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EXHIBIT 1
PEGASUS SYSTEMS, INC.
AND
AMERICAN SECURITIES TRANSFER & TRUST, INC.
RIGHTS AGENT
RIGHTS AGREEMENT
DATED AS OF SEPTEMBER 28, 1998
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TABLE OF CONTENTS
SECTION PAGE
------- ----
Section 1. Certain Definitions......................................................... 1
Section 2. Appointment of Rights Agent. ............................................... 6
Section 3. Issuance of Rights Certificates............................................. 6
(a) Distribution Date; Rights Certificates...................................... 6
(b) Common Stock Certificates; Summary of Rights................................ 7
(c) Legend...................................................................... 7
Section 4. Form of Rights Certificates................................................. 8
(a) Form; Date.................................................................. 8
(b) Acquiring Person Legend..................................................... 9
Section 5. Countersignature and Registration........................................... 9
(a) Signatures.................................................................. 9
(b) Registration and Transfer................................................... 10
Section 6. Transfer, Split Up, Combination and Exchange of Rights Certificates;
Mutilated, Destroyed, Lost or Stolen Rights Certificates.................... 10
(a) Procedure................................................................... 10
(b) Issuance of New Rights Certificates......................................... 10
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights............... 11
(a) Exercise.................................................................... 11
(b) Purchase Price.............................................................. 11
(c) Rights Agent Actions........................................................ 12
(d) Partial Exercise............................................................ 12
(e) Termination of Acquiring Person's Rights.................................... 12
(f) Surrender of Rights Certificates; Identity of Beneficial Owner.............. 13
Section 8. Cancellation and Destruction of Rights Certificates......................... 13
Section 9. Reservation and Availability of Capital Stock............................... 13
(a) Reservation of Capital Stock................................................ 13
(b) Listing..................................................................... 13
(c) Registration under the Act.................................................. 14
(d) Covenant Regarding Capital Stock............................................ 14
(e) Transfer Taxes and Charges.................................................. 14
Section 10. Preferred Stock Record Date................................................. 15
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Section 11. Adjustment of Purchase Price; Number and Kind of Shares or Number of
Rights...................................................................... 15
(a) Certain Adjustments......................................................... 15
(b) Purchase Price Adjustment -- Capital Stock.................................. 18
(c) Purchase Price Adjustment -- Cash, Assets, etc.............................. 19
(d) Current Market Price........................................................ 19
(e) Purchase Price Adjustment Threshold......................................... 21
(f) Equivalent Adjustments...................................................... 21
(g) Post-Adjustment Rights Issuances............................................ 21
(h) Preferred Stock Anti-Dilution............................................... 21
(i) Adjustment of Number of Rights.............................................. 22
(j) Rights Certificates......................................................... 22
(k) Adjustment Below Par Value.................................................. 23
(l) Adjustment Effective as of Future Date; Exercise............................ 23
(m) Tax Adjustments............................................................. 23
(n) Restriction on Certain Transactions......................................... 23
(o) Restriction Against Diminishing Benefits of the Rights...................... 24
(p) Common Stock Adjustments.................................................... 24
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.................. 24
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power....... 25
(a) Flip-over Event............................................................. 25
(b) Principal Party............................................................. 26
(c) Supplemental Agreement...................................................... 26
(d) Exceptions.................................................................. 27
Section 14. Fractional Rights and Fractional Shares..................................... 27
(a) Fractional Rights........................................................... 27
(b) Fractional Shares of Preferred Stock........................................ 28
(c) Fractional Shares of Common Stock........................................... 28
(d) Waiver of Fractional Rights and Shares...................................... 29
Section 15. Rights of Action............................................................ 29
Section 16. Agreement of Rights Holders................................................. 29
Section 17. Rights Certificate Holder Not Deemed a Stockholder.......................... 30
Section 18. Concerning the Rights Agent................................................. 30
(a) Compensation................................................................ 30
(b) Reliance.................................................................... 30
Section 19. Merger or Consolidation or Change of Name of Rights Agent................... 31
(a) Successor................................................................... 31
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(b) Prior Countersignatures..................................................... 31
Section 20. Duties of Rights Agent...................................................... 31
(a) Legal Counsel............................................................... 31
(b) Certification by the Company................................................ 31
(c) Liability for Negligence, etc............................................... 32
(d) Statements of Fact or Recitals.............................................. 32
(e) Agreement; Adjustments...................................................... 32
(f) Further Assurances.......................................................... 32
(g) Instructions................................................................ 32
(h) Dealing in Rights........................................................... 32
(i) Agents; Reasonable Care..................................................... 33
(j) Expenses; Repayment Assurances.............................................. 33
(k) Exercise of Rights; Consultation with Company............................... 33
Section 21. Change of Rights Agent...................................................... 33
Section 22. Issuance of New Rights Certificates......................................... 34
Section 23. Redemption and Termination.................................................. 34
(a) Redemption.................................................................. 34
(b) Effect of Redemption; Procedure............................................. 35
Section 24. Exchange.................................................................... 35
(a) Right to Exchange........................................................... 35
(b) Effect of Exchange; Procedure............................................... 36
(c) Common Stock Equivalents.................................................... 36
(d) Insufficient Common Stock................................................... 36
(e) Fractional Shares........................................................... 36
Section 25. Notice of Certain Events.................................................... 37
(a) Preferred Stock Transactions, etc........................................... 37
(b) Other Transactions.......................................................... 37
Section 26. Notices..................................................................... 38
Section 27. Supplements and Amendments.................................................. 38
Section 28. Successors.................................................................. 39
Section 29. Determinations and Actions by the Board of Directors, etc................... 39
Section 30. Benefits of this Agreement.................................................. 40
Section 31. Severability................................................................ 40
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Section 32. Governing Law............................................................... 40
Section 33. Counterparts................................................................ 40
Section 34. Descriptive Headings........................................................ 40
EXHIBIT 1 Certificate of Designation, Preferences and Rights of Series
A Preferred Stock
EXHIBIT 2 Form of Rights Certificate
EXHIBIT 3 Letter to Stockholders
EXHIBIT 4 Press Release
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RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of September 28, 1998, between Pegasus
Systems, Inc., a Delaware corporation (the "Company"), and American Securities
Transfer & Trust, Inc., a Colorado corporation (the "Rights Agent").
RECITALS
On September 28, 1998 (the "Rights Dividend Declaration Date"), the
Board of Directors of the Company authorized and declared a dividend
distribution of one Right for each share of Common Stock (as hereinafter
defined) of the Company outstanding at the close of business on October 13, 1998
(the "Record Date"), and has authorized the issuance of one Right (as such
number may hereafter be adjusted pursuant to the provisions of Section 11(p)
(Adjustment of Purchase Price; Number and Kind of Shares or Number of Rights --
Common Stock Adjustments)) for each share of Common Stock of the Company issued
between the Record Date (whether originally issued or delivered from the
Company's treasury) and the Distribution Date, each Right initially representing
the right to purchase one one-thousandth of a share of Series A Preferred Stock
of the Company having the rights, powers and preferences set forth in the form
of Certificate of Designation, Preferences and Rights attached hereto as Exhibit
1, upon the terms and subject to the conditions hereinafter set forth (the
"Rights");
AGREEMENT
In consideration of the premises and the mutual agreements herein set
forth, the parties hereto hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or which,
together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner (as such term is hereinafter defined) of 20% or more of the
shares of Common Stock then outstanding, but shall not include (i) the Company,
(ii) any Subsidiary of the Company, (iii) any employee benefit plan of the
Company or of any Subsidiary of the Company, or any Person or entity organized,
appointed or established by the Company for or pursuant to the terms of any such
plan, or (iv) any Person who becomes an Acquiring Person solely as a result of a
reduction in the number of shares of Common Stock outstanding due to the
repurchase of shares of Common Stock by the Company, unless and until such
Person shall purchase or otherwise become (as a result of actions taken by such
Person or its Affiliates or Associates) the Beneficial Owner of additional
shares of Common Stock constituting 1% or more of the then outstanding shares of
Common Stock; provided, however, that if a Person shall become the Beneficial
Owner of 20% or more of the Common Stock of the Company then outstanding by
reason of share repurchases by the Company and shall, after such share
repurchases by the Company, become the Beneficial Owner of any additional Common
Stock of the Company, then such Person shall be deemed to be an
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"Acquiring Person," unless upon the consummation of the acquisition of such
additional shares of Common Stock such Person does not beneficially own 20% or
more of the shares of Common Stock then outstanding. Notwithstanding the
foregoing, if the Board of Directors of the Company determines in good faith
that a Person who would otherwise be an Acquiring Person, as defined pursuant to
the foregoing provisions of this paragraph, has become such inadvertently
(including, without limitation, because (i) such Person was unaware that it
beneficially owned a percentage of Common Stock that would otherwise cause such
Person to be an Acquiring Person, or (ii) such Person was aware of the extent of
its Beneficial Ownership of Common Stock but had no actual knowledge of the
consequences of such Beneficial Ownership under this Agreement) and without any
intention of changing or influencing control of the Company, and such Person
divests as promptly as practicable a sufficient number of shares of Common Stock
so that such Person would no longer be an Acquiring Person as defined pursuant
to the foregoing provisions of this paragraph, then such Person shall not be
deemed to be or to have become an Acquiring Person for any purposes of this
Agreement.
(b) "Act" shall mean the Securities Act of 1933, as amended as
of the date hereof and in effect from time to time.
(c) "Adjustment Shares" shall have the meaning set forth in
Section 11(a)(ii) (Adjustment of Purchase Price; Number and Kind of Shares or
Number of Rights -- Certain Adjustments).
(d) "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.
(e) "Agreement" shall mean this Rights Agreement as originally
executed or as it may from time to time be supplemented or amended pursuant to
the applicable provisions hereof.
(f) "Beneficial Owner"; "Beneficial Ownership": A Person shall
be deemed the "Beneficial Owner" of, and shall be deemed to "beneficially own,"
any securities:
(i) which such Person or any of such Person's
Affiliates or Associates, directly or indirectly, has the right to acquire
(whether such right is exercisable immediately or only after the passage of
time) pursuant to any agreement, arrangement or understanding (whether or not in
writing) or upon the exercise of conversion rights, exchange rights, rights,
warrants or options, or otherwise; provided, however, that a Person shall not,
for purposes of this paragraph (i), be deemed the "Beneficial Owner" of or to
"beneficially own," (A) securities tendered pursuant to a tender or exchange
offer made by such Person or any of such Person's Affiliates or Associates until
such tendered securities are accepted for purchase or exchange, or (B)
securities issuable upon exercise of Rights at any time prior to the occurrence
of a Triggering Event, or (C) securities issuable upon exercise of Rights from
and after the occurrence of a Triggering Event, which Rights were acquired by
such Person or any of such Person's Affiliates or Associates prior to the
Distribution Date or pursuant to Section 3(a) (Issuance of Rights Certificates
-- Distribution Date; Rights Certificates) or Section 22 (Issuance of New Rights
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Certificates) (the "Original Rights") or pursuant to Section 11(i) (Adjustment
of Purchase Price; Number and Kind of Shares or Number of Rights -- Adjustment
of Number of Rights) in connection with an adjustment made with respect to any
Original Rights;
(ii) which such Person or any of such Person's
Affiliates or Associates, directly or indirectly, has the right to vote or
dispose of or has "beneficial ownership" of (as determined pursuant to Rule
13d-3 of the General Rules and Regulations under the Exchange Act), including
pursuant to any agreement, arrangement or understanding, whether or not in
writing; provided, however, that a Person shall not be deemed the "Beneficial
Owner" of, or to "beneficially own," any security under this subparagraph (ii)
as a result of an agreement, arrangement or understanding to vote such security
if such agreement, arrangement or understanding: (A) arises solely from a
revocable proxy given in response to a public proxy or consent solicitation made
pursuant to, and in accordance with, the applicable provisions of the General
Rules and Regulations under the Exchange Act, and (B) is not also then
reportable by such Person on a Schedule 13D under the Exchange Act (or any
comparable or successor report); or
(iii) which are "beneficially owned," directly or
indirectly, by any other person (or any Affiliate or Associate thereof) with
which such Person (or any of such Person's Affiliates or Associates) has any
agreement, arrangement or understanding (whether or not in writing), for the
purpose of acquiring, holding, voting (except pursuant to a revocable proxy as
described in the proviso to subparagraph (ii) of this paragraph (f)) or
disposing of any voting securities of the Company; provided, however, that
nothing in this paragraph (f) shall cause a person engaged in business as an
underwriter of securities to be the "Beneficial Owner" of or to "beneficially
own," any securities acquired through such person's participation in good faith
in a firm commitment underwriting until the expiration of forty (40) calendar
days after the date of such acquisition.
(g) "Board" means the Board of Directors of the Company.
(h) "Business Day" shall mean any day other than a Saturday,
Sunday or a day on which banking institutions in the State of Texas are
authorized or obligated by law or executive order to close.
(i) "Close of Business" on any given date shall mean 5:00
P.M., Dallas, Texas time, on such date; provided, however, that if such date is
not a Business Day it shall mean 5:00 P.M., Dallas, Texas time, on the next
succeeding Business Day.
(j) "Common Stock" shall mean the common stock, $.01 par value
per share, of the Company, except that "Common Stock" when used with reference
to any Person other than the Company shall mean the capital stock of such Person
with the greatest voting power, or the equity securities or other equity
interest having power to control or direct the management, of such Person.
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(k) "Common Stock Equivalents" shall have the meaning set
forth in Section 11(a)(iii) (Adjustment of Purchase Price; Number and Kind of
Shares or Number of Rights -- Certain Adjustments).
(l) "Company" shall mean the Person named as the "Company" in
the first paragraph of this Agreement until a successor corporation shall have
become such, or until a Principal Party shall assume, and thereafter be liable
for, all obligations and duties of the Company hereunder, pursuant to the
applicable provisions of this Agreement, and thereafter "Company" shall mean
such successor corporation or Principal Party.
(m) "Current Market Price" shall have the meaning set forth in
Section 11(d) (Adjustment of Purchase Price; Number and Kind of Shares or Number
of Rights -- Current Market Price).
(n) "Current Value" shall have the meaning set forth in
Section 11(a)(iii) (Adjustment of Purchase Price; Number and Kind of Shares or
Number of Rights -- Certain Adjustments).
(o) "Distribution Date" shall have the meaning set forth in
Section 3(a) (Issuance of Rights Certificates -- Distribution Date; Rights
Certificates).
(p) "Equivalent Preferred Stock" shall have the meaning set
forth in Section 11(b) (Adjustment of Purchase Price; Number and Kind of Shares
or Number of Rights -- Purchase Price Adjustment -- Capital Stock).
(q) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended as of the date hereof and in effect on the date of this
Agreement.
(r) "Exchange Number" shall mean one-half of the number of
shares of Common Stock, one one-thousandth of a share of Preferred Stock, or
shares or other units of other property for which a Right is exercisable
immediately prior to the time of the action of the Board to exchange the Rights.
(s) "Expiration Date" shall have the meaning set forth in
Section 7(a) (Exercise of Rights; Purchase Price; Expiration Date of Rights --
Exercise).
(t) "Final Expiration Date" shall mean the Close of Business
on October 13, 2008.
(u) "Flip-in Event" shall mean any event described in Section
11(a)(ii)(A) or (B) (Adjustment of Purchase Price; Number and Kind of Shares or
Number of Rights -- Certain Adjustments).
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(v) "Flip-in Trigger Date" shall have the meaning set forth in
Section 11(a)(iii) (Adjustment of Purchase Price; Number and Kind of Shares or
Number of Rights -- Certain Adjustments).
(w) "Flip-over Event" shall mean any event described in
clauses (x), (y) or (z) of Section 13(a) (Consolidation, Merger or Sale or
Transfer of Assets or Earning Power -- Flip-over Event).
(x) "Original Rights" shall have the meaning set forth in
Section 1(f)(i) (Certain Definitions).
(y) "Person" shall mean any individual, firm, corporation,
partnership, limited liability company or other entity.
(bb) "Preferred Stock" shall mean shares of Preferred Stock,
Series A, $.01 par value per share, of the Company (the "Series A Preferred
Stock"), and, to the extent that there is not a sufficient number of shares of
Series A Preferred Stock authorized to permit the full exercise of the Rights,
any other series of Preferred Stock, $.01 par value per share, of the Company
designated for such purpose containing terms substantially similar to the terms
of the Series A Preferred Stock.
(cc) "Principal Party" shall have the meaning set forth in
Section 13(b) (Consolidation, Merger or Sale or Transfer of Assets or Earning
Power -- Principal Party).
(dd) "Purchase Price" shall have the meaning set forth in
Section 4(a) (Form of Rights Certificates -- Form; Date).
(ee) "Record Date" shall have the meaning set forth in the
Recitals at the beginning of the Agreement.
(ff) "Redemption Date" shall have the meaning set forth in
Section 23(a) (Redemption and Termination -- Redemption).
(gg) "Redemption Price" shall have the meaning set forth in
Section 23(a) (Redemption and Termination -- Redemption).
(hh) "Rights" shall have the meaning set forth in the Recitals
at the beginning of the Agreement.
(ii) "Rights Agent" shall mean the Person named as the "Rights
Agent" in the first paragraph of this Agreement until a successor Rights Agent
shall have become such pursuant to the applicable provisions hereof and
thereafter "Rights Agent" shall mean such successor Rights Agent. If at any time
there is more than one Person appointed by the Company as Rights Agent pursuant
to the applicable provisions of this Agreement, "Rights Agent" shall mean and
include each such Person.
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(jj) "Rights Certificates" shall have the meaning set forth in
Section 3(a) (Issuance of Rights Certificates -- Distribution Date; Rights
Certificates).
(kk) "Rights Dividend Declaration Date" shall have the meaning
set forth in the Recitals at the beginning of the Agreement.
(ll) "Spread" shall have the meaning set forth in Section
11(a)(iii) (Adjustment of Purchase Price; Number and Kind of Shares or Number of
Rights -- Certain Adjustments).
(mm) "Stock Acquisition Date" shall mean the first date of
public announcement (which, for purposes of this definition, shall include,
without limitation, a report filed pursuant to Section 13(d) under the Exchange
Act) by the Company or an Acquiring Person that an Acquiring Person has become
such.
(nn) "Subsidiary" shall mean, with reference to any Person,
any corporation or other entity of which a majority of the voting power of
equity securities or majority of the equity interest is beneficially owned,
directly or indirectly, by such Person, or otherwise controlled by such Person.
(oo) "Substitution Period" shall have the meaning set forth in
Section 11(a)(iii) (Adjustment of Purchase Price; Number and Kind of Shares or
Number of Rights -- Certain Adjustments).
