Page 9 of 76 Pages
EXHIBIT 1
RIGHTS AGREEMENT
by and between
THE WET SEAL, INC.
and
AMERICAN STOCK TRANSFER & TRUST COMPANY
as Rights Agent
Dated as of
August 19, 1997
Page 10 of 76 Pages
TABLE OF CONTENTS
Section 1. Certain Definitions................................................1
-------------------
Section 2. Appointment of Rights Agent........................................7
---------------------------
Section 3. Issuance of Right Certificates.....................................7
------------------------------
Section 4. Form of Right Certificates.........................................8
--------------------------
Section 5. Countersignature and Registration..................................9
---------------------------------
Section 6. Transfer, Split Up, Combination and Exchange of Right Certificates;
-------------------------------------------------------------------
Mutilated, Destroyed, Lost or Stolen Right Certificates............9
-------------------------------------------------------
Section 7. Exercise of Rights; Exercise Price; Expiration Date of Rights.....10
-------------------------------------------------------------
Section 8. Cancellation and Destruction of Right Certificates................12
--------------------------------------------------
Section 9. Reservation and Availability of Shares of Preferred Stock.........13
---------------------------------------------------------
Section 10. Preferred Stock Record Date......................................14
---------------------------
Section 11. Adjustment of Exercise Price or Number of Shares.................14
------------------------------------------------
Section 12. Certification of Adjusted Exercise Price or Number of Shares.....18
------------------------------------------------------------
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning
--------------------------------------------------------------
Power............................................................19
-----
Section 14. Fractional Rights and Fractional Shares..........................22
---------------------------------------
Section 15. Rights of Action.................................................22
----------------
i
Page 11 of 76 Pages
Section 16. Agreement of Right Holders.......................................23
--------------------------
Section 17. Right Certificate Holder Not Deemed a Stockholder................23
-------------------------------------------------
Section 18. Concerning the Rights Agent......................................23
---------------------------
Section 19. Merger or Consolidation of, or Change in Name of, the Rights
------------------------------------------------------------
Agent............................................................24
-----
Section 20. Duties of Rights Agent...........................................25
----------------------
Section 21. Change of Rights Agent...........................................26
----------------------
Section 22. Issuance of New Right Certificates...............................27
----------------------------------
Section 23. Redemption.......................................................27
----------
Section 24. Notice of Proposed Actions.......................................28
--------------------------
Section 25. Notices..........................................................29
-------
Section 26. Supplements and Amendments.......................................30
--------------------------
Section 27. Successors.......................................................30
----------
Section 28. Benefits of this Rights Agreement................................30
---------------------------------
Section 29. Delaware Contract................................................31
-----------------
Section 30. Counterparts.....................................................31
------------
Section 31. Descriptive Headings.............................................31
--------------------
Section 32. Severability.....................................................31
------------
ii
Page 12 of 76 Pages
Exhibit A -- Summary of Rights
Exhibit B -- Form of Right Certificate
Exhibit C -- Form of Certificate of Designations
iii
Page 13 of 76 Pages
RIGHTS AGREEMENT
Agreement, dated as of August 19, 1997, by and between The Wet
Seal, Inc., a Delaware corporation (the "Company"), and American Stock Transfer
& Trust Company, a New York corporation (the "Rights Agent").
W I T N E S S E T H:
WHEREAS, on August 19, 1997, the Board of Directors of the
Company authorized the issuance of, and declared a dividend payable in, one
right (a "Class A Right"), for each share of the Company's Class A Common Stock,
par value $0.10 per share (the "Class A Common Stock"), and one right (a "Class
B Right", and together with the Class A Rights, the "Rights"), for each share of
the Company's Class B Common Stock, par value $0.10 per share ( the "Class B
Common Stock", and together with the Class A Common Stock, the "Common Stock"),
in each case outstanding as of the close of business on August 29, 1997 (the
"Record Date"). Each such Class A Right represents the right to purchase one
one-hundredth of a share of Class A Junior Preferred Stock of the Company (the
"Class A Preferred Stock"), and each such Class B Right represents the right to
purchase one one-hundredth of a share of Class B Junior Preferred Stock of the
Company (the "Class B Preferred Stock", and together with the Class A Preferred
Stock, the "Preferred Stock"), in each case having the rights and preferences
set forth in the form of the Certificate of Designations attached hereto as
Exhibit C authorized by the Board of Directors on August 19, 1997, upon the
terms and subject to the conditions hereinafter set forth; and
WHEREAS, the Board of Directors of the Company further authorized
the issuance of one Class A Right (subject to adjustment) with respect to each
share of Class A Common Stock, and one Class B Right (subject to adjustment)
with respect to each share of Class B Common Stock, in each case which may be
issued between the Record Date and the earlier to occur of the Expiration Date
or the Final Expiration Date (as such terms are hereinafter defined);
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 shall have the meanings indicated:
(a) "Acquiring Person" shall mean any Person (as such term
is hereinafter defined) who or which, together with all
Affiliates (as such term is hereinafter defined) and Associates
(as such term is hereinafter defined) of such Person, shall be
the Beneficial Owner (as such term is hereinafter defined) of 12%
Page 14 of 76 Pages
or more of the Voting Stock (as such term is hereinafter defined)
of the Company then outstanding; provided, that, an Acquiring
Person shall not include (i) an Exempt Person (as such term is
hereinafter defined), or (ii) any Person, together with all
Affiliates and Associates of such Person, who or which would be
an Acquiring Person solely by reason of (A) being the Beneficial
Owner of shares of Voting Stock of the Company, the Beneficial
Ownership of which was acquired by such Person pursuant to any
action or transaction or series of related actions or
transactions approved by the Board of Directors before such
Person otherwise became an Acquiring Person, or (B) a reduction
in the number of issued and outstanding shares of Voting Stock of
the Company pursuant to a transaction or a series of related
transactions approved by the Board of Directors of the Company;
provided, further, that in the event such Person described in
this clause (ii) does not become an Acquiring Person by reason of
subclause (A) or (B) of this clause (ii), such Person nonetheless
becomes an Acquiring Person in the event such Person thereafter
acquires Beneficial Ownership of an additional 1% of the Voting
Stock of the Company, unless the acquisition of such additional
Voting Stock would not result in such Person becoming an
Acquiring Person by reason of subclause (A) or (B) of this clause
(ii). Notwithstanding the foregoing, if the Board of Directors of
the Company determines in good faith (but only if at the time of
such determination by the Board of Directors there are then in
office not less than a majority of directors who are Continuing
Directors (as such term is hereinafter defined) and such action
is approved by a majority of the Continuing Directors then in
office) that a Person who would otherwise be an "Acquiring
Person" as defined pursuant to the foregoing provisions of this
paragraph (a) has become such inadvertently, and such Person
divests as promptly as practicable a sufficient number of shares
of Voting Stock so that such Person would no longer be an
"Acquiring Person" as defined pursuant to the foregoing
provisions of this paragraph (a), then such Person shall not be
deemed an "Acquiring Person" for any purposes of this Rights
Agreement.
(b) "Affiliate" of a Person shall have the meaning ascribed
to such term in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as amended ("Exchange
Act"), as in effect on the date of this Rights Agreement.
(c) "Associate" of a Person shall mean (i) with respect to
a corporation, any officer or director thereof or of any
Subsidiary (as such term is hereinafter defined) thereof, or any
Beneficial Owner of 10% or more of any class of equity security
thereof, (ii) with respect to a partnership, any general partner
thereof or any limited partner thereof who is, directly or
indirectly, the Beneficial Owner of a 10% ownership interest
therein, (iii) with respect to a business trust, any officer or
trustee thereof or of any Subsidiary thereof or any Beneficial
Owner of 10% or more of any class of beneficial interest therein,
(iv) with respect to any association other than a corporation,
partnership or business trust, any officer or director or other
person performing similar functions thereof or of any Subsidiary
thereof or any Beneficial Owner of 10% or more of the Common
2
Page 15 of 76 Pages
Stock (as such term is hereinafter defined) of the association,
(v) with respect a trust that is not a business trust or an
estate, any trustee, executor or similar fiduciary or any Person
who has a 10% or greater interest as a beneficiary in the income
from or principal of such trust or estate, (vi) with respect to a
natural person, any relative or spouse of such person, or any
relative of such spouse, who has the same home as such person,
and (vii) any Affiliate of such Person.
(d) A Person shall be deemed the "Beneficial Owner" of, or
to "Beneficially Own", any securities (and correlative terms
shall have correlative meanings):
(i) which such Person or any of such Person's
Affiliates or Associates beneficially owns, directly or
indirectly, for purposes of Section 13(d) of the Exchange
Act and Regulations 13D and 13G thereunder (or any
comparable or successor law or regulation), in each case as
in effect on the date hereof; or
(ii) which such Person or any of such Person's
Affiliates or Associates has (A) the right to acquire
(whether such right is exercisable immediately or only after
the passage of time or the fulfillment of a condition or
both) pursuant to any agreement, arrangement or
understanding, or upon the exercise of conversion rights,
exchange rights, other rights (other than these Rights),
warrants or options, or otherwise; provided, however, that a
Person shall not be deemed the "Beneficial Owner" of, or to
"Beneficially Own", securities tendered pursuant to a tender
or exchange offer made by such Person or any of such
Person's Affiliates or Associates until such tendered
securities are accepted for purchase or exchange, or (B) the
right to vote, alone or in concert with others, pursuant to
any agreement, arrangement or understanding (whether or not
in writing); provided, however, that a Person shall not be
deemed the "Beneficial Owner" of, or to "Beneficially Own",
any securities if the agreement, arrangement or
understanding to vote such securities (1) arises solely from
a revocable proxy or consent given in response to a proxy or
consent solicitation made pursuant to, and in accordance
with, the applicable rules and regulations under the
Exchange Act, and (2) is not at the time reportable by such
Person on a Schedule 13D report under the Exchange Act (or
any comparable or successor report), other than by reference
to a proxy or consent solicitation being conducted by such
Person; or
(iii)which are beneficially owned, directly or
indirectly, by any other Person with which such Person or
any of such Person's Affiliates or Associates has any
agreement, arrangement or understanding (whether or not in
writing) for the purpose of acquiring, holding, voting
(except as described in clause (B) of subparagraph (ii) of
this paragraph (d)) or disposing of any securities of the
Company; provided, however, that for purposes of determining
3
Page 16 of 76 Pages
Beneficial Ownership of securities under this Rights
Agreement, officers and directors of the Company solely by
reason of their status as such shall not constitute a group
(notwithstanding that they may be Associates of one another
or may be deemed to constitute a group for purposes of
Section 13(d) of the Exchange Act) and shall not be deemed
to own shares owned by another officer or director of the
Company. Notwithstanding anything in this paragraph (d) to
the contrary, a Person shall not be deemed the "Beneficial
Owner" of, or to "Beneficially Own," any security
beneficially owned by another Person solely by reason of an
agreement, arrangement or understanding with such other
Person for the purposes of: (x) soliciting the Company's
shareholders for the election of director nominees or any
other shareholder resolution, the formation of and
membership on any committee for the purpose of promoting or
opposing any shareholder resolution or for electing a slate
of nominees to the Company's Board of Directors, service on
such a slate of nominees, or agreement to a slate of
director nominees, provided, that such other Person retains
the right at any time to withdraw as a nominee or member of
any such committee, and to withhold or revoke any vote or
proxy for or against any such shareholder resolution or for
such slate of nominees; (y) entering into revocable voting
agreements or the granting or solicitation of revocable
proxies with respect to any of the matters described in the
foregoing clause (x); or (z) the sharing of expenses and the
indemnification against expenses and liabilities by any such
other Person with respect to expenses incurred or conduct
occurring during the time such other Person is a nominee or
a member of any such committee described in the foregoing
clause (x). Further, notwithstanding anything in this
paragraph (d) to the contrary, a Person engaged in the
business of underwriting securities shall not be deemed the
"Beneficial Owner" of, or to "Beneficially Own," any
securities acquired in good faith in a firm commitment
underwriting until the expiration of forty days after the
date of such acquisition.
(e) "Business Day" shall mean any day other than a
Saturday, Sunday, or a day on which banking institutions in the
State of New York are authorized or obligated by law or executive
order to close.
(f) "Close of Business" on any given date shall mean 5:00
P.M., New York time, on such date; provided, however, that if
such date is not a Business Day it shall mean 5:00 P.M., New York
time, on the next succeeding Business Day.
(g) "Common Stock" when used with reference to the Company
shall mean the Class A Common Stock and the Class B Common Stock,
collectively. "Common Stock" when used with reference to any
Person other than the Company which shall be organized in
corporate form shall mean the capital stock or other equity
security with the greatest per share voting power of such Person.
"Common Stock" when used with reference to any Person other than
4
Page 17 of 76 Pages
the Company which shall not be organized in corporate form shall
mean units of beneficial interest which shall represent the right
to participate in profits, losses, deductions and credits of such
Person and which shall be entitled to exercise the greatest
voting power per unit of such Person.
(h) "Continuing Director" shall mean any member of the
Board of Directors, while such person is a member of the Board of
Directors, who is not an Acquiring Person, or an Affiliate or
Associate of an Acquiring Person, or a representative or nominee
of an Acquiring Person or of any such Affiliate or Associate, and
who either (i) was a member of the Board of Directors prior to
the time that any Person became an Acquiring Person (other than
pursuant to a Qualifying Tender Offer), or (ii) subsequently
became a member of the Board of Directors, and whose nomination
for election or election to the Board of Directors was
recommended or approved by a majority of the Continuing Directors
then on the Board of Directors.
(i) "Distribution Date" shall have the meaning set forth in
Section 3(b) hereof.
(j) "Exchange Act" shall have the meaning set forth in
Section 1(b) hereof.
(k) "Exempt Person" shall mean (i) the Company, any
Subsidiary of the Company, or any employee benefit plan or
employee stock plan of the Company or any Subsidiary of the
Company, or any trust or other entity organized, appointed,
established or holding Common Stock for or pursuant to the terms
of any such plan, or (ii) any Original Class B Stockholder (as
such term is defined in the Company's restated Certificate of
Incorporation, as in effect on the date of this Agreement) or any
Permitted Transferee (as such term is defined in the Company's
restated Certificate of Incorporation, as in effect on the date
of this Agreement) of any such Original Class B Stockholder.
(l) "Exercise Price" shall have the meaning set forth in
Sections 4 and 7(b) hereof.
(m) "Expiration Date" shall have the meaning set forth in
Section 7(a) hereof.
(n) "Fair Market Value" of any property shall mean the fair
market value of such property as determined in accordance with
Section 11(b) hereof.
(o) "Final Expiration Date" shall have the meaning set
forth in Section 7(a) hereof.
(p) "Person" shall mean any partnership, limited liability
company, business trust, other association, government entity,
estate, trust, foundation or natural person.
5
Page 18 of 76 Pages
(q) "Principal Party" shall have the meaning set forth in
Section 13(b) hereof.
(r) "Qualifying Tender Offer" shall mean a tender or
exchange offer for all outstanding shares of Common Stock of the
Company approved by a majority of the Board of Directors
(provided, that at the time of such approval of the Board of
Directors there are then in office not less than a majority of
directors who are Continuing Directors and such offer is approved
by a majority of the Continuing Directors then in office), after
taking into account the potential long-term value of the Company
and all other factors that they consider relevant.
(s) "Redemption Price" shall have the meaning set forth in
Section 23(a) hereof.
(t) "Right Certificate" shall have the meaning set forth in
Section 3(d) hereof.
(u) "Stock Acquisition Date" shall mean the first date on
which there shall be a public announcement by the Company or an
Acquiring Person that an Acquiring Person has become such (which,
for purposes of this definition, shall include, without
limitation, a report filed pursuant to Section 13(d) of the
Exchange Act) or such earlier date as a majority of the
Continuing Directors shall become aware of the existence of an
Acquiring Person.
(v) "Subsidiary" of a Person shall mean any corporation or
other entity of which securities or other ownership interests
having voting power sufficient to elect a majority of the board
of directors or other persons performing similar functions are
beneficially owned, directly or indirectly, by such Person or by
any corporation or other entity that is otherwise controlled by
such Person.
(w) "Summary of Rights" shall have the meaning set forth in
Section 3(a) hereof.
(x) "Trading Day" shall have the meaning set forth in
Section 11(b) hereof.
(y) "Transfer Tax" shall mean any tax or charge, including
any documentary stamp tax, imposed or collected by any
governmental or regulatory authority in respect of any transfer
of any security, instrument or right, including Rights, shares of
Common Stock and shares of Preferred Stock.
(z) "Voting Stock" shall mean (i) the Common Stock of the
Company, and (ii) any other shares of capital stock of the
Company entitled to vote generally in the election of directors
or entitled to vote together with the Common Stock in respect of
any merger, consolidation, sale of all or substantially all of
the Company's assets, liquidation, dissolution or winding up. For
purposes of this Agreement, a stated percentage of the Voting
6
Page 19 of 76 Pages
Stock shall mean a number of shares of the Voting Stock as shall
equal in voting power that stated percentage of the total voting
power of the then outstanding shares of Voting Stock in the
election of a majority of the Board of Directors or in respect of
any merger, consolidation, sale of all or substantially all of
the Company's assets, liquidation, dissolution or winding up.
