RIGHTS AGREEMENT
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This Rights Agreement, dated as of March 30, 1998 is made by and between
Brilliant Digital Entertainment, Inc., a Delaware corporation (the "Company"),
and U. S. Stock Transfer Corporation as Rights Agent (the "Rights Agent"),
W I T N E S S E T H
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WHEREAS, effective March 18, 1998 (the "Declaration Date") the Board of
Directors of the Company authorized and declared a dividend distribution of one
right (a "Right") for each share of the Common Stock, par value $0.001 per
share, of the Company (the "Common Stock") outstanding at the close of business
on April 2, 1998 (the "Record Date") and has further authorized the issuance of
one Right (as such number may hereafter be adjusted pursuant to the provisions
of this Rights Agreement) with respect to each share of Common Stock issued
between the Record Date and the earliest of the Distribution Date and the
Expiration Date (as such terms are hereinafter defined). Each Right shall
represent the right to purchase, upon the terms and subject to the conditions
hereinafter set forth, one one-hundredth (1/100th) of a share (subject to
adjustment) of the Series A Preferred Stock, par value $0.001 per share (the
"Preferred Stock"), of the Company having the rights and preferences set forth
in the form of Certificate of Designation of Rights, Preferences and Privileges
of Series A Preferred Stock attached hereto as EXHIBIT A;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
SECTION 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms have the meanings indicated;
"Acquiring Person" shall mean (i) any Person (as hereinafter defined)
who is an Adverse Person (as hereinafter defined), or (ii) any Person who or
which, together with all Affiliates (as hereinafter defined) and Associates (as
hereinafter defined) of such Person, shall, subsequent to the Declaration Date,
become the Beneficial Owner (as hereinafter defined) of 15% or more of the
shares of Common Stock then outstanding, but shall not include (x) any Exempt
Person (as hereinafter defined), (y) any Permitted Holder, or (z) any Person
who becomes a Beneficial Owner of 15% or more of the shares of Common Stock
then outstanding solely because (1) of a change in the aggregate number of
shares of Common Stock outstanding since the last date on which such Person
acquired Beneficial Ownership of any shares of Common Stock, or (2) it acquired
such Beneficial Ownership in the good faith belief that such acquisition would
not (A) cause such Beneficial Ownership to equal or exceed 15% of the shares of
Common Stock then outstanding (or in the case of a Permitted Holder, the
percentage the Permitted Holder may hold without ceasing to be a Permitted
Holder) and such Person relied in good faith in computing the percentage of its
Beneficial Ownership on publicly filed reports or documents of the Company
which are inaccurate or out-of-date, or (B) otherwise cause a Distribution Date
or the adjustment provided for in Section 14 to occur. Notwithstanding clause
(z) of the prior sentence, if any Person that is not an Acquiring Person
because of the operation of such clause (z) does not reduce
its Beneficial Ownership of shares of Common Stock to less than 15% (or in the
case of a Permitted Holder, the percentage the Permitted Holder may hold
without ceasing to be a Permitted Holder) by the close of business on the fifth
Business Day after notice from the Company (the date of notice being the first
day) that such Person's Beneficial Ownership of Common Stock equals or exceeds
15% (or in the case of a Permitted Holder, the percentage the Permitted Holder
may hold without ceasing to be a Permitted Holder), such Person shall, at the
end of such five Business Day period, become an Acquiring Person (and clause
(z) shall no longer apply to such Person). For purposes of this definition,
the determination whether any Person acted in "good faith" shall be
conclusively determined by the Board of Directors, acting by a vote of those
directors of the Company whose approval would be required to redeem the Rights
under Section 25.
"Adverse Person" shall mean any Person other than an Exempt Person
who is declared to be an Adverse Person by the Board of Directors of the
Company upon a determination that such Person, alone or together with its
Affiliates and Associates, has, at any time after the Declaration Date, become
the Beneficial Owner of a number of shares of Common Stock that the Board of
Directors determines to be substantial (which amount shall in no event be less
than 10% of the shares of Common Stock then outstanding) and a determination by
a majority of the Board of Directors after reasonable inquiry and
investigation, including consultation with such Persons as the Board of
Directors shall deem appropriate, that (i) such Beneficial Ownership by such
Person is intended to cause the Company to repurchase the shares of Common
Stock beneficially owned by such Person or to cause pressure on the Company to
take action or enter into a transaction or series of transactions intended to
provide such Person with short-term financial gain under circumstances where
the Board of Directors determines that the best long-term interest of the
Company and its stockholders would not be served by taking such action or
entering into such transaction or series of transactions at that time, or (ii)
such Beneficial Ownership is causing or reasonably likely to cause a material
adverse impact on the business or prospects of the Company.
"Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as in
effect on the date hereof.
A Person shall be deemed the "Beneficial Owner" of, and shall be
deemed to "beneficially own," and shall be deemed to have "Beneficial
Ownership" of, any securities:
(i) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, is deemed to beneficially own (as
determined pursuant to Rule 13d-3 of the General Rules and Regulations under
the Exchange Act as in effect on the date of this Agreement) or has the right
to dispose of;
(ii) which such Person or any of such Person's Affiliates or
Associates has, directly or indirectly, (A) the right to acquire (whether such
right is exercisable immediately or only after the passage of time) pursuant to
any agreement (other than customary agreements with and between underwriters
and selling group members with respect to a bona fide public offering of
securities), arrangement or understanding (whether or not in writing), or upon
the exercise of conversion rights, exchange rights, rights (other than the
Rights), warrants or options, or otherwise; PROVIDED, HOWEVER, that a Person
shall not be deemed the "Beneficial Owner" of
PAGE 2
or to "beneficially own," or to have the "Beneficial Ownership" of, (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 payment or exchange; or (2) securities
issuable upon exercise of Rights at any time prior to the occurrence of the
Distribution Date, (B) the right to vote, including pursuant to any agreement,
arrangement or understanding (whether or not in writing); PROVIDED, HOWEVER,
that a Person shall not be deemed the "Beneficial Owner" of or to "beneficially
own," or to have the "Beneficial Ownership" of, any security under this clause
(ii)(B) as a result of an agreement, arrangement or understanding to vote such
security if such agreement, arrangement or understanding (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 under the Exchange Act, and (2) is not also
then reportable by such Person 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
(other than customary agreements with and between underwriters and selling
group members with respect to a bona fide public offering of securities),
arrangement or understanding (whether or not in writing) for the purpose of
acquiring, holding, voting (except pursuant to a revocable proxy as described
in clause (B) of subparagraph (ii) of this definition) or disposing of any
voting securities of the Company.
"Board of Directors" shall mean the Board of Directors of the Company
or any duly authorized committee thereof.
"Business Day" shall mean any day other than a Saturday, Sunday or a
day on which banking institutions in the State of California are authorized or
obligated by law or executive order to close.
"Certificate of Designation" shall mean the Certificate of
Designation of Rights, Preferences and Privileges of Series A Preferred Stock,
a copy of which is attached hereto as EXHIBIT "A."
"Close of business" on any given date shall mean 5:00 P.M., Los
Angeles time, on such date; PROVIDED, HOWEVER, that if such date is not a
Business Day, "Close of business" shall mean 5:00 P.M., Los Angeles time, on
the next succeeding Business Day.
"Common Stock" when used with reference to the Company shall mean the
shares of Common Stock, presently par value $0.001 per share, of the Company,
or any other shares of capital stock of the Company into which the Common Stock
shall be reclassified or changed. "Common Stock" when used with reference to
any Person other than the Company shall mean the Common Stock (or, in the case
of a trust, partnership or other unincorporated entity, the equivalent equity
interest) with the greatest voting power of such Person (or, (i) if such Person
is a Subsidiary of another Person, the Person which ultimately controls such
first-mentioned Person, or (ii) if such Person is ultimately controlled by two
or more Persons, the controlling Person having Common Stock or equivalent
equity interests with the greatest aggregate current market
PAGE 3
value (determined by reference to the Current Market Price of such Common Stock
or equivalent equity interests), together with all rights and benefits (however
denominated or constituted) relating to such Common Stock (including, without
limitation, any rights or warrants to acquire additional shares of such Common
Stock or other securities or assets, or to participate in any trust for the
benefit of holders of such shares, or to share in the benefits of any
agreements or other arrangements for the benefit of such holders), whether or
not such rights are yet exercisable, and together with any other securities
which are represented by the certificates for such shares or are transferred in
connection with transfers of such shares.
"Continuing Director" shall mean any member of the Board of Directors
of the Company (while such Person is a member of such Board of Directors) who
is not an Acquiring Person or an Affiliate or Associate of an Acquiring Person
or a representative or nominee of an Acquiring Person or of any such Affiliate
or Associate, and who either (i) was a member of such Board of Directors prior
to the Stock Acquisition Date or (ii) subsequently became a member of such
Board of Directors, and whose nomination for election or reelection thereto was
recommended or approved by a majority of the Continuing Directors then on such
Board of Directors.
"Current Market Price" per share of Common Stock or Preferred Stock
("Stock") on any date shall be deemed to be the average of the daily closing
price per share of Stock for the 30 consecutive Trading Days (as such term is
hereinafter defined) immediately prior to such date; PROVIDED, HOWEVER, that in
the event that the Current Market Price per share of Stock is determined during
a period following the announcement by the issuer of such Stock of (A) a
dividend or distribution on such Stock, or (B) any subdivision, combination or
reclassification of such Stock, and prior to the expiration of 30 Trading Days
after the ex-dividend date for such dividend or distribution, or the record
date for such subdivision, combination or reclassification of such Stock, then,
and in such case, the "Current Market Price" shall be proportionately adjusted
to take into account ex-dividend or ex-distribution trading. 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 Stock 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 or the principal national securities exchange on which the Stock is
listed or admitted to trading or, if the Stock is not listed or admitted to
trading on any national securities exchange, the last price or, if not so
quoted, the average of the closing bid and asked prices per share for the
securities in the over-the-counter market, as reported by the National
Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ")
or such other system then in use, or, if on any such date the security is not
quoted by such organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the Stock selected
by the Board of Directors. If on any such date no market maker is making a
market in the Stock the fair value of such shares on such date as determined in
good faith by the Board of Directors shall be used. The term "Trading Day"
shall mean a day on which the principal national securities exchange on which
the shares of the Stock are listed or admitted to trading or traded is open for
the transaction of business or, if the Stock is not listed or admitted to
trading on any national securities exchange, a Business Day. If the Common
Stock is not publicly held
PAGE 4
or not so listed or traded, "Current Market Price" per share shall mean the
fair value per share of Common Stock as determined in good faith by the Board
of Directors.
If the Current Market Price per share of Preferred Stock cannot be
determined in the manner provided above or if the Preferred Stock is not
publicly traded, the "Current Market Price" per share of the Preferred Stock
shall be conclusively deemed to be an amount equal to the Current Market Price
per share of the Common Stock as determined pursuant to the immediately
preceding paragraph, multiplied by the Formula Number. If neither the Common
Stock nor the Preferred Stock are publicly held or so listed or traded, the
"Current Market Price" per share of the Preferred Stock shall mean the fair
value per share as determined in good faith by the Board of Directors, whose
determination shall be described in a statement filed with the Rights Agent and
shall be conclusive and binding for all purposes. For all purposes of this
Rights Agreement, the Current Market Price of one one-hundredth of a share of
Preferred Stock shall be equal to the Current Market Price of one share of
Preferred Stock divided by 100.
"Distribution Date" shall have the meaning set forth in Section 3
hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as in
effect on the date in question, unless otherwise specifically provided.
"Exempt Person" shall include (i) the Company, (ii) any Subsidiary
(as hereinafter defined) of the Company, and (iii) any employee benefit plan of
the Company or any of its Subsidiaries, or any entity holding shares of Common
Stock which was organized, appointed or established by the Company or any
Subsidiary of the Company for or pursuant to the terms of any such plan.
"Permitted Acquisition" shall mean an acquisition of shares of Common
Stock by a Person in a transaction or series of transactions which has been
previously approved by a majority of the Board of Directors with the
concurrence of a majority of the Continuing Directors.
"Permitted Holder" shall mean a Person who acquires Beneficial
Ownership of the Common Stock of the Company pursuant to a Permitted
Acquisition; PROVIDED, HOWEVER, a Permitted Holder shall remain a Permitted
Holder so long as the aggregate Beneficial Ownership of Common Stock held by
such Person does not exceed that number of shares of Common Stock held by such
Person immediately following the Permitted Acquisition pursuant to which such
Person became a Permitted Holder (reduced by the number of shares of Common
Stock from time to time disposed of by such Person) plus a number of additional
shares of Common Stock equal to 1% of the then outstanding shares of Common
Stock of the Company; PROVIDED, HOWEVER, any shares of Common Stock issued or
issuable to a Permitted Holder pursuant to employee benefit plans maintained by
the Company for the benefit of its employees, directors and consultants shall
be disregarded and not counted for purposes of calculating the limitations
imposed by the immediately preceding sentence.
"Person" shall mean any individual, firm, corporation, trust,
partnership or other entity, whether similar or dissimilar to the foregoing.
PAGE 5
"Preferred Stock" shall mean the Series A Preferred Stock, par value
$0.001 per share, of the Company having the rights and preferences set forth in
the form of Certificate of Designation.
"Purchase Price" with respect to each Right shall mean $15.00, as
such amount may from time to time be adjusted as provided herein, and shall be
payable in lawful money of the United States of America. All references herein
to the Purchase Price shall mean the Purchase Price as in effect at the time in
question.
"Record Date" shall mean April 2, 1998.
"Redemption Date" shall have the meaning set forth in Section 25.
"Redemption Price" with respect to each Right shall mean $0.001, as
such amount may from time to time be adjusted in accordance with Section 25.
All references herein to the Redemption Price shall mean the Redemption Price
in effect at the time in question.
"Right Certificate" shall mean a certificate representing a Right in
substantially the form attached hereto as EXHIBIT "B."
"Rights" shall mean the rights to purchase shares of Preferred Stock,
Common Stock and/or other securities, as the case may be, as provided in this
Rights Agreement.
"Securities Act" shall mean the Securities Act of 1933, as in effect
on the date in question, unless otherwise specifically provided.
"Stock Acquisition Date" shall mean 5:00 P.M., Los Angeles time, on
the first date of public announcement by the Company or an Acquiring Person
that an Acquiring Person has become such.
"Subsidiary" shall mean, with respect to any Person, any other Person
of which securities or other ownership interests having ordinary voting power,
in the absence of contingencies, to elect a majority of the board of directors
of such Person (if such Person is a corporation) or to participate in the
management and control of such Person (if such Person is not a corporation),
are at the time directly or indirectly owned by such first Person.
The terms set forth below are defined in the Sections indicated
below:
TERM SECTION
---- -------
Declaration Date RECITAL
Distribution Date 3(a)
Exchange Consideration 16
Expiration Date 7(a)
Final Expiration Date 7(a)
Formula Number Exhibit A
PAGE 6
Principal Party 14(b)
Summary of Rights 3(b)
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. In the event the Company appoints one or more co-
Rights Agents, the respective duties of the Rights Agent and any co-Rights
Agents shall be as the Company shall determine.
SECTION 3. ISSUANCE OF RIGHT CERTIFICATES.