(pp) "Trading Day" shall have the meaning set forth in Section
11(d)(i) (Adjustment of Purchase Price; Number and Kind of Shares or Number of
Rights -- Current Market Price).
(qq) "Triggering Event" shall mean any Flip-in Event or any
Flip-over Event.
Section 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such additional rights agents (the
"Co-Rights Agents") as it may deem necessary or desirable.
Section 3. Issuance of Rights Certificates.
(a) Distribution Date; Rights Certificates. Until the earlier
of (i) the Close of Business on the tenth Business Day after the Stock
Acquisition Date (or, if the tenth Business Day after the Stock Acquisition Date
occurs before the Record Date, the Close of Business on the Record Date), or
(ii) the Close of Business on the tenth Business Day (or such later date as the
Board shall determine prior to such time as any Person becomes an Acquiring
Person) after the date that a tender or exchange offer by any Person (other than
the Company, any Subsidiary of the Company, any employee benefit plan of the
Company or of any Subsidiary of the Company, or any Person or entity organized,
appointed or established by the Company for or pursuant to the terms of any such
plan) is first published or sent or given within the meaning of
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Rule 14d-2(a) of the General Rules and Regulations under the Exchange Act, if
upon consummation thereof such Person would be the Beneficial Owner of 20% or
more of the shares of Common Stock then outstanding (the earlier of (i) and (ii)
being herein referred to as the "Distribution Date"), (x) the Rights will be
evidenced (subject to the provisions of paragraph (b) of this Section 3) by the
certificates for the Common Stock registered in the names of the holders of the
Common Stock (which certificates for Common Stock shall be deemed also to be
certificates for Rights) and not by separate certificates, and (y) the Rights
will be transferable only in connection with the transfer of the underlying
shares of Common Stock (including a transfer to the Company, except pursuant to
the provision of Section 23 (Redemption and Termination)). As soon as
practicable after the Distribution Date, the Rights Agent will send by
first-class, insured, postage prepaid mail, to each record holder of the Common
Stock as of the Close of Business on the Distribution Date, at the address of
such holder shown on the records of the Company, one or more rights
certificates, in substantially the form of Exhibit 2 hereto (the "Rights
Certificates"), evidencing one Right for each share of Common Stock so held,
subject to adjustment as provided herein. In the event that an adjustment in the
number of Rights per share of Common Stock has been made pursuant to Section
11(p) (Adjustment of Purchase Price; Number and Kind of Shares or Number of
Rights -- Common Stock Adjustments) at the time of distribution of the Rights
Certificates, the Company shall make the necessary and appropriate rounding
adjustments (in accordance with Section 14(a) (Fractional Rights and Fractional
Shares -- Fractional Rights)) so that Rights Certificates representing only
whole numbers of Rights are distributed and cash is paid in lieu of any
fractional Rights. As of and after the Distribution Date, the Rights will be
evidenced solely by such Rights Certificates.
(b) Common Stock Certificates; Summary of Rights. With respect
to certificates for the Common Stock outstanding as of the Record Date, until
the Distribution Date, the Rights associated with the Common Stock represented
by such certificates will be evidenced by such certificates alone and the
registered holders of such Common Stock shall also be the registered holders of
the associated Rights. Until the earlier of the Distribution Date or the
Expiration Date, the transfer of any certificates representing shares of Common
Stock in respect of which Rights have been issued shall also constitute the
transfer of the Rights associated with such shares of Common Stock. On the
Record Date, or as soon as practicable thereafter, the Company will send a copy
of a Summary of Rights to Purchase Preferred Stock, in substantially the form of
Exhibit 3 hereto (the "Summary of Rights"), by first-class, postage-prepaid
mail, to each record holder of shares of Common Stock as of the Close of
Business on the Record Date, at the address of such holder shown on the records
of the Company.
(c) Legend. Rights shall be issued in respect of all
certificates for shares of Common Stock which are issued (whether originally
issued or from the Company's treasury) after the Record Date but prior to the
earliest of the (i) Distribution Date, (ii) the Expiration Date, or (iii) the
Redemption Date, or, in certain circumstances provided in Section 22 (Issuance
of New Rights Certificates) after the Distribution Date. Certificates
representing such shares of Common Stock shall also be deemed to be certificates
for Rights, and shall bear the following legend:
This certificate also evidences and entitles the holder hereof
to certain Rights as set forth in the Rights Agreement dated
as of September 28, 1998, by and between
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Pegasus Systems, Inc. (the "Company") and AMERICAN SECURITIES
TRANSFER & TRUST, INC., as Rights Agent (the "Rights
Agreement"), the terms of which are hereby incorporated herein
by reference and a copy of which is on file at the principal
offices of the Company. Under certain circumstances, as set
forth in the Rights Agreement, such Rights will be evidenced
by separate certificates and will no longer be evidenced by
this certificate. The Company will mail to the holder of this
certificate a copy of the Rights Agreement, as in effect on
the date of mailing, without charge promptly after receipt of
a written request therefor. Under certain circumstances set
forth in the Rights Agreement, Rights issued to, or held by,
any Person who is, was or becomes an Acquiring Person or any
Affiliate or Associate thereof (as such terms are defined in
the Rights Agreement), whether currently held by or on behalf
of such Person or by any subsequent holder, may become null
and void.
With respect to such certificates containing the foregoing legend, until the
earliest of (i) the Distribution Date, (ii) the Expiration Date, and (iii) the
Redemption Date, (x) the Rights associated with the Common Stock represented by
such certificates shall be evidenced by such certificates alone, (y) the
registered holders of such Common Stock shall also be the registered holders of
the associated Rights and (z) the transfer of any of such certificates shall
also constitute the transfer of the Rights associated with such shares of Common
Stock. In the event that the Company purchases, or acquires any shares of Common
Stock after the Record Date but prior to the Distribution Date, any rights
associated with such shares of Common Stock shall be deemed canceled and retired
so that the Company shall not be entitled to exercise any Rights associated with
shares of Common Stock which are no longer outstanding.
Section 4. Form of Rights Certificates.
(a) Form; Date. The Rights Certificates (and the forms of
election to purchase and of assignment to be printed on the reverse thereof)
shall each be substantially in the form set forth in Exhibit 2 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 applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange on which the Rights
may from time to time be listed or any securities association on whose
interdealer quotation system the Rights may be from time to time authorized for
quotation, or to conform to usage. Subject to the provisions of Section 11
(Adjustment of Purchase Price; Number and Kind of Shares or Number of Rights)
and Section 22 (Issuance of New Rights Certificates), the Rights Certificates,
whenever distributed, shall be dated as of the Record Date and on their face
shall entitle the holders thereof to purchase such number of one one-thousandth
of a share of Preferred Stock as shall be set forth therein at the price set
forth therein (such exercise price per one one-thousandth of a share is referred
to herein as the "Purchase Price"), but the amount and type of securities
purchasable upon the exercise of each Right and the Purchase Price thereof shall
be subject to adjustment as provided herein.
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(b) Acquiring Person Legend. Any Rights Certificate issued
pursuant to Section 3(a) (Issuance of Rights Certificates -- Distribution Date;
Rights Certificates) or Section 22 (Issuance of New Rights Certificates) that
represents Rights beneficially owned by (i) an Acquiring Person or any Associate
or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person
(or of any such Associate or Affiliate) who becomes a transferee after the
Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person (or
of any such Associate or Affiliate) who becomes a transferee prior to or
concurrently with the Acquiring Person becoming such and receives such Rights
pursuant to either (A) a transfer (whether or not for consideration) from the
Acquiring Person to holders of equity interests in such Acquiring Person or to
any Person with whom such Acquiring Person has any continuing agreement,
arrangement or understanding regarding the transferred Rights or (B) a transfer
which the Board has determined is part of a plan, arrangement or understanding
which has as a primary purpose or effect avoidance of Section 7(e) (Exercise of
Rights; Purchase Price; Expiration Date of Rights -- Termination of Acquiring
Person's Rights) and any Rights Certificate issued pursuant to Section 6
(Transfer, Split Up, Combination and Exchange of Rights Certificates; Mutilated,
Destroyed, Lost or Stolen Rights Certificates), Section 11 (Adjustment of
Purchase Price; Number and Kind of Shares or Number of Rights) or Section 22
(Issuance of New Rights Certificates) upon transfer, exchange, replacement or
adjustment of any other Rights Certificate referred to in this sentence, shall
contain (to the extent feasible) the following legend:
The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became an Acquiring Person or
an Affiliate or Associate of an Acquiring Person (as such terms are
defined in the Rights Agreement dated as of September 28, 1998, by and
between Pegasus Systems, Inc. and AMERICAN SECURITIES TRANSFER & TRUST,
INC., as Rights Agent). Accordingly, this Rights Certificate and the
Rights represented hereby may become null and void in the circumstances
specified in Section 7(e) (Exercise of Rights; Purchase Price;
Expiration Date of Rights -- Termination of Acquiring Person's Rights)
of such Agreement.
Section 5. Countersignature and Registration.
(a) Signatures. The Rights Certificates shall be executed on
behalf of the Company by its Chairman of the Board, its President or any Vice
President, either manually or by facsimile signature, and shall have affixed
thereto the Company's seal or a facsimile thereof which shall be attested to by
the Secretary or an Assistant Secretary of the Company, either manually or by
facsimile signature. The Rights Certificates shall be countersigned by the
Rights Agent, either manually or by facsimile signature, and shall not be valid
for any purpose unless so countersigned. In case any officer of the Company who
shall have signed any of the Rights Certificates shall cease to be such officer
of the Company before countersignature by the Rights Agent and issuance and
delivery by the Company, such Rights Certificates, nevertheless, may be
countersigned by the Rights Agent and issued and delivered by the Company with
the same force and effect as though the person who signed such Rights
Certificates had not ceased to be such officer of the Company; and any Rights
Certificates may be signed on behalf of the Company by any person who, at the
actual date of the execution of such Rights Certificate, shall be a
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proper officer of the Company to sign such Rights Certificate, although at the
date of the execution of this Rights Agreement any such person was not such an
officer.
(b) Registration and Transfer. Following the Distribution
Date, the Rights Agent will keep or cause to be kept, at its principal office or
offices designated as the appropriate place for surrender of Rights Certificates
upon exercise or transfer, books for registration and transfer of the Rights
Certificates issued hereunder. Such books shall show the names and addresses of
the respective holders of the Rights Certificates, the number of Rights
evidenced on its face by each of the Rights Certificates and the date of each of
the Rights Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.
(a) Procedure. Subject to the provisions of Section 4(b) (Form
of Rights Certificates -- Acquiring Person Legend), Section 7(e) (Exercise of
Rights; Purchase Price; Expiration Date of Rights -- Termination of Acquiring
Person's Rights) and Section 14 (Fractional Rights and Fractional Shares), at
any time after the Close of Business on the Distribution Date, and at or prior
to the Close of Business on the Expiration Date, any Rights Certificate or
Certificates may be transferred, split up, combined or exchanged for another
Rights Certificate or Certificates, entitling the registered holder to purchase
a like number of one one-thousandth of a share of Preferred Stock (or, following
a Triggering Event, Common Stock, other securities, cash or other assets, as the
case may be) as the Rights Certificate or Certificates surrendered then entitled
such holder (or former holder in the case of a transfer) to purchase. Any
registered holder desiring to transfer, split up, combine or exchange any Rights
Certificate or Certificates shall make such request in writing delivered to the
Rights Agent, and shall surrender the Rights Certificate or Certificates to be
transferred, split up, combined or exchanged at the principal office or offices
of the Rights Agent designated for such purpose. Neither the Rights Agent nor
the Company shall be obligated to take any action whatsoever with respect to the
transfer of any such surrendered Rights Certificate until the registered holder
shall have completed and signed the certificate contained in the form of
assignment on the reverse side of such Rights Certificate and shall have
provided such additional evidence of the identity of the Beneficial Owner (or
former Beneficial Owner) or Affiliates or Associates thereof as the Company
shall reasonably request. Thereupon, the Rights Agent shall, subject to Section
4(b), Section 7(e) and Section 14, countersign and deliver to the Person
entitled thereto a Rights Certificate or Rights Certificates, as the case may
be, as so requested. The Company may require payment of a sum sufficient to
cover any tax or governmental charge that may be imposed in connection with any
transfer, split up, combination or exchange of Rights Certificates.
(b) Issuance of New Rights Certificates. Upon receipt by the
Company and the Rights Agent of evidence reasonably satisfactory to them of the
loss, theft, destruction or mutilation of a Rights Certificate, and, in case of
loss, theft or destruction, of indemnity or security reasonably satisfactory to
them, and reimbursement to the Company and the Rights Agent of all reasonable
expenses incidental thereto, and upon surrender to the Rights Agent and
cancellation of the Rights Certificate if mutilated, the Company will execute
and deliver a new
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Rights Certificate of like tenor to the Rights Agent for countersignature and
delivery to the registered owner in lieu of the Rights Certificate so lost,
stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of
Rights.
(a) Exercise. Subject to Section 7(e) (Exercise of Rights;
Purchase Price; Expiration Date of Rights -- Termination of Acquiring Person's
Rights), the registered holder of any Rights Certificate may exercise the Rights
evidenced thereby (except as otherwise provided herein, including, without
limitation, the restrictions on exercisability set forth in Section 9(c)
(Reservation and Availability of Capital Stock -- Registration under the Act),
Section 11(a)(iii) (Adjustment of Purchase Price; Number and Kind of Shares or
Number of Rights -- Certain Adjustments), Section 23(a) (Redemption and
Termination -- Redemption), and Section 24(b) (Exchange -- Effect of Exchange;
Procedure)) in whole or in part at any time after the Distribution Date upon
surrender of the Rights Certificate, with the form of election to purchase and
the certificate on the reverse side thereof duly executed, to the Rights Agent
at the principal office or offices of the Rights Agent designated for such
purpose, together with payment of the aggregate Purchase Price with respect to
the total number of one one-thousandth of a share of Preferred Stock (or other
securities, cash or other assets, as the case may be) as to which such
surrendered Rights are then exercisable and an amount equal to any applicable
transfer tax, at or prior to the earliest of (i) the Final Expiration Date, (ii)
the Redemption Date, or (iii) the expiration of the Rights pursuant to Section
13(d) (Consolidation, Merger or Sale or Transfer of Assets or Earning Power --
Exceptions) (the earliest of (i), (ii) and (iii) being herein referred to as the
"Expiration Date"). The payment of the Purchase Price and the applicable
transfer tax, if any (as such amount may be reduced pursuant to Section
11(a)(iii) (Adjustment of Purchase Price; Number and Kind of Shares or Number of
Rights -- Certain Adjustments)), may be made (x) in cash, (y) by certified
check, cashier's check or money order payable to the order of the Company, or
(z) by delivery of a certificate or certificates (with appropriate stock powers
executed in blank attached thereto) evidencing a number of shares of Common
Stock equal to the then Purchase Price divided by the closing price (as
determined pursuant to Section 11(d) (Adjustment of Purchase Price; Number and
Kind of Shares or Number of Rights -- Current Market Price) per share of Common
Stock on the Trading Day immediately preceding the date of such exercise. In the
event that the Company is obligated to issue other securities (including Common
Stock) of the Company, pay cash and/or distribute other property pursuant to
Section 11(a), the Company will make all arrangements necessary so that such
other securities, cash and/or other property are available for distribution by
the Rights Agent, if and when appropriate. The Company reserves the right to
require prior to the occurrence of a Triggering Event that upon any exercise of
Rights, a number of Rights be exercised so that only whole shares of Preferred
Stock would be issued.
(b) Purchase Price. The Purchase Price for each one
one-thousandth of a share of Preferred Stock pursuant to the exercise of a Right
shall initially be $90.00, and shall be subject to adjustment from time to time
as provided in Section 11 (Adjustment of Purchase Price; Number and Kind of
Shares or Number of Rights) and Section 13(a) (Consolidation, Merger or Sale or
Transfer of Assets or Earning Power -- Flip-over Event) and shall be payable in
accordance with paragraph (a) of this Section 7.
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(c) Rights Agent Actions. Upon receipt of a Rights Certificate
representing exercisable Rights and the compliance by the holder of such Rights
Certificate with paragraph (a) of this Section 7, the Rights Agent shall,
subject to Section 20(k) (Duties of Rights Agent -- Exercise of Rights;
Consultation with Company), thereupon promptly (i) (A) requisition from any
transfer agent of the shares of Preferred Stock (or make available, if the
Rights Agent is the transfer agent for such shares) certificates for the total
number of one one-thousandth of a share of Preferred Stock to be purchased and
the Company hereby irrevocably authorizes its transfer agent to comply with all
such requests, or (B) if the Company shall have elected to deposit the total
number of shares of Preferred Stock issuable upon exercise of the Rights
hereunder with a depositary agent, requisition from the depositary agent
depositary receipts representing such number of one one-thousandth of a share of
Preferred Stock as are to be purchased (in which case certificates for the
shares of Preferred Stock represented by such receipts shall be deposited by the
transfer agent with the depositary agent) and the Company will direct the
depositary agent to comply with such request, (ii) requisition from the Company
the amount of cash, if any, to be paid in lieu of fractional shares in
accordance with Section 14 (Fractional Rights and Fractional Shares), (iii)
after receipt thereof, deliver such certificates or depositary receipts to or
upon the order of the registered holder of such Rights Certificate, registered
in such name or names as may be designated by such holder and (iv) after receipt
thereof, deliver such cash, if any, to or upon the order of the registered
holder of such Rights Certificate.
(d) Partial Exercise. In case the registered holder of any
Rights Certificate shall exercise less than all the Rights evidenced thereby, a
new Rights Certificate evidencing Rights equivalent to the Rights remaining
unexercised shall be issued by the Rights Agent and delivered to, or upon the
order of the registered holder of such Rights Certificate, registered in such
name or names as may be designated by such holder, subject to the provisions of
Section 14 (Fractional Rights and Fractional Shares).
(e) Termination of Acquiring Person's Rights. Notwithstanding
anything in this Agreement to the contrary, from and after the first occurrence
of a Flip-in Event, any Rights beneficially owned by (i) an Acquiring Person, or
an Associate or Affiliate of an Acquiring Person, (ii) a transferee of an
Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee after such 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 the Acquiring Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which the Board has determined is part of a plan,
arrangement or understanding which has as a primary purpose or effect the
avoidance of this Section 7(e), shall become null and void without any further
action and no holder of such Rights shall have any rights whatsoever with
respect to such Rights, whether under any provision of this Agreement or
otherwise. The Company shall use all reasonable efforts to ensure that the
provisions of this Section 7(e) and Section 4(b) (Form of Rights Certificates --
Acquiring Person Legend) are complied with, but shall have no liability to any
holder of Rights Certificates or other Person as a result of its failure
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to make any determinations with respect to an Acquiring Person or any of its
respective Affiliates, Associates or transferees hereunder.