Any determination required to be made by the Board of Directors
of the Company for purposes of applying the definitions contained in this
Section 1 shall be made by the Board of Directors in its good faith judgment,
which determination shall be binding on the Rights Agent and the holders of the
Rights.
Section 2. Appointment of Rights Agent. The Company hereby
----------------------------
appoints the Rights Agent to act as agent for the Company and the holders of the
Rights in accordance with the terms and conditions hereof, and the Rights Agent
hereby accepts such appointment. The Company may from time to time appoint such
co-Rights Agents as it may deem necessary or desirable.
Section 3. Issuance of Right Certificates.
------------------------------
(a) On the Record Date (or as soon as practicable thereafter),
the Company or the Rights Agent shall send a copy of a Summary of Rights, in
substantially the form attached hereto as Exhibit A (the "Summary of Rights"),
by first class mail, postage prepaid, to each record holder of the Common Stock
as of the close of business on the Record Date, at the address of such holder
shown on the records of the Company.
(b) Until the close of business on the day which is the earlier
of (i) the tenth day after the Stock Acquisition Date, or (ii) the tenth
business day (or such later date as may be determined by action of the Board of
Directors prior to such time as any Person becomes an Acquiring Person) after
the date of the commencement by any Person (other than an Exempt Person) of, or
the first public announcement of the intent of any Person (other than an Exempt
Person) to commence, a tender or exchange offer upon the successful consummation
of which such Person, together with its Affiliates and Associates, would be the
Beneficial Owner of 20% or more of the then outstanding shares of Voting Stock
of the Company (irrespective of whether any shares are actually purchased
pursuant to any such offer) (the earlier of such dates being herein referred to
as the "Distribution Date"), (x) the Class A Rights shall be evidenced by the
certificates for Class A Common Stock registered in the name of the holders of
Class A Common Stock and the Class B Rights shall be evidenced by the
certificates for Class B Common Stock registered in the name of the holders of
Class B Common Stock, and in each case not by separate Right certificates and
the record holders of such certificates for Common Stock shall be the record
holders of the Rights represented thereby, and (y) each Right shall be
transferable only simultaneously and together with the transfer of a share of
Common Stock (subject to adjustment as hereinafter provided). Until the
Distribution Date (or, if earlier, the Expiration Date or Final Expiration
Date), the surrender for transfer of any certificate for Common Stock shall
constitute the surrender for transfer of the Right or Rights associated with the
Common Stock evidenced thereby, whether or not accompanied by a copy of the
Summary of Rights.
7
Page 20 of 76 Pages
(c) Rights shall be issued in respect of all shares of Common
Stock that become outstanding after the Record Date but prior to the earlier of
the Distribution Date, the Expiration Date or the Final Expiration Date and, in
certain circumstances provided in Section 22 hereof, may be issued in respect of
shares of Common Stock that become outstanding after the Distribution Date.
Certificates for Common Stock (including, without limitation, certificates
issued upon original issuance, disposition from the Company's treasury or
transfer or exchange of Common Stock) after the Record Date but prior to the
earliest of the Distribution Date, the Expiration Date, or the Final Expiration
Date (or, in certain circumstances as provided in Section 22 hereof, after the
Distribution Date) shall have impressed, printed, written or stamped thereon or
otherwise affixed thereto the following legend:
This certificate also evidences and entitles the
holder hereof to the same number of Rights
(subject to adjustment) as the number of shares of
Common Stock represented by this certificate, such
Rights being on the terms provided under the
Rights Agreement between The Wet Seal, Inc. and
American Stock Transfer & Trust Company (the
"Rights Agent"), dated as of August 19, 1997, as
it may be amended from time to time (the "Rights
Agreement"), the terms of which are incorporated
herein by reference and a copy of which is on file
at the principal executive offices of The Wet
Seal, Inc. Under certain circumstances, as set
forth in the Rights Agreement, such Rights shall
be evidenced by separate certificates and shall no
longer be evidenced by this certificate. The Wet
Seal, Inc. shall mail to the registered holder of
this certificate a copy of the Rights Agreement
without charge within five days after receipt of a
written request therefor. Under certain
---------------
circumstances as provided in Section 7(e) of the
--------------------------------------------------
Rights Agreement, Rights issued to or Beneficially
--------------------------------------------------
Owned by Acquiring Persons or their Affiliates or
--------------------------------------------------
Associates (as such terms are defined in the
--------------------------------------------------
Rights Agreement) or any subsequent holder of such
--------------------------------------------------
Rights shall be null and void and may not be
--------------------------------------------------
transferred to any Person.
-------------------------
(d) As soon as practicable after the Distribution Date, the
Company will prepare and execute, the Rights Agent will countersign, and the
Company will send or cause to be sent (and the Rights Agent will, if requested,
send), by first class mail, postage prepaid, to each record holder of the Common
Stock as of the close of business on the Distribution Date, as shown by the
records of the Company, at the address of such holder shown on such records, a
certificate in the form provided by Section 4 hereof (a "Right Certificate"),
evidencing one Right (subject to adjustment as provided herein) for each share
of Common Stock so held. As of and after the Distribution Date, the Rights shall
be evidenced solely by Right Certificates and may be transferred by the transfer
of the Right Certificate as permitted hereby, separately and apart from any
transfer of one or more shares of Common Stock.
Section 4. Form of Right Certificates. The Right Certificates
--------------------------
(and the forms of election to purchase shares, certificate and assignment to be
printed on the reverse thereof), when, as and if issued, shall be substantially
in the form set forth in Exhibit B hereto and may have such marks of
8
Page 21 of 76 Pages
identification or designation and such legends, summaries or endorsements
printed thereon as may be required to comply with any law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any stock
exchange on which the Common Stock or the Rights may from time to time be listed
or as the Company may deem appropriate to conform to usage or otherwise and as
are not inconsistent with the provisions of this Rights Agreement. Subject to
the provisions of Section 22 hereof, Right Certificates evidencing Rights
whenever issued, (i) shall be dated as of the date of issuance of the Rights
they represent, and (ii) subject to adjustment from time to time as provided
herein, on their face shall entitle the holders thereof to purchase such number
of shares (including fractional shares which are integral multiples of
one-hundredth of a share) of Class A Preferred Stock or Class B Preferred Stock,
as the case may be, as shall be set forth therein at the price payable upon
exercise of a Right provided by Section 7(b) hereof as the same may from time to
time be adjusted as provided herein (the "Exercise Price").
Section 5. Countersignature and Registration.
---------------------------------
(a) Each Right Certificate shall be executed on behalf of the
Company by its Chairman of the Board, President or any Vice President, either
manually or by facsimile signature, and have affixed thereto the Company's seal
or a facsimile thereof which shall be attested by the Secretary or any Assistant
Secretary of the Company, either manually or by facsimile signature. Each Right
Certificate shall be countersigned by the Rights Agent either manually or by
facsimile signature and shall not be valid for any purpose unless so
countersigned. In case any officer of the Company who shall have signed any
Right Certificate shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery of the
certificate by the Company, such Right Certificate, nevertheless, may be
countersigned by the Rights Agent and 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, on the 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 one or more offices designated
as the appropriate place for surrender of Right Certificates upon exercise or
transfer, and in such other locations as may be required by law, 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 Sections 7(e), 7(f) and 14
hereof, at any time after the Close of Business on the
Distribution Date, and at or prior to the Close of Business
on the earlier of the Expiration Date or the Final
Expiration Date, any Right Certificate may be (i)
transferred, or (ii) split up, combined or exchanged for one
or more other Right Certificates, entitling the registered
9
Page 22 of 76 Pages
holder to purchase a like number of shares of Class A
Preferred Stock or Class B Preferred Stock as the Right
Certificate or Rights Certificates surrendered then entitled
such holder to purchase. Any registered holder desiring to
transfer any Right Certificate shall surrender the Right
Certificate at the office of the Rights Agent designated for
the surrender of Right Certificates with the form of
certificate and assignment on the reverse side thereof duly
endorsed (or enclosed with such Right Certificate a written
instrument of transfer in form satisfactory to the Company
and the Rights Agent), duly executed by the registered
holder thereof or his attorney duly authorized in writing,
and with such signature duly guaranteed. Any registered
holder desiring to split up, combine or exchange any Right
Certificate shall make such request in writing delivered to
the Rights Agent, and shall surrender the Right Certificate
to be split up, combined or exchanged at the office of the
Rights Agent designated therefor. Thereupon, the Rights
Agent shall 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 of a sum sufficient to cover any Transfer Tax that
may be imposed in connection with any transfer, split up,
combination or exchange of any Right Certificates.
(b) Subject to the provisions of Sections 7(e), 7(f) and 14
hereof, 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, if requested by the Company,
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, or upon surrender to the Rights Agent and cancellation of
the Right Certificate if mutilated, the Company shall issue and deliver a new
Right Certificate of like tenor to the Rights Agent for delivery to the
registered owner in lieu of the Right Certificate so lost, stolen, destroyed or
mutilated.
Section 7. Exercise of Rights; Exercise Price; Expiration
--------------------------------------------------
Date of Rights.
--------------
(a) The Rights shall not be exercisable until, and shall become
exercisable on, the Distribution Date (unless otherwise provided herein,
including, without limitation, the restrictions on exercisability set forth in
Sections 7(e) and 23(a) hereof). Except as otherwise provided herein, the Rights
may be exercised, in whole or in part, at any time commencing with the
Distribution Date upon surrender of the Right Certificate, with the form of
election to purchase and certificate on the reverse side thereof duly executed
(with signatures duly guaranteed), to the Rights Agent at the principal office
of the Rights Agent at ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, together
with payment of the Exercise Price for each Right exercised, subject to
adjustment as hereinafter provided, at or prior to the Close of Business on the
earlier of (i) August 29, 1997 (the "Final Expiration Date"), or (ii) the date
on which the Rights are redeemed as provided in Section 23 hereof (such earlier
date being herein referred to as the "Expiration Date").
(b) The Exercise Price for each one one-hundredth (1/100) of a
share of Class A Preferred Stock issued pursuant to the exercise of a Class A
Right or for each one one-hundredth (1/100) of a share of Class B Preferred
Stock issued pursuant to the exercise of a Class B Right, as the case may be,
shall initially be $73.00 (the "Exercise Price"). The Exercise Price and the
number of shares of Preferred Stock or other securities to be acquired upon
exercise of a Right shall be subject to adjustment from time to time as provided
in Sections 11 and 13 hereof. The Exercise Price shall be payable in lawful
money of the United States of America, in accordance with paragraph (c) below.
10
Page 23 of 76 Pages
(c) Except as otherwise provided herein, upon receipt of a Right
Certificate representing exercisable Rights with the form of election to
purchase duly executed, accompanied by payment by certified check, cashier's
check, bank draft or money order payable to the Company or the Rights Agent of
the Exercise Price for the shares to be purchased and an amount equal to any
applicable Transfer Tax required to be paid by the holder of the Right
Certificate in accordance with Section 9(e) hereof, the Rights Agent shall
thereupon promptly (i) requisition from any transfer agent of the Class A
Preferred Stock or Class B Preferred Stock, as appropriate, one or more
certificates representing the number of shares of Class A Preferred Stock or
Class B Preferred Stock to be so purchased, and the Company hereby authorizes
and directs such transfer agent to comply with all such requests, (ii) as
provided in Section 14(b) hereof, at the election of the Company, cause
depositary receipts to be issued in lieu of fractional shares of Preferred
Stock, (iii) if the election provided for in the immediately preceding clause
(ii) has not been made, requisition from the Company the amount of cash to be
paid in lieu of the issuance of fractional shares in accordance with Section
14(b) hereof, (iv) after receipt of such Preferred Stock certificates and, if
applicable, 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 (v) when appropriate,
after receipt, promptly deliver such cash to or upon the order of the registered
holder of such Right Certificate; provided, however, that in the case of a
purchase of securities, other than Preferred Stock, pursuant to Section 13
hereof, the Rights Agent shall promptly take the appropriate actions
corresponding in such case to that referred to in the foregoing clauses (i)
through (v) of this Section 7(c). Notwithstanding the foregoing provisions of
this Section 7(c), the Company may suspend the issuance of shares of Preferred
Stock upon exercise of a Right for a reasonable period, not in excess of 90
days, during which the Company seeks to register under the Securities Act of
1933, as amended (the "Securities Act"), and any applicable securities law of
any other jurisdiction, the shares of Preferred Stock to be issued pursuant to
the Rights; provided, however, that nothing contained in this Section 7(c) shall
relieve the Company of its obligations under Section 9(c) hereof.
(d) In case the record 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 to the registered holder of such Right Certificate or his
assign, subject to the provisions of Section 14(b) hereof.
(e) Notwithstanding any provision of this Rights Agreement to
the contrary, from and after the time (the "invalidation time") when any Person
11
Page 24 of 76 Pages
first becomes an Acquiring Person, other than pursuant to a Qualifying Tender
Offer, any Rights that are beneficially owned by (x) such Acquiring Person (or
any Associate or Affiliate of such Acquiring Person), (y) a transferee of such
Acquiring Person (or any such Associate or Affiliate) who becomes a transferee
after the invalidation time, or (z) a transferee of such Acquiring Person (or
any such Associate or Affiliate) who becomes a transferee prior to or
concurrently with the invalidation time pursuant to either (I) a transfer from
the Acquiring Person to holders of its equity securities or to any Person with
whom it has any continuing agreement, arrangement or understanding regarding the
transferred Rights, or (II) a transfer which the Board of Directors has
determined is part of a plan, arrangement or understanding which has the purpose
or effect of avoiding the provisions of this Section 7(e), and subsequent
transferees of such Persons referred to in clause (y) and (z) above, shall be
void without any further action and any holder of such Rights shall thereafter
have no rights whatsoever with respect to such Rights under any provision of
this Rights Agreement. The Company shall use all reasonable efforts to ensure
that the provisions of this Section 7(e) are complied with, but shall have no
liability to any holder of Right Certificates or any other Person as a result of
its failure to make any determination with respect to an Acquiring Person or its
Affiliates, Associates or transferees hereunder. No Right Certificate shall be
issued pursuant to Section 3 hereof that represents Rights Beneficially Owned by
an Acquiring Person whose Rights would be void pursuant to the provisions of
this Section 7(e) or any Associate or Affiliate thereof; no Right Certificate
shall be issued at any time upon the transfer of any Rights to an Acquiring
Person whose Rights would be void pursuant to the provisions of this Section
7(e) or any Associate or Affiliate thereof or to any nominee of such Acquiring
Person, Associate or Affiliate; and any Right Certificate delivered to the
Rights Agent for transfer to an Acquiring Person whose Rights would be void
pursuant to the provisions of this Section 7(e) shall be canceled.
(f) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a record holder upon the occurrence of any purported
exercise as set forth in this Section 7 unless such record holder shall have (i)
completed and signed the certificate following 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 for the purpose of exercise,
------------
transfer, split up, combination or exchange shall, if surrendered to the Company
or to any of its agents, be delivered to the Rights Agent for cancellation or in
canceled form, or, if surrendered to the Rights Agent, shall be canceled by it,
and no 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 cancel and retire, any Right Certificate purchased or acquired by
the Company otherwise than upon the exercise thereof. 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 of
--------------------------------------------------
Preferred Stock.
---------------
(a) The Company covenants and agrees that it will cause to be
reserved and kept available out of its authorized and unissued shares of Class A
Preferred Stock and Class B Preferred Stock or out of authorized and issued
shares of Class A Preferred Stock and Class B Preferred Stock held in its
treasury, such number of shares of Class A Preferred Stock and Class B Preferred
Stock as will from time to time be sufficient to permit the exercise in full of
all outstanding Class A Rights and Class B Rights.
12
Page 25 of 76 Pages
(b) The Company shall use its best efforts to cause, from and
after such time as the Class A Rights and Class B Rights become exercisable, all
shares of Class A Preferred Stock and Class B Preferred Stock issued or reserved
for issuance in accordance with this Rights Agreement to be listed, upon
official notice of issuance, upon the principal national securities exchange, if
any, upon which the Class A Common Stock or the Class B Common Stock, as the
case may be, is listed or, if the principal market for the Class A Common Stock
or the Class B Common Stock, as the case may be, is not on any national
securities exchange, to be eligible for quotation in The Nasdaq Stock Market or
any successor thereto or other comparable quotation system.
(c) The Company covenants and agrees that it will take all such
action as may be necessary to insure that all shares of Preferred Stock
delivered upon exercise of Rights shall, at the time of delivery of the
certificates for such shares (subject to payment of the Exercise Price in
respect thereof), be duly and validly authorized and issued and fully paid and
non-assessable shares.
