EXHIBIT 4.1
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EMAK WORLDWIDE, INC.
AND
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
AS RIGHTS AGENT
RIGHTS AGREEMENT
DATED AS OF MARCH 15, 2006
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TABLE OF CONTENTS
Page
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SECTION 1. CERTAIN DEFINITIONS.....................................................2
SECTION 2. APPOINTMENT OF RIGHTS AGENT.............................................8
SECTION 3. ISSUE OF RIGHT CERTIFICATES.............................................8
SECTION 4. FORM OF RIGHT CERTIFICATES.............................................10
SECTION 5. COUNTERSIGNATURE AND REGISTRATION......................................11
SECTION 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHT
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHT CERTIFICATES..11
SECTION 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS..........12
SECTION 8. CANCELLATION AND DESTRUCTION OF RIGHT CERTIFICATES.....................14
SECTION 9. AVAILABILITY OF PREFERRED SHARES.......................................14
SECTION 10. PREFERRED SHARES RECORD DATE...........................................15
SECTION 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER OF SHARES OR NUMBER OF RIGHTS.....15
SECTION 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES.............22
SECTION 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR EARNING POWER...22
SECTION 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES................................25
SECTION 15. RIGHTS OF ACTION.......................................................27
SECTION 16. AGREEMENT OF RIGHT HOLDERS.............................................27
SECTION 17. RIGHT CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER......................28
SECTION 18. CONCERNING THE RIGHTS AGENT............................................28
SECTION 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT..............29
SECTION 20. DUTIES OF RIGHTS AGENT.................................................29
SECTION 21. CHANGE OF RIGHTS AGENT.................................................31
SECTION 22. ISSUANCE OF NEW RIGHT CERTIFICATES.....................................32
SECTION 23. REDEMPTION.............................................................32
SECTION 24. EXCHANGE...............................................................34
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Table of Contents
(continued)
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SECTION 25. NOTICE OF CERTAIN EVENTS...............................................36
SECTION 26. NOTICES................................................................37
SECTION 27. SUPPLEMENTS AND AMENDMENTS.............................................37
SECTION 28. DETERMINATION AND ACTIONS BY THE BOARD OF DIRECTORS, ETC...............38
SECTION 29. SUCCESSORS.............................................................38
SECTION 30. BENEFITS OF THIS AGREEMENT.............................................38
SECTION 31. SEVERABILITY...........................................................39
SECTION 32. GOVERNING LAW..........................................................39
SECTION 33. COUNTERPARTS...........................................................39
SECTION 34. DESCRIPTIVE HEADINGS...................................................39
EXHIBITS
A. Form of Certificate of Designation of Series A Junior Participating
Preferred Stock
B. Form of Right Certificate
C. Summary of Rights to Purchase Preferred Shares
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RIGHTS AGREEMENT
THIS RIGHTS AGREEMENT ("Agreement"), dated as of March 15, 2006,
between EMAK WORLDWIDE, INC., a Delaware corporation (the "Company"), and
CONTINENTAL STOCK TRANSFER & TRUST COMPANY ("Rights Agent").
WHEREAS, the Board of Directors of the Company (the "Board of
Directors") has authorized and declared a dividend of one preferred share
purchase right (a "Right") for each Common Share (as such term is hereinafter
defined) outstanding at the close of business on March 26, 2006 (the "Record
Date"), each Right representing the right to purchase one one-thousandth of a
Preferred Share (as such term is hereinafter defined), upon the terms and
subject to the conditions herein set forth, and has further authorized and
directed the issuance of one Right with respect to each Common Share that shall
become outstanding between the Record Date and the earliest to occur of the
Distribution Date, the Redemption Date and the Final Expiration Date (as such
terms are hereinafter defined); provided, however, that Rights may be issued
with respect to Common Shares that shall become outstanding after the
Distribution Date and prior to the earlier of the Redemption Date and the Final
Expiration Date in accordance with the provisions of Section 22 hereof; and
WHEREAS, the Board of Directors has approved and authorized the
appointment of the Rights Agent, and the Rights Agent desires to accept such
appointment.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
SECTION 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "ACQUIRING PERSON" shall mean any Person (as such term is
hereinafter defined) who or which, together with all Affiliates and Associates
(as such terms are hereinafter defined) of such Person, shall be the Beneficial
Owner (as such term is hereinafter defined) of 10% or more of the Common Shares
then outstanding. Notwithstanding the foregoing, (A) the term Acquiring Person
shall not include (i) the Company, (ii) any Subsidiary (as such term is
hereinafter defined) of the Company, (iii) any employee benefit or compensation
plan of the Company or any Subsidiary of the Company, (iv) any entity holding
Common Shares for or pursuant to the terms of any such employee benefit or
compensation plan of the Company or any Subsidiary of the Company, (B) if, as of
the date of this Agreement, any Person is the Beneficial Owner of 10% or more of
the Common Shares outstanding (an "Existing Holder"), such Existing Holder shall
not be or become an "Acquiring Person" unless and until such time as such
Existing Holder shall become the Beneficial Owner of one or more additional
Common Shares (other than pursuant to a dividend or distribution paid or made by
the Company on the outstanding Common Shares in Common Shares or pursuant to a
split or subdivision of the outstanding Common Shares or pursuant to any award
granted by the Company under an equity-based compensation plan), unless, upon
becoming the Beneficial Owner of such additional Common Shares, such Existing
Holder is not then the Beneficial Owner of 10% or more of the Common Shares then
outstanding, (C) Crown EMAK Partners LLC and its Affiliates ("Crown") shall not
be or become an "Acquiring Person" solely as a result of Common Shares
Beneficially
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Owned by Crown or issuable upon the conversion of shares of Series AA Senior
Cumulative Convertible Preferred Stock, par value $.001 per share, of the
Company or the exercise of any options or warrants Crown holds to acquire
capital stock of the Company, in each case held by Crown as of the date of this
Agreement, unless and until such time as Crown shall become the Beneficial Owner
of one or more additional Common Shares (other than pursuant to a dividend or
distribution paid or made by the Company on the outstanding Common Shares in
Common Shares or pursuant to a split or subdivision of the outstanding Common
Shares), unless, upon becoming the Beneficial Owner of such additional Common
Shares, Crown is not then the Beneficial Owner of 10% or more of the Common
Shares then outstanding and (D) no Person shall become an "Acquiring Person"
either (x) as the result of an acquisition of Common Shares by the Company
which, by reducing the number of shares outstanding, increases the proportionate
number of shares beneficially owned by such Person to 10% or more of the Common
Shares then outstanding; provided, however, that if a Person shall become the
Beneficial Owner of 10% or more of the Common Shares then outstanding by reason
of share purchases by the Company and shall, following written notice from, or
public disclosure by the Company of such share purchases by the Company, become
the Beneficial Owner of any additional Common Shares without the prior consent
of the Company and shall then Beneficially Own more than 10% of the Common
Shares then outstanding, then such Person shall be deemed to be an "Acquiring
Person," or (y) as the result of the acquisition of Common Shares directly from
the Company as long as, prior to any acquisition of Common Shares directly from
the Company, the Company has been apprised by any such Person of the number of
Common Shares beneficially owned by such Person immediately prior to any such
acquisition; provided, however, that if a Person shall become the Beneficial
Owner of 10% or more of the Common Shares then outstanding by reason of share
purchases directly from the Company and shall, after that date, become the
Beneficial Owner of any additional Common Shares without the prior written
consent of the Company and shall then Beneficially Own more than 10% of the
Common Shares then outstanding, then such Person shall be deemed to be an
"Acquiring Person" or (z) if the Board of Directors determines in good faith
that a Person who would otherwise be an "Acquiring Person," as defined pursuant
to the foregoing provisions of this paragraph (a), has become such
inadvertently, and without any intention of changing or influencing control of
the Company, and such Person promptly enters into an irrevocable written
commitment in favor of the Company to divest, and thereafter divests (without
retaining any power, including voting with respect to such Common Shares), as
promptly as practicable (as determined in good faith by the Board of Directors),
following receipt of written notice from the Company of such event, of
Beneficial Ownership of a sufficient number of Common Shares so that such Person
would no longer be an Acquiring Person, as defined pursuant to the foregoing
provisions of this paragraph (a), then such Person shall not be deemed to be an
"Acquiring Person" for any purposes of this Agreement; provided, however, that
if such Person shall again become the Beneficial Owner of 10% or more of the
Common Shares then outstanding, such Person shall be deemed an "Acquiring
Person," subject to the exceptions set forth in this Section 1(a).
(b) "ACT" shall have the meaning set forth in Section 9(i)
hereof.
(c) "AFFILIATE" and "ASSOCIATE" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as in effect on the date of this Agreement; provided, however, that the
limited partners of a limited partnership shall not be
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deemed to be Associates of such limited partnership solely by virtue of their
limited partnership interests.
(d) "AGREEMENT" shall have the meaning set forth in the Preamble
hereof.
(e) A Person shall be deemed the "BENEFICIAL OWNER" or to have
"BENEFICIAL OWNERSHIP" of and shall be deemed to "beneficially own" any
securities:
(i) which such Person or any of such Person's Affiliates
or Associates is deemed to beneficially own, within the meaning of Rule 13d-3 of
the General Rules and Regulations under the Exchange Act as in effect on the
date of this Agreement;
(ii) which such Person or any of such Person's Affiliates
or Associates has (A) the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding (other than customary agreements with and between
underwriters and selling group members with respect to a bona fide public
offering of securities) other than agreements between the Company and any Person
pursuant to which the right to purchase securities is conditioned upon the
achievement of milestones which have not yet been achieved or upon the exercise
of conversion rights, exchange rights, rights (other than the Rights), warrants
or options, or otherwise; provided, however, that a Person shall not be deemed
the Beneficial Owner of, or to beneficially own, securities tendered pursuant to
a tender or exchange offer made by or on behalf of such Person or any of such
Person's Affiliates or Associates until such tendered securities are accepted
for purchase or exchange; or (B) the right to vote pursuant to any agreement,
arrangement or understanding; provided, however, that a Person shall not be
deemed the Beneficial Owner of, or to beneficially own, any security if the
agreement, arrangement or understanding to vote such security (1) arises solely
from a revocable proxy or consent given to such Person in response to a public
proxy or consent solicitation made pursuant to, and in accordance with, the
applicable rules and regulations promulgated under the Exchange Act and (2) is
not also then reportable on Schedule 13D under the Exchange Act (or any
comparable or successor report); or
(iii) which are beneficially owned, directly or
indirectly, by any other Person with which such Person or any of such Person's
Affiliates or Associates has any agreement, arrangement or understanding (other
than customary agreements with and between underwriters and selling group
members with respect to a bona fide public offering of securities) for the
purpose of acquiring, holding, voting (except to the extent contemplated by the
proviso to Section 1(e)(ii)(B) hereof) or disposing of any securities of the
Company; provided, however, that an agreement, arrangement or understanding for
purposes of this Section 1(e)(iii) shall not be deemed to include actions,
including any agreement, arrangement or understanding, or statements by (A) any
member of the Board of Directors, as comprised on the date of this Agreement
(the "Existing Directors"), (B) any subsequent directors of the Company who have
been nominated by a majority of the Existing Directors (the "Successor
Directors"), or (C) any subsequent member of the Board of Directors who is
elected by a majority of the Existing Directors and/or Successor Directors,
nominating as a group.
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Notwithstanding anything in this definition of Beneficial Ownership to
the contrary, the phrase, "then outstanding," when used with reference to a
Person's Beneficial Ownership of securities of the Company, shall mean the
number of such securities then issued and outstanding together with the number
of such securities not then actually issued and outstanding of which such Person
would be deemed the Beneficial Owner hereunder.
(f) "BOARD OF DIRECTORS" shall have the meaning set forth in the
Preamble hereof.
(g) "BUSINESS DAY" shall mean any day other than a Saturday, a
Sunday, or a day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.
(h) "CLOSE OF BUSINESS" on any given date shall mean 5:00 p.m.,
Eastern Time, on such date; provided, however, that if such date is not a
Business Day it shall mean 5:00 p.m., Eastern Time, on the next succeeding
Business Day.
(i) "COMMON SHARES" shall mean the shares of common stock, par
value $0.00l per share, of the Company; provided, however, that, "Common
Shares," when used in this Agreement in connection with a specific reference to
any Person other than the Company, shall mean the capital stock (or equity
interest) with the greatest voting power of such other Person or, if such other
Person is a Subsidiary of another Person, the Person or Persons which ultimately
control such first-mentioned Person.
(j) "COMPANY" shall have the meaning set forth in the Preamble
hereof.
(k) "DISTRIBUTION DATE" shall have the meaning set forth in
Section 3 hereof.
(l) "EQUIVALENT PREFERRED SHARES" shall have the meaning set
forth in Section 11(b) hereof.
(m) "EXCHANGE RATIO" shall have the meaning set forth in Section
24(a) hereof.
(n) "EXISTING DIRECTORS" shall have the meaning set forth in
Section 1(e)(iii) hereof.
(o) "FINAL EXPIRATION DATE" shall mean June 15, 2008 unless the
Rights are previously redeemed, exchanged or terminated or unless the
continuation of the Rights is previously approved by the stockholders of the
Company by a vote of the majority of the shares present and entitled to vote at
a stockholders meeting prior to June 15, 2008 (the "First Meeting"). If the
stockholders approve the continuation of Rights at the First Meeting, the Final
Expiration Date will be March 15, 2016, subject to stockholder ratification of
this Agreement by a vote of the majority of shares present and entitled to vote
at a stockholders meeting to be held every subsequent two years no later than
June 15 of the applicable year beginning in 2010.
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(p) "INJUNCTION" shall have the meaning set forth in Section
11(a)(ii) hereof.
(q) "INTERESTED STOCKHOLDER" shall mean any Acquiring Person or
any Affiliate or Associate of an Acquiring Person or any other Person in which
any such Acquiring Person, Affiliate or Associate has an interest, or any other
Person acting directly or indirectly on behalf of or in concert with any such
Acquiring Person, Affiliate or Associate.
(r) "NASDAQ" shall have the meaning set forth in Section 11(d)(i)
hereof.
(s) "PERSON" shall mean any individual, firm, corporation,
partnership, limited liability company, joint venture, trust, association,
unincorporated organization, group or other entity, and shall include any
successor (by merger or otherwise) of such entity.
(t) "PREFERRED SHARES" shall mean shares of Series A Junior
Participating Preferred Stock, par value $.001 per share, of the Company having
the designations and the powers, preferences and rights, and the qualifications,
limitations and restrictions set forth in the Form of Certificate of Designation
attached to this Agreement as Exhibit A.
(u) "PRINCIPAL PARTY" shall have the meaning set forth in Section
13(b) hereof.
(v) "PURCHASE PRICE" shall have the meaning set forth in Section
7(b) hereof.
(w) "QUALIFIED OFFER" shall mean an all-cash tender offer for all
outstanding Common Shares commenced within the meaning of Rule 14d-2(a) under
the Exchange Act; provided, however, that the Person making the tender offer
must, prior to or upon commencing such offer, provide the Company with firm
written commitments from responsible financial institutions, which have been
accepted by such Person, to provide (subject only to customary terms and
conditions, which shall in no event include conditions requiring access by such
financial institutions to non-public information to be provided by the Company,
conditions based on the accuracy of any information concerning the Company other
than such as would be the subject of representations and warranties in a public
financing by the Company or conditions requiring the Company to make any
representations, warranties or covenants in connection with such financing)
funds for such offer which, when added to the amount of cash and cash
equivalents which such Person then has available and has irrevocably committed
in writing to the Company to utilize for purposes of the offer if consummated,
will be sufficient (i) to pay for all Common Shares then outstanding on a fully
diluted basis, (ii) to pay or retire all debt or other securities of the Company
which is required to be repaid or retired, including at the option of the holder
thereof, upon the consummation of such transaction, and (iii) to pay all related
expenses. Such offer must also meet all of the following additional conditions:
(i) the offer must include a non-waivable condition that
such Person must own, after consummating such offer, at least 50% of the Common
Shares
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then outstanding (other than shares held by the Person making such offer, its
Affiliates or Associates or any director or officer of the Company);
(ii) such offer must remain open for at least sixty (60)
Business Days and at least ten (10) Business Days after the Special Meeting, and
must be extended for at least twenty (20) Business Days after the last increase
in the price offered and after any bona fide higher alternative offer is made,
and shall be subject only to customary terms and conditions, which shall in no
event include satisfaction of any conditions relating to the business, financial
condition, results of operations or prospects of the Company other than such as
are based on information publicly disclosed by the Company or any conditions
relating to approval of the offeror's stockholders; and
(iii) prior to or upon commencing such offer, such Person
must irrevocably commit in writing to the Company and in the offer to purchase
relating to the offer:
(1) to consummate promptly upon completion of the offer a
transaction whereby all Common Shares then outstanding and not tendered into the
offer will be acquired at the same price per share and for the same
consideration paid pursuant to the offer, and otherwise not to purchase any
Common Shares following completion of the offer;
(2) that such Person will not materially amend such offer,
except to increase the price offered; and
(3) that such Person will not make any offer for any
equity securities of the Company for six months after commencement of the
original offer if the original offer does not result in the tender of the number
of shares required to be purchased pursuant to subsection (i) above, unless
another Qualified Offer with a per share offer price at least ten percent (10%)
higher than the last price offered by the Person making the original offer is
commenced by another Person or Persons who are not Affiliates or Associates of,
acting in concert with, or instigated or financed by, the Person making the
original offer or with whom the Person making the original offer has any
agreement, arrangement or understanding relating to the Company or any assets or
securities of it or any of its Subsidiaries.
