<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM 8-A
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934
NetVantage, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 95-4324525
- -------------------------- --------------------------------
(State of incorporation (I.R.S. Employer
or organization) Identification No.)
201 Continental Boulevard, Suite 201
El Segundo, California 90245-4427
- --------------------------------------------------------------------------------
(Address of principal executive offices and zip code)
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
- ------------------- ------------------------------
Not Applicable
Securities to be registered pursuant to Section 12(g) of the Act:
Preferred Share Purchase Rights Pursuant to Rights Agreement
- --------------------------------------------------------------------------------
(Title of Class)
<PAGE>
Item 1. Description of Securities to be Registered.
------------------------------------------
On February 13, 1998, the Board of Directors (the "Board") of
NetVantage, Inc. (the "Corporation") declared a dividend distribution of one
preferred share purchase right (a "Right") for each outstanding share of Class A
Common Stock, par value $.001 per share (the "Common Stock"), of the
Corporation. The dividend is payable to the stockholders of record on March 6,
1998 (the "Record Date"), and with respect to shares of Common Stock issued
thereafter until the Distribution Date (as defined below) and, in certain
circumstances, with respect to shares of Common Stock issued after the
Distribution Date. Except as set forth below, each Right, when it becomes
exercisable, entitles the registered holder to purchase from the Corporation one
one-thousandth (1/1000th) of a share of Series RP Preferred Stock, $0.01 par
value per share (the "Preferred Stock"), of the Corporation at a price of
$35.00 per one one-thousandth (1/1000th) of a share of Preferred Stock (the
"Purchase Price"), subject to adjustment. The description and terms of the
Rights are set forth in a Rights Agreement (the "Rights Agreement") between the
Corporation and Continental Stock Transfer and Trust Company, as Rights Agent
(the "Rights Agent"), dated as of February 13, 1998.
Initially, the Rights will be attached to all certificates representing
shares of Common Stock then outstanding, and no separate certificates
representing the Rights ("Right Certificates") will be distributed. The Rights
will separate from the Common Stock upon the earliest to occur of (i) a person
or group of affiliated or associated persons having acquired, without the prior
approval of the Corporation's Board of Directors, beneficial ownership of shares
of Common Stock which when added to all other voting securities of the
Corporation beneficially owned by such person or group represents 15% or more of
the voting power of the Corporation (except pursuant to a Permitted Offer, as
hereinafter defined) or (ii) 10 days (or such later date as the Board may
determine) following the commencement of, or announcement of an intention to
make, a tender offer or exchange offer the consummation of which would result in
a person or group of affiliated or associated persons becoming an Acquiring
Person (as hereinafter defined) (the "Distribution Date"). A person or group
whose acquisitions of shares of Common Stock cause a Distribution Date pursuant
to clause (i) above is an "Acquiring Person," with certain exceptions as set
forth in the Rights Agreement. The date that a person or group is first
publicly announced to have become such by the Corporation or such Acquiring
Person is the "Shares Acquisition Date."
The Rights Agreement provides that, until the Distribution Date, the
Rights will be transferred with and only with the associated shares of Common
Stock. Until the Distribution Date (or earlier redemption or expiration of the
Rights), new Common Stock certificates issued after the Record Date upon
transfer or new issuance of shares of Common Stock will contain a notation
incorporating the Rights Agreement by reference. Until the Distribution Date (or
earlier redemption or expiration of the Rights), the
2
<PAGE>
surrender for transfer of any certificates for shares of Common Stock
outstanding as of the Record Date, even without attaching thereto such notation
or a copy of the Summary of Rights attached to the Rights Agreement as Exhibit
C, will also constitute the transfer of the Rights associated with the shares of
Common Stock represented by such certificate. As soon as practicable following
the Distribution Date, separate certificates evidencing the Rights ("Right
Certificates") will be mailed to the holders of record of shares of the Common
Stock as of the Close of Business (as defined in the Rights Agreement) on the
Distribution Date (and to each initial record holder of certain shares of Common
Stock issued after the Distribution Date), and such separate Right Certificates
alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date and will
expire at the Close of Business on February 13, 2008, unless earlier redeemed by
the Corporation as described below.
In the event that any person becomes an Acquiring Person (except
pursuant to a tender or exchange offer which is for all outstanding shares of
Common Stock at a price and on terms which a majority of certain members of the
Board determines to be adequate and in the best interests of the Corporation,
its stockholders and other relevant constituencies, other than such Acquiring
Person, its affiliates and associates (a "Permitted Offer")), each holder of a
Right will thereafter have the right (the "Flip-In Right") to receive upon
exercise the number of shares of Common Stock (or, in certain circumstances, of
one one-thousandths (1/1000ths) of a share of Preferred Stock or other
securities of the Corporation) having a value (immediately prior to such
triggering event) equal to two times the then-applicable Purchase Price of the
Right. Notwithstanding the foregoing, following the occurrence of the event
described above, all Rights that are, or (under certain circumstances specified
in the Rights Agreement) were, beneficially owned by any Acquiring Person or any
affiliate or associate thereof will be null and void. The Board has the option,
at any time after any person becomes an Acquiring Person, to exchange all or
part of the then-exercisable Rights (excluding those that have become void, as
described in the immediately preceding sentence) for shares of Common Stock, at
an exchange ratio determined by dividing the then-applicable Purchase Price by
the then-current market price per share of Common Stock as determined in
accordance with the Rights Agreement. However, this option generally terminates
if any person becomes the beneficial owner of 50% or more of the Common Stock.
In the event that, at any time following the Shares Acquisition Date,
(i) the Corporation is acquired in a merger or other business combination
transaction in which the holders of all of the outstanding Common Stock
immediately prior to the consummation of the transaction are not the holders of
all of the surviving corporation's voting power, or (ii) more than 50% of the
Corporation's assets or earning power is sold or transferred, in either case
with or to (x) an Acquiring Person or any affiliate or
3
<PAGE>
associate thereof or (y) any other person in which such Acquiring Person,
affiliate or associate has an interest or any person acting on behalf of or in
concert with such Acquiring Person, affiliate or associate, or (z) if, in such
transaction, all holders of shares of Common Stock are not treated alike, any
other person, then each holder of a Right (except Rights which previously have
been voided as set forth above) shall thereafter have the right (the "Flip-Over
Right") to receive, upon exercise, common stock of the acquiring company having
a value equal to two times the exercise price of the Right. The holder of a
Right will continue to have the Flip-Over Right whether or not such holder
exercises or surrenders the Flip-In Right.
The Purchase Price payable, and the number of shares of Preferred Stock,
shares of Common Stock or other securities issuable, upon exercise of the Rights
are subject to adjustment from time to time to prevent dilution (i) in the event
of a stock dividend on, or a subdivision, combination or reclassification of,
the Preferred Stock, (ii) upon the grant to holders of shares of the Preferred
Stock of certain rights or warrants to subscribe for or purchase shares of
Preferred Stock at a price, or securities convertible into Preferred Stock with
a conversion price, less than the then current market price of the Preferred
Stock or (iii) upon the distribution to holders of shares of the Preferred Stock
of evidences of indebtedness or assets (excluding regular quarterly cash
dividends) or of subscription rights or warrants (other than those referred to
above).
The number of outstanding Rights and the number of the one-thousandths
(1/1000ths) of a share of Preferred Stock issuable upon exercise of each Right
are also subject to adjustment in the event of a stock split of the Common Stock
or a stock dividend on the Common Stock payable in Common Stock or subdivisions,
consolidations or combinations of the Common Stock occurring, in any such case,
prior to the Distribution Date.
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price.
At any time prior to the earlier to occur of (i) a person becoming an
Acquiring Person or (ii) the expiration of the Rights, and under certain other
circumstances, the Corporation may redeem the Rights in whole, but not in part,
at a price (payable in cash or, at the Corporation's election, in Common Stock)
of $.001 per Right (the "Redemption Price"), which redemption shall be effective
upon the action of the Board. Additionally, following the Shares Acquisition
Date, the Corporation may redeem the then outstanding Rights in whole, but not
in part, at the Redemption Price, provided that such redemption is in connection
with a merger or other business combination transaction or series of
transactions involving the Corporation in which all holders of shares of Common
Stock are treated alike but not involving an Acquiring Person or its affiliates
or associates.
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<PAGE>
All of the provisions of the Rights Agreement may be amended by the
Board of Directors of the Corporation prior to the Distribution Date. After the
Distribution Date, the provisions of the Rights Agreement may be amended by the
Board in order to cure any ambiguity, defect or inconsistency, to make changes
that do not adversely affect the interests of holders of Rights (excluding the
interests of any Acquiring Person), or, subject to certain limitations, to
shorten or lengthen any time period under the Rights Agreement.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Corporation, including, without limitation, the
right to vote or to receive dividends. While the distribution of the Rights
will not be taxable to stockholders of the Corporation, stockholders may,
depending upon the circumstances, recognize taxable income should the Rights
become exercisable or upon the occurrence of certain events thereafter.
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
hereby incorporated herein by reference.
As of February 12, 1998, there were 10,087,952.5 shares of Common Stock
outstanding. Each share of Common Stock outstanding on the Record Date will
receive one Right. As long as the Rights are attached to the shares of Common
Stock, the Corporation will issue one Right with each new share of Common Stock
so that all such shares will have attached rights.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the
Corporation without conditioning the offer on the Rights being redeemed or a
substantial number of Rights being acquired. However, the Rights should not
interfere with any tender offer or merger approved by the Corporation (other
than with an Acquiring Person) because the Rights do not become exercisable in
the event of a Permitted Offer or other acquisition exempted by the Company's
Board.
Attached hereto as Exhibit 4.1 and incorporated herein by reference are
copies of the Rights Agreement and the exhibits thereto, as follows: Exhibit A
- -- Form of Certificate of Designation, Preferences and Rights of Series RP
Preferred Stock of NetVantage, Inc.; Exhibit B -- Form of Right Certificate; and
Exhibit C -- Summary of Rights to Purchase Series RP Preferred Stock. The
foregoing description of the Rights is qualified in its entirety by reference to
the Rights Agreement and such exhibits thereto.
5
<PAGE>
Item 2. Exhibits.
--------
4.1 Rights Agreement, dated as of February 13, 1998, between NetVantage,
Inc. and Continental Stock Transfer and Trust Company as Rights Agent,
which includes: as Exhibit A thereto, the Form of Certificate of
Designation, Preferences and Rights of Series RP Preferred Stock of
NetVantage, Inc.; as Exhibit B thereto, the Form of Right Certificate;
and, as Exhibit C thereto, the Summary of Rights to Purchase Series RP
Preferred Stock.
[REST OF PAGE INTENTIONALLY LEFT BLANK]
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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.
NETVANTAGE, INC.
By: /s/ Thomas Iwanski
-----------------------------
Thomas Iwanski
Vice President of Finance,
Secretary and Chief
Financial Officer
Date: February 17, 1998
7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description
- ------- -----------
<S> <C>
4.1 Rights Agreement, dated as of February 13, 1998,
between NetVantage, Inc. and Continental Stock
Transfer and Trust Company as Rights Agent, which
includes: as Exhibit A thereto, the Form of Certificate
of Designation, Preferences and Rights of Series RP
Preferred Stock of NetVantage, Inc.; as Exhibit B
thereto, the Form of Right Certificate; and, as
Exhibit C thereto, the Summary of Rights to
Purchase Series RP Preferred Stock.
</TABLE>
<PAGE>
Exhibit 4.1
- --------------------------------------------------------------------------------
NETVANTAGE, INC.
and
CONTINENTAL STOCK TRANSFER & TRUST COMPANY,
AS RIGHTS AGENT
RIGHTS AGREEMENT
DATED AS OF FEBRUARY 13, 1998
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
1. Certain Definitions................................................................ 1
2. Appointment of Rights Agent........................................................ 6
3. Issuance of Right Certificates..................................................... 7
4. Form of Right Certificate.......................................................... 9
5. Countersignature and Registration.................................................. 9
6. Transfer, Split-Up, Combination and Exchange of Right Certificates; Mutilated,
Destroyed, Lost or Stolen Right Certificates....................................... 10
7. Exercise of Rights; Purchase Price; Expiration Date of Rights...................... 11
8. Cancellation and Destruction of Right Certificates................................. 13
9. Reservation and Availability of Preferred Stock.................................... 14
10. Preferred Stock Record Date....................................................... 15
11. Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights....... 15
12. Certificate of Adjusted Purchase Price or Number of Shares........................ 22
13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power.............. 22
14. Fractional Rights and Fractional Shares........................................... 25
15. Rights of Action.................................................................. 27
16. Agreement of Right Holders........................................................ 27
17. Right Certificate Holder Not Deemed a Stockholder................................. 28
18. Concerning the Rights Agent....................................................... 28
19. Merger or Consolidation or Change of Name of Rights Agent......................... 29
20. Duties of Rights Agent............................................................ 30
21. Change of Rights Agent............................................................ 32
22. Issuance of New Right Certificates................................................ 33
23. Redemption and Termination........................................................ 33
24. Notice of Certain Events.......................................................... 35
25. Miscellaneous..................................................................... 36
26. Exchange.......................................................................... 38
Exhibit A - Form of Certificate of Designation of Series RP Preferred Stock............A-1
Exhibit B - Form of Right Certificate..................................................B-1
Exhibit C - Form of Summary of Rights..................................................C-1
</TABLE>
<PAGE>
RIGHTS AGREEMENT
This RIGHTS AGREEMENT (this "Agreement") is made as of this 13th day
---------
of February, 1998 by and between NetVantage, Inc., a Delaware corporation (the
"Corporation"), and Continental Stock Transfer & Trust Company, a New York
- ------------
corporation (the "Rights Agent"), with respect to the following facts and
------------
circumstances.
A. The Board of Directors of the Corporation has authorized and
declared a dividend of one preferred share purchase right (a "Right") for each
-----
share of Common Stock (as hereinafter defined) of the Corporation outstanding at
the Close of Business (as hereinafter defined) on March 6, 1998 (the "Record
------
Date"), each Right representing the right to purchase one one-thousandth
- ----
(1/1000th) of a share of Preferred Stock (as hereinafter defined), upon the
terms and subject to the conditions herein set forth.
B. The Board of Directors of the Corporation has further authorized
and directed the issuance of one Right with respect to each share of Common
Stock that shall become outstanding between the Record Date and the earliest of
the Distribution Date, the Redemption Date or the Final Expiration Date (as such
terms are hereinafter defined); provided, however, that Rights may be issued
-------- -------
with respect to shares of Common Stock that shall become outstanding after the
Distribution Date and prior to the earlier of the Redemption Date and the Final
Expiration Date in accordance with the provisions of Section 22 of this
Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements herein set forth, the parties hereby agree as follows:
1. Certain Definitions.
-------------------
For purposes of this Agreement, the following terms have the meanings
indicated:
1.1 "Acquiring Person" means any Person who or which, together
----------------
with all Affiliates and Associates of such Person, without the prior approval of
the Corporation's Board of Directors, shall be the Beneficial Owner of such
number of the then outstanding shares of Common Stock which, when added to all
other voting securities of the Corporation of which such Person (together with
the Affiliates and Associates of such Person) is the Beneficial Owner (other
than as a result of a Permitted Offer) or was such a Beneficial Owner at any
time after the date hereof, whether or not such person continues to be the
Beneficial Owner of such voting securities, represents 15% or more of the Voting
Power of the Corporation. Notwithstanding the foregoing: (A) the term "Acquiring
Person" shall not include (i) the Corporation, (ii) any Subsidiary of the
Corporation, (iii) any employee benefit plan of the Corporation or of any
Subsidiary of the Corporation, (iv) any Person or entity organized, appointed or
established by the Corporation or any Subsidiary of the Corporation for or
pursuant to the terms of any such
<PAGE>
plan, or (v) any Person who or which, together with all Affiliates and
Associates of such Person, becomes the Beneficial Owner of voting securities
representing 15% or more of the Voting Power of the Corporation as a result of
the acquisition of shares of Common Stock or other voting securities of the
Corporation directly from the Corporation; and (B) no Person shall be deemed to
be an "Acquiring Person" either (i) as a result of the acquisition of Common
Stock by the Corporation which, by reducing the number of shares of Common Stock
outstanding, increases the proportional number of shares beneficially owned by
such Person together with all Affiliates and Associates of such Person;
provided, however, that if (X) a Person would become an Acquiring Person (but
- -------- -------
for the operation of this subclause (B)(i)) as a result of the acquisition of
shares of Common Stock by the Corporation, and (Y) after such share acquisition
by the Corporation, such Person, or an Affiliate or Associate of such Person,
becomes the Beneficial Owner of any additional shares of Common Stock, then such
Person shall be deemed an Acquiring Person, or (ii) if (X) within eight (8) days
after such Person would otherwise have become an Acquiring Person (but for the
operation of this subclause (B)(ii)), such Person notifies the Board of
Directors of the Corporation that such Person did so inadvertently and (Y)
within two (2) days after such notification, such Person is the Beneficial Owner
of voting securities representing less than 15% of the Voting Power of the
Corporation.