(a) Until the earlier of (i) the close of business on the tenth day
after the Stock Acquisition Date (including any such date which is after the
Declaration Date and prior to the issuance of the Rights), (ii) the close of
business on the tenth day (or such later day as may be determined by action of
the Board of Directors) after the date of the commencement of a tender or
exchange offer by any Person (other than an Exempt Person) to acquire (when
added to any equity securities as to which such Person is the Beneficial Owner
immediately prior to such commencement) Beneficial Ownership of that number of
shares of the issued and outstanding Common Stock which would cause such Person
to become an Acquiring Person pursuant to the terms of this Agreement
(including any such date which is after the Declaration Date and prior to the
issuance of the Rights), and (iii) the close of business on the tenth day (or
such later day as may be determined by action of the Board of Directors) after
the filing by any Person (other than an Exempt Person) of a registration
statement under the Securities Act, with respect to a contemplated exchange
offer to acquire (when added to any equity securities as to which such Person
is the Beneficial Owner immediately prior to such filing) Beneficial Ownership
of that number of shares of the issued and outstanding Common Stock which would
cause such Person to become an Acquiring Person pursuant to the terms of this
Agreement (including any such date which is after the Declaration Date and
prior to the issuance of the Rights) (the earliest of such dates referred to in
clauses (i), (ii) and (iii) of this Section 3(a) being herein referred to as
the "Distribution Date"), (A) the Rights will be evidenced (subject to the
provisions of Section 3(b) hereof) by the certificates for the Common Stock
registered in the names of the holders of the Common Stock (which certificates
for shares of Common Stock shall also be deemed to be Right Certificates (as
such term is hereinafter defined)) and not by separate Right Certificates, and
(B) the Rights (and the right to receive Right Certificates) will be
transferable only in connection with the transfer of the underlying Common
Stock; PROVIDED, that if the Distribution Date would be prior to the Record
Date, the Record Date shall be the Distribution Date, and PROVIDED, FURTHER,
that (x) if, following the occurrence of the Stock Acquisition Date and prior
to the Distribution Date, (1) a Person who is an Acquiring Person shall have
transferred or otherwise disposed of a number of shares of Common Stock of the
Company in one transaction or a series of transactions (not directly or
indirectly involving the Company or any of its Subsidiaries) such that such
Person is thereafter the Beneficial Owner of less than 15% (or (a) in the case
of a Permitted Holder, the percentage the Permitted Holder may hold without
ceasing to be a Permitted Holder, and (b) in the case of an Adverse Person, the
percentage such Person may hold as determined by the Board of Directors, which
in no event may the Board of Directors require to be less than 10% of the
shares of Common Stock then outstanding, so that the Board of Directors no
longer declares such
PAGE 7
Person to be an Adverse Person) of the outstanding Common Stock of the Company,
(2) there are no other Persons, immediately following the occurrence of the
event described in clause (1), who are Acquiring Persons, and (3) the Board of
Directors of the Company (with the concurrence of a majority of the Continuing
Directors) shall so approve, then, for purposes of this Agreement, the Stock
Acquisition Date shall be deemed never to have occurred, and (y) if a tender or
exchange offer referred to in clauses (ii) or (iii) above is canceled or
withdrawn prior to the Distribution Date, such offer shall be deemed, for
purposes of this Agreement, never to have been made. As soon as practicable
after the Company has notified the Rights Agent of the occurrence of the
Distribution Date, the Rights Agent will send, by first-class, insured, postage
prepaid mail, to each record holder of the Common Stock as of the close of
business on the Distribution Date, at the address of such holder shown on the
records of the Company, one or more Right Certificates, evidencing one Right
for each share of Common Stock so held, subject to adjustment as herein
provided. As of and after the Distribution Date, the Rights will be evidenced
solely by such Right Certificates.
(b) On the Record Date or as soon as practicable thereafter, the
Company will send a copy of a Summary of Rights to Purchase Preferred Stock, in
substantially the form of EXHIBIT "C" hereto (the "Summary of Rights"), by
first-class, postage prepaid mail, to each record holder of the Common Stock on
the Record Date, as shown by the records of the Company, at the address of such
holder shown on the records of the Company. With respect to certificates for
Common Stock outstanding as of the Record Date, until the Distribution Date (or
the earlier redemption, exchange, expiration or termination of the Rights), the
Rights will be evidenced solely by such certificates for Common Stock
registered in the names of the holders of the Common Stock and the registered
holders of the Common Stock shall also be registered holders of the associated
Rights. Until the Distribution Date (or the earlier redemption, exchange,
expiration or termination of the Rights), the surrender for transfer of any
certificate for Common Stock in respect of which Rights have been issued shall
also constitute the transfer of the Rights associated with the Common Stock
represented by such certificates.
(c) The Company will mail to any record holder of a Right
(including, prior to the Distribution Date, a record holder of Common Stock) a
copy of this Rights Agreement, without charge, within ten Business Days of
receipt of a written request therefor.
(d) Rights shall be issued in respect of all shares of Common Stock
which are issued or sold out of treasury after the Record Date but prior to the
Distribution Date (or the earlier redemption, exchange, expiration or
termination of the Rights). All certificates for Common Stock issued or sold
after the Record Date but prior to the earlier of the Distribution Date and the
Expiration Date shall be deemed also to be certificates for Rights and shall
have impressed on, printed on, written on or otherwise affixed to them the
following legend:
This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in a Rights Agreement between Brilliant
Digital Entertainment, Inc. (the "Company") and U.S. Stock Transfer
Corporation as Rights Agent, dated as of March 30, 1998, as it may
from time to time be supplemented or amended pursuant to its terms
(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
PAGE 8
of the Company. Under certain circumstances, as set forth in the Rights
Agreement, such Rights may be redeemed, may expire, or may be evidenced by
separate certificates and no longer be evidenced by this certificate. The
Company will mail to the holder of record of this certificate a copy of
the Rights Agreement without charge within ten business days after receipt
of a written request therefor. Under certain circumstances, as set forth
in the Rights Agreement, Rights issued to, or held by, any Person who is,
was or becomes an Acquiring Person or an 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 certificates containing the foregoing legend, until the
Distribution Date (or the earlier redemption, exchange, expiration or
termination of the Rights) the Rights associated with the Common Stock
represented by such certificates shall be evidenced by such certificates alone,
and the surrender for transfer of any of such certificates shall also
constitute the transfer of the Rights associated with the Common Stock
represented by such certificates. Notwithstanding this clause (d), the
omission of a legend shall not affect the enforceability of any part of this
Rights Agreement or the rights of any holder of Rights.
SECTION 4. FORM OF RIGHT CERTIFICATES. The Right Certificates (and
the forms of election to purchase and of assignment to be printed on the
reverse thereof) shall be substantially in the form of EXHIBIT "B" hereto and
may have such marks of identification or designation and such legends,
summaries or endorsements printed thereon as the Company may deem appropriate
and as are not inconsistent with the provisions of this Rights Agreement, or as
may be required to comply with any applicable law, rule or regulation or with
any rule or regulation of any stock exchange or quotation system on which the
Rights may from time to time be listed, or to conform to usage. Subject to the
provisions of Section 7, Section 11 and Section 24 hereof, the Right
Certificates, whenever issued, shall be dated as of the Distribution Date, and
on their face shall entitle the holders thereof to purchase such number of one
one-hundredth (1/100th) of one share of Preferred Stock as shall be set forth
therein at the Purchase Price set forth therein, but the number and type of
shares of Preferred Stock, Common Stock and other securities purchasable upon
the exercise of each Right and the Purchase Price thereof shall be subject to
adjustment as provided herein. To the extent provided in Section 7(f) hereof,
certain Rights Certificates shall contain the legend provided for therein.
SECTION 5. EXECUTION, COUNTERSIGNATURE AND REGISTRATION.
(a) The Right Certificates shall be executed on behalf of the
Company by its Chairman of the Board, its Chief Executive Officer, President,
Chief Operating Officer, Chief Financial Officer or any Vice President, either
manually or by facsimile signature. The Right Certificates shall be manually
countersigned by the Rights Agent and shall not be valid for any purpose unless
so countersigned. In case any officer of the Company whose manual or facsimile
signature is affixed to the Right Certificates shall cease to be such officer
of the Company before countersignature by the Rights Agent and issuance and
delivery by the Company, such Right Certificates, nevertheless, may be
countersigned by the Rights Agent, issued and delivered with the same force and
effect as though the Person who signed such Right Certificates had not ceased
PAGE 9
to be such officer of the Company. Any Right Certificate may be signed on
behalf of the Company by any Person who, at the actual date of the execution of
such Right Certificate, shall be a proper officer of the Company to sign such
Right Certificate, although at the date of the execution of this Rights
Agreement any such Person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its principal office or offices designated as the
appropriate place for surrender of Right Certificates upon exercise or
transfer, books for registration and transfer of the Right Certificates issued
hereunder. Such books shall show the names and addresses of the respective
holders of the Right Certificates, the number of Rights evidenced on its face
by each of the Right Certificates and the date of each of the Right
Certificates.
SECTION 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHT
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHT CERTIFICATES.
(a) Subject to the provisions of Section 7(f) and Section 15 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 Right Certificate or
Right Certificates (other than Right Certificates representing Rights that have
become null and void pursuant to Section 7(f) hereof or that have been
exchanged pursuant to Section 16 hereof) may be transferred, split up, combined
or exchanged for another Right Certificate or Right Certificates, representing,
in the aggregate, the same number of Rights as the Right Certificate or Right
Certificates surrendered then represented. Any registered holder desiring to
transfer, split up, combine or exchange any Right Certificate or Certificates
shall make such request in writing delivered to the Rights Agent, and shall
surrender the Right Certificate or Right Certificates to be transferred, split
up, combined or exchanged at the principal office or offices of the Rights
Agent designated for such purpose. Neither the Rights Agent nor the Company
shall be obligated to take any action whatsoever with respect to the transfer
of any such surrendered Right Certificate or Right Certificates until the
registered holder shall have completed and signed the certificate contained in
the form of assignment on the reverse side of such Right Certificate and shall
have provided such additional evidence of the identity of the Beneficial Owner,
former Beneficial Owner and transferee Beneficial Owner (and Associates and
Affiliates of the foregoing) as the Company shall reasonably request.
Thereupon the Rights Agent shall, subject to Section 7(f) and Section 15
hereof, countersign and deliver to the Person entitled thereto a Right
Certificate or Right Certificates, as the case may be, as so requested. The
Company may require payment by such holder of a sum sufficient to cover any tax
or governmental charge that may be imposed in connection with any transfer,
split up, combination or exchange of Right Certificates.
(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 Right Certificate, and, in case of loss, theft or destruction, of
indemnity or security reasonably satisfactory to them, and reimbursement to the
Company and the Rights Agent of all reasonable expenses incidental thereto, and
upon surrender to the Rights Agent and cancellation of the Right Certificate if
mutilated, the Company will execute and deliver a new Right Certificate of like
tenor to the Rights Agent for countersignature and delivery to the registered
owner in lieu of the Right Certificate so lost, stolen, destroyed or mutilated.
PAGE 10
(c) Notwithstanding any other provision hereof, the Company and the
Rights Agent may amend this Rights Agreement to provide for uncertificated
Rights in addition to or in place of Rights evidenced by Right Certificates.
SECTION 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF
RIGHTS.
(a) Subject to Section 7(f), each Right shall entitle the registered
holder thereof, upon exercise thereof as provided herein, to purchase for the
Purchase Price at any time after the Distribution Date and prior to the earlier
of (i) the close of business on April 2, 2008 (the "Final Expiration Date"),
(ii) the Redemption Date and (iii) the time at which all exercisable Rights are
exchanged pursuant to Section 16 hereof (the earlier of (i), (ii) and (iii)
being herein referred to as the "Expiration Date"), one one-hundredth (1/100th)
of a share of Preferred Stock, subject to adjustment from time to time as
provided in Sections 11, 12 and 14 hereof.
(b) The registered holder of any Right Certificate may exercise the
Rights evidenced thereby (except as otherwise provided herein) in whole or in
part at any time after the Distribution Date, upon surrender of the Right
Certificate, with the form of election to purchase on the reverse side thereof
duly executed, to the Rights Agent at the principal office of the Rights Agent,
together with payment of the Purchase Price for each one one-hundredth
(1/100th) of a share of Preferred Stock as to which the Rights are exercised,
at or prior to the Expiration Date.
(c) The Purchase Price for each one one-hundredth (1/100th) of a
share of Preferred Stock pursuant to the exercise of a Right shall initially be
$15, shall be subject to adjustment from time to time as provided in Sections
11, 12 and 14 hereof and shall, except as otherwise provided in this Section
7(c), be payable in lawful money of the United States of America in accordance
with Section 7(d) below. In lieu of the cash payment referred to in the
immediately preceding sentence, following the occurrence of a Distribution
Date, the registered holder of a Right Certificate may exercise the Rights
evidenced thereby (except as otherwise provided herein) in whole or in part
upon surrender of the Right Certificate together with an election to exercise
such Rights without payment of cash on the reverse side thereof duly completed.
With respect to any such Rights as to which such an election is made, the
holder shall receive a number of one one-hundredths (1/100ths) of a share of
Preferred Stock, Common Stock and/or other securities, as the case may be,
having a value equal to the difference between (i) the value of the Preferred
Stock, Common Stock and/or other securities, as the case may be, that would
have been issuable upon payment of the Purchase Price and (ii) the Purchase
Price. For purposes of this Section 7(c), the value of any securities shall be
the Current Market Price thereof (or of the security to which such security is
deemed for purposes of this Agreement to be an equivalent) on the Trading Day
immediately preceding the Distribution Date.
(d) Upon receipt of a Right Certificate representing exercisable
Rights, with the form of election to purchase and the certificate duly
executed, accompanied by payment, with respect to each Right so exercised, of
the Purchase Price per one one-hundredth (1/100th) of a share of Preferred
Stock, Common Stock and/or other securities, as the case may be, to be
purchased, and an amount equal to any applicable transfer tax, in cash or by
certified check or bank draft payable to the order of the Company, or a duly
completed election to exercise without payment of cash, the Rights Agent shall,
subject to Section 22(k) hereof, thereupon promptly
PAGE 11
(i)(A) requisition from any transfer agent of the Preferred Stock, Common Stock
and/or other securities, as the case may be, (or make available, if the Rights
Agent is the transfer agent) certificates for the total number of shares of
Preferred Stock, Common Stock and/or other securities, as the case may be, to
be purchased or acquired and/or (B) requisition from the depositary agent
depositary receipts representing such number of fractional shares of Preferred
Stock, Common Stock and/or other securities, as the case may be, as are to be
purchased, in which case certificates for the fractional shares of Preferred
Stock, Common Stock and/or other securities, as the case may be, so represented
shall be deposited with the depositary agent (and the Company hereby
irrevocably authorizes and directs its transfer agent and any such depositary
agent to comply with all such requests), (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 15 hereof, (iii) promptly after
receipt of such certificates or depositary receipts, cause the same to be
delivered to or upon the order of the registered holder of such Right
Certificate, registered in such name or names as may be designated by such
holder, and (iv) when appropriate, after receipt thereof, promptly deliver any
such cash to or upon the order of the registered holder of such Right
Certificate. In the event that the Company is obligated to issue other
securities (including Common Stock of the Company) and/or distribute cash or
other property pursuant to Sections 9, 11, 12 or 14 hereof, the Company will
make all arrangements necessary so that such other securities, cash or other
property are available for distribution by the Rights Agent, if and when
appropriate.
