HOMEGOLD FINANCIAL, INC.
and
FIRST UNION NATIONAL BANK
as Rights Agent
SHAREHOLDER RIGHTS AGREEMENT
January 29, 2002
SHAREHOLDER RIGHTS AGREEMENT
Shareholder Rights Agreement (as the same may from time to time be
amended or supplemented, this "Agreement"), dated as of January 29, 2002,
between HomeGold Financial, Inc., a South Carolina corporation (the "Company"),
and First Union National Bank, (the "Rights Agent", which term shall include any
successor Rights Agent hereunder).
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, in order to discourage any person from acquiring shares or
additional shares of the Company's outstanding Common Stock, $0.001 par value
per share (the "Common Stock") so as to become the Beneficial Owner (as that
term is hereinafter defined) of 5% or more of the Common Stock, and to prevent
the loss to the Company of its net operating loss carryforwards ("NOL") to be
used to offset its taxable income in future years, on January 10, 2002, the
Board of Directors of the Company authorized and declared a dividend
distribution of a Right (as hereinafter defined) to be effective January 29,
2002 for each whole share of Common Stock outstanding as of the Close of
Business on January 9, 2002 (the "Record Date") and authorized the issuance of
one Right for each whole share of Common Stock of the Company that is
outstanding on the Record Date or that becomes outstanding between the Record
Date and the earliest of the second Share Acquisition Date, the Redemption Date
and the Final Expiration Date (as such terms are hereinafter defined), each
Right representing the right to receive on up to two successive occasions: (i)
from the Company, one share of Common Stock, automatically with no further
action by the holder or the Company, simultaneously upon the first acquisition
on or after the date hereof by a person of beneficial ownership of shares of
Common Stock which, together with any Common Stock already owned by such person,
would result in such person then owning 5% or more of the outstanding Common
Stock; and (ii) from the Company, one share of Common Stock, automatically with
no further action by the holder or the Company, simultaneously upon the second
acquisition on or after the date hereof by a person of beneficial ownership of
shares of Common Stock which, together with any Common Stock already owned by
such person, would result in such person then owning 5% or more of the
outstanding Common Stock on a date after the date of the acquisition referred to
in clause (i) above (the "Rights");
WHEREAS, First Union National Bank is the stock transfer agent for the
Company and has agreed to serve as Rights Agent;
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 who or which,
together with all Affiliates and Associates of such Person, shall on any date
hereafter, be the Beneficial Owner of 5% or more of the shares of Common Stock
1
then outstanding, but shall not include (i) the Company, (ii) any Subsidiary of
the Company, (iii) any employee benefit plan of the Company or any of its
Subsidiaries, (iv) any Person who is the Beneficial Owner of 5% or more of the
shares of Common Stock outstanding on the date of this Agreement unless
thereafter there is any increase in the number of shares of Common Stock owned
by such Person (other than pursuant to Rights), and (v) any Person whose
ownership (together with all Affiliates and Associates of such Person) of 5% or
more of the shares of Common Stock then outstanding will, in the judgment of the
Company's Board of Directors, not jeopardize or endanger the availability to the
Company of its NOL to be used to offset its taxable income in future years. The
Persons described in clauses (i) through (v) above are referred to herein as
"Exempt Persons". Notwithstanding the foregoing, no Person shall become an
"Acquiring Person" as the result of an acquisition of Common Stock by the
Company which, by reducing the number of shares outstanding, increases the
proportionate number of shares beneficially owned by such Person (together with
all Affiliates and Associates of such Person) to 5% or more of the Common Stock
of the Company then outstanding; provided, however, that if any Person,
(together with all Affiliates and Associates of such Person, (other than Exempt
Persons) shall become the Beneficial Owner of 5% or more of the Common Stock of
the Company then outstanding by reason of share purchases by the Company and
shall, after such share purchases by the Company, become the Beneficial Owner of
any additional shares of Common Stock of the Company, then such Person shall be
deemed to be an "Acquiring Person." In calculating beneficial ownership for
purposes of determining whether a Person is an Acquiring Person, shares held for
or pursuant to the terms of an employee benefit plan of the Company or any of
its Subsidiaries shall not be counted.
(b) An "Affiliate" or "Associate" of a Person shall mean any
other Person whose Common Stock would be deemed constructively owned by such
first Person pursuant to the provisions of Section 382 of the Internal Revenue
Code of 1986, as amended, or any successor provision or replacement provision;
provided, however, that no Exempt Person shall be deemed an Affiliate or an
Associate.
(c) A Person shall be deemed the "Beneficial Owner" of, and
shall be deemed to "beneficially own" any securities which such Person owns
directly and which such Person would be deemed to constructively own pursuant to
Section 382 of the Internal Revenue Code of 1986, as amended, or any successor
provision or replacement provision.
(d) "Business Day" shall mean any day other than a Saturday,
Sunday, or a day on which banking institutions in the State of South Carolina
are authorized or obligated by law or executive order to close.
(e) "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.
(f) "Common Stock" shall mean the Common Stock, $0.001 par
value per share, of the Company.