1.2. "Act" means the Securities Act of 1933, as amended.
---
1.3. "Adjusted Number of Shares" and "Adjusted Purchase Price" have
------------------------- -----------------------
the respective meanings set forth in Section 11.1.3 hereof.
1.4. "Adjustment Shares" has the meaning set forth in Section
-----------------
11.1.2 hereof.
1.5. "Affiliate" and "Associate" shall have the respective meanings
--------- ---------
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Exchange Act.
1.6. The term "current per share market price" shall have the meaning
------------------------------
set forth in Section 11.4.1 hereof when used with respect to a "Security" (as
defined in said Section 11.4.1) and shall have the meaning set forth in Section
11.4.2 when used with respect to the Preferred Stock.
1.7. A Person is the "Beneficial Owner" of and "beneficially owns"
---------------- -----------------
any securities which:
1.7.1. such Person or any of such Person's Affiliates or
Associates beneficially owns, directly or indirectly;
2
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1.7.2. such Person or any of such Person's Affiliates or
Associates has (A) the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding, or upon the exercise of conversion rights,
exchange rights, rights (other than the Rights), warrants or options, or
otherwise; provided, however, that a Person shall not be deemed the Beneficial
-------- -------
Owner of, or to beneficially own, securities tendered pursuant to a tender or
exchange offer made by or on behalf of such Person or any of such Person's
Affiliates or Associates until such tendered securities are accepted for
purchase or exchange; or (B) the right to vote pursuant to any agreement,
arrangement or understanding; provided, however, that a Person shall not be
-------- -------
deemed the Beneficial Owner of, or to beneficially own, any security if the
agreement, arrangement or understanding to vote such security (1) arises solely
from a revocable proxy or consent given to such Person in response to a public
proxy or consent solicitation made pursuant to, and in accordance with, the
applicable rules and regulations promulgated under the Exchange Act and (2) is
not also then reportable on Schedule 13D under the Exchange Act (or any
comparable or successor report); or
1.7.3. 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 relating to the acquisition, holding, voting (except to the extent
contemplated by the proviso to subclause (B) of Section 1.7.2), or disposing of
any securities of the Corporation.
Notwithstanding anything in this Section 1.7 to the contrary, the
phrase "then outstanding," when used with reference to a Person's Beneficial
Ownership of securities of the Corporation, shall mean the number of such
securities then issued and outstanding together with the number of such
securities not then actually issued and outstanding which such Person would be
deemed to own beneficially hereunder.
Notwithstanding anything in this Section 1.7 to the contrary, no
Person shall be deemed to beneficially own any securities solely by reason of
such Person being a party to a customary agreement pursuant to which such Person
acts or agrees to act as an underwriter with respect to a bona fide public
offering of securities.
No decision reached, or action taken, by the Board of Directors
of the Corporation or any committee thereof shall cause any Person (or any
Affiliate or Associate of such Person) who is a member of the Board of Directors
of the Corporation or such committee to be deemed, for the purposes of this
Agreement, to be a Beneficial Owner of any securities beneficially owned by any
other Person (or any Affiliate or Associate of such Person) who is a member of
the Board of Directors of the Corporation or any committee thereof solely by
reason of such membership of the Board of Directors or any committee thereof or
participation in the decisions or actions thereof on the part of either or both
of such Persons.
3
<PAGE>
1.8. "Business Day" means any day other than a Saturday, Sunday or
------------
United States federal holiday.
1.9. "Capital Stock Equivalents" has the meaning set forth in Section
-------------------------
11.1.3 hereof.
1.10. "Close of Business" on any given date means 5:00 P.M., New York
-----------------
time, on such date; provided, however, that if such date is not a Business Day
-------- -------
it means 5:00 P.M., New York time, on the next succeeding Business Day.
1.11. "Common Stock" when used with reference to the Corporation means
------------
the Class A Common Stock, par value $.001 per share, of the Corporation or, in
the event of a subdivision, combination or consolidation with respect to such
shares of Common Stock, the shares of Common Stock resulting from such
subdivision, combination or consolidation. "Common Stock" when used with
reference to any Person other than the Corporation means the capital stock (or
equity interest) with the greatest voting power of such other Person or, if such
other Person is a Subsidiary of another Person, the Person or Persons which
ultimately control such first-mentioned Person.
1.12. "Corporation" means NetVantage, Inc., a Delaware corporation,
-----------
and also means a Principal Party to the extent provided in Section 13.1 hereof.
1.13. "Distribution Date" has the meaning set forth in Section 3.1
-----------------
hereof.
1.14. "Equivalent Preferred Stock" has the meaning set forth in
--------------------------
Section 11.2 hereof.
1.15. "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
1.16. "Exchange Ratio" has the meaning set forth in Section 26.1
--------------
hereof.
1.17. "Final Expiration Date" has the meaning set forth in Section 7.1
---------------------
hereof.
1.18. "Interested Stockholder" means any Acquiring Person or any
----------------------
Affiliate or Associate of an Acquiring Person or any other Person in which any
such Acquiring Person, Affiliate or Associate has an interest, or any other
Person acting directly or indirectly on behalf of or in concert with any such
Acquiring Person, Affiliate or Associate.
4
<PAGE>
1.19. "NASDAQ" has the meaning set forth in Section 11.4.1 hereof.
------
1.20. "Permitted Offer" means a tender or exchange offer which is for
---------------
all outstanding shares of Common Stock of the Corporation at a price and on
terms determined, prior to the purchase of shares under such tender or exchange
offer, by at least a majority of the members of the Board of Directors who are
not officers of the Corporation and who are not Acquiring Persons or Affiliates,
Associates, nominees or representatives of an Acquiring Person, to be adequate
(taking into account all factors that such directors deem pertinent including,
without limitation, prices that could reasonably be achieved if the Corporation
or its assets were sold on an orderly basis designed to realize maximum value)
and otherwise in the best interests of the Corporation, its stockholders (other
than the Person or any Affiliate or Associate thereof on whose basis the offer
is being made) and other relevant constituencies, taking into account all
factors that such directors may deem pertinent.
1.21. "Person" means any individual, firm, partnership, corporation,
------
limited liability company, limited liability partnership, trust, association,
joint venture or other entity, and includes any successor (by merger or
otherwise) of such entity.
1.22. "Preferred Stock" means shares of the Corporation's Series RP
---------------
Preferred Stock, par value $.01 per share, having the relative rights,
preferences and limitations set forth in the Form of the Certificate of
Designation, Preferences and Rights of Series RP Preferred Stock attached to
this Agreement as Exhibit A.
1.23. "Principal Party" has the meaning set forth in Section 13.2
---------------
hereof.
1.24. "Proration Factor" has the meaning set forth in Section 11.1.3
----------------
hereof.
1.25. "Purchase Price" has the meaning set forth in Section 4.1
--------------
hereof.
1.26. "Record Date" has the meaning set forth in Recital A hereof.
-----------
1.27. "Redemption Date" has the meaning set forth in Section 7.1
---------------
hereof.
1.28. "Redemption Price" has the meaning set forth in Section 23.1.1
----------------
hereof.
1.29. "Right Certificate" has the meaning set forth in Section 3.1
-----------------
hereof.
5
<PAGE>
1.30. "Rights" has the meaning set forth in Recital A hereof.
------
1.31. "Rights Agent" means Continental Stock Transfer & Trust Company,
------------
a New York corporation, as Rights Agent hereunder, and, from the time of its
succession, any successor Rights Agent under Section 19 or Section 21 hereof.
1.32. "Section 11.1.2 Event" has the meaning set forth in Section
--------------------
11.1.2 hereof.
1.33. "Section 13 Event" means any event described in clause (x), (y)
----------------
or (z) of Section 13.1 hereof.
1.34. "Shares Acquisition Date" means the first date of public
-----------------------
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to the Exchange Act) by the Corporation or
an Acquiring Person that an Acquiring Person has become such or that facts exist
as a result of which there exists an Acquiring Person; provided, that, if such
--------
Person is determined not to have become an Acquiring Person pursuant to
subclause (B)(ii) of Section 1.1 hereof, then no Shares Acquisition Date shall
be deemed to have occurred.
1.35. "Subsidiary" of any Person means any corporation or other
----------
Person of which a majority of the voting power of the voting equity securities
or equity interest is owned, directly or indirectly, by such Person.
1.36. "Summary of Rights" has the meaning set forth in Section 3.2
-----------------
hereof.
1.37. "Trading Day" has the meaning set forth in Section 11.4.1
-----------
hereof.
1.38. "Triggering Event" means any Section 11.1.2 Event or any Section
----------------
13 Event.
1.39. "Voting Power" means the power of the voting securities of the
------------
Corporation, outstanding on any relevant determination date, to vote generally
in the election of directors of the Corporation.
1.40. The term "voting securities" has the meaning set forth in
-----------------
Section 13.1 hereof.
6
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2. Appointment of Rights Agent.
---------------------------
2.1. The Corporation hereby appoints the Rights Agent to act as agent
for the Corporation and the holders of the Rights (who, in accordance with
Section 3 hereof, shall prior to the Distribution Date also be the holders of
shares of Common Stock) in accordance with the terms and conditions hereof, and
the Rights Agent hereby accepts such appointment. The Corporation may from time
to time appoint such co-Rights Agents as it may deem necessary or desirable.
3. Issuance of Right Certificates.
------------------------------
3.1. Until the earlier of (i) the Shares Acquisition Date or (ii) the
Close of Business on the tenth (10th) day (or such later date as may be
determined by action of the Corporation's Board of Directors) after the date of
the commencement by any Person (other than the Corporation, any Subsidiary of
the Corporation, any employee benefit plan of the Corporation or of any
Subsidiary of the Corporation or any Person or entity organized, appointed or
established by the Corporation or any Subsidiary of the Corporation for or
pursuant to the terms of any such plan) of, or after the date of the first
public announcement of the intention of any Person (other than the Corporation,
any Subsidiary of the Corporation, any employee benefit plan of the Corporation
or of any Subsidiary of the Corporation or any Person or entity organized,
appointed or established by the Corporation or any Subsidiary of the Corporation
for or pursuant to the terms of any such plan) to commence (which intention to
commence remains in effect for five (5) Business Days after such announcement),
a tender or exchange offer the consummation of which would result in any Person
becoming an Acquiring Person (including, in the case of both (i) and (ii), any
such date which is after the date of this Agreement and prior to the issuance of
the Rights) (the "Distribution Date"), (x) the Rights will be evidenced (subject
-----------------
to the provisions of Section 3.2 hereof) by the certificates for shares of
Common Stock registered in the names of the holders thereof (which certificates
shall also be deemed to be Right Certificates) and not by separate Right
Certificates, and (y) the right to receive Right Certificates will be
transferable only in connection with the transfer of the underlying shares of
Common Stock (including a transfer to the Corporation); provided, however, that
-------- -------
if a tender or exchange offer is terminated prior to the occurrence of a
Distribution Date, then no Distribution Date shall occur as a result of such
tender or exchange offer. As soon as practicable after the Distribution Date,
the Corporation will prepare and execute, the Rights Agent will countersign, and
the Corporation will send or cause to be sent by first-class, postage-prepaid
mail, to each record holder of shares of Common Stock as of the Close of
Business on the Distribution Date, at the address of such holder shown on the
records of the Corporation, a Right Certificate, substantially in the form of
Exhibit B hereto (a "Right Certificate"), evidencing one Right for each share of
-----------------
Common Stock so held. As of and after the Distribution Date, the Rights will be
evidenced solely by such Right Certificates.
7
<PAGE>
3.2. As promptly as practicable following the Record Date, the
Corporation will send a copy of a Summary of Rights to Purchase Preferred Stock,
in substantially the form of Exhibit C hereto (the "Summary of Rights"), by
-----------------
first-class, postage-prepaid mail, to each record holder of shares of Common
Stock as of the Close of Business on the Record Date, at the address of such
holder shown on the records of the Corporation. With respect to certificates
for shares of Common Stock outstanding as of the Record Date, until the
Distribution Date the Rights will be evidenced by such certificates registered
in the names of the holders thereof together with a copy of the Summary of
Rights attached thereto. Until the Distribution Date (or the earlier of the
Redemption Date or the Final Expiration Date), the surrender for transfer of any
certificate for shares of Common Stock outstanding on the Record Date, with or
without a copy of the Summary of Rights attached thereto, shall also constitute
the transfer of the Rights associated with such shares of Common Stock.
3.3. Certificates for shares of Common Stock that become outstanding
(including, without limitation, reacquired shares of Common Stock referred to in
the last sentence of this Section 3.3) after the Record Date but prior to the
earliest of the Distribution Date, the Redemption Date or the Final Expiration
Date, shall be deemed also to be certificates for Rights, and shall bear the
following legend:
This certificate also evidences and entitles the holder hereof to
certain rights as set forth in a Rights Agreement between NetVantage,
Inc. and Continental Stock Transfer & Trust Company, a New York
corporation, as Rights Agent, dated as of February 13, 1998 (the
"Rights Agreement"), the terms of which are hereby incorporated herein
by reference and a copy of which is on file at the principal executive
offices of NetVantage, Inc. Under certain circumstances, as set forth
in the Rights Agreement, such Rights will be evidenced by separate
certificates and will no longer be evidenced by this certificate.
NetVantage, Inc. will mail to the holder of this certificate a copy of
the Rights Agreement without charge after receipt of a written request
therefor. Under certain circumstances set forth in the Rights
Agreement, Rights issued to, or held by, any Person who is, was or
becomes an Acquiring Person or an Affiliate or Associate thereof (as
defined in the Rights Agreement) and certain related persons, whether
currently held by or on behalf of such Person or by any subsequent
holder, may become null and void.
With respect to such certificates containing the foregoing legend, until the
Distribution Date the Rights associated with the shares of Common Stock
represented by such certificates shall be evidenced by such certificates alone,
and the surrender for transfer of any such certificate shall also constitute the
transfer of the Rights associated with the shares of Common Stock represented
thereby. In the event that the Corporation purchases or acquires any shares of
Common Stock after the Record Date but prior to the Distribution Date (or the
earlier of the Redemption Date or
8
<PAGE>
the Final Expiration Date), any Rights associated with such shares of Common
Stock shall be deemed cancelled and retired so that the Corporation shall not be
entitled to exercise any Rights associated with the Common Stock that are no
longer outstanding.
4. Form of Right Certificate.
-------------------------
4.1. The Right Certificates (and the forms of election to purchase and
of assignment to be printed on the reverse thereof) shall be substantially in
the form set forth in Exhibit B hereto and may have such marks of identification
or designation and such legends, summaries or endorsements printed thereon as
the Corporation 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 Right Certificates shall entitle the holders thereof
to purchase such number of one one-thousandths (1/1000ths) of a share of
Preferred Stock as shall be set forth therein at the price per one one-
thousandth (1/1000th) of a share of Preferred Stock set forth therein (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.
4.2. Any Right Certificate issued pursuant to Section 3.1 or Section
22 hereof that represents Rights that are null and void pursuant to Section 7.6
of this Agreement and any Right Certificate issued pursuant to Section 6 or
Section 11 hereof upon transfer, exchange, replacement or adjustment of any
other Right Certificate referred to in this sentence, shall contain (to the
extent feasible) the following legend:
The Rights represented by this Right Certificate are or were
beneficially owned by a Person who was or became an Acquiring Person
or an Affiliate or Associate of an Acquiring Person (as such terms are
defined in the Rights Agreement). Accordingly, this Right Certificate
and the Rights represented hereby are null and void.
The provisions of Section 7.6 of this Agreement shall be operative whether or
not the foregoing legend is contained on any such Right Certificate.