(e) In case the registered holder of any Right Certificate shall
exercise less than all the Rights evidenced thereby, a new Right Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be
issued by the Rights Agent and delivered to, or upon the order of, the
registered holder of such Right Certificate, registered in such name or names
as may be designated by such holder, subject to the provisions of Section 15
hereof.
(f) Notwithstanding anything in this Rights Agreement to the
contrary, from and after the Stock Acquisition Date, any Rights beneficially
owned by (i) an Acquiring Person or any Affiliate or Associate thereof, (ii) a
transferee of an Acquiring Person or any Affiliate or Associate thereof, (iii)
a transferee of an Acquiring Person (or Associate or Affiliate thereof) who
becomes the transferee of such Rights concurrently with such Acquiring Person
becoming such or at any time thereafter, or (iv) a transferee of an Acquiring
Person (or Associate of Affiliate thereof) who becomes a transferee prior to
the Acquiring Person becoming such and receives the Rights pursuant to either
(A) a transfer (whether or not for consideration) by the Acquiring Person to
holders of its stock or other equity securities or to any Person with whom the
Acquiring Person has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer which the Board of Directors
has determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect the avoidance of this Section 7(f), shall be null and
void, and any existing or subsequent holder of any such Right shall not have
any right to exercise or transfer any such Right. Any Right Certificate issued
pursuant to this Rights Agreement that represents Rights beneficially owned by
any Person referred to in clause (A) or (B) above, and any Right Certificate
issued upon transfer, exchange, replacement or adjustment of any other Right
Certificate referred to in this sentence, shall contain (to the extent
feasible) the following legend:
PAGE 12
The Rights represented by this Right Certificate are or were
beneficially owned by a Person who is, was or became an Acquiring
Person or an Affiliate or an Associate of an Acquiring Person (as
those terms are defined in the Rights Agreement). This Right
Certificate and the Rights represented hereby may become null and
void in the circumstances specified in the Rights Agreement.
The Company shall use all reasonable efforts to comply with this
Section 7(f), but neither it nor the Rights Agent shall have any liability to
any Person as a result of the failure to make any determination with respect to
an Acquiring Person, or its Associates, Affiliates or any transferees of the
foregoing.
(g) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action whatsoever with respect to a registered holder of Rights upon the
occurrence of any purported exercise as set forth in this Section 7 unless such
registered holder shall have (i) completed and signed the certificate contained
in the form of election to purchase set forth on the reverse side of the Right
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 shall reasonably request.
SECTION 8. CANCELLATION AND DESTRUCTION OF RIGHT CERTIFICATES. All
Right Certificates surrendered or presented for the purpose of exercise,
transfer, split-up, combination or exchange shall, and any Right Certificate
representing Rights that have become null and void and non-transferable
pursuant to Section 7(f) surrendered or presented for any purpose 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 Right Certificates shall be issued in
lieu thereof except as expressly permitted by any of the provisions of this
Rights Agreement. The Company shall deliver to the Rights Agent for
cancellation and retirement, and the Rights Agent shall so cancel and retire,
any Right Certificate purchased or acquired by the Company. The Rights Agent
shall deliver all canceled Right Certificates to the Company, or shall, at the
written request of the Company, destroy such canceled Right Certificates, and
in such case shall deliver a certificate of destruction thereof to the Company.
SECTION 9. RESERVATION AND AVAILABILITY OF SHARES.
(a) The Company covenants and agrees that it shall use its best
efforts to at all times cause to be reserved and kept available out of its
authorized and unissued shares of Preferred Stock, Common Stock and/or other
securities, as the case may be, the number of shares of Preferred Stock, Common
Stock and/or other securities, as the case may be, that, as provided in this
Agreement, will be sufficient to permit the exercise in full of all outstanding
Rights.
(b) In the event that there shall not be sufficient shares of
Preferred Stock, Common Stock and/or other securities, as the case may be,
issued but not outstanding or authorized but unissued to permit the exercise or
exchange of Rights in accordance with Section 7 and Section 16, the Company
covenants and agrees that it will take all such action as may be necessary to
authorize additional Preferred Stock, Common Stock and/or other securities, as
the
PAGE 13
case may be, for issuance upon the exercise or exchange of Rights pursuant to
Section 7 and Section 16; provided, however, that if the Company is unable to
cause the authorization of additional shares of Preferred Stock, Common Stock
and/or other securities, as the case may be, then the Company shall, or in lieu
of seeking any such authorization, the Company may, to the extent necessary and
permitted by applicable law and any agreements or instruments in effect prior
to the Distribution Date to which it is a party, (A) upon surrender of a Right,
pay cash equal to the Purchase Price in lieu of issuing Preferred Stock, Common
Stock and/or other securities, as the case may be, and requiring payment
therefor, (B) upon due exercise of a Right and payment of the Purchase Price
due and payable with respect to each Right which is exercised, distribute a
combination of Preferred Stock, Common Stock, cash and/or other equity
securities and/or debt securities having an aggregate value equal to the value
of the Preferred Stock, Common Stock and/or other securities, as the case may
be, which otherwise would have been issuable pursuant to Section 7 or Section
16. To the extent that any legal or contractual restrictions (pursuant to
agreements or instruments in effect prior to the Distribution Date to which it
is party) prevent the Company from paying the full amount payable in accordance
with the foregoing sentence, the Company shall pay to holders of the Rights as
to which such payments are being made all amounts which are not then restricted
on a pro rata basis as such payments become permissible under such legal or
contractual restrictions until such payments have been paid in full.
(c) The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all shares of Preferred Stock and/or
Common Stock or other securities delivered upon exercise of Rights shall, at
the time of delivery of the certificates for such shares of Preferred Stock or
Common Stock or other securities (subject to payment of the Purchase Price), be
duly and validly authorized and issued and fully paid and nonassessable shares.
(d) The Company covenants and agrees that it will pay when due and
payable any and all federal and state transfer taxes and charges which may be
payable in respect of the issuance or delivery of the Right Certificates or of
any shares of Preferred Stock and/or Common Stock or other securities, as the
case may be, upon exercise of Rights. The Company shall not, however, be
required to pay any transfer tax which may be payable in respect of any
transfer involved in the transfer or delivery of Right Certificates or the
issuance or delivery of certificates or depository receipts for shares of
Preferred Stock and/or Common Stock or other securities, as the case may be, in
a name other than that of the registered holder of the Right Certificate
evidencing Rights surrendered for exercise or to issue or deliver any
certificates or depository receipts for shares of Preferred Stock and/or Common
Stock or other securities, as the case may be, upon the exercise of any Rights
until any such tax shall have been paid (any such tax being payable by the
holder of such Right Certificate at the time of surrender) or until it has been
established to the Company's satisfaction that no such tax is due.
(e) So long as the shares of Preferred Stock, Common Stock and/or
other securities, as the case may be, issuable upon the exercise of the Rights
may be listed on any national securities exchange or quoted on NASDAQ, the
Company shall use its best efforts to cause, from and after such time as the
Rights become exercisable, all shares reserved for such issuance to be listed
on such exchange or quoted on NASDAQ upon official notice of issuance of such
exercise.
PAGE 14
(f) The Company shall, unless an appropriate exemption from the
provisions of the Act is available, use its best efforts (i) to file, as soon
as practicable following the Stock Acquisition Date or at such earlier date as
may be required by law, as the case may be, a registration statement under the
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 Act and the rules and regulations promulgated by the
Securities Exchange Commission thereunder) until the earlier of (A) the date as
of which the Rights are no longer exercisable for such securities and (B) the
expiration of the Rights. The Company will also take such action as may be
appropriate to ensure compliance with the securities or "blue sky" laws of the
various states in connection with the exercisability of the Rights. The
Company may temporarily suspend, for a period of time not to exceed 90 days
after the date set forth in clause (i) of the first sentence of this Section
9(f), the exercisability of the Rights in order to prepare and file such
registration statement and permit it to become effective; provided, however,
that no such suspension shall remain effective after, and the Rights without
any further action by the Company or any other Person become exercisable
immediately upon, the effectiveness of such Registration Statement. Upon any
such suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a
public announcement at such time as the suspension is no longer in effect.
Notwithstanding any provision of this Agreement to the contrary, the Rights
shall not be exercisable (x) unless and until the registration statement under
the Act referred to above shall have been declared effective by the Securities
and Exchange Commission, (y) in any jurisdiction, unless and until any
requisite state securities or "blue sky" qualification in such jurisdiction
shall have been obtained, and (z) in a jurisdiction in which the exercise of
such Right shall not then be permitted under applicable law.
SECTION 10. RECORD DATE. Each Person (other than the Company) in whose
name any certificate or depository receipt for Preferred Stock, Common Stock
and/or other securities, as the case may be, is issued upon the exercise of
Rights shall for all purposes be deemed to have become the holder of record of
such Preferred Stock, Common Stock and/or other securities, as the case may be,
represented thereby on, and such certificate or depository receipt shall be
dated the date upon which the Right Certificate evidencing such Rights was duly
surrendered and payment of the Purchase Price (and any applicable transfer
taxes) was made; PROVIDED, HOWEVER, that if the date of such surrender and
payment is a date upon which the transfer books of the Company for the
Preferred Stock, Common Stock and/or other securities are closed, such Person
shall be deemed to have become the record holder of such shares of Preferred
Stock, Common Stock and/or other securities on, and such certificate or
depository receipt shall be dated, the next succeeding Business Day on which
the transfer books of the Company for the Preferred Stock, Common Stock and/or
other securities are open. Prior to the exercise of the Rights evidenced
thereby, the holder of a Right Certificate shall not be entitled to any rights
of a holder of shares of Preferred Stock, Common Stock and/or other securities
of the Company with respect to 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.
PAGE 15
SECTION 11. ADJUSTMENTS TO PURCHASE PRICE, NUMBER AND KIND OF SHARES OR
NUMBER OF RIGHTS. The Purchase Price, the number and kind of shares subject to
purchase upon exercise of each Right and the number of Rights outstanding are
subject to adjustment from time to time as provided in this Section 11.
(a) (i) In the event that the Company shall at any time after the
date of this Rights Agreement (A) declare or pay a dividend on the Preferred
Stock which is payable in shares of Preferred Stock or other securities of the
Company, (B) subdivide or split the outstanding shares of Preferred Stock into
a greater number of shares, (C) combine or consolidate the outstanding shares
of Preferred Stock into a smaller number of shares of Preferred Stock or effect
a reverse split of the outstanding shares of Preferred Stock or (D) issue any
shares of its capital stock in a reclassification of the Preferred Stock
(including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing or surviving entity), except as
otherwise provided in this Section 7(f) or 11, the Purchase Price in effect at
the time of the record date for such dividend or the effective date of such
subdivision, combination or reclassification, and the number and kind of shares
of Preferred Stock or capital stock or interests therein issuable upon exercise
of a Right on such date, shall be proportionately adjusted so that the holder
of any Right exercised after such time shall be entitled to receive, upon
payment of an amount equal to (x) the Purchase Price in effect immediately
prior to the record date or effective date of such dividend, subdivision,
combination or reclassification multiplied by (y) the number of one one-
hundredth (1/100th) of a share of Preferred Stock, or the number of shares of
capital stock, as the case may be, as to which a Right was exercisable
immediately prior to such date, the aggregate number and kind of shares of
Preferred Stock or of capital stock or interests therein which, if such Right
had been exercised immediately prior to such date he would have owned upon such
exercise and been entitled to receive, or would be deemed to have owned, by
virtue of such dividend, subdivision, combination or reclassification. If an
event occurs which would require an adjustment under both this Section 11(a)(i)
and Section 11(a)(ii) hereof, the adjustment provided for in this Section
11(a)(i) shall be in addition to, and shall be made prior to, any adjustment
required pursuant to Section 11(a)(ii) hereof.
(ii) Subject to the second proviso of the first sentence of
Section 3(a), and Sections 14(a) and 16 of this Agreement, in the event that
the Stock Acquisition Date occurs, then, subject to the last sentence of
Section 25(b) hereof, and in each such case, proper provision shall be made so
that each holder of a Right (except as otherwise provided in Section 7(f)
hereof) thereafter (or if the Distribution Date has not occurred, upon the
Distribution Date) shall have the right to receive, upon exercise thereof at a
price equal to the current Purchase Price in accordance with this Rights
Agreement, such number of one one-hundredth (1/100th) of a share of Preferred
Stock as shall equal the result obtained by multiplying the Purchase Price by a
fraction, the numerator of which is the number of one one-hundredth (1/100th)
of a share of Preferred Stock for which a Right is then exercisable, and the
denominator of which is 50% of the then Current Market Price of the Common
Stock on the Stock Acquisition Date.
(b) In case the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of shares of Preferred Stock
entitling them (for a period expiring within 45 calendar days after such record
date) to subscribe for or purchase Preferred Stock (or securities having the
same rights, privileges and preferences as the Preferred Stock ("Equivalent
Shares"))
PAGE 16
or securities convertible into Preferred Stock or Equivalent Shares at a price
per share of Preferred Stock or per Equivalent Share (or having a conversion or
exercise price per share of Preferred Stock, if a security convertible into or
exercisable for Preferred Shares or Equivalent Shares) less than the Current
Market Price per share of Preferred Stock on such record date, the Purchase
Price to be in effect after such record date shall be determined by multiplying
the Purchase Price in effect immediately prior to such date by a fraction, the
numerator of which shall be the sum of (i) the number of shares of Preferred
Stock and Equivalent Shares outstanding on such record date, plus (ii) the
number of shares of Preferred Stock which the aggregate offering price of the
total number of shares of Preferred Stock and/or Equivalent Shares to be so
offered (and/or the aggregate initial conversion price of the convertible
securities so to be offered) would purchase at such Current Market Price and
the denominator of which shall be the sum of (A) the number of shares of
Preferred Stock and Equivalent Shares outstanding on such record date plus (B)
the number of additional shares of Preferred Stock and/or Equivalent Shares to
be offered for subscription or purchase (or into which the convertible
securities so to be offered are initially convertible). In case such
subscription price may be paid by delivery of consideration part or all of
which shall be in a form other than cash, the value of such consideration shall
be as determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agents
and shall be conclusive and binding on the Rights Agent and the holders of
Rights. Shares of Preferred Stock owned by or held for the account of the
Company shall not be deemed outstanding for the purpose of any such
computation. Such adjustment shall be made successively whenever such a record
date is fixed; and in the event that such rights, options or warrants are not
so issued, the Purchase Price shall be adjusted to be the Purchase Price which
would then be in effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for the making of a
distribution to all holders of shares of Preferred Stock (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving entity) of evidences of indebtedness or
assets (other than a regular periodic cash dividend or a dividend payable in
shares of Preferred Stock), or convertible securities, subscription rights or
warrants (excluding those referred to in Section 11(b) hereof), the Purchase
Price to be in effect after such record date shall be determined by multiplying
the Purchase Price in effect immediately prior to such record date by a
fraction, the numerator of which shall be the difference between (i) the
Current Market Price per share of Preferred Stock on such record date, minus
(ii) the fair market value (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 and shall be conclusive and binding on the Rights
Agent and the holder of Rights) of the portion of the assets or evidences of
indebtedness to be so distributed or of such convertible securities,
subscription rights or warrants applicable to one share of Preferred Stock and
the denominator of which shall be such Current Market Price per share of
Preferred Stock. Such adjustments shall be made successively whenever such a
record date is fixed; and in the event that such distribution is not so made,
the Purchase Price shall again be adjusted to the Purchase Price which would
then be in effect if such record date had not been fixed.
