rights Certificates have been issued, shall be at least ten (10)
days later than the date of the public announcement. If Rights Certificates have
been issued, upon each adjustment of the number of Rights pursuant to this
Section 11(i), the Company shall, as promptly as practicable, cause to be
distributed to holders of record of Rights Certificates on such record date
Rights Certificates evidencing, subject to Section 14 hereof, the additional
Rights to which such holders shall be entitled as a result of such adjustment,
or, at the option of the Company, shall cause to be distributed to such holders
of record in substitution and replacement for the Rights Certificates held by
such holders prior to the date of adjustment, and upon surrender thereof, if
required by the Company, new Rights Certificates evidencing all the Rights to
which such holders shall be entitled after such adjustment. Rights Certificates
so to be distributed shall be issued, executed and countersigned in the manner
provided for herein (and may bear, at the option of the Company, the adjusted
Purchase Price) and shall be registered in the names of the holders of record of
Rights Certificates on the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase
Price or the number of one one-thousandths of a share of Series A Preferred
Stock issuable upon the exercise of the Rights, the Rights Certificates
theretofore and thereafter issued may continue to express the Purchase Price per
share and the number of one one-thousandths of a share of Series A Preferred
Stock which were expressed in the initial Rights Certificates issued hereunder.
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(k) Before taking any action that would cause an adjustment
reducing the Purchase Price below one one-thousandth of the then stated or par
value, if any, of the shares of Series A Preferred Stock issuable upon exercise
of the Rights, the Company shall take any corporate action which may, in the
opinion of its counsel, be necessary in order that the Company may validly and
legally issue such number of fully paid and nonassessable shares of Series A
Preferred Stock at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised after such record date
the number of shares of Series A Preferred Stock and other capital stock or
securities of the Company, if any, issuable upon such exercise over and above
the number of shares of Series A Preferred Stock and other capital stock or
securities of the Company, if any, issuable upon such exercise on the basis of
the Purchase Price in effect prior to such adjustment; PROVIDED, HOWEVER, that
the Company shall deliver to such holder a due bill or other appropriate
instrument evidencing such holder's right to receive such additional shares
(fractional or otherwise) or securities upon the occurrence of the event
requiring such adjustment.
(m) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make such reductions in the
Purchase Price, in addition to those adjustments expressly required by this
Section 11, as and to the extent that in its good faith judgment the Board of
Directors of the Company shall determine to be advisable in order that any (i)
consolidation or subdivision of the Series A Preferred Stock, (ii) issuance
wholly for cash of any shares of Series A Preferred Stock at less
than the current market price, (iii) issuance wholly for cash of shares of
Series A Preferred Stock or securities which by their terms are convertible into
or exchangeable for shares of Series A Preferred Stock, (iv) dividends on Series
A Preferred Stock payable in Series A Preferred Stock or (v) issuance of rights,
options or warrants referred to in this Section 11, hereafter made by the
Company to holders of its Series A Preferred Stock shall not be taxable to such
shareholders.
(n) The Company covenants and agrees that it shall not, at any
time after the Distribution Date, (i) consolidate with any other Person (other
than a Subsidiary of the Company in a transaction which complies with Section
11(o) hereof), (ii) merge with or into any other Person (other than a Subsidiary
of the Company in a transaction which complies with Section 11(o) hereof) or
(iii) sell or transfer (or permit any Subsidiary to sell or transfer), in one
transaction, or a series of related transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person or Persons (other than the
Company and/or any of its Subsidiaries in one or more transactions each of which
complies with Section 11(o) hereof), if (x) at the time of or immediately after
such consolidation, merger or sale there are any rights, warrants or other
instruments or securities outstanding or agreements in effect which would
substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights or (y) prior to, simultaneously with or immediately after
such consolidation, merger or sale, the stockholders of the Person who
constitute, or would constitute, the "Principal Party" for purposes of Section
13(a) hereof shall have received a distribution of Rights previously owned by
such Person or any of its Affiliates and Associates.
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(o) The Company covenants and agrees that, after the
Distribution Date, it will not, except as permitted by Section 23 or Section 26
hereof, take (or permit any Subsidiary to take) any action if at the time such
action is taken it is reasonably foreseeable that such action will diminish
substantially or otherwise eliminate the benefits intended to be afforded by the
Rights.
(p) Anything in this Agreement to the contrary
notwithstanding, in the event that the Company shall at any time after the
Rights Dividend Declaration Date and prior to the Distribution Date (i) declare
a dividend on the outstanding shares of Common Stock payable in shares of Common
Stock, (ii) subdivide the outstanding shares of Common Stock, or (iii) combine
the outstanding shares of Common Stock into a smaller number of shares, then in
any such case (A) the number of one one-thousandths of a share of Series A
Preferred Stock purchasable after such event upon proper exercise of each Right
shall be determined by multiplying the number of one one-thousandths of a share
of Series A Preferred Stock so purchasable immediately prior to such event by a
fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately before such event and the denominator of which is the
number of shares of Common Stock outstanding immediately after such event, and
(B) each share of Common Stock outstanding immediately after such event shall
have issued with respect to it that number of Rights which each share of Common
Stock outstanding immediately prior to such event had issued with respect to it.
The adjustments provided for in this Section 11(p) shall be made successively
whenever such a dividend is declared or paid or such a subdivision, combination
or consolidation is effected.
(q) (i) The Board of Directors of the Company may, at its
option, at any time after any Person becomes an Acquiring Person or an
Adverse Person, exchange all or part of the then outstanding and
exercisable Rights (which shall not include Rights that have become
void pursuant to the provisions of Section 7(e) hereof) for Common
Stock at an exchange ratio of one share of Common Stock per Right,
appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof (such exchange
ratio being hereinafter referred to as the "Exchange Ratio").
Notwithstanding the foregoing, the Board of Directors shall not be
empowered to effect such exchange at any time after any Person (other
than the Company, any Subsidiary of the Company, any employee benefit
plan of the Company or any such Subsidiary, or any entity holding
Common Stock for or pursuant to the terms of any such plan), together
with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of 50% or more of the Common Stock then outstanding.
(ii) Immediately upon the action of the Board of
Directors of the Company ordering the exchange of any Rights pursuant
to paragraph (i) of this Section 11(q) and without any further action
and without any notice, the right to exercise such Rights shall
terminate and the only right thereafter of a holder of such Rights
shall be to receive that number of shares of Common Stock equal to the
number of such Rights held by such holder multiplied by the Exchange
Ratio. The Company shall promptly give public notice of any such
exchange; PROVIDED, HOWEVER, that the failure to give, or any defect
in, such notice shall not affect the validity of such exchange. The
Company promptly shall mail a notice of any such exchange to all of the
holders of such Rights at their last addresses as they appear upon the
registry books of the Rights Agent. Any notice which is mailed in the
manner herein provided shall be deemed given, whether or not the holder
receives the
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notice. Each such notice of exchange will state the method by which the
exchange of the Common Stock for Rights will be effected and, in the
event of any partial exchange, the number of Rights which will be
exchanged. Any partial exchange shall be effected pro rata based on the
number of Rights (other than Rights which have become void pursuant to
the provisions of Section 7(e) hereof), held by each holder of Rights.
(iii) In the event that there shall not be sufficient
Common Stock available for issuance to permit any exchange of Rights as
contemplated in accordance with this Section 11(q), the Company shall
take all such action as may be necessary to authorize additional Common
Stock for issuance upon exchange of the Rights. In the event that the
Company shall, after good faith effort, be unable to take all such
action as may be necessary to authorize such additional Common Stock,
the Company shall substitute, for each share of Common Stock that would
otherwise be issuable upon exchange of a Right, a number of shares of
Series A Preferred Stock or fraction thereof such that the current
market price per share of one share of Series A Preferred Stock
multiplied by such number or fraction is equal to the current market
price per share of one share of Common Stock as of the date of issuance
of such share of Series A Preferred Stock or fraction thereof.
(iv) The Company shall not be required to issue fractions of
shares of Common Stock or to distribute certificates which evidence
fractional shares of Common Stock. In lieu of such fractional shares of
Common Stock, the Company shall pay to the registered holders of the
Right Certificates with regard to which such fractional shares of
Common Stock would otherwise be issuable an amount in cash equal to the
same fraction of the current market value of a whole share of Common
stock. For the purposes of this paragraph (iv), the current market
value of a whole share of Common Stock shall be the closing price of a
share of Common Stock (as determined pursuant to the second sentence of
Section 11(d)(i) hereof) for the Trading Day immediately prior to the
date of exchange pursuant to this Section 11.
