SOURCE MEDIA, INC.
AND
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
RIGHTS AGENT
RIGHTS AGREEMENT
DATED AS OF APRIL 24, 1998
TABLE OF CONTENTS
PAGE
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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 Common Shares . . . . . . . . . . . . . . . . . . . . . .-13-
Section 10. Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-14-
Section 11. Adjustment of Exercise Price, Number of Shares or Number of Rights. . . . . . . . . . . .-15-
Section 12. Certificate of Adjusted Exercise Price or Number of Shares. . . . . . . . . . . . . . . .-20-
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power. . . . . . . . . . .-21-
Section 14. Fractional Rights and Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . .-25-
Section 15. Rights of Action. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-25-
Section 16. Agreement of Rights Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-26-
Section 17. Rights Certificate Holder Not Deemed a Stockholder. . . . . . . . . . . . . . . . . . . .-26-
Section 18. Concerning the Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-26-
Section 19. Merger or Consolidation or Change of Name of Rights Agent . . . . . . . . . . . . . . . .-27-
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TABLE OF CONTENTS
(CONTINUED)
PAGE
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Section 20. Duties of Rights Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-27-
Section 21. Change of Rights Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-30-
Section 22. Issuance of New Rights Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . .-30-
Section 23. Redemption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-31-
Section 24. Exchange. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-32-
Section 25. Notice of Certain Events. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-34-
Section 26. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-34-
Section 27. Supplements and Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-35-
Section 28. Successors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-36-
Section 29. Determinations and Actions by the Board of Directors, etc.. . . . . . . . . . . . . . . .-36-
Section 30. Benefits of this Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-36-
Section 31. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-36-
Section 32. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-36-
Section 33. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-37-
Section 34. Descriptive Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-37-
EXHIBITS
Exhibit A Form of Rights Certificate
Exhibit B Summary of Rights
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RIGHTS AGREEMENT
Agreement, dated as of April 24, 1998, between Source Media, Inc., a
Delaware corporation, and ChaseMellon Shareholder Services, L.L.C.
On April 22, 1998 (the "RIGHTS DIVIDEND DECLARATION DATE"), the Board of
Directors of the Company authorized and declared a dividend of one Common
Share Purchase Right (a "RIGHT") for each Common Share (as hereinafter
defined) of the Company outstanding as of the Close of Business (as
hereinafter defined) on May 7, 1998 (the "RECORD DATE"), each Right
representing the right to purchase one Common Share (as such number may be
adjusted pursuant to the provisions of this Agreement), upon the terms and
subject to the conditions herein set forth, and further authorized and
directed the issuance of one Right (as such number may be adjusted pursuant
to the provisions of this Agreement) with respect to each Common Share that
shall become outstanding between the Record Date and the earlier of the
Distribution Date and the Expiration Date (as such terms are hereinafter
defined), and in certain circumstances after the Distribution Date.
NOW, THEREFORE, in consideration of the promises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "ACQUIRING PERSON" shall mean any Person who or which,
together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of 15% or more of the Common Shares then outstanding, but
shall not include the Company, any Subsidiary of the Company or any employee
benefit plan of the Company or of any Subsidiary of the Company, or any
Person organized, appointed or established by the Company for or pursuant to
the terms of any such plan. Notwithstanding the foregoing, no Person shall
be deemed to be an Acquiring Person as the result of an acquisition of Common
Shares by the Company which, by reducing the number of shares outstanding,
increases the proportionate number of shares beneficially owned by such
Person to 15% or more of the Common Shares of the Company then outstanding;
PROVIDED, HOWEVER, that if a Person shall become the Beneficial Owner of 15%
or more of the Common Shares of the Company then outstanding by reason of
share purchases by the Company and shall, after such share purchases by the
Company, become the Beneficial Owner of any additional Common Shares of the
Company (other than pursuant to a dividend or distribution paid or made by
the Company on the outstanding Common Shares in Common Shares or pursuant to
a split or subdivision of the outstanding Common Shares), then such Person
shall be deemed to be an Acquiring Person unless upon becoming the Beneficial
Owner of such additional Common Shares of the Company such Person does not
beneficially own 15% or more of the Common Shares of the Company then
outstanding. Notwithstanding the foregoing, (i) if the Company's Board of
Directors determines in good faith that a Person who would otherwise be an
"Acquiring Person," as defined pursuant to the foregoing provisions of this
paragraph (a), has become such inadvertently (including, without limitation,
because (A) such Person was
unaware that it beneficially owned a percentage of the Common Shares that
would otherwise cause such Person to be an "Acquiring Person," as defined
pursuant to the foregoing provisions of this paragraph (a), or (B) such
Person was aware of the extent of the Common Shares it beneficially owned but
had no actual knowledge of the consequences of such beneficial ownership
under this Agreement) and without any intention of changing or influencing
control of the Company, and if such Person divested or divests as promptly as
practicable a sufficient number of Common Shares so that such Person would no
longer be an "Acquiring Person," as defined pursuant to the foregoing
provisions of this paragraph (a), then such Person shall not be deemed to be
or to have become an "Acquiring Person" for any purposes of this Agreement;
and (ii) if, as of the date hereof, any Person is the Beneficial Owner of 15%
or more of the Common Shares outstanding, such Person shall not be or become
an "Acquiring Person," as defined pursuant to the foregoing provisions of
this paragraph (a), unless and until such time as such Person shall become
the Beneficial Owner of additional Common Shares (other than pursuant to a
dividend or distribution paid or made by the Company on the outstanding
Common Shares in Common Shares or pursuant to a split or subdivision of the
outstanding Common Shares), unless, upon becoming the Beneficial Owner of
such additional Common Shares, such Person is not then the Beneficial Owner
of 15% or more of the Common Shares then outstanding.
(b) "ADJUSTMENT FRACTION" shall have the meaning set forth in
Section 11(a)(i) hereof.
(c) "AFFILIATE" and "ASSOCIATE" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act, as in effect on the date of this
Agreement.
(d) A Person shall be deemed the "BENEFICIAL OWNER" of and
shall be deemed to "BENEFICIALLY OWN" any securities:
(i) which such Person or any of such Person's
Affiliates or Associates beneficially owns, directly or indirectly, for
purposes of Section 13(d) of the Exchange Act and Rule 13d-3 thereunder (or
any comparable or successor law or regulation);
(ii) which such Person or any of such Person's
Affiliates or Associates has (A) the right to acquire (whether such right is
exercisable immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding (other than customary agreements with
and between underwriters and selling group members with respect to a bona
fide public offering of securities), or upon the exercise of conversion
rights, exchange rights, rights (other than the Rights), warrants or options,
or otherwise; PROVIDED, HOWEVER, that a Person shall not be deemed pursuant
to this Section 1(d)(ii)(A) to be the Beneficial Owner of, or to beneficially
own, (1) securities tendered pursuant to a tender or exchange offer made by
or on behalf of such Person or any of such Person's Affiliates or Associates
until such tendered securities are accepted for purchase or exchange, or (2)
securities which a Person or any of such Person's Affiliates or Associates
may be deemed to have the right to acquire pursuant to any merger or other
acquisition agreement between the Company
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and such Person (or one or more of its Affiliates or Associates) if such
agreement has been approved by the Board of Directors of the Company prior to
there being an Acquiring Person; or (B) the right to vote pursuant to any
agreement, arrangement or understanding; PROVIDED, HOWEVER, that a Person
shall not be deemed the Beneficial Owner of, or to beneficially own, any
security under this Section 1(d)(ii)(B) if the agreement, arrangement or
understanding to vote such security (1) arises solely from a revocable proxy
or consent given to such Person in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the applicable rules
and regulations of the Exchange Act and (2) is not also then reportable on
Schedule 13D under the Exchange Act (or any comparable or successor report);
or
(iii) which are beneficially owned, directly or
indirectly, by any other Person (or any Affiliate or Associate thereof) with
which such Person or any of such Person's Affiliates or Associates has any
agreement, arrangement or understanding, whether or not in writing (other
than customary agreements with and between underwriters and selling group
members with respect to a bona fide public offering of securities) for the
purpose of acquiring, holding, voting (except to the extent contemplated by
the proviso to Section 1(d)(ii)(B)) or disposing of any securities of the
Company; PROVIDED, HOWEVER, that in no case shall an officer or director of
the Company be deemed (x) the Beneficial Owner of any securities beneficially
owned by another officer or director of the Company solely by reason of
actions undertaken by such persons in their capacity as officers or directors
of the Company or (y) the Beneficial Owner of securities held of record by
the trustee of any employee benefit plan of the Company or any Subsidiary of
the Company for the benefit of any employee of the Company or any Subsidiary
of the Company, other than the officer or director, by reason of any
influence that such officer or director may have over the voting of the
securities held in the plan.
(e) "BUSINESS DAY" shall mean any day other than a Saturday,
Sunday or a day on which banking institutions in New York are authorized or
obligated by law or executive order to close.
(f) "CLOSE OF BUSINESS" on any given date shall mean 5:00
P.M., Dallas time, on such date; PROVIDED, HOWEVER, that if such date is not
a Business Day it shall mean 5:00 P.M., Dallas time, on the next succeeding
Business Day.
(g) "COMMON SHARES" when used with reference to the Company
shall mean the shares of Common Stock of the Company, $0.001 par value.
Common Shares when used with reference to any Person other than the Company
shall mean the capital stock (or equity interest) with the greatest voting
power of such other Person or, if such other Person is a Subsidiary of
another Person, the Person or Persons which ultimately control such
first-mentioned Person.
(h) "COMMON STOCK EQUIVALENTS" shall have the meaning set
forth in Section 11(a)(iii) hereof.
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(i) "COMPANY" shall mean Source Media, Inc., a Delaware
corporation, subject to the terms of Section 13(a)(iii)(C) hereof.
(j) "CURRENT PER SHARE MARKET PRICE" of any security (a
"Security" for purposes of this definition), for all computations other than
those made pursuant to Section 11(a)(iii) hereof, shall mean the average of
the daily closing prices per share of such Security for the thirty (30)
consecutive Trading Days immediately prior to but not including such date,
and for purposes of computations made pursuant to Section 11(a)(iii) hereof,
the Current Per Share Market Price of any Security on any date shall be
deemed to be the average of the daily closing prices per share of such
Security for the ten (10) consecutive Trading Days immediately prior to but
not including such date; PROVIDED, HOWEVER, that in the event that the
Current Per Share Market Price of the Security is determined during a period
following the announcement by the issuer of such Security of (i) a dividend
or distribution on such Security payable in shares of such Security or
securities convertible into such shares or (ii) any subdivision, combination
or reclassification of such Security, and prior to the expiration of the
applicable thirty (30) Trading Day or ten (10) Trading Day period, after the
ex-dividend date for such dividend or distribution, or the record date for
such subdivision, combination or reclassification, then, and in each such
case, the Current Per Share Market Price shall be appropriately adjusted to
reflect the current market price per share equivalent of such Security. The
closing price for each day shall be the last sale price, regular way, or, in
case no such sale takes place on such day, the average of the closing bid and
asked prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed
or admitted to trading on the New York Stock Exchange or, if the Security is
not listed or admitted to trading on the New York Stock Exchange, as reported
in the principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on which the
Security is listed or admitted to trading or, if the Security is not listed
or admitted to trading on any national securities exchange, the last sale
price or, if such last sale price is not reported, the average of the high
bid and low asked prices in the over-the-counter market, as reported by
Nasdaq or such other system then in use, or, if on any such date the Security
is not quoted by any such organization, the average of the closing bid and
asked prices as furnished by a professional market maker making a market in
the Security selected by the Board of Directors of the Company. If on any
such date the Security is not publicly held or so listed or traded, Current
Per Share Market Price shall mean the fair value per share as determined in
good faith by the Board of Directors of the Company, whose determination
shall be described in a statement filed with the Rights Agent.
(k) "CURRENT VALUE" shall have the meaning set forth in
Section 11(a)(iii) hereof.
(l) "DISTRIBUTION DATE" shall mean the earlier of (i) the
Close of Business on the tenth day after the Shares Acquisition Date (or, if
the tenth day after the Shares Acquisition Date occurs before the Record
Date, the Close of Business on the Record Date) or (ii) the Close of Business
on the tenth Business Day (or such later date as may be determined by action
of the Company's Board of Directors) after the date that a tender or exchange
offer by any Person (other than the Company, any Subsidiary of the Company,
any employee benefit plan of the Company or of any Subsidiary of the Company,
or any Person organized, appointed or established by the Company
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for or pursuant to the terms of any such plan) is first published or sent or
given within the meaning of Rule 14d-2(a) of the General Rules and
Regulations under the Exchange Act, if, assuming the successful consummation
thereof, such Person would be an Acquiring Person.