(d) Anything herein to the contrary notwithstanding, no adjustment
to the Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least 1% to the Purchase Price; PROVIDED, HOWEVER,
that any adjustments which by reason of this
PAGE 17
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 one one-millionth of a
share of Preferred Stock, or one one-thousandth interest in any other share or
security, as the case may be, whichever is of lesser value. Notwithstanding
the first sentence of this Section 11(d), any adjustment required by this
Section 11 shall be made no later than the earlier of (i) three years from the
date of the transaction which mandates such adjustment or (ii) the Expiration
Date.
(e) In the event that at any time, as a result of an adjustment made
pursuant to Sections 11, 12 or 14 hereof, the holder of any Right thereafter
exercised shall be entitled to receive upon exercise of such Right any
securities other than shares of Preferred Stock or interests therein,
thereafter the number or amount of such other securities so receivable upon
exercise of any Right and the Purchase 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 Preferred Stock contained in
Xxxxxxx 00(x), (x), (x), (x), (x), (x), (x), (x), (x) and (l), and the
provisions of Sections 7, 9, 10, 12, 14 and 15 hereof with respect to the
Preferred Stock shall apply on like terms to any such other securities.
(f) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-hundredth
(1/100th) of a share of Preferred Stock purchasable from time to time hereunder
upon exercise of the Rights, all subject to further adjustments as provided
herein.
(g) Unless the Company shall have exercised its election as provided
in Section 11(h) hereof, upon each adjustment of the Purchase Price as a result
of the calculations made in Section 11(a), (b) and (c) hereof, each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of
one one-hundredth (1/100th) of a share of Preferred Stock (calculated to the
nearest one one-millionth of a share of Preferred Stock) obtained by (i)
multiplying (A) the number of one one-hundredth (1/100th) of a share of
Preferred Stock covered by a Right immediately prior to this adjustment by (B)
the Purchase Price in effect immediately prior to such adjustment of the
Purchase Price and (ii) dividing the product so obtained by the Purchase Price
in effect immediately after such adjustment of the Purchase Price.
(h) The Company may elect on or after the date of any adjustment of
the Purchase Price to adjust the number of Rights, in lieu of any adjustment in
the number of one one-hundredth (1/100th) of a share of Preferred Stock
purchasable upon the exercise of a Right. Each of the Rights outstanding after
such adjustment of the number of Rights shall be exercisable for the number of
one one-hundredth (1/100th) of a share of Preferred Stock for which such Right
was exercisable immediately prior to such adjustment. Each Right held of
record prior to such adjustment of the number of Rights shall become that
number of Rights (calculated to the nearest one one-millionth of a share of
Preferred Stock) obtained by dividing the Purchase Price in effect immediately
prior to adjustment of the Purchase Price by the Purchase Price in effect
immediately after adjustment of the Purchase Price. The Company shall make a
public announcement of its election to adjust the number of Rights, indicating
the record date for the adjustment, and, if
PAGE 18
known at the time, the amount of the adjustment to be made. This record date
may be the date on which the Purchase Price is adjusted or any day thereafter,
but, if the Right Certificates have been issued, shall be at least 10 days
later than the date of the public announcement. If Right Certificates have
been issued, upon each 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 Right Certificates on such record date
Right Certificates evidencing, subject to Section 15 hereof, the additional
Rights to which such holders shall be entitled as a result of such adjustment,
or, at the option of the Company, shall cause to be distributed to such holders
of record in substitution and replacement for the Right Certificates held by
such holders prior to the date of adjustment, and upon surrender thereof, if
required by the Company, new Right Certificates evidencing all the Rights to
which such holder shall be entitled after such adjustment. Right Certificates
so to be distributed shall be issued, executed and countersigned in the manner
provided for herein (and may bear, at the option of the Company, the adjusted
Purchase Price) and shall be registered in the names of the holders of record
of Right Certificates on the record date specified in the public announcement.
(i) Irrespective of any adjustment or change in the Purchase Price
or the number of one one-hundredth (1/100th) of a share of Preferred Stock
issuable upon the exercise of the Rights, the Right Certificates theretofore
and thereafter issued may continue to express the Purchase Price and the number
of one one-hundredth (1/100th) of a share of Preferred Stock which were
expressed in the initial Right Certificates issued hereunder.
(j) Before taking any action that would cause an adjustment reducing
the Purchase Price below the then par or stated value, if any, of the Preferred
Stock issuable upon exercise of the Rights, the Company shall take any 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, such
number of shares of Preferred Stock at such adjusted Purchase Price.
(k) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuing to the holder of any Right exercised after such record date
the number of shares of Preferred Stock and other securities of the Company, if
any, issuable upon such exercise on the basis of 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 of Preferred Stock upon the occurrence of the event requiring
such adjustment.
(l) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that it in its sole discretion shall determine to be advisable in
order that any (i) consolidation or subdivision of the Preferred Stock, (ii)
issuance wholly for cash of any shares of Preferred Stock at less than the
Current Market Price, (iii) issuance wholly for cash of shares of Preferred
Stock or securities which by their terms are convertible into or exchangeable
for shares of Preferred Stock, (iv) dividends on the Preferred Stock payable
solely in Preferred Stock or (v) issuance of rights, options or warrants
referred to
PAGE 19
hereinabove in this Section 11, hereafter made by the Company to the holders of
its Preferred Stock, shall not be taxable to such stockholders.
(m) The Company covenants and agrees that it shall not at any time
after the Distribution Date (i) consolidate with, (ii) merge with or into, or
(iii) sell or transfer, in one transaction or a series of related transactions,
assets or earning power aggregating more than 50% of the assets or earning
power of the Company and its Subsidiaries taken as a whole, to any other Person
or Persons (other than any of its subsidiaries in one or more transactions each
of which complies with Section 11(o) hereof) if (A) at the time or immediately
after such consolidation, merger or sale there are any rights, warrants or
other instruments outstanding or agreements or arrangements in effect which
would substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights or (B) prior to, simultaneously with or immediately
after such consolidation, merger or sale, the stockholders of a Person who
constitutes, or would constitute, the "Principal Party" for the purposes of
Section 14(a) hereof shall have received a distribution of Rights previously
owned by such Person or any of its Affiliates and Associates.
(n) In the event that at any time after the date of this Agreement
and prior to the Distribution Date, the Company shall (i) declare or pay any
dividend on the Common Stock payable in Common Stock or (ii) effect a
subdivision, combination or consolidation of the Common Stock (by
reclassification or otherwise then by payment of dividends in Common Stock)
into a greater or lesser number of shares of Common Stock, then in any such
case (i) the number of one one-hundredth (1/100th) of shares of Preferred Stock
purchasable after such event upon proper exercise of each Right shall be
determined by multiplying the number of one one-hundredth (1/100th) of a share
of Preferred Stock so purchasable immediately prior to such event by a
fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately before such event and the denominator of which is the
number of shares of Common Stock outstanding immediately after such event, and
(ii) each share of Common Stock outstanding immediately after such event shall
be issued with respect to it that number of rights which each share of Common
Stock outstanding immediately prior to such event has issued with respect to
it. The adjustments provided for in this Section 11(n) shall be made
successively whenever such a dividend is declared or paid or such a
subdivision, combination or consolidation is effected.
(o) The Company covenants and agrees that after the Distribution
Date it will not, except as permitted by Section 25 or Section 28 hereof, take
(or permit any Subsidiary to take) any action if at the time such action is
taken it is reasonably foreseeable that such action will substantially diminish
or otherwise eliminate the benefits intended to be afforded by the Rights.
SECTION 12. CERTAIN ADJUSTMENTS.
(a) To preserve the actual or potential economic value of the
Rights, if at any time after the date of this Rights Agreement there shall be
any change in the Common Stock or the Preferred Stock, whether by reason of
stock dividends, stock splits, recapitalizations, mergers, consolidations,
combinations or exchanges of securities, split-ups, split-offs, spin-offs,
liquidations, other similar changes in capitalization, any distribution or
issuance of cash, assets, evidences of indebtedness or stock subscription
rights, options or warrants to holders of the Common Stock or Preferred Stock,
as the case may be or otherwise (other than a distribution of
PAGE 20
the Rights or regular quarterly cash dividends or event described in Section 11
or 14), then in such event the Board of Directors of the Company shall make
such appropriate adjustments in the number of shares of Preferred Stock, Common
Stock or other securities, as applicable issuable upon exercise of each Right,
the Purchase Price and Redemption Price in effect at such time and the number
of Rights outstanding at such time (including the number of Rights or
fractional Rights associated with each share of Common Stock) such that
following such adjustment such event shall not have had the effect of reducing
or limiting the benefits the holders of the Rights would have had absent such
event.
(b) All Rights originally issued by the Company subsequent to any
adjustment made to the amount of Preferred Stock or other securities relating
to a right shall evidence the right to purchase, for the Purchase Price, the
adjusted number and kind of securities purchasable from time to time hereunder
upon exercise of the Rights, all subject to further adjustment as provided
herein.
(c) Irrespective of any adjustment or change in the Purchase Price
or the number of shares of Preferred Stock or number or kind of other
securities issuable upon the exercise of the Rights, the Right Certificates
theretofore and thereafter issued may continue to express the terms which were
expressed in the initial Right Certificates issued hereunder.
(d) In any case in which action taken pursuant to Section 12(a)
requires that an adjustment 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
the Preferred Stock and/or other securities, if any, issuable upon such
exercise over and above the Preferred Stock and/or other securities, if any,
issuable before giving effect 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 securities upon the
occurrence of the event requiring such adjustment.
SECTION 13. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES.
Whenever an adjustment is made as provided in Section 11, 12 or 14 hereof,
the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent and with each transfer agent for the
Preferred Stock and Common Stock a copy of such certificate, and (c) mail a
brief summary thereof to each holder of a Right Certificate (or, if prior to
the Distribution Date, to each holder of a certificate representing Common
Stock) in accordance with Section 26 hereof. The Rights Agent shall be fully
protected in relying on any such certificate and on any adjustment therein
contained.
PAGE 21
SECTION 14. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR
EARNING POWER.
(a) In the event that, directly or indirectly, (x) the Company shall
consolidate with, or merge with and into, any other Person (other than the
Company or a Subsidiary of the Company in one or more transactions each of
which complies with Section 11(o) hereof), and the Company shall not be the
continuing or surviving entity of such consolidation or merger, (y) any Person
(other than a Subsidiary of the Company in one or more transactions each of
which complies with Section 11(o) hereof) shall consolidate with, or merge with
and into the Company, and the Company shall be the continuing or surviving
entity of such merger and, in connection with such merger, all or part of the
Common Stock shall be changed into or exchanged for stock or other securities
of any other Person or cash or any other property, or (z) the Company shall
sell or otherwise transfer (or one or more of its Subsidiaries shall sell or
otherwise transfer), in one transaction or a series of related transactions,
assets or earning power aggregating more than 50% of the assets or earning
power of the Company and its Subsidiaries (taken as a whole and calculated on
the basis of the Company's most recent regularly prepared financial statements)
to any other Person or Persons (other than a Subsidiary of the Company in one
or more transactions each of which complies with Section 11(o)hereof), then,
and in each such case, appropriate provision shall be made so that (i) each
holder of a Right, except as provided in Section 7(f) hereof, shall thereafter
have the right to receive, upon the exercise thereof at the then current
Purchase Price, in accordance with the terms of this Agreement, such number of
validly authorized and issued, fully paid and nonassessable shares of freely
tradeable Common Stock of the Principal Party (as hereinafter defined,
including the Company as successor thereto or as the surviving entity), not
subject to any rights of call or first refusal, liens, encumbrances or other
claims, as shall be equal to the result obtained by (A) multiplying the then
current Purchase Price by the number of one one-hundredth (1/100th) of a share
of Preferred Stock for which a Right is exercisable immediately prior to the
first occurrence of any event described in Section 14(a)(x), (y) or (z) hereof,
and (B) dividing that product (which, following the first occurrence of any
event referred to in Section 14(a)(x), (y) or (z), shall be referred to as the
"Purchase Price" for each Right and for all purposes of this Agreement) by 50%
of the Current Market Price per share of Common Stock of such Principal Party
on the date of consummation of such consolidation, merger, sale or transfer;
(ii) the Principal Party shall thereafter be liable for, and shall assume, by
virtue of such consolidation, merger, sale or transfer, all the obligations and
duties of the Company pursuant to this Agreement; (iii) the term "Company"
shall thereafter be deemed to refer to such Principal Party, it being
specifically intended that the provisions of Section 11 hereof shall apply to
such Principal Party and (iv) such Principal Party shall take such steps
(including, but not limited to, the authorization and reservation of a
sufficient number of shares of its Common Stock to permit exercise of all
outstanding Rights in accordance with this Section 14(a)) in connection with
such consummation as may be necessary to assure that the provisions hereof
shall thereafter be applicable, as nearly as reasonably may be, in relation to
the shares of its Common Stock thereafter deliverable upon the exercise of the
Rights, PROVIDED, that upon the subsequent occurrence of any merger,
consolidation, sale of all or substantially all of the assets,
recapitalization, reclassification of shares, reorganization or other
extraordinary transaction in respect of such Principal Party, each holder of
the Right shall thereupon be entitled to receive, upon exercise of a Right and
payment of the Purchase Price, such cash, shares, rights, warrants and other
property which holder would have been entitled to receive had he, at the time
of such transaction, owned the shares of Common Stock of the Principal Party
purchasable upon the
PAGE 22
exercise of a Right, 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 and (v) the
provisions of Section 11(a)(ii) hereof shall be of no effect following the
occurrence of any event described in Section 14(a)(x), (y) or (z).
(b) "Principal Party" shall mean
(i) in the case of any transaction described in clause (x) or
(y) of Section 14(a) hereof: (A) the Person that is the issuer of any
securities into which shares of Common Stock of the Company is converted in
such merger or consolidation, or, if there is more than one such issuer, the
issuer the Common Stock of which has 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, or, if there is more than one such Person,
the Person the Common Stock of which has 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 corporation if it survives) or (z) the Person resulting from the
consolidation; and
(ii) in the case of any transaction described in clause (z) of
Section 14(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 each person that is a party to such transaction or
transactions receives the same 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 as is the issuer
of Common Stock having the greatest aggregate market value of shares
outstanding; PROVIDED, HOWEVER, that in any such case described in the
foregoing clause (b)(i) or (ii), (A) if the Common Stock of such Person is not
at such time and has not been continuously over the preceding 12-month period
registered under Section 12 of the Exchange Act, and such Person is a direct or
indirect Subsidiary of another Person the Common Stock of which is and has been
so registered, "Principal Party" shall refer to such other Person; and (B) if
such Person is a Subsidiary, directly or indirectly, of more than one Person,
the Common Stock of two or more of which are and have been so registered,
"Principal Party" shall refer to whichever of such Persons is the issuer of the
Common Stock having the greatest aggregate market value of shares outstanding,
or (C) 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 (A) and (B) 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 14 in the same ratio as its interest in such Person bears to the total
of such interests.