(f) Surrender of Rights Certificates; Identity of Beneficial
Owner. Notwithstanding anything in this Agreement to the contrary, neither the
Rights Agent nor the Company shall be obligated to undertake any action with
respect to a registered holder upon the occurrence of any purported exercise as
set forth in this Section 7 unless such registered holder shall have (i)
completed and signed the certificate contained in the form of election to
purchase set forth on the reverse side of the Rights Certificate surrendered for
such exercise, and (ii) provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Rights Certificates. All
Rights Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be canceled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Rights Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
canceled Rights Certificates to the Company, or shall, at the written request of
the Company, destroy such canceled Rights Certificates, and in such case shall
deliver a certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of Capital Stock.
(a) Reservation of Capital Stock. The Company will cause to be
reserved and kept available out of its authorized and unissued shares of
Preferred Stock (and, following the occurrence of a Triggering Event, out of its
authorized and unissued shares of Common Stock and/or other securities or out of
its authorized and issued shares of Common Stock held in its treasury), the
number of shares of Preferred Stock (and, following the occurrence of a
Triggering Event, Common Stock and/or other securities) that, as provided in
this Agreement, including the rights of the Company under Section 11(a)(iii)
(Adjustment of Purchase Price; Number and Kind of Shares or Number of Rights --
Certain Adjustments) to otherwise fulfill its obligations, will be sufficient to
permit the exercise in full of all outstanding Rights.
(b) Listing. So long as the shares of Preferred Stock (and,
following the occurrence of a Triggering Event, Common Stock and/or other
securities) issuable and deliverable upon the exercise of the Rights may be
listed on any national securities exchange or authorized for quotation on any
interdealer quotation system of any securities association, the Company shall
use its best efforts to cause, from and after such time as the Rights become
exercisable, all shares reserved for such issuance to be listed on such exchange
or quoted on such system upon official notice of issuance upon such exercise.
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(c) Registration under the Act. The Company will use its best
efforts to (i) file, as soon as practicable following the earliest date after
the first occurrence of a Flip-in Event on which the consideration to be
delivered by the Company upon exercise of the Rights has been determined in
accordance with Section 11(a)(iii) (Adjustment of Purchase Price; Number and
Kind of Shares or Number of Rights -- Certain Adjustments), or as soon as is
required by law following the Distribution Date, as the case may be, a
registration statement on an appropriate form under the Act with respect to the
securities purchasable upon exercise of the Rights, (ii) cause such registration
statement to become effective as soon as practicable after such filing, and
(iii) cause such registration statement to remain effective (with a prospectus
at all times meeting the requirements of the Act) until the earlier of (A) the
date as of which the Rights are no longer exercisable for such securities, and
(B) the Expiration Date. The Company will also take such action as may be
appropriate under, or to ensure compliance with, the securities or "blue sky"
laws of the various states in connection with the exercisability of the Rights.
The Company may temporarily suspend, for a period of time not to exceed ninety
(90) calendar days after the date set forth in clause (i) of the first sentence
of this Section 9(c), the exercisability of the Rights in order to prepare and
file such registration statement and permit it to become effective. Upon any
such suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in effect. In addition,
if the Company shall determine that a registration statement is required
following the Distribution Date, the Company may temporarily suspend the
exercisability of the Rights until such time as a registration statement has
been declared effective. Notwithstanding any provision of this Agreement to the
contrary, the Rights shall not be exercisable in any jurisdiction if the
requisite qualification in such jurisdiction shall not have been obtained, the
exercise thereof shall not be permitted under applicable law or a registration
statement shall not have been declared effective.
(d) Covenant Regarding Capital Stock. The Company will take
all such action as may be necessary to ensure that all one one-thousandth of a
share of Preferred Stock (and, following the occurrence of a Triggering Event,
Common Stock and/or other securities) delivered upon exercise of Rights shall,
at the time of delivery of the certificates for such shares (subject to payment
of the Purchase Price), be duly and validly authorized and issued and fully paid
and nonassessable.
(e) Transfer Taxes and Charges. The Company will pay when due
and payable any and all federal and state transfer taxes and charges which may
be payable in respect of the issuance or delivery of the Rights Certificates and
of any certificates for a number of one one-thousandth of a share of Preferred
Stock (or Common Stock and/or other securities, as the case may be) upon the
exercise of Rights. The Company shall not, however, be required to pay any
transfer tax which may be payable in respect of any transfer or delivery of
Rights Certificates to a Person other than, or the issuance or delivery of a
number of one one-thousandth of a share of Preferred Stock (or Common Stock
and/or other securities, as the case may be) in respect of a name other than,
that of the registered holder of the Rights Certificates evidencing Rights
surrendered for exercise or to issue or deliver any certificates for a number of
one one-thousandth of a share of Preferred Stock (or Common Stock and/or other
securities, as the case may be) in a name other than that of the registered
holder upon the exercise of any Rights until such tax
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shall have been paid (any such tax being payable by the holder of such Rights
Certificate at the time of surrender) or until it has been established to the
Company's satisfaction that no such tax is due.
Section 10. Preferred Stock Record Date. Each Person in whose name any
certificate for a number of one one-thousandth of a share of Preferred Stock (or
Common Stock and/or other securities, as the case may be) is issued upon the
exercise of Rights shall for all purposes be deemed to have become the holder of
record of such fractional shares of Preferred Stock (or Common Stock and/or
other securities, as the case may be) represented thereby on, and such
certificate shall be dated as of, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and all applicable transfer taxes) was made; provided, however, that if the
date of such surrender and payment is a date upon which the Preferred Stock (or
Common Stock and/or other securities, as the case may be) transfer books of the
Company are closed, such Person shall be deemed to have become the record holder
of such shares (fractional or otherwise) on, and such certificate shall be
dated, the next succeeding Business Day on which the Preferred Stock (or Common
Stock and/or other securities, as the case may be) transfer books of the Company
are open. Prior to the exercise of the Rights evidenced thereby, the holder of a
Rights Certificate shall not be entitled to any rights of a stockholder of the
Company with respect to shares for which the Rights shall be exercisable,
including, without limitation, the right to vote, to receive dividends or other
distributions or to exercise any preemptive rights, and shall not be entitled to
receive any notice of any proceedings of the Company, except as provided herein.
Section 11. Adjustment of Purchase Price; Number and Kind of Shares or
Number of Rights. The Purchase Price, the number and kind of shares covered by
each Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.
(a) Certain Adjustments.
(i) In the event the Company shall at any time
after the date of this Agreement (A) declare a dividend on the Preferred Stock
payable in shares of Preferred Stock, (B) subdivide or split the outstanding
Preferred Stock, (C) combine the outstanding Preferred Stock into a smaller
number of shares, or (D) issue any shares of its capital stock in a
reclassification of the Preferred Stock (including any such reclassification in
connection with a consolidation or merger in which the Company is the continuing
or surviving corporation), except as otherwise provided in this Section 11(a)
and Section 7(e) (Exercise of Rights; Purchase Price; Expiration Date of Rights
-- Termination of Acquiring Person's Rights), the Purchase Price in effect at
the time of the record date for such dividend or of the effective date of such
subdivision, split, combination or reclassification, and the number and kind of
shares of Preferred Stock or capital stock, as the case may be, issuable on such
date, shall be proportionately adjusted so that the holder of any Right
exercised after such time shall be entitled to receive, upon payment of the
aggregate adjusted Purchase Price then in effect necessary to exercise a Right
in full, the aggregate number and kind of shares of Preferred Stock or capital
stock, as the case may be, which, if such Right had been exercised immediately
prior to such date and at a time when the
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Preferred Stock (or other capital stock, as the case may be) transfer books of
the Company were open, such holder would have owned upon such exercise and been
entitled to receive by virtue of such dividend, subdivision, split, combination
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:
(A) (1) any Acquiring Person or any
Associate or Affiliate of any Acquiring Person, at any time after the date of
this Agreement, directly or indirectly, shall merge into the Company or
otherwise combine with the Company and the Company shall be the continuing or
surviving corporation of such merger or combination and the Common Stock of the
Company shall remain outstanding and unchanged, or (2) subject to Section 23
(Redemption and Termination), any Person (other than the Company, any Subsidiary
of the Company, any employee benefit plan of the Company or of any subsidiary of
the Company, or any Person or entity organized, appointed or established by the
Company for or pursuant to the terms of any such plan), alone or together with
its Affiliates and Associates, shall, at any time after the Rights Dividend
Declaration Date, become an Acquiring Person, unless the event causing such
Person to become an Acquiring Person is a Flip-over Event, or is an acquisition
of shares of Common Stock pursuant to a tender offer or an exchange offer for
all outstanding shares of Common Stock at a price and on terms determined by a
majority of the Board after receiving advice from one or more recognized
investment banking firms selected by the Board, to be (a) at a price which is
fair to the stockholders of the Company (taking into account all factors which
the Board deems relevant including, without limitation, prices which could
reasonably be achieved if the Company or its assets were sold on an orderly
basis designed to realize maximum value) and (b) otherwise in the best interests
of the Company and its stockholders, other than such Acquiring Person, its
Affiliates and its Associates; or
(B) during 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
transaction or series of transactions involving the Company or any of its
Subsidiaries, other than a transaction or transactions to which the provisions
of Section 13(a) (Consolidation, Merger or Sale or Transfer of Assets or Earning
Power -- Flip-over Event) apply (whether or not with or into or otherwise
involving an Acquiring Person) which has the effect, directly or indirectly, of
increasing by more than 1% the proportionate share of the outstanding shares of
any class of equity securities of the Company or any of its subsidiaries which
is directly or indirectly beneficially owned by any Acquiring Person or any
Associate or Affiliate of any Acquiring Person, then, promptly following the
occurrence of any such Flip-in Event (whether described in Section 11(a)(ii)(A)
or (B)), proper provision shall be made so that each holder of a Right (except
as provided below and in Section 7(e) (Exercise of Rights; Purchase Price;
Expiration Date of Rights -- Termination of Acquiring Person's Rights)) shall
thereafter have the right to receive, upon exercise thereof at the then current
Purchase Price in accordance with the terms of this Agreement, in lieu of the
number of one one-thousandth of a share of Preferred Stock, such
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number of shares of Common Stock of the Company as shall equal the result
obtained by (x) multiplying the then current Purchase Price by the then number
of one one-thousandth of a share of Preferred Stock for which a Right was
exercisable immediately prior to the first occurrence of a Flip-in Event, and
(y) dividing that product (which, following such first occurrence, shall
thereafter be referred to as the "Purchase Price" for each Right and for all
purposes of this Agreement) by 50% of the Current Market Price per share of
Common Stock on the date of such first occurrence (such number of shares being
referred to as the "Adjustment Shares").
(iii) In the event that the number of shares of
Common Stock that are authorized by the Company's Certificate of Incorporation
but not outstanding or reserved for issuance for purposes other than upon
exercise of the Rights is not sufficient to permit the exercise in full of the
Rights in accordance with the foregoing subparagraph (ii) of this Section 11(a),
the Company shall: (A) determine the excess of (1) the value of the Adjustment
Shares issuable upon the exercise of a Right (the "Current Value") over (2) the
Purchase Price (such excess, the "Spread"), and (B) with respect to each Right,
subject to Section 7(e)(Exercise of Rights; Purchase Price; Expiration Date of
Rights -- Termination of Acquiring Person's Rights), make adequate provision to
substitute for the Adjustment Shares, upon payment of the applicable Purchase
Price, (1) cash, (2) a reduction in the Purchase Price, (3) Common Stock or
other equity securities of the Company (including, without limitation, shares,
or units of shares, of preferred stock which the Board has deemed to have
essentially the same value or economic rights as shares of Common Stock (such
shares of preferred stock being referred to as "Common Stock Equivalents")), (4)
debt securities of the Company, (5) other assets, or (6) any combination of the
foregoing, having an aggregate value equal to the Current Value (less the amount
of any reduction in the Purchase Price), where such aggregate value has been
determined by the Board based upon the advice of a recognized investment banking
firm selected by the Board; provided, however, that if the Company shall not
have made adequate provision to deliver value pursuant to clause (B) above
within thirty (30) calendar days following the later of (x) the first occurrence
of a Flip-in Event and (y) the date on which the Company's right of redemption
pursuant to Section 23(a) (Redemption and Termination -- Redemption) expires
(the later of (x) and (y) being referred to herein as the "Flip-in Trigger
Date"), then the Company shall be obligated to deliver, upon the surrender for
exercise of a Right and without requiring payment of the Purchase Price, shares
of Common Stock (to the extent available) and then, if necessary, cash, which
shares and/or cash have an aggregate value equal to the Spread. If the Board
shall determine in good faith that it is likely that sufficient additional
shares of Common Stock could be authorized for issuance upon exercise in full of
the Rights, the thirty (30) calendar day period set forth above may be extended
to the extent necessary, but not more than ninety (90) calendar days after the
Flip-in Trigger Date, in order that the Company may seek stockholder approval
for the authorization of such additional shares (such period, the "Substitution
Period"). To the extent that the Company determines that some action need be
taken pursuant to the first and/or second sentences of this Section 11(a)(iii),
the Company (x) shall provide, subject to Section 7(e), that such action shall
apply uniformly to all outstanding Rights, and (y) may suspend the
exercisability of the Rights until the expiration of the Substitution Period in
order to seek any authorization of additional shares and/or to decide the
appropriate form of distribution to be made pursuant to such first sentence and
to determine the value thereof. In the event of any such suspension, the Company
shall issue a public announcement stating that the exercisability of the Rights
has been
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temporarily suspended, as well as a public announcement at such time as the
suspension is no longer in effect. For purposes of this Section 11(a)(iii), the
value of the Common Stock shall be the Current Market Price per share of the
Common Stock on the Flip-in Trigger Date and the value of any Common Stock
Equivalent shall be deemed to have the same value as the Common Stock on such
date.
(iv) If the rules of the national securities
exchange, registered as such pursuant to Section 6 of the Exchange Act, or of
the national securities association, registered as such pursuant to Section 15A
of the Exchange Act, on which the Common Stock is principally traded or quoted
would prohibit such exchange or association from listing or continuing to list,
or from authorizing for or continuing quotation and/or transaction reporting
through an inter-dealer quotation system, the Common Stock or other equity
securities of the Company if the Rights were to be exercised for shares of
Common Stock in accordance with subparagraph (ii) of this Section 11(a) because
such issuance would nullify, restrict or disparately reduce the per share voting
rights of holders of Common Stock, the Company shall: (A) determine the Spread,
and (B) with respect to each Right, make adequate provision to substitute for
the Adjustment Shares, upon payment of the applicable Purchase Price, (1) cash,
(2) a reduction in the Purchase Price, (3) equity securities of the Company,
including, without limitation, Common Stock Equivalents, other than securities
which would have the effect of nullifying, restricting or disparately reducing
the per share voting rights of holders of Common Stock, (4) debt securities of
the Company, (5) other assets, or (6) any combination of the foregoing, having
an aggregate value equal to the Current Value, where such aggregate value has
been determined by the Board based upon the advice of a recognized investment
banking firm selected by the Board; provided, however, if the Company shall not
have made adequate provision to deliver value pursuant to clause (B) above
within thirty (30) calendar days following the Flip-in Trigger Date, then the
Company shall be obligated to deliver, upon the surrender for exercise of a
Right and without requiring payment of the Purchase Price, cash having an
aggregate value equal to the Spread. To the extent that the Company determines
that some action need be taken pursuant to the first sentence of this Section
11(a)(iv), the Company (x) shall provide, subject to Section 7(e) (Exercise of
Rights; Purchase Price; Expiration Date of Rights -- Termination of Acquiring
Person's Rights), that such action shall apply uniformly to all outstanding
Rights and (y) may suspend the exercisability of the Rights, but not longer than
ninety (90) calendar days after the Flip-in Trigger Date, in order to decide the
appropriate form of distribution to be made pursuant to such first sentence and
to determine the value thereof. In the event of any such suspension, the Company
shall issue a public announcement stating that the exercisability of the Rights
has been temporarily suspended, as well as a public announcement at such time as
the suspension is no longer in effect. For purposes of this Section 11(a)(iv),
the value of the Common Stock shall be the Current Market Price per share of the
Common Stock on the Flip-in Trigger Date and the value of any Common Stock
Equivalent shall be deemed to have the same value as the Common Stock on such
date.
(b) Purchase Price Adjustment -- Capital Stock. In case the
Company shall fix a record date for the issuance of rights, options or warrants
to all holders of Preferred Stock entitling them to subscribe for or purchase
(for a period expiring within forty-five (45) calendar days after such record
date) Preferred Stock (or shares having the same rights, privileges and
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preferences as the shares of Preferred Stock ("Equivalent Preferred Stock")) or
securities convertible into Preferred Stock or Equivalent Preferred Stock at a
price per share of Preferred Stock or per share of Equivalent Preferred Stock
(or having a conversion price per share, if a security convertible into
Preferred Stock or Equivalent Preferred Stock) less than the Current Market
Price per share of Preferred Stock on such record date, the Purchase Price to be
in effect after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the number of shares of Preferred Stock outstanding
on such record date, plus the number of shares of Preferred Stock which the
aggregate offering price of the total number of shares of Preferred Stock and/or
Equivalent Preferred Stock so to be offered (and/or the aggregate initial
conversion price of the convertible securities so to be offered) would purchase
at such Current Market Price, and the denominator of which shall be the number
of shares of Preferred Stock outstanding on such record date, plus the number of
additional shares of Preferred Stock and/or Equivalent Preferred Stock to be
offered for subscription or purchase (or into which the convertible securities
so to be offered are initially convertible). In case such subscription price may
be paid by delivery of consideration part or all of which may be in a form other
than cash, the value of such consideration shall be as determined in good faith
by the Board, whose determination shall be described in a statement filed with
the Rights Agent and shall be binding on the Rights Agent and the holders of the
Rights. Shares of Preferred Stock owned by or held for the account of the
Company shall not be deemed outstanding for the purpose of any such computation.
Such adjustment shall be made successively whenever such a record date is fixed,
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) Purchase Price Adjustment -- Cash, Assets, etc. In case
the Company shall fix a record date for a distribution to all holders of
Preferred Stock (including any such distribution made in connection with a
consolidation or merger in which the Company is the continuing corporation) of
evidences of indebtedness, cash (other than a regular quarterly cash dividend
out of the earnings or retained earnings of the Company), assets (other than a
dividend payable in Preferred Stock, but including any dividend payable in stock
other than Preferred Stock) or subscription rights or warrants (excluding those
referred to in Section 11(b) (Adjustment of Purchase Price; Number and Kind of
Shares or Number of Rights Purchase Price Adjustment -- Capital Stock)), the
Purchase Price to be in effect after such record date shall be determined by
multiplying the Purchase Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the Current Market Price per
share of Preferred Stock on such record date, less the fair market value (as
determined in good faith by the Board, whose determination shall be described in
a statement filed with the Rights Agent) of the portion of the cash, assets or
evidences of indebtedness so to be distributed or of such subscription rights or
warrants applicable to a share of Preferred Stock and the denominator of which
shall be such Current Market Price per share of Preferred 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 be
adjusted to be the Purchase Price which would have been in effect if such record
date had not been fixed.