5. Countersignature and Registration.
---------------------------------
5.1. The Right Certificates shall be executed on behalf of the
Corporation by its Chairman of the Board, its Chief Executive Officer, its
President, any of its Vice Presidents, or its Treasurer, either manually or by
facsimile signature, shall have affixed thereto the Corporation's seal or a
facsimile thereof, and shall be attested by the Secretary or an Assistant
Secretary of the Corporation, either manually or by facsimile signature. The
Right Certificates
9
<PAGE>
shall be countersigned by the Rights Agent and shall not be valid for any
purpose unless so countersigned. In case any officer of the Corporation who
shall have signed any of the Right Certificates shall cease to be such officer
of the Corporation before countersignature by the Rights Agent and issuance and
delivery by the Corporation, such Right Certificates may nevertheless be
countersigned by the Rights Agent and issued and delivered by the Corporation
with the same force and effect as though the person who signed such Right
Certificates had not ceased to be such officer of the Corporation; and any Right
Certificate may be signed on behalf of the Corporation by any Person who, at the
actual date of the execution of such Right Certificate, shall be a proper
officer of the Corporation to sign such Right Certificate, although at the date
of the execution of this Rights Agreement any such Person was not such an
officer.
5.2. 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 or transfer of the Right Certificates, books for
registration and transfer of the Right Certificates issued hereunder. Such
books shall show the names and addresses of the respective holders of the Right
Certificates, the number of Rights evidenced on the face of each of the Right
Certificates and the certificate number and the date of each of the Right
Certificates.
6. Transfer, Split-Up, Combination and Exchange of Right Certificates;
-------------------------------------------------------------------
Mutilated, Destroyed, Lost or Stolen Right Certificates.
-------------------------------------------------------
6.1. Subject to the provisions of Section 4.2, Section 7.6 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 earlier of the Redemption Date or
the Final Expiration Date, any Right Certificate or Right Certificates may be
transferred, split up, combined or exchanged for another Right Certificate or
Right Certificates, entitling the registered holder to purchase a like number of
one one-thousandths (1/1000ths) of a share of Preferred Stock (or, following a
Triggering Event, other securities, as the case may be) as the Right Certificate
or Right 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 Right Certificate or Right
Certificates shall make such request in writing delivered to the Rights Agent,
and shall surrender the Right Certificate or Right Certificates to be
transferred, split up, combined or exchanged at the principal office or offices
of the Rights Agent designated for such purpose. Neither the Rights Agent nor
the Corporation shall be obligated to take any action whatsoever with respect to
the transfer of any such surrendered Right Certificate until the registered
holder shall have completed and signed the certificate contained in the form of
assignment on the reverse side of such Right 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 Corporation shall
reasonably request. Thereupon the Rights Agent shall, subject to Section 4.2,
Section 7.6 and Section 14 hereof, countersign and deliver to the Person
entitled thereto a Right Certificate or Right Certificates, as the case may be,
as so requested. The Corporation may require payment of a sum sufficient to
cover any tax or governmental charge
10
<PAGE>
that may be imposed in connection with any transfer, split up, combination or
exchange of Right Certificates.
6.2. Upon receipt by the Corporation and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Right Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and, at the Corporation's request,
reimbursement to the Corporation and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Right Certificate if mutilated, the Corporation will make and deliver a new
Right Certificate of like tenor to the Rights Agent for countersignature and
delivery to the registered holder in lieu of the Right Certificate so lost,
stolen, destroyed or mutilated.
7. Exercise of Rights; Purchase Price; Expiration Date of Rights.
-------------------------------------------------------------
7.1. Subject to Section 7.6 hereof, the registered holder of any Right
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein) in whole or in part at any time after the Distribution Date
upon surrender of the Right Certificate, with the form of election to purchase
and the certificate on the reverse side thereof duly executed, to the Rights
Agent at the principal office or offices of the Rights Agent designated for such
purpose, together with payment of the aggregate Purchase Price for the total
number of one one-thousandths (1/1000ths) of a share of Preferred Stock (or
other securities, as the case may be) as to which such surrendered Rights are
exercised, at or prior to the earlier of (i) the Close of Business on February
13, 2008 (the "Final Expiration Date"), or (ii) the time at which the Rights are
---------------------
redeemed as provided in Section 23 hereof (the "Redemption Date").
---------------
7.2. The Purchase Price for each one one-thousandth (1/1000th) of a
share of Preferred Stock pursuant to the exercise of a Right shall initially be
$35.00, shall be subject to adjustment from time to time as provided in the next
sentence and in Sections 11 and 13.1 hereof and shall be payable in accordance
with paragraph 7.3 below. Anything in this Agreement to the contrary
notwithstanding, in the event that at any time after the date of this Agreement
and prior to the Distribution Date, the Corporation shall (i) declare or pay any
dividend on the Common Stock payable in Common Stock or (ii) effect a
subdivision, combination or consolidation of the Common Stock (by
reclassification or otherwise than by payment of dividends in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then, in any
such case, each share of Common Stock outstanding following such subdivision,
combination or consolidation shall continue to have a Right associated therewith
and the Purchase Price following any such event shall be proportionately
adjusted to equal the result obtained by multiplying the Purchase Price
immediately prior to such event by a fraction the numerator of which shall be
the total number of shares of Common Stock outstanding immediately prior to the
occurrence of the event and the denominator of which shall be the total number
of shares of Common Stock outstanding immediately following the occurrence of
such event. The
11
<PAGE>
adjustment provided for in the preceding sentence shall be made successively
whenever such a dividend is declared or paid or such a subdivision, combination
or consolidation is effected.
7.3. Upon receipt of a Right Certificate representing exercisable
Rights, with the form of election to purchase and the certificate on the reverse
side thereof duly executed, accompanied by payment of the Purchase Price for the
Preferred Stock (or other securities, as the case may be) to be purchased and an
amount equal to any applicable transfer tax required to be paid by the holder of
such Right Certificate in accordance with Section 6 hereof by certified check,
cashier's check or money order payable to the order of the Corporation, the
Rights Agent shall thereupon promptly (i) (A) requisition from any transfer
agent of the Preferred Stock certificates for the number of shares of Preferred
Stock to be purchased, and the Corporation hereby irrevocably authorizes its
transfer agent to comply with all such requests, or (B) if the Corporation, in
its sole discretion, shall have elected to deposit the Preferred Stock issuable
upon exercise of the Rights hereunder into a depositary, requisition from the
depositary agent depositary receipts representing such number of one one-
thousandths (1/1000ths) of a share of Preferred Stock as are to be purchased (in
which case certificates for the Preferred Stock represented by such receipts
shall be deposited by the transfer agent with the depositary agent) and the
Corporation will direct the depositary agent to comply with such requests, (ii)
when appropriate, requisition from the Corporation the amount of cash to be paid
in lieu of issuance of fractional shares in accordance with Section 14 hereof,
(iii) after receipt of such certificates or depositary receipts, cause the same
to be delivered to or upon the order of the registered holder of such Right
Certificate, registered in such name or names as may be designated by such
holder, and (iv) when appropriate, after receipt thereof, deliver such cash to
or upon the order of the registered holder of such Right Certificate. In the
event that the Corporation is obligated to issue other securities (including
shares of Common Stock) of the Corporation pursuant to Section 11.1 hereof, the
Corporation will make all arrangements necessary so that such other securities
are available for distribution by the Rights Agent, if and when appropriate.
7.4. In addition, in the case of an exercise of the Rights by a holder
pursuant to Section 11.1.2, the Rights Agent shall return such Right Certificate
to the registered holder thereof after imprinting, stamping or otherwise
indicating thereon that the Rights represented by such Right Certificate no
longer include the rights provided by Section 11.1.2 of the Rights Agreement and
if less than all the Rights represented by such Right Certificate were so
exercised, the Rights Agent shall indicate on the Right Certificate the number
of Rights represented thereby that continue to include the rights provided by
Section 11.1.2.
7.5. In case the registered holder of any Right Certificate shall
exercise less than all the Rights evidenced thereby, a new Right Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent to the registered holder of such Right Certificate or to his
duly authorized assigns, subject to the provisions of Section 14 hereof, or the
Rights Agent shall place an appropriate notation on the Right Certificate with
respect to those Rights exercised.
12
<PAGE>
7.6. Notwithstanding anything in this Agreement to the contrary, from
and after the first occurrence of a Section 11.1.2 Event, any Rights
beneficially owned by (i) an Acquiring Person or an Affiliate or Associate of an
Acquiring Person, (ii) a transferee of an Acquiring Person (or of any Affiliate
or Associate thereof) who becomes a transferee after the Acquiring Person
becomes such, or (iii) a transferee of an Acquiring Person (or of any Affiliate
or Associate thereof) who becomes a transferee prior to or concurrently with the
Acquiring Person becoming such and receives such Rights pursuant to either (A) a
transfer (whether or not for consideration) from the Acquiring Person (or from
any Affiliate or Associate thereof) to holders of equity interests in such
Acquiring Person or to any Person with whom the Acquiring Person has a
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer that the Board of Directors of the Corporation has
determined is part of a plan, arrangement or understanding that has as a primary
purpose or effect the avoidance of this Section 7.6, 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 Corporation shall use all reasonable efforts to
insure that the provisions of this Section 7.6 and Section 4.2 hereof are
complied with, but shall have no liability to any holder of Right Certificates
or other Person as a result of its failure to make any determinations with
respect to an Acquiring Person or its Affiliates, Associates or transferees
hereunder.
7.7. Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Corporation 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 Right 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 Corporation shall reasonably request.
8. Cancellation and Destruction of Right Certificates.
--------------------------------------------------
8.1. All Right Certificates surrendered for the purpose of exercise,
transfer, split up, combination or exchange shall, if surrendered to the
Corporation or to any of its agents, be delivered to the Rights Agent for
cancellation or in cancelled form, or, if surrendered to the Rights Agent, shall
be cancelled by it, and no Right Certificates shall be issued in lieu thereof
except as expressly permitted by the provisions of this Rights Agreement. The
Corporation shall deliver to the Rights Agent for cancellation and retirement,
and the Rights Agent shall so cancel and retire, any other Right Certificate
purchased or acquired by the Corporation otherwise than upon the exercise
thereof. The Rights Agent shall deliver all cancelled Right Certificates to the
Corporation, or shall, at the written request of the Corporation, destroy such
cancelled Right Certificates, and in such case shall deliver a certificate of
destruction thereof to the Corporation.
13
<PAGE>
9. Reservation and Availability of Preferred Stock.
-----------------------------------------------
9.1. The Corporation covenants and agrees that, at all times prior to
the occurrence of a Section 11.1.2 Event, it will cause to be reserved and kept
available out of its authorized and unissued Preferred Stock, or any authorized
and issued Preferred Stock held in its treasury, the number of shares of
Preferred Stock that will be sufficient to permit the exercise in full of all
outstanding Rights and, after the occurrence of a Section 11.1.2 Event, shall,
to the extent reasonably practicable, so reserve and keep available a sufficient
number of shares of Common Stock (and/or other securities) that may be required
to permit the exercise in full of the Rights pursuant to this Agreement.
9.2. So long as the shares of Preferred Stock (and, after the
occurrence of a Section 11.1.2 Event, shares of Common Stock or any other
securities) issuable upon the exercise of the Rights may be listed on any
national securities exchange, the Corporation shall use its best efforts to
cause, from and after such time as the Rights become exercisable, all shares or
other securities reserved for such issuance to be listed on such exchange upon
official notice of issuance upon such exercise.
9.3. The Corporation covenants and agrees that it will take all such
action as may be necessary to ensure that all shares of Preferred Stock (or
shares of Common Stock and/or other securities, as the case may be) delivered
upon exercise of Rights shall, at the time of delivery of the certificates for
such shares or other securities (subject to payment of the Purchase Price), be
duly and validly authorized and issued and fully paid and non-assessable shares
or securities.
9.4. The Corporation covenants and agrees that it will pay when due
and payable any and all United States federal and state transfer taxes and
charges that may be payable in respect of the issuance or delivery of the Right
Certificates or of any shares of Preferred Stock (or shares of Common Stock
and/or other securities, as the case may be) upon the exercise of Rights. The
Corporation shall not, however, be required to pay any transfer tax that may be
payable in respect of any transfer or delivery of Right Certificates to a person
other than, or the issuance or delivery of certificates or depositary receipts
for the shares of Preferred Stock (or shares of Common Stock and/or other
securities, as the case may be) in a name other than that of, the registered
holder of the Right Certificate evidencing Rights surrendered for exercise, or
to issue or to deliver any certificates or depositary receipts for shares of
Preferred Stock (or shares of Common Stock and/or other securities, as the case
may be) upon the exercise of any Rights, until any such tax shall have been paid
(any such tax being payable by the holder of such Right Certificate at the time
of surrender) or until it has been established to the Corporation's reasonable
satisfaction that no such tax is due.
14
<PAGE>
9.5. The Corporation shall use its best efforts to (i) file, as soon
as practicable following the Shares Acquisition 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 and the rules and regulations thereunder)
until the date of the expiration of the period for exercise of the Rights
provided by Section 11.1.2. The Corporation will also take such action as may be
appropriate under the blue sky laws of the various states.
10. Preferred Stock Record Date
---------------------------
10.1. Each Person in whose name any certificate for shares of
Preferred Stock (or shares of Common Stock and/or other securities, as the case
may be) is issued upon the exercise of Rights shall for all purposes be deemed
to have become the holder of record of the shares of Preferred Stock (or shares
of Common Stock and/or other securities, as the case may be) represented thereby
on, and such certificate shall be dated, the date upon which the Right
Certificate evidencing such Rights was duly surrendered and payment of the
Purchase Price (and any applicable transfer taxes) was made; provided, however,
-------- -------
that, if the date of such surrender and payment is a date upon which the shares
of Preferred Stock (or shares of Common Stock and/or other securities, as the
case may be) transfer books of the Corporation 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 shares of
Preferred Stock (or shares of Common Stock and/or other securities, as the case
may be) transfer books of the Corporation are open.
11. Adjustment of Purchase Price, Number and Kind of Shares or Number of
--------------------------------------------------------------------
Rights
- ------
The Purchase Price, the number and kind of shares covered by each Right and
the number of Rights outstanding are subject to adjustment from time to time as
provided in this Section 11.
11.1. Adjustment Events.
-----------------
11.1.1. In the event the Corporation shall at any time after the
date of this Agreement (A) declare a dividend on the Preferred Stock payable in
Preferred Stock, (B) subdivide the outstanding Preferred Stock, (C) combine the
outstanding Preferred Stock into a smaller number of Preferred Stock or (D)
issue any shares of its capital stock in a reclassification of the Preferred
Stock (including any such reclassification in connection with a consolidation or
merger in which the Corporation is the continuing or surviving corporation),
except as otherwise provided in this Section 11.1 and Section 7.6 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
15
<PAGE>
to receive the aggregate number and kind of shares of capital stock that, if
such Right had been exercised immediately prior to such date and at a time when
the Preferred Stock transfer books of the Corporation were open, such holder
would have owned upon such exercise and been entitled to receive by virtue of
such dividend, subdivision, combination or reclassification; provided, however,
-------- -------
that in no 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
Corporation issuable upon exercise of one Right. If an event occurs that would
require an adjustment under both Section 11.1.1 and Section 11.1.2, the
adjustment provided for in this Section 11.1.1 shall be in addition to, and
shall be made prior to, any adjustment required pursuant to Section 11.1.2.
11.1.2. In the event (a "Section 11.1.2 Event") that any Person,
--------------------
alone or together with its Affiliates and Associates, shall become an Acquiring
Person, then proper provision shall be made so that each holder of a Right
(except as provided below and in Section 7.6 hereof) shall, for a period of
sixty (60) days (or such longer period as the Board of Directors of the
Corporation may determine at any time prior to or during such period of sixty
(60) days) after the later of the occurrence of any such event or the effective
date of an appropriate registration statement under the Act pursuant to Section
9.5 hereof, have a right to receive, upon exercise thereof at a price equal to
the then current Purchase Price, in accordance with the terms of this Agreement,
such number of shares of Common Stock (or, in the discretion of the Board of
Directors, one one-thousandths (1/1000ths) of a share of Preferred Stock) as
shall equal the result obtained by (x) multiplying the then current Purchase
Price by the then number of one one-thousandth (1/1000th) of a share of
Preferred Stock for which a Right was exercisable immediately prior to the first
occurrence of a Section 11.1.2 Event, and (y) dividing that product by 50% of
the then current per share market price of the Common Stock (determined pursuant
to Section 11.4 hereof) on the date of such first occurrence (such number of
shares being referred to as the "Adjustment Shares"); provided, however, that if
----------------- -------- -------
the transaction that would otherwise give rise to the foregoing adjustment is
also subject to the provisions of Section 13 hereof, then only the provisions of
Section 13 hereof shall apply and no adjustment shall be made pursuant to this
Section 11.1.2.