(c) The Company shall not enter into any transaction of the kind
referred to in this Section 14 if at the time of such transaction there are
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. The Company shall not agree to consummate or consummate any such
consolidation, merger, sale or transfer unless the Principal Party shall have a
sufficient number of authorized shares of its Common Stock which have not been
issued or reserved for issuance to
PAGE 23
permit the exercise in full of the Rights in accordance with this Section 14
and unless prior thereto the Company and such Principal Party shall have
executed and delivered to the Rights Agent a supplemental agreement so
providing, confirming that the requirements of Sections 14(a) and (b) hereof
shall promptly be performed in accordance with their terms and that such
consolidation, merger, sale or transfer of assets shall not result in a default
by the Principal Party under this Agreement as the same shall have been assumed
by the Principal Party pursuant to Sections 14(a) and (b) hereof and further
providing that, as soon as practicable after the date of any consolidation,
merger or sale of assets mentioned in Section 14(a), the Principal Party will:
(i) prepare and file a registration statement under the Act, if
necessary, with respect to the Rights and the securities purchasable upon
exercise of the Rights on an appropriate form, will use its best efforts to
cause such registration statement to become effective as soon as practicable
after such filing and to remain effective (with a prospectus at all times
meeting the requirements of the Act) until the date of expiration of the
Rights, and similarly comply with applicable state securities laws; and
(ii) use its best efforts, if the Common Stock of the Principal
Party shall become listed on a national securities exchange, to list (or
continue the listing of) the Rights and the securities purchasable upon
exercise of the Rights on such securities exchange and, if the Common Stock of
the Principal Party shall not be listed on a national securities exchange, to
cause the Rights and the securities purchasable upon exercise of the Rights to
be reported by NASDAQ or such other system then in use; and
(iii) deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates which comply in
all respects with the requirements for registration on Form 10 (or any
successor form) under the Exchange Act; and
(iv) obtain waivers of any rights of first refusal or preemptive
rights in respect of the shares of the Common Stock of the Principal Party
subject to purchase upon exercise of outstanding Rights.
The provisions of this Section 14 shall similarly apply to successive
mergers or consolidations or sales or other transfers. If any event described
in this Section 14 shall occur at any time after the occurrence of a Stock
Acquisition Date, the Rights which have not theretofore been exercised shall
thereafter become exercisable in the manner described in Section 14(a) hereof.
(d) If the Principal Party which is to be a party to a transaction
referred to in this Section 14 has a provision in any of its authorized
securities or in its Certificate of Incorporation or Bylaws or other instrument
governing its corporate affairs, which provision would have the effect of (i)
causing such Principal Party to issue, in connection with or as a consequence
of, the consummation of the transaction referred to in this Section 14, shares
of Common Stock of such Principal Party at less than the Current Market Price
per share or securities exercisable for, or convertible into, Common Stock of
such Principal Party at less than such then Current Market Price (other than to
holders of Rights pursuant to this Section 14) or (ii) providing for any
special payment, tax or similar provisions in connection with the issuance of
the
PAGE 24
Common Stock of such Principal Party pursuant to the provisions of Section 14,
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 applicable provision will
have no effect in connection with or as a consequence of, the consummation of
the proposed transaction.
SECTION 15. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
(a) The Company shall not be required to issue fractions of Rights
or to distribute Right Certificates which evidence fractional Rights. In lieu
of such fractional Rights existing or arising subsequent to the Distribution
Date, there shall be paid to the registered holders of the Right Certificates
with regard to which such fractional Rights would otherwise be issuable, an
amount in cash equal to the same fraction of the Current Market Value of a
whole Right. For the purposes of this Section 15(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. The closing price of the Rights for any day shall be the
last sale price, regular way, or, in case no such sale takes place on such day,
the average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange or, if the Rights are not listed or admitted to trading on the New
York Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the Rights are listed or admitted to trading or,
if the Rights are not listed or admitted to trading on any national securities
exchange, the last quoted price, or, if not so quoted, the average of the bid
and asked prices in the over-the-counter market, as reported by NASDAQ or such
other system then in use or, if on any such date the Rights are not quoted by
any such organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the Rights selected
by the Board of Directors of the Company. If on any such date Rights are not
quoted by any such organization and no professional market maker is making such
a market in the Rights, the fair value of the Rights on such date as determined
in good faith by the Board of Directors shall be used.
(b) The Company shall not be required to issue fractional interests
in the shares of Preferred Stock (other than fractional interests which are
integral multiples of one one-hundredth (1/100th) of a share of Preferred
Stock) upon exercise of the Rights or to distribute certificates which evidence
fractional interests in shares of Preferred Stock (other than fractions which
are integral multiples of one one-hundredth (1/100th) of a share of Preferred
Stock). Fractional interests in shares of Preferred Stock in integral
multiples of one one-hundredth (1/100th) of a share of Preferred Stock may, at
the election of the Company, be evidenced by depositary receipts, pursuant to
an appropriate agreement between the Company and a depositary selected by it;
PROVIDED, that such agreement shall provide that the holders of such depositary
receipts shall have all the rights, privileges and preferences to which they
are entitled as beneficial owners of the Preferred Stock represented by such
depositary receipts. In lieu of fractional interests in shares of Preferred
Stock, the Company shall pay to the registered holders of Right
PAGE 25
Certificates at the time such Right Certificates are exercised as herein
provided an amount in cash equal to the same fraction of the Current Market
Value of one share of Preferred Stock or other securities of the Company on the
date of exercise.
(c) The Company shall not be required to issue fractions of shares
of Common Stock upon exercise of the Rights or to distribute certificates which
evidence fractional shares of Common Stock. In lieu of fractional shares of
Common Stock the Company may 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 one share of
Common Stock on the date of exercise.
(d) The holder of a Right by the acceptance of the Rights expressly
waives his right to receive any fractional Rights subsequent to the
Distribution Date, or any fractional share of Preferred Stock upon exercise of
Rights (except as provided above).
SECTION 16. EXCHANGE.
(a) The Board of Directors of the Company may, at its option,
at any time after a Stock Acquisition Date (and, if the Distribution Date has
not then occurred, after the Distribution Date), mandatorily exchange all or
part of the then outstanding and exercisable Rights (which shall not include
Rights that shall have become null and void and nontransferable pursuant to the
provisions of Section 7(f) hereof) for consideration per Right consisting of
one-half of the securities that would be issuable at such time upon the
exercise of one Right in accordance with Section 11(a) (the consideration
issuable per Right pursuant to this Section 16 being the "Exchange
Consideration"). The Board of Directors of the Company may, at its option,
issue, in substitution for Preferred Stock, shares of Common Stock in an amount
per whole share of Preferred Stock equal to the Formula Number if there are
sufficient shares of Common Stock issued but not outstanding or authorized but
unissued. If the Board of Directors elects to exchange all the Rights for
Exchange Consideration pursuant to this Section 16 prior to the physical
distribution of the Rights Certificates, the Company may distribute the
Exchange Consideration in lieu of distributing Right Certificates, in which
case for purposes of this Rights Agreement holders of Rights shall be deemed to
have simultaneously received and surrendered for exchange Rights Certificates
on the date of such distribution. Notwithstanding the foregoing, the Board of
Directors shall not be empowered to effect such exchange at any time after any
Person (other than an Exempt Person or a Permitted Holder) which, together with
all Affiliates and Associates of such Person, becomes the beneficial owner of
50% or more of the Common Stock outstanding.
(b) Any action of the Board of Directors of the Company
ordering the exchange of any Rights pursuant to Section 16(a) shall be
irrevocable and, immediately upon the taking of such action and without any
further action and without any notice, the right to exercise any such Right
shall terminate and the only right thereafter of a holder of such Right shall
be to receive the Exchange Consideration in exchange for each such Right held
by such holder. The Company shall promptly give public notice of any such
exchange; provided, however, that the failure to give, or any defect in, such
notice shall not affect the validity of such exchange. The Company promptly
shall mail a notice of any such exchange to all holders of such Rights at their
last addresses as they appear upon the registry books of the Rights Agent. Any
notice which is
PAGE 26
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 for the Exchange Consideration 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 shall have become null and void
and nontransferable pursuant to the provisions of Section 7(f)) held by each
holder of Rights.
SECTION 17. RIGHTS OF ACTION. All rights of action in respect of this
Rights Agreement, to the extent any such rights exist, are vested in the
respective registered holders of the Right Certificates (and, prior to the
Distribution Date, the registered holders of Common Stock); and any registered
holder of any Right Certificate (or, prior to the Distribution Date, of the
Common Stock), without the consent of the Rights Agent or of the holder of any
other Right Certificate (or, prior to the Distribution Date, of the Common
Stock), may, in his own behalf and for his 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 right to exercise the Rights
evidenced by such Right Certificate in the manner provided in such Right
Certificate and in this Rights 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 Rights 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 Rights
Agreement.
SECTION 18. AGREEMENT OF RIGHT HOLDERS. Every holder of a Right by
accepting the same consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of Common Stock;
(b) after the Distribution Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office or offices of the Rights Agent designated for such
purposes, duly endorsed or accompanied by a proper instrument of transfer and
with the appropriate certificates fully executed;
(c) subject to Sections 6 and 7(g) hereof, the Company and the
Rights Agent may deem and treat the Person in whose name the Right Certificate
(or, prior to the Distribution Date, the associated Common Stock certificate)
is registered as the absolute owner thereof and of the Rights evidenced thereby
(notwithstanding any notations of ownership or writing on the Right
Certificates or the associated Common Stock certificate made by anyone other
than the Company or the Rights Agent) for all purposes whatsoever, and neither
the Company nor the Rights Agent, shall be affected by any notice to the
contrary; and
(d) notwithstanding anything in this Rights Agreement to the
contrary, neither the Company nor the Rights Agent shall have any liability to
any holder of a Right or other Person as a result of its inability to perform
any of its obligations under this Agreement by reason of any preliminary or
permanent injunction or other order, decree or ruling issued by a court of
PAGE 27
competent jurisdiction or by a governmental, regulatory or administrative
agency or commission, or any statute, rule, regulation or executive order
promulgated or enacted by any governmental authority prohibiting or otherwise
restraining performance of such obligation; PROVIDED, HOWEVER, the Company must
use its best efforts to have any such order, decree or ruling lifted or
otherwise overturned as soon as possible.
SECTION 19. RIGHT CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER. No
holder, as such, of any Right Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the number of shares of
Preferred Stock or any interest therein or any other securities of the Company
which may at any time be issuable on the exercise of the Rights represented
thereby, nor shall anything contained herein or in any Right Certificate be
construed to confer upon the holder of any Right Certificate, as such, any of
the rights of a stockholder of the Company or any right to vote for the
election of Directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in Section 26 hereof), or to receive dividends or subscription rights,
or otherwise, until the Right or Rights evidenced by such Right Certificate
shall have been exercised in accordance with the provisions hereof.
SECTION 20. CONCERNING THE RIGHTS AGENT.
(a) In the event that the Rights Agent is not the Company, the
Company agrees to pay to the Rights Agent reasonable compensation for all
services rendered by it hereunder and, from time to time, on demand of the
Rights Agent, its reasonable expenses and counsel fees and disbursements and
other disbursements incurred in the administration and execution of this
Agreement and the exercise and performance of its duties hereunder.
(b) The Rights Agent shall be protected and shall incur no liability
for or in respect of any action taken, suffered or omitted by it in connection
with its administration of this Agreement in its capacity as Rights Agent in
reliance upon any Right Certificate or certificate for Common Stock or
Preferred Stock or for other securities of the Company, instrument of
assignment or transfer, power of attorney, endorsement, affidavit, letter,
notice, direction, consent, certificate, statement, or other paper or document
believed by it to be genuine and to be signed, executed and, where necessary,
verified or acknowledged, by the proper Person or Persons.
SECTION 21. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT.
(a) Any trust, corporation or other entity into which the Rights
Agent or any successor Rights Agent may be merged or with which it may be
consolidated, or any trust, corporation or other entity resulting from any
merger or consolidation to which the Rights Agent or any successor Rights Agent
shall be a party or any trust, corporation or other entity succeeding to the
corporate trust business of the Rights Agent, shall be the successor to the
Rights Agent under this Rights Agreement without the execution or filing of any
paper or any further action on the part of any of the parties hereto, provided
that such trust, corporation or other entity would be eligible for appointment
as a successor Rights Agent under the provisions of Section 23 hereof.
PAGE 28
In case at the time such successor Rights Agent shall succeed to the agency
created by this Agreement, any of the Right Certificates shall have been
countersigned but not delivered, any such successor Rights Agent may adopt the
countersignature of the predecessor Rights Agent and deliver such Right
Certificates so countersigned; and in case at that time any of the Right
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Right Certificates either in the name of the predecessor
Rights Agent or in the name of the successor Rights Agent; and in all such
cases such Right Certificates shall have the full force provided in the Right
Certificates and in this Rights Agreement.
(b) In case at any time the name of the Rights Agent shall be
changed and at such time any of the Right Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the
countersignature under its prior name and deliver Right Certificates so
countersigned; and in case at that time any of the Right Certificates shall not
have been countersigned, the Rights Agent may countersign such Right
Certificates either in its prior name or in its changed name; and in all such
cases such Right Certificates shall have the full force provided in the Right
Certificates and in this Rights Agreement.
SECTION 22. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the
duties and obligations expressly set forth in this Rights Agreement and no
implied duties or obligations shall be read into this Rights Agreement against
the Rights Agent. The Rights Agent undertakes the duties and obligations
imposed by this Rights Agreement upon the following terms and conditions, by
all of which the Company and the holders of Right Certificates, by their
acceptance thereof, shall be bound;
(a) The Rights Agent may consult with legal counsel (who may be
legal counsel for the Company), and the opinion of such counsel shall be full
and complete authorization and protection to the Rights Agent as to any action
taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Rights
Agreement the Rights Agent shall deem it necessary or desirable that any fact
or matter (including, without limitation, the identity of any Acquiring Person
or any Affiliate or Associate thereof and the determination of Current Market
Price) be proved or established by the Company prior to taking or suffering any
action hereunder, such fact or matter (unless other evidence in respect thereof
be herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by the Chairman of the Board, the
President, the Chief Operating Officer or any Vice President and by the Chief
Financial Officer, Treasurer or the Secretary of the Company and delivered to
the Rights Agent; and such certificate shall be full authorization to the
Rights Agent for any action taken or suffered in good faith by it under the
provisions of this Rights Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its own
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 Rights Agreement or in the
Right Certificates (except
PAGE 29
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 be under any responsibility in
respect of the validity of this Rights Agreement or the execution and delivery
hereof (except the due execution hereof by the Rights Agent) or in respect of
the validity or execution of any Right Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Rights Agreement or in any Right
Certificate; nor shall it be responsible for any change in the exercisability
of the Rights (including certain of the Rights becoming void pursuant to
Section 7(f) hereof) or any adjustment in the terms of the Rights (including
the manner, method or amount thereof) provided for in Sections 3, 11, 12, 14,
16 or 25 hereof, or the ascertaining of the existence of facts that would
require any such adjustment (except with respect to the exercise of Rights
evidenced by Right Certificates after actual notice of any such adjustment);
nor shall it by any act hereunder be deemed to make any representation or
warranty as to the authorization or reservation of any shares of Preferred
Stock, Common Stock and/or other securities, as the case may be, to be issued
pursuant to this Rights Agreement or any Right Certificate or as to whether any
shares of Preferred Stock, Common Stock and/or other securities, as the case
may be, 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 Rights Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
Chairman of the Board, the Chief Executive Officer, the President, the Chief
Operating Officer, the Chief Financial Officer or any Vice President or the
Treasurer or the 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 or suffered to be taken by it in good faith in
accordance with instructions of any such officer.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or
other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or lend
money to the Company or otherwise act as fully and freely as though it were not
the Rights Agent under this Rights Agreement. Nothing herein shall preclude
the Rights Agent from acting in any other capacity for the Company or for any
other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent shall not be answerable
or accountable for any act, default, neglect or misconduct of any such
attorneys or agents or for any loss to the Company resulting from any such act,
default, neglect or misconduct, PROVIDED reasonable care was exercised in the
selection and continued employment thereof.
