XXXXX'X LIQUID GOLD-INC.
AND
XXXXX FARGO BANK MINNESOTA, N.A.
AS RIGHTS AGENT
--------------
SHAREHOLDER RIGHTS AGREEMENT
DATED AS OF FEBRUARY 21, 2001
TABLE OF CONTENTS
Section 1. Certain Definitions................................................. 1
Section 2. Appointment of Rights Agent......................................... 7
Section 3. Issuance of Rights Certificates..................................... 7
Section 4. Form of Rights Certificates......................................... 9
Section 5. Countersignature and Registration................................... 10
Section 6. Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights
Certificates........................................................ 10
Section 7. Exercise of Rights; Exercise Price; Expiration Date of Rights....... 11
Section 8. Cancellation and Destruction of Rights Certificates................. 13
Section 9. Reservation and Availability of Shares of Common Stock.............. 13
Section 10. Common Stock Record Date............................................ 14
Section 11. Antidilution Adjustments............................................ 15
Section 12. Certificate of Adjustments.......................................... 23
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power....................................................... 24
Section 14. Fractional Rights and Fractional Shares............................. 26
Section 15. Rights of Action.................................................... 26
Section 16. Agreement of Rights Holders......................................... 27
Section 17. Rights 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........... 28
Section 20. Duties of Rights Agent.............................................. 29
Section 21. Change of Rights Agent.............................................. 31
Section 22. Issuance of New Rights Certificates................................. 00
-x-
Xxxxxxx 00. Redemption and Termination.......................................... 33
Section 24. Exchange............................................................ 33
Section 25. Notice of Proposed Actions.......................................... 34
Section 26. Notices............................................................. 35
Section 27. Supplements and Amendments.......................................... 36
Section 28. Successors.......................................................... 37
Section 29. Determinations and Actions by the Board; etc........................ 37
Section 30. Benefits of this Agreement.......................................... 37
Section 31. Severability........................................................ 37
Section 32. Governing Law....................................................... 38
Section 33. Counterparts........................................................ 38
Section 34. Descriptive Headings................................................ 38
Exhibit A - Form of Rights Certificate
Exhibit B - Summary of Rights
-ii-
SHAREHOLDER RIGHTS AGREEMENT
This Shareholder Rights Agreement (the "Agreement") dated as of February
21, 2001 is between Xxxxx'x Liquid Gold-Inc., a Colorado corporation (the
"Company"), and Xxxxx Fargo Bank Minnesota, N.A., as rights agent (the "Rights
Agent").
RECITALS
A. On February 21, 2001 the Board of Directors of the Company (the
"Board") authorized the issuance of rights (each a "Right"), each Right being a
right to purchase, on the terms and subject to the provisions of this Agreement,
one share of the Company's Common Stock;
B. On February 21, 2001 (the "Dividend Declaration Date") the Board: (a)
authorized and declared a dividend distribution of one Right for every share of
Common Stock of the Company outstanding at the Close of Business on March 2,
2001 (the "Dividend Record Date"); and (b) authorized the issuance of, and
agreed to issue, one Right (as such number may be adjusted in accordance with
Section 11 hereof) for every share of Common Stock of the Company issued between
the Dividend Record Date and the Distribution Date (defined below); and
C. The Company desires to set forth certain terms and conditions
governing the Rights.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties agree as follows:
SECTION 1. CERTAIN DEFINITIONS.
For purposes of this Agreement, the following terms have the meanings
indicated:
a. "Acquiring Person" shall mean any Person who or which, together
with all Affiliates and Associates of such Person, shall be the Beneficial Owner
of 15% or more of the shares of Common Stock then outstanding, but shall not
include (i) the Company, (ii) any Subsidiary of the Company, (iii) the Xxxxxxxxx
Group (defined below), (iv) any employee benefit plan of the Company or of any
Subsidiary of the Company, or (v) any Person organized, appointed, or
established by the Company or a Subsidiary of the Company pursuant to the terms
of any such employee benefit plan; provided, however, that in no event shall a
Person who, together with all Affiliates and Associates of such Person, is the
Beneficial Owner of less than 15% of the Company's outstanding shares of Common
Stock become an Acquiring Person solely as a result of a reduction of the number
of shares of outstanding Common Stock, including without limitation, by reason
of repurchases of outstanding shares of Common Stock by the Company, which
reduction increases the percentage of outstanding shares of Common Stock
beneficially owned by such Person; and provided, however, that if such Person
shall become the Beneficial Owner of 15% or more of the Common Stock of the
Company then outstanding by reason of the reduction and shall after the
reduction become the Beneficial Owner of any additional Common Stock of the
Company, then such Person shall be deemed to be an Acquiring Person.
b. "Act" shall mean the Securities Act of 1933, as amended, and as
may from time to time be in effect (or any successor to that Act).
c. "Adjustment Shares" shall have the meaning set forth in Section
11(a).
d. "Affiliate," with respect to any Person, shall mean any other
Person who is, or who would be deemed to be, an "affiliate" of such Person
within the meaning ascribed to such term in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act, as such Rule is in effect on the Dividend
Declaration Date; provided, that no Person shall be deemed an affiliate of
another Person solely as a result of such Persons' status as a director of the
Company.
e. "Associate," with respect to any Person, shall mean any other
Person who is, or who would be deemed to be, an "associate" of such Person
within the meaning ascribed to such term in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act, as such Rule is in effect on the Dividend
Declaration Date; provided, that no Person shall be deemed an associate of
another Person solely as a result of such Persons' status as a director of the
Company.
f. A Person shall be deemed the "Beneficial Owner" of, and shall be
deemed to "beneficially own" or have "Beneficial Ownership" of, any securities:
i. which such Person or any of such Person's Affiliates or
Associates has "beneficial ownership" of within the meaning of Rule 13d-3 of the
General Rules and Regulations under the Exchange Act, as such Rule is in effect
on the date of this Agreement;
ii. which such Person or any of such Person's Affiliates or
Associates has, directly or indirectly, the right to acquire (whether such right
is exercisable immediately or after the passage of time) pursuant to any
agreement, arrangement or understanding (whether or not in writing) or upon the
exercise, conversion or exchange of other rights, warrants or options, or
otherwise;
iii. which such Person or any of such Person's Affiliates or
Associates has, directly or indirectly, the right to vote or dispose of,
including pursuant to any agreement, arrangement or understanding (whether or
not in writing); provided, however, that a Person shall not be deemed the
"Beneficial Owner" of, or to "beneficially own," any security for purposes of
this Section as a result of an agreement, arrangement or understanding to vote
such security if such agreement, arrangement or understanding: (a) arises solely
from a revocable proxy given in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the applicable proxy
solicitation rules and regulations promulgated under the Exchange Act or (b) is
made in connection with, or is to otherwise participate in, a
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proxy or consent solicitation made, or to be made, pursuant to, and in
accordance with, the applicable proxy solicitation rules and regulations
promulgated under the Exchange Act, in either case described in clause (a) or
(b) above, whether or not such agreement, arrangement or understanding is also
then reportable by such Person on Schedule 13D under the Exchange Act (or any
comparable or successor report); or
iv. which are beneficially owned, directly or indirectly, by any
other Person or any Affiliate thereof with which such Person or any of such
Person's Affiliates or Associates has any agreement, arrangement or
understanding (whether or not in writing), for the purpose of acquiring,
holding, voting (except pursuant to a revocable proxy or in connection with a
proxy or consent solicitation described in clause (a) or (b) of the proviso to
Section 1(f)(iii) hereof) or disposing of any securities of the Company;
provided, however, that for purposes of this Section a Person shall not be
deemed the "Beneficial Owner" of, or to "beneficially own," (a) securities
tendered pursuant to a tender or exchange offer made by such Person or any of
such Person's Affiliates or Associates until such tendered securities are
accepted for purchase or exchange, (b) securities issuable upon exercise of
Rights at any time prior to the occurrence of a Common Stock Event, or (c)
securities issuable upon exercise of Rights which were held by a Person or its
Affiliates or Associates prior to the Distribution Date as long as such Person
is not responsible for the occurrence of the Common Stock Event giving rise to
the Distribution Date.
g. "Business Day" shall mean any day other than a Saturday, Sunday
or a day on which banking institutions in the State of Colorado or the city in
which the principal office of the Rights Agent is located 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.,
Denver, Colorado time, on such date; provided, however, that if such date is not
a Business Day it shall mean 5:00 p.m., Denver, Colorado time, on the next
succeeding Business Day.
i. "Closing Price" shall have the meaning set forth in Section 11(d)
hereof.
j. "Common Stock" shall mean the Common Stock, par value $.10 per
share, of the Company.
k. "Common Stock Event" shall mean the occurrence of any event
described in (i) Section 11(a)(ii) hereof or (ii) clause (a), (b) or (c) of the
first sentence of Section 13 hereof.
l. "Company" shall have the meaning set forth in the preamble to
this Agreement.
m. "Current Market Price" shall have the meaning set forth in
Section 11(d) hereof.
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n. "Current Value" shall have the meaning set forth in Section
11(a)(iii) hereof.
o. "Directors" shall mean the members of the Company's Board of
Directors.
p. "Disqualified Transferee" shall mean any Person who is a direct
or indirect transferee of any Right from an Acquiring Person or an Affiliate or
Associate of an Acquiring Person and became such a transferee (1) after the
occurrence of a Common Stock Event or (2) prior to or concurrently with the
Acquiring Person becoming such and received such Right pursuant to a transfer
(whether or not for value) (a) from the Acquiring Person to holders of its
Common Stock or other equity securities or to any Person with whom the Acquiring
Person has any continuing agreement, arrangement, or understanding (whether or
not in writing) regarding the transferred Right, or (b) which a majority of the
Board then in office reasonably determines is part of a plan, arrangement, or
understanding (whether or not in writing) which has as a primary purpose or
effect, the avoidance of Section 7(e) hereof.
q. "Distribution Date" shall mean the date which is the later of (a)
the earlier of (1) the 10th Business Day following the Stock Acquisition Date or
(2) the 10th Business Day following the Offer Commencement Date or (b) such
later date as may be determined by a majority of the Board prior to such time as
any Person becomes an Acquiring Person.
r. "Dividend Declaration Date" shall have the meaning set forth in
the preamble to this Agreement.
s. "Dividend Record Date" shall have the meaning set forth in the
preamble to this Agreement.
t. "Excess Amount" shall have the meaning set forth in Section
11(a)(iii) hereof.
u. "Exchange Act" shall mean the Securities Exchange Act of 1934 (or
any successor act), as in effect on the Dividend Declaration Date.
v. "Exchange Ratio" shall have the meaning set forth in Section
24(a) hereof.
w. "Exercise Price" shall have the meaning set forth in Section 7(b)
hereof.
x. "Expiration Date" shall have the meaning set forth in Section
7(a) hereof.
y. "Xxxxxxxxx Group" means:
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(1) Xxxx X. Xxxxxxxxx who is at the date of this Agreement an
officer and director of the Company and a beneficial owner of more than 15% of
the Common Stock;
(2) the Xxxxxxxxx Family Corporation, a Colorado corporation (or
any successor entity);
(3) the Xxxxxxxxx Family Partnership, Ltd, a Colorado limited
partnership (or any successor entity);
(4) any Person that is an Affiliate of any of the Persons listed
in clauses (1) through (3) of this definition;
(5) a Related Party of Xx. Xxxxxxxxx; and
(6) any transferee of Common Stock owned beneficially by any
Person described in the foregoing clauses that is approved in advance of a
transfer by a majority of the Board of Directors of the Company.
For purposes of this definition, "Related Party" means: (A) a spouse, children
(by blood or adoption), and other descendants (by blood or adoption); (B) any
trust primarily for the benefit of Xx. Xxxxxxxxx and/or any of the Persons
described in clause (B); (C) any entity owned beneficially entirely by any of
Xx. Xxxxxxxxx, Persons described in clause (A) and/or Persons described in
clause (B); and (D) in the case of the death of Xx. Xxxxxxxxx or any Person that
was a Related Party immediately prior to the Person's death, the heirs,
legatees, devisees, distributees, personal representatives, or estate of the
deceased Person, whether by will or intestacy.
z. "Inadvertent Acquiror" shall have the meaning set forth in
Section 3(b).
aa. "Offer Commencement Date" shall mean the date of the commencement
by any Person, other than (i) the Company, (ii) a Subsidiary of the Company,
(iii) the Xxxxxxxxx Group, (iv) any employee benefit plan of the Company or of
any Subsidiary of the Company or (v) any Person organized, appointed, or
established by the Company or such Subsidiary pursuant to the terms of any such
employee benefit plan, of a tender or exchange offer (including when such offer
is first published or sent or given within the meaning of Rule 14d-2(a) of the
General Rules and Regulations under the Exchange Act) if upon consummation
thereof the Person and Affiliates or Associates thereof would be the Beneficial
Owner of 15% or more of the then outstanding shares of Common Stock (including
any such date which is after the date of this Agreement and prior to the
issuance of the Rights on the Dividend Record Date or thereafter).
bb. "Officers' Certificate" has the meaning set forth in Section
20(b) hereof.