(x) "RECORD DATE" shall have the meaning set forth in the
Preamble hereof.
(y) "REDEMPTION DATE" shall have the meaning set forth in Section
7(a) hereof.
(z) "REDEMPTION PRICE" shall have the meaning set forth in
Section 23(b) hereof.
(aa) "RIGHT" shall have the meaning set forth in the Preamble
hereof.
(bb) "RIGHT CERTIFICATE" shall have the meaning set forth in
Section 3(a) hereof.
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(cc) "RIGHTS AGENT" shall have the meaning set forth in the
Preamble hereof.
(dd) "SHARES ACQUISITION DATE" shall mean the first date of
public announcement by the Company that an Acquiring Person exists, or by an
Acquiring Person that such Person has become an Acquiring Person; provided,
however that, if such Person is determined not to have become an Acquiring
Person pursuant to clause (z) of Subsection 1(a)(B) hereof, then no Shares
Acquisition Date shall be deemed to have occurred.
(ee) "SPECIAL MEETING" shall have the meaning set forth in
Section 23(c) hereof.
(ff) "SUBSIDIARY" of any Person shall mean any corporation or
other entity of which a majority of the voting power of the voting equity
securities or equity interest is owned, directly or indirectly, by such Person.
(gg) "SUCCESSOR DIRECTORS" shall have the meaning set forth in
Section 1(e)(iii) hereof.
(hh) "SUMMARY OF RIGHTS" shall have the meaning set forth in
Section 3(b) hereof.
(ii) "TRADING DAY" shall mean a day on which the principal
national securities exchange on which the Security is listed or admitted to
trading is open for the transaction of business or, if the Security is not
listed or admitted to trading on any national securities exchange, a Business
Day.
(jj) "TRANSACTION" shall mean any merger, consolidation or sale
of assets described in Section 13(a) hereof or any acquisition of Common Shares
which would result in a Person becoming an Acquiring Person or a Principal
Party.
(kk) "TRANSACTION PERSON" with respect to a Transaction shall
mean (i) any Person who (x) is or will become an Acquiring Person or a Principal
Party (as such term is hereinafter defined) if the Transaction were to be
consummated and (y) directly or indirectly proposed or nominated a director of
the Company which director is in office at the time of consideration of the
Transaction, or (ii) an Affiliate or Associate of such a Person.
SECTION 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints the
Rights Agent to act as agent for the Company in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such co-Rights Agents as it may deem
necessary or desirable. The Rights Agent shall have no duty to supervise, and in
no event shall be liable for, the acts or omissions of any such co-Rights Agent.
SECTION 3. ISSUE OF RIGHT CERTIFICATES.
(a) Until the earlier of the Close of Business on (i) the Shares
Acquisition Date or (ii) the tenth (10th) Business Day (or such later date as
may be determined by
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action of the Board of Directors prior to such time as any Person becomes an
Acquiring Person) after the date of the commencement (determined in accordance
with Rule 14d-2 under the Exchange Act) by any Person (other than the Company,
any Subsidiary of the Company, any employee benefit plan of the Company or of
any Subsidiary of the Company or any entity holding Common Shares for or
pursuant to the terms of any such plan) of, or of the first public announcement
of the intention of any Person (other than the Company, any Subsidiary of the
Company, any employee benefit plan of the Company or of any Subsidiary of the
Company or any entity holding Common Shares for or pursuant to the terms of any
such plan) to commence, a tender or exchange offer (which intention to commence
remains in effect for five Business Days after such announcement), the
consummation of which would result in any Person becoming an Acquiring Person
(including any such date which is after the date of this Agreement and prior to
the issuance of the Rights, the earlier of such dates being herein referred to
as the "Distribution Date"), (x) the Rights will be evidenced by the
certificates for Common Shares registered in the names of the holders thereof
(which certificates shall also be deemed to be Right Certificates) and not by
separate Right Certificates, and (y) the Rights (and the right to receive Right
Certificates therefor) will be transferable only in connection with the transfer
of Common Shares. As soon as practicable after the Distribution Date, the
Company shall promptly notify the Rights Agent of the occurrence thereof and, if
the Rights Agent is not then also the transfer agent and registrar for the
Common Stock, provide the Rights Agent with the names and addresses of all
record holders of Common Stock, and the Company will prepare and execute, the
Rights Agent will countersign, and the Company will send or cause to be sent
(and the Rights Agent will, if requested, and provided with all necessary
information, send) by first-class, insured, postage-prepaid mail, to each record
holder of Common Shares as of the Close of Business on the Distribution Date, at
the address of such holder shown on the records of the Company, a Right
Certificate, in substantially the form of Exhibit B hereto (a "Right
Certificate"), evidencing one Right for each Common Share so held, subject to
the adjustment provisions of Section 11 hereof. As of the Distribution Date, the
Rights will be evidenced solely by such Right Certificates.
(b) On the Record Date, or as soon as practicable thereafter, the
Company will send (directly or through the Rights Agent or its transfer agent) a
copy of a Summary of Rights to Purchase Preferred Shares, in substantially the
form of Exhibit C hereto (the "Summary of Rights"), by first-class,
postage-prepaid mail, to each record holder of Common Shares as of the Close of
Business on the Record Date, at the address of such holder shown on the records
of the Company. Until the Distribution Date (or, if earlier, the Redemption Date
or the Final Expiration Date), the Rights associated with the Common Shares
represented by such certificates shall be evidenced by such certificates alone,
and the surrender for transfer of any certificate for Common Shares outstanding
shall also constitute the transfer of the Rights associated with the Common
Shares represented thereby (whether or not such certificates have impressed on,
printed, written on or otherwise affixed to them the legend set forth in Section
3(c)).
(c) Certificates for Common Shares which become outstanding
(including, without limitation, reacquired Common Shares referred to in the
second to last sentence of this paragraph (c)) after the Record Date but prior
to the earliest of the Distribution Date, the Redemption Date or the Final
Expiration Date shall have impressed on, printed on, written on or otherwise
affixed to them a legend in substantially the form set forth below:
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This certificate also evidences and entitles the
holder hereof to certain rights as set forth in an Agreement
between EMAK Worldwide, Inc. (the "Company") and Continental
Stock Transfer & Trust Company, as Rights Agent (the "Rights
Agent"), dated as of March 15, 2006, as amended from time to
time (the "Agreement"), the terms of which are hereby
incorporated herein by reference and a copy of which is on
file at the principal executive offices of the Company. Under
certain circumstances, as set forth in the Agreement, such
Rights will be evidenced by separate certificates and will no
longer be evidenced by this certificate. The Company will mail
to the holder of this certificate a copy of the Agreement
without charge after receipt of a written request therefor. As
described in the Agreement, Rights issued to any Person who
becomes an Acquiring Person or an Affiliate or Associate
thereof (as defined in the Agreement) and certain related
Persons, whether currently held by or on behalf of such Person
or by any subsequent holder, shall become null and void.
With respect to such certificates containing the foregoing legend, until the
Distribution Date (or, if earlier, the earlier of the Redemption Date or the
Final Expiration Date), the Rights associated with the Common Shares represented
by such certificates shall be evidenced by such certificates alone, and the
surrender for transfer of any such certificate shall also constitute the
transfer of the Rights associated with the Common Shares represented thereby. In
the event that the Company purchases or acquires any Common Shares after the
Record Date but prior to the Distribution Date, any Rights associated with such
Common Shares shall be deemed canceled and retired so that the Company shall not
be entitled to exercise any Rights associated with the Common Shares which are
no longer outstanding. Notwithstanding this Section 3(c), the omission of a
legend shall not affect the enforceability of any part of this Agreement or the
rights of any holder of the Rights.
SECTION 4. FORM OF RIGHT CERTIFICATES.
(a) The Right Certificates (and the form of election to purchase
Preferred Shares, the form of assignment and the form of certification to be
printed on the reverse thereof) shall be substantially the same as Exhibit B
hereto and may have such marks of identification or designation and such
legends, summaries or endorsements printed thereon as the Company may deem
appropriate (provided that such marks, legends, summaries and endorsements do
not affect the rights, duties or responsibilities of the Rights Agent) and are
not inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange or quotation system
on which the Rights may from time to time be listed, or to conform to usage.
Subject to the provisions of Sections 7, 11 and 22 hereof the Right Certificates
shall entitle the holders thereof to purchase such number of one one-thousandths
of a Preferred Share as shall be set forth therein at the Purchase Price (as
defined in Section 7(b)), but the number of such one one-thousandths of a
Preferred Share and the Purchase Price shall be subject to adjustment as
provided herein.
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(b) Any Right Certificate issued pursuant to Section 3(a) or
Section 22 hereof that represents Rights which are null and void pursuant to
Section 11(a)(ii) hereof and any Right Certificate issued pursuant to Section 6
or Section 11 hereof upon transfer, exchange, replacement or adjustment of any
other Right Certificate referred to in this sentence, shall contain (to the
extent the Rights Agent has notice thereof and to the extent feasible) the
following legend:
The Rights represented by this Right Certificate are
or were beneficially owned by a Person who was or became an
Acquiring Person or an Affiliate or Associate of an Acquiring
Person (as such terms are defined in the Agreement).
Accordingly, this Right Certificate and the Rights represented
hereby are null and void.
The provisions of Section 11(a)(ii) hereof shall be operative whether
or not the foregoing legend is contained on any such Right Certificate.
SECTION 5. COUNTERSIGNATURE AND REGISTRATION. The Right Certificates
shall be executed on behalf of the Company by its Chairman of the Board, its
Chief Executive Officer, its President, its Vice Chairman of the Board, its
Chief Financial Officer, its Chief Administrative Officer or any of its
Executive Vice Presidents, either manually or by facsimile signature, shall have
affixed thereto the Company's seal or a facsimile thereof if the Company has a
seal, and shall be attested by the Secretary or an Assistant Secretary of the
Company, either manually or by facsimile signature. The Right Certificates shall
be manually countersigned by the Rights Agent and shall not be valid for any
purpose unless countersigned. In case any officer of the Company who shall have
signed any of the Right Certificates shall cease to be such officer of the
Company before countersignature by the Rights Agent and issuance and delivery by
the Company, such Right Certificates, nevertheless, may be countersigned by the
Rights Agent and issued and delivered by the Company with the same force and
effect as though the person who signed such Right Certificates had not ceased to
be such officer of the Company; and any Right Certificate may be signed on
behalf of the Company by any person who, at the actual date of the execution of
such Right Certificate, shall be a proper officer of the Company to sign such
Right Certificate, although at the date of the execution of this Agreement any
such person was not such an officer.
Following the Distribution Date, and receipt by the Rights Agent of
written notice to that effect and all other relevant information referred to in
Section 3(a) hereof, the Rights Agent will keep or cause to be kept, at its
office designated for such purpose, books for registration and transfer of the
Right Certificates issued hereunder. Such books shall show the names and
addresses of the respective holders of the Right Certificates, the number of
Rights evidenced on its face by each of the Right Certificates and the date of
each of the Right Certificates.
SECTION 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHT
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHT CERTIFICATES. Subject
to the provisions of Section 11(a)(ii), Section 14 and Section 24 hereof, at any
time after the Close of Business on the Distribution Date, and at or prior to
the Close of Business on the earlier of the Redemption Date or the Final
Expiration Date, any Right Certificate or Right Certificates may be transferred,
split up, combined or exchanged for another
11
Right Certificate or Right Certificates, entitling the registered holder to
purchase a like number of one one-thousandth of a Preferred Share as the Right
Certificate or Right Certificates surrendered then entitled such holder to
purchase. Any registered holder desiring to transfer, split up, combine or
exchange any Right Certificate or Right Certificates shall make such request in
writing delivered to the Rights Agent, and shall surrender the Right Certificate
or Right Certificates to be transferred, split up, combined or exchanged at the
office of the Rights Agent designated for such purpose. Neither the Rights Agent
nor the Company shall be obligated to take any action whatsoever with respect to
the transfer of any such surrendered Right Certificate until the registered
holder shall have properly completed and signed the certificate contained in the
form of assignment on the reverse side of such Right Certificate and shall have
provided such additional evidence of the identity of the Beneficial Owner (or
former Beneficial Owner) or Affiliates or Associates thereof as the Company or
the Rights Agent shall request. Thereupon the Rights Agent shall, subject to
Section 11(a)(ii), Section 14 and Section 24 hereof, countersign and deliver to
the Person entitled thereto a Right Certificate or Right Certificates, as the
case may be, as so requested. The Company may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer, split up, combination or exchange of Right
Certificates. The Rights Agent shall have no duty or obligation under this
Section 6 or any other similar provision of this Agreement unless and until it
is reasonably satisfied that all such taxes and/or governmental charges have
been paid in full.
Upon receipt by the Company and the Rights Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a Right
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and, at the Company's request,
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Right Certificate if mutilated, the Company will issue, execute and deliver
a new Right Certificate of like tenor to the Rights Agent for countersignature
and delivery to the registered holder in lieu of the Right Certificate so lost,
stolen, destroyed or mutilated.
Notwithstanding any other provisions hereof, the Company and the Rights
Agent may amend this Agreement to provide for uncertificated Rights in addition
to or in place of Rights evidenced by Rights Certificates.
SECTION 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF
RIGHTS.
(a) The registered holder of any Right Certificate may exercise
the Rights evidenced thereby (except as otherwise provided herein) in whole or
in part at any time after the Distribution Date upon surrender of the Right
Certificate, with the form of election to purchase on the reverse side thereof
duly executed, to the Rights Agent at the office of the Rights Agent designated
for such purpose, together with payment of the Purchase Price for each one
one-thousandth of a Preferred Share (or such other number of shares or other
securities) as to which the Rights are exercised, at or prior to the earliest of
(i) the Final Expiration Date, (ii) the time at which the Rights are redeemed as
provided in Section 23 hereof (the "Redemption Date"), or (iii) the time at
which such Rights are exchanged as provided in Section 24 hereof.
12
(b) The purchase price for each one one-thousandth of a Preferred
Share pursuant to the exercise of a Right shall initially be $40.00 (the
"Purchase Price") and shall be subject to adjustment from time to time as
provided in Sections 11 and 13 hereof and shall be payable in lawful money of
the United States of America in accordance with paragraph (c) below.
(c) Upon receipt of a Right Certificate representing exercisable
Rights, with the form of election to purchase duly executed, accompanied by
payment of the Purchase Price for the shares to be purchased and an amount equal
to any applicable transfer tax required to be paid by the holder of such Right
Certificate in accordance with Section 9 hereof by certified check, cashier's
check, bank draft or money order payable to the order of the Company, the Rights
Agent shall thereupon promptly (i) (A) requisition from any transfer agent for
the Preferred Shares certificates for the number of Preferred Shares to be
purchased and the Company hereby irrevocably authorizes its transfer agent to
comply with all such requests, or (B) if the Company, in its sole discretion,
shall have elected to deposit the Preferred Shares issuable upon exercise of the
Rights hereunder into a depository, requisition from the depositary agent
depositary receipts representing such number of one one-thousandths of a
Preferred Share as are to be purchased (in which case certificates for the
Preferred Shares represented by such receipts shall be deposited by the transfer
agent with the depositary agent) and the Company hereby directs the depositary
agent to comply with such request, (ii) when appropriate, requisition from the
Company the amount of cash to be paid in lieu of issuance of fractional shares
in accordance with Section 14 hereof, (iii) after receipt of such certificates
or depositary receipts, cause the same to be delivered to or upon the order of
the registered holder of such Right Certificate, registered in such name or
names as may be designated by such holder and (iv) when appropriate, after
receipt, deliver such cash to or upon the order of the registered holder of such
Right Certificate. In the event that the Company is obligated to issue
securities of the Company other than Preferred Shares (including Common Shares)
of the Company pursuant to Section 11(a) hereof, the Company will make all
arrangements necessary so that such other securities are available for
distribution by the Rights Agent, if and when appropriate.