SECTION 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES.
Whenever an adjustment is made as provided in Section 11 and Section 13 hereof,
the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent, and with the transfer agent for the
Series A Preferred Stock or Common Stock, a copy of such certificate and (c)
mail a brief summary thereof to each holder of a Rights Certificate (or, if
prior to the Distribution Date, to each holder of a certificate representing
shares of Common Stock) in accordance with Section 25 hereof.
SECTION 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR
EARNING POWER.
(a) In the event that, following the Stock Acquisition Date,
directly or indirectly, (x) the Company shall consolidate with, or merge with
and into, any other Person (other than a Subsidiary of the Company in a
transaction which complies with Section 11(o) hereof), and the Company shall not
be the continuing or surviving corporation of such consolidation or merger, (y)
any Person (other than a Subsidiary of the Company in a transaction which
complies with Section 11(o) hereof) shall consolidate with, or merge with or
into, the Company, and the Company shall be the continuing or surviving
corporation of such consolidation or merger and, in connection with such
consolidation or merger, all or part of the outstanding shares of Common Stock
shall be
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<PAGE>
changed into or exchanged for stock or other securities of any other Person or
cash or any other property or (z) the Company shall sell or otherwise transfer
(or one or more of its Subsidiaries shall sell or otherwise transfer) in one
transaction or a series of related transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any Person or Persons (other than the Company
or any Subsidiary of the Company in one or more transactions each of which
complies with Section 11(o) hereof), then, and in each such case, proper
provisions shall be made so that: (i) each holder of a Right, except as provided
in Section 7(e) hereof, shall thereafter have the right to receive, upon the
exercise thereof at a price equal to the then current Purchase Price multiplied
by the number of one one-thousandths of a share of Series A Preferred Stock for
which a Right is then exercisable (disregarding any adjustment of the Purchase
Price pursuant to Section 11(a)(ii) hereof) in accordance with the terms of this
Agreement, such number of validly authorized and issued, fully paid,
nonassessable and freely tradable shares of Common Stock of the Principal Party
(as such term is hereinafter defined), not subject to any liens, encumbrances,
rights of first refusal or other adverse claims, as shall be equal to the result
obtained by (1) multiplying the then current Purchase Price by the number of one
one-thousandths of a share of Series A Preferred Stock for which a Right is
exercisable immediately prior to the first occurrence of a Section 13 Event (or,
if a Section 11(a)(ii) Event has occurred prior to the first occurrence of a
Section 13 Event, multiplying the number of one one-hundredths of a share for
which a Right was exercisable immediately prior to the first occurrence of a
Section 11(a)(ii) Event by the Purchase Price in effect immediately prior to
such first occurrence), and dividing that product (which, following the first
occurrence of a Section 13 Event, shall be referred to as the "Purchase Price"
for each Right and for all purposes of this Agreement) by (2) 50% of the current
market price (determined pursuant to Section 11(d)(i) hereof) per share of the
Common Stock of such Principal Party on the date of consummation of such Section
13 Event; (ii) such Principal Party shall thereafter be liable for, and shall
assume, by virtue of such Section 13 Event, all the obligations and duties of
the Company pursuant to this Agreement; (iii) the term "Company" shall
thereafter be deemed to refer to such Principal Party, it being specifically
intended that the provisions of Section 11 hereof shall apply only to such
Principal Party following the first occurrence of a Section 13 Event; (iv) such
Principal Party shall take such steps (including, but not limited to, the
reservation of a sufficient number of shares of its Common Stock) in connection
with the consummation of any such transaction as may be necessary to assure that
the provisions hereof shall thereafter be applicable, as nearly as reasonably
may be, in relation to its shares of Common Stock thereafter deliverable upon
the exercise of the Rights; and (v) the provisions of Section 11(a)(ii) hereof
shall be of no effect following the first occurrence of any Section 13 Event.
(b) "Principal Party" shall mean
(i) in the case of any transaction described in
clause (x) or (y) of the first sentence of Section 13(a), the Person
that is the issuer of any securities into which shares of Common Stock
of the Company are converted in such merger or consolidation, and if no
securities are so issued, the Person that is the other party to such
merger or consolidation; and
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(ii) in the case of any transaction described in
clause (z) of the first sentence of Section 13(a), the Person that is
the party receiving the greatest portion of the assets or earning power
transferred pursuant to such transaction or transactions;
PROVIDED, HOWEVER, that in any such case, (1) if the Common Stock of such Person
is not at such time and has not been continuously over the preceding twelve (12)
month period registered under Section 12 of the Exchange Act, and such Person is
a direct or indirect Subsidiary of another Person the Common Stock of which is
and has been so registered, "Principal Party" shall refer to such other Person;
and (2) in case such Person is a Subsidiary, directly or indirectly, of more
than one Person, the Common Stocks of five or more of which are and have been so
registered, "Principal Party" shall refer to whichever of such Persons is the
issuer of the Common Stock having the greatest aggregate market value.
(c) The Company shall not consummate any such consolidation,
merger, sale or transfer unless the Principal Party shall have a sufficient
number of authorized shares of its Common Stock which have not been issued or
reserved for issuance to permit the exercise in full of the Rights in accordance
with this Section 13 and unless prior thereto the Company and such Principal
Party shall have executed and delivered to the Rights Agent a supplemental
agreement providing for the terms set forth in paragraphs (a) and (b) of this
Section 13 and further providing that, as soon as practicable after the date of
any consolidation, merger or sale of assets mentioned in paragraph (a) of this
Section 13, the Principal Party will
(i) prepare and file a registration statement under
the Act, with respect to the Rights and the securities purchasable upon
exercise of the Rights on an appropriate form, and will use its best
efforts to cause such registration statement to (A) become effective as
soon as practicable after such filing and (B) remain effective (with a
prospectus at all times meeting the requirements of the Act) until the
Expiration Date; and
(ii) will deliver to holders of the Rights historical
financial statements for the Principal Party and each of its Affiliates
which comply in all respects with the requirements for registration on
Form 10 under the Exchange Act.
The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. In the event that a Section 13 Event
shall occur at any time after the occurrence of a Section 11(a)(ii) Event, the
Rights which have not theretofore been exercised shall thereafter become
exercisable in the manner described in Section 13(a).
(d) Notwithstanding anything in this Agreement to the
contrary, Section 13 shall not be applicable to a transaction described in
subparagraphs (x) and (y) of Section 13(a) if (i) such transaction is
consummated with a Person or Persons who acquired shares of Common Stock
pursuant to a cash tender offer for all outstanding shares of Common stock which
complies with the provisions of Section 11(a)(ii) hereof (or a wholly owned
Subsidiary of any such Person or Persons), (ii) the price per share of Common
Stock offered in such transaction is not less than the price per share of Common
Stock paid to all holders of shares of Common Stock whose shares were purchased
pursuant to such tender offer, and (iii) the form of consideration being offered
to the remaining holders of shares of Common stock pursuant to such transaction
is the same as the
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form of consideration paid pursuant to such tender offer. Upon consummation of
any such transaction contemplated by this Section 13(d), all Rights hereunder
shall expire.
SECTION 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
(a) The Company shall not be required to issue fractions of Rights,
except prior to the Distribution Date as provided in Section 11(p) hereof, or to
distribute Rights Certificates which evidence fractional Rights. In lieu of such
fractional Rights, there shall be paid to the registered holders of the Rights
Certificates with regard to which such fractional Rights would be otherwise be
issuable, an amount in cash equal to the same fraction of the cuncipal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange or, if the Rights are not
listed or admitted to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the Rights are
listed or admitted to trading, or if the Rights are not listed or admitted to
trading on any national securities exchange, the last quoted price or, if not so
quoted, the average of the high bid and low asked prices in the over-the-counter
market, as reported by Nasdaq or such other system then in use or, if on any
such date the Rights are not quoted by any such organization, the average of the
closing bid and asked prices as furnished by a professional market maker making
a market in the Rights selected by the Board of Directors of the Company. If on
any such date no such market maker is making a market in the Rights the fair
value of the Rights on such date as determined in good faith by the Board of
Directors of the Company shall be used.
