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SERVICE MERCHANDISE COMPANY, INC.
and
▇▇▇▇▇▇ TRUST AND SAVINGS BANK
RIGHTS AGENT
---------------
AMENDED AND RESTATED RIGHTS AGREEMENT
DATED NOVEMBER 4, 1998
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TABLE OF CONTENTS
Page
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Section 1. Certain Definitions.............................................................................1
Section 2. Appointment of Rights Agent.....................................................................4
Section 3. Issue of Rights Certificates....................................................................4
Section 4. Form of Rights Certificates.....................................................................6
Section 5. Countersignature and Registration...............................................................6
Section 6. Transfer, Split Up, Combination and Exchange of Rights Certificates; Mutilated,
Destroyed, Lost or Stolen Rights Certificates...................................................7
Section 7. Exercise of Rights, Purchase Price; Expiration Date of Rights...................................8
Section 8. Cancellation and Destruction of Rights Certificates............................................10
Section 9. Reservation and Availability of Capital Stock..................................................10
Section 10. Preferred Stock Record Date....................................................................11
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights....................11
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.....................................19
Section 13. Share Exchange, Merger or Sale or Transfer of Assets or Earning Power..........................19
Section 14. Fractional Rights and Fractional Shares........................................................22
Section 15. Rights of Action...............................................................................23
Section 16. Agreement of Rights Holders....................................................................24
Section 17. Rights Certificate Holder Not Deemed a Shareholder.............................................24
Section 18. Concerning the Rights Agent....................................................................24
Section 19. Merger or Share Exchange or Change of Name of Rights Agent.....................................25
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Section 20. Duties of Rights Agent.........................................................................26
Section 21. Change of Rights Agent.........................................................................28
Section 22. Issuance of New Rights Certificates............................................................29
Section 23. Redemption and Termination.....................................................................29
Section 24. Exchange.......................................................................................30
Section 25. Notice of Certain Events.......................................................................31
Section 26. Notices........................................................................................32
Section 27. Supplements and Amendments.....................................................................32
Section 28. Successors.....................................................................................33
Section 29. Determinations and Actions by the Board of Directors, etc......................................33
Section 30. Benefits of this Agreement.....................................................................34
Section 31. Severability...................................................................................34
Section 32. Governing Law..................................................................................34
Section 33. Counterparts...................................................................................34
Section 34. Descriptive Headings...........................................................................34
Exhibit A Form of Rights Certificate
Exhibit B Form of Summary of Rights
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RIGHTS AGREEMENT
AMENDED AND RESTATED RIGHTS AGREEMENT, dated this 4th day of November,
1998 (the "Agreement"), between Service Merchandise Company, Inc., a Tennessee
corporation (the "Company"), and ▇▇▇▇▇▇ Trust and Savings Bank (the "Rights
Agent").
WHEREAS, on February 2, 1998 (the "Rights Dividend Declaration Date"),
the Board of Directors of the Company authorized and declared a distribution of
one Right for each share of common stock, par value $.50 per share, of the
Company (the "Company Common Stock") outstanding at the Close of Business on
February 9, 1998 (the "Record Date"), subject to the execution of this Agreement
and to certain other matters, and has authorized the issuance of one Right (as
such number may hereinafter be adjusted pursuant hereto) for each share of
Company Common Stock issued between the Record Date (whether originally issued
or delivered from the Company's treasury) and the Distribution Date, each Right
initially representing the right to purchase upon the terms and subject to the
conditions hereinafter set forth one Unit of Series A Junior Preferred Stock
(the "Right"or collectively, the "Rights");
WHEREAS, the Company and the Rights Agent entered into that certain
Rights Agreement, dated February 2, 1998 (the "Initial Rights Agreement"); and
WHEREAS, the Initial Rights Agreement provides that the Company and the
Rights Agent may amend the Initial Rights Agreement without the consent of the
holders of the Rights Certificates; and
WHEREAS, the Company and the Rights Agent wish to amend and restate the
Initial Rights Agreement in its entirety as follows:
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person (other than the Company,
any Subsidiary of the Company, any employee benefit plan maintained by the
Company or any of its Subsidiaries or any trustee or fiduciary with respect to
such plan acting in such capacity) which shall be the Beneficial Owner of 15% or
more of the shares of Company Common Stock then outstanding. Notwithstanding the
foregoing, if the Board of Directors of the Company determines in good faith
that a Person who would otherwise be an "Acquiring Person," as defined pursuant
to the foregoing provisions of this paragraph (a), has become such
inadvertently, and such Person divests as promptly as practicable a sufficient
number of shares of Company Common 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 to be an "Acquiring Person"
for any purposes of this Agreement.
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(b) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as in
effect on the date hereof.
(c) A Person shall be deemed the "Beneficial Owner" of, and shall be
deemed to "beneficially own," any securities:
(i) of which such Person or any of such Person's Affiliates or
Associates is considered to be a "beneficial owner" under Rule 13d-3 of the
General Rules and Regulations under the Exchange Act (the "Exchange Act
Regulations") as in effect on the date hereof; provided, however, that a Person
shall not be deemed the "Beneficial Owner" of, or to "beneficially own," any
security under this subparagraph (i) as a result of an agreement, arrangement or
understanding, to vote such security if such agreement, arrangement or
understanding (A) arises solely from a revocable proxy given in response to a
proxy or consent solicitation made pursuant to, and in accordance with, the
applicable provisions of the Exchange Act and the Exchange Act Regulations, and
(B) is not reportable by such Person on Schedule 13D under the Exchange Act (or
any comparable or successor report);
(ii) which are beneficially owned, directly or indirectly, by
any other Person (or any Affiliate or Associate of such 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 pursuant to a revocable proxy as
described in the proviso to subparagraph (i) of this paragraph (c)) or disposing
of such securities; or
(iii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to acquire (whether such right
is exercisable immediately or only after the passage of time or upon the
satisfaction of conditions) pursuant to any agreement, arrangement or
understanding (whether or not in writing) or upon the exercise of conversion
rights, exchange rights, rights, warrants or options, or otherwise;
provided, however, that under this paragraph (c) a Person shall not be deemed
the "Beneficial Owner" of, or to "beneficially own," (A) securities tendered
pursuant to a tender or exchange offer made by such Person or any of such
Person's Affiliates or Associates until such tendered securities are accepted
for purchase or exchange, (B) securities that may be issued upon exercise of
Rights at any time prior to the occurrence of a Triggering Event, or (C)
securities that may be issued upon exercise of Rights from and after the
occurrence of a Triggering Event, which Rights were acquired by such Person or
any of such Person's Affiliates or Associates prior to the Distribution Date or
pursuant to Section 3(a) or Section 22 hereof (the "Original Rights") or
pursuant to Section 11(i) hereof in connection with an adjustment made with
respect to any Original Rights.
(d) "Business Day" shall mean any day other than a Saturday, Sunday or
a day on which banking institutions in New York City or Illinois are authorized
or obligated by law or executive order to close.
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(e) "Close of Business" on any given date shall mean 5:00 P.M.,
Nashville time, on such date; provided, however, that if such date is not a
Business Day it shall mean 5:00 P.M., Nashville time, on the next succeeding
Business Day.
(f) "Common Stock" of any Person other than the Company shall mean the
capital stock of such Person with the greatest voting power, or, if such Person
shall have no capital stock, the equity securities or other equity interest
having power to control or direct the management of such Person.
(g) "Company Common Stock" has the meaning set forth in the Whereas
Clause.
(h) "Distribution Date" has the meaning set forth in Section 3(a).
(i) "Exchange Ratio" has the meaning set forth in Section 24(a).
(j) "Expiration Date" has the meaning set forth in Section 7(a).
(k) [intentionally left blank]
(l) "Person" shall mean any individual, partnership, firm, corporation,
association, trust, unincorporated organization or other entity, as well as any
syndicate or group deemed to be a person under Section 14(d)(2) of the Exchange
Act.
(m) "Preferred Stock" shall mean the Series A Junior Preferred Stock,
par value $1.00 per share, of the Company having the voting powers, designation,
preferences and relative, participating, optional or other special rights and
qualifications, limitations and restrictions described in the Company's Restated
Charter.
(n) "Purchase Price" has the meaning met forth in Section 7(b).
(o) "Record Date" has the meaning set forth in the Whereas Clause.
(p) "Right" has the meaning set forth in the Whereas Clause.
(q) "Rights Certificate" has the meaning set forth in Section 3(a).
(r) "Rights Dividend Declaration Date" has the meaning set forth in the
Whereas Clause.
(s) "Section 11(a)(ii) Event" shall mean any event described in Section
11(a)(ii)(A), (B) or (C) hereof.
(t) "Section 13 Event" shall mean any event described in clause (x),
(y) or (z) of Section 13(a) hereof.
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(u) "Stock Acquisition Date" shall mean the first date of public
announcement (including, without limitation, the filing of any report pursuant
to Section 13(d) of the Exchange Act) by the Company or an Acquiring Person that
an Acquiring Person has become such.
(v) "Subsidiary" shall mean, with reference to any Person, any
corporation of which an amount of voting securities sufficient to elect at least
a majority of the directors of such corporation is beneficially owned, directly
or indirectly, by such Person, or otherwise controlled by such Person.
(w) "Triggering Event" shall mean any Section 11(a)(ii) Event or any
Section 13 Event.
(x) "Unit" has the meaning set forth in Section 7(b).
Section 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. With
the consent of the Rights Agent, the Company may from time to time appoint such
Co-Rights Agents as it may deem necessary or desirable.
Section 3. Issue of Rights Certificates.
(a) Until the earlier of (i) the Close of Business on the tenth day
after the Stock Acquisition Date, and (ii) the Close of Business on the tenth
day (or such later date as may be determined by the Board of Directors prior to
such time as any Person becomes an Acquiring Person) after the date that a
tender or exchange offer by any Person (other than the Company, any Subsidiary
of the Company, any employee benefit plan maintained by the Company or any of
its Subsidiaries or any trustee or fiduciary with respect to such plan acting in
such capacity) is first published or sent or given within the meaning of Rule
14d-4 (a) of the Exchange Act Regulations, if upon consummation thereof such
Person would be the Beneficial Owner of 15% or more of the shares of Company
Common Stock then outstanding (the earlier of (i) and (ii) above being the
"Distribution Date"), (x) the Rights will be evidenced (subject to the
provisions of paragraph (b) of this Section 3) by the certificates for shares of
Company Common Stock registered in the names of the holders of shares of Company
Common Stock as of and subsequent to the Record Date (which certificates for
shares of Company Common Stock shall be deemed also to be certificates for
Rights) and not by separate certificates, and (y) the Rights will be
transferable only in connection with the transfer of the underlying shares of
Company Common Stock (including a transfer to the Company). As soon as
practicable after the Distribution Date, the Rights Agent will send, at the
expense of the Company by first-class, insured, postage prepaid mail, to each
record holder of shares of Company Common Stock as of the Close of Business on
the Distribution Date, at the address of such holder shown on the records of the
Company, one or more right certificates, in substantially the form of Exhibit A
hereto (the "Rights Certificates"), evidencing one Right for each share of
Company Common Stock so held, subject to adjustment as provided herein. In the
event that an adjustment in the number of Rights per share of Company Common
Stock has been made pursuant to Section 11(p) hereof, at the time of
distribution of the Rights Certificates, the Company shall make the necessary
and appropriate rounding adjustments (in accordance with Section 14(a) hereof)
so that Rights Certificates representing only
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whole numbers of Rights are distributed and cash is paid in lieu of any
fractional Rights. As of and after the Distribution Date, the Rights will be
evidenced solely by such Rights Certificates.