In addition, in the case of an exercise of the Rights by a holder
pursuant to Section 11(a)(ii) hereof, the Rights Agent shall return such Right
Certificate to the registered holder thereof after imprinting, stamping or
otherwise indicating thereon that the rights represented by such Right
Certificate no longer include the rights provided by Section 11(a)(ii) hereof,
and, if fewer than all the Rights represented by such Right Certificate were so
exercised, the Rights Agent shall indicate on the Right Certificate the number
of Rights represented thereby which continue to include the rights provided by
Section 11(a)(ii) hereof. Neither the Company nor the Rights Agent shall have
any liability to any holder of Rights Certificates or to any other Person as a
result of the Company's failure to make any determinations with respect to an
Acquiring Person or such Acquiring Person's Affiliates, Associates or
transferees hereunder.
(d) In case the registered holder of any Right Certificate shall
exercise fewer than all the Rights evidenced thereby (other than a partial
exercise of Rights pursuant to Section 11(a)(ii) as described in Section 7(c)
hereof), a new Right Certificate evidencing Rights equivalent to the Rights
remaining unexercised shall be issued by the Rights Agent to the registered
holder of such Right Certificate or to his duly authorized assigns, subject to
the provisions of Section 14 hereof.
13
(e) The Company covenants and agrees that it will cause to be
reserved and kept available out of its authorized and unissued Preferred Shares
or any Preferred Shares held in its treasury, the number of Preferred Shares
that will be sufficient to permit the exercise in full of all outstanding Rights
in accordance with this Section 7.
(f) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a registered holder upon the occurrence of any purported
exercise as set forth in this Section 7 unless such registered holder shall have
(i) properly completed and signed the certification following the form of
election to purchase set forth on the reverse side of the Rights Certificate
surrendered for such exercise, (ii) tendered the Purchase Price (and an amount
equal to any applicable transfer tax required to be paid by the holder of such
Right Certificate in accordance with Section 9 hereof) to the Company in the
manner set forth in Section 7(c) hereof, and (iii) provided such additional
evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or
Affiliates or Associates thereof as the Company or the Rights Agent shall
reasonably request.
SECTION 8. CANCELLATION AND DESTRUCTION OF RIGHT CERTIFICATES. All
Right Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if delivered or surrendered to the Rights Agent, shall be canceled by it,
and no Right Certificates shall be issued in lieu thereof except as expressly
permitted by any of the provisions of this Agreement. The Company shall deliver
to the Rights Agent for cancellation and retirement, and the Rights Agent shall
so cancel and retire, any other Right Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall deliver
all canceled Right Certificates to the Company approximately one and one-half
years after the cancellation date, or shall, at the written request of the
Company, destroy such canceled Right Certificates, and in such case shall
deliver a certificate of destruction thereof to the Company.
SECTION 9. AVAILABILITY OF PREFERRED SHARES. The Company agrees that so
long as the Preferred Shares (and, after the time a Person becomes an Acquiring
Person, Common Shares or any other securities) issuable upon the exercise of the
Rights may be listed on any national securities exchange or quotation system,
the Company shall use its best efforts to cause, from and after such time as the
Rights become exercisable, all shares reserved for such issuance to be listed on
such exchange or quotation system upon official notice of issuance upon such
exercise.
The Company agrees that it will take all such action as may be
necessary to ensure that all Preferred Shares (or Common Shares and other
securities, as the case may be) delivered upon exercise of Rights shall, at the
time of delivery of the certificates for such Preferred Shares (subject to
payment of the Purchase Price), be duly and validly authorized and issued and
fully paid and nonassessable shares or other securities.
The Company further agrees that it will pay when due and payable any
and all federal and state transfer taxes and charges which may be payable in
respect of the issuance or delivery of the Right Certificates or of any
Preferred Shares upon the exercise of Rights. The Company
14
shall not, however, be required to pay any transfer tax which may be payable in
respect of any transfer or delivery of Right Certificates to a Person other
than, or the issuance or delivery of certificates or depositary receipts for the
Preferred Shares in a name other than that of, the registered holder of the
Right Certificate evidencing Rights surrendered for exercise or to issue or to
deliver any certificates or depositary receipts for Preferred Shares upon the
exercise of any Rights until any such tax shall have been paid (any such tax
being payable by the holder of such Right Certificate at the time of surrender)
or until it has been established to the Company's reasonable satisfaction that
no such tax is due.
As soon as practicable after the Distribution Date, the Company shall
use its best efforts to:
(i) prepare and file a registration statement under the
Securities Act of 1933, as amended (the "Act"), with respect to the Rights and
the securities purchasable upon exercise of the Rights on an appropriate form,
will use its best efforts to cause such registration statement to become
effective as soon as practicable after such filing and will use its best efforts
to cause such registration statement to remain effective (with a prospectus at
all times meeting the requirements of the Act) until the Final Expiration Date;
and
(ii) use its best efforts to qualify or register the
Rights and the securities purchasable upon exercise of the Rights under the blue
sky laws of such jurisdictions as may be necessary or appropriate.
SECTION 10. PREFERRED SHARES RECORD DATE. Each Person in whose name any
certificate for Preferred Shares or other securities is issued upon the exercise
of Rights shall for all purposes be deemed to have become the holder of record
of the Preferred Shares or other securities represented thereby on, and such
certificate shall be dated, the date upon which the Right Certificate evidencing
such Rights was duly surrendered with the forms of election and certification
duly executed and payment of the Purchase Price (and any applicable transfer
taxes) was made; provided, however, that if the date of such surrender and
payment is a date upon which the Preferred Shares or other securities 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 Preferred Shares or other securities
transfer books of the Company are open. Prior to the exercise of the Rights
evidenced thereby, the holder of a Right Certificate, as such, shall not be
entitled to any rights of a holder of Preferred Shares for which the Rights
shall be exercisable, including, without limitation, the right to vote, to
receive dividends or other distributions or to exercise any preemptive rights,
and shall not be entitled to receive any notice of any proceedings of the
Company, except as provided herein.
SECTION 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER OF SHARES OR NUMBER OF
RIGHTS. The Purchase Price, the number of Preferred Shares covered by each Right
and the number of Rights outstanding are subject to adjustment from time to time
as provided in this Section 11.
(a) (i) In the event the Company shall at any time after the date
of this Agreement (A) declare a dividend on the Preferred Shares payable in
Preferred Shares, (B)
15
subdivide the outstanding Preferred Shares, (C) combine the outstanding
Preferred Shares into a smaller number of Preferred Shares or (D) issue any
shares of its capital stock in a reclassification of the Preferred Shares
(including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing or surviving corporation), except
as otherwise provided in this Section 11(a), the Purchase Price in effect at the
time of the record date for such dividend or of the effective date of such
subdivision, combination or reclassification, and the number and kind of shares
of capital stock issuable on such date, shall be proportionately adjusted so
that the holder of any Right exercised after such time shall be entitled to
receive the aggregate number and kind of shares of capital stock which, if such
Right had been exercised immediately prior to such date and at a time when the
Preferred Shares transfer books of the Company were open, such holder would have
owned upon such exercise and been entitled to receive by virtue of such
dividend, subdivision, combination or reclassification; provided, however, that
in no event shall the consideration to be paid upon the exercise of one Right be
less than the aggregate par value of the shares of capital stock of the Company
issuable upon exercise of one Right. If an event occurs which would require an
adjustment under both Section 11(a)(i) and Section 11(a)(ii) hereof, the
adjustment provided for in this Section 11(a)(i) shall be in addition to, and
shall be made prior to any adjustment required pursuant to Section 11(a)(ii)
hereof.
(ii) Subject to Section 24 hereof and the provisions of
the next paragraph of this Section 11(a)(ii), in the event any Person shall
become an Acquiring Person, each holder of a Right shall, for a period of 60
days after the later of such time that any Person becomes an Acquiring Person or
the effective date of an appropriate registration statement filed under the Act
pursuant to Section 9 hereof (provided, however that, if at any time prior to
the expiration or termination of the Rights there shall be a temporary
restraining order, a preliminary injunction, an injunction, or temporary
suspension by the Board of Directors, or similar obstacle to exercise of the
Rights (the "Injunction") which prevents exercise of the Rights, a new 60-day
period shall commence on the date the Injunction is removed), have a right to
receive, upon exercise thereof at a price equal to the then current Purchase
Price multiplied by the number of one one-thousandths of a Preferred Share for
which a Right is then exercisable, in accordance with the terms of this
Agreement and in lieu of Preferred Shares, such number of Common Shares as shall
equal the result obtained by (A) multiplying the then current Purchase Price by
the number of one one-thousandths of a Preferred Share for which a Right is then
exercisable and dividing that product by (B) 50% of the then current per share
market price of the Common Shares (determined pursuant to Section 11(d) hereof)
on the date such Person became an Acquiring Person; provided, however, that if
the transaction that would otherwise give rise to the foregoing adjustment is
also subject to the provisions of Section 13 hereof, then only the provisions of
Section 13 hereof shall apply and no adjustment shall be made pursuant to this
Section 11(a)(ii). In the event that any Person shall become an Acquiring Person
and the Rights shall then be outstanding, the Company shall not take any action
which would eliminate or diminish the benefits intended to be afforded by the
Rights.
Notwithstanding anything in this Agreement to the contrary, from and
after the time any Person becomes an Acquiring Person, any Rights beneficially
owned by (i) such Acquiring Person or an Associate or Affiliate of such
Acquiring Person, (ii) a transferee of such Acquiring Person (or of any such
Associate or
16
Affiliate) who becomes a transferee after the Acquiring Person became such, or
(iii) a transferee of such Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee prior to or concurrently with the Acquiring
Person's becoming such and receives such Rights pursuant to either (A) a
transfer (whether or not for consideration) from the Acquiring Person to holders
of equity interests in such Acquiring Person or to any Person with whom the
Acquiring Person has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer which the Board of Directors
has determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect the avoidance of this Section 11(a)(ii), shall become
null and void without any further action and no holder of such Rights shall have
any rights whatsoever with respect to such Rights, whether under any provision
of this Agreement or otherwise. The Company shall use all reasonable efforts to
insure that the provisions of this Section 11(a)(ii) and Section 4(b) hereof are
complied with, but neither the Company nor the Rights Agent shall have any
liability to any holder of Right Certificates or other Person as a result of the
Company's failure to make any determinations with respect to an Acquiring Person
or its Affiliates, Associates or transferees hereunder. No Right Certificate
shall be issued at any time upon the transfer of any Rights to an Acquiring
Person whose Rights would be null and void pursuant to the first sentence of
this paragraph or any Associate or Affiliate thereof or to any nominee of such
Acquiring Person, Associate or Affiliate; and any Right Certificate delivered to
the Rights Agent for transfer to an Acquiring Person whose Rights would be null
and void pursuant to the first sentence of this paragraph shall be canceled.
(iii) In lieu of issuing Common Shares in accordance with
Section 11(a)(ii) hereof, the Company may, if a majority of the Board of
Directors then in office determines that such action is necessary or appropriate
and not contrary to the interests of holders of Rights, elect to (and, in the
event that the Board of Directors has not exercised the exchange right contained
in Section 24(c) hereof and there are not sufficient treasury shares and
authorized but unissued Common Shares to permit the exercise in full of the
Rights in accordance with the foregoing subparagraph (ii), the Company shall)
take all such action as may be necessary to authorize, issue or pay, upon the
exercise of the Rights, cash (including by way of a reduction of the Purchase
Price), property, Common Shares, other securities or any combination thereof
having an aggregate value equal to the value of the Common Shares which
otherwise would have been issuable pursuant to Section 11(a)(ii) hereof which
aggregate value shall be determined by a nationally recognized investment
banking firm selected by a majority of the Board of Directors then in office.
For purposes of the preceding sentence, the value of the Common Shares shall be
determined pursuant to Section 11(d) hereof. Any such election by the Board of
Directors must be made within 60 days following the date on which the event
described in Section 11(a)(ii) hereof shall have occurred. Following the
occurrence of the event described in Section 11(a)(ii) hereof, a majority of the
Board of Directors then in office may suspend the exercisability of the Rights
for a period of up to 60 days following the date on which the event described in
Section 11(a)(ii) hereof shall have occurred to the extent that such directors
have not determined whether to exercise their rights of election under this
Section 11(a)(iii). In the event of any such suspension, the Company shall
promptly notify the Rights Agent in writing of such suspension and shall issue a
public announcement stating that the exercisability of the Rights has been
temporarily suspended.
(b) In case the Company shall fix a record date for the issuance
of rights, options or warrants to all holders of Preferred Shares entitling them
(for a period expiring within 45 calendar days after such record date) to
subscribe for or purchase Preferred Shares (or
17
shares having the same designations and the powers, preferences and rights, and
the qualifications, limitations and restrictions as the Preferred Shares
("Equivalent Preferred Shares")) or securities convertible into Preferred Shares
or Equivalent Preferred Shares at a price per Preferred Share or Equivalent
Preferred Share (or having a conversion price per share, if a security
convertible into Preferred Shares or Equivalent Preferred Shares) less than the
then current per share market price of the Preferred Shares (as such term is
hereinafter defined) on such record date, the Purchase Price to be in effect
after such record date shall be determined by multiplying the Purchase Price in
effect immediately prior to such record date by a fraction, the numerator of
which shall be the number of Preferred Shares outstanding on such record date
plus the number of Preferred Shares which the aggregate offering price of the
total number of Preferred Shares and/or Equivalent Preferred Shares so to be
offered (and/or the aggregate initial conversion price of the convertible
securities so to be offered) would purchase at such current market price and the
denominator of which shall be the number of Preferred Shares outstanding on such
record date plus the number of additional Preferred Shares and/or Equivalent
Preferred Shares to be offered for subscription or purchase (or into which the
convertible securities so to be offered are initially convertible); provided,
however, that in no event shall the consideration to be paid upon the exercise
of one Right be less than the aggregate par value of the shares of capital stock
of the Company issuable upon exercise of one Right. In case such subscription
price may be paid as consideration, part or all of which shall be in a form
other than cash, the value of such consideration shall be as determined in good
faith by the Board of Directors, whose determination shall be described in a
reasonably detailed statement filed with the Rights Agent. Preferred Shares
owned by or held for the account of the Company shall not be deemed outstanding
for the purpose of any such computation. Such adjustment shall be made
successively whenever such a record date is fixed; and in the event that such
rights, options or warrants are not so issued, the Purchase Price shall be
adjusted to be the Purchase Price which would then be in effect if such record
date had not been fixed.
(c) In case the Company shall fix a record date for the making of
a distribution to all holders of the Preferred Shares (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) of evidences of indebtedness
or assets (other than a regular quarterly cash dividend or a dividend payable in
Preferred Shares) or subscription rights or warrants (excluding those referred
to in Section 11(b) hereof), the Purchase Price to be in effect after such
record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the then current per share market price of the Preferred Shares on such
record date, less the fair market value (as determined in good faith by the
Board of Directors, whose determination shall be described in a reasonably
detailed statement filed with the Rights Agent) of the portion of the assets or
evidences of indebtedness so to be distributed or of such subscription rights or
warrants applicable to one Preferred Share and the denominator of which shall be
such current per share market price of the Preferred Shares; provided, however,
that in no event shall the consideration to be paid upon the exercise of one
Right be less than the aggregate par value of the shares of capital stock of the
Company to be issued upon exercise of one Right. Such adjustments shall be made
successively whenever such a record date is fixed; and in the event that such
distribution is not so made, the Purchase Price shall again be adjusted to be
the Purchase Price which would then be in effect if such record date had not
been fixed.