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cc. "Other Consideration" shall mean consideration for Rights
substituted for Common Stock following a Common Stock Event, including Common
Stock and/or such other securities, cash or other assets as shall be issuable in
respect of the Rights in accordance with the terms of this Agreement.
dd. "Person" shall mean any individual, corporation, association,
partnership, joint venture, trust, limited liability company, estate,
organization, business, unincorporated organization, syndicate or group deemed
to be a person under Section 14(d)(2) of the Exchange Act, or other entity.
ee. "Principal Party" shall mean: (i) in the case of any transaction
described in the first sentence of Section 13(a) hereof, the Person that is the
issuer of any securities into which shares of Common Stock of the Company are
converted in such merger or consolidation, and if no securities are so issued,
the Person that is the other party to such merger or consolidation; and (ii) in
the case of any transaction described in clause (c) of the first sentence 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 such case, (1) if the common
stock of such Person is not at such time and has not been continuously over the
preceding twelve month period registered under Section 12 of the Exchange Act,
and such Person is a direct or indirect Subsidiary of another Person, the common
stock of which is and has been so registered, "Principal Party" shall refer to
such other Person; and (2) in case such Person is a Subsidiary, directly or
indirectly, or more than one Person, the common stocks of two or more of which
are and have been so registered, "Principal Party" shall refer to whichever of
such Persons is the issuer of the common stock having the greatest aggregate
market value.
ff. "Redemption Price" shall have the meaning set forth in Section 23
hereof.
gg. "Rights" shall have the meaning set forth in the preamble to this
Agreement.
hh. "Rights Agent" shall have the meaning set forth in the preamble
to this Agreement subject to the appointment of a successor Rights Agent
pursuant to Section 21 hereof.
ii. "Rights Certificates" shall have the meaning set forth in Section
3(a) hereof.
jj. "Stock Acquisition Date" shall mean the later of (i) the date of
the first public announcement by an Acquiring Person or the Company that an
Acquiring Person has become such (including the first date on which any filing
with any governmental authority disclosing that an Acquiring Person has become
such becomes available to the public), or (ii) the date on which an executive
officer of the Company has actual knowledge that an Acquiring Person has become
such.
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kk. "Subsidiary" shall mean, as of any date, any Person of which the
Company (or other specified parent) owns directly, or indirectly through a
Subsidiary or Subsidiaries, at least a majority of the outstanding capital stock
(or other shares of beneficial interest) entitled to vote generally, or holds
directly, or indirectly through a Subsidiary or Subsidiaries, at least a
majority of partnership or similar interests, or is a general partner or of
which the Company (or other specified parent) owns voting securities sufficient
to elect at least a majority of the directors of such Person.
ll. "Summary of Rights" shall have the meaning set forth in Section
3(c) hereof.
mm. "Trading Day" shall mean a day on which the principal national
securities exchange or the regulated quotation service, including without
limitation, the OTC Bulletin Board-Registered Trademark-, on which such
security is listed, quoted or admitted to trading is open for the transaction
of business or, if such security is not so listed, quoted or admitted to
trading, on a day which is a Business Day.
SECTION 2. APPOINTMENT OF RIGHTS AGENT.
The Company hereby appoints the Rights Agent to act as agent for the
Company and the holders of the Rights in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time, upon prior written notice to the Rights Agent,
appoint such Co-Rights Agents as it may deem necessary or desirable and the
respective duties of the Rights Agent and the Co-Rights Agent shall be as the
Company shall determine.
SECTION 3. ISSUANCE OF RIGHTS CERTIFICATES.
a. Until the Distribution Date, (i) the Rights will be evidenced
(subject to the provisions of Section 3(c) hereof) by the certificates
representing shares of Common Stock registered in the names of the holders of
the Common Stock (which certificates shall be deemed also to be certificates for
the associated Rights) and not by separate rights certificates, and (ii) the
Rights will be transferable only in connection with the transfer of the
associated shares of Common Stock. As soon as practicable after the Distribution
Date, the Rights Agent will send by first-class, insured, postage prepaid mail,
to each record holder of Common Stock as of the Close of Business on the
Distribution Date, at the address of such holder shown on the stock transfer
records of the Company, one or more rights certificates, in substantially the
form of EXHIBIT A hereto (the "Rights Certificates"), evidencing in the
aggregate that number of Rights to which such holder is entitled in accordance
with the provisions of this Agreement. As of and after the Distribution Date,
the Rights will be evidenced solely by such Rights Certificates.
b. Any Person who has reported or is required to report ownership of
the Company's capital stock on Schedule 13G under the Exchange Act (or any
comparable or successor report) or on Schedule 13D under the Exchange Act (or
any comparable or successor report), which Schedule 13D does not state any
intention to or
7
reserve the right to control or influence the management or policies of the
Company or engage in any of the actions specified in Item 4 (or any successor or
comparable provision) of such Schedule (other than the disposition of the Common
Stock), who within 10 Business Days of being requested by the Company, certifies
to the Company that such Person acquired shares of Common Stock in excess of
14.9% inadvertently or without knowledge of the terms of the Rights and who,
together with all of such Person's Affiliates and Associates, thereafter does
not acquire additional shares of Common Stock while the Beneficial Owner of 15%
or more of the shares of Common Stock then outstanding, shall be deemed an
inadvertent acquiror (an "Inadvertent Acquiror"). Within 10 Business Days of
such certification, the Inadvertent Acquiror must divest itself of enough shares
of Common Stock to reduce its holdings below the 15% threshold, and failure to
so divest will result in such Inadvertent Acquiror becoming an Acquiring Person
immediately after such 10 Business Day Period.
c. As soon as practicable after the Dividend Record Date, the
Company will cause a copy of the Summary of Rights, in substantially the form
attached hereto as EXHIBIT B (the "Summary of Rights"), to be sent by
first-class, postage prepaid mail, to each record holder of Common Stock as of
the Close of Business on the Dividend Record Date, at the address of such holder
shown on the stock transfer records of the Company.
d. Rights shall, without any further action, be issued in respect of
all shares of Common Stock which are outstanding on the Dividend Record Date and
in respect of all shares of Common Stock which are issued (whether originally
issued or delivered from the Company's treasury) after the Dividend Record Date
but prior to the earliest of (i) the Distribution Date, (ii) the Expiration
Date, or (iii) the redemption of the Rights. Commencing as soon as reasonably
practicable following the Dividend Record Date, certificates issued after the
Dividend Record Date for shares of Common Stock shall bear the following legend
(or a legend substantially in the form thereof):
This certificate also evidences and entitles the holder to Rights set
forth in a Shareholder Rights Agreement between the issuer and Xxxxx
Fargo Bank Minnesota, N.A., as Rights Agent (the "Rights Agent"),
dated as of February 21, 2001 (the "Shareholder Rights Agreement"),
the terms of which are incorporated herein by reference and a copy of
which is on file at the principal offices of both the issuer and the
Rights Agent. The Rights Agent will mail to the registered holder of
this certificate a copy of the Shareholder Rights Agreement, as in
effect on the date of mailing, without charge upon written request.
Under certain circumstances set forth in the Shareholder Rights
Agreement, such Rights will be evidenced by separate certificates and
will no longer be evidenced by this certificate. Under certain
circumstances set forth in the Shareholder Rights Agreement, Rights
issued to, or held by any Person who is, was or becomes, or acquires
shares from, an Acquiring
8
Person or any Affiliate or Associate of an Acquiring Person (as each
such term is defined in the Shareholder Rights Agreement), whether
currently held by or on behalf of such Person, Affiliate, Associate or
certain subsequent holders, may become null and void.
With respect to certificates representing shares of Common Stock (whether or not
such certificates include the foregoing legend or have appended to them the
Summary of Rights), until the earliest of the (i) Distribution Date, (ii) the
Expiration Date or (iii) the redemption of the Rights, the Rights associated
with the shares of Common Stock represented by such certificates shall be
evidenced by such certificates alone and the registered holders of the shares of
Common Stock shall also be the registered holders of the associated Rights, and
the surrender for transfer of any such certificates shall also constitute the
transfer of the Rights associated with the shares of the Common Stock
represented by such certificate.
SECTION 4. FORM OF RIGHTS CERTIFICATES.
a. The Rights Certificates (and the form of assignment, exercise
notice and certificate to be printed on the reverse thereof) shall each be
substantially in the form set forth in EXHIBIT A hereto and may have such marks
of identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange, the Nasdaq Stock Market (or its
successor) or regulated quotation service on which the Rights may from time to
time be listed traded or quoted, or to conform to usage. Subject to the
provisions of Sections 11 and 22 hereof, the Rights Certificates, whenever
distributed, shall be dated as of the Dividend Record Date (or, if the shares
pursuant to which the Rights are attached are issued thereafter, such date of
issuance), shall include the date of countersignature and on their face shall
entitle the holders thereof to purchase such number of shares of Common Stock as
shall be set forth therein at the Exercise Price, but the amount and type of
securities issuable upon the exercise of each Right and the Exercise Price shall
be subject to adjustment as provided herein.
b. Any Rights Certificate issued pursuant to this Agreement that
represents Rights beneficially owned by (i) any Acquiring Person or any
Affiliate or Associate of an Acquiring Person, or (ii) any Disqualified
Transferee, and any other Rights Certificate issued pursuant to Section 6 or 11
hereof upon the transfer, exchange, replacement, or adjustment of any such
Rights Certificate shall contain (to the extent feasible) the following legend:
The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became an Acquiring Person
or an Affiliate or Associate of an
9
Acquiring Person (as each such term is defined in the Shareholder
Rights Agreement between the issuer and Xxxxx Fargo Bank Minnesota,
N.A., as Rights Agent, dated as of February 21, 2001 (the "Shareholder
Rights Agreement")). Accordingly, this Rights Certificate and the
Rights represented hereby may become null and void in the
circumstances specified in Section 7(e) of the Shareholder Rights
Agreement. The Rights Agent will mail to the registered holder of this
certificate a copy of the Shareholder Rights Agreement, as in effect
on the date of such mailing, without charge upon written request.
SECTION 5. COUNTERSIGNATURE AND REGISTRATION.
The Rights Certificates shall be executed on behalf of the Company by its
then Chairman of the Board, Chief Executive Officer, President, or any Vice
President, either manually or by facsimile signature. The Rights Certificates
shall be countersigned, either manually or by facsimile signature, by the Rights
Agent and shall not be valid for any purpose unless so countersigned. Rights
certificates bearing signatures of individuals who were, upon signing, the
proper officers of the Company shall bind the Company, notwithstanding that any
such individuals have ceased to hold such offices prior to the countersignature
of such Rights Certificates.
Following the Distribution Date, the Rights Agent shall keep or cause to be
kept, at the office of the Rights Agent designated for such purpose, books for
registration and transfer of the Rights Certificates issued hereunder. Such
books shall show the names and addresses of the respective holders of the Rights
Certificates, the number of Rights evidenced by each of the Rights Certificates,
and the date of countersignature thereof by the Rights Agent.
SECTION 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHTS CERTIFICATES;
MUTILATED, DESTROYED, LOST OR STOLEN RIGHTS CERTIFICATES.
a. Subject to the provisions of Sections 4(b), 7(e), and 14 hereof,
at any time after the Close of Business on the Distribution Date, and at or
prior to the earlier of the Close of Business on the Expiration Date or the
redemption of the Rights, any Rights Certificate may be transferred, split up,
combined or exchanged for another Rights Certificate or Rights Certificates,
entitling the registered holder to purchase a like number of shares of Common
Stock (or, following a Common Stock Event, Common Stock and/or such other
securities, cash, or other assets as shall be issuable in respect of the Rights
in accordance with the terms of this Agreement ("Other Consideration")) as the
Rights Certificate surrendered then entitled such holder (or former holder in
the case of a transfer) to purchase. Any registered holder desiring to transfer,
split up, combine or exchange any Rights Certificate shall make such request in
writing delivered to the Rights Agent, and shall surrender the Rights
Certificate to be transferred, split up, combined, or exchanged at the office of
the Rights Agent designated for such purpose, accompanied by a signature
guarantee and such other
10
documentation as the Rights Agent may reasonably request. Neither the Rights
Agent nor the Company shall be obligated to take any action whatsoever with
respect to the transfer of any such surrendered Rights Certificate until the
registered holder shall have completed and signed the certificate contained in
the form of assignment on the reverse side of such Rights Certificate and shall
have provided such additional evidence of the identity of the Beneficial Owner
from whom the Rights evidenced by such Rights Certificate are to be transferred
(or the Beneficial Owner to whom such Rights are to be transferred) or
Affiliates or Associates thereof as the Company shall reasonably request.
Thereupon, subject to Sections 4(b), 7(e) and 14 hereof, the Company shall
execute, and the Rights Agent shall countersign and deliver to the Person
entitled thereto, a Rights Certificate as so requested. The Company may require
payment by the Rights holders 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 such holder's Rights Certificates which the
Company is not required to pay in accordance with Section 9(d) hereof.
b. Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Rights Certificate, and, in case of loss, theft or destruction, the receipt of
indemnity or security satisfactory to them, and upon reimbursement to the
Company and the Rights Agent of all reasonable expenses incidental thereto, and
upon surrender to the Rights Agent and cancellation of the Rights Certificate,
if mutilated, accompanied by a signature guarantee and such other documentation
as the Rights Agent may reasonably request, the Company will execute and deliver
a new Rights Certificate of like tenor to the Rights Agent for countersignature
and delivery to the registered owner in lieu of the Rights Certificate so lost,
stolen, destroyed, or mutilated.