(b) As promptly as practicable following the Record Date, the Company
will send a copy of a Summary of Rights to Purchase Preferred Stock, in a form
which may be appended to certificates that represent shares of Company Common
Stock in substantially the form attached hereto as Exhibit B (the "Summary of
Rights"), by first-class, postage prepaid mail, to each record holder of shares
of Company 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.
(c) Rights shall, without any further action, be issued in respect of
all shares of Company Common Stock which are outstanding on the Record Date and
which are issued (including any shares of Company Common Stock held in treasury)
after the Record Date but prior to the earlier of the Distribution Date and the
Expiration Date. Certificates representing such shares of Company Common Stock
issued after the Record Date shall bear the following legend:
"This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in the Amended and Restated Rights
Agreement between Service Merchandise Company, Inc. (the "Company") and
▇▇▇▇▇▇ Trust and Savings Bank (the "Rights Agent") dated November ___,
1998 (the "Rights Agreement"), the terms of which are hereby
incorporated herein by reference and a copy of which is on file at the
principal office of the stock transfer administration office of the
Rights Agent. Under certain circumstances, as set forth in the Rights
Agreement, such Rights will be evidenced by separate certificates and
will no longer be evidenced by this certificate. The Company will mail
to the holder of this certificate a copy of the Rights Agreement, as in
effect on the date of mailing, without charge promptly after receipt of
a written request therefor. Under certain circumstances set forth in
the Rights Agreement, Rights issued to, or held by, any Person who is,
was or becomes an Acquiring Person or any Affiliate or Associate
thereof (as such terms are defined in the Rights Agreement), whether
currently held by or on behalf of such Person or by any subsequent
holder, may become null and void."
With respect to certificates representing shares of Company Common Stock
(whether or not such certificates include the foregoing legend or have appended
to them the Summary of Rights), until the earlier of (i) the Distribution Date
and (ii) the Expiration Date, the Rights associated with the shares of Company
Common Stock represented by such certificates shall be evidenced by such
certificates alone and registered holders of the shares of Company Common Stock
shall also be the registered holders of the associated Rights, and the transfer
of any of such certificates shall also constitute the transfer of the Rights
associated with the shares of Company Common Stock represented by such
certificates.
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Section 4. Form of Rights Certificates.
(a) The Rights Certificates (and the forms of election to purchase,
assignment and certificate to be printed on the reverse thereof) shall each be
substantially in the form set forth in Exhibit A hereto and may have such marks
of identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
applicable law or any rule or regulation thereunder or with any rule or
regulation of any stock exchange on which the Rights may from time to time be
listed or to conform to usage. Subject to the provisions of Section 11 and
Section 22 hereof, the Rights Certificates, whenever distributed, shall be dated
as of the Record Date and on their face shall entitle the holders thereof to
purchase such number of Units of Preferred Stock as shall be set forth therein
at the price set forth therein, but the amount and type of securities, cash or
other assets that may be acquired upon the exercise of each Right and the
Purchase Price thereof shall be subject to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant hereto that represents
Rights beneficially owned by: (i) an Acquiring Person or any Associate or
Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or
of any such Associate or Affiliate) which becomes a transferee after the
Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person (or
of any such Associate or Affiliate) which becomes a transferee prior to or
concurrently with the Acquiring Person becoming such and which receives such
Rights pursuant to either (A) a transfer (whether or not for consideration) from
the Acquiring Person (or any such Associate or Affiliate) to holders of equity
interests in such Acquiring Person (or such Associate or Affiliate) or to any
Person with whom such Acquiring Person (or such Associate or Affiliate) has any
continuing agreement, arrangement or understanding regarding either the
transferred Rights, shares of Company Common Stock of the Company or (B) a
transfer which the Board of Directors has determined to be part of a plan,
arrangement or understanding which has as a primary purpose or effect the
avoidance of Section 7(e) hereof shall, upon the written direction of the Board
of Directors, contain (to the extent feasible), the following legend:
The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became an Acquiring Person or
an Affiliate or Associate of an Acquiring Person (as such terms are
defined in the Rights Agreement). Accordingly, this Rights Certificate
and the Rights represented hereby may become null and void in the
circumstances specified in Section 7(e) of such Agreement.
Section 5. Countersignature and Registration.
(a) Rights Certificates shall be executed on behalf of the Company by
its Chairman of the Board, President or one of its Vice Presidents and shall be
attested by its Secretary or one of its Assistant Secretaries. The signature of
any of these officers on the Rights Certificates may be manual or facsimile.
Rights Certificates bearing the manual or facsimile signatures of the
individuals who were at any time the proper officers of the Company shall bind
the Company, notwithstanding that
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such individuals or any of them have ceased to hold such offices prior to the
countersignature of such Rights Certificates or did not hold such offices at the
date of such Rights Certificates. No Rights Certificate shall be entitled to any
benefit under this Agreement or be valid for any purpose unless there appears on
such Rights Certificate a countersignature duly executed by the Rights Agent by
manual signature of an authorized officer, and such countersignature upon any
Rights Certificate shall be conclusive evidence, and the only evidence, that
such Rights Certificate has been duly countersigned as required hereunder.
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its office designated for surrender of Rights Certificates
upon exercise or transfer, books for registration and transfer of the Rights
Certificates issued hereunder. Such books shall show the name and address of
each holder of the Rights Certificates, the number of Rights evidenced on its
face by each Rights Certificate and the date of each Rights Certificate.
Section 6. Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.
(a) Subject to the provisions of Sections 4(b), 7(e) and 14 hereof, at
any time after the Close of Business on the Distribution Date, and at or prior
to the Close of Business on the Expiration Date, any Rights Certificate or
Certificates may be transferred, split up, combined or exchanged for another
Rights Certificate or Certificates, entitling the registered holder to purchase
a like number of shares of Preferred Stock (or, following a Triggering Event,
other securities, cash or other assets, as the case may be) as the Rights
Certificate or Certificates surrendered then entitled such holder to purchase.
Any registered holder desiring to transfer, split up, combine or exchange any
Rights Certificate or Certificates shall make such request in writing delivered
to the Rights Agent, and shall surrender the Rights Certificate or Certificates
to be transferred, split up, combined or exchanged at the office of the Rights
Agent designated for such purpose. Neither the Rights Agent nor the Company
shall be obligated to take any action whatsoever with respect to the transfer of
any such surrendered Rights Certificate until the registered holder shall have
completed the certificate set forth in the form of assignment on the reverse
aide of such Rights Certificate and shall have provided such additional evidence
of the identity of the Beneficial Owner (or former Beneficial Owner) of the
Rights represented by such Rights Certificate or Affiliates or Associates
thereof as the Company shall reasonably request; whereupon the Rights Agent
shall, subject to the provisions of Section 4(b), Section 7(e) and Section 14
hereof, countersign and deliver to the Person entitled thereto a Rights
Certificate or Rights Certificates, as the case may be, as so requested.
(b) If a Rights Certificate shall be mutilated, lost, stolen or
destroyed, upon request by the registered holder of the Rights represented
thereby, there shall be issued, in exchange for and upon cancellation of the
mutilated Rights Certificate, or in substitution for the lost, stolen or
destroyed Rights Certificate, a New Rights Certificate, in substantially the
form of the prior Rights Certificate, of like tenor and representing the
equivalent number of Rights, but in the case of loss, theft or destruction, only
upon receipt of evidence satisfactory to the Company and the Rights Agent
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of such loss, theft or destruction of such Rights Certificate and, if requested
by the Company or the Rights Agent, indemnity also satisfactory to it.
Section 7. Exercise of Rights, Purchase Price; Expiration Date of
Rights.
(a) Prior to the earlier of (i) the Close of Business on the tenth
anniversary hereof (the "Final Expiration Date"), or (ii) the time at which the
Rights are redeemed as provided in Section 23 hereof (the earlier of (i) and
(ii) being the "Expiration Date"), the registered holder of any Rights
Certificate may, subject to the provisions of Section 7(e) hereof, exercise the
Rights evidenced thereby (except as otherwise provided herein including, without
limitation, the restriction on exercisability set forth in Section 23(a) hereof)
in whole or in part at any time after the Distribution Date upon surrender of
the Rights Certificate, with the form of election to purchase and the
certificate on the reverse side thereof duly executed, to the Rights Agent at
the office of the Rights Agent designated for such purpose, together with
payment of the aggregate Purchase Price (as hereinafter defined) for the number
of Units of Preferred Stock (or, following a Triggering Event, other securities,
cash or other assets, as the case may be) for which such surrendered Rights are
then exercisable.
(b) The purchase price for each one one-hundredth of a share (each such
one one-hundredth of a share being a "Unit") of Preferred Stock upon exercise of
Rights shall be $10.00, subject to adjustment from time to time as provided in
Sections 11 and 13(a) hereof (such purchase price, as so adjusted, being the
"Purchase Price"), and shall be payable in accordance with paragraph (c) below.
