EXHIBIT 4.4
RIGHTS AGREEMENT
THIS RIGHTS AGREEMENT, dated as of November 21, 2003, is made by and
between Tarrant Apparel Group, a California corporation (the "COMPANY"), and
Computershare Trust Company, as Rights Agent (the "RIGHTS AGENT").
WITNESSETH
WHEREAS, effective November 12, 2003 (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, no par value, of the
Company (the "COMMON STOCK") outstanding at the close of business on December
12, 2003 (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-thousandth (1/1000th) of a share (subject to adjustment) of the
Series B Preferred Stock, no par value, of the Company (the "PREFERRED STOCK")
having the rights and preferences set forth in the form of Certificate of
Determination of Preferences, Rights and Limitations of Series B 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 shareholders
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 or to "beneficially
own," or to have the "Beneficial Ownership" of, (1) securities tendered pursuant
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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 DETERMINATION" shall mean the Certificate of
Determination of Preferences, Rights and Limitations of Series B 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 no par value, 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 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
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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.
"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 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
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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-thousandth of a share of Preferred Stock shall be equal to the Current
Market Price of one share of Preferred Stock divided by 1,000.
"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, (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, (iv)
Xxxxxx Xxxx ("GUEZ"), (v) Xxxx Xxx ("XXX," and together with Guez, collectively
referred to herein as the "SIGNIFICANT SHAREHOLDERS" and each as a "SIGNIFICANT
SHAREHOLDER"), and (vi) the Nacif Group; PROVIDED, that, subject to the
following sentence, if after the date hereof the aggregate individual Beneficial
Ownership of Common Stock of the Nacif Group or a Significant Shareholder
increases, then the Nacif Group or the Significant Shareholder shall no longer
be deemed to be an Exempt Person. Notwithstanding any other provisions hereof,
none of the following events shall be deemed to cause an increase in the
Beneficial Ownership of Common Stock of the Nacif Group or a Significant
Shareholder or to cause the Nacif Group or a Significant Shareholder to cease to
be an Exempt Person or to become an Acquiring Person: (x) the acquisition of
additional shares of Common Stock by a Significant Shareholder or any member of
the Nacif Group as a result of or pursuant to the exercise of options to
purchase Common Stock granted to the Significant Shareholder or member of the
Nacif Group by the Company pursuant to the Company's existing stock option plan
or a stock option plan hereafter adopted by the Board of Directors; (y) a
reduction in the aggregate number of shares of Common Stock outstanding
subsequent to the later of the Record Date and the last date on which a
Significant Shareholder or member of the Nacif Group acquired Beneficial
Ownership of any shares of Common Stock; or (z) the acquisition of additional
shares of Common Stock by a Significant Shareholder or member of the Nacif Group
so long as, with respect to Guez or the Nacif Group, the aggregate Beneficial
Ownership of Common Stock held by each such Person does not exceed 30% of the
shares of Common Stock then outstanding, and with respect to Xxx, the aggregate
Beneficial Ownership of Common Stock held by such Person does not exceed 20% of
the shares of Common Stock then outstanding.
"NACIF GROUP" shall mean Xxxxx Xxxxx Xxxxx and/or Jamil
Textil, S.A. de C.V. and/or Xxxx Xxxxxxx Xxxxx Xxxxxxxxx and each of their
Affiliates and/or Associates, whether or not acting together.
"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.
"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
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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.
"PREFERRED STOCK" shall mean the Series B Preferred Stock, no
par value, of the Company having the rights and preferences set forth in the
form of Certificate of Determination.
"PURCHASE PRICE" with respect to each Right shall mean $25.00,
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 December 12, 2003.
"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.
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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
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,
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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 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 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:
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This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in a Rights Agreement between Tarrant
Apparel Group (the "Company") and Computershare Trust Company as Rights
Agent, dated as of November 21, 2003, 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 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-thousandth
(1/1000th) 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
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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 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
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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.
(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 December 12, 2013 (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-thousandth
(1/1000th) 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-thousandth
(1/1000th) 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-thousandth
(1/1000th) of a share of Preferred Stock pursuant to the exercise of a Right
shall initially be $25.00, 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-thousandths (1/1000ths) 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
11
respect to each Right so exercised, of the Purchase Price per one one-thousandth
(1/1000th) 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 (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
12
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:
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.
13
(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 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.
14
(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.
(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
15
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.
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-thousandth (1/1000th) 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-thousandth (1/1000th) 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-thousandth (1/1000th)
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.
16
(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")) 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.
17
(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 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-thousandth (1/1000th) 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-thousandth (1/1000th) 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-thousandth (1/1000th) 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-thousandth (1/1000th) 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-thousandth (1/1000th) 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
18
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 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-thousandth (1/1000th) 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-thousandth (1/1000th) 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
19
warrants referred to hereinabove in this SECTION 11, hereafter made by the
Company to the holders of its Preferred Stock, shall not be taxable to such
shareholders.
(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 shareholders 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-thousandth (1/1000th) 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-thousandth (1/1000th) 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,
20
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 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.
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
21
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 tradable 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-thousandth
(1/1000th) 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 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).