(d) Current Market Price.
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(i) For the purpose of any computation
hereunder, other than computations made pursuant to Section 11(a)(iii)
(Adjustment of Purchase Price; Number and Kind of Shares or Number of Rights --
Certain Adjustments), 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
such Common Stock for the thirty (30) consecutive Trading Days immediately prior
to such date, and for purposes of computations made pursuant to Section
11(a)(iii), 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 such Common
Stock for the ten (10) consecutive Trading Days immediately following such date;
provided, however, that in the event that the Current Market Price per share of
the Common Stock is determined during a period following the announcement by the
issuer of such Common Stock of (A) a dividend or distribution on such Common
Stock payable in shares of such Common Stock or securities convertible into
shares of such Common Stock (other than the Rights), or (B) any subdivision,
combination or reclassification of such Common Stock and the ex-dividend date
for such dividend or distribution, or the record date for such subdivision,
combination or reclassification shall not have occurred prior to the
commencement of the requisite thirty (30) Trading Day or ten (10) Trading Day
period, as set forth above, then, and in each such case, the Current Market
Price shall be properly adjusted to take into account ex-dividend trading. The
closing price for each Trading Day shall be the last sale price, regular way,
or, in case no such sale takes place on such Trading 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 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 of Common Stock are listed or admitted to trading or, if the
shares of 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 on
the Nasdaq National Market, the Nasdaq Small Cap Market or such other system
then in use, or, if on any such date the shares of Common Stock are not quoted
by any such organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the Common Stock
selected by the Board. If on any such date no market maker is making a market in
the Common Stock, the fair value of such shares on such date as determined in
good faith by the Board shall be used. The term "Trading Day" shall mean a day
on which the principal national securities exchange on which the shares of
Common Stock are listed or admitted to trading is open for the transaction of
business or, if the shares of Common Stock are not listed or admitted to trading
on any national securities exchange, a Business Day. If the Common Stock is not
publicly held or not so listed or traded, Current Market Price per share shall
mean the fair value per share as determined in good faith by the Board, whose
determination shall be described in a statement filed with the Rights Agent and
shall be conclusive for all purposes.
(ii) For the purpose of any computation
hereunder, the Current Market Price per share of Preferred Stock shall be
determined in the same manner as set forth above for the Common Stock in clause
(i) of this Section 11(d) (other than the last sentence thereof). If the Current
Market Price per share of Preferred Stock cannot be determined in the manner
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provided above or if the Preferred Stock is not publicly held or listed or
traded in a manner described in clause (i) of this Section 11(d), the Current
Market Price per share of Preferred Stock shall be conclusively deemed to be an
amount equal to 1,000 (as such number may be appropriately adjusted for such
events as stock splits, stock dividends and recapitalizations with respect to
the Common Stock occurring after the date of this Agreement) multiplied by the
Current Market Price per share of the Common Stock. If neither the Common Stock
nor the Preferred Stock is publicly held or so listed or traded, Current Market
Price per share of the Preferred Stock shall mean the fair value per share as
determined in good faith by the Board, whose determination shall be described in
a statement filed with the Rights Agent and shall be conclusive for all
purposes. For all purposes of this Agreement, the Current Market Price of one
one-thousandth of a share of Preferred Stock shall be equal to the Current
Market Price of one share of Preferred Stock divided by 1,000.
(e) Purchase Price Adjustment Threshold. Anything herein to
the contrary notwithstanding, no adjustment in the Purchase Price shall be
required unless such adjustment would require an increase or decrease of at
least one percent (1%) in the Purchase Price; provided however, that any
adjustments which by reason of this Section 11(e) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations under this Section 11 (Adjustment of Purchase Price; Number and
Kind of Shares or Number of Rights) shall be made to the nearest cent or to the
nearest thousandth of a share of Common Stock or other share or one
ten-millionth of a share of Preferred Stock, as the case may be. Notwithstanding
the first sentence of this Section 11(e), any adjustment required by this
Section 11 shall be made no later than the earlier of (i) three (3) years from
the date of the transaction which mandates such adjustment, or (ii) the
Expiration Date.
(f) Equivalent Adjustments. If as a result of an adjustment
made pursuant to Section 11(a)(ii) (Adjustment of Purchase Price; Number and
Kind of Shares or Number of Rights -- Certain Adjustments) or Section 13(a)
(Consolidation Merger or Sale or Transfer of Assets or Earning Power --
Flip-over Event) the holder of any Right thereafter exercised shall become
entitled to receive any shares of capital stock other than Preferred Stock,
thereafter the number of such other shares so receivable upon exercise of any
Right and the Purchase Price thereof shall be subject to adjustment from time to
time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Preferred Stock contained in Sections 11(a), (b),
(c), (e), (g), (h), (i), (j), (k) and (m), and the provisions of Sections 7, 9,
10, 13 and 14 with respect to the Preferred Stock shall apply on like terms to
any such other shares.
(g) Post-Adjustment Rights Issuances. All Rights originally
issued by the Company subsequent to any adjustment made to the Purchase Price
hereunder shall evidence the right to purchase, at the adjusted Purchase Price,
the number of one one-thousandth of a share of Preferred Stock purchasable from
time to time hereunder upon exercise of the Rights, all subject to further
adjustment as provided herein.
(h) Preferred Stock Anti-Dilution. Unless the Company shall
have exercised its election as provided in Section 11(i) (Adjustment of Purchase
Price; Number and Kind of Shares or Number of Rights -- Adjustment of Number of
Rights), upon each adjustment of the
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Purchase Price as a result of the calculations made in Section 11(b) (Adjustment
of Purchase Price; Number and Kind of Shares or Number of Rights -- Purchase
Price Adjustment -- Capital Stock) and Section 11(c) (Adjustment of Purchase
Price; Number and Kind of Shares or Number of Rights -- Purchase Price
Adjustment -- Cash, Assets, etc.), each Right outstanding immediately prior to
the making of such adjustment shall thereafter evidence the right to purchase,
at the adjusted Purchase Price, that number of one one-thousandth of a share of
Preferred Stock (calculated to the nearest one ten-millionth) obtained by (i)
multiplying (x) the number of one one-thousandth of a share covered by a Right
immediately prior to this adjustment, by (y) the Purchase Price in effect
immediately prior to such adjustment of the Purchase Price, and (ii) dividing
the product so obtained by the Purchase Price in effect immediately after such
adjustment of the Purchase Price.
(i) Adjustment of Number of Rights. The Company may elect on
or after the date of any adjustment of the Purchase Price to adjust the number
of Rights, in lieu of any adjustment in the number of one one-thousandth of a
share of Preferred Stock purchasable upon the exercise of a Right. Each of the
Rights outstanding after the adjustment in the number of Rights shall be
exercisable for the number of one one-thousandth of a share of Preferred Stock
for which a Right was exercisable immediately prior to such adjustment. Each
Right held of record prior to such adjustment of the number of Rights shall
become that number of Rights (calculated to the nearest one hundred-thousandth)
obtained by dividing the Purchase Price in effect immediately prior to
adjustment of the Purchase Price by the Purchase Price in effect immediately
after adjustment of the Purchase Price. The Company shall make a public
announcement of its election to adjust the number of Rights, indicating the
record date for the adjustment, and, if known at the time, the amount of the
adjustment to be made. This record date may be the date on which the Purchase
Price is adjusted or any day thereafter, but, if the Rights Certificates have
been issued, shall be at least ten (10) calendar days later than the date of the
public announcement. If Rights Certificates have been issued, upon each
adjustment of the number of Rights pursuant to this Section 11(i), the Company
shall, as promptly as practicable, cause to be distributed to holders of record
of Rights Certificates on such record date Rights Certificates evidencing,
subject to Section 14 (Fractional Rights and Fractional Shares) the additional
Rights to which such holders shall be entitled as a result of such adjustment,
or, at the option of the Company, shall cause to be distributed to such holders
of record in substitution and replacement for the Rights Certificates held by
such holders prior to the date of adjustment, and upon surrender thereof, if
required by the Company, new Rights Certificates evidencing all the Rights to
which such holders shall be entitled after such adjustment. Rights Certificates
so to be distributed shall be issued, executed and countersigned in the manner
provided for herein (and may bear, at the option of the Company, the adjusted
Purchase Price) and shall be registered in the names of the holders of record of
Rights Certificates on the record date specified in the public announcement.
(j) Rights Certificates. Irrespective of any adjustment or
change in the Purchase Price or the number of one one-thousandth of a share of
Preferred Stock issuable upon the exercise of the Rights, the Rights
Certificates theretofore and thereafter issued may continue to express the
Purchase Price per one one-thousandth of a share and the number of one
one-thousandth of a share which were expressed in the initial Rights
Certificates issued hereunder.
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(k) Adjustment Below Par Value. Before taking any action that
would cause an adjustment reducing the Purchase Price below the then par or
stated value, if any, of the number of one one-thousandth of a share of
Preferred Stock issuable upon exercise of the Rights, the Company shall take any
corporate action which is or may, in the opinion of its counsel, be necessary in
order that the Company may validly and legally issue fully paid and
nonassessable such number of one one-thousandth of a share of Preferred Stock at
such adjusted Purchase Price.
(l) Adjustment Effective as of Future Date; Exercise. In any
case in which this Section 11 (Adjustment of Purchase Price; Number and Kind of
Shares or Number of Rights) shall require that an adjustment in the Purchase
Price be made effective as of a record date for a specified event, the Company
may elect to defer until the occurrence of such event the issuance to the holder
of any Right exercised after such record date the number of one one-thousandth
of a share of Preferred Stock and other capital stock or securities of the
Company, if any, issuable upon such exercise over and above the number of one
one-thousandth of a share of Preferred Stock and other capital stock or
securities of the Company, if any, issuable upon such exercise on the basis of
the Purchase Price in effect prior to such adjustment; provided, however, that
the Company shall deliver to such holder a due xxxx or other appropriate
instrument evidencing such holder's right to receive such additional shares
(fractional or otherwise) or securities upon the occurrence of the event
requiring such adjustment.
(m) Tax Adjustments. Anything in this Section 11 (Adjustment
of Purchase Price; Number and Kind of Shares or Number of Rights) to the
contrary notwithstanding, the Company shall be entitled to make such reductions
in the Purchase Price, in addition to those adjustments expressly required by
this Section 11, as and to the extent that in its good faith judgment the Board
shall determine to be advisable in order that any (i) consolidation or
subdivision of the Preferred Stock, (ii) issuance wholly for cash of any shares
of Preferred Stock at less than the Current Market Price, (iii) issuance wholly
for cash of shares of Preferred Stock or securities which by their terms are
convertible into or exchangeable for shares of Preferred Stock, (iv) stock
dividends or (v) issuance of rights, options or warrants referred to in this
Section 11, hereafter made by the Company to holders of its Preferred Stock
shall not be taxable to such stockholders.
(n) Restriction on Certain Transactions. The Company shall
not, at any time after the Distribution Date, (i) consolidate with any other
Person (other than a Subsidiary of the Company in a transaction which complies
with Section 11(o) (Adjustment of Purchase Price; Number and Kind of Shares or
Number of Rights -- Restriction Against Diminishing Benefits of the Rights)),
(ii) merge with or into any other Person (other than a Subsidiary of the Company
in a transaction which complies with Section 11(o)), (iii) enter into a
statutory share exchange or similar transaction with any other Person (other
than a Subsidiary of the Company in a transaction which complies with Section
11(o)), or (iv) sell or transfer (or permit any Subsidiary to sell or transfer),
in one transaction, or a series of related transactions, assets, cash flow or
earning power aggregating more than 50% of the assets, cash flow or earning
power of the Company and its Subsidiaries (taken as a whole) to any other Person
or Persons (other than the Company and/or any of its Subsidiaries in one or more
transactions each of which complies with Section 11(o)), if (x) at the time of
or immediately after such consolidation, merger, statutory
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share exchange or similar transaction, or sale there are any rights, warrants or
other instruments or securities outstanding or agreements in effect which would
substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights or (y) prior to, simultaneously with or immediately after
such consolidation, merger, statutory share exchange or similar transaction, or
sale, the stockholders of the Person who constitutes, or would constitute, the
"Principal Party" for purposes of Section 13(a) (Consolidation, Merger or Sale
or Transfer of Assets or Earning Power -- Flip-over Event) shall have received a
distribution of Rights previously owned by such Person or any of its Affiliates
and Associates.
(o) Restriction Against Diminishing Benefits of the Rights.
The Company covenants and agrees that, after the Distribution Date, it will not,
except as permitted by Section 23 (Redemption and Termination) or Section 27
(Supplements and Amendments) take (or permit any Subsidiary to take) any action
if at the time such action is taken it is reasonably foreseeable that such
action will diminish substantially or otherwise eliminate the benefits intended
to be afforded by the Rights.
(p) Common Stock Adjustments. Anything in this Agreement to
the contrary notwithstanding, in the event that the Company shall at any time
after the Rights Dividend Declaration Date and prior to the Distribution Date
(i) declare a dividend on the outstanding shares of Common Stock payable in
shares of Common Stock, (ii) subdivide or split the outstanding shares of Common
Stock, or (iii) combine the outstanding shares of Common Stock into a smaller
number of shares, the number of Rights associated with each share of Common
Stock then outstanding, or issued or delivered thereafter but prior to the
Distribution Date, shall be proportionately adjusted so that the number of
Rights thereafter associated with each share of Common Stock following any such
event shall equal the result obtained by multiplying the number of Rights
associated with each share of Common Stock immediately prior to such event by a
fraction, the numerator of which shall be the total number of shares of Common
Stock outstanding immediately prior to the occurrence of the event and the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately following the occurrence of such event. The adjustments
provided for in this Section 11(p) shall be made successively whenever such a
dividend is declared or paid or such subdivision, combination or consolidation
is effected.
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Section 11 (Adjustment of Purchase
Price; Number and Kind of Shares or Number of Rights) and Section 13
(Consolidation, Merger or Sale or Transfer of Assets or Earning Power) the
Company shall (a) promptly prepare a certificate setting forth such adjustment
and a brief statement of the facts accounting for such adjustment, (b) promptly
file with the Rights Agent, and with each transfer agent for the Preferred Stock
and the Common Stock, a copy of such certificate, and (c) mail or cause the
Rights Agent to mail a brief summary thereof to each holder of a Rights
Certificate (or, if prior to the Distribution Date, to each holder of a
certificate representing shares of Common Stock) in accordance with Section 26
(Notices). The Rights Agent shall be fully protected in relying on any such
certificate and on any adjustment therein contained.
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Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power.
(a) Flip-over Event. In the event that, following the Stock
Acquisition Date, directly or indirectly, (x) the Company shall consolidate
with, or merge with and into, or enter into a statutory stock exchange or
similar transaction with, any other Person (other than a Subsidiary of the
Company in a transaction which complies with Section 11(o)(Adjustment of
Purchase Price; Number and Kind of Shares or Number of Rights -- Restriction
Against Diminishing Benefits of the Rights)), and the Company shall not be the
continuing or surviving corporation of such consolidation, merger or statutory
share exchange or similar transaction, (y) any Person (other than a Subsidiary
of the Company in a transaction which complies with Section 11(o)) shall
consolidate with, or merge with or into, or enter into a statutory stock
exchange or similar transaction with, the Company, and the Company shall be the
continuing or surviving corporation of such consolidation, merger or statutory
share exchange or similar transaction and, in connection with such
consolidation, merger or statutory share exchange or similar transaction, all or
part of the outstanding shares of Common Stock shall be changed into or
exchanged for stock or other securities of any other Person or cash or any other
property, or (z) the Company shall sell or otherwise transfer (or one or more of
its Subsidiaries shall sell or otherwise transfer), in one transaction or a
series of related transactions, assets, cash flow or earning power aggregating
more than 50% of the assets, cash flow or earning power of the Company and its
Subsidiaries (taken as a whole) to any Person or Persons (other than the Company
or any Subsidiary of the Company in one or more transactions each of which
complies with Section 11(o)), then, and in each such case (except as may be
contemplated by Section 13(d) (Consolidation, Merger or Sale or Transfer of
Assets or Earning Power -- Exceptions)), (i) proper provision shall be made so
that each holder of a Right, except as provided in Section 7(e) (Exercise of
Rights; Purchase Price; Expiration Date of Rights -- Termination of Acquiring
Person's Rights) shall thereafter have the right to receive, upon the exercise
thereof at the then current Purchase Price in accordance with the terms of this
Agreement, such number of validly authorized and issued, fully paid,
nonassessable and freely tradeable shares of Common Stock of the Principal
Party, not subject to any liens, encumbrances, rights of first refusal or other
adverse claims, as shall be equal to the result obtained by (A) multiplying the
then current Purchase Price by the number of one one-thousandth of a share of
Preferred Stock for which a Right is exercisable immediately prior to the first
occurrence of a Flip-over Event (or, if a Flip-in Event has occurred prior to
the first occurrence of a Flip-over Event, multiplying the number of such one
one-thousandth of a share for which a Right was exercisable immediately prior to
the first occurrence of a Flip-in Event by the Purchase Price in effect
immediately prior to such first occurrence), and (B) dividing that product
(which, following the first occurrence of a Flip-over Event, shall be referred
to as the "Purchase Price" for each Right and for all purposes of this
Agreement) by 50% of the Current Market Price per share of the Common Stock of
such Principal Party on the date of consummation of such Flip-over Event; (ii)
such Principal Party shall thereafter be liable for, and shall assume, by virtue
of such Flip-over Event, all the obligations and duties of the Company pursuant
to this Agreement; (iii) the term "Company" shall thereafter be deemed to refer
to such Principal Party, it being specifically intended that the provisions of
Section 11 (Adjustment of Purchase Price; Number and Kind of Shares or Number of
Rights) shall apply only to such Principal Party following the first occurrence
of a Flip-over Event; (iv) such Principal Party shall take such steps
(including, but not limited to, the reservation
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of a sufficient number of shares of its Common Stock) in connection with the
consummation of any such transaction as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably may
be, in relation to its shares of Common Stock thereafter deliverable upon the
exercise of the Rights; and (v) the provisions of Section 11(a)(ii) (Adjustment
of Purchase Price; Number and Kind of Shares or Number of Rights -- Certain
Adjustments) hereof shall be of no effect following the first occurrence of any
Flip-over Event.