(m) "EQUIVALENT SHARES" shall mean Common Shares of the
Company and any other class or series of capital stock of the Company which
is entitled to the same rights, privileges and preferences as the Common
Shares.
(n) "EXCHANGE ACT" shall mean the Securities Exchange Act of
1934, as amended.
(o) "EXCHANGE RATIO" shall have the meaning set forth in
Section 24(a) hereof.
(p) "EXERCISE PRICE" shall have the meaning set forth in
Section 4(a) hereof.
(q) "EXPIRATION DATE" shall mean the earliest to occur of: (i)
the Close of Business on the Final Expiration Date, (ii) the Redemption Date,
or (iii) the time at which the Board of Directors orders the exchange of the
Rights as provided in Section 24 hereof.
(r) "FINAL EXPIRATION DATE" shall mean May 7, 2008.
(s) "INTERESTED PERSON" with respect to a Transaction shall
mean any Person who (i) is or will become an Acquiring Person if the
Transaction were to be consummated or an Affiliate or Associate of such a
Person, and (ii) is, or directly or indirectly proposed, nominated or
financially supported, a director of the Company in office at the time of
consideration of the Transaction in question who was elected by written
consent of stockholders.
(t) "NASDAQ" shall mean the National Association of Securities
Dealers, Inc. Automated Quotations System.
(u) "PERSON" shall mean any individual, firm, corporation or
other entity, and shall include any successor (by merger or otherwise) of
such entity.
(v) "POST-EVENT TRANSFEREE" shall have the meaning set forth
in Section 7(e) hereof.
(w) "PRE-EVENT TRANSFEREE" shall have the meaning set forth in
Section 7(e) hereof.
(x) "PRINCIPAL PARTY" shall have the meaning set forth in
Section 13(b) hereof.
(y) "RECORD DATE" shall have the meaning set forth in the
recitals at the beginning of this Agreement.
(z) "REDEMPTION DATE" shall have the meaning set forth in
Section 23(a) hereof.
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(aa) "REDEMPTION PRICE" shall have the meaning set forth in
Section 23(a) hereof.
(bb) "RIGHTS" shall have the meaning set forth in the recitals
at the beginning of this Agreement.
(cc) "RIGHTS AGENT" shall mean ChaseMellon Shareholder
Services, L.L.C. or its successor or replacement as provided in Sections 19
and 21 hereof.
(dd) "RIGHTS CERTIFICATE" shall mean a certificate
substantially in the form attached hereto as Exhibit A.
(ee) "RIGHTS DIVIDEND DECLARATION DATE" shall have the meaning
set forth in the recitals at the beginning of this Agreement.
(ff) "SECTION 11(a)(ii) TRIGGER DATE" shall have the meaning
set forth in Section 11(a)(iii) hereof.
(gg) "SECTION 13 EVENT" shall mean any event described in
clause (i), (ii) or (iii) of Section 13(a) hereof.
(hh) "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
(ii) "SHARES ACQUISITION DATE" shall mean the first date of
public announcement (which, for purposes of this definition, shall include,
without limitation, a report filed pursuant to Section 13(d) under the
Exchange Act) by the Company or an Acquiring Person that an Acquiring Person
has become such; PROVIDED THAT, if such Person is determined not to have
become an Acquiring Person pursuant to Section 1(a) hereof, then no Shares
Acquisition Date shall be deemed to have occurred.
(jj) "SPREAD" shall have the meaning set forth in Section
11(a)(iii) hereof.
(kk) "SUBSIDIARY" of any Person shall mean any corporation or
other entity of which an amount of voting securities sufficient to elect a
majority of the directors or Persons having similar authority of such
corporation or other entity is beneficially owned, directly or indirectly, by
such Person, or any corporation or other entity otherwise controlled by such
Person.
(ll) "SUBSTITUTION PERIOD" shall have the meaning set forth in
Section 11(a)(iii) hereof.
(mm) "SUMMARY OF RIGHTS" shall mean a summary of this Agreement
substantially in the form attached hereto as Exhibit B.
(nn) "TOTAL EXERCISE PRICE" shall have the meaning set forth in
Section 4(a) hereof.
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(oo) "TRADING DAY" shall mean a day on which the principal
national securities exchange on which a referenced security is listed or
admitted to trading is open for the transaction of business or, if a
referenced security is not listed or admitted to trading on any national
securities exchange, a Business Day.
(pp) "TRANSACTION" shall mean any merger, consolidation or sale
of assets described in Section 13(a) hereof or any acquisition of Common
Shares which would result in a Person becoming an Acquiring Person.
(qq) A "TRIGGERING EVENT" shall be deemed to have occurred upon
any Person becoming an Acquiring Person.
Section 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints
the Rights Agent to act as agent for the Company in accordance with the terms
and conditions hereof, and the Rights Agent hereby accepts such appointment.
The Company may from time to time appoint such co-Rights Agents as it may
deem necessary or desirable.
Section 3. ISSUANCE OF RIGHTS CERTIFICATES.
(a) Until the Distribution Date, (i) the Rights will be
evidenced (subject to the provisions of Sections 3(b) and 3(c) hereof) by the
certificates for Common Shares registered in the names of the holders thereof
(which certificates shall also be deemed to be Rights Certificates) and not
by separate Rights Certificates and (ii) the Rights will be transferable only
in connection with the transfer of Common Shares. Until the earlier of the
Distribution Date or the Expiration Date, the surrender for transfer of
certificates for Common Shares shall also constitute the surrender for
transfer of the Rights associated with the Common Shares represented thereby.
As soon as practicable after the Distribution Date, the Company will prepare
and execute, the Rights Agent will countersign, and the Company will send or
cause to be sent (and the Rights Agent will, if requested and, if necessary,
provided with a shareholder list of the Company's Common Shares, send) by
first-class, postage-prepaid mail, to each record holder of Common Shares as
of the Close of Business on the Distribution Date, at the address of such
holder shown on the records of the Company, a Rights Certificate evidencing
one Right for each Common Share so held, subject to adjustment as provided
herein. In the event that an adjustment in the number of Rights per Common
Share has been made pursuant to Section 11 hereof, then at the time of
distribution of the Rights Certificates, the Company shall make the necessary
and appropriate rounding adjustments (in accordance with Section 14(a)
hereof) so that Rights Certificates representing only whole numbers of Rights
are distributed and cash is paid in lieu of any fractional Rights. As of and
after the Distribution Date, the Rights will be evidenced solely by such
Rights Certificates and may be transferred by the transfer of the Rights
Certificates as permitted hereby, separately and apart from any transfer of
Common Shares, and the holders of such Rights Certificates as listed in the
records of the Company or any transfer agent or registrar for the Rights
shall be the record holders thereof.
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(b) On the Record Date or as soon as practicable thereafter,
the Company will send a copy of the Summary of Rights by first-class,
postage-prepaid mail, to each record holder of Common Shares as of the Close
of Business on the Record Date, at the address of such holder shown on the
records of the Company's transfer agent and registrar. With respect to
certificates for Common Shares outstanding as of the Record Date, until the
Distribution Date, the Rights will be evidenced by such certificates
registered in the names of the holders thereof together with the Summary of
Rights. Until the Distribution Date (or, if earlier, the Expiration Date),
the surrender for transfer of any certificate for Common Shares outstanding
on the Record Date, with or without a copy of the Summary of Rights, shall
also constitute the transfer of the Rights associated with the Common Shares
represented thereby.
(c) Unless the Board of Directors by resolution adopted at or
before the time of the issuance of any Common Shares specifies to the
contrary, Rights shall be issued in respect of all Common Shares that are
issued after the Record Date but prior to the earlier of the Distribution
Date or the Expiration Date or, in certain circumstances provided in Section
22 hereof, after the Distribution Date. Certificates representing such
Common Shares shall also be deemed to be certificates for Rights, and shall
bear the following legend:
THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER HEREOF TO
CERTAIN RIGHTS AS SET FORTH IN A RIGHTS AGREEMENT BETWEEN SOURCE
MEDIA, INC. AND CHASEMELLON SHAREHOLDER SERVICES, L.L.C., AS THE
RIGHTS AGENT, DATED AS OF APRIL 24, 1998, (THE "RIGHTS AGREEMENT"),
THE TERMS OF WHICH ARE HEREBY INCORPORATED HEREIN BY REFERENCE AND A
COPY OF WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF SOURCE
MEDIA, INC. UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS
AGREEMENT, SUCH RIGHTS WILL BE EVIDENCED BY SEPARATE CERTIFICATES AND
WILL NO LONGER BE EVIDENCED BY THIS CERTIFICATE. SOURCE MEDIA, INC.
WILL MAIL TO THE HOLDER OF THIS CERTIFICATE A COPY OF THE RIGHTS
AGREEMENT WITHOUT CHARGE AFTER RECEIPT OF A WRITTEN REQUEST THEREFOR.
UNDER CERTAIN CIRCUMSTANCES SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS
ISSUED TO, OR HELD BY, ANY PERSON WHO IS, WAS OR BECOMES AN ACQUIRING
PERSON OR ANY AFFILIATE OR ASSOCIATE THEREOF (AS SUCH TERMS ARE
DEFINED IN THE RIGHTS AGREEMENT), WHETHER CURRENTLY HELD BY OR ON
BEHALF OF SUCH PERSON OR BY ANY SUBSEQUENT HOLDER, MAY BECOME NULL AND
VOID.
With respect to such certificates containing the foregoing legend, until the
earlier of (i) the Distribution Date or (ii) the Expiration Date, the Rights
associated with the Common Shares represented by such certificates shall be
evidenced by such certificates alone, and the surrender for transfer of any
such certificate shall also constitute the transfer of the Rights associated
with the Common Shares represented thereby.
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(d) In the event that the Company purchases or acquires any
Common Shares after the Record Date but prior to the Distribution Date, any
Rights associated with such Common Shares shall be deemed canceled and
retired so that the Company shall not be entitled to exercise any Rights
associated with the Common Shares which are no longer outstanding.
Section 4. FORM OF RIGHTS CERTIFICATES.
(a) The Rights Certificates (and the forms of election to
purchase Common Shares and of assignment to be printed on the reverse
thereof) shall be substantially in the form of 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 (subject to the
consent of the Rights Agent, not to be unreasonably withheld, for any changes
to the Rights Certificate which affect the duties or responsibilities of the
Rights Agent), or as may be required to comply with any applicable law or
with any rule or regulation made pursuant thereto or with any rule or
regulation of any stock exchange or automated quotation system, on which the
Rights may from time to time be listed or included, or to conform to usage.
Subject to the provisions of Section 11 and Section 22 hereof, the Rights
Certificates, whenever distributed, shall be dated as of the Record Date (or
in the case of Rights issued with respect to Common Shares issued by the
Company after the Record Date, as of the date of issuance of such Common
Shares) and on their face shall entitle the holders thereof to purchase such
number of Common Shares as shall be set forth therein at the price set forth
therein (such exercise price per Common Share being hereinafter referred to
as the "EXERCISE PRICE" and the aggregate Exercise Price of all Common Shares
issuable upon exercise of one Right being hereinafter referred to as the
"TOTAL EXERCISE PRICE"), but the number and type of securities purchasable
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 Section 3(a) or
Section 22 hereof that represents Rights beneficially owned by: (i) an
Acquiring Person or any Associate or Affiliate of an Acquiring Person, (ii) a
transferee of an Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee after the Acquiring Person becomes such or (iii) a
transferee of an Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee prior to or concurrently with the Acquiring Person
becoming such and receives such Rights pursuant to either (A) a transfer
(whether or not for consideration) from the Acquiring Person to holders of
equity interests in such Acquiring Person or to any Person with whom such
Acquiring Person has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer which the Company's Board
of Directors has determined is part of a plan, arrangement or understanding
which has as a primary purpose or effect avoidance of Section 7(e) hereof,
and any Rights Certificate issued pursuant to Section 6 or Section 11 hereof
upon transfer, exchange, replacement or adjustment of any other Rights
Certificate referred to in this sentence, shall contain (to the extent
feasible) the following legend:
THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE
BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN
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ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS
SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY, THIS
RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND
VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF THE RIGHTS
AGREEMENT.
Section 5. COUNTERSIGNATURE AND REGISTRATION.