18
(d) (i) For the purpose of any computation hereunder, the
"current per share market price" of any security (a "Security" for the purpose
of this Section 11(d)(i)) on any date shall be deemed to be the average of the
daily closing prices per share of such Security for the 30 consecutive Trading
Days immediately prior to such date; provided, however, that in the event that
the current per share market price of the Security is determined during a period
following the announcement by the issuer of such Security of (A) a dividend or
distribution on such Security payable in shares of such Security or securities
convertible into such shares, or (B) any subdivision, combination or
reclassification of such Security or securities convertible into such shares, or
(C) any subdivision, combination or reclassification of such Security and prior
to the expiration of 30 Trading Days after the ex-dividend date for such
dividend or distribution, or the record date for such subdivision, combination
or reclassification, then, and in each such case, the current per share market
price shall be appropriately adjusted to reflect the current market price per
share equivalent of such Security. The closing price for each day shall be the
last sale price, regular way, or, in case no such sale takes place on such day,
the average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the Security is not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the Security is listed or admitted to trading or as reported on the
NASDAQ National Market (which shall become the NASDAQ Global Market on or about
July 1, 2006) or NASDAQ SmallCap Market (which shall become the NASDAQ Capital
Market on or about July 1, 2006) or, if the Security is not listed or admitted
to trading on any national securities exchange or reported on the NASDAQ
National Market or NASDAQ SmallCap Market, the last quoted price or, if not so
quoted, the average of the high bid and low asked prices in the over-the-counter
market, as reported by the National Association of Securities Dealers, Inc.
Automated Quotations System ("NASDAQ") or such other system then in use, or, if
on any such date the Security is not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a professional
market maker making a market in the Security selected by the Board of Directors
or, if on any such date no professional market maker is making a market in the
Security, the price as determined in good faith by the Board of Directors.
(ii) For the purpose of any computation hereunder, the
"current per share market price" of the Preferred Shares shall be determined in
accordance with the method set forth in Section 11(d)(i) hereof. If the
Preferred Shares are not publicly traded, the "current per share market price"
of the Preferred Shares shall be conclusively deemed to be the current per share
market price of the Common Shares as determined pursuant to Section 11(d)(i)
hereof (appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof) multiplied by one thousand.
If neither the Common Shares nor the Preferred Shares are publicly held or so
listed or traded, "current per share market price" shall mean the fair value per
share as determined in good faith by the Board of Directors, whose determination
shall be described in a reasonably detailed statement filed with the Rights
Agent.
(e) No adjustment in the Purchase Price shall be required unless
such adjustment would require an increase or decrease of at least 1% in the
Purchase Price; provided, however, that any adjustments which by reason of this
Section 11(e) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations
19
under this Section 11 shall be made to the nearest cent or to the nearest one
one-thousandth of a Preferred Share or one ten-thousandth of any other share or
security as the case may be. Notwithstanding the first sentence of this Section
11(e), any adjustment required by this Section 11 shall be made no later than
the earlier of (i) three years from the date of the transaction which requires
such adjustment or (ii) the date of the expiration of the right to exercise any
Rights.
(f) If as a result of an adjustment made pursuant to Section
11(a) hereof, the holder of any Right thereafter exercised shall become entitled
to receive any shares of capital stock of the Company other than Preferred
Shares, thereafter the number of such other shares so receivable upon exercise
of any Right shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to the
Preferred Shares contained in Sections 11(a) through 11(c) hereof, inclusive,
and the provisions of Sections 7, 9, 10, 13 and 14 hereof with respect to the
Preferred Shares shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-thousandths of a
Preferred Share purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as
provided in Section 11(i) hereof, upon each adjustment of the Purchase Price as
a result of the calculations made in Section 11(b) and Section 11(c) hereof,
each Right outstanding immediately prior to the making of such adjustment shall
thereafter evidence the right to purchase, at the adjusted Purchase Price, that
number of one one-thousandths of a Preferred Share (calculated to the nearest
one one- millionth of a Preferred Share) obtained by (i) multiplying (x) the
number of one one-thousandths of a Preferred Share covered by a Right
immediately prior to this adjustment by (y) the Purchase Price in effect
immediately prior to such adjustment of the Purchase Price and (ii) dividing the
product so obtained by the Purchase Price in effect immediately after such
adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment
of the Purchase Price to adjust the number of Rights, in substitution for any
adjustment in the number of one one-thousandths of a Preferred Share purchasable
upon the exercise of a Right. Each of the Rights outstanding after such
adjustment of the number of Rights shall be exercisable for the number of one
one-thousandths of a Preferred Share for which a Right was exercisable
immediately prior to such adjustment. Each Right held of record prior to such
adjustment of the number of Rights shall become that number of Rights
(calculated to the nearest one ten-thousandth) obtained by dividing the Purchase
Price in effect immediately prior to adjustment of the Purchase Price by the
Purchase Price in effect immediately after adjustment of the Purchase Price. The
Company shall promptly notify the Rights Agent in writing of such election and
shall make a public announcement of its election to adjust the number of Rights,
indicating the record date for the adjustment, and, if known at the time, the
amount of the adjustment to be made. This record date may be the date on which
the Purchase Price is adjusted or any day thereafter, but, if the Right
Certificates have been issued, shall be at least 10 days later than the date of
the public announcement. If Right Certificates have been issued, upon each
20
adjustment of the number of Rights pursuant to this Section 11(i), the Company
shall, as promptly as practicable, cause to be distributed to holders of record
of Right Certificates on such record date Right Certificates evidencing, subject
to Section 14 hereof, the additional Rights to which such holders shall be
entitled as a result of such adjustment, or, at the option of the Company, shall
cause to be distributed to such holders of record in substitution and
replacement for the Right Certificates held by such holders prior to the date of
adjustment, and upon surrender thereof, if required by the Company, new Right
Certificates evidencing all the Rights to which such holders shall be entitled
after such adjustment. Right Certificates so to be distributed shall be issued,
executed and countersigned in the manner provided for herein and shall be
registered in the names of the holders of record of Right Certificates on the
record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase
Price or the number of one one-thousandths of a Preferred Share issuable upon
the exercise of the Rights, the Right Certificates theretofore and thereafter
issued may continue to express the Purchase Price and the number of one
one-thousandths of a Preferred Share which were expressed in the initial Right
Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment
reducing the Purchase Price below one one-thousandth of the then par value, if
any, of the Preferred Shares issuable upon exercise of the Rights, the Company
shall take any corporate action which may, in the opinion of its counsel, be
necessary in order that the Company may validly and legally issue fully paid and
nonassessable Preferred Shares at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer (with prompt written notice
thereof to the Rights Agent) until the occurrence of such event the issuing to
the holder of any Right exercised after such record date of the Preferred Shares
and other capital stock or securities of the Company, if any, issuable upon such
exercise on the basis of the Purchase Price in effect prior to such adjustment;
provided, however, that the Company shall deliver to such holder a due xxxx or
other appropriate instrument evidencing such holder's right to receive such
additional shares upon the occurrence of the event requiring such adjustment.
(m) The Company covenants and agrees that, after the Distribution
Date, it will not, except as permitted by Section 23 or Section 27 hereof take
(or permit any Subsidiary to take) any action the purpose of which is to, or if
at the time such action is taken it is reasonably foreseeable that the effect of
such action is to, materially diminish or eliminate the benefits intended to be
afforded by the Rights. Any such action taken by the Company during any period
after any Person becomes an Acquiring Person but prior to the Distribution Date
shall be null and void unless such action could be taken under this Section
11(m) from and after the Distribution Date.
(n) Anything in this Section 11 to the contrary notwithstanding,
the Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that it in its sole discretion shall determine to be advisable in
order that any consolidation or subdivision of the Preferred
21
Shares, issuance wholly for cash of any Preferred Shares at less than the
current market price, issuance wholly for cash of Preferred Shares or securities
which by their terms are convertible into or exchangeable for Preferred Shares,
dividends on Preferred Shares payable in Preferred Shares or issuance of rights,
options or warrants referred to hereinabove in Section 11(b), hereafter made by
the Company to holders of its Preferred Shares shall not be taxable to such
stockholders.
(o) In the event that at any time after the date of this
Agreement and prior to the Distribution Date, the Company shall (i) declare or
pay any dividend on the Common Shares payable in Common Shares or (ii) effect a
subdivision, combination or consolidation of the Common Shares (by
reclassification or otherwise than by payment of dividends in Common Shares)
into a greater or lesser number of Common Shares, then in any such case (A) the
number of one one-thousandths of a Preferred Share purchasable after such event
upon proper exercise of each Right shall be determined by multiplying the number
of one one-thousandths of a Preferred Share so purchasable immediately prior to
such event by a fraction, the numerator of which is the number of Common Shares
outstanding immediately before such event and the denominator of which is the
number of Common Shares outstanding immediately after such event, and (B) each
Common Share outstanding immediately after such event shall have issued with
respect to it that number of Rights which each Common Share outstanding
immediately prior to such event had issued with respect to it. The adjustments
provided for in this Section 11(o) shall be made successively whenever such a
dividend is declared or paid or such a subdivision, combination or consolidation
is effected.
(p) The exercise of Rights under Section 11(a)(ii) hereof shall
only result in the loss of rights under Section 11(a)(ii) hereof to the extent
so exercised and shall not otherwise affect the rights represented by the Rights
under this Agreement, including the rights represented by Section 13 hereof.
SECTION 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES.
Whenever an adjustment is made as provided in Sections 11 and 13 hereof, the
Company shall promptly (a) prepare a certificate setting forth such adjustment,
and a brief, reasonably detailed statement of the facts, computations and
methodology accounting for such adjustment, (b) file with the Rights Agent and
with each transfer agent for the Common Shares or the Preferred Shares a copy of
such certificate and (c) mail a brief summary thereof to each holder of a Right
Certificate in accordance with Section 25 hereof. The Rights Agent shall be
fully protected in relying on any such certificate and on any adjustment therein
contained, and shall have no duty or liability with respect to, and shall not be
deemed to have knowledge of any adjustment unless and until it shall have
received such certificate.
SECTION 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR
EARNING POWER.
(a) In the event that, following the Shares Acquisition Date or,
if a Transaction is proposed, the Distribution Date, directly or indirectly (x)
the Company shall consolidate with, or merge with and into, any Interested
Stockholder, or if in such merger or consolidation all holders of Common Shares
are
22
not treated alike, any other Person, (y) any Interested Stockholder, or if in
such merger or consolidation all holders of Common Shares are not treated alike,
any other Person shall, consolidate with the Company, or merge with and into the
Company, and the Company shall be the continuing or surviving corporation of
such merger (other than, in the case of either transaction described in (x) or
(y), a merger or consolidation which would result in all of the voting power
represented by the securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into securities of the surviving entity) all of the voting power
represented by the securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation and the holders of
such securities not having changed as a result of such merger or consolidation),
or (z) the Company shall sell, mortgage or otherwise transfer (or one or more of
its Subsidiaries shall sell, mortgage or otherwise transfer), in one or more
transactions, assets or earning power aggregating more than 50% of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to any
Interested Stockholder or Stockholders, or if in such transaction all holders of
Common Shares are not treated alike, any other Person, (other than the Company
or any Subsidiary of the Company in one or more transactions each of which
individually and the aggregate does not violate Section 13(d) hereof) then, and
in each such case, proper provision shall be made so that (i) each holder of a
Right, subject to Section 11(a)(ii) hereof, shall have the right to receive,
upon the exercise thereof at a price equal to the then current Purchase Price
multiplied by the number of one one-thousandths of a Preferred Share for which a
Right is then exercisable in accordance with the terms of this Agreement and in
lieu of Preferred Shares, such number of freely tradable Common Shares of the
Principal Party (as such term is hereinafter defined), free and clear of liens,
rights of call or first refusal, encumbrances or other adverse claims, as shall
be equal to the result obtained by (A) multiplying the then current Purchase
Price by the number of one one-thousandths of a Preferred Share for which a
Right is then exercisable (without taking into account any adjustment previously
made pursuant to Section 11(a)(ii) hereof) and dividing that product by (B) 50%
of the then current per share market price of the Common Shares of such
Principal Party (determined pursuant to Section 11(d) hereof) on the date of
consummation of such consolidation, merger, sale or transfer; (ii) such
Principal Party shall thereafter be liable for, and shall assume, by virtue of
such consolidation, merger, sale or transfer, all the obligations and duties of
the Company pursuant to this Agreement; (iii) the term "Company" shall
thereafter be deemed to refer to such Principal Party, it being specifically
intended that the provisions of Section 11 hereof shall apply to such Principal
Party; and (iv) such Principal Party shall take such steps (including, but not
limited to, the reservation of a sufficient number of shares of its Common
Shares in accordance with Section 9 hereof) in connection with such consummation
as may be necessary to assure that the provisions hereof shall thereafter be
applicable, as nearly as reasonably may be, in relation to its Common Shares
thereafter deliverable upon the exercise of the Rights.
(b) "Principal Party" shall mean:
(i) in the case of any transaction described in clause (x)
or (y) of the first sentence of Section 13(a) hereof, the Person that is the
issuer of any securities into which Common Shares are converted in such merger
or consolidation, and if no securities are so issued, the Person that is the
other party to the merger or consolidation (or, if applicable, the Company, if
it is the surviving corporation); and
23
(ii) in the case of any transaction described in clause
(z) of Section 13(a) hereof, the Person that is the party receiving the greatest
portion of the assets or earning power transferred pursuant to such transaction
or transactions;
provided, however, that in any case, (1) if the Common Shares of such Person are
not at such time and have not been continuously over the preceding 12-month
period registered under Section 12 of the Exchange Act, and such Person is a
direct or indirect Subsidiary or Affiliate of another Person the Common Shares
of which are and have been so registered, "Principal Party" shall refer to such
other Person; (2) if such Person is a Subsidiary, directly or indirectly, or
Affiliate of more than one Person, the Common Shares of two or more of which are
and have been so registered, "Principal Party" shall refer to whichever of such
Persons is the issuer of the Common Shares having the greatest aggregate market
value; and (3) if such Person is owned, directly or indirectly, by a joint
venture formed by two or more Persons that are not owned, directly or
indirectly, by the same Person, the rules set forth in (1) and (2) above shall
apply to each of the chains of ownership having an interest in such joint
venture as if such party were a "Subsidiary" of both or all of such joint
ventures and the Principal Parties in each such chain shall bear the obligations
set forth in this Section 13 in the same ratio as their direct or indirect
interests in such Person bear to the total of such interests.
(c) The Company shall not consummate any such consolidation,
merger, sale or transfer unless the Principal Party shall have a sufficient
number of authorized Common Shares that have not been issued or reserved for
issuance to permit the exercise in full of the Rights in accordance with this
Section 13 and unless prior thereto the Company and each Principal Party and
each other Person who may become a Principal Party as a result of such
consolidation, merger, sale or transfer shall have (i) executed and delivered to
the Rights Agent a supplemental agreement providing for the terms set forth in
paragraphs (a) and (b) of this Section 13 and (ii) prepared, filed and had
declared and remain effective a registration statement under the Act on the
appropriate form with respect to the Rights and the securities exercisable upon
exercise of the Rights and further providing that, as soon as practicable after
the date of any consolidation, merger, sale or transfer of assets mentioned in
paragraph (a) of this Section 13, the Principal Party at its own expense will:
(i) cause the registration statement under the Act with
respect to the Rights and the securities purchasable upon exercise of the Rights
on an appropriate form to remain effective (with a prospectus at all times
meeting the requirements of the Act) until the Final Expiration Date;
(ii) use its best efforts to qualify or register the
Rights and the securities purchasable upon exercise of the Rights under the blue
sky laws of such jurisdictions as may be necessary or appropriate;
(iii) list the Rights and the securities purchasable upon
exercise of the Rights on each national securities exchange on which the Common
Shares were listed prior to the consummation of such consolidation, merger, sale
or transfer of assets or on the NASDAQ National Market if the Common Shares were
listed on the NASDAQ National Market or, if the Common Shares were not listed on
a national securities exchange or the NASDAQ
24
National Market prior to the consummation of such consolidation, merger, sale or
transfer of assets, on a national securities exchange or the NASDAQ National
Market; and
(iv) deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates which comply in
all material respects with the requirements for registration on Form 10 under
the Exchange Act.
The provisions of this Section 13 shall similarly apply to successive
mergers or consolidations or sales or other transfers.