(b) The Company shall not be required to issue fractions of shares of
Series A Preferred Stock (other than fractions which are integral multiples of
one one-thousandths of a share of Series A Preferred Stock) upon exercise of the
Rights or to distribute certificates which evidence fractional shares of Series
A Preferred Stock (other than fractions which are integral multiples of one
one-thousandths of a share of Series A Preferred Stock). In lieu of fractional
shares of Series A Preferred Stock that are not integral multiples of one
one-thousandth of a share of Series A Preferred Stock, the Company may pay to
the registered holders of Rights Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same fraction of the
current market value of a share of Series A Preferred Stock. For purposes of
this Section 14(b), the current market value of a share of Series A Preferred
Stock shall be the closing price of a share of Series A Preferred Stock (as
determined pursuant to Section 11(d) hereof) for the Trading Day immediately
prior to the date of such exercise.
(c) The holder of a Right by the acceptance of the Rights expressly
waives his right to receive any fractional Rights or any fractional shares upon
exercise of a Right, except as permitted by this Section 14.
SECTION 15. RIGHTS OF ACTION. All rights of action in respect of this
Agreement are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution
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<PAGE>
Date, the registered holders of the Common Stock); and any registered holder of
any Rights Certificate (or, prior to the Distribution Date, of the Common
Stock), without the consent of the Rights Agent or of the holder of any other
Rights Certificate (or, prior to the Distribution Date, of the Common Stock),
may, in his own behalf and for his own benefit, enforce, and may institute and
maintain any suit, action or proceeding against the Company to enforce, or
otherwise act in respect of, his right to exercise the Rights evidenced by such
Rights Certificate and in this Agreement. Without limiting the foregoing or any
remedies available to the holders of the Rights, the holders of the Rights would
not have an adequate remedy at law for any breach of this Agreement and shall be
entitled to specific performance of the obligations hereunder and injunctive
relief against actual or threatened violations of the obligations hereunder of
any Person subject to this Agreement.
SECTION 16. AGREEMENT OF RIGHTS HOLDERS. Every holder of a Right by
accepting of the same consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of Common Stock;
(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office or offices of the Rights Agent designated for such
purposes, duly endorsed or accompanied by a proper instrument of transfer and
with the appropriate forms and certificates fully executed;
(c) subject to Section 6(a) and Section 7(f) hereof, the Company and
the Rights Agent may deem and treat the person in whose name a Rights
Certificate (or, prior to the Distribution Date, the associated Common Stock
certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the
Rights Certificates or the associated Common Stock certificate made by anyone
other than the Company or the Rights Agent) for all purposes whatsoever, and
neither the Company nor the Rights Agent, subject to the last sentence of
Section 7(e) hereof, shall be required to be affected by any notice to the
contrary; and
(d) notwithstanding anything in this Agreement to the contrary, neither
the Company nor the Rights Agent shall have any liability to any holder of a
Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligations.
SECTION 17. RIGHTS CERTIFICATE HOLDER NOT DEEMED A SHAREHOLDER. No
holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the fraction of a share (or
number of shares) of Series A Preferred Stock or any other securities of the
Company which may at any time be issuable on the exercise of the Rights
represented thereby, nor shall anything contained herein or in any Rights
Certificate be construed to confer upon the holder of any Rights Certificate, as
such, any of the rights of a shareholder of the Company or any right to vote for
the election of directors or upon any matter
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<PAGE>
submitted to shareholders at any meeting thereof, or to give or withhold consent
to any corporate action, or to receive notice of meetings or other actions
affecting shareholders (except as provided in Section 24 hereof), or to receive
dividends or subscription rights, or otherwise, until the Right or Rights
evidenced by such Rights Certificate shall have been exercised in accordance
with the provisions hereof.
SECTION 18. CONCERNING THE RIGHTS AGENT.
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
disbursements and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability, or expense, incurred without
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.
(b) The Rights Agent shall be protected and shall incur no liability
for or in respect of any action taken, suffered or omitted by it in connection
with its administration of this Agreement in reliance upon any Rights
Certificate or certificate for Series A Preferred Stock or for other securities
of the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement, or other paper or document believed by it to be genuine and to be
signed, executed and, where necessary, verified or acknowledged, by the proper
Person or Persons.
SECTION 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT.
(a) Any corporation into which the Rights Agent or any successor Rights
Agent may be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any corporation succeeding to the
corporate trust business of the Rights Agent or any successor Rights Agent,
shall be the successor to the Rights Agent under this Agreement without the
execution or filing of any paper or any further act on the part of any of the
parties hereto; PROVIDED, HOWEVER, that such corporation would be eligible for
appointment as a successor Rights Agent under the provisions of Section 21
hereof. In case at the time such successor Rights Agent shall succeed to the
agency created by this Agreement any of the Rights Certificates shall have been
countersigned but not delivered, any such successor Rights Agent may adopt the
countersignature of a predecessor Rights Agent and deliver such Rights
Certificates so countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor or in
the name of the successor Rights Agent; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.
(b) In case at any time the name of the Rights Agent shall be changed
and at such time any of the Rights Certificates shall have been countersigned
but not delivered, the Rights Agent may adopt the countersignature under its
prior name and deliver Rights Certificates so countersigned; and in case at that
time any of the Rights Certificates shall not have been
24
<PAGE>
countersigned, the Rights Agent may countersign such Rights Certificates either
in its prior name or in its changed name; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.
SECTION 20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Rights Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel of its choice
(which may be counsel to the Company) subject to the approval of the Company
which approval shall not be unreasonably withheld. The opinion of such counsel
shall be full and complete authorization and protection to the Rights Agent as
to any action taken or omitted by it in good faith and in accordance with such
opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person and the
determination of "current market price") be proved or established by the Company
prior to taking or suffering any action hereunder, such fact or matter (unless
other evidence in respect thereof be herein specifically prescribed) may be
deemed to be conclusively proved and established by a certificate signed by the
Chairman of the Board, the Vice Chairman of the Board, if any, the President,
any Vice President, the Treasurer or the Secretary of the Company and delivered
to the Rights Agent; and such certificate shall be full authorization to the
Rights Agent and shall release the Rights Agent from any liability for any
action taken or suffered in good faith by it under the provisions of this
Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its own
negligence, bad faith or willful misconduct, and shall not be liable for any
action it takes or omits to take in good faith which it believes to be
authorized or within its rights or powers granted hereunder. The Rights Agent
need only perform such duties which are specifically set forth herein.
(d) The Rights Agent shall not be under any responsibility in respect
of the validity of this Agreement or the execution and delivery hereof (except
the due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Rights Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Rights Certificate; nor shall it
be responsible for any adjustment required under the provisions of Section 11 or
Section 13 hereof or responsible for the manner, method or amount of any such
adjustment (except with respect to the exercise of Rights evidenced by Rights
Certificates after actual notice of any such adjustment); nor shall it by any
act hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any shares of Series A Preferred Stock to be
issued pursuant to this Agreement or any Rights Certificate or as to whether any
shares of Series A Preferred Stock will, when so issued, be validly authorized
and issued, fully paid and nonassessable.
(e) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
25
<PAGE>
(f) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
Chairman of the Board, the Vice Chairman of the Board, if any, the President,
any Vice President, the Secretary or the Treasurer of the Company, and to apply
to such officers for advice or instructions in connection with its duties, and
it shall not be liable for any action taken or suffered to be taken by it in
good faith in accordance with instructions of any such officer. The Rights Agent
may rely upon any instruction and shall not be responsible to investigate any
factual matters set forth in any such instruction which it reasonably believes
in good faith to have been signed and presented to it by an authorized officer
of the Company.
(g) The Rights Agent and any stockholder, director, officer or employee
of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from acting
in any other capacity for the Company or for any other legal entity.
(h) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct; PROVIDED, HOWEVER, reasonable care was exercised in the
selection and continued employment thereof.
(i) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, including personnel and other
internal costs, or in the exercise of its rights unless there shall be
reasonable grounds for believing that repayment of such funds or adequate
indemnification against such risk or liability is assured to it.
(j) If, with respect to any Rights Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise or transfer without first consulting with the Company.