PAGE 30
(j) No provision of this Rights Agreement shall require the Rights
Agent to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder or in the exercise
of its rights if there shall be reasonable grounds for believing that repayment
of such funds or adequate indemnification against such risk or liability is not
reasonably assured to it.
(k) If, with respect to any Right Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with respect to
such requested exercise of transfer without first consulting with the Company.
(l) The Company agrees to indemnify and to hold the Rights Agent
harmless against any loss, liability, damage or expense (including reasonable
fees and expenses of counsel) which the Rights Agent may incur resulting from
its actions as Rights Agent pursuant to this Rights Agreement; PROVIDED,
HOWEVER, that the Rights Agent shall not be indemnified or held harmless with
respect to any such loss, liability, damage or expense incurred by the Rights
Agent as a result of, or arising out of, its own negligence, bad faith or
wilful misconduct. In no case shall the Company be liable with respect to any
action, proceeding, suit or claim against the Rights Agent unless the Rights
Agent shall have notified the Company, by letter or by facsimile confirmed by
letter, of the assertion of an action, proceeding, suit or claim against the
Rights Agent, promptly after the Rights Agent shall have notice of any such
assertion of an action, proceeding, suit or claim or have been served with the
summons or other first legal process giving information as to the nature and
basis of the action, proceeding, suit or claim. The Company shall be entitled
to participate at its own expense in the defense of any such action,
proceeding, suit or claim, and, if the Company so elects, the Company shall
assume the defense of any such action, proceeding, suit or claim. In the event
that the Company assumes such defense, the Company shall not thereafter be
liable for the fees and expenses of any additional counsel retained by the
Rights Agent, so long as the Company shall retain counsel satisfactory to the
Rights Agent, in the exercise of its reasonable judgment, to defend such
action, proceeding, suit or claim. The Rights Agent agrees not to settle any
litigation in connection with any action, proceeding, suit or claim with
respect to which it may seek indemnification from the Company without the prior
written consent of the Company.
SECTION 23. CHANGE OF RIGHTS AGENT. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Rights
Agreement upon 30 days' notice in writing mailed to the Company and to each
transfer agent of the shares of Common Stock and Preferred Stock, if any, by
registered or certified mail, and, subsequent to the Distribution Date, to the
holders of the Right Certificates by first-class mail. The Company may remove
the Rights Agent or any successor Rights Agent upon 30 days' notice in writing,
mailed to the Rights Agent or successor Rights Agent, as the case may be, and
to each transfer agent of the Common Stock and Preferred Stock, if any, by
registered or certified mail, and subsequent to the Distribution Date, to the
holders of the Right 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 30 days after such removal or
after it has been notified in writing of such resignation or
PAGE 31
incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Right Certificate (who shall, with such notice, submit his Right Certificate
for inspection by the Company), then the registered holder of any Right
Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether
appointed by the Company or by such a court, shall be a corporation organized
and doing business under the laws of the United States or of any state at the
United States, in good standing, having a principal office in the United States
of America, which is authorized under such laws to exercise stock transfer or
corporate trust powers and is subject to supervision or examination by federal
or state authority. 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 such appointment, the Company shall file
notice thereof in writing with the predecessor Rights Agent and each transfer
agent of the Common Stock and the Preferred Stock and, subsequent to the
Distribution Date, mail a notice thereof in writing to the registered holders
of the Right Certificates. Failure to give any notice provided for in this
Section 23, 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 24. ISSUANCE OF NEW RIGHT CERTIFICATES. Notwithstanding any of
the provisions of this Rights Agreement or of the Rights to the contrary, the
Company may, at its option, issue new Right Certificates evidencing Rights in
such form as may be approved by its Board of Directors to reflect any
adjustment or change in the Purchase Price and the number or kind or class of
shares of Preferred Stock, Common Stock and/or other securities, as the case
may be, purchasable under the Right Certificates made in accordance with the
provisions of this Rights Agreement. In addition, if deemed necessary or
appropriate by the Board of Directors of the Company, the Company may issue
Right Certificates representing the appropriate number of Rights in connection
with the issuance or sale of Common Stock following the Distribution Date but
prior to the Expiration Date; PROVIDED, HOWEVER, that (a) no such Right
Certificate shall be issued if, and to the extent that, the Company shall be
advised by counsel that such issuance would create a significant risk of
material adverse tax consequences to the Company or the person to whom such
Right Certificate would be issued, and (b) no such Right Certificate shall be
issued if, and to the extent that, appropriate adjustment shall otherwise have
been made in lieu of the issuance thereof.
PAGE 32
SECTION 25. REDEMPTION.
(a) The Company may, by resolution of the Board of Directors (which
resolution shall, if adopted following the Stock Acquisition Date, be effective
only with the concurrence of a majority of the Continuing Directors and only if
the Continuing Directors constitute a majority of the number of Directors then
in office), at its option, at any time prior to the earlier to occur of (i) the
close of business on the tenth day following the Stock Acquisition Date, and
(ii) the close of business on the Final Expiration Date, elect to redeem all
but not less than all of the then outstanding Rights at a redemption price of
$.001 per Right (the date of such redemption being the "Redemption Date"),
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such redemption price being
hereinafter referred to as the "Redemption Price"). The Company may, at its
option, pay the Redemption Price in cash, shares of Common Stock or Preferred
Stock (based on the Current Market Price of the Common Stock or Preferred
Stock, as applicable at the time of redemption) or any other form of
consideration deemed appropriate by the Board of Directors.
(b) If, following the occurrence of a Stock Acquisition Date and
prior to the Distribution Date, (i) a Person who is an Acquiring Person shall
have transferred or otherwise disposed of a number of shares of Common Stock of
the Company in one transaction, or a series of transactions (not directly or
indirectly involving the Company or any of its Subsidiaries), which did not
result in an event described in Section 14 hereof, such that such Person is
thereafter a Beneficial Owner of less than 15% (or (a) in the case of a
Permitted Holder, the percentage the Permitted Holder may hold without ceasing
to be a Permitted Holder, and (b) in the case of an Adverse Person, the
percentage such Person may hold as determined by the Board of Directors, which
in no event may the Board of Directors require to be less than 10% of the
shares of Common Stock then outstanding, so that the Board of Directors no
longer declares such Person to be an Adverse Person) of the outstanding Common
Stock of the Company, (ii) there are no other Persons, immediately following
the occurrence of the event described in clause (i), who are Acquiring Persons,
and (iii) the Board of Directors of the Company (with the concurrence of a
majority of the Continuing Directors) shall so approve, then the Company's
right of redemption provided in subparagraph (a) of this Section 25 shall be
reinstated and thereafter all outstanding Rights shall again be subject to the
provisions of this Section 25. Notwithstanding anything to the contrary
contained in this Rights Agreement, the Rights shall not be exercisable after
the first occurrence of a Stock Acquisition Date until such time as the
Company's right of redemption hereunder has expired.
(c) Immediately upon the action of the Board of Directors of the
Company electing to redeem the Rights (or, if such redemption is subject to
conditions, immediately upon satisfaction of such conditions), 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 the only right thereafter of the holders of Rights shall be to receive the
Redemption Price for each Right so held. Promptly (but, in any event, within
ten 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
PAGE 33
Rights Agent or, prior to the Distribution Date, on the registry books of the
Transfer Agent for the Common Stock. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of redemption 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 as specifically set forth in this
Section 25, and other than in connection with the purchase, acquisition or
redemption of Common Stock prior to the Distribution Date.
SECTION 26. NOTICE OF CERTAIN EVENTS.
(a) In case the Company shall propose, at any time after the
Distribution Date, (i) to pay any dividend payable in securities of the Company
of any class to the holders of its shares of Preferred Stock or to make any
other distribution to the holders of shares of Preferred Stock (other than a
regular periodic cash dividend), or (ii) to offer to the holders of its shares
of Preferred Stock rights, options or warrants to subscribe for or to purchase
any additional shares of Preferred Stock or securities convertible into shares
of Preferred Stock, or (iii) to effect any reclassification of its shares of
Preferred Stock (other than a reclassification involving only the subdivision
of outstanding shares of Preferred Stock), or (iv) to effect any consolidation
or merger into or with any other Person, or to effect any sale or other
transfer (or to permit one or more of its Subsidiaries to effect any sale or
other transfer), in one transaction or a series of related transactions, of
more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person or Persons, or (v) to
effect the liquidation, dissolution or winding up of the Company, then, in each
such case, (i) the Company shall give to each holder of a Right, to the extent
feasible and in accordance with Section 26, a notice of such proposed action,
which notice shall specify the proposed event and the consequences of the event
to the holders of Rights under Section 11(a), Section 12 or Section 14 hereof,
as the case may be, and, upon consummating such transaction, shall similarly
give notice thereof to each holder of Rights and (ii) all references in the
preceding paragraph (a) to Preferred Stock shall be deemed thereafter referred
to Common Stock or other securities, as appropriate warrants, or the date on
which such reclassification, consolidation, merger, sale, transfer,
liquidation, dissolution, or winding up is to take place and the date of
participation therein by the holders of Common Stock, if any such date is to be
fixed, and such notice shall be so given in the case of any action covered by
clause (i), (ii) or (v) above at least 20 days prior to the record date for
determining holders of Common Stock for purposes of such action, and in the
case of any such other action, at least 20 days prior to the date of the taking
of such proposed action or the date of participation therein by the holders of
Common Stock, whichever shall be the earlier. The failure to give notice
required by this Section 26 or any defect therein shall not affect the legality
or validity of the action taken by the Company or the vote upon any such
action.
(b) Notwithstanding anything in this Rights Agreement to the
contrary, prior to the Distribution Date a filing by the Company with the
Securities and Exchange Commission shall constitute sufficient notice to the
holders of securities of the Company, including the Rights, for purposes of
this Rights Agreement and no other notice need be given.
PAGE 34
SECTION 27. NOTICES. Notices or demands authorized by this Rights
Agreement to be given or made by the Rights Agents or by the holder of any
Right Certificate (or, prior to the Distribution Date, of the Common Stock) to
or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address if filed in writing
with the Rights Agent) as follows:
Brilliant Digital Entertainment, Inc.
0000 Xxxxxxx Xxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Chief Executive Officer
Subject to the provisions of Section 23 hereof, any notice or demand authorized
by this Rights Agreement to be given or made by the Company or by the holder of
any Right Certificate to or on the Rights Agent shall be sufficiently given or
made if sent by first-class mail, postage prepaid, addressed (until another
address is filed in writing with the Company) as follows:
U. S. Stock Transfer Corporation
0000 Xxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxx 00000-0000
Notices or demands authorized by this Rights Agreement to be given or made by
the Company or the Rights Agent to the holder of any Right Certificate (or,
prior to the Distribution Date, to the holder of any certificate representing
Common Stock) shall be sufficiently given or made if sent by first-class mail,
postage prepaid, addressed to such holder at the address of such holder as
shown on the registry books of the Company.
SECTION 28. SUPPLEMENTS AND AMENDMENTS. Prior to the Distribution
Date, the Company may and the Rights Agent shall, if the Company so directs,
supplement or amend any provision of this Rights Agreement (including, without
limitation, the date on which the Distribution Date shall occur, the definition
of Acquiring Person or Adverse Person, the time during which the Rights may be
redeemed or any provision of the Certificate of Designation) without the
approval of any holders of certificates representing shares of Common Stock.
From and after the Distribution Date and subject to the penultimate sentence of
this Section 28, the Company and the Rights Agent shall, if the Company so
directs, supplement or amend this Rights Agreement without the approval of any
holders of Rights Certificates in order (a) to cure any ambiguity, (b) to
correct or supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein, (c) to shorten or lengthen any
time period hereunder (which shortening or lengthening shall be effective only
if there are Continuing Directors then in office and shall require the
concurrence of a majority of such Continuing Directors if such supplement or
amendment occurs at or after the time a Person becomes an Acquiring Person) or
(d) to change or supplement the provisions hereof in any manner which the
Company may deem necessary or desirable and which shall not adversely affect
the interests of the holders of Rights Certificate (other than an Acquiring
Person or an Affiliate or Associate of an Acquiring Person); PROVIDED, HOWEVER,
that this Rights Agreement may not be supplemented or amended to lengthen,
pursuant to clause (c) of this sentence, (i) a time period relating to when the
Rights may be redeemed at such time as the Rights are not then redeemable or
(ii) any other
PAGE 35
time period unless such lengthening is for the purposes of protecting,
enhancing or clarifying the rights of, and/or the benefits to, the holders of
Rights. Upon the delivery of a certificate from an appropriate officer of the
Company which states that the proposed supplement or amendment is in compliance
with the terms of this Section 28, 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 Stock.
SECTION 29. SUCCESSORS. All the covenants and provisions of this
Rights Agreement by or for the benefit of the Company or the Rights Agent shall
bind and inure to the benefit of their respective successors and assigns
hereunder.
SECTION 30. DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS, ETC.
For all purposes of this Rights Agreement, any calculation of the number of
shares of Common Stock outstanding at any particular time, including for
purposes of determining the particular percentage of such outstanding shares of
Common Stock of which any Person is the Beneficial Owner, shall be made in
accordance with the last sentence of Rule 13d-3(d)(1)(i) of the General Rules
and Regulations under the Exchange Act. Except as explicitly otherwise
provided herein, the Board of Directors of the Company shall have the exclusive
power and authority to administer this Rights Agreement and to exercise all
rights and powers specifically granted to the Board of Directors or to the
Company, or as may be necessary or advisable in the administration of this
Rights Agreement, including without limitation, the right and power to (a)
interpret the provisions of this Rights Agreement and (b) make all
determinations deemed necessary or advisable for the administration of this
Rights Agreement (including a determination to redeem or not redeem the Rights
or to amend the Rights Agreement and a determination of whether there is an
Acquiring Person). All such actions, calculations, interpretations and
determinations (including, for purposes of clause (ii) below, all omissions
with respect to the foregoing) which are done or made by the Board of Directors
in good faith, shall (i) be final, conclusive and binding on the Company, the
Rights Agent, the holders of the Rights and all other parties, and (ii) not
subject the Board of Directors to any liability to the holders of the Rights.