(b) Principal Party. "Principal Party" shall mean
(i) in the case of any transaction described in
clause (x) or (y) of the first sentence of Section 13(a)
(Consolidation, Merger or Sale or Transfer of Assets or Earning Power
-- Flip-over Event), the Person that is the issuer of any securities
into which shares of Common Stock of the Company are converted in such
consolidation, merger or statutory share exchange or similar
transaction, and if no securities are so issued, the Person that is the
other party to such consolidation, merger or statutory share exchange
or similar transaction, and
(ii) in the case of any transaction described in
clause (z) of the first sentence of Section 13(a) (Consolidation,
Merger or Sale or Transfer of Assets or Earning Power -- Flip-over
Event), the Person that is the party receiving the greatest portion of
the assets, cash flow or earning power transferred pursuant to such
transaction or transactions;
provided, however, that in any such case, (1) if the Common Stock of such Person
is not at such time and has not been continuously over the preceding twelve (12)
month period registered under Section 12 of the Exchange Act, and such Person is
a direct or indirect Subsidiary of another Person the Common Stock of which is
and has been so registered, "Principal Party" shall refer to such other Person;
and (2) in case such Person is a Subsidiary, directly or indirectly, of more
than one Person, the Common Stocks of two or more of which are and have been so
registered, "Principal Party" shall refer to whichever of such Persons is the
issuer of the total outstanding Common Stock having the greatest aggregate
market value.
(c) Supplemental Agreement. The Company shall not consummate a
Flip-over Event unless the Principal Party shall have a sufficient number of
authorized shares of its Common Stock which have not been issued or reserved for
issuance to permit the exercise in full of the Rights in accordance with this
Section 13 (Consolidation, Merger or Sale or Transfer of Assets or Earning
Power) and unless prior thereto the Company and such Principal Party shall have
executed and delivered to the Rights Agent a supplemental agreement providing
for the terms set forth in paragraphs (a) and (b) of this Section 13 and further
providing that, as soon as practicable after the date of such Flip-over Event,
the Principal Party will
(i) prepare and file a registration statement under
the Act, with respect to the Rights and the securities purchasable upon
exercise of the Rights on an appropriate form, and will use its best
efforts to cause such registration statement to (A) become
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effective as soon as practicable after such filing and (B) remain
effective (with a prospectus at all times meeting the requirements of
the Act) until the Expiration Date; and
(ii) will deliver to holders of the Rights historical
financial statements for the Principal Party and each of its Affiliates
which comply in all respects with the requirements for registration on
Form 10 under the Exchange Act.
The provisions of this Section 13 (Consolidation, Merger or Sale or Transfer of
Assets or Earning Power) shall similarly apply to successive consolidation,
mergers or statutory share exchanges or similar transactions or sales or other
transfers. In the event that a Flip-over Event shall occur at any time after the
occurrence of a Flip-in Event, the Rights which have not theretofore been
exercised shall thereafter become exercisable in the manner described in Section
13(a) (Consolidation, Merger or Sale or Transfer of Assets or Earning Power --
Flip-over Event).
(d) Exceptions. Notwithstanding anything in this Agreement to
the contrary, Section 13 (Consolidation, Merger or Sale or Transfer of Assets or
Earning Power) shall not be applicable to a transaction described in
subparagraphs (x) and (y) of Section 13(a) (Consolidation, Merger or Sale or
Transfer of Assets or Earning Power -- Flip-over Event) if (i) such transaction
is consummated with a Person or Persons who acquired shares of Common Stock
pursuant to a tender offer or exchange offer for all outstanding shares of
Common Stock which satisfies the requirements of Section 11(a)(ii)(A)
(Adjustment of Purchase Price; Number and Kind of Shares or Number of Rights --
Certain Adjustments) (or a wholly-owned subsidiary of any such Person or
Persons), (ii) the price per share of Common Stock offered in such transaction
is not less than the price per share of Common Stock paid to all holders of
shares of Common Stock whose shares were purchased pursuant to such tender or
exchange offer and (iii) the form of consideration being offered in such
transaction is the same as the form of consideration paid to all holders of
shares of Common Stock whose shares were purchased pursuant to such tender offer
or exchange offer. Upon consummation of any such transaction contemplated by
this Section 13(d), all Rights hereunder shall expire.
Section 14. Fractional Rights and Fractional Shares.
(a) Fractional Rights. The Company shall not be required to
issue fractions of Rights, except prior to the Distribution Date as provided in
Section 11(p) (Adjustment of Purchase Price; Number and Kind of Shares or Number
of Rights -- Common Stock Adjustments), or to distribute Rights Certificates
which evidence fractional Rights. In lieu of such fractional Rights, there shall
be paid to the registered holders of the Rights Certificates with regard to
which such fractional Rights would otherwise be issuable, an amount in cash
equal to the same fraction of the current market value of a whole Right. For
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 of the Rights for any Trading Day shall be the last sale price,
regular way, or, in case no such sale takes place on such Trading Day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading
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on the New York Stock Exchange or, if the Rights are not listed or admitted to
trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Rights are listed or
admitted to trading, or if the Rights are not listed or admitted to trading on
any national securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter market
as reported on the Nasdaq National Market, the Nasdaq Small Cap Market or such
other system then in use or, if on any such date the Rights are not quoted by
any such organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the Rights selected
by the Board. If on any such date no such market maker is making a market in the
Rights, the fair value of the Rights on such date as determined in good faith by
the Board shall be used.
(b) Fractional Shares of Preferred Stock. The Company shall
not be required to issue fractions of shares of Preferred Stock (other than
fractions which are integral multiples of one one-thousandth of a share of
Preferred Stock which may at the option of the Company, be evidenced by
depositary receipts) upon exercise of the Rights or to distribute certificates
which evidence fractional shares of Preferred Stock (other than fractions which
are integral multiples of one one-thousandth of a share of Preferred Stock).
Interests in fractions of Preferred Stock in integral multiples of one
one-thousandth of a share of Preferred Stock may, at the election of the
Company, be evidenced by depositary receipts, pursuant to an appropriate
agreement between the Company and a depositary selected by it; provided,
however, that such agreement shall provide that the holders of such depositary
receipts shall have all the rights, privileges and preferences to which they are
entitled as beneficial owners of the Preferred Stock represented by such
depositary receipts. In lieu of fractional shares of Preferred Stock that are
not integral multiples of one one-thousandth of a share of Preferred Stock, the
Company may pay to the registered holders of Rights Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market value of one one-thousandth of a share of
Preferred Stock. For purposes of this Section 14(b), the current market value of
one one-thousandth of a share of Preferred Stock shall be one one-thousandth of
the closing price of a share of Preferred Stock (as determined pursuant to
Section 11(d)(ii) (Adjustment of Purchase Price; Number and Kind of Shares or
Number of Rights -- Current Market Price) for the Trading Day immediately prior
to the date of such exercise.
(c) Fractional Shares of Common Stock. Following the
occurrence of a Triggering Event, the Company shall not be required to issue
fractions of shares of Common Stock upon exercise of the Rights or to distribute
certificates which evidence fractional shares of Common Stock. In lieu of
fractional shares of Common Stock, the Company may pay to the registered holders
of Rights Certificates at the time such Rights are exercised as herein provided
an amount in cash equal to the same fraction of the current market value of one
(1) share of Common Stock. For purposes of this Section 14(c), the current
market value of one share of Common Stock shall be the closing price of one
share of Common Stock (as determined pursuant to Section 11(d)(i) (Adjustment of
Purchase Price; Number and Kind of Shares or Number of Rights -- Current Market
Price) for the Trading Day immediately prior to the date of such exercise.
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(d) Waiver of Fractional Rights and Shares. The holder of a
Right by the acceptance of the Right expressly waives his or her right to
receive any fractional Rights or any fractional shares upon exercise of a Right,
except as permitted by this Section 14 (Fractional Rights and Fractional
Shares).
Section 15. Rights of Action. All rights of action in respect of this
Agreement are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock); and any registered holder of any Rights Certificate (or, prior to
the Distribution Date, of the Common Stock), without the consent of the Rights
Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of the Common Stock), may, in his or her own behalf and for
his or her own benefit, enforce, and may institute and maintain any suit, action
or proceeding against the Company to enforce, or otherwise act in respect of,
his or her right to exercise the Rights evidenced by such Rights Certificate in
the manner provided in such Rights Certificate and in this Agreement. Without
limiting the foregoing or any remedies available to the holders of Rights, it is
specifically acknowledged that the holders of Rights would not have an adequate
remedy at law for any breach of this Agreement and shall be entitled to specific
performance of the obligations hereunder and injunctive relief against actual or
threatened violations of the obligations hereunder of any Person subject to this
Agreement.
Section 16. Agreement of Rights Holders. Every holder of a Right by
accepting the same consents and agrees with the Company and the Rights Agent and
with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of Common Stock;
(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office or offices of the Rights Agent designated for such
purposes, duly endorsed or accompanied by a proper instrument of transfer and
with the appropriate forms and certificates fully executed;
(c) subject to Section 6(a) (Transfer, Split Up, Combination
and Exchange of Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights
Certificates -- Procedure) and Section 7(f) (Exercise of Rights; Purchase Price;
Expiration Date of Rights -- Surrender of Rights Certificates; Identity of
Beneficial Owner), the Company and the Rights Agent may deem and treat the
person in whose name a Rights Certificate (or, prior to the Distribution Date,
the associated Common Stock certificate) is registered as the absolute owner
thereof and of the Rights evidenced thereby (notwithstanding any notations of
ownership or writing on the Rights Certificates or the associated Common Stock
certificate made by anyone other than the Company or the Rights Agent) for all
purposes whatsoever, and neither the Company nor the Rights Agent, subject to
the last sentence of Section 7(e) (Exercise of Rights; Purchase Price;
Expiration Date of Rights -- Termination of Acquiring Person's Rights), shall be
required to take any action or be affected by any notice to the contrary; and
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(d) notwithstanding anything in this Agreement to the
contrary, neither the Company nor the Rights Agent shall have any liability to
any holder of a Right or other Person as a result of its inability to perform
any of its obligations under this Agreement by reason of any preliminary or
permanent injunction or other order, decree or ruling issued by a court of
competent jurisdiction or by a governmental, regulatory or administrative agency
or commission, or any statute, rule, regulation or executive order promulgated
or enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, the Company must use its best
efforts to have any such order, decree or ruling lifted or otherwise overturned
as soon as possible.
Section 17. Rights Certificate Holder Not Deemed a Stockholder. No
holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the number of one
one-thousandth of a share of Preferred Stock or any other securities of the
Company which may at any time be issuable on the exercise of the Rights
represented thereby, nor shall anything contained herein or in any Rights
Certificate be construed to confer upon the holder of any Rights Certificate, as
such, any of the rights of a stockholder of the Company or any right to vote for
the election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in Section 25 (Notice of Certain Events)), or to receive dividends or
subscription rights, or otherwise, until the Right or Rights evidenced by such
Rights Certificate shall have been exercised in accordance with the provisions
hereof.
Section 18. Concerning the Rights Agent.
(a) Compensation. The Company shall 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
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 to be
done by the Rights Agent in connection with the acceptance and administration of
this Agreement, including the costs and expenses of defending against or
investigating any claim of liability in the premises.
(b) Reliance. The Rights Agent shall be protected and shall
incur no liability for or in respect of any action taken, suffered or omitted to
be taken by it in connection with its administration of this Agreement in
reliance upon any Rights Certificate 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 to be genuine
and to be signed, executed and, where necessary, verified or acknowledged, by
the proper Person or Persons, or otherwise upon the advice of counsel as set
forth in Section 20 (Duties of Rights Agent).
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Section 19. Merger or Consolidation or Change of Name of Rights Agent.
(a) Successor. Any corporation into which the Rights Agent or
any successor Rights Agent may be merged or with which it may be consolidated,
or any corporation resulting from any merger or consolidation to which the
Rights Agent or any successor Rights Agent shall be a party, or any corporation
succeeding to the corporate trust or 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, however, that such
corporation would be eligible for appointment as a successor Rights Agent under
the provisions of Section 21 (Change of Rights Agent). In case at the time such
successor Rights Agent shall succeed to the agency created by this Agreement,
any of the Rights Certificates shall have been countersigned but not delivered,
any such successor Rights Agent may adopt the countersignature of a predecessor
Rights Agent and deliver such Rights Certificates so countersigned; and in case
at that time any of the Rights Certificates shall not have been countersigned,
any successor Rights Agent may countersign such Rights Certificates either in
the name of the predecessor or in the name of the successor Rights Agent; and in
all such cases such Rights Certificates shall have the full force provided in
the Rights Certificates and in this Agreement.
(b) Prior Countersignatures. In case at any time the name of
the Rights Agent shall be changed and at such time any of the Rights
Certificates shall have been countersigned but not delivered, the Rights Agent
may adopt the countersignature under its prior name and deliver Rights
Certificates so countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, the Rights Agent may countersign
such Rights Certificates either in its prior name or in its changed name; and in
all such cases such Rights Certificates shall have the full force provided in
the Rights Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Rights Certificates,
by their acceptance thereof, shall be bound:
(a) Legal Counsel. 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 to be taken by it in good faith and in
accordance with such opinion.
(b) Certification by the Company. Whenever in the performance
of its duties under this Agreement the Rights Agent shall deem it necessary or
desirable that any fact or matter (including, without limitation, the identity
of any Acquiring Person and the determination of Current Market Price) be proved
or established by the Company prior to taking or suffering any action hereunder,
such fact or matter (unless other evidence in respect thereof be herein
specifically prescribed) may be deemed to be conclusively proved and established
by a certificate signed by the President, any Vice President, the Secretary, any
Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company and
delivered to the Rights Agent; and such certificate
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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) Liability for Negligence, etc. The Rights Agent shall be
liable hereunder only for its own negligence, bad faith or willful misconduct.
(d) Statements of Fact or Recitals. The Rights Agent shall not
be liable for or by reason of any of the statements of fact or recitals
contained in this Agreement or in the Rights Certificates or be required to
verify the same (except as to its countersignature on such Rights Certificates),
but all such statements and recitals are and shall be deemed to have been made
by the Company only.
(e) Agreement; Adjustments. The Rights Agent shall not be
under any responsibility in respect of the validity of this Agreement or the
execution and delivery hereof (except the due execution hereof by the Rights
Agent) or in respect of the validity or execution of any Rights Certificate
(except its countersignature); nor shall it be responsible for any breach by the
Company of any covenant or condition contained in this Agreement or in any
Rights Certificate; nor shall it be responsible for any adjustment required
under the provisions of Section 11 (Adjustment of Purchase Price; Number and
Kind of Shares or Number of Rights) or Section 13 (Consolidation, Merger or Sale
or Transfer of Assets or Earning Power) 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 Rights Certificates after actual notice of any such adjustment);
nor shall it by any act hereunder be deemed to make any representation or
warranty as to the authorization or reservation of any shares of Common Stock or
Preferred Stock to be issued pursuant to this Agreement or any Rights
Certificate or as to whether any shares of Common Stock or Preferred Stock will,
when so issued, be validly authorized and issued, fully paid and nonassessable.
(f) Further Assurances. The Company will perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all such further and other acts, instruments and assurances as may
reasonably be required by the Rights Agent for the carrying out or performing by
the Rights Agent of the provisions of this Agreement.
(g) Instructions. The Rights Agent is hereby authorized and
directed to accept instructions with respect to the performance of its duties
hereunder from the President, any Vice President, the Secretary, any Assistant
Secretary, the Treasurer or any Assistant Treasurer of the Company and to apply
to such persons 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 the instructions of any such person.
(h) Dealing in Rights. 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
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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) Agents; Reasonable Care. The Rights Agent may execute and
exercise any of the rights or powers hereby vested in it or perform any duty
hereunder either itself or by or through its attorneys or agents, and the Rights
Agent shall not be answerable or accountable for any act, default, neglect or
misconduct of any such attorneys or agents or for any loss to the Company
resulting from any such act, default, neglect or misconduct; provided, however,
reasonable care was exercised in the selection and continued employment thereof.
(j) Expenses; Repayment Assurances. No provision of this
Agreement shall require the Rights Agent to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its duties
hereunder or in the exercise of its rights if there shall be reasonable grounds
for believing that repayment of such funds or adequate indemnification against
such risk or liability is not reasonably assured to it.
(k) Exercise of Rights; Consultation with Company. If, with
respect to any Rights Certificate surrendered to the Rights Agent for exercise
or transfer, the certificate attached to the form of assignment or form of
election to purchase, as the case may be, has either not been completed or
indicates an affirmative response to clause 1 and/or 2 thereof, the Rights Agent
shall not take any further action with respect to such requested exercise or
transfer without first consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon thirty (30) calendar days' notice in writing mailed to the Company, and to
each transfer agent of the Common Stock and Preferred Stock, by registered or
certified mail, and to the holders of the Rights Certificates by first-class
mail. The Company may remove the Rights Agent or any successor Rights Agent upon
thirty (30) calendar days' notice in writing, mailed to the Rights Agent or
successor Rights Agent, as the case may be, and to each transfer agent of the
Common Stock and Preferred Stock, by registered or certified mail, and to the
holders of the Rights Certificates by first-class mail. If the Rights Agent
shall resign or be removed or shall otherwise become incapable of acting, the
Company shall appoint a successor to the Rights Agent. If the Company shall fail
to make such appointment within a period of thirty (30) calendar days after
giving notice of such removal or after it has been notified in writing of such
resignation or incapacity by the resigning or incapacitated Rights Agent or by
the holder of a Rights Certificate (who shall, with such notice, submit his
Rights Certificate for inspection by the Company), then the registered holder of
any Rights Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether appointed
by the Company or by such a court, shall be (a) a corporation organized and
doing business under the laws of the United States or of any State of the United
States, in good standing, which is authorized under such laws to exercise stock
transfer or corporate trust powers, is subject to supervision or examination by
federal or state authority and has at the time of its appointment as Rights
Agent a combined capital and surplus of at least $50,000,000 or (b) an Affiliate
of a corporation described in clause (a) of this sentence. After appointment,
the successor Rights Agent shall be vested with
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the same powers, rights, duties and responsibilities as if it had been
originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment, the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Stock and the Preferred Stock, and mail a notice thereof in writing
to the registered holders of the Rights Certificates. Failure to give any notice
provided for in this Section 21 (Change of Rights Agent), or any defect therein,
shall not affect the legality or validity of the resignation or removal of the
Rights Agent or the appointment of the successor Rights Agent, as the case may
be.