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 sixty (60) days' notice in writing mailed to the Company, and to each
transfer agent of the Common Stock, by registered or certified mail, and to the
holders of the Rights Certificates by first-class mail. The Company may remove
the Rights Agent or any successor Rights Agent upon sixty (60) days' notice in
writing, mailed to the Rights Agent or successor Rights Agent, as the case may
be, and to the transfer agent of the Common Stock, by registered or certified
mail, and to the holders of the Rights Certificates by first-class mail. If the
Rights Agent shall resign or be removed or shall otherwise become incapable of
acting, the Company shall appoint a successor to the Rights Agent. If the
Company shall fail to make such appointment within a period of sixty (60) days
after giving notice of such removal or after it has been notified in writing of
such resignation or incapacity by the resigning or
26
<PAGE>
incapacitated Rights Agent or by the holder of a Rights Certificate (who shall,
with such notice, submit his Rights Certificate for inspection by the Company),
then any registered holder of any Rights Certificate may apply to any court of
competent jurisdiction for the appointment of a new Rights Agent. Any successor
Rights Agent, whether appointed by the Company or by such a court, shall be a
corporation organized and doing business under the laws of the United States or
of any state of the United States, in good standing, which is authorized under
such laws to exercise corporate trust powers and is subject to supervision or
examination by federal or state authority and which has at the time of its
appointment as Rights Agent a combined capital and surplus of at least
$5,000,000. After appointment, the successor Rights Agent shall be vested with
the same powers, rights, duties and responsibilities as if it had been
originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment, the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Stock and mail a notice thereof in writing to the registered holders
of the Rights Certificates. Failure to give any notice provided for in this
Section 21, however, or any defect therein, shall not affect the legality or
validity of the resignation or removal of the Rights Agent or the appointment of
the successor Rights Agent, as the case may be.
SECTION 22. ISSUANCE OF NEW RIGHTS CERTIFICATES. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Rights Certificates evidencing Rights in such form
as may be approved by its Board of Directors to reflect any adjustment or change
in the Purchase Price and the number or kind or class of shares or other
securities or property purchasable under the Rights Certificates made in
accordance with the provisions of this Agreement. In addition, in connection
with the issuance or sale of shares of Common Stock following the Distribution
Date and prior to the redemption or expiration of the Rights, the Company (a)
shall, with respect to shares of Common Stock so issued or sold pursuant to the
exercise of stock options or under any employee plan or arrangement, or upon the
exercise, conversion or exchange of securities hereinafter issued by the
Company, and (b) may, in any other case, if deemed necessary or appropriate by
the Board of Directors of the Company, issue Rights Certificates representing
the appropriate number of Rights in connection with such issuance or sale;
PROVIDED, HOWEVER, that (i) no such Rights Certificate shall be issued if, and
to the extent that, the Company shall be advised by counsel that such issuance
would create a significant risk of material adverse tax consequences to the
Company or the Person to whom such Rights Certificate would be issued, and (ii)
no such Rights Certificate shall be issued if, and to the extent that,
appropriate adjustment shall otherwise have been made in lieu of the issuance
thereof.
SECTION 23. REDEMPTION AND TERMINATION.
(a) The Board of Directors of the Company may, at its option,
at any time prior to the earlier of (i) the close of business on the tenth day
following the Stock Acquisition Date (or, if the Stock Acquisition Date shall
have occurred prior to the Record Date, the close of business on the tenth day
following the Record Date) subject to extension by the Company pursuant to
Section 26 hereof, or (ii) the Final Expiration Date, redeem all but not less
than all the then outstanding Rights for cash at a redemption price of $.000001
per Right, as such amount may be appropriately adjusted to reflect any stock
split, stock dividend or similar transaction occurring after the date
27
<PAGE>
hereof (such redemption price being hereinafter referred to as the "Redemption
Price"); PROVIDED, HOWEVER, if the Board of Directors of the Company authorizes
redemption of the Rights in either of the circumstances set forth in clauses (i)
and (ii) below, then there must be five Continuing Directors then in office and
such authorization shall require the concurrence of a majority of such
Continuing Directors: (i) such authorization occurs on or after the time a
Person becomes an Acquiring Person or an Adverse Person or (ii) such
authorization occurs on or after the date of a change (resulting from a proxy or
consent solicitation) in a majority of the directors in office at the
commencement of such solicitation if any Person who is a participant in such
solicitation has stated (or, if upon the commencement of such solicitation, a
majority of the Board of Directors of the Company has determined in good faith)
that such person (or any of its Affiliates or Associates) intends to take, or
may consider taking, any action which would result in such Person becoming an
Acquiring Person or an Adverse Person or which would cause the occurrence of a
Triggering Event; PROVIDED FURTHER, however, that if, following the occurrence
of a Stock Acquisition Date and following the expiration of the right of
redemption hereunder but prior to any Triggering Event, (i) a Person who is an
Acquiring Person or an Adverse Person shall have transferred or otherwise
disposed of a number of shares of Common Stock in one transaction or a series of
transactions, not directly or indirectly involving the Company or any of its
Subsidiaries, which did not result in the occurrence of a Triggering Event such
that such Person is thereafter a Beneficial Owner of less than 10% of the
outstanding shares of Common Stock, and (ii) there are no other Persons,
immediately following the occurrence of the event described in clause (i), who
are Acquiring Persons or Adverse Persons, then the right of redemption shall be
reinstated and thereafter be subject to the provisions of this Section 23.
Notwithstanding anything contained in this Agreement to the contrary, the Rights
shall not be exercisable after the first occurrence of a Section 11(a)(ii) Event
until such time as the Company's right of redemption hereunder has expired.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights, evidence of which shall have been
filed with the Rights Agent and without any further action and without any
notice, the right to exercise the Rights will terminate and the only right
thereafter of the holders of Rights shall be to receive the Redemption Price for
each Right so held. Promptly after the action of the Board of Directors ordering
the redemption of the Rights, the Company shall give notice of such redemption
to the Rights Agent and the holders of the then outstanding Rights by mailing
such notice to all such holders at each holder's last address as it appears upon
the registry books of the Rights Agent or, prior to the Distribution Date, on
the registry books of the Transfer Agent for the Common Stock; PROVIDED,
HOWEVER, that the failure to give, or any defect in, any such notice shall not
affect the validity of such redemption. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of redemption will state the method by which the
payment of the Redemption Price will be made.
SECTION 24. NOTICE OF CERTAIN EVENTS.
(a) In case the Company shall propose, at any time after the
Distribution Date, (i) to pay any dividend payable in stock of any class to the
holders of Series A Preferred Stock or to make any other distribution to the
holders of Series A Preferred Stock (other than a regular quarterly cash
dividend out of earnings or retained earnings of the Company), or (ii) to offer
to the holders of Series A Preferred Stock rights or warrants to subscribe for
or to purchase any additional
28
<PAGE>
shares of Series A Preferred Stock or shares of stock of any class or any other
securities, rights or options, or (iii) to effect any reclassification of its
Series A Preferred Stock (other than a reclassification involving only the
subdivision of outstanding shares of Series A Preferred Stock), or (iv) to
effect any consolidation or merger into or with any other Person (other than a
Subsidiary of the Company in a transaction which complies with Section 11(o)
hereof), or to effect any sale or other transfer (or to permit one or more of
its Subsidiaries to effect any sale or other transfer), in one transaction or a
series of related transactions, of more than 50% of the assets or earning power
of the Company and its Subsidiaries (taken as a whole) to any other Person or
Persons (other than the Company and/or any of its Subsidiaries in one or more
transactions each of which complies with Section 11(o) hereof), or (v) to effect
the liquidation, dissolution or winding up of the Company, or (vi) to declare or
pay any dividend on the Common Stock payable in shares of Common Stock or to
effect a subdivision, combination or consolidation of the Common Stock (by
reclassification or otherwise than by payment of dividends in Common Stock),
then, in each such case, the Company shall give to each holder of a Rights
Certificate, to the extent feasible and in accordance with Section 25 hereof, a
notice of such proposed action, which shall specify the record date for the
purposes of such stock dividend, distribution of rights or warrants, or the date
on which such reclassification, consolidation, merger, sale, transfer,
liquidation, dissolution, or winding up is to take place and the date of
participation therein by the holders of the shares of Series A Preferred Stock,
if any such date is to be fixed, and such notice shall be so given in the case
of any action covered by clause (i) or (ii) above at least twenty (20) days
prior to the record date for determining holders of the shares of Common Stock
for purposes of such action, and in the case of any such other action, at least
twenty (20) days prior to the date of the taking of such proposed action or the
date of participation therein by the holders of the shares of Common Stock
whichever shall be the earlier.
