EXHIBIT 4.2
================================================================================
AMENDED AND RESTATED
STOCKHOLDER PROTECTION RIGHTS AGREEMENT
dated as of
November 1, 2001
Between
COVAD COMMUNICATIONS GROUP, INC.
And
MELLON INVESTOR SERVICES LLC,
as Rights Agent
================================================================================
AMENDED AND RESTATED
--------------------
STOCKHOLDER PROTECTION RIGHTS AGREEMENT
---------------------------------------
AMENDED AND RESTATED STOCKHOLDER PROTECTION RIGHTS AGREEMENT (as amended
from time to time, this "Agreement"), dated as of November 1, 2001, between
COVAD COMMUNICATIONS GROUP, INC., a Delaware corporation (the "Company"), and
MELLON INVESTOR SERVICES, LLC, a New Jersey limited liability company, as Rights
Agent (the "Rights Agent", which term shall include any successor Rights Agent
hereunder).
WITNESSETH:
WHEREAS, the Board of Directors of the Company (the "Board of Directors")
has (a) authorized and declared a dividend of one right ("Right") in respect of
each share of Common Stock (as hereinafter defined) and Class B Common Stock (as
hereinafter defined) held of record as of the close of business on February 15,
2000 (the "Record Time") and (b) authorized the issuance of one Right in respect
of each share of Common Stock and Class B Common Stock issued after the Record
Time and prior to the Separation Time (each as hereinafter defined) and, to the
extent provided in Section 5.3, each share of Common Stock and Class B Common
Stock issued after the Separation Time;
WHEREAS, subject to the terms hereof, each Right entitles the holder
thereof, after the Separation Time, to purchase securities of the Company (or,
in certain cases, of certain other entities) pursuant to the terms and subject
to the conditions set forth herein; and
WHEREAS, the Company executed and entered into the Rights Agreement (as
defined in the legend set forth in Section 2.2 below) with BankBoston, N.A. The
Board of Directors of the Company has determined to amend and restate the Rights
Agreement to reflect the appointment of Mellon Investor Services LLC, as
successor Rights Agent to BankBoston, N.A., as well as certain changes requested
by Mellon regarding the rights, duties and obligations of the Rights Agent and
certain other updating and conforming changes.
NOW THEREFORE, in consideration of the premises and the respective
agreements set forth herein, the parties hereby agree as follows:
ARTICLE I.
CERTAIN DEFINITIONS
-------------------
1.1. Certain Definitions. For purposes of this Agreement, the following
-------------------
terms have the meanings indicated:
"Acquiring Person" shall mean any Person who is a Beneficial Owner of
15% or more of the outstanding shares of Common Stock; provided, however, that
the term "Acquiring Person" shall not include any Person (i) who shall become
the Beneficial Owner of 15% or more of the outstanding shares of Common Stock
solely as a result of an acquisition by the Company of shares of Common Stock,
until such time thereafter as such Persons shall become the Beneficial Owner
(other than by means of a stock dividend or
- 1 -
stock split) of any additional shares of Common Stock, (ii) who is the
Beneficial Owner of 15% or more of the outstanding shares of Common Stock but
who acquired Beneficial Ownership of shares of Common Stock without any plan or
intention to seek or affect control of the Company, if such Person promptly
enters into an irrevocable commitment promptly to divest, and thereafter
promptly divests (without exercising or retaining any power, including voting,
with respect to such shares), sufficient shares of Common Stock (or securities
convertible into, exchangeable into or exercisable for Common Stock) so that
such Person ceases to be the Beneficial Owner of 15% or more of the outstanding
shares of Common Stock or (iii) who Beneficially Owns shares of Common Stock
consisting solely of one or more of (A) shares of Common Stock Beneficially
Owned pursuant to the grant or exercise of an option granted to such Person by
the Company in connection with an agreement to merge with, or acquire, the
Company at a time at which there is no Acquiring Person, (B) shares of Common
Stock (or securities convertible into, exchangeable into or exercisable for
Common Stock), Beneficially Owned by such Person or its Affiliates or Associates
at the time of grant of such option or (C) shares of Common Stock (or securities
convertible into, exchangeable into or exercisable for Common Stock) acquired by
Affiliates or Associates of such Person after the time of such grant which, in
the aggregate, amount to less than 1% of the outstanding shares of Common Stock.
In addition, the Company, any wholly-owned Subsidiary of the Company and any
employee stock ownership or other employee benefit plan of the Company or a
wholly-owned Subsidiary of the Company shall not be an Acquiring Person.
"Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 under the Securities Exchange Act of 1934,
as such Rule is in effect on the date of this Agreement.
A Person shall be deemed the "Beneficial Owner", and to have
"Beneficial Ownership" of, and to "Beneficially Own", any securities as to which
such Person or any of such Person's Affiliates or Associates is or may be deemed
to be the beneficial owner of pursuant to Rule 13d-3 and 13d-5 under the
Securities Exchange Act, as such Rules are in effect on the date of this
Agreement as well as any securities as to which such Person or any of such
Person's Affiliates or Associates has the right to become Beneficial Owner
(whether such right is exercisable immediately or only after the passage of time
or the occurrence of conditions) pursuant to any agreement, arrangement or
understanding, or upon the exercise of conversion rights, exchange rights,
rights (other than the Rights), warrants or options, or otherwise; provided,
however, that a Person shall not be deemed the "Beneficial Owner", or to have
"Beneficial Ownership" of, or to "Beneficially Own", any security (i) solely
because such security has been tendered pursuant to a tender or exchange offer
made by such Person or any of such Person's Affiliates or Associates until such
tendered security is accepted for payment or exchange or (ii) solely because
such Person or any of such Person's Affiliates or Associates has or shares the
power to vote or direct the voting of such security pursuant to a revocable
proxy given in response to a public proxy or consent solicitation made to more
than ten holders of shares of a class of stock of the Company registered under
Section 12 of the Securities Exchange Act of 1934 and pursuant to, and in
accordance with, the applicable rules and regulations under the Securities
Exchange Act of 1934, except if such power (or the arrangements relating
thereto) is then reportable under Item 6 of Schedule 13D under the Securities
Exchange Act of 1934 (or any similar provision of a comparable or successor
report). For purposes of this Agreement, in determining the percentage of the
outstanding
- 2 -
shares of Common Stock with respect to which a Person is the Beneficial Owner,
all shares as to which such Person is deemed the Beneficial Owner shall be
deemed outstanding.
"Business Day" shall mean any day other than a Saturday, Sunday or a
day on which banking institutions in The City of New York are generally
authorized or obligated by law or executive order to close.
"Class B Common Stock" shall mean the shares of Class B Common Stock,
par value $.001 per share, of the Company.
"Close of Business" on any given date shall mean 5:00 p.m. Los
Angeles, California time on such date (or, if such date is not a Business Day,
5:00 p.m. Los Angeles, California time on the next succeeding Business Day) at
which the Los Angeles, California office of the transfer agent for the Common
Stock (or, after the Separation Time, the Los Angeles, California office of the
Rights Agent) are closed to the public.
"Common Stock" shall mean the shares of Common Stock, par value $.001
per share), of the Company.
"Exchange Time" shall mean the time at which the right to exercise the
Rights shall terminate pursuant to Section 3.1(c) hereof.
"Exercise Price" shall mean, as of any date, the price at which a
holder may purchase the securities issuable upon exercise of one whole Right.
Until adjustment thereof in accordance with the terms hereof, the Exercise Price
shall equal $400.00.
"Expiration Time" shall mean the earliest of (i) the Exchange Time,
(ii) the Redemption Time, (iii) the Close of Business on the tenth-year
anniversary of the Record Time and (iv) upon the merger of the Company with or
into another corporation pursuant to an agreement entered into when there is no
Acquiring Person.
"Flip-in Date" shall mean the tenth Business Day after any Stock
Acquisition Date which is not the result of a Flip-over Transaction or Event or
such earlier or later date not beyond the thirtieth day after such Stock
Acquisition Date as the Board of Directors of the Company may from time to time
fix by resolution adopted prior to the Flip-in Date that would otherwise have
occurred.
"Flip-over Entity," for purposes of Section 3.2, shall mean (i) in the
case of a Flip-over Transaction or Event described in clause (i) of the
definition thereof, the Person issuing any securities into which shares of
Common Stock are being converted or exchanged and, if no such securities are
being issued, the other party to such Flip-over Transaction or Event and (ii) in
the case of a Flip-over Transaction or Event referred to in clause (ii) of the
definition thereof, the Person receiving the greatest portion of the assets or
earning power being transferred in such Flip-over Transaction or Event, provided
in all cases if such Person is a subsidiary of a corporation, the parent
corporation shall be the Flip-Over Entity.
"Flip-over Stock" shall mean the capital stock (or similar equity
interest) with the greatest voting power in respect of the election of directors
(or other persons similarly responsible for direction of the business and
affairs) of the Flip-Over Entity.