Section 22. Issuance of New Rights Certificates. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Rights Certificates evidencing Rights in such form
as may be approved by the Board to reflect any adjustment or change in the
Purchase Price and the number or kind or class of shares or other securities or
property purchasable under the Rights Certificates made in accordance with the
provisions of this Agreement. In addition, in connection with the issuance or
sale of shares of Common Stock following the Distribution Date and prior to the
redemption or expiration of the Rights, the Company (a) shall, with respect to
shares of Common Stock so issued or sold pursuant to the exercise of stock
options or under any employee plan or arrangement, or upon the exercise,
conversion or exchange of securities hereafter issued by the Company, in either
case outstanding as of the Distribution Date, and (b) may, in any other case, if
deemed necessary or appropriate by the Board, issue Rights Certificates
representing the appropriate number of Rights in connection with such issuance
or sale; provided, however, that (i) no such Rights Certificate shall be issued
if, and to the extent that, the Company shall be advised by counsel that such
issuance would create a significant risk of material, adverse tax consequences
to the Company or the Person to whom such Rights Certificate would be issued,
and (ii) no such Rights Certificate shall be issued if, and to the extent that,
appropriate adjustment shall otherwise have been made in lieu of the issuance
thereof.
Section 23. Redemption and Termination.
(a) Redemption. The Company may, at its option, at any time
prior to the earlier of (i) the Close of Business on the tenth Business Day
following the Stock Acquisition Date (or, if the Stock Acquisition Date shall
have occurred prior to the Record Date, the Close of Business on the tenth
Business Day following the Record Date), or (ii) the Final Expiration Date,
redeem (the date of such redemption being referred to herein as the "Redemption
Date") all but not less than all of the then outstanding Rights at a redemption
price of $0.01 per Right, as such amount may be appropriately adjusted to
reflect any stock split, stock dividend or similar transaction occurring after
the date hereof (such redemption price being hereinafter referred to as the
"Redemption Price"); provided, however, that any redemption after the Stock
Acquisition Date must be authorized by a majority of the entire Board; provided
further, however, that if, following the occurrence of a Stock Acquisition Date
and following the expiration of the right of redemption hereunder but prior to
any Triggering Event, (i) a Person who is an Acquiring Person shall have
transferred or otherwise disposed of a number of shares of Common Stock in
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one transaction or series of transactions, not directly or indirectly involving
the Company or any of its Subsidiaries, which did not result in the occurrence
of a Triggering Event such that such Person is thereafter a Beneficial Owner of
20% or less of the outstanding shares of Common Stock, and (ii) there are not
other Persons, immediately following the occurrence of the event described in
clause (i), who are Acquiring Persons, then the right of redemption shall be
reinstated and thereafter be subject to the provisions of this Section 23.
Notwithstanding anything contained in this Agreement to the contrary, the Rights
shall not be exercisable after the first occurrence of a Flip-in Event until
such time as the Company's right of redemption hereunder has expired. The
redemption of the Rights by the Company may be made effective at such time, on
such basis and with such conditions as the Board in its sole discretion may
establish. The Company may, at its option, pay the Redemption Price in cash,
shares of Common Stock (based on the Current Market Price of the Common Stock at
the time of redemption) or any other form of consideration deemed appropriate by
the Board.
(b) Effect of Redemption; Procedure. Immediately upon the
action of the Company ordering the redemption of the Rights and without any
further action and without any notice, the right to exercise the Rights will
terminate and the only right thereafter of the holders of Rights shall be to
receive the Redemption Price for each Right so held. Promptly after the
Redemption Date, the Company shall (i) give notice of such redemption to the
Rights Agent, (ii) give public notice of such redemption; provided, however,
that the failure to give, or any defect in, such notice shall not affect the
validity of such redemption, and (iii) mail notice of such redemption to the
holders of the then outstanding Rights at their last addresses as they appear
upon the registry books of the Rights Agent or, prior to the Distribution Date,
on the registry books of the Transfer Agent for the Common Stock. Any notice
which is mailed in the manner herein provided shall be deemed given, whether or
not the holder receives the notice. Each such notice of redemption will state
the method by which the payment of the Redemption Price will be made. Amounts
payable shall be rounded down to the nearest $0.01.
Section 24. Exchange.
(a) Right to Exchange. The Company may, at its option, at any
time and from time to time after the first occurrence of a Flip-in Event,
exchange all or part of the then outstanding and exercisable Rights (other than
Rights which have become void as provided in Section 7(e) (Exercise of Rights;
Purchase Price; Expiration Date of Rights -- Termination of Acquiring Person's
Rights)) for the Exchange Number of shares of Common Stock, shares or units of
Preferred Stock which the Board has determined to be a Common Stock Equivalent,
units of other property or any combination thereof as determined by the Board.
Notwithstanding the foregoing, the Company shall not be empowered to effect such
exchange at any time after any Person (other than the Company, any Subsidiary of
the Company, any employee benefit plan of the Company or any such Subsidiary or
any entity holding shares of Common Stock for or pursuant to any such plan),
together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of 50% or more of the shares of Common Stock then outstanding.
The exchange of the Rights by the Company may be made effective at such time, on
such basis and with such conditions as the Board in its sole discretion may
establish.
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(b) Effect of Exchange; Procedure. Immediately upon the action
of the Company ordering the exchange of any Rights pursuant to paragraph (a) of
this Section 24, evidence of which shall have been filed with the Rights Agent
and without any further action and without any notice, the right to exercise
such Rights will terminate and the only right thereafter of a holder of such
Rights shall be to receive that number of shares of Common Stock, Common Stock
Equivalents or units of other property equal to the number of such Rights held
by such holder multiplied by the Exchange Number. Promptly after the action of
the Company ordering the exchange of the Rights, the Company shall (i) file
evidence of such action with the Rights Agent, (ii) give public notice of such
exchange; provided, however, that the failure to give, or any defect in, such
notice shall not affect the validity of such exchange, and (iii) mail notice of
such exchange to 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 will be effected and, in the event of any partial exchange, the
number of Rights which will be exchanged. Any partial exchange shall be effected
pro rata based on the number of Rights (other than Rights which have become void
as provided in Section 7(e) (Exercise of Rights; Purchase Price; Expiration Date
of Rights -- Termination of Acquiring Person's Rights)) held by each holder of
Rights.
(c) Common Stock Equivalents. In any exchange pursuant to this
Section 24, the Company, at its option, may substitute Common Stock Equivalents
for Common Stock exchangeable for Rights, at the initial rate of one share of
Common Stock Equivalent for each share of Common Stock, as appropriately
adjusted to reflect adjustments in the voting rights of the Common Stock
pursuant to the Company's Certificate of Incorporation, so that the share of
Common Stock Equivalent delivered in lieu of each share of Common Stock shall
have the same voting rights as one share of Common Stock.
(d) Insufficient Common Stock. In the event that the number of
shares of Common Stock which are authorized by the Company's Certificate of
Incorporation but not outstanding or reserved for issuance for purposes other
than upon exercise of the Rights is not sufficient to permit any exchange of
Rights in accordance with this Section 24, the Company may, at its option, take
all such action as may be necessary to authorize additional shares of Common
Stock for issuance upon such exchange.
(e) Fractional Shares. Upon the action of the Company ordering
the exchange of any Rights pursuant to paragraph (a) of this Section 24, the
Company shall not be required to issue fractions of shares or to distribute
certificates which evidence fractional shares. In lieu of such fractional
shares, the Company may pay to the registered holders of the Rights Certificates
with regard to which such fractional shares would otherwise be issuable an
amount in cash equal to the same fraction of the current market value of one
share of Common Stock. For purposes of this Section 24, the current market value
of one share of Common Stock shall be the closing price of one share of Common
Stock (as determined pursuant to Section 11(d)(i) (Adjustment of Purchase Price;
Number and Kind of Shares or Number of Rights -- Current Market Price)) for the
Trading Day immediately prior to the date of exchange pursuant to this Section
24, and the
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value of any Common Stock Equivalent shall be deemed to have the same current
market value as the Common Stock on such date.
Section 25. Notice of Certain Events.
(a) Preferred Stock Transactions, etc. In case the Company
shall propose, at any time after the Distribution Date, (i) to pay any dividend
payable in stock of any class to the holders of Preferred Stock or to make any
other distribution to the holders of Preferred Stock (other than a regular
quarterly cash dividend out of earnings or retained earnings of the Company);
(ii) to offer to the holders of Preferred Stock rights or warrants to subscribe
for or to purchase any additional shares of Preferred Stock or shares of stock
of any class or any other securities, rights or options; (iii) to effect any
reclassification of its Preferred Stock (other than a reclassification involving
only the subdivision of outstanding shares of Preferred Stock); (iv) to effect
any consolidation with, merger into or with, or statutory share exchange or
similar transaction with, any other Person (other than a Subsidiary of the
Company in a transaction which complies with Section 11(o) (Adjustment of
Purchase Price; Number and Kind of Shares or Number of Rights -- Restriction
against Diminishing Benefits of the Rights)), or to effect any sale or other
transfer (or to permit one or more of its Subsidiaries to effect any sale or
other transfer), in one transaction or a series of related transactions, of more
than 50% of the assets, cash flow or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person or Persons (other than the
Company and/or any of its Subsidiaries in one or more transactions each of which
complies with Section 11(o)); (v) to effect the liquidation, dissolution or
winding up of the Company or (vi) to declare or pay any dividend on the shares
of Common Stock payable in Common Stock or to effect a subdivision, combination
or consolidation of the shares of Common Stock (by reclassification or otherwise
than by payment of dividends in Common Stock), then, in each such case, the
Company shall give to each holder of a Rights Certificate, to the extent
feasible and in accordance with Section 26 (Notices), a notice of such proposed
action, which shall specify the record date for the purposes of such stock
dividend, distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, statutory share exchange or similar
transaction, sale, transfer, liquidation, dissolution, or winding up is to take
place and the date of participation therein by the holders of the shares of
Preferred Stock, if any such date is to be fixed, and such notice shall be so
given in the case of any action covered by clause (i) or (ii) above at least
twenty (20) calendar days prior to the record date for determining holders of
the shares of Preferred Stock for purposes of such action, and in the case of
any such other action, at least twenty (20) calendar days prior to the date of
the taking of such proposed action or the date of participation therein by the
holders of the shares of Preferred Stock, whichever shall be the earlier.
(b) Other Transactions. In case any of the events set forth in
Section 11(a)(ii) (Adjustment of Purchase Price; Number and Kind of Shares or
Number of Rights -- Certain Adjustments) shall occur, then, in any such case,
(i) the Company shall as soon as practicable thereafter give to each holder of a
Rights Certificate, to the extent feasible and in accordance with Section 26
(Notices), a notice of the occurrence of such event, which shall specify the
event and the consequences of the event to holders of Rights under Section
11(a)(ii), and (ii) all references
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in the preceding paragraph to Preferred Stock shall be deemed thereafter to
refer to Common Stock and/or, if appropriate, other securities.
Section 26. Notices. Notices or demands authorized by this Agreement to
be given or made by the Rights Agent or by the holder of any Rights Certificate
to or on the Company shall be sufficiently given or made if sent by telecopier
(with receipt confirmed) or by first-class mail, postage prepaid, addressed
(until another address is filed in writing with the Rights Agent) as follows:
Pegasus Systems, Inc.
0000 Xxxxxx Xxxxx Xxxxxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Telecopier: (000) 000-0000
Subject to the provisions of Section 21 (Change of Rights Agent), any notice or
demand authorized by this Agreement to be given or made by the Company or by the
holder of any Rights Certificate to or on the Rights Agent shall be sufficiently
given or made if sent by telecopier (with receipt confirmed) or by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Company) as follows:
AMERICAN SECURITIES TRANSFER & TRUST, INC.
0000 Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000-0000
Telecopier: (000) 000-0000
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Common Stock) shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed to such holder at the address of
such holder as shown on the registry books of the Company.
Section 27. Supplements and Amendments. Prior to the Distribution Date
and subject to the penultimate sentence of this Section 27, 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; provided, however, that any supplement or
amendment of this Agreement after the Stock Acquisition Date must be approved by
a majority of the entire Board. From and after the Distribution Date and subject
to the penultimate sentence of this Section 27, the Company and the Rights Agent
shall, if the Company so directs, supplement or amend this Agreement without the
approval of any holders of Rights Certificates in order (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 or (iv) to change or supplement
the provisions hereunder in any manner which the Company may deem necessary or
desirable and which shall not adversely affect the interests of the holders of
Rights Certificates (other than an Acquiring
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Person or an Affiliate or Associate of any such Acquiring Person); 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; provided further, that any supplement or amendment of this Agreement
after the Stock Acquisition Date must be approved by a majority of the entire
Board. Upon the delivery of a certificate from an appropriate officer of the
Company which states that the proposed supplement or amendment is in compliance
with the terms of this Section 27, the Rights Agent shall execute such
supplement or amendment. Notwithstanding anything contained in this Agreement to
the contrary, no supplement or amendment shall be made which changes the
Redemption Price, the Final Expiration Date, the Purchase Price, or the number
of one one-thousandth of a share of Preferred Stock for which a right is
exercisable; provided, however, that at any time prior to (i) the existence of
an Acquiring Person or (ii) the date that a tender or exchange offer by any
Person (other than the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or any Subsidiary of the Company, or any Person or
entity organized, appointed or established by the Company for or pursuant to the
terms of any such plan) is first published or sent or given within the meaning
of Rule 14d-2(a) of the General Rules and Regulations under the Exchange Act, if
upon consummation thereof, such Person would be the Beneficial Owner of 20% or
more of the shares of Common Stock then outstanding, the Board may amend this
Agreement to increase the Purchase Price or extend the Final Expiration Date.
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 28. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 29. Determinations and Actions by the Board of Directors, etc.
For all purposes of this Agreement, any calculation of the number of shares of
Common Stock outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding shares of Common Stock
of which any Person is the Beneficial Owner, shall be made in accordance with
the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations
under the Exchange Act. The Board shall have the exclusive power and authority
to administer this Agreement and to exercise all rights and powers specifically
granted to the 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 (y) below, all omissions with
respect to the foregoing) which are done or made by the Board in good faith,
shall (x) be final, conclusive and binding on the Company, the Rights Agent, the
holders of the Rights and all other parties, and (y) not subject the Board to
any liability to the holders of the Rights.
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45
Section 30. Benefits of this Agreement. Nothing in this Agreement shall
be construed to give to any Person other than the Company, the Rights Agent and
the registered holders of the Rights Certificates (and, prior to the
Distribution Date, registered holders of the Common Stock) any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the Distribution
Date, registered holders of the Common Stock).
Section 31. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board determines
in its good faith judgment that severing the invalid language from this
Agreement would adversely affect the purpose or effect of this Agreement, the
right of redemption set forth in Section 23 (Redemption and Termination) shall
be reinstated and shall not expire until the Close of Business on the tenth
Business Day following the date of such determination by the Board.
Section 32. Governing Law. This Agreement, each Right and each Rights
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts made
and to be performed entirely within such State.
Section 33. Counterparts. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
Section 34. Descriptive Headings. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
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46
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
Attest: PEGASUS SYSTEMS, INC.
By: /s/ XXX X. XXXXX By: /s/ XXXX X. XXXXX, III
--------------------------------- ------------------------------
Xxx X. Xxxxx Xxxx X. Xxxxx, III
General Counsel and Secretary President and Chief
Executive Officer
AMERICAN SECURITIES TRANSFER
& TRUST, INC.
By: By: /s/ XXXXX X. XXXXXXXX
--------------------------------- ------------------------------
Name: Name: XXXXX X. XXXXXXXX
Title: Title: Vice President/
Trust Officer
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EXHIBIT 1
CERTIFICATE OF
DESIGNATION, PREFERENCES AND RIGHTS OF
SERIES A PREFERRED STOCK
OF
PEGASUS SYSTEMS, INC.
Pursuant to the provisions of
Subchapter V, Section 151(g) of the Delaware General Corporation Law ("DGCL"),
the undersigned, Xxxx X. Xxxxx, III, Chief Executive Officer and President of
Pegasus Systems, Inc. (the "Corporation"), a corporation organized and existing
under the DGCL, DOES HEREBY CERTIFY:
That pursuant to the authority
conferred upon the Board of Directors (the "Board") by the Second Amended and
Restated Articles of Incorporation of the Corporation, as amended, the said
Board on September 28, 1998, adopted the following resolutions creating a series
of one hundred thousand shares of Preferred Stock, $.01 par value per share,
designated as Series A Preferred Stock:
RESOLVED, that, pursuant to the
authority vested in the Board in accordance with the provisions of its Second
Amended and Restated Articles of Incorporation, as amended, the Board does
hereby create, authorize and provide for the issuance upon the exercise of the
Corporation's Preferred Stock Purchase Rights, of a series of Preferred Stock of
the Corporation, and does hereby fix and state that the designations, amounts,
powers, preferences and relative and other special rights and the
qualifications, limitations or restrictions thereof are as follows:
Series A Preferred Stock
Section 1. Designation and Amount.
The shares of such series shall be designated as Series A Preferred Stock and
the number of shares constituting such series shall be 100,000.
Section 2. Dividends and
Distributions.
(A) Subject to the prior
and superior rights of the holders of any shares of any series of Preferred
Stock ranking prior and superior to the shares of Series A Preferred Stock with
respect to dividends, the holders of shares of Series A Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors out of
funds legally available for that purpose, quarterly dividends payable in cash on
the 1st day of November, February, May, and August in each year commencing
November 1, 1998 (each such date being referred to herein as a "Quarterly
Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date
after the first issuance of a share or fraction of a share of Series A Preferred
Stock, in an amount per share rounded to the nearest cent equal to the
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48
greater of (a) $0.10 or (b) subject to the provision for adjustment hereinafter
set forth, one thousand (1,000) times the aggregate per share amount of all cash
dividends, and one thousand (1,000) times the aggregate per share amount
(payable in kind) of all non-cash dividends or other distributions other than a
dividend payable in shares of the common stock of the Corporation, $.01 par
value per share ("the Common Stock"), or a subdivision of the outstanding shares
of Common Stock (by reclassification or otherwise), declared on the Common
Stock, since the immediately preceding Quarterly Dividend Payment Date, or, with
respect to the first Quarterly Dividend Payment Date, since the first issuance
of any share or fraction of a share of Series A Preferred Stock. In the event
the Corporation shall at any time after September 28, 1998 (the "Rights
Declaration Date") (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the amount to which holders of shares of Series A Preferred Stock were entitled
immediately prior to such event under clause (b) of the preceding sentence shall
be adjusted by multiplying such amount by a fraction the numerator of which is
the number of shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) The Corporation shall
declare a dividend or distribution on the Series A Preferred Stock as provided
in paragraph (A) above 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
$0.10 per share on the Series A Preferred Stock shall nevertheless be payable on
such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin
to accrue and be cumulative on outstanding shares of Series A Preferred Stock
from the Quarterly Dividend Payment Date next preceding the date of issue of
such shares of Series A Preferred Stock, unless the date of issue of such shares
is prior to the record date for the first Quarterly Dividend Payment Date, in
which case dividends on such shares shall begin to accrue from the date of issue
of such shares, or unless the date of issue is a Quarterly Dividend Payment Date
or is a date after the record date for the determination of holders of shares of
Series A Preferred Stock entitled to receive a quarterly dividend and before
such Quarterly Dividend Payment Date, in either of which events such dividends
shall begin to accrue and be cumulative from such Quarterly Dividend Payment
Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on
the shares of Series A Preferred Stock in an amount less than the total amount
of such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at the time
outstanding. The Board of Directors may fix a record date for the determination
of holders of shares of Series A Preferred Stock entitled to receive payment of
a dividend or distribution declared thereon, which record date shall be no more
than thirty (30) days prior to the date fixed for the payment thereof.
