<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
INFERENCE CORPORATION
- -------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 95-3436352
- ------------------------------- -----------------------
(State of Incorporation (I.R.S. Employer
or Organization) Identification No.)
100 ROWLAND WAY
NOVATO, CALIFORNIA 94945
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Securities to be registered pursuant to Section 12(b) of the Act:
NONE
Securities to be registered pursuant to Section 12(g) of the Act:
PREFERRED STOCK PURCHASE RIGHTS
- --------------------------------------------------------------------------------
(Title of Class)
_______________________________________
The total number of pages is 83.
The Exhibit Index is located on page 6.
<PAGE>
ITEM 1. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED.
On November 25, 1996, the Board of Directors of Inference Corporation (the
"COMPANY") declared a distribution of one Right for each outstanding share of
common stock (the "COMMON SHARES") of the Company. The distribution is to be
made as of December 10, 1996 (the "RECORD DATE") to the stockholders of record
on that date. Each Right entitles the registered holder to purchase from the
Company, initially, one one-hundredth of a share of Junior Participating
Preferred Stock ("PREFERRED SHARES") at a price of $40.00 (the "PURCHASE
PRICE"), subject to adjustment. The description and terms of the Rights are set
forth in a Rights Agreement between the Company and Harris Trust Company of
California, as Rights Agent (the "RIGHTS AGREEMENT").
Preferred Shares purchasable upon exercise of the Rights will be entitled
to dividends of 100 times the dividends, per share, declared on the Common
Shares and in the event of liquidation will be entitled to a minimum
preferential liquidating distribution of $l00 per share and an aggregate
liquidating distribution, per share, of 100 times the distribution made per
Common Share. The Preferred Shares will vote together with the Common Shares
and in the event of any merger, consolidation or other transaction in which
Common Shares are exchanged, each Preferred Share will be entitled to receive
100 times the amount received per Common Share.
Because of the Preferred Shares' dividend and liquidation rights, the value
when issued of the one one-hundredth interest in a Preferred Share purchasable
upon exercise of each Right should approximate the value of one Common Share.
Until the earlier to occur of (i) 10 business days following a public
announcement that a person or group of affiliated or associated persons (an
"ACQUIRING PERSON") has acquired beneficial ownership of 20% or more of the
Company's general voting power other than pursuant to a Qualified Offer (as
defined below), the date of such public announcement being called the "STOCK
ACQUISITION DATE," or (ii) 10 business days (or such later date as may be
determined by action of the Board of Directors) following the commencement of,
or announcement of an intention to make, a tender offer or exchange offer the
consummation of which would result in the beneficial ownership by a person or
group of 20% or more of the Company's general voting power (the date of such
earlier occurrence being called the "DISTRIBUTION DATE"), the Rights will be
evidenced by the certificates representing the Common Shares and will be
transferred with and only with the Common Shares. New Common Share certificates
issued after the Record Date upon transfer or new issuance of Common Shares will
contain a notation incorporating the Rights Agreement by reference, and the
surrender for transfer of any certificate for Common Shares, even
2
<PAGE>
without such notation, will also constitute the transfer of the Rights
associated with the Common Shares represented by such certificate. As soon as
practicable following the Distribution Date, separate certificates evidencing
the Rights ("RIGHTS CERTIFICATES") will be mailed to holders of record of the
Common Shares as of the close of business on the Distribution Date and such
separate Rights Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date. The Rights
will expire on the tenth anniversary of the Record Date (the "FINAL EXPIRATION
DATE"), unless the Final Expiration Date is extended or unless the Rights are
earlier redeemed or exchanged by the Company, as described below.
The Purchase Price payable, the number of shares or other securities or
property issuable upon exercise of the Rights, and the number of outstanding
Rights, are subject to adjustment from time to time to prevent dilution.
A "QUALIFIED OFFER" is a tender offer or exchange offer for all outstanding
Common Shares which is determined by the non-affiliated continuing directors to
be fair to and otherwise in the best interests of the Company and its
stockholders.
In the event that any person becomes an Acquiring Person other than by a
purchase pursuant to a Qualified Offer, proper provision shall be made so that
each holder of a Right, other than Rights beneficially owned by the Acquiring
Person (which will not be entitled to the benefit of such adjustment) will
thereafter have the right to receive upon exercise that number of Common Shares
or Common Share equivalents having a market value of two times the exercise
price of the Right.
In the event that, at any time after an Acquiring Person has become such,
the Company is acquired in a merger or other business combination transaction
(other than a merger which follows a Qualified Offer at the same or a higher
price) or 50% or more of its consolidated assets or earning power are sold,
proper provision will be made so that each holder of a Right will thereafter
have the right to receive, upon the exercise thereof at the then current
exercise price of the Right, that number of shares of common stock of the
acquiring company which at the time of such transaction will have a market value
of two times the exercise price of the Right.
At any time after an Acquiring Person has become such, the Board of
Directors of the Company may exchange the Rights (other than Rights owned by
such person or group), in whole or in part, at an exchange ratio of one Common
Share per Right (subject to adjustment).
3
<PAGE>
Up to and including the tenth business day after a Stock Acquisition Date,
the Board of Directors of the Company may redeem the Rights in whole, but not in
part, at a price of $0.001 per Right (the "REDEMPTION PRICE"). Immediately upon
any redemption of the Rights, the right to exercise them will terminate and the
only right of the holders will be to receive the Redemption Price.
The terms of the Rights may be amended by the Board of Directors without
the consent of the holders of the Rights at any time prior to the Distribution
Date. Thereafter, the Rights may be amended to make changes which do not
adversely affect the interests of the holders of the Rights, or which shorten or
lengthen time periods, subject to certain limitations set forth in the Rights
Agreement.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company.
A copy of the Rights Agreement has been filed as Exhibit 2 to this
Registration Statement on Form 8-A. A copy of the Rights Agreement is available
free of charge from the Company. This summary description of the Rights does
not purport to be complete and is qualified in its entirety by reference to the
Rights Agreement, which is incorporated herein by reference.
ITEM 2. EXHIBITS.
1. Form of Right Certificate.
2. Rights Agreement, dated as of November 25, 1996, between Inference
Corporation and Harris Trust Company of California, as Rights Agent.
3. Form of letter to be sent to stockholders of Inference Corporation.
4. Form of Certificate of Designations of Junior Participating Preferred
Stock.
4
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereto duly authorized.
INFERENCE CORPORATION
Date: November 27, 1996 By: /s/ WILLIAM D. GRIFFIN
---------------------------------------
Name: William D. Griffin
Title: Senior Vice President and Chief
Financial Officer
5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT NO. NAME OF ITEM PAGE NO.
- ----------- ------------- ----------
<C> <S> <C>
1. Form of Right Certificate 7 - 12
2. Rights Agreement, dated as of 13 - 73
November 25, 1996, between
Inference Corporation and Harris
Trust Company of California, as
Rights Agent.
3. Form of letter to be sent to 74 - 76
stockholders of Inference Corporation
4. Form of Certificate of Designations 77 - 83
of Junior Participating Preferred Stock.
</TABLE>
6
<PAGE>
EXHIBIT 1
[Form of Facing Side of Right Certificate]
Certificate No. R- _____ Rights
NOT EXERCISABLE AFTER PUBLIC ANNOUNCEMENT OF
REDEMPTION IS MADE. THE RIGHTS ARE SUBJECT TO
REDEMPTION, AT THE OPTION OF THE COMPANY, AT
$0.001 PER RIGHT ON THE TERMS SET FORTH IN THE
AGREEMENT. IN THE EVENT THAT THE RIGHTS
REPRESENTED BY THIS CERTIFICATE ARE ISSUED TO
A PERSON WHO IS AN ACQUIRING PERSON OR AN ASSOCIATE
OR AFFILIATE THEREOF (AS SUCH TERMS ARE DEFINED
IN THE RIGHTS AGREEMENT) OR CERTAIN TRANSFEREES
THEREOF, THIS RIGHT CERTIFICATE AND THE RIGHTS
REPRESENTED HEREBY MAY BE SUBJECT TO CERTAIN
LIMITATIONS IN THE CIRCUMSTANCES SPECIFIED IN
SECTION 7 OF THE RIGHTS AGREEMENT.
RIGHT CERTIFICATE
This certifies that _______________, or registered assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions and conditions of the Rights
Agreement, dated as of November 25, 1996 (the "Rights Agreement"), between
Inference Corporation, a Delaware corporation (the "Company"), and Harris Trust
Company of California (the "Rights Agent"), to purchase from the Company, unless
the Rights have been previously redeemed, at any time after the Distribution
Date (as such term is defined in the Rights Agreement) and prior to the
Expiration Date (as such term is defined in the Rights Agreement), or the date,
if any, on which the Rights evidenced by this Certificate may be redeemed, at
the stock transfer office of the Rights Agent, or its successors as Rights
Agent, one one-hundredth of a fully paid and nonassessable share of Junior
Participating Preferred Stock ("Preferred Shares"), at a purchase price of
$40.00 (the "Purchase Price"), upon presentation and surrender of this Right
Certificate with the Form of Election to Purchase duly completed and executed.
The number of Rights evidenced by this Right Certificate (and the number of
shares which may be purchased upon exercise thereof) as set forth above, and the
Purchase Price set forth above, are the number and Purchase
<PAGE>
Price as of the date of the Rights Agreement based on the shares of Common Stock
of the Company as constituted at such date.
Upon the occurrence of an event described in clause (A), (B), (C) or
(D) of Section 11(a)(ii) of the Rights Agreement, the holder of any Rights that
are, or were, beneficially owned by an Acquiring Person or an Associate or
Affiliate thereof (as such terms are defined in the Rights Agreement) or certain
transferees thereof which engaged in, or realized the benefit of, an event or
transaction or transactions described in clause (A), (B), (C) or (D) of such
Section 11(a)(ii), shall not be entitled to the benefit of the adjustment
described in such Section 11(a)(ii).
As provided in the Rights Agreement, the Purchase Price and the number
and class of shares which 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.
This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Right Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the above-mentioned office of the
Rights Agent and at the principal office of the Company.
This Right Certificate, with or without other Right Certificates, upon
surrender at the stock transfer office of the Rights Agent set forth above, may
be exchanged for another Right Certificate or Right Certificates of like tenor
and date evidencing Rights entitling the holder to purchase such number of
shares 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 Company at its option at a
redemption price of $0.001 per Right.
2
<PAGE>
No fractional shares will be issued upon the exercise of any Rights
evidenced hereby, but in lieu thereof a cash payment may 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 or of any
other securities of the Company which may at any time be issuable on the
exercise hereof, nor shall anything contained in the Rights Agreement or herein
be construed to confer upon the holder hereof, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting stockholders (except as provided in the Rights
Agreement), or to receive dividends or subscription rights, or otherwise, until
the Right or Rights evidenced by this Right Certificate shall have been
exercised as provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signatures of the proper officers of the
Company. Dated as of ____________, 199__.
Attest: Inference Corporation
By:
- --------------------------- --------------------------------
Secretary Title:
Countersigned:
Harris Trust Company of California
By:
--------------------
Authorized Signature
3
<PAGE>
[Form of Reverse Side of Right Certificate]
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate.)
FOR VALUE RECEIVED hereby sells,
------------------------------------
assigns and 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 to
----------------------
transfer the within Right Certificate on the books of the within-named
Corporation, with full power of substitution.
Dated: , 19
------- -- ----------------------------------------
Signature
Signature Guaranteed:
CERTIFICATE
-----------
The undersigned hereby certifies (after due inquiry and to the best
knowledge of the undersigned) by checking the appropriate boxes that:
(1) this Right Certificate [ ] is [ ] is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of an Acquiring Person (as such terms are defined in the
Rights Agreement);
(2) the undersigned [ ] did [ ] did not acquire the Rights evidenced
by this Right Certificate from any Person who is, was or subsequently became an
Acquiring Person or an Affiliate or Associate of an Acquiring Person.
Date: , 19
----- -- --------------------------------------
Signature
Signature Guaranteed:
NOTICE
------
The signature to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Right Certificate in
every particular, without alteration or enlargement or any change whatsoever.
4
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FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if holder desires to
exercise the Right Certificate.)
To the Company and the Rights Agent:
The undersigned hereby irrevocably elects to exercise
---------------
Rights represented by this Right Certificate and to purchase the shares issuable
upon the exercise of such Rights and requests that certificates for such shares
be issued in the name of:
Please insert social security
or other identifying number:
--------------------------------------------------
- -------------------------------------------------------------------------------
(Please print name and address)
- -------------------------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced by this 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
or other identifying number:
--------------------------------------------------
- ------------------------------------------------------------------------------
(Please print name and address)
- ------------------------------------------------------------------------------
Dated: , 19
------ ---- ------------------------------------------
Signature
Signature Guaranteed:
5
<PAGE>
CERTIFICATE
-----------
The undersigned hereby certifies (after due inquiry and to the best
knowledge of the undersigned) by checking the appropriate boxes that:
(1) the Rights evidenced by this Right Certificate [ ] are [ ] are not
being exercised by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of an Acquiring Person (as such terms are defined in
the Rights Agreement);
(2) the undersigned [ ] did [ ] did not acquire the Rights evidenced
by this Right Certificate from any person who is, was or subsequently became an
Acquiring Person or an Affiliate or Associate of an Acquiring Person.
Date: , 19
--------- --- -------------------------------
Signature
Signature Guaranteed:
NOTICE
------
The signature to the foregoing Election to Purchase and Certificate
must correspond to the name as written upon the face of this Right Certificate
in every particular, without alteration or enlargement or any change whatsoever.
6
<PAGE>
EXHIBIT 2
================================================================================
INFERENCE CORPORATION
AND
HARRIS TRUST COMPANY OF CALIFORNIA,
RIGHTS AGENT
--------------------------
RIGHTS AGREEMENT
DATED AS OF NOVEMBER 25, 1996
===============================================================================
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
<S> <C> <C>
Page
----
Section 1. Certain Definitions............................................................................. 1
-------------------
Section 2. Appointment of Rights Agent..................................................................... 6
---------------------------
Section 3. Issuance of Right Certificates.................................................................. 6
------------------------------
Section 4. Form of Right Certificate....................................................................... 8
-------------------------
Section 5. Countersignature and Registration............................................................... 9
---------------------------------
Section 6. Transfer, Split Up, Combination and Exchange of Right Certificates; Mutilated, Destroyed, Lost
----------------------------------------------------------------------------------------------
or Stolen Right Certificates.................................................................... 10
----------------------------
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights................................... 11
-------------------------------------------------------------
Section 8. Cancellation and Destruction of Right Certificates.............................................. 13
--------------------------------------------------
Section 9. Reservation and Availability of Shares; Registration............................................ 14
----------------------------------------------------
Section 10. Record Date..................................................................................... 15
-----------
Section 11. Adjustment of Purchase Price, Number of Shares or Number of Rights.............................. 15
------------------------------------------------------------------
Section 12. Certification of Adjusted Purchase Price or Number of Shares.................................... 24
------------------------------------------------------------
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power............................ 25
--------------------------------------------------------------------
Section 14. Fractional Rights and Fractional Shares......................................................... 29
---------------------------------------
Section 15. Rights of Action................................................................................ 30
----------------
Section 16. Agreement of Right Holders...................................................................... 30
--------------------------
Section 17. Right Certificate Holder Not Deemed a Stockholder............................................... 31
-------------------------------------------------
Section 18. Concerning the Rights Agent..................................................................... 31
---------------------------
</TABLE>
i
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<TABLE>
<CAPTION>
<S> <C> <C>
Section 19. Merger or Consolidation or Change of Name of Rights Agent....................................... 32
---------------------------------------------------------
Section 20. Duties of Rights Agent.......................................................................... 32
----------------------
Section 21. Change of Rights Agent.......................................................................... 35
----------------------
Section 22. Issuance of New Right Certificates.............................................................. 36
----------------------------------
Section 23. Redemption...................................................................................... 36
-----------
Section 24. Notice of Proposed Actions...................................................................... 37
--------------------------
Section 25. Notices......................................................................................... 38
-------
Section 26. Supplements and Amendments...................................................................... 38
--------------------------
Section 27. Exchange........................................................................................ 39
--------
Section 28. Successors...................................................................................... 40
----------
Section 29. Determination and Actions Taken by the Board of Directors....................................... 40
---------------------------------------------------------
Section 30. Benefits of this Agreement...................................................................... 41
--------------------------
Section 31. Governing Law................................................................................... 41
-------------
Section 32. Counterparts.................................................................................... 41
------------
Section 33. Section Headings................................................................................ 41
----------------
Section 34. Severability.................................................................................... 41
------------
</TABLE>
Exhibit A Form of Right Certificate
Exhibit B Form of Summary of Rights
Exhibit C Form of Certificate of Designations of
Junior Participating Preferred Stock
ii
<PAGE>
RIGHTS AGREEMENT
----------------
RIGHTS AGREEMENT, dated as of November 25, 1996, between Inference
Corporation, a Delaware corporation (the "Company"), and Harris Trust Company of
California, as Rights Agent.