- 3 -
"Flip-over Transaction or Event" shall mean a transaction or series of
transactions after the time when an Acquiring Person has become such in which,
directly or indirectly, (i) the Company shall consolidate or merge or
participate in a share exchange with any other Person if, at the time of the
consolidation, merger or share exchange or at the time the Company enters into
any agreement with respect to any such consolidation, merger or share exchange,
the Acquiring Person controls the Board of Directors of the Company and any term
of or arrangement concerning the treatment of shares of capital stock in such
consolidation, merger or share exchange relating to the Acquiring Person is not
identical to the terms and arrangements relating to other holders of the Common
Stock or (ii) the Company shall sell or otherwise transfer (or one or more of
its Subsidiaries shall sell or otherwise transfer) assets (A) aggregating more
than 50% of the assets (measured by either book value or fair market value) or
(B) generating more than 50% of the revenue, operating income or cash flow, of
the Company and its Subsidiaries (taken as a whole) to any Person (other than
the Company or one or more of its wholly owned Subsidiaries) or to two or more
such Persons which are Affiliates or Associates or otherwise acting in concert,
if, at the time of the entry by the Company (or any such Subsidiary) into an
agreement with respect to such sale or transfer of assets, the Acquiring Person
controls the Board of Directors of the Company. For purposes of the foregoing
description, the term "Acquiring Person" shall include any Acquiring Person and
Affiliates and Associates counted together as a single Person.
"Market Price" per share of any securities on any date shall mean the
average of the daily closing prices per share of such securities (determined as
described below) on each of the 20 consecutive Trading Days through and
including the Trading Day immediately preceding such date; provided, however,
that if an event of a type analogous to any of the events described in Section
2.4 hereof shall have caused the closing prices used to determine the Market
Price on any Trading Days during such period of 20 Trading Days not to be fully
comparable with the closing price on such date, each such closing price so used
shall be appropriately adjusted in order to make it fully comparable with the
closing price on such date. The closing price per share of any securities on any
date shall be the last reported sale price, regular way, or, in case no such
sale takes place or is quoted on such date, the average of the closing bid and
asked prices, regular way, for each share of such securities, 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, Inc.
or, if the securities are not listed or admitted to trading on the New York
Stock Exchange, Inc., as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the securities are listed or admitted to trading
or, if the securities are not listed or admitted to trading on any national
securities exchange, as reported by the National Association of Securities
Dealers, Inc. Automated Quotation System or such other system then in use, or,
if on any such date the securities are not listed or admitted to trading on any
national securities exchange or 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 securities selected by the Board of Directors of the
Company; provided, however, that if on any such date the securities are not
listed or admitted to trading on a national securities exchange or traded in the
over-the-counter market, the closing price per share of such securities on such
date shall mean the fair value per share of securities on such date as
determined in good faith by the
- 4 -
Board of Directors of the Company, after consultation with a nationally
recognized investment banking firm, and set forth in a certificate delivered to
the Rights Agent.
"Person" shall mean any individual, firm, partnership, association,
group (as such term is used in Rule 13d-5 under the Securities Exchange Act of
1934, as such Rule is in effect on the date of this Agreement), corporation,
limited liability company or other entity.
"Preferred Stock" shall mean the series of Participating Preferred
Stock, par value $.001 per share, of the Company created by a Certificate of
Designation and Terms in substantially the form set forth in Exhibit B hereto
appropriately completed.
"Redemption Price" shall mean an amount equal to one-tenth of one
cent, $0.001.
"Redemption Time" shall mean the time at which the right to exercise
the Rights shall terminate pursuant to Section 5.1 hereof.
"Separation Time" shall mean the Close of Business on the earlier of
(i) the tenth Business Day (or such later date as the Board of Directors of the
Company may from time to time fix by resolution adopted prior to the Separation
Time that would otherwise have occurred) after the date on which any Person
commences a tender or exchange offer which, if consummated, would result in such
Person's becoming an Acquiring Person and (ii) the Flip-in Date; provided,
however, that if the foregoing results in the Separation Time being prior to the
Record Time, the Separation Time shall be the Record Time; and provided further,
that if any tender or exchange offer referred to in clause (i) of this paragraph
is cancelled, terminated or otherwise withdrawn prior to the Separation Time
without the purchase of any shares of Common Stock pursuant thereto, such offer
shall be deemed, for purposes of this paragraph, never to have been made.
"Stock Acquisition Date" shall mean the first date of public
announcement by the Company (by any means) or by an Acquiring Person (including
by means of filing a Schedule 13D or Schedule 13G under the Securities Exchange
Act of 1934 (or any comparable or successor report or schedule) or an amendment
thereto) that an Acquiring Person has become such.
"Subsidiary" of any specified Person shall mean any corporation or
other entity of which a majority of the voting power of the equity securities or
a majority of the equity interest is Beneficially Owned, directly or indirectly,
by such Person.
"Trading Day," when used with respect to any securities, shall mean a
day on which the New York Stock Exchange, Inc. is open for the transaction of
business or, if such securities are not listed or admitted to trading on the New
York Stock Exchange, Inc., a day on which the principal national securities
exchange on which such securities are listed or admitted to trading is open for
the transaction of business or, if such securities are not listed or admitted to
trading on any national securities exchange, a Business Day.
- 5 -
ARTICLE II.
THE RIGHTS
----------
2.1. Summary of Rights. As soon as practicable after the Record Time, the
-----------------
Company will mail a letter summarizing the terms of the Rights to each holder of
record of Common Stock or Class B Common Stock as of the Record Time, at such
holder's address as shown by the records of the Company.
2.2. Legend on Common Stock and Class B Common Stock Certificates.
------------------------------------------------------------
Certificates for the Common Stock and Class B Common Stock issued after the
Record Time but prior to the Separation Time shall evidence one Right for each
share of Common Stock or Class B Common Stock represented thereby and shall have
impressed on, printed on, written on or otherwise affixed to them the following
legend:
Until the Separation Time (as defined in the Rights Agreement referred to
below), this certificate also evidences and entitles the holder hereof to
certain Rights as set forth in a Rights Agreement, dated as of February 15,
2000 (as such may be amended from time to time, the "Rights Agreement"),
between Covad Communications Group, Inc. (the "Company") and BankBoston,
N.A., as Rights Agent, the terms of which are hereby incorporated herein by
reference and a copy of which is on file at the principal executive offices
of the Company. Under certain circumstances, as set forth in the Rights
Agreement, such Rights may be redeemed, may be exchanged for shares of
Common Stock or other securities or assets of the Company or a Subsidiary
of the Company, may expire, may become void (if they are "Beneficially
Owned" by an "Acquiring Person" or an Affiliate or Associate thereof, as
such terms are defined in the Rights Agreement, or by any transferee of any
of the foregoing) or may be evidenced by separate certificates and may no
longer be evidenced by this certificate. The Company will mail or arrange
for the mailing of a copy of the Rights Agreement to the holder of this
certificate without charge within five days after the receipt of a written
request therefor.
Certificates representing shares of Common Stock or Class B Common Stock that
are issued and outstanding at the Record Time shall evidence one Right for each
share of Common Stock or Class B Common Stock evidenced thereby notwithstanding
the absence of the foregoing legend.
2.3. Exercise of Rights; Separation of Rights.
----------------------------------------
(a) Subject to Sections 3.1, 5.1 and 5.10 and subject to adjustment as
herein set forth, each Right will entitle the holder thereof, after the
Separation Time and prior to the Expiration Time, to purchase, for the Exercise
Price, one one-thousandth of a share of Preferred Stock.
(b) Until the Separation Time, (i) no Right may be exercised and (ii)
each Right will be evidenced by the certificate for the associated share of
Common Stock or Class B Common Stock (together, in the case of certificates
issued prior to the Record Time, with the letter mailed to the record holder
thereof pursuant to Section 2.1) and will be transferable
- 6 -
only together with, and will be transferred by a transfer (whether with or
without such letter) of, such associated share.
(c) Subject to the terms hereof, after the Separation Time and prior
to the Expiration Time, the Rights (i) may be exercised and (ii) may be
transferred independent of shares of Common Stock or Class B Common Stock.
Promptly following the Separation Time, upon receipt by the Rights Agent of
notice thereof and receipt of all other necessary information, the Rights Agent
will mail to each holder of record of Common Stock or Class B Common Stock as of
the Separation Time (other than any Person whose Rights have become void
pursuant to Section 3.1(b)), at such holder's address as shown by the records of
the Company (the Company hereby agreeing to furnish copies of such records to
the Rights Agent for this purpose), (x) a certificate (a "Rights Certificate")
in substantially the form of Exhibit A hereto appropriately completed,
representing the number of Rights held by such holder at the Separation Time and
having such marks of identification or designation and such legends, summaries
or endorsements printed thereon as the Company may deem appropriate (but which
do not affect the rights, duties or obligations of the Rights Agent) and as are
not inconsistent with the provisions of this Agreement, or as may be required to
comply with any law or with any rule or regulation made pursuant thereto or with
any rule or regulation of any national securities exchange or quotation system
on which the Rights may from time to time be listed or traded, or to conform to
usage, and (y) a disclosure statement describing the Rights.
(d) Subject to the terms hereof, Rights may be exercised on any
Business Day after the Separation Time and prior to the Expiration Time by
submitting to the Rights Agent the Rights Certificate evidencing such Rights
with an Election to Exercise (an "Election to Exercise") substantially in the
form attached to the Rights Certificate duly and properly completed, accompanied
by payment in cash, or by certified or official bank check or money order
payable to the order of the Company, of a sum equal to the Exercise Price
multiplied by the number of Rights being exercised and a sum sufficient to cover
any tax or charge which may be payable in respect of any transfer involved in
the transfer or delivery of Rights Certificates or the issuance or delivery of
certificates for shares or depositary receipts (or both) in a name other than
that of the holder of the Rights being exercised.