(c) As promptly as practicable following the occurrence of the
Distribution Date, the Company shall deposit with a corporation organized under
the laws of the United States or any State of the United States in good
standing, which is authorized under such laws to exercise corporate trust powers
and is subject to supervision or examination by federal or state authority
(which corporation may be a Subsidiary of the Company) (such institution being
the "Depositary Agent") certificates representing the shares of Preferred Stock
that may be acquired upon exercise of the Rights and shall cause such Depositary
Agent to enter into an agreement pursuant to which the Depositary Agent shall
issue receipts representing interests in the shares of Preferred Stock so
deposited. Upon receipt of a Rights Certificate representing exercisable Rights,
with the form of election to purchase and the certificate duly executed,
accompanied by payment, with respect to each Right so exercised, of the Purchase
Price for the Units of Preferred Stock (or, following a Triggering Event, other
securities, cash or other assets, as the case may be) to be purchased thereby as
set forth below and an amount equal to any applicable transfer tax or evidence
satisfactory to the Company of payment of such tax, the Rights Agent shall,
subject to Section 20(j) hereof, thereupon promptly (i) requisition from the
Depositary Agent depositary receipts representing such number of Units of
Preferred Stock as are to be purchased and the Company will direct the
Depositary Agent to comply with such request, (ii) requisition from the Company
the amount of cash, if any, to be paid in lieu of fractional shares in
accordance with Section 14 hereof, (iii) after receipt of such depositary
receipts, cause the same to be delivered to or upon the order of the registered
holder of such Rights Certificate, registered in
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such name or names as may be designated by such holder, and (iv) after receipt
thereof, deliver such cash, if any, to or upon the order of the registered
holder of such Rights Certificate. In the event that the Company is obligated to
issue Company Common Stock, other securities of the Company, pay cash and/or
distribute other property pursuant to Section 11(a) hereof, the Company will
make all arrangements necessary so that such Company Common Stock, other
securities, cash and/or other property are available for distribution by the
Rights Agent, if and when appropriate. The payment of the Purchase Price (as
such amount may be reduced pursuant to Section 11(a)(iii) hereof) may be made in
cash or by certified or bank check or bank draft payable to the order of the
Company.
(d) In case the registered holder of any Rights Certificate shall
exercise less than all the Rights evidenced thereby, a new Rights Certificate
evidencing the Rights remaining unexercised shall be issued by the Rights Agent
and delivered to, or upon the order of, the registered holder of such Rights
Certificate, registered in such name or names as may be designated by such
holder, subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary, from
and after the first occurrence of a Section 11(a)(ii) Event, any Rights
beneficially owned by (i) an Acquiring Person or an Associate or Affiliate of an
Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) which becomes a transferee after the Acquiring Person
becomes such, or (iii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) which becomes a transferee prior to or concurrently with
the Acquiring Person becoming such and which receives such Rights pursuant to
either (A) a transfer (whether or not for consideration) from the Acquiring
Person (or any such Associate or Affiliate) to holders of equity interests in
such Acquiring Person (or any such Associate or Affiliate) or to any Person with
whom the Acquiring Person (or such Associate or Affiliate) has any continuing
agreement, arrangement or understanding regarding the transferred Rights, shares
of Company Common Stock or the Company or (B) a transfer which the Board of
Directors has determined to be part of a plan, arrangement or understanding
which has as a primary purpose or effect the avoidance of this Section 7(e),
shall be null and void without any further action, and no holder of such Rights
shall have any rights whatsoever with respect to such Rights, whether under any
provision of this Agreement or otherwise. The Company shall use all reasonable
efforts to ensure that the provisions of this Section 7(e) and Section 4(b)
hereof are complied with, but shall have no liability to any holder of Rights or
any other Person as a result of its failure to make any determination under this
Section 7(e) or such Section 4(b) with respect to an Acquiring Person or its
Affiliates, Associates or transferees.
(f) Notwithstanding anything in this Agreement or any Rights
Certificate to the contrary, neither the Rights Agent nor the Company shall be
obligated to undertake any action with respect to a registered holder upon the
occurrence of any purported exercise by such registered holder unless such
registered holder shall have (i) completed and executed the certificate
following the form of election to purchase set forth on the reverse side of the
Rights Certificate surrendered for such exercise, and (ii) provided such
additional evidence of the identity of the Beneficial Owner (or former
Beneficial Owner) of the Rights represented by such Rights Certificate or
Affiliates or Associates thereof as the Company shall reasonably request.
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Section 8. Cancellation and Destruction of Rights Certificates. All
Rights Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be canceled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
this Agreement. The Company shall deliver to the Rights Agent for cancellation
and retirement, and the Rights Agent shall so cancel and retire, any Rights
Certificates acquired by the Company otherwise than upon the exercise thereof.
The Rights Agent shall deliver all canceled Rights Certificates to the Company,
or shall, at the written request of the Company, destroy such canceled Rights
Certificates, and in such case shall deliver a certificate of destruction
thereof to the Company.
Section 9. Reservation and Availability of Capital Stock.
(a) The Company shall at all times prior to the Expiration Date cause
to be reserved and kept available out of its authorized and unissued shares of
Preferred Stock, the number of shares of Preferred Stock that, as provided in
this Agreement, including, without limitation, Section 11(a)(iii) hereof, will
be sufficient to permit the exercise in full of all outstanding Rights.
(b) The Company shall use its best efforts (i) as soon as practicable
following the occurrence of a Section 11(a)(ii) Event and a determination by the
Company in accordance with Section 11(a)(iii) hereof of the consideration to be
delivered by the Company upon exercise of the Rights or, if so required by law,
as soon as practicable following the Distribution Date (such date being the
"Registration Date"), to file a registration statement on an appropriate form
under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the securities that may be acquired upon exercise of the Rights (the
"Registration Statement"), (ii) to cause the Registration Statement to become
effective as soon as practicable after such filing, (iii) to cause the
Registration Statement to continue to be effective (and to include a prospectus
complying with the requirements of the Securities Act) until the earlier of (A)
the date as of which the Rights are no longer exercisable for the securities
covered by the Registration Statement, and (B) the Expiration Date, and (iv) to
take as soon as practicable following the Registration Date such action as may
be required to ensure that any acquisition of securities upon exercise of the
Rights complies with any applicable state securities or "blue sky" laws.
(c) The Company shall take such action as may be necessary to ensure
that all shares of Preferred Stock (and, following the occurrence of a
Triggering Event, any other securities that may be delivered upon exercise of
Rights) shall be, at the time of delivery of the certificates or depositary
receipts for such securities, duly and validly authorized and issued and fully
paid and nonassessable.
(d) The Company shall pay any documentary, stamp or transfer tax
imposed in connection with the issuance or delivery of the Rights Certificates
or upon the exercise of Rights; provided, however, the Company shall not be
required to pay any such tax imposed in connection with the issuance or delivery
of Units of Preferred Stock, or any certificates or depositary receipts for such
Preferred Stock (or, following the occurrence of a Triggering Event, any other
securities,
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cash or assets, as the case may be) to any person other than the registered
holder of the Rights Certificates evidencing the Rights surrendered for
exercise. The Company shall not be required to issue or deliver any certificates
or depositary receipts for Units of Preferred Stock (or, following the
occurrence of a Triggering Event, any other securities, cash or assets, as the
case may be) to, or in a name other than that of, the registered holder upon the
exercise of any Rights until any such tax shall have been paid (any such tax
being payable by the holder of such Rights Certificate at the time of surrender)
or until it has been established to the Company's satisfaction that no such tax
is due.
Section 10. Preferred Stock Record Date. Each person in whose name any
certificate for shares of Preferred Stock (or, following the occurrence of a
Triggering Event, other securities) is issued upon the exercise of Rights shall
for all purposes be deemed to have become the holder of record of the shares of
Preferred Stock (or, following the occurrence of a Triggering Event, other
securities) represented thereby on, and such certificate shall be dated, the
date upon which the Rights Certificate evidencing such Rights was duly
surrendered and payment of the Purchase Price (and any applicable transfer
taxes) was made; provided, however, that if the date of such surrender and
payment is a date upon which the Preferred Stock (or, following the occurrence
of a Triggering Event, other securities) transfer books of the Company are
closed, such Person shall be deemed to have become the record holder of such
securities on, and such certificate shall be dated, the next succeeding Business
Day on which the Preferred Stock (or, following the occurrence of a Triggering
Event, other securities) transfer books of the Company are open. Prior to the
exercise of the Rights evidenced thereby, the holder of a Rights Certificate
shall not be entitled to any rights of a shareholder of the Company with respect
to securities for which the Rights shall be exercisable, including, without
limitation, the right to vote, to receive dividends or other distributions or to
exercise any preemptive rights, and shall not be entitled to receive any notice
of any proceedings of the Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or
Number of Rights. The Purchase Price, the number and kind of securities covered
by each Right and the number of Rights outstanding are subject to adjustment
from time to time as provided in this Section 11.
(a)(i) In the event the Company shall at any time after the date of
this Agreement (A) declare a dividend on the Preferred Stock payable in shares
of Preferred Stock, (B) subdivide the outstanding Preferred Stock, (C) combine
the outstanding Preferred Stock into a smaller number of shares, or (D) issue
any shares of its capital stock in a reclassification of the Preferred Stock
(including any such reclassification in connection with a share exchange or
merger in which the Company is the continuing or surviving corporation), except
an otherwise provided in this Section 11(a), the Purchase Price in effect at the
time of the record date for such dividend or of the effective date of such
subdivision, combination or reclassification, and the number and kind of shares
of Preferred Stock or capital stock, as the case may be, issuable on such date
upon exercise of the Rights, shall be proportionately adjusted so that the
holder of any Right exercised after such time shall be entitled to receive, upon
payment of the Purchase Price then in effect, the aggregate number and kind of
shares of Preferred Stock or capital stock, as the case may be, which, if such
Right had
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been exercised immediately prior to such date, such holder would have owned upon
such exercise and been entitled to receive by virtue of such dividend,
subdivision, combination or reclassification. If an event occurs which would
require an adjustment under both this Section 11(a)(i) and Section 11(a)(ii)
hereof, the adjustment provided for in this Section 11(a)(i) shall be in
addition to, and shall be made prior to, any adjustment required pursuant to
Section 11(a)(ii) hereof.