(d) The Company shall use its best efforts to (i) file, as soon
as practicable following the occurrence of the event described in Section
11(a)(ii) hereof, or as soon as is required by law following the Distribution
Date, as the case may be, a registration statement under the Securities Act,
with respect to the shares of Class A Preferred Stock and Class B Preferred
Stock purchasable upon exercise of the Class A Rights or the Class B Rights, as
the case may be, on an appropriate form, (ii) cause such registration statement
to become effective as soon as practicable after such filing, and (iii) cause
such registration statement to remain effective (with a prospectus at all times
meeting the requirements of the Securities Act) until the earlier of (A) the
date as of which the Rights are no longer exercisable for Preferred Stock, and
(b) the date of the expiration of the Rights. The Company may temporarily
suspend, for a period of time not to exceed ninety days, the issuance of shares
of Preferred Stock upon exercise of a Right in order to prepare and file a
registration statement under the Securities Act and permit it to become
effective. The Company will also take such action as may be appropriate under,
or to ensure compliance with, the securities or "blue sky" laws of the various
states in connection with the exercisability of the Rights. Notwithstanding any
provision of this Agreement to the contrary, the Rights shall not be exercisable
in any jurisdiction unless the requisite qualification in such jurisdiction
shall have been obtained and until a registration statement under the Securities
Act (if required) shall have been declared effective.
(e) The Company covenants and agrees that it will pay when due
and payable any and all federal and state Transfer Taxes which may be payable in
respect of the issuance or delivery of the Right Certificates or of any shares
of Preferred Stock issued or delivered upon the exercise of Rights. The Company
shall not, however, be required to pay any Transfer Tax which may be payable in
respect of any transfer or delivery of a Right Certificate to a Person other
than, or the issuance or delivery of certificates for Preferred Stock upon
exercise of Rights in a name other than that of, the registered holder of the
Right Certificate, and the Company shall not be required to issue or deliver a
Right Certificate or certificate for Preferred Stock to a Person other than such
registered holder until any such Transfer Tax shall have been paid (any such
Transfer 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 Transfer Tax is due.
13
Page 26 of 76 Pages
Section 10. Preferred Stock Record Date. Each Person in whose
----------------------------
name any certificate for shares of Class A Preferred Stock or Class B Preferred
Stock is issued upon the exercise of Class A Rights or Class B Rights shall for
all purposes be deemed to have become the holder of record of such Preferred
Stock represented thereby on, and such certificate shall be dated as of, the
date upon which the Right Certificate evidencing such Rights was duly
surrendered and payment of the Exercise 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 Class A Preferred Stock or Class B Preferred
Stock transfer books of the Company are closed, such Person shall be deemed to
have become the record holder of such shares on, and such certificate shall be
dated as of, the next succeeding Business Day on which the relevant transfer
books of the Company are open. Prior to the exercise of the Rights evidenced
thereby, the holder of a Right Certificate, as such, shall not be entitled to
any rights of a stockholder of the Company with respect to shares for which the
Rights shall be exercisable, including, without limitation, the right to vote,
to receive dividends or other distributions or to exercise any preemptive
rights, and shall not be entitled to receive any notice of any proceedings of
the Company, except as provided herein.
Section 11. Adjustment of Exercise Price or Number of Shares.
-------------------------------------------------
The Exercise Price and the number of shares of Preferred Stock which may be
purchased upon exercise of a Right are subject to adjustment from time to time
as provided in this Section 11.
(a)(i) In the event the Company shall at any time after the
date of this Rights Agreement (A) declare or pay any dividend on
Class A Common Stock or Class B Common Stock payable in shares of
Class A Common Stock or Class B Common Stock, (B) subdivide or
split the outstanding shares of Class A Common Stock or Class B
Common Stock into a greater number of shares, or (C) combine or
consolidate the outstanding shares of Class A Common Stock or
Class B Common Stock into a smaller number of shares or effect a
reverse split of the outstanding shares of Class A Common Stock
or Class B Common Stock, then and in each such event the number
of shares of Class A Preferred Stock or Class B Preferred Stock
issuable upon the exercise of a Class A Right or Class B Right
after the record date for such event (if one shall have been
established or, if not, after the date of such event) shall be
the number of shares of Class A Preferred Stock or Class B
Preferred Stock issuable immediately prior to such event
multiplied by a fraction the numerator of which is the number of
Class A Rights or Class B Rights outstanding immediately prior to
such event and the denominator of which is the number of Class A
Rights or Class B Rights outstanding immediately after such event
and the Exercise Price after such event shall be the Exercise
Price in effect immediately prior to such event multiplied by
such fraction. 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) In the event that any Person (other than an Exempt
Person), alone or together with its Affiliates and Associates,
shall become an Acquiring Person, except pursuant to a Qualifying
14
Page 27 of 76 Pages
Tender Offer, then, subject to the last sentence of Section 23(a)
hereof and except as otherwise provided in this Section 11, each
holder of a Class A Right or Class B Right, except as provided in
Section 7(e) hereof, shall thereafter have the right to receive
upon exercise of such Class A Right or Class B Right in
accordance with the terms of this Rights Agreement and payment of
the Exercise Price, the greater of (1) the number of one
one-hundredths of a share of Class A Preferred Stock or Class B
Preferred Stock for which such Right was exercisable immediately
prior to the first occurrence of the event described in this
Section 11(a)(ii), or (2) such number of one one-hundredths of a
share of Class A Preferred Stock or Class B Preferred Stock,
based on the per share Fair Market Value of such Preferred Stock
(determined pursuant to Section 11(b) hereof) on the date of such
first occurrence, having a value equal to twice the Exercise
Price; provided, however, that if the transaction that would
otherwise give rise to the foregoing adjustment is also subject
to the provisions of Section 13 hereof, then only the provisions
of Section 13 hereof shall apply and no adjustment shall be made
pursuant to this Section 11(a)(ii).
(iii)In the event that the Company does not have available
sufficient authorized but unissued Preferred Stock to permit the
adjustments required pursuant to the foregoing subparagraph (i)
or the exercise in full of the Rights in accordance with the
foregoing subparagraph (ii), the Company shall take all such
action as may be necessary to authorize and reserve for issuance
such number of additional shares of Class A Preferred Stock or
Class B Preferred Stock as may from time to time be required to
be issued upon the exercise in full of all Class A Rights or
Class B Rights from time to time outstanding and, if necessary,
shall use its best efforts to obtain stockholder approval
thereof. In lieu of issuing shares of Preferred Stock in
accordance with the foregoing subparagraphs (i) and (ii), the
Company may, if the Board of Directors determines (but only if at
the time of such determination by the Board of Directors there
are then in office not less than a majority of directors who are
Continuing Directors and such action is approved by a majority of
the Continuing Directors then in office) that such action is
necessary or appropriate and not contrary to the interests of
holders of Class A Rights or Class B Rights, elect to issue or
pay, upon the exercise of such Rights, cash, property, shares of
Preferred Stock or Common Stock, or any combination thereof,
having an aggregate Fair Market Value equal to the Fair Market
Value of the shares of Class A Preferred Stock or Class B
Preferred Stock which otherwise would have been issuable pursuant
to Section 11(a)(ii) hereof, which Fair Market Value shall be
determined by an investment banking firm selected by the Board of
Directors (but only if at the time of such selection there are
then in office not less than a majority of directors who are
Continuing Directors and such selection is approved by a majority
of the Continuing Directors then in office). For purposes of the
preceding sentence, the Fair Market Value of the Class A
Preferred Stock or Class B Preferred Stock shall be as determined
pursuant to Section 11(b) hereof. Subject to Section 23 hereof,
any such election by the Board of Directors of the Company must
be made and publicly announced within thirty (30) days after the
date on which the event described in Section 11(a)(ii) hereof
occurs.
15
Page 28 of 76 Pages
(b) For the purpose of this Rights Agreement, the "Fair
Market Value" of any share of Class A Preferred Stock or Class B
Preferred Stock, Class A Common Stock or Class B Common Stock or
any other stock or any Class A Right or Class B Right or other
security or any other property on any date shall be determined as
provided in this Section 11(b). In the case of a publicly-traded
stock or other security, the Fair Market Value on any date shall
be deemed to be the average of the daily closing prices per share
of such stock or per unit of such other security 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 Fair Market Value per share of any share of Class
A Common Stock or Class B Common Stock is determined during a
period which includes any date that is within 30 Trading Days
after (i) the ex-dividend date for a dividend or distribution on
such stock payable in shares of Class A Common Stock or Class B
Common Stock or securities convertible into shares of Class A
Common Stock or Class B Common Stock, or (ii) the effective date
of any subdivision, split, combination, consolidation, reverse
stock split or reclassification of such stock, then, and in each
such case, the Fair Market Value shall be appropriately adjusted
by the Board of Directors of the Company to take into account
ex-dividend or post-effective date trading. The closing price 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
applicable transaction reporting system with respect to
securities listed or admitted to trading on the New York Stock
Exchange), or, if the securities are not listed or admitted to
trading on the New York Stock Exchange, as reported in the
applicable transaction reporting system with respect to
securities listed on the principal national securities exchange
on which such security is listed or admitted to trading; or, if
not listed or admitted to trading on any national securities
exchange, the last quoted price (or, if not so quoted, the
average of the high bid and low asked prices) in the
over-the-counter market, as reported by The Nasdaq Stock Market
or such other system then in use; or, if no bids for such
security are 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 such security selected by the
Board of Directors of the Company. The term "Trading Day" shall
mean a day on which the principal national securities exchange on
which such security is listed or admitted to trading is open for
the transaction of business or, if such security is not listed or
admitted to trading on any national securities exchange, a
Business Day. If a security is not publicly held or not so listed
16
Page 29 of 76 Pages
or traded, "Fair Market Value" shall mean the fair value per
share of stock or per other unit of such other security, as
determined by an independent investment banking firm experienced
in the valuation of securities selected in good faith by the
Board of Directors of the Company, or, if no such investment
banking firm is, in the good faith judgment of the Board of
Directors, available to make such determination, in good faith by
the Board of Directors of the Company; provided, however, that
for purposes of making the adjustment provided for by Section
11(a)(ii) hereof, the Fair Market Value of a share of Class A
Preferred Stock or Class B Preferred Stock shall not be less than
100% of the product of the Fair Market Value of a share of Class
A Common Stock or Class B Common Stock, as the case may be,
multiplied by the higher of the then Dividend Multiple or Vote
Multiple applicable to the Class A Preferred Stock or Class B
Preferred Stock (as such terms are defined in the Certificate of
Designations relating to the Preferred Stock) and shall not
exceed 105% of the product of the then Fair Market Value of a
share of Class A Common Stock or Class B Common Stock, as the
case may be, multiplied by the higher of the then Dividend
Multiple or Vote Multiple applicable to the Class A Preferred
Stock or Class B Preferred Stock. In the case of property other
than securities, the "Fair Market Value" thereof shall be
determined in good faith by the Board of Directors of the Company
based upon such appraisals or valuation reports of such
independent experts as the Board of Directors of the Company
shall in good faith determine to be appropriate in accordance
with good business practices and the interests of the holders of
Rights. Any such determination of Fair Market Value shall be
described in a statement filed with the Rights Agent and shall be
binding upon the Rights Agent.
(c) All calculations under this Section 11 shall be made to
the nearest cent or to the nearest one one-hundredth of a share,
as the case may be.
(d) Irrespective of any adjustment or change in the
Exercise Price or the number of shares of Preferred Stock
issuable upon the exercise of the Rights, the Right Certificates
theretofore and thereafter issued may continue to express the
Exercise Price and the number of shares to be issued upon
exercise of the Rights as in the initial Right Certificates
issued hereunder but, nevertheless, shall represent the Rights as
so adjusted.
(e) Before taking any action that would cause an adjustment
reducing the purchase price per whole share of Class A Preferred
Stock or Class B Preferred Stock upon exercise of the Class A
Rights or Class B Rights below the then par value, if any, of the
shares of Class A Preferred Stock or Class B Preferred Stock, the
Company shall use its best efforts to take any corporate action
which may, in the opinion of its counsel, be necessary in order
that the Company may validly and legally issue fully paid and
non-assessable shares of such Preferred Stock at such adjusted
purchase price per share.
(f) Anything in this Section 11 to the contrary
notwithstanding, in the event of any reclassification of stock of
the Company or any recapitalization, reorganization or partial
liquidation of the Company or similar transaction, the Company
shall be entitled to make such further adjustments in the number
of shares of Class A Preferred Stock or Class B Preferred Stock
which may be acquired upon exercise of the Class A Rights or
Class B Rights, and such adjustments in the Exercise Price
therefor, in addition to those adjustments expressly required by
17
Page 30 of 76 Pages
the other paragraphs of this Section 11, as the Board of
Directors of the Company shall determine to be necessary or
appropriate in order for the holders of such Rights in such event
to be treated equitably and in accordance with the purpose and
intent of this Rights Agreement or in order that any such event
shall not, but for such adjustment, in the opinion of counsel to
the Company, result in the stockholders of the Company being
subject to any United States federal income tax liability by
reason thereof.
(g) In the event the Company shall at any time after the
Record Date make any distribution on the shares of Class A Common
Stock or Class B Common Stock of the Company, whether by way of a
dividend or a reclassification of stock, a recapitalization,
reorganization or partial liquidation of the Company or
otherwise, in cash or any debt security, debt instrument, real or
personal property or any other property (other than any shares of
Class A Common Stock or Class B Common Stock or other capital
stock of the Company and other than any right or warrant to
acquire any such shares, including any debt security convertible
into or exchangeable for any such share, at less than the Fair
Market Value of such shares) and the amount of such cash dividend
or the Fair Market Value of such debt security, debt instrument
or property exceeds 150% of the aggregate amount of the cash
dividends declared or paid on the Class A Common Stock or Class B
Common Stock of the Company in the 15-month period immediately
preceding such distribution, then and in each such event, unless
such distribution is part of or is made in connection with a
transaction to which Section 11(a)(ii) or Section 13 hereof
applies, the Exercise Price shall be reduced by an amount equal
to the cash or the Fair Market Value of such distribution, as the
case may be, per share of Class A Common Stock or Class B Common
Stock. For purposes hereof, the Fair Market Value of any property
distributed to the holders of shares of Class A Common Stock or
Class B Common Stock of the Company shall be the Fair Market
Value of such property as determined by an independent investment
banking firm experienced in the valuation of securities or the
other property so distributed, as the case may be, selected in
good faith by the Board of Directors of the Company, or, if no
such investment banking firm is in the good faith judgment of the
Board of Directors available to make such determination, in good
faith by the Board of Directors of the Company, whose
determination shall be final and binding on the Company, the
Rights Agent and the holders of Rights.
Section 12. Certification of Adjusted Exercise Price or Number
--------------------------------------------------
of Shares. Whenever an adjustment is made as provided in Section 11, 13 or 23(c)
---------
hereof, the Company shall (a) promptly prepare a certificate setting forth such
adjustment, and a brief statement of the facts giving rise to such adjustment,
(b) promptly file with the Rights Agent and with each transfer agent for the
Class Preferred Stock or Class B Preferred Stock a copy of such certificate, and
(c) mail a brief summary thereof to each holder of a Right Certificate in
accordance with Section 25 hereof. Notwithstanding the foregoing sentence, the
failure of the Company to make such certification or give such notice shall not
affect the validity of or the force or effect of the requirement for such
adjustment. Any adjustment to be made pursuant to Section 11, 13 or 23(c) of
this Rights Agreement shall be effective as of the date of the event giving rise
to such adjustment. The Rights Agent shall be fully protected in relying on any
18
Page 31 of 76 Pages
such certificate and on any adjustment therein contained and shall not be deemed
to have knowledge of any adjustment unless and until it shall have received such
certificate.
Section 13. Consolidation, Merger or Sale or Transfer of
--------------------------------------------------
Assets or Earning Power.
-----------------------
(a) Except for any transaction approved by the Board of
Directors (but only if at the time of such approval by the Board of Directors
there are then in office not less than a majority of directors who are
Continuing Directors and such action is approved by a majority of the Continuing
Directors then in office), in the event that, at any time on or after the
Distribution Date, (x) the Company shall, directly or indirectly, consolidate
with, or merge with and into, any other Person or Persons (other than an Exempt
Person) and the Company shall not be the surviving or continuing corporation of
such consolidation or merger or the Company shall divide into two or more
corporations and the Company shall not survive the division, or (y) any Person
or Persons (other than an Exempt Person) shall, directly or indirectly,
consolidate with, or merge with and into, the Company, and the Company shall be
the continuing or surviving corporation of such consolidation or merger and, in
connection with such consolidation or merger, all or part of the outstanding
shares of Class A Common Stock or Class B Common Stock shall be changed into or
19
Page 32 of 76 Pages
exchanged for stock or other securities of any other Person (other than an
Exempt Person) or of the Company or cash or any other property, or (z) the
Company or one or more of its Subsidiaries shall, directly or indirectly, sell
or otherwise transfer to any other Person or any Affiliate or Associate of such
Person, in one or more transactions, or the Company or one or more of its
Subsidiaries shall sell or otherwise transfer to any Persons in one 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), then, on the first occurrence of any such event, proper provision shall
be made so that (i) each holder of record of a Class A Right or Class B Right,
except as provided in Section 7(e) hereof, shall thereafter have the right to
receive, upon the exercise thereof and payment of the Exercise Price in
accordance with the terms of this Rights Agreement, such number of shares of
validly issued, fully paid, non-assessable and freely tradable Common Stock of
the Principal Party (as defined herein), not subject to any liens, encumbrances,
rights of first refusal or other adverse claims, as shall, based on the Fair
Market Value of the Common Stock of the Principal Party on the date of the
Consummation of such consolidation, merger, sale or transfer, equal twice the
Exercise Price; (ii) such 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 Rights Agreement; (iii)
the term "Company" for all purposes of this Rights Agreement shall thereafter be
deemed to refer to such Principal Party; (iv) such Principal Party shall take
such steps (including, but not limited to, the reservation of a sufficient
number of shares of its Common Stock in accordance with the provisions of
Section 9 hereof applicable to the reservation of Preferred Stock) in connection
with such consummation as may be necessary to assure that the provisions hereof
shall thereafter be applicable, as nearly as reasonably may be, in relation to
its shares of Common Stock thereafter deliverable upon the exercise of the Class
A Rights or Class B Rights; provided, however, 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
such Class A Right or Class B Right shall thereupon be entitled to receive, upon
exercise of a Right and payment of the Exercise Price, such cash, shares,
rights, warrants and other property which such holder would have been entitled
to receive had it, 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 clause (x), (y) or (z) above of this Section 13(a).