(b) In case any of the events set forth in Section 11(a)(ii) hereof
shall occur, then, in any such case, (i) the Company shall as soon as
practicable thereafter give to each holder of a Rights Certificate, to the
extent feasible and in accordance with Section 25 hereof, a notice of the
occurrence of such event, which shall specify the event and the consequences of
the event to holders of Rights under Section 11(a)(ii) hereof, and (ii) all
references in the preceding paragraph to Series A Preferred Stock shall be
deemed thereafter to refer, if appropriate, to other securities.
SECTION 25. NOTICES. Notices or demands authorized by this Agreement to
be given or made by the Rights Agent or by the holder of any Rights Certificate
to or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:
CHS Electronics, Inc.
2000 N.W. 84th Avenue
Miami, Florida 33122
Attention: Chairman of the Board,
Chief Executive Officer and President
Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent
29
<PAGE>
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:
Interwest Transfer Company
1981 East 4800 South, Suite 100
Salt Lake City, Utah 84117
Attention: Vice President, Stock Transfer
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Common Stock) shall be sufficiently given or made if sent by
first-class mail, postage pre-paid, addressed to such holder at the address of
such holder as shown on the registry books of the Company.
SECTION 26. SUPPLEMENTS AND AMENDMENTS. For as long as the Rights are
then redeemable and except as provided in the last sentence of this Section 26,
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
without the approval of any holders of the Rights or the Common Stock. At any
time when the Rights are not then redeemable and except as provided in the last
sentence of this Section 26, 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 (a) to cure any ambiguity, (b) to
correct or supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein or (c) to change or supplement the
provisions hereunder in any manner which the Company may deem necessary or
desirable, provided, that no such supplement or amendment pursuant to clause (c)
above shall materially adversely affect the interests of the holders of Rights
Certificates as such. 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 26, the Rights Agent shall execute
such supplement or amendment. Notwithstanding anything contained in this Rights
Agreement to the contrary, no supplement or amendment shall be made which
changes the Redemption Price or the Final Expiration Date and supplements or
amendments may be made after the time that any Person becomes an Acquiring
Person or an Adverse Person (other than pursuant to a Qualifying Tender Offer)
only if at the time of the action of the Board of Directors approving such
supplement or amendment there are then in office not less than five Continuing
Directors and such supplement or amendment is approved by a majority of the
Continuing Directors then in office.
SECTION 27. 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 28. DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS, ETC.
For all purposes of this Agreement, any calculation of the number of shares of
Common Stock outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding shares of Common Stock
of which any Person is the Beneficial Owner, shall be made in accordance with
the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations
under the Exchange Act. The Board of Directors of the Company (with, where
specifically provided for herein, the concurrence of the Continuing Directors)
shall have the exclusive power and authority to administer this Agreement and to
exercise all rights and powers specifically granted to the Board (with, where
specifically
30
<PAGE>
provided for herein, the concurrence of the Continuing Directors) or to the
Company, or as may be necessary or advisable in the administration of this
Agreement, including, without limitation, the right and power to (i) interpret
the provisions of this Agreement and (ii) make all determinations deemed
necessary or advisable for the administration of this Agreement (including a
determination to redeem or not redeem the Rights or to amend the Agreement). All
such actions, calculations, interpretations and determinations (including, for
purposes of clause (y) below, all omissions with respect to the foregoing) which
are done or made by the Board (with, where specifically provided for herein, the
concurrence of the Continuing Directors) in good faith, shall (x) be final,
conclusive and binding on the Company, the Rights Agent, the holders of the
Rights and all other parties and (y) not subject the Board or the Continuing
Directors to any liability to the holders of the Rights.
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 Rights Certificates (and, prior to the
Distribution Date, registered holders of the Common Stock) any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the Distribution
Date, registered holders of the Common Stock).
SECTION 30. SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated;
PROVIDED, HOWEVER, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board of
Directors of the Company determines in its good faith judgment that severing the
invalid language from this Agreement would adversely affect the purpose or
effect of this Agreement, the right of redemption set forth in Section 23 hereof
shall be reinstated and shall not expire until the close of business on the
tenth day following the date of such determination by the Board of Directors.
Without limiting the foregoing, if any provision requiring that a determination
be made by less than the entire Board (or at a time or with the concurrence of a
group of directors consisting of less than the entire Board) is held by a court
of competent jurisdiction or other authority to be invalid, void or
unenforceable, such determination shall then be made by the Board in accordance
with applicable law and the Company's Articles of Incorporation and By-laws.
SECTION 31. GOVERNING LAW. This Agreement, each Right and each Rights
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Florida and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts made
and to be performed entirely within such State.
SECTION 32. CONSENT TO JURISDICTION; SERVICE OF PROCESS. The Company,
the Rights Agent and the holders of the Rights Certificates hereby irrevocably
submit to the jurisdiction of the state or federal courts located in Dade
County, Florida in connection with any suit, action or other proceeding arising
out of or relating to this Agreement and the transactions contemplated hereby,
and hereby agree not to assert, by way of motion, as a defense, or otherwise in
any such suit, action
31
<PAGE>
or proceeding that the suit, action or proceeding is brought in an inconvenient
forum, that the venue of the suit, action or proceeding is improper or that this
Agreement or the subject matter hereof may not be enforced by such courts.
SECTION 33. COUNTERPARTS. This Agreement may be executed in
counterparts and both of such counterparts shall for all purposes be deemed to
be an original, and such counterparts shall together constitute but one and the
same instrument.
SECTION 34. DESCRIPTIVE HEADINGS. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
(SIGNATURES ON FOLLOWING PAGE.)
32
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested, all as of the date first above written.
Attest: CHS ELECTRONICS, INC.
By: By:
-------------------------- --------------------------------------
Name: Antonio Boccalandro Name: Claudio Osorio
Title: Secretary Title: Chairman of the Board, Chief
Executive Officer and President
Attest: INTERWEST TRANSFER COMPANY
By: By:
--------------------------- --------------------------------------
Name: Name:
Title: Title:
33
<PAGE>
EXHIBIT A
FORM
of
CERTIFICATE OF DESIGNATIONS
of
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
CHS ELECTRONICS, INC.
(Pursuant to Section 607.0602 of the
Florida Business Corporation Act)
------------------------------------
CHS Electronics, Inc., a corporation organized and existing
under the Business Corporation Act of the State of Florida (hereinafter called
the "Corporation"), hereby certifies that the following resolution was adopted
by the Board of Directors of the Corporation as required by Section 607.0602 of
the Business Corporation Act at a meeting duly called and held on January 16,
1998:
RESOLVED, that pursuant to the authority granted to and vested
in the Board of Directors of this Corporation (hereinafter called the "Board of
Directors" or the "Board") in accordance with the provisions of the Articles of
Incorporation of the Corporation, the Board of Directors hereby creates a series
of Preferred Stock, par value $.001 per share (the "Preferred Stock"), of the
Corporation and hereby states the designation and number of shares, and fixes
the relative rights, preferences, and limitations thereof as follows:
Series A Junior Participating Preferred Stock:
1. DESIGNATION AND AMOUNT. The shares of such series shall be
designated as "Series A Junior Participating Preferred Stock" (the "Series A
Preferred Stock") and the number of shares constituting the Series A Preferred
Stock shall be 100,000. 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 A 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 Corporation
convertible into Series A Preferred Stock.
A-1
<PAGE>
2. RANK. The Series A Preferred Stock shall rank: (i) prior to
all of the Corporation's Common Stock, par value $.001 per share (the "Common
Stock"); (ii) prior to any class or series of capital stock of the Corporation
hereafter created specifically ranking by its terms junior to any Series A
Preferred Stock of whatever subdivision (collectively, with the Common Stock,
"Junior Securities"); and (iii) on parity with any class or series of capital
stock of the Corporation hereafter created specifically ranking by its terms on
parity with the Series A Preferred Stock ("Parity Securities"), in each case as
to distributions of assets upon liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary.