2
(g) "Disinterested Director" shall mean (i) any member of the
Company's Board of Directors who is unaffiliated with an Acquiring Person, or an
Affiliate or Associate of any such Person and was a member of the Company's
Board of Directors prior to the time that an Acquiring Person became such, and
any successor of a Disinterested Director who is unaffiliated with an Acquiring
Person, or any Affiliate or Associate of any such Person and is recommended to
succeed a Disinterested Director by a majority of the Disinterested Directors
then on the Company's Board of Directors.
(h) "Final Expiration Date" shall have the meaning set forth
in Section 4 hereof.
(i) "Group" shall mean two or more Persons acting as a
partnership, limited partnership, syndicate or other group for the purpose of
acquiring, holding or disposing of the Common Stock.
(j) "Person" shall mean any individual, firm, corporation,
partnership, limited liability company or other entity or Group, and shall
include any successor (by merger or otherwise) thereof; provided, however, that
when two or more Persons act as a partnership, limited partnership, syndicate or
other Group for the purpose of acquiring, holding or disposing of the Common
Stock, such partnership, limited partnership, syndicate or other Group shall be
deemed to be a single Person.
(k) "Record Date" shall have the meaning set forth in the
recital clause of this Agreement.
(l) "Redemption Date" shall have the meaning set forth in
Section 4 hereof.
(m) "Rights" shall have the meaning set forth in the recital
clause of this Agreement.
(n) "Share Acquisition Date" shall mean the first date after
the date hereof on which a Person becomes an Acquiring Person or the second date
after the date hereof on which a Person becomes an Acquiring Person.
(o) "Subsidiary" of any Person shall mean any other
corporation or other entity of which a majority of the voting equity securities
or voting interests is owned, directly or indirectly, by such Person, or which
is otherwise controlled by such Person.
(p) "Summary of Rights" shall have the meaning set forth in
Section 3(a) hereof.
Section 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company and the holders of the Rights (who,
in accordance with Section 3 hereof, shall also be the holders of the Common
Stock) 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, upon ten (10) days'
prior written notice to the Rights Agent. The Rights Agent shall have no duty to
supervise and shall in no event be liable for the acts or omissions of any such
3
co-Rights Agent. In the event the Company appoints one or more co-Rights Agents,
the respective duties of the Rights Agent and any co-Rights Agents shall be as
the Company shall determine.
Section 3. Notice of Rights; Transferability
---------------------------------
(a) On the Record Date, or as soon thereafter as practicable,
the Company will send a notification of the existence of the Rights, by postage
prepaid mail, to each record holder of the Common Stock as of the Close of
Business on the Record Date, at the address of such holder shown on the records
of the Company. With respect to certificates for the Common Stock outstanding as
of the Record Date, until the earlier of the Redemption Date or the Final
Expiration Date, the Rights will be evidenced by such certificates for the
Common Stock with or without a copy of the Summary of Rights in the form
attached hereto as EXHIBIT A (the "Summary of Rights") attached thereto, and the
registered holders of the Common Stock shall also be the registered holders of
the associated Rights. The rights will be transferable only in connection with
the transfer of the underlying shares of Common Stock. Until the redemption,
expiration or termination of the Rights, the transfer of any of the certificates
for the Common Stock outstanding on the Record Date, even without a copy of the
Summary of Rights attached thereto, shall also constitute the transfer of the
Rights associated with the Common Stock represented by such certificate.
(b) Certificates for the Common Stock issued after the Record
Date, but prior to the earlier of the Redemption Date or the Final Expiration
Date, shall be deemed also to be certificates for Rights, and shall bear the
following legend:
This certificate also evidences and entitles the holder hereof
to certain Rights as set forth in a Shareholder Rights Agreement
between HomeGold Financial, Inc. and First Union National Bank, as
Rights Agent, dated as of January 29, 2002 (the "Rights Agreement"),
the terms of which are hereby incorporated herein by reference and a
copy of which is on file at the principal offices of HomeGold
Financial, Inc. HomeGold Financial, Inc. will mail to the holder of
this certificate a copy of the Rights Agreement, as in effect on the
date of mailing, without charge promptly after receipt of a written
request therefor. Under certain circumstances, Rights issued to
Acquiring Persons or any Affiliates or Associates thereof (as defined
in the Rights Agreement) and any subsequent holder of such Rights may
become null and void.
With respect to such certificates containing the foregoing legend, until the
earlier of the Redemption Date or the Final Expiration Date, the Rights
associated with the Common Stock represented by such certificates shall be
evidenced by such certificates alone, and the transfer of any of such
certificates shall also constitute the transfer of the Rights associated with
the Common Stock represented by such certificates. In the event that the Company
purchases or acquires any shares of Common Stock after the Record Date, any
Rights associated with such Common Stock shall be deemed cancelled and retired
so that the Company shall not be entitled to exercise any Rights associated with
the shares of Common Stock which are no longer outstanding.