(a) The Rights Certificates shall be executed on behalf of the
Company by its Chairman of the Board, its Chief Executive Officer, its Chief
Financial Officer, its President or any Vice President, either manually or by
facsimile signature, and by the Secretary or an Assistant Secretary of the
Company, either manually or by facsimile signature, and shall have affixed
thereto the Company's seal (if any) or a facsimile thereof. The Rights
Certificates shall be manually countersigned by the Rights Agent and shall
not be valid for any purpose unless countersigned. In case any officer of
the Company who shall have signed any of the Rights Certificates shall cease
to be such officer of the Company before countersignature by the Rights Agent
and issuance and delivery by the Company, such Rights Certificates,
nevertheless, may be countersigned by the Rights Agent and issued and
delivered by the Company with the same force and effect as though the person
who signed such Rights Certificates on behalf of the Company had not ceased
to be such officer of the Company; and any Rights Certificate may be signed
on behalf of the Company by any person who, at the actual date of the
execution of such Rights Certificate, shall be a proper officer of the
Company to sign such Rights Certificate, although at the date of the
execution of this Rights Agreement any such person was not such an officer.
(b) Following the Distribution Date and, if necessary,
receipt by the Rights Agent of a list of record holders of Common Shares, the
Rights Agent will keep or cause to be kept, at its office designated for such
purposes, books for registration and transfer of the Rights Certificates
issued hereunder. Such books shall show the names and addresses of the
respective holders of the Rights Certificates, the number of Rights evidenced
on its face by each of the Rights Certificates and the date of each of the
Rights Certificates.
Section 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHTS
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHTS CERTIFICATES.
(a) Subject to the provisions of Sections 7(e), 14 and 24
hereof, at any time after the Close of Business on the Distribution Date, and
at or prior to the Close of Business on the Expiration Date, any Rights
Certificate or Rights Certificates 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 Common Shares (or,
following a Triggering Event, other securities, cash or other assets, as the
case may be) as the Rights Certificate or Rights Certificates surrendered
then entitled such holder to purchase. Any registered holder desiring to
transfer, split up, combine or exchange any Rights Certificate or Rights
Certificates shall make such request in writing delivered
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to the Rights Agent, and shall surrender the Rights Certificate or Rights
Certificates to be transferred, split up, combined or exchanged at the
principal Dallas office of the Rights Agent (the "DESIGNATED OFFICE").
Neither the Rights Agent nor the Company shall be obligated to take any
action whatsoever with respect to the transfer of any such surrendered Rights
Certificate until the registered holder shall have completed and signed the
certificate contained in the form of assignment on the reverse side of such
Rights Certificate and shall have provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates
or Associates thereof as the Company shall reasonably request. Thereupon the
Rights Agent shall, subject to Sections 7(e), 14 and 24 hereof, countersign
and deliver to the person entitled thereto a Rights Certificate or Rights
Certificates, as the case may be, as so requested. The Company may require
payment of a sum sufficient to cover any tax or governmental charge that may
be imposed in connection with any transfer, split up, combination or exchange
of Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent of
evidence reasonably satisfactory to them of the loss, theft, destruction or
mutilation of a Rights Certificate, and, in case of loss, theft or
destruction, of indemnity or security satisfactory to them, and, at the
Company's request, reimbursement to the Company and the Rights Agent of all
reasonable expenses incidental thereto, and upon surrender to the Rights
Agent and cancellation of the Rights Certificate if mutilated, the Company
will make and deliver a new Rights Certificate of like tenor to the Rights
Agent for delivery to the registered holder in lieu of the Rights Certificate
so lost, stolen, destroyed or mutilated.
Section 7. EXERCISE OF RIGHTS; EXERCISE PRICE; EXPIRATION DATE OF
RIGHTS.
(a) Subject to Sections 7(e), 23(b) and 24(b) hereof, the
registered holder of any Rights Certificate may exercise the Rights evidenced
thereby (except as otherwise provided herein) in whole or in part at any time
after the Distribution Date and prior to the Close of Business on the
Expiration Date by surrender of the Rights Certificate, with the form of
election to purchase on the reverse side thereof duly executed, to the Rights
Agent at the Designated Office, together with payment of the Exercise Price
for each Common Share (or, following a Triggering Event, other securities,
cash or other assets as the case may be) as to which the Rights are exercised.
(b) The Exercise Price for each Common Share issuable pursuant
to the exercise of a Right shall initially be SIXTY-FIVE DOLLARS ($65.00),
shall be subject to adjustment from time to time as provided in Sections 11
and 13 hereof and shall be payable in lawful money of the United States of
America in accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing
exercisable Rights, with the form of election to purchase duly executed,
accompanied by payment of the Exercise Price for the number of Common Shares
(or, following a Triggering Event, other securities, cash or other assets as
the case may be) to be purchased and an amount equal to any applicable tax or
governmental charge required to be paid by the holder of such Rights
Certificate in accordance with Section 9(e) hereof, the Rights Agent shall,
subject to Section 20(k) hereof, thereupon promptly (i) (A) requisition
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from any transfer agent of the Common Shares (or make available, if the
Rights Agent is the transfer agent for the Common Shares) a certificate or
certificates for the number of Common Shares (or, following a Triggering
Event, other securities, cash or other assets as the case may be) to be
purchased and the Company hereby irrevocably authorizes its transfer agent to
comply with all such requests or (B) if the Company shall have elected to
deposit the total number of Common Shares (or, following a Triggering Event,
other securities, cash or other assets as the case may be) issuable upon
exercise of the Rights hereunder with a depositary agent, requisition from
the depositary agent depositary receipts representing such number of Common
Shares (or, following a Triggering Event, other securities, cash or other
assets as the case may be) as are to be purchased (in which case certificates
for the Common Shares (or, following a Triggering Event, other securities,
cash or other assets as the case may be) represented by such receipts shall
be deposited by the transfer agent with the depositary agent) and the Company
hereby directs the depositary agent to comply with such request, (ii) when
appropriate, requisition from the Company the amount of cash to be paid in
lieu of issuance of fractional shares in accordance with Section 14 hereof,
(iii) after receipt of such certificates or depositary receipts, cause the
same to be delivered to or upon the order of the registered holder of such
Rights Certificate, registered in such name or names as may be designated by
such holder and (iv) when appropriate, after receipt thereof, deliver such
cash to or upon the order of the registered holder of such Rights
Certificate. The payment of the Exercise Price (as such amount may be
reduced (including to zero) pursuant to Section 11(a)(iii) hereof) and an
amount equal to any applicable tax or governmental charge required to be paid
by the holder of such Rights Certificate in accordance with Section 9(e)
hereof, may be made in cash or by certified bank check, cashier's check or
bank draft payable to the order of the Company. In the event that the
Company is obligated to issue securities of the Company other than Common
Shares, pay cash and/or distribute other property pursuant to Section 11(a)
hereof, the Company will make all arrangements necessary so that such other
securities, cash and/or other property are available for distribution by the
Rights Agent, if and when necessary to comply with this Agreement.
(d) In case the registered holder of any Rights Certificate
shall exercise less than all the Rights evidenced thereby, a new Rights
Certificate evidencing Rights equivalent to the Rights remaining unexercised
shall be issued by the Rights Agent to the registered holder of such Rights
Certificate or to his or her duly authorized assigns, subject to the
provisions of Section 6 and Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the
contrary, from and after the first occurrence of a Triggering Event, any
Rights beneficially owned by (i) an Acquiring Person or an Associate or
Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person
(or of any such Associate or Affiliate) who becomes a transferee after the
Acquiring Person becomes such (a "POST-EVENT TRANSFEREE"), (iii) a transferee
of an Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee prior to or concurrently with the Acquiring Person becoming such
and receives such Rights pursuant to either (A) a transfer (whether or not
for consideration) from the Acquiring Person to holders of equity interests
in such Acquiring Person or to any Person with whom the Acquiring Person has
any continuing agreement, arrangement or understanding regarding the
transferred Rights or (B) a transfer which the Company's Board of Directors
has determined is part
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of a plan, arrangement or understanding which has as a primary purpose or
effect the avoidance of this Section 7(e) (a "PRE-EVENT TRANSFEREE") or (iv)
any subsequent transferee receiving transferred Rights from a Post-Event
Transferee or a Pre-Event Transferee, either directly or through one or more
intermediate transferees, 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 neither the Company nor the Rights Agent shall have any liability to any
holder of Rights Certificates or to any other Person as a result of the
Company's failure to make any determinations with respect to an Acquiring
Person or any of such Acquiring Person's Affiliates, Associates or
transferees hereunder.
(f) Notwithstanding anything in this Agreement to the
contrary, neither the Rights Agent nor the Company shall be obligated to
undertake any action with respect to a registered holder upon the occurrence
of any purported exercise as set forth in this Section 7 unless such
registered holder shall, in addition to having complied with the requirements
of Section 7(a), have (i) properly completed and signed the certificate
contained in the form of election to purchase set forth on the reverse side
of the Rights Certificate surrendered for such exercise and (ii) provided
such additional evidence of the identity of the Beneficial Owner (or former
Beneficial Owner) or Affiliates or Associates thereof as the Company or the
Rights Agent shall reasonably request.
Section 8. CANCELLATION AND DESTRUCTION OF RIGHTS CERTIFICATES. All
Rights Certificates surrendered for the purpose of exercise, transfer, split
up, combination or exchange shall, if surrendered to the Company or 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 Rights Certificate purchased or
acquired by the Company otherwise than upon the exercise thereof. The Rights
Agent shall deliver all canceled Rights Certificates to the Company, or
shall, at the written request of the Company, destroy such canceled Rights
Certificates, and in such case shall deliver a certificate of destruction
thereof to the Company.
Section 9. RESERVATION AND AVAILABILITY OF COMMON SHARES.
(a) The Company covenants and agrees that it will use its best
efforts to cause to be reserved and kept available out of and to the extent
of its authorized and unissued Common Shares not reserved for another purpose
(and, following the occurrence of a Triggering Event, out of its authorized
and unissued Common Shares and/or other securities), the number of Common
Shares (and, following the occurrence of the Triggering Event, Common Shares
and/or other securities) that will be sufficient to permit the exercise in
full of all outstanding Rights.
(b) If the Company has in the past or shall hereafter list any
of its Common Shares on a national securities exchange or quotation system,
then so long as the Common Shares (and,
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following the occurrence of a Triggering Event, Common Shares and/or other
securities) issuable and deliverable upon exercise of the Rights may be
listed on such exchange or quotation system, the Company shall use its best
efforts to cause, from and after such time as the Rights become exercisable
(but only to the extent that it is reasonably likely that the Rights will be
exercised), all shares reserved for such issuance to be listed on such
exchange upon official notice of issuance upon such exercise.
(c) The Company shall use its best efforts to (i) file, as
soon as practicable following the earliest date after the first occurrence of
a Triggering Event in which the consideration to be delivered by the Company
upon exercise of the Rights is described in Section 11(a)(ii) or Section
11(a)(iii) hereof, or as soon as is required by law following the
Distribution Date, as the case may be, a registration statement under the
Securities Act with respect to the securities purchasable upon exercise of
the Rights on an appropriate form, (ii) cause such registration statement to
become effective as soon as practicable after such filing and (iii) cause
such registration statement to remain effective (with a prospectus at all
times meeting the requirements of the Securities Act) until the earlier of
(A) the date as of which the Rights are no longer exercisable for such
securities and (B) the Expiration Date. The Company may temporarily suspend,
for a period not to exceed ninety (90) days after the date set forth in
clause (i) of the first sentence of this Section 9(c), the exercisability of
the Rights in order to prepare and file such registration statement and
permit it to become effective. Upon any such suspension, the Company shall
issue a public announcement stating, and notify the Rights Agent, that the
exercisability of the Rights has been temporarily suspended, as well as a
public announcement and notification to the Rights Agent at such time as the
suspension is no longer in effect. The Company will also take such action as
may be appropriate under, or to ensure compliance with, the securities or
"blue sky" laws of the various states in connection with the exercisability
of the Rights. 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, or an
exemption therefrom shall be available, and until a registration statement
has been declared effective.
(d) The Company covenants and agrees that it will take all
such action as may be necessary to ensure that all Common Shares (or other
securities of the Company) delivered upon exercise of Rights shall, at the
time of delivery of the certificates for such securities (subject to payment
of the Exercise Price), be duly and validly authorized and issued and fully
paid and nonassessable shares.