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, the Board of Directors of the Company has authorized and
declared the distribution of one right for (i) each share of the Company's Class
A Common Stock and the Company's Class B Common Stock (collectively, the "Common
Stock") outstanding at the Close of Business (as hereinafter defined) on
December 10, 1996 (the "Rights Record Date"), each right representing the right
to purchase one Unit consisting, initially, of one one-hundredth of a share of
Junior Participating Preferred Stock, and (ii) each additional share of Common
Stock which shall become outstanding between the Rights Record Date and the
earliest of the Distribution Date, the Expiration Date (as such terms are
hereinafter defined) and the date, if any, on which such rights may be redeemed,
all upon the terms and subject to the conditions hereinafter set forth (each
such right being hereinafter referred to as a "Right");
NOW, THEREFORE, the parties agree as follows:
Section 1. Certain Definitions.
-------------------
(a) For purposes of this Agreement, the following terms have the
meanings indicated:
"Acquiring Person" shall mean any Person who or which, alone or
----------------
together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner (within the meaning of Section 1(b)) of a Substantial
Block of Voting Stock, but shall not include (i) an Exempt Person or
(ii) any Person who or which acquires a Substantial Block of Voting
Stock in connection with a transaction or series of transactions
approved prior to such transaction or transactions by the Board of
Directors of the Company; provided that no person shall become an
Acquiring Person solely as a result of a reduction in the number of
shares of Voting Stock outstanding, unless and until such Person shall
thereafter become the Beneficial Owner of additional
<PAGE>
shares constituting 1% or more of the general voting power of the
Company. Notwithstanding the foregoing, if the Continuing Directors
determine in good faith that a Person who would otherwise be an
"Acquiring Person" has become such inadvertently, and such Person
divests as promptly as practicable a sufficient number of Common Shares
so that such Person would no longer be an Acquiring Person as herein
defined, then such Person shall not be deemed to be an "Acquiring
Person" unless and until such Person shall become the Beneficial Owner
of additional shares constituting 1% or more of the general voting power
of the Company.
"Affiliate" and "Associate" shall have the respective meanings
--------- ---------
ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act, as in effect as of the date hereof.
"Business Day" shall mean any day other than a Saturday, Sunday
------------
or day on which banking institutions in the State of California are
authorized or obligated by law or executive order to close.
"Close of Business" on any given date shall mean 5:00 p.m., Los
-----------------
Angeles time, on such date; provided, however, that if such date is not
-------- -------
a Business Day it shall mean 5:00 p.m., Los Angeles time, on the next
succeeding Business Day.
"Common Stock" shall have the meaning assigned to it in the
------------
preamble; and "common stock" when used with reference to Persons other
------------
than the Company shall mean: (i) in the case of Persons organized in
corporate form, the capital stock or equity security with the greatest
voting power of such Person or, if such Person is a Subsidiary of
another Person, of the Person or Persons which ultimately control such
first-mentioned Person; and (ii) in the case of Persons not organized in
corporate form, the units of beneficial interest which (A) represent the
right to participate generally in the profits and losses of such Person
(including without limitation any flow-through tax benefits resulting
from an ownership interest in such Person) and (B) are entitled to
exercise the greatest voting power of such Person or, in the case of a
limited partnership, shall have the power to remove the general partner
or partners.
2
<PAGE>
"Continuing Director" shall mean any member of the Board of
-------------------
Directors of the Company (while such Person is a member of the Board)
who (i) is not an Acquiring Person, or an Affiliate or Associate of an
Acquiring Person, or a representative of an Acquiring Person or of any
such Affiliate or Associate, and (ii) either (A) was a member of the
Board of Directors prior to the time any Person became an Acquiring
Person, or (B) became a member of the Board of Directors subsequent to
the time any Person became an Acquiring Person, if such Person's
nomination for election, or re-election, to the Board was recommended,
or approved, by a majority of the Continuing Directors then in office.
"Distribution Date" shall have the meaning assigned to it in
-----------------
Section 3(a).
"Equivalent Stock" shall have the meaning assigned to it in
----------------
Section 7(a).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended from time to time.
"Exempt Person" shall mean the Company, any Subsidiary of the
-------------
Company and any employee benefit plan or employee stock plan of the
Company or of any Subsidiary of the Company, or any trust or other
entity organized, established or holding shares of Common Stock by, for
or pursuant to, the terms of any such plan.
"Expiration Date" shall have the meaning assigned to it in
---------------
Section 7(a).
"Offer Date" shall have the meaning assigned to it in Section
----------
3(a).
"Person" shall mean any individual, firm, corporation,
------
partnership, trust or other entity and shall include any successor (by
merger or otherwise) of any of the foregoing.
"Principal Party" shall have the meaning assigned to it in
---------------
Section 13(b).
"Purchase Price" shall mean the price payable for one Unit upon
--------------
exercise of a Right.
"Qualified Offer" shall mean a tender or exchange offer for all
---------------
outstanding Common Stock at a
3
<PAGE>
price and on terms determined to be adequate and otherwise in the best
interests of the Company and its stockholders (other than the Person or
an Affiliate or Associate thereof on whose behalf the offer is made) by
at least a majority of the Continuing Directors who are not
representatives of or affiliated with the Person making such offer or
any Affiliate or Associate of such Person.
"Redemption Price" shall have the meaning assigned to it in
----------------
Section 23(a).
"Right" shall have the meaning assigned to it in the preamble.
-----
"Rights Record Date" shall have the meaning assigned to it in the
------------------
preamble.
"Stock Acquisition Date" shall mean the date of the first public
----------------------
announcement by the Company or an Acquiring Person that an Acquiring
Person has become such.
"Subject Shares" shall mean the class or series of shares then
--------------
issuable on exercise of the Rights.
"Subsidiary" shall mean, with respect to any Person, a
----------
corporation or other entity the securities or other ownership interests
of which having ordinary voting power sufficient to elect a majority of
the board of directors or other persons performing similar functions are
at the time directly or indirectly owned by such Person and any
Affiliate of such Person.
"Substantial Block" shall mean a number of shares of Voting Stock
-----------------
having in the aggregate twenty percent (20%) or more of the general
voting power.
"Trading Day" shall have the meaning assigned to it in Section
-----------
11(d).
"Unit" shall mean the shares or other securities issuable upon
----
exercise of one Right, initially one one-hundredth of a share of Junior
Participating Preferred Stock of the Company having the rights and
preferences set forth in Exhibit C, before any adjustment pursuant to
Section 11(a)(ii) or Section 13.
4
<PAGE>
"Voting Stock" shall mean shares of the Company's capital stock
------------
the holders of which have general voting power.
(b) For purposes of this Agreement, a Person shall be deemed the
"Beneficial Owner" of any securities:
- -----------------
(i) which such Person or any of such Person's Affiliates or
Associates beneficially owns, directly or indirectly;
(ii) which such Person or any of such Person's Affiliates or
Associates has (A) the right to acquire (whether such right is
exercisable immediately or only after the passage of time) pursuant to
any agreement, arrangement or understanding, (whether or not in writing)
or upon the exercise of any conversion, exchange or purchase rights
(other than the Rights), warrants or options, or otherwise; provided,
however, that a Person shall not be deemed the "Beneficial Owner" of
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 payment or exchange; or
(B) the right to vote or to direct the voting of, pursuant to any
agreement, arrangement or understanding (whether or not in writing); or
(C) the right to dispose or to direct the disposition of, pursuant to
any agreement, arrangement or understanding (whether or not in writing);
or
(iii) which are beneficially owned, directly or indirectly, by
any other Person with which such Person or any of such Person's
Affiliates or Associates has any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of any
securities of the Company;
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 the grant of a revocable proxy or
consent given to such Person in connection with a public proxy or consent
solicitation made pursuant to, and in accordance with, the applicable rules and
regulations under the Exchange Act, and (2) is not also then reportable on
Schedule 13D (or any comparable or successor report) under the Exchange Act;
provided, further, that a Person engaged in business as an underwriter of
securities shall not be deemed the "Beneficial Owner" of securities acquired
through such person's participation in good faith in a firm
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<PAGE>
commitment underwriting until the expiration of the 40-day period immediately
following the date of such acquisition.
Section 2. Appointment of Rights Agent. The Company hereby appoints
---------------------------
the Rights Agent to act as agent for the Company and the holders of the Rights
in accordance with the terms and conditions hereof, and the Rights Agent hereby
accepts such appointment. The Company may from time to time appoint such Co-
Rights Agent or Agents as it may deem necessary or desirable and determine the
respective duties of the Rights Agent and the Co-Rights Agents.
Section 3. Issuance of Right Certificates.
------------------------------
(a) Until the Close of Business on the earlier of (i) the tenth
Business Day after a Stock Acquisition Date or (ii) the tenth Business Day (or
such later date as the Company's Board of Directors shall determine) after the
date of the commencement by any Person (other than an Exempt Person) of, or the
date of the first public announcement (such commencement date or announcement
date being herein referred to as the "Offer Date") of the intent of any Person
(other than an Exempt Person) to commence, a tender or exchange offer upon the
successful consummation of which such Person, together with its Affiliates and
Associates, would be the Beneficial Owner of twenty percent (20%) or more of the
then outstanding Voting Stock (irrespective of whether any shares are actually
purchased pursuant to such offer) (the tenth Business Day after the first to
occur of a Stock Acquisition Date or an Offer Date being herein referred to as
the "Distribution Date"),
(i) the Rights will automatically attach to, and be evidenced by,
the certificates for Common Stock registered in the names of the holders
of Common Stock (which certificates for Common Stock shall be deemed
also to be Right Certificates) and not by separate Right Certificates,
and
(ii) each Right (and the right to receive Right Certificates
therefor) will be transferable only in connection with the transfer of
the underlying shares of Common Stock.
As soon as practicable after the Distribution Date, the Rights Agent
will mail, by first-class, insured, postage prepaid mail, to each record holder
of Common Stock as of the Close of Business on the Distribution Date, as shown
by the records of the Company at the Close of Business on the Distribution Date,
at the address of such holder shown on such records, a Right Certificate, in
substantially
6
<PAGE>
the form of Exhibit A hereto, evidencing one Right for each share of Common
Stock so held.
(b) As soon as practicable after the Rights Record Date, the Company
will send a copy of a Summary of Rights, in substantially the form attached
hereto as Exhibit B, by first-class mail, postage prepaid, to each record holder
of Common Stock as of the Close of Business on the Rights Record Date, at the
address of such holder shown on the records of the Company.
(c) The Company will cause certificates for Common Stock issued after
the Rights Record Date (including replacement certificates for shares of Common
Stock outstanding on or prior to the Rights Record Date), but prior to the
earliest of (i) the Distribution Date, (ii) the Expiration Date and (iii) the
date, if any, on which the Rights may be redeemed, to have impressed on, printed
on, written on or otherwise affixed to them the following legend:
This certificate also entitles the holder hereof to certain Rights
as set forth in the Rights Agreement between the Company and Harris
Trust Company of California, as Rights Agent as the same shall be
amended from time to time (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 the Company.
Under certain circumstances, as set forth in the Rights Agreement,
such Rights will be evidenced by separate certificates and will no
longer be evidenced by this certificate. The Company will mail to
the holder of this certificate a copy of the Rights Agreement
without charge after receipt of a written request therefor. Under
certain circumstances set forth in the Rights Agreement, Rights
issued to, or held by, any Person who is, was or becomes an
Acquiring Person or any Affiliate or Associate thereof (as such
terms are defined in the Rights Agreement) or certain transferees
of any thereof, whether currently held by or on behalf of such
Person or by any subsequent holder, may be limited as provided in
Section 7(f) of the Rights Agreement.
With respect to such certificates containing the foregoing legend, until the
Distribution Date, the Rights associated with Common Stock represented by such
certificates shall be evidenced by such certificates alone, and the surrender
for
7
<PAGE>
transfer of any such certificates shall also constitute the transfer of the
Rights associated with the Common Stock represented by such certificate.
(d) Until the Distribution Date, the surrender for transfer of any of
the certificates for Common Stock outstanding on or after the Rights Record
Date, with or without a copy of the Summary of Rights attached thereto and with
or without the legend set forth in subsection (c) above, shall also constitute
the transfer of the Rights associated with such Common Stock. After the
Distribution Date, the Rights will be evidenced solely by the Right
Certificates. If a holder of the Class B Common Stock converts any of the
shares thereof into Class A Common Stock after the Distribution Date, such
holder shall not receive any Rights in connection with the issuance of Class A
Common Stock as a result of such conversion.
Section 4. Form of Right Certificates.
--------------------------
(a) The Right Certificates (and the forms of assignment and
certification and of election to purchase shares to be printed on the reverse
thereof) shall be in substantially the form of Exhibit A hereto and may have
such marks of identification or designation and such legends, summaries or
endorsements printed thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this Agreement, or as may be required to
comply with any 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.
(b) Any Right Certificate issued pursuant to Section 3(a) or Section
22 that represents Rights Beneficially Owned by: (i) an Acquiring Person or any
Associate or Affiliate of any Acquiring Person, (ii) a transferee of an
Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee after the Acquiring Person becomes such, or (iii) a transferee of an
Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee prior to or concurrently with the Acquiring Person becoming such and
receives such Rights pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person to holders of equity interests in such
Acquiring Person or to any Person with whom such Acquiring Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights, or (B) a transfer which the Board of Directors of the Company has
determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect avoidance of Section 7(f), and any Right
8
<PAGE>
Certificate issued pursuant to Section 6 or Section 11 upon transfer, exchange,
replacement or adjustment of any other Right Certificate referred to in this
sentence, shall contain (to the extent feasible and reasonably identifiable as
such) 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) or certain transferees thereof.