(d) After the Distribution Date, the Company covenants and agrees
that it shall not (i) consolidate with, (ii) merge with or into, or (iii) sell
or transfer to, in one or more transactions, assets or earning power aggregating
more than 50% of the assets or earning power of the Company and its Subsidiaries
taken as a whole, any other Person (other than a Subsidiary of the Company in a
transaction which does not violate Section 11(m) hereof), if (x) at the time of
or after such consolidation, merger or sale there are any charter or bylaw
provisions or any rights, warrants or other instruments or securities
outstanding, agreements in effect or any other action taken which would diminish
or otherwise eliminate the benefits intended to be afforded by the Rights or (y)
prior to, simultaneously with or immediately after such consolidation, merger or
sale, the stockholders of the Person who constitutes, or would constitute, the
"Principal Party" for purposes of Section 13(a) hereof shall have received a
distribution of Rights previously owned by such Person or any of its Affiliates
and Associates. The Company shall not consummate any such consolidation, merger,
sale or transfer unless prior thereto the Company and such other Person shall
have executed and delivered to the Rights Agent a supplemental agreement
evidencing compliance with this Section 13(d).
SECTION 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
(a) The Company shall not be required to issue fractions of
Rights or to distribute Right Certificates which evidence fractional Rights. In
lieu of such fractional Rights, there shall be paid to the registered holders of
the Right Certificates with regard to which such fractional Rights would
otherwise be issuable, an amount in cash equal to the same fraction of the
current market value of a whole Right. For the purposes of this Section 14(a),
the current market value of a whole Right shall be the closing price of the
Rights for the Trading Day immediately prior to, but not including, the date on
which such fractional Rights would have been otherwise issuable. The closing
price for any day shall be the last sale price, regular way, or, in case no such
sale takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Rights are not listed or
admitted to trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Rights are listed or
admitted to trading or as reported on the NASDAQ National Market or NASDAQ
SmallCap Market or, if the Rights are not listed or admitted to trading on any
national securities exchange or reported on the NASDAQ National Market or NASDAQ
SmallCap Market, the last quoted price or, if not so quoted, the average of the
high bid and low asked prices in the over-the-counter market, as reported by
NASDAQ or such other system then in use or, if on any such date the Rights are
not quoted by
25
any such organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the Rights selected
by the Board of Directors. If on any such date no such market maker is making a
market in the Rights, the fair value of the Rights on such date as determined in
good faith by the Board of Directors shall be used.
(b) The Company shall not be required to issue fractions of
Preferred Shares (other than fractions which are integral multiples of one
one-thousandth of a Preferred Share) upon exercise of the Rights or to
distribute certificates which evidence fractional Preferred Shares (other than
fractions which are integral multiples of one one-thousandth of a Preferred
Share). Fractions of Preferred Shares in integral multiples of one
one-thousandth of a Preferred Share may, at the election of the Company, be
evidenced by depositary receipts; provided, however, that holders of such
depositary receipts shall have all of the designations and the powers,
preferences and rights, and the qualifications, limitations and restrictions to
which they are entitled as beneficial owners of the Preferred Shares represented
by such depositary receipts. In lieu of fractional Preferred Shares that are not
integral multiples of one one-thousandth of a Preferred Share, the Company shall
pay to the registered holders of Right Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same fraction of the
current market value of one Preferred Share. For the purposes of this Section
14(b), the current market value of a Preferred Share shall be the current per
share market price of the Preferred Shares (as determined pursuant to the second
sentence of Section 11(d)(i) hereof) for the Trading Day immediately prior to,
but not including, the date of such exercise (or, if not publicly traded, in
accordance with Section 11(d)(ii) hereof).
(c) Following the occurrence of one of the transactions or events
specified in Section 11 hereof giving rise to the right to receive Common
Shares, capital stock equivalents (other than Preferred Shares) or other
securities upon the exercise of a Right, the Company shall not be required to
issue fractions of Common Shares or units of such Common Shares, capital stock
equivalents or other securities upon exercise of the Rights or to distribute
certificates which evidence fractional Common Shares, capital stock equivalents
or other securities. In lieu of fractional Common Shares, capital stock
equivalents or other securities, the Company shall pay to the registered holders
of Right Certificates at the time such Rights are exercised as herein provided
an amount in cash equal to the same fraction of the current market value of one
Common Share or unit of such Common Shares, capital stock equivalents or other
securities. For purposes of this Section 14(c), the current market value shall
be the current per share market price (as determined pursuant to Section
11(d)(i) hereof) for the Trading Day immediately prior to, but not including,
the date of such exercise and, if such capital stock equivalent is not traded,
each such capital stock equivalent shall have the value of one one-thousandth of
a Preferred Share.
(d) The holder of a Right by the acceptance of the Right
expressly waives his right to receive any fractional Rights or any fractional
shares upon exercise of a Right (except as provided above); and
(e) Whenever a payment for fractional Rights or fractional shares
is to be made by the Rights Agent, the Company shall (i) promptly prepare and
deliver to the Rights Agent a certificate setting forth in reasonable detail the
facts related to such payment and the prices and/or formulas utilized in
calculating such payments, and (ii) provide sufficient monies to
26
the Rights Agent in the form of fully collected funds to make such payments. The
Rights Agent shall be fully protected in relying upon such a certificate and
shall have no duty with respect to, and shall not be deemed to have knowledge of
any payment for fractional Rights or fractional shares under any Section of this
Agreement relating to the payment of fractional Rights or fractional shares
unless and until the Rights Agent shall have received such a certificate and
sufficient monies.
SECTION 15. RIGHTS OF ACTION. All rights of action in respect of this
Agreement, excepting the rights of action given to the Rights Agent under
Sections 18 and 20 hereof, are vested in the respective registered holders of
the Right Certificates (and, prior to the Distribution Date, the registered
holders of the Common Shares) and any registered holder of any Right Certificate
(or, prior to the Distribution Date, of the Common Shares), without the consent
of the Rights Agent or of the holder of any other Right Certificate (or, prior
to the Distribution Date, of the Common Shares), may, in his, her or its own
behalf and for his, her or its own benefit, enforce, and may institute and
maintain any suit, action or proceeding against the Company to enforce, or
otherwise act in respect of, his, her or its right to exercise the Rights
evidenced by such Right Certificate in the manner provided in such Right
Certificate and in this Agreement. Without limiting the foregoing or any
remedies available to the holders of Rights, it is specifically acknowledged
that the holders of Rights would not have an adequate remedy at law for any
breach of this Agreement and will be entitled to specific performance of the
obligations under, and injunctive relief against actual or threatened violations
of the obligations of any Person subject to, this Agreement. Holders of Rights
shall be entitled to recover the reasonable costs and expenses, including
attorneys fees, incurred by them in any action to enforce the provisions of this
Agreement.
SECTION 16. AGREEMENT OF RIGHT HOLDERS. Every holder of a Right, by
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of the Common Shares;
(b) after the Distribution Date, the Right Certificates are
transferable (subject to the provisions of this Agreement) only on the registry
books of the Rights Agent if surrendered at the office of the Rights Agent
designated for such purpose, duly endorsed or accompanied by a proper instrument
of transfer; and
(c) the Company and the Rights Agent may deem and treat the
Person in whose name the Right Certificate (or, prior to the Distribution Date,
the associated Common Shares certificate) is registered as the absolute owner
thereof and of the Rights evidenced thereby (notwithstanding any notations of
ownership or writing on the Right Certificates or the associated Common Shares
certificate made by anyone other than the Company or the Rights Agent) for all
purposes whatsoever, and neither the Company nor the Rights Agent shall be
affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Rights Agent shall have any liability to any holder
of a Right or other
27
Person as a result of its inability to perform any of its obligations under this
Agreement by reason of any preliminary or permanent injunction or other order,
decree, judgment or ruling (whether interlocutory or final) issued by a court of
competent jurisdiction or by a governmental, regulatory or administrative agency
or commission, or any statute, rule, regulation or executive order promulgated
or enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, that the Company must use its
reasonable best efforts to have any such order, decree, judgment or ruling
lifted or otherwise overturned as soon as possible.
SECTION 17. RIGHT CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER. No
holder, as such, of any Right Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the Preferred Shares or any
other securities of the Company which may at any time be issuable on the
exercise of the Rights represented thereby, nor shall anything contained herein
or in any Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 25 hereof), or to receive dividends
or subscription rights, or otherwise, until the Right or Rights evidenced by
such Right Certificate shall have been exercised in accordance with the
provisions hereof.
SECTION 18. CONCERNING THE RIGHTS AGENT. 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,
delivery, administration, execution 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
(each as finally determined by a court of competent jurisdiction) on the part of
the Rights Agent, for any action taken, suffered or omitted by the Rights Agent
in connection with the acceptance, administration and execution of this
Agreement or the exercise and performance of its duties hereunder, including,
without limitation, the costs and expenses of defending against any claim of
liability in the premises. The provisions of this Section 18 and Section 20
below (including, but not limited to, the indemnity provided herein) shall
survive the exercise or expiration of the Rights, the termination of this
Agreement and the resignation or removal of the Rights Agent. The costs and
expenses incurred in enforcing this right of indemnification shall be paid by
the Company.
The Rights Agent shall be protected and shall incur no liability for,
or in respect of any action taken, suffered or omitted by it in connection with,
the acceptance and administration of this Agreement in reliance upon any Right
Certificate or certificate for the Preferred Shares or Common Shares or for
other securities of the Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement, or other paper or document believed by it to be genuine
and to be signed, executed and, where necessary, verified or acknowledged, by
the proper person or persons, or otherwise upon the advice of counsel as set
forth in Section 20 hereof. The Rights Agent shall not be deemed to
28
have any duty or notice unless and until the Company has provided the Rights
Agent with actual written notice. Anything in this Agreement to the contrary
notwithstanding, in no event shall the Rights Agent be liable for special,
punitive, indirect, incidental or consequential loss or damage of any kind
whatsoever (including, but not limited to, lost profits), even if the Rights
Agent has been advised of the possibility of such loss or damage. Any liability
of the Rights Agent under this Agreement shall be limited to the amount of fees
paid by the Company to the Rights Agent.
SECTION 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT.
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
shall be a party, or any Person succeeding to the shareholder services or
corporate trust business of the Rights Agent or any successor Rights Agent,
shall be the successor to the Rights Agent under this Agreement without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, provided that such Person would be eligible for appointment as a
successor Rights Agent under the provisions of Section 21 hereof. In case at the
time such successor Rights Agent shall succeed to the agency created by this
Agreement and at such time any of the Right Certificates shall have been
countersigned but not delivered, any such successor Rights Agent may adopt the
countersignature of the predecessor Rights Agent and deliver such Right
Certificates so countersigned; and in case at that time any of the Right
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Right Certificates either in the name of the predecessor Rights
Agent or in the name of the successor Rights Agent; and in all such cases such
Right Certificates shall have the full force provided in the Right Certificates
and in this Agreement.
In case at any time the name of the Rights Agent shall be changed and
at such time any of the Right Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Right Certificates so countersigned; and in case at that time any of
the Right Certificates shall not have been countersigned, the Rights Agent may
countersign such Right Certificates either in its prior name or in its changed
name; and in all such cases such Right Certificates shall have the full force
provided in the Right Certificates and in this Agreement.
SECTION 20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the
duties and obligations expressly imposed by this Agreement (and no implied
duties or obligations shall be read against the Rights Agent) upon the following
terms and conditions, by all of which the Company and the holders of Right
Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel of its choice
(who may be legal counsel for the Company), and the advice or opinion of such
counsel shall 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 or omitted by it in accordance with such advice or opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable that any fact or
matter be proved or
29
established by the Company prior to taking or 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 any one of the Chairman of the
Board, the Chief Executive Officer, the President, the Chief Financial Officer,
Chief Administrative Officer, any Executive Vice President, the Treasurer or the
Secretary of the Company and delivered to the Rights Agent; and such certificate
shall 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 omitted in good faith by it under the provisions of this Agreement in
reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the Company and
any other Person only for its own gross negligence, bad faith or willful
misconduct (each as finally determined by a final, non-appealable order,
judgment, decree or ruling of a court of competent jurisdiction).
(d) The Rights Agent shall not be liable for or by reason of any
of the statements of fact or recitals contained in this Agreement or in the
Right Certificates (except its countersignature thereof) or be required to
verify the same, but all such statements and recitals are and shall be deemed to
have been made by the Company only.
(e) The Rights Agent shall not have any liability nor be under
any responsibility in respect of the validity of this Agreement or the execution
and delivery hereof (except the due execution hereof by the Rights Agent) or in
respect of the validity or execution of any Right Certificate (except its
countersignature thereof); nor shall it be responsible for any breach by the
Company of any covenant or condition contained in this Agreement or in any Right
Certificate; nor shall it be responsible for any change in the exercisability of
the Rights (including the Rights becoming null and void pursuant to Section
11(a)(ii) hereof) or any adjustment in the terms of the Rights (including the
manner, method or amount thereof) provided for in Sections 3, 11, 13, 23 or 24
hereof, or the ascertaining of the existence of facts that would require any
such change or adjustment (except with respect to the exercise of Rights
evidenced by Right Certificates after receipt of a certificate pursuant to
Section 12 hereof describing such change or adjustment); nor shall it by any act
hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any Preferred Shares to be issued pursuant to
this Agreement or any Right Certificate or as to whether any Preferred Shares
will, when issued, be validly authorized and issued, fully paid and
nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge
and deliver or cause to be performed, executed, acknowledged and delivered all
such further and other acts, instruments and assurances as may 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
advice or instructions with respect to the performance of its duties hereunder
from any one of the Chairman of the Board, the Chief Executive Officer, the
President, the Chief Financial Officer, any Executive Vice President, the
Secretary or the Treasurer of the Company, and to apply to such officers for
advice or instructions in connection with its duties, and such advice or
instructions shall be full authorization and protection to the Rights Agent and
the Rights Agent
30
shall incur no liability for or in respect of any action taken, suffered or
omitted by it in good faith in accordance with the advice or instructions of any
such officer or for any delay in acting while waiting for those instructions.
Any application by the Rights Agent for written instructions from the Company
may, at the option of the Rights Agent, set forth in writing any action proposed
to be taken or omitted by the Rights Agent with respect to its duties or
obligations under this Agreement and the date on and/or after which such action
shall be taken or omitted and the Rights Agent shall not be liable for any
action taken, suffered or omitted in accordance with a proposal included in any
such application on or after the date specified therein (which date shall not be
less than three Business Days after the date indicated in such application
unless any such officer shall have consented in writing to an earlier date)
unless, prior to taking, suffering or omitting any such action, the Rights Agent
has received written instructions in response to such application specifying the
action to be taken, suffered or omitted.
(h) The Rights Agent and any stockholder, affiliate, director,
officer or employee of the Rights Agent may buy, sell or deal in any of the
Rights or other securities of the Company or become pecuniarily interested in
any transaction in which the Company may be interested, or contract with or lend
money to the Company or otherwise act as fully and freely as though it were not
a 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 shall not be answerable
or accountable for any act, default, neglect or misconduct of any such attorneys
or agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct, absent gross negligence, willful misconduct or bad faith
(each as finally determined by a court of competent jurisdiction) 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.
(k) If, with respect to any Right Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has not been
executed, the Rights Agent shall not take any further action with respect to
such requested exercise of transfer without first consulting with the Company.
SECTION 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days' notice in writing mailed to the Company and to each transfer agent
for the Common Shares or Preferred Shares by registered or certified mail, and
to the holders of the Right Certificates by first-class mail. The Company may
remove the Rights Agent or any successor Rights Agent upon 30 days' notice in
writing, mailed to the Rights Agent or successor Rights Agent, as the case may
be, and to each transfer agent for the Common Shares or Preferred Shares by
registered or certified mail, and to the holders of the Right Certificates by
first-class mail. If the Rights
31
Agent shall resign or be removed or shall otherwise become incapable of acting,
the Company shall appoint a successor to the Rights Agent. If the Company shall
fail to make such appointment within a period of 30 days after giving notice of
such removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Right Certificate (who shall, with such notice, submit his Right Certificate for
inspection by the Company), then the registered holder of any Right Certificate
may apply to any court of competent jurisdiction for the appointment of a new
Rights Agent. Any successor Rights Agent, whether appointed by the Company or by
such a court, shall be either (a) a Person organized and doing business under
the laws of the United States or of any State of the United States which is
authorized under such laws to conduct shareholder services business 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 $10 million or (b) an Affiliate of such Person. After
appointment, the successor Rights Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as Rights
Agent without further act or deed; but the predecessor Rights Agent shall
deliver and transfer to the successor Rights Agent any property at the time held
by it hereunder, and execute and deliver any further assurance, conveyance, act
or deed necessary for the purpose. Not later than the effective date of any such
appointment the Company shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent for the Common Shares or
Preferred Shares, and mail a notice thereof in writing to the registered holders
of the Right Certificates. Failure to give any notice provided for in this
Section 21, however, or any defect therein, shall not affect the legality or
validity of the resignation or removal of the Rights Agent or the appointment of
the successor Rights Agent, as the case may be.