(ii) Subject to Section 24, in the event:
(A) any Acquiring Person or any Associate or Affiliate of any
Acquiring Person, at any time after the date of this Agreement, directly or
indirectly, (1) shall merge into the Company or otherwise combine with the
Company and the Company shall be the continuing or surviving corporation of such
merger or combination and Company Common Stock shall remain outstanding and
unchanged, (2) shall, in one transaction or a series of transactions, transfer
any assets to the Company or to any of its Subsidiaries in exchange (in whole or
in part) for shares of Company Common Stock, for other equity securities of the
Company or any such Subsidiary, or for securities exercisable for or convertible
into shares of equity securities of the Company or any of its Subsidiaries
(whether Company Common Stock or otherwise) or otherwise obtain from the Company
or any of its Subsidiaries, with or without consideration, any additional shares
of such equity securities or securities exercisable for or convertible into such
equity securities (other than pursuant to a pro rata distribution to all holders
of Company Common Stock), (3) shall sell, purchase, lease, exchange, mortgage,
pledge, transfer or otherwise acquire or dispose of, in one transaction or a
series of transactions, to, from or with (as the case may be) the Company or any
of its Subsidiaries or any employee benefit plan maintained by the Company or
any of its Subsidiaries or any trustee or fiduciary with respect to such plan
acting in such capacity, assets (including securities) on terms and conditions
less favorable to the Company or such Subsidiary or plan than those that could
have been obtained in arm's-length negotiations with an unaffiliated third
party, other than pursuant to a transaction set forth in Section 13(a) hereof,
(4) shall sell, purchase, lease, exchange, mortgage, pledge, transfer or
otherwise acquire or dispose of in one transaction or a series of transactions,
to, from or with the Company or any of the Company's Subsidiaries or any
employee benefit plan maintained by the Company or any of its Subsidiaries or
any trustee or fiduciary with respect to such plan acting in such capacity
(other than transactions, if any, consistent with those engaged in, as of the
date hereof, by the Company and such Acquiring Person or such Associate or
Affiliate), assets (including securities) having an aggregate fair market value
of more than $10,000,000, other than pursuant to a transaction set forth in
Section 13(a) hereof, (5) shall sell, purchase, lease, exchange, mortgage,
pledge, transfer or otherwise acquire or dispose of in one transaction or a
series of transactions, to, from or with the Company or any of its Subsidiaries
or any employee benefit plan maintained by the Company or any of its
Subsidiaries or any trustee or fiduciary with respect to such plan acting in
such capacity, any material trademark or material service ▇▇▇▇, other than
pursuant to a transaction set forth in Section 13(a) hereof, (6) shall receive
any compensation from the Company or any of its Subsidiaries other than
compensation for full time employment as a regular employee at rates in
accordance with the Company's (or its Subsidiaries') past practices, or (7)
shall receive the benefit, directly or indirectly (except proportionately as a
shareholder or as required by law or governmental regulation), of any loans,
advances, guarantees,
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pledges or other financial assistance or any tax credits or other tax advantage
provided by the Company or any of its Subsidiaries or any employee benefit plan
maintained by the Company or any of its Subsidiaries; or
(B) any Person shall become an Acquiring Person, other than
pursuant to any transaction set forth in Section 13(a) hereof; or
(C) during such time as there is an Acquiring Person, there
shall be any reclassification of securities (including any reverse stock split),
or recapitalization of the Company, or any merger or share exchange of the
Company with any of its Subsidiaries or any other transaction or series of
transactions involving the Company or any of its Subsidiaries, other than a
transaction or transactions to which the provisions of Section 13(a) apply
(whether or not with or into or otherwise involving an Acquiring Person) which
has the effect, directly or indirectly, of increasing by more than 1% the
proportionate share of the outstanding shares of any class of equity securities
of the Company or any of its Subsidiaries which is directly or indirectly
beneficially owned by any Acquiring Person or any Associate or Affiliate of any
Acquiring Person;
then, immediately upon the date of the occurrence of an event described in
Section 11(a)(ii)(A)-(C) hereof (a "Section 11(a)(ii) Event"), proper provision
shall be made so that each holder of a Right (except as provided below and in
Section 7(e) hereof) shall thereafter have the right to receive, upon exercise
thereof at the then current Purchase Price in accordance with the terms of this
Agreement, in lieu of the number of Units of Preferred Stock for which a Right
was exercisable immediately prior to the first occurrence of a Section 11(a)(ii)
Event, such number of Units of Preferred Stock as shall equal the result
obtained by (x) multiplying the then current Purchase Price by the then number
of Units of Preferred Stock for which a Right was exercisable immediately prior
to the first occurrence of a Section 11(a)(ii) Event (such product thereafter
being, for all purposes of this Agreement other than Section 13 hereof, the
"Purchase Price"), and (y) dividing that product by 50% of the then current
market price (determined pursuant to Section 11(d) hereof) per Unit of Preferred
Stock on the date of such first occurrence (such shares or units of shares of
Preferred Stock being the "Adjustment Shares").
(iii) In the event that the number of shares of Preferred Stock which
are authorized by the Company's Charter but not outstanding or reserved for
issuance for purposes other than upon exercise of the Rights are not sufficient
to permit the exercise in full of the Rights in accordance with the foregoing
subparagraph (ii) of this Section 11(a), the Company, by a vote of the Board of
Directors, shall: (A) determine the excess of (1) the value of the Adjustment
Shares issuable upon the exercise of a Right (the "Current Value") over (2) the
Purchase Price (such excess being the "Spread"), and (B) with respect to each
Right, make adequate provision to substitute for such Adjustment Shares, upon
payment of the applicable Purchase Price, (1) cash, (2) a reduction in the
Purchase Price, (3) Company Common Stock or other equity securities of the
Company (including, without limitation, shares, or units of shares, of preferred
stock (such other shares being "preferred stock equivalents")), (4) debt
securities of the Company, (5) other assets, or (6) any combination of the
foregoing, having an aggregate value equal to the Current Value, where such
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aggregate value has been determined by the Board of Directors, after receiving
advice from a nationally recognized investment banking firm; provided, however,
that if the Company shall not have made adequate provision to deliver value
pursuant to clause (B) above within thirty days following the later of (x) the
first occurrence of a Section 11(a)(ii) Event and (y) the date on which the
Company's right of redemption pursuant to Section 23(a) expires (the later of
(x) and (y) being referred to herein as the "Section 11(a)(ii) Trigger Date"),
then the Company shall be obligated to deliver, upon the surrender for exercise
of a Right and without requiring payment of the Purchase Price, Units of
Preferred Stock (to the extent available) and then, if necessary, cash, which
shares or units of shares and/or cash shall have an aggregate value equal to the
Spread. To the extent that the Company determines that some action need be taken
pursuant to the first sentence of this Section 11(a)(iii), the Company shall
provide, subject to Section 7(e) hereof, that such action shall apply uniformly
to all outstanding Rights. For purposes of this Section 11(a)(iii), the value of
the Preferred Stock shall be the current market price (as determined pursuant to
Section 11(d) hereof) per Unit of Preferred Stock on the Section 11(a)(ii)
Trigger Date and the value of any "preferred stock equivalent" shall be deemed
to have the same value as the Preferred Stock on such date.
(b) In case the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Preferred Stock entitling them to
subscribe for or purchase (for a period expiring within forty-five calendar days
after such record date) shares of Preferred Stock (or shares having the same
rights, privileges and preferences as shares of Preferred Stock ("equivalent
preferred stock")) or securities convertible into Preferred Stock or equivalent
preferred stock at a price per share of Preferred Stock or per share of
equivalent preferred stock (or having a conversion price per share, if a
security convertible into Preferred Stock or Equivalent preferred stock) less
than the current market price (as determined pursuant to Section 11(d) hereof)
per share of Preferred Stock on such record date, the Purchase Price to be in
effect after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the sum of the number of shares of Preferred Stock
outstanding on such record date plus the number of shares of Preferred Stock
which the aggregate offering price of the total number of shares of Preferred
Stock and/or equivalent preferred stock so to be offered (and/or the aggregate
initial conversion price of the convertible securities so to be offered) would
purchase at such current market price, and the denominator of which shall be the
number of shares of Preferred Stock outstanding on such record date plus the
number of additional shares of Preferred Stock and/or equivalent preferred stock
to be offered for subscription or purchase (or into which the convertible
securities so to be offered are initially convertible). In case such
subscription price may be paid by delivery of consideration part or all of which
may be in a form other than cash, the value of such consideration shall be as
determined in good faith by the Board of Directors, whose determination shall be
described in a statement filed with the Rights Agent and shall be binding on the
Rights Agent and the holders of the Rights. Shares of Preferred Stock owned by
or held for the account of the Company or any Subsidiary shall not be deemed
outstanding for the purpose of any such computation. Such adjustment shall be
made successively whenever such a record date is fixed, and in the event that
such rights or warrants are not so issued, the Purchase Price shall be adjusted
to be the Purchase Price which would then be in effect if such record date had
not been fixed.
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(c) In case the Company shall fix a record date for a distribution to
all holders of shares of Preferred Stock (including any such distribution made
in connection with a share exchange or merger in which the Company is the
continuing corporation) of evidences of indebtedness, cash (other than a regular
quarterly cash dividend out of the earnings or retained earnings of the
Company), assets (other than a dividend payable in shares of Preferred Stock but
including any dividend payable in stock other than Preferred Stock) or
subscription rights or warrants (excluding those referred to in Section 11(b)
hereof), the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the current market
price (as determined pursuant to Section 11(d) hereof) per share of Preferred
Stock on such record date less the fair market value (as determined in good
faith by the Board of Directors, whose determination shall be described in a
statement filed with the Rights Agent and shall be binding on the Rights Agent
and the holders of the Rights) of the portion of the cash, assets or evidences
of indebtedness so to be distributed or of such subscription rights or warrants
applicable to a share of Preferred Stock and the denominator of which shall be
such current market price (as determined pursuant to Section 11(d) hereof) per
share of Preferred Stock. Such adjustments shall be made successively whenever
such a record date is fixed, and in the event that such distribution is not so
made, the Purchase Price shall be adjusted to be the Purchase Price which would
have been in effect if such record date had not been fixed.
(d)(i) For the purpose of any computation hereunder, the "current
market price" per share of Company Common Stock or Common Stock on any date
shall be deemed to be the average of the daily closing prices per share of such
shares for the ten consecutive Trading Days (as such term is hereinafter
defined) immediately prior to such date; provided, however, if prior to the
expiration of such requisite ten Trading Day period the issuer announces either
(A) a dividend or distribution on such shares payable in such shares or
securities convertible into such shares (other than the Rights), or (B) any
Subdivision, combination or reclassification of such shares, then, following the
ex-dividend date for such dividend or the record date for such subdivision, as
the case may be, the "current market price" shall be properly adjusted to take
into account such event. The closing price for each day shall be, if the shares
are listed and admitted to trading on a national securities exchange, as
reported in the principal consolidated transaction reporting system with respect
to securities listed on the principal national securities exchange on which such
shares are listed or admitted to trading or, if such shares are not listed or
admitted to trading on any national securities exchange, the last quoted sales
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 National Association of
Securities Dealers, Inc. Automated Quotation System ("NASDAQ") or such other
system then in use, or, if on any such date such 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 such shares selected by the
Board of Directors. If on any such date no market maker is making a market in
such shares, the fair value of such shares on such date as determined in good
faith by the Board of Directors shall be used. If such shares are not publicly
held or not so listed or traded, "current market price" per share shall mean the
fair value per share as determined in good faith by the Board of Directors,
whose determination shall be described in a Statement filed with the Rights
Agent and shall be conclusive for all purposes. The term "Trading Day" shall
mean a Business Day or, if such shares are listed or
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admitted to trading on any national securities exchange, a day on which the
principal national securities exchange on which such shares are listed or
admitted to trading is open for the transaction of business.