Accordingly, under certain circumstances as provided in the Rights
Agreement, this Right Certificate and the Rights represented hereby may
be limited as provided in Section 7(f) of such Agreement.
Section 5. Countersignature and Registration.
---------------------------------
(a) The Right Certificates shall be executed on behalf of the Company
by its Chairman of the Board, its President or any of its Vice Presidents,
either manually or by facsimile signature, and have affixed thereto the
Company's seal or a facsimile thereof which shall be attested by the Secretary
or an Assistant Secretary of the Company, either manually or by facsimile
signature. The Right Certificates shall be manually countersigned by the Rights
Agent and shall not be valid for any purpose unless so countersigned. In case
any officer of the Company who shall have signed any of the Right Certificates
shall cease to be such officer of the Company before countersignature by the
Rights Agent and issuance and delivery by the Company, such Right Certificates,
nevertheless, may be countersigned by the Rights Agent, issued and delivered
with the same force and effect as though the person who signed such Right
Certificates had not ceased to be such officer of the Company; and any Right
Certificate may be signed on behalf of the Company by any person who, at the
actual date of the execution of such Right Certificate, shall be a proper
officer (as specified above) of the Company to sign such Right Certificate,
although at the date of the execution of this Rights Agreement any such person
was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept books for registration and transfer of the Right Certificates
issued hereunder. Such books shall show the names and addresses of the
respective holders of the Right Certificates, the number of Rights evidenced on
its face by each Right Certificate, the date of each Right Certificate and the
number of each Right Certificate.
9
<PAGE>
Section 6. Transfer, Split Up, Combination and Exchange of Right
-----------------------------------------------------
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates.
- ---------------------------------------------------------------------
(a) Subject to the provisions of Section 4(b), Section 7(f) and
Section 14, at any time after the Close of Business on the Distribution Date,
and prior to the Close of Business on the Expiration Date or the day prior to
the day, if any, on which the Rights are to be redeemed pursuant to Section 23,
any Right Certificate or Certificates may be transferred, split up, combined or
exchanged for another Right Certificate or Right Certificates, entitling the
registered holder to purchase such number of Units as the Right Certificate or
Right Certificates surrendered then entitled such holder to purchase. Any
registered holder desiring to transfer, split up, combine or exchange any Right
Certificate shall make such request in writing delivered to the Rights Agent,
and shall surrender the Right Certificate(s) to be transferred, split up,
combined or exchanged, with the form of assignment on the reverse side(s)
thereof duly completed and executed, at the stock transfer office of the Rights
Agent. Thereupon the Rights Agent shall countersign and deliver to the persons
entitled thereto the Right Certificate(s) requested. The Company may require
payment of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer, split up, combination or exchange of
Right Certificates. Notwithstanding the foregoing, neither the Rights Agent nor
the Company shall be obligated to take any action whatsoever with respect to the
transfer of any such surrendered Right Certificate unless and 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 Company
shall reasonably request.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Right Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and reimbursement to the Company and
the Rights Agent of all reasonable expenses incidental thereto, and upon
surrender to the Rights Agent and cancellation of the Right Certificate, if
mutilated, the Company will execute and deliver a new Right Certificate of like
tenor to the Rights Agent for delivery to the registered owner in lieu of the
Right Certificate so lost, stolen, destroyed or mutilated.
10
<PAGE>
Section 7. Exercise of Rights; Purchase Price; Expiration Date of
------------------------------------------------------
Rights.
- ------
(a) Subject to Section 7(f), and unless earlier redeemed as provided
in Section 23, the registered holder of any Right Certificate may exercise the
Rights evidenced thereby 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 on the reverse side thereof duly completed and executed, to the Rights
Agent at the stock transfer office of the Rights Agent, together with payment of
the Purchase Price for each Unit as to which the Rights are exercised, at or
prior to the Close of Business on the tenth anniversary of the Rights Record
Date or such other date to which the Rights may be extended as provided in this
Agreement (the latest of such dates being herein referred to as the "Expiration
Date"). If at any time after the Distribution Date but prior to the Expiration
Date the Company is unable, under its Certificate of Incorporation, to issue the
number and class of shares required to be issued upon the exercise of all of the
outstanding Rights, the Company may issue upon exercise of any of the Rights
shares of capital stock or other securities of the Company of equivalent value
to the shares so required to be issued ("Equivalent Stock"), as determined by
the Board of Directors.
(b) The Purchase Price for each Unit pursuant to the exercise of a
Right shall initially be $40.00, shall be subject to adjustment from time to
time as provided in Sections 11 and 13 and shall be payable in lawful money of
the United States of America.
(c) Upon receipt of a Right Certificate, with the form of election to
purchase duly executed, accompanied by payment of the Purchase Price for the
Units to be purchased and an amount equal to any applicable transfer tax in
cash, or by certified check, bank draft or money order payable to the order of
the Company, the Rights Agent shall thereupon promptly (i) requisition from the
Company or any transfer agent of the Company a certificate for the number of
shares to be purchased and the Company will comply, and hereby irrevocably
authorizes its transfer agent to comply, with all such requests, (ii)
requisition from the Company the amount of cash to be paid in lieu of issuance
of a fractional share, when appropriate, in accordance with Section 14, and
(iii) promptly after receipt of such certificate from any such transfer agent,
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, when appropriate, after
11
<PAGE>
receipt promptly deliver such cash in lieu of a fractional share to or upon the
order of the registered holder of such Right Certificate; provided, however,
that in the case of the purchase, in connection with the exercise of a Right, of
securities other than shares of stock, the Rights Agent shall promptly take the
appropriate actions with respect thereto as shall as nearly as practicable
correspond to the actions described in the foregoing clauses (i) through (iii).
(d) The Company shall not be required to pay any transfer tax which
may be payable in respect of any transfer involved in the transfer or delivery
of Right Certificates, or the issuance or delivery of certificates in a name
other than that of the registered holder of the Right Certificate evidencing
Rights surrendered for exercise, or to issue or deliver any certificates 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 Company's satisfaction that
no such tax is due.
(e) 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.
(f) Notwithstanding any provision of this Agreement to the contrary,
upon the occurrence of any of the events described in any of clauses (A), (B),
(C) or (D) of Section 11(a)(ii), the adjustment provided for under Section
11(a)(ii) shall not apply with respect to any Rights that are at the time of the
occurrence of such event Beneficially Owned by (i) an Acquiring Person or by any
Associate or Affiliate of such Acquiring Person (which Acquiring Person or
Affiliate or Associate engages in, or realizes the benefit of, one or more of
the transactions described in clause (A) or clause (B) of Section 11(a)(ii),
realizes the benefits set forth in clause (C) of Section 11(a)(ii) or, alone or
together, become the Beneficial Owner(s) of a number of shares of Voting Stock
which equals or exceeds the percentage of the general voting power as provided
in clause (D) of Section 11(a)(ii), as the case may be), or (ii) a transferee of
an Acquiring Person or of any Associate or Affiliate of such Acquiring Person
(which Acquiring Person or Associate or Affiliate engages in, or realizes the
benefit of, one or more of the transactions described in clause (A) or clause
(B) of Section 11(a)(ii), realizes the
12
<PAGE>
benefits set forth in clause (C) of Section 11(a)(ii) or, alone or together with
such Acquiring Person or any such Associate or Affiliate, become the Beneficial
Owner(s) of a number of shares of Voting Stock which equals or exceeds the
percentage of the general voting power as provided in clause (D) of Section
11(a)(ii), as the case may be) (A) who becomes a transferee after the Acquiring
Person becomes such, or (B) who becomes a transferee prior to or concurrently
with the Acquiring Person becoming such and receives such Rights pursuant to
either (1) a transfer (whether or not for consideration) from the Acquiring
Person to holders of equity interests in such Acquiring Person or to any Person
with whom such Acquiring Person has any continuing agreement, arrangement or
understanding regarding the transferred Rights or (2) a transfer which the Board
of Directors of the Company has determined is part of a plan, arrangement or
understanding which has as a primary purpose or effect the avoidance of this
Section 7(f). Upon the exercise of such Rights, the holders thereof shall be
entitled to receive, upon payment of the Purchase Price, the number of Units
issuable upon exercise of such Rights without giving effect to the adjustment
provided for under Section 11(a)(ii). The Company shall use all reasonable
efforts to insure that the provisions of this Section 7(f) and Section 4(b) are
complied with, but shall have no liability to any holder of Right Certificates
or other Person as a result of its making or failing to make any determinations
with respect to an Acquiring Person or its Affiliates, Associates or transferees
hereunder.
(g) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a registered holder upon the occurrence of any purported
exercise as set forth in this Section 7 unless such registered holder shall have
(i) completed and signed the certificate contained in the form of election to
purchase set forth on the reverse side of the 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 Company shall reasonably request.
Section 8. Cancellation and Destruction of Right Certificates. All
--------------------------------------------------
Right Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Right
Certificates shall be issued in lieu thereof except as expressly permit-
13
<PAGE>
ted by this Agreement. The Company shall deliver to the Rights Agent for
cancellation and retirement, and the Rights Agent shall so cancel and retire,
any other Right Certificate purchased or acquired by the Company otherwise than
upon the exercise thereof. The Rights Agent shall deliver all cancelled Right
Certificates to the Company, or shall, at the written request of the Company,
destroy such cancelled Right Certificates, and in such case shall deliver a
certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of Shares; Registration.
----------------------------------------------------
(a) The Company covenants and agrees that it shall (i) on or prior to
the Rights Record Date, take all such action as shall be necessary to cause to
be reserved and kept available out of its authorized and unissued capital stock,
the number, class and series of shares that will be sufficient to permit the
exercise in full of all Rights to be outstanding as of the Rights Record Date,
(ii) no later than promptly following the Distribution Date, take all such
action as shall be necessary to cause to be reserved and kept available out of
its authorized and unissued capital stock, or its authorized and issued shares
held in its treasury, the number of additional shares that will, from time to
time, be sufficient to permit the exercise in full of all Rights from time to
time outstanding, (iii) take all such action as may be necessary to insure that
all shares delivered upon exercise of Rights shall, at the time of delivery of
the certificates for such shares (subject to payment of the Purchase Price), be
duly and validly authorized and issued and fully paid and nonassessable, and
(iv) pay when due and payable any and all federal and state transfer taxes and
charges which may be payable in respect of the issuance or delivery of the Right
Certificates or of any shares upon the exercise of Rights (except as otherwise
provided in Section 7(d)).
(b) The Company agrees to take all such action, from and after the
Distribution Date, as may be necessary or appropriate to permit the issuance of
shares in connection with the exercise of the Rights, including any required
registration under (i) the Securities Act of 1933, as amended from time to time
(the "Securities Act"), and (ii) the securities or "blue sky" laws of the
various states. The Company may temporarily suspend, for a period of time not to
exceed 90 days, the exercisability of the Rights in order to prepare and file a
registration statement or statements for the purpose of effecting any such
registration and permit such statement(s) to become effective. At the
commencement and termination of any such
14
<PAGE>
suspension, the Company shall issue a public announcement and shall provide
written notice to the Rights Agent, stating that the exercisability of the
Rights has been temporarily suspended, or that such suspension has terminated,
as the case may be.
Section 10. Record Date. Each Person in whose name any stock
-----------
certificate is issued upon the exercise of Rights shall for all purposes be
deemed to have become the holder of record of the shares 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. Prior to the exercise of the
Rights evidenced thereby, the holder of a Right Certificate shall not be
entitled to any rights of a stockholder of the Company with respect to shares
for which the Rights shall be exercisable, including without limitation the
right to vote or to receive dividends or other distributions, and such holder
shall not be entitled to receive any notice of any proceedings of the Company,
except as provided herein.
Section 11. Adjustment of Purchase Price, Number of Shares or Number
--------------------------------------------------------
of Rights. The Purchase Price, the number and kind of shares or other
- ---------
securities covered by each Right and the number of Rights outstanding are
subject to adjustment from time to time as provided in this Section 11.
(a) (i) In the event the Company shall at any time after the date of
this Agreement (A) declare and pay a dividend on the shares which are
subject to the Rights ("Subject Shares") payable in shares of stock of
the Company, (B) subdivide or split the Subject Shares, (C) combine or
consolidate the Subject Shares into a smaller number of shares or effect
a reverse stock split of the Subject Shares or (D) issue any shares of
its capital stock in a reclassification of the Subject Shares (including
any such reclassification in connection with a consolidation or merger
in which the Company is the continuing or surviving corporation), then,
and in each such event, except as otherwise provided in this Section
11(a), the Purchase Price in effect at the time of the record date for
such dividend or of the effective date of such subdivision, split,
reverse split, combination, consolidation or reclassification, and the
number and kind of shares of capital stock issuable on such date, shall
be proportionately adjusted so that the holder of any Right exercised
after such time shall be entitled to receive the
15
<PAGE>
aggregate number and kind of shares of capital stock which, if such
Right had been exercised immediately prior to such date and at a time
when the transfer books of the Company were open, he would have received
upon such exercise and been entitled to receive by virtue of such
dividend, subdivision, split, reverse split, combination, consolidation
or reclassification. If an event occurs which would require an
adjustment under both this Section 11(a)(i) and Section 11(a)(ii), the
adjustment provided for in this Section 11(a)(i) shall be in addition
to, and shall be made prior to, any adjustment required pursuant to
Section 11(a)(ii).