(e) Upon receipt of a Rights Certificate, with an Election to Exercise
duly and properly completed accompanied by payment as set forth in Section
2.3(d), and subject to the terms hereof, the Rights Agent will thereupon
promptly (i)(A) requisition from a transfer agent stock certificates evidencing
such number of shares or other securities to be purchased (the Company hereby
irrevocably authorizing its transfer agents to comply with all such
requisitions) and (B) if the Company elects pursuant to Section 5.5 not to issue
certificates representing fractional shares, requisition from the depositary
selected by the Company depositary receipts representing the fractional shares
to be purchased or requisition from the Company the amount of cash to be paid in
lieu of fractional shares in accordance with Section 5.5 and (ii) after receipt
of such certificates, depositary receipts and/or cash, deliver the same to or
upon the order of the registered holder of such Rights Certificate, registered
(in the case of certificates or depositary receipts) in such name or names as
may be designated by such holder.
- 7 -
(f) In case the holder of any Rights shall exercise less than all the
Rights evidenced by such holder's Rights Certificate, a new Rights Certificate
evidencing the Rights remaining unexercised will be issued by the Rights Agent
to such holder or to such holder's duly authorized assigns.
(g) The Company covenants and agrees that it will (i) take all such
action as may be necessary to ensure that all shares delivered upon exercise of
Rights shall, at the time of delivery of the certificates for such shares
(subject to payment of the Exercise Price), be duly and validly authorized,
executed, issued and delivered and fully paid and nonassessable; (ii) take all
such action as may be necessary to comply with any applicable requirements of
the Securities Act of 1933 or the Securities Exchange Act of 1934, and the rules
and regulations thereunder, and any other applicable law, rule or regulation, in
connection with the issuance of any shares upon exercise of Rights; and (iii)
pay when due and payable any and all taxes and governmental charges which may be
payable in respect of the original issuance or delivery of the Rights
Certificates or of any shares issued upon the exercise of Rights, provided that
the Company shall not be required to pay any tax or governmental charge which
may be payable in respect of any transfer involved in the transfer or delivery
of Rights Certificates or the issuance or delivery of certificates for shares in
a name other than that of the holder of the Rights being transferred or
exercised.
2.4. Adjustments to Exercise Price; Number of Rights.
-----------------------------------------------
(a) In the event the Company shall at any time after the Record Time
and prior to the Separation Time (i) declare or pay a dividend on Common Stock
payable in Common Stock, (ii) subdivide the outstanding Common Stock or (iii)
combine the outstanding Common Stock into a smaller number of shares of Common
Stock, (x) the Exercise Price in effect after such adjustment will be equal to
the Exercise Price in effect immediately prior to such adjustment divided by the
number of shares of Common Stock (the "Expansion Factor") that a holder of one
share of Common Stock immediately prior to such dividend, subdivision or
combination would hold thereafter as a result thereof and (y) each Right held
prior to such adjustment will become that number of Rights equal to the
Expansion Factor, and the adjusted number of Rights will be deemed to be
distributed among the shares of Common Stock with respect to which the original
Rights were associated (if they remain outstanding) and the shares issued in
respect of such dividend, subdivision or combination, so that each such share of
Common Stock will have exactly one Right associated with it. Each adjustment
made pursuant to this paragraph shall be made as of the payment or effective
date for the applicable dividend, subdivision or combination.
In the event the Company shall at any time after the Record Time and
prior to the Separation Time issue any shares of Common Stock otherwise than in
a transaction referred to in the preceding paragraph, each such share of Common
Stock so issued shall automatically have one new Right associated with it, which
Right shall be evidenced by the certificate representing such share. To the
extent provided in Section 5.3, Rights shall be issued by the Company in respect
of shares of Common stock that are issued or sold by the Company after the
Separation Time.
(b) In the event the Company shall at any time after the Record Time
and prior to the Separation Time issue or distribute any securities or assets in
respect of, in lieu
- 8 -
of or in exchange for Common Stock (other than pursuant to a regular periodic
cash dividend or a dividend paid solely in Common Stock) whether by dividend, in
a reclassification or recapitalization (including any such transaction involving
a merger, consolidation or share exchange), or otherwise, the Company shall make
such adjustments, if any, in the Exercise Price, number of Rights and/or
securities or other property purchasable upon exercise of Rights as the Board of
Directors of the Company, in its sole discretion, may deem to be appropriate
under the circumstances in order to adequately protect the interests of the
holders of Rights generally, and the Company and the Rights Agent shall amend
this Agreement as necessary to provide for such adjustments.
(c) Each adjustment to the Exercise Price made pursuant to this
Section 2.4 shall be calculated to the nearest cent. Whenever an adjustment to
the Exercise Price is made pursuant to this Section 2.4, the Company shall (i)
promptly prepare a certificate setting forth such adjustment and a brief
statement of the facts and computations accounting for such adjustment, (ii)
promptly file with the Rights Agent and with each transfer agent for the Common
Stock a copy of such certificate and (iii) either (x) mail a brief summary
thereof to each holder of Rights or (y) make other public disclosure (including
but not limited to the issuance of a press release or the filing of a report
with the Securities and Exchange Commission). The Rights Agent shall be fully
protected in relying on any such certificate and on any adjustment therein
contained and shall have no duty with respect to and shall not be deemed to have
knowledge of any adjustment unless and until it shall have received such a
certificate.
(d) Irrespective of any adjustment or change in the securities
purchasable upon exercise of the Rights, the Rights Certificates theretofore and
thereafter issued may continue to express the securities so purchasable which
were expressed in the initial Rights Certificates issued hereunder.
2.5. Date on Which Exercise is Effective. Each Person in whose name any
-----------------------------------
certificate for shares is issued upon the exercise of Rights shall for all
purposes be deemed to have become the holder of record of the shares represented
thereby on, and such certificate shall be dated, the date upon which the Rights
Certificate evidencing such Rights was duly surrendered and payment of the
Exercise Price for such Rights (and any applicable taxes and other governmental
charges payable by the exercising holder hereunder) was made; provided, however,
that if the date of such surrender and payment is a date upon which the stock
transfer books of the Company are closed, such Person shall be deemed to have
become the record holder of such shares on, and such certificate shall be dated,
the next succeeding Business Day on which the stock transfer books of the
Company are open.
2.6. Execution, Authentication, Delivery and Dating of Rights Certificates.
---------------------------------------------------------------------
(a) The Rights Certificates shall be executed on behalf of the Company
by its Chairman of the Board, President or one of its Vice Presidents, under its
corporate seal reproduced thereon attested by its Secretary or one of its
Assistant Secretaries. The signature of any of these officers on the Rights
Certificates may be manual or facsimile.
Rights Certificates bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall bind
the
- 9 -
Company, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the countersignature and delivery of such Rights
Certificates.
Promptly after the Company learns of the Separation Time, the
Company will notify the Rights Agent in writing of such Separation Time and will
deliver Rights Certificates executed by the Company to the Rights Agent for
counter-signature, and, subject to Section 3.1(b), the Rights Agent shall
manually countersign and deliver such Rights Certificates to the holders of the
Rights pursuant to Section 2.3(c) hereof. No Rights Certificate shall be valid
for any purpose unless manually countersigned by the Rights Agent.
(b) Each Rights Certificate shall be dated the date of
countersignature thereof.
2.7. Registration, Registration of Transfer and Exchange.
---------------------------------------------------
(a) After the Separation Time, the Company will cause to be kept a
register (the "Rights Register") in which, subject to such reasonable
regulations as it may prescribe, the Company will provide for the registration
and transfer of Rights. The Rights Agent is hereby appointed "Rights Registrar"
for the purpose of maintaining the Rights Register for the Company and
registering Rights and transfers of Rights after the Separation Time as herein
provided. In the event that the Rights Agent shall cease to be the Rights
Registrar, the Rights Agent will have the right to examine the Rights Register
at all reasonable times after the Separation Time.
After the Separation Time and prior to the Expiration Time, upon
surrender for registration of transfer or exchange of any Rights Certificate,
and subject to the provisions of Section 2.7(c) and (d), the Company will
execute, and the Rights Agent will countersign and deliver, in the name of the
holder or the designated transferee or transferees, as required pursuant to the
holder's instructions, one or more new Rights Certificates evidencing the same
aggregate number of Rights as did the Rights Certificate so surrendered.
(b) Except as otherwise provided in Section 3.1(b), all Rights issued
upon any registration of transfer or exchange of Rights Certificates shall be
the valid obligations of the Company, and such Rights shall be entitled to the
same benefits under this Agreement as the Rights surrendered upon such
registration of transfer or exchange.
(c) Every Rights Certificate surrendered for registration of transfer
or exchange shall be duly endorsed, or be accompanied by a written instrument of
transfer in form satisfactory to the Company or the Rights Agent, as the case
may be, duly executed by the holder thereof or such holder's attorney duly
authorized in writing. As a condition to the issuance of any new Rights
Certificate under this Section 2.7, the Company may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto. The Rights Agent shall have no duty or obligation to take any
action under any Section of this Agreement which requires the payment by a
Rights holder of applicable taxes and governmental charges unless and until the
Rights Agent is satisfied that all such taxes and/or charges have been paid.
- 10 -
(d) The Company shall not be required to register the transfer or
exchange of any Rights after such Rights have become void under Section 3.1(b),
been exchanged under Section 3.1(c) or been redeemed or terminated under Section
5.1.
2.8. Mutilated, Destroyed, Lost and Stolen Rights Certificates.
---------------------------------------------------------
(a) If any mutilated Rights Certificate is surrendered to the Rights
Agent prior to the Expiration Time, then, subject to Sections 3.1(b) and 5.1,
the Company shall execute and the Rights Agent shall countersign and deliver in
exchange therefor a new Rights Certificate evidencing the same number of Rights
as did the Rights Certificate so surrendered.