4
(c) The Company shall give notice to the Rights Agent promptly
after it becomes aware of the existence and identity of any Acquiring Person or
any Associate or Affiliate thereof.
Section 4. Final Expiration of Rights.
--------------------------
The Rights shall expire at the earlier of (i) the Close of Business on
May 9, 2003 (the "Final Expiration Date"), (ii) the time when the Rights are
redeemed as provided in Section 13 hereof (the "Redemption Date"), or (iii) the
day after the second Share Acquisition Date.
Section 5. Reservation and Availability of Common Stock.
---------------------------------------------
(a) The Company covenants and agrees that it will cause to be
reserved and kept available out of its authorized and unissued shares of Common
Stock the number of shares of Common Stock that, as provided in this Agreement,
will be sufficient to give effect in full to all outstanding Rights.
(b) If at the time Common Stock is issued pursuant to the
Rights, the then outstanding shares of Common Stock are listed on any national
or regional securities exchange or are quoted on the National Association of
Securities Dealers, Inc. Automated Quotation System ("NASDAQ") or any successor
thereto or other comparable quotation system, the Company shall use its best
efforts to cause all shares of Common Stock issued pursuant to the Rights to be
quoted on such system or listed on such exchange, as the case may be.
(c) The Company covenants and agrees that it will take all
such action as may be reasonably necessary to ensure that all shares of Common
Stock issued pursuant to the Rights shall, at the time of delivery of the
certificates for such shares, be duly and validly authorized and issued and
fully paid and nonassessable.
Section 6. Common Stock Record Date. Each Person in whose name any
certificate for Common Stock is issued pursuant to the Rights shall for all
purposes be deemed to have become the holder of record of the shares of Common
Stock represented thereby on, and such certificate shall be dated, the date upon
which a Person became an Acquiring Person thereby entitling the holder of Rights
to receive such Common Stock. Prior to the issuance of Common Stock pursuant to
a Right, the holder of a Right shall not be entitled to any rights of a
shareholder of the Company with respect to shares issuable pursuant to Rights,
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 7. Adjustment of Number of Shares or Number of Rights. The
number and kind of shares covered by each Right and the number of Rights
outstanding are subject to adjustment from time to time as provided in this
Section 7. In the event the Company shall at any time after the date of this
Agreement (A) declare a dividend on the Common Stock payable in shares of Common
Stock, (B) subdivide the outstanding Common Stock, (C) combine the outstanding
Common Stock into a smaller number of shares or (D) issue any shares of its
capital stock in a reclassification of the Common Stock (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation), then, except as otherwise
5
provided in this Section 7, the number and kind of shares of Common Stock
issuable on such date, shall be proportionately adjusted so that the holder of
any Right after such time shall be entitled to receive the aggregate number of
shares of Common Stock which, if such Common Stock had been issued pursuant to
the Right immediately prior to such date and at a time when the Common Stock
transfer books of the Company were open, such holder would have been entitled to
receive by virtue of such dividend, subdivision, combination or
reclassification.
Notwithstanding anything in this Agreement to the contrary,
immediately upon a Share Acquisition Date, any Rights beneficially owned by (i)
an Acquiring Person or any Associate or Affiliate of an Acquiring Person, (ii) a
transferee of an Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee after the Acquiring Person becomes such, or (iii) a
transferee of an Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee prior to or concurrently with the Acquiring Person becoming
such and receives such Rights pursuant to either (A) a transfer (whether or not
for consideration) from the Acquiring Person to holders of equity interests in
such Acquiring Person or to any Person with whom the Acquiring Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights, or (B) a transfer which the Board of Directors of the Company has
determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect the avoidance of this Section 7, shall become null and
void without any further action and no holder or beneficial owner of such Rights
shall have any rights whatsoever with respect to such Rights, whether under any
provision of this Agreement or otherwise. The Company shall use all reasonable
efforts to ensure that the provisions of this Section 7 are complied with, but
shall have no liability to any holder or beneficial owner of Rights or any other
Person as a result of its failure to make any determinations with respect to an
Acquiring Person or any Affiliates and Associates thereof or any transferee of
any of them hereunder.
Section 8. Agreement of Right Holders. Every holder of a Right shall
be deemed to have consented and agreed with the Company and with the Rights
Agent and with every other holder of a Right that:
(a) each Right will be transferable only simultaneously
and together with the transfer of shares of Common Stock;
(b) the Company and the Rights Agent may deem and treat the
person in whose name the associated Common Stock certificate is registered as
the absolute owner thereof and of the Rights evidenced thereby (notwithstanding
any notations of ownership or writing on the associated Common Stock certificate
made by anyone other than the Company or the Rights Agent) for all purposes
whatsoever, and neither the Company nor the Rights Agent shall be affected by
any notice to the contrary; and
(c) notwithstanding anything in this Agreement to the
contrary, neither the Company nor the Rights Agent shall have any liability to
any holder of a Right or other Person as the result of its inability to perform
any of its obligations under this Agreement by reason of any preliminary or
permanent injunction or other order, decree or ruling issued by a court of
competent jurisdiction or by a governmental, regulatory or administrative agency
or commission, or any statute, rule, regulation or executive order promulgated
or enacted by any governmental authority prohibiting or otherwise restraining
6
performance of such obligations; provided, however, that the Company must use
its reasonable best efforts to have any such order, decree or ruling lifted or
otherwise overturned as soon as possible.