(ii) In the event that at any time after the date of this
Agreement
(A) any Acquiring Person, or any Associate or Affiliate of
any Acquiring Person, directly or indirectly (1) shall merge into
the Company or any of its Subsidiaries or otherwise combine with
the Company or any of its Subsidiaries, and the Company or such
Subsidiary shall be the continuing or surviving corporation of such
merger or combination and the Common Stock shall remain outstanding
and the outstanding shares thereof shall not be changed into or
exchanged for stock or other securities of the Company or of any
other Person or cash or any other property, or (2) shall sell or
otherwise transfer in one or more transactions, assets to the
Company or any of its Subsidiaries in exchange for 25 percent or
more of the shares of any class of capital stock of the Company or
any of its Subsidiaries, and the Common Stock shall remain
outstanding and unchanged, or
(B) directly or indirectly, any Acquiring Person, or any
Associate or Affiliate of any Acquiring Person, shall (1) in one or
more transactions, transfer any assets to the Company or any of its
Subsidiaries in exchange (in whole or in part) for shares of any
class of capital stock of the Company or any of its Subsidiaries or
for securities exercisable for or convertible into shares of any
class of capital stock of the Company or any of its Subsidiaries or
otherwise obtain from the Company or any of its Subsidiaries, with
or without consideration, any additional shares of any class of
capital stock of the Company or any of its Subsidiaries or other
securities exercisable for or convertible into
16
<PAGE>
shares of any class of capital stock of the Company or any of its
Subsidiaries (other than as part of a pro rata distribution by the
--- ----
Company or such Subsidiary to all holders of Common Stock), (2)
sell, purchase, lease, exchange, mortgage, pledge, transfer or
otherwise dispose (in one or more transactions), to, from or with,
as the case may be, the Company or any of its Subsidiaries, assets
on terms and conditions less favorable to the Company or such
Subsidiary than the Company or such Subsidiary would be able to
obtain in arm's-length negotiation with an unaffiliated third
party, (3) receive any compensation from the Company or any of the
Company's Subsidiaries other than compensation for full-time
employment as a regular employee, or fees for serving as director,
at rates in accordance with the Company's (or its Subsidiaries')
past practices, or (4) receive the benefit, directly or indirectly
(except proportionately as a stockholder), of any loans, advances,
guarantees, pledges or other financial assistance provided by the
Company or any of its Subsidiaries, on terms and conditions less
favorable to the Company or such Subsidiary than the Company or
such Subsidiary would be able to obtain in arm's-length negotiation
with an unaffiliated third party, or
(C) during any such time as there is an Acquiring Person,
there shall be any reclassification of securities (including any
reverse stock split), or recapitalization of the Company, or any
merger or consolidation of the Company with any of its Subsidiaries
or any other similar transaction or series of transactions
involving the Company or any of its Subsidiaries (whether or not
with or into or otherwise involving an Acquiring Person or any
Affiliate or Associate of such Acquiring Person) which has the
effect, directly or indirectly, of increasing by more than one
percent the proportionate share of the outstanding shares of any
class of equity securities, or of securities exercisable for or
convertible into equity securities, of the Company or any of its
Subsidiaries which is directly or indirectly owned by any Acquiring
Person or any Associate or Affiliate of any Acquiring Person, or
(D) any Person shall become an Acquiring Person otherwise
than pursuant to a Qualified Offer,
17
<PAGE>
then, and in each such case, but subject to the provisions of
Section 27, proper provision shall be made so that each holder of a
Right, except as provided below and in Section 7(f), shall, on and
after the later of (I) the date of the occurrence of an event
described in clause (A), (B), (C) or (D) of this Section 11(a)(ii),
or (II) the date of the expiration of the period within which the
Rights may be redeemed pursuant to Section 23 (as the same may have
been amended as provided in Section 26), have the right to receive,
upon exercise thereof at the then current Purchase Price, such
number of shares of Class A Common Stock (or such number of shares
of Class B Common Stock at the option of the holder of the Right)
as shall equal the result obtained by (x) multiplying the then
current Purchase Price by the then number of Units for which a
Right is then exercisable and dividing that product by (y) 50
percent of the current market price per share of Common Stock
(determined in accordance with Section 11(d)) on the date of the
occurrence of the relevant event listed above in clause (A), (B),
(C) or (D) of this subparagraph (ii); provided, however, that if
-------- -------
the transaction that would otherwise give rise to the foregoing
adjustment is also subject to the provisions of Section 13, then
only the provisions of Section 13 shall apply and no adjustment
shall be made pursuant to this Section 11(a)(ii). The Company shall
not consummate any such merger, combination, transfer or
transaction referred to in any of such clauses (A), (B) and (C)
unless prior thereto there shall be sufficient authorized but
unissued Common Stock to permit the exercise in full of the Rights
in accordance with the foregoing sentence, unless the Board of
Directors has determined to issue Equivalent Stock in accordance
with Section 7(a); provided, however, that in no case may the
-------- -------
Company consummate any such merger, combination, transfer or
transaction if at the time of or immediately after such transaction
there are any rights, warrants or other instruments or securities
outstanding or agreements in effect which would substantially
diminish or otherwise eliminate the benefits intended to be
afforded by the Rights.
In the event that the Company issues Equivalent Stock upon
the exercise of any Rights pursuant to the immediately preceding
paragraph, then, upon any such exercise, proper provision shall be
made so that the holder of a Right (except as provided in Section
7(f)) shall have the right to receive, upon such exercise at the
then current Purchase Price, such number of shares or other units
of Equivalent Stock of the Company as shall equal the result
obtained by (x) multiplying the then current Purchase Price by the
number of Units for which a Right is then exercisable and dividing
that product by (y) 50 percent of the current
18
<PAGE>
market price per share or other unit of the Equivalent Stock of the
Company (determined on substantially the same basis as is
prescribed by Section 11(d) with respect to the valuation of Common
Stock) on the date of occurrence of the relevant event listed above
in clause (A), (B), (C) or (D) of this subparagraph (ii). In the
event that at any time the Company should be prohibited by law, by
any provision of its Certificate of Incorporation, or by any
instrument or agreement to which the Company is a party or by which
it is bound, from issuing, or should be unable under its
Certificate of Incorporation to issue, sufficient Equivalent Stock
to permit the exercise of all outstanding Rights in accordance with
the foregoing sentence, then, in lieu of issuing such Equivalent
Stock upon such exercise, the Company shall pay to each holder of a
Right (except as provided in Section 7(f)) upon surrender of the
Right as provided herein but without payment of the Purchase Price,
an amount in cash for each Right equal to the Purchase Price.
(b) In case the Company shall at any time after the Rights
Record Date fix a record date for the issuance of rights or
warrants to all holders of Common Stock or Subject Shares entitling
them (for a period expiring within 45 calendar days after such
record date) to subscribe for or purchase Common Stock or Subject
Shares or securities convertible into Common Stock or Subject
Shares at a price per share (or having a conversion price per
share, if a security convertible into Common Stock) less than the
current market price per share (determined in accordance with
Section 11(d)) 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, of which the numerator shall be the total number of
shares of Common Stock and Subject Shares outstanding on such
record date plus the number of shares of Common Stock which the
aggregate offering price of the total number of shares so to be
offered (and/or the aggregate initial conversion price of the
convertible securities so to be offered) would purchase at such
current market price and of which the denominator shall be the
total number of shares of Common Stock and Subject Shares
outstanding on such record date plus the number of additional
shares to be offered for subscription or purchase (or into which
the convertible securities to be offered are initially
convertible). In case such subscription or purchase price may be
paid, in whole or in part, in a form other than cash, the value of
such consideration shall be as determined in good faith by the
Board of Directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent.
19
<PAGE>
Shares owned by or held for the account of the Company shall not be
deemed outstanding for the purpose of any such computation. Such
adjustment shall be made successively whenever such a record date
is fixed, and in the event that such rights or warrants are not so
issued, the Purchase Price shall be adjusted to be the Purchase
Price which would then be in effect if such record date had not
been fixed.
(c) In case the Company shall at any time after the Rights
Record Date fix a record date for the making of a distribution on
the shares of Common Stock or the Subject Shares, whether by way of
a dividend, distribution, reclassification of stock,
recapitalization, reorganization or partial liquidation of the
Company or otherwise (and including any such distribution made in
connection with a consolidation or merger in which the Company is
the continuing corporation), of subscription rights or warrants
(excluding those referred to in Section 11(b)), evidences of
indebtedness or other assets (other than (i) regular periodic cash
dividends, (ii) a dividend payable in Common Stock or (iii) a
distribution which is part of or is made in connection with a
transaction to which Section 11(a)(ii) or Section 13 applies), 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, of which the numerator
shall be the current market price per share of Common Stock
(determined in accordance with Section 11(d)) on such record date,
less the fair market value applicable to one share of Common Stock
(as determined in good faith by the Board of Directors of the
Company, whose determination shall be described in a statement
filed with the Rights Agent) of such assets or evidences of
indebtedness or of such subscription rights or warrants so to be
distributed, and of which the denominator shall be such current
market price per share of Common Stock. Such adjustments shall be
made successively whenever such a record date is fixed; and in the
event that such distribution is not so made, the Purchase Price
shall again be adjusted to be the Purchase Price which would then
be in effect if such record date had not been fixed.
(d) For the purpose of any computation hereunder, the
"current market price" per share of Common Stock on any date shall
be deemed to be the average of the daily closing prices per share
of the Class A Common Stock for the 30 consecutive Trading Days
immediately prior to such date; provided, however, that in the
-------- -------
event that the current market price per share of Common Stock is
determined during a period following the announcement by the issuer
of the Common Stock of a dividend or distribution on such Common
Stock payable in shares of such Common Stock or securities
20
<PAGE>
convertible into shares of Common Stock (other than the Rights),
and prior to the expiration of 30 Trading Days after the ex-
dividend date for such dividend or distribution, then, and in each
such case, the current market price shall be appropriately adjusted
to reflect the current market price per share of Common Stock in
connection with ex-dividend trading. 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 shares of Class A Common Stock are not listed
or admitted to trading on the New York Stock Exchange, as reported
in the principal consolidated transaction reporting system with
respect to securities listed on the principal national securities
exchange on which the shares Class A of Common Stock are listed or
admitted to trading or as reported on the Nasdaq National Market
or, if the shares of Class A Common Stock are not listed or
admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and
low asked prices in the over-the-counter market, as reported by the
National Association of Securities Dealers, Inc., Automated
Quotation System ("NASDAQ"). If on any such date the shares of
Class A Common Stock are not quoted by any such organization, the
fair market value of such shares on such date as determined in good
faith by the Board of Directors of the issuer of such Common Stock
shall be used. Any such determination of current market price
shall be described in a statement filed with the Rights Agent.
For the purpose of any computation hereunder, the "current
market price" of a Unit shall be deemed to be equal to the current
market price per share of Common Stock, and the "current market
price" of a Subject Share shall be deemed to be equal to the
current market price per share of Common Stock divided by the
number of Subject Shares which comprise a Unit.
For purposes of this Agreement, the term "Trading Day" shall
mean a day on which the principal national securities exchange on
which the shares of Class A Common Stock are listed or admitted to
trading is open for the transaction of business or, if the shares
of Class A Common Stock are not listed or admitted to trading on
any national securities exchange, a Business Day.
(e) No adjustment in the Purchase Price shall be required
unless such adjustment would require an increase or
21
<PAGE>
decrease of at least one percent in such Price; provided, however,
-------- -------
that any adjustments which by reason of this Section 11(e) are not
required to be made shall be carried forward and taken into account
in any subsequent adjustment. All calculations under this Section
11 shall be made to the nearest cent or to the nearest one-
hundredth of a share, as the case may be. Notwithstanding the
proviso to the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than the earlier
of (i) three years from the date of the transaction which gives
rise to such adjustment or (ii) the date of the expiration of the
right to exercise any Rights.
(f) In the event that at any time, as a result of an
adjustment made pursuant to Section 11(a), the holder of any Right
thereafter exercised shall become entitled to receive any shares of
capital stock of the Company other than shares of Common Stock,
thereafter the number of such 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 such shares, contained in
Sections 11(a) through (c), inclusive, and the provisions of
Sections 7, 9, 10, 13 and 14 with respect to the shares of Common
Stock shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company
subsequent to any adjustment made to the Purchase Price hereunder
shall represent the right to purchase, at the adjusted Purchase
Price, the number of shares purchasable from time to time hereunder
upon exercise of the Rights, all subject to further adjustment as
provided herein.
(h) Unless the Company shall have exercised its election as
provided in Section 11(i), upon each adjustment of the Purchase
Price as a result of the calculations made in Sections 11(b) and
(c), each Right outstanding immediately prior to the making of such
adjustment shall thereafter evidence the right to purchase, at the
adjusted Purchase Price, that number of shares (calculated to the
nearest one-hundredth) obtained by (i) multiplying (x) the number
of shares covered by a Right immediately prior to such adjustment
by (y) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price and (ii) dividing the product so
obtained by the Purchase Price in effect immediately after such
adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any
adjustment of the Purchase Price to adjust the number of Rights, in
substitution for any adjustment in the number of shares purchasable
upon the exercise of each Right. Each of
22
<PAGE>
the Rights outstanding after such adjustment of the number of
Rights shall be exercisable for the number of Units 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-hundredth) obtained by dividing the Purchase Price in
effect immediately prior to adjustment of the Purchase Price by the
Purchase Price in effect immediately after adjustment of the
Purchase Price. The Company shall make a public announcement of its
election to adjust the number of Rights, indicating the record date
for the adjustment, and, if known at the time, the amount of the
adjustment to be made. This record date may be the date on which
the Purchase Price is adjusted or any day thereafter, but, if the
Right Certificates have been issued, shall be at least 10 days
later than the date of the public announcement. If Right
Certificates have been issued, upon each adjustment of the number
of Rights pursuant to this Section 11(i) the Company 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, the additional Rights to which
such holders shall be entitled as a result of such adjustment, or,
at the option of the Company, shall cause to be distributed to such
holders of record in substitution and replacement for the Right
Certificates held by such holders prior to the date of adjustment,
and upon surrender thereof, if required by the Company, new Right
Certificates evidencing all the Rights to which such holders shall
be entitled after such adjustment. Right Certificates so to be
distributed shall be issued, executed and countersigned in the
manner provided for herein (and may bear, at the option of the
Company, the adjusted Purchase Price) and shall be registered in
the names of the holders of record of Right Certificates on the
record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase
Price or the number of shares issuable upon the exercise of the
Rights, the Right Certificates theretofore and thereafter issued
may continue to express the Purchase Price per share and the number
of shares which were expressed in the initial Right Certificates
issued hereunder.
(k) In any case in which this Section 11 requires that an
adjustment in the Purchase Price be made effective as of the record
date for a specified event, the Company may elect to defer until
the occurrence of such event the issuance to the holder of any
Right exercised after such record date the additional shares or
securities of the
23
<PAGE>
Company, if any, issuable as a consequence of such adjustment;
provided, however, that the Company shall deliver to such holder a
-------- -------
due bill or other appropriate instrument evidencing such holder's
right to receive such additional shares or securities upon the
occurrence of such event.
(l) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make such
adjustments in the number of shares which may be acquired upon
exercise of the Rights, and such adjustments in the Purchase Price,
in addition to those adjustments expressly required by the other
subsections of this Section 11, as and to the extent that the
Company, in its sole discretion, shall determine to be advisable,
in order that, in the event of (i) any reclassification,
consolidation or subdivision of the Common Stock, (ii) any
reorganization or partial liquidation of the Company or similar
transaction, (iii) any issuance wholly for cash of any Common Stock
at less than the current market price, (iv) any issuance wholly for
cash of Common Stock or securities which by their terms are
convertible into or exchangeable for Common Stock, (v) any stock
dividends or (vi) any issuance of rights, options or warrants,
hereafter made by the Company to holders of its Common Stock as
provided herein-above in this Section 11, (x) the holders of the
Rights in any such event shall be treated equitably and in
accordance with the purpose and intent of this Agreement, and (y)
to the extent reasonably possible, such event shall not, in the
opinion of counsel for the Company, result in the stockholders of
the Company being subject to any United States federal income tax
liability by reason thereof.
Section 12. Certification of Adjusted Purchase Price or
-------------------------------------------
Number of Shares. Whenever an adjustment is made as provided in
----------------
Section 11 or 13, the Company shall (i) promptly prepare a
certificate setting forth such adjustment, and a brief statement of
the facts accounting for such adjustment, (ii) promptly file with
the Rights Agent and with each transfer agent for the Common Stock
a copy of such certificate, and (iii) mail a brief summary thereof
to each holder of a Right Certificate in accordance with Section
25. Notwithstanding the foregoing sentence, the failure of the
Company to give such notice shall not affect the validity of, or
the force or effect of, the requirement for such adjustment.
24
<PAGE>
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
------------------------------------------------------
Earning Power.