22
(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 are 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 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
23
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 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
24
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-thousandth (1/1000th) 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-thousandth (1/1000th) of a share of
Preferred Stock). Fractional interests in shares of Preferred Stock in integral
multiples of one one-thousandth (1/1000th) 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 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
25
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 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.
26
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
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 SHAREHOLDER. No
holder, as such, of any Right Certificate shall be entitled to vote, receive
dividends or be deemed for any
27
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 shareholder of the Company or
any right to vote for the election of Directors or upon any matter submitted to
shareholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
shareholders (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. 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.
28
(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 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
29
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 Vice 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 shareholder, 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.
(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
30
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 willful 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 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
31
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.
SECTION 25. REDEMPTION.
(a) The Company may, by resolution of the Board of
Directors, 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
32
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 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
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
33
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.
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:
Tarrant Apparel Group
0000 Xxxx Xxxxxxxxxx Xxxxxxxxx
Xxx Xxxxxxx, XX 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:
Computershare Trust Company
000 Xxxxxxx Xxxxxx
Xxxxx 000
Xxxxxx, Xx 00000
Attention:
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.
34
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 Determination) 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 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 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.
35
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 California 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.
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.
36
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.
TARRANT APPAREL GROUP,
a California corporation
By: /s/ Xxxxxxx Xxxx
---------------------------------
Xxxxxxx Xxxx
Title: Chief Financial Officer
Attest: Computershare Trust Company,
as Rights Agent
By: /s/ Xxxxxx Xxxxx
---------------------------------
Xxxxxx Xxxxx
Title: Vice President
---------------------------------
By: /s/ Xxxx X. Xxxx
---------------------------------
Xxxx X. Xxxx
Title: Corporate Trust Officer
---------------------------------
EXHIBIT A
TARRANT APPAREL GROUP
CERTIFICATE OF DETERMINATION
OF PREFERENCES, RIGHTS AND LIMITATIONS OF
SERIES B PREFERRED STOCK
(Pursuant to Section 401 of the California General Corporation Law)
The undersigned, Xxxxxx Xxxx and Xxxxxx Xx, hereby certify that:
1. They are the duly elected Chief Executive Officer and
Secretary, respectively, of Tarrant Apparel Group, a California corporation (the
"CORPORATION"); and
2. The authorized number of shares of Preferred Stock is
2,000,000, of which 1,000,000 shares are designated Series A Convertible
Preferred Stock. The authorized number of shares of Series B Preferred Stock is
250,000, none of which have been issued.
3. Pursuant to the authority conferred upon the Board of
Directors by the Articles of Incorporation of the Corporation, the Board of
Directors duly adopted the following recitals and resolutions:
RESOLVED, that there is hereby designated a series of
Preferred Stock to be known as Series B Preferred Stock having the following
rights and preferences:
Section 1. DESIGNATION AND AMOUNT. The shares of such series shall be
designated as "Series B Preferred Stock" (the "SERIES B PREFERRED STOCK") and
the number of shares constituting the Series B Preferred Stock shall be 250,000
shares of Series B Preferred Stock, no par value. 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 B 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 B Preferred Stock.
Section 2. DIVIDENDS AND DISTRIBUTIONS
(a) Subject to the rights of the holders of any shares of
Series A Convertible Preferred Stock and any other series of Preferred Stock (or
any similar stock) ranking prior and superior to the Series B Preferred Stock
with respect to dividends, the holders of shares of Series B Preferred Stock, in
preference to the holders of Common Stock, no par value (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 B Preferred Stock, in an amount per share
(rounded to the nearest cent) equal to $1.00 per share of Series B Preferred
Stock less the per share amount of all cash dividends declared on the Series B
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 B 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 B 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 B 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 1,000; provided, however, that if at any time after
November 21, 2003, 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 November 21, 2003 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 B 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 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 B 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 B Preferred Stock entitled to
receive a quarterly dividend and before such Quarterly Dividend
2
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 B
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 B 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 B Preferred
Stock shall have the following voting rights:
(a) Each holder of Series B Preferred Stock shall be
entitled to a number of votes equal to the Formula Number then in effect, for
each share of Series B Preferred Stock held of record on each matter on which
holders of the Common Stock or shareholders generally are entitled to vote,
multiplied by the maximum number of votes per share which any holder of the
Common Stock or shareholders 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 B 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 shareholders of the Corporation.
(c) Except as set forth herein, or as otherwise provided
by law, holders of Series B 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 unpaid Participating Dividends and
Preferential Dividends, whether or not declared, on shares of Series B 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 B 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 B
Preferred Stock, except dividends paid ratably on the Series B 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;
3
(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
B 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 B
Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for
consideration shares of Series B Preferred Stock, or any shares of stock ranking
on a parity with the Series B 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 B 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
Articles of Incorporation, or in any other Certificate of Amendment or
Certificate of Determination 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 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 B Preferred Stock unless, prior thereto, the holders of shares of Series
B 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 B
Preferred Stock, unless simultaneously therewith distributions are made ratably
on the Series B Preferred Stock and all such parity stock in proportion to the
total amounts to which the holders of Series B 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
4
in any such case each share of Series B 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 B 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 B 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 B Preferred Stock shall
not be redeemable.