(e) The Company further covenants and agrees that it will pay
when due and payable any and all taxes and governmental charges which may be
payable in respect of the original issuance or delivery of the Rights
Certificates or of any Common Shares (or other securities) upon the exercise
of Rights. The Company shall not, however, be required to pay any tax or
governmental charge which may be payable in respect of any transfer or
delivery of Rights Certificates to a person other than, or the issuance or
delivery of certificates or depositary receipts for the Common Shares (or
other securities of the Company) in a name other than that of, the registered
holder of the Rights Certificate evidencing Rights surrendered for exercise
or to issue or to deliver any certificates or depositary receipts for Common
Shares (or other securities of the Company) upon the exercise of any
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Rights until any such tax or governmental charge shall have been paid (any
such tax or governmental charge being payable by the holder of such Rights
Certificate at the time of surrender) or until it has been established to the
Company's satisfaction that no such tax is due.
Section 10. RECORD DATE. Each Person in whose name any certificate
for a number of Common Shares (or other securities) is issued upon the
exercise of Rights shall for all purposes be deemed to have become the holder
of record of the Common Shares (or other securities) represented thereby on,
and such certificate shall be dated, the date upon which the Rights
Certificate evidencing such Rights was duly surrendered and payment of the
Exercise Price with respect to which the Rights have been exercised (and any
applicable taxes or governmental charges) was made; PROVIDED, HOWEVER, that
if the date of such surrender and payment is a date upon which the transfer
books of the Company are closed, such Person shall be deemed to have become
the record holder of such shares on, and such certificate shall be dated, the
next succeeding Business Day on which the transfer books of the Company are
open. Prior to the exercise of the Rights evidenced thereby, the holder of a
Rights Certificate shall not be entitled to any rights of a holder of Common
Shares (or other securities) for which the Rights shall be exercisable,
including, without limitation, the right to vote, to receive dividends or
other distributions or to exercise any preemptive rights, and shall not be
entitled to receive any notice of any proceedings of the Company, except as
provided herein.
Section 11. ADJUSTMENT OF EXERCISE PRICE, NUMBER OF SHARES OR NUMBER
OF RIGHTS. The Exercise Price, the number and kind of shares or other
property covered by each Right and the number of Rights outstanding are
subject to adjustment from time to time as provided in this Section 11.
(a) (i) In the event the Company shall at any time after
the date of this Agreement (A) declare a dividend on the Common Shares
payable in Common Shares, (B) subdivide the outstanding Common Shares, (C)
combine the outstanding Common Shares (by reverse stock split or otherwise)
into a smaller number of Common Shares, or (D) issue any shares of its
capital stock in a reclassification of the Common Shares (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation), then, in each such
event, except as otherwise provided in this Section 11 and Section 7(e)
hereof: (1) the Exercise Price in effect at the time of the record date for
such dividend or of the effective date of such subdivision, combination or
reclassification shall be adjusted so that the Exercise Price thereafter
shall equal the result obtained by dividing the Exercise Price in effect
immediately prior to such time by a fraction (the "ADJUSTMENT FRACTION"), the
numerator of which shall be the total number of Common Shares (or shares of
capital stock issued in such reclassification of the Common Shares)
outstanding immediately following such time and the denominator of which
shall be the total number of Common Shares outstanding immediately prior to
such time; PROVIDED, HOWEVER, that in no event shall the consideration to be
paid upon the exercise of one Right be less than the aggregate par value of
the shares of capital stock of the Company issuable upon exercise of such
Right; and (2) the number of Common Shares (or shares of such other capital
stock) issuable upon the exercise of each Right shall equal the number of
Common Shares (or shares of such other capital stock) as were issuable upon
exercise of a Right immediately prior to the occurrence of the event
described in clauses (A)-(D) of
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this Section 11(a)(i), multiplied by the Adjustment Fraction. Each Common
Share that shall become outstanding after an adjustment has been made
pursuant to this Section 11(a)(i) shall have associated with it the number of
Rights, exercisable at the Exercise Price and for the number of Common Shares
(or shares of such other capital stock) as one Common Share has associated
with it immediately following the adjustment made pursuant to this Section
11(a)(i).
(ii) Subject to Section 24 of this Agreement, in the
event a Triggering Event shall have occurred, then promptly following such
Triggering Event each holder of a Right, except as provided in Section 7(e)
hereof, shall thereafter have the right to receive for each Right, upon
exercise thereof in accordance with the terms of this Agreement and payment
of the Exercise Price in effect immediately prior to the occurrence of the
Triggering Event, such number of Common Shares of the Company as shall equal
the result obtained by multiplying the Exercise Price in effect immediately
prior to the occurrence of the Triggering Event by the number of Common
Shares for which a Right was exercisable (or would have been exercisable if
the Distribution Date had occurred) immediately prior to the first occurrence
of a Triggering Event, and dividing that product by 50% of the Current Per
Share Market Price for Common Shares on the date of occurrence of the
Triggering Event; provided, however, that the Exercise Price and the number
of Common Shares of the Company so receivable upon exercise of a Right shall
be subject to further adjustment as appropriate in accordance with Section
11(e) hereof to reflect any events occurring in respect of the Common Shares
of the Company after the occurrence of the Triggering Event.
(iii) In lieu of issuing Common Shares in accordance with
Section 11(a)(ii) hereof, the Company may, if the Company's Board of
Directors determines that such action is necessary or appropriate and not
contrary to the interest of holders of Rights and, in the event that the
number of Common Shares which are authorized by the Company's Certificate of
Incorporation but not outstanding or reserved for issuance for purposes other
than upon exercise of the Rights are not sufficient to permit the exercise in
full of the Rights, or if any necessary regulatory approval for such issuance
has not been obtained by the Company, the Company shall: (A) determine the
excess of (1) the value of the Common Shares issuable upon the exercise of a
Right (the "CURRENT VALUE") over (2) the Exercise Price (such excess, the
"SPREAD") and (B) with respect to each Right, make adequate provision to
substitute for such Common Shares, upon exercise of the Rights, (1) cash, (2)
a reduction in the Exercise Price, (3) other equity securities of the Company
(including, without limitation, shares or units of shares of any series of
preferred stock which the Company's Board of Directors has deemed to have the
same value as Common Shares (such shares or units of shares of preferred
stock are herein called "COMMON STOCK EQUIVALENTS")), except to the extent
that the Company has not obtained any necessary stockholder or regulatory
approval for such issuance, (4) debt securities of the Company, except to the
extent that the Company has not obtained any necessary stockholder or
regulatory approval for such issuance, (5) other assets or (6) any
combination of the foregoing, having an aggregate value equal to the Current
Value, where such aggregate value has been determined by the Company's Board
of Directors based upon the advice of a nationally recognized investment
banking firm selected by the Company's Board of Directors; PROVIDED, HOWEVER,
if the Company shall not have made adequate provision to deliver value
pursuant to clause (B) above within thirty (30) days following the later of
(x) the first occurrence of a
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Triggering Event and (y) the date on which the Company's right of redemption
pursuant to Section 23(a) expires (the later of (x) and (y) being referred to
herein as the "SECTION 11(a)(ii) TRIGGER DATE"), 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 Shares (to the extent
available), except to the extent that the Company has not obtained any
necessary stockholder or regulatory approval for such issuance, and then, if
necessary, cash, which shares and/or cash have an aggregate value equal to
the Spread. If the Company's Board of Directors shall determine in good
faith that it is likely that sufficient additional Common Shares could be
authorized for issuance upon exercise in full of the Rights or that any
necessary regulatory approval for such issuance will be obtained, the thirty
(30) day period set forth above may be extended to the extent necessary, but
not more than ninety (90) days after the Section 11(a)(ii) Trigger Date, in
order that the Company may seek stockholder approval for the authorization of
such additional shares or take action to obtain such regulatory approval
(such period, as it may be extended, the "SUBSTITUTION PERIOD"). To the
extent that the Company determines that some action need be taken pursuant to
the first and/or second sentences of this Section 11(a)(iii), the Company (x)
shall provide, subject to Section 7(e) hereof, that such action shall apply
uniformly to all outstanding Rights and (y) may suspend the exercisability of
the Rights until the expiration of the Substitution Period in order to seek
any authorization of additional shares, to take any action to obtain any
required regulatory approval and/or to decide the appropriate form of
distribution to be made pursuant to such first sentence and to determine the
value thereof. In the event of any such suspension, the Company shall notify
the Rights Agent thereof and issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as
notify the Rights Agent and issue a public announcement at such time as the
suspension is no longer in effect. For purposes of this Section 11(a)(iii),
the value of the Common Shares shall be the Current Per Share Market Price of
the Common Shares on the Section 11(a)(ii) Trigger Date and the value of any
Common Stock Equivalent shall be deemed to have the same value as the Common
Shares on such date.
(b) In case the Company shall, at any time after the date of
this Agreement, fix a record date for the issuance of rights, options or
warrants to all holders of Common Shares or of any class or series of
Equivalent Shares entitling such holders (for a period expiring within
forty-five (45) calendar days after such record date) to subscribe for or
purchase Common Shares or Equivalent Shares or securities convertible into
Common Shares or Equivalent Shares at a price per share (or having a
conversion price per share, if a security convertible into Common Shares or
Equivalent Shares) less than the then Current Per Share Market Price of the
Common Shares or Equivalent Shares on such record date, then, in each such
case, 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 number of
Common Shares and Equivalent Shares (if any) outstanding on such record date,
plus the number of Common Shares or Equivalent Shares, as the case may be,
which the aggregate offering price of the total number of Common Shares or
Equivalent Shares, as the case may be, to be offered or issued (and/or the
aggregate initial conversion price of the convertible securities to be
offered or issued) would purchase at such current market price, and the
denominator of which shall be the number of Common Shares and Equivalent
Shares (if any) outstanding on such record date, plus the number of
additional
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Common Shares or Equivalent Shares, as the case may be, to be offered for
subscription or purchase (or into which the convertible securities so to be
offered are initially convertible); PROVIDED, HOWEVER, that in no event shall
the consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Company issuable
upon exercise of one Right. In case such subscription price may be paid in a
consideration part or all of which shall be in a form other than cash, the
value of such consideration shall be as determined in good faith by the
Company's Board of Directors, 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. Common Shares and Equivalent Shares
owned by or held for the account of the Company shall not be deemed
outstanding for the purpose of any such computation. Such adjustment shall
be made successively whenever such a record date is fixed, and in the event
that such rights, options or warrants are not so issued, the 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 case the Company shall, at any time after the date of
this Agreement, fix a record date for the making of a distribution to all
holders of the Common Shares or of any class or series of Equivalent Shares
(including any such distribution made in connection with a consolidation or
merger in which the Company is the continuing or surviving corporation) of
evidences of indebtedness or assets (other than a regular quarterly cash
dividend, if any, or a dividend payable in Common Shares) or subscription
rights, options or warrants (excluding those referred to in Section 11(b)),
then, in each such case, 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 Current Per Share Market Price of a Common Share or an
Equivalent Share on such record date, less the fair market value per Common
Share or Equivalent Share (as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a
statement filed with the Rights Agent) of the portion of the cash, assets or
evidences of indebtedness so to be distributed or of such subscription rights
or warrants applicable to a Common Share or Equivalent Share, as the case may
be, and the denominator of which shall be such Current Per Share Market Price
of a Common Share or Equivalent Share on such record date; PROVIDED, HOWEVER,
that in no event shall the consideration to be paid upon the exercise of one
Right be less than the aggregate par value of the shares of capital stock of
the Company issuable upon exercise of one Right. 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) 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(d)
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 Common
Share or other share, as the case may be. Notwithstanding the first sentence
of this Section 11(d), any adjustment required by this Section 11 shall be
made no later than the
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earlier of (i) three (3) years from the date of the transaction which
requires such adjustment or (ii) the Expiration Date.
(e) If as a result of an adjustment made pursuant to Section
11(a) or 13(a) hereof, the holder of any Right thereafter exercised shall
become entitled to receive any shares of capital stock other than Common
Shares, thereafter the number of such other shares so receivable upon
exercise of any Right and, if required, 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 Shares
contained in Sections 11(a), 11(b), 11(c), 11(d), 11(f), 11(g), 11(h), 11(i),
11(j), 11(k) and 11(l), and the provisions of Sections 7, 9, 10, 13 and 14
with respect to the Common Shares shall apply on like terms to any such other
shares.
(f) 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 Common Shares
purchasable from time to time hereunder upon exercise of the Rights, all
subject to further adjustment as provided herein.