- -------------
(a) In the event that, at any time after an Acquiring Person has
become such,
(i) the Company shall consolidate with, or merge with and into,
any other Person and the Company shall not be the continuing or
surviving corporation of such consolidation or merger,
(ii) any other Person(s) shall consolidate or merge with and into
the Company, the Company shall be the continuing or surviving
corporation of such merger and, in connection with such consolidation or
merger, all or part of the Common Stock shall be changed into or
exchanged for stock or other securities of the Company or of any other
Person or cash or any other property, or
(iii) the Company shall sell or otherwise transfer (or one or
more of its Subsidiaries shall sell or otherwise transfer), in one or
more transactions, assets or earning power aggregating more than 50
percent of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person, (other than a pro
rata distribution by the Company of assets (including securities) of the
Company or any of its Subsidiaries to all holders of the Company's
Common Stock),
then, on and after the later of (I) the date of the occurrence of an event
described in clause (i), (ii) or (iii) of this Section 13(a), or (II) the date
of the expiration of the period within which the Rights may be redeemed pursuant
to Section 23 (as the same may have been amended as provided in Section 26):
(A) proper provision shall be made so that each holder of a
Right shall thereafter have the right to receive, upon the exercise
thereof at the then current Purchase Price, such number of shares
of common stock of the Principal Party as shall be equal to the
result obtained by (x) multiplying the then current Purchase Price
by the number of Units for which a Right is then exercisable and
dividing that product by (y) 50 percent of the current market price
per share of the common stock of the Principal Party (determined in
the same manner as the current market price of Common Stock is
determined under Section
25
<PAGE>
11(d)) on the date of consummation of such consolidation, merger,
sale or transfer;
(B) the Principal Party shall thereafter be liable for, and
shall assume, by virtue of such consolidation, merger, sale or
transfer, all the obligations and duties of the Company pursuant to
this Agreement, and proper provision shall be made for the
foregoing, provided that the Principal Party shall, prior to the
first occurrence of an event described in clause (i), (ii) or (iii)
of this Section 13(a), have caused to be reserved out of its
authorized and unissued shares of common stock (or its authorized
and issued shares of common stock held in its treasury), for
issuance pursuant to this Agreement, the number of shares of common
stock that will be sufficient to permit the exercise in full of the
Rights after the occurrence of such event;
(C) the term "Company" wherever used in this Agreement shall
thereafter be deemed to refer to such Principal Party; and
(D) the Principal Party shall, in addition to the
reservation of shares of its common stock as provided in the
proviso to clause (B) above, take such steps (including without
limitation compliance with the Company's other obligations as set
forth in Section 9) in connection with such consummation as may be
necessary to assure that the provisions hereof shall thereafter be
applicable, as nearly as reasonably may be, in relation to the
shares of its Common Stock thereafter deliverable upon the exercise
of the Rights; provided, however, that, upon the subsequent
-------- -------
occurrence of any merger, consolidation, sale of all or
substantially all assets, recapitalization, reclassification of
shares, reorganization or other extraordinary transaction in
respect of such Principal Party, each holder of a Right shall
thereupon be entitled to receive, upon exercise of a Right and
payment of the Purchase Price, such cash, shares, rights, warrants
and other property which such holder would have been entitled to
receive had such holder, at the time of such transaction, owned the
shares of common stock of the Principal Party purchasable upon the
exercise of a Right, and such Principal Party shall take such steps
(including, but not limited to, reservation of shares of stock) as
may be necessary to
26
<PAGE>
permit the subsequent exercise of the Rights in accordance with the
terms hereof for such cash, shares, rights, warrants and other
property.
(b) For purposes of this Agreement, "Principal Party" shall mean
(i) in the case of any transaction described in clause (i) or
(ii) of Section 13(a), (A) the Person that is the issuer of the
securities into which shares of Common Stock are converted in such
merger or consolidation, or, if there is more than one such issuer, the
issuer the common stock of which has the greatest market value, or (B)
if no securities are so issued, (x) the Person that is the other party
to the merger or consolidation and that survives said merger or
consolidation, or, if there is more than one such Person, the Person the
common stock of which has the greatest market value or (y) if the Person
that is the other party to the merger or consolidation does not survive
the merger or consolidation, the Person that does so survive (including
the Company if it survives); and
(ii) in the case of any transaction described in clause (iii) of
Section 13(a), the Person that is the party receiving the greatest
portion of the assets or earning power transferred pursuant to such
transaction or transactions, or, if each Person that is a party to such
transaction or transactions receives the same portion of the assets or
earning power so transferred or if the Person receiving the greatest
portion of the assets or earning power cannot be determined, whichever
of such Persons is the issuer of common stock having the greatest market
value of shares outstanding;
provided, however, that in any such case, (1) if the common stock of such Person
- -------- -------
is not at such time and has not been continuously over the preceding 12-month
period registered under Section 12 of the Exchange Act, and such Person is a
direct or indirect Subsidiary of another corporation the common stock of which
is and has been so registered, "Principal Party" shall refer to such other
corporation; (2) if the common stock of such Person is not and has not been so
registered and such Person is not a direct or indirect Subsidiary of another
corporation the common stock of which is and has been so registered, "Principal
27
<PAGE>
Party" shall refer to the corporation which ultimately controls such Person; (3)
in case such Person is a Subsidiary, directly or indirectly, of more than one
corporation, the common stocks of all of which are and have been so registered,
"Principal Party" shall refer to whichever of such corporations is the issuer of
common stock having the greatest market value of shares held by the public; and
(4) if the common stock of such Person is not and has not been so registered and
such Person is owned, directly or indirectly, by a joint venture formed by two
or more Persons that are not owned, directly or indirectly, by the same Person,
the rules set forth in clauses (1), (2) and (3) above shall apply to each of the
chains of ownership having an interest in such joint venture as if such Person
were a "Subsidiary" of both or all of such joint venturers and the Principal
Party in each such chain shall bear the obligations set forth in this Section 13
in the same ratio as its direct or indirect interests in such Person bear to the
total of such interests.
(c) The Company shall not consummate any such consolidation, merger,
sale or transfer unless prior thereto the Company and the Principal Party shall
have executed and delivered to the Rights Agent a supplemental agreement making
valid provision for the results described in clause (A) of Section 13(a) and
confirming that the Principal Party will perform its obligations under this
Section 13(a); provided, however, that in no case may the Company consummate any
-------- -------
such consolidation, merger, sale or transfer if (i) at the time of or
immediately after such transaction there are any rights, warrants or other
instruments or securities outstanding or agreements in effect which would
substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights or (ii) prior to, simultaneously with or immediately
after such transaction, the shareholders of the Person which constitutes, or
would constitute, the Principal Party for purposes of this Section 13 shall have
received a distribution of Rights previously owned by such Person or any of its
Affiliates and Associates.
(d) The provisions of this Section 13 shall similarly apply to
successive mergers or consolidations or sales or other transfers. This Section
13 shall not be applicable to a transaction described in Subparagraphs (i), (ii)
or (iii) of Subsection (a) of this Section if (i) such transaction is
consummated with a Person or Persons who acquired Common Stock pursuant to a
Qualified Offer (or a wholly owned subsidiary of any such Person or Persons),
(ii) the price per share of Common Stock offered in such transaction or
distributable to shareholders upon conclusion of such transaction is not less
than the price per share of Common Stock paid to all holders of Common Stock
whose shares were purchased pursuant to such Qualified Offer and (iii) the form
of consideration being offered to the remaining holders of Common Stock pursuant
to such
28
<PAGE>
transaction or distributable to shareholders upon conclusion of such
transaction is the same as the form of consideration paid pursuant to such
Qualified Offer. Upon conclusion of any transaction described in the foregoing
sentence, all Rights shall expire.
Section 14. Fractional Rights and Fractional Shares.
---------------------------------------
(a) The Company shall not be required to issue fractions of Rights or
to distribute Right Certificates which evidence fractional Rights. If the
Company shall elect not to issue such fractional Rights, in lieu of such
fractional Rights, there shall be paid to the registered holders of the Right
Certificates with regard to which such Fractional Rights would otherwise be
issuable an amount in cash equal to the same fraction of the current market
value of a whole Right. For the purposes of this Section 14(a), the current
market value of a whole Right shall be the closing price of the Rights for the
Trading Day immediately prior to the date on which such fractional Rights would
have been otherwise issuable. The closing price for any day shall be the last
sale price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the 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 as reported on the
Nasdaq National Market 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. If on any such date the Rights are not quoted by any
such organization, the fair value of the Rights on such date as determined in
good faith by the Board of Directors of the Company shall be used. Any such
determination of current market value shall be described in a statement filed
with the Rights Agent.
(b) The Company shall not be required to issue fractions of shares
upon exercise of a Right or to distribute certificates which evidence fractional
shares. In lieu of fractional shares, the Company shall pay to the registered
holders of Right Certificates at the time such Right Certificates are exercised
as herein provided an amount in cash equal to the same fraction of the current
market value of a share of Common Stock. For purposes of this Section 14, the
current market value
29
<PAGE>
of a share of Common Stock shall be the closing price of a share of Class A
Common Stock (as determined pursuant to the second sentence of Section 11(d))
for the Trading Day immediately prior to the date of such exercise.
(c) The holder of a Right by the acceptance thereof expressly waives
his right to receive any fractional Rights or any fractional shares upon
exercise of a Right.
Section 15. Rights of Action. All rights of action in respect of
----------------
this Agreement are vested in the respective registered holders of the Right
Certificates (and prior to the Distribution Date, the registered holders of the
Common Stock), and any registered holder of any Right Certificate (or, prior to
the Distribution Date, any registered holder 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, any other registered holder of the Common
Stock), may, on his own behalf and for his own benefit, enforce, and may
institute and maintain, any suit, action or proceeding against the Company to
enforce, or otherwise act in respect of, his right to exercise the Rights
evidenced by such 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.
Section 16. Agreement of Right Holders. Every holder of a Right by
--------------------------
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of Common Stock;
(b) on and after the Distribution Date, the Right Certificates will be
transferable only on the registry books of the Rights Agent and then if
surrendered at the stock transfer office of the Rights Agent, duly endorsed or
accompanied by a proper instrument of transfer; and
30
<PAGE>
(c) the Company and the Rights Agent may deem and treat the person in
whose name the Right Certificate (or, prior to the Distribution Date, the
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 Certificates or the associated Common Stock certificate
made by anyone other than the Company or the Rights Agent) for all purposes
whatsoever, and neither the Company nor the Rights Agent shall be affected by
any notice to the contrary.
Section 17. Right Certificate Holder Not Deemed a Stockholder. No
-------------------------------------------------
holder, as such, of any Right Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of Common Stock or any other
securities of the Company which may at any time be issuable on the exercise of
the Rights represented thereby, nor shall anything contained herein or in any
Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any 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), or to receive dividends 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.
Section 18. Concerning the Rights Agent.
---------------------------
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
other disbursements incurred in the administration and execution of this
Agreement and the exercise and performance of its duties hereunder. The Company
also agrees to indemnify the Rights Agent for, and to hold it harmless against,
any loss, liability, or expense incurred, without negligence, bad faith or
willful misconduct on the part of the Rights Agent, for anything done or omitted
by the Rights Agent in connection with the acceptance and administration of this
Agreement, including the costs and expenses of defending against any claim of
liability in the premises.
(b) The Rights Agent shall be protected and shall incur no liability
for or in respect of any action taken, suffered or omitted by it in connection
with its administration of this Agreement in reliance upon any Right Certifi-
31
<PAGE>
cate or Certificate for Common Stock or for other securities of the Company,
instrument of assignment or transfer, power of attorney, endorsement, affidavit,
letter, notice, direction, consent, certificate, statement, or other paper or
document believed by it, acting with reasonable care, to be genuine and to be
signed, executed and, where necessary, verified or acknowledged, by the proper
person or persons.
Section 19. Merger or Consolidation or Change of Name of Rights
---------------------------------------------------
Agent.
- ------
(a) Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Rights Agent
or any successor Rights Agent shall be a party, or any corporation succeeding to
the stock transfer business of the Rights Agent or any successor Rights Agent,
shall be the successor to the Rights Agent under this Agreement without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, provided that such corporation would be eligible for appointment
as a successor Rights Agent under the provisions of Section 21. In case at the
time such successor Rights Agent shall succeed to the agency created by this
Agreement any of the Right Certificates shall have been countersigned but not
delivered, any such successor Rights Agent may adopt the countersignature of the
predecessor Rights Agent and deliver such Right Certificates so countersigned,
and in case at that time any of the Right Certificates shall not have been
countersigned, any successor Rights Agent may countersign such Right
Certificates either in the name of the predecessor Rights Agent or in the name
of the successor Rights Agent and in all such cases such Right Certificates
shall have the full force provided in the Right Certificates and in this
Agreement.
(b) In case at any time the name of the Rights Agent shall be changed
and at such time any of the Right Certificates shall have been countersigned but
not delivered, the Rights Agent may adopt the countersignature under its prior
name and deliver Right Certificates so countersigned, and in case at that time
any of the Right Certificates shall not have been countersigned, the Rights
Agent may countersign such Right Certificates either in its prior name or in its
changed name, and in all such cases such Right Certificates shall have the full
force provided in the Right Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the
----------------------
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of
32
<PAGE>
which the Company and the holders of Right Certificates, by their acceptance
thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action taken
or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter be
proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by the Chairman of the Board, Chief
Executive Officer, the President, Chief Financial Officer, any Vice President,
or the Secretary of the Company and delivered to the Rights Agent, and such
certificate shall be full authorization to the Rights Agent for any action taken
or suffered in good faith by it under the provisions of this Agreement in
reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its own
negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement or in the Right
Certificates (except its countersignature thereof) or be required to verify the
same, but all such statements and recitals are and shall be deemed to have been
made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect
of the validity of this Agreement or the execution and delivery hereof (except
the due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Right Certificate (except its countersignature thereof), nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Right Certificate, nor shall it
be responsible for any adjustment required under the provisions of Section 11 or
13 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 actual notice of any such adjustment), nor shall it by any act hereunder
33
<PAGE>
be deemed to make any representation or warranty as to the authorization or
reservation of any shares of stock to be issued pursuant to this Agreement or
any Right Certificate or as to whether any shares of stock will, when issued, be
validly authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performance by the Rights Agent of
the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
Chairman of the Board, the Chief Executive Officer, the President, the Chief
Financial Officer, any Vice President or the Secretary of the Company, and to
apply to such officers for advice or instructions in connection with its duties,
and it shall not be liable for any action taken or suffered to be taken by it in
good faith in accordance with instructions of any such officer.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from
acting in any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct, provided reasonable care was exercised in the selection
and continued employment thereof.
(j) If, with respect to any Right Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to
34
<PAGE>
clause 1 and/or 2 thereof, the Rights Agent shall not take any further action
with respect to such requested exercise or transfer without first obtaining the
Company's approval.
Section 21. Change of Rights Agent. Unless the Company and the
----------------------
Rights Agent agree to a shorter time period, the Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days' notice in writing mailed to the Company and to each transfer agent
of Common Stock by registered or certified mail, and to the holders of the Right
Certificates by first-class mail. Unless the Company and the Rights Agent agree
to a shorter time period, the Company may remove the Rights Agent or any
successor Rights Agent upon 30 days' notice in writing, mailed to the Rights
Agent or successor Rights Agent, as the case may be, and to each transfer agent
of Common Stock by registered or certified mail, and to the holders of the Right
Certificates by first-class mail. If the Rights Agent shall resign or be
removed or shall otherwise become incapable of acting, the Company shall appoint
a successor to the Rights Agent. If the Company shall fail to make such
appointment within a period of 30 days after such removal or after it has been
notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Right Certificate (who shall,
with such notice, submit his Right Certificate for inspection by the Company),
then the registered holder of any Right Certificate may apply to any court of
competent jurisdiction for the appointment of a new Rights Agent. Any successor
Rights Agent, whether appointed by the Company or by such a court, shall be a
corporation organized and doing business under the laws of the United States or
of the State of 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 the
State of California) in good standing, having a stock transfer office in the
State of California, which is authorized under such laws to exercise stock
transfer powers and is subject to supervision or examination by federal or state
authority and which has at the time of its appointment as Rights Agent a
combined capital and surplus of at least $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
Company shall file notice thereof in writing with the predecessor Rights Agent
and each transfer
35
<PAGE>
agent of Common 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.