(b) "Principal Party" shall mean
(i) in the case of any transaction described in clause (x)
or (y) of the first sentence of Section 13(a) hereof: (A) the Person that is the
issuer of the securities into which shares of Common Stock of the Company are
changed or otherwise exchanged or converted in such merger, consolidation or
20
Page 33 of 76 Pages
other fundamental transaction, or, if there is more than one such issuer, the
issuer of the Common Stock of which has the greatest market value or (B) if no
securities are so issued, (x) the Person that is the other party to the merger,
consolidation or other fundamental transaction and that survives such merger,
consolidation or other fundamental transaction, or, if there is more than one
such Person, the Person the Common Stock of which has the greatest market value
or (y) if the Person that is the other party to the merger, consolidation or
other fundamental transaction does not survive the merger, consolidation or
other fundamental transaction, the Person that does survive the merger,
consolidation or other fundamental transaction (including the Company if it
survives); and
(ii) in the case of any transaction described in clause (z)
of the first sentence in Section 13(a), 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 market value of shares
outstanding; provided, however, that in any such case, 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, the term "Principal Party" shall refer to such
other Person, or if such Person is a Subsidiary, directly or indirectly, of more
than one Person, the Common Stocks of all of which are and have been so
registered, the term "Principal Party" shall refer to whichever of such Persons
is the issuer of the Common Stock having the greatest market value of shares
outstanding.
(c) The Company shall not consummate any consolidation, merger,
other fundamental transaction or sale or transfer of assets or earning power
referred to in Section 13(a) unless the Principal Party shall have a sufficient
number of authorized shares of its Common Stock that have not been issued or
reserved for issuance to permit exercise in full of all Rights in accordance
with this Section 13 and unless prior thereto the Company and the Principal
Party involved therein shall have executed and delivered to the Rights Agent an
agreement confirming that the Principal Party shall, upon consummation of such
consolidation, merger, other fundamental transaction or sale or transfer of
assets or earning power, assume this Rights Agreement in accordance with Section
13(a) hereof and that all rights of first refusal or preemptive rights in
respect of the issuance of shares of Common Stock of the Principal Party upon
exercise of outstanding Rights have been waived and that such transaction shall
not result in a default by the Principal Party under this Rights Agreement, and
further providing that, as soon as practicable after the date of any
consolidation, merger, other fundamental transaction or sale or transfer of
assets or earning power referred to in Section 13(a) hereof, the Principal Party
will:
(i) prepare and file a registration statement under the
Securities Act with respect to the Rights and the securities
purchasable upon exercise of the Rights on an appropriate form,
use its best efforts to cause such registration statement to
become effective as soon as practicable after such filing and use
21
Page 34 of 76 Pages
its best efforts to cause such registration statement to remain
effective (with a prospectus at all times meeting the
requirements of the Securities Act) until the date of expiration
of the Rights, and similarly comply with applicable state
securities laws;
(ii) use its best efforts to list (or continue the listing
of) the Rights and the securities purchasable upon exercise of
the Rights on a national securities exchange or to meet the
eligibility requirements for quotation on The Nasdaq Stock
Market; and
(iii)deliver to holders of the Rights historical financial
statements for the Principal Party which comply in all respects
with the requirements for registration on Form 10 (or any
successor form) under the Exchange Act.
In the event that any of the transactions described in Section
13(a) hereof shall occur at any time after the occurrence of a transaction
described in Section 11(a)(ii) hereof, the Rights which have not theretofore
been exercised shall, subject to the provisions of Section 7(e) hereof,
thereafter be exercisable in the manner described in Section 13(a) hereof.
(d) In case the Principal Party which is to be a party to a
transaction referred to in this Section 13 has a provision in any of its
authorized securities or in its Certificate of Incorporation or By-laws or other
instrument governing its corporate affairs, which provision would have the
effect of (i) causing such Principal Party to issue, in connection with, or as a
consequence of, the consummation of a transaction referred to in this Section
13, shares of Common Stock of such Principal Party at less than the then Fair
Market Value per share (determined pursuant to Section 11(b) hereof) or
securities exercisable for, or convertible into, Common Stock of such Principal
Party at less than such then Fair Market Value (other than to holders of Rights
pursuant to this Section 13) or (ii) providing for any special tax or similar
payment in connection with the issuance to any holder of a Right of Common Stock
of such Principal Party pursuant to the provisions of this Section 13, then, in
such event, the Company shall not consummate any such transaction unless prior
thereto the Company and such Principal Party shall have executed and delivered
to the Rights Agent a supplemental agreement providing that the provision in
question of such Principal Party shall have been canceled, waived or amended, or
that the authorized securities shall be redeemed, so that the applicable
provision will have no effect in connection with, or as a consequence of, the
consummation of the proposed transaction.
Section 14. Fractional Rights and Fractional Shares.
---------------------------------------
(a) The Company shall not be required to issue fractions of
Class A Rights or Class B Rights or to distribute Right Certificates which
evidence fractional Class A Rights or Class B Rights (i.e., Rights to acquire
less than one one-hundredth of a share of Preferred Stock), unless such
fractional Rights result from a transaction referred to in Section 11(a)(i)
hereof. If the Company shall determine not to issue such fractional Rights,
then, in lieu of such fractional Rights, there shall be paid to the holders of
record 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
Fair Market Value of a whole Class A Right or Class B Right, as appropriate.
22
Page 35 of 76 Pages
(b) The Company shall not be required to issue fractions of
shares of Preferred Stock (other than fractions which are integral multiples of
one-hundredth of a share) upon exercise of the Rights or to distribute
certificates which evidence fractional shares (other than fractions which are
integral multiples of one-hundredth of a share). In lieu of issuing fractions of
shares of Preferred Stock, the Company may, at its election, issue depositary
receipts evidencing fractions of shares 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 of the rights, privileges and preferences to which they would be entitled as
owners of the Preferred Stock. With respect to fractional shares that are not
integral multiples of one-hundredth of a share, if the Company does not issue
such fractional shares or depositary receipts in lieu thereof, there shall be
paid to the holders of record 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 Fair Market Value of a share of Class A Preferred Stock or
Class B Preferred Stock, as appropriate.
(c) The holder of a Right by the acceptance of a Right expressly
waives his right to receive any fractional Right or any fractional shares of
Preferred Stock (other than fractions which are integral multiples of one
one-hundredth of a share) upon exercise of a Right.
Section 15. Rights of Action. All rights of action in respect
----------------
of this Rights Agreement, except the rights of action given to the Rights Agent
in Section 18 hereof, are vested in the respective registered holders of the
Right Certificates (and, prior to the Distribution Date, the holders of record
of the Common Stock); and any holder of record 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 16. Agreement of Right Holders. Each 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 shall be
evidenced by the certificates for Common Stock registered in the
name of the holders of Common Stock (together, as applicable,
with the Summary of Rights), which certificates for Common Stock
shall also constitute certificates for Rights, and not by
separate Right Certificates, and each Right shall be transferable
only simultaneously and together with the transfer of shares of
Common Stock;
23
Page 36 of 76 Pages
(b) after the Distribution Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if
surrendered at the office of the Rights Agent designated for such
purpose, duly endorsed or accompanied by a proper instrument of
transfer; and
(c) 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.
Section 17. Right Certificate Holder Not Deemed a Stockholder.
-------------------------------------------------
No holder, as such, of any Right Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of Preferred Stock or any
other securities which may at any time be issuable on the exercise of the Rights
represented thereby, nor shall anything contained herein or in any Right
Certificate be construed to confer upon the holder of any Right Certificate, as
such, any of the rights of a stockholder of the Company or any right to vote for
the election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in Section 24 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 18. Concerning the Rights Agent.
---------------------------
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reason-able expenses and counsel fees and
other disbursements incurred in the administration and execution of this Rights
Agreement and the exercise and performance of its duties hereunder. The Company
also agrees to indemnify the Rights Agent for, and to hold it harmless against,
any loss, liability, or expense, incurred without negligence, bad faith or
willful misconduct on the part of the Rights Agent, for anything done or omitted
to be done by the Rights Agent in connection with the acceptance and
administration of this Rights Agreement, including the cost and expenses of
defending against any claim of liability relating to the Rights or this Rights
Agreement.
(b) The Rights Agent shall be protected against, 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 Rights Agreement in reliance upon
any Right Certificate or certificate for 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.
24
Page 37 of 76 Pages
(c) Anything in this Agreement to the contrary notwithstanding,
in no event shall the Rights Agent be liable for special, indirect or
consequential loss or damage of any kind whatsoever (including but not limited
to lost profits), even if the Rights Agent has been advised of the likelihood of
such loss or damage and regardless of the form of the action.
Section 19. Merger or Consolidation of, or Change in Name of,
--------------------------------------------------
the Rights Agent.
----------------
(a) Any corporation into which the Rights Agent or any
successor Rights Agent may be merged or with which it may be consolidated, or
any corporation resulting from any merger or consolidation to which the Rights
Agent or any successor Rights Agent shall be a party, or any corporation
succeeding to the corporate trust or stock transfer business of the Rights Agent
or any successor 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 act on the part of any of the parties hereto, provided that such
corporation would be eligible for appointment as a successor Rights Agent under
the provisions of Section 21 hereof. In case at the time such successor Rights
Agent shall succeed to the agency created by this Rights Agreement any of the
Rights Certificates shall have been countersigned but not delivered, any such
successor Rights Agent may adopt the countersignature of the predecessor Rights
Agent and deliver such Right Certificates so countersigned; and in case at that
time any of the Right Certificates shall not have been countersigned, any
successor Rights Agent may countersign such Right Certificates either in the
name of the predecessor Rights Agent or in the name of the successor Rights
Agent; and in all such cases such Right Certificates shall have the full force
provided in the Right Certificates and in this Rights Agreement.
(b) In case at any time the name of the Rights Agent shall
be changed and at such time any of the Right Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver Right Certificates so countersigned; 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; in all such cases such Right Certificates shall have the
full force provided in the Right Certificates and in this Rights Agreement.
Section 20. Duties of 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 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
25
Page 38 of 76 Pages
established by a certificate signed by the Chairman of the Board, the President
or any Vice President and by the Treasurer, the Secretary or any Assistant
Secretary of the Company and delivered to the Rights Agent. Any 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 adjustment required under the
provisions of Section 11 or 13 hereof or responsible for the manner, method or
amount of any such adjustment or the ascertaining of the existence of facts that
would require any such adjustment (except with respect to the exercise of Rights
evidenced by Right Certificates after receipt of a certificate describing 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 to be issued pursuant to this Rights Agreement or any Right
Certificate or as to whether any shares of Preferred Stock will, when issued, be
validly authorized and issued, fully paid and non-assessable.
(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 the 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 President or any Vice President or the Secretary or
the Treasurer of the Company, and to apply to such officers for advice or
instructions in connection with its duties, and it shall not be liable for any
action taken or suffered to be taken by it in good faith in accordance with
instructions of any such officer.
(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.
26
Page 39 of 76 Pages
(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.
Section 21. 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 Class A Common Stock and Class B Common Stock and the
Class A Preferred Stock and Class B Preferred Stock by registered or certified
mail. The Company may remove the Rights Agent or any successor Rights Agent
(with or without cause) 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 Class A Common Stock and Class B Common Stock and the Class A Preferred
Stock and Class B Preferred Stock by registered or certified 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. Notwithstanding the
foregoing provisions of this Section 21, in no event shall the resignation or
removal of a Rights Agent be effective until a successor Rights Agent shall have
been appointed and have accepted such appointment. 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 incumbent Rights Agent or the holder of record 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) a corporation organized and doing
business under the laws of the United States or of any state thereof, in good
standing, which is authorized under such laws to exercise corporate trust or
stock transfer powers and is subject to supervision or examination in the
conduct of its corporate trust or stock transfer business by federal or state
authorities and which has at the time of its appointment as Rights Agent a
combined capital and surplus of at least $5,000,000, or (b) an Affiliate
controlled by a corporation described in clause (a) of this sentence. After
appointment, the successor Rights Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as Rights
Agent without further act or deed, but the predecessor Rights Agent shall
deliver and transfer to the successor Rights Agent any property at the time held
by it hereunder, and execute and deliver any further assurance, conveyance, act
or deed necessary for the purpose. Not later than the effective date of any such
appointment, the Company shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Class A Common Stock and
Class B Common Stock and Class A Preferred Stock and Class B Preferred Stock,
and mail a notice thereof in writing to the registered holders of the Right
Certificates. Failure to give any notice provided for in this Section 21,
however, or any defect therein, shall not affect the legality or validity of the
resignation or removal of the Rights Agent or the appointment of the successor
Rights Agent, as the case may be. Notwithstanding the foregoing provisions, in
27
Page 40 of 76 Pages
the event of resignation, removal or incapacity of the Rights Agent, the Company
shall have the authority to act as the Rights Agent until a successor Rights
Agent shall have assumed the duties of the Rights Agent hereunder.
Section 22. 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 Exercise Price per share and the number or kind or
class of shares of stock or other securities or property purchasable under the
Right Certificates made in accordance with the provisions of this Rights
Agreement.
Section 23. Redemption.
----------
(a) The Company may, at its option, but only by the vote of a
majority of the Board of Directors then in office, redeem all but not less than
all of the then outstanding Rights, at any time prior to the Close of Business
on the earlier of (i) the tenth day following the Stock Acquisition Date
(subject to extension by the Company as provided in Section 26 hereof), or (ii)
the Final Expiration Date, at a redemption price of $0.01 per Right, subject to
adjustments as provided in subsection (c) below (the "Redemption Price");
provided, however, that from and after the time that any Person shall become an
Acquiring Person (other than pursuant to a Qualifying Tender Offer), the Company
may redeem the Rights only if at the time of the action of the Board of
Directors there are then in office not less than a majority of directors who are
Continuing Directors and such redemption is approved by a majority of the
Continuing Directors then in office. Notwithstanding anything contained in this
Rights Agreement to the contrary, the Rights shall not be exercisable pursuant
to Section 11(a)(ii) hereof prior to the expiration of the Company's right of
redemption hereunder.
(b) Without any further action and without any notice, the right
to exercise the Rights will terminate effective at the effective time of the
action of the Board of Directors ordering the redemption of the Rights and the
only right thereafter of the holders of Rights shall be to receive the
Redemption Price. Within 10 days after the effective time of the action of the
Board of Directors ordering the redemption of the Rights, the Company shall give
notice of such redemption to the holders of the then outstanding Rights by
mailing such notice to all such holders at their last addresses as they appear
upon the registry books of the Rights Agent or, prior to the Distribution Date,
on the registry books of the transfer agent for the Class A Common Stock and
Class B 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
notice of redemption will state the method by which the payment of the
Redemption Price will be made. At the option of the Board of Directors, the
Redemption Price may be paid in cash to each Rights holder or by the issuance of
shares (and, at the Company's election, cash or depositary receipts in lieu of
fractions of shares other than fractions which are integral multiples of one
one-hundredth (1/100) of a share of Preferred Stock) of Class A Preferred Stock
or Class B Preferred Stock, as appropriate, or Class A Common Stock or Class B
Common Stock, as appropriate, in each case having a Fair Market Value equal to
such cash payment.
(c) In the event the Company shall at any time after the date of
this Rights Agreement (A) pay any dividend on Class A Common Stock or Class B
Common Stock in shares of Class A Common Stock or Class B Common Stock, (B)
subdivide or split the outstanding shares of Class A Common Stock or Class B
28
Page 41 of 76 Pages
Common Stock into a greater number of shares, or (C) combine or consolidate the
outstanding shares of Class A Common Stock or Class B Common Stock into a
smaller number of shares or effect a reverse split of the outstanding shares of
Class A Common Stock or Class B Common Stock, then, and in each such event, the
Redemption Price shall be adjusted so that the Redemption Price after such event
shall equal the Redemption Price immediately prior to such event multiplied by a
fraction the numerator of which is the number of shares of Class A Common Stock
or Class B Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Class A Common Stock or Class B
Common Stock outstanding immediately prior to such event; provided, however,
that in each case such adjustment to the Redemption Price shall be made only if
the amount of the Redemption Price shall be reduced or increased by at least
$0.01 per Right.
Section 24. Notice of Proposed Actions.