SECTION 7. EXERCISE OF RIGHTS; EXERCISE PRICE; EXPIRATION DATE OF RIGHTS.
a. Except as otherwise provided herein, the registered holder of any
Rights Certificate may exercise the Rights evidenced thereby in whole or in part
at any time from and after the Distribution Date and at or prior to the Close of
Business on February 21, 2011 (the "Expiration Date") or the earlier redemption
of the Rights. Immediately upon the Close of Business on the Expiration Date (or
the earlier redemption of Rights), all Rights shall be extinguished and all
Rights Certificates shall become null and void. To exercise Rights, the
registered holder of the Rights Certificate evidencing such Rights shall
surrender such Rights Certificate, with the form of election to purchase on the
reverse side thereof and the certificate contained therein duly executed, to the
Rights Agent at the office of the Rights Agent designated for such purpose,
accompanied by a signature guarantee and such other documentation as the Rights
Agent may reasonably request, together with payment in cash (only by electronic
or wire transfer), or by certified check or bank check, of the Exercise Price
with respect to the total number of shares of Common Stock (or Other
Consideration) as to which the Rights are exercised (which payment shall include
any additional amount payable by such Person in accordance with Section 9(d)
hereof). The Rights Agent shall promptly deliver to the Company all payments of
the Exercise Price received in respect of Rights Certificates accepted for
exercise.
11
b. The purchase price for each share of Common Stock issuable
pursuant to the exercise of a Right (the "Exercise Price") shall be $8.00,
subject to adjustment as provided in Section 11 hereof, and payable in such
currency of the United States of America as at the time of payment is legal
tender for the payment of private and public debt.
c. Upon receipt of a Rights Certificate representing the Rights,
with the form of election to purchase set forth on the reverse side thereof and
the certificate contained therein duly executed, accompanied by payment of the
Exercise Price, with respect to each Right so exercised, the Rights Agent,
subject to Sections 7(e), 11(a)(iii) and 20(k) hereof, shall thereupon promptly
(i) requisition from any transfer agent of the Common Stock (or from the Company
if there shall be no such transfer agent, or make available if the Rights Agent
is such transfer agent) certificates for the total number of shares of Common
Stock to be purchased and the Company hereby irrevocably authorizes such
transfer agent to comply with any such request, (ii) after receipt of such
certificates, cause the same to be delivered to or upon the order of the
registered holder of such Rights Certificate, registered in such name or names
as may be designated in writing by such holder, and (iii) when appropriate,
requisition from the Company the amount of cash to be paid in lieu of issuance
of a fractional share in accordance with Section 14 hereof and after receipt
promptly deliver such cash to or upon the order of the registered holder of such
Rights Certificate. After the occurrence of a Common Stock Event, the Company
shall make all necessary arrangements so that any Other Consideration then
deliverable in respect of the Rights is available for distribution by the Rights
Agent. For purposes of this Section 7, the Rights Agent shall be entitled to
rely, and shall be protected in relying, on an Officers' Certificate from the
Company to the effect that the Distribution Date has occurred.
d. Subject to Sections 4(b), 7(e) and 14 hereof, in case the
registered holder of any Rights Certificate shall exercise less than all the
Rights evidenced thereby, a new Rights Certificate evidencing Rights equivalent
to the Rights remaining unexercised shall be executed and delivered by the
Company to the Rights Agent and countersigned and delivered by the Rights Agent
to the registered holder of such Rights Certificate or to such holder's duly
authorized assigns.
e. Notwithstanding anything in this Agreement to the contrary, from
and after the first occurrence of a Common Stock Event, any Rights beneficially
owned by (i) an Acquiring Person or an Affiliate or Associate of an Acquiring
Person, or (ii) a Disqualified Transferee shall become null and void without any
further action, and no holder of such Rights shall have any rights whatsoever
with respect to such Rights, whether under any provision of this Agreement or
otherwise. The Company shall use all reasonable efforts to ensure that the
provisions of this Section 7(e) and Section 4(b) hereof are complied with, but
the Company shall have no liability to any holder of Rights Certificates or
other Person and none of the terms of this Agreement or the Rights shall be
deemed to be waived with respect to such holder or other Person as a result of
any failure by the Company to make any determinations with respect to an
Acquiring Person or any Affiliate or Associate of an Acquiring Person or
Disqualified Transferees hereunder or any failure to have a legend placed on any
Rights Certificate
12
in accordance with Section 4(b) hereof or on any Common Stock certificate in
accordance with Section 3(d) hereof.
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 holder of any Rights Certificate upon the occurrence of
any purported exercise thereof unless such holder shall have (i) completed and
executed the certificate contained in the form of election to exercise set forth
on the reverse side of the Rights Certificate surrendered for such exercise, and
(ii) provided such additional evidence of the identity of the Beneficial Owner
from whom the Rights evidenced by such Rights Certificate are to be transferred
(or the Beneficial Owner to whom such Rights are to be transferred) or
Affiliates or Associates thereof as the Company shall reasonably request.
SECTION 8. CANCELLATION AND DESTRUCTION OF RIGHTS CERTIFICATES.
All Rights Certificates surrendered for the purpose of and accepted for
exercise, or surrendered for the purpose of redemption, 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 surrendered to the Rights Agent, shall be canceled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Rights Certificates purchased or retired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
canceled Rights Certificates to the Company.
SECTION 9. RESERVATION AND AVAILABILITY OF SHARES OF COMMON STOCK.
The Company covenants and agrees that:
a. Prior to the Expiration Date, it shall use reasonable efforts to
cause to be reserved and kept available out of its authorized and unissued
shares of Common Stock, or authorized and issued shares held in its treasury (or
Other Consideration), the number of shares of Common Stock (or Other
Consideration) that, except as provided in Section 11(a)(iii) hereof, would then
be sufficient to permit the exercise in full of all outstanding Rights; provided
however, in no event shall such failure to so reserve shares or Other
Consideration affect the rights of any Rights holder hereunder.
b. On and after the Distribution Date so long as the Common Stock
(or Other Consideration) issuable upon the exercise of Rights may be listed on
any national securities exchange, the Nasdaq Stock Market (or its successor) or
quoted on a regulated quotation service, including without limitation, the OTC
Bulletin Board, the Company shall use its reasonable best efforts to cause all
shares (or similar units) reserved for such issuance to be listed on such
exchange upon official notice of issuance upon such exercise or quoted on such
regulated quotation service.
c. The Company shall take all such action as may be necessary to
ensure that each share of Common Stock (or Other Consideration) delivered upon
13
exercise of Rights shall, at the time of delivery of the certificates for such
shares (or Other Consideration), subject to payment in full of the Exercise
Price, be duly and validly authorized and issued and fully paid and
nonassessable.
d. The Company shall pay when due and payable any and all federal
and state transfer taxes and similar charges which may be payable in respect of
the issuance or delivery of the Rights Certificates or of any shares of Common
Stock (or Other Consideration) upon the exercise of Rights; provided, however,
that the Company shall not be required to pay any transfer tax which may be
payable in respect of any transfer involved in the transfer or delivery of
Rights Certificates or in the issuance or delivery of certificates for any
shares of Common Stock (or Other Consideration) in a name other than that of the
registered holder of the Rights Certificate evidencing Rights surrendered for
exercise or to issue or deliver any certificates for any shares of Common Stock
(or Other Consideration) upon the exercise of any Rights until any such tax
shall have been paid (any such tax being payable by the holder of such Rights
Certificate at the time of surrender thereof) or until it has been established
to the Company's satisfaction that no such tax is due.
e. The Company shall use its reasonable best efforts (i) to file, as
soon as practicable following the earliest date after the first occurrence of a
Common Stock Event on which the consideration to be delivered by the Company
upon exercise of the Rights has been determined in accordance with this
Agreement and to the extent such consideration constitutes securities of the
Company, or as soon as is required by law following the Distribution Date, as
the case may be, a registration statement under the Act, with respect to the
securities issuable upon exercise of the Rights on an appropriate form, (ii) to
cause such registration statement to become effective as soon as practicable
after such filing, and (iii) to cause such registration statement to remain
effective (with a prospectus at all times meeting the requirements of the Act)
until the earlier of (a) the date as of which the Rights are no longer
exercisable for such securities, or (b) the Expiration Date or earlier
redemption of the Rights. The Company will also take such action as may be
appropriate under, or to ensure compliance with, the securities or "blue sky"
laws of the various states of the United States in connection with the
exercisability of the Rights. The Company may temporarily suspend, for a period
of time not to exceed ninety (90) days after the date set forth in clause (i) of
the first sentence of this Section 9(e), the exercisability of the Rights in
order to prepare and file such registration statement or to permit it to become
effective. Upon any such suspension, the Company shall issue a public
announcement stating that the exercisability of the Rights has been suspended
temporarily. The Company shall thereafter issue a public announcement at such
time as the suspension is no longer in effect. Notwithstanding any provision of
this Agreement to the contrary, the Rights shall not be exercisable in any
jurisdiction unless the requisite qualification in such jurisdiction shall have
been obtained.
SECTION 10. COMMON STOCK RECORD DATE.
Each Person in whose name any certificate for any shares of Common Stock
(or Other Consideration) is issued upon the exercise of Rights shall for all
purposes be
14
deemed to have become the holder of record of such shares of Common Stock (or
Other Consideration, as the case may be) represented thereby, and such
certificate shall be dated the date which is the later of (i) the date upon
which the Rights Certificate evidencing such Rights was duly surrendered, or
(ii) the date upon which payment of the Exercise Price (and any applicable
transfer taxes) in respect thereof was made; provided, however, that if such
date is a date upon which the relevant transfer books of the Company are closed,
such Person shall be deemed to have become the record holder of such shares (or
Other Consideration) on, and such certificate shall be dated, the next
succeeding Business Day on which such transfer books of the Company are open;
provided, further, that the Company covenants and agrees that it shall not close
such transfer books for a period exceeding ten consecutive days. Prior to the
exercise of the Rights evidenced thereby (which shall be deemed to have occurred
on the date such certificate for shares and/or similar units of Common Stock or
Other Consideration shall be dated in accordance with this Section 10), the
holder of a Rights Certificate, as such, shall not be entitled to any rights of
a security holder of the Company with respect to the shares of Common Stock
(and/or such shares or similar units of Common Stock or Other Consideration) 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 expressly provided herein.
SECTION 11. ANTIDILUTION ADJUSTMENTS.
ADJUSTMENT OF EXERCISE PRICE, NUMBER AND KIND OF SHARES OR NUMBER OF
RIGHTS. The Exercise Price, the number and kind of securities covered by each
Right and the number of Rights outstanding are subject to adjustment from time
to time as provided in this Section 11.
a. (i) In the event that the Company shall at any time after the
date of this Agreement (A) declare and pay 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, change or alter any shares of its capital stock in a reclassification or
recapitalization of the Common Stock (including any such reclassification or
recapitalization in connection with a consolidation or merger in which the
Company is the continuing or surviving Person), except as otherwise provided in
this Section 11(a), the Exercise Price in effect at the time of the record date
for such dividend or of the effective time of such subdivision, combination or
reclassification or recapitalization, and the number and kind of shares of
Common Stock or capital stock, as the case may be, issuable upon the exercise of
Rights at such time, shall be proportionately adjusted so that the holder of any
Right exercised after such time shall be entitled to receive, upon payment of
the Exercise Price then in effect, the aggregate number and kind of shares of
Common Stock or capital stock, as the case may be, which, if such Right had been
exercised immediately prior to such time, such holder would have owned upon such
exercise and been entitled to receive by virtue of such dividend, subdivision,
combination reclassification or recapitalization. If an event occurs which would
require an adjustment under both this Section 11(a)(i) and Section 11(a)(ii),
the adjustment
15
provided for in this Section 11(a)(i) shall be in addition to, and shall be made
prior to, any adjustment required pursuant to Section 11(a)(ii).