3. DIVIDENDS AND DISTRIBUTIONS.
(A) Subject to the rights of the holders of Senior
Securities, the holders of shares of Series A Preferred Stock, in
preference to the holders of Junior 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 first day of March, June, September and December in each
year (each such date being referred to herein as a "Quarterly Dividend
Payment Date"), commencing on the first Quarterly Dividend Payment Date
after the first issuance of a share or fraction of a share of Series A
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 shares of Common Stock
or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date or, with respect
to the first Quarterly Dividend Payment Date, since the first issuance
of any share or fraction of a share of Series A Preferred Stock. In the
event the Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares
of Common Stock (by reclassification or otherwise than by payment of a
dividend in shares of Common Stock) into a greater or lesser number of
shares of Common Stock, then in each such case the amount to which
holders of shares of Series A Preferred Stock were entitled immediately
prior to such event under clause (b) of the preceding sentence shall be
adjusted by multiplying such amount by a fraction, the numerator of
which is the number of shares of Common Stock outstanding immediately
after such event and the denominator of which is the number of shares
of Common Stock that were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or
distribution on the Series A Preferred Stock as provided in paragraph
(A) of this Section immediately after it declares a dividend or
distribution on the Common Stock (other than a dividend payable in
shares of Common Stock); provided that, in the event no dividend or
distribution shall have been declared on the Common Stock during the
period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a
A-2
<PAGE>
dividend of $1 per share on the Series A Preferred Stock shall
nevertheless be payable on such subsequent Quarterly Dividend Payment
Date.
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares,
unless the date of issue of such shares is prior to the record date for
the first Quarterly Dividend Payment Date, in which case dividends on
such shares shall begin to accrue from the date of issue of such
shares, or unless the date of issue is a Quarterly Dividend Payment
Date or is a date after the record date for the determination of
holders of shares of Series A Preferred Stock entitled to receive a
quarterly dividend and before such Quarterly Dividend Payment Date, in
either of which events such dividends shall begin to accrue and be
cumulative from such Quarterly Dividend Payment Date. Accrued but
unpaid dividends shall not bear interest. Dividends paid on the shares
of Series A Preferred Stock in an amount less than the total amount of
such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at
the time outstanding. The Board of Directors may fix a record date for
the determination of holders of shares of Series A Preferred Stock
entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be not more than 60 days prior to the
date fixed for the payment thereof.
4. VOTING RIGHTS. The holders of shares of Series A Preferred
Stock shall have the following voting rights:
(A) Subject to the provision for adjustment
hereinafter set forth, each share of Series A Preferred Stock shall
entitle the holder thereof to one vote on all matters submitted to a
vote of the shareholders of the Corporation. In the event the
Corporation shall at any time declare or pay any dividend on the Common
Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock
(by reclassification or otherwise than by payment of a dividend in
shares of Common Stock) into a greater or lesser number of shares of
Common Stock, then in each such case the number of votes per share to
which holders of shares of Series A Preferred Stock were entitled
immediately prior to such event shall be adjusted by multiplying such
number by a fraction, the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) Except as otherwise provided herein, in any other
Certificate of Designations creating a series of Preferred Stock or any
similar stock, or by law, the holders of shares of Series A Preferred
Stock and the holders of shares of Common Stock and any other capital
stock of the Corporation having general voting rights shall vote
together as one class on all matters submitted to a vote of
stockholders of the Corporation.
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(C) Except as set forth herein, or as otherwise
provided by law, holders of Series A Preferred Stock shall have no
special voting rights and their consent shall not be required (except
to the extent they are entitled to vote with holders of Common Stock as
set forth herein) for taking any corporate action.
5. CERTAIN RESTRICTIONS.
(A) Whenever quarterly dividends or other dividends
or distributions payable on the Series A Preferred Stock as provided in
Section 3 are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on shares of
Series A Preferred Stock outstanding shall have been paid in full, the
Corporation shall not:
(i) declare or pay dividends, or make any other
distributions, on any Junior Securities;
(ii) declare or pay dividends, or make any other
distributions, on any Parity Securities, except dividends paid
ratably on the Series A Preferred Stock and all such Parity
Securities 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 any Junior Securities, provided that the
Corporation may at any time redeem, purchase or otherwise
acquire Junior Securities in exchange for other Junior
Securities; or
(iv) redeem or purchase or otherwise acquire for
consideration any Parity Securities, 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
Parity Securities upon such terms as the Board of Directors,
after consideration of the respective annual dividend rates
and other relative rights and preferences of the respective
series and classes, shall determine in good faith will result
in fair and equitable treatment among the respective series or
classes.
(B) The Corporation shall not permit any subsidiary
of the Corporation to purchase or otherwise acquire for consideration
any shares of stock of the Corporation unless the Corporation could,
under paragraph (A) of this Section 5, purchase or otherwise acquire
such shares at such time and in such manner.
6. REACQUIRED SHARES. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
subject to the conditions and restrictions on issuance set forth herein, in the
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Articles of Incorporation, or in any other Certificate of Designations creating
a series of Preferred Stock or any similar stock or as otherwise required by
law.
7. LIQUIDATION, DISSOLUTION OR WINDING UP. Upon any
liquidation, dissolution or winding up of the Corporation, no distribution shall
be made (1) to the holders of Junior Securities unless, prior thereto, the
holders of shares of Series A Preferred Stock shall have received $100 per
share, plus an amount equal to accrued and unpaid dividends and distributions
thereon, whether or not declared, to the date of such payment, provided that the
holders of shares of Series A 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 shares of Common Stock, or (2) to the holders of Parity
Securities, except distributions made ratably on the Series A Preferred Stock
and all such Parity Securities 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 Corporation shall at any time declare or pay any
dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock, then
in each such case the aggregate amount to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event under the proviso
in clause (1) of the preceding sentence shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
8. CONSOLIDATION, MERGER, ETC. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Series A Preferred Stock shall at the same time be similarly exchanged 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 share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series A Preferred Stock shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
9. NO REDEMPTION. The shares of Series A Preferred Stock shall
not be redeemable.
A-5
<PAGE>
10. AMENDMENT. The Articles of Incorporation of the Corporation shall
not be amended in any manner which would materially alter or change the powers,
preferences or special rights of the Series A Preferred Stock so as to affect
them adversely without the affirmative vote of the holders of at least
two-thirds of the outstanding shares of Series A Preferred Stock, voting
together as a single class.
IN WITNESS WHEREOF, this Certificate of Designations is executed on
behalf of the Corporation by its President and attested by its Secretary this
16th day of January, 1998.
-----------------------------------
Claudio Osorio, President
Attest:
- ------------------------------------
Antonio Boccalandro, Secretary
A-6
<PAGE>
EXHIBIT B
[FORM OF RIGHTS CERTIFICATE]
Certificate No. R-_____________________ ____________________________ Rights
NOT EXERCISABLE AFTER JANUARY 15, 2008 OR EARLIER IF REDEEMED BY THE
COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE
COMPANY, AT $.000001 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS
AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN
ACQUIRING PERSON OR ADVERSE PERSON (AS SUCH TERM IS DEFINED IN THE
RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF THE RIGHTS MAY BECOME
NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE
OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING
PERSON, AN ADVERSE PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING
PERSON OR AN ADVERSE PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS
AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS
REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES
SPECIFIED IN SECTION 7(e) OF SUCH AGREEMENT.]
RIGHTS CERTIFICATE
CHS ELECTRONICS, INC.
This certifies that _________________________________, or registered
assigns, is the registered owner of the number of Rights set forth above, each
of which entitles the owner thereof, subject to the terms, provisions and
conditions of the Rights Agreement, dated as of January 16, 1998 (the "Rights
Agreement"), between CHS Electronics, Inc., a Florida corporation (the
"Company"), and Interwest Transfer Company, a Utah corporation (the "Rights
Agent"), to purchase from the Company at any time prior to 5:00 P.M. (New York
time) on January 15, 2008 at the office or offices of the Rights Agent
designated for such purpose, or its successors as Rights
- -------------------
1 The portion of the legend in brackets shall be inserted only if
applicable and shall replace the preceding sentence.
B-1
<PAGE>
Agent, one one-thousandth of a fully paid, non-assessable share of Series A
Junior Participating Preferred Stock, par value $.001 per share (the "Series A
Preferred Stock"), of the Company, at a purchase price of $100 per one
one-thousandth of a share of Series A Preferred Stock (the "Purchase Price"),
upon presentation and surrender of this Rights Certificate with the Form of
Election to Purchase and related Certificate duly executed. The Purchase Price
shall be paid in cash. The number of Rights evidenced by this Rights
Certificate (and the number of one one-thousandths of a share of Series A
Preferred Stock which may be purchased upon exercise thereof) set forth above,
and the Purchase Price per one one-thousandth of a share set forth above, are
the number and Purchase Price as of January 16, 1998, based on the Series A
Preferred Stock as constituted at such date.