Section 22. Issuance of New Right Certificates. Notwithstanding any
----------------------------------
of the provisions of this Agreement or of the Rights to the contrary, the
Company may, at its option, issue new Right Certificates evidencing Rights in
such form as may be approved by its Board of Directors to reflect any adjustment
or change in the Expiration Date, the Purchase Price per share or the number or
kind or class of shares of stock or other securities or property purchasable
under the Right Certificates made in accordance with the provisions of this
Agreement.
Section 23. Redemption.
----------
(a) The Board of Directors of the Company may, at its option and as
provided herein, and notwithstanding the provisions of Sections 11 and 13 of
this Agreement, elect to redeem all but not less than all of the then
outstanding Rights at a redemption price of $0.001 per Right, appropriately
adjusted to reflect any stock split, stock dividend, reclassification or similar
transaction occurring after the date hereof (such redemption price being herein
referred to as the "Redemption Price") at any time up to the Close of Business
on the tenth Business Day after a Stock Acquisition Date; provided, however, the
-------- -------
Board of Directors of the Company may authorize the redemption of the Rights
after the time that an Acquiring Person has become such only if (i) there is at
least one Continuing Director then in office and (ii) a majority of all of the
Continuing Directors then in office approves such redemption.
(b) Immediately upon the action of the Board of Directors of the
Company electing to redeem the Rights, the Company shall make a public
announcement thereof, and from and after the date of such announcement, without
any further action and without any further 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. As soon as practicable after the
election of the Board of Directors to redeem the Rights, the Company shall give
notice of such redemption to the holders of the then outstanding Rights by
mailing such notice to all such holders at their last addresses as they appear
upon the registry books of the Rights Agent. Any notice which is
36
<PAGE>
mailed in the manner herein provided shall be deemed given, whether or not the
holder receives the notice. Each such notice of redemption will state the method
by which the payment of the Redemption Price will be made.
Section 24. Notice of Proposed Actions. In case the Company, after
--------------------------
the Rights become exercisable, shall propose (i) to pay any dividend payable in
stock of any class to the holders of its Common Stock or the Subject Shares or
to make any other distribution to the holders of its Common Stock or Subject
Shares (other than a regular periodic cash dividend), or (ii) to offer to the
holders of its Common Stock or Subject Shares rights or warrants to subscribe
for or to purchase any additional shares of Common Stock or shares of stock of
any class or any other securities, rights or options, or (iii) to effect any
reclassification of its Common Stock or Subject Shares (other than a
reclassification involving only the subdivision of outstanding shares of Common
Stock) or any recapitalization or reorganization of the Company, or (iv) to
effect any consolidation or merger into or with, 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 more than 50 percent of the
assets or earning power of the Company and its Subsidiaries (taken as a whole)
to, any other Person, or (v) to effect the liquidation, dissolution or winding
up of the Company, then, in each such case, the Company shall give to each
holder of a Right, in accordance with Section 25, a notice of such proposed
action, which shall specify the record date for the purposes of such dividend,
distribution of rights or warrants, or the date on which such reclassification,
recapitalization, reorganization, consolidation, merger, sale, transfer,
liquidation, dissolution or winding up is to take place and the date of
participation therein by the holders of Common Stock and/or Subject Shares, 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 days prior to the
record date for determining holders of the Common Stock and/or Subject Shares
for purposes of such action, and in the case of any such other action, at least
twenty days prior to the date of the taking of such proposed action or the date
of participation therein by the holders of Common Stock and/or Subject Shares,
whichever shall be the earlier. The failure to give notice required by this
Section 24 or any defect thereon shall not affect the legality or validity of
the action taken by the Company or the vote upon any such action.
37
<PAGE>
Section 25. Notices. Notices or demands authorized by this Agreement
-------
to be given or made by the Rights Agent or by the holder of any Right
Certificate to or on the Company shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Rights Agent) as follows:
Inference Corporation
100 Rowland Way
Novato, California 94945
Attention: The President
Subject to the provisions of Section 21, any notice or demand
authorized by this Agreement to be given or made by the Company or by the holder
of any Right Certificate to or on the Rights Agent shall be sufficiently given
or made if sent by first-class mail, postage prepaid, addressed (until another
address is filed in writing with the Company) as follows:
Harris Trust Company of California
601 S. Figueroa Street, Suite 4900
Los Angeles, California 90017
Attention: Mr. Neil Rosso
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to or on the holder of any Right Certificate shall
be sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
Section 26. Supplements and Amendments. Prior to the Distribution
--------------------------
Date and subject to the penultimate sentence of this Section 26, the Company and
the Rights Agent shall, if the Company so directs, supplement or amend any
provision of this Agreement without the approval of any holders of certificates
representing shares of Common Stock. From and after the Distribution Date and
subject to the penultimate sentence of this Section 26, the Company and the
Rights Agent shall, if the Company so directs, supplement or amend this
Agreement without the approval of any holders of Right Certificates in order (i)
to cure any ambiguity, (ii) to correct or supplement any provision contained
herein which may be defective or inconsistent with any other provisions herein,
(iii) to shorten or lengthen any time period hereunder (which lengthening or
shortening, after the time that any Acquiring Person has become such, shall be
effective only if (x) there is at least one Continuing Director then in office
and (y) a majority of all of the Continuing Directors then in office have
approved of such action), or
38
<PAGE>
(iv) to change or supplement the provisions hereof in any manner which the
Company may deem necessary or desirable and which shall not adversely affect the
interests of the holders of Right Certificates; provided, however, this
-------- -------
Agreement may not be supplemented or amended to lengthen, pursuant to clause
(iii) of this sentence, (A) a time period relating to when the Rights may be
redeemed at such time as the Rights are not then redeemable, or (B) any other
time period, unless such lengthening is for the purpose of protecting, enhancing
or clarifying the rights of, and/or the benefits to, the holders of Rights. Upon
the delivery of a certificate from an appropriate officer of the Company which
states that the proposed supplement or amendment is in compliance with the terms
of this Section 26, the Rights Agent shall execute such supplement or amendment.
Notwithstanding anything contained in this Agreement to the contrary: (1) no
supplement or amendment shall be made which changes the Redemption Price, the
Purchase Price or the number of shares or Units for which a Right is
exercisable; and (2) the duration of the Rights may not be shortened without the
written consent of the registered holders thereof (other than by a redemption of
the Rights pursuant to Section 23). Prior to the Distribution Date, the
interests of the holders of Rights shall be deemed coincident with the interests
of the holders of Common Stock.
Section 27. Exchange.
--------
(a) The Board of Directors of the Company 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 subject to the provisions of Section 7(f) hereof) for Class A Common
Stock at an exchange ratio of one share of Class A Common Stock per Right,
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such exchange ratio being
hereinafter referred to as the "Exchange Ratio").
(b) Immediately upon the action of the Board of Directors of the
Company ordering the exchange of any Rights pursuant to subsection (a) of this
Section and without any further action and without any notice, the right to
exercise such Rights shall terminate and the only right thereafter of a holder
of such Rights shall be to receive that number of shares of Common Stock equal
to the number of such Rights held by such holder multiplied by the Exchange
Ratio. The Company shall promptly give public notice of any such exchange;
provided, however, that the failure to give, or any defect in, such notice shall
- -------- -------
not affect the validity of
39
<PAGE>
such exchange. The Company promptly shall mail a notice of any such exchange to
all of the holders of such Rights at their last addresses as they appear upon
the registry books of the Rights Agent. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of exchange will state the method by which the exchange
of the Common Stock for Rights will be effected and, in the event of any partial
exchange, the number of Rights which will be exchanged. Any partial exchange
shall be effected pro rata based on the number of Rights (other than Rights
which have become subject to the provisions of Section 7(f) hereof) held by each
holder of Rights.
(c) In the event that there shall not be sufficient authorized Common
Stock to permit an exchange of Rights as contemplated in accordance with this
Section, the Company shall take all such action as may be necessary to authorize
additional Common Stock or Equivalent Stock for issuance upon exchange of the
Rights.
Section 28. Successors. All the covenants and provisions of this
----------
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 29. Determination and Actions Taken by the Board of
-----------------------------------------------
Directors. For all purposes of this Agreement, any calculation of the number of
shares of Common Stock (or other applicable securities hereunder) outstanding at
any particular time, including for purposes of determining the particular
percentage of such outstanding shares of Common Stock (or 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) (as in effect on the date of this
Agreement) of the General Rules and Regulations under the Exchange Act. The
Board of Directors of the Company shall have the exclusive power and authority
to administer this Agreement and to exercise all rights and powers specifically
granted to such Board or to the Company, or as may be necessary or advisable in
the administration of this Agreement, including without limitation the right and
power to (i) interpret the provisions of this Agreement, and (ii) make all
determinations deemed necessary or advisable for the administration of this
Agreement (including a determination to redeem or not redeem the Rights or to
amend the Agreement). All such actions, calculations, interpretations and
determinations (including, for purposes of clause (B) below, all omissions with
respect to the foregoing) which are done or made by the Board in good
40
<PAGE>
faith, shall (A) be final, conclusive and binding on the Company, the Rights
Agent, the holders of the Rights and all other parties, and (B) not subject the
Board to any liability to the holders of the Rights .
Section 30. Benefits of this Agreement. Nothing in this Agreement
--------------------------
shall be construed to give to any Person other than the Company, the Rights
Agent and the registered holders of the Right Certificates (and, prior to the
Distribution Date, the holders 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 Company, the Rights Agent and the registered holders of
the Right Certificates (and, prior to the Distribution Date, the holders of
Common Stock).
Section 31. Governing Law. This Agreement and each Right Certificate
-------------
issued hereunder shall be deemed to be a contract made under the laws of the
State of Delaware and for all purposes shall be governed by and construed in
accordance with the laws of such State applicable to contracts to be made and
performed entirely within such State.
Section 32. Counterparts. This Agreement may be executed in any
------------
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
Section 33. Section 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.
Section 34. 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, illegal, or unenforceable, (i) such invalid,
illegal or unenforceable term, provision, covenant or restriction shall
nevertheless be valid, legal and enforceable to the extent, if any, provided by
such court or authority, and (ii) 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.
41
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
THE COMPANY: Inference Corporation
By:
---------------------------
Peter R. Tierney,
Chairman of the Board of
Directors, President and
Chief Executive Officer
THE RIGHTS AGENT: Harris Trust Company of
California
By:
---------------------------
42
<PAGE>
EXHIBIT A
[Form of Facing Side of Right Certificate]
Certificate No. R- _____ Rights
NOT EXERCISABLE AFTER PUBLIC ANNOUNCEMENT OF
REDEMPTION IS MADE. THE RIGHTS ARE SUBJECT TO
REDEMPTION, AT THE OPTION OF THE COMPANY, AT
$0.001 PER RIGHT ON THE TERMS SET FORTH IN THE
AGREEMENT. IN THE EVENT THAT THE RIGHTS
REPRESENTED BY THIS CERTIFICATE ARE ISSUED TO
A PERSON WHO IS AN ACQUIRING PERSON OR AN ASSOCIATE
OR AFFILIATE THEREOF (AS SUCH TERMS ARE DEFINED
IN THE RIGHTS AGREEMENT) OR CERTAIN TRANSFEREES
THEREOF, THIS RIGHT CERTIFICATE AND THE RIGHTS
REPRESENTED HEREBY MAY BE SUBJECT TO CERTAIN
LIMITATIONS IN THE CIRCUMSTANCES SPECIFIED IN
SECTION 7 OF THE RIGHTS AGREEMENT.
RIGHT CERTIFICATE
This certifies that , or registered assigns, is the
--------------
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions and conditions of the Rights
Agreement, dated as of November 25, 1996 (the "Rights Agreement"), between
Inference Corporation, a Delaware corporation (the "Company"), and Harris Trust
Company of California (the "Rights Agent"), to purchase from the Company, unless
the Rights have been previously redeemed, at any time after the Distribution
Date (as such term is defined in the Rights Agreement) and prior to the
Expiration Date (as such term is defined in the Rights Agreement), or the date,
if any, on which the Rights evidenced by this Certificate may be redeemed, at
the stock transfer office of the Rights Agent, or its successors as Rights
Agent, one one-hundredth of a fully paid and nonassessable share of Junior
Participating Preferred Stock ("Preferred Shares"), at a purchase price of
$40.00 (the "Purchase Price"), upon presentation and surrender of this Right
Certificate with the Form of Election to Purchase duly completed and executed.
The number of Rights evidenced by this Right Certificate (and the number of
shares which may be purchased upon exercise thereof) as set forth above, and the
A-1
<PAGE>
Purchase Price set forth above, are the number and Purchase Price as of the date
of the Rights Agreement based on the shares of Common Stock of the Company as
constituted at such date.
Upon the occurrence of an event described in clause (A), (B), (C) or
(D) of Section 11(a)(ii) of the Rights Agreement, the holder of any Rights that
are, or were, beneficially owned by an Acquiring Person or an Associate or
Affiliate thereof (as such terms are defined in the Rights Agreement) or certain
transferees thereof which engaged in, or realized the benefit of, an event or
transaction or transactions described in clause (A), (B), (C) or (D) of such
Section 11(a)(ii), shall not be entitled to the benefit of the adjustment
described in such Section 11(a)(ii).
As provided in the Rights Agreement, the Purchase Price and the number
and class of shares which 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.
This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Right Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the above-mentioned office of the
Rights Agent and at the principal office of the Company.
This Right Certificate, with or without other Right Certificates, upon
surrender at the stock transfer office of the Rights Agent set forth above, may
be exchanged for another Right Certificate or Right Certificates of like tenor
and date evidencing Rights entitling the holder to purchase such number of
shares 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
A-2
<PAGE>
the Company at its option at a redemption price of $0.001 per Right.
No fractional shares will be issued upon the exercise of any Rights
evidenced hereby, but in lieu thereof a cash payment may 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 or of any
other securities of the Company which may at any time be issuable on the
exercise hereof, nor shall anything contained in the Rights Agreement or herein
be construed to confer upon the holder hereof, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting stockholders (except as provided in the Rights
Agreement), or to receive dividends or subscription rights, or otherwise, until
the Right or Rights evidenced by this Right Certificate shall have been
exercised as provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signatures of the proper officers of the
Company. Dated as of , 199 .
----------- -
Attest: Inference Corporation
By:
- ------------------------------------ ------------------------------
Secretary Title:
Countersigned:
Harris Trust Company of California
By:
--------------------------------
Authorized Signature
A-3
<PAGE>
A-3
[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 to
----------------------
transfer the within Right Certificate on the books of the within-named
Corporation, with full power of substitution.