--------------------------
(a) In case the Company, after the Distribution Date, shall
propose (i) to effect any of the transactions referred to in Section 11(a)(i) or
11(g) hereof, (ii) to offer to the holders of record of any class of its Common
Stock options, warrants, or other rights to subscribe for or to purchase shares
of any class of its Common Stock (including any security convertible into or
exchangeable for Common Stock) or shares of stock of any class or any other
securities, options, warrants, convertible or exchangeable securities or other
rights, (iii) to effect any reclassification of its Preferred Stock or Common
Stock or any recapitalization or reorganization of the Company, (iv) to effect
any consolidation or merger with or into, 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 or more 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, the Company shall give to
each holder of record of a Right Certificate, in accordance with Section 25
hereof, notice of such proposed action, which shall specify the record date for
the purposes of such transaction referred to in Section 11(a)(i) hereof or such
dividend or distribution, or the date on which such reclassification,
recapitalization, reorganization, consolidation, merger, sale or transfer of
assets, liquidation, dissolution, or winding up is to take place and the record
date for determining participation therein by the holders of record of Common
Stock or Preferred 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) or (ii) above at
least 10 days prior to the record date for determining holders of record of the
Preferred Stock for purposes of such action, and in the case of any such other
action, at least 10 days prior to the date of the taking of such proposed action
or the date of participation therein by the holders of record of Common Stock or
Preferred Stock, whichever shall be the earlier. The failure to give notice
required by this Section 24 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) In case any of the transactions referred to in Section
11(a)(i), 11(g) or 13 of this Rights Agreement are proposed, then, in any such
case, the Company shall give to each holder of Rights, in accordance with
Section 25 hereof, notice of the proposal of such transaction at least 10 days
prior to consummating such transaction, which notice shall specify the proposed
event and the consequences of the event to holders of Rights under Section
11(a)(i), 11(g) or 13 hereof, as the case may be, and, upon consummating such
transaction, shall similarly give notice thereof to each holder of Rights.
29
Page 42 of 76 Pages
Section 25. Notices. Notices or demands authorized by this
-------
Rights Agreement to be given or made by the Rights Agent or by the holder of
record of any Right Certificate or Right to or on the Company shall be
sufficiently given or made if sent by first class mail, postage prepaid,
addressed (until another address is filed in writing with the Rights Agent) as
follows:
The Wet Seal, Inc.
▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇, President
With a copy to:
Akin, Gump, Strauss, ▇▇▇▇▇ & ▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇, Esq.
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Rights Agreement to be given or made by the Company or by the holder of
record of any Right Certificate or Right to or on the Rights Agent shall be
sufficiently given or made if sent by first class mail, postage prepaid,
addressed (until another address is filed in writing with the Company) as
follows:
American Stock Transfer & Trust Company
▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
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 record of any Right Certificate
or Right shall be sufficiently given or made if sent by first class mail,
postage prepaid, addressed to such holder at the address of such holder as shown
on the registry books of the Company.
Section 26. Supplements and Amendments. For as long as the
----------------------------
Rights are then redeemable and except as provided in the last sentence of this
Section 26, the Company may in its sole and absolute discretion, and the Rights
Agent shall if the Company so directs, supplement or amend any provision of this
Agreement without the approval of any holders of the Rights. At any time when
the Rights are not then redeemable and except as provided in the last sentence
of this Section 26, the Company may, and the Rights Agent shall if the Company
so directs, supplement or amend this Rights Agreement without the approval of
any holders of Right Certificates (i) to cure any ambiguity, (ii) to correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provisions herein, or (iii) to change or supplement the
provisions hereunder in any manner which the Company may deem necessary or
desirable, provided that no such supplement or amendment pursuant to this clause
(iii) shall materially adversely affect the interest of the holders of Right
30
Page 43 of 76 Pages
Certificates. 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 26, the Rights Agent shall execute
such supplement or amendment. This Agreement may be amended or supplemented at
any time with the approval of a majority of the registered holders of the Right
Certificates (and, prior to the Distribution Date, the Class A Common Stock and
Class B Common Stock). Notwithstanding anything contained in this Rights
Agreement to the contrary, no supplement or amendment shall be made which
changes the Redemption Price or the Final Expiration Date and supplements or
amendments may be made after the time that any Person becomes an Acquiring
Person (other than pursuant to a Qualifying Tender Offer) only if at the time of
the action of the Board of Directors approving such supplement or amendment
there are then in office not less than a majority of directors who are
Continuing Directors and such supplement or amendment is approved by a majority
of the Continuing Directors then in office.
Section 27. Successors. All of 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 28. Benefits of this Rights Agreement. Nothing in this
---------------------------------
Rights Agreement shall be construed to give to any person or corporation other
than the Company, the Rights Agent and the registered holders of the Right
Certificates (and, prior to the Distribution Date, the holders of Common Stock
in their capacity as holders of the Rights) 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 holders of
record of the Right Certificates (and, prior to the Distribution Date, the
holders of Common Stock in their capacity as holders of the Rights).
Section 29. Delaware Contract. This Rights Agreement and each
-----------------
Right Certificate issued hereunder shall be deemed to be a contract made under
the laws of the State of Delaware and for all purposes shall be governed by and
construed and enforced in accordance with the laws of such state applicable to
contracts to be made and performed entirely within such state.
Section 30. Counterparts. 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 but one and the same instrument.
Section 31. Descriptive Headings. Descriptive headings of the
--------------------
several Sections of this Rights Agreement are inserted for convenience only and
shall not control or affect the meaning or construction of any of the provisions
hereof.
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.
31
Page 44 of 76 Pages
IN WITNESS WHEREOF, the parties hereto have caused this Rights
Agreement to be duly executed, all as of the day and year first above written.
THE WET SEAL, INC.
Attest: __________________________ By: _____________________________
(SEAL) Name: _____________________________
Title: _____________________________
AMERICAN STOCK TRANSFER &
TRUST COMPANY
Attest: __________________________ By: _____________________________
(SEAL) Name: _____________________________
Title: _____________________________
Page 45 of 76 Pages
EXHIBIT A
UNDER CERTAIN CIRCUMSTANCES AS PROVIDED IN THE
RIGHTS AGREEMENT (AS REFERRED TO BELOW), RIGHTS
ISSUED TO OR BENEFICIALLY OWNED BY ACQUIRING
PERSONS OR THEIR AFFILIATES OR ASSOCIATES (AS SUCH
TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) OR ANY
SUBSEQUENT HOLDER OF SUCH RIGHTS SHALL BE NULL AND
VOID AND MAY NOT BE TRANSFERRED TO ANY PERSON.
THE WET SEAL, INC.
SUMMARY OF RIGHTS TO PURCHASE
CLASS A JUNIOR PREFERRED STOCK
AND
CLASS B JUNIOR PREFERRED STOCK
On August 19, 1997, the Board of Directors of The Wet Seal, Inc.
(the "Company"), declared a dividend distribution of one Preferred Stock
Purchase Right (a "Class A Right"), for each outstanding share of the Company's
Class A Common Stock, par value $0.10 per share (the "Class A Common Stock"),
and one Preferred Stock Purchase Right (a "Class B Right", and together with the
Class A Rights, the "Rights"), for each outstanding share of the Company's Class
B Common Stock, par value $0.10 per share (the "Class B Common Stock", and
together with the Class A Common Stock, the "Common Stock"). The distribution is
payable as of August 29, 1997 to shareholders of record on that date. Each Class
A Right entitles the registered holder to purchase from the Company one
one-hundredth (1/100) of a share of preferred stock of the Company, designated
as Class A Junior Preferred Stock (the "Class A Preferred Stock"), and each
Class B Right entitles the registered holder to purchase from the Company one
one-hundredth (1/100) of a share of preferred stock of the Company, designated
as Class B Junior Preferred Stock (the "Class B Preferred Stock", and together
with the Class A Preferred Stock, the "Preferred Stock"), in each case at a
price of $73.00 per one one-hundredth (1/100) of a share ("Exercise Price"). The
description and terms of the Rights are set forth in a Rights Agreement (the
"Rights Agreement"), between the Company and American Stock Transfer & Trust
Company, as Rights Agent (the "Rights Agent").
AS DISCUSSED BELOW, INITIALLY THE RIGHTS WILL NOT BE EXERCISABLE,
CERTIFICATES WILL NOT BE SENT TO STOCKHOLDERS AND THE RIGHTS WILL AUTOMATICALLY
TRADE WITH THE COMMON STOCK.
The Rights, unless earlier redeemed by the Board of Directors,
become exercisable upon the close of business on the day (the "Distribution
Date"), which is the earlier of (i) the tenth day following a public
announcement that a person or group of affiliated or associated persons, with
certain exceptions set forth below, has acquired beneficial ownership of 12% or
more of the outstanding voting stock of the Company (an "Acquiring Person"), and
(ii) the tenth business day (or such later date as may be determined by the
Page 46 of 76 Pages
Board of Directors prior to such time as any person or group of affiliated or
associated persons becomes an Acquiring Person) after the date of the
commencement or announcement of a person's or group's intention to commence a
tender or exchange offer the consummation of which would result in the ownership
of 20% or more of the Company's outstanding voting stock (even if no shares are
actually purchased pursuant to such offer); prior thereto, the Rights would not
be exercisable, would not be represented by a separate certificate, and would
not be transferable apart from the Company's Common Stock, but will instead be
evidenced, with respect to any of the Common Stock certificates outstanding as
of August 29, 1997, by such Common Stock certificate. An Acquiring Person does
not include (A) the Company, (B) any subsidiary of the Company, (C) any employee
benefit plan or employee stock plan of the Company or of any subsidiary of the
Company, or any trust or other entity organized, appointed, established or
holding Common Stock for or pursuant to the terms of any such plan, (D) any
Original Class B Stockholder (as such term is defined in the Company's restated
Certificate of Incorporation, as in effect on the date of the Rights Agreement)
or any Permitted Transferee (as such term is defined in the Company's restated
Certificate of Incorporation, as in effect on the date of the Rights Agreement)
of any such Original Class B Stockholder, or (E) any person or group whose
ownership of 12% or more of the shares of voting stock of the Company then
outstanding results solely from (i) any action or transaction or transactions
approved by the Board of Directors before such person or group became an
Acquiring Person, or (ii) a reduction in the number of issued and outstanding
shares of voting stock of the Company pursuant to a transaction or transactions
approved by the Board of Directors (provided that any person or group that does
not become an Acquiring Person by reason of clause (i) or (ii) above shall
become an Acquiring Person upon acquisition of an additional 1% or more of the
Company's voting stock unless such acquisition of additional voting stock will
not result in such person or group becoming an Acquiring Person by reason of
such clause (i) or (ii)).
Until the Distribution Date (or earlier redemption or expiration
of the Rights), new Common Stock certificates issued after August 29, 1997, will
contain a legend incorporating the Rights Agreement by reference. Until the
Distribution Date (or earlier redemption or expiration of the Rights), the
surrender for transfer of any of the Common Stock certificates outstanding as of
August 29, 1997, with or without a copy of this Summary of Rights attached
thereto, will also constitute the transfer of the Rights associated with the
Common Stock represented by such certificate. As soon as practicable following
the Distribution Date, separate certificates evidencing the Rights ("Right
Certificates") will be mailed to holders of record of the Common Stock as of the
close of business on the Distribution Date and such separate certificates alone
will evidence the Rights from and after the Distribution Date.
The Rights are not exercisable until the Distribution Date. The
Rights will expire at the close of business on August 29, 2007, unless earlier
redeemed by the Company as described below.
The Preferred Stock is nonredeemable and, unless otherwise
provided in connection with the creation of a subsequent series of preferred
stock, subordinate to any other series of the Company's preferred stock. The
Preferred Stock may not be issued except upon exercise of Rights. The holders of
each share of Class A Preferred Stock or Class B Preferred Stock will be
Page 47 of 76 Pages
entitled to receive when, as and if declared, a quarterly dividend in an amount
equal to the greater of $1.00 per share or 100 times the cash dividends declared
on the Company's Class A Common Stock or Class B Common Stock, as appropriate.
In addition, the Class A Preferred Stock or Class B Preferred Stock is entitled
to 100 times any non-cash dividends (other than dividends payable in equity
securities or certain rights or warrants) declared on the Class A Common Stock
or Class B Common Stock, in like kind, as appropriate. In the event of the
liquidation of the Company, the holders of Class A Preferred Stock or Class B
Preferred Stock will be entitled to receive, for each share of Class A Preferred
Stock or Class B Preferred Stock, a payment in an amount equal to the greater of
$73.00 per one one-hundredth share of Class A Preferred Stock or Class B
Preferred Stock or 100 times the payment made per share of Class A Common Stock
or Class B Common Stock, as appropriate. Each share of Class A Preferred Stock
will have 100 votes and each share of Class B Preferred Stock will have 1,000
votes, in each case voting together with the Common Stock. In the event of any
merger, consolidation or other transaction in which Class A Common Stock or
Class B Common Stock is exchanged, each share of Class A Preferred Stock or
Class B Preferred Stock will be entitled to receive 100 times the amount
received per share of Class A Common Stock or Class B Common Stock, as
appropriate. The rights of Preferred Stock as to dividends, liquidation and
voting are protected by anti-dilution provisions.
The number of shares of Preferred Stock issuable upon exercise of
the Rights is subject to certain adjustments from time to time in the event of a
stock dividend on, or a subdivision or combination of, the Common Stock. The
Exercise Price for the Rights is subject to adjustment in the event of
extraordinary distributions of cash or other property to holders of Common
Stock.
Unless the Rights are earlier redeemed or the transaction is
approved by the Board of Directors and the Continuing Directors (as defined in
the Rights Agreement), if the Company at any time after the Distribution Date
were to be acquired in a merger or other business combination (in which any
shares of Class A Common Stock or Class B Common Stock are changed into or
exchanged for other securities or assets) or more than 50% of the assets or
earning power of the Company and its subsidiaries (taken as a whole) were to be
sold or transferred in one or a series of related transactions, the Rights
Agreement provides that proper provision will be made so that each holder of
record of a Right will from and after such date have the right to receive, upon
payment of the Exercise Price, that number of shares of common stock of the
acquiring company having a market value at the time of such transaction equal to
two times the Exercise Price. In addition, unless the Rights are earlier
redeemed, in the event that a person or group becomes the beneficial owner of
12% or more of the Company's voting stock (other than pursuant to a tender or
exchange offer (a "Qualifying Tender Offer") for all outstanding shares of Class
A Common Stock and Class B Common Stock that is approved by the Board of
Directors, after taking into account the long-term value of the Company and all
other factors they consider relevant in the circumstances), the Rights Agreement
provides that proper provisions will be made so that each holder of record of a
Right, other than the Acquiring Person (whose Rights will thereupon become null
and void), will thereafter have the right to receive, upon payment of the
Exercise Price, that number of shares of the Preferred Stock having a market
value at the time of the transaction equal to two times the Exercise Price (such
market value to be determined with reference to the market value of the
Company's Class A Common Stock and Class B Common Stock as provided in the
Rights Agreement).
Page 48 of 76 Pages
Fractions of shares of Preferred Stock (other than fractions
which are integral multiples of one one-hundredth of a share) may, at the
election of the Company, be evidenced by depositary receipts. The Company may
also issue cash in lieu of fractional shares which are not integral multiples of
one one-hundredth of a share.
At any time on or prior to the close of business on the earlier
of (i) the tenth day after the time that a person has become an Acquiring Person
(or such later date as a majority of the Board of Directors and, if applicable,
a majority of the Continuing Directors may determine) or (ii) August 29, 2007,
the Company may redeem the Rights in whole, but not in part, at a price of $0.01
per Right, subject to adjustment (the "Redemption Price"). The Rights may be
redeemed after the time that any Person has become an Acquiring Person only if
approved by a majority of the Continuing Directors. Immediately upon the
effective time of the action of the Board of Directors of the Company
authorizing redemption of the Rights, the right to exercise the Rights will
terminate and the only right of the holders of Rights will be to receive the
Redemption Price.
For as long as the Rights are then redeemable, the Company may,
except with respect to the Redemption Price or date of expiration of the Rights,
amend the Rights in any manner, including an amendment to extend the time period
in which the Rights may be redeemed. At any time when the Rights are not then
redeemable, the Company may amend the Rights in any manner that does not
materially adversely affect the interests of holders of the Rights as such.
Amendments to the Rights Agreement from and after the time that any Person
becomes an Acquiring Person requires the approval of a majority of the
Continuing Directors (as provided in the Rights Agreement).
Until a Right is exercised, the holder, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends.
A copy of the Rights Agreement has been filed with the Securities
and Exchange Commission as an Exhibit to a Registration Statement on Form 8-A
dated August 25, 1997. 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 in this summary description herein by reference.