11.1.3. In the event that there shall not be sufficient treasury
or authorized but unissued (and unreserved) Common Stock to permit the exercise
in full of the Rights in accordance with Section 11.1.2 and the Rights become so
exercisable (and the Board of Directors of the Corporation has not determined to
make the Rights exercisable solely into fractions of a share of Preferred
Stock), notwithstanding any other provision of this Agreement, to the extent
necessary and permitted by applicable law, each Right shall thereafter represent
the right to receive, upon exercise thereof at the then current Purchase Price
in accordance with the terms of this Agreement, (x) a number of (or fractions
of) shares of Common Stock (up to the maximum number of shares of Common Stock
that may permissibly be issued) and (y) one one-thousandth (1/1000th) of a share
of Preferred Stock or a number of, or fractions of, other equity securities of
the Corporation (or, in the discretion of the Board of Directors of the
Corporation, debt) that the Board of Directors of the Corporation has determined
to have the same aggregate current market value (determined pursuant to Section
11.1.1 and Section 11.1.2 hereof, to the extent applicable)
16
<PAGE>
as one share of Common Stock (such number of, or fractions of, shares of
Preferred Stock, debt or other equity securities or debt of the Corporation
being referred to as a "Capital Stock Equivalent"), equal in the aggregate to
------------------------
the number of Adjustment Shares; provided, however, if sufficient shares of
-------- -------
Common Stock and/or Capital Stock Equivalents are unavailable, then the
Corporation shall, to the extent permitted by applicable law, take all such
action as may be necessary to authorize additional shares of Common Stock or
Capital Stock Equivalents for issuance upon exercise of the Rights, including
the calling of a meeting of stockholders; and provided, further, that if the
-------- -------
Corporation is unable to cause sufficient shares of Common Stock and/or Capital
Stock Equivalents to be available for issuance upon exercise in full of the
Rights, then each Right shall thereafter represent the right to receive the
Adjusted Number of Shares upon exercise at the Adjusted Purchase Price (as such
terms are hereinafter defined). As used herein, the term "Adjusted Number of
------------------
Shares" shall be equal to that number of (or fractions of) shares of Common
- ------
Stock (and/or Capital Stock Equivalents) equal to the product of (x) the number
of Adjustment Shares and (y) a fraction, the numerator of which is the number of
shares of Common Stock (and/or Capital Stock Equivalents) available for issuance
upon exercise of the Rights and the denominator of which is the aggregate number
of Adjustment Shares otherwise issuable upon exercise in full of all Rights
(assuming there were a sufficient number of shares of Common Stock available)
(such fraction being referred to as the "Proration Factor"). The "Adjusted
---------------- --------
Purchase Price" shall mean the product of the Purchase Price and the Proration
- --------------
Factor. The Board of Directors of the Corporation may, but shall not be
required to, establish procedures to allocate the right to receive shares of
Common Stock and Capital Stock Equivalents upon exercise of the Rights among
holders of Rights.
11.2. In case the Corporation shall fix a record date for the issuance
of rights (other than the Rights), options or warrants to all holders of
Preferred Stock entitling them (for a period expiring within 45 calendar days
after such record date) to subscribe for or purchase shares of Preferred Stock
(or shares having the same rights, privileges and preferences as the Preferred
Stock ("Equivalent Preferred Stock")) or securities convertible into Preferred
--------------------------
Stock or Equivalent Preferred Stock at a price per share of Preferred Stock or
Equivalent Preferred Stock (or having a conversion price per share, if a
security convertible into shares of Preferred Stock or Equivalent Preferred
Stock) less than the then current per share market price of the Preferred Stock
(as determined pursuant to Section 11.4 hereof) on such record date, the
Purchase Price to be in effect after such record date shall be determined by
multiplying the Purchase Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the number of shares of Preferred
Stock outstanding on such record date plus the number of shares of Preferred
Stock that the aggregate offering price of the total number of shares of
Preferred Stock and/or Equivalent Preferred Stock so to be offered (and/or the
aggregate initial conversion price of the convertible securities so to be
offered) would purchase at such current per share market price, and the
denominator of which shall be the number of shares of Preferred Stock
outstanding on such record date plus the number of additional shares of
Preferred Stock and/or Equivalent Preferred Stock to be offered for subscription
or purchase (or into which the convertible securities so to be offered are
initially convertible); 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 Corporation issuable
upon exercise of one Right. In case such
17
<PAGE>
subscription price may be paid in a consideration part or all of which shall be
in a form other than cash, the value of such consideration shall be determined
in good faith by the Board of Directors of the Corporation, whose determination
shall be described in a statement filed with the Rights Agent and shall be
binding on the Rights Agent. Preferred Stock owned by or held for the account of
the Corporation shall not be deemed outstanding for the purpose of any such
computation. Such adjustment shall be made successively whenever such a record
date is fixed; and in the event that such rights, options or warrants are not so
issued, the Purchase Price shall be adjusted to be the Purchase Price that would
then be in effect if such record date had not been fixed.
11.3. In case the Corporation shall fix a record date for the making
of a distribution to all holders of the Preferred Stock (including any such
distribution made in connection with a consolidation or merger in which the
Corporation is the continuing or surviving corporation) of evidences of
indebtedness or assets (other than a regular quarterly cash dividend or a
dividend payable in Preferred Stock) or subscription rights or warrants
(excluding those referred to in Section 11.2 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 then current per share market price (as
determined pursuant to Section 11.4 hereof) of the Preferred Stock on such
record date, less the fair market value (as determined in good faith by the
Board of Directors of the Corporation, whose determination shall be described in
a statement filed with the Rights Agent and shall be binding on the Rights
Agent) of the portion of the assets or evidences of indebtedness so to be
distributed or of such subscription rights or warrants applicable to one share
of Preferred Stock, and the denominator of which shall be such current per share
market price of the Preferred Stock; provided, however, that in no event shall
-------- -------
the consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Corporation to be
issued upon exercise of one Right. Such adjustments shall be made successively
whenever such a record date is fixed; and in the event that such distribution is
not so made, the Purchase Price shall again be adjusted to be the Purchase Price
that would then be in effect if such record date had not been fixed.
11.4. Computation of "Current Per Share Market Price."
----------------------------------------------
11.4.1. For the purpose of any computation hereunder, the
"current per share market price" of any security (a "Security" for the purpose
of this Section 11.4.1) on any date shall be deemed to be the average of the
daily closing prices per share of such Security for the thirty (30) consecutive
Trading Days immediately prior to such date; provided, however, that in the
-------- -------
event that the current per share market price of the Security is determined
during a period following the announcement by the issuer of such Security of (A)
a dividend or distribution on such Security payable in shares of such Security
or securities convertible into such shares, or (B) any subdivision, combination
or reclassification of such Security and prior to the expiration of thirty (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
18
<PAGE>
per share market price shall be appropriately adjusted to reflect the current
market price per share equivalent of such Security. The closing price for each
day shall be the last sale price, regular way, or, in case no such sale takes
place on such day, the average of the closing bid and asked prices, regular way,
in either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the New York
Stock Exchange or, if the Security is not listed or admitted to trading on the
New York Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the Security is listed or admitted to trading or,
if the Security is not listed or admitted to trading on any national securities
exchange, the last 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 Corporation. If on any
such date no such market maker is making a market in the Security, the fair
value of the Security on such date as determined in good faith by the Board of
Directors of the Corporation 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.
11.4.2. For the purpose of any computation hereunder, the
"current per share market price" of the Preferred Stock shall be determined in
accordance with the method set forth in Section 11.4.1. If the shares of
Preferred Stock are not publicly traded, the "current per share market price" of
the Preferred Stock shall be conclusively deemed to be the current per share
market price of the Common Stock as determined pursuant to Section 11.4.1
(appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof), multiplied by 1,000. If neither
the Common Stock nor the Preferred Stock are publicly held or so listed or
traded, "current per share market price" shall mean, with respect to the
Preferred Stock, the fair value per share as determined in good faith by the
Board of Directors of the Corporation, whose determination shall be described in
a statement filed with the Rights Agent and shall be binding on the Rights
Agent.
11.5. 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 1% in the Purchase Price; provided, however,
-------- -------
that any adjustments that by reason of this Section 11.5 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 one-thousandth (1/1000th) of a share of Preferred
Stock or of any other share or security as the case may be. Notwithstanding the
first sentence of this Section 11.5, 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 that mandates such adjustment or (ii) the Final Expiration Date.
19
<PAGE>
11.6. If as a result of an adjustment made pursuant to Section 11.1.2
or Section 13.1 hereof, the holder of any Right thereafter exercised shall
become entitled to receive any shares of capital stock of the Corporation other
than Preferred Stock, thereafter the number of other shares so receivable upon
exercise of any Right shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Preferred Stock contained in Section 11.1 through 11.3,
inclusive, and the provisions of Sections 7, 9, 10, 13 and 14 with respect to
the Preferred Stock shall apply on like terms to any such other shares.
11.7. All Rights originally issued by the Corporation subsequent to
any adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-thousandths
(1/1000ths) of a share of Preferred Stock purchasable from time to time
hereunder upon exercise of the Rights, all subject to further adjustment as
provided herein.
11.8. The Corporation 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 (1/1000ths) of a share of Preferred Stock
purchasable upon the exercise of a Right. Each of the Rights outstanding after
such adjustment of the number of Rights shall be exercisable for the number of
one one-thousandths (1/1000ths) of a share of Preferred Stock for which a Right
was exercisable immediately prior to such adjustment. Each Right held of record
prior to such adjustment of the number of Rights shall become that number of
Rights (calculated to the nearest one ten-thousandth) obtained by dividing the
Purchase Price in effect immediately prior to adjustment of the Purchase Price
by the Purchase Price in effect immediately after adjustment of the Purchase
Price. The Corporation shall make a public announcement of its election to
adjust the number of Rights, indicating the record date for the adjustment, and,
if known at the time, the amount of the adjustment to be made. This record date
may be the date on which the Purchase Price is adjusted or any day thereafter,
but, if the Right Certificates have been issued, shall be at least ten (10) days
later than the date of the public announcement. If Right Certificates have been
issued, upon each adjustment of the number of Rights pursuant to this Section
11.8, the Corporation shall, as promptly as practicable, cause to be distributed
to holders of record of Right Certificates on such record date Right
Certificates evidencing, subject to Section 14 hereof, the additional Rights to
which such holders shall be entitled as a result of such adjustment, or, at the
option of the Corporation, shall cause to be distributed to such holders of
record in substitution and replacement for the Right Certificates held by such
holders prior to the date of adjustment, and upon surrender thereof, if required
by the Corporation, new Right Certificates evidencing all the Rights to which
such holders shall be entitled after such adjustment. Right Certificates so to
be distributed shall be issued, executed and countersigned in the manner
provided for herein and shall be registered in the names of the holders of
record of Right Certificates on the record date specified in the public
announcement.
11.9. Irrespective of any adjustment or change in the Purchase Price
or the number of one one-thousandths (1/1000ths) of a share of Preferred Stock
issuable upon the
20
<PAGE>
exercise of the Rights, the Right Certificates theretofore and thereafter issued
may continue to express the Purchase Price and the number of one one-thousandths
(1/1000ths) of a share of Preferred Stock that were expressed in the initial
Right Certificates issued hereunder.
11.10. Before taking any action that would cause an adjustment
reducing the Purchase Price below the then par value, if any, of the number of
one one-thousandths (1/1000ths) of a share of Preferred Stock, share of Common
Stock or other securities issuable upon exercise of the Rights, the Corporation
shall take any corporate action that may, in the opinion of its counsel, be
necessary in order that the Corporation may validly and legally issue such
number of fully paid and non-assessable one one-thousandths (1/1000ths) of a
share of Preferred Stock, share of Common Stock or other securities at such
adjusted Purchase Price.
11.11. 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 Corporation may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised after such record date
of the Preferred Stock, shares of Common Stock or other securities of the
Corporation, if any, issuable upon such exercise over and above the Preferred
Stock, shares of Common Stock or other securities of the Corporation, if any,
issuable upon such exercise on the basis of the Purchase Price in effect prior
to such adjustment; provided, however, that the Corporation shall deliver to
-------- -------
such holder a due bill or other appropriate instrument evidencing such holder's
right to receive such additional shares upon the occurrence of the event
requiring such adjustment.
11.12. Anything in this Section 11 to the contrary notwithstanding,
the Corporation 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 the Corporation in its sole discretion shall determine to be
advisable in order that any (i) consolidation or subdivision of the Preferred
Stock, (ii) issuance wholly for cash of Preferred Stock at less than the current
market price, (iii) issuance wholly for cash of Preferred Stock or securities
that by their terms are convertible into or exchangeable for Preferred Stock,
(iv) stock dividends or (v) issuance of rights, options or warrants referred to
in this Section 11, hereafter made by the Corporation to holders of its
Preferred Stock shall not be taxable to such holders.
11.13. The Corporation 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 Corporation in a transaction that does not
violate Section 11.14 hereof), (ii) merge with or into any other Person (other
than a Subsidiary of the Corporation in a transaction that does not violate
Section 11.14 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 Corporation and its Subsidiaries (taken as a whole) to any other Person
or Persons (other than the Corporation and/or any of its Subsidiaries in one or
more transactions each of which does not violate Section 11.14 hereof), if (x)
at the time of or
21
<PAGE>
immediately after such consolidation, merger, sale or transfer, there are any
charter or bylaw provisions or any rights, warrants or other instruments or
securities outstanding or agreements in effect or other actions taken that would
materially 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, sale or transfer, the stockholders of the Person who
constitutes, or would constitute, the "Principal Party" for purposes of Section
13.1 hereof shall have received a distribution of Rights previously owned by
such Person or any of its Affiliates and Associates. The Corporation shall not
consummate any such consolidation, merger, sale or transfer unless prior thereto
the Corporation and such other Person shall have executed and delivered to the
Rights Agent a supplemental agreement evidencing compliance with this Section
11.13.
11.14. The Corporation covenants and agrees that, after the
Distribution Date, it will not, except as permitted by Section 23 or Section
25.2 hereof, take (or permit any Subsidiary to take) any action the purpose of
which is to, or if at the time such action is taken it is reasonably foreseeable
that the effect of such action is to, materially diminish or otherwise eliminate
the benefits intended to be afforded by the Rights.
11.15. The exercise of Rights under Section 11.1.2 shall only result
in the loss of rights under Section 11.1.2 to the extent so exercised and shall
not otherwise affect the rights represented by the Rights under this Agreement,
including the rights represented by Section 13.
12. Certificate of Adjusted Purchase Price or Number of Shares
----------------------------------------------------------
12.1. Whenever an adjustment is made as provided in Section 11 or
Section 13 hereof, the Corporation shall promptly (a) prepare a certificate
setting forth such adjustment and a brief statement of the facts accounting for
such adjustment, (b) file with the Rights Agent and with each transfer agent for
the Common Stock and the Preferred Stock a copy of such certificate and (c) mail
a brief summary thereof to each holder of a Right Certificate in accordance with
Section 25.1 hereof. The Rights Agent shall be fully protected in relying on
any such certificate and on any adjustment therein contained and shall not be
deemed to have knowledge of such adjustment unless and until it shall have
received such certificate.
13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power.
--------------------------------------------------------------------
13.1. In the event that, on or following the Shares Acquisition Date,
directly or indirectly, (x) the Corporation shall consolidate with, or merge
with and into, any Interested Stockholder or, if in such merger or consolidation
all holders of shares of Common Stock are not treated alike, any other Person,
(y) the Corporation shall consolidate with, or merge with, any Interested
Stockholder or, if in such merger or consolidation all holders of shares of
Common Stock are not treated alike, any other Person, and the Corporation shall
be the continuing or surviving corporation of such consolidation or merger
(other than, in a case of any transaction
22
<PAGE>
described in (x) or (y), a merger or consolation that would result in all of the
securities generally entitled to vote in the election of directors of the
Corporation ("voting securities") outstanding immediately prior thereto
-----------------
continuing to represent (either by remaining outstanding or by being converted
into securities of the surviving entity) all of the voting securities of the
Corporation or such voting surviving entity outstanding immediately after such
merger or consolidation and the holders of such securities not having changed as
a result of such merger or consolidation), or (z) the Corporation 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
Corporation and its Subsidiaries (taken as a whole) to any Interested
Stockholder or Stockholders or, if in such transaction all holders of Common
Stock are not treated alike, any other Person (other than the Corporation or any
Subsidiary of the Corporation in one or more transactions each of which does not
violate Section 11.14 hereof), then, and in each such case (except as provided
in Section 13.4 hereof), proper provision shall be made so that (i) each holder
of a Right, except as provided in Section 7.6 hereof, shall thereafter have the
right to receive, upon the exercise thereof at a price equal to the then current
Purchase Price, in accordance with the terms of this Agreement and in lieu of
Preferred Stock, such number of freely tradeable shares of Common Stock of the
Principal Party, not subject to any liens, encumbrances, rights of first refusal
or other adverse claims, as shall equal the result obtained by (A) multiplying
the then current Purchase Price by the number of one one-thousandths (1/1000ths)
of a share of Preferred Stock for which a Right is then exercisable (without
taking into account any adjustment previously made pursuant to Section 11.1.2)
and dividing that product by (B) 50% of the then current per share market price
of the Common Stock of such Principal Party (determined pursuant to Section 11.4
hereof) 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 Corporation
pursuant to this Agreement; (iii) the term "Corporation" 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; and (iv) such Principal
Party shall take such steps (including, but not limited to, the reservation of a
sufficient number of its shares of Common Stock) in 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 the shares of Common Stock thereafter deliverable upon the
exercise of the Rights.