SECTION 31. BENEFITS OF THIS RIGHTS AGREEMENT. Nothing in this Rights
Agreement shall be construed to give to any Person other than the Company, the
Rights Agent and the registered holders of the Right Certificates (and, prior
to the Distribution Date, the Common Stock) any legal or equitable right,
remedy or claim under this Rights Agreement; but this Rights Agreement shall be
for the sole and exclusive benefit of the Company, the Rights Agent and the
registered holders of the Right Certificates (and, prior to the Distribution
Date, the Common Stock).
SECTION 32. SEVERABILITY. If any term, provision, covenant or
restriction of this Rights 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 Rights
Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
SECTION 33. GOVERNING LAW. This Rights Agreement, each right and each
right certificate issued hereunder shall be deemed to be a contract made under
the laws of the State of
PAGE 36
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 34. COUNTERPARTS; EFFECTIVENESS. This Rights 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 one and the same instrument. This Rights Agreement shall
be effective as of the close of business on the date hereof.
PAGE 37
SECTION 35. DESCRIPTIVE HEADINGS. The captions herein are included for
convenience of reference only, do not constitute a part of this Rights
Agreement and shall be ignored in the construction and interpretation hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Rights Agreement
to be duly executed, all as of the date and year first above written.
Brilliant Digital Entertainment, Inc.
By:
--------------------------------
Xxxxxxx Xxxx
Title: Chief Financial Officer
Attest: -------------------------------------
as Rights Agent
By: ______________________ By: ______________________________
Title: Title:
PAGE 38
EXHIBIT A
---------
CERTIFICATE OF DESIGNATION OF
RIGHTS, PREFERENCES, AND PRIVILEGES
OF SERIES A PREFERRED STOCK
OF
BRILLIANT DIGITAL ENTERTAINMENT, INC.
Pursuant to Section 151 of the Delaware General Corporation law:
The undersigned hereby certifies that the following resolution has been adopted
by the Board of Directors of Brilliant Digital Entertainment, Inc., a Delaware
corporation (the "Corporation") as required by Section 151 of the Delaware
General Corporation Law by action of the Corporation's Board of Directors on
March 18, 1998;
RESOLVED FURTHER, that pursuant to the authority
vested in the Board of Directors in accordance with the
provisions of the certificate of incorporation of the
Corporation, the Board of Directors hereby creates a series
of preferred stock, par value $0.001 per share of the
Corporation and hereby states the designation and number of
shares, and fixes the relative rights, preferences and
limitations thereof (in addition to any provisions set
forth in the certificate of incorporation of the
Corporation which are applicable to the Preferred Stock of
all classes and series) as set forth in the Certificate of
Designation of Rights, Preferences and Privileges of Series
A Preferred Stock of Brilliant Digital Entertainment, Inc.,
a copy of which is attached to the Rights Agreement as
Exhibit A.:
Series A Preferred Stock:
Section 1. DESIGNATION AND AMOUNT. The shares of such series shall be
designated as "Series A Preferred Stock" (the "Series A Preferred Stock") and
the number of shares constituting the Series A Preferred Stock shall be 300,000
shares of Series A Preferred Stock, having a par value of $0.001 per share.
Such number of shares may be increased or decreased by resolution of the Board
of Directors; PROVIDED, that no decrease shall reduce the number of shares of
Series A Preferred Stock to a number less than the number of shares then
outstanding plus the number of shares reserved for issuance upon the exercise
of outstanding options, rights or warrants or upon the conversion of any
outstanding securities issued by the Corporation convertible into Series A
Preferred Stock.
PAGE 39
Section 2. DIVIDENDS AND DISTRIBUTIONS
(a) Subject to the rights of the holders of any shares of any series
of Preferred Stock (or any similar stock) ranking prior and superior to the
Series A Preferred Stock with respect to dividends, the holders of shares of
Series A Preferred Stock, in preference to the holders of Common Stock, par
value $0.001 per share (the "Common Stock"), of the Corporation, and of any
other junior stock, shall be entitled to receive, when, as and if declared by
the Board of Directors out of funds legally available for the purpose, (i) cash
dividends in an amount per whole share (rounded to the nearest cent) equal to
the Formula Number (as defined below) then in effect, times the aggregate per
share amount of all cash dividends declared or paid on the Common Stock, and
(ii) a preferential cash dividend (a "Preferential Dividend"), if any, on the
first day of April, July, October and January in each year (each such date
being referred to herein as a "Quarterly Dividend Payment Date"), commencing on
the first Quarterly Dividend Payment Date after the first issuance of a share
or fraction of a share of Series A Preferred Stock, in an amount per share
(rounded to the nearest cent) equal to $1.00 per share of Series A Preferred
Stock less the per share amount of all cash dividends declared on the Series A
Preferred Stock pursuant to clause (i) of this sentence since the immediately
preceding Quarterly Dividend Payment Date or, with respect to the first
Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Preferred Stock. In addition, if the
Corporation shall pay any dividend or make any distribution on the Common Stock
payable in assets, securities or other forms of noncash consideration (other
than dividends or distributions solely in shares of Common Stock), then, in
each such case, the Corporation shall simultaneously pay or make on each whole
outstanding share of Series A Preferred Stock, a dividend or distribution in
like kind equal to the Formula Number then in effect times such dividend or
distribution on each share of the Common Stock. The dividends and
distributions on the Series A Preferred Stock to which holders thereof are
entitled pursuant to clause (i) of the first sentence of this paragraph and the
second sentence of this paragraph are hereinafter referred to as "Participating
Dividends." As used herein, the "Formula Number" shall be 100; provided,
however, that if at any time after April 2, 1998, the Corporation shall (i)
declare or pay any dividend or make any distribution on the Common Stock,
payable in shares of Common Stock, (ii) subdivide (by a stock split or
otherwise), the outstanding shares of Common Stock into a larger number of
shares of Common Stock, or (iii) combine (by a reverse stock split or
otherwise) the outstanding shares of Common Stock into a smaller number of
shares of Common Stock, then in each such case the Formula Number in effect
immediately prior to such event shall be adjusted to a number determined by
multiplying the Formula Number then in effect by a fraction, the numerator of
which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event (and rounding the result
to the nearest whole number); and provided further, that, if at any time after
April 2, 1998, the Corporation shall issue any shares of its capital stock in a
merger, reclassification, or change of the outstanding shares of Common Stock,
then in each such event the Formula Number shall be appropriately adjusted to
reflect such merger, reclassification, or change so that each share of Series A
Preferred Stock continues to be the economic equivalent of a Formula Number of
shares of Common Stock prior to such merger, reclassification or change.
(b) The Corporation shall declare each Participating Dividend
immediately prior to or at the same time it declares any cash or non-cash
dividend or distribution on the Common
PAGE 40
Stock in respect of which a Participating Dividend is required to be paid. No
cash or non-cash dividend or distribution on the Common Stock in respect of
which a Participating Dividend is required shall be paid or set aside for
payment on the Common Stock unless a Participating Dividend in respect of such
dividend shall have been paid.
(c) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Preferred Stock from the Quarterly Dividend Payment Date
preceding the date of issue of such shares, unless the date of issue of such
shares is prior to the record date for the first Quarterly Dividend Payment
Date, in which case dividends on such shares shall begin to accrue from the
date of issue of such shares, or unless the date of issue is a Quarterly
Dividend Payment Date or is a date after the record date for the determination
of holders of shares of Series A Preferred Stock entitled to receive a
quarterly dividend and before such Quarterly Dividend Payment Date, in either
of which events such dividends shall begin to accrue and be cumulative from
such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not
bear interest. Dividends paid on the shares of Series A Preferred Stock in an
amount less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding. The Board of Directors may fix
a record date for the determination of holders of shares of Series A Preferred
Stock entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be not more than 60 days prior to the date
fixed for the payment thereof.
Section 3. VOTING RIGHTS. The holders of shares of Series A Preferred
Stock shall have the following voting rights:
(a) Each holder of Series A Preferred Stock shall be entitled to a
number of votes equal to the Formula Number then in effect, for each share of
Series A Preferred Stock held of record on each matter on which holders of the
Common Stock or stockholders generally are entitled to vote, multiplied by the
maximum number of votes per share which any holder of the Common Stock or
stockholders generally then have with respect to such matter (assuming any
holding period or other requirement to vote a greater number of shares is
satisfied).
(b) Except as otherwise provided herein, in any other Certificate of
Amendment creating a series of Preferred Stock or any similar stock, or by law,
the holders of shares of Series A Preferred Stock and the holders of shares of
Common Stock and any other capital stock of the Corporation having general
voting rights shall vote together as one class on all matters submitted to a
vote of stockholders of the Corporation.
(c) Except as set forth herein, or as otherwise provided by law,
holders of Series A Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent they are entitled to
vote with holders of Common Stock as set forth herein) for taking any corporate
action.
Section 4. CERTAIN RESTRICTIONS.
(a) Whenever Preferential Dividends or Participating Dividends are
in arrears or the Corporation shall be in default in payment thereof,
thereafter and until all accrued and
PAGE 41
unpaid Participating Dividends and Preferential Dividends, whether or not
declared, on shares of Series A Preferred Stock outstanding shall have been
paid or set aside for payment in full, the Corporation shall not:
(i) declare or pay dividends, or make any other distributions
on or redeem or purchase or otherwise acquire for consideration any shares of
stock ranking junior (either as to dividends or upon liquidation, dissolution
or winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends, or make any other distributions,
on the shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Stock,
except dividends paid ratably on the Series A Preferred Stock and all such
parity stock on which dividends are payable or in arrears in proportion to the
total amounts to which the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking junior or on a parity (either as to dividends or
upon liquidation, dissolution or winding up) to or with the Series A Preferred
Stock, provided that the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such junior or parity stock in exchange for
shares of any stock of the Corporation ranking junior (either as to dividends
or upon dissolution, liquidation or winding up) to the Series A Preferred
Stock; or
(iv) redeem or purchase or otherwise acquire for consideration
shares of Series A Preferred Stock, or any shares of stock ranking on a parity
with the Series A Preferred Stock, except in accordance with a purchase offer
made in writing or by publication (as determined by the Board of Directors) to
all holders of such shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other relative rights
and preferences of the respective series and classes, shall determine in good
faith will result in fair and equitable treatment among the respective series
or classes.
(b) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under paragraph (a) of
this Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
Section 5. REACQUIRED SHARES. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
subject to the conditions and restrictions on issuance set forth herein, in the
Certificate of Incorporation, or in any other Certificate of Amendment or
Certificate of Designation creating a series of Preferred Stock or any similar
stock or as otherwise required by law.
Section 6. LIQUIDATION, DISSOLUTION OR WINDING UP. Upon any voluntary
or involuntary liquidation, dissolution or winding up of the Corporation, no
distribution shall be
PAGE 42
made (a) to the holders of shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series A
Preferred Stock unless, prior thereto, the holders of shares of Series A
Preferred Stock shall have received an amount equal to the accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment, plus an amount equal to the greater of (i) $0.01 per whole share,
or (ii) an aggregate amount per share equal to the Formula Number then in
effect times the aggregate amount to be distributed per share to holders of
Common Stock, or (b) to the holders of shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up) with
the Series A Preferred Stock, unless simultaneously therewith distributions are
made ratably on the Series A Preferred Stock and all such parity stock in
proportion to the total amounts to which the holders of Series A Preferred
Stock shares are entitled under clause (a)(i) of this sentence and to which the
holders of such parity shares are entitled in each case upon such liquidation,
dissolution or winding up.
Section 7. CONSOLIDATION, MERGER, ETC. If the Corporation shall enter
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Series A Preferred Stock shall at the same time be similarly exchanged or
changed into an amount per share equal to the Formula Number then in effect
times the aggregate amount of stock, securities, cash and/or any other property
(payable in kind), as the case may be, into which or for which each share of
Common Stock is changed or exchanged. In the event that both this Section 7
and Section 2 appear to apply to a transaction, this Section 7 shall control.
Section 8. EFFECTIVE TIME OF ADJUSTMENTS.
(a) Adjustments to the Series A Preferred Stock required by the
provisions hereof shall be effective as of the time at which the event
requiring such adjustments occurs.
(b) The Corporation shall give prompt written notice to each holder
of a share of Series A Preferred Stock of the effect on any such shares of any
adjustment to the dividend rights or rights upon liquidation, dissolution or
winding up of the Corporation required by the provisions hereof.
Notwithstanding the foregoing sentence, the failure of the Corporation to give
such notice shall not affect the validity of or the force or effect of or the
requirement for such adjustment.
Section 9. NO REDEMPTION. The shares of Series A Preferred Stock
shall not be redeemable.
Section 10. RANK. Unless otherwise provided in the Certificate of
Incorporation or a Certificate of Designation relating to a subsequent series
of Preferred Stock of the Corporation, the Series A Preferred Stock shall rank,
with respect to the payment of dividends and the distribution of assets, junior
to all series of any other class of the Corporation's Preferred Stock.
Section 11. FRACTIONAL SHARES. The Series A Preferred Stock shall be
issuable upon exercise of the Rights issued pursuant to the Rights Agreement in
whole shares or in any fraction
PAGE 43
of a share that is one one-hundredth (1/100th) of a share or any integral
multiple of such fraction which shall entitle the holder, in proportion to such
holder's fractional shares, to receive dividends, exercise voting rights,
participate in distributions and to have the benefit of all other rights of
holders of Series A Preferred Stock. In lieu of fractional shares, the
Corporation, prior to the first issuance of a share or a fraction of a share of
Series A Preferred Stock, may elect (1) to make a cash payment as provided in
the Rights Agreement for fractions of a share other than one one-hundredth
(1/100th) of a share or any integral multiple thereof, or (2) to issue
depository receipts evidencing such authorized fraction of a share of Series A
Preferred Stock pursuant to an appropriate agreement between the Corporation
and a depository selected by the Corporation; provided that such agreement
shall provide that the holders of such depository receipts shall have the
rights, privileges and preferences to which they are entitled as holders of the
Series A Preferred Stock.
Section 12. AMENDMENT. The Certificate of Incorporation of the
Corporation shall not be amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series A Preferred
Stock so as to affect them adversely without the affirmative vote of the
holders of at least two-thirds of the outstanding shares of Series A Preferred
Stock, voting together as a single class.
PAGE 44
IN WITNESS WHEREOF, BRILLIANT DIGITAL ENTERTAINMENT, INC. has caused
this Certificate to be signed this ----- day of March, 1998.
------------------------
Xxxxxxx Xxxx
Chief Financial Officer
PAGE 45
EXHIBIT B
---------
FORM OF RIGHTS CERTIFICATE
Certificate No. R- ----------- Rights
NOT EXERCISABLE AFTER APRIL 2, 2008 OR EARLIER IF REDEEMED OR
EXCHANGED BY THE COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT
THE OPTION OF THE COMPANY, AT $.001 PER RIGHT ON THE TERMS SET FORTH
IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS
BENEFICIALLY OWNED BY AN ACQUIRING PERSON (AS SUCH TERM IS DEFINED IN
THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY
BECOME NULL AND VOID AND NON-TRANSFERABLE.