Upon the occurrence of a Section 11(a)(ii) Event (as such term is
defined in the Rights Agreement), if the Rights evidenced by this Rights
Certificate are beneficially owned by (i) an Acquiring Person, an Adverse Person
or an Affiliate or Associate thereof (as such terms are defined in the Rights
Agreement), (ii) a transferee of any such Acquiring Person, Adverse Person,
Associate or Affiliate, or (iii) under certain circumstances specified in the
Rights Agreement, a transferee of a person who, after such transfer, became an
Acquiring Person, an Adverse Person or an Affiliate or Associate thereof, such
Rights shall become null and void and no holder hereof shall have any right with
respect to such Rights from and after the occurrence of such Section 11(a)(ii)
Event.
As provided in the Rights Agreement, the Purchase Price and the number
(or fraction thereof) and kind of shares of Series A Preferred Stock or other
capital stock or other securities, which may be purchased upon the exercise of
the Rights evidenced by this Rights Certificate are
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<PAGE>
subject to modification and adjustment upon the happening of certain events,
including Triggering Events.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the above-mentioned office of the
Rights Agent and are also available upon written request to the Rights Agent.
This Rights Certificate, with or without other Rights Certificates,
upon surrender at the principal office or offices of the Rights Agent designated
for such purpose, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of shares of Series A Preferred Stock as the
Rights evidenced by the Rights Certificate or Rights Certificates surrendered
shall have entitled such holder to purchase. If this Rights Certificate shall be
exercised in part, the holder shall be entitled to receive upon surrender hereof
another Rights Certificate or Rights Certificates for the number of whole Rights
not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Certificate may be redeemed by the Company at its option at a redemption
price of $.000001 per Right at any time prior to the earlier of the close of
business on (i) the tenth day following the Stock Acquisition Date (as such time
period may be extended pursuant to the Rights Agreement) and (ii) the Final
Expiration Date. Under certain circumstances set forth in the Rights Agreement,
the decision to
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<PAGE>
redeem shall require the concurrence of a majority of the Continuing Directors.
After the expiration of the redemption period, the Company's right of redemption
may be reinstated if an Acquiring Person or an Adverse Person reduces his
beneficial ownership to less than 10% of the outstanding shares of Common Stock
in a transaction or series of transactions not involving the Company.
No fractional shares of Series A Preferred Stock will be issued upon
the exercise of any Right or Rights evidenced hereby (other than fractions which
are integral multiples of one one-thousandth of a share of Series A Preferred
Stock), but in lieu thereof a cash payment will be made, as provided in the
Rights Agreement.
No holder of this Rights Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of shares of Series A
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 shareholder of the Company or any right to vote for the
election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting shareholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Rights
Certificate shall have been exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
B-4
<PAGE>
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal.
Dated as of ______________, ____
ATTEST: CHS ELECTRONICS, INC.
_________________________________ By:_____________________________
Secretary Title:
Countersigned:
INTERWEST TRANSFER COMPANY
By:______________________________
Authorized Signature
B-5
<PAGE>
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if
such holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED __________________________________________ hereby sells,
assigns and transfers unto______________________________________________________
________________________________________________________________________________
(Please print name and address of transferee)
this Rights Certificate, together will all right, title and interest therein,
and does hereby irrevocably constitute and appoint_____________________________
Attorney, to transfer the within Rights Certificate on the books of the
within-named Company, with full power of substitution.
Dated:_____________________, ____
______________________________
Signature
Signature Guaranteed:
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<PAGE>
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) this Rights Certificate [ ] is [ ] is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate thereof (as such terms are defined pursuant to the Rights
Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate from
any Person who is, was or subsequently became an Acquiring Person, an Adverse
Person or an Affiliate or Associate thereof.
Dated:_______________, ____
_____________________________
Signature
Signature Guaranteed:
NOTICE
The signature to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
B-7
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to
exercise Rights represented by the
Rights Certificate.)
To: CHS Electronics, Inc.
The undersigned hereby irrevocably elects to exercise _______________
Rights represented by this Rights Certificate to purchase the shares of Series A
Preferred Stock issuable upon the exercise of the Rights (or such other
securities of the Company or of any other person which may be issuable upon the
exercise of the Rights) and requests that certificates for such shares be issued
in the name of and delivered to:
Please insert social security or other identifying number
_______________________________________________________________________________
(Please print name and address)
_______________________________________________________________________________
If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
Please insert social security or other identifying number
_______________________________________________________________________________
(Please print name and address)
_______________________________________________________________________________
_______________________________________________________________________________
Dated:______________, ____
___________________________
Signature
Signature Guaranteed:
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<PAGE>
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not
being exercised by or on behalf of a Person who is or was an Acquiring Person,
an Adverse Person or an Affiliate or Associate thereof (as such terms are
defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate from
any Person who is, was or became an Acquiring Person, an Adverse Person or an
Affiliate or Associate thereof.
Dated:_________________, ____
_________________________
Signature
Signature Guaranteed:
NOTICE
The signature to the foregoing Election to Purchase and Certificate
must correspond to the name as written upon the face of this Rights Certificate
in every particular, without alteration or enlargement or any change whatsoever.
B-9
<PAGE>
EXHIBIT C
SUMMARY OF RIGHTS TO PURCHASE
SERIES A PREFERRED STOCK
[CHS ELECTRONICS, INC. LETTERHEAD]
January __, 1998
To Our Shareholders:
Your Board of Directors today declared a dividend distribution of one
Right (a "Right") for each outstanding share of common stock, $.001 par value
(the "Common Stock"), of the Company to shareholders of record at the close of
business on January 30, 1998. Each Right entitles the registered holder to
purchase from the Company one one-thousandth of a share of Series A Junior
Participating Preferred Stock, $.001 par value (the "Series A Preferred Stock"),
of the Company at a price of $100 per one one-thousandth of a share (the
"Purchase Price"), subject to adjustment. This letter describes the Board's
reasons for adopting the Series A Preferred Stock Purchase Rights Plan and
summarizes the material terms of the Rights Plan. The Rights Plan was not
adopted in response to any specific effort to acquire control of the Company,
and the Board is not aware of any such effort.
The Rights Plan contains provisions designed to protect shareholders in
the event of an unsolicited attempt to acquire the Company, including a gradual
accumulation of shares in the open market, a partial or two-tier tender offer
that does not treat all shareholders equally, a squeeze-out merger and other
abusive takeover tactics that could impair the Board's ability to represent your
interests fully. The main purpose and value of a rights plan is to potentially
slow down the process by which a takeover of the Company may occur in order to
allow the Company's Board of Directors and shareholders to have a sufficient
amount of time to research and evaluate whether or not a takeover is in the
Company's best interest. In terms of mechanics, rights plans deter certain
abusive takeover tactics by (i) making them unacceptably expensive to the
prospective acquirer, and (ii) by simultaneously encouraging the prospective
acquirer to negotiate with the board of directors of the target.
The Rights Plan is definitely not intended to prevent an acquisition of
the Company on terms that are favorable and fair to all shareholders. Further,
it should not dissuade any prospective offeror willing to negotiate with your
Board of Directors and certainly will not interfere with a merger or any other
business combination transaction that your Board of Directors deems to be fair
and provide full value to the shareholders. Further, the Rights Plan is not
intended to perpetuate the
C-1
<PAGE>
existence of current management of the Company. The Rights Plan, however, is
designed to deal with the very serious problem of unilateral actions by hostile
acquirers that are calculated to deprive the Company's Board and its
shareholders of their ability to determine the destiny of the Company.
Over 2,000 companies, including over two-thirds of the Standard &
Poor's 500 Index, have issued rights to protect their shareholders against these
tactics.
According to a study conducted by Georgeson & Company, Inc., a
respected proxy solicitation and shareholder relations organization, companies
protected by shareholders rights plans received significantly higher premiums on
their shares in takeover contests than companies that had not adopted such a
plan, after adjustment for changes in the S&P 500 Index. The study also
concluded that such plans do not prevent takeovers and they also do not diminish
the value of a company's stock. There can be no assurance, however, that the
Plan will result in any premium being paid on the Company's Common Stock in the
event of a takeover contest.