13.2. "Principal Party" shall mean:
---------------
13.2.1. in the case of any transaction described in clause (x)
or (y) of the first sentence of Section 13.1, the Person that is the issuer of
any securities into which shares of Common Stock of the Corporation 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 (including,
if applicable, the Corporation if it is the surviving corporation); and
23
<PAGE>
13.2.2. in the case of any transaction described in clause (z)
of the first sentence of Section 13.1, 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 of the foregoing cases, (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
shares of Common Stock of which are and have been so registered, "Principal
Party" shall refer to such other Person; (2) in case such Person is a
Subsidiary, directly or indirectly, of more than one Person, the shares of
Common Stock of two or more of which are and have been so registered, "Principal
Party" shall refer to whichever of such Persons is the issuer of the Common
Stock having the greatest aggregate market value; and (3) in case such Person is
owned, directly or indirectly, by a joint venture formed by two or more Persons
that are not owned, directly or indirectly, by the same Person, the rules set
forth in (1) and (2) above shall apply to each of the chains of ownership having
an interest in such joint venture as if such party were a "Subsidiary" of both
or all of such joint venturers and the Principal Parties in each such chain
shall bear the obligations set forth in this Section 13 in the same ratio as
their direct or indirect interests in such Person bear to the total of such
interests.
13.3. The Corporation shall not consummate any such consolidation,
merger, sale or transfer unless the Principal Party shall have a sufficient
number of its authorized shares of Common Stock that have not been issued or
reserved for issuance to permit the exercise in full of the Rights in accordance
with this Section 13 and unless prior thereto the Corporation and such Principal
Party shall have executed and delivered to the Rights Agent a supplemental
agreement providing for the terms set forth in Sections 13.1 and 13.2 and
further providing that, as soon as practicable after the date of any
consolidation, merger, sale or transfer mentioned in Section 13.1, the Principal
Party at its own expense shall:
13.3.1. 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 Final Expiration Date;
13.3.2. use its best efforts to qualify or register the Rights
and the securities purchasable upon exercise of the Rights under the blue sky
laws of such jurisdictions as may be necessary or appropriate; and
13.3.3. deliver to holders of the Rights historical financial
statements for the Principal Party that comply in all respects with the
requirements for registration on Form 10 under the Exchange Act.
24
<PAGE>
The provisions of this Section 13 shall similarly apply to
successive mergers or consolidations or sales or other transfers. The rights
under this Section 13 shall be in addition to the rights to exercise Rights and
adjustments under Section 11.1.2 and shall survive any exercise thereof.
13.4. Notwithstanding anything in this Agreement to the contrary, the
foregoing provisions of this Section 13 shall not be applicable to a transaction
described in clauses (x) and (y) of Section 13.1 if: (i) such transaction is
consummated with a Person or Persons who acquired shares of Common Stock
pursuant to a Permitted Offer (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
Permitted Offer; and (iii) the form of consideration offered in such transaction
is the same as the form of consideration paid pursuant to such Permitted Offer.
Upon consummation of any such transaction contemplated by this Section 13.4, all
Rights hereunder shall expire.
14. Fractional Rights and Fractional Shares
---------------------------------------
14.1. The Corporation shall not be required to issue fractions of
Rights or to distribute Right Certificates that evidence fractional Rights. In
lieu of such fractional Rights, there shall be paid to the registered holders of
the Right Certificates with regard to which such fractional Rights would
otherwise be issuable an amount in cash equal to the same fraction of the
current market value of a whole Right. For the purposes of this Section 14.1,
the current market value of a whole Right shall be the closing price of the
Rights for the Trading Day immediately prior to the date on which such
fractional Rights would have been otherwise issuable. The closing price for any
day shall be the last sale price, regular way, or, in case no such sale takes
place on such day, the average of the closing bid and asked prices, regular way,
in either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the 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 Corporation. 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
Corporation shall be used.
14.2. The Corporation shall not be required to issue fractions of
shares of Preferred Stock (other than fractions that are one one-thousandth
(1/1000th) or integral multiples
25
<PAGE>
of one one-thousandth (1/1000th) of a share of Preferred Stock) upon exercise of
the Rights or to distribute certificates that evidence fractional shares of
Preferred Stock (other than fractions that are one one-thousandth (1/1000th) or
integral multiples of one one-thousandth (1/1000th) of a share of Preferred
Stock). Fractions of shares of Preferred Stock in integral multiples of one one-
thousandth (1/1000th) of a share of Preferred Stock may, at the election of the
Corporation, be evidenced by depositary receipts, pursuant to an appropriate
agreement between the Corporation and a depositary selected by it; provided that
--------
such agreement shall provide that the holders of such depositary receipts shall
have the rights, privileges and preferences to which they are entitled as
beneficial owners of the Preferred Stock represented by such depositary
receipts. In lieu of fractional shares of Preferred Stock that are not one one-
thousandth (1/1000th) or integral multiples of one one-thousandth (1/1000th) of
a share of Preferred Stock, the Corporation shall pay to the registered holders
of Right Certificates at the time such Rights are exercised as herein provided
an amount in cash equal to the same fraction of the current market value of one
share of Preferred Stock. For the purposes of this Section 14.2, the current
market value of a share of Preferred Stock shall be the closing price of a share
of Preferred Stock (as determined pursuant to Section 11.4.2 hereof) for the
Trading Day immediately prior to the date of such exercise.
14.3. Following the occurrence of one of the transactions or events
specified in Section 11 giving rise to the right to receive shares of Common
Stock, Capital Stock Equivalents (other than Preferred Stock) or other
securities upon the exercise of a Right, the Corporation shall not be required
to issue fractions of shares or units of such shares of Common Stock, Capital
Stock Equivalents or other securities upon exercise of the Rights or to
distribute certificates that evidence fractions of such shares of Common Stock,
Capital Stock Equivalents or other securities. In lieu of fractional shares or
units of such shares of Common Stock, Capital Stock Equivalents or other
securities, the Corporation may pay to the registered holders of Right
Certificates at the time such Rights are exercised as herein provided an amount
in cash equal to the same fraction of the current market value of a share or
unit of such shares of Common Stock, Capital Stock Equivalents or other
securities. For purposes of this Section 14.3, the current market value shall
be determined in the manner set forth in Section 11.4 hereof for the Trading Day
immediately prior to the date of such exercise and, if such Capital Stock
Equivalent is not traded, each such Capital Stock Equivalent shall have the
value of one one-thousandth (1/1000th) of a share of Preferred Stock.
14.4. The holder of a Right by the acceptance of the Right expressly
waives such holders's right to receive any fractional Rights or any fractional
share upon exercise of a Right (except as provided above).
15. Rights of Action
----------------
15.1. All rights of action in respect of this Agreement, excepting the
rights of action given to the Rights Agent under Section 18 hereof, are vested
in the respective registered holders of the Right Certificates (and, prior to
the Distribution Date, the registered holders of
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<PAGE>
shares of the Common Stock); and any registered holder of any Right Certificate
(or, prior to the Distribution Date, of shares of the Common Stock), without the
consent of the Rights Agent or of the holder of any other Right Certificate (or,
prior to the Distribution Date, of shares of the Common Stock), may, in such
registered holder's own behalf and for such registered holder's own benefit,
enforce, and may institute and maintain any suit, action or proceeding against
the Corporation to enforce, or otherwise act in respect of, such registered
holder's right to exercise the Rights evidenced by such Right Certificate in the
manner provided in such Right Certificate and in this Agreement. Without
limiting the foregoing or any remedies available to the holders of Rights, it is
specifically acknowledged that the holders of Rights would not have an adequate
remedy at law for any breach of this Agreement and will be entitled to specific
performance of the obligations under, and injunctive relief against actual or
threatened violations of the obligations of any Person subject to, this
Agreement. Nothing in this Section 15 is intended to modify or limit the
authority of the Board of Directors under Section 25.3.
16. Agreement of Right Holders
--------------------------
Every holder of a Right, by accepting the same, consents and agrees with
the Corporation and the Rights Agent and with every other holder of a Right
that:
16.1. prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of the associated shares of Common Stock;
16.2. after the Distribution Date, the Right 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 purpose,
duly endorsed or accompanied by a proper instrument of transfer and with the
appropriate form fully executed;
16.3. subject to Section 6 and Section 7.7 hereof, the Corporation and
the Rights Agent may deem and treat the Person in whose name the Right
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
Right Certificate or the associated Common Stock certificate made by anyone
other than the Corporation or the Rights Agent) for all purposes whatsoever, and
neither the Corporation nor the Rights Agent, subject to the last sentence of
Section 7.6 hereof, shall be required to be affected by any notice to the
contrary; and
16.4. notwithstanding anything in this Agreement to the contrary,
neither the Corporation nor the Rights Agent shall have any liability to any
holder of a Right or a beneficial interest in 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
27
<PAGE>
promulgated or enacted by any governmental authority, prohibiting or otherwise
restraining performance of such obligation; provided, however, that the
-------- -------
Corporation must use its best efforts to have any such order, decree or ruling
lifted or otherwise overturned as soon as practicable.
17. Right Certificate Holder Not Deemed a Stockholder.
------------------------------------------------
No holder, as such, of any Right Certificate shall be entitled to vote,
receive dividends or be deemed for any purpose the holder of shares of the
Preferred Stock or any other securities of the Corporation that may at any time
be issuable on the exercise of the Rights represented thereby, nor shall
anything contained herein or in any Right Certificate be construed to confer
upon the holder of any Right Certificate, as such, any of the rights of a
stockholder of the Corporation or any right to vote for the election of
directors or upon any matter submitted to stockholders at any meeting thereof,
or to give or withhold consent to any corporate action, or to receive notice of
meetings or other actions affecting stockholders (except as provided in Section
24 hereof), or to receive dividends or other distributions or to exercise any
preemptive or subscription rights, or otherwise, until the Right or Rights
evidenced by such Right Certificate shall have been exercised in accordance with
the provisions hereof.
18. Concerning the Rights Agent
---------------------------
18.1. The Corporation agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
other disbursements incurred in the administration and execution of this
Agreement and the exercise and performance of its duties hereunder. The
Corporation also agrees to indemnify the Rights Agent for, and to hold it
harmless against, any loss, liability or expense incurred without negligence,
bad faith or willful misconduct on the part of the Rights Agent, for anything
done or omitted by the Rights Agent in connection with the acceptance and
administration of this Agreement, including the costs and expenses of defending
against any claim of liability in the premises. The indemnity provided for
herein shall survive the expiration of the Rights and the termination of this
Agreement.
18.2. The Rights Agent shall be protected and shall incur no liability
for, or in respect of, any action taken, suffered or omitted by it in connection
with its administration of this Agreement in reliance upon any Right Certificate
or certificate for shares of Common Stock or for other securities of the
Corporation, 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.
18.3. Anything in this Agreement to the contrary notwithstanding, in
no event shall the Rights Agent be liable for special, indirect or consequential
loss or damage of any kind
28
<PAGE>
whatsoever (including but not limited to lost profits), even if the Rights Agent
has been advised of the likelihood of such loss or damage and regardless of the
form of the action.
19. Merger or Consolidation or Change of Name of Rights Agent.
---------------------------------------------------------
19.1. Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Rights Agent
or any successor Rights Agent shall be a party, or any corporation succeeding to
the stock transfer or all or substantially all of 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 that such
--------
corporation would be eligible for appointment as a successor Rights Agent under
the provisions of Section 21 hereof. In case at the time such successor Rights
Agent shall succeed to the agency created by this Agreement, any of the Right
Certificates shall have been countersigned but not delivered, any such successor
Rights Agent may adopt the countersignature of a predecessor Rights Agent and
deliver such Right Certificates so countersigned; and in case at that time any
of the Right Certificates shall not have been countersigned, any successor
Rights Agent may countersign such Right Certificates either in the name of the
predecessor or in the name of the successor Rights Agent; and in all such cases
such Right Certificates shall have the full force provided in the Right
Certificates and in this Agreement.
19.2. In case at any time the name of the Rights Agent shall be
changed and at such time any of the Right Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver Right Certificates so countersigned; and in
case at that time any of the Right Certificates shall not have been
countersigned, the Rights Agent may countersign such Right Certificates either
in its prior name or in its changed name; and in all such cases such Right
Certificates shall have the full force provided in the Right Certificates and in
this Agreement.
20. Duties of Rights Agent.
----------------------
20.1. The Rights Agent undertakes only those duties and obligations
imposed by this Agreement upon the following terms and conditions, by all of
which the Corporation and the holders of Right Certificates, by their acceptance
thereof, shall be bound.
20.2. The Rights Agent may consult with legal counsel (who may be legal
counsel for the Corporation), and the opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action taken
or omitted by it in good faith and in accordance with such opinion.
29
<PAGE>
20.3. 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 an Acquiring Person and the
determination of the current market price of any security) be proved or
established by the Corporation prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the Chairman of the Board, the
Chief Executive Officer, the President, any Vice President, the Treasurer or the
Secretary of the Corporation and delivered to the Rights Agent; and such
certificate shall be full authorization to the Rights Agent for any action taken
or suffered in good faith by it under the provisions of this Agreement in
reliance upon such certificate.
20.4. The Rights Agent shall be liable hereunder only for its own
negligence, bad faith or willful misconduct.
20.5. The Rights Agent shall not be liable for, or by reason of, any
of the statements of fact or recitals contained in this Agreement or in the
Right Certificates (except its countersignature on such Right Certificates) or
be required to verify the same, but all such statements and recitals are and
shall be deemed to have been made by the Corporation only.
20.6. The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Right Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Corporation of any
covenant or condition contained in this Agreement or in any Rights Certificate;
nor shall it be responsible for any change in the exercisability of the Rights
(including the Rights becoming void pursuant to Section 7.6 hereof) or 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 or the
ascertaining of the existence of facts that would require any such adjustment
(except with respect to the exercise of Rights evidenced by Right Certificates
after receipt of the certificate described in Section 12 hereof); nor shall it
by any act hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any shares of Preferred Stock or shares of
Common Stock to be issued pursuant to this Agreement or any Right Certificate or
as to whether any Preferred Stock or shares of Common Stock will, when issued,
be validly authorized and issued, fully paid and non-assessable.
20.7. The Corporation 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.
30
<PAGE>
20.8. The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the Board, the Chief Executive Officer, the President,
any Vice President, the Treasurer or the Secretary of the Corporation, and to
apply to such officers for advice or instructions in connection with its duties,
and shall not be liable for any action taken or suffered by it in good faith or
lack of action in accordance with instructions of any such officer or for any
delay in acting while waiting for those instructions. Any application by the
Rights Agent for written instructions from the Corporation may, at the option of
the Rights Agent, set forth in writing any action proposed to be taken or
omitted by the Rights Agent under this Agreement and the date on or after which
such action shall be taken or such omission shall be effective. The Rights
Agent shall not be liable for any action taken by, or omission of, the Rights
Agent in accordance with a proposal included in any such application on or after
the date specified in such application (which date shall not be less than five
(5) Business Days after the date any officer of the Corporation actually
receives such application, unless any such officer shall have consented in
writing to an earlier date) unless, prior to taking any such action (or the
effective date in the case of an omission), the Rights Agent shall have received
written instruction in response to such application specifying the action to be
taken or omitted.
20.9. 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 Corporation or become pecuniarily interested in any
transaction in which the Corporation may be interested, or contract with or lend
money to the Corporation 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 Corporation or for any other
legal entity.
20.10. 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, negligence or misconduct of any such
attorneys or agents or for any loss to the Corporation resulting from any such
act, default, negligence or misconduct, provided reasonable care was exercised
in the selection and continued employment thereof.
20.11. No provision of this Agreement shall require the Rights Agent
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or in the exercise of its rights
if there shall be reasonable grounds for believing that repayment of such funds
or adequate indemnification against such risk or liability is not reasonably
assured to it.