Section 9. Concerning the Rights Agent.
---------------------------
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
disbursements and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent and its
directors, officers, employees and agents for, and to hold each of them harmless
against, any loss, liability, or expense, incurred without gross negligence,
recklessness, bad faith or willful misconduct on the part of the Rights Agent,
for anything done or omitted by the Rights Agent or such other indemnified party
in connection with the acceptance and administration of this Agreement or the
performance of the Rights Agent's duties hereunder, including the costs and
expenses of defending against any claim of liability arising therefrom, directly
or indirectly.
(b) The Rights Agent shall be protected and shall incur no
liability for or in respect of any action taken, suffered or omitted by it in
connection with its administration of this Agreement or the performance of the
Rights Agent's duties hereunder in reliance upon any 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 in reliance upon the advice of
counsel as set forth in Section 11(a) hereof.
(c) The indemnity provided in this Section 9 shall survive the
expiration of the Rights and the termination of the Agreement.
Section 10. Merger or Consolidation or Change of Name of Rights Agent.
---------------------------------------------------------
Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Rights Agent
or any successor Rights Agent shall be a party, or any corporation succeeding to
the corporate trust or shareholder services business of the Rights Agent or any
successor Rights Agent, shall be the successor to the Rights Agent under this
Agreement without the execution or filing of any paper or any further act on the
part of any of the parties hereto, provided that such corporation would be
eligible for appointment as a successor Rights Agent under the provisions of
Section 12 hereof.
7
Section 11. Duties of Rights Agent. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Rights shall be
bound:
(a) The Rights Agent may consult with legal counsel selected
by it (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 as to any action taken or omitted by it in good faith and in
accordance with such advice or opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable that any fact or
matter (including, without limitation, the identity of any Acquiring Person) be
proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any duly authorized officer of the
Company and delivered to the Rights Agent; and such certificate shall be full
and complete authorization and protection to the Rights Agent as to any action
taken or omitted by it in good faith in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its
own gross negligence, recklessness, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of
any of the statements of fact or recitals contained in this Agreement or be
required to verify the same, but all such statements and recitals are and shall
be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity of any Right; nor shall it be responsible for any breach by the Company
of any covenant or condition contained in this Agreement; nor shall it be
responsible for any change in the Rights (including the Rights becoming void
pursuant to Section 7 hereof) or any adjustment required under the provisions of
Section 7 hereof or responsible for the manner, method or amount of any such
adjustment or the ascertaining of the existence of facts that would require any
such adjustment, nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any shares
of Common Stock to be issued pursuant to this Agreement or any Right or as to
whether any shares of Common Stock will, when so issued, be validly authorized
and issued, fully paid and nonassessable; nor shall it be under any obligation
to institute any action, suit or legal proceeding or to take any other action
likely to involve expense unless the Company or one or more of the registered
holders of the Rights shall furnish the Rights Agent with security and indemnity
to its satisfaction for any costs and expenses which may be incurred; nor shall
it be liable for any failure to perform any duties except as specifically set
forth herein and no implied covenants or obligations shall be read into this
Agreement against the Rights Agent, whose duties and obligations shall be
determined solely by the express provisions hereof.
8
(f) The Company agrees that it will inform the Rights Agent
promptly upon the Company's determination that a Person has become an Acquiring
Person, and the Rights Agent will not be responsible for making such
determination or be deemed to have knowledge thereof prior to such notice by the
Company. Upon receipt of a notice from the Company that a Person has become an
Acquiring Person, the Rights Agent shall, subject to Section 11(j) hereof,
thereupon promptly (i)(A) requisition from any transfer agent of the shares of
Common Stock (or make available, if the Rights Agent is the transfer agent
therefor) certificates for the number of shares of Common Stock to be issued
pursuant to the Rights and the Company hereby irrevocably authorizes its
transfer agent to comply with all such requests, or (B) if the Company shall
have elected to deposit the total number of shares of Common Stock issuable upon
exercise of the Rights hereunder with a depositary agent, requisition from the
depositary agent depositary receipts representing such number of shares of
Common Stock as are to be issued pursuant to the Rights (in which case
certificates for the shares of Common Stock represented by such receipts shall
be deposited by the transfer agent with the depositary agent) and the Company
will direct the depositary agent to comply with such request, and (ii) promptly
after receipt of such certificates or depository receipts, cause the same to be
delivered to or upon the order of the registered holder of such Rights.