(ii) For the purpose of any computation hereunder, the
"current market price" per share of Preferred Stock shall be determined in the
same manner as set forth above for Company Common Stock in clause (i) of this
Section 11(d) (other than the fourth sentence thereof). If the current market
price per share of Preferred Stock cannot be determined in the manner provided
above or if the Preferred Stock is not publicly held or listed or traded in a
manner described in clause (i) of this Section 11(d), the "current market price"
per share of Preferred Stock shall be conclusively deemed to be an amount equal
to 100 (as such Amount may be appropriately adjusted for such events as stock
splits, stock dividends and recapitalizations with respect to Company Common
Stock occurring after the date of this Agreement) multiplied by the current
market price per share of Company Common Stock. If neither Company Common Stock
nor Preferred Stock is publicly held or so listed or traded, "current market
price" per share of the Preferred Stock shall mean the fair value per share as
determined in good faith by the Board of Directors whose determination shall be
described in a statement filed with the Rights Agent and shall be binding on the
Rights Agent and the holders of the Rights. For all purposes of this Agreement,
the "current market price" of a Unit of Preferred Stock shall be equal to the
"current market price" of one share of Preferred Stock divided by 100.
(e) Anything herein to the contrary notwithstanding, no adjustment in
the Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least one percent (1%) in the Purchase Price;
provided, however, that any adjustments which by reason of this Section 11(e)
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this Section 11 shall be made
to the nearest cent or to the nearest ten-thousandth of a share of Company
Common Stock or Common Stock or other share or one-millionth of a share of
Preferred Stock, as the case may be. Notwithstanding the first sentence of this
Section 11(e), any adjustment required by this Section 11 shall be made no later
than the earlier of (i) three years from the date of the transaction which
mandates such adjustment or (ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to Sections 11(a)(ii)
or 13(a) hereof, the holder of any Right thereafter exercised shall become
entitled to receive any shares of capital stock other than Preferred Stock,
thereafter the number of such other shares so receivable upon exercise of any
Right and the Purchase Price thereof shall be subject to adjustment from time to
time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Preferred Stock contained in Sections 11(a), (b),
(c), (e), (g), (h), (i), (j), (k), and (m), and the provisions of Sections 7, 9,
10, 13 and 14 hereof with respect to the Preferred Stock shall apply on like
terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the
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number of Units of Preferred Stock (or other securities or amount of cash or
combination thereof) that may be acquired from time to time hereunder upon
exercise of the Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided in
Section 11(i), upon each adjustment of the Purchase Price as a result of the
calculations made in Sections 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of Units of Preferred
Stock (calculated to the nearest one-millionth of a share) obtained by (i)
multiplying (x) the number of Units of Preferred Stock covered by a Right
immediately prior to this adjustment by (y) the Purchase Price in effect
immediately prior to such adjustment of the Purchase Price and (ii) dividing the
product so obtained by the Purchase Price in effect immediately after such
adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment of the
Purchase Price to adjust the number of Rights, in lieu of any adjustment in the
number of Units of Preferred Stock that may be acquired upon the exercise of a
Right. Each of the Rights outstanding after the adjustment in the number of
Rights shall be exercisable for the number of Units of Preferred Stock for which
a Right was exercisable immediately prior to such adjustment. Each Right held of
record prior to such adjustment of the number of Rights shall become that number
of Rights (calculated to the nearest ten-thousandth) obtained by dividing the
Purchase Price in effect immediately prior to adjustment of the Purchase Price
by the Purchase Price in effect immediately after adjustment of the Purchase
Price. The Company shall make a public announcement of its election to adjust
the number of Rights, indicating the record date for the adjustment, and, if
known at the time, the amount of the adjustment to be made. This record date may
be the date on which the Purchase Price is adjusted or any day thereafter, but,
if the Rights Certificates have been issued, shall be at least ten days later
than the date of such public announcement. If Rights Certificates have been
issued, upon each adjustment of the number of Rights pursuant to this Section
11(i), the Company shall, as promptly as practicable, cause to be distributed to
holders of record of Rights Certificates on such record date Rights Certificates
evidencing, subject to Section 14 hereof, the additional Rights to which such
holders shall be entitled as a result of such adjustment, or, at the option of
the Company, shall cause to be distributed to such holders of record in
substitution and replacement for the Rights Certificates held by such holders
prior to the date of adjustment, and upon surrender thereof, if required by the
Company, new Rights Certificates evidencing all the Rights to which such holders
shall be entitled after such adjustment. Rights Certificates to be so
distributed shall be issued, executed and countersigned in the manner provided
for herein (and may bear, at the option of the Company, the adjusted Purchase
Price) and shall be registered in the names of the holders of record of Rights
Certificates on the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or
the number of Units of Preferred Stock issuable upon the exercise of the Rights,
the Rights Certificates theretofore and thereafter issued may continue to
express the Purchase Price per Unit and the number of Units of Preferred Stock
which was expressed in the initial Rights Certificates issued hereunder.
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(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below the then par value of the number of Units of Preferred
Stock issuable upon exercise of the Rights, the Company shall take any corporate
action which may, in the opinion of its counsel, be necessary in order that the
Company may validly and legally issue such fully paid and nonassessable number
of Units of Preferred Stock at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised after such record date
of that number of Units of Preferred Stock and shares of other capital stock or
securities of the Company, if any, issuable upon such exercise over and above
the number of Units of Preferred Stock and shares of other capital stack or
securities of the Company, if any, issuable upon such exercise on the basis of
the Purchase Price in effect prior to such adjustment; provided, however, that
the Company shall deliver to such holder a due ▇▇▇▇ or other appropriate
instrument evidencing such holder's right to receive such additional shares
(fractional or otherwise) or securities upon the occurrence of the event
requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that in their good faith judgment the Board of Directors shall
determine to be advisable in order that any (i) consolidation or subdivision of
the Preferred Stock, (ii) issuance wholly for cash of any shares of Preferred
Stock at less than the current market price, (iii) issuance wholly for cash of
shares of Preferred Stock or securities which by their terms are convertible
into or exchangeable for shares of Preferred Stock, (iv) stock dividends or (v)
issuance of rights, options or warrants referred to in this Section 11,
hereafter made by the Company to holders of its Preferred Stock, shall not be
taxable to such holders or shall reduce the taxes payable by such holders.
(n) The Company shall not, at any time after the Distribution Date, (i)
effect a share exchange with any other Person (other than a Subsidiary of the
Company in a transaction which complies with Section 11(o) hereof), (ii) merge
with or into any other Person (other than a Subsidiary of the Company in a
transaction which complies with Section 11(o) hereof), or (iii) sell or transfer
(or permit any Subsidiary to sell or transfer), in one transaction, or a series
of transactions, assets or earning power aggregating more than 50% of the assets
or earning power of the Company and its Subsidiaries (taken as a whole) to any
other Person or Persons (other than the Company and/or any of its Subsidiaries
in one or more transactions each of which complies with Section 11(o) hereof),
if (x) at the time of or immediately after such share exchange, merger or sale
there are any rights, warrants or other instruments or Securities outstanding or
agreements in effect which would substantially diminish or otherwise eliminate
the benefits intended to be afforded by the Rights or (y) prior to,
simultaneously with or immediately after such share exchange, merger or sale,
the Person which constitutes, or would constitute, the "Principal Party" for
purposes of Section 13(a) hereof shall have distributed or otherwise transferred
to its shareholders or other persons holding an equity interest in such Person
Rights previously owned by such Person or any of, its Affiliates and
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Associates; provided, however, this Section 11(a) shall not affect the ability
of any Subsidiary of the Company to effect a share exchange with, merge with or
into, or sell or transfer assets or earning power to, any other Subsidiary of
the Company.
(o) After the Distribution Date, the Company shall not, except as
permitted by Section 23 or Section 27 hereof, take (or permit any Subsidiary to
take) any action if at the time such action is taken it is reasonably
foreseeable that such action will diminish substantially or otherwise eliminate
the benefits intended to be afforded by the Rights.
(p) Anything in this Agreement to the contrary notwithstanding, in the
event that the Company shall at any time after the Rights Dividend Declaration
Date and prior to the Distribution Date (i) declare a dividend on the
outstanding shares of Company Common Stock payable in shares of Company Common
Stock, (ii) subdivide the outstanding shares of Company Common Stock, (iii)
combine the outstanding shares of Company Common Stock into a smaller number of
shares, or (iv) issue any shares of its capital stock in a reclassification of
Company Common Stock (including any such reclassification in connection with a
share exchange or merger in which the Company is not the continuing or surviving
corporation), the number of Rights associated with each share of Company Common
Stock then outstanding, or issued or delivered thereafter but prior to the
Distribution Date, shall be proportionately adjusted so that the number of
Rights thereafter associated with each share of Company Common Stock following
any such event shall equal the result obtained by multiplying the number of
Rights associated with each share of Company Common Stock immediately prior to
such event by a fraction the numerator of which shall be the total number of
shares of Company Common Stock outstanding immediately prior to the occurrence
of the event and the denominator of which shall be the total number of shares of
Company Common Stock outstanding immediately following the occurrence of such
event.
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Section 11 and Section 13 hereof,
the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent, and with each transfer agent for the
Preferred Stock and the Company Common Stock, a copy of such certificate, and
(c) mail a brief summary thereof to each holder of a Rights Certificate (or, if
prior to the Distribution Date, to each holder of a certificate representing
shares of Company Common Stock) in accordance with Section 26 hereof. The Rights
Agent shall be fully protected in relying on any such certificate and on any
adjustment therein contained and shall not be obligated or responsible for
calculating any adjustment nor shall it be deemed to have knowledge of any such
Adjustment unless and until it shall have received such certificate.
Section 13. Share Exchange, Merger or Sale or Transfer of Assets or
Earning Power.