(g) Unless the Company shall have exercised its election as
provided in Section 11(h), upon each adjustment of the Exercise Price as a
result of the calculations made in Section 11(b), 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 Common
Shares (calculated to the nearest ten-thousandth of a share) obtained by (i)
multiplying (x) the number of Common Shares 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.
(h) The Company may elect on or after the date of any
adjustment of the Exercise Price as a result of the calculations made in
Section 11(b) to adjust the number of Rights, in substitution for any
adjustment in the number of Common Shares purchasable upon the exercise of a
Right. Each of the Rights outstanding after such adjustment of the number of
Rights shall be exercisable for the number of Common Shares 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 (with notice thereof to the Rights
Agent), 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 ten (10) days
later than the date of the public announcement. If Rights Certificates have
been issued, upon each adjustment of the number of Rights pursuant to this
Section 11(h), 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 hereof, the additional
Rights to which such holders shall be entitled as a
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result of such adjustment, or, at the option of the Company, shall cause to
be distributed to such holders of record in substitution and replacement for
the Rights Certificates held by such holders prior to the date of adjustment,
and upon surrender thereof, if required by the Company, new Rights
Certificates evidencing all the Rights to which such holders shall be
entitled after such adjustment. Rights Certificates so to be distributed
shall be issued, executed and countersigned in the manner provided for herein
(and may bear, at the option of the Company, the adjusted 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.
(i) Irrespective of any adjustment or change in the Exercise
Price or the number of Common Shares issuable upon the exercise of the
Rights, the Rights Certificates theretofore and thereafter issued may
continue to express the Exercise Price per Common Share and the number of
Common Shares which were expressed in the initial Rights Certificates issued
hereunder.
(j) Before taking any action that would cause an adjustment
reducing the Exercise Price below the par or stated value, if any, of the
number of Common Shares issuable upon exercise of the Rights, the Company
shall take any corporate action which may, in the opinion of its counsel, be
necessary in order that the Company may validly and legally issue as fully
paid and nonassessable shares such number of Common Shares at such adjusted
Exercise Price.
(k) 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 issuing to the holder of any Right exercised after such record date
of the number of Common Shares and other capital stock or securities of the
Company, if any, issuable upon such exercise over and above the number of
Common Shares and 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)
upon the occurrence of the event requiring such adjustment.
(l) Anything in this Section 11 to the contrary
notwithstanding, prior to the Distribution Date, 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
it in its sole discretion shall determine to be advisable in order that any
(i) consolidation or subdivision of the Common Shares or any Equivalent
Shares, (ii) issuance wholly for cash of any Common Shares or Equivalent
Shares at less than the current market price, (iii) issuance wholly for cash
of Common Shares or Equivalent Shares or securities which by their terms are
convertible into or exchangeable for Common Shares or Equivalent Shares, (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
Shares shall not be taxable to such stockholders.
(m) The Company covenants and agrees that, after the
Distribution Date, it will not, except as permitted by Sections 23, 24 or 27
hereof, take (or permit to be taken) any action if at the
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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.
Section 12. CERTIFICATE OF ADJUSTED EXERCISE PRICE OR NUMBER OF
SHARES. Whenever an adjustment is made as provided in Sections 11 or 13
hereof, the Company shall promptly (a) prepare a certificate setting forth
such adjustment and a brief statement of the facts and computations
accounting for such adjustment, (b) file with the Rights Agent and with each
transfer agent for the Common Shares a copy of such certificate and (c) mail
a brief summary thereof to each holder of a Rights Certificate in accordance
with Section 26 hereof. Notwithstanding the foregoing sentence, the failure
of the Company to make such certification or give such notice shall not
affect the validity of such adjustment or the force or effect of the
requirement for such adjustment. The Rights Agent shall be fully protected
in relying on any such certificate and on any adjustment contained therein,
shall have no duty with respect to and shall not be deemed to have knowledge
of, such adjustment unless and until it shall have received such certificate.
Section 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR
EARNING POWER.
(a) In the event that, following a Triggering Event, directly
or indirectly:
(i) the Company shall consolidate with, or merge with
and into, any other Person (other than a wholly-owned Subsidiary of the
Company in a transaction the principal purpose of which is to change the
state of incorporation of the Company and which complies with Section 11(m)
hereof);
(ii) any Person (other than a Subsidiary of the Company
in a transaction that complies with Section 11(m) hereof) shall consolidate
with the Company, or merge with and into the Company and the Company shall be
the continuing or surviving corporation of such consolidation or merger; or
(iii) the Company shall sell or otherwise transfer (or
one or more of its Subsidiaries shall sell or otherwise transfer), in one or
more transactions, assets or earning power aggregating 50% or more of the
assets or earning power of the Company and its Subsidiaries (taken as a
whole) to any other Person or Persons (other than the Company or one or more
of its wholly owned Subsidiaries in one or more transactions, each of which
individually (and together) complies with Section 11(m) hereof),
then, concurrent with and in each such case,
(A) 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 a price equal to the Total Exercise Price applicable
immediately prior to the occurrence of the Section 13 Event in accordance
with the terms of this Agreement, such number of validly authorized and
issued, fully paid, nonassessable and freely tradeable Common Shares of the
Principal Party (as hereinafter defined), free
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of any liens, encumbrances, rights of first refusal or other adverse claims,
as shall be equal to the result obtained by dividing such Total Exercise
Price by 50% of the Current Per Share Market Price of the Common Shares of
such Principal Party on the date of consummation of such Section 13 Event,
PROVIDED, HOWEVER, that the Exercise Price and the number of Common Shares of
such Principal Party so receivable upon exercise of a Right shall be subject
to further adjustment as appropriate in accordance with Section 11(e) hereof;
(B) such Principal Party shall thereafter be
liable for, and shall assume, by virtue of such Section 13 Event, all the
obligations and duties of the Company pursuant to this Agreement;
(C) the term "Company" shall thereafter be
deemed to refer to such Principal Party, it being specifically intended that
the provisions of Section 11 hereof shall apply only to such Principal Party
following the first occurrence of a Section 13 Event;
(D) such Principal Party shall take such steps
(including, but not limited to, the reservation of a sufficient number of its
Common Shares) in connection with the consummation of any such transaction as
may be necessary to ensure that the provisions hereof shall thereafter be
applicable, as nearly as reasonably may be, in relation to its Common Shares
thereafter deliverable upon the exercise of the Rights; and
(E) upon the subsequent occurrence of any
consolidation, merger, sale or transfer of assets or other extraordinary
transaction in respect of such Principal Party, each holder of a Right shall
thereupon be entitled to receive, upon exercise of a Right and payment of the
Total Exercise Price as provided in this Section 13(a), such cash, shares,
rights, warrants and other property which such holder would have been
entitled to receive had such holder, at the time of such transaction, owned
the Common Shares of the Principal Party receivable upon the exercise of such
Right pursuant to this Section 13(a), and such Principal Party shall take
such steps (including, but not limited to, reservation of shares of stock) as
may be necessary to permit the subsequent exercise of the Rights in
accordance with the terms hereof for such cash, shares, rights, warrants and
other property.
(F) For purposes hereof, the "earning power" of
the Company and its Subsidiaries shall be determined in good faith by the
Company's Board of Directors on the basis of the operating earnings of each
business operated by the Company and its Subsidiaries during the three fiscal
years preceding the date of such determination (or, in the case of any
business not operated by the Company or any Subsidiary during three full
fiscal years preceding such date, during the period such business was
operated by the Company or any Subsidiary).
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(b) For purposes of this Agreement, the term "PRINCIPAL PARTY"
shall mean:
(i) in the case of any transaction described in clause
(i) or (ii) of Section 13(a) hereof: (A) the Person that is the issuer of the
securities into which the Common Shares are converted in such merger or
consolidation, or, if there is more than one such issuer, the issuer the
Common Shares of which have the greatest aggregate market value of shares
outstanding, or (B) if no securities are so issued, (x) the Person that is
the other party to the merger, if such Person survives said merger, or, if
there is more than one such Person, the Person the Common Shares of which
have the greatest aggregate market value of shares outstanding or (y) if the
Person that is the other party to the merger does not survive the merger, the
Person that does survive the merger (including the Company if it survives) or
(z) the Person resulting from the consolidation; and
(ii) in the case of any transaction described in clause
(iii) 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, or, if more than one Person that is a party to
such transaction or transactions receives the same portion of the assets or
earning power so transferred and each such portion would, were it not for the
other equal portions, constitute the greatest portion of the assets or
earning power so transferred, or if the Person receiving the greatest portion
of the assets or earning power cannot be determined, whichever of such
Persons is the issuer of Common Shares having the greatest aggregate market
value of shares outstanding;
PROVIDED, HOWEVER, that in any such case described in the foregoing clause
(b)(i) or (b)(ii), if the Common Shares of such Person are not at such time
or have not been continuously over the preceding 12-month period registered
under Section 12 of the Exchange Act, then (1) if such Person is a direct or
indirect Subsidiary of another Person the Common Shares of which are and have
been so registered, the term "Principal Party" shall refer to such other
Person, or (2) if such Person is a Subsidiary, directly or indirectly, of
more than one Person, the Common Shares of which are and have been so
registered, the term "Principal Party" shall refer to whichever of such
Persons is the issuer of Common Shares having the greatest aggregate market
value of shares outstanding, or (3) if such Person is owned, directly or
indirectly, by a joint venture formed by two or more Persons that are not
owned, directly or indirectly by the same Person, the rules set forth in
clauses (1) and (2) above shall apply to each of the owners having an
interest in the venture as if the Person owned by the joint venture was a
Subsidiary of both or all of such joint venturers, and the Principal Party in
each such case shall bear the obligations set forth in this Section 13 in the
same ratio as its interest in such Person bears to the total of such
interests.
(c) The Company shall not consummate any Section 13 Event
unless the Principal Party shall have a sufficient number of authorized
Common Shares that have not been issued or reserved for issuance to permit
the exercise in full of the Rights in accordance with this Section 13 and
unless prior thereto the Company and such issuer shall have executed and
delivered to the Rights Agent a supplemental agreement confirming that such
Principal Party shall, upon consummation of such Section 13 Event, assume
this Agreement in accordance with Sections 13(a) and 13(b) hereof, that all
rights of first refusal or preemptive rights in respect of the issuance of
Common Shares of
-23-
such Principal Party upon exercise of outstanding Rights have been waived,
that there are no rights, warrants, instruments or securities outstanding or
any agreements or arrangements which, as a result of the consummation of such
transaction, would eliminate or substantially diminish the benefits intended
to be afforded by the Rights and that such transaction shall not result in a
default by such Principal Party under this Agreement, and further providing
that, as soon as practicable after the date of such Section 13 Event, such
Principal Party will:
(i) prepare and file a registration statement under the
Securities Act with respect to the Rights and the securities purchasable upon
exercise of the Rights on an appropriate form, use its best efforts to cause
such registration statement to become effective as soon as practicable after
such filing and use its best efforts to cause such registration statement to
remain effective (with a prospectus at all times meeting the requirements of
the Securities Act) until the Expiration Date, and similarly comply with
applicable state securities laws;
(ii) use its best efforts to list (or continue the
listing of) the Rights and the securities purchasable upon exercise of the
Rights on a national securities exchange or to meet the eligibility
requirements for quotation on Nasdaq and list (or continue the listing of)
the Rights and the securities purchasable upon exercise of the Rights on
Nasdaq; and
(iii) deliver to holders of the Rights historical
financial statements for such Principal Party which comply in all respects
with the requirements for registration on Form 10 (or any successor form)
under the Exchange Act.
In the event that at any time after the occurrence of a Triggering Event
some or all of the Rights shall not have been exercised at the time of a
transaction described in this Section 13, the Rights which have not
theretofore been exercised shall thereafter be exercisable in the manner
described in Section 13(a) (without taking into account any prior adjustment
required by Section 11(a)(ii)).
(d) In case the "Principal Party" for purposes of Section
13(b) hereof has provision in any of its authorized securities or in its
certificate of incorporation or by-laws or other instrument governing its
corporate affairs, which provision would have the effect of (i) causing such
Principal Party to issue (other than to holders of Rights pursuant to Section
13 hereof), in connection with, or as a consequence of, the consummation of a
Section 13 Event, Common Shares or Equivalent Shares of such Principal Party
at less than the then Current Per Share Market Price thereof or securities
exercisable for, or convertible into, Common Shares or Equivalent Shares of
such Principal Party at less than such then Current Per Share Market Price,
or (ii) providing for any special payment, tax or similar provision in
connection with the issuance of the Common Shares of such Principal Party
pursuant to the provisions of Section 13 hereof, then, in such event, the
Company hereby agrees with each holder of 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 the provision in question of such Principal Party
shall have been canceled, waived or amended, or that the authorized
securities shall be redeemed, so that the
-24-
applicable provision will have no effect in connection with or as a
consequence of, the consummation of the proposed transaction.