ii. In the event that:
(A) any Person shall at any time after the date of this
Agreement become an Acquiring Person, or
(B) any Acquiring Person or any Affiliate or Associate of
any Acquiring Person, at any time after the date of this Agreement, directly or
indirectly, shall
(1) merge into the Company or otherwise combine with the Company
and the Company shall be the continuing or surviving corporation of such merger
or combination and Common Stock shall remain outstanding and no shares thereof
shall be changed or otherwise transformed into stock or other securities of any
other Person or the Company or cash or any other property,
(2) in one transaction or a series of transactions, transfer any
assets to the Company or to any of its Subsidiaries in exchange (in whole or in
part) for shares of Common Stock, for other equity securities of the Company or
any such Subsidiary, or for securities exercisable for or convertible into
shares of equity securities of the Company or any of its Subsidiaries (whether
Common Stock or otherwise) or otherwise obtain from the Company or any of its
Subsidiaries, with or without consideration, any additional shares of such
equity securities or securities exercisable for or convertible into such equity
securities (other than as part of a pro rata distribution to all holders of any
such securities),
(3) sell, purchase, lease, exchange, mortgage, pledge, transfer
or otherwise acquire or dispose of, in one transaction or a series of
transactions, to, from or with the Company or any of its Subsidiaries or any
employee benefit plan maintained by the Company or any of its Subsidiaries or
any trustee or fiduciary with respect to such plan acting in such capacity, in
excess of 25% of the assets of the Company and its Subsidiaries (taken at net
asset value as stated on the books of the Company and determined on a
consolidated basis in accordance with generally accepted accounting principles
applied on a consistent basis ("GAAP")) and excluding the sale or transfer of
inventory and assets in the ordinary course of business,
(4) sell, purchase, lease, exchange, mortgage, pledge, transfer
or otherwise acquire or dispose of, in one transaction or a series of
transactions, to, from or with the Company or any of its Subsidiaries or any
employee benefit plan maintained by the Company or any of its Subsidiaries or
any trustee or fiduciary with respect to such plan acting in such capacity, any
material trademark or material service xxxx,
(5) receive (or any designee, agent or representative of such
Acquiring Person or any Affiliate or Associate of such Acquiring Person shall
receive) any compensation from the Company or any of its Subsidiaries other than
compensation
16
as a director of the Company or for full-time employment as a regular employee
at rates in accordance with the Company's (or its Subsidiaries') past practices,
or
(6) receive the benefit, directly or indirectly (except
proportionately as a holder of Common Stock or as required by law or
governmental regulation), of any loans, advances, guarantees, pledges or other
financial assistance or any tax credits or other tax advantage provided by the
Company or any of its Subsidiaries or any employee benefit plan maintained by
the Company or any of its Subsidiaries or any trustee or fiduciary with respect
to such plan acting in such capacity;
(C) during such time as there is an Acquiring Person, there
shall be any reclassification of securities (including any combination thereof
or reverse stock split), or recapitalization of the Company, or any merger or
consolidation of the Company with any of its Subsidiaries or any other
transaction or series of transactions involving the Company or any of its
Subsidiaries (whether or not with or into or otherwise involving an Acquiring
Person or any Affiliate or Associate of an Acquiring Person), or any repurchase
by the Company or any of its Subsidiaries of shares of Common Stock of the
Company, or any other class or series of securities issued by the Company which
(1) is effected at a time when a majority of the Board consists of Persons who
are the Acquiring Person or its Affiliates or Associates, or nominees or
designees of any of them and (2) has the effect, directly or indirectly, of
increasing by more than 1% the proportionate share of the outstanding shares of
any class of equity securities, or securities exercisable for or convertible
into any class of equity securities, of the Company or any of its Subsidiaries
that is directly or indirectly beneficially owned by any Acquiring Person or any
Affiliate or Associate of any Acquiring Person;
then within 10 Business Days after the occurrence of an event described in this
Section 11(a)(ii), proper provision shall be made so that each holder of a Right
(except as provided below and in Section 7(e)) shall thereafter have the right
to receive, upon exercise thereof at the then current Exercise Price in
accordance with the terms of this Agreement, such number of shares of Common
Stock as shall equal the result obtained by (x) multiplying the then current
Exercise Price by the then number of shares of Common Stock for which a Right
was or would have been exercisable immediately prior to the first occurrence of
such event, whether or not such right was then exercisable, and (y) dividing
that product by 50% of the then Current Market Price per share of Common Stock
on the date of such first occurrence (such shares of Common Stock being the
"Adjustment Shares").
iii. In the event that the number of shares of Common Stock which
are authorized by the Company's Restated Articles of Incorporation but not
outstanding or reserved for issuance for purposes other than upon exercise of
the Rights is not sufficient to permit the exercise in full of the Rights in
accordance with the foregoing subparagraph (ii) of this Section 11(a), or if a
majority of the Board then in office determines that it would be appropriate and
not contrary to the interests of Rights holders (other than any Acquiring Person
or Disqualified Transferee or their
17
Affiliates or Associates), the Company, by the vote of a majority of the
Company's Board, shall:
(A) determine an amount, if any (the "Excess Amount"),
equal to the excess of (1) the value (the "Current Value") of the Adjustment
Shares issuable upon the exercise of a Right over (2) the Exercise Price, and
(B) with respect to each Right, make adequate provision to
substitute for such Adjustment Shares, upon payment of the applicable Exercise
Price, (1) cash, (2) a reduction in the Exercise Price, (3) Common Stock or
other equity securities of the Company (including, without limitation, shares,
or units of shares, of Common Stock (such other shares being "Common Stock
equivalents")), (4) debt securities of the Company, (5) other assets, or (6) any
combination of the foregoing, having an aggregate value equal to the Current
Value, where such aggregate value has been determined by a majority of the
Company's Board; provided, however, that if the Company shall not have made
adequate provision to deliver value pursuant to clause (B) above within 30 days
following the later of (1) the first occurrence of a Common Stock Event
described in Section 11(a)(ii) and (2) the date on which the Company's right of
redemption pursuant to Section 23 expires, then the Company shall be obligated
to deliver, upon the surrender for exercise of a Right and without requiring
payment of the Exercise Price, Common Stock (to the extent available) and then,
if necessary, cash, which Common Stock and/or cash shall have an aggregate value
equal to the Excess Amount. To the extent that the Company determines that some
action need be taken pursuant to the first sentence of this Section 11(a)(iii),
the Company shall provide, subject to Section 7(e), that such action shall apply
uniformly to all outstanding Rights. For purposes of this Section 11(a)(iii),
the value of a share of Common Stock shall be the Current Market Price per share
of Common Stock on the later of the first occurrence of an event described in
Section 11(a)(ii) and the expiration of the Company's right of redemption, and
the value of any Common Stock equivalent shall be deemed to have the same value
as the Common Stock on such date.
b. In the event the Company shall, after the Dividend Record Date,
fix a record date for the issuance of rights, options or warrants to all holders
of Common Stock entitling them to subscribe for or purchase (for a period
expiring within 45 calendar days after such record date) shares of Common Stock
(or shares having substantially the same rights, privileges and preferences as
shares of Common Stock ("Equivalent Common Stock")) or securities convertible
into Common Stock or Equivalent Common Stock at a price per share of Common
Stock or per share of Equivalent Common Stock (or having a conversion price per
share of a security convertible into Common Stock or Equivalent Common Stock)
less than the Current Market Price per share of Common Stock on such record
date, the Exercise Price to be in effect after such record date shall be
determined by multiplying the Exercise Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the sum of the number
of shares of Common Stock outstanding on such record date plus the number of
shares of Common Stock which the aggregate offering price of the total number of
shares of Common Stock and/or Equivalent Common Stock so to be offered (and/or
the aggregate initial conversion price of the convertible securities so to
18
be offered) would purchase at such Current Market Price, and the denominator of
which shall be the number of shares of Common Stock outstanding on such record
date plus the number of additional shares of Common Stock and/or Equivalent
Common Stock to be offered for subscription or purchase (or into which the
convertible securities so to be offered are initially convertible). In the event
such subscription price may be paid by delivery of consideration part or all of
which may be in a form other than cash, the value of such consideration shall be
as determined in good faith by a majority of the Company's Board, whose
determination shall be described in a statement filed with the Rights Agent and
shall be binding on the Rights Agent and the holders of the Rights. Shares of
Common Stock owned by or held for the account of the Company or any Subsidiary
shall not be deemed outstanding for the purpose of any such computation. Such
adjustment shall be made successively whenever such a record date is fixed, and
in the event that such rights or warrants are not so issued, the Exercise Price
shall be adjusted to be the Exercise Price which would then be in effect if such
record date had not been fixed.
c. In the event that the Company shall, after the Dividend Record
Date, fix a record date for a distribution to all holders of shares of Common
Stock (including any such distribution made in connection with a consolidation
or merger in which the Company is the surviving or continuing Person) of
evidences of indebtedness, cash (other than a regular quarterly cash dividend
out of the earnings or retained earnings of the Company), assets (other than a
dividend payable in shares of Common Stock, but including any dividend payable
in stock other than Common Stock) or subscription rights or warrants (excluding
those referred to in Section 11(b)), the Exercise Price to be in effect after
such record date shall be determined by multiplying the Exercise Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be (i) the Current Market Price per share of Common Stock on such record
date, less (ii) the sum of (A) that portion of cash plus (B) the fair market
value (as determined in good faith by a majority of the Company's Board, whose
determination shall be described in a statement filed with the Rights Agent and
shall be binding on the Rights Agent and the holder of the Rights) of that
portion of the assets or evidences of indebtedness so to be distributed or of
such subscription rights or warrants distributable in respect of a share of
Common Stock and the denominator of which shall be such Current Market Price per
share of Common Stock. Such adjustments shall be made successively whenever such
a record date is fixed, and in the event that such distribution is not so made,
the Exercise Price shall be adjusted to be the Exercise Price which would have
been in effect if such record date had not been fixed.
d. (i) For the purpose of any computation hereunder, the "Current
Market Price" per share of any security on any date shall be deemed to be the
average of the daily closing prices per share of such shares for the ten
consecutive Trading Days immediately prior to such date; provided, however, if
prior to the expiration of such requisite ten Trading Day period the issuer
announces either (A) a dividend or distribution on such shares payable in such
shares or securities convertible into such shares (other than the Rights), or
(B) any subdivision, combination or reclassification of such shares, then,
following the date for such dividend or the record date for such subdivision, as
the case may be, the Current Market Price shall be properly adjusted to
19
take into account such event. The closing price for each day shall be, if the
shares are listed and admitted to trading on a national securities exchange, as
reported in the principal consolidated transaction reporting system with respect
to securities listed on the principal national securities exchange on which such
shares are listed or admitted to trading or, if such shares are not listed or
admitted to trading on any national securities exchange, the last sale price (or
the last quoted price if a sale price is not available) or the average of the
high bid and low asked prices in the over-the-counter market (if a sale or
quoted price is not available), as reported by the National Association of
Securities Dealers, Inc. Automated Quotation System ("NASDAQ"), the OTC Bulletin
Board or such other system then in use, (the "Closing Price"). If on any such
date there is no trading in the Company's shares, then the closing price for
that day shall be the same as the closing price on the last previous date on
which the shares traded. If such shares are not publicly held or not so listed
or traded, Current Market Price per share shall mean the fair value per share as
determined in good faith by a majority of the Company's Board, whose
determination shall be described in a statement filed with the Rights Agent and
shall be conclusive for all purposes.
e. Anything herein to the contrary notwithstanding, no adjustment in
the Exercise Price shall be required unless such adjustment would require an
increase or decrease of at least 1% in the Exercise Price; provided, however,
that any adjustments which by reason of this Section 11(e) are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 11 shall be made to the nearest
cent or to the nearest ten-thousandth of a share of Common Stock or other share
or one-millionth of a share of Common Stock, as the case may be. Notwithstanding
the first sentence of this Section 11(e), any adjustment required by this
Section 11 shall be made no later than the earlier of (i) three years from the
date of the transaction which mandates such adjustment and (ii) the Expiration
Date.
f. If as a result of an adjustment made in respect of a Common Stock
Event, the holder of any Right thereafter exercised shall become entitled to
receive any shares of capital stock other than Common Stock, thereafter the
number of such other shares so receivable upon exercise of any Right and the
Exercise Price thereof shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Common Stock contained in Sections 11(a), (b), (c), (d), (e),
(g), (h), (i), (j), (k), (l), (m) and (p), and the provisions of Sections 7, 9,
10, 11(d), 13 and 14 with respect to the shares of Common Stock shall apply on
like terms to any such other shares.
g. All Rights originally issued by the Company subsequent to any
adjustment made to the Exercise Price hereunder shall evidence the right to
purchase, at the adjusted Exercise Price, the number of shares of Common Stock
(or other securities or amount of cash or combination thereof) that may be
acquired from time to time hereunder upon exercise of the Rights, all subject to
further adjustment as provided herein.
20
h. Unless the Company shall have exercised its election as provided
in Section 11(i), upon each adjustment of the Exercise Price as a result of the
calculations made in Sections 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Exercise Price, that number of shares of Common Stock
(calculated to the nearest one ten-thousandth of a share) obtained by (i)
multiplying (x) the number of shares of Common Stock covered by a Right
immediately prior to this adjustment by (y) the Exercise Price in effect
immediately prior to such adjustment of the Exercise Price and (ii) dividing the
product so obtained by the Exercise Price in effect immediately after such
adjustment of the Exercise Price.
i. The Company may elect on or after the date of any adjustment of
the Exercise Price to adjust the number of Rights, in lieu of any adjustment in
the number of shares of Common Stock that may be acquired upon the exercise of a
Right. Each of the Rights outstanding after the adjustment in the number of
Rights shall be exercisable for the number of shares of Common Stock for which a
Right was exercisable immediately prior to such adjustment. Each Right held of
record prior to such adjustment of the number of Rights shall become that number
of Rights (calculated to the nearest ten-thousandth) obtained by dividing the
Exercise Price in effect immediately prior to adjustment of the Exercise Price
by the Exercise Price in effect immediately after adjustment of the Exercise
Price. The Company shall make a public announcement of its election to adjust
the number of Rights, indicating the record date for the adjustment, and, if
known at the time, the amount of the adjustment to be made. This record date may
be the date on which the Exercise Price is adjusted or any day thereafter, but,
if the Rights Certificates have been issued, shall be at least 10 days later
than the date of such public announcement. If Rights Certificates have been
issued, upon each adjustment of the number of Rights pursuant to this Section
11(i), the Company shall, as promptly as practicable, cause to be distributed to
holders of record of Rights Certificates on such record date Rights Certificates
evidencing, subject to Section 14, the additional Rights to which such holders
shall be entitled as a result of such adjustment, or, at the option of the
Company, shall cause to be distributed to such holders of record in substitution
and replacement for the Rights Certificates held by such holders prior to the
date of adjustment, and upon surrender thereof, if required by the Company, new
Rights Certificates evidencing all the Rights to which such holders shall be
entitled after such adjustment. Rights Certificates to be so distributed shall
be issued, executed and countersigned in the manner provided for herein (and may
bear, at the option of the Company, the adjusted Exercise Price) and shall be
registered in the names of the holders of record of Rights Certificates on the
record date specified in the public announcement.
j. Irrespective of any adjustment or change in the Exercise Price or
the number of shares of Common Stock issuable upon the exercise of the Rights,
the Rights Certificates theretofore and thereafter issued may continue to
express the Exercise Price per share and the number of shares of Common Stock
which were expressed in the initial Rights Certificates issued hereunder without
prejudice to any such adjustment or change.