RIGHT CERTIFICATE
BRILLIANT DIGITAL ENTERTAINMENT, 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 ----------, 1998 (the Rights
Agreement") between Brilliant Digital Entertainment, Inc., a Delaware
corporation (the "Company"), and U. S. Stock Transfer Corporation as Rights
Agent (the "Rights Agent"), unless the rights evidenced hereby shall have been
previously redeemed by the Company, 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. Los Angeles time on April 2, 2008, at the principal
office or offices of the Rights Agent designated for such purpose, or at the
office of its successor as Rights Agent or its successors as Rights Agent, one
one-hundredth (1/100th) of a fully paid and non-assessable share of Series A
Preferred Stock, par value $0.001 per share (the "Preferred Stock") of the
Company, at a cash purchase price of $15.00 per one one-hundredth (1/100th) of
a share of Preferred Stock, as the same may from time to time be adjusted in
accordance with the Rights Agreement (the "Purchase Price"), upon presentation
and surrender of this Right Certificate with the form of election to purchase
and the related certificate duly executed. The number of Rights evidenced by
this Right Certificate (and the number of fractional shares of Preferred Stock
which may be purchased upon exercise thereof) set forth above, and the Purchase
Price set forth above, are the number and Purchase Price as of __________ __,
____ based on the shares of Preferred Stock as constituted at such date.
PAGE 46
As provided in the Rights Agreement, the Purchase Price and the number of
shares of Preferred Stock which may be purchased upon the exercise of the
Rights evidenced by this Right Certificate are subject to modification and
adjustment upon the happening of certain events, and in certain circumstances
may be exercised to purchase securities other than shares of Preferred Stock or
securities of issuers other than the Company.
If the Rights evidenced by this Rights Certificate are at any time
beneficially owned by an Acquiring Person or an Affiliate or Associate of an
Acquiring Person (as such terms are defined in the Rights Agreement), such
Rights shall be null and void and nontransferable and the holder of any such
Right (including any purported transferee or subsequent holder) shall not have
any right to exercise or transfer any such Right.
This Right 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 thereunder of the
Rights Agent, the Company and the holders of the Right Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the office of the Company and the
Rights Agent and are also available free of charge upon written request mailed
to the Rights Agent at:
U. S. Stock Transfer Corporation
0000 Xxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxx 00000-0000
This Right Certificate, with or without other Right Certificates, upon
surrender at the office or offices of the Rights Agent designated for such
purpose, may be exchanged for another Right Certificate or Right Certificates
of like tenor and date evidencing Rights entitling the holder to purchase a
like aggregate number of shares of Preferred Stock as the Rights evidenced by
the Right Certificate or Right Certificates surrendered shall have entitled
such holder to purchase. If this Right Certificate shall be exercised in part,
the holder shall be entitled to receive upon surrender hereof another Right
Certificate or Right Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Right Certificate may be redeemed by the Board of Directors at a
redemption price of $.001 per Right (payable in cash or other consideration)
appropriately adjusted as provided in the Rights Agreement at any time prior to
the earlier to occur of (i) 10 days after a Stock Acquisition Date (as defined
in the Rights Agreement), and (ii) the Final Expiration Date.
No fractional shares of Preferred Stock (other than integral multiples of
one one-hundredths (1/100ths) of a share, which may, at the election of the
Company, be evidenced by depositary receipts) 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.
PAGE 47
No holder of this Right Certificate, as such, shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of shares of
Preferred Stock or of any other securities of the Company which may at any time
be issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Right
Certificate shall have been exercised as provided in the Rights Agreement.
This Right 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.
Dated as of ----------------, ------ BRILLIANT DIGITAL ENTERTAINMENT, INC.
------------------------------- By ------------------------------
Secretary Title:
Countersigned:
---------------------------------
as Rights Agent
By ------------------------------
Title:
PAGE 48
[On Reverse Side of Rights Certificate]
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise
Rights represented by the Right Certificate.)
To: BRILLIANT DIGITAL ENTERTAINMENT, INC.
The undersigned hereby irrevocably elects to exercise ---------------
Rights represented by this Right Certificate to purchase one one-hundredth
(1/100th) of a share of Preferred Stock issuable upon the exercise of the
Rights (or such other securities of the Company or of any other Person which
may be issuable upon the exercise of the Rights) and requests that certificates
for such securities be issued in the name of and delivered to:
Please insert social security
or other identifying number
-----------------------------------------------------------------
(Please print name and address)
-----------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced by this
Right Certificate, a new Right Certificate for the balance 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)
-----------------------------------------------------------------
OPTIONAL ELECTION TO EXERCISE WITHOUT PAYMENT OF CASH:
With respect to the exercise of -------------- of the Rights specified above,
the undersigned hereby elects to exercise such Rights without payment of cash
and to receive a number of one one-
PAGE 49
hundredth (1/100th) of a share of Preferred Stock or other securities having a
value (as determined pursuant to the Rights Agreement) equal to the difference
between (i) the value of the Preferred Stock or other securities that would
have been issuable upon exercise thereof upon payment of the Purchase Price as
provided in the Rights Agreement, and (ii) the amount of such Purchase Price.
Dated: --------------------, ----
------------------------------
Signature
Signature Guaranteed:
CERTIFICATE
-----------
The undersigned hereby certifies by checking the appropriate boxes that:
1. the Rights evidenced by this Right 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 Acquiring 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 Right Certificate from
any Person who is, was or became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.
Dated: --------------, ---- ------------------------------
Signature
Signature Guaranteed:
NOTICE
The signature to the foregoing Election to Purchase and Certificate must
correspond to the name as written upon the face of this Right Certificate in
every particular, without alteration or enlargement or any change whatsoever.
PAGE 50
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate)
FOR VALUE RECEIVED --------------------------------------- hereby sells,
assigns and transfers unto
--------------------------------------------------------------------------
(Please print name and address of transferee)
-----------------------------------------------------------------
this Right Certificate, together with all right, title and interest therein,
and does hereby irrevocably constituzte and appoint -------------------------
Attorney, to transfer the within Right Certificate on the books of Brilliant
Digital Entertainment, Inc., with full power of substitution.
Dated: --------------------, ----
------------------------------
Signature
Signature Guaranteed:
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
1. the Rights evidenced by this Right Certificate --- are --- are not
being sold, assigned and transferred by or on behalf of a Person who is or was
an Acquiring Person or an Affiliate or Associate of any such Acquiring Person
(as such terms are defined in the Rights Agreement);
PAGE 51
2. after due inquiry and to the best knowledge of the undersigned, it
-- did -- did not acquire the Rights evidenced by this Right Certificate from
any Person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person.
Dated: --------------, ---- ------------------------------
Signature
Signature Guaranteed:
NOTICE
The signature to the foregoing Assignment and Certificate must correspond
to the name as written upon the face of this Right Certificate in every
particular, without alteration or enlargement or any change whatsoever.
PAGE 52
EXHIBIT C
---------
SUMMARY OF RIGHTS TO PURCHASE PREFERRED STOCK
DISTRIBUTION OF RIGHTS: Effective March 18, 1998, the Board of Directors
of Brilliant Digital Entertainment, Inc., a Delaware corporation (the
"Company") authorized and declared a dividend of one right (a "Right") for each
issued and outstanding share of the Common Stock, par value $0.001 per share
(the "Common Stock") of the Company. The dividend is payable to the
stockholders of record April 2, 1998 (the "Record Date"). All Rights are
issued pursuant to, and will be subject to the terms and conditions of, the
Rights Agreement between the Company and U. S. Stock Transfer Corporation as
Rights Agent dated as of March 30, 1998. The following is a brief summary of
the terms of the Rights.
Each Right, when exercisable, will entitle the registered holder thereof
to purchase from the Company one one-hundredth (1/100th) of a share of the
Series A Preferred Stock, par value $0.001 per share, of the Company (the
"Preferred Stock") at a Purchase Price of $15.00 per one one-hundredth
(1/100th) of a share of Preferred Stock (the "Purchase Price"), subject to
certain adjustments.
EXERCISE OF RIGHTS: The Rights will initially be represented by the
certificates evidencing the Common Stock and will not be exercisable, or
transferable apart from the Common Stock, until the earliest to occur of (i)
the tenth day after the acquisition by a person or group of affiliated or
associated persons (other than an Exempt Person or, in certain cases, a
Permitted Holder) of beneficial ownership of 15% or more of the outstanding
Common Stock; PROVIDED, that if within said ten-day period the Acquiring Person
reduces his beneficial ownership to less than 15%, then he shall be deemed not
to be an Acquiring Person and the Stock Acquisition Date (as defined below)
shall be deemed not to have occurred; (ii) the tenth day after the commencement
of a tender or exchange offer the consummation of which would result in the
beneficial ownership by a person or group of affiliated or associated persons
of 15% or more of the outstanding Common Stock; PROVIDED, that if within said
ten day period the person withdraws the tender or exchange offer, then such
offer shall be deemed not to have been made; (iii) the tenth day after the date
of filing of a registration statement for any such exchange offer under the
Securities Act of 1933, as amended, and (iv) the tenth day after the date on
which the Board of Directors of the Company (the "Board") declares any person
or group of affiliated or associated persons which beneficially owns 10% or
more of the outstanding Common Stock to be an "Adverse Person" (as described
below) (the earliest of these dates is referred to as the "Distribution Date").
Under the Rights Agreement, any person or group described in items (i) or (iv)
above is referred to as an "Acquiring Person," and the date upon which a person
or group first becomes an Acquiring Person is referred to as the "Stock
Acquisition Date."
An "Adverse Person" is any person or group of affiliated or associated
persons (other than an Exempt Person and a Permitted Holder) beneficially
owning 10% or more of the outstanding Common Stock, if the Board determines (i)
that the person or group is holding the shares of Common Stock in order to
cause the Company to repurchase their Common Stock or to take any
PAGE 53
other actions intended to provide them with short-term financial gain, in
circumstances where the Board determines that the actions to be taken are not
in the best long-term interests of the Company or its stockholders, or (ii)
that beneficial ownership of the Common Stock by the person or group is causing
or reasonably likely to cause a material adverse impact on the business or
prospects of the Company.
An "Exempt Person" is defined as the Company, a subsidiary of the Company,
an employee benefit plan of the Company, or any of its subsidiaries.
A "Permitted Holder" shall mean a Person who acquires beneficial ownership
of the Common Stock of the Company pursuant to a Permitted Acquisition;
PROVIDED, HOWEVER, a Permitted Holder shall remain a Permitted Holder so long
as the aggregate beneficial ownership of Common Stock held by such Person does
not exceed that number of shares of Common Stock held by such Person
immediately following the Permitted Acquisition pursuant to which such Person
became a Permitted Holder (reduced by the number of shares of Common Stock from
time to time disposed of by such Person) plus a number of additional shares of
Common Stock equal to 1% of the then outstanding shares of Common Stock of the
Company; PROVIDED, HOWEVER, any shares of Common Stock issued or issuable to a
Permitted Holder pursuant to employee benefit plans maintained by the Company
for the benefit of its employees, directors and consultants shall be
disregarded and not counted for purposes of calculating the limitations imposed
by the immediately preceding sentence.
"Permitted Acquisition" shall mean an acquisition of shares of Common
Stock by a Person in a transaction or series of transactions which has been
previously approved by a majority of the Board of Directors with the
concurrence of a majority of the Continuing Directors.
The Rights (unless sooner redeemed) will first become exercisable on the
Distribution Date, at which time the Company will distribute separate Right
Certificates representing the Rights to its then current stockholders, and it
is expected that the Rights could then begin trading separately from the Common
Stock. The Rights will expire on April 2, 2008 (the "Final Expiration Date"),
unless the Final Expiration Date is extended or unless the Rights are earlier
redeemed or exchanged by the Company.
ANTI-TAKEOVER PROVISIONS: Following the Stock Acquisition Date, the
Rights would give holders (other than the Acquiring Person, its affiliates and
transferees) the right to purchase from the Company, for the Purchase Price,
that number of one one-hundredth (1/100th) of a share of Preferred Stock (or,
in certain circumstances, Common Stock, cash, property or other securities of
the Company) having a market value of twice the Purchase Price of the Right.
Notwithstanding any of the foregoing, following the Stock Acquisition Date, all
Rights that are, or (under certain circumstances specified in the Rights
Agreement) were, beneficially owned by any Acquiring Person will be null and
void.
Further, in a merger, consolidation or sale or transfer of 50% or more of
the consolidated assets or earning power of the Company, each Right will be
converted into the right to purchase, for the Purchase Price, that number of
shares of common stock of the surviving entity or (in
PAGE 54
certain circumstances) its parent corporation, which at the time of such
transaction will have a market value of twice the Purchase Price of the Right.
Following the Distribution Date, exercisable Rights may be exercised, at
the option of the holder thereof, without the payment of the Purchase Price in
cash. In any such case, the number of securities which such person would
otherwise be entitled to receive upon the exercise of such Rights will be
reduced by the amount of the Purchase Price.
Preferred Stock purchasable upon exercise of the Rights will not be
redeemable. Each one one-hundredth (1/100th) of a share of Preferred Stock
will be entitled to an aggregate dividend per one one-hundredth (1/100th) of a
share of 100 times the dividend declared per share of Common Stock. In the
event of liquidation, the Preferred Stock holders will be entitled to a
preferential liquidation payment. These rights are protected by customary
anti-dilution provisions.
REDEMPTION OF RIGHTS: At any time prior to that date which is ten days
following the Stock Acquisition Date, the Board may redeem the outstanding
Rights at a price of $.001 per Right, and may amend the Rights Agreement in any
and all respects and particulars. If during said ten-day period the Acquiring
Person reduces his beneficial ownership to less than 15%, the Rights will again
be redeemable. Subsequent to ten days following the Stock Acquisition Date,
the Rights are not redeemable and the Board may amend the Rights Agreement only
to eliminate ambiguities or to provide additional benefits to the holders of
the Rights (other than any Acquiring Person).
VOTING OR DIVIDEND RIGHTS: Until a Right is exercised, the holder
thereof, as such, will have no rights as a stockholder of the Company,
including, without limitation, the right to vote or to receive dividends.
EFFECT OF RIGHTS: The Rights have certain anti-takeover effects. The
Rights may cause substantial dilution to a person or group that attempts to
acquire the Company on terms not approved by the Board of Directors of the
Company. The Rights should not interfere with any merger or other business
combination approved by the Board of Directors prior to the time that holders
of the Rights become entitled to exercise their Rights for Common Stock (or
common stock of the surviving entity in a merger with the Company), since until
that time the Rights may be redeemed by the Board of Directors of the Company
at $.001 per Right.
AMENDMENT: Any of the provisions of the Rights Agreement may be amended
by the Board of Directors of the Company prior to the Distribution Date. After
the Distribution Date, the provisions of the Rights Agreement may be amended by
the Board in order to cure any ambiguity, to make changes which do not
adversely affect the interests of holders of Rights or to shorten or lengthen
any time period under the Rights Agreement; PROVIDED, HOWEVER, that no
amendment to adjust the time period governing redemption shall be made at such
time as the Rights are not redeemable.
RIGHTS AGREEMENT: A copy of the Rights Agreement is being filed with the
Securities and Exchange Commission as an Exhibit to a Current Report on Form 8-
K dated on or about April 1, 1998. A copy of the Rights Agreement is available
free of charge from the Company. This
PAGE 55
summary description of the Rights does not purport to be complete and is
qualified in its entirety by reference to the Rights Agreement, which is
incorporated herein by reference.