(b) If there shall be delivered to the Company and the Rights Agent
prior to the Expiration Time (i) evidence to their satisfaction of the
destruction, loss or theft of any Rights Certificate and (ii) such security or
indemnity as may be required by them to save each of them and any of their
agents harmless, then, subject to Sections 3.1(b) and 5.1 and in the absence of
notice to the Company or the Rights Agent that such Rights Certificate has been
acquired by a bona fide purchaser, the Company shall execute and upon its
request the Rights Agent shall countersign and deliver, in lieu of any such
destroyed, lost or stolen Rights Certificate, a new Rights Certificate
evidencing the same number of Rights as did the Rights Certificate so destroyed,
lost or stolen.
(c) As a condition to the issuance of any new Rights Certificate under
this Section 2.8, the Company may require the payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and any other expenses (including the fees and expenses of the Rights
Agent) connected therewith.
(d) Every new Rights Certificate issued pursuant to this Section 2.8
in lieu of any destroyed, lost or stolen Rights Certificate shall evidence an
original additional contractual obligation of the company, whether or not the
destroyed, lost or stolen Rights Certificate shall be at any time enforceable by
anyone, and shall be entitled to all the benefits of this Agreement equally and
proportionately with any and all other Rights duly issued hereunder.
2.9. Persons Deemed Owners. Prior to due presentment of a Rights
---------------------
Certificate (or, prior to the Separation Time, the associated Common Stock or
Class B Common Stock certificate) for registration of transfer, the Company, the
Rights Agent and any agent of the Company or the Rights Agent may deem and treat
the person in whose name such Rights Certificate (or, prior to the Separation
Time, such Common Stock or Class B Common Stock certificate) is registered as
the absolute owner thereof and of the Rights evidenced thereby for all purposes
whatsoever, including the payment of the Redemption Price and neither the
Company nor the Rights Agent shall be affected by any notice to the contrary. As
used in this Agreement, unless the context otherwise requires, the term "holder"
of any Rights shall mean the registered holder of such Rights (or, prior to the
Separation Time, the associated shares of Common Stock or Class B Common Stock).
2.10. Delivery and Cancellation of Certificates. All Rights Certificates
-----------------------------------------
surrendered upon exercise or for registration of transfer or exchange shall, if
surrendered to
- 11 -
any Person other than the Rights Agent, be delivered to the Rights Agent and, in
any case, shall be promptly cancelled by the Rights Agent. The Company may at
any time deliver to the Rights Agent for cancellation any Rights Certificates
previously countersigned and delivered hereunder which the Company may have
acquired in any manner whatsoever, and all Rights Certificates so delivered
shall be promptly cancelled by the Rights Agent. No Rights Certificates shall be
countersigned in lieu of or in exchange for any Rights Certificates cancelled as
provided in this Section 2.10, except as expressly permitted by this Agreement.
The Rights Agent shall destroy all cancelled Rights Certificates and deliver a
certificate of destruction to the Company.
2.11. Agreement of Rights Holders. Every holder of Rights by accepting the
---------------------------
same consents and agrees with the Company and the Rights Agent and with every
other holder of Rights that:
(a) prior to the Separation Time, each Right will be transferable
only together with, and will be transferred by a transfer of, the associated
share of Common Stock or Class B Common Stock;
(b) after the Separation Time, the Rights Certificates will be
transferable only on the Rights Register as provided herein;
(c) prior to due presentment of a Rights Certificate (or, prior to
the Separation Time, the associated Common Stock or Class B Common Stock
certificate) for registration of transfer, the Company, the Rights Agent and any
agent of the Company or the Rights Agent may deem and treat the person in whose
name the Rights Certificate (or, prior to the Separation Time, the associated
Common Stock or Class B Common Stock certificate) is registered as the absolute
owner thereof and of the Rights evidenced thereby for all purposes whatsoever,
and neither the Company nor the Rights Agent shall be affected by any notice to
the contrary;
(d) Rights beneficially owned by certain Persons will, under the
circumstances set forth in Section 3.1(b), become void; and
(e) this Agreement may be supplemented or amended from time to time
pursuant to Section 2.4(b) or 5.4 hereof.
ARTICLE III.
ADJUSTMENTS TO THE RIGHTS IN
----------------------------
THE EVENT OF CERTAIN TRANSACTIONS
---------------------------------
3.1. Flip-in.
-------
(a) In the event that prior to the Expiration Time a Flip-in Date
shall occur, then the Company shall take such action as shall be necessary to
ensure and provide that, except as provided in this Section 3.1, each Right
shall constitute the right to purchase from the Company, upon exercise thereof
in accordance with the terms hereof (but subject to Section 5.10), that number
of shares of Common Stock having an aggregate Market Price on the Stock
Acquisition Date equal to twice the Exercise Price for an amount in cash equal
to the Exercise Price (such right to be appropriately adjusted in order to
protect the interests of
- 12 -
the holders of Rights generally in the event that on or after such Stock
Acquisition Date an event of a type analogous to any of the events described in
Section 2.4(a) or (b) shall have occurred with respect to the Common Stock).
(b) Notwithstanding the foregoing, any Rights that are or were
Beneficially Owned on or after the Stock Acquisition Date by an Acquiring Person
or an Affiliate or Associate thereof or by any transferee, direct or indirect,
of any of the foregoing shall become void and any holder of such Rights
(including transferees) shall thereafter have no right to exercise or transfer
such Rights under any provision of this Agreement. If any Rights Certificate is
presented for assignment or exercise and the Person presenting the same will not
complete the certification set forth at the end of the form of assignment or
notice of election to exercise and provide such additional evidence of the
identity of the Beneficial Owner and its Affiliates and Associates (or former
Beneficial Owners and their Affiliates and Associates) as the Company shall
reasonably request, then the Company shall be entitled conclusively to deem the
Beneficial Owner thereof to be an Acquiring Person or an Affiliate or Associate
thereof or a transferee of any of the foregoing and accordingly will deem the
Rights evidenced thereby to be void and not transferable or exercisable.
(c) The Board of Directors of the Company may, at its option, at any
time after a Flip-in Date and prior to the time that an Acquiring Person becomes
the Beneficial Owner of more than 50% of the outstanding shares of Common Stock,
elect to exchange all (but not less than all) the then outstanding Rights (which
shall not include Rights that have become void pursuant to the provisions of
Section 3.1(b)) for shares of Common Stock at an exchange ratio of one share of
Common Stock per Right, appropriately adjusted in order to protect the interests
of holders of Rights generally in the event that after the Separation Time an
event of a type analogous to any of the events described in Section 2.4(a) or
(b) shall have occurred with respect to the Common Stock (such exchange ratio,
as adjusted from time to time, being hereinafter referred to as the "Exchange
Ratio").
Immediately upon the action of the Board of Directors of the
Company electing to exchange the Rights, without any further action and without
any notice, the right to exercise the Rights will terminate and each Right
(other than Rights that have become void pursuant to Section 3.1(b)) will
thereafter represent only the right to receive a number of shares of Common
Stock equal to the Exchange Ratio. Promptly after the action of the Board of
Directors electing to exchange the Rights, the Company shall give written notice
thereof (specifying the steps to be taken to receive shares of Common Stock in
exchange for Rights) to the Rights Agent and the holders of the Rights (other
than Rights that have become void pursuant to Section 3.1(b)) outstanding
immediately prior thereto by mailing such notice in accordance with Section 5.9.
Each Person in whose name any certificate for shares is issued
upon the exchange of Rights pursuant to this section 3.1(c) or Section 3.1(d)
shall for all purposes be deemed to have become the holder of record of the
shares represented thereby on, and such certificate shall be dated, the date
upon which the Rights Certificate evidencing such Rights was duly surrendered
and payment of any applicable taxes and other governmental charges payable by
the holder was made; provided, however, that if the date of such surrender and
payment is a date upon which the stock transfer books of the Company are closed,
such Person shall be deemed to have become the record holder of such shares on,
- 13 -
and such certificate shall be dated, the next succeeding Business Day on which
the stock transfer books of the Company are open.
(d) Whenever the Company shall become obligated under Section 3.1(a)
or (c) to issue shares of Common Stock upon exercise of or in exchange for
Rights, the Company, at its option, may substitute therefor shares of Preferred
Stock, at a ratio of one one-thousandth of a share of Preferred Stock for each
share of Common Stock so issuable.
(e) In the event that there shall not be sufficient treasury shares
or authorized but unissued shares of Common Stock or Preferred Stock of the
Company to permit the exercise or exchange in full of the Rights in accordance
with Section 3.1(a) or (c), the Company shall either (i) call a meeting of
stockholders seeking approval to cause sufficient additional shares to be
authorized (provided that if such approval is not obtained the Company will take
the action specified in clause (ii) of this sentence) or (ii) take such action
as shall be necessary to ensure and provide, to the extent permitted by
applicable law and any agreements or instruments in effect on the Stock
Acquisition Date to which it is a party, that each Right shall thereafter
constitute the right to receive, (x) at the Company's option, either (A) in
return for the Exercise Price, debt or equity securities or other assets (or a
combination thereof) having a fair value equal to twice the Exercise Price, or
(B) without payment of consideration (except as otherwise required by applicable
law), debt or equity securities or other assets (or a combination thereof)
having a fair value equal to the Exercise Price, or (y) if the Board of
Directors of the Company elects to exchange the Rights in accordance with
Section 3.1(c), debt or equity securities or other assets (or a combination
thereof) having a fair value equal to the product of the Market Price of a share
of Common Stock on the Flip-in Date times the Exchange Ratio in effect on the
Flip-in Date, where in any case set forth in (x) or (y) above the fair value of
such debt or equity securities or other assets shall be as determined in good
faith by the Board of Directors of the Company, after consultation with a
nationally recognized investment banking firm.