The Company agrees that it will perform, execute, acknowledge
and deliver or cause to be performed, executed, acknowledged and delivered all
such further and other acts, instruments and assurances as may reasonably be
required by the Rights Agent for the carrying out or performing by the Rights
Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties hereunder and
certificates delivered pursuant to any provision hereof from any duly authorized
officer of the Company, and is authorized to apply to any such officer for
advice or instructions in connection with its duties, and it shall not be liable
for any action taken or suffered to be taken by it in good faith in accordance
with instructions of any such officer or for any delay in acting while awaiting
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 under this Agreement
and the date on and/or after which such action shall be taken or such omission
shall be effective. The Rights Agent shall not be liable for any action taken
by, or omission of, the Rights Agent in accordance with a proposal included in
such application on or after the date specified in such application (which date
shall not be less than five Business Days after the date any officer of the
Company actually receives such application, unless any such officer shall have
consented in writing to an earlier date) unless, prior to taking any such action
(or the effective date in the case of an omission), the Rights Agent shall have
received written instructions in response to such application specifying the
action to be taken or omitted.
(h) The Rights Agent and any shareholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any 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 the Rights Agent under this
9
Agreement. Nothing herein shall preclude the Rights Agent from acting in any
other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the
rights or powers vested in it or perform any of its duties hereunder either
directly 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 attorney or agent or for any loss to the Company resulting from any
such act, default, neglect or misconduct, provided the Rights Agent was not
grossly negligent in the selection or continued employment of such agent.
(j) Anything in this Agreement to the contrary not
withstanding, in no event shall the Rights Agent be liable for special, indirect
or consequential loss or damage of any kind whatsoever (including but not
limited to lost profits).
(k) No provision in this Agreement shall require the Rights
Agent to expend or risk its own funds or otherwise incur any financial liability
in the performance of any of its duties hereunder or in the exercise of its
rights if there shall be reasonable grounds for believing that repayment of such
funds or adequate indemnification against such risk or liability is not
reasonably assured to it.
Section 12. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this agreement
upon thirty (30) days' notice in writing mailed to the Company, and to each
transfer agent of the Common Stock by registered or certified mail, and to the
holders of Common Stock by first-class mail. The Company may remove the Rights
Agent or any successor Rights Agent (with or without cause) upon thirty (30)
days' notice in writing, mailed to the Rights Agent or successor Rights Agent,
as the case may be, and to each transfer agent of the Common Stock by registered
or certified mail, and to the holders of Common Stock by first-class mail. If
the Rights Agent shall resign or be removed or shall otherwise become incapable
of acting, the Company shall appoint a successor to the Rights Agent. If the
Company shall fail to make such appointment within a period of 30 days after
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, then
the incumbent Rights Agent or any registered holder of Common Stock may apply to
any court of competent jurisdiction for the appointment of a new Rights Agent.
Any successor Rights Agent, whether appointed by the Company or by such a court,
shall be (a) a corporation or trust company organized and doing business under
the laws of the United States or of the State of South Carolina (or of any other
state of the United States so long as such corporation is authorized to do
business as a banking institution in the State of South Carolina), in good
standing, which is authorized under such laws to exercise shareholder services
or corporate trust powers and is subject to supervision or examination by
federal or state authority or (b) an Affiliate of a corporation described in
clause (a) of this sentence. 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
10
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Stock and mail a notice thereof in writing to the registered holders
of Common Stock. Failure to give any notice provided for in this Section 12,
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 13. Redemption.
----------
The Board of Directors of the Company may, at its option, at
any time prior to the earlier of (x) a Share Acquisition Date, or (y) the Final
Expiration Date, redeem all but not less than all of the then outstanding Rights
at a redemption price of $.001 per Right, as such amount may be appropriately
adjusted, as determined by the Board of Directors, to reflect any transaction of
the kind described in Section 7 hereof occurring after the date hereof (such
redemption price being hereinafter referred to as the "Redemption Price"). In
considering whether to redeem the Rights, the Board of Directors of the Company
may consider the best long-term and short-term interests of the Company,
including, without limitation, the amount of the NOL, and its anticipated
availability to the Company.
Section 14. Issuance of Common Stock Pursuant to Rights.
-------------------------------------------
(a) On the first Share Acquisition Date occurring on or after
the date hereof, each registered holder of Rights (other than any Rights
beneficially owned by (i) an Acquiring Person or any Associate or Affiliate of
an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee after the Acquiring Person
becomes such, or (iii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee prior to or concurrently with
the Acquiring Person becoming such and receives such Rights pursuant to either
(A) a transfer (whether or not for consideration) from the Acquiring Person to
holders of equity interests in such Acquiring Person or to any Person with whom
the Acquiring Person has any continuing agreement, arrangement or understanding
regarding the transferred Rights, or (B) a transfer which the Board of Directors
of the Company has determined is part of a plan, arrangement or understanding
which has as a primary purpose or effect the avoidance of this Section 14) will
be entitled automatically, without any action by such holder, to receive one
share of Common Stock for each such Right dated the first Share Acquisition Date
occurring after the date hereof. The Rights Agent will send such shares by
first-class, insured, postage-prepaid mail to each holder at the address as
shown on the records of the Company.