(a) In the event that, following the Stock Acquisition Date, directly
or indirectly, either (x) the Company shall effect a share exchange with, or
merge with and into, any other Person (other than a Subsidiary of the Company in
a transaction which complies with Section 11(o) hereof), and the Company shall
not be the continuing or surviving corporation of such share exchange or merger,
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(y) any Person (other than a Subsidiary of the Company in a transaction which
complies with Section 11(o) hereof) shall effect a share exchange with, or merge
with or into, the Company, and the Company shall be the continuing or surviving
corporation of such share exchange or merger and, in connection with such share
exchange or merger, all or part of the outstanding shares of Company Common
Stock shall be converted into or exchanged for stock or other securities of any
other Person or cash or any other property, or (z) the Company shall sell or
otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise
transfer) to any Person or Persons (other than the Company or any of its
Subsidiaries in one or more transactions each of which complies with Section
11(o) hereof), in one or more 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) (any such event being a "Section 13 Event"), then, and in
each such case, proper provision shall be made so that: (i) each holder of a
Right, except as provided in Section 7(e) hereof, shall thereafter have the
right to receive, upon the exercise thereof at the then current Purchase Price,
such number of validly authorized and issued, fully paid and nonassessable
shares of Common Stock of the Principal Party (as such term is hereinafter
defined), which shares shall not be subject to any liens, encumbrances, rights
of first refusal, transfer restrictions or other adverse claims, as shall be
equal to the result obtained by (1) multiplying the then current Purchase Price
by the number of Units of Preferred Stock for which a Right is exercisable
immediately prior to the first occurrence of a Section 13 Event (or, if a
Section 11(a)(ii) Event has occurred prior to the first occurrence of a Section
13 Event, multiplying the number of such Units for which a Right would be
exercisable hereunder but for the occurrence of such Section 11(a)(ii) Event by
the Purchase Price which would be in effect hereunder but for such first
occurrence) and dividing that product (which, following the first occurrence of
a Section 13 Event, shall be the "Purchase Price" for all purposes of this
Agreement) by (2) 50% of the current market price (determined pursuant to
Section 11(d) hereof) per share of the Common Stock of such Principal Party on
the date of consummation of such Section 13 Event; (ii) such Principal Party
shall thereafter be liable for, and shall assume, by virtue of such Section 13
Event, all the obligations and duties of the Company pursuant to this Agreement;
(iii) the term "Company" shall thereafter be deemed to refer to such Principal
Party, it being specifically intended that the provisions of Section 11 hereof
shall apply only to such Principal Party following the first occurrence of a
Section 13 Event; (iv) such Principal Party shall take such steps (including,
but not limited to, the reservation of a sufficient number of shares of its
Common Stock) in connection with the consummation of any such transaction as may
be necessary to ensure that the provisions of this Agreement shall thereafter be
applicable to its shares of Common Stock thereafter deliverable upon the
exercise of the Rights; and (v) the provisions of Section 11(a)(ii) hereof shall
be of no further effect following the first occurrence of any Section 13 Event.
(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), (A) the Person that is the issuer of
any securities into which shares of Company Common Stock are converted in such
merger or share exchange, or, if there is more than one such issuer, the issuer
of Common Stock that has the highest aggregate current market price (determined
pursuant to Section 11(d) hereof); and (B) if no securities are so issued, the
Person that is the
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other party to such merger or share exchange, or, if there is more than one such
Person, the Person the Common Stock of which has the highest aggregate current
market price (determined pursuant to Section 11(d) hereof); and
(ii) in the case of any transaction described in clause (z) of
the first sentence of Section 13(a), the Person that is the party receiving the
largest 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 transferred pursuant to such transaction or transactions or if the Person
receiving the largest portion of the assets or earning power cannot be
determined, whichever Person the Common Stock of which has the highest aggregate
current market price (determined pursuant to Section 11(d) hereof); provided,
however, that in any such case, (1) if the Common Stock of such Person is not at
such time and has not been continuously over the preceding twelve-month period
registered under Section 12 of the Exchange Act ("Registered Common Stock"), or
such Person is not a corporation, and such Person is a direct or indirect
Subsidiary of another Person that has Registered Common Stock outstanding,
"Principal Party" shall refer to such other Person; (2) if the Common Stock of
such Person is not Registered Common Stock or such Person is not a corporation,
and such Person is a direct or indirect Subsidiary of another Person but is not
a direct or indirect Subsidiary of another Person which has Registered Common
Stock outstanding, "Principal Party" shall refer to the ultimate parent entity
of such first-mentioned Person; (3) if the Common Stock of such Person is not
Registered Common Stock or such Person is not a corporation, and such Person is
directly or indirectly controlled by more than one Person, and one or more of
such other Persons has Registered Common Stock outstanding, "Principal Party"
shall refer to whichever of such other Persons is the issuer of the Registered
Common Stock having the highest aggregate current market price (determined
pursuant to Section 11(d) hereof); and (i) if the Common Stock of such Person is
not Registered Common Stock or such Person is not a corporation, and such Person
is directly or indirectly controlled by more than one Person, and none of such
other Persons have Registered Common Stock outstanding, "Principal Party" shall
refer to whichever ultimate parent entity is the corporation having the greatest
stockholders equity or, if no such ultimate parent entity is a corporation,
shall refer to whichever ultimate parent entity is the entity having the
greatest net assets.
(c) The Company shall not consummate any such share exchange, merger,
sale or transfer unless the Principal Party shall have a sufficient number of
authorized shares of its Common Stock which have not been issued or reserved for
issuance to permit the exercise in full of the Rights in accordance with Section
13, and unless prior thereto the Company and such Principal Party shall have
executed and delivered to the Rights Agent a supplemental agreement providing
for the terms set forth in paragraphs (a) and (b) of this Section 13 and further
providing that the Principal Party will:
(i)(A) file on an appropriate form, as soon as practicable
following the execution of such agreement, a registration statement under the
Securities Act with respect to the Common Stock that may be acquired upon
exercise of the Rights, (B) cause such registration statement to remain
effective (and to include a prospectus complying with the requirement of the
Securities Act) until
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the Expiration Date, and (C) as soon as practicable following the execution of
such agreement, take such action as may be required to ensure that any
acquisition of such Common Stock upon the exercise of the Rights complies with
any applicable state security or "blue sky" laws; and
(ii) will deliver to holders of the Rights historical
financial statements for the Principal Party and each of its Affiliates which
comply in all respects with the requirements for registration on Form 10 under
the Exchange Act.
(d) In case the Principal Party which is to be a party to a transaction
referred to in this Section 13 has provision in any of its authorized securities
or in its Charter or Bylaws or other instrument governing its corporate affairs,
which provision would have the effect of (i) causing such Principal Party to
issue, in connection with, or as a consequence of, the consummation of a
transaction referred to in this Section 13, shares of Common Stock of such
Principal Party at less than the then current market price per share (determined
pursuant to Section 11(d) hereof) or securities exercisable for, or convertible
into, Common Stock of such Principal Party at less than such then current market
price (other than to holders of Rights pursuant to this Section 13) or (ii)
providing for any special payment, tax or similar provisions in connection with
the issuance of the Common Stock of such Principal Party pursuant to the
provisions of Section 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.
(e) The provisions of this Section 13 shall similarly apply to
successive mergers or share exchanges or mergers or other transfers. In the
event that a Section 13 Event shall occur at any time after the occurrence of a
Section 11(a)(ii) Event, the Rights which have not theretofore been exercised
shall thereafter become exercisable in the manner described in Section 13(a).
Section 14. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue fractions of Rights or
to distribute Rights Certificates which evidence fractional Rights. In lieu of
such fractional Rights, there shall be paid to the Persons to which such
fractional Rights would otherwise be issuable, an amount in cash equal to such
fraction of the market value of a whole Right. For purposes of this Section
14(a), the market value of a whole Right shall be the closing price of the
Rights for the Trading Day immediately prior to the date on which such
fractional Rights would have been otherwise issuable. The closing price of the
Rights for any day shall be, if the Rights are listed or admitted to trading on
a national securities exchange, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the principal
national securities exchange on which the Rights are listed or admitted to
trading or, if the Rights are not listed or admitted to trading on any national
securities exchange, the last quoted sales price or, if not so quoted, the
average of the high bid and low asked
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prices in the over-the-counter market, as reported by NASDAQ or such other
system then in use or, if on any such date the Rights are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Rights selected by the Board of
Directors. If on any such date no such market maker is making a market in the
Rights, the fair value of the Rights on such date as determined in good faith by
the Board of Directors shall be used and such determination shall be described
in a statement filed with the Rights Agent and the holders of the Rights.
(b) The Company shall not be required to issue fractions of shares of
Preferred Stock (other than fractions which are integral multiples of one
one-hundredth of a share of Preferred Stock) upon exercise of the Rights or to
distribute certificates which evidence such fractional shares of Preferred Stock
(other than fractions which are integral multiples of one one-hundredth of a
share of Preferred Stock). In lieu of such fractional shares of Preferred Stock
that are not integral multiples of one one-hundredth of a share, the Company may
pay to the registered holders of Rights Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same fraction of the
then current market value of one one-hundredth of a share of Preferred Stock.
For purposes of this Section 14(b), the current market value of one
one-hundredth of a share of Preferred Stock shall be the closing price of one
one-hundredth of a share of Preferred Stock (as the term "closing price" is used
in Section 11(d) hereof) for the Trading Day immediately prior to the date of
such exercise.
(c) The holder of a Right by the acceptance of the Rights expressly
waives his right to receive any fractional Rights or any fractional shares upon
exercise of a Right, except as permitted by this Section 14.
Section 15. Rights of Action. All rights of action in respect of this
Agreement, other than rights of action vented in the Rights Agent pursuant to
Section 18 hereof, are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of
certificates representing shares of Company Common Stock); and any registered
holder of a Rights Certificate (or, prior to the Distribution Date, of a
certificate representing shares of Company Common stock), without the consent of
the Rights Agent or of the holder of any other Rights Certificate (or, prior to
the Distribution Date, of a certificate representing shares of Company 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 or any
other Person to enforce, or otherwise act in respect of, his right to exercise
the Rights evidenced by such Rights Certificate in the manner provided in such
Rights Certificate and in this Agreement. Without limiting the foregoing or any
remedies available to the holders of Rights, it is specifically acknowledged
that the holders of Rights would not have an adequate remedy at law for any
breach of this Agreement and shall be entitled to specific performance of the
obligations hereunder and injunctive relief against actual or threatened
violations of the obligations hereunder of any Person subject to this Agreement.
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Section 16. Agreement of Rights Holders. Every holder of a Right by
accepting the same consents and agrees with the Company and the Rights Agent and
with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights shall be transferable
only in connection with the transfer of Company Common Stock;
(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the office of the Rights Agent designated for such purposes, duly endorsed or
accompanied by a proper instrument of transfer and with the appropriate forms
and certificates duly executed;
(c) subject to Section 6(a) and Section 7(f) hereof, the Company and
the Rights Agent may deem and treat the person in whose name a Rights
Certificate (or, prior to the Distribution Date, the associated Company Common
Stock certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the
Rights Certificates or the associated Company 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, subject to the last sentence of
Section 7(e) hereof, shall be affected by any notice to the contrary; and
(d) notwithstanding anything the contrary, neither the Company nor the
Rights Agent shall have any liability to any holder of a Right or any other
Person as a result of its inability to perform any of its obligations under this
Agreement by reason of any preliminary or permanent injunction or other order,
decree or ruling issued by a court of competent jurisdiction or by a
governmental, regulatory or administrative agency or commission, or any statute,
rule, regulation or executive order promulgated or enacted by any governmental
authority, prohibiting or otherwise restraining performance of such obligation;
provided, however, the Company must use its best efforts to have any such order,
decree or ruling lifted or otherwise overturned as promptly as practicable.