(e) The Company covenants and agrees that it shall not, at any
time after the Distribution Date, effect or permit to occur any Section 13
Event, if (i) at the time or immediately after such Section 13 Event there
are any rights, warrants or other instruments or securities outstanding or
agreements in effect which would substantially diminish or otherwise
eliminate the benefits intended to be afforded by the Rights, (ii) prior to,
simultaneously with or immediately after such Section 13 Event, the
stockholders of the Person who constitutes, or would constitute, the
"Principal Party" for purposes of Section 13(b) hereof shall have received a
distribution of Rights previously owned by such Person or any of its
Affiliates or Associates or (iii) the form or nature of organization of the
Principal Party would preclude or limit the exercisability of the Rights.
(f) The provisions of this Section 13 shall similarly apply to
successive mergers or consolidations or sales or other transfers.
Section 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
(a) The Company shall not be required to issue fractions of
Rights or to distribute Rights Certificates which evidence fractional Rights.
In lieu of such fractional Rights, there shall be paid to the registered
holders of the Rights Certificates with regard to which such fractional
Rights would otherwise be issuable, an amount in cash equal to the same
fraction of the current market value of a whole Right. For 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, as
determined pursuant to the second sentence of Section 1(j) hereof.
(b) The Company shall not be required to issue fractions of
Common Shares or to distribute certificates which evidence fractional Common
Shares upon the exercise or exchange of Rights. In lieu of such fractional
Common Shares, the Company shall pay to the registered holders of Rights
Certificates at the time such Rights are exercised as herein provided an
amount in cash equal to the same fraction of the current market value of a
Common Share. For purposes of this Section 14(b), the current market value
of a Common Share shall be the closing price of a Common Share (as determined
pursuant to the second sentence of Section 1(j) hereof) 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 his or her right to receive any fractional Rights or any
fractional shares upon exercise of a Right.
Section 15. RIGHTS OF ACTION. All rights of action in respect of this
Agreement, excepting the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the
Rights Certificates (and, prior to the Distribution Date, the registered
holders of the Common Shares); and any registered holder of any Rights
Certificate (or, prior to the
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Distribution Date, of the Common Shares), without the consent of the Rights
Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of the Common Shares), may, in his or her own behalf and
for his or her own benefit, enforce, and may institute and maintain any suit,
action or proceeding against the Company to enforce, or otherwise act in
respect of, his or her right to exercise the Rights evidenced by such Rights
Certificate in the manner provided in such Rights Certificate and in this
Agreement. Without limiting the foregoing or any remedies available to the
holders of Rights, it is specifically acknowledged that the holders of Rights
would not have an adequate remedy at law for any breach of this Agreement and
will be entitled to specific performance of the obligations under, and
injunctive relief against actual or threatened violations of, the obligations
of any Person subject to this Agreement.
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 the Common Shares;
(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the Designated Office, duly endorsed or accompanied by a proper instrument of
transfer and with the appropriate forms and certificates fully and properly
executed; and
(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 the Rights
Certificate (or, prior to the Distribution Date, the associated Common Shares
certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on
the Rights Certificates or the associated Common Shares certificate made by
anyone other than the Company or the Rights Agent) for all purposes
whatsoever, and neither the Company nor the Rights Agent shall be affected by
any notice to the contrary.
Section 17. RIGHTS CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER. No
holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose to be the holder of the Common Shares
or any other securities of the Company which may at any time be issuable on
the exercise of the Rights represented thereby, nor shall anything contained
herein or in any Rights Certificate be construed to confer upon the holder of
any Rights Certificate, as such, any of the rights of a stockholder of the
Company or any right to vote for the election of directors or upon any matter
submitted to stockholders at any meeting thereof, or to give or withhold
consent to any corporate action, or to receive notice of meetings or other
actions affecting stockholders (except as provided in Section 25 hereof), or
to receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by such Rights Certificate shall have been exercised in
accordance with the provisions hereof.
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Section 18. CONCERNING THE RIGHTS AGENT.
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to
time, on demand of the Rights Agent, its reasonable expenses and counsel fees
and other disbursements incurred in the administration, execution and any
amendment of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability, damage, judgment, fine,
penalty, claim, demand, settlement, cost or expense, incurred without gross
negligence, bad faith or willful misconduct on the part of the Rights Agent,
for any action taken, suffered or omitted by the Rights Agent in connection
with the acceptance and administration of this Agreement, including the costs
and expenses of defending against any claim of liability in the premises. In
no event will the Rights Agent be liable for special, indirect, incidental or
consequential loss or damage of any kind whatsoever, even if the Rights Agent
has been advised of the possibility of such loss or damage.
(b) The Rights Agent shall be authorized to rely on, 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 acceptance and
administration of this Agreement in reliance upon any Rights Certificate or
certificate for the Common Shares or for other securities of the Company,
instrument of assignment or transfer, power of attorney, endorsement,
affidavit, letter, notice, direction, consent, certificate, statement or
other paper or document reasonably believed by it to be genuine and to be
signed, executed and, where necessary, verified or acknowledged, by the
proper Person or Persons, or otherwise upon the advice of counsel as set
forth in Section 20 hereof.
Section 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT.
(a) Any corporation, partnership or similar entity into which
the Rights Agent or any successor Rights Agent may be merged or with which it
may be consolidated, or any corporation resulting from any merger or
consolidation to which the Rights Agent or any successor Rights Agent shall
be a party, or any corporation, partnership or similar entity succeeding to
the business of the Rights Agent or any successor Rights Agent, shall be the
successor to the Rights Agent under this Agreement without the execution or
filing of any paper or any further act on the part of any of the parties
hereto; PROVIDED, HOWEVER, that such corporation, partnership or similar
entity would be eligible for appointment as a successor Rights Agent under
the provisions of Section 21 hereof. In case at the time such successor
Rights Agent shall succeed to the agency created by this Agreement, 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 in
case at that time any of the Rights Certificates shall not have been
countersigned, any successor Rights Agent may countersign such Rights
Certificates either in the name of the predecessor 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.
-27-
(b) In case at any time the name of the Rights Agent shall be
changed and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the
countersignature under its prior name and deliver Rights Certificates so
countersigned; and in case at that time any of the Rights Certificates shall
not have been countersigned, the Rights Agent may countersign such Rights
Certificates either in its prior name or in its changed name; and in all such
cases such Rights Certificates shall have the full force provided in the
Rights Certificates and in this Agreement.
Section 20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes only
the duties and obligations expressly imposed by this Agreement upon the
following terms and conditions, by all of which the Company and the holders
of Rights Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may
be legal counsel for the Company), and the written advice or opinion of such
counsel shall be full and complete authorization and protection to the Rights
Agent, and the Rights Agent shall incur no liability for, or in respect of,
any action taken, suffered or omitted by it in good faith and in accordance
with such written advice or opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable that any fact
or matter (including, without limitation, the identity of any Acquiring
Person and the determination of Current Per Share Market Price) be proved or
established by the Company prior to taking, suffering or omitting any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the Chairman of the Board,
the Chief Executive Officer, the President, any Vice President, the Chief
Financial Officer, the Secretary or any Assistant Secretary of the Company
and delivered to the Rights Agent; and such certificate shall be full
authorization and protection to the Rights Agent and the Rights Agent shall
incur no liability for, or in respect of, any action taken, omitted or
suffered in good faith by it under the provisions of this Agreement in
reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the Company
and any other Person only for its own gross negligence, bad faith or willful
misconduct.
(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 thereof) or be required
to verify the same, but all such statements and recitals are and shall be
deemed to have been made by the Company only.
(e) The Rights Agent shall not have any liability for nor be
under any responsibility in respect of the validity of this Agreement or the
execution and delivery hereof (except the due execution hereof by the Rights
Agent) or in respect of the validity or execution of any Rights Certificate
(except its countersignature thereof); nor shall it be responsible for any
breach by the
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Company of any covenant or condition contained in this Agreement or in any
Rights Certificate; nor shall it be responsible for any change in the
exercisability of the Rights or any adjustment in the terms of the Rights
(including the manner, method or amount thereof) provided for in Sections 3,
11, 13, 23 or 24, or the ascertaining of the existence of facts that would
require any such change or adjustment (except with respect to the exercise of
Rights evidenced by Rights Certificates after receipt by the Rights Agent of
a certificate furnished pursuant to Section 12 describing such change or
adjustment); nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any
Common Shares to be issued pursuant to this Agreement or any Rights
Certificate or as to whether any Common Shares will, when issued, be validly
authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all such further and other acts, instruments and assurances as may
reasonably be required by the Rights Agent for the carrying out or performing
by the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties hereunder
from any one of the Chairman of the Board, the Chief Executive Officer, the
President, any Vice President, the Chief Financial Officer, the Secretary or
any Assistant Secretary 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, omitted or suffered by it in good faith in
accordance with instructions of any such officer or for any delay in acting
while waiting for those instructions. Any application by the Rights Agent
for written instructions from the Company may, at the option of the Rights
Agent, set forth in writing any action proposed to be taken, suffered or
omitted by the Rights Agent under this Rights Agreement and the date on
and/or after which such action shall be taken or such omission shall be
effective. The Rights Agent shall not be liable for any action taken by, or
omission of, the Rights Agent in accordance with a proposal included in any
such application on or after the date specified in such application (which
date shall not be less than five (5) Business Days after the date any officer
of the Company actually receives such application, unless any such officer
shall have consented in writing to an earlier date) unless, prior to taking
any such action (or the effective date in the case of an omission), the
Rights Agent shall have received written instructions in response to such
application specifying the action to be taken, suffered or omitted.
(h) The Rights Agent and any stockholder, affiliate, director,
officer or employee of the Rights Agent may buy, sell or deal in any of the
Rights or other securities of the Company or become pecuniarily interested in
any transaction in which the Company may be interested, or contract with or
lend money to the Company or otherwise act as fully and freely as though it
were not Rights Agent under this Agreement. Nothing herein shall preclude
the Rights Agent from acting in any other capacity for the Company or for any
other Person.
(i) The Rights Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder either
itself or by or through its attorneys or agents, and
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the Rights Agent shall not be answerable or accountable for any act, default,
neglect or misconduct of any such attorneys or agents or for any loss to the
Company resulting from any such act, default, neglect or misconduct, absent
gross negligence, bad faith or willful misconduct.
(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 assured to it.
(k) If, with respect to any Rights Certificate surrendered to
the Rights Agent for exercise or transfer, the certificate attached to the
form of assignment or form of election to purchase, as the case may be, has
either not been completed or indicates an affirmative response to clause 1
and/or 2 thereof, the Rights Agent shall not take any further action with
respect to such requested exercise or transfer without first consulting with
the Company.
Section 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this
Agreement upon thirty (30) days' notice in writing mailed to the Company and
to each transfer agent of the Common Shares by registered or certified mail,
and to the holders of the Rights Certificates by first-class mail. The
Company may remove the Rights Agent or any successor Rights Agent upon thirty
(30) days' notice in writing, mailed to the Rights Agent or successor Rights
Agent, as the case may be, and to each transfer agent of the Common Shares by
registered or certified mail, and to the holders of the Rights Certificates
by first-class mail. If the Rights Agent shall resign or be removed or shall
otherwise become incapable of acting, the Company shall appoint a successor
to the Rights Agent. If the Company shall fail to make such appointment
within a period of thirty (30) days after giving notice of such removal or
after it has been notified in writing of such resignation or incapacity by
the resigning or incapacitated Rights Agent or by the holder of a Rights
Certificate (who shall, with such notice, submit his or her 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 (i) a corporation,
partnership or similar entity organized and doing business under the laws of
the United States or of any state of the United States, in good standing,
which is authorized under such laws to exercise corporate trust or
stockholder services 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 million or (ii) a
wholly-owned subsidiary of one or more such corporations, partnerships or
similar entities. After appointment, the successor Rights Agent shall be
vested with the same powers, rights, duties and responsibilities as if it had
been originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver
any further assurance, conveyance, act or deed necessary for the purpose.