Page 49 of 76 Pages
EXHIBIT B
[Form of Right Certificate]
Certificate No. R-_________ [Class A][Class B] Rights
NOT EXERCISABLE AFTER AUGUST 29, 1997, OR EARLIER
IF REDEEMED. THE RIGHTS ARE SUBJECT TO REDEMPTION,
AT THE OPTION OF THE COMPANY AND UNDER CERTAIN
OTHER CIRCUMSTANCES, AT $0.01 PER RIGHT (SUBJECT
TO ADJUSTMENT), ON THE TERMS SET FORTH OR REFERRED
TO IN THE RIGHTS AGREEMENT. UNDER CERTAIN
---------------
CIRCUMSTANCES AS PROVIDED IN THE RIGHTS AGREEMENT
--------------------------------------------------
(AS REFERRED TO BELOW), RIGHTS ISSUED TO OR
--------------------------------------------------
BENEFICIALLY OWNED BY ACQUIRING PERSONS OR THEIR
--------------------------------------------------
AFFILIATES OR ASSOCIATES (AS SUCH TERMS ARE
--------------------------------------------------
DEFINED IN THE RIGHTS AGREEMENT) OR ANY SUBSEQUENT
--------------------------------------------------
HOLDER OF SUCH RIGHTS SHALL BE NULL AND VOID AND
--------------------------------------------------
MAY NOT BE TRANSFERRED TO ANY PERSON.
------------------------------------
RIGHT CERTIFICATE
THE WET SEAL, INC.
This certifies that ______________, or registered assigns, is the
registered owner of the number of [Class A][Class B] 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 August 19, 1997 (the "Rights
Agreement") between The Wet Seal, Inc., a Delaware corporation (the "Company"),
and American Stock Transfer & Trust Company, a New York corporation (the "Rights
Agent"), to purchase from the Company at any time after the Distribution Date
(as such term is defined in the Rights Agreement) and prior to 5:00 P.M. (New
York time) on August 29, 1997, at the office of the Rights Agent designated in
the Rights Agreement for such purpose, or its successor as Rights Agent, in New
York, New York, one one-hundredth (1/100) of a fully paid nonassessable share of
[Class A][Class B] Junior Preferred Stock (the "Preferred Stock") of the Company
at a purchase price of $73.00, as the same may from time to time be adjusted in
accordance with the Rights Agreement (the "Exercise Price"), upon presentation
and surrender of this Right Certificate with the Form of Election to Purchase
attached hereto duly executed.
As provided in the Rights Agreement, the Exercise 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
Page 50 of 76 Pages
adjustment upon the happening of certain events and, upon the happening of
certain events, securities other than shares of Preferred Stock, or other
property, may be acquired upon exercise of the Rights evidenced by this Right
Certificate, as provided in the Rights Agreement.
This Right Certificate is subject to all of the terms, provisions
and conditions of the Rights Agreement, which terms, provisions and conditions
are 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 of the Rights Agent,
the Company and the holders of record of Right Certificates. Copies of the
Rights Agreement are on file at the principal executive office of the Company.
This Right Certificate, with or without other Right Certificates,
upon surrender at the office of the Rights Agent designated in the Rights
Agreement for such purpose, may be exchanged for another Right Certificate or
Right Certificates of like tenor and date evidencing Rights entitling the holder
of record 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 Certificate may be redeemed by the Company at its option or
under certain other circumstances at a redemption price of $0.01 per Right.
No fractional shares of Preferred Stock (other than fractions
which are integral multiples of one one-hundredth (1/100) of a share) are
required to be issued upon the exercise of any Right or Rights evidenced hereby,
and in lieu thereof the Company may cause depository receipts to be issued
and/or a cash payment may 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
Preferred Stock or of any other securities of the Company which may at any time
be issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at meeting
thereof, or to give or withhold consent to any corporate action or to receive
notice of meetings or other actions affecting stockholders (except as provided
in the Rights Agreement), or to receive dividends or 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 and its corporate seal. Dated as of _____________, _____.
2
Page 51 of 76 Pages
ATTEST: THE WET SEAL, INC.
--------------------------------- By:
[Secretary or Assistant -----------------------------
Secretary] Name:
Title:
Countersigned:
AMERICAN STOCK TRANSFER
& TRUST COMPANY
By:
----------------------------
Name:
Title:
3
Page 52 of 76 Pages
[Form of Reverse Side of Right Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Right Certificates.)
FOR VALUE RECEIVED
---------------------------------------------
hereby sells, assigns and transfers unto
--------------------------------------
-------------------------------------------------------------------------------
(Please print name and address of transferee)
-------------------------------------------------------------------------------
Rights evidenced by 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 the
within-named Company, with full power of substitution.
Dated: ________________.
_____________________________
Signature
Signature Guaranteed:
Page 53 of 76 Pages
Certificate
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Right Certificate [ ] is [ ] is not being sold, assigned or
transferred by or on behalf of a Person who is or was an Acquiring Person or an
Associate or an Affiliate thereof (as such terms are defined in the Rights
Agreement); and
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Right Certificate from
any Person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate thereof (as such terms are defined in the Rights
Agreement).
Dated: ____________ ________________________
Signature
NOTICE
------
The signature to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Right Certificate in
every particular, without alteration or enlargement or any change whatsoever.
Page 54 of 76 Pages
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if registered holder desires
to exercise the Right Certificate.)
TO THE WET SEAL, INC.:
The undersigned hereby irrevocably elects to exercise _________________
Rights represented by this Right Certificate to purchase the shares of Preferred
Stock issuable upon the exercise of such Rights and requests that certificates
for such share(s) be issued in the following name:
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 remaining of such
Rights shall be registered in the name of and delivered to:
Please insert social security
or other identifying number:____________________________________________________
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
Dated: _____________.
______________________________
Signature
(Signature must conform in all
respects to name of holder as
specified on the fact of this
Right Certificate)
Signature Guaranteed:
Page 55 of 76 Pages
EXHIBIT C
FORM OF
CERTIFICATE OF DESIGNATIONS
OF
CLASS A JUNIOR PREFERRED STOCK
AND
CLASS B JUNIOR PREFERRED STOCK
OF
THE WET SEAL, INC.
Pursuant to Section 151 of the Delaware
General Corporation Law
I, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Vice Chairman and Chief Executive Officer of The Wet
Seal, Inc., a corporation organized and existing under the Delaware General
Corporation Law (the "Company"), in accordance with the provisions of Section
151 of such law, DO HEREBY CERTIFY that at a meeting of the Board of Directors
on August 19, 1997, at which meeting a quorum was present, that the following
resolutions were adopted:
RESOLVED, that pursuant to the authority vested in the Board of Directors
of the Company in accordance with the provisions of Article IV of the Company's
restated Certificate of Incorporation, as amended, a series of Preferred Stock
of the Company be, and hereby is, created, and the powers, designations,
preferences and relative, participating, optional or other special rights of the
shares of such series, and the qualifications, limitations or restrictions
thereof, be, and hereby are, as follows:
Section 1. Designation and Amount. The shares of such series shall be
designated as "Class A Junior Preferred Stock" (the "Class A Preferred Stock")
and the number of shares constituting such series initially shall be 800,000.
Notwithstanding the foregoing, however, if more than a total of 800,000 shares
of Class A Preferred Stock shall be issuable upon the exercise of Class A Rights
(the "Class A Rights") issued pursuant to the Rights Agreement, dated as of
August 19, 1997, between the Company and American Stock Transfer & Trust
Company, as Rights Agent (as such agreement may be amended from time to time,
the "Rights Agreement"), the Board of Directors of the Company shall direct by
resolution or resolutions that the total number of shares of Class A Preferred
Stock authorized to be issued be increased (to the extent that the Certificate
of Incorporation, as amended, then permits) to the largest number of whole
shares (rounded up to the nearest whole number) issuable upon exercise of such
Class A Rights.
Section 2. Dividends and Distributions.
(A) Subject to the provisions for adjustment hereinafter set forth, the
holders of shares of Class A Preferred Stock shall be entitled to receive, when,
Page 56 of 76 Pages
as and if declared by the Board of Directors out of funds legally available for
the purpose, (i) cash dividends in an amount per share (rounded to the nearest
cent) equal to 100 times the aggregate per share amount of all cash dividends
declared or paid on the Company's Class A Common Stock, $0.10 par value per
share (the "Common Stock"), and (ii) a preferential cash dividend (the
"Preferential Dividends"), if any, in preference to the holders of Common Stock,
on the first day of March, June, September and December of each year (each 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 Class
A Preferred Stock, payable in an amount (except in the case of the first
Quarterly Dividend Payment if the date of the first issuance of Class A
Preferred Stock is a date other than a Quarterly Dividend Payment Date, in which
case such payment shall be a prorated amount of such amount) equal to $1.00 per
share of Class A Preferred Stock less the per share amount of all cash dividends
declared on the Class A Preferred Stock pursuant to clause (i) of this sentence
since the immediately preceding Quarterly Dividend Payment Date or, with respect
to the first Quarterly Dividend Payment Date, since the first issuance of any
share or fraction of a share of Class A Preferred Stock. In the event the
Company shall, at any time after the issuance of any share or fraction of a
share of Class A Preferred Stock, make any distribution on the shares of Common
Stock of the Company, whether by way of a dividend or a reclassification of
stock, a recapitalization, reorganization or partial liquidation of the Company
or otherwise, which is payable in cash or any debt security, debt instrument,
real or personal property or any other property (other than cash dividends
subject to the immediately preceding sentence, a distribution of shares of
Common Stock or other capital stock of the Company or a distribution of rights
or warrants to acquire any such share, including any debt security convertible
into or exchangeable for any such share, at a price less than the Fair Market
Value (as hereinafter defined) of such share), then, and in each such event, the
Company shall simultaneously pay on each then outstanding share of Class A
Preferred Stock of the Company a distribution, in like kind, of 100 times such
distribution paid on a share of Common Stock (subject to the provisions for
adjustment hereinafter set forth). The dividends and distributions on the Class
A Preferred Stock to which holders thereof are entitled pursuant to clause (i)
of the first sentence of this paragraph and pursuant to the second sentence of
this paragraph are hereinafter referred to as "Dividends" and the multiple of
such cash and non-cash dividends on the Common Stock applicable to the
determination of the Dividends, which shall be 100 initially but shall be
adjusted from time to time as hereinafter provided, is hereinafter referred to
as the "Dividend Multiple". In the event the Company shall at any time after
August 29, 1997, declare or pay any dividend or make any distribution on Common
Stock payable in shares of Common Stock, or effect a subdivision or split or a
combination, consolidation or reverse split of the outstanding shares of Common
Stock into a greater or lesser number of shares of Common Stock, then in each
such case the Dividend Multiple thereafter applicable to the determination of
the amount of Dividends which holders of shares of Class A Preferred Stock shall
be entitled to receive shall be the Dividend Multiple applicable immediately
prior to such event multiplied 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.
(B) The Company shall declare each Dividend at the same time it declares
any cash or non-cash dividend or distribution on the Common Stock in respect of
which a Dividend is required to be paid. No cash or non-cash dividend or
2
Page 57 of 76 Pages
distribution on the Common Stock in respect of which a Dividend is required to
be paid shall be paid or set aside for payment on the Common Stock unless a
Dividend in respect of such dividend or distribution on the Common Stock shall
be simultaneously paid, or set aside for payment, on the Class A Preferred
Stock.
(C) Preferential Dividends shall begin to accrue on outstanding shares of
Class A Preferred Stock from the Quarterly Dividend Payment Date next preceding
the date of issuance of any shares of Class A Preferred Stock. Accrued but
unpaid Preferential Dividends shall cumulate but shall not bear interest.
Preferential Dividends paid on the shares of Class A Preferred Stock in an
amount less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding.
Section 3. Voting Rights. The holders of shares of Class A Preferred Stock
shall have the following voting rights:
(A) Subject to the provisions for adjustment hereinafter set forth, each
share of Class A Preferred Stock shall entitle the holder thereof to 100 votes
on all matters submitted to a vote of the holders of the Common Stock. The
number of votes which a holder of Class A Preferred Stock is entitled to cast,
as the same may be adjusted from time to time as hereinafter provided, is
hereinafter referred to as the "Vote Multiple". In the event the Company shall
at any time after August 29, 1997, declare or pay any dividend on Common Stock
payable in shares of Common Stock, or effect a subdivision or split or a
combination, consolidation or reverse split of the outstanding shares of Common
Stock into a greater or lesser number of shares of Common Stock, then in each
such case the Vote Multiple thereafter applicable to the determination of the
number of votes per share to which holders of shares of Class A Preferred Stock
shall be entitled after such event shall be the Vote Multiple immediately prior
to such event multiplied 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.
(B) Except as otherwise provided herein, in the Company's restated
Certificate of Incorporation or By-laws, in each case as the same may be
amended, the holders of shares of Class A Preferred Stock and the holders of
shares of Common Stock shall vote together as one class on all matters submitted
to a vote of stockholders of the Company.
(C) In the event that the Preferential Dividends accrued on the Class A
Preferred Stock for four or more quarterly dividend periods, whether consecutive
or not, shall not have been declared and paid or irrevocably set aside for
payment, the holders of record of Preferred Stock of the Company of all series
(including the Class A Preferred Stock), other than any series in respect of
which such right is expressly withheld by the authorizing resolutions therefor,
shall have the right, at the next meeting of stockholders called for the
election of directors, to elect two members to the Board of Directors, which
directors shall be in addition to the number required by the By-laws, as
amended, prior to such event, to serve until the next Annual Meeting and until
their successors are elected and qualified or their earlier resignation, removal
or incapacity or until such earlier time as all accrued and unpaid Preferential
Dividends upon the outstanding shares of Class A Preferred Stock shall have been
paid (or irrevocably set aside for payment) in full. The holders of shares of
3
Page 58 of 76 Pages
Class A Preferred Stock shall continue to have the right to elect directors as
provided by the immediately preceding sentence until all accrued and unpaid
Preferential Dividends upon the outstanding shares of Class A Preferred Stock
shall have been paid (or set aside for payment) in full. Such directors may be
removed and replaced by such stockholders, and vacancies in such directorships
may be filled only by such stockholders (or by the remaining director elected by
such stockholders, if there be one) in the manner permitted by law; provided,
however, that any such action by stockholders shall be taken at a meeting of
stockholders and shall not be taken by written consent thereto.
(D) Except as otherwise required by the Company's restated Certificate of
Incorporation or By-laws or set forth herein, in each case as the same may be
amended, holders of Class A Preferred Stock shall have no other 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 the
taking of any corporate action.
Section 4. Certain Restrictions.
(A) Whenever Preferential Dividends or Dividends are in arrears or the
Company shall be in default of payment thereof, thereafter and until all accrued
and unpaid Preferential Dividends and Dividends, whether or not declared, on
shares of Class A Preferred Stock outstanding shall have been paid or set
irrevocably aside for payment in full, and in addition to any and all other
rights which any holder of shares of Class A Preferred Stock may have in such
circumstances, the Company shall not
(i) declare or pay dividends on, 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 Class A Preferred Stock;
(ii) declare or pay dividends on or make any other distributions on any
shares of stock ranking on a parity as to dividends with the Class A Preferred
Stock, unless dividends are paid ratably on the Class A Preferred Stock and all
such parity stock on which dividends are payable or in arrears in proportion to
the total amounts to which the holders of all such shares are then entitled if
the full dividends accrued thereon were to be paid;
(iii) except as permitted by subparagraph (iv) of this paragraph 4(A),
redeem or purchase or otherwise acquire for consideration shares of any stock
ranking on a parity (either as to dividends or upon liquidation, dissolution or
winding up) with the Class A Preferred Stock, provided that the Company may at
any time redeem, purchase or otherwise acquire shares of any such parity stock
in exchange for shares of any stock of the Company ranking junior (both as to
dividends and upon liquidation, dissolution or winding up) to the Class A
Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any shares of Class A
Preferred Stock, or any shares of stock ranking on a parity with the Class A
Preferred Stock (either as to dividends or upon liquidation, dissolution or
winding up), except in accordance with a purchase offer made to all holders of
such shares upon such terms as the Board of Directors, after consideration of
4
Page 59 of 76 Pages
the respective annual dividend rates and other relative rights and preferences
of the respective classes, shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.
(B) The Company shall not permit any Subsidiary (as hereinafter defined) of
the Company to purchase or otherwise acquire for consideration any shares of
stock of the Company unless the Company could, under paragraph (A) of this
Section 4, purchase or otherwise acquire such shares at such time and in such
manner. A "Subsidiary" of the Company shall mean any corporation or other entity
of which securities or other ownership interests having ordinary voting power
sufficient to elect a majority of the board of directors of such corporation or
other entity or other persons performing similar functions are beneficially
owned, directly or indirectly, by the Company or by any corporation or other
entity that is otherwise controlled by the Company.
(C) The Company shall not issue any shares of Class A Preferred Stock
except upon exercise of Rights issued pursuant to the Rights Agreement, a copy
of which is on file with the Secretary of the Company at its principal executive
office and shall be made available to stockholders of record without charge upon
written request therefor addressed to said Secretary. Notwithstanding the
foregoing sentence, nothing contained in the provisions hereof shall prohibit or
restrict the Company from issuing for any purpose any series of Preferred Stock
with rights and privileges similar to, different from, or greater than, those of
the Class A Preferred Stock.
Section 5. Reacquired Shares. Any shares of Class A Preferred Stock
purchased or otherwise acquired by the Company in any manner whatsoever shall be
retired and canceled promptly after the acquisition thereof. All such shares
upon their retirement and cancellation shall become authorized but unissued
shares of Preferred Stock, without designation as to series, and such shares may
be reissued as part of a new series of Preferred Stock to be created by
resolution or resolutions of the Board of Directors.