Section 10. RANK. Unless otherwise provided in the Articles of
Incorporation or a Certificate of Determination relating to a subsequent series
of Preferred Stock of the Corporation, the Series B 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 B Preferred Stock shall be
issuable upon exercise of the Rights issued pursuant to the Rights Agreement in
whole shares or in any fraction of a share that is one one-thousandth (1/1000th)
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 B 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 B 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-thousandth (1/1000th) of a share or any integral multiple thereof, or (2) to
issue depository receipts evidencing such authorized fraction of a share of
Series B 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 B Preferred Stock.
Section 12. AMENDMENT. The Articles 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 B 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 B Preferred Stock, voting
together as a single class.
5
IN WITNESS WHEREOF, the undersigned declare under penalty of perjury
under the laws of the State of California that the matters set forth in the
foregoing certificate are true and correct to their own knowledge.
Dated as of November 21, 2003 By:
--------------------------
Xxxxxx Xxxx
Chief Executive Officer
By:
--------------------------
Xxxxxxx Xxxx
Chief Financial Officer
6
EXHIBIT B
FORM OF RIGHTS CERTIFICATE
Certificate No. R- ____________ Rights
NOT EXERCISABLE AFTER DECEMBER 12, 2013 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
TARRANT APPAREL GROUP
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 November 21, 2003 (the "Rights
Agreement") between Tarrant Apparel Group, a California corporation (the
"Company"), and Computershare Trust Company, 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 December 12, 2013, 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-thousandth (1/1000th) of
a fully paid and non-assessable share of Series B Preferred Stock, no par value,
of the Company (the "Preferred Stock"), at a cash purchase price of $25.00 per
one one-thousandth (1/1000th) 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.
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:
Computershare Trust Company
000 Xxxxxxx Xxxxxx
Xxxxx 000
Xxxxxx, XX 00000
Attention:
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-thousandths (1/1000ths) 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.
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 shareholder of the Company or any right to vote for the
election of directors or upon any matter submitted to shareholders at any
meeting thereof, or give or withhold consent to any corporate action, or to
receive notice of meetings or other actions
2
affecting shareholders (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 ______________, ____ TARRANT APPAREL GROUP
______________________________ By: ____________________________
Secretary Title:
Countersigned:
Computershare Trust Company,
as Rights Agent
By: ____________________________
Title:
By: ____________________________
Title:
3
[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: TARRANT APPAREL GROUP
The undersigned hereby irrevocably elects to exercise ______________
Rights represented by this Right Certificate to purchase one one-thousandth
(1/1000th) 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-thousandth (1/1000th) 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:
4
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.
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate)
FOR VALUE RECEIVED _____________________ hereby sells, assigns and
transfers unto
------------------------------------------------------------------------------
(Please print name and address of transferee)
------------------------------------------------------------------------------
this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint ___________________________
Attorney, to transfer the within Right Certificate on the books of Tarrant
Apparel Group, with full power of substitution.
Dated: ____________________, ____ _____________________________
Signature
Signature Guaranteed:
5
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);
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.
6
EXHIBIT C
SUMMARY OF RIGHTS TO PURCHASE PREFERRED STOCK
DISTRIBUTION OF RIGHTS: Effective November 12, 2003, the Board of
Directors (the "Board") of Tarrant Apparel Group, a California corporation (the
"Company") authorized and declared a dividend of one right (a "Right") for each
issued and outstanding share of the Common Stock, no par value (the "Common
Stock") of the Company. The dividend is payable to the shareholders of record on
December 12, 2003 (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 Computershare Trust Company, as Rights Agent, dated as of November
21, 2003. 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-thousandth (1/1000th) of a share of
the Series B Preferred Stock, no par value, of the Company (the "Preferred
Stock") at a Purchase Price of $25.00 per one one-thousandth (1/1000th) 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 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 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 shareholders, 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,
and, subject to certain conditions, Xxxxxx Xxxx, Xxxx Xxx, and the Nacif Group,
which consists of Xxxxx Xxxxx Xxxxx, and/or Jamil Textil, S.A. de C.V. and/or
Xxxx Xxxxxxx Xxxxx Xxxxxxxxx and each of their Affiliates and/or Associates (as
defined in the Rights Agreement), whether or not acting together.
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.
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 shareholders, and it is
expected that the Rights could then begin trading separately from the Common
Stock. The Rights will expire on December 12, 2013 (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-thousandth (1/1000th) 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 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.
2
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-thousandth (1/1000th) of a share of Preferred Stock
will be entitled to participating dividends per one one-thousandth (1/1000th) of
a share equal to dividends which may from time to time be declared on a 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 shareholder 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. The Rights should not
interfere with any merger or other business combination approved by the Board
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
at $.001 per Right.
AMENDMENT: Any of the provisions of the Rights Agreement may be amended
by the Board 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 November 21, 2003. A copy of the Rights Agreement is
available free of charge from the Company. This summary description of the
Rights does not purport to be complete and is qualified in its entirety by
reference to the Rights Agreement, which is incorporated herein by reference.
3