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49
Section 3. Voting Rights.
The holders of shares of Series A Preferred Stock shall have the following
voting rights:
(A) Subject to the
provision for adjustment hereinafter set forth, each share of Series A Preferred
Stock shall entitle the holder thereof to one thousand (1,000) votes on all
matters submitted to a vote of the stockholders of the Corporation. In the event
the Corporation shall at any time after the Rights Declaration Date (i) declare
any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide
the outstanding Common Stock, or (iii) combine the outstanding Common Stock into
a smaller number of shares, then in each such case the number of votes per share
to which holders of shares of Series A Preferred Stock were entitled immediately
prior to such event shall be adjusted by multiplying such number by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(B) Except as otherwise
provided herein or by law, the holders of shares of Series A Preferred Stock and
the holders of shares of Common Stock shall vote together as one class on all
matters submitted to a vote of stockholders of the Corporation. Except as
otherwise provided herein or by law, the holders of the shares of Series A
Preferred Stock shall not be entitled to vote as a separate class on any matters
submitted to a vote of the stockholders.
(C) (i) If at any time
dividends on any Series A Preferred Stock shall be in arrears in an amount equal
to six (6) quarterly dividends thereon, the holders of the Series A Preferred
Stock, voting as a separate series from all other series of Preferred Stock and
classes of capital stock, shall be entitled to elect two members of the Board of
Directors in addition to any directors elected by any other series, class or
classes of securities, and the authorized number of directors will automatically
be increased by two. Promptly thereafter, the Board of Directors of this
Corporation shall, as soon as may be practicable, call a special meeting of
holders of Series A Preferred Stock for the purpose of electing such members of
the Board of Directors. Said special meeting shall in any event be held within
45 days of the occurrence of such arrearage.
(ii) During any period
when the holders of Series A Preferred Stock, voting as a separate series, shall
be entitled and shall have exercised their right to elect two directors, then
and during such time as such right continues (a) the then authorized number of
directors shall be increased by two, and the holders of Series A Preferred
Stock, voting as a separate series, shall be entitled to elect the additional
directors so provided for, and (b) each such additional director shall not be a
member of any existing class of the Board of Directors, but shall serve until
the next annual meeting of stockholders for the election of directors, or until
his successor shall be elected and shall qualify, or until his right to hold
such office terminates pursuant to the provisions of this Section 3(C).
(iii) A director elected
pursuant to the terms hereof may be removed with or without cause by the holders
of Series A Preferred Stock entitled to vote in an election of such Director.
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(iv) If during any
interval between annual meetings of stockholders for the election of directors
and while the holders of Series A Preferred Stock shall be entitled to elect two
directors, there is no such director in office by reason of resignation, death
or removal, then, promptly thereafter, the Board of Directors shall call a
special meeting of the holders of Series A Preferred Stock for the purpose of
filling such vacancy and such vacancy shall be filled at such special meeting.
Such special meeting shall in any event be held within 90 days of the occurrence
of such vacancy, unless an annual meeting of stockholders is scheduled during
such 90-day period.
(v) At such time as the
arrearage is fully cured, and all dividends accumulated and unpaid on any shares
of Series A Preferred Stock outstanding are paid, and, in addition thereto, at
least one regular dividend has been paid subsequent to curing such arrearage,
the term of office of any directors elected pursuant to this Section 3(C), or
his successor, shall automatically terminate, and the authorized number of
directors shall automatically decrease by two, the rights of the holders of the
shares of the Series A Preferred Stock to vote as provided in this Section 3(C)
shall cease, subject to renewal from time to time upon the same terms and
conditions, and the holders of shares of the Series A Preferred Stock shall have
only the limited voting rights elsewhere herein set forth.
(D) Except as set forth herein,
holders of Series A Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent they are entitled to
vote with holders of Common Stock as set forth herein) for taking any corporate
action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends
or other dividends or distributions payable on the Series A Preferred Stock as
provided in Section 2 are in arrears, thereafter and until all accrued and
unpaid dividends and distributions, whether or not declared, on shares of Series
A Preferred Stock outstanding shall have been paid in full, the Corporation
shall not:
(i) declare or pay
dividends on, make any other distributions on, or redeem or purchase or
otherwise acquire for consideration any shares of stock ranking junior (either
as to dividends or upon liquidation, dissolution or winding up) to, the Series A
Preferred Stock;
(ii) declare or pay
dividends on, or make any other distributions on, any shares of stock ranking
junior (either as to dividends or upon liquidation, dissolution or winding up)
to the Series A Preferred Stock, except dividends paid ratably on the Series A
Preferred Stock and all such junior stock on which dividends are payable or in
arrears in proportion to the total amounts to which the holders of all such
shares are then entitled;
(iii) redeem or purchase
or otherwise acquire for consideration shares of any stock ranking on a parity
(either as to dividends
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or upon liquidation, dissolution or winding up) with the Series A Preferred
Stock, provided that the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such parity stock in exchange for shares of any
stock of the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A Preferred Stock; or
(iv) purchase or otherwise
acquire for consideration any shares of Series A Preferred Stock, or any shares
of stock ranking on a parity with the Series A 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 4, purchase or otherwise acquire such
shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
to be created by resolution or resolutions of the Board of Directors, subject to
the conditions and restrictions on issuance set forth herein.
Section 6. Liquidation, Dissolution or Winding Up.
(A) Upon any liquidation
(voluntary or otherwise), dissolution or winding up of the Corporation, no
distribution shall be made to the holders of shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or winding up) to the
Series A Preferred Stock unless, prior thereto, the holders of shares of Series
A Preferred Stock shall have received $180.00 per share, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not declared,
to the date of such payment (the "Series A Liquidation Preference").
Notwithstanding any provision of the Second Amended and Restated Articles of
Incorporation, as amended, to the contrary, following the payment of the full
amount of the Series A Liquidation Preference, no additional distributions shall
be made to the holders of shares of Series A Preferred Stock unless, prior
thereto, the holders of shares of Common Stock shall have received an amount per
share (the "Common Adjustment") equal to the quotient obtained by dividing (i)
the Series A Liquidation Preference by (ii) one thousand (1,000) (as
appropriately adjusted as set forth in paragraph (C) of this Section to reflect
such events as stock splits, stock dividends and recapitalizations with respect
to the Common Stock) (such number in clause (ii) immediately above being
referred to as the "Adjustment Number"). Following the payment of the full
amount of the Series A Liquidation Preference and the Common Adjustment in
respect of all outstanding shares of Series A Preferred Stock and Common Stock,
respectively, holders of Series A Preferred Stock and holders of shares of
Common Stock shall receive their ratable and proportionate share of the
remaining assets to
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52
be distributed in the ratio of the Adjustment Number to one (1) with respect to
such Preferred Stock and Common Stock, on a per share basis, respectively.
(B) In the event, however,
that there are not sufficient assets available to permit payment in full of the
Series A Liquidation Preference and the liquidation preferences of all other
series of preferred stock, if any, which rank on a parity with the Series A
Preferred Stock, then such remaining assets shall be distributed ratably to the
holders of such parity shares in proportion to their respective liquidation
preferences. In the event, however, that there are not sufficient assets
available to permit payment in full of the Common Adjustment, then such
remaining assets shall be distributed ratably to the holders of Common Stock.
(C) In the event the
Corporation shall at any time after the Rights Declaration Date (i) declare any
dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock, or (iii) combine the outstanding Common Stock into a
smaller number of shares, then in each such case the Adjustment Number in effect
immediately prior to such event shall be adjusted by multiplying such Adjustment
Number by a fraction the numerator of which is the number of shares of 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.
Section 7. 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,
securities, cash or any other property, then in any such case the shares of
Series A Preferred Stock shall at the same time be similarly exchanged or
changed in an amount per share (subject to the provision for adjustment
hereinafter set forth) equal to one thousand (1,000) times the aggregate amount
of stock, securities, cash and/or any other property (payable in kind), as the
case may be, into which or for which each share of Common Stock is changed or
exchanged. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (ii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the amount set forth in the preceding sentence with respect to the exchange or
change of shares of Series A Preferred Stock shall be adjusted by multiplying
such amount by a fraction the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding immediately
prior to such event.
Section 8. Redemption. The outstanding shares of Series A Preferred Stock
may be redeemed at the option of the Board of Directors as a whole, but not in
part, at any time, or from time to time, at a cash price per share equal to one
hundred five percent (105%) of (i) the product of the Adjustment Number times
the Average Market Value (as such term is hereinafter defined) of the Common
Stock, plus (ii) all dividends which on the redemption date have accrued on the
shares to be redeemed and have not been paid, or declared and a sum sufficient
for the payment thereof set apart, without interest. The "Average Market Value"
is the average of the closing sale prices of the Common Stock during the thirty
(30) day period immediately preceding
6
53
the date before the redemption date on the Composite Tape for New York Stock
Exchange Listed Stocks, or, if such stock is not quoted on the Composite Tape,
on the New York Stock Exchange, or, if such stock is not listed on such
Exchange, on the principal United States securities exchange registered under
the Securities Exchange Act of 1934, as amended, on which such stock is listed,
or, if such stock is not listed on any such exchange, the average of the closing
sale prices with respect to a share of Common Stock during such thirty (30) day
period, as quoted on the Nasdaq National Market, the Nasdaq Small Cap Market or
any system then in use, or if no such quotations are available, the fair market
value of the Common Stock as determined by the Board of Directors in good faith.
Section 9. Ranking. The Series A Preferred Stock shall rank junior to all
other series of the Corporation's Preferred Stock as to the payment of dividends
and the distribution of assets, unless the terms of any such series shall
provide otherwise.
Section 10. Amendment. Except as otherwise provided in the Second Amended
and Restated Articles of Incorporation, as amended, or by law, the Second
Amended and Restated Articles of Incorporation of the Corporation, as amended,
shall not be further amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series A Preferred Stock
so as to affect them adversely without the affirmative vote of the holders of a
majority or more of the outstanding shares of Series A Preferred Stock, voting
separately as a class.
Section 11. Fractional Shares. At the Corporation's sole discretion,
Series A Preferred Stock may be issued in fractions of a share which shall
entitle the holder, in proportion to such holder's fractional shares, to
exercise voting rights, receive dividends, participate in distributions and to
have the benefit of all other rights of holders of Series A Preferred Stock.
IN WITNESS WHEREOF, the undersigned has executed and subscribed this
Certificate and does affirm the foregoing as true as of September 28, 1998.
---------------------------
Xxxx X. Xxxxx, III
Chief Executive Officer and
President
Attest:
---------------------------------------------
Xxx X. Xxxxx
General Counsel and Secretary
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EXHIBIT 2
[FORM OF RIGHTS CERTIFICATE]
Certificate No. R Rights
---- ------
NOT EXERCISABLE AFTER THE EARLIER OF OCTOBER 13, 2008 OR SUCH DATE AS THE RIGHTS
REPRESENTED HEREBY ARE REDEEMED BY PEGASUS SYSTEMS, INC. (THE "CORPORATION").
THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE SUBJECT TO REDEMPTION, AT
THE OPTION OF THE CORPORATION, AT $0.01 PER RIGHT ON THE TERMS SET FORTH IN THE
RIGHTS AGREEMENT DATED AS OF SEPTEMBER 28, 1998, BY AND BETWEEN THE CORPORATION
AND AMERICAN SECURITIES TRANSFER & TRUST, INC., AS RIGHTS AGENT (THE "RIGHTS
AGREEMENT"). UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN
ACQUIRING PERSON (AS SUCH TERM IS DEFINED IN THE RIGHTS AGREEMENT) AND ANY
SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS
REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A
PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN
ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT).
ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY
BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) (EXERCISE OF
RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS -- TERMINATION OF ACQUIRING
PERSON'S RIGHTS) OF SUCH AGREEMENT.](1)
RIGHTS CERTIFICATE
PEGASUS SYSTEMS, INC.
This certifies that ___________________________________, or its, his or
her 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 September 28,
1998 (the "Rights Agreement"), between Pegasus Systems, Inc., a Delaware
corporation (the "Corporation"), and American Securities Transfer & Trust, Inc.,
a Colorado corporation (the "Rights Agent"), to purchase from the Corporation at
any time prior to 5:00 P.M. (Dallas, Texas time) on October 13, 2008 at the
office or offices of the Rights Agent designated for such purpose, or its
successors as Rights Agent, one one-thousandth (1/1,000) of a fully paid,
nonassessable share of Series A Preferred Stock (the "Preferred Stock") of the
Corporation, at a purchase price of $90.00 per one one-thousandth (1/1,000) of a
share (the "Purchase Price"), upon
------------------------
(1) The portion of the legend in brackets shall be inserted only if applicable
and shall replace the preceding sentence.
1
55
presentation and surrender of this Rights Certificate with the Form of Election
to Purchase and related Certificate duly executed. The number of Rights
evidenced by this Rights Certificate (and the number of shares which may be
purchased upon exercise thereof) set forth above, and the Purchase Price set
forth above, are the number and Purchase Price as of _____________, ______,
based on the Preferred Stock as constituted at such date. The Corporation
reserves the right to require, prior to the occurrence of a Triggering Event (as
such term is defined in the Rights Agreement), that upon any exercise of Rights,
a number of Rights be exercised so that only whole shares of Preferred Stock
would be issued.
Upon the occurrence of a Flip-in Event (as such term is defined in the
Rights Agreement), if the Rights evidenced by this Rights Certificate are
beneficially owned by (i) an Acquiring Person or an Associate or Affiliate or
any such Person (as such terms are defined in the Rights Agreement), (ii) a
transferee of an Acquiring Person or its Associate or Affiliate who becomes a
transferee after such Acquiring Person or its Associate or Affiliate becomes
such, or (iii) under certain circumstances specified in the Rights Agreement, a
transferee of an Acquiring Person or its Associate or Affiliate who becomes a
transferee prior to or concurrently with the Acquiring Person becoming such,
such Rights shall become null and void and no holder hereof shall have any right
with respect to such Rights from and after the occurrence of such Flip-in Event.
As provided in the Rights Agreement, the Purchase Price and the number
and kind of shares of Preferred Stock or other securities, which may be
purchased upon the exercise of the Rights evidenced by this Rights Certificate
are subject to modification and adjustment upon the happening of certain events,
including Triggering Events (as such term is defined in the Rights Agreement).
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Corporation and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the above-mentioned office of the
Rights Agent and are also available upon written request to the Rights Agent.
This Rights Certificate, with or without other Rights Certificates, upon
surrender at the principal office or offices of the Rights Agent designated for
such purpose, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of one one-thousandth of a share of Preferred
Stock as the Rights evidenced by the Rights Certificate or Rights Certificates
surrendered shall have entitled such holder to purchase. If this Rights
Certificate shall be exercised in part, the holder shall be entitled to receive
upon surrender hereof another Rights Certificate or Rights Certificates for the
number of whole Rights for which this Rights Certificate is not exercised.
2
56
Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Certificate (i) may be redeemed by the Corporation at its option at a
redemption price of $0.01 per Right at any time prior to the earlier of (a) the
Close of Business (as such term is defined in the Rights Agreement) on the tenth
(10th) Business Day (as such term is defined in the Rights Agreement) following
the Stock Acquisition Date (as such term is defined in the Rights Agreement) (as
such time period may be extended pursuant to the Rights Agreement) or (b) the
Final Expiration Date (as such term is defined in the Rights Agreement) and (ii)
may be exchanged in whole or in part for Preferred Stock, shares of the
Corporation's Common Stock, no par value, other property or any combination
thereof.
In addition, the Rights may be exchanged, in whole or in part, for shares
of the Common Stock, or shares of common stock equivalents of the Corporation
having essentially the same value or economic rights as such shares. Immediately
upon the action of the Board of Directors of the Corporation authorizing any
such exchange, and without any further action or any notice, the Rights (other
than Rights which are not subject to such exchange) will terminate and the
Rights will only enable holders to receive the shares issuable upon such
exchange.
No fractional shares of Preferred Stock will be issued upon the exercise
of any Right or Rights evidenced hereby (other than fractions which are integral
multiples of one one-thousandth (1/1,000) of a share of Preferred Stock, which
may, at the election of the Corporation, be evidenced by depositary receipts),
but a cash payment will be made in lieu thereof, as provided in the Rights
Agreement.
No holder of this Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of shares of Preferred Stock
or of any other securities of the Corporation 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 Corporation or any right to vote for the election of
directors or upon any matter submitted to stockholders of the Corporation 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 of the
Corporation (except as provided in the Rights Agreement), or to receive
dividends or subscription rights, or otherwise, until the Right or Rights
evidenced by this Rights Certificate shall have been exercised as provided in
the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
3
57
WITNESS the facsimile signature of the proper officers of the Corporation
and its corporate seal.
Dated as of
-----------------
ATTEST:
PEGASUS SYSTEMS, INC.
----------------------------
Secretary By:
-------------------------
Title:
Countersigned:
RIGHTS AGENT
By:
-------------------------
Authorized Signature
4
58
[FORM OF REVERSE SIDE OF RIGHTS CERTIFICATE]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED,_____________________________________________________________
hereby sells, assigns and transfers unto________________________________________
________________________________________________________________________________
(PLEASE PRINT NAME AND ADDRESS OF TRANSFEREE)
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ___________________________
Attorney, to transfer the within Rights Certificate on the books of the
within-named Corporation, with full power of substitution.
Dated:
----------------------- ------------------------------------
Signature
Signature Guaranteed:
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Rights Certificate [ ] is [ ] is not
being sold, assigned and transferred by or on behalf of a Person who is or was
an Acquiring Person or an Affiliate or Associate of an Acquiring Person (as such
terms are defined in the Rights Agreement); and
(2) after due inquiry and to the best
knowledge of the undersigned, it [ ] did [ ] did not acquire the Rights
evidenced by this Rights Certificate from any Person who is, was or subsequently
became an Acquiring Person or an Affiliate or Associate of an Acquiring Person.