(b) On the second Share Acquisition Date occurring on or after
the date hereof, each registered holder of Rights (other than any Rights
beneficially owned by (i) an Acquiring Person or any Associate or Affiliate of
an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee after the Acquiring Person
becomes such, or (iii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee prior to or concurrently with
the Acquiring Person becoming such and receives such Rights pursuant to either
(A) a transfer (whether or not for consideration) from the Acquiring Person to
holders of equity interests in such Acquiring Person or to any Person with whom
the Acquiring Person has any continuing agreement, arrangement or understanding
11
regarding the transferred Rights, or (B) a transfer which the Board of Directors
of the Company has determined is part of a plan, arrangement or understanding
which has as a primary purpose or effect the avoidance of this Section 14) will
be entitled automatically, without any action by such holder, to receive one
share of Common Stock for each such Right (including Rights associated with
Common Stock issued on the first Share Acquisition Date occurring after the date
hereof) dated the second Share Acquisition Date occurring after the date hereof.
The Rights Agent will send such shares by first-class, insured, postage-prepaid
mail to each holder at the address as shown on the records of the Company.
(c) Immediately after the issuance of Common Stock pursuant to
the Rights on the second Share Acquisition Date, the Rights shall terminate
without any further action and without any notice.
(d) The Company shall not be required to issue fractional
shares of Common Stock pursuant to the Rights.
Section 15. Notices. Notices or demands authorized by this Agreement to
be given or made by the Rights Agent or by the holder of any Right to or on the
Company shall be sufficiently given or made if sent by first-class mail, postage
prepaid, addressed (until another address is filed in writing with the Rights
Agent) as follows:
HomeGold Financial, Inc.
0000 Xxxxxxxxx Xxxxxx, Xxxxx X
Xxxxxxxx, XX 00000
Tel: (000) 000-0000
Attention: General Counsel
Subject to the provisions of Section 12 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Right to or on the Rights Agent shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Company) as follows:
First Union National Bank
0000 Xxxx X.X. Xxxxxx Xxxx.
Xxxxxxxx 0X0
Xxxxxxxxx, XX 00000-0000
Attention: Equity Services Group
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any certificate representing shares
of Common Stock shall be sufficiently given or made if sent by first-class mail,
postage prepaid, addressed to such holder at the address of such holder as shown
on the registry books of the Company.
Section 16. Supplements and Amendments. The Company may, and the Rights
Agent shall, if the Company so directs, supplement or amend this Agreement
without the approval of any holder of Rights in order (i) to cure any ambiguity,
(ii) to correct or supplement any provision contained herein which may be
12
defective or inconsistent with any other provisions herein, (iii) to shorten or
lengthen any time period hereunder or (iv) to change or supplement the
provisions hereunder in any manner which the Company may deem necessary or
desirable and which shall not adversely affect, as determined solely by the
Company, the interests of the holders of the Rights (other than an Acquiring
Person or an Affiliate or Associate of an Acquiring Person or the transferee of
an Acquiring Person or any of its Affiliates or Associates); provided, however,
that this Agreement may not be supplemented or amended pursuant to clause (iii)
of this sentence (A) to lengthen any time period unless such lengthening is for
the purpose of protecting, enhancing or clarifying the rights of, and/or the
benefits to, registered holders of the Rights, or (B) to lengthen any time
period relating to when the Rights may be redeemed if at such time the Rights
are not then redeemable. Upon the delivery of such 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 16, the Rights Agent
shall execute such supplement or amendment. Notwithstanding anything contained
in this Agreement to the contrary, no supplement or amendment shall be made
which changes the Redemption Price or the Final Expiration Date, and no
supplement or amendment that changes the rights and duties of the Rights Agent
under this Agreement shall be effective without the consent of the Rights Agent.
The interests of the holders of Rights shall be deemed coincident at all times
with the interests of the holders of Common Stock.
Section 17. 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 18. Determinations and Actions by the Board of Directors. For
all purposes of this Agreement, any calculation of the number of shares of
Common Stock outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding shares of Common Stock
of which any Person is the Beneficial Owner, shall be made in accordance with
the provisions of Section 382 of the Internal Revenue Code of 1986, as amended,
or any successor provision or replacement provision. The Board of Directors of
the Company (with, where specifically provided for herein, the approval of a
majority of the Disinterested Directors) shall have the exclusive power and
authority to administer this Agreement and to exercise all rights and powers
specifically granted to the Board (with, where specifically provided for herein,
the approval of a majority of the Disinterested Directors) or to the Company, or
as may be necessary or advisable in the administration of this Agreement,
including without limitation, the right and power to (i) interpret the
provisions of this Agreement and (ii) make all determinations deemed necessary
or advisable for the administration of this Agreement (including a determination
to redeem or not redeem the Rights or to amend the Agreement). All such actions,
calculations, interpretations and determinations (including, for purposes of
clause (y) below, all omissions with respect to the foregoing) which are done or
made by the Board of Directors (or, where specifically provided for herein, by a
majority of the Disinterested Directors) in good faith shall (x) be final,
conclusive and binding on the Company, the Rights Agent, the holders of the
Rights and all other parties, and (y) not subject any member of the Board of
Directors or any of the Disinterested Directors to any liability to the holders
of the Rights or to any other person.