21
k. Before taking any action that would cause an adjustment reducing
the Exercise Price below the then par value of the shares of Common Stock
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 such fully paid and non-assessable shares
of Common Stock at such adjusted Exercise Price.
l. In any case in which this Section 11 shall require that an
adjustment in the Exercise Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised after such record date
of that number of shares of Common Stock and shares of other capital stock or
securities of the Company, if any, issuable upon such exercise over and above
the number of shares of Common Stock and shares of other capital stock or
securities of the Company, if any, issuable upon such exercise on the basis of
the Exercise Price in effect prior to such adjustment; provided, however, that
the Company shall deliver to such holder a due xxxx or other appropriate
instrument evidencing such holder's right to receive such additional shares
(fractional or otherwise) or securities upon the occurrence of the event
requiring such adjustment.
m. Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Exercise Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that in their good faith judgment a majority of the Board shall
determine to be advisable in order that any (i) consolidation or subdivision of
the Common Stock, (ii) issuance wholly for cash of any shares of Common Stock at
less than the Current Market Price, (iii) issuance wholly for cash of shares of
Common Stock or securities which by their terms are convertible into or
exchangeable for shares of Common Stock, (iv) stock dividends or (v) issuance of
rights, options or warrants referred to in this Section 11, hereafter made by
the Company to holders of its Common Stock, shall not be taxable to such holders
or shall reduce the taxes payable by such holders.
n. The Company shall not, at any time after the Distribution Date,
(i) consolidate with any other Person (other than a Subsidiary of the Company in
a transaction which complies with Section 11(o)), (ii) merge with or into any
other Person (other than a Subsidiary of the Company in a transaction which
complies with Section 11(o)), or (iii) sell or transfer (or permit any
Subsidiary to sell or transfer), in one transaction, or a series of
transactions, assets or earning power aggregating more than 25% of (A) the
assets (taken at net asset value as stated on the books of the Company and
determined in accordance with GAAP) and excluding the sale or transfer of
inventory and assets in the ordinary course of business or (B) earning power of
the Company and its Subsidiaries (determined on a consolidated basis in
accordance with GAAP) to any other Person or Persons (other than the Company
and/or any of its Subsidiaries in one or more transactions each of which
complies with Section 11(o)), if (1) at the time of or immediately after such
consolidation, merger or sale there are any rights, warrants or other
instruments or securities outstanding or agreements (whether or not in writing)
in effect which would substantially diminish or otherwise eliminate the benefits
intended to be afforded by the Rights or (2) prior to, simultaneously with or
22
immediately after such consolidation, merger or sale, the Person which
constitutes, or would constitute, the "Principal Party" for purposes of Section
13(a) shall have distributed or otherwise transferred to its stockholders or
other persons holding an equity interest in such Person Rights previously owned
by such Person or any of its Affiliates or Associates; provided, however, this
Section 11(n) shall not affect the ability of any Subsidiary of the Company to
consolidate with, merge with or into, or sell or transfer assets or earning
power to, any other Subsidiary of the Company.
o. After the Distribution Date, the Company shall not, except as
permitted by Section 23 or Section 27, take (or permit any Subsidiary to take)
any action if at the time such action is taken it is reasonably foreseeable that
such action will diminish substantially or otherwise eliminate the benefits
intended to be afforded by the Rights.
p. Anything in this Agreement to the contrary notwithstanding, in
the event that the Company shall at any time after the Dividend Declaration Date
and prior to the Distribution Date (i) declare a dividend on the outstanding
shares of Common Stock payable in shares of Common Stock, or (ii) effect a
subdivision, combination or consolidation of the outstanding shares of Common
Stock by a reclassification or otherwise than by payment of dividends in shares
of Common Stock (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing or surviving
Person), into a greater or smaller number of shares, then in any such case, the
number of Rights associated with each share of Common Stock then outstanding, or
issued or delivered thereafter but prior to the Distribution Date, shall be
proportionately adjusted so that the number of Rights thereafter associated with
each share of Common Stock following any such event shall equal the result
obtained by multiplying the number of Rights associated with each share of
Common Stock immediately prior to such event by a fraction the numerator of
which shall be the total number of shares of Common Stock outstanding
immediately prior to the occurrence of the event and the denominator of which
shall be the total number of shares of Common Stock outstanding immediately
following the occurrence of such event. The adjustments provided for in this
Section 11(p) shall be made successively whenever such a dividend is declared or
paid or such a subdivision, combination or consolidation is effected.
SECTION 12. CERTIFICATE OF ADJUSTMENTS.
Whenever an adjustment is made as provided in Section 11 or 13 hereof, the
Company shall (a) promptly prepare an Officers' Certificate setting forth such
adjustment, including any adjustment in Exercise Price, the number of shares or
Other Consideration payable, and a brief statement of the facts accounting for
such adjustment, (b) promptly file with the Rights Agent and with the transfer
agent for the Common Stock a copy of such Officers' Certificate, and (c) mail a
brief summary thereof to each registered holder of a Rights Certificate in
accordance with Section 26 hereof. The Rights Agent shall be fully protected in
relying on any such Officers' Certificate and on any adjustment therein
contained, and shall not be deemed to have
23
knowledge of any such adjustment unless and until it shall have received such an
Officers' Certificate.
SECTION 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR EARNING
POWER.
In the event that, following the Stock Acquisition Date, directly or
indirectly, (a) the Company shall consolidate with, or merge with and into, any
other Person (other than a Subsidiary of the Company in a transaction that
complies with Section 11(o) hereof) and the Company shall not be the continuing
or surviving Person of such consolidation or merger, (b) any Person (other than
a Subsidiary of the Company in a transaction that complies with Section 11(o)
hereof) shall consolidate with, or merge with or into, the Company, and the
Company shall be the continuing or surviving Person of such consolidation or
merger and, in connection with such consolidation or merger, all or part of the
Common Stock of the Company shall be changed or otherwise transformed into other
stock or other securities of any other Person or the Company, or cash or any
other property, or (c) the Company shall sell or otherwise transfer (or one or
more of its Subsidiaries shall sell or otherwise transfer), in one transaction
or a series of related transactions, more than 25% of (1) the assets (taken at
net asset value as stated on the books of the Company and determined on a
consolidated basis in accordance with GAAP) and excluding the sale or transfer
of inventory and assets in the ordinary course of business or (2) the earning
power of the Company and its Subsidiaries (determined on a consolidated basis in
accordance with GAAP) to any Person (other than the Company or any Subsidiary of
the Company in one or more transactions each of which complies with Section
11(o) hereof) then, from and after such event, proper provision shall be made so
that:
i. each holder of a Right, except as provided in Section 7(e)
hereof, shall thereafter have the right to receive, upon the exercise thereof at
the Exercise Price in effect at the time of such exercise in accordance with the
terms of this Agreement, such number of whole or fractional shares of validly
authorized and issued, fully paid, non-assessable, and freely tradeable common
stock of such Principal Party (as defined in Section 1(ee)), free and clear of
any liens, encumbrances, rights of first refusal, or other adverse claims, as
shall be equal to the result obtained by (1) multiplying the Exercise Price in
effect immediately prior to the first occurrence of any Common Stock Event
described in this Section 13 by the number of shares of Common Stock for which a
Right is exercisable immediately prior to such first occurrence (and without
taking into account any prior adjustment made pursuant to 11(a)(ii)) and (2)
dividing that product by 50% of the Current Market Price per share of the Common
Stock of the Principal Party determined as of the date of consummation of such
consolidation, merger, sale, or transfer;
ii. the Principal Party shall thereafter be liable for, and
shall assume, by virtue of such consolidation, merger, sale, or transfer, all
the obligations and duties of the Company pursuant to this Agreement;
24
iii. the term "Company" shall thereafter be deemed, for all
purposes of this Agreement, to refer to such Principal Party, it being
specifically intended that the provisions of Section 11 hereof (other than
Section 11(a)(ii) hereof) shall apply only to such Principal Party following the
first occurrence of a Common Stock Event described in this Section 13;
iv. such Principal Party shall take such steps (including, but
not limited to, the reservation of a sufficient number of shares of its common
stock) in connection with such consummation as may be necessary to assure that
the provisions hereof shall thereafter be applicable, as nearly as reasonably
may be, in relation to the whole or fractional shares of its common stock
thereafter deliverable upon the exercise of the Rights; and
v. the provisions of Section 11(a)(ii) hereof shall be of no
effect following the first occurrence of any Common Stock Event described in
clauses (a), (b) or (c) of this Section 13.
The Company shall not consummate any such consolidation, merger, sale or
transfer unless (i) such Principal Party shall have a sufficient number of
authorized shares of its common stock which have not been issued or reserved for
issuance as will permit the exercise in full of the Rights in accordance with
this Section 13, and (ii) prior thereto the Company and such Principal Party
shall have executed and delivered to the Rights Agent a supplemental agreement
so providing and further providing that as soon as practicable after the date of
any Common Stock Event described above in this Section 13 such issuer shall:
(A) prepare and file a registration statement under the
Act, with respect to the Rights and the securities purchasable upon exercise of
the Rights on an appropriate form, and will use its best efforts to cause such
registration statement to (i) become effective as soon as practicable after such
filing and (ii) remain effective (with a prospectus at all times meeting the
requirements of the Act) until the Expiration Date;
(B) use its best efforts to qualify or register the Rights
and the securities purchasable upon exercise of such Rights under the Blue Sky
laws of such jurisdictions as may be necessary or appropriate; and
(C) will deliver to holders of the Rights historical
financial statements of such Principal Party and each of its Affiliates or
Associates which comply in all respects with the requirements for registration
on Form 10 (or other appropriate form) under the Exchange Act.
Furthermore, in case the Principal Party has any provision in any of its
authorized securities or in its charter or by-laws or other agreement or
instrument governing its affairs, which provision would have the effect of
causing such Principal Party to issue, in connection with, or as a consequence
of, the consummation of a Common Stock Event described in clauses (a), (b), or
(c) of this Section 13, whole or fractional shares
25
of common stock of such Principal Party at less than the then Current Market
Price per share thereof (as defined in Section 11(d)), or to issue securities
exercisable for, or convertible into, common stock of such Principal Party at
less than such then Current Market Price, then, in such event, the Company
hereby agrees with each holder of the Rights that it shall not consummate any
such transaction unless prior thereto the Company and such Principal Party shall
have executed and delivered to the Rights Agent a supplemental agreement
providing that such provision in question shall have been canceled, waived, or
amended so that it will have no effect in connection with, or as a consequence
of, the consummation of the proposed transaction. The provisions of this Section
13 shall similarly apply to successive mergers or consolidations or sales or
other transfers. In the event that a Common Stock Event described in this
Section 13 shall occur at any time after the occurrence of a Common Stock Event
described in Section 11(a)(ii) hereof, the Rights which have not theretofore
been exercised shall thereafter become exercisable, except as provided in
Section 7(e) hereof, in the manner described in this Section 13.
SECTION 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
a. The Company shall not be required to issue fractions of Rights or
to distribute fractions of Rights, except prior to the Distribution Date as
provided in Section 11(i) hereof, or to distribute Rights Certificates which
evidence fractional Rights. In lieu of issuing such fractional Rights, at the
election of the Company, there shall be paid to the registered holders of the
Rights with regard to which such fractional Rights would otherwise be issuable,
an amount in cash equal to the same fraction of the current market value of a
whole Right. For the purposes of this Section 14(a), the current market value of
a whole Right shall be the Closing Price of the Rights for the Trading Day
immediately prior to the date on which such fractional Rights would have been
otherwise issuable.
b. The Company shall not be required to issue fractions of shares of
its capital stock upon exercise of the Rights or to distribute certificates
which evidence fractional shares. In lieu of fractional shares, at the election
of the Company, there shall be paid to the registered holders of Rights 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 a share of such capital stock. For
purposes of this Section 14(b), the current market value of a share of such
capital stock shall be the Closing Price of such capital stock for the Trading
Day immediately prior to the date of such exercise.
c. The holder of a Right, by the acceptance of the Right, expressly
waives such holder's right to receive any fractional Rights or (except as
provided in Section 14(b) hereof) any fractional share upon exercise of a Right.
SECTION 15. RIGHTS OF ACTION.
Excepting the rights of action given the Rights Agent under Section 18
hereof and except as set forth in Section 20(l) hereof, all rights of action in
respect of this Agreement are vested in the registered holder of each Right; and
any registered holder
26
of any Right, without the consent of the Rights Agent or of the holder of any
other Right, may, in its own behalf and for 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, such registered holder's right to
exercise the rights evidenced by such Right in the manner provided in such
Rights Certificate and in this Agreement. Without limiting the foregoing or any
remedies available to the holders of Rights, it is specifically acknowledged
that the holders of Rights would not have an adequate remedy at law for any
breach of the obligations hereunder, and shall be entitled to injunctive relief
against actual or threatened violations of the obligations hereunder of any
Person subject to this Agreement.
SECTION 16. AGREEMENT OF RIGHTS HOLDERS.
Every holder of a Right by accepting the same consents and agrees with the
Company and the Rights Agent and with every other holder of a Right that:
a. prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of Common Stock;
b. after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office of the Rights Agent, duly endorsed or accompanied by a
proper instrument of transfer with a form of assignment and certificate set
forth on the reverse side thereof duly executed, accompanied by a signature
guarantee and such other documentation as the Rights Agent may reasonably
request;
c. subject to Sections 6(a) and 7(f) hereof, the Company and the
Rights Agent may deem and treat the person in whose name a Rights Certificate
(or, prior to the Distribution Date, the associated Common Stock certificate) is
registered as the absolute owner thereof and of the Rights evidenced thereby
(notwithstanding any notations of ownership or writing on the Rights Certificate
or, prior to the Distribution Date, 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
d. notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Rights Agent shall have any liability to any holder
of a Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority prohibiting or otherwise restraining
performance of such obligation; provided, however, the Company agrees to use its
best efforts to have any such order, decree or ruling lifted or otherwise
overturned as soon as possible.