20.12. 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 not been
completed, the Rights Agent shall not take any further
31
<PAGE>
action with respect to such requested exercise or transfer without first
consulting with the Corporation.
21. Change of Rights Agent
----------------------
The Rights Agent or any successor Rights Agent may resign and be discharged
from its duties under this Agreement upon thirty (30) days' notice in writing
mailed to the Corporation and to each transfer agent of the Common Stock or
Preferred Stock by registered or certified mail, and to the holders of the Right
Certificates by first-class mail. The Corporation 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 each
transfer agent of the Common Stock or Preferred Stock by registered or certified
mail, and to holders of the Right Certificates by first-class mail. If the
Rights Agent shall resign or be removed or shall otherwise become incapable of
acting, the Corporation shall appoint a successor to the Rights Agent. If the
Corporation 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 incapacitated
Rights Agent or by the holder of a Right Certificate (who shall, with such
notice, submit his Right Certificate for inspection by the Corporation), then
the registered holder of any Right Certificate may apply to any court of
competent jurisdiction for the appointment of a new Rights Agent. Any successor
Rights Agent, whether appointed by the Corporation or by such a court, shall be
a corporation organized and doing business under the laws of the United States
or of any of the States of New York, New Jersey or California (or of any other
state of the United States so long as such corporation is authorized to do
business as a banking institution in any of the States of New York, New Jersey
or California), in good standing, having an office in any of such States, which
is authorized under such laws to exercise corporate trust or stock transfer
powers and is subject to supervision or examination by federal or state
authority and which (or the parent corporation of which) has at the time of its
appointment as Rights Agent a combined capital and surplus of at least
$100,000,000. After appointment, the successor Rights Agent shall be vested
with the same powers, rights, duties and responsibilities as if it had been
originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment, the Corporation shall file
notice thereof in writing with the predecessor Rights Agent and each transfer
agent of the Common Stock or Preferred Stock, and mail a notice thereof in
writing to the registered holders of the Right Certificates. Failure to give
any notice provided for in this Section 21, however, or any defect therein,
shall not affect the legality or validity of the resignation or removal of the
Rights Agent or the appointment of the successor Rights Agent, as the case may
be.
22. Issuance of New Right Certificates.
----------------------------------
22.1. Notwithstanding any of the provisions of this Agreement or of
the Rights to the contrary, the Corporation may, at its option, issue new Right
Certificates evidencing
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<PAGE>
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 Right Certificates
made in accordance with the provisions of this Agreement.
22.2. In connection with the issuance or sale of Common Stock
following the Distribution Date and prior to the earlier of the Redemption Date
and the Final Expiration Date, the Corporation (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, notes or debentures issued by the Corporation, and (b)
may in any other case, if deemed necessary or appropriate by the Board of
Directors of the Corporation, issue Right Certificates representing the
appropriate number of Rights in connection with such issuance or sale; provided,
--------
however, that (i) the Corporation shall not be obligated to issue any such Right
- -------
Certificates if, and to the extent that, the Corporation shall be advised by
counsel that such issuance would create a significant risk of material adverse
tax consequences to the Corporation or the Person to whom such Right Certificate
would be issued, and (ii) no Right Certificate shall be issued if, and to the
extent that, appropriate adjustment shall otherwise have been made in lieu of
the issuance thereof.
23. Redemption and Termination
--------------------------
23.1. Redemption
----------
23.1.1. The Board of Directors of the Corporation may, at its
option, redeem all but not less than all of the then outstanding Rights at a
redemption price of $.001 per Right, as such amount may be appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof (such redemption price being hereinafter
referred to as the "Redemption Price"), at any time prior to the earlier of the
----------------
occurrence of a Section 11.1.2 Event or the Final Expiration Date. The
Corporation may, at its option, pay the Redemption Price either in shares of
Common Stock (based on the current per share market price of the Common Stock at
the time of redemption) or cash; provided that if the Corporation elects to pay
--------
the Redemption Price in shares of Common Stock, the Corporation shall not be
required to issue any fractional shares of Common Stock and the number of shares
of Common Stock issuable to each holder of Rights shall be rounded down to the
next whole share.
23.1.2. In addition, the Board of Directors of the Corporation
may, at its option, at any time following the occurrence of a Section 11.1.2
Event and the expiration of any period during which the holder of Rights may
exercise the Rights under Section 11.1.2 but prior to any Section 13 Event
redeem all but not less than all of the then outstanding Rights at the
Redemption Price (x) in connection with any merger, consolidation or sale or
other transfer (in one transaction or in a series of related transactions) of
assets or earning power aggregating 50%
33
<PAGE>
or more of the earning power of the Corporation and its Subsidiaries (taken as a
whole) in which all holders of shares of Common Stock are treated alike and not
involving (other than as a holder of shares of Common Stock being treated like
all other such holders) an Interested Stockholder or (y) (i) if and for so long
as the Acquiring Person is not thereafter the Beneficial Owner of voting
securities representing 15% or more of the Voting Power of the Corporation, and
(ii) at the time of redemption no other Persons are Acquiring Persons.
23.2. In the case of a redemption permitted under Section 23.1.1,
immediately upon the date for redemption set forth in (or determined in the
manner specified in) a resolution of the Board of Directors of the Corporation
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. In the case of a redemption permitted only under Section 23.1.2, evidence
of which shall have been filed with the Rights Agent, the right to exercise the
Rights will terminate and represent only the right to receive the Redemption
Price upon the later of ten (10) Business Days following the giving of such
notice or the expiration of any period during which the Rights may be exercised
under Section 11.1.2. The Corporation shall promptly give public notice of any
such redemption; provided, however, that the failure to give, or any defect in,
-------- -------
any such notice shall not affect the validity of such redemption. Within ten
(10) days after such date for redemption set forth in a resolution of the Board
of Directors of the Corporation ordering the redemption of the Rights, the
Corporation shall mail a notice of redemption to all the holders of the then
outstanding Rights at their addresses as they appear upon the registry books of
the Rights Agent or, prior to the Distribution Date, on the registry books of
the transfer agent for the Common Stock. Any notice which is mailed in the
manner herein provided shall be deemed given, whether or not the holder receives
the notice. Each such notice of redemption will state the method by which the
payment of the Redemption Price will be made. Neither the Corporation nor any
of its Affiliates or Associates may redeem, acquire or purchase for value any
Rights at any time in any manner other than as specifically set forth in this
Section 23 and other than in connection with the purchase of shares of Common
Stock prior to the Distribution Date.
23.3. The Corporation may, at its option, discharge all of its
obligations with respect to the Rights by (i) issuing a press release announcing
the manner of redemption of the Rights in accordance with this Agreement and
(ii) mailing payment of the Redemption Price to the registered holders of the
Rights at their addresses as they appear on the registry books of the Rights
Agent or, prior to the Distribution Date, on the registry books of the Transfer
Agent of the Common Stock, and upon such action, all outstanding Rights and
Right Certificates shall be null and void without any further action by the
Corporation.
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24. Notice of Certain Events
------------------------
24.1. In case the Corporation shall propose (i) to pay any dividend
payable in stock of any class to the holders of its Preferred Stock or to make
any other distribution to the holders of its Preferred Stock (other than a
regular quarterly cash dividend), (ii) to offer to the holders of its Preferred
Stock rights or warrants to subscribe for or to purchase any additional
Preferred Stock or shares of stock of any class or any other securities, rights
or options, (iii) to effect any reclassification of its Preferred Stock (other
than a reclassification involving only the subdivision of outstanding Preferred
Stock), (iv) to effect any consolidation or merger into or with any other Person
(other than a Subsidiary of the Corporation in a transaction which does not
violate Section 11.14 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 or more transactions, of 50% or more of the assets or earning power of the
Corporation and its Subsidiaries (taken as a whole) to any other Person or
Persons (other than the Corporation and/or any of its Subsidiaries in one or
more transactions each of which does not violate Section 11.14 hereof), or (v)
to effect the liquidation, dissolution or winding up of the Corporation, then,
in each such case, the Corporation shall give to each holder of a Right
Certificate, in accordance with Section 25 hereof, a notice of such proposed
action to the extent feasible and file a certificate with the Rights Agent to
that effect, which shall specify the record date for the purposes of such stock
dividend or distribution of rights or warrants, or the date on which such
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 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 Preferred 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
Preferred Stock, whichever shall be the earlier.
24.2. In case of a Section 11.1.2 Event, then (i) the Corporation
shall as soon as practicable thereafter give to each holder of a Right
Certificate, in accordance with Section 25.1.3 hereof, a notice of the
occurrence of such event, which notice shall describe such event and the
consequences of such event to holders of Rights under Section 11.1.2 hereof, and
(ii) all references in the preceding Section 24.1 to Preferred Stock shall be
deemed thereafter to refer also to shares of Common Stock and/or, if
appropriate, other securities of the Corporation.
25. Miscellaneous
25.1. Notices.
-------
25.1.1. Notices or demands authorized by this Agreement to be
given or made by the Rights Agent or by the holder of any Right Certificate to
or on the Corporation shall
35
<PAGE>
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:
NetVantage, Inc.
201 Continental Boulevard, Suite 201
El Segundo, California 90245
Attention: Corporate Secretary
25.1.2. Subject to the provisions of Section 21 hereof, any
notice or demand authorized by this Agreement to be given or made by the
Corporation or by the holder of any Right Certificate to or on the Rights Agent
shall be sufficiently given or made if sent by first-class mail, postage
prepaid, addressed (until another address is filed in writing with the
Corporation) as follows:
Continental Stock Transfer & Trust Company
Two Broadway
New York, New York 10004
Attention: Compliance Department
25.1.3. Notices or demands authorized by this Agreement to be
given or made by the Corporation or the Rights Agent to the holder of any Right
Certificate or, if prior to the Distribution Date, to the holder of certificates
representing shares of Common Stock shall be sufficiently given or made if sent
by first-class mail, postage prepaid, addressed to such holder at the address of
such holder as shown on the registry books of the Corporation.
25.2. Supplements and Amendments. The Corporation may from time to
--------------------------
time supplement or amend any provision of this Agreement without the approval of
any holders of Rights in order to cure any ambiguity, to correct or supplement
any provision herein, or to make any other provision with respect to the Rights
which the Corporation may deem necessary or desirable, any such supplement or
amendment to be evidenced by a writing signed by the Corporation and the Rights
Agent; provided, however, that from and after any Shares Acquisition Date this
-------- -------
Agreement shall not be amended in any manner which will adversely affect the
interests of the holders of Rights. Upon the delivery of a certificate from an
appropriate officer of the Corporation which states that the proposed supplement
or amendment is in compliance with the terms of this Section 25.2, the Rights
Agent shall execute such supplement or amendment, provided that such supplement
--------
or amendment does not adversely affect the rights or obligations of the Rights
Agent under Section 18 or Section 20 of this Agreement. Prior to the
Distribution Date, the interests of the holders of Rights shall be deemed
coincident with the interests of the holders of shares of Common Stock.
25.3. Determination and Actions by the Board of Directors, etc. The
--------------------------------------------------------
Board of Directors of the Corporation shall have the exclusive power and
authority to administer this
36
<PAGE>
Agreement and to exercise all rights and powers specifically granted to the
Board, or the Corporation, 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, without limitation, a determination to redeem or not
redeem the Rights or to amend the Agreement and whether any proposed amendment
adversely affects the interests of the holders of Right Certificates). For all
purposes of this Agreement, any calculation of the number of shares of Common
Stock or other securities outstanding at any particular time, including for
purposes of determining the particular percentage of such outstanding shares of
Common Stock or any other securities of which any Person is the Beneficial
Owner, shall be made in accordance with the last sentence of Rule 13d-3(d)(1)(i)
of the General Rules and Regulations under the Exchange Act as in effect on the
date of this Agreement. All such actions, calculations, interpretations and
determinations (including, for purposes of clause (y) below, all omissions with
respect to the foregoing) which are done or made by the Board in good faith,
shall (x) be final, conclusive and binding on the Corporation, the Rights Agent,
the holders of the Right Certificates and all other parties, and (y) not subject
the Board to any liability to the holders of the Right Certificates. Nothing in
Section 15 hereof is intended to modify or limit this Section 25.3.
25.4. Successors. All the covenants and provisions of this Agreement
----------
by or for the benefit of the Corporation or the Rights Agent shall bind and
inure to the benefit of their respective successors and assigns hereunder.
25.5. Benefits of this Agreement. Nothing in this Agreement shall be
--------------------------
construed to give to any person or corporation other than the Corporation, the
Rights Agent and the registered holders of the Right Certificates (and, prior to
the Distribution Date, the shares of Common Stock) any legal or equitable right,
remedy or claim under this Agreement. This Agreement shall be for the sole and
exclusive benefit of the Corporation, the Rights Agent and the registered
holders of the Right Certificates (and, prior to the Distribution Date, the
shares of Common Stock).
25.6. 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.
25.7. Governing Law. This Agreement, each Right and each Right
-------------
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts to
be made and performed entirely within such State.
37
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25.8. Counterparts. This Agreement may be executed in any number of
------------
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
25.9. 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.
26. Exchange.
--------
26.1. Notwithstanding any other provision hereof, the Board of
Directors of the Corporation may, at its option, at any time after any Person
becomes an Acquiring Person, exchange all or part of the then outstanding and
exercisable Rights (which shall not include Rights that have become void
pursuant to the provisions of Section 7.6 hereof) for shares of Common Stock of
the Corporation at an exchange ratio determined by dividing the then-applicable
exercise price of the Rights determined under Section 7.2 by the "current per
share market price" as defined in Section 11.4.1 (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 Corporation, any Subsidiary of the
Corporation, any employee benefit plan of the Corporation or any such
Subsidiary, any Person or entity holding shares of Common Stock for or pursuant
to the terms of any such plan or any trustee, administrator or fiduciary of such
a plan), together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of 50% or more of the Common Stock then outstanding.
26.2. Immediately upon the action of the Board of Directors of the
Corporation ordering the exchange of any Rights pursuant to Section 26.1 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
(other than a holder of Rights that have become void pursuant to the provisions
of Section 7.6 hereof) 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 Corporation 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 Corporation promptly
shall mail a notice of any such exchange to all of the holders of such Rights at
their last addresses as they appear upon the registry books of the Rights Agent.
Any notice which is mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice. Each such notice of exchange
shall 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 7.6) held by each holder of Rights.
38
<PAGE>
26.3. In the event that there shall not be sufficient shares of Common
Stock issued but not outstanding or authorized but unissued to permit any
exchange of Rights as contemplated in accordance with this Section 26, the
Corporation shall take all such action as may be necessary to authorize
additional shares of Common Stock or Preferred Stock for issuance upon exchange
of the Rights.
[REST OF PAGE INTENTIONALLY LEFT BLANK]
39
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and attested, all as of the date and year first above written.
NETVANTAGE, INC.
Attest:
/s/ Thomas G. Iwanski /s/ Stephen R. Rizzone
By:_________________________________ By:_________________________________
Name: Thomas G. Iwanski Name: Stephen R. Rizzone
Title: Chief Financial Officer, Title: President, Chief Executive
Vice President of Finance and Officer and Chairman of the
Secretary Board
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
/s/ William F. Seegraber
By:_________________________________
William F. Seegraber
Name:_______________________________
Vice President
Title:______________________________
<PAGE>
EXHIBIT A
---------
Form of
Certificate of Designation, Preferences and
Rights of Series RP Preferred Stock
of
NetVantage, Inc.
(Pursuant to (S) 151 of the Delaware General Corporation Law)
I, Thomas G. Iwanski, Secretary of NetVantage, Inc. (the "Corporation"), a
corporation organized and existing under the General Corporation Law of the
State of Delaware, in accordance with the provisions of Section 103 thereof, DO
HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors of the
Corporation by the Restated Certificate of Incorporation of the Corporation, the
said Board of Directors on February 13, 1998, adopted the following resolutions
creating a series of 17,000 shares of Preferred Stock designated as Series RP
Preferred Stock.