Section 17. Rights Certificate Holder Not Deemed a Shareholder. No
holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the number of shares of
Preferred Stock or any other securities of the Company which may at any time be
issuable on the exercise of the Rights represented thereby, nor shall anything
contained herein or in any Rights Certificate be construed to confer upon the
holder of any Rights Certificate, as such, any of the rights of a shareholder of
the Company or any right to vote for the election of directors or upon any
matter submitted to shareholders at any meeting thereof, or to give or withhold
consent to any corporate action, or, except as provided in Section 25 hereof, to
receive notice of meetings or other actions affecting shareholders, or to
receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by such Rights Certificate shall have been exercised in
accordance with the provisions hereof.
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Section 18. Concerning the Rights Agent.
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses, including reasonable
fees and disbursements of its counsel, incurred in connection with the execution
and administration of this Agreement and the exercise and performance of its
duties hereunder. The Company shall indemnify the Rights Agent for, and hold it
harmless against, any losses, expenses, claims, damages or liabilities incurred
without negligence, bad faith or willful misconduct on the part of the Rights
Agent, for anything done or omitted by the Rights Agent in connection with the
acceptance and administration of this Agreement and performance hereunder,
including without limitation the costs and expenses of defending against any
claim of liability therefrom, directly or indirectly and will promptly reimburse
the Rights Agent for legal and other expenses reasonably incurred in defending
any such loss, expense, claim, damage or liability. The costs and expenses of
enforcing this right of indemnification shall also be paid by the Company. The
indemnification provided for hereunder shall survive the expiration of the
Rights and the termination of this Agreement.
(b) The Rights Agent shall be protected by the indemnity provided by
this Section and shall incur no liability for or in respect of any action taken,
suffered or omitted by it in connection with its administration of this
Agreement in reliance upon any Rights Certificate or certificate for 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 have been signed, executed and, where necessary, verified or
acknowledged by the proper Person or Persons.
(c) Notwithstanding anything in this Agreement to the contrary, 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 action.
Section 19. Merger or Share Exchange or Change of Name of Rights Agent.
(a) Any corporation into which the Rights Agent or any successor Rights
Agent may be merged or with which it may effect a share exchange, or any
corporation resulting from any merger or share exchange to which the Rights
Agent or any successor Rights Agent shall be a party, or any corporation
succeeding to the corporate trust or shareholder services businesses of the
Rights Agent or any successor Rights Agent, shall be the successor to the Rights
Agent under this Agreement without the execution or filing of any document or
any further act on the part of any of the parties hereto; provided, however,
that such corporation would be eligible for appointment as a successor Rights
Agent under the provisions of Section 21 hereof. In case at the time such
successor Rights Agent shall succeed to the agency created by this Agreement,
any of the Rights Certificates shall have been countersigned but not delivered,
any such successor Rights Agent may adopt the countersignature of predecessor
Rights Agent and deliver such Rights Certificates so countersigned; and in case
at that time any of the Rights Certificates shall not have been countersigned,
any successor Rights Agent may countersign such Rights Certificates either in
the name of the predecessor or in the name of the successor Rights Agent; and in
all such cases such Rights Certificates shall have the full force provided in
the Rights Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be changed
and at such time any of the Rights Certificates shall have been countersigned
but not delivered, the Rights Agent may
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adopt the countersignature under its prior name and deliver Rights Certificates
so countersigned; and in case at that time any of the Rights Certificates shall
not have been countersigned, the Rights Agent may countersign such Rights
Certificates either in its prior name or in its changed name; and in all such
cases such Rights Certificates shall have the full force provided in the Rights
Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions (and no implied obligations or duties shall be read into this
Agreement against the Rights Agent), by all of which the Company and the holders
of Rights Certificates, by their acceptance thereof, shall be bound:
(a) Before the Rights Agent acts, 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 Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person and the
determination of "current market price") be proved or established by the Company
prior to taking or suffering any action hereunder, such fact or matter (unless
other evidence in respect thereof be specified herein) may be deemed to be
conclusively proved and established by a certificate signed by the Chairman of
the Board, the President, any Vice President, the Treasurer, any Assistant
Treasurer, the Secretary or any Assistant Secretary of the Company and delivered
to the Rights Agent; provided, however, that so long as any Person is an
Acquiring Person hereunder, such certificate shall be signed and delivered by
the Board of Directors; and such certificate shall be full authorization to the
Rights Agent for any action taken or suffered in good faith by it under the
provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Rights
Certificates or be required to verify the same (except as to its
countersignature on such Rights Certificates), but all such statements and
recitals are and shall be deemed to have been made by the Company only.
(d) The Rights Agent shall not have any responsibility for the validity
or legality of this Agreement or the execution and delivery hereof (except the
due execution hereof by the Rights Agent) or for the validity, legality or
execution of any Rights Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or failure
by the Company to satisfy conditions contained in this Agreement or in any
Rights Certificate; nor shall it be responsible for any adjustment required
under the provisions of Section 11 or Section 13 hereof or 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 Rights Certificates after receipt by the Rights
Agent of the certificate describing any such adjustment contemplated by Section
12); 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
or
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any other securities to be issued pursuant to this Agreement or any Rights
Certificate or as to whether any shares of Preferred Stock or any other
securities will, when so issued, be validly authorized and issued, fully paid
and nonassessable.
(e) The Company shall perform, execute, acknowledge and deliver or
cause to be performed, executed, acknowledged and delivered all such further
acts, instruments and assurances as may reasonably be required by the Rights
Agent for the performance by the Rights Agent of its duties under this
Agreement.
(f) 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, any Vice President, the Secretary, any
Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company,
and to apply to such officers for advice or instructions in connection with its
duties, and it shall not be liable to the Company, the holder of any Rights
Certificate or any shareholder of the Company for any action taken or suffered
to be taken by it in good faith in accordance with instructions of any such
officer; provided, however, that so long as any Person is an Acquiring Person
hereunder, the Rights Agent shall accept such instructions and advice only from
the Board of Directors and shall not be liable for any action taken or suffered
to be taken by it in good faith in accordance with such instructions of the
Board of Directors. Any application by the Rights Agent for written instructions
from the Company may, at the option of the Rights Agent, set forth in writing
any action proposed to be taken or omitted by the Rights Agent under this Rights
Agreement and the date on and/or after which such action shall be taken or such
omission shall be effective. The Rights Agent shall not be liable for any action
taken by, or omission of, the Rights Agent in accordance with a proposal
included in any such application on or after the date specified in such
application (which date shall not be less than five Business Days after the date
any such officer of the Company actually receives such application, unless any
such officer shall have consented in writing to an earlier date) unless, prior
to taking any such action (or the effective date in the case of an omission),
the Rights Agent shall have received written instructions in response to such
application specifying the action to be taken or omitted.
(g) The Rights Agent and any shareholder, director, officer or employee
of the Rights Agent may buy, tell or deal in any of the Rights or offer
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from acting
in any other capacity for the Company or for any other legal entity.
(h) 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 if reasonable care was exercised in the selection and
continued employment thereof.
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(i) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties or in the exercise of its rights hereunder if
the Rights Agent in its sole judgment shall have reasonable grounds for
believing that repayment of such funds or adequate indemnification against such
risk or liability is not reasonably assured to it.
(j) If, with respect to any Rights Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed, not signed or indicates an affirmative response to clause 1
and/or 2 thereof, the Rights Agent shall not take any further action with
respect to such requested exercise of transfer without first consulting with the
Company. If such certificate has been completed and signed, the Rights Agent may
assume without further inquiry that the Rights Certificate is not owned by a
person described in Section 4(b) or Section 7(e) hereof and shall not be charged
with any knowledge to the contrary.
(k) The Rights Agent shall be liable hereunder only for its
negligence, bad faith or willful misconduct.
(l) The Rights Agent shall not be required to take notice or be deemed
to have notice of any fact, event or determination (including without
limitation, any dates or events defined in this Agreement or the designation of
any Person, Affiliate or Associate) under this Agreement unless and until the
Rights Agent shall be specifically notified in writing by the Company of such
fact, event or determination.
Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon thirty days' notice in writing mailed to the Company, and to each transfer
agent of the Preferred Stock and the Company Common Stock, by registered or
certified mail, and to the holders of Certificates, at the expense of the
Company, by first-class mail. The Company may remove the Rights Agent or any
successor Rights Agent upon thirty 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 Preferred Stock and the Company Common Stock, by registered or certified
mail, and to the holders of the Rights Certificates by first-class mail. If the
Rights Agent shall resign or be removed or shall otherwise become incapable of
acting, the Company shall appoint a successor to the Rights Agent. If the
Company shall fail to make such appointment within a period of thirty days after
giving notice of such removal or after it has been notified in writing of such
resignation or incapacity by the resigning or incapacitated Rights Agent or by
the holder of a Rights Certificate (who shall, with such notice, submit his
Rights Certificate for inspection by the Company), then any registered holder of
any Rights Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether appointed
by the Company or by such a court, shall be a corporation organized and doing
business under the laws of the United States or any state of the United States
in good standing and may be the Company or a Subsidiary of the Company. 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 Preferred Stock and the
Company Common Stock, and mail a notice thereof in writing to the registered
holders of the Rights Certificates. Failure to give any notice provided for in
this Section 21, however, or any defect therein, shall not affect the legality
or validity of the resignation or removal of the Rights Agent or the appointment
of the successor Rights Agent.
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Section 22. Issuance of New Rights Certificates. Notwithstanding any of
the provisions of this Agreement or the Rights to the contrary, the Company may,
at its option, issue new Rights Certificates evidencing Rights in such form as
may be approved by the Board of Directors to reflect any adjustment or change
made in accordance with the provisions of this Agreement in the Purchase Price
or the number or kind or class of shares or other securities or property that
may be acquired under the Rights Certificates. In addition, in connection with
the issuance or sale of shares of Company Common Stock following the
Distribution Date and prior to the Expiration Date, the Company (a) shall, with
respect to shares of Company Common Stock so issued or sold pursuant to the
exercise of stock options or under any employee plan or arrangement, or upon the
exercise, conversion or exchange of securities hereinafter issued by the
Company, and (b) may, in any other case, if deemed necessary or appropriate by
the Board of Directors, issue Rights Certificates representing the appropriate
number of Rights in connection with such issuance or sale; provided, however,
that (i) no such Rights Certificate shall be issued if, and to the extent that,
the Company shall be advised by counsel that such issuance would create a
significant risk of material adverse tax consequences to the Company or the
person to whom such Rights Certificate would be issued, and (ii) no such Rights
Certificate shall be issued if, and to the extent that, appropriate adjustment
shall otherwise have been made in lieu of the issuance thereof.