The issuance of the Rights does not in any way weaken the financial
strength of the Company or interfere with its business plans. The issuance of
the Rights has no dilutive effect, will not affect reported earnings per share,
is not taxable to the Company or to you, and will not change the way in which
you can presently trade the Company's shares. As explained in detail below, the
Rights will only be exercisable if and when the problem arises which they were
created to deal with.
Your Board was aware when it acted that some people have advanced
arguments that securities of the sort we are issuing deter legitimate
acquisition proposals. We carefully considered these views and concluded that
the arguments are speculative and do not justify leaving shareholders without
any protection against unfair treatment by an acquirer.
Initially, the Rights will be attached to all Common Stock certificates
representing shares then outstanding, and no separate Rights Certificates will
be distributed. The Rights will separate from the Common Stock and a
distribution of the Rights will occur upon the earlier of (i) ten business days
following a public announcement that a person or group of affiliated or
associated persons (an "Acquiring Person") has acquired, or obtained the right
to acquire, beneficial ownership of 15% or more of the outstanding shares of
Common Stock, (ii) ten business days after a person or group of affiliated or
associated persons has (x) become the direct or indirect beneficial owner of at
least 10% of the Company's outstanding Common Stock, and (y) whose ownership
interest is deemed by the Board of Directors of the Company to cause a material
adverse impact on the business or prospects of the Company or its shareholders
(such persons or group hereinafter called an "Adverse Person"), or (iii) ten
business days following the commencement of a tender offer or exchange offer
that would result in a person or group becoming an Acquiring Person or an
Adverse Person. Until the date that the Rights are distributed (the
"Distribution Date"), (i) the Rights will be evidenced by the Common Stock
certificates and will be transferred with and only with such Common Stock
certificates, (ii) new Common Stock certificates issued after the date that the
Rights Plan is adopted, will contain a notation incorporating the Rights
Agreement by reference and (iii) the surrender for transfer of any certificates
for Common Stock outstanding also will constitute the transfer of the Rights
associated with the Common Stock represented by such certificates.
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<PAGE>
The Rights are not exercisable until the Distribution Date and will
expire ten years after the adoption of the Rights Plan, unless earlier redeemed
by the Company as described below.
As soon as practicable after the Distribution Date, Rights Certificates
will be mailed to holders of record of the Common Stock as of the close of
business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights. Except as otherwise determined by
the Board of Directors, only shares of Common Stock issued prior to the
Distribution Date will be issued with Rights.
If, following a person becoming an Acquiring Person or an Adverse
Person, (i) the Company shall consolidate with or merge into any other person in
which the Company is not the surviving corporation, (ii) any other person shall
merge into the Company and all or part of the outstanding Common Stock shall be
changed into or exchanged for securities of any other person or cash or any
other property, or (iii) the Company sells 50% or more of its assets or earning
power, each Right then outstanding would "flip over" and thereby would become a
right to buy that number of shares of common stock of the acquiring company
which at the time of such transaction has a market value of two times the
exercise price of the Right. Thus, if the acquiring company's common stock at
the time of such transaction were trading at $25 per share and the exercise
price of the Rights at such time was $100 per one one-thousandth of a share,
each Right would thereafter be exercisable at $100 for 8 shares (I.E., the
number of shares that could be purchased for $200, or two times the exercise
price of the Right) of the acquiring company's common stock.
In the event a person becomes an Acquiring Person or an Adverse Person
(except pursuant to an offer for all outstanding shares of Common Stock that is
determined by the Board of Directors to be fair to and otherwise in the best
interest of the Company and its Shareholders, a "Qualifying Tender Offer"), each
Right then outstanding would "flip in" and become a right to buy that number of
shares of Common Stock of the Company which at the time of such acquisition
would have a market value of two times the exercise price of the Right. The
acquirer who triggered the Rights would be excluded from the "flip-in" because
his Rights would have become null and void upon his triggering acquisition.
Thus, if the Company's Common Stock at the time of the "flip-in" were trading at
$25 per share and the exercise price of the Rights at such time were $100 per
one one-thousandth of a share, each Right would thereafter be exercisable at
$100 for 8 shares of the Company's Common Stock.
In the event that the "flip in" is triggered, if there is not
sufficient authorized Common Stock available for issuance upon the exercise of
each Right, the Company shall take all such action as may be necessary to
authorize additional shares of Common Stock. In the event that the Company shall
be unable to take all such action, the Company shall substitute, for each share
of Common Stock that would be otherwise issuable upon exercise of a Right, a
number of shares of Series A Preferred Stock or fraction thereof having a
current market value equal to one share of Common Stock.
At any time after a person becomes an Acquiring Person or an Adverse
Person and before the acquisition by a person or group of 50% or more of the
outstanding Common Stock of the Company, the board may exchange the Rights
(other than Rights owned by such person or group which have become void), in
whole or in part, at an exchange ratio of one share of the Company's Common
Stock per Right, subject to adjustment.
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<PAGE>
At any time until ten days following the public announcement that a
person has become an Acquiring Person or an Adverse Person, the Company may
redeem the Rights in whole, but not in part, at a price of $.000001 per Right,
payable in cash. Under certain circumstances set forth in the Rights Agreement,
the decision to redeem shall require the concurrence of a majority of the
Continuing Directors (as hereinafter defined). After the redemption period has
expired, the Company's rights of redemption may be reinstated if the Acquiring
Person or Adverse Person reduces his or her beneficial ownership to less than
10% of the outstanding shares of Common Stock in a transaction or series of
transactions not involving the Company. Immediately upon the action of the Board
of Directors ordering redemption of the Rights, with, where required, the
concurrence of the Continuing Directors, the Rights will terminate and the only
right which the holders of Rights will thereafter have will be to receive the
$.000001 redemption price.
The term "Continuing Directors" means any member of the Board of
Directors of the Company who was a member of the Board prior to the date of the
Rights Agreement, and any person who is subsequently elected to the Board if
such person is recommended or approved by a majority of the Continuing
Directors, but shall not include an Acquiring Person or an Adverse Person, or an
affiliate or associate of an Acquiring Person or an Adverse Person, or any
representative or designee of the foregoing.
The Purchase Price payable, and the number of shares of Series A
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 Series A Preferred Stock, (ii) if holders of the Series
A Preferred Stock are granted certain rights or warrants to subscribe for Series
A Preferred Stock or convertible securities at less than the current market
price of the Series A Preferred Stock, or (iii) upon the distribution to holders
of the Series A Preferred Stock of evidences of indebtedness or assets
(excluding regular quarterly cash dividends) or of subscription rights or
warrants (other than those referred to above).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. No fractional shares of Series A Preferred Stock (other than fractions
which are integral multiples of one one-thousandth of a share) or Common Stock
will be issued and, in lieu thereof, an adjustment in cash will be made based on
the market price of the Series A Preferred Stock or the Common Stock, as
applicable, on the last trading date prior to the date of exercise.
The shares of Series A Preferred Stock purchasable upon exercise of the
Rights will not be redeemable. Each share of Series A Preferred Stock will be
entitled 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
Series A Preferred Stock will be entitled to a minimum preferential liquidation
payment of $100 per share but will be entitled to an aggregate payment of 100
times the payment made per share of Common Stock. Each share of Series A
Preferred Stock will have one vote, voting together with the Common Stock.
Finally, in the event of any merger, consolidation or other transaction in which
shares of Common Stock are exchanged, each share of Series A 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.
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Because of the nature of the dividend, liquidation and voting rights of
the Series A Preferred Stock, the value of the one one-thousandth interest in a
share of Series A Preferred Stock purchasable upon exercise of each Right should
approximate the value of one share of Common Stock.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including, without limitation, the right
to vote or to receive dividends.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A dated
January 16, 1998. A copy of the Rights Agreement is available free of charge
from the Rights Agent. This summary description of the Rights does not purport
to be complete and is qualified in its entirety by reference to the Rights
Agreement, which is incorporated herein by reference.
In declaring the Rights dividend, we have expressed our confidence in
the future and our determination that you, our shareholders, be given every
opportunity to participate fully in that future.
On behalf of the Board of Directors.
______________________________________
Claudio Osorio
Chairman of the Board, Chief Executive
Officer and President
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