Dated:
----------------------- ------------------------------------
Signature
Signature Guaranteed:
5
59
NOTICE
The signature to the foregoing Assignment and Certificate must correspond
to the name as written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any change whatsoever.
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to
exercise Rights represented by the
Rights Certificate.)
To: Pegasus Systems, Inc.
The undersigned hereby irrevocably elects to exercise _______________
Rights represented by this Rights Certificate to purchase the shares of
Preferred Stock issuable upon the exercise of the Rights (or such other
securities of the Corporation or of any other person which may be issuable upon
the exercise of the Rights) and requests that certificates for such shares be
issued in the name of and delivered to:
Please insert social security or
other identifying number
--------------------------------------------------------------------------------
(PLEASE PRINT NAME AND ADDRESS)
--------------------------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
Please insert social security or
other identifying number
--------------------------------------------------------------------------------
(PLEASE PRINT NAME AND ADDRESS)
--------------------------------------------------------------------------------
Dated:
----------------------- ------------------------------------
Signature
Signature Guaranteed:
6
60
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Rights
Certificate [ ] are [ ] are not being acquired or 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); and
(2) after due inquiry and to the best
knowledge of the undersigned, it [ ] did [ ] did not acquire the Rights
evidenced by this Rights Certificate from any Person who is, was or became an
Acquiring Person or an Affiliate or Associate of an Acquiring Person.
Dated:
----------------------- ------------------------------------
Signature
Signature Guaranteed:
NOTICE
The signature to the foregoing Election to Purchase and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
7
61
EXHIBIT 3
[PEGASUS SYSTEMS, INC. LETTERHEAD]
October 27, 1998
Dear Pegasus Systems Stockholders,
As you may be aware, on September 28, 1998, your Board of Directors
approved and adopted a Stockholder Rights Plan (the "Plan"). The Plan is
designed to prevent a potential acquiror from gaining control of Pegasus
Systems, Inc. (the "Company") without fairly compensating all of its
stockholders. It provides for a dividend distribution of one preferred stock
purchase right (a "Right") for each outstanding share of common stock of the
Company held on October 13, 1998.
The Rights will initially trade with shares of the Company's common stock
and will have no impact on the way in which the Company's shares are traded. At
the outset of the Plan, there are no separate certificates or market for the
Rights. The Rights will not become exercisable and trade separately from the
common stock until the earlier of (i) ten business days after a public
announcement that a person has acquired 20% or more of the common stock of the
Company or (ii) ten business days (or any later date determined by the Company's
Board of Directors) after a person makes a tender or exchange offer for 20% or
more of the Company's common stock.
Pertinent details of the Plan are described in the attached Summary of
Rights To Purchase Preferred Stock, which we urge you to read carefully.
The adoption of the Plan is intended to help assure that any potential
acquiror seeking to obtain control of the Company will pay full and fair value
to all stockholders. The Rights are not intended to prevent any takeover or
proxy contest for control of the Company, but rather to increase the ability of
your Board effectively to represent the best interests of stockholders in the
event of an unsolicited attempt to acquire the Company. We are not aware of any
effort to acquire the Company, but we remain concerned about the possibility of
a takeover attempt that might include coercive and unfair tactics that do not
result in a fair price being paid to all stockholders. As a prudent response to
such a possibility, your Board has authorized the issuance of the Rights. Since
1985, over 2,500 companies have adopted similar plans, indicating widespread
agreement that such plans can help directors deflect coercive and inadequate
offers.
1
62
Issuance of the Rights will not have a dilutive effect, will not affect
reported earnings per share and should not cause the Company or you to recognize
gain for federal income tax purposes. In addition, the Plan does not weaken the
financial strength of the Company or interfere with its business plans.
A copy of the Plan has been filed with the Securities and Exchange
Commission and is available free of charge from the Company.
Your Board of Directors and management are enthusiastic about the
potential for the Company and are committed to serving the best interests of the
Company's stockholders. The Board believes that the Plan represents a sound and
reasonable means of addressing the complex problems created by the possibility
of unfair takeover attempts. Accordingly, we take great satisfaction in
providing these new Rights to you to preserve the long-term value of your
investment in the Company.
Respectfully,
-------------------------
Xxx X. Xxxxx
General Counsel
Attachment
2
63
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED STOCK
On September 28, 1998, the Board of Directors of PEGASUS SYSTEMS, INC. (the
"Company") declared a dividend distribution of one Right for each outstanding
share of the Company's common stock, $.01 par value (the "Common Stock"), to
stockholders of record at the close of business on October 13, 1998. This
dividend distribution will be made on or about October 27, 1998. Each Right
entitles the registered holder to purchase from the Company one one-thousandth
(1/1,000th) of a share of Series A Preferred Stock, $.01 par value (the
"Preferred Stock"), at a Purchase Price of $90.00 per one one-thousandth
(1/1,000th) of a share, subject to adjustment. The description and terms of the
Rights are set forth in a Rights Agreement (the "Rights Agreement") between the
Company and American Securities Transfer & Trust, Inc., a Colorado corporation,
as Rights Agent (the "Rights Agent").
Initially, the Rights will be attached to all Common Stock certificates
representing shares then outstanding, and no separate Rights Certificates will
be distributed. The Rights will separate from the Common Stock upon the earlier
of (i) ten (10) business days following a public announcement that a person or
group of affiliated or associated persons (an "Acquiring Person") has acquired,
or obtained the right to acquire, beneficial ownership of twenty percent (20%)
or more of the outstanding shares of Common Stock (the "Stock Acquisition
Date"), or (ii) ten (10) business days (or such later date as the Board of
Directors shall determine) following the commencement of a tender or exchange
offer that would result in a person or group beneficially owning twenty percent
(20%) or more of such outstanding shares of Common Stock. The date the Rights
separate is referred to as the "Distribution Date."
Until the Distribution Date, (i) the Rights will be evidenced by the Common
Stock certificates and will be transferred with and only with such Common Stock
certificates, (ii) new Common Stock certificates issued after October 13, 1998
will contain a notation incorporating the Rights Agreement by reference, and
(iii) the surrender for transfer of any certificates for Common Stock
outstanding will also constitute the transfer of the Rights associated with the
Common Stock represented by such certificates. Pursuant to the Rights Agreement,
the Company reserves the right to require prior to the occurrence of a
Triggering Event (as defined below) that, upon any exercise of Rights, a number
of Rights be exercised so that only whole shares of Preferred Stock will be
issued.
The Rights are not exercisable until the Distribution Date and will expire
at the close of business on October 13, 2008, unless earlier redeemed by the
Company as described below.
As soon as practicable after the Distribution Date, Rights Certificates
will be mailed to holders of record of the Common Stock as of the close of
business on the Distribution Date and, thereafter, the separate Rights
Certificates will represent the Rights. Except in connection with shares of
Common Stock issued or sold pursuant to the exercise of stock options under any
employee plan or arrangement, or upon the exercise, conversion or exchange of
securities
64
hereafter issued by the Company, or as otherwise determined by the Board of
Directors, only shares of Common Stock issued prior to the Distribution Date
will be issued with Rights.
In the event that (i) the Company is the surviving corporation in a merger
or other business combination with an Acquiring Person (or any associate or
affiliate thereof) and its Common Stock remains outstanding and unchanged, (ii)
any person shall acquire beneficial ownership of more than twenty percent (20%)
of the outstanding shares of Common Stock (except pursuant to (A) certain
consolidations or mergers involving the Company or sales or transfers of the
combined assets, cash flow or earning power of the Company and its subsidiaries
or (B) an offer for all outstanding shares of Common Stock at a price and upon
terms and conditions which a majority of the Board of Directors determines to be
in the best interests of the Company and its stockholders), or (iii) there
occurs a reclassification of securities, a recapitalization of the Company or
any of certain business combinations or other transactions (other than certain
consolidations and mergers involving the Company and sales or transfers of the
combined assets, cash flow or earning power of the Company and its subsidiaries)
involving the Company or any of its subsidiaries which has the effect of
increasing by more than one percent (1%) the proportionate share of any class of
the outstanding equity securities of the Company or any of its subsidiaries
beneficially owned by an Acquiring Person (or any associate or affiliate
thereof), each holder of a Right (other than the Acquiring Person and certain
related parties) will thereafter have the right to receive, upon exercise,
Common Stock (or, in certain circumstances, cash, property or other securities
of the Company) having a value equal to two times the Purchase Price of the
Right. However, Rights are not exercisable following the occurrence of either of
the events described above until such time as the Rights are no longer
redeemable by the Company as described below. Notwithstanding any of the
foregoing, following the occurrence of any of the events described in this
paragraph, all Rights that are, or (under certain circumstances specified in the
Rights Agreement) were, beneficially owned by any Acquiring Person will be null
and void.
For example, at a Purchase Price of $90.00 per Right, each Right not owned
by an Acquiring Person (or by certain related parties or transferees) following
an event set forth in the preceding paragraph would entitle its holder to
purchase $180.00 worth of Common Stock (or other consideration, as noted above)
for $90.00.
In the event that, at any time following the Stock Acquisition Date, (i)
the Company shall enter into a merger or other business combination transaction
in which the Company is not the surviving corporation, (ii) the Company is the
surviving corporation in a consolidation, merger or similar transaction pursuant
to which all or part of the outstanding shares of Common Stock are changed into
or exchanged for stock or other securities of any other person or cash or any
other property or (iii) more than 50% of the combined assets, cash flow or
earning power of the Company and its subsidiaries is sold or transferred (in
each case other than certain consolidations with, mergers with and into, or
sales of assets, cash flow or earning power by or to subsidiaries
-2-
65
of the Company as specified in the Rights Agreement), each holder of a Right
(except Rights which previously have been voided as set forth above) shall
thereafter have the right to receive, upon exercise, common stock of the
acquiring company having a value equal to two times the Purchase Price of the
Right. The events described in this paragraph and in the second preceding
paragraph are referred to as the "Triggering Events."
The Purchase Price payable, the number and kind of shares covered by each
Right and the number of Rights outstanding are subject to adjustment from time
to time to prevent dilution (i) in the event of a stock dividend on, or a
subdivision, combination or reclassification of, the Preferred Stock, (ii) if
holders of the Preferred Stock are granted certain rights, options or warrants
to subscribe for Preferred Stock or securities convertible into Preferred Stock
at less than the current market price of the Preferred Stock, or (iii) upon the
distribution to holders of the Preferred Stock of evidences of indebtedness,
cash (excluding regular quarterly cash dividends), assets (other than dividends
payable in Preferred Stock) or subscription rights or warrants (other than those
referred to in clause (ii) immediately above).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least one percent (1%) of the
Purchase Price. No fractional shares of Preferred Stock are required to be
issued (other than fractions which are integral multiples of one one-thousandth
(1/1,000th) of a share of Preferred Stock) and, in lieu thereof, the Company may
make an adjustment in cash based on the market price of the Preferred Stock on
the trading date immediately prior to the date of exercise.
At any time after any person or group becomes an Acquiring Person and prior
to the acquisition by such person or group of fifty percent (50%) or more of the
outstanding shares of Common Stock, the Board of Directors of the Company may,
without payment of the Purchase Price by the holder, exchange the Rights (other
than Rights owned by such person or group, which will become void), in whole or
in part, for shares of Common Stock at an exchange ratio of one-half (1/2) the
number of shares of Common Stock (or in certain circumstances Preferred Stock)
for which a Right is exercisable immediately prior to the time of the Company's
decision to exchange the Rights (subject to adjustment).
At any time until ten (10) business days following the Stock Acquisition
Date, the Company may redeem the Rights in whole, but not in part, at a price of
$0.01 per Right (payable in cash, shares of Common Stock or other consideration
deemed appropriate by the Board of Directors). Immediately upon the action of
the Board of Directors ordering redemption of the Rights, the Rights will
terminate and the only right of the holders of Rights will be to receive the
$0.01 redemption price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends. While
-3-
66
the distribution of the Rights will not be taxable to stockholders or to the
Company, stockholders may, depending upon the circumstances, recognize taxable
income in the event that the Rights become exercisable for Common Stock (or
other consideration) of the Company or for common stock of an acquiring company
as set forth above or in the event that the Rights are redeemed.
Other than those provisions relating to the principal economic terms of the
Rights, any of the provisions of the Rights Agreement may be amended by the
Board of Directors of the Company prior to the Distribution Date; provided, that
any amendments after the Stock Acquisition Date must be approved by a majority
of the entire Board of Directors. After the Distribution Date, the provisions of
the Rights Agreement may be amended by the Board in order to cure any ambiguity,
inconsistency or defect, to make changes which do not adversely affect the
interest of holders of Rights (excluding the interest of any Acquiring Person)
or to shorten or lengthen any time period under the Rights Agreement; provided,
however, that no amendment to adjust the time period governing redemption shall
be made at such time as the Rights are not redeemable; and, provided, that any
amendments after the Stock Acquisition Date must be approved by a majority of
the entire Board of Directors.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A filed
on October , 1998. A copy of the Rights Agreement is available free of charge
from the Rights Agent. This summary description of the Rights does not purport
to be complete and is qualified in its entirety by reference to the Rights
Agreement, which is incorporated herein by reference.
-4-
67
EXHIBIT 4
FOR IMMEDIATE RELEASE
CONTACTS:
Xxxxxx Xxxxxx Xxxxx Xxxxxxx
Chief Financial Officer Corporate Communications
Pegasus Systems, Inc. Pegasus Systems, Inc.
(000) 000-0000 (000) 000-0000
xxxxxx@xxxxxx.xxx xxxxxx@xxxxxx.xxx
PEGASUS SYSTEMS' BOARD OF DIRECTORS AUTHORIZES STOCK REPURCHASE
AND STOCKHOLDER PROTECTION PLAN
DALLAS -- SEPTEMBER 28, 1998 -- Pegasus Systems, Inc. (Nasdaq: PEGS) today
announced its Board of Directors authorized the repurchase of shares of the
Company's common stock from time to time in an aggregate amount of up to $6
million. The Board also authorized the activation of a stockholder protection
plan designed to assure all Pegasus Systems stockholders receive fair and equal
treatment in the potentiality of any takeover attempt.
As of June 30, 1998, Pegasus Systems had 10,505,985 shares of common stock
outstanding. The Pegasus purchases may be made on the open market, in privately
negotiated transactions or otherwise, depending upon market conditions, share
availability and other factors. Shares repurchased may be reserved for later
reissue in connection with employee benefit plans, a potential exercise of
existing warrants to purchase shares of the Company's common stock and other
general corporate purposes.
"The Board of Directors believes the current valuation of Pegasus Systems'
common shares makes the stock a solid investment and represents an attractive
opportunity to enhance long-term shareholder value," said Xxxx X. Xxxxx III,
Pegasus Systems' chief executive officer. "The buyback authorization expresses
our confidence in the Company's strategic plan for future growth and sound
business fundamentals.
"Additionally, the rights issued under our stockholder plan are intended to
enable all Pegasus Systems stockholders to realize the long-term value of their
investment in the Company. Although the rights do not prevent a takeover, they
should encourage anyone seeking to acquire Pegasus Systems Inc. to negotiate
with the Board prior to attempting such a takeover. The rights also guard
against partial tender offers and other abusive tactics," Xxxxx continued. "At
this time, we are not aware of any takeover attempt."
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Pegasus Systems Stock Repurchase/Stockholder Protection Plan - Page 2
An overview of the Pegasus Systems stockholder protection plan is attached.
This news release contains statements relating to future results, which are
forward-looking statements regarding future events and the future financial
performance of the company. Actual results may differ materially from those
projected as a result of certain risks and uncertainties detailed in the
Company's periodic reports and registration statement filed with the Securities
and Exchange Commission, including without limitation the Form 10-K for the 1997
fiscal year of Pegasus Systems.
ABOUT PEGASUS SYSTEMS, INC.
Pegasus Systems, Inc. provides global electronic commerce and transaction
processing solutions to hotels, travel agencies, meetings and convention
planners, corporate travel departments and Internet businesses around the world
via its services that include: THISCO(TM), HCC(TM), TravelWeb(R), NetBooker(TM)
and Pegasus IQ(TM). The Company's THISCO, TravelWeb and NetBooker hotel room
reservation services improve the efficiency and effectiveness of the reservation
process by enabling travel agents and individual travelers to electronically
access hotel room inventory information and conduct reservation transactions.
The Company's HCC service, the global leader in hotel commission payment
processing, improves the efficiency and effectiveness of the commission payment
process for participating hotels and travel agencies by consolidating payments
and providing comprehensive transaction reports. Pegasus Systems' new Pegasus IQ
unit will provide data mining services for the hotel industry. Pegasus Systems
has its headquarters in Dallas, Texas and offices in Rockville, Maryland and
London, England. The company's stock is traded on the Nasdaq National Market
under the symbol PEGS.
# # #
69
PEGASUS SYSTEMS STOCKHOLDER PROTECTION PLAN OVERVIEW
ADOPTED September 28, 1998
The Board of Directors of Pegasus Systems, Inc. (the "Company") has declared a
dividend distribution of one preferred stock purchase right for each outstanding
share of the Company's common stock. Each right will entitle stockholders to buy
one one-thousandth of a share of the Company's Series A Preferred Stock for each
share of the Company's common stock held, at a price of $90.00. The rights will
be exercisable only if a person or group of affiliated or associated persons
acquires, or has announced the intent to acquire, 20% or more of the Company's
common stock.
The rights will provide for protection against self-dealing transactions by a
control stockholder. In case of acquisition through a merger or other business
combination, the rights will entitle holders to purchase a number of the
acquiring company's common shares having the market value at that time of twice
the rights exercise price. In the event of the acquisition or the announcement
of the intention to acquire 20% or more of the Company's common stock, rights
holders may, upon exercise, receive the Company's common shares having a market
value of two times the exercise price of the rights. Under similar
circumstances, the Board of Directors may exchange each right for shares of the
Company's common stock at an exchange ratio of one half the number of shares of
common stock (or in certain circumstances preferred stock) for which a right is
exercisable immediately prior to the time of the Company's decision to exchange
the rights.
The rights plan will not prevent tender offers or other takeover attempts.
However, it will enable stockholders to realize the long-term value of the
Company's common stock in the event of a takeover. It is the Company's belief
that the plan will cause anyone contemplating a takeover of the Company to first
discuss its plans with the Board of Directors.
The Company is entitled to redeem the rights in whole, but not in part, at a
price of $.01 per right at any time prior to the acquisition of 20% or more of
the Company's common stock.
The dividend distribution will be made to stockholders of record on October 13,
1998. The rights will be evidenced by, and transferred with, the Company's
common stock certificates until such time as the acquisition of, or the
announcement of the intention to acquire, 20% or more of the Company's common
stock. If either event were to occur, separate rights certificates would be
mailed to stockholders as soon as practicable.
# # #