Not later than the effective date of any such appointment, the Company shall
file notice thereof in writing with the predecessor Rights Agent and each
transfer agent of the Common Shares, and mail a notice thereof
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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 its Board of Directors to reflect any
adjustment or change in the Exercise Price and the number or kind or class of
shares or other securities or property purchasable under the Rights
Certificates made in accordance with the provisions of this Agreement. In
addition, in connection with the issuance or sale of Common Shares following
the Distribution Date and prior to the redemption or expiration of the
Rights, the Company (a) shall, with respect to Common Shares 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 other securities
of the Company outstanding at the date hereof 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
of Directors of the Company, issue Rights Certificates representing the
appropriate number of Rights in connection with such issuance or sale;
PROVIDED, HOWEVER, that (i) no such Rights Certificate shall be issued and
this sentence shall be null and void AB INITIO if, and to the extent that,
such issuance or this sentence would create a significant risk of or result
in material adverse tax consequences to the Company or the Person to whom
such Rights Certificate would be issued or would create a significant risk of
or result in such options' or employee plans' or arrangements' failing to
qualify for otherwise available special tax treatment and (ii) no such Rights
Certificate shall be issued if, and to the extent that, appropriate
adjustment shall otherwise have been made in lieu of the issuance thereof.
Section 23. REDEMPTION.
(a) The Company may, at its option and with the approval of
the Board of Directors, at any time prior to the earlier of (i) the
Distribution Date or (ii) the Close of Business on the Final Expiration Date,
redeem all but not less than all the then outstanding Rights at a redemption
price of $0.001 per Right, appropriately adjusted to reflect any stock split,
stock dividend or similar transaction occurring after the date hereof (such
redemption price being herein referred to as the "REDEMPTION PRICE") and the
Company may, at its option, pay the Redemption Price either in Common Shares
(based on the Current Per Share Market Price thereof at the time of
redemption) or cash. Such redemption of the Rights by the Company may be
made effective at such time, on such basis and with such conditions as the
Board of Directors in its sole discretion may establish. The date on which
the Board of Directors of the Company elects to make the redemption effective
shall be referred to as the "REDEMPTION DATE."
(b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption 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 will terminate and
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the only right thereafter of the holders of Rights shall be to receive the
Redemption Price. The Company shall promptly give public notice of any such
redemption; PROVIDED, HOWEVER, that the failure to give or any defect in, any
such notice shall not affect the validity of such redemption. Within ten
(10) days after the action of the Board of Directors ordering the redemption
of the Rights, the Company shall give notice of such redemption to the Rights
Agent and 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 Shares. Any notice which is
mailed in the manner herein provided shall be deemed given, whether or not
the holder receives the notice. Each such notice of redemption will state
the method by which the payment of the Redemption Price will be made.
Neither the Company nor any of its Affiliates or Associates may redeem,
acquire or purchase for value any Rights at any time in any manner other than
that specifically set forth in this Section 23 or in Section 24 hereof, and
other than in connection with the purchase of Common Shares prior to the
Distribution Date.
(c) Notwithstanding the provisions of Section 23(a), in the
event that a majority of the Board of Directors of the Company is elected by
stockholder action by written consent, then until the 180th day following the
effectiveness of such election the Rights shall not be redeemed if such
redemption is reasonably likely to have the purpose or effect of facilitating
a Transaction with an Interested Person.
Section 24. EXCHANGE.
(a) Subject to applicable laws, rules and regulations, and
subject to subsection 24(c) below, the Company may, at its option, by action
of its Board of Directors, at any time after the occurrence of a Triggering
Event, exchange all or part of the then outstanding and exercisable Rights
(which shall not include Rights that have become null and void pursuant to
the provisions of Section 7(e) hereof) for Common Shares at an exchange ratio
of one Common Share per Right, appropriately adjusted to reflect any stock
split, stock dividend or similar transaction occurring after the date hereof
(such exchange ratio being hereinafter referred to as the "EXCHANGE RATIO").
Notwithstanding the foregoing, such Board of Directors shall not be empowered
to effect such exchange at any time after any Person (other than the Company,
any Subsidiary of the Company, any employee benefit plan of the Company or
any such Subsidiary, or any Person organized, appointed or established by the
Company for or pursuant to the terms of any such plan), together with all
Affiliates and Associates of such Person, becomes the Beneficial Owner of 50%
or more of the Common Shares then outstanding.
(b) Immediately upon the action of the Board of Directors
ordering the exchange of any Rights pursuant to subsection 23(c), 24(a),
24(g) and without any further action and without any notice, the right to
exercise such Rights shall terminate and the only right thereafter of the
holders of such Rights shall be to receive that number of Common Shares equal
to the number of such Rights held by such holder multiplied by the Exchange
Ratio. The Company shall give public notice of any such exchange (with
notice thereof to the Rights Agent); PROVIDED, HOWEVER, that the failure to
give,
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or any defect in, such notice shall not affect the validity of such exchange.
The Company 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 will state the method by which the
exchange of the Common Shares for Rights will be effected and, in the event
of any partial exchange, the number of Rights which will be exchanged. Any
partial exchange shall be effected pro rata based on the number of Rights
(other than Rights which have become void pursuant to the provisions of
Section 7(e) hereof) held by each holder of Rights.
(c) In the event that there shall not be sufficient Common
Shares issued but not outstanding or authorized but unissued to permit any
exchange of Rights as contemplated in accordance with Section 23(c), 24(a),
24(g), the Company shall either take such action as may be necessary to
authorize additional Common Shares for issuance upon exchange of the Rights
or alternatively, at the option of a majority of the Board of Directors, with
respect to each Right (i) pay cash in an amount equal to the Current Value
(as hereinafter defined), in lieu of issuing Common Shares in exchange
therefor, or (ii) issue debt or equity securities or a combination thereof,
having a value equal to the Current Value, in lieu of issuing Common Shares
in exchange for each such Right, where the value of such securities shall be
determined by a nationally recognized investment banking firm selected by
majority vote of the Board of Directors, or (iii) deliver any combination of
cash, property, Common Shares and/or other securities having a value equal to
the Current Value in exchange for each Right. For purposes of this Section
24(c) only, the "Current Value" shall mean the product of the Current Per
Share Market Price of Common Shares on the date of the occurrence of the
event described above in subparagraph (a), multiplied by the number of Common
Shares for which the Right otherwise would be exchangeable if there were
sufficient shares available. To the extent that the Company determines that
some action need be taken pursuant to clauses (i), (ii) or (iii) of this
Section 24(c), the Board of Directors may temporarily suspend the
exercisability of the Rights for a period of up to sixty (60) days following
the date on which the event described in Section 23(c),24(a), 24(g) shall
have occurred, in order to seek any authorization of additional Common Shares
and/or to decide the appropriate form of distribution to be made pursuant to
the above provision and to determine the value thereof. In the event of any
such suspension, the Company shall issue a public announcement stating that
the exercisability of the Rights has been temporarily suspended (with notice
thereof to the Rights Agent).
(d) The Company shall not be required to issue fractions of
Common Shares or to distribute certificates which evidence fractional Common
Shares. In lieu of such fractional Common Shares, there shall be paid to the
registered holders of the Rights Certificates with regard to which such
fractional Common Shares would otherwise be issuable, an amount in cash equal
to the same fraction of the current market value of a whole Common Share (as
determined pursuant to the second sentence of Section 1(j) hereof).
(e) The Company may, at its option, by majority vote of its Board
of Directors, at any time before any Person has become an Acquiring Person,
exchange all or part of the then
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outstanding Rights for rights of substantially equivalent value, as
determined reasonably and with good faith by the Board of Directors, based
upon the advice of one or more nationally recognized investment banking firms.
(f) Immediately upon the action of the Board of Directors
ordering the exchange of any Rights pursuant to subsection 24(e) of this
Section 24 and without any further action and without any notice, the right
to exercise such Rights shall terminate and the only right thereafter of a
holder of such Rights shall be to receive that number of rights in exchange
therefor as has been determined by the Board of Directors in accordance with
subsection 24(e) above. The Company shall give public notice of any such
exchange (with notice thereof to the Rights Agent); PROVIDED, HOWEVER, that
the failure to give, or any defect in, such notice shall not affect the
validity of such exchange. The Company 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 transfer agent for the Common Shares of
the Company. Any notice which is mailed in the manner herein provided shall
be deemed given, whether or not the holder receives the notice. Each such
notice of exchange will state the method by which the exchange of the Rights
will be effected.
(g) Notwithstanding the provisions of this Section 24, in the
event that a majority of the Board of Directors of the Company is elected by
stockholder action by written consent, then until the 180th day following the
effectiveness of such election the Rights shall not be exchanged for Common
Shares or rights of substantially equivalent value if such exchange is
reasonably likely to have the purpose or effect of facilitating a Transaction
with an Interested Person.
Section 25. NOTICE OF CERTAIN EVENTS.
(a) In case the Company shall propose to effect or permit to
occur any Triggering Event or Section 13 Event, the Company shall give notice
thereof to the Rights Agent and to each holder of Rights in accordance with
Section 26 hereof at least twenty (20) days prior to occurrence of such
Triggering Event or such Section 13 Event.
(b) In case any Triggering Event or Section 13 Event 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
event, which shall specify the event and the consequences of the event to
holders of Rights under Sections 11(a)(ii) and 13 hereof.
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Section 26. NOTICES. Notices or demands authorized by this Agreement
to be given or made by the Rights Agent or by the holder of any Rights
Certificate to or on the Company shall be sufficiently given or made if sent
by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Rights Agent) as follows:
Source Media, Inc.
0000 XXX Xxxxxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: General Counsel
with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
Professional Corporation
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx Xxxxxx
Subject to the provisions of Section 21 hereof, any notice or demand
authorized by this Agreement to be given or made by the Company or by the
holder of any 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:
ChaseMellon Shareholder Services, L.L.C.
0000 Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx Xxxxxx
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.
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(a) Prior to the Distribution Date, the Company may supplement
or amend this Agreement in any respect without the approval of any holders of
Rights and the Rights Agent shall, if the Company so directs (subject to the
Rights Agent's consent, not to be unreasonably withheld, if such supplement
or amendment changes or increases the Rights Agent's duties, liabilities or
obligations hereunder), execute such supplement or amendment. From and after
the Distribution Date, the Company and the Rights Agent may from time to time
supplement or amend this Agreement without the approval of any holders of
Rights in order to (i) cure any ambiguity, (ii) correct or supplement any
provision contained herein which may be defective or inconsistent with any
other provisions herein, (iii) shorten or lengthen any time period hereunder
or (iv) to change or supplement the provisions hereunder in any manner that
the Company may deem necessary or desirable and that shall not adversely
affect the interests of the Rights Agent or the holders of Rights (other than
an Acquiring Person or an Affiliate or Associate of an Acquiring Person);
PROVIDED, this Agreement may not be supplemented or amended to lengthen,
pursuant to clause (iii) of this sentence, (A) a time period relating to when
the Rights may be redeemed at such time as the Rights are not then redeemable
or (B) any other time period unless such lengthening is for the purpose of
protecting, enhancing or clarifying the rights of, and/or the benefits to,
the holders of Rights (other than an Acquiring Person or an Affiliate or
Associate of an Acquiring Person). Upon the delivery of a certificate from
an appropriate officer of the Company that states that the proposed
supplement or amendment is in compliance with the terms of this Section 27,
the Rights Agent shall execute such supplement or amendment. Prior to the
Distribution Date, the interests of the holders of Rights shall be deemed
coincident with the interests of the holders of Common Shares.
(b) Notwithstanding the provisions of Section 27(a), in the
event that a majority of the Board of Directors of the Company is elected by
stockholder action by written consent, then until the 180th day following the
effectiveness of such election, this Rights Agreement shall not be
supplemented or amended in any manner reasonably likely to have the purpose
or effect of facilitating a Transaction with an Interested Person.
Section 28. SUCCESSORS. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 29. DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS, ETC.
For all purposes of this Agreement, any calculation of the number of Common
Shares outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding Common Shares of
which any Person is the Beneficial Owner, shall be made in accordance with
the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations
under the Exchange Act. The Board of Directors of the Company shall have the
exclusive power and authority to administer this Agreement and to exercise
all rights and powers specifically granted to the Board, or the Company, or
as may be necessary or advisable in the administration of this Agreement,
including, without limitation, the right and power to (i) interpret the
provisions of this Agreement and (ii) make all determinations deemed
necessary or advisable for the administration of this Agreement (including a
determination to redeem or not redeem the Rights or to amend the Agreement).