27
SECTION 17. RIGHTS CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER.
No holder, as such, of any Rights Certificate shall be entitled to vote,
receive dividends, or otherwise be deemed for any purpose the holder of any
securities of the Company which may be issuable on the exercise of the Rights
represented thereby, nor shall anything contained herein or in any Rights
Certificate be construed to confer upon the holder of any Rights Certificate, as
such, any of the rights of a stockholder of the Company or any right to vote in
the election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any action by the Company, or
to receive notice of meetings or other actions affecting stockholders (except as
provided in Section 25 hereof), or to receive dividends or preemptive rights, or
otherwise, until the time specified in Section 10 hereof.
SECTION 18. CONCERNING THE RIGHTS AGENT.
The Company agrees to pay to the Rights Agent such reasonable compensation
as shall be agreed to in writing between the Company and the Rights Agent 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 for, and to hold it harmless against,
any and all loss, liability, damages, claims or expense, incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection with the acceptance
and administration of this Agreement, including the costs and expenses
(including reasonable attorneys' fees and expenses) of defending against any
claim of liability for any of the foregoing.
The Rights Agent shall be protected and shall incur no liability for or in
respect of any action taken, suffered, or omitted by it in connection with its
administration of this Agreement in reliance upon any Rights Certificate or
certificate for any number of shares of Common Stock or for other securities of
the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, instruction, direction, consent,
certificate, statement, or other paper or document believed by it to be genuine
and to be signed and executed by the proper Person or Persons, and verified or
acknowledged as required by this Agreement.
SECTION 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT.
Any corporation into which the 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 shall be a party, or any corporation
succeeding to the shareholder services business of the Rights Agent, shall be
the successor to the Rights Agent under this Agreement without the execution or
filing of any paper or any further act on the part of any of the parties hereto;
provided, however, that such corporation would be eligible for appointment as a
successor Rights Agent under the provisions of Section 21 hereof. If at the time
such successor Rights Agent shall succeed to the
28
agency created by this Agreement and any of the Rights 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 Rights
Certificates so countersigned; and if at that time any of the Rights
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor
Rights Agent or in the name of the successor Rights Agent; and in all such cases
such Rights Certificates shall have the full force provided in the Rights
Certificates and in this Agreement.
If at any time the name of the Rights Agent shall be changed and at such
time any of the Rights Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver such Rights Certificates so countersigned; and if at that time any
of the Rights Certificates shall not have been countersigned, the Rights Agent
may countersign such Rights Certificates either in its prior name or in its
changed name; and in all such cases such Rights Certificates shall have the full
force provided in the Rights Certificates and in this Agreement.
SECTION 20. DUTIES OF RIGHTS AGENT.
The Rights Agent undertakes only the duties and obligations expressly
imposed upon it by this Agreement and no implied duties or obligations shall be
read into this Agreement against the Rights Agent. The Rights Agent shall
perform its duties and obligations hereunder upon the following terms and
conditions:
a. The Rights Agent may consult with legal counsel of its selection
(who may be legal counsel to the Company), and the opinion of such counsel shall
be full and complete authorization and protection to the Rights Agent as to any
action taken or omitted by it in good faith and in accordance with such opinion.
b. Whenever in the performance of its duties under this Agreement
the Rights Agent shall deem it necessary or desirable that any fact or matter
(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 (an "Officers' Certificate") signed by the Chairman of the
Board, the Chief Executive Officer, the President or any Vice President and by
the Treasurer or any Assistant Treasurer or the Secretary or any Assistant
Secretary of the Company and delivered to the Rights Agent; and such Officers'
Certificate shall be full authorization to the Rights Agent for any action taken
or suffered in good faith by it under the provisions of this Agreement in
reliance upon such Officers' Certificate.
c. The Rights Agent shall be liable hereunder only for its own
negligence, bad faith, or willful misconduct.
29
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 Rights
Certificates (except its countersignature on such Rights Certificate) 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 for the
validity of this Agreement or the execution and delivery hereof (except the due
execution hereof by the Rights Agent) or for the validity or execution of any
Rights 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 Rights Certificate; nor shall it be responsible for
any adjustment required under the provisions of Sections 11 or 13 hereof or be
responsible for the manner, method or amount of any such adjustment or
procedures or the ascertaining of the existence of facts that would require any
such adjustment or procedure (except with respect to the exercise of Rights
evidenced by Rights Certificates after receipt of a certificate delivered
pursuant to Section 12 hereof, describing any such adjustment or procedures);
nor shall it by any act hereunder be deemed to make any representation or
warranty as to the authorization or reservation of any Common Stock or other
securities to be issued pursuant to this Agreement or any Rights Certificate or
as to whether any shares of Common Stock, or any shares or similar units of
other securities, will, when issued, be validly authorized and issued, fully
paid, and nonassessable.
f. The Company agrees that it will perform, execute, acknowledge and
deliver, or cause to be performed, executed, acknowledged and delivered, all
such further and other acts, instruments and assurances as may reasonably be
required by the Rights Agent for the carrying out or performing by the Rights
Agent of the provisions of this Agreement.
g. The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
Chairman of the Board, the Chief Executive Officer, the President or any Vice
President or the Secretary or any Assistant Secretary or the Treasurer or any
Assistant Treasurer of the Company, and to apply to such officers for advice or
instructions in connection with its duties, and it shall not be liable for any
action taken or suffered to be taken by it in good faith in accordance with
instructions of any such officer; provided, however, that so long as any Person
is an Acquiring Person hereunder, the Rights Agent shall accept such
instructions and advice only from a majority of the Board. 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 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 any such officer actually receives such application, unless any
such officer shall have consented in writing to an earlier date) unless, prior
to taking or omitting any such action, the Rights Agent has received
30
written instructions from the Company in response to such application specifying
the action to be taken or omitted.
h. The Rights Agent and any stockholder, director, officer, or
employee of the Rights Agent may buy, sell, or deal in any of the Rights or
other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or lend
money to the Company or otherwise act as fully and freely as though it were not
Rights Agent under this Agreement. Nothing herein shall preclude the Rights
Agent from acting in any other capacity for the Company or for any other entity.
i. The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents.
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
there shall be reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.
k. If, with respect to any Rights Certificate surrendered to the
Rights Agent for exercise or transfer, the certification appearing on the
reverse side thereof following the form of election to purchase has either not
been completed or indicates an affirmative response to clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise of transfer without first consulting with the Company.
l. The provisions of this Section 20 are solely for the benefit of
the Rights Agent or the Company and any failure or omission under this Section
20 shall not affect the rights of the Company under this Agreement and neither
the Rights Agent nor the Company shall have any liability to any holder of
Rights or other Person on account of such failure or omission.
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 the transfer agent of the Common Stock and Common Stock by
registered or certified mail, and, subsequent to the Distribution Date, to the
holders of the Rights 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, to the transfer agent of the Common Stock and Common
Stock by registered or certified mail, and, subsequent to the Distribution Date,
to the holders of the Rights Certificates by first-class mail. If the Rights
Agent shall resign or be removed or shall otherwise become incapable of acting,
the Company shall appoint a successor to the Rights Agent. If the Company shall
fail to make such appointment within a period of
31
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 Rights Certificate (who shall, with such
notice, submit such holder's Rights Certificate for inspection by the Company),
then the registered holder of any Rights Certificate may apply to any court of
competent jurisdiction for the appointment of a new Rights Agent. Any successor
Rights Agent, whether appointed by the Company or by such a court, shall be a
corporation organized and doing business under the laws of the United States or
the State of Colorado (or of any other State of the United States, in good
standing, which is authorized under such laws to exercise corporate trust and/or
stock transfer powers and is subject to supervision or examination by federal or
state authority and which has at the time of its appointment as Rights Agent a
combined capital and surplus of at least $50,000,000. After appointment, the
successor Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and transfer
to the successor Rights Agent any property at the time held by it hereunder, and
execute and deliver any further assurance, conveyance, act or deed necessary for
the purpose; and, except as the context herein otherwise requires, such
successor Rights Agent shall be deemed to be the "Rights Agent" for all purposes
of this Agreement. Not later than the effective date of any such appointment the
Company shall file notice thereof in writing with the predecessor Rights Agent
and the transfer agent of the Common Stock, and mail a notice thereof in writing
to the registered holders of the Rights Certificates. Failure to give any notice
provided for in this Section 21, 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 RIGHTS CERTIFICATES.
Notwithstanding any of the provisions of this Agreement or of the Rights to
the contrary, the Company may, at its option, issue new Rights Certificates
evidencing Rights in such form as may be approved by the Board to reflect any
adjustment or change in the Exercise Price per share and the number or kind or
class of shares of stock or other securities or property purchasable under the
Rights Certificates made in accordance with the provisions of this Agreement. In
addition, in connection with the issuance or sale by the Company of shares of
Common Stock following the Distribution Date and prior to the redemption or
expiration of the Rights, the Company (a) shall, with respect to shares of
Common Stock so issued or sold pursuant to the exercise of stock options or
under any employee plan or arrangement, or upon the exercise, conversion or
exchange of securities hereinafter issued by the Company, and (b) may, in any
other case, if deemed necessary or appropriate by the Board, issue Rights
Certificates representing the appropriate number of Rights in connection with
such issuance or sale; provided, however, that (i) no such Rights evidenced by a
Rights Certificate shall be issued if, and to the extent that, the Company shall
be advised by counsel that such issuance would create a significant risk of
material adverse tax consequences to the Company or the Person to whom such
Rights would be issued, and (ii) no such Rights Certificate shall be issued if,
and to the extent that, appropriate adjustment shall otherwise have been made in
lieu of the issuance thereof.
32
SECTION 23. REDEMPTION AND TERMINATION.
a. The Company, may, at its option, upon the affirmative vote or
written consent of not less than a majority of the Board then in office, at any
time prior to the earlier of (i) the 10th Business Day following the Stock
Acquisition Date or the Offer Commencement Date, or (ii) the Close of Business
on the Expiration Date, redeem all (but not less than all) of the then
outstanding Rights at a redemption price of $.01 per Right, appropriately
adjusted to reflect any stock split, stock dividend, combination of shares, or
similar transaction occurring after the date hereof (such redemption price being
hereinafter referred to as the "Redemption Price"). The Company may, at its
option, pay the Redemption Price in cash, Common Stock (based on the Current
Market Price of the Common Stock at the time of redemption) or any other form of
consideration deemed appropriate by the majority of the Board then in office.
b. Immediately upon the taking of such action ordering the
redemption of all of the Rights, evidence of which shall have been filed with
the Rights Agent, and without any further action and without any notice, the
right to exercise the Rights so redeemed will terminate and the only right
thereafter of the holders of such Rights so redeemed shall be to receive the
Redemption Price (without the payment of any interest thereon). Within 10 days
after such action ordering the redemption of all of the Rights, the Company
shall give notice of such redemption to the holders of the then outstanding
Rights by mailing such notice to all such holders at their last addresses as
they appear upon the registry books of the Rights Agent or, prior to the
Distribution Date, on the registry books of the transfer agent for the Common
Stock. Any notice which is mailed in the manner herein provided shall be deemed
given, whether or not the holder receives the notice. Each such notice of
redemption shall state the method by which the payment of the Redemption Price
shall be made.
SECTION 24. EXCHANGE.
a. The Board, by majority vote of the Directors then in office, 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 for shares
of Common Stock at an exchange ratio of one share of Common Stock per Right,
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such exchange ratio, as the same
may be adjusted from time to time, being hereinafter referred to as the
"Exchange Ratio"). Notwithstanding the foregoing, the Board shall not be
empowered to effect such exchange at any time after any Person (other than (i)
the Company, (ii) any Subsidiary of the Company, (iii) the Xxxxxxxxx Group, (iv)
any employee benefit plan of the Company or of any such Subsidiary, or (v) any
entity holding Common Stock for or pursuant to the terms of any such plan),
together with all Affiliates or Associates of such Person, becomes the
Beneficial Owner of 50% or more of the Common Stock then outstanding.
b. Immediately upon the action of the Board ordering the exchange of
any Rights pursuant to subsection (a) of this Section 24 and without any further
action
33
and without any notice, the right to exercise such Rights shall terminate and
the only right thereafter of a holder of such Rights shall be to receive that
number of shares of Common Stock equal to the number of such Rights held by such
holder multiplied by the Exchange Ratio. The Company shall promptly give public
notice of any such exchange; provided, however, that the failure to give, or any
defect in, such notice shall not affect the validity of such exchange. The
Company promptly shall mail a notice of any such exchange to all of the holders
of such Rights at their last addresses as they appear upon the registry books of
the Rights Agent. Any notice which is mailed in the manner herein provided shall
be deemed given, whether or not the holder receives the notice. Each such notice
of exchange shall state the method by which the exchange of the Common Stock for
Rights shall be effected and, in the event of any partial exchange, the number
of Rights which will be exchanged. Any partial exchange shall be effected pro
rata based on the number of Rights (other than Rights which have become void
pursuant to the provisions of Section 7(e) hereof) held by each holder of
Rights.
c. In any exchange pursuant to this Section 24, the Company, at its
option, may substitute shares of Equivalent Common Stock for shares of Common
Stock exchangeable for Rights.
d. In the event that there shall not be sufficient shares of Common
Stock issued but not outstanding or authorized but unissued to permit any
exchange of Rights as contemplated in accordance with this Section 24, the
Company shall take all such action as may be necessary to authorize additional
Common Stock for issuance upon exchange of the Rights.
e. The Company shall not be required to issue fractions of shares of
Common Stock or to distribute certificates which evidence fractional shares of
Common Stock. In lieu of such fractional shares of Common Stock, the Company
shall pay to each registered holder of a Right Certificate with regard to which
a fractional share of Common Stock would otherwise be issuable an amount in cash
equal to the same fraction of the current market value of a whole share of
Common Stock. For the purposes of this paragraph (e), the current market value
of a whole share of Common Stock shall be the Closing Price of a share of Common
Stock for the Trading Day immediately prior to the date of exchange pursuant to
this Section 24.