13
Section 19. Benefits of this Agreement. Nothing in this Agreement shall
be construed to give to any Person or corporation other than the Company, the
Rights Agent and the registered holders of Common Stock any legal or equitable
right, remedy or claim under this Agreement; but this Agreement shall be for the
sole and exclusive benefit of the Company, the Rights Agent and the registered
holders of Common Stock.
Section 20. 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, (i) 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
and (ii) any term, provision, covenant or restriction found to be invalid, void
or unenforceable shall be deemed automatically revised and amended to the
minimum extent necessary to make such term, provision, covenant or restriction
valid and enforceable to the maximum extent possible in accordance with the
original intent and effect of such term, provision, covenant or restriction.
Section 21. Governing Law. This Agreement and each Right shall be
deemed to be a contract made under the laws of the State of South Carolina 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 to be performed entirely
within South Carolina.
Section 22. 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 23. 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.
SIGNATURES ON FOLLOWING PAGE
14
IN WITNESS WHEREOF, the parties hereto have caused this Shareholder
Rights Agreement to be duly executed and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
ATTEST: HOMEGOLD FINANCIAL, INC.
By: /s/ Xxxxx Xxxxxxx By: /s/ Xxxxxx X. Xxxxxxxx
--------------------------------- ----------------------------
Name: Xxxxx Xxxxxxx Chief Executive Officer
------------------------------
Title: Executive Vice President
------------------------------
ATTEST: FIRST UNION NATIONAL BANK
By: /s/ Xxxxxxx X. Xxxxxxx By: /s/ Xxxxx X. Xxxx
-------------------------------- ----------------------------
Name: Xxxxxxx X. Xxxxxxx Name: Xxxxx X. Xxxx
------------------------------ --------------------------
Title: Assistant Vice President Title: Vice President
----------------------------- --------------------------
15
EXHIBIT A
FORM OF SUMMARY OF RIGHTS
On January 10, 2002, the Board of Directors of HomeGold Financial, Inc. (the
"Company") declared for each outstanding share of Common Stock of the Company a
Shareholder Right to be effective January 29, 2002 to stockholders of record at
the close of business on January 9, 2002. Each Right entitles the registered
holder of shares of Common Stock to receive on up to two successive occasions:
(i) from the Company, one share of Common Stock, automatically with no further
action by the holder or the Company, simultaneously upon the first acquisition
on or after the effective date by a person of beneficial ownership of shares of
Common Stock which, together with any Common Stock already owned by such person,
would result in such person then owning 5% or more of the outstanding Common
Stock; and (ii) from the Company, one share of Common Stock, automatically with
no further action by the holder or the Company, simultaneously upon the second
acquisition on or after the effective date by a person of beneficial ownership
of shares of Common Stock which, together with any Common Stock already owned by
such person, would result in such person then owning 5% or more of the
outstanding Common Stock on a date after the date of the acquisition referred to
in clause (i) above. The description and terms of the Rights are set forth in a
Shareholder Rights Agreement between the Company and First Union National Bank,
as Rights Agent.
The purpose of the Rights is to protect the Company's net operating
loss carry-forwards ("NOLs") (a positive value on the books of the Company) and
therefore protect shareholder value. The Company has experienced substantial
operating losses in previous years. Under the Internal Revenue Code and rules
promulgated by the Internal Revenue Service, the Company can "carry forward"
these losses in certain circumstances to offset future earnings and thus reduce
its federal income tax liability (subject to certain requirements and
restrictions). The Company believes that it will be able to carry forward
several million dollars worth of NOLs in certain circumstances and so believes
these NOLs constitute a substantial asset of the Company. If the Company
experiences an "Ownership Change" as defined in Section 382 of the Internal
Revenue Code, its ability to use the NOLs could be substantially limited or lost
altogether. The acquisition of HomeSense Financial Corp. and its affiliates by
the Company on May 9, 2000, came close to constituting an Ownership Change. The
Company believes that if a new stockholder were to acquire beneficial ownership
of 5% or more of the Company's Common Stock or an existing "5% stockholder" were
to increase its ownership before May 9, 2003, an Ownership Change could occur
and the Company could lose part or all of its NOLs. The Board of Directors of
the Company has issued the Rights to protect the NOLs which in turn will protect
shareholder value. Set forth below is a summary of how the Rights are intended
to function to protect the Company's NOLs.
The Rights will be attached to all outstanding shares of Common Stock,
and no separate Right Certificates will be distributed. Common Stock issued
after January 9, 2002, but prior to the earlier of redemption or final
expiration shall also entitle the holder thereof to the Rights. The Rights will
be triggered initially by the acquisition by a person or group of affiliated or
associated persons (other than an Exempt Person as defined in the Agreement) of
16
beneficial ownership of such number of shares of Common Stock as, taken with any
Common Stock already owned by such person or group, equals or exceeds 5% of the
outstanding shares of Common Stock (each such acquirer is hereinafter referred
to as an "Acquiring Person" and the date a person becomes an Acquiring Person is
referred to hereinafter as a "Share Acquisition Date"). The Rights may be
triggered a second time in the event another Acquiring Person acquires Common
Stock.