SECTION 22. ISSUANCE OF NEW RIGHT CERTIFICATES. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Right Certificates evidencing Rights in such form
as may be approved by its Board of Directors to reflect any adjustment or change
in the Purchase Price and the number or kind or class of shares or other
securities or property purchasable under the Right Certificates made in
accordance with the provisions of this Agreement. In addition, in connection
with the issuance or sale of Common Shares following the Distribution Date and
prior to the earlier of the Redemption Date and the Final Expiration Date, the
Company (a) shall with respect to Common Shares so issued or sold pursuant to
the exercise of stock options or under any equity-based compensation plan or
arrangement in existence prior to the Distribution Date, or upon the exercise,
conversion or exchange of securities, notes or debentures issued by the Company
and in existence prior to the Distribution Date, and (b) may, in any other case,
if deemed necessary or appropriate by the Board of Directors, issue Right
Certificates representing the appropriate number of Rights in connection with
such issuance or sale; provided, however, that (i) the Company shall not be
obligated to issue any such Right Certificates if, and to the extent that, the
Company shall be advised by counsel that such issuance would create a
significant risk of material adverse tax consequences to the Company or the
Person to whom such Right Certificate would be issued, and (ii) no Right
Certificate shall be issued if, and to the extent that, appropriate adjustment
shall otherwise have been made in lieu of the issuance thereof.
32
SECTION 23. REDEMPTION.
(a) The Rights may be redeemed by action of the Board of
Directors pursuant to Section 23(b) hereof or by stockholder action pursuant to
Section 23(c) hereof and shall not be redeemed in any other manner.
(b) (i) The Board of Directors may, at its option, at any time
prior to the earlier of (A) such time as any Person becoming an Acquiring
Person, or (B) the Final Expiration Date, redeem all but not less than all of
the then outstanding Rights at a redemption price of $0.001 per Right,
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such redemption price being
hereinafter referred to as the "Redemption Price"), and the Company may, at its
option, pay the Redemption Price in Common Shares (based on the "current
per-share market price," as such term is defined in Section 11(d) hereof, of the
Common Shares at the time of redemption), cash or any other form of
consideration deemed appropriate by the Board of Directors. The redemption of
the Rights by the Board of Directors may be made effective at such time, on such
basis and subject to such conditions as the Board of Directors in its sole
discretion may establish. Notwithstanding anything contained in this Agreement
to the contrary, the Rights shall not be exercisable pursuant to Section
11(a)(ii) hereof prior to the expiration or termination of the Company's right
of redemption under this Section 23(b)(i) or Section 23(b)(ii).
(i) In addition, the Board of Directors may, at its
option, at any time after the time a Person becomes an Acquiring Person and
after the expiration of any period during which the holder of Rights may
exercise the rights under Section 11(a)(ii) hereof but prior to any event
described in clause (x), (y) or (z) of the first sentence of Section 13(a)
hereof, redeem all but not less than all of the then outstanding Rights at the
Redemption Price (x) in connection with any merger, consolidation or sale or
other transfer (in one transaction or in a series of related transactions) of
assets or earning power aggregating 50% or more of the assets or earning power
of the Company and its Subsidiaries (taken as a whole) in which all holders of
Common Shares are treated alike and not involving (other than as a holder of
Common Shares being treated like all other such holders) an Interested
Stockholder or a Transaction Person or (y)(A) if and for so long as the
Acquiring Person is not thereafter the Beneficial Owner of 10% or more of the
then outstanding Common Shares; provided, however, that if such Acquiring Person
is an Existing Holder, such Acquiring Person may thereafter be the Beneficial
Owner of the number of Common Shares such Acquiring Person Beneficially Owned as
of the date of this Agreement, and (B) at the time of redemption no other
Persons are Acquiring Persons.
(c) In the event the Company receives a Qualified Offer which has
not been terminated or withdrawn, the Board of Directors of the Company shall
call a special meeting of the stockholders (the "Special Meeting") in order to
consider and vote whether to require the Company to Redeem the Rights Plan. For
purposes of this Section 23(c), "Redeem the Rights Plan" shall mean redeem the
outstanding Rights or take other action as determined by the Board of Directors
so that the existence of the Rights does not interfere with the consummation of
a Qualified Offer. The Special Meeting shall be held on a date selected by the
Board of Directors, which date shall be not less than 60 nor more than 120
Business Days after the date such Qualified Offer is received by the Company. If
at the Special Meeting, holders of fifty percent (50%) of the then outstanding
Common Shares (other than shares held by any Person making such Qualified Offer,
such Person's Affiliates or Associates or any officer or director of the
Company), shall vote to Redeem the Rights Plan, then the Company shall Redeem
33
the Rights Plan as promptly as practicable. In the event that the Special
Meeting is not held on or prior to the 120th Business Day following receipt of
the Qualified Offer by the Company, the Company shall Redeem the Rights Plan.
Notwithstanding the foregoing, the Company shall not be required to hold the
Special Meeting unless at such time such Qualified Offer (A) has an expiration
date which is at least ten (10) Business Days after the Special Meeting and (B)
has not been terminated or withdrawn.
(d) Immediately upon the action of the Board of Directors
ordering the redemption of the Rights pursuant to Section 23(b) or (c) hereof,
and without any further action and without any notice, the right to exercise the
Rights will terminate and the only right thereafter of the holders of Rights
shall be to receive the Redemption Price. The Company shall promptly notify the
Rights Agent in writing of such redemption and shall promptly give public notice
of any such redemption; provided, however, that the failure to give, or any
defect in, any such notice shall not affect the validity of such redemption.
Within 10 days after such action of the Board of Directors ordering the
redemption of the Rights pursuant to Section 23(b) or (c) hereof, the Company
shall mail a notice of redemption to all the holders of the then outstanding
Rights at their last addresses as they appear upon the registry books of the
Rights Agent or, prior to the Distribution Date, on the registry books of the
transfer agent for the Common Shares, provided, however, that failure to give,
or any defect in, any such notice shall not affect the validity of such
redemption. Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each such notice of
redemption will state the method by which the payment of the Redemption Price
will be made. Neither the Company nor any of its Affiliates or Associates may
redeem, acquire or purchase for value any Rights at any time in any manner other
than that specifically set forth in this Section 23 or in Section 24 hereof, and
other than in connection with the purchase of Common Shares prior to the
Distribution Date.
(e) The Company may, at its option, discharge all of its
obligations with respect to any redemption of the Rights by (i) issuing a press
release announcing the manner of redemption of the Rights and (ii) mailing
payment of the Redemption Price to the registered holders of the Rights at their
last addresses as they appear on the registry books of the Rights Agent or,
prior to the Distribution Date, on the registry books of the transfer agent for
the Common Shares, and upon such action, all outstanding Right Certificates
shall be null and void without any further action by the Company. In the event
the Company elects to discharge all of its obligations with respect to any
redemption of Rights by mailing payment of the Redemption Price to the
registered holders of the Rights as set forth in the preceding sentence, the
dollar amount sent to each such registered holder representing the full
Redemption Price to which such registered holder shall be entitled shall be
rounded up to the nearest whole cent.
SECTION 24. EXCHANGE.
(a) The Board of Directors may, at its option, at any time after
any Person becomes an Acquiring Person, exchange all or part of the then
outstanding and exercisable Rights (which shall not include Rights that have
become null and void pursuant to the provisions of Section 11(a)(ii) hereof) for
Common Shares at an exchange ratio of one Common Share per Right, appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof (such exchange ratio being hereinafter referred
34
to as the "Exchange Ratio"). Notwithstanding the foregoing, the Board of
Directors shall not be empowered to effect such exchange at any time after any
Person (other than the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or any such Subsidiary, or any entity holding Common
Shares for or pursuant to the terms of any such plan), together with all
Affiliates and Associates of such Person, becomes the Beneficial Owner of 50% or
more of the Common Shares then outstanding.
(b) Immediately upon the action of the Board of Directors
ordering the exchange of any Rights pursuant to Section 24(a) hereof and without
any further action and without any notice, the right to exercise such Rights
shall terminate and the only right thereafter of a holder of such Rights shall
be to receive that number of Common Shares equal to the number of such Rights
held by such holder multiplied by the Exchange Ratio. The Company shall promptly
give public notice of any such exchange; provided, however, that the failure to
give, or any defect in, such notice shall not affect the validity of such
exchange. The Company promptly shall mail a notice of any such exchange to the
Rights Agent and to all of the holders of such Rights at their last addresses as
they appear upon the registry books of the Rights Agent; provided, however, that
the failure to give, or any defect in, such notice shall not affect the validity
of such exchange. Any notice which is mailed in the manner herein provided shall
be deemed given, whether or not the holder receives the notice. Each such notice
of exchange will state the method by which the exchange of the Common Shares for
Rights will be effected and, in the event of any partial exchange, the number of
Rights which will be exchanged. Any partial exchange shall be effected pro rata
based on the number of Rights (other than Rights which have become null and void
pursuant to the provisions of Section 11(a)(ii) hereof) held by each holder of
Rights.
(c) In lieu of issuing Common Shares in accordance with Section
24(a) hereof, the Company may, if a majority of the Board of Directors then in
office determines that such action is necessary or appropriate and not contrary
to the interests of the holders of Rights, elect to (and, in the event that
there are not sufficient treasury shares and authorized but unissued Common
Shares to permit any exchange of the Rights in accordance with Section 24(a)
hereof, the Company shall) take all such action as may be necessary to
authorize, issue or pay, upon the exchange of the Rights, cash (including by way
of a reduction of the Purchase Price), property, Common Shares, other securities
or any combination thereof having an aggregate value equal to the value of the
Common Shares which otherwise would have been issuable pursuant to Section 24(a)
hereof, which aggregate value shall be determined by a nationally recognized
investment banking firm selected by a majority of the Board of Directors then in
office. For purposes of the preceding sentence, the value of the Common Shares
shall be determined pursuant to Section 11(d) hereof. Any election pursuant to
this Section 24(c) by the Board of Directors must be made by resolution within
60 days following the date on which the event described in Section 11(a)(ii)
hereof shall have occurred. Following the occurrence of the event described in
Section 11(a)(ii) hereof, a majority of the Board of Directors then in office
may suspend the exercisability of the Rights for a period of up to 60 days
following the date on which the event described in Section 11(a)(ii) hereof
shall have occurred to the extent that such directors have not determined
whether to exercise their rights of exchange under this Section 24(c). In the
event of any such suspension, the Company shall promptly notify the Rights Agent
in writing of such suspension and shall issue a public announcement stating that
the exercisability of the Rights has been temporarily suspended.
35
(d) The Company shall not be required to issue fractions of
Common Shares or to distribute certificates which evidence fractional Common
Shares. In lieu of such fractional Common Shares, the Company shall pay to the
registered holders of the Right Certificates with regard to which such
fractional Common Shares would otherwise be issuable an amount in cash equal to
the same fraction of the current market value of a whole Common Share. For the
purposes of this Section 24(d), the current market value of a whole Common Share
shall be the closing price of a Common Share (as determined pursuant to the
second sentence of Section 11(d)(i) hereof) for the Trading Day immediately
after the date of the first public announcement by the Company that an exchange
is to be effected pursuant to this Section 24.
(e) The Company shall not be required to issue fractions of
Preferred Shares (other than fractions which are integral multiples of one
one-thousandth of a Preferred Share) upon exchange of the Rights or to
distribute certificates which evidence fractional Preferred Shares (other than
fractions which are integral multiples of one one-thousandth of a Preferred
Share). Fractions of Preferred Shares in integral multiples of one
one-thousandth of a Preferred Share may, at the election of the Company, be
evidenced by depositary receipts; provided, however, that holders of such
depositary receipts shall have all of the designations and the powers,
preferences and rights, and the qualifications, limitations and restrictions to
which they are entitled as beneficial owners of the Preferred Shares represented
by such depositary receipts. In lieu of fractional Preferred Shares that are not
integral multiples of one one-thousandth of a Preferred Share, the Company shall
pay to the registered holders of Right Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same fraction of the
current market value of one Preferred Share. For the purposes of this Section
24(e), the current market value of a Preferred Share shall be 1000 times the
closing price of a Common Share (as determined pursuant to the second sentence
of Section 11(d)(i) hereof) for the Trading Day immediately after the date of
the first public announcement by the Company that an exchange is to be effected
pursuant to this Section 24.
SECTION 25. NOTICE OF CERTAIN EVENTS.
(a) In case the Company shall propose (i) to pay any dividend
payable in stock of any class to the holders of its Preferred Shares or to make
any other distribution to the holders of its Preferred Shares (other than a
regular quarterly cash dividend), (ii) to offer to the holders of its Preferred
Shares rights or warrants to subscribe for or to purchase any additional
Preferred Shares or shares of stock of any class or any other securities, rights
or options, (iii) to effect any reclassification of its Preferred Shares (other
than a reclassification involving only the subdivision of outstanding Preferred
Shares), (iv) to effect any consolidation or merger into or with, or to effect
any sale or other transfer (or to permit one or more of its Subsidiaries to
effect any sale or other transfer), in one or more transactions, of 50% or more
of the assets or earning power of the Company and its Subsidiaries (taken as a
whole), to any other Person, (v) to effect the liquidation, dissolution or
winding up of the Company, or (vi) to declare or pay any dividend on the Common
Shares payable in Common Shares or to effect a subdivision, combination or
consolidation of the Common Shares (by reclassification or otherwise than by
payment of dividends in Common Shares), then, in each such case, the Company
shall give to each holder of a Right Certificate, in accordance with Section 26
hereof, a notice of such proposed action, which shall specify the record date
for the purpose of such stock dividend, or distribution of rights or warrants,
or the date on which such reclassification, consolidation, merger, sale,
36
transfer, liquidation, dissolution, or winding up is to take place and the date
of participation therein by the holders of the Common Shares and/or the
Preferred Shares, if any such date is to be fixed, and such notice shall be so
given in the case of any action covered by clause (i) or (ii) above at least 10
days prior to the record date for determining holders of the Preferred Shares
for purposes of such action, and in the case of any such other action, at least
10 days prior to the date of the taking of such proposed action or the date of
participation therein by the holders of the Common Shares and/or the Preferred
Shares, whichever shall be the earlier.
(b) In case the event set forth in Section 11(a)(ii) hereof shall
occur, then the Company shall as soon as practicable thereafter give to each
holder of a Right Certificate, in accordance with Section 26 hereof, a notice of
the occurrence of such event, which notice shall describe the event and the
consequences of the event to holders of Rights under Section 11(a)(ii) hereof.
SECTION 26. NOTICES. Notices or demands authorized by this Agreement to
be given or made by the Rights Agent or by the holder of any Right Certificate
to or on the Company shall be sufficiently given or made if sent by courier, via
a nationally recognized overnight delivery service or by U.S. mail, postage
prepaid, addressed (until another address is filed in writing with the Rights
Agent) as follows:
EMAK Worldwide, Inc.
0000 Xxx Xxxxxxx Xxxxxxxxx
Xxx Xxxxxxx, XX 00000
Attn: General Counsel
Facsimile: (000) 000-0000
with a copy to: Paul, Hastings, Xxxxxxxx & Xxxxxx LLP
000 Xxxxx Xxxxxx Xxxxxx
25th Floor
Attn: Xxxxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
Subject to the provisions of Section 21 hereof, any notice or demand
authorized by this Agreement to be given or made by the Company or by the holder
of any Right Certificate to or on the Rights Agent shall be sufficiently given
or made if sent by courier, via a nationally recognized overnight delivery
service or by U.S. mail, postage prepaid, addressed (until another address is
filed in writing with the Company) as follows:
Continental Stock Transfer & Trust Company
00 Xxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Compliance Department
Facsimile: (000) 000-0000
SECTION 27. SUPPLEMENTS AND AMENDMENTS. Prior to the Distribution Date,
the Company and the Rights Agent shall, if the Company so directs, supplement or
amend any provision of this Agreement without the approval of any holders of the
Rights. From and
37
after the Distribution Date, the Company and the Rights Agent shall, if the
Company so directs, from time to time supplement or amend any provision of this
Agreement without the approval of any holders of Right Certificates in order to
(i) cure any ambiguity, (ii) correct or supplement any provision contained
herein which may be defective or inconsistent with any other provisions herein,
or (iii) change any other provisions with respect to the Rights which the
Company may deem necessary or desirable; provided, however, that no such
supplement or amendment shall be made which would adversely affect the interests
of the holders of Rights (other than the interests of an Acquiring Person or its
Affiliates or Associates). Any supplement or amendment adopted during any period
after any Person has become an Acquiring Person but prior to the Distribution
Date shall become null and void unless such supplement or amendment could have
been adopted by the Company from and after the Distribution Date. Any such
supplement or amendment shall be evidenced by a writing signed by the Company
and the Rights Agent. Upon delivery of a certificate from an appropriate officer
of the Company which states that the proposed supplement or amendment is in
compliance with the terms of this Section 27, the Rights Agent shall execute
such supplement or amendment unless the Rights Agent shall have determined that
such supplement or amendment would adversely change or increase its rights,
duties, obligations or liabilities under this Agreement. Prior to the
Distribution Date, the interests of the holders of Rights shall be deemed
coincident with the interests of the holders of Common Shares.