Section 6. Liquidation, Dissolution or Winding Up. Upon any voluntary or
involuntary liquidation, dissolution or winding up of the Company, no
distribution shall be made (i) to the holders of shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or winding up) to the
Class A Preferred Stock unless the holders of shares of Class A Preferred Stock
shall have received for each share of Class A Preferred Stock, subject to
adjustment as hereinafter provided, (A) $73.00 per one one-hundredth of a share
plus an amount equal to accrued and unpaid dividends and distributions thereon,
whether or not declared, to the date of such payment or, (B) if greater than the
amount specified in clause (i)(A) of this sentence, an amount equal to 100 times
the aggregate amount to be distributed per share to holders of Common Stock, as
the same may be adjusted as hereinafter provided, and (ii) to the holders of
stock ranking on a parity upon liquidation, dissolution or winding up with the
Class A Preferred Stock, unless simultaneously therewith distributions are made
ratably on the Class A Preferred Stock and all other shares of such parity stock
in proportion to the total amounts to which the holders of shares of Class A
Preferred Stock are entitled under clause (i)(A) of this sentence and to which
the holders of such parity shares are entitled, in each case upon such
liquidation, dissolution or winding up. The amount to which holders of Class A
Preferred Stock may be entitled upon liquidation, dissolution or winding up of
the Company pursuant to clause (i)(B) of the foregoing sentence is hereinafter
referred to as the "Participating Liquidation Amount" and the multiple of the
5
Page 60 of 76 Pages
amount to be distributed to holders of shares of Common Stock upon the
liquidation, dissolution or winding up of the Company applicable pursuant to
said clause to the determination of the Participating Liquidation Amount, as
said multiple may be adjusted from time to time as hereinafter provided, is
hereinafter referred to as the "Liquidation Multiple". In the event the Company
shall at any time after August 29, 1997, declare or pay any dividend on Common
Stock payable in shares of Common Stock, or effect a subdivision or split or a
combination, consolidation or reverse split of the outstanding shares of Common
Stock into a greater or lesser number of shares of Common Stock, then, in each
such case, the Liquidation Multiple thereafter applicable to the determination
of the Participating Liquidation Amount to which holders of Class A Preferred
Stock shall be entitled after such event shall be the Liquidation Multiple
applicable immediately prior to such event multiplied 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.
Section 7. Certain Reclassifications and Other Events.
(A) In the event that holders of shares of Common Stock of the Company
receive after August 29, 1997, in respect of their shares of Common Stock, any
share of capital stock of the Company (other than any share of Common Stock of
the Company), whether by way of reclassification, recapitalization,
reorganization, dividend or other distribution or otherwise (a "Transaction"),
then, and in each such event, the dividend rights, voting rights and rights upon
the liquidation, dissolution or winding up of the Company of the shares of Class
A Preferred Stock shall be adjusted so that after such event the holders of
Class A Preferred Stock shall be entitled, in respect of each share of Class A
Preferred Stock held, in addition to such rights in respect thereof to which
such holder was entitled immediately prior to such adjustment, to (i) such
additional dividends as equal the Dividend Multiple in effect immediately prior
to such Transaction multiplied by the additional dividends which the holder of a
share of Common Stock shall be entitled to receive by virtue of the receipt in
the Transaction of such capital stock, (ii) such additional voting rights as
equal the Vote Multiple in effect immediately prior to such Transaction
multiplied by the additional voting rights which the holder of a share of Common
Stock shall be entitled to receive by virtue of the receipt in the Transaction
of such capital stock, and (iii) such additional distributions upon liquidation,
dissolution or winding up of the Company as equal the Liquidation Multiple in
effect immediately prior to such Transaction multiplied by the additional amount
which the holder of a share of Common Stock shall be entitled to receive upon
liquidation, dissolution or winding up of the Company by virtue of the receipt
in the Transaction of such capital stock, as the case may be, all as provided by
the terms of such capital stock.
(B) In the event that holders of shares of Common Stock of the Company
receive after August 29, 1997, in respect of their shares of Common Stock, any
right or warrant to purchase Common Stock (including as such a right, for all
purposes of this paragraph, any security convertible into or exchangeable for
Common Stock) at a purchase price per share less than the Fair Market Value of a
share of Common Stock on the date of issuance of such right or warrant, then and
in each such event the dividend rights, voting rights and rights upon the
liquidation, dissolution or winding up of the Company of the shares of Class A
Preferred Stock shall each be adjusted so that after such event the Dividend
Multiple, the Vote Multiple and the Liquidation Multiple shall each be the
6
Page 61 of 76 Pages
product of the Dividend Multiple, the Vote Multiple and the Liquidation
Multiple, as the case may be, in effect immediately prior to such event
multiplied by a fraction the numerator of which shall be the number of shares of
Common Stock outstanding immediately before such issuance of rights or warrants
plus the maximum number of shares of Common Stock which could be acquired upon
exercise in full of all such rights or warrants and the denominator of which
shall be the number of shares of Common Stock outstanding immediately before
such issuance of rights or warrants plus the number of shares of Common Stock
which could be purchased, at the Fair Market Value of the Common Stock at the
time of such issuance, by the maximum aggregate consideration payable upon
exercise in full of all such rights or warrants.
(C) In the event that holders of shares of Common Stock of the Company
receive after August 29, 1997, in respect of their shares of Common Stock, any
right or warrant to purchase capital stock of the Company (other than shares of
Common Stock), including as such a right, for all purposes of this paragraph,
any security convertible into or exchangeable for capital stock of the Company
(other than Common Stock), at a purchase price per share less than the Fair
Market Value of such shares of capital stock on the date of issuance of such
right or warrant, then and in each such event the dividend rights, voting rights
and rights upon liquidation, dissolution or winding up of the Company of the
shares of Class A Preferred Stock shall each be adjusted so that after such
event each holder of a share of Class A Preferred Stock shall be entitled, in
respect of each share of Class A Preferred Stock held, in addition to such
rights in respect thereof to which such holder was entitled immediately prior to
such event, to receive (i) such additional dividends as equal the Dividend
Multiple in effect immediately prior to such event multiplied, first, by the
additional dividends to which the holder of a share of Common Stock shall be
entitled upon exercise of such right or warrant by virtue of the capital stock
which could be acquired upon such exercise and multiplied again by the Discount
Fraction (as hereinafter defined), and (ii) such additional voting rights as
equal the Vote Multiple in effect immediately prior to such event multiplied,
first, by the additional voting rights to which the holder of a share of Common
Stock shall be entitled upon exercise of such right or warrant by virtue of the
capital stock which could be acquired upon such exercise and multiplied again by
the Discount Fraction, and (iii) such additional distributions upon liquidation,
dissolution or winding up of the Company as equal the Liquidation Multiple in
effect immediately prior to such event multiplied, first, by the additional
amount which the holder of a share of Common Stock shall be entitled to receive
upon liquidation, dissolution or winding up of the Company upon exercise of such
right or warrant by virtue of the capital stock which could be acquired upon
such exercise and multiplied again by the Discount Fraction. For purposes of
this paragraph, the "Discount Fraction" shall be a fraction the numerator of
which shall be the difference between the Fair Market Value of a share of the
capital stock subject to a right or warrant distributed to holders of shares of
Common Stock of the Company as contemplated by this paragraph immediately after
the distribution thereof and the purchase price per share for such share of
capital stock pursuant to such right or warrant and the denominator of which
shall be the Fair Market Value of a share of such capital stock immediately
after the distribution of such right or warrant.
(D) For purposes of this Certificate of Designations, the "Fair Market
Value" of a share of capital stock of the Company (including a share of Common
Stock) on any date shall be deemed to be the average of the daily closing price
per share thereof over the 30 consecutive Trading Days (as such term is
7
Page 62 of 76 Pages
hereinafter defined) immediately prior to such date; provided, however, that, in
the event that such Fair Market Value of any such share of capital stock is
determined during a period which includes any date that is within 30 Trading
Days after (i) the ex-dividend date for a dividend or distribution on stock
payable in shares of such stock or securities convertible into shares of such
stock, or (ii) the effective date of any subdivision, split, combination,
consolidation, reverse stock split or reclassification of such stock, then, and
in each such case, the Fair Market Value shall be appropriately adjusted by the
Board of Directors of the Company to take into account ex-dividend or
post-effective date trading. The closing price 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 applicable transaction reporting system with respect to
securities listed or admitted to trading on the New York Stock Exchange), or, if
the shares are not listed or admitted to trading on the New York Stock Exchange,
as reported in the applicable transaction reporting system with respect to
securities listed on the principal national securities exchange on which the
shares are listed or admitted to trading or, if the shares 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 high bid and low asked prices in the
over-the-counter market, as reported by The Nasdaq National Market System or
such other system then in use, or if on any such date the shares 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 shares selected
by the Board of Directors of the Company. The term "Trading Day" shall mean a
day on which the principal national securities exchange on which the shares are
listed or admitted to trading is open for the transaction of business or, if the
shares are not listed or admitted to trading on any national securities
exchange, on which the New York Stock Exchange or such other national securities
exchange as may be selected by the Board of Directors of the Company is open. If
the shares are not publicly held or not so listed or traded on any day within
the period of 30 Trading Days applicable to the determination of Fair Market
Value thereof as aforesaid, "Fair Market Value" shall mean the fair market value
thereof per share as determined in good faith by the Board of Directors of the
Company. In either case referred to in the foregoing sentence, the determination
of Fair Market Value shall be described in a statement filed with the Secretary
of the Company.
Section 8. Consolidation, Merger, etc. In case the Company shall enter into
any consolidation, merger, combination or other transaction in which the shares
of Common Stock are exchanged for or changed into other stock or securities,
cash and/or any other property, then in any such case each outstanding share of
Class A Preferred Stock shall at the same time be similarly exchanged for or
changed into the aggregate amount of stock, securities, cash and/or other
property (payable in like kind), as the case may be, for which or into which
each share of Common Stock is changed or exchanged multiplied by the highest of
the Vote Multiple, the Dividend Multiple or the Liquidation Multiple in effect
immediately prior to such event.
Section 9. Effective Time of Adjustments.
(A) Adjustments to the Class A Preferred Stock required by the provisions
hereof shall be effective as of the time at which the event requiring such
adjustments occurs.
(B) The Company shall give prompt written notice to each holder of a share
of Class A Preferred Stock of the effect of any adjustment to the voting rights,
dividend rights or rights upon liquidation, dissolution or winding up of the
8
Page 63 of 76 Pages
Company of such shares required by the provisions hereof. Notwithstanding the
foregoing sentence, the failure of the Company to give such notice shall not
affect the validity of or the force or effect of or the requirement for such
adjustment.
Section 10. No Redemption. The shares of Class A Preferred Stock shall not
be redeemable at the option of the Company or any holder thereof.
Notwithstanding the foregoing sentence of this Section, the Company may acquire
shares of Class A Preferred Stock in any other manner permitted by law, and the
provisions hereof and the Certificate of Incorporation of the Company, in each
case as the same may be amended.
Section 11. Ranking. Unless otherwise provided in a Certificate of
Designations relating to a subsequent series of preferred stock of the Company,
the Class A Preferred Stock shall rank junior to all other series of the
Company's preferred stock as to the payment of dividends and the distribution of
assets on liquidation, dissolution or winding up and senior to the Common Stock.
Section 12. Amendment. The provisions hereof and the restated Certificate
of Incorporation, as amended, of the Company shall not be amended in any manner
which would adversely affect the rights, privileges or powers of the Class A
Preferred Stock without, in addition to any other vote of stockholders required
by law, the affirmative vote of the holders of two-thirds or more of the
outstanding shares of Class A Preferred Stock, voting together as a single
class.
RESOLVED, that pursuant to the authority vested in the Board of Directors
of the Company in accordance with the provisions of Article IV of the Company's
restated Certificate of Incorporation, as amended, another series of Preferred
Stock of the Company be, and hereby is, created, and the powers, designations,
preferences and relative, participating, optional or other special rights of the
shares of such series, and the qualifications, limitations or restrictions
thereof, be, and hereby are, as follows:
Section 1. Designation and Amount. The shares of such series shall be
designated as "Class B Junior Preferred Stock" (the "Class B Preferred Stock")
and the number of shares constituting such series initially shall be 200,000.
Notwithstanding the foregoing, however, if more than a total of 200,000 shares
of Class B Preferred Stock shall be issuable upon the exercise of Class B Rights
(the "Class B Rights") issued pursuant to the Rights Agreement, dated as of
August 19, 1997, between the Company and American Stock Transfer & Trust
Company, as Rights Agent (as such agreement may be amended from time to time,
the "Rights Agreement"), the Board of Directors of the Company shall direct by
resolution or resolutions that the total number of shares of Class B Preferred
Stock authorized to be issued be increased (to the extent that the Certificate
of Incorporation, as amended, then permits) to the largest number of whole
shares (rounded up to the nearest whole number) issuable upon exercise of such
Class B Rights.
Section 2. Dividends and Distributions.
(A) Subject to the provisions for adjustment hereinafter set forth, the
holders of shares of Class B Preferred Stock shall be entitled to receive, when,
9
Page 64 of 76 Pages
as and if declared by the Board of Directors out of funds legally available for
the purpose, (i) cash dividends in an amount per share (rounded to the nearest
cent) equal to 100 times the aggregate per share amount of all cash dividends
declared or paid on the Company's Class B Common Stock, $0.10 par value per
share (the "Common Stock"), and (ii) a preferential cash dividend (the
"Preferential Dividends"), if any, in preference to the holders of Common Stock,
on the first day of March, June, September and December of each year (each 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 Class
B Preferred Stock, payable in an amount (except in the case of the first
Quarterly Dividend Payment if the date of the first issuance of Class B
Preferred Stock is a date other than a Quarterly Dividend Payment Date, in which
case such payment shall be a prorated amount of such amount) equal to $1.00 per
share of Class B Preferred Stock less the per share amount of all cash dividends
declared on the Class 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 Class B Preferred Stock. In the event the
Company shall, at any time after the issuance of any share or fraction of a
share of Class B Preferred Stock, make any distribution on the shares of Common
Stock of the Company, whether by way of a dividend or a reclassification of
stock, a recapitalization, reorganization or partial liquidation of the Company
or otherwise, which is payable in cash or any debt security, debt instrument,
real or personal property or any other property (other than cash dividends
subject to the immediately preceding sentence, a distribution of shares of
Common Stock or other capital stock of the Company or a distribution of rights
or warrants to acquire any such share, including any debt security convertible
into or exchangeable for any such share, at a price less than the Fair Market
Value (as hereinafter defined) of such share), then, and in each such event, the
Company shall simultaneously pay on each then outstanding share of Class B
Preferred Stock of the Company a distribution, in like kind, of 100 times such
distribution paid on a share of Common Stock (subject to the provisions for
adjustment hereinafter set forth). The dividends and distributions on the Class
B Preferred Stock to which holders thereof are entitled pursuant to clause (i)
of the first sentence of this paragraph and pursuant to the second sentence of
this paragraph are hereinafter referred to as "Dividends" and the multiple of
such cash and non-cash dividends on the Common Stock applicable to the
determination of the Dividends, which shall be 100 initially but shall be
adjusted from time to time as hereinafter provided, is hereinafter referred to
as the "Dividend Multiple". In the event the Company shall at any time after
August 29, 1997, declare or pay any dividend or make any distribution on Common
Stock payable in shares of Common Stock, or effect a subdivision or split or a
combination, consolidation or reverse split of the outstanding shares of Common
Stock into a greater or lesser number of shares of Common Stock, then in each
such case the Dividend Multiple thereafter applicable to the determination of
the amount of Dividends which holders of shares of Class B Preferred Stock shall
be entitled to receive shall be the Dividend Multiple applicable immediately
prior to such event multiplied 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.
(B) The Company shall declare each Dividend at the same time it declares
any cash or non-cash dividend or distribution on the Common Stock in respect of
which a Dividend is required to be paid. No cash or non-cash dividend or
10
Page 65 of 76 Pages
distribution on the Common Stock in respect of which a Dividend is required to
be paid shall be paid or set aside for payment on the Common Stock unless a
Dividend in respect of such dividend or distribution on the Common Stock shall
be simultaneously paid, or set aside for payment, on the Class B Preferred
Stock.
(C) Preferential Dividends shall begin to accrue on outstanding shares of
Class B Preferred Stock from the Quarterly Dividend Payment Date next preceding
the date of issuance of any shares of Class B Preferred Stock. Accrued but
unpaid Preferential Dividends shall cumulate but shall not bear interest.
Preferential Dividends paid on the shares of Class 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.
Section 3. Voting Rights. The holders of shares of Class B Preferred Stock
shall have the following voting rights:
(A) Subject to the provisions for adjustment hereinafter set forth, each
share of Class B Preferred Stock shall entitle the holder thereof to 1,000 votes
on all matters submitted to a vote of the holders of the Common Stock. The
number of votes which a holder of Class B Preferred Stock is entitled to cast,
as the same may be adjusted from time to time as hereinafter provided, is
hereinafter referred to as the "Vote Multiple". In the event the Company shall
at any time after August 29, 1997, declare or pay any dividend on Common Stock
payable in shares of Common Stock, or effect a subdivision or split or a
combination, consolidation or reverse split of the outstanding shares of Common
Stock into a greater or lesser number of shares of Common Stock, then in each
such case the Vote Multiple thereafter applicable to the determination of the
number of votes per share to which holders of shares of Class B Preferred Stock
shall be entitled after such event shall be the Vote Multiple immediately prior
to such event multiplied 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.