All such actions,
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calculations, interpretations and determinations (including, for purposes of
clause (y) below, all omissions with respect to the foregoing) which are done
or made by the Board in good faith, shall (x) be final, conclusive and
binding on the Company, the Rights Agent, the holders of the Rights
Certificates and all other parties and (y) not subject the Board to any
liability to the holders of the Rights. The Rights Agent shall be entitled
to assume that the Company's Board of Directors acts in good faith at all
times and shall incur no liability for such reliance.
Section 30. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement
shall be construed to give to any Person other than the Company, the Rights
Agent and the registered holders of the Rights Certificates (and, prior to
the Distribution Date, the Common Shares) any legal or equitable right,
remedy or claim under this Agreement; but this Agreement shall be for the
sole and exclusive benefit of the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the Distribution
Date, the Common Shares).
Section 31. SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain
in full force and effect and shall in no way be affected, impaired or
invalidated; 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 of Directors of the Company 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 Company's Board of Directors.
Section 32. GOVERNING LAW. This Agreement and each Right and each
Rights Certificate issued hereunder shall be deemed to be a contract made
under the laws of the State of Delaware and for all purposes shall be
governed by and construed in accordance with the laws of such State
applicable to contracts to be made and performed entirely within such State.
Section 33. COUNTERPARTS. This Agreement may be executed in any
number of counterparts and each of such counterparts shall for all purposes
be deemed to be an original, and all such counterparts shall together
constitute but one and the same instrument.
Section 34. DESCRIPTIVE HEADINGS. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
"COMPANY" SOURCE MEDIA, INC.
By: /s/ Xxxx X. Xxxx
--------------------------------
Name: Xxxx X. Xxxx
Title: President
"RIGHTS AGENT" CHASEMELLON SHAREHOLDER SERVICES,
L.L.C.
By: /s/ Xxxxx Xxxxxxx
--------------------------------
Name: Xxxxx Xxxxxxx
------------------------------
Title: Relationship Manager
-----------------------------
EXHIBIT A
FORM OF RIGHTS CERTIFICATE
Certificate No. R- _________ Rights
NOT EXERCISABLE AFTER THE EARLIER OF (i) MAY 7, 2008 (ii) THE DATE
TERMINATED BY THE COMPANY OR (iii) THE DATE THE COMPANY EXCHANGES THE
RIGHTS PURSUANT TO THE RIGHTS AGREEMENT. THE RIGHTS ARE SUBJECT TO
REDEMPTION, AT THE OPTION OF THE COMPANY, AT $0.001 PER RIGHT ON THE
TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES,
RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN AFFILIATE OR
ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE
RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME
NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE
OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING
PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH
TERMS ARE DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS
CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND VOID
IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF SUCH RIGHTS
AGREEMENT.]
RIGHTS CERTIFICATE
SOURCE MEDIA, INC.
This certifies that ______________________________, or registered assigns,
is the registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Rights Agreement dated as of April 24, 1998, (the "RIGHTS AGREEMENT"),
between Source Media, Inc., a Delaware corporation (the "COMPANY"), and
ChaseMellon Shareholder Services, L.L.C. ( 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., New York time, on May 7, 2008 at
the principal Dallas office of the Rights Agent, or at the office of its
successor as Rights Agent, one fully paid non-assessable share of Common Stock,
$0.001 par value, (the "COMMON SHARES"), of the Company, at a Exercise Price of
SIXTY-FIVE DOLLARS ($65.00) per Common Share (the "EXERCISE PRICE"), upon
presentation and surrender of this Rights Certificate with the Form of Election
to Purchase
and related Certificate duly executed. The number of Rights evidenced
by this Rights Certificate (and the number of Common Shares which may be
purchased upon exercise hereof) set forth above are the number and Exercise
Price as of April 24, 1998 based on the Common Shares as constituted at such
date. As provided in the Rights Agreement, the Exercise Price and the number
and kind of Common Shares or other securities which may be purchased upon the
exercise of the Rights evidenced by this Rights Certificate are subject to
modification and adjustment upon the happening of certain events.
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 principal executive offices of
the Company and the above-mentioned office of the Rights Agent.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Rights Certificate (i) may be redeemed by the Company, at its
option, at a redemption price of $0.001 per Right or (ii) may be exchanged by
the Company in whole or in part for Common Shares, substantially equivalent
rights or other consideration as determined by the Company.
This Rights Certificate, with or without other Rights Certificates,
upon surrender at the principal Dallas office of the Rights Agent, may be
exchanged for another Rights Certificate or Rights Certificates of like tenor
and date evidencing Rights entitling the holder to purchase a like aggregate
amount of securities as the Rights evidenced by the Rights Certificate or Rights
Certificates surrendered shall have entitled such holder to purchase. If this
Rights Certificate shall be exercised in part, the holder shall be entitled to
receive upon surrender hereof another Rights Certificate or Rights Certificates
for the number of whole Rights not exercised.
No fractional portion of a Common Share will be issued upon the
exercise of any Right or Rights evidenced hereby but in lieu thereof a cash
payment will be made, 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 the Common
Shares or of any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or
2
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 of the Company and
its corporate seal. Dated as of _______________, 19____.
ATTEST: SOURCE MEDIA, INC.
____________________________________________ By: ___________________________
________________________________, Secretary
Its: __________________________
Countersigned:
CHASEMELLON SHAREHOLDER
SERVICES, L.L.C.
as Rights Agent
By: _______________________________
Its: ______________________________
3
FORM OF REVERSE SIDE OF RIGHTS CERTIFICATE
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate)
FOR VALUE RECEIVED ____________________________________ hereby
sells, assigns and transfers unto
_______________________________________________________________________________
(Please print name and address of transferee)
________________________________________________________________________________
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint __________________________
Attorney, to transfer the within Rights Certificate on the books of the
within-named Company, with full power of substitution.
Dated: _______________, 19____
_______________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Rights Certificate [ ] is [ ] is not being sold,
assigned and transferred by or on behalf of a Person who is or was an Acquiring
Person, or an Affiliate or Associate of any such Person (as such terms are
defined in the Rights Agreement);
(2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this Rights
Certificate from any Person who is, was or subsequently became an Acquiring
Person or an Affiliate or Associate of any such Person.
Dated: _______________, 19____
------------------------------
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.
FORM OF REVERSE SIDE OF RIGHTS CERTIFICATE -- CONTINUED
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to
exercise the Rights Certificate)
To: ___________________________
The undersigned hereby irrevocably elects to exercise
_________________________ Rights represented by this Rights Certificate to
purchase the number of Common Shares issuable upon the exercise of such Rights
and requests that certificates for such number of Common Shares 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: ___________________ , 19____
-------------------------------
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.
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 or Associate of any such Person (as such terms are defined in the
Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate from
any Person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate of any such Person.
Dated: _______________, 19____
------------------------------
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.
FORM OF REVERSE SIDE OF RIGHTS CERTIFICATE -- CONTINUED
NOTICE
The signature in the foregoing Forms of Assignment and Election must
conform to the name as written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any change whatsoever.
EXHIBIT B
STOCKHOLDER RIGHTS PLAN
SOURCE MEDIA, INC.
SUMMARY OF RIGHTS
DISTRIBUTION AND
TRANSFER OF RIGHTS;
RIGHTS CERTIFICATE: The Board of Directors has declared a dividend of one
Right for each share of Source Media, Inc. Common Stock
outstanding. Prior to the Distribution Date referred to
below, the Rights will be evidenced by and trade with the
certificates for the Common Stock. After the Distribution
Date, Source Media, Inc. (the "COMPANY") will mail Rights
certificates to the Company's stockholders and the Rights
will become transferable apart from the Common Stock.
DISTRIBUTION DATE: Rights will separate from the Common Stock and become
exercisable (the "DISTRIBUTION DATE") following (a) the
tenth day after a person or group acquires beneficial
ownership of 15% or more of the Company's Common Stock or
(b) the tenth business day (or such later date as may be
determined by the Company's Board of Directors) after a
person or group announces a tender or exchange offer, the
consummation of which would result in ownership by a
person or group of 15% or more of the Company's Common
Stock.
COMMON STOCK
PURCHASABLE UPON
EXERCISE OF RIGHTS: After the Distribution Date, each Right will entitle the
holder to purchase for $65.00 (the "EXERCISE PRICE"), one
share of the Company's Common Stock.
FLIP-IN: If an acquiror (an "ACQUIRING PERSON") obtains 15% or more
of the Company's Common Stock THEN each Right (other than
Rights owned by an Acquiring Person or its affiliates)
will entitle the holder thereof to purchase, for the
Exercise Price, a number of shares of the Company's Common
Stock having a then current market value of twice the
Exercise Price.
FLIP-OVER: If, after an Acquiring Person obtains 15% or more of the
Company's Common Stock, (a) the Company merges into
another entity, (b) an acquiring entity merges into the
Company or (c) the Company sells more than 50% of the
Company's assets or earning power, THEN each Right (other
than Rights owned by an Acquiring Person or its
affiliates) will entitle the holder thereof to purchase,
for the Exercise Price, a number of shares of Common Stock
of the person engaging in
the transaction having a then current market value of
twice the Exercise Price.
EXCHANGE PROVISION: At any time after the date an Acquiring Person obtains 15%
or more of the Company's Common Stock and prior to the
acquisition by the Acquiring Person of 50% of the
outstanding Common Stock, the Company's Board of Directors
may exchange the Rights (other than Rights owned by the
Acquiring Person or its affiliates), in whole or in part,
for shares of Common Stock of the Company at an exchange
ratio of one share of Common Stock per Right (subject to
adjustment). However, if a majority of the Company's
Board of Directors is elected by stockholder action by
written consent, then for a period of 180 days following
such election the Rights cannot be exchanged if such
exchange is reasonably likely to have the purpose or
effect of facilitating an acquisition of the Company by a
person or entity who proposed, nominated or supported a
director of the Company so elected by written consent (an
"INTERESTED PERSON").
REDEMPTION OF
THE RIGHTS: Rights will be redeemable at the Company's option for
$0.001 per Right at any time on or prior to the
Distribution Date. However, if a majority of the
Company's Board of Directors is elected by stockholder
action by written consent, then for a period of 180 days
following such election the Rights cannot be redeemed if
such redemption is reasonably likely to have the purpose
or effect of facilitating an acquisition of the Company by
an Interested Person.
EXPIRATION OF
THE RIGHTS: The Rights expire on the earliest of (a) May 7, 2008 or
(b) exchange or redemption of the Rights as described
above.
AMENDMENT OF
TERMS OF RIGHTS: The terms of the Rights and the Rights Agreement may be
amended in any respect without the consent of the Rights
holders on or prior to the Distribution Date; thereafter,
the terms of the Rights and the Rights Agreement may be
amended without the consent of the Rights holders in order
to cure any ambiguities or to make changes which do not
adversely affect the interests of Rights holders (other
than the Acquiring Person). However, if a majority of the
Company's Board of Directors is elected by stockholder
action by written consent, then for a period of 180 days
following such election the Rights Agreement cannot be
amended in any manner reasonably likely to have the
purpose or effect of facilitating an acquisition of the
Company by an Interested Person.
VOTING RIGHTS: Rights will not have any voting rights.
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ANTI-DILUTION
PROVISIONS: Rights will have the benefit of certain customary
anti-dilution provisions.
TAXES: The Rights distribution should not be taxable for federal
income tax purposes. However, following an event which
renders the Rights exercisable or upon redemption of the
Rights, stockholders may recognize taxable income.
The foregoing is a summary of certain principal terms of the Stockholder Rights
Plan only and is qualified in its entirety by reference to the detailed terms of
the Rights Agreement dated as of April 24, 1998, between the Company and the
Rights Agent.
UNDER CERTAIN CIRCUMSTANCES SET FORTH IN THE RIGHTS AGREEMENT BETWEEN SOURCE
MEDIA, INC. AND CHASEMELLON SHAREHOLDER SERVICES, L.L.C. DATED AS OF APRIL 24,
1998, RIGHTS ISSUED TO, OR HELD BY, ANY PERSON WHO IS, WAS OR BECOMES AN
ACQUIRING PERSON OR ANY AFFILIATE OR ASSOCIATE THEREOF (AS SUCH TERMS ARE
DEFINED IN SUCH RIGHTS AGREEMENT), WHETHER CURRENTLY HELD BY OR ON BEHALF OF
SUCH PERSON OR BY ANY SUBSEQUENT HOLDER, MAY BECOME NULL AND VOID.
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