RESOLVED, that pursuant to the authority granted to and vested in the Board
of Directors of the Corporation in accordance with the provisions of the
Restated Certificate of Incorporation of the Corporation, the Board of Directors
hereby creates a series of Series RP Preferred Stock, with a par value of $0.01
per share, of the Corporation and hereby states the designation and number of
shares, and fixes the relative rights, preferences and limitations thereof as
follows (the following provisions being intended to operate in addition to any
other provisions of said Restated Certificate of Incorporation applicable to any
series of Preferred Stock):
Series RP Preferred Stock
Section 1. Designation, Par Value and Amount. The shares of such series
---------------------------------
shall be designated as "Series RP Preferred Stock" (hereinafter referred to as
"Series RP Preferred Stock"), the shares of such series shall be with par value
of $0.01 per share, and the number of shares constituting such series shall be
17,000; provided, however, that, if more than a total of 17,000 shares of Series
-------- -------
RP Preferred Stock shall be issuable upon the exercise of Rights (the "Rights")
issued pursuant to the Rights Agreement, dated as of February 13, 1998, between
the Corporation and Continental Stock Transfer & Trust Company, as Rights Agent
(as amended from time to time, the "Rights Agreement"), the Board of Directors
of the Corporation shall direct by resolution or resolutions that a certificate
be properly executed, acknowledged and filed providing for the total number of
shares of Series RP Preferred Stock authorized to be issued to
<PAGE>
be increased (to the extent that the Restated Certificate of Incorporation then
permits) to the largest number of whole shares (rounded up to the nearest whole
number) issuable upon exercise of the Rights.
Section 2. Dividends and Distributions.
---------------------------
2.1 Subject to the prior and superior rights of the holders of any shares
of any series of Preferred Stock ranking prior and superior to the shares of
Series RP Preferred Stock with respect to dividends, the holders of shares of
Series RP Preferred Stock shall be entitled to receive, when, as and if declared
by the Board of Directors out of assets legally available for the purpose,
quarterly dividends payable in cash on the first business 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 RP Preferred Stock, in an amount per share (rounded to the nearest cent)
equal to the greater of (a) $1.00 or (b) subject to the provision for adjustment
set forth in Section 6.1, 1,000 times the aggregate per share amount of all cash
dividends, and 1,000 times the aggregate per share amount (payable in kind) of
all non-cash dividends or other distributions other than a dividend payable in
shares of Class A Common Stock, par value $.001 per share, of the Corporation
(the "CLASS A COMMON STOCK") or a subdivision of the outstanding shares of Class
A Common Stock (by reclassification or otherwise), declared on the Class A
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 RP Preferred Stock.
2.2 The Corporation shall declare a dividend or distribution on the Series
RP Preferred Stock as provided in Section 2.1 above immediately after it
declares a dividend or distribution on the Class A Common Stock (other than a
dividend payable in shares of Class A Common Stock); provided that, in the event
-------- ----
no dividend or distribution shall have been declared on the Class A Common Stock
during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per share on the
Series RP Preferred Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.
2.3 Dividends shall begin to accrue and be cumulative on outstanding
shares of Series RP Preferred Stock from the Quarterly Dividend Payment Date
next preceding the date of issue of such shares of Series RP Preferred Stock,
unless the date of issue of such shares is prior to the record date for the
first Quarterly Dividend Payment Date, in which case dividends on such shares
shall begin to accrue from the date of issue of such shares, or unless the date
of issue is a Quarterly Dividend Payment Date or is a date after the record date
for the determination of holders of shares of Series RP 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 RP 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
2
<PAGE>
outstanding. The Board of Directors may fix a record date for the determination
of holders of shares of Series RP Preferred Stock entitled to receive payment of
a dividend or distribution declared thereon, which record date shall be not more
than 30 days prior to the date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series RP Preferred
-------------
Stock shall have the following voting rights:
3.1 Except as provided in Section 3.3 and subject to the provision for
adjustment hereinafter set forth, each share of Series RP Preferred Stock shall
entitle the holder thereof to 1,000 votes on all matters submitted to a vote of
the stockholders of the Corporation.
3.2 Except as otherwise provided herein or by law, the holders of shares
of Series RP Preferred Stock and the holders of shares of Class A Common Stock
shall vote together as one class on all matters submitted to a vote of
stockholders of the Corporation.
3.3 The following additional provisions shall apply with respect to the
voting of shares of Series RP Preferred Stock:
3.3.1 If, on the date used to determine stockholders of record for
any meeting of stockholders for the election of directors, a default in
preference dividends (as defined in Section 3.3.5 below) on the Series RP
Preferred Stock shall exist, the holders of the Series RP Preferred Stock shall
have the right, voting as a class as described in Section 3.3.2 below, to elect
two directors (in addition to the directors elected by holders of Class A Common
Stock of the Corporation). Such right may be exercised (a) at any meeting of
stockholders for the election of directors or (b) at a meeting of the holders of
shares of Voting Preferred Stock (as hereinafter defined), called for the
purpose in accordance with the Bylaws of the Corporation, until all such
cumulative dividends (referred to above) shall have been paid in full or until
non-cumulative dividends have been paid regularly for at least one year.
3.3.2 The right of the holders of Series RP Preferred Stock to elect
two directors, as described above, shall be exercised as a class concurrently
with the rights of holders of any other series of Preferred Stock upon which
voting rights to elect such directors have been conferred and are then
exercisable. The Series RP Preferred Stock and any additional series of
Preferred Stock that the Corporation may issue and that may provide for the
right to vote with the foregoing series of Preferred Stock are collectively
referred to herein as "VOTING PREFERRED STOCK."
3.3.3 Each director elected by the holders of shares of Voting
Preferred Stock shall be referred to herein as a "PREFERRED DIRECTOR." A
Preferred Director shall continue to serve as such for a term of one year,
except that upon any termination of the right of all holders of Voting Preferred
Stock to vote as a class for Preferred Directors, the term of office of
Preferred Directors then serving shall terminate. Any Preferred Director may be
removed by, and shall not be removed except by, the vote of the holders of
record of a majority of the outstanding shares of Voting Preferred Stock then
entitled to vote for the election of directors, present (in person or by proxy)
and voting together as a single class (a) at a meeting of the
3
<PAGE>
stockholders, or (b) at a meeting of the holders of shares of such Voting
Preferred Stock, called for the purpose in accordance with the Bylaws of the
Corporation.
3.3.4 So long as a default in any preference dividends of the Series
RP Preferred Stock shall exist or the holders of any other series of Voting
Preferred Stock shall be entitled to elect Preferred Directors, (a) any vacancy
in the office of a Preferred Director may be filled (except as provided in the
following clause (b)) by an instrument in writing signed by the remaining
Preferred Director and filed with the Corporation and (b) in the case of the
removal of any Preferred Director, the vacancy may be filled by the vote or
written consent of the holders of a majority of the outstanding shares of Voting
Preferred Stock then entitled to vote for the election of directors, present (in
person or by proxy) and voting together as a single class, at such time as the
removal shall be effected. Each director appointed as aforesaid by the remaining
Preferred Director shall be deemed, for all purposes hereof, to be a Preferred
Director. Whenever (x) no default in preference dividends on the Series RP
Preferred Stock shall exist and (y) the holders of other series of Voting
Preferred Stock shall no longer be entitled to elect such Preferred Directors,
then the number of directors constituting the Board of Directors of the
Corporation shall be reduced by two.
3.3.5 For purposes hereof, a "DEFAULT IN PREFERENCE DIVIDENDS" on the
Series RP Preferred Stock shall be deemed to have occurred whenever the amount
of cumulative and unpaid dividends on the Series RP Preferred Stock shall be
equivalent to six full quarterly dividends or more (whether or not consecutive),
and, having so occurred, such default shall be deemed to exist thereafter until,
but only until, all cumulative dividends on all shares of the Series RP
Preferred Stock then outstanding shall have been paid through the last Quarterly
Dividend Payment Date or until, but only until, non-cumulative dividends have
been paid regularly for at least one year.
3.4 Except as set forth herein (or as otherwise required by applicable
law), holders of Series RP Preferred Stock shall have no general or special
voting rights and their consent shall not be required for taking any corporate
action.
Section 4. Certain Restrictions.
--------------------
4.1 Whenever quarterly dividends or other dividends or distributions
payable on the Series RP Preferred Stock as provided in Section 2 are in
arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series RP Preferred Stock
outstanding shall have been paid in full, the Corporation shall not:
4.1.1 declare or pay dividends, or make any other distributions, on
any shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series RP Preferred Stock;
4.1.2 declare or pay dividends, or make any other distributions, on
any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series RP Preferred Stock,
except dividends paid ratably on the Series RP Preferred
4
<PAGE>
Stock and all such parity stock on which dividends are payable or in arrears in
proportion to the total amounts to which the holders of all such shares are then
entitled;
4.1.3 redeem or purchase or otherwise acquire for consideration
(except as provided in Section 4.1.4 below) shares of any stock ranking junior
(either as to dividends or upon liquidation, dissolution or winding up) to the
Series RP Preferred Stock, provided that the Corporation may at any time redeem,
purchase or otherwise acquire shares of any such junior stock in exchange for
shares of any stock of the Corporation ranking junior (either as to dividends or
upon dissolution, liquidation or winding up) to the Series RP Preferred Stock;
4.1.4 redeem or purchase or otherwise acquire for consideration any
shares of Series RP Preferred Stock, or any shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up) with the
Series RP Preferred Stock, except in accordance with a purchase offer made in
writing or by publication (as determined by the Board of Directors) to all
holders of such shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other relative rights
and preferences of the respective series and classes, shall determine in good
faith will result in fair and equitable treatment among the respective series or
classes.
4.2 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 Section 4.1, purchase or
otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series RP 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
Certificate of Incorporation, in any other Certificate of Amendment creating a
series of Preferred Stock or as otherwise required by law.
Section 6. Liquidation, Dissolution or Winding Up.
--------------------------------------
6.1 Subject to the prior and superior rights of holders of any shares of
any series of Preferred Stock ranking prior and superior to the shares of Series
RP Preferred Stock with respect to rights upon liquidation, dissolution or
winding up (voluntary or otherwise), no distribution shall be made to the
holders of shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series RP Preferred Stock unless,
prior thereto, the holders of shares of Series RP Preferred Stock shall have
received per share an amount equal to the greater of 1,000 times $35.00 or
1,000 times the payment made per share of Class A Common Stock, plus an amount
equal to accrued and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment (the "SERIES RP LIQUIDATION PREFERENCE").
Following the payment of the full amount of the Series RP Liquidation
Preference, no additional distributions shall be made to the holders of shares
of Series RP Preferred Stock unless, prior thereto, the holders of shares of
Class A Common Stock shall have received an amount per share
5
<PAGE>
(the "CAPITAL ADJUSTMENT") equal to the quotient obtained by dividing (i) the
Series RP Liquidation Preference by (ii) 1,000 (as appropriately adjusted as set
forth in Section 6.3 to reflect such events as stock splits, stock dividends and
recapitalizations with respect to the Class A Common Stock) (such number in
clause (ii) being hereafter referred to as the "ADJUSTMENT NUMBER"). Following
the payment of the full amount of the Series RP Liquidation Preference and the
Capital Adjustment in respect of all outstanding shares of Series RP Preferred
Stock and Class A Common Stock, respectively, holders of Series RP Preferred
Stock and holders of Class A Common Stock shall receive their ratable and
proportionate share of the remaining assets to be distributed in the ratio of
the Adjustment Number to 1 with respect to such Preferred Stock and Class A
Common Stock, on a per share basis, respectively.
6.2 In the event, however, that there are not sufficient assets available
to permit payment in full of the Series RP Liquidation Preference and the
liquidation preferences of all other series of preferred stock, if any, which
rank on a parity with the Series RP Preferred Stock, then such remaining assets
shall be distributed ratably to the holders of Series RP Preferred Stock and the
holders of such parity shares in proportion to their respective liquidation
preferences. In the event, however, that there are not sufficient assets
available to permit payment in full of the Capital Adjustment, then such
remaining assets shall be distributed ratably to the holders of Class A Common
Stock.
6.3 In the event the Corporation shall (i) declare any dividend on Class A
Common Stock payable in shares of Class A Common Stock, (ii) subdivide the
outstanding Class A Common Stock, or (iii) combine the outstanding Class A
Common Stock into a smaller number of shares, then in each such case the
Adjustment Number in effect immediately prior to such event shall be adjusted by
multiplying such Adjustment Number by a fraction the numerator of which is the
number of shares of Class A Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Class A Common
Stock that were outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the Corporation shall
---------------------------
enter into any consolidation, merger, combination or other transaction in which
the shares of Class A Common Stock are exchanged for or changed into other stock
or securities, cash and/or any other property, then in any such case the shares
of Series RP Preferred Stock shall at the same time be similarly exchanged or
changed in an amount per share equal to the Adjustment Number (as appropriately
adjusted as set forth in Section 6.3 to reflect such events as stock splits,
stock dividends and recapitalizations with respect to the Class A Common Stock)
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
Class A Common Stock is changed or exchanged.
Section 8. No Redemption. The shares of Series RP Preferred Stock shall
-------------
not be redeemable.
Section 9. Ranking. The Series RP Preferred Stock shall rank junior to
-------
all other series of the Corporation's Preferred Stock as to the payment of
dividends and the distribution of assets, unless the terms of any such other
series shall provide otherwise.
6
<PAGE>
Section 10. Amendment. The Restated Certificate of Incorporation of the
---------
Corporation shall not be further amended in any manner that would materially
alter or change the powers, preferences or special rights of the Series RP
Preferred Stock so as to affect them adversely without the affirmative vote of
the holders of a majority or more of the outstanding shares of Series RP
Preferred Stock, voting separately as a class.
Section 11. Fractional Shares. Series RP Preferred Stock may be issued in
-----------------
fractions of a share which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and have the benefit of all other rights of holders
of Series RP Preferred Stock.
RESOLVED, that the proper officers of the Corporation be, and each of them
hereby is, authorized to execute a Certificate of Designation with respect to
the Series RP Preferred Stock pursuant to Section 151 of the General Corporation
Law of the State of Delaware and to take all appropriate action to cause such
Certificate to become effective, including, but not limited to, the filing and
recording of such Certificate with and/or by the Secretary of State of the State
of Delaware.
[REST OF PAGE INTENTIONALLY LEFT BLANK]
7
<PAGE>
IN WITNESS WHEREOF, I have executed and subscribed to this Certificate and
do affirm the foregoing as true under penalty of perjury this 13th day of
February, 1998.
/s/ Thomas G. Iwanski
_________________________________
Thomas G. Iwanski
Chief Financial Officer, Vice President of
Finance and Secretary
8
<PAGE>
EXHIBIT B
---------
Form of Right Certificate
Certificate No. R- _____ Rights
NOT EXERCISABLE AFTER FEBRUARY 13, 2008 OR EARLIER IF REDEEMED BY THE
CORPORATION. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.001 PER RIGHT
ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.
Right Certificate
NETVANTAGE, 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 February 13, 1998 (the "Rights Agreement"), between
NetVantage, Inc., a Delaware corporation (the "Corporation"), and Continental
Stock Transfer & Trust Company (the "Rights Agent") to purchase from the
Corporation at any time after the Distribution Date (as such term is defined in
the Rights Agreement) and prior to 5:00 P.M., New York time, on February 13,
2008, unless the Rights evidenced hereby shall have been previously redeemed by
the Corporation, at the principal office or offices of the Rights Agent
designated for such purpose, or at the office of its successor as Rights Agent,
one one-thousandth (1/1000th) of a fully paid non-assessable share of Series RP
Preferred Stock, $0.001 par value per share (the "Preferred Stock"), of the
Corporation, at a purchase price of $35.00 per one one-thousandth (1/1000th)
of a share of Preferred Stock (the "Purchase Price"), upon presentation and
surrender of this Right Certificate with the Form of Election to Purchase duly
executed. The number of Rights evidenced by this Right Certificate (and the
number of one one-thousandths (1/1000ths) of a share of Preferred Stock that may
be purchased upon exercise hereof) set forth above, and the Purchase Price set
forth above, are the number and Purchase Price as of March 6, 1998, based on the
Preferred Stock as constituted at such date.
Upon the occurrence of a Section 11.1.2 Event (as such term is defined
in the Rights Agreement), if the Rights evidenced by this Right Certificate are
beneficially owned by (i) an Acquiring Person or an Affiliate or Associate of
any such Acquiring Person (as such terms are defined in the Rights Agreement),
(ii) a transferee of any such Acquiring Person, Associate or Affiliate who
becomes a transferee after the Acquiring Person becomes such, or (iii) under
certain circumstances specified in the Rights Agreement, a transferee of any
such Acquiring Person, Associate or Affiliate who becomes a transferee prior to
or concurrently with the Acquiring Person becoming such, such Rights shall
become null and void and no holder hereof
<PAGE>
shall have any right with respect to such Rights from and after the occurrence
of such Section 11.1.2 Event.
As provided in the Rights Agreement, the Purchase Price and the number
of one one-thousandths (1/1000ths) of a share of Preferred Stock or other
securities that may be purchased upon the exercise of the Rights evidenced by
this Right Certificate are subject to modification and adjustment upon the
happening of certain events, including Triggering Events (as such term is
defined in the Rights Agreement).