3.2. Flip-over.
---------
(a) Prior to the Expiration Time, the Company shall not enter into any
agreement with an Acquiring Person (or any of its Affiliates or Associates) with
respect to, consummate or permit to occur any Flip-over Transaction or Event
unless and until it shall have entered into a supplemental agreement with the
Flip-over Entity, for the benefit of the holders of the Rights, providing that,
upon consummation or occurrence of the Flip-over Transaction or Event (i) each
Right shall thereafter constitute the right to purchase from the Flip-over
Entity, upon exercise thereof in accordance with the terms hereof, that number
of shares of Flip-over Stock of the Flip-over Entity having an aggregate Market
Price on the date of consummation or occurrence of such Flip-over Transaction or
Event equal to twice the Exercise Price for an amount in cash equal to the
Exercise Price (such right to be appropriately adjusted in order to protect the
interests of the holders of Rights generally in the event that after such date
of consummation or occurrence an event of a type analogous to any of the events
described in Section 2.4(a) or (b) shall have occurred with respect to the
Flip-over Stock) and (ii) the Flip-over Entity shall thereafter be liable for,
and shall assume, by virtue of such Flip-over Transaction or Event and such
supplemental agreement, all the obligations and duties of the Company pursuant
to this Agreement. The provisions of this Section 3.2 shall apply to successive
Flip-over Transactions or Events.
- 14 -
(b) Prior to the Expiration Time, unless the Rights will be redeemed
pursuant to Section 5.1 hereof in connection therewith, the Company shall not
enter into any agreement with respect to, consummate or permit to occur any
Flip-over Transaction or Event if at the time thereof there are any rights,
warrants or securities outstanding or any other arrangements, agreements or
instruments that would eliminate or otherwise diminish in any material respect
the benefits intended to be afforded by this Rights Agreement to the holders of
Rights upon consummation of such transaction.
ARTICLE IV.
THE RIGHTS AGENT
----------------
4.1. General.
-------
(a) 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 agrees to pay to the Rights
Agent reasonable compensation for all services rendered by it hereunder and,
from time to time, on demand of the Rights Agent, its reasonable expenses and
counsel fees and other disbursements incurred in the preparation, execution,
delivery, administration and amendment of this Agreement and the exercise and
performance of its duties hereunder. The Company also agrees to indemnify the
Rights Agent for, and to hold it harmless against, any loss, liability, damage,
judgment, fine, penalty, claim, demand, settlement, cost or expense, incurred
without gross negligence, bad faith or willful misconduct on the part of the
Rights Agent (each as determined by a final, non-appealable order, judgment,
decree or ruling of a court of competent jurisdiction), for any action taken,
suffered or omitted by the Rights Agent in connection with the acceptance and
administration of this Agreement, including, without limitation, the costs and
expenses of defending against any claim of liability. The costs and expenses
incurred in enforcing this right of indemnification shall be paid by the Company
if the Rights Agent prevails in enforcing this right of indemnification. The
provisions of this Section 4.1 and Section 4.3 below shall survive the
termination of this Agreement, the exercise or expiration of the Rights and the
resignation or removal of the Rights Agent.
(b) The Rights Agent shall be authorized and protected and shall incur
no liability for or in respect of any action taken, suffered or omitted by it in
connection with its acceptance and administration of this Agreement in reliance
upon any certificate for securities purchasable upon exercise of Rights, Rights
Certificate, certificate 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 4.3. The Rights Agent shall not be
deemed to have knowledge of any event of which it was supposed to receive notice
thereof hereunder, and the Rights Agent shall be fully protected and shall incur
no liability for failing to take any action in connection therewith unless and
until it has received such notice in writing.
- 15 -
4.2. Merger or Consolidation or Change of Name of Rights Agent.
---------------------------------------------------------
(a) Any Person into which the Rights Agent or any successor Rights
Agent may be merged or with which it may be consolidated, or any Person
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent is a party, or any Person succeeding to the shareholder
services business of the Rights Agent or any successor Rights Agent, will be the
successor to the Rights Agent under this Agreement without the execution or
filing of any paper or any further act on the part of any of the parties hereto,
provided that such Person would be eligible for appointment as a successor
Rights Agent under the provisions of Section 4.4 hereof. In case at the time
such successor Rights Agent succeeds to the agency created by this Agreement any
of the Rights Certificates have been countersigned but not delivered, any such
successor Rights Agent may adopt the countersignature of the predecessor Rights
Agent and deliver such Rights Certificates so countersigned; and in case at that
time any of the Rights Certificates have not been countersigned, any successor
Rights Agent may countersign such Rights Certificates either in the name of the
predecessor Rights Agent or in the name of the successor Rights Agent; and in
all such cases such Rights Certificates will have the full force provided in the
Rights Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent is 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.
4.3. Duties of Rights Agent. The Rights Agent undertakes only the duties
----------------------
and obligations expressly imposed by this Agreement (and no implied duties) upon
the following terms and conditions, by all of which the Company and the holders
of Rights Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the advice or opinion of such counsel will be full
and complete authorization and protection to the Rights Agent, and the Rights
Agent shall incur no liability for or in respect of any action taken, suffered
or omitted by it in good faith and in accordance with such advice or opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent deems it necessary or desirable that any fact or matter (including,
without limitation, the identity of any Acquiring Person and the determination
of Market Price) be proved or established by the Company prior to taking,
suffering or omitting to take 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 a
person believed by the Rights Agent to be the Chairman of the Board, the
President or any Vice President and by the Treasurer or any Assistant Treasurer
or the Secretary or any Assistant Secretary of the Company and delivered to the
Rights Agent; and such certificate will be full authorization and protection to
the Rights Agent, and the Rights
- 16 -
Agent shall incur no liability for or in respect of, any action taken, suffered
or omitted to be taken by it under the provisions of this Agreement in reliance
upon such certificate.
(c) The Rights Agent will be liable hereunder only for its own gross
negligence, bad faith or willful misconduct (each as determined by a final,
non-appealable order, judgment, decree or ruling of a court of competent
jurisdiction). Anything to the contrary notwithstanding, in no event shall the
Rights Agent be liable for special, punitive, indirect, consequential or
incidental loss or damage of any kind whatsoever (including but not limited to
lost profits), even if the Rights Agent has been advised of the likelihood of
such loss or damage. Any liability of the Rights Agent to the Company under this
Rights Agreement will be limited to $100,000.
(d) The Rights Agent will not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the
certificates for securities purchasable upon exercise of Rights or the Rights
Certificates (except its countersignature thereof) or be required to verify the
same, but all such statements and recitals are and will be deemed to have been
made by the Company only.
(e) The Rights Agent will not be under any responsibility in respect
of the validity of this Agreement or the execution and delivery hereof (except
the due authorization, execution and delivery hereof by the Rights Agent) or in
respect of the validity or execution of any certificate for securities
purchasable upon exercise of Rights or Rights Certificate (except its
countersignature thereof); nor will it be responsible for any breach by the
Company of any covenant or condition contained in this Agreement or in any
Rights Certificate; nor will it be responsible for any change in the
exercisability of the Rights (including the Rights becoming void pursuant to
Section 3.1(b) hereof) or any adjustment required under the provisions of
section 2.4, 3.1 or 3.2 hereof or responsible for the manner, method or amount
of any such adjustment or the ascertaining of the existence of facts that would
require any such adjustment (except with respect to the exercise of Rights after
receipt of the certificate contemplated by Section 2.4 describing any such
adjustment); nor will it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any
securities purchasable upon exercise of Rights or any Rights or as to whether
any securities purchasable upon exercise of Rights will, when issued, be duly
and validly authorized, executed, issued and delivered and fully paid and
nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
person believed by the Rights Agent to be the Chairman of the Board, the
President or any Vice President or the Secretary or any Assistant Secretary or
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 such
instructions shall be full authorization and protection to the Rights Agent,
- 17 -
and the Rights Agent shall incur no liability for, or in respect of, any action
taken, suffered or omitted by it in accordance with instructions of any such
person.
(h) The Rights Agent and any stockholder, affiliate, director, officer
or employee of the Rights Agent may buy, sell or deal in Common Stock, Rights or
other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or lend
money to the Company or otherwise act as fully and freely as though it were not
Rights Agent under this Agreement. Nothing herein shall preclude the Rights
Agent from acting in any other capacity for the Company or for any other Person.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent will not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct, provided reasonable care was exercised in the selection
and continued employment thereof.
(j) 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
it believes that repayment of such funds or adequate indemnification against
such risk or liability is not assured to it.
4.4. Change of Rights Agent. The Rights Agent may resign and be discharged
----------------------
from its duties under this Agreement upon 60 days' notice (or such lesser notice
as is acceptable to the Company) in writing mailed to the Company and to each
transfer agent of Common Stock and Class B Common Stock by registered or
certified mail, and to the holders of the Rights in accordance with Section 5.9.