SECTION 28. DETERMINATION AND ACTIONS BY THE BOARD OF DIRECTORS, ETC.
For all purposes of this Agreement, any calculation of the number of Common
Shares outstanding at any particular time, including for purposes of determining
the particular percentage of such outstanding Common Shares or any other
securities of which any Person is the Beneficial Owner, shall be made in
accordance with the last sentence of Rule 13d-3(d)(l)(i) of the General Rules
and Regulations under the Exchange Act as in effect on the date of this
Agreement. The Board of Directors shall have the exclusive power and authority
to administer this Agreement and to exercise all rights and powers specifically
granted to the Board of Directors, or the Company, or as may be necessary or
advisable in the administration of this Agreement, including without limitation,
the right and power to (1) interpret the provisions of this Agreement, and (ii)
make all determinations deemed necessary or advisable for the administration of
this Agreement (including a determination to redeem or not redeem the Rights or
to amend 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 of Directors in
good faith, shall (x) be final, conclusive and binding on the Rights Agent and
the holders of the Rights, and (y) not subject the Board of Directors to any
liability to the holders of the Rights. The Rights Agent shall always be
entitled to assume that the Company's Board of Directors acted in good faith and
shall be fully protected and incur no liability in reliance thereon.
SECTION 29. SUCCESSORS. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
SECTION 30. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall
be construed to give to any Person other than the Company, the Rights Agent and
the registered holders of the Right Certificates (and, prior to the Distribution
Date, the Common Shares) any legal or equitable right, remedy or claim under
this Agreement. This Agreement
38
shall be for the sole and exclusive benefit of the Company, the Rights Agent and
the registered holders of the Right Certificates (and, prior to the Distribution
Date, the Common Shares).
SECTION 31. SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
SECTION 32. GOVERNING LAW. This Agreement and each Right Certificate
issued hereunder shall be deemed to be a contract made under the laws of the
State of Delaware and for all purposes shall be governed by and construed in
accordance with the laws of such State applicable to contracts to be made and
performed entirely within such State; provided, however, that all provisions
regarding the rights, duties and obligations of the Rights Agent shall be
governed 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.
SECTION 33. COUNTERPARTS. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
SECTION 34. DESCRIPTIVE HEADINGS. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
39
IN WITNESS WHEREOF, parties whereto have caused this Agreement to be
duly executed, all as of the day and year first above written.
EMAK WORLDWIDE, INC.
By: /s/ XXXXXX X. XXXXXX
--------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Chief Administrative Officer &
General Counsel
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
By: /s/ XXXXXXX X. XXXXXXXXX
--------------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
------------------------------------
Title: Vice President
-----------------------------------
40
(EXHIBIT A TO RIGHTS AGREEMENT)
FORM OF CERTIFICATE OF DESIGNATION
OF
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
(PURSUANT TO SECTION 151 OF THE
DELAWARE GENERAL CORPORATION LAW)
EMAK Worldwide, Inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware (hereinafter called the
"Company"), hereby certifies that the following resolution was adopted by the
Board of Directors of the Company as required by Section 151 of the General
Corporation Law at a meeting duly called and held on March 14, 2006:
RESOLVED, that pursuant to the authority granted to and vested
in the Board of Directors of the Company in accordance with the
provisions of its Certificate of Incorporation, as amended, the Board
of Directors hereby creates a series of Preferred Stock, par value
$0.001 per share, of the Company and hereby states the designation and
number of shares, and fixes the relative designations and the powers,
preferences and rights, and the qualifications, limitations and
restrictions thereof (in addition to the provisions set forth in its
Certificate of Incorporation, as amended, of the Company, which are
applicable to the Preferred Stock of all classes and series), as
follows:
Series A Junior Participating Preferred Stock:
SECTION 1. DESIGNATION AND AMOUNT. Twenty-five thousand (25,000) shares
of Preferred Stock, $0.001 par value, are designated "Series A Junior
Participating Preferred Stock" with the designations and the powers, preferences
and rights, and the qualifications, limitations and restrictions specified
herein (the "Junior Preferred Stock"). Such number of shares may be increased or
decreased by resolution of the Board of Directors; provided, that no decrease
shall reduce the number of shares of Junior Preferred Stock to a number less
than the number of shares then outstanding plus the number of shares reserved
for issuance upon the exercise of outstanding options, rights or warrants or
upon the conversion of any outstanding securities issued by the Company
convertible into Junior Preferred Stock.
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SECTION 2. DIVIDENDS AND DISTRIBUTIONS.
(A) Subject to the rights of the holders of any shares of any
series of Preferred Stock (or any similar stock) ranking prior and superior to
the Junior Preferred Stock with respect to dividends, the holders of shares of
Junior Preferred Stock, in preference to the holders of Common Stock, par value
$0.001 per share (the "Common Stock"), of the Company, and of any other junior
stock, shall be entitled to receive, when, as and if declared by the Board of
Directors out of funds legally available for the purpose, quarterly dividends
payable in cash on the first day of April, July, October and January in each
year (each such date being referred to herein as a "Quarterly Dividend Payment
Date"), commencing on the first Quarterly Dividend Payment Date after the first
issuance of a share or fraction of a share of (a) $1.00 per share or (b) subject
to the provision for adjustment hereinafter set forth, 1000 times the aggregate
per share amount of all cash dividends, and 1000 times the aggregate per share
amount (payable in kind) of all non-cash dividends or other distributions, other
than a dividend payable in shares of Common Stock or a subdivision of the
outstanding shares of Common Stock (by reclassification or otherwise), declared
on the Common Stock since the immediately preceding Quarterly Dividend Payment
Date or, with respect to the first Quarterly Dividend Payment Date, since the
first issuance of any share or fraction of a share of Junior Preferred Stock. In
the event the Company shall at any time declare or pay any dividend on the
Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the amount to which holders of shares of Junior Preferred Stock were
entitled immediately prior to such event under clause (b) of the preceding
sentence shall be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(B) The Company shall declare a dividend or distribution on the
Junior Preferred Stock as provided in paragraph (A) of this Section immediately
after it declares a dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock); provided, that in the event no
dividend or distribution shall have been declared on the Common Stock during the
period between any Quarterly Dividend Payment Date and the next subsequent
Quarterly Dividend Payment Date, a dividend of $1.00 per share on the Junior
Preferred Stock shall nevertheless be payable on such subsequent Quarterly
Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Junior Preferred Stock from the Quarterly Dividend Payment
Date next preceding the date of issue of such shares, unless the date of issue
of such shares is prior to the record date for the first Quarterly Dividend
Payment Date, in which case dividends on such shares shall begin to accrue from
the date of issue of such shares, or unless the date of issue is a Quarterly
Dividend Payment Date or is a date after the record date for the determination
of holders of shares of Junior Preferred Stock entitled to receive a quarterly
dividend and before such Quarterly Dividend Payment Date, in either of which
events such dividends shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear
interest. Dividends paid on the shares of Junior Preferred Stock in an amount
less than the total amount of such dividends at the time accrued and payable on
such shares shall be allocated pro
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rata on a share-by-share basis among all such shares at the time outstanding.
The Board of Directors may fix a record date for the determination of holders of
shares of Junior Preferred Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be not more than 60 days
prior to the date fixed for the payment thereof.
SECTION 3. VOTING RIGHTS. The holders of Junior Preferred Stock shall
have the following voting rights:
(A) Subject to the provisions for adjustment hereinafter set
forth, each share of Junior Preferred Stock shall entitle the holder thereof to
1000 votes on all matters submitted to a vote of the stockholders of the
Company. In the event the Company shall at any time declare or pay any dividend
on the Common Stock payable in shares of Common Stock, or effect a subdivision
or combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the number of votes per share to which holders of shares of Junior
Preferred Stock were entitled immediately prior to such event shall be adjusted
by multiplying such number by a fraction, the numerator of which is the number
of shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) Except as otherwise provided herein, in any other Certificate
of Designation creating a series of Preferred Stock or any similar stock, or by
law, the holders of shares of Junior Preferred Stock and the holders of shares
of Common Stock and any other capital stock of the Company having general voting
rights shall vote together as one class on all matters submitted to a vote of
stockholders of the Company.
(C) Except as set forth herein, or as otherwise provided by law,
holders of Junior Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for taking any corporate
action.
SECTION 4. CERTAIN RESTRICTIONS.
(A) Whatever quarterly dividends or other dividends or
distributions payable on the Junior Preferred Stock as provided in Section 2 are
in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Junior Preferred Stock
outstanding shall have been paid in full, the Company shall not:
(i) declare or pay dividends, or make any other
distributions, on any shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Junior Preferred Stock;
(ii) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Junior
Preferred Stock, except dividends paid ratably on the Junior Preferred Stock and
all such parity stock on which dividends are payable or in arrears in proportion
to the total amount to which the holders of all such shares are then entitled;
A-3
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Junior Preferred Stock, provided
that the Company may at any time redeem, purchase or otherwise acquire shares of
any such junior stock in exchange for shares of any stock of the Company ranking
junior (either as to dividends or upon dissolution, liquidation or winding up)
to the Junior Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for
consideration any shares of Junior Preferred Stock, or any shares of stock
ranking on a parity (either as to dividends or upon liquidation, dissolution or
winding up) with the Junior Preferred Stock, except in accordance with a
purchase offer made in writing or by publication (as determined by the Board of
Directors) to all holders of such shares upon such terms as the Board of
Directors, after consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable treatment among the
respective series or classes.
(B) The Company shall not permit any subsidiary of the Company to
purchase or otherwise acquire for consideration any shares of stock of the
Company unless the Company could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
SECTION 5. REACQUIRED SHARES. Any shares of Junior Preferred Stock
purchased or otherwise acquired by the Company in any manner whatsoever shall be
retired and cancelled promptly after the acquisition thereof. All such shares
shall upon their cancellation become authorized but unissued shares of Preferred
Stock and may be reissued as part of a new series of Preferred Stock subject to
the conditions and restrictions on issuance set forth herein, in the Amended and
Restated Certificate of Incorporation, or in any other Certificate of
Designation creating a series of Preferred Stock or any similar stock or as
otherwise required by law.
SECTION 6. LIQUIDATION, DISSOLUTION OR WINDING UP. Upon any
liquidation, dissolution or winding up of the Company, no distribution shall be
made (1) to the holders of shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Junior
Preferred Stock unless, prior thereto, the holders of shares of Junior Preferred
Stock shall have received $1000.00 per share, plus an amount equal to accrued
and unpaid dividends and distributions thereon, whether or not declared, to the
date of such payment, provided that the holders of shares of Junior Preferred
Stock shall be entitled to receive an aggregate amount per share, subject to the
provision for adjustment hereinafter set forth, equal to 1000 times the
aggregate amount to be distributed per share to holders of shares of Common
Stock, or (2) to the holders of shares of stock ranking on a parity (either as
to dividends or upon liquidation, dissolution or winding up) with the Junior
Preferred Stock, except distributions made ratably on the Junior Preferred Stock
and all such parity stock in proportion to the total amounts to which the
holders of all such shares are entitled upon such liquidation, dissolution or
winding up. In the event the Company shall at any time declare or pay any
dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock, then
in each such case the aggregate amount to which holders of shares of Junior
A-4
Preferred Stock were entitled immediately prior to such event under the proviso
in clause (1) of the preceding sentence shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
SECTION 7. CONSOLIDATION, MERGER, ETC. In case the Company shall enter
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Junior Preferred Stock shall at the same time be similarly exchanged or changed
into an amount per share, subject to the provision for adjustment hereinafter
set forth, equal to 1000 times the aggregate amount of stock, securities, cash
and/or any other property (payable in kind), as the case may be, into which or
for which each share of Common Stock is changed or exchanged. In the event the
Company shall at any time declare or pay any dividend on the Common Stock
payable in shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the
amount set forth in the preceding sentence with respect to the exchange or
change of shares of Junior Preferred Stock shall be adjusted by multiplying such
amount by a fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
SECTION 8. NO REDEMPTION. The shares of Junior Preferred Stock shall
not be redeemable.
SECTION 9. RANK. The Junior Preferred Stock shall rank, with respect
to the payment of dividends and the distribution of assets, junior to all series
of any other class of the Company's Preferred Stock.
SECTION 10. AMENDMENT. The Certificate of Incorporation of the Company,
as amended, shall not be amended in any manner which would materially alter or
change the powers, preferences or special rights in the Junior Preferred Stock
so as to affect them adversely without the affirmative vote of the holders of at
least two-thirds of the outstanding shares of Junior Preferred Stock, voting
together as a single class.
IN WITNESS WHEREOF, the undersigned has executed this Certificate as of
March 15, 2006.
---------------------------------------
Xxxxxx X. Xxxxxx
Secretary
A-5
(EXHIBIT B TO RIGHTS AGREEMENT)
FORM OF RIGHT CERTIFICATE
CERTIFICATE NO. R-____________ _______RIGHTS
Certificate No. R-_____Rights
NOT EXERCISABLE AFTER JUNE 15, 2008 OR EARLIER IF
REDEMPTION OR EXCHANGE OCCURS. THE RIGHTS ARE SUBJECT TO
REDEMPTION AT $0.00l PER RIGHT AND TO EXCHANGE ON THE TERMS
SET FORTH IN THE RIGHTS AGREEMENT.
RIGHT CERTIFICATE
EMAK WORLDWIDE, INC.
This certifies that _____________________ or registered assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions and conditions of the Rights
Agreement, dated as of March 15, 2006 (the "Agreement"), between EMAK Worldwide,
Inc., a Delaware corporation (the "Company"), and Continental Stock Transfer &
Trust Company (the "Rights Agent"), to purchase from the Company at any time
after the Distribution Date (as such term is defined in the Agreement) and prior
to 5:00 p.m., Pacific Standard Time, on June 15, 2008 at the office of the
Rights Agent designated for such purpose, or at the office of its successor as
Rights Agent, one one-thousandth of a fully paid non-assessable share of Series
A Junior Participating Preferred Stock, par value $0.001 per share (the
"Preferred Shares"), of the Company, at a purchase price of $40.00, subject to
adjustment, per one one-thousandth of a Preferred Share (the "Purchase Price"),
upon presentation and surrender of this Right Certificate with the Form of
Election to Purchase duly executed. The number of Rights evidenced by this Right
Certificate (and the number of one one-thousandths of a Preferred Share which
may be purchased upon exercise hereof) set forth above, and the Purchase Price
set forth above, are the number and Purchase Price as of _________________,
_____, based on the Preferred Shares as constituted at such date.
From and after the time any Person becomes an Acquiring Person, (as
such terms are defined in the Agreement), if the Rights evidenced by this Right
Certificate are beneficially owned by (i) an Acquiring Person or an Affiliate or
Associate of any such Acquiring Person (as such terms are defined in the
Agreement), (ii) a transferee of any such Acquiring Person, Associate or
Affiliate who becomes a transferee after the Acquiring Person becomes such, or
(iii) under certain circumstances specified in the Agreement, a transferee of
any such Acquiring Person, Associate or Affiliate who becomes a transferee prior
to or concurrently with the Acquiring Person becoming such, such Rights shall
become null and void without any further action and no holder hereof shall have
any right with respect to such Rights from and after the time any Person becomes
an Acquiring Person.
As provided in the Agreement, the Purchase Price and the number of one
one-thousandths of a Preferred Share which may be purchased upon the exercise of
the Rights
B-1
evidenced by this Right Certificate are subject to modification and adjustment
upon the happening of certain events.