SECTION 25. NOTICE OF PROPOSED ACTIONS.
If the Company shall after the Distribution Date propose (a) to pay any
dividend payable in stock of any class to the holders of its Common Stock or to
make any other distribution to the holders of its Common Stock (other than a
cash dividend out of earnings or the retained earnings of the Company), or (b)
to offer to the holders of its Common Stock rights or warrants to subscribe for
or to purchase any additional shares of Common Stock or shares of stock of any
other class or any other securities, rights, or options, or (c) to effect any
reclassification of the Common Stock (other than a reclassification involving
only the subdivision of outstanding shares of Common Stock), or (d) to effect
any consolidation or merger into or with, or to effect any sale or
34
other transfer (or to permit one or more of its Subsidiaries to effect any sale
or other transfer), in one transaction or a series of related transactions, of
more than 25% of (i) the assets of the Company and its Subsidiaries (taken at
net asset value as stated on the books of the Company and determined on a
consolidated basis in accordance with GAAP) and excluding the sale or transfer
of inventory or assets in the ordinary course of business or (ii) the earning
power of the Company and its Subsidiaries (determined on a consolidated basis in
accordance with GAAP) to any other Person or Persons, or (e) to effect the
liquidation, dissolution or winding up of the Company, then, in each such case,
the Company shall give to the Rights Agent and each holder of a Right, in
accordance with Section 26 hereof, a notice of such proposed action, which shall
specify the record date for the purposes of such stock dividend, distribution of
rights or warrants, or the date on which such reclassification, consolidation,
merger, sale, transfer, liquidation, dissolution, or winding up is to take place
and the date of participation therein by the holders of Common Stock, if any
such date is to be fixed, and such notice shall be so given in the case of any
action covered by clause (a) or (b) above at least 20 days prior to the record
date for determining holders of the Common Stock for purposes of such action,
and in the case of any such other action, at least twenty days prior to the date
of the taking of such proposed action or the date of participation therein by
the holders of Common Stock whichever shall be the earlier. The failure to give
notice required by this Section 25 or any defect therein shall not affect the
legality or validity of the action taken by the Company or the vote upon any
such action.
If any Common Stock Event described in Section 11(a)(ii) hereof shall
occur, then, in any such case, the Company shall as soon as practicable
thereafter give to the Rights Agent and each holder of a Rights Certificate, in
accordance with Section 26 hereof, a notice of the occurrence of such Common
Stock Event, which shall specify such event and the consequences of the event to
holders of Rights under Section 11(a)(ii) hereof.
Notwithstanding anything in this Agreement to the contrary, prior to the
Distribution Date a filing by the Company with the Securities and Exchange
Commission shall constitute sufficient notice to the holders of securities of
the Company, including the Rights, for purposes of this Agreement and no other
notice need be given.
SECTION 26. NOTICES.
Notices or demands authorized by this Agreement to be given or made by the
Rights Agent or by the holder of any Rights Certificate to 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:
Xxxxx'x Liquid Gold-Inc.
0000 Xxxxxx Xxxxxx
X.X. Xxx 00X
00
Xxxxxx, XX 00000-0000
Attn: Chief Executive Officer
Copy to:
Xxxxxxx & Xxxx XXX
Xxxxx 0000
000 Xxxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Attn: Xxxx X. Xxxx, Esq.
Subject to the provisions of Sections 19 and 21 hereof, any notice or
demand authorized by this Agreement to be given or made by the Company or by the
holder of any Rights Certificate to or on the Rights Agent shall be sufficiently
given or made if sent by first-class mail, postage prepaid, addressed (until
another address is filed in writing with the Company) as follows:
Xxxxx Fargo Bank Minnesota, N.A.
Attn: Account Management
000 X. Xxxxxxx Xxxxxxxx
X. Xx. Xxxx, XX 00000
(Xxxxx'x Liquid Gold-Inc. Shareholder Rights Agreement)
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
SECTION 27. SUPPLEMENTS AND AMENDMENTS.
Prior to the Distribution Date, the Board, upon the vote of a majority of
the Board then in office, may from time to time supplement or amend this
Agreement without the approval of any holders of the Rights. From and after the
Distribution Date, the Board may, upon the vote of a majority of the Board then
in office, from time to time amend this Agreement without the approval of any
holders of the Rights in order (i) to cure any ambiguity, (ii) to correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provisions herein, (iii) to change any time period governing
redemption of the Rights or any other time period or (iv) to make any other
provisions in regard to matters or questions arising hereunder which the Board,
upon the vote of a majority of the Board then in office, may deem necessary or
desirable and which shall not adversely affect the interests of the holders of
the Rights (other than any Acquiring Person or Disqualified Transferee or any
Affiliate or Associate of an Acquiring Person or Disqualified Transferee). The
Rights Agent shall join with the Company in the execution and delivery of any
such supplement or amendment, unless such supplement or amendment affects any of
the rights, duties, or obligations of the Rights Agent hereunder, in which case
the Rights Agent may, but shall not be required to, join in such execution and
delivery.
36
SECTION 28. SUCCESSORS.
All the covenants and provisions of this Agreement by or for the benefit of
the Company or the Rights Agent shall bind and inure to the benefit of their
respective successors and assigns hereunder.
SECTION 29. DETERMINATIONS AND ACTIONS BY THE BOARD; ETC.
The Board shall have the exclusive power and authority to administer this
Agreement and to exercise all rights and powers specifically granted to the
Board, or to the Company, or as may be necessary or advisable in the
administration of this Agreement, including, without limitation, the right and
power to (i) interpret the provisions of this Agreement and (ii) make all
determinations deemed necessary or advisable for the administration of this
Agreement. All such actions, calculations, interpretations and determinations
(including, for purposes of clause (y) below all omissions with respect to the
foregoing) which are done or made by the Board in good faith and with the
concurrence of a majority of the Board then in office 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 Director to any liability
to the holders of the Rights.
SECTION 30. BENEFITS OF THIS AGREEMENT.
Nothing in this Agreement shall be construed to give to any Person other
than the Company, the Rights Agent, and the registered holders of the Rights
(and, prior to the Distribution Date, the associated shares of Common Stock) any
legal or equitable right, remedy, or claim under this Agreement or the Rights;
but this Agreement shall be for the sole and exclusive benefit of the Company,
the Rights Agent, and the registered holders of the Rights (and, prior to the
Distribution Date, the associated Common Stock).
SECTION 31. SEVERABILITY.
The invalidity or unenforceability of any term or provision hereof shall
not affect the validity or enforceability of any other term or provision hereof.
If any term, provision, covenant or restriction of this Agreement is held by a
court of competent jurisdiction or other authority to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated; provided, however, that
notwithstanding anything in this Agreement to the contrary, if any such term,
provision, covenant or restriction is held by such court or authority to be
invalid, void or unenforceable and the Board determines in its good faith
judgment that severing the invalid language from this Agreement would adversely
affect the purpose or effect of this Agreement, the right of redemption set
forth in Section 23 hereof shall be reinstated and shall not expire until the
Close of Business on the tenth day following the date of such determination by
the Board.
37
SECTION 32. GOVERNING LAW.
This Agreement and each Rights Certificate issued hereunder shall be deemed
to be a contract made under the laws of the State of Colorado 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, without regard to the conflicts of laws principles of 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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and set their respective hands and seals, all as of the day and
year first above written.
XXXXX'X LIQUID GOLD-INC.
By: /s/ Xxxx X. Xxxxxxxxx
-----------------------------------------
Title: President and Chief Executive Officer
Attest:
By: /s/ Xxxxxxx X. Xxxxxxxx
-----------------------------
Title: Executive Vice President,
Chief Operating Officer
and Secretary
XXXXX FARGO BANK MINNESOTA, N.A.
By: /s/ Xxxxxxx X. Xxxxx
----------------------------------------
Title: Vice President
Attest:
By: /s/ Xxxxx X. Xxxxxx
-----------------------------
Title: Assistant Secretary
38
EXHIBIT A
FORM OF RIGHTS CERTIFICATE
Certificate No. R-____________ _______ Rights
NOT EXERCISABLE AFTER FEBRUARY 21, 2011 OR EARLIER IF REDEEMED. THE RIGHTS ARE
SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $.01 PER RIGHT ON THE
TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS
BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN AFFILIATE (WHICH INCLUDES
AFFILIATES AND ASSOCIATES) OF AN ACQUIRING PERSON (AS EACH SUCH TERM IS DEFINED
IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME
NULL AND VOID. THE RIGHTS SHALL NOT BE EXERCISABLE IN ANY JURISDICTION WHERE THE
REQUISITE QUALIFICATION TO THE ISSUANCE TO SUCH HOLDER, OR THE EXERCISE BY SUCH
HOLDER, OF THE RIGHTS IN SUCH JURISDICTION SHALL NOT HAVE BEEN OBTAINED OR BE
OBTAINABLE.
[THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY
OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR AN
ASSOCIATE OF AN ACQUIRING PERSON (AS EACH SUCH TERM IS DEFINED IN THE
SHAREHOLDER RIGHTS AGREEMENT BETWEEN THE ISSUER AND XXXXX FARGO BANK MINNESOTA,
N.A., AS RIGHTS AGENT, DATED AS OF FEBRUARY 21, 2001 (THE "SHAREHOLDER RIGHTS
AGREEMENT")). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED
HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e)
OF THE SHAREHOLDER RIGHTS AGREEMENT. THE RIGHTS AGENT WILL MAIL TO THE
REGISTERED HOLDER OF THIS CERTIFICATE A COPY OF THE SHAREHOLDER RIGHTS
AGREEMENT, AS IN EFFECT ON THE DATE OF SUCH MAILING, WITHOUT CHARGE UPON WRITTEN
REQUEST.]*
RIGHTS CERTIFICATE
This certifies that _________________, or registered assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions, and conditions of the
Rights Agreement dated as of February 21, 2001 (the " Rights Agreement") between
Xxxxx'x Liquid Gold-Inc. (the "Company"), and Xxxxx Fargo Bank Minnesota, N.A.
(the "Rights Agent"), to purchase from the Company at any time after the
Distribution Date (as such term is defined in the Rights Agreement) and prior to
5:00 p.m. (Denver, Colorado time) on February 21, 2011 (the "Expiration Date")
at the office of the Rights Agent designated for such purpose, or its successors
as
--------------
*The portion of the legend in brackets shall be inserted only if applicable.
A-1
Rights Agent, one share of Common Stock, with a par value of $.10 per share
("Common Stock"), of the Company per each Right represented hereby, at an
exercise price of $8.00 per share (the "Exercise Price") upon presentation and
surrender of this Rights Certificate with the Form of Election to Exercise set
forth on the reverse side hereof and the certificate contained therein duly
completed and executed, accompanied by a signature guarantee and such other
documentation as the Rights Agent may reasonably request. The number of Rights
evidenced by this Rights Certificate (and the number of shares which may be
purchased upon exercise thereof) set forth above, and the Exercise Price per
share set forth above, are the number and Exercise Price as of February 21, 2001
based on the shares of Common Stock of the Company as constituted at such date.
As more fully set forth in the Rights Agreement, upon the occurrence of a
Common Stock Event (as such term is defined in the Rights Agreement), if the
Rights evidenced by this Rights Certificate are beneficially owned by (i) an
Acquiring Person or an Affiliate or an Associate of an Acquiring Person (as each
such term is defined in the Rights Agreement) or (ii) a Disqualified Transferee
(as defined in the Rights Agreement), such Rights shall automatically become
null and void and no holder hereof shall have any right with respect to such
Rights from and after the occurrence of such Common Stock Event.
The Rights evidenced by this Rights Certificate shall not be exercisable by
a holder in any jurisdiction where the requisite qualification to the issuance
to such holder, or the exercise by such holder, of the Rights in such
jurisdiction shall not have been obtained or be obtainable.
As provided in the Rights Agreement, the Exercise Price, and the number and
type of securities which may be purchased upon the exercise of the Rights
evidenced by this Rights Certificate are subject to modification and adjustment
upon the happening of certain events.
In the circumstances described in Section 13 of the Rights Agreement, the
securities issuable upon the exercise of the Rights evidenced hereby shall be
the common stock or similar equity securities or equity interests of an entity
other than the Company.
This Rights Certificate is subject to all of the terms, provisions, and
conditions of the Rights Agreement, which terms, provisions, and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties, and immunities hereunder of the
Rights Agent, the Company, and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the office of the Rights Agent
designated for such purpose and may be obtained by the holder of any Rights upon
written request to the Rights Agent.