The Company may remove the Rights Agent upon 30 days' notice in writing, mailed
to the Rights Agent and to each transfer agent of the Common Stock and Class B
Common Stock by registered or certified mail, and to the holders of the Rights
in accordance with Section 5.9. If the Rights Agent should resign or be removed
or otherwise become incapable of acting, the Company will appoint a successor to
the Rights Agent. If the Company fails to make such appointment within a period
of 30 days after such removal or after it has been notified in writing of such
resignation or incapacity by the resigning or incapacitated Rights Agent or by
the holder of any Rights (which holder shall, with such notice, submit such
holder's Rights Certificate for inspection by the Company), then the holder of
any Rights or the Rights Agent 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 (i) a Person (other than a
natural person) organized and doing business under the laws of the United States
or of the State of New York or the State of California, in good standing, having
its principal office in the State of New York or the State of California, which
is authorized under such laws to exercise the powers of the Rights Agent
contemplated by this Agreement and is subject to supervision or examination by
federal or state authority and which has at the time of its appointment as
Rights Agent a combined capital and surplus of at least $50,000,000, or (ii)
with the prior written consent of the Company, which shall not be unreasonably
withheld, an Affiliate (other than a natural person) of a Person described in
clause (i). After appointment, the successor Rights Agent will be vested with
the same powers, rights, duties
- 18 -
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 will file notice thereof in writing with the predecessor Rights Agent
and each transfer agent of the Common Stock and the Class B Common Stock, and,
if such appointment occurs after the Separation Time, mail a notice thereof in
writing to the holders of the Rights. Failure to give any notice provided for in
this Section 4.4, however, or any defect therein, shall not affect the legality
or validity of the resignation or removal of the Rights Agent or the appointment
of the successor Rights Agent, as the case may be.
ARTICLE V.
MISCELLANEOUS
-------------
5.1. Redemption
----------
(a) The Board of Directors of the Company may, at its option, at any
time prior to the Close of Business on the Flip-in Date, elect to redeem all
(but not less than all) the then outstanding Rights at the Redemption Price and
the Company, at its option, may pay the Redemption Price either in cash or
shares of Common Stock or other securities of the Company deemed by the Board of
Directors, in the exercise of its sole discretion, to be at least equivalent in
value to the Redemption Price.
(b) Immediately upon the action of the Board of Directors of the
Company electing to redeem the Rights (or, if the resolution of the Board of
Directors electing to redeem the Rights states that the redemption will not be
effective until the occurrence of a specified future time or event, upon the
occurrence of such future time or event), without any further action and without
any notice, the right to exercise the Rights will terminate and each Right will
thereafter represent only the right to receive the Redemption Price in cash or
securities, as determined by the Board of Directors. Promptly after the Rights
are redeemed, the Company shall give written notice of such redemption to the
Rights Agent and the holders of the then outstanding Rights by mailing such
notice in accordance with Section 5.9.
5.2. Expiration. The Rights and this Agreement shall expire at the
----------
Expiration Time and no Person shall have any rights pursuant to this Agreement
or any Right after the Expiration Time, except, if the Rights are exchanged or
redeemed, as provided in Section 3.1(c), 3.1(d), 3.1(e), 3.2 or 5.1 hereof.
5.3. Issuance of New Rights Certificates. Notwithstanding any of the
-----------------------------------
provisions of this Agreement or of the Rights to the contrary, the Company may,
at its option, issue new Rights Certificates evidencing Rights in such form as
may be approved by its Board of Directors to reflect any adjustment or change in
the number or kind or class of shares of stock purchasable upon exercise of
Rights made in accordance with the provisions of this Agreement. In addition, in
connection with the issuance or sale of shares of Common Stock or Class B Common
Stock by the Company following the Separation Time and prior to the Redemption
Time or Expiration Time pursuant to the terms of securities convertible or
- 19 -
redeemable into shares of Common Stock or Class B Common Stock or to options, in
each case issued or granted prior to, and outstanding at, the Separation Time,
the Company shall issue to the holders of such shares of Common Stock or Class B
Common Stock, Rights Certificates representing the appropriate number of Rights
in connection with the issuance or sale of such shares of Common Stock or Class
B Common Stock; provided, however, in each case, (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 to the Person to whom such Rights
Certificates would be issued, (ii) no such Rights Certificates shall be issued
if, and to the extent that, appropriate adjustment shall have otherwise been
made in lieu of the issuance thereof, and (iii) the Company shall have no
obligation to distribute Rights Certificates to any Acquiring Person or
Affiliate or Associate of an Acquiring Person or any transferee of any of the
foregoing.
5.4. Supplements and Amendments. The Company and the Rights Agent may from
--------------------------
time to time supplement or amend this Agreement without the approval of any
holders of Rights (i) prior to the close of business on the Flip-in Date, in any
respect and (ii) after the close of business on the Flip-in Date, to make any
changes that the Company may deem necessary or desirable and which shall not
adversely affect the interests of the holders of Rights generally or in order to
cure any ambiguity or to correct or supplement any provision contained herein
which may be inconsistent with any other provisions herein or otherwise
defective. Upon delivery of a certificate from an appropriate officer of the
Company that states that the proposed supplement or amendment is in compliance
with the terms of this Section 5.4, the Rights Agent will duly execute and
deliver any supplement or amendment hereto requested by the Company which
satisfies the terms of the preceding sentence; provided, however, that such
supplement or amendment does not change or increase the Rights Agent's rights,
duties, liabilities or obligations.
5.5. Fractional Shares. If the Company elects not to issue certificates
-----------------
representing fractional shares upon exercise or redemption of Rights, the
Company shall, in lieu thereof, in the sole discretion of the Board of
Directors, either (a) evidence such fractional shares by depositary receipts
issued pursuant to an appropriate agreement between the Company and a depositary
selected by it, providing that each holder of a depositary receipt shall have
all of the rights, privileges and preferences to which such holder would be
entitled as a beneficial owner of such fractional share, or (b) sell such shares
on behalf of the holders of Rights and pay to the registered holder of such
Rights the appropriate fraction of the price per share received upon such sale.
5.6. Rights of Action. Subject to the terms of this Agreement (including
----------------
Section 3.1(b)), rights of action in respect of this Agreement, other than
rights of action vested solely in the Rights Agent, are vested in the respective
holders of the Rights; and any holder of any Rights, without the consent of the
Rights Agent or of the holder of any other Rights, may, on such holder's own
behalf and for such holder's own benefit and the benefit of other holders of
Rights, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, such holder's
right to exercise such holder's Rights in the manner provided in such holder's
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
- 20 -
adequate remedy at law for any breach of this Agreement and will be entitled to
specific performance of the obligations under, and injunctive relief against
actual or threatened violations of, the obligations of any Person subject to
this Agreement.
5.7. Holder of Rights Not Deemed a Stockholder. No holder, as such, of any
-----------------------------------------
Rights shall be entitled to vote, receive dividends or be deemed for any purpose
the holder of shares or any other securities which may at any time be issuable
on the exercise of such Rights, nor shall anything contained herein or in any
Rights Certificate be construed to confer upon the holder of any Rights, 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 5.8 hereof), or to receive dividends or subscription rights,
or otherwise, until such Rights shall have been exercised or exchanged in
accordance with the provisions hereof.
5.8. Notice of Proposed Actions. In case the Company shall propose after
--------------------------
the Separation Time and prior to the Expiration Time (i) to effect or permit (in
cases where the Company's permission is required) occurrence of any Flip-in Date
or Flip-over Transaction or Event or (ii) to effect the liquidation, dissolution
or winding up of the Company, then, in each such case, the Company shall give to
each holder of a Right, in accordance with Section 5.9 hereof, a notice of such
proposed action, which shall specify the Flip-in Date or the date on which such
Flip-over Transaction or Event, liquidation, dissolution, or winding up is to
take place, and such notice shall be so given at least 20 Business Days prior to
the date of the taking of such proposed action.
5.9. Notices. Notices or demands authorized or required by this Agreement
-------
to be given or made by the Rights Agent or by the holder of any Rights to or on
the Company shall be sufficiently given or made if delivered or sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Rights Agent) or by facsimile transmission as follows:
Covad Communications Group, Inc.
ββββ βββββββ ββββββββββ
βββββ βββββ, ββ βββββ
Attention: Secretary
Facsimile No.:
Any notice or demand authorized or required by this Agreement to be given or
made by the Company or by the holder of any Rights to or on the Rights Agent
shall be sufficiently given or made if delivered or sent by first-class mail,
postage prepaid, addressed (until another address is filed in writing with the
Company) as follows:
Mellon Investor Services LLC
βββ βββββ ββββ ββββββ, βββ βββββ
βββ βββββββ, ββ βββββ
Attention: Relationship Manager
Facsimile No.: (βββ) βββ-ββββ
- 21 -
with a copy to:
Mellon Investor Services LLC
ββ ββββββββββ ββββ
ββββββββββ ββββ, βββ ββββββ βββββ
Attention: General Counsel
Facsimile No.: (βββ) βββ-ββββ
Notices or demands authorized or required by this Agreement to be given or made
by the Company or the Rights Agent to or on the holder of any Rights shall be
sufficiently given or made if delivered or sent by first-class mail, postage
prepaid, addressed to such holder at the address of such holder as it appears
upon the registry books of the Rights Agent or, prior to the Separation Time, on
the registry books of the transfer agent for the Common Stock or the Class B
Common Stock. Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice.
5.10. Suspension of Exercisability. To the extent that the Company
----------------------------
determines in good faith that some action will or need be taken pursuant to
Section 3.1(a), (b), (d) or (e) or to comply with federal or state securities
laws, the Company may suspend the exercisability of the Rights for a period of
up to ninety (90) days following the date of the occurrence of the Separation
Time or the Flip-in Date in order to take such action or comply with such laws.