This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Corporation and the holders of the Right Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the principal executive offices of
the Corporation and the principal office or offices of the Rights Agent.
This Right Certificate, with or without other Right Certificates, upon
surrender at the principal office of the Rights Agent, may be exchanged for
another Right Certificate or Right Certificates of like tenor and date
evidencing Rights entitling the holder to purchase a like aggregate number of
shares of Preferred Stock or other securities as the Rights evidenced by the
Right Certificate or Right Certificates surrendered shall have entitled such
holder to purchase. If this Right Certificate shall be exercised in part, the
holder shall be entitled to receive upon surrender hereof another Right
Certificate or Right Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may be redeemed by the Corporation at a redemption
price of $.001 per Right (subject to adjustment as provided in the Rights
Agreement) payable in cash.
No fractional shares of Preferred Stock will be issued upon the
exercise of any Right or Rights evidenced hereby (other than fractions that are
one one-thousandth (1/1000th) or integral multiples of one one-thousandth
(1/1000th) of a share of Preferred Stock, which may, at the election of the
Corporation, be evidenced by depository receipts), but in lieu thereof a cash
payment will be made, as provided in the Rights Agreement.
No holder of this Right Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of shares of the
Preferred Stock or of any other securities of the Corporation that may at any
time be issuable on the exercise hereof, nor shall anything contained in the
Rights Agreement or herein be construed to confer upon the holder hereof, as
such, any of the rights of a stockholder of the Corporation or any right to vote
for the election of directors or upon any matter submitted to stockholders at
any meeting thereof, or to give or withhold consent to any corporate action, or
to receive notice of meetings or other actions
2
<PAGE>
affecting stockholders (except as provided in the Rights Agreement), or to
receive dividends or other distributions or to exercise any preemptive or
subscription rights, or otherwise, until the Right or Rights evidenced by this
Right Certificate shall have been exercised as provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
3
<PAGE>
WITNESS the signature of the proper officers of the Corporation and its
corporate seal.
Dated __________, _____.
[SEAL]
ATTEST: NETVANTAGE, INC.
By____________________________ By___________________________________
Name__________________________ Name_________________________________
Title_________________________ Title________________________________
Countersigned:
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
By:
Authorized Officer
4
<PAGE>
Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to
transfer the Right Certificate.)
FOR VALUE RECEIVED ____________________________________________________
hereby sells, assigns and transfers unto____________________________________
____________________________________________________________________________
(Please print name and address of transferee)
============================================================================
this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint _______________ Attorney-in-Fact,
to transfer the within Right Certificate on the books of the within-named
Corporation, with full power of substitution.
Dated:__________, _____ ______________________________
Signature
Signature Guaranteed:
______________________________
Signatures must be guaranteed by an "Eligible Guarantor Institution"
as defined in Rule 17Ad-15 (or any successor rule or regulation) promulgated
pursuant to the Securities Exchange Act of 1934, as amended (this term means, in
general, banks, stock brokers, savings and loan associations, and credit unions,
in each case with membership in an approved signature guarantee medallion
program).
The undersigned hereby certifies that (1) the Rights evidenced by this
Right Certificate are not being sold, assigned or 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 in the Rights Agreement), (2) this Right Certificate
is not being sold, assigned or transferred to or on behalf of any such Acquiring
Person, Affiliate or Associate, and (3) after due inquiry and to the best
knowledge of the undersigned, the undersigned did not acquire the Rights
evidenced by this Right Certificate from any Person who is or was an Acquiring
Person or an Affiliate or Associate thereof (as such terms are defined in the
Rights Agreement).
__________________________________________
Signature
<PAGE>
Form of Reverse Side of Right Certificate -- continued
FORM OF ELECTION TO PURCHASE
(To be executed by the registered holder if such holder desires to
exercise Rights represented by the Right Certificate)
To the Rights Agent:
The undersigned hereby irrevocably elects to exercise ______________
Rights represented by this Right Certificate to purchase the shares of Preferred
Stock, shares of Common Stock or other securities issuable upon the exercise of
such Rights and requests that certificates for such shares of Preferred Stock,
shares of Common Stock or other securities be issued in the name of:
Please insert social security number
or other identifying number_____________________________________________________
________________________________________________________________________________
(Please print name and address)
If such number of Rights shall not be all the Rights evidenced by this
Right Certificate, a new Right Certificate for the balance remaining of such
Rights shall be registered in the name of and delivered to:
Please insert social security number
or other identifying number_____________________________________________________
________________________________________________________________________________
(Please print name and address)
Dated: __________, _____
__________________________________________________
Signature
Signature Guaranteed:
______________________________
Signatures must be guaranteed by an "Eligible Guarantor Institution"
as defined in Rule 17Ad-15 (or any successor rule or regulation) promulgated
pursuant to the Securities Exchange Act of 1934, as amended (this term means, in
general, banks, stock brokers, savings and loan associations, and credit unions,
in each case with membership in an approved signature guarantee medallion
program).
<PAGE>
Form of Reverse Side of Right Certificate -- continued
The undersigned hereby certifies that (1) the Rights evidenced by this
Right Certificate are not being exercised 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 in the Rights Agreement), (2) this Right Certificate is not being sold,
assigned or transferred by or on behalf of any such Acquiring Person, Affiliate
or Associate, and (3) after due inquiry and to the best knowledge of the
undersigned, the undersigned did not acquire the Rights evidenced by this Right
Certificate from any Person who is or was an Acquiring Person or an Affiliate or
Associate thereof (as such terms are defined in the Rights Agreement).
___________________________________________
Signature
Notice
The signature on the foregoing Forms of Assignment and Election and
certificates must conform to the name as written upon the face of this Right
Certificate in every particular, without alteration or enlargement or any change
whatsoever.
In the event the certification set forth above in the Form of
Assignment or the Form of Election to Purchase, as the case may be, is not
completed, the Corporation and the Rights Agent will deem the Beneficial Owner
of the Rights evidenced by this Right Certificate to be an Acquiring Person or
an Affiliate or Associate thereof (as such terms are defined in the Right
Agreement) and such Assignment or Election to Purchase will not be honored.
<PAGE>
EXHIBIT C
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NETVANTAGE, INC.
201 Continental Boulevard, Suite 201
El Segundo, California 90245
SUMMARY OF RIGHTS TO PURCHASE
SERIES RP PREFERRED SHARES
On February 13, 1998, the Board of Directors (the "Board") of NetVantage,
Inc. (the "Corporation") declared a dividend distribution of one preferred share
purchase right (a "Right") for each outstanding share of Class A Common Stock,
par value $.001 per share (the "Common Stock"), of the Corporation. The dividend
is payable to the stockholders of record on March 6, 1998 (the "Record Date"),
and with respect to shares of Common Stock issued thereafter until the
Distribution Date (as defined below) and, in certain circumstances, with respect
to shares of Common Stock issued after the Distribution Date. Except as set
forth below, each Right, when it becomes exercisable, entitles the registered
holder to purchase from the Corporation one one-thousandth (1/1000th) of a share
of Series RP Preferred Stock, $0.01 par value per share (the "Preferred Stock"),
of the Corporation at a price of $35.00 (the "Purchase Price"), subject to
adjustment. The description and terms of the Rights are set forth in a Rights
Agreement (the "Rights Agreement") between the Corporation and Continental Stock
Transfer & Trust Company, as Rights Agent (the "Rights Agent"), dated as of
February 13, 1998.
Initially, the Rights will be attached to all certificates representing
shares of Common Stock then outstanding, and no separate certificates
representing the Rights ("Right Certificates") will be distributed. The Rights
will separate from the Common Stock upon the earliest to occur of (i) a person
or group of affiliated or associated persons having acquired, without the prior
approval of the Corporation's Board of Directors, beneficial ownership of shares
of Common Stock which when added to all other voting securities of the
Corporation beneficially owned by such person or group represents 15% or more of
the voting power of the Corporation (except pursuant to a Permitted Offer, as
hereinafter defined) or (ii) 10 days (or such later date as the Board may
determine) following the commencement of, or announcement of an intention to
make, a tender offer or exchange offer the consummation of which would result in
a person or group of affiliated or associated persons becoming an Acquiring
Person (as hereinafter defined) (the "Distribution Date"). A person or group
whose acquisitions of shares of Common Stock cause a Distribution Date pursuant
to clause (i) above is an "Acquiring Person," with certain exceptions as set
forth in the Rights Agreement. The date that a person or group is first publicly
announced to have become such by the Corporation or such Acquiring Person is the
"Shares Acquisition Date."
The Rights Agreement provides that, until the Distribution Date, the Rights
will be transferred with and only with the associated shares of Common Stock.
Until the Distribution Date (or earlier redemption or expiration of the Rights),
new Common Stock certificates issued after the Record Date upon transfer or new
issuance of shares of Common Stock will contain a
<PAGE>
notation incorporating the Rights Agreement by reference. Until the Distribution
Date (or earlier redemption or expiration of the Rights), the surrender for
transfer of any certificates for shares of Common Stock outstanding as of the
Record Date, even without such notation or a copy of this Summary of Rights
being attached thereto, will also constitute the transfer of the Rights
associated with the shares of Common Stock represented by such certificate. As
soon as practicable following the Distribution Date, Right Certificates will be
mailed to the holders of record of the shares of Common Stock as of the Close of
Business (as defined in the Rights Agreement) on the Distribution Date (and to
each initial record holder of certain shares of Common Stock issued after the
Distribution Date), and such separate Right Certificates alone will evidence the
Rights.
The Rights are not exercisable until the Distribution Date and will expire
at the close of business on February 13, 2008, unless earlier redeemed by the
Corporation as described below.
In the event that any person becomes an Acquiring Person (except pursuant
to a tender or exchange offer which is for all outstanding shares of Common
Stock at a price and on terms which a majority of certain members of the Board
determines to be adequate and in the best interests of the Corporation, its
stockholders and other relevant constituencies, other than such Acquiring
Person, its affiliates and associates (a "Permitted Offer")), each holder of a
Right will thereafter have the right (the "Flip-In Right") to receive, upon
exercise, the number of shares of Common Stock (or, in certain circumstances, of
one one-thousandths (1/1000ths) of a share of Preferred Stock or other
securities of the Corporation) having a value (immediately prior to such
triggering event) equal to two times the exercise price of the Right.
Notwithstanding the foregoing, following the occurrence of the event described
above, all Rights that are, or (under certain circumstances specified in the
Rights Agreement) were, beneficially owned by any Acquiring Person or any
affiliate or associate thereof will be null and void. The Board has the option,
at any time after any person becomes an Acquiring Person, to exchange all or
part of the then-exercisable Rights (excluding those that have become void, as
described in the immediately preceding sentence) for shares of Common Stock, at
an exchange ratio determined by dividing the then-applicable Purchase Price by
the then-current market price per share of Common Stock as determined in
accordance with the Rights Agreement. However, this option generally terminates
if any person becomes the beneficial owner of 50% or more of the Common Stock.
In the event that, at any time following the Shares Acquisition Date, (i)
the Corporation is acquired in a merger or other business combination
transaction in which the holders of all of the outstanding shares of Common
Stock immediately prior to the consummation of the transaction are not the
holders of all of the surviving corporation's voting power, or (ii) more than
50% of the Corporation's assets or earning power is sold or transferred, in
either case with or to (x) an Acquiring Person or any affiliate or associate
thereof or (y) any other person in which such Acquiring Person, affiliate or
associate has an interest or any person acting on behalf of or in concert with
such Acquiring Person, affiliate or associate, or (z) if, in such transaction,
all holders of shares of Common Stock are not treated alike, any other person,
then each holder of a Right (except Rights which previously have been voided as
set forth above) shall thereafter have the right (the "Flip-Over Right") to
receive, upon exercise, common shares
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<PAGE>
of the acquiring company having a value equal to two times the exercise price of
the Right. The holder of a Right will continue to have the Flip-Over Right
whether or not such holder exercises or surrenders the Flip-In Right.
The Purchase Price payable, and the number of shares of Preferred Stock,
shares of Common Stock or other securities issuable, upon exercise of the Rights
are subject to adjustment from time to time to prevent dilution (i) in the event
of a stock dividend on, or a subdivision, combination or reclassification of,
the Preferred Stock, (ii) upon the grant to holders of shares of the Preferred
Stock of certain rights or warrants to subscribe for or purchase Preferred Stock
at a price, or securities convertible into Preferred Stock with a conversion
price, less than the then current market price of the Preferred Stock or (iii)
upon the distribution to holders of shares of the Preferred Stock of evidences
of indebtedness or assets (excluding regular quarterly cash dividends) or of
subscription rights or warrants (other than those referred to above).
The number of outstanding Rights and the number of one one-thousandths
(1/1000ths) of a share of Preferred Stock issuable upon exercise of each Right
are also subject to adjustment in the event of a stock split of the Common Stock
or a stock dividend on the Common Stock payable in Common Stock or subdivisions,
consolidations or combinations of the Common Stock occurring, in any such case,
prior to the Distribution Date.
Preferred Stock purchasable upon exercise of the Rights will not be
redeemable. Each share of Preferred Stock will be entitled to a minimum
preferential quarterly dividend payment of $1.00 per share but, if greater, will
be entitled to an aggregate dividend per share of 1,000 times the dividend
declared per share of Common Stock. In the event of liquidation, the holders of
shares of the Preferred Stock will be entitled to a minimum preferential
liquidation payment per share in an amount equal to the greater of 1,000 times
$35.00 or 1,000 times the payment made per share of Common Stock plus an amount
equal to accrued and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment (the "Series RP Liquidation Preference");
thereafter, and after the holders of shares of the Common Stock receive a
liquidation payment of an amount equal to the quotient obtained by dividing the
Series RP Liquidation Preference by 1,000 (subject to certain adjustments for
stock splits, stock dividends and recapitalizations with respect to the Common
Stock), the holders of shares of the Preferred Stock and the holders of the
Common Stock will share the remaining assets in the ratio of 1,000 to 1 (as
adjusted) for each share of Preferred Stock and Common Stock so held,
respectively. Finally, in the event of any merger, consolidation or other
transaction in which shares of Common Stock are exchanged, each share of
Preferred Stock will be entitled to receive 1,000 times the amount received per
share of Common Stock. These rights are protected by customary antidilution
provisions. In the event that the amount of accrued and unpaid dividends on the
Preferred Stock is equivalent to six full quarterly dividends or more, the
holders of shares of the Preferred Stock shall have the right, voting as a
class, to elect two directors in addition to the directors elected by the
holders of shares of the Common Stock until all cumulative dividends on the
Preferred Stock have been paid through the last quarterly dividend payment date
or until non-cumulative dividends have been paid regularly for at least one
year.
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<PAGE>
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional shares of Preferred Stock will be issued
(other than fractions which are one one-thousandth (1/1000th) or integral
multiples of one one-thousandth (1/1000th) of a share of Preferred Stock, which
may, at the election of the Corporation, be evidenced by depositary receipts)
and in lieu thereof, an adjustment in cash will be made based on the market
price of the Preferred Stock on the last trading day prior to the date of
exercise.
At any time prior to the earlier to occur of (i) a person becoming an
Acquiring Person or (ii) the expiration of the Rights, and under certain other
circumstances, the Corporation may redeem the Rights in whole, but not in part,
at a price (payable in cash or, at the Corporation's election, in Common Stock)
of $0.001 per Right (the "Redemption Price"), which redemption shall be
effective upon the action of the Board. Additionally, following the Shares
Acquisition Date, the Corporation may redeem the then outstanding Rights in
whole, but not in part, at the Redemption Price, provided that such redemption
is in connection with a merger or other business combination transaction or
series of transactions involving the Corporation in which all holders of shares
of Common Stock are treated alike but not involving an Acquiring Person or its
affiliates or associates.
All of the provisions of the Rights Agreement may be amended by the Board
of Directors of the Corporation prior to the Distribution Date. After the
Distribution Date, the provisions of the Rights Agreement may be amended by the
Board in order to cure any ambiguity, defect or inconsistency, to make changes
that do not adversely affect the interests of holders of Rights (excluding the
interests of any Acquiring Person), or, subject to certain limitations, to
shorten or lengthen any time period under the Rights Agreement.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Corporation, including, without limitation, the
right to vote or to receive dividends. While the distribution of the Rights will
not be taxable to stockholders of the Corporation, stockholders may, depending
upon the circumstances, recognize taxable income should the Rights become
exercisable or upon the occurrence of certain events thereafter.
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. A
copy of the Rights Agreement is available free of charge from the Corporation.
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 hereby
incorporated herein by reference.
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