Dated: , 19
---------- -- ------------------------------------
Signature
Signature Guaranteed:
CERTIFICATE
-----------
The undersigned hereby certifies (after due inquiry and to the best
knowledge of the undersigned) by checking the appropriate boxes that:
(1) this Right Certificate [ ] is [ ] is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of an Acquiring Person (as such terms are defined in the
Rights Agreement);
(2) the undersigned [ ] did [ ] did not acquire the Rights evidenced
by this Right Certificate from any Person who is, was or subsequently became an
Acquiring Person or an Affiliate or Associate of an Acquiring Person.
Date: , 19
---------- -- ------------------------------------
Signature
Signature Guaranteed:
NOTICE
------
The signature to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Right Certificate in
every particular, without alteration or enlargement or any change whatsoever.
A-4
<PAGE>
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if holder desires to
exercise the Right Certificate.)
To the Company and the Rights Agent:
The undersigned hereby irrevocably elects to exercise_______________
Rights represented by this Right Certificate and to purchase the shares issuable
upon the exercise of such Rights and requests that certificates for such shares
be issued in the name of:
Please insert social security
or other identifying number:
---------------------------------------------------
- -------------------------------------------------------------------------------
(Please print name and address)
If such number of Rights shall not be all the Rights evidenced by this 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
or other identifying number:
---------------------------------------------------
- -------------------------------------------------------------------------------
(Please print name and address)
- -------------------------------------------------------------------------------
Dated: , 19
----------- -- --------------------------------
Signature
Signature Guaranteed:
A-5
<PAGE>
CERTIFICATE
-----------
The undersigned hereby certifies (after due inquiry and to the best
knowledge of the undersigned) by checking the appropriate boxes that:
(1) the Rights evidenced by this Right Certificate [ ] are [ ] are not
being exercised by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of an Acquiring Person (as such terms are defined in
the Rights Agreement);
(2) the undersigned [ ] did [ ] did not acquire the Rights evidenced
by this Right Certificate from any person who is, was or subsequently became an
Acquiring Person or an Affiliate or Associate of an Acquiring Person.
Date: , 19
------------ -- ----------------------------------
Signature
Signature Guaranteed:
NOTICE
------
The signature to the foregoing Election to Purchase and Certificate
must correspond to the name as written upon the face of this Right Certificate
in every particular, without alteration or enlargement or any change whatsoever.
A-6
<PAGE>
EXHIBIT B
---------
SUMMARY OF RIGHTS
On November 25, 1996, the Board of Directors of Inference Corporation
(the "Company"), declared a distribution of one Right for each outstanding share
of common stock (the "Common Shares") of the Company. The distribution is to be
made as of December 10, 1996 (the "Record Date") to the stockholders of record
on that date. Each Right entitles the registered holder to purchase from the
Company, initially, one one-hundredth of a share of Junior Participating
Preferred Stock ("Preferred Shares") at a price of $40.00 (the "Purchase
Price"), subject to adjustment. The description and terms of the Rights are set
forth in a Rights Agreement between the Company and Harris Trust Company of
California, as Rights Agent.
Preferred Shares purchasable upon exercise of the Rights will be
entitled to dividends of 100 times the dividends, per share, declared on the
Common Shares and in the event of liquidation will be entitled to a minimum
preferential liquidating distribution of $l00 per share and an aggregate
liquidating distribution, per share, of 100 times the distribution made per
Common Share. The Preferred Shares will vote together with the Common Shares
and in the event of any merger, consolidation or other transaction in which
Common Shares are exchanged, each Preferred Share will be entitled to receive
100 times the amount received per Common Share.
Because of the Preferred Shares' dividend and liquidation rights, the
value when issued of the one one-hundredth interest in a Preferred Share
purchasable upon exercise of each Right should approximate the value of one
Common Share.
Until the earlier to occur of (i) 10 business days following a public
announcement that a person or group of affiliated or associated persons (an
"Acquiring Person") has acquired beneficial ownership of 20% or more of the
Company's general voting power other than pursuant to a Qualified Offer (as
defined below), the date of such public announcement being called the "Stock
Acquisition Date," or (ii) 10 business days (or such later date as may be
determined by action of the Board of Directors) following the commencement of,
or announcement of an intention to make, a tender offer or exchange offer the
consummation of which would result in the beneficial ownership by a person or
group of 20% or more of the Company's general voting
B-1
<PAGE>
power (the date of such earlier occurrence being called the "Distribution
Date"), the Rights will be evidenced by the certificates representing the Common
Shares and will be transferred with and only with the Common Shares. New Common
Share certificates issued after the Record Date upon transfer or new issuance of
Common Shares will contain a notation incorporating the Rights Agreement by
reference, and the surrender for transfer of any certificate for Common Shares,
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
Common Shares represented by such certificate. As soon as practicable following
the Distribution Date, separate certificates evidencing the Rights ("Right
Certificates") will be mailed to holders of record of the Common Shares as of
the close of business on the Distribution Date and such separate Right
Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date. The
Rights will expire on the tenth anniversary of the Record Date (the "Final
Expiration Date"), unless the Final Expiration Date is extended or unless the
Rights are earlier redeemed or exchanged by the Company, as described below.
The Purchase Price payable, the number of shares or other securities
or property issuable upon exercise of the Rights, and the number of outstanding
Rights, are subject to adjustment from time to time to prevent dilution.
A "Qualified Offer" is a tender offer or exchange offer for all
outstanding Common Shares which is determined by the non-affiliated continuing
directors to be fair to and otherwise in the best interests of the Company and
its shareholders.
In the event that any person becomes an Acquiring Person other than by
a purchase pursuant to a Qualified Offer, proper provision shall be made so that
each holder of a Right, other than Rights beneficially owned by the Acquiring
Person (which will not be entitled to the benefit of such adjustment) will
thereafter have the right to receive upon exercise that number of Common Shares
or Common Share equivalents having a market value of two times the exercise
price of the Right.
In the event that, at any time after an Acquiring Person has become
such, the Company is acquired in a merger or other business combination
transaction (other than a merger which follows a Qualified Offer at the same or
a higher price) or 50% or more of its consolidated assets or earning power are
sold, proper provision will be made so
B-2
<PAGE>
that each holder of a Right will thereafter have the right to receive, upon the
exercise thereof at the then current exercise price of the Right, that number of
shares of common stock of the acquiring company which at the time of such
transaction will have a market value of two times the exercise price of the
Right.
At any time after an Acquiring Person has become such, the Board of
Directors of the Company may exchange the Rights (other than Rights owned by
such person or group), in whole or in part, at an exchange ratio of one Common
Share per Right (subject to adjustment).
Up to and including the tenth business day after a Stock Acquisition
Date, the Board of Directors of the Company may redeem the Rights in whole, but
not in part, at a price of $0.001 per Right (the "Redemption Price").
Immediately upon any redemption of the Rights, the right to exercise them will
terminate and the only right of the holders will be to receive the Redemption
Price.
The terms of the Rights may be amended by the Board of Directors
without the consent of the holders of the Rights at any time prior to the
Distribution Date. Thereafter, the Rights may be amended to make changes which
do not adversely affect the interests of the holders of the Rights, or which
shorten or lengthen time periods, subject to certain limitations set forth in
the Rights Agreement.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company.
A copy of the Rights Agreement will be 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 Company. This
summary description of the Rights does not purport to be complete and is
qualified in its entirety by reference to the Rights Agreement, which is
incorporated herein by reference.
B-3
<PAGE>
Exhibit C
---------
CERTIFICATE OF DESIGNATIONS
of
JUNIOR PARTICIPATING PREFERRED STOCK
of
INFERENCE CORPORATION
Inference Corporation, a Delaware corporation (the "Corporation"),
hereby certifies that the following resolution has been duly adopted by the
Board of Directors of the Corporation:
RESOLVED, that pursuant to the authority granted to the Board of
Directors of the Corporation by the Certificate of Incorporation, a series of
shares of the Preferred Stock of the Corporation is hereby established and the
number of shares constituting such series and the designation thereof, and the
rights, preferences, privileges and restrictions of the shares of such series,
are fixed and established as follows:
I. Designation and Amount
----------------------
The shares of such series shall be designated as "Junior Participating
Preferred Stock" (the "Junior Preferred Stock") and the number of shares
constituting the Junior Preferred Stock shall be 300,000. Such number of
shares may be increased or decreased by resolution of the Board of Directors;
provided, that no decrease shall reduce the number of shares of Junior Preferred
- --------
Stock to a number less than the number of shares then outstanding plus the
number of shares reserved for issuance upon the exercise of outstanding options,
rights or warrants or upon the conversion of any outstanding securities issued
by the Corporation convertible into Junior Preferred Stock.
II. Dividends and Distributions
---------------------------
(A) Subject to the rights of the holders of any shares of any
series of Preferred Stock (or any similar stock) ranking prior and
superior to the Junior Preferred Stock with respect to dividends, the
holders of shares of Junior Preferred Stock, in preference to the
holders of Common Stock (as defined below) of the Corporation, shall be
entitled to receive, when, as and if declared by the Board of Directors
out of funds
C-1
<PAGE>
legally available for the purpose, quarterly dividends
payable in cash on the first day of March, June, September and December
in each year (each such date being referred to herein as a "Quarterly
Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or fraction of a share
of Junior 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 hereinafter set forth, 100 times the aggregate
per share amount of all cash dividends, and 100 times the aggregate per
share amount (payable in kind) of all non-cash dividends or other
distributions, other than a dividend payable in shares of Common Stock
or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date or, with respect
to the first Quarterly Dividend Payment Date, since the first issuance
of any share or fraction of a share of Junior Preferred Stock. In the
event the Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of
Common Stock (by reclassification or otherwise than by payment of a
dividend in shares of Common Stock) into a greater or lesser number of
shares of Common Stock, then in each such case the amount to which
holders of shares of Junior Preferred Stock were entitled immediately
prior to such event under clause (b) of the preceding sentence shall be
adjusted by multiplying such amount by a fraction, the numerator of
which is the number of shares of Common Stock outstanding immediately
after such event and the denominator of which is the number of shares of
Common Stock that were outstanding immediately prior to such event. For
purposes of this Certificate of Designations, the term "Common Stock"
shall mean collectively the Corporation's Class A Common Stock and the
Corporation's Class B Common Stock.
(B) The Corporation shall declare a dividend or distribution on
the Junior Preferred Stock as provided in paragraph (A) of this Section
immediately after it declares a dividend or distribution on the Common
Stock (other than a dividend payable in shares of Common Stock);
provided that, in the event no dividend or distribution shall have been
--------
declared on the Common Stock during the period between any Quarterly
Dividend Payment Date and the next subsequent Quarterly Dividend Payment
Date, a dividend of $1.00 per share on the Ju-
C-2
<PAGE>
nior Preferred Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Junior Preferred Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares, unless the
date of issue of such shares is prior to the record date for the first
Quarterly Dividend Payment Date, in which case dividends on such shares
shall begin to accrue from the date of issue of such shares, or unless
the date of issue is a Quarterly Dividend Payment Date or is a date
after the record date for the determination of holders of shares of
Junior 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 Junior Preferred Stock in
an amount less than the total amount of such dividends at the time
accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The
Board of Directors may fix a record date for the determination of
holders of shares of Junior Preferred Stock entitled to receive payment
of a dividend or distribution declared thereon, which record date shall
be not more than 60 days prior to the date fixed for the payment
thereof.
III. Voting Rights
-------------
The holders of shares of Junior Preferred Stock shall have the
following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth,
each share of Junior Preferred Stock shall entitle the holder thereof to
100 votes on all matters submitted to a vote of the stockholders of the
Corporation. In the event the Corporation shall at any time declare or
pay any dividend on the Common Stock payable in shares of Common Stock,
or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise
than by payment of a dividend in shares of Common Stock) into a greater
or lesser number of shares of Common Stock, then in each such case the
number of votes per share to which holders of shares of Junior Preferred
Stock were entitled immediately prior to such event shall be adjusted by
multiplying such number by a fraction, the numerator of which is the
number of shares of Common Stock outstanding immediately after
C-3
<PAGE>
such event and the denominator of which is the number of shares of
Common Stock that were outstanding immediately prior to such event.
(B) Except as otherwise provided herein, or in any other
resolutions of the Board creating a series of Preferred Stock or any
similar stock, or by law, the holders of shares of Junior Preferred
Stock and the holders of shares of Common Stock and any other capital
stock of the Corporation having general voting rights shall vote
together as one class on all matters submitted to a vote of stockholders
of the Corporation.
(C) Except as set forth herein, in the Corporation's Certificate of
Incorporation or as otherwise provided by law, holders of Junior
Preferred Stock shall have no voting rights.
IV. Certain Restrictions
--------------------
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Junior Preferred Stock as provided in
Section II are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on shares of
Junior Preferred Stock outstanding shall have been paid in full, the
Corporation shall not:
(i) declare or pay dividends, or make any other distributions,
on any shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Junior
Preferred Stock;
(ii) 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 Junior
Preferred Stock, except dividends paid ratably on the Junior
Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which
the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Junior Preferred
Stock, provided that the Corporation may at any time redeem,
purchase or otherwise acquire shares
C-4
<PAGE>
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 Junior Preferred
Stock; or
(iv) redeem or purchase or otherwise acquire for consideration
any shares of Junior Preferred Stock, or any shares of stock
ranking on a parity with the Junior Preferred Stock, except in
accordance with a purchase offer made in writing or by publication
(as determined by the Board of Directors) to all holders of such
shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and
classes, shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any
shares of stock of the Corporation unless the Corporation could, under
paragraph (A) of this Section IV, purchase or otherwise acquire such
shares at such time and in such manner.
V. Reacquired Shares
-----------------
Any shares of Junior 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, or in any other Certificate of Designations creating a series of
Preferred Stock or any similar stock or as otherwise required by law.
VI. Liquidation, Dissolution or Winding Up
--------------------------------------
Upon any liquidation, dissolution or winding up of the Corporation, no
distribution shall be made (1) to the holders of shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or winding up) to the
Junior Preferred Stock unless, prior thereto, the holders of shares of Junior
Preferred Stock shall have received $100 per share, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not declared,
to the date of such payment, provided that the
C-5
<PAGE>
holders of shares of Junior Preferred Stock shall be entitled to receive an
aggregate amount per share, subject to the provision for adjustment hereinafter
set forth, equal to 100 times the aggregate amount to be distributed per share
to holders of shares of Common Stock, or (2) to the holders of shares of stock
ranking on a parity (either as to dividends or upon liquidation, dissolution or
winding up) with the Junior Preferred Stock, except distributions made ratably
on the Junior Preferred Stock and all such parity stock in proportion to the
total amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up. In the event the Corporation shall at
any time declare or pay any dividend on the Common Stock payable in shares of
Common Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the aggregate amount to which
holders of shares of Junior Preferred Stock were entitled immediately prior to
such event under the proviso in clause (1) of the preceding sentence shall be
adjusted by multiplying such amount by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
VII. Consolidation, Merger, etc.
---------------------------
In case the Corporation shall enter into any consolidation, merger,
combination or other transaction in which the shares of Common Stock are
exchanged for or changed into other stock or securities, cash and/or any other
property, then in any such case each share of Junior Preferred Stock shall at
the same time be similarly exchanged or changed into an amount per share,
subject to the provision for adjustment hereinafter set forth, equal to 100
times the aggregate amount of stock, securities, cash and/or any other property
(payable in kind), as the case may be, into which or for which each share of
Common Stock is changed or exchanged. In the event the Corporation shall at any
time declare or pay any dividend on the Common Stock payable in shares of Common
Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the amount set forth in the
preceding sentence with respect to the exchange or change of shares of Junior
Preferred Stock shall be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such
C-6
<PAGE>
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
VIII. Redemption
----------
The shares of Junior Preferred Stock shall not be redeemable.