(B) Except as otherwise provided herein, in the Company's restated
Certificate of Incorporation or By-laws, in each case as the same may be
amended, the holders of shares of Class B Preferred Stock and the holders of
shares of Common Stock shall vote together as one class on all matters submitted
to a vote of stockholders of the Company.
(C) In the event that the Preferential Dividends accrued on the Class B
Preferred Stock for four or more quarterly dividend periods, whether consecutive
or not, shall not have been declared and paid or irrevocably set aside for
payment, the holders of record of Preferred Stock of the Company of all series
(including the Class B Preferred Stock), other than any series in respect of
which such right is expressly withheld by the authorizing resolutions therefor,
shall have the right, at the next meeting of stockholders called for the
election of directors, to elect two members to the Board of Directors, which
directors shall be in addition to the number required by the By-laws, as
amended, prior to such event, to serve until the next Annual Meeting and until
their successors are elected and qualified or their earlier resignation, removal
or incapacity or until such earlier time as all accrued and unpaid Preferential
Dividends upon the outstanding shares of Class B Preferred Stock shall have been
paid (or irrevocably set aside for payment) in full. The holders of shares of
11
Page 66 of 76 Pages
Class B Preferred Stock shall continue to have the right to elect directors as
provided by the immediately preceding sentence until all accrued and unpaid
Preferential Dividends upon the outstanding shares of Class B Preferred Stock
shall have been paid (or set aside for payment) in full. Such directors may be
removed and replaced by such stockholders, and vacancies in such directorships
may be filled only by such stockholders (or by the remaining director elected by
such stockholders, if there be one) in the manner permitted by law; provided,
however, that any such action by stockholders shall be taken at a meeting of
stockholders and shall not be taken by written consent thereto.
(D) Except as otherwise required by the Company's restated Certificate of
Incorporation or By-laws or set forth herein, in each case as the same may be
amended, holders of Class B Preferred Stock shall have no other 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 the
taking of any corporate action.
Section 4. Certain Restrictions.
(A) Whenever Preferential Dividends or Dividends are in arrears or the
Company shall be in default of payment thereof, thereafter and until all accrued
and unpaid Preferential Dividends and Dividends, whether or not declared, on
shares of Class B Preferred Stock outstanding shall have been paid or set
irrevocably aside for payment in full, and in addition to any and all other
rights which any holder of shares of Class B Preferred Stock may have in such
circumstances, the Company shall not
(i) declare or pay dividends on, 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 Class B Preferred Stock;
(ii) declare or pay dividends on or make any other distributions on any
shares of stock ranking on a parity as to dividends with the Class B Preferred
Stock, unless dividends are paid ratably on the Class 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 if
the full dividends accrued thereon were to be paid;
(iii) except as permitted by subparagraph (iv) of this paragraph 4(A),
redeem or purchase or otherwise acquire for consideration shares of any stock
ranking on a parity (either as to dividends or upon liquidation, dissolution or
winding up) with the Class B Preferred Stock, provided that the Company may at
any time redeem, purchase or otherwise acquire shares of any such parity stock
in exchange for shares of any stock of the Company ranking junior (both as to
dividends and upon liquidation, dissolution or winding up) to the Class B
Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any shares of Class B
Preferred Stock, or any shares of stock ranking on a parity with the Class B
Preferred Stock (either as to dividends or upon liquidation, dissolution or
winding up), except in accordance with a purchase offer made to all holders of
such shares upon such terms as the Board of Directors, after consideration of
12
Page 67 of 76 Pages
the respective annual dividend rates and other relative rights and preferences
of the respective classes, shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.
(B) The Company shall not permit any Subsidiary (as hereinafter defined) of
the Company to purchase or otherwise acquire for consideration any shares of
stock of the Company unless the Company could, under paragraph (A) of this
Section 4, purchase or otherwise acquire such shares at such time and in such
manner. A "Subsidiary" of the Company shall mean any corporation or other entity
of which securities or other ownership interests having ordinary voting power
sufficient to elect a majority of the board of directors of such corporation or
other entity or other persons performing similar functions are beneficially
owned, directly or indirectly, by the Company or by any corporation or other
entity that is otherwise controlled by the Company.
(C) The Company shall not issue any shares of Class B Preferred Stock
except upon exercise of Rights issued pursuant to the Rights Agreement, a copy
of which is on file with the Secretary of the Company at its principal executive
office and shall be made available to stockholders of record without charge upon
written request therefor addressed to said Secretary. Notwithstanding the
foregoing sentence, nothing contained in the provisions hereof shall prohibit or
restrict the Company from issuing for any purpose any series of Preferred Stock
with rights and privileges similar to, different from, or greater than, those of
the Class B Preferred Stock.
Section 5. Reacquired Shares. Any shares of Class B Preferred Stock
purchased or otherwise acquired by the Company in any manner whatsoever shall be
retired and canceled promptly after the acquisition thereof. All such shares
upon their retirement and cancellation shall become authorized but unissued
shares of Preferred Stock, without designation as to series, and such shares may
be reissued as part of a new series of Preferred Stock to be created by
resolution or resolutions of the Board of Directors.
Section 6. Liquidation, Dissolution or Winding Up. Upon any voluntary or
involuntary liquidation, dissolution or winding up of the Company, no
distribution shall be made (i) to the holders of shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or winding up) to the
Class B Preferred Stock unless the holders of shares of Class B Preferred Stock
shall have received for each share of Class B Preferred Stock, subject to
adjustment as hereinafter provided, (A) $73.00 per one one-hundredth of a share
plus an amount equal to accrued and unpaid dividends and distributions thereon,
whether or not declared, to the date of such payment or, (B) if greater than the
amount specified in clause (i)(A) of this sentence, an amount equal to 100 times
the aggregate amount to be distributed per share to holders of Common Stock, as
the same may be adjusted as hereinafter provided, and (ii) to the holders of
stock ranking on a parity upon liquidation, dissolution or winding up with the
Class B Preferred Stock, unless simultaneously therewith distributions are made
ratably on the Class B Preferred Stock and all other shares of such parity stock
in proportion to the total amounts to which the holders of shares of Class B
Preferred Stock are entitled under clause (i)(A) of this sentence and to which
the holders of such parity shares are entitled, in each case upon such
liquidation, dissolution or winding up. The amount to which holders of Class B
Preferred Stock may be entitled upon liquidation, dissolution or winding up of
the Company pursuant to clause (i)(B) of the foregoing sentence is hereinafter
referred to as the "Participating Liquidation Amount" and the multiple of the
13
Page 68 of 76 Pages
amount to be distributed to holders of shares of Common Stock upon the
liquidation, dissolution or winding up of the Company applicable pursuant to
said clause to the determination of the Participating Liquidation Amount, as
said multiple may be adjusted from time to time as hereinafter provided, is
hereinafter referred to as the "Liquidation Multiple". In the event the Company
shall at any time after August 29, 1997, declare or pay any dividend on Common
Stock payable in shares of Common Stock, or effect a subdivision or split or a
combination, consolidation or reverse split of the outstanding shares of Common
Stock into a greater or lesser number of shares of Common Stock, then, in each
such case, the Liquidation Multiple thereafter applicable to the determination
of the Participating Liquidation Amount to which holders of Class B Preferred
Stock shall be entitled after such event shall be the Liquidation Multiple
applicable immediately prior to such event multiplied 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.
Section 7. Certain Reclassifications and Other Events.
(A) In the event that holders of shares of Common Stock of the Company
receive after August 29, 1997, in respect of their shares of Common Stock, any
share of capital stock of the Company (other than any share of Common Stock of
the Company), whether by way of reclassification, recapitalization,
reorganization, dividend or other distribution or otherwise (a "Transaction"),
then, and in each such event, the dividend rights, voting rights and rights upon
the liquidation, dissolution or winding up of the Company of the shares of Class
B Preferred Stock shall be adjusted so that after such event the holders of
Class B Preferred Stock shall be entitled, in respect of each share of Class B
Preferred Stock held, in addition to such rights in respect thereof to which
such holder was entitled immediately prior to such adjustment, to (i) such
additional dividends as equal the Dividend Multiple in effect immediately prior
to such Transaction multiplied by the additional dividends which the holder of a
share of Common Stock shall be entitled to receive by virtue of the receipt in
the Transaction of such capital stock, (ii) such additional voting rights as
equal the Vote Multiple in effect immediately prior to such Transaction
multiplied by the additional voting rights which the holder of a share of Common
Stock shall be entitled to receive by virtue of the receipt in the Transaction
of such capital stock, and (iii) such additional distributions upon liquidation,
dissolution or winding up of the Company as equal the Liquidation Multiple in
effect immediately prior to such Transaction multiplied by the additional amount
which the holder of a share of Common Stock shall be entitled to receive upon
liquidation, dissolution or winding up of the Company by virtue of the receipt
in the Transaction of such capital stock, as the case may be, all as provided by
the terms of such capital stock.
(B) In the event that holders of shares of Common Stock of the Company
receive after August 29, 1997, in respect of their shares of Common Stock, any
right or warrant to purchase Common Stock (including as such a right, for all
purposes of this paragraph, any security convertible into or exchangeable for
Common Stock) at a purchase price per share less than the Fair Market Value of a
share of Common Stock on the date of issuance of such right or warrant, then and
in each such event the dividend rights, voting rights and rights upon the
liquidation, dissolution or winding up of the Company of the shares of Class B
Preferred Stock shall each be adjusted so that after such event the Dividend
Multiple, the Vote Multiple and the Liquidation Multiple shall each be the
14
Page 69 of 76 Pages
product of the Dividend Multiple, the Vote Multiple and the Liquidation
Multiple, as the case may be, in effect immediately prior to such event
multiplied by a fraction the numerator of which shall be the number of shares of
Common Stock outstanding immediately before such issuance of rights or warrants
plus the maximum number of shares of Common Stock which could be acquired upon
exercise in full of all such rights or warrants and the denominator of which
shall be the number of shares of Common Stock outstanding immediately before
such issuance of rights or warrants plus the number of shares of Common Stock
which could be purchased, at the Fair Market Value of the Common Stock at the
time of such issuance, by the maximum aggregate consideration payable upon
exercise in full of all such rights or warrants.
(C) In the event that holders of shares of Common Stock of the Company
receive after August 29, 1997, in respect of their shares of Common Stock, any
right or warrant to purchase capital stock of the Company (other than shares of
Common Stock), including as such a right, for all purposes of this paragraph,
any security convertible into or exchangeable for capital stock of the Company
(other than Common Stock), at a purchase price per share less than the Fair
Market Value of such shares of capital stock on the date of issuance of such
right or warrant, then and in each such event the dividend rights, voting rights
and rights upon liquidation, dissolution or winding up of the Company of the
shares of Class B Preferred Stock shall each be adjusted so that after such
event each holder of a share of Class B Preferred Stock shall be entitled, in
respect of each share of Class B Preferred Stock held, in addition to such
rights in respect thereof to which such holder was entitled immediately prior to
such event, to receive (i) such additional dividends as equal the Dividend
Multiple in effect immediately prior to such event multiplied, first, by the
additional dividends to which the holder of a share of Common Stock shall be
entitled upon exercise of such right or warrant by virtue of the capital stock
which could be acquired upon such exercise and multiplied again by the Discount
Fraction (as hereinafter defined), and (ii) such additional voting rights as
equal the Vote Multiple in effect immediately prior to such event multiplied,
first, by the additional voting rights to which the holder of a share of Common
Stock shall be entitled upon exercise of such right or warrant by virtue of the
capital stock which could be acquired upon such exercise and multiplied again by
the Discount Fraction, and (iii) such additional distributions upon liquidation,
dissolution or winding up of the Company as equal the Liquidation Multiple in
effect immediately prior to such event multiplied, first, by the additional
amount which the holder of a share of Common Stock shall be entitled to receive
upon liquidation, dissolution or winding up of the Company upon exercise of such
right or warrant by virtue of the capital stock which could be acquired upon
such exercise and multiplied again by the Discount Fraction. For purposes of
this paragraph, the "Discount Fraction" shall be a fraction the numerator of
which shall be the difference between the Fair Market Value of a share of the
capital stock subject to a right or warrant distributed to holders of shares of
Common Stock of the Company as contemplated by this paragraph immediately after
the distribution thereof and the purchase price per share for such share of
capital stock pursuant to such right or warrant and the denominator of which
shall be the Fair Market Value of a share of such capital stock immediately
after the distribution of such right or warrant.
(D) For purposes of this Certificate of Designations, the "Fair Market
Value" of a share of capital stock of the Company (including a share of Common
Stock) on any date shall be deemed to be the average of the daily closing price
per share thereof over the 30 consecutive Trading Days (as such term is
15
Page 70 of 76 Pages
hereinafter defined) immediately prior to such date; provided, however, that, in
the event that such Fair Market Value of any such share of capital stock is
determined during a period which includes any date that is within 30 Trading
Days after (i) the ex-dividend date for a dividend or distribution on stock
payable in shares of such stock or securities convertible into shares of such
stock, or (ii) the effective date of any subdivision, split, combination,
consolidation, reverse stock split or reclassification of such stock, then, and
in each such case, the Fair Market Value shall be appropriately adjusted by the
Board of Directors of the Company to take into account ex-dividend or
post-effective date trading. The closing price 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 applicable transaction reporting system with respect to
securities listed or admitted to trading on the New York Stock Exchange), or, if
the shares are not listed or admitted to trading on the New York Stock Exchange,
as reported in the applicable transaction reporting system with respect to
securities listed on the principal national securities exchange on which the
shares are listed or admitted to trading or, if the shares 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 high bid and low asked prices in the
over-the-counter market, as reported by The Nasdaq National Market System or
such other system then in use, or if on any such date the shares 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 shares selected
by the Board of Directors of the Company. The term "Trading Day" shall mean a
day on which the principal national securities exchange on which the shares are
listed or admitted to trading is open for the transaction of business or, if the
shares are not listed or admitted to trading on any national securities
exchange, on which the New York Stock Exchange or such other national securities
exchange as may be selected by the Board of Directors of the Company is open. If
the shares are not publicly held or not so listed or traded on any day within
the period of 30 Trading Days applicable to the determination of Fair Market
Value thereof as aforesaid, "Fair Market Value" shall mean the fair market value
thereof per share as determined in good faith by the Board of Directors of the
Company. In either case referred to in the foregoing sentence, the determination
of Fair Market Value shall be described in a statement filed with the Secretary
of the Company.
Section 8. Consolidation, Merger, etc. In case the Company shall enter into
any consolidation, merger, combination or other transaction in which the shares
of Common Stock are exchanged for or changed into other stock or securities,
cash and/or any other property, then in any such case each outstanding share of
Class B Preferred Stock shall at the same time be similarly exchanged for or
changed into the aggregate amount of stock, securities, cash and/or other
property (payable in like kind), as the case may be, for which or into which
each share of Common Stock is changed or exchanged multiplied by the highest of
the Vote Multiple, the Dividend Multiple or the Liquidation Multiple in effect
immediately prior to such event.
Section 9. Effective Time of Adjustments.
(A) Adjustments to the Class 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 Company shall give prompt written notice to each holder of a share
of Class B Preferred Stock of the effect of any adjustment to the voting rights,
dividend rights or rights upon liquidation, dissolution or winding up of the
16
Page 71 of 76 Pages
Company of such shares required by the provisions hereof. Notwithstanding the
foregoing sentence, the failure of the Company to give such notice shall not
affect the validity of or the force or effect of or the requirement for such
adjustment.
Section 10. No Redemption. The shares of Class B Preferred Stock shall not
be redeemable at the option of the Company or any holder thereof.
Notwithstanding the foregoing sentence of this Section, the Company may acquire
shares of Class B Preferred Stock in any other manner permitted by law, and the
provisions hereof and the Certificate of Incorporation of the Company, in each
case as the same may be amended.
Section 11. Ranking. Unless otherwise provided in a Certificate of
Designations relating to a subsequent series of preferred stock of the Company,
the Class B Preferred Stock shall rank junior to all other series of the
Company's preferred stock as to the payment of dividends and the distribution of
assets on liquidation, dissolution or winding up and senior to the Common Stock.
Section 12. Amendment. The provisions hereof and the restated Certificate
of Incorporation, as amended, of the Company shall not be amended in any manner
which would adversely affect the rights, privileges or powers of the Class B
Preferred Stock without, in addition to any other vote of stockholders required
by law, the affirmative vote of the holders of two-thirds or more of the
outstanding shares of Class B Preferred Stock, voting together as a single
class.
17
Page 72 of 76 Pages
IN WITNESS WHEREOF, I have executed and subscribed this Certificate of
Designations and do affirm the foregoing as true under the penalties of perjury
this ____ day of _____, 1997.
By:
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Vice Chairman and
Chief Executive
Officer
ATTEST:
By: ____________________
Name: ____________________
Title: ____________________
19