In the event of any such suspension, the Company shall issue as promptly as
practicable a public announcement stating that the exercisability or
exchangeability of the Rights has been temporarily suspended (with prompt
written notice thereof to the Rights Agent). Notice thereof pursuant to Section
5.9 shall not be required.
Failure to give a notice pursuant to the provisions of this
Agreement shall not affect the validity of any action taken hereunder.
5.11. Costs of Enforcement. The Company agrees that if the Company or any
--------------------
other Person the securities of which are purchasable upon exercise of Rights
fails to fulfill any of its obligations pursuant to this Agreement, then the
Company or such Person will reimburse the holder of any Rights for the costs and
expenses (including legal fees) incurred by such holder in actions to enforce
such holder's rights pursuant to any Rights or this Agreement.
5.12. 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.
5.13. 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
holders of the Rights 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 holders of the Rights.
5.14. Determination and Actions by the Board of Directors, etc. The Board
--------------------------------------------------------
of Directors of the Company shall have the exclusive power and authority to
administer this Agreement and to exercise all rights and powers specifically
granted to the Board or to the
- 22 -
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. 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 of Directors of the Company to any
liability to the holders of the Rights. The Rights Agent shall always be
entitled to assume that the Board of Directors acted in good faith and shall be
fully protected and incur no liability in reliance thereon.
5.15. Descriptive Headings. Descriptive headings appear herein for
--------------------
convenience only and shall not control or affect the meaning or construction of
any of the provisions hereof.
5.16. Governing Law. THIS AGREEMENT AND EACH RIGHT ISSUED HEREUNDER SHALL
-------------
BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF DELAWARE AND FOR
ALL PURPOSES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
SUCH STATE APPLICABLE TO CONTRACTS TO BE MADE AND PERFORMED ENTIRELY WITHIN SUCH
STATE; PROVIDED, HOWEVER, THAT ALL PROVISIONS REGARDING THE RIGHTS, DUTIES AND
OBLIGATIONS OF THE RIGHTS AGENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE
PERFORMED ENTIRELY WITHIN SUCH STATE.
5.17. 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.
5.18. Severability. If any term or provision hereof or the application
------------
thereof to any circumstance shall, in any jurisdiction and to any extent, be
invalid or unenforceable, such term or provision shall be ineffective as to such
jurisdiction to the extent of such invalidity or unenforceability without
invalidating or rendering unenforceable the remaining terms and provisions
hereof or the application of such term or provision to circumstances other than
those as to which it is held invalid or unenforceable.
5.19. Class B Common Stock. Notwithstanding anything to the contrary
--------------------
contained in this Agreement, any holder of a Right which was received with
respect to shares of the Company's Class B Common Stock (but not any transferee
of such Right) may elect to receive shares of Class B Common Stock in lieu of
shares of Common Stock upon exercise of such Right or if the Board of Directors
exercises its exchange rights under Section 3.1(c) hereof to exchange the Rights
for shares of Common Stock. The number of shares of Class B Common Stock to be
so issued in such case shall be based upon the then-applicable conversion ratio
between the Common Stock and the Class B Common Stock.
- 23 -
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
COVAD COMMUNICATIONS GROUP, INC.
By:__________________________________
Name:
Title:
MELLON INVESTOR SERVICES LLC
By:__________________________________
Name:
Title:
- 24 -
EXHIBIT A
---------
[Form of Rights Certificate]
Certificate No. W- __________ Rights
THE RIGHTS ARE SUBJECT TO REDEMPTION OR MANDATORY EXCHANGE, AT THE OPTION OF THE
COMPANY, ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. RIGHTS BENEFICIALLY
OWNED BY ACQUIRING PERSONS OR AFFILIATES OR ASSOCIATES THEREOF (AS SUCH TERMS
ARE DEFINED IN THE RIGHTS AGREEMENT) OR TRANSFEREES OF ANY OF THE FOREGOING WILL
BE VOID.
Rights Certificate
COVAD COMMUNICATIONS GROUP, INC.
This certifies that ___________________________, or registered assigns, is
the registered holder of the number of Rights set forth above, each of which
entitles the registered holder thereof, subject to the terms, provisions and
conditions of the Stockholder Protection Rights Agreement, dated as of February
15, 2000 (as amended from time to time, the "Rights Agreement"), between Covad
Communications Group, Inc., a Delaware corporation (the "Company"), and Mellon
Investor Services LLC, a New Jersey limited liability company, as Rights Agent
(the "Rights Agent", which term shall include any successor Rights Agent under
the Rights Agreement), to purchase from the Company at any time after the
Separation Time (as such term is defined in the Rights Agreement) and prior to
the close of business on February 15, 2010, one one-thousandth of a fully paid
share of Participating Preferred Stock, par value $.001 per share (the
"Preferred Stock"), of the Company (subject to adjustment as provided in the
Rights Agreement) at the Exercise Price referred to below, upon presentation and
surrender of this Rights Certificate with the Form of Election to Exercise duly
executed at the principal office of the Rights Agent in Los Angeles, California
at βββ βββββ ββββ ββββββ, βββ βββββ, βββ βββββββ, ββ βββββ or such other address
of the Rights Agent as shall be contained in a press release, Form 8-K or other
manner of publicly disseminated or publicly available notice given by the
Company.
The Exercise Price shall initially be $400.00 per Right and shall be
subject to adjustment in certain events as provided in the Rights Agreement.
In certain circumstances described in the Rights Agreement, the Rights
evidenced hereby may entitle the registered holder thereof to purchase
securities of an entity other than the Company or securities or assets of the
Company other than Preferred Stock, all as provided 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
- 1 -
immunities hereunder of the Rights Agent, the Company and the holders of the
Rights Certificates. Copies of the Rights Agreement are on file at the principal
office of the Company and are available without cost upon written request.
This Rights Certificate, with or without other Rights Certificates, upon
surrender at the office of the Rights Agent designated for such purpose, may be
exchanged for another Rights Certificate or Rights Certificates of like tenor
evidencing an aggregate number of Rights equal to the aggregate number of Rights
evidenced by the Rights Certificate or Rights Certificates surrendered. If this
Rights Certificate shall be exercised in part, the registered holder shall be
entitled to receive, upon surrender hereof, another Rights Certificate or Rights
Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, each Right evidenced by
this Certificate may be (a) redeemed by the Company under certain circumstances,
at its option, at a redemption price of $0.001 per Right or (b) exchanged by the
Company under certain circumstances, at its option, for one share of Common
Stock or one one-thousandth of a share of Preferred Stock per Right (or, in
certain cases, other securities or assets of the Company), subject in each case
to adjustment in certain events as provided in the Rights Agreement.
No holder of this Rights Certificate, as such, shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of any securities
which may at any time be issuable on the exercise hereof, nor shall anything
contained in the Rights Agreement or herein be construed to confer upon the
holder hereof, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in the Rights Agreement), or to receive
dividends or subscription rights, or otherwise, until the Rights evidenced by
this Rights Certificate shall have been exercised or exchanged as provided in
the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any purpose
until it shall have been counter-signed by the Rights Agent.
- 2 -
WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal.
Date:_________________________
ATTEST: COVAD COMMUNICATIONS GROUP, INC.
___________________________________ By:____________________________________
Secretary
Countersigned:
MELLON INVESTOR SERVICES LLC
By:________________________________
Authorized Signature
- 3 -
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer this 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
Company, with full power of substitution.
Dated:______________________, 20__
Signature Guaranteed: __________________________________
Signature
(Signature must correspond to name
as written upon the face of this
Rights Certificate in every
particular, without alteration or
enlargement or any change
whatsoever)
Signatures must be guaranteed by an "Eligible Guarantor Institution" as
defined in Rule 17Ad-15 (or any successor rule or regulation) promulgated
pursuant to the Securities Exchange Act of 1934, as amended (this term means, in
general, banks, stock brokers, savings and loan associations and credit unions,
in each case with membership in an approved signature guarantee medallion
program).
________________________________________________________________________________
(To be completed if true)
The undersigned hereby represents, for the benefit of all holders of Rights
and shares of Common Stock, that the Rights evidenced by this Rights Certificate
are not, and, to the knowledge of the undersigned, have never been, Beneficially
Owned by an Acquiring Person or an Affiliate or Associate thereof (as defined in
the Rights Agreement).
__________________________________
Signature
________________________________________________________________________________
- 1 -
NOTICE
In the event the certification set forth above is not completed in
connection with a purported assignment, the Company will deem the Beneficial
Owner of the Rights evidenced by the enclosed Rights Certificate to be an
Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights
Agreement) or a transferee of any of the foregoing and accordingly will deem the
Rights evidenced by such Rights Certificate to be void and not transferable or
exercisable.
- 2 -
[To be attached to each Rights Certificate]
FORM OF ELECTION TO EXERCISE
(To be executed if holder desires to exercise the Rights Certificate.)
TO: COVAD COMMUNICATIONS GROUP, INC.