IX. Rank
----
The Junior Preferred Stock shall rank, with respect to the payment of
dividends and the distribution of assets, junior to all series of any other
class of the Corporation's Preferred Stock.
X. Amendment
---------
The Certificate of Incorporation of the Corporation shall not be
amended in any manner which would alter or change the powers, preferences or
special rights of the Junior Preferred Stock so as to affect them adversely
without the affirmative vote of the holders of at least two-thirds of the
outstanding shares of Junior Preferred Stock, voting together as a single class.
IN WITNESS WHEREOF, this Certificate of Designations is executed on
behalf of the Corporation by its President and attested by its Secretary as of
this __ day of November, 1996.
Attest:
- --------------------- --------------------------
William D. Griffin Peter R. Tierney
Secretary President
C-7
<PAGE>
EXHIBIT 3
---------
SUMMARY OF RIGHTS
On November 25, 1996, the Board of Directors of Inference Corporation
(the "Company"), declared a distribution of one Right for each outstanding share
of common stock (the "Common Shares") of the Company. The distribution is to be
made as of December 10, 1996 (the "Record Date") to the stockholders of record
on that date. Each Right entitles the registered holder to purchase from the
Company, initially, one one-hundredth of a share of Junior Participating
Preferred Stock ("Preferred Shares") at a price of $40.00 (the "Purchase
Price"), subject to adjustment. The description and terms of the Rights are set
forth in a Rights Agreement between the Company and Harris Trust Company of
California, as Rights Agent.
Preferred Shares purchasable upon exercise of the Rights will be
entitled to dividends of 100 times the dividends, per share, declared on the
Common Shares and in the event of liquidation will be entitled to a minimum
preferential liquidating distribution of $l00 per share and an aggregate
liquidating distribution, per share, of 100 times the distribution made per
Common Share. The Preferred Shares will vote together with the Common Shares
and in the event of any merger, consolidation or other transaction in which
Common Shares are exchanged, each Preferred Share will be entitled to receive
100 times the amount received per Common Share.
Because of the Preferred Shares' dividend and liquidation rights, the
value when issued of the one one-hundredth interest in a Preferred Share
purchasable upon exercise of each Right should approximate the value of one
Common Share.
Until the earlier to occur of (i) 10 business days following a public
announcement that a person or group of affiliated or associated persons (an
"Acquiring Person") has acquired beneficial ownership of 20% or more of the
Company's general voting power other than pursuant to a Qualified Offer (as
defined below), the date of such public announcement being called the "Stock
Acquisition Date," or (ii) 10 business days (or such later date as may be
determined by action of the Board of Directors) following the commencement of,
or announcement of an intention to make, a tender offer or exchange offer the
consummation of which would result in the beneficial ownership by a person or
group of 20% or more of the Company's general voting
<PAGE>
power (the date of such earlier occurrence being called the "Distribution
Date"), the Rights will be evidenced by the certificates representing the Common
Shares and will be transferred with and only with the Common Shares. New Common
Share certificates issued after the Record Date upon transfer or new issuance of
Common Shares will contain a notation incorporating the Rights Agreement by
reference, and the surrender for transfer of any certificate for Common Shares,
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
Common Shares represented by such certificate. As soon as practicable following
the Distribution Date, separate certificates evidencing the Rights ("Right
Certificates") will be mailed to holders of record of the Common Shares as of
the close of business on the Distribution Date and such separate Right
Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date. The
Rights will expire on the tenth anniversary of the Record Date (the "Final
Expiration Date"), unless the Final Expiration Date is extended or unless the
Rights are earlier redeemed or exchanged by the Company, as described below.
The Purchase Price payable, the number of shares or other securities
or property issuable upon exercise of the Rights, and the number of outstanding
Rights, are subject to adjustment from time to time to prevent dilution.
A "Qualified Offer" is a tender offer or exchange offer for all
outstanding Common Shares which is determined by the non-affiliated continuing
directors to be fair to and otherwise in the best interests of the Company and
its shareholders.
In the event that any person becomes an Acquiring Person other than by
a purchase pursuant to a Qualified Offer, proper provision shall be made so that
each holder of a Right, other than Rights beneficially owned by the Acquiring
Person (which will not be entitled to the benefit of such adjustment) will
thereafter have the right to receive upon exercise that number of Common Shares
or Common Share equivalents having a market value of two times the exercise
price of the Right.
In the event that, at any time after an Acquiring Person has become
such, the Company is acquired in a merger or other business combination
transaction (other than a merger which follows a Qualified Offer at the same or
a higher price) or 50% or more of its consolidated assets or earning power are
sold, proper provision will be made so
2
<PAGE>
that each holder of a Right will thereafter have the right to receive, upon the
exercise thereof at the then current exercise price of the Right, that number of
shares of common stock of the acquiring company which at the time of such
transaction will have a market value of two times the exercise price of the
Right.
At any time after an Acquiring Person has become such, the Board of
Directors of the Company may exchange the Rights (other than Rights owned by
such person or group), in whole or in part, at an exchange ratio of one Common
Share per Right (subject to adjustment).
Up to and including the tenth business day after a Stock Acquisition
Date, the Board of Directors of the Company may redeem the Rights in whole, but
not in part, at a price of $0.001 per Right (the "Redemption Price").
Immediately upon any redemption of the Rights, the right to exercise them will
terminate and the only right of the holders will be to receive the Redemption
Price.
The terms of the Rights may be amended by the Board of Directors
without the consent of the holders of the Rights at any time prior to the
Distribution Date. Thereafter, the Rights may be amended to make changes which
do not adversely affect the interests of the holders of the Rights, or which
shorten or lengthen time periods, subject to certain limitations set forth in
the Rights Agreement.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company.
A copy of the Rights Agreement will be 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 Company. This
summary description of the Rights does not purport to be complete and is
qualified in its entirety by reference to the Rights Agreement, which is
incorporated herein by reference.
3
<PAGE>
EXHIBIT 4
CERTIFICATE OF DESIGNATIONS
OF
JUNIOR PARTICIPATING PREFERRED STOCK
OF
INFERENCE CORPORATION
Inference Corporation, a Delaware corporation (the "Corporation"),
hereby certifies that the following resolution has been duly adopted by the
Board of Directors of the Corporation:
RESOLVED, that pursuant to the authority granted to the Board of
Directors of the Corporation by the Certificate of Incorporation, a series of
shares of the Preferred Stock of the Corporation is hereby established and the
number of shares constituting such series and the designation thereof, and the
rights, preferences, privileges and restrictions of the shares of such series,
are fixed and established as follows:
I. Designation and Amount
----------------------
The shares of such series shall be designated as "Junior Participating
Preferred Stock" (the "Junior Preferred Stock") and the number of shares
constituting the Junior Preferred Stock shall be 300,000. Such number of
shares may be increased or decreased by resolution of the Board of Directors;
provided, that no decrease shall reduce the number of shares of Junior Preferred
- --------
Stock to a number less than the number of shares then outstanding plus the
number of shares reserved for issuance upon the exercise of outstanding options,
rights or warrants or upon the conversion of any outstanding securities issued
by the Corporation convertible into Junior Preferred Stock.
II. Dividends and Distributions
---------------------------
(A) Subject to the rights of the holders of any shares of any series
of Preferred Stock (or any similar stock) ranking prior and superior to
the Junior Preferred Stock with respect to dividends, the holders of
shares of Junior Preferred Stock, in preference to the holders of Common
Stock (as defined below) of the Corporation, shall be entitled to
receive, when, as and if declared by the Board of Directors out of funds
<PAGE>
legally available for the purpose, quarterly dividends payable in cash
on the first day of March, June, September and December in each year
(each such date being referred to herein as a "Quarterly Dividend
Payment Date"), commencing on the first Quarterly Dividend Payment Date
after the first issuance of a share or fraction of a share of Junior
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 hereinafter set forth, 100 times the aggregate per share
amount of all cash dividends, and 100 times the aggregate per share
amount (payable in kind) of all non-cash dividends or other
distributions, other than a dividend payable in shares of Common Stock
or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date or, with respect
to the first Quarterly Dividend Payment Date, since the first issuance
of any share or fraction of a share of Junior Preferred Stock. In the
event the Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of
Common Stock (by reclassification or otherwise than by payment of a
dividend in shares of Common Stock) into a greater or lesser number of
shares of Common Stock, then in each such case the amount to which
holders of shares of Junior Preferred Stock were entitled immediately
prior to such event under clause (b) of the preceding sentence shall be
adjusted by multiplying such amount by a fraction, the numerator of
which is the number of shares of Common Stock outstanding immediately
after such event and the denominator of which is the number of shares of
Common Stock that were outstanding immediately prior to such event. For
purposes of this Certificate of Designations, the term "Common Stock"
shall mean collectively the Corporation's Class A Common Stock and the
Corporation's Class B Common Stock.
(B) The Corporation shall declare a dividend or distribution on the
Junior Preferred Stock as provided in paragraph (A) of this Section
immediately after it declares a dividend or distribution on the Common
Stock (other than a dividend payable in shares of Common Stock);
provided that, in the event no dividend or distribution shall have been
--------
declared on the Common Stock during the period between any Quarterly
Dividend Payment Date and the next subsequent Quarterly Dividend Payment
Date, a dividend of $1.00 per share on the Ju-
2
<PAGE>
nior Preferred Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Junior Preferred Stock from the Quarterly Dividend Payment
Date next preceding the date of issue of such shares, unless the date of
issue of such shares is prior to the record date for the first Quarterly
Dividend Payment Date, in which case dividends on such shares shall
begin to accrue from the date of issue of such shares, or unless the
date of issue is a Quarterly Dividend Payment Date or is a date after
the record date for the determination of holders of shares of Junior
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 Junior Preferred Stock in an
amount less than the total amount of such dividends at the time accrued
and payable on such shares shall be allocated pro rata on a share-by-
share basis among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders of
shares of Junior Preferred Stock entitled to receive payment of a
dividend or distribution declared thereon, which record date shall be
not more than 60 days prior to the date fixed for the payment thereof.
III. Voting Rights
-------------
The holders of shares of Junior Preferred Stock shall have the
following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth,
each share of Junior Preferred Stock shall entitle the holder thereof to
100 votes on all matters submitted to a vote of the stockholders of the
Corporation. In the event the Corporation shall at any time declare or
pay any dividend on the Common Stock payable in shares of Common Stock,
or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise
than by payment of a dividend in shares of Common Stock) into a greater
or lesser number of shares of Common Stock, then in each such case the
number of votes per share to which holders of shares of Junior Preferred
Stock were entitled immediately prior to such event shall be adjusted by
multiplying such number by a fraction, the numerator of which is the
number of shares of Common Stock outstanding immediately after
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such event and the denominator of which is the number of shares of
Common Stock that were outstanding immediately prior to such event.
(B) Except as otherwise provided herein, or in any other resolutions
of the Board creating a series of Preferred Stock or any similar stock,
or by law, the holders of shares of Junior Preferred Stock and the
holders of shares of Common Stock and any other capital stock of the
Corporation having general voting rights shall vote together as one
class on all matters submitted to a vote of stockholders of the
Corporation.
(C) Except as set forth herein, in the Corporation's Certificate of
Incorporation or as otherwise provided by law, holders of Junior
Preferred Stock shall have no voting rights.
IV. Certain Restrictions
--------------------
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Junior Preferred Stock as provided in Section II are in
arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Junior Preferred
Stock outstanding shall have been paid in full, the Corporation shall
not:
(i) declare or pay dividends, or make any other distributions,
on any shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Junior
Preferred Stock;
(ii) 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 Junior
Preferred Stock, except dividends paid ratably on the Junior
Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which
the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Junior Preferred
Stock, provided that the Corporation may at any time redeem,
purchase or otherwise acquire shares
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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 Junior Preferred
Stock; or
(iv) redeem or purchase or otherwise acquire for consideration
any shares of Junior Preferred Stock, or any shares of stock
ranking on a parity with the Junior Preferred Stock, except in
accordance with a purchase offer made in writing or by publication
(as determined by the Board of Directors) to all holders of such
shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and
classes, shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any
shares of stock of the Corporation unless the Corporation could, under
paragraph (A) of this Section IV, purchase or otherwise acquire such
shares at such time and in such manner.
V. Reacquired Shares
-----------------
Any shares of Junior 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, or in any other Certificate of Designations creating a series of
Preferred Stock or any similar stock or as otherwise required by law.
VI. Liquidation, Dissolution or Winding Up
--------------------------------------
Upon any liquidation, dissolution or winding up of the Corporation, no
distribution shall be made (1) to the holders of shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or winding up) to the
Junior Preferred Stock unless, prior thereto, the holders of shares of Junior
Preferred Stock shall have received $100 per share, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not declared,
to the date of such payment, provided that the
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holders of shares of Junior Preferred Stock shall be entitled to receive an
aggregate amount per share, subject to the provision for adjustment hereinafter
set forth, equal to 100 times the aggregate amount to be distributed per share
to holders of shares of Common Stock, or (2) to the holders of shares of stock
ranking on a parity (either as to dividends or upon liquidation, dissolution or
winding up) with the Junior Preferred Stock, except distributions made ratably
on the Junior Preferred Stock and all such parity stock in proportion to the
total amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up. In the event the Corporation shall at
any time declare or pay any dividend on the Common Stock payable in shares of
Common Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the aggregate amount to which
holders of shares of Junior Preferred Stock were entitled immediately prior to
such event under the proviso in clause (1) of the preceding sentence shall be
adjusted by multiplying such amount by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
VII. Consolidation, Merger, etc.
---------------------------
In case the Corporation shall enter into any consolidation, merger,
combination or other transaction in which the shares of Common Stock are
exchanged for or changed into other stock or securities, cash and/or any other
property, then in any such case each share of Junior Preferred Stock shall at
the same time be similarly exchanged or changed into an amount per share,
subject to the provision for adjustment hereinafter set forth, equal to 100
times the aggregate amount of stock, securities, cash and/or any other property
(payable in kind), as the case may be, into which or for which each share of
Common Stock is changed or exchanged. In the event the Corporation shall at any
time declare or pay any dividend on the Common Stock payable in shares of Common
Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the amount set forth in the
preceding sentence with respect to the exchange or change of shares of Junior
Preferred Stock shall be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such
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event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
VIII. Redemption
----------
The shares of Junior Preferred Stock shall not be redeemable.
IX. Rank
----
The Junior Preferred Stock shall rank, with respect to the payment of
dividends and the distribution of assets, junior to all series of any other
class of the Corporation's Preferred Stock.
X. Amendment
---------
The Certificate of Incorporation of the Corporation shall not be
amended in any manner which would alter or change the powers, preferences or
special rights of the Junior Preferred Stock so as to affect them adversely
without the affirmative vote of the holders of at least two-thirds of the
outstanding shares of Junior Preferred Stock, voting together as a single class.
IN WITNESS WHEREOF, this Certificate of Designations is executed on
behalf of the Corporation by its President and attested by its Secretary as of
this __ day of November, 1996.
Attest:
- ------------------------ ----------------------------
William D. Griffin Peter R. Tierney
Secretary President
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