Simultaneously with the time a person becomes an Acquiring Person, if
permitted by applicable law and to the extent adequate authorized but unissued
shares of Common Stock are available for issuance, each Right (other than any
Rights beneficially owned by any Acquiring Person or its Affiliates or
Associates or its or their transferees or certain related persons) entitles the
registered holder to receive and such person shall be deemed to have received
and own: (i) on the first Share Acquisition Date on or after the effective date,
one share of Common Stock automatically with no further action by the holder or
the Company; and (ii) on the second Share Acquisition Date on or after the
effective date, one share of Common Stock, automatically with no further action
by the holder or the Company. The number of shares of Common Stock of the
Company to be received will be subject to adjustment as provided in the Rights
Agreement.
Until their redemption or expiration, (a) the Rights will be
transferable only with the Common Stock certificates, (b) new Common Stock
certificates issued after the record date for the issuance of Rights will
contain a notation incorporating the Shareholder Rights Agreement by reference,
and (c) the surrender for transfer of any certificates for Common Stock will
also constitute the transfer of the Rights associated with the Common Stock
represented by such certificate.
The Rights will expire at the close of business on May 9, 2003 unless
previously redeemed by the Company as described below. Notwithstanding any of
the foregoing, in the event any Person becomes an Acquiring Person, Rights that
are or were beneficially owned by an Acquiring Person or its Associates or
Affiliates and its and their transferees and certain related persons, shall
become null and void.
The Rights may be redeemed in whole, but not in part, at a price of
$0.001 per Right (payable in cash, Common Stock or other consideration deemed
appropriate by the Board of Directors) by the Board of Directors at any time
prior to their expiration. Immediately upon the action of the Board of Directors
ordering redemption of the Rights, the Rights will terminate and thereafter the
only right of the holders of Rights will be to receive the redemption price.
Until Common Stock issuable pursuant to a Right is issued, the holder
will have no rights as a stockholder of the Company (beyond those as an existing
stockholder), including the right to vote or to receive dividends.
The number of shares of Common Stock issuable, pursuant to the Rights
is subject to adjustment from time to time in the event of a stock dividend on,
or a subdivision, combination or reclassification of, the Common Stock.
No fractional shares of Common Stock will be issued in connection with
a Right.
17
The provisions of the Rights Agreement, other than those relating to
the principal economic terms of the Rights, may be amended by the Board to cure
any ambiguity, defect or inconsistency, to make changes that do not adversely
affect the interests of holders of Rights (excluding the interests of any
Acquiring Person).
While the distribution of the Rights will not be taxable to
stockholders or to the Company, stockholders may, depending upon the
circumstances, recognize taxable income if they receive shares of Common Stock
in the event a person becomes an Acquiring Person.
A copy of the Shareholder Rights Agreement is available free of charge
from the Company. This summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the Shareholder Rights
Agreement. You can obtain a copy of the Shareholder Rights Agreement by request
to the following address or telephone number:
HomeGold Financial, Inc.
0000 Xxxxxxxxx Xxxxxx, Xxxxx X
Xxxxxxxx, XX 00000
Tel: (000) 000-0000
Attention: General Counsel
18
Table of Contents
Section 1. Certain Definitions...........................................................1
-------------------
Section 2. Appointment of Rights Agent...................................................3
---------------------------
Section 3. Notice of Rights; Transferability.............................................4
---------------------------------
Section 4. Final Expiration Date of Rights...............................................5
-------------------------------
Section 5. Reservation and Availability of Common Stock..................................5
--------------------------------------------
Section 6. Common Stock Record Date......................................................5
------------------------
Section 7. Adjustment of Number of Shares or Number of Rights............................5
--------------------------------------------------
Section 8. Agreement of Right Holders....................................................6
--------------------------
Section 9. Concerning the Rights Agent...................................................7
---------------------------
Section 10. Merger or Consolidation or Change of Name of Rights Agent.....................7
---------------------------------------------------------
Section 11. Duties of Rights Agent........................................................8
----------------------
Section 12. Change of Rights Agent.......................................................10
----------------------
Section 13. Redemption...................................................................11
----------
Section 14. Issuance of Common Stock Pursuant to Rights..................................11
-------------------------------------------
Section 15. Notices......................................................................12
-------
Section 16. Supplements and Amendments...................................................12
--------------------------
Section 17. Successors...................................................................13
----------
Section 18. Determinations and Action by the Board of Directors..........................13
---------------------------------------------------
Section 19. Benefits of this Agreement...................................................14
--------------------------
Section 20. Severability.................................................................14
------------
Section 21. Governing Law................................................................14
-------------
Section 22. Counterparts.................................................................14
------------
Section 23. Descriptive Headings.........................................................14
--------------------
Exhibit A - Form of Summary of Rights
i