This Right Certificate is subject to all of the terms, provisions and
conditions of the Agreement, as amended from time to time, which terms,
provisions and conditions are hereby incorporated herein by reference and made a
part hereof and to which Agreement reference is hereby made for a full
description of the rights, limitations of rights, obligations, duties and
immunities hereunder of the Rights Agent, the Company and the holders of the
Right Certificates. Copies of the Agreement are on file at the principal
executive offices of the Company and the above-mentioned offices of the Rights
Agent.
This Right Certificate, with or without other Right Certificates, upon
surrender at the office of the Rights Agent designated for such purpose, may be
exchanged for another Right Certificate or Right Certificates of like tenor and
date evidencing Rights entitling the holder to purchase a like aggregate number
of Preferred Shares as the Rights evidenced by the Right Certificate or Right
Certificates surrendered shall have entitled such holder to purchase. If this
Right Certificate shall be exercised in part, the holder shall be entitled to
receive upon surrender hereof another Right Certificate or Right Certificates
for the number of whole Rights not exercised.
Subject to the provisions of the Agreement, the Rights evidenced by
this Certificate (i) may be redeemed by the Company at a redemption price of
$0.001 per Right or (ii) may be exchanged in whole or in part for shares of the
Company's Common Stock, par value $0.001 per share, or, upon circumstances set
forth in the Agreement, cash, property or other securities of the Company,
including fractions of a share of Preferred Stock.
No fractional Preferred Shares will be issued upon the exercise of any
Right or Rights evidenced hereby (other than fractions which are integral
multiples of one one-thousandth of a Preferred Share, which may, at the election
of the Company, be evidenced by depositary receipts) but in lieu thereof a cash
payment will be made, as provided in the Agreement.
No holder of this Right Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of the Preferred
Shares or of any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained in the 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
Agreement), or to receive dividends or subscription rights, or otherwise, until
the Right or Rights evidenced by this Right Certificate shall have been
exercised as provided in the Agreement.
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
B-2
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal. Dated as of___________.
ATTEST: EMAK WORLDWIDE, INC.
---------------------------------- --------------------------------------
COUNTERSIGNED:
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
as Rights Agent
By:
-------------------------------
Authorized Officer
B-3
FORM OF REVERSE SIDE OF RIGHT CERTIFICATE
FORM OF ASSIGNMENT
(TO BE EXECUTED BY THE REGISTERED HOLDER IF SUCH
HOLDER DESIRES TO TRANSFER THE RIGHT CERTIFICATE.)
FOR VALUE RECEIVED_______________________________________hereby sells,
assigns and transfers unto
--------------------------------------------------------------------------------
(Please print name and address of transferee)
__________________ this Right Certificate, together with all right, title and
interest therein, and does hereby irrevocably constitute and appoint
_______________________ Attorney, to transfer the within Right Certificate on
the books of the within-named Company, with full power of substitution.
Dated:
-----------------------------
--------------------------------------------------------------------------------
Signature
B-4
SIGNATURE GUARANTEED:
Signatures must be guaranteed by an "eligible guarantor institution" as
defined in Rule 1 7Ad-15 promulgated under the Securities Exchange Act of 1934,
as amended.
The undersigned hereby certifies that (1) the Rights evidenced by this
Right Certificate are not being sold, assigned or transferred by or on behalf of
a Person who is or was an Acquiring Person, an Interested Stockholder or an
Affiliate or Associate thereof (as such terms are defined in the Agreement); and
(2) after due inquiry and to the best of the knowledge of the undersigned, the
undersigned did not acquire the Rights evidenced by this Right Certificate from
any Person who is or was an Acquiring Person, an Interested Stockholder, or an
Affiliate or Associate thereof.
-------------------------------------------
Signature
B-5
FORM OF ELECTION TO PURCHASE
(TO BE EXECUTED IF HOLDER DESIRES TO EXERCISE
RIGHTS REPRESENTED BY THE RIGHT CERTIFICATE.)
To Continental Stock Transfer & Trust Company:
The undersigned hereby irrevocably elects to exercise
_______________________ Rights represented by this Right Certificate to purchase
the Preferred Shares issuable upon the exercise of such Rights and requests that
certificates for such Preferred Shares be issued in the name of:
Please insert social security or other identifying number:_____________
________________________________________________________________________________
________________________________________________________________________________
(Please print name and address)
If such number of Rights shall not be all the Rights evidenced by this
Right Certificate, a new Right Certificate for the balance remaining of such
Rights shall be registered in the name of and delivered to:
Please insert social security or other identifying number:_____________
________________________________________________________________________________
________________________________________________________________________________
(Please print name and address)
Dated:
-----------------------------
-------------------------------------------
Signature
B-6
SIGNATURE GUARANTEED:
Signatures must be guaranteed by an "eligible guarantor institution" as
defined in Rule l7Ad-15 promulgated under the Securities Exchange Act of 1934,
as amended.
The undersigned hereby certifies that (1) the Rights evidenced by this
Right Certificate are not beneficially owned by nor are they being exercised on
behalf of an Acquiring Person, an Interested Stockholder or an Affiliate or
Associate thereof (as such terms are defined in the Agreement); and (2) after
due inquiry and to the best of the knowledge of the undersigned, the undersigned
did not acquire the Rights evidenced by this Right Certificate from any Person
who is or was an Acquiring Person, an Interested Stockholder, or an Affiliate or
Associate thereof.
-------------------------------------------
Signature
NOTICE
The signature in the Form of Assignment or Form of Election to
Purchase, as the case may be, must conform to the name as written upon the face
of this Right Certificate in every particular, without alteration or enlargement
or any change whatsoever.
In the event the certification set forth above in the Form of
Assignment or the Form of Election to Purchase, as the case may be, is not
completed, the Company and the Rights Agent will deem the beneficial owner of
the Rights evidenced by this Right Certificate to be an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Agreement) and such Assignment
or Election to Purchase will not be honored.
B-7
(EXHIBIT C TO RIGHTS PLAN)
EMAK WORLDWIDE, INC.
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED SHARES
On March 15, 2006, the Board of Directors of EMAK WORLDWIDE, INC. (the
"Company") declared a dividend of one preferred share purchase right (a "Right")
for each outstanding share of common stock, par value $0.001 per share (the
"Common Shares"), of the Company. The dividend is effective as of March 26, 2006
(the "Record Date") with respect to the stockholders of record on that date. The
Rights will also attach to new Common Shares issued after the Record Date. Each
Right entitles the registered holder to purchase from the Company one
one-thousandth of a share of Series A Junior Participating Preferred Stock, par
value $0.001 per share (the "Preferred Shares"), of the Company at a price of
$40.00 per one one-thousandth of a Preferred Share (the "Purchase Price"),
subject to adjustment. Each Preferred Share is designed to be the economic
equivalent of 1000 Common Shares. The description and terms of the Rights are
set forth in a Rights Agreement dated as of March 15, 2006 (the "Agreement"),
between the Company and Continental Stock Transfer & Trust Company (the "Rights
Agent").
DETACHMENT AND TRANSFER OF RIGHTS
Initially, the Rights will be evidenced by the stock certificates
representing Common Shares then outstanding, and no separate Right Certificates
will be distributed. Until the earlier to occur of (i) a public announcement
that a person or group of affiliated or associated persons, has become an
"Acquiring Person" (as such term is defined in the Agreement) or (ii) 10
business days (or such later date as the Board may determine) following the
commencement of, or announcement of an intention to make, a tender offer or
exchange offer which would result in the beneficial ownership by an Acquiring
Person of 10% or more of the outstanding Common Shares (the earlier of such
dates being called the "Distribution Date"), the Rights will be evidenced, with
respect to any of the Common Share certificates outstanding as of the Record
Date, by such Common Share certificate. In general, an "Acquiring Person" is a
person, the affiliates or associates of such person, or a group, which has
acquired beneficial ownership of 10% or more of the outstanding Common Shares
(other than existing stockholders who currently own more than 10% of the
outstanding Common Shares so long as they do not acquire additional Common
Shares).
The Agreement provides that, until the Distribution Date (or earlier
redemption or expiration of the Rights), the Rights will be transferable with
and only with the Common Shares. Until the Distribution Date (or earlier
redemption or expiration of the Rights), new Common Share certificates issued
after the Record Date upon transfer or new issuance of Common Shares will
contain a notation incorporating the Agreement by reference. Until the
Distribution Date (or earlier redemption or expiration of the Rights) the
surrender or transfer of any certificates for Common Shares outstanding as of
the Record Date, even without such notation or a copy of this Summary of Rights
being attached thereto, will also constitute the transfer of the Rights
C-1
associated with the Common Shares represented by such certificate. As soon as
practicable following the Distribution Date, separate certificates evidencing
the Rights ("Right Certificates") will be mailed to holders of record of the
Common Shares as of the close of business on the Distribution Date and such
separate Right Certificates alone will evidence the Rights.
EXERCISABILITY OF RIGHTS
The Rights are not exercisable until the Distribution Date. The Rights
expire on June 15, 2008 unless the Rights are previously redeemed, exchanged or
terminated as described below, or unless the continuation of the Rights is
previously approved by the stockholders of the Company by a vote of the majority
of the shares present and entitled to vote at a stockholders meeting prior to
June 15, 2008 (the "First Meeting"). If the stockholders approve the
continuation of Rights at the First Meeting, the Final Expiration Date will be
March 15, 2016, subject to stockholder ratification of this Agreement by a vote
of the majority of shares present and entitled to vote at a stockholders meeting
to be held every subsequent two years no later than June 15 of the applicable
year beginning in 2010. Until a Right is exercised, the holder thereof, as such,
will have no rights as a stockholder of the Company, including, without
limitation, the right to vote or to receive dividends.
The Purchase Price payable, and the number of Preferred Shares or other
securities or property issuable or payable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution. The number of
outstanding Rights and the number of one one- thousandths of a Preferred Share
issuable upon exercise of each Right are also subject to adjustment in the event
of a stock split of the Common Shares or a stock dividend on the Common Shares
payable in Common Shares, or subdivisions, consolidations or combinations of the
Common Shares occurring, in any such case, prior to the Distribution Date. With
certain exceptions, no adjustment in the Purchase Price will be required until
cumulative adjustments require an adjustment of at least 1% in such Purchase
Price. No fractional Preferred Shares will be issued (other than fractions which
are integral multiples of one one-thousandth of a Preferred Share, which may, at
the election of the Company, be evidenced by depositary receipts) and in lieu
thereof, an adjustment in cash will be made based on the market price of the
Preferred Shares on the last trading day prior to the date of exercise.
TERMS OF PREFERRED SHARES
Preferred Shares purchasable upon exercise of the Rights will not be
redeemable. Each Preferred Share will be entitled to a minimum preferential
quarterly dividend payment of $1 per share but will be entitled to an aggregate
dividend of 1000 times the dividend declared per Common Share. In the event of
liquidation, the holders of the Preferred Shares will be entitled to a minimum
preferential liquidation payment of $1000 per share but will be entitled to an
aggregate payment of 1000 times the payment made per Common Share. Each
Preferred Share will have 1000 votes, voting together with the Common Shares.
Finally, in the event of any merger, consolidation or other transaction in which
Common Shares are exchanged, each Preferred Share will be entitled to receive
1000 times the amount received per Common Share. These rights are protected by
customary anti-dilution provisions. Because of the nature of the Preferred
Shares' dividend, liquidation and voting rights, the value of the one
one-thousandth interest in a Preferred Share purchasable upon exercise of each
Right should approximate the
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value of one Common Share. The Preferred Shares would rank junior to any other
series of the Company's preferred stock.
TRIGGER OF FLIP-IN AND FLIP-OVER RIGHTS
In the event that any person or group of affiliated or associated
persons becomes an Acquiring Person, proper provision shall be made so that each
holder of a Right, other than Rights beneficially owned by the Acquiring Person
or any Affiliate or Associate thereof (which will thereafter be void), will
thereafter have the right to receive upon exercise that number of Common Shares
having a market value of two times the exercise price of the Right. This right
will commence on the date of public announcement that a person has become an
Acquiring Person (or the effective date of a registration statement relating to
distribution of the Rights, if later) and terminate 60 days later (subject to
adjustment in the event exercise of the Rights is enjoined).
In the event that the Company is acquired in a merger or other business
combination transaction or 50% or more of its consolidated assets or earning
power are sold to an Acquiring Person, its Affiliates or Associates or certain
other persons in which such persons have an interest, proper provision will be
made so that each such holder of a Right will thereafter have the right to
receive, upon the exercise thereof at the then current exercise price of the
Right, that number of shares of common stock of the acquiring company which at
the time of such transaction will have a market value of two times the exercise
price of the Right.
REDEMPTION
At any time prior to the earlier of (i) the close of business on the
day of the first public announcement that a person has become an Acquiring
Person, or (ii) the Final Expiration Date, the Board of Directors of the Company
may redeem the Rights in whole, but not in part, at a price of $0.00l per Right
(the "Redemption Price"). In addition, in the event the Company receives a
Qualified Offer (which has not been terminated or withdrawn), meaning a tender
offer which (among other things) (a) is for all of the Company's Common Shares,
(b) consists of cash, (c) includes a firm commitment letter from an established
financial institution stating that the offeror has the money to pay any cash
included in the offer, (d) has a non-waivable condition that the offeror must
own at least 50% of the Company's Common Shares (other than shares held by such
offeror, its affiliates or associates or any directors or officers of the
Company) after the consummation of the offer, (e) stays open for at least 60
business days and is extended in the event of a price increase or a competing
offer, (f) commits the offeror to buying all other Common Shares at a price not
less than the original offer, and (g) if the original offer is unsuccessful,
prohibits the original offeror from making another offer for the Company's
equity securities for six months, unless a subsequent Qualified Offer which is
at least 10% higher than the original offer is made by an unrelated third party,
then the Company's Board of Directors shall call a special meeting of the
stockholders (the "Special Meeting") to consider and vote whether to require the
Company to withdraw the Agreement or take other action so that the existence of
the Rights does not interfere with the consummation of a Qualified Offer. The
Special Meeting shall be held on a date selected by the Board of Directors,
which date shall be not less than 60 nor more than 120 business days after the
date such Qualified Offer is received by the Company. If at the Special Meeting,
holders of at least 50% of the then outstanding
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Common Shares (other than shares held by the offeror, its affiliates or
associates or any officer or director of the Company), shall vote to withdraw
the Agreement or take other action so that the existence of the Rights does not
interfere with the consummation of a Qualified Offer, then the Company shall do
so as promptly as practicable. In the event that the Special Meeting is not held
on or prior to the 120th business day following receipt of the Qualified Offer
by the Company, the Company shall withdraw the Agreement or take other action so
that the existence of the Rights does not interfere with the consummation of a
Qualified Offer. Notwithstanding the foregoing, the Company shall not be
required to hold the Special Meeting unless at such time such Qualified Offer
has an expiration date which is at least ten (10) business days after the
Special Meeting. Immediately upon any redemption of the Rights, the right to
exercise the Rights will terminate and the only right of the holders of Rights
will be to receive the Redemption Price.
EXCHANGE OF RIGHTS
At any time after any Person becomes an Acquiring Person and prior to
the acquisition by such person or group of 50% or more of the outstanding Common
Shares, the Board of Directors of the Company may exchange the Rights (other
than Rights owned by such person or group which will have become void), in whole
or in part, at an exchange ratio of one Common Share, or, under circumstances
set forth in the Agreement, cash, property or other securities of the Company,
including fractions of a Preferred Share (or of a share of a class or series of
the Company's preferred stock having equivalent designations and the powers,
preferences and rights, and the qualifications, limitations and restrictions),
per Right (with value equal to such Common Shares).
AMENDMENT OF RIGHTS
The terms of the Rights generally may be amended by the Board of
Directors of the Company without the consent of the holders of the Rights,
except that from and after such time as the Rights are distributed no such
amendment may adversely affect the interests of the holders of the Rights
(excluding the interest of any Acquiring Person).
ADDITIONAL INFORMATION
A copy of the Agreement has been filed with the Securities and Exchange
Commission as an Exhibit to a Current Report on Form 8-K dated March 15, 2006. A
copy of the Agreement is available from the Company by writing to: Attn:
Investor Relations, EMAK Worldwide, Inc., 0000 Xxx Xxxxxxx Xxxx., Xxx Xxxxxxx,
Xxxxxxxxxx 00000. This summary description of the Rights is not intended to be
complete and is qualified in its entirety by reference to the Agreement, which
is hereby incorporated herein by reference.
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