This Rights Certificate, with or without other Rights Certificates, upon
surrender at the office of the Rights Agent designated for such purpose,
accompanied by a signature guarantee and such other documentation as the Rights
Agent designated for such purpose may reasonably request, may be exchanged for
another Rights Certificate or Rights Certificates of like tenor and date
evidencing Rights entitling the holder to purchase a like
A-2
aggregate number of shares of Common Stock (or other consideration, as the case
may be) as the Rights evidenced by the Rights Certificate(s) surrendered shall
have entitled such holder to purchase. If this Rights Certificate shall be
exercised in part, the holder shall be entitled to receive, upon surrender
hereof, another Rights Certificate(s) for the number of whole Rights not
exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Rights Certificate may be redeemed by the Company by a majority vote of the
Board (as defined in the Rights Agreement) then in office at any time prior to
the earlier of the Distribution Date or the Expiration Date, at a redemption
price of $.01 per Right (which amount is subject to adjustment as provided in
the Rights Agreement). In addition, in certain circumstances, the Rights may be
exchanged, in whole or in part, for shares of Common Stock. Immediately upon the
action of the Board ordering the exchange of any Rights and without any further
action and without any notice, the right to exercise such Rights will terminate
and the only right thereafter of a holder of such Rights will be to receive that
number of shares of Common Stock issuable upon the exchange.
The Company is not obligated to issue whole or fractional shares of Common
Stock (or other securities) upon the exercise of any Right or Rights evidenced
hereby, but in lieu thereof a cash or other payment may be made at the election
of the Company, as provided in the Rights Agreement.
No holder of this Rights Certificate, as such, shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of Common Stock or of
any other securities of the Company which may at any time be issuable on the
exercise hereof, nor shall anything contained in the Rights Agreement or herein
be construed to confer upon the holder hereof, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof, or to give or
withhold consent to any action by the Company, or to receive notice of meetings
or other actions affecting stockholders (except as provided in the Rights
Agreement), or to receive dividends or subscription rights, or otherwise, until
the Right or Rights evidenced by this Rights Certificate shall have been
exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers and the seal of the
Company. Dated as of February 21, 2001.
XXXXX'X LIQUID GOLD-INC.
By:
---------------------------------
Title:
------------------------------
ATTEST:
-------------------------------
Title:
A-3
Countersigned:
XXXXX FARGO BANK MINNESOTA, N.A.
Date of Countersignature: By:
------------------------------------
Authorized Signatory
A-4
[Form of Reverse Side of Rights Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder
desires to transfer the Rights Certificate)
FOR VALUE RECEIVED ____________________ hereby sells, assigns and transfers unto
____________________________________________________________________________,
(Please print name and address of transferee)
whose social security or tax identification number is ______________, the Rights
evidenced by this Rights Certificate, together with all right, title and
interest herein, and does hereby irrevocably constitute and appoint
____________________ Attorney, to transfer the within Rights Certificate on the
books of the within-named Company, with full power of substitution.
Dated: ____________, ____. ________________________________
Signature
Signature Guaranteed:*
----------------------
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not
being sold, assigned and transferred by or on behalf of a Person who
is or was an Acquiring Person or an Affiliate of an Acquiring Person
(as each such term is defined in the Rights Agreement); and
(2) after due inquiry and to the best knowledge of the undersigned, it [ ]
did [ ] did not acquire the Rights evidenced by this Rights
Certificate after the occurrence of a Common Stock Event from any
Person who is, was or subsequently became an Acquiring Person or an
Affiliate of an Acquiring Person.
Dated: ____________, ____. ________________________________
Signature
Signature Guaranteed:*
-------------------------
NOTICE
The signature to the foregoing Assignment and Certificate must correspond
to the name as written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any change whatsoever.
--------------
*Signature must be guaranteed by an "Eligible Guarantor Institution" (with
membership in an approved signature guarantees medallion program) pursuant to
Rule 17Ad-15 of the Securities Exchange Act of 1934.
A-5
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise the Rights Certificate)
Xxxxx'x Liquid Gold-Inc.
The undersigned hereby irrevocably elects to exercise _________________ Rights
represented by this Rights Certificate to purchase the number of shares of
Common Stock (or other securities) issuable upon the exercise of such Rights and
requests that certificates for such shares be issued in the name of:
Please insert social security
or other identifying number ________________________________________________
(Please print name and address)
_____________________________________________________________________________.
If such number of Rights shall not be all the Rights evidenced by this Rights
Certificate, a new Rights 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
(Signature must conform in all respects
to name of holder as specified on the
face of this Rights Certificate)
Signature Guaranteed:**
-------------------------
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not
being exercised by or on behalf of a Person who is or was an Acquiring
Person or an Affiliate of any such Acquiring Person (as each such term
is defined in the Rights Agreement); and
(2) after due inquiry and to the best knowledge of the undersigned, it [ ]
did [ ] did not acquire the Rights evidenced by this Rights
Certificate after the occurrence of a Common Stock Event (as such term
is defined in the Rights Agreement) from any Person who is, was, or
subsequently became an Acquiring Person or an Affiliate of an
Acquiring Person.
Dated: ____________, ____ _____________________________________
Signature
Signature Guaranteed:**
-------------------------
--------------
**Signature must be guaranteed by an "Eligible Guarantor Institution" (with
membership in an approved signature guarantees medallion program) pursuant to
Rule 17Ad-15 of the Securities Exchange Act of 1934.
A-6
EXHIBIT B
XXXXX'X LIQUID GOLD-INC.
SUMMARY OF PURCHASE RIGHTS
On February 21, 2001, the Board of Directors (the "Board") of Xxxxx'x
Liquid Gold-Inc. (the "Company") declared a dividend of one purchase right (a
"Right") for every outstanding share of the Company's common stock, $.10 par
value per share (the "Common Stock"). The Rights will be distributed on March 2,
2001 to stockholders of record as of the close of business on March 2, 2001 (the
"Dividend Record Date"). The terms of the Rights are set forth in a Shareholder
Rights Agreement dated as of February 21, 2001 (the "Rights Agreement") between
the Company and Xxxxx Fargo Bank Minnesota, N.A. (the "Rights Agent"). The
Rights Agreement provides for the issuance of one Right for every share of
Common Stock issued and outstanding on the Dividend Record Date and for each
share of Common Stock that is issued or sold after that date and prior to the
"Distribution Date" (as defined below).
Each Right entitles the holder to purchase from the Company one share of
Common Stock at a price of $8.00 per share, subject to adjustment. The Rights
will expire on February 21, 2011 (the "Expiration Date"), or upon the earlier
redemption of the Rights, and are not exercisable until the Distribution Date.
No separate certificates representing the Rights will be issued at the
present time. Until the Distribution Date (or earlier redemption or expiration
of the Rights):
(i) the Rights will be evidenced by the Common Stock certificates and
will be transferred with and only with such Common Stock
certificates;
(ii) new Common Stock certificates issued after the Dividend Record Date
upon transfer or new issuance of the Company's Common Stock will
contain a notation incorporating the Rights Agreement by reference;
and
(iii) the surrender for transfer of any of the Company's Common Stock
certificates will also constitute the transfer of the Rights
associated with the Common Stock represented by such certificate.
The Rights will separate from the Common Stock, and certificates
representing the Rights will be issued, on the Distribution Date. Unless
otherwise determined by a majority of the Board then in office, the Distribution
Date will occur (in general) on the earlier of (i) the tenth business day
following the later of (A) the date of a public announcement that a person,
including affiliates or associates of such person, but excluding Xxxx X.
Xxxxxxxxx, Chairman of the Board, Chief Executive Officer and President of the
Company, affiliates of Xx. Xxxxxxxxx and certain of their transferees (as the
term "Xxxxxxxxx Group" is defined in the Rights Agreement) (an "Acquiring
Person"), except as described below, has acquired or obtained the right to
acquire, beneficial ownership of 15% or more of the outstanding shares of Common
Stock, or (B) the date on which an executive officer of the Company has actual
knowledge that an Acquiring Person became such (the later being, the "Stock
Acquisition Date"), or (ii) the tenth
B-1
business day following commencement of a tender offer or exchange offer that
would result in any person, together with its affiliates and associates,
becoming the beneficial owner of 15% or more of the Company's outstanding Common
Stock. In any event, the Board may delay the distribution of the certificates.
After the Distribution Date, separate certificates evidencing the Rights
("Rights Certificates") will be mailed to holders of record of the Company's
Common Stock as of the close of business on the Distribution Date and
thereafter, such separate Rights Certificates alone will evidence the Rights.
If, at any time after the Board declares the Rights dividend, any person or
group of affiliated or associated persons (other than the Company, affiliates of
the Company and the Xxxxxxxxx Group) shall become an Acquiring Person, each
holder of a Right will have the right to receive shares of the Company's Common
Stock (or, in certain circumstances, cash, property or other securities of the
Company) having a market value of two times the exercise price of the Right. For
example, if the exercise price is $8.00, the holder of each Right would be
entitled to receive $16.00 in market value of the Company's Common Stock for
$8.00. Also, in the event that at any time after the Stock Acquisition Date, the
Company is acquired in a merger or other business combination, or if more than
25% of its assets or earning power are sold (other than inventory and assets in
the ordinary course of business), each holder of a Right would have the right to
exercise such Right and thereby receive common stock of the acquiring company
with a market value of two times the exercise price of the Right. Thus, if the
exercise price is $8.00, the holder of each Right would be entitled to receive
$16.00 in market value of the acquiring company's common stock upon payment of
the $8.00. Following the occurrence of any of the events described in this
paragraph, any Rights that are, or (under certain circumstances specified in the
Rights Agreement) were, beneficially owned by any Acquiring Person or
Disqualified Transferee shall immediately become null and void.
The Board 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 for shares of Common Stock (or other securities of the Company equivalent
in value to such shares of Common Stock) at an exchange ratio of one share of
Common Stock (or other such consideration) per Right, appropriately adjusted to
reflect any stock split, stock dividend or similar transaction occurring after
the date of declaration of the Rights dividend (such exchange ratio being
hereinafter referred to as the "Exchange Ratio"). The Board, however, may not
effect an exchange at any time after any person (other than (i) the Company,
(ii) any subsidiary of the Company, (iii) the Xxxxxxxxx Group, or (iv) any
employee benefit plan of the Company or any such subsidiary or any entity
holding Common Stock for or pursuant to the terms of any such plan), together
with all affiliates of such person, becomes the beneficial owner of 50% or more
of the Common Stock then outstanding. Immediately upon the action of the Board
ordering the exchange of any Rights and without any further action and without
any notice, the right to exercise such Rights will terminate and the only right
thereafter of a holder of such Rights will be to receive that number of shares
of Common Stock equal to the number of such Rights held by the holder multiplied
by the Exchange Ratio.
The exercise price of the Rights, and the number of shares of Common Stock
or other consideration issuable upon exercise of the Rights, are subject to
adjustment from
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time to time to prevent dilution (i) in the event of a stock dividend on, or a
subdivision, combination, reclassification or recapitalization of, the Common
Stock, (ii) upon the grant to holders of the Common Stock of certain rights or
warrants to subscribe for shares of the Common Stock or convertible securities
at less than the current market price of the Common Stock or (iii) upon the
distribution to holders of the Common Stock of evidences of indebtedness or
assets (excluding cash dividends paid out of the earnings or retained earnings
of the Company and certain other distributions) or of subscription rights or
warrants (other than those referred to above).
With certain exceptions, no adjustments in the exercise price of the Rights
will be required until cumulative adjustments equal at least 1% in such price.
At any time prior to the earlier of (i) the Distribution Date or (ii) the
close of business ten years after the Rights Agreement becomes effective (the
"Expiration Date"), the Company, by a majority vote of the Board then in office,
may redeem the Rights at a redemption price of $.01 per Right (the "Redemption
Price"), as described in the Rights Agreement. Immediately upon the action of
the Board electing to redeem 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.
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.
Neither the distribution of the Rights nor the subsequent separation of the
Rights on the Distribution Date will be a taxable event for the Company or its
stockholders. Holders of Rights may, depending upon the circumstances, recognize
taxable income upon the occurrence of certain Rights triggering events including
a tender offer for 15% or more of the Common Stock or a person or group
attaining beneficial ownership of 15% or more of the Common Stock (collectively,
"Common Stock Events"). In addition, holders of Rights may have taxable income
as a result of (i) an exchange by the Company of shares of Common Stock for
Rights as described above or (ii) certain anti-dilution adjustments made to the
terms of the Rights after the Distribution Date. A redemption of the Rights
would be a taxable event to holders.
The Rights Agreement may be amended by the Board at any time prior to the
Distribution Date without the approval of the holders of the Rights. From and
after the Distribution Date, the Rights Agreement may be amended by the Board
without the approval of the holders of the Rights in order to cure any
ambiguity, to correct any defective or inconsistent provisions, to change any
time period for redemption or any other time period under the Rights Agreement
or to make any other changes that do not adversely affect the interests of the
holders of the Rights (other than any Acquiring Person or its affiliates or
associates or their transferees).
A copy of the Rights Agreement will be filed with the Securities and
Exchange Commission as an Exhibit to the Company's Form 8-A registration
statement with respect to the Rights. A copy of the Rights Agreement is
available free of charge from the Rights Agent, at the following address:
Xxxxx Fargo Bank Minnesota, N.A.
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Attn: Account Management
000 Xxxxx Xxxxxxx Xxxxxxxx
Xxxxx Xx. Xxxx, XX 00000
(Xxxxx'x Liquid Gold-Inc. Rights Agreement)
This summary description of the Rights does not purport to be complete and
is qualified in its entirety by reference to the Rights Agreement, which is
incorporated herein by reference.
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