The undersigned hereby irrevocably elects to exercise ____________________
whole Rights represented by the attached Rights Certificate to purchase the
shares of Participating Preferred Stock issuable upon the exercise of such
Rights and requests that certificates for such shares be issued in the name of:
___________________________________________________________
Address:___________________________________________________
___________________________________________________________
Social Security or Other Taxpayer Identification
Number:____________________________________________________
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:
___________________________________________________________
Address:___________________________________________________
___________________________________________________________
Social Security or Other Taxpayer Identification
Number:____________________________________________________
Dated:__________________________, 20__
Signature Guaranteed: __________________________________
Signature
(Signature must correspond to name
as written upon the face of this
Rights Certificate in every
particular, without alteration or
enlargement or any change
whatsoever)
Signatures must be guaranteed by an "Eligible Guarantor Institution" as
defined in Rule 17Ad-15 (or any successor rule or regulation) promulgated
pursuant to the Securities Exchange Act of 1934, as amended (this term means, in
general, banks, stock brokers, savings and loan associations and credit unions,
in each case with membership in an approved signature guarantee medallion
program).
________________________________________________________________________________
(To be completed if true)
- 1 -
The undersigned hereby represents, for the benefit of all holders of Rights
and shares of Common Stock, that the Rights evidenced by this Rights Certificate
are not, and, to the knowledge of the undersigned, have never been, Beneficially
Owned by an Acquiring Person or an Affiliate or Associate thereof (as defined in
the Rights Agreement).
__________________________________
Signature
________________________________________________________________________________
NOTICE
In the event the certification set forth above is not completed in
connection with a purported assignment, the Company will deem the Beneficial
Owner of the Rights evidenced by the enclosed Rights Certificate to be an
Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights
Agreement) or a transferee of any of the foregoing and accordingly will deem the
Rights evidenced by such Rights Certificate to be void and not transferable or
exercisable.
- 2 -
EXHIBIT B
FORM OF CERTIFICATE OF DESIGNATION AND TERMS
OF PARTICIPATING PREFERRED STOCK OF
COVAD COMMUNICATIONS GROUP, INC.
Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
We, the undersigned, ____________________________________________ and
______________________________, the _________________________________, and
_________________, respectively, of Covad Communications Group, Inc., a Delaware
corporation (the "Corporation"), do hereby certify as follows:
Pursuant to authority granted by Article IV of the Amended and Restated
Certificate of Incorporation of the Corporation and in accordance with the
provisions of Section 151 of the General Corporation Law of the State of
Delaware, the Board of Directors of the Corporation has adopted the following
resolutions fixing the designation and certain terms, powers, preferences and
other rights of a new series of the Corporation's Preferred Stock, par value
$.001 per share, and certain qualifications, limitations and restrictions
thereon:
RESOLVED, that there is hereby established a series of Preferred Stock, par
value $.001 per share, of the Corporation, and the designation and certain
terms, powers, preferences and other rights of the shares of such series, and
certain qualifications, limitations and restrictions thereon, are hereby fixed
as follows:
(i) The distinctive serial designation of this series shall be
"Participating Preferred Stock" (hereinafter called "this Series"). Each
share of this Series shall be identical in all respects with the other
shares of this Series except as to the dates from and after which dividends
thereon shall be cumulative.
(ii) The number of shares in this series shall initially be [700,000],
which number may from time to time be increased or decreased (but not below
the number then outstanding) by the Board of Directors. Shares of this
Series purchased by the Corporation shall be cancelled and shall revert to
authorized but unissued shares of Preferred Stock undesignated as to
series. Shares of this Series may be issued in fractional shares, which
fractional shares shall entitle the holder, in proportion to such holder's
fractional share, to all rights of a holder of a whole share of this
Series.
(iii) The holders of full or fractional shares of this Series shall be
entitled to receive, when and as declared by the Board of Directors, but
only out of funds legally available therefor, dividends, (A) on each date
that dividends or other distributions (other than dividends or
distributions payable in Common Stock of the Corporation) are payable on or
in respect of Common Stock comprising part of the Reference Package (as
defined below), in an amount per whole share of this Series equal to the
aggregate amount of dividends or
- 1 -
other distributions (other than dividends or distributions payable in
Common Stock of the Corporation) that would be payable on such date to a
holder of the Reference Package and (B) on the last day of March, June,
September and December in each year, in an amount per whole share of this
Series equal to the excess (if any) of $1,000 over the aggregate dividends
paid per whole share of this Series during the three month period ending on
such last day. Each such dividend shall be paid to the holders of record of
shares of this Series on the date, not exceeding sixty days preceding such
dividend or distribution payment date, fixed for the purpose by the Board
of Directors in advance of payment of each particular dividend or
distribution. Dividends on each full and each fractional share of this
Series shall be cumulative from the date such full or fractional share is
originally issued; provided that any such full or fractional share
originally issued after a dividend record date and on or prior to the
dividend payment date to which such record date relates shall not be
entitled to receive the dividend payable on such dividend payment date or
any amount in respect of the period from such original issuance to such
dividend payment date.
The term "Reference Package" shall initially mean 1,000 shares of Common
Stock, par value $.001 per share ("Common Stock"), of the Corporation. In the
event the corporation shall at any time after the close of business on
___________, 20__/1/ (A) declare or pay a dividend on any Common Stock payable
in Common Stock, (B) subdivide any Common Stock or (C) combine any Common Stock
into a smaller number of shares, then and in each such case the Reference
Package after such event shall be the Common Stock that a holder of the
Reference Package immediately prior to such event would hold thereafter as a
result thereof.
Holders of shares of this Series shall not be entitled to any dividends,
whether payable in cash, property or stock, in excess of full cumulative
dividends, as herein provided on this Series.
So long as any shares of this Series are outstanding, no dividend (other
than a dividend in Common Stock or in any other stock ranking junior to this
Series as to dividends and upon liquidation) shall be declared or paid or set
aside for payment or other distribution declared or made upon the Common Stock
or upon any other stock ranking junior to this Series as to dividends or upon
liquidation, nor shall any Common Stock nor any other stock of the Corporation
ranking junior to or on a parity with this Series as to dividends or upon
liquidation be redeemed, purchased or otherwise acquired for any consideration
(or any moneys be paid to or made available for a sinking fund for the
redemption of any shares of any such stock) by the Corporation (except by
conversion into or exchange for stock of the Corporation ranking junior to this
Series as to dividends and upon liquidation), unless, in each case, the full
cumulative dividends (including the dividend to be due upon payment of
______________
/1/ For a certificate of designation relating to shares to be issued pursuant to
Section 2.3 of the Rights Agreement, insert the Separation Time. For a
certificate of designation relating to shares to be issued pursuant to Section
3.1(d) of the Rights Agreement, insert the Flip-in Date.
- 2 -
such dividend, distribution, redemption, purchase or other acquisition) on all
outstanding shares of this Series shall have been, or shall contemporaneously
be, paid.
(iv) In the event of any merger, consolidation, reclassification or other
transaction in which the shares of Common Stock are exchanged for or
changed into other stock or securities, cash and/or any other property,
then in any such case the shares of this Series shall at the same time be
similarly exchanged or changed in an amount per whole share equal to the
aggregate amount of stock, securities, cash and/or any other property
(payable in kind), as the case may be, that a holder of the Reference
Package would be entitled to receive as a result of such transaction.
(v) In the event of any liquidation, dissolution or winding up of the
affairs of the Corporation, whether voluntary or involuntary, the holders
of full and fractional shares of this Series shall be entitled, before any
distribution or payment is made on any date to the holders of the Common
Stock or any other stock of the Corporation ranking junior to this Series
upon liquidation, to be paid in full an amount per whole share of this
Series equal to the greater of (A) $_________/2/ or (B) the aggregate
amount distributed of to be distributed prior to such date in connection
with such liquidation, dissolution or winding up to a holder of the
Reference Package (such greater amount being hereinafter referred to as the
"Liquidation Preference"), together with accrued dividends to such
distribution or payment date, whether or not earned or declared. If such
payment shall have been made in full to all holders of shares of this
Series, the holders of shares of this Series as such shall have no right or
claim to any of the remaining assets of the Corporation.
In the event the assets of the Corporation available for distribution to
the holders of shares of this Series upon any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, shall be
insufficient to pay in full all amounts to which such holders are entitled
pursuant to the first paragraph of this Section (v), no such distribution shall
be made on account of any shares of any other class or series of Preferred Stock
ranking on a parity with the shares of this Series upon such liquidation,
dissolution or winding up unless proportionate distributive amounts shall be
paid on account of the shares of this Series, ratably in proportion to the full
distributable amounts for which holders of all such parity shares are
respectively entitled upon such liquidation, dissolution or winding up.
Upon the liquidation, dissolution or winding up of the Corporation, the
holders of shares of this Series then outstanding shall be entitled to be paid
out of assets of the Corporation available for distribution to its stock-holders
all amounts to which such holders are entitled pursuant to the first paragraph
of this Section (v) before any payment shall be made to the holders of Common
Stock or any other stock of the Corporation ranking junior upon liquidation to
this Series.
_____________________
/2/ Insert an amount equal to 1,000 times the Exercise Price in effect as of the
Separation Time.
- 3 -
For the purposes of this Section (v), the consolidation or merger of, or
binding share exchange by, the Corporation with any other corporation shall not
be deemed to constitute a liquidation, dissolution or winding up of the
Corporation. The shares of this Series shall not be redeemable.
(vi) In addition to any other vote or consent of stockholders required by
law or by the Restated Certificate of Incorporation, as amended, of the
Corporation, each whole share of this Series shall, on any matter, vote as
a class with any other capital stock comprising part of the Reference
Package and voting on such matter and shall have the number of votes
thereon that a holder of the Reference Package would have.
IN WITNESS WHEREOF, the undersigned have signed and attested this
certificate on the ____ day of ________________, 20__.
__________________________________
Attest:
_________________________________
- 4 -