Section 23. Redemption and Termination.
(a) Subject to Section 31 hereof, the Company may, at its option, by
action of the Board of Directors, at any time prior to the earlier of (i) the
Close of Business on the tenth day following the Stock Acquisition Date, or (ii)
the Final Expiration Date, redeem all but not less than all of the then
outstanding Rights at a redemption price of $.01 per Right, as such amount may
be appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such redemption price being the
"Redemption Price"), and the Company may, at its option, by action of the Board
of Directors, pay the Redemption Price either in shares of Company Common Stock
(based on the "current market price," as defined in Section 11(d) hereof, of the
shares of Company Common Stock at the time of redemption) or cash.
Notwithstanding anything in this Agreement to the contrary, the Rights shall not
be exercisable after the first occurrence of a Section 11(a)(ii) Event until
such time as the Company's right of redemption hereunder has expired.
(b) Immediately upon the action of the Board of Directors ordering the
redemption of the Rights, evidence of which shall be filed with the Rights
Agent, and without any further action and without any notice, the right to
exercise the Rights will terminate and the only right thereafter of the holders
of Rights shall be to receive the Redemption Price for each Right so held.
Promptly after the action of the Board of Directors ordering the redemption of
the Rights, the Company shall give notice of such redemption to the Rights Agent
and the holders of the then outstanding Rights by mailing such notice to all
such holders at each holder's last address as it appears upon the registry books
of the Rights Agent or, prior to the Distribution Date, on the registry books of
the transfer agent for Company Common Stock. Any notice which is mailed in the
manner herein provided shall be deemed given, whether or not the holder receives
the notice. Each such notice of redemption will state the method by which the
payment of the Redemption Price will be made.
29
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Section 24. Exchange.
(a) The Board of Directors of the Company may, at its option, at any
time after a Section 11(a)(ii) Event, exchange all or part of the then
outstanding and exercisable Rights (which shall not include Rights that have
become void pursuant to provisions of Section 7(e) hereof) for Company Common
Stock at an exchange ratio of one share of Company Common Stock per Right,
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such exchange ratio being
hereinafter referred to as the "Exchange Ratio"). Notwithstanding the foregoing,
the Board of Directors of the Company shall not be empowered to effect such
exchange at any time after any Person (other than the Company, any Subsidiary of
the Company, any employee benefit plan of the Company or any such Subsidiary, or
any entity holding Company Common Stock for or pursuant to the terms of any such
plan), together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of fifty percent (50%) or more of the Company Common Stock then
outstanding.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the exchange of any Rights pursuant to subsection (a) of this
Section 24 and without any further action and without any notice, the right to
exercise such Rights shall terminate and the only right thereafter of a holder
of such Rights shall be to receive that number of shares of Company Common Stock
equal to the number of such Rights held by such holder multiplied by the
Exchange Ratio. The Company shall promptly give public notice of any such
exchange; provided, however, that the failure to give, or any defect in, such
notice shall not affect the validity of such exchange. The Company promptly
shall mail a notice of any such exchange to all of the holders of such Rights at
their last addresses as they appear upon the registry books of the Company. Any
notice which is mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice. Each such notice of exchange will
state the method by which the exchange of Company Common Stock for Rights will
be effected and, in the event of any partial exchange, the number of Rights
which will be exchanged. Any partial exchange shall be effected pro rata based
on the number of Rights (other than Rights which have become void pursuant to
the provisions of Section 7(e) hereof) held by each holder of Rights.
(c) In any exchange pursuant to this Section 24, the Company, at its
option, may substitute Preferred Stock (or equivalent preferred stock, as such
term is defined in paragraph (b) of Section 11 hereof) for Company Common Stock
exchangeable for Rights, at the initial rate of one one-hundredth of a share of
Preferred Stock (or equivalent preferred stock) for each share of Company Common
Stock, as appropriately adjusted to reflect stock splits, stock dividends or
other similar transactions effected after the date hereof.
(d) In the event that there shall not be sufficient Company Common
Stock issued but not outstanding or authorized but unissued to permit any
exchange of Rights as contemplated in accordance with this Section 24, the
Company shall take all such action as may be necessary to authorize additional
shares of Company Common Stock for issuance upon exchange of the Rights.
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34
Section 25. Notice of Certain Events.
(a) In case the Company shall propose, at any time after the
Distribution Date, (i) to pay any dividend payable in stock of any class to the
holders of Preferred Stock or to make any other distribution to the holders of
Preferred Stock (other than a regular quarterly cash dividend out of earnings or
retained earnings of the Company), (ii) to offer to the holders of Preferred
Stock rights or warrants to subscribe for or to purchase any additional shares
of Preferred Stock or shares of stock of any class or any other securities,
rights or options, (iii) to effect any reclassification of its Preferred Stock
(other than a reclassification involving only the subdivision of outstanding
shares of Preferred Stock), (iv) to effect any share exchange or merger into or
with any other Person (other than a Subsidiary of the Company in a transaction
which complies with Section 11(o) hereof), 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 (other than the Company and/or any of its Subsidiaries
in one or more transactions each of which complies with Section 11(o) hereof),
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 a Rights
Certificate, to the extent feasible and in accordance with Section 26 hereof, a
notice of such proposed action, which shall specify the record date for the
purposes of such stock dividend, distribution of rights or warrants, or the date
on which such reclassification, share exchange, merger, sale, transfer,
liquidation, dissolution, or winding up is to take place and the date of
participation therein by the holders of the shares of 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 twenty (20) days prior to
the record date for determining holders of the shares of Preferred Stock for
purposes of such action, and in the case of any such other action, at least
twenty (20) days prior to the date of the taking of such proposed action or the
date of participation therein by the holders of the shares of Preferred Stock
whichever shall be the earlier; provided, however, no such notice shall be
required pursuant to this Section 25, if any Subsidiary of the Company effects a
share exchange or merger with or into, or effects a sale or other transfer of
assets or earnings power to, any other Subsidiary of the Company.
(b) In case any of the events set forth in Section 11(a)(ii) hereof
shall occur, then, in any such case, (i) the Company shall as soon as
practicable thereafter give to each holder of a Rights Certificate, to the
extent feasible and in accordance with Section 26 hereof, a notice of the
occurrence of such event, which shall specify the event and the consequences of
the event to holders of Rights under Section 11(a)(ii) hereof.
Section 26. Notices. Notices or demands authorized by this Agreement
to be given or made by the Rights Agent or by the holder of any Right
Certificate to or on the Company shall be sufficiently given or made if sent by
first-class mail, postage prepaid, or by telex, telegram or cable, addressed
(until another address is filed in writing with the Rights Agent) as follows:
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35
Service Merchandise Company, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Legal Officer
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Right Certificate to or on the Rights Agent shall be sufficiently given if sent
by registered or certified mail and shall be deemed given upon receipt,
addressed (until further address is filed in writing with the Company) as
follows:
▇▇▇▇▇▇ Trust and Savings Bank
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Company Common Stock) shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed to such holder at the address of
such holder as shown on the registry books of the Company.
Section 27. Supplements and Amendments. Prior to the Distribution Date
and subject to the penultimate sentence of this Section 27, the Company 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 certificates
representing shares of Company Common Stock; provided, however, that any
supplement or amendment which changes the rights and duties of the Rights Agent
under this Agreement shall be effective only with the consent of the Rights
Agent. From and after the Distribution Date and subject to the penultimate
sentence of this Section 27, the Company and the Rights Agent shall, if the
Company so directs, supplement or amend this Agreement without the approval of
any holders of Rights Certificates in order (i) to cure any ambiguity, (ii) to
correct or supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein, (iii) to shorten or lengthen any
time period hereunder, or (iv) to change or supplement the provisions hereunder
in any manner which the Company may deem necessary or desirable and which shall
be consistent with, and for the purpose of fulfilling, the objectives of the
Board of Directors adopting this Agreement; provided, however, that from and
after such time as any Person becomes an Acquiring Person, this Agreement shall
not be amended in any manner which would adversely affect the interests of the
holders of Rights, and provided, however, this Agreement may not be supplemented
or amended to lengthen, pursuant to clause (iii) of this sentence, (A) subject
to Section 31 hereof, a time period relating to when the Rights may be redeemed
at such time as the Rights are not then redeemable, or (B) any other time period
unless such lengthening is for the purpose of protecting, enhancing or
clarifying the rights of, and/or the benefits to, the holders of Rights. Without
limiting the foregoing, the Company may at any time prior to such time as any
Person becomes an Acquiring Person amend this Agreement to change the Purchase
Price hereunder. Upon the delivery of a certificate from an appropriate officer
of the
32
36
Company or, so long as any Person is an Acquiring Person hereunder, from the
Board of Directors which states that the proposed supplement or amendment is in
compliance with the terms of this Section 27, the Rights Agent shall execute
such supplement or amendment. Notwithstanding anything contained in this
Agreement to the contrary, no supplement or amendment shall be made which
changes the Redemption Price, the Purchase Price, the Expiration Date or the
number of Units of Preferred Stock for which a Right is exercisable without the
approval of the Board of Directors. Prior to the Distribution Date, the
interests of the holders of Rights shall be deemed coincident with the interests
of the holders of Company Common Stock.
Section 28. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 29. Determinations and Actions by the Board of Directors, etc.
For all purposes of this Agreement, any calculation of the number of shares of
Company Common Stock outstanding at any particular time, including for purposes
of determining the particular percentage of such outstanding shares of Company
Common Stock of which any Person is the Beneficial Owner, shall be made in
accordance with the last sentence of Rule 13d-3(d)(1)(i) of the Exchange Act
Regulations as in effect on the date hereof. Except as otherwise specifically
provided herein, the Board of Directors of the Company shall have the exclusive
power and authority to administer this Agreement and to exercise all rights and
powers specifically granted to the Board or to the Company, or as may be
necessary or advisable in the administration of this Agreement, including,
without limitation, the right and power (i) to interpret the provisions of this
Agreement, and (ii) to make all determinations deemed necessary or advisable for
the administration of this Agreement. All such actions, calculations,
interpretations and determinations (including, for purposes of clause (y) below,
all omissions with respect to the foregoing) which are done or made by the Board
of Directors in good faith shall (x) be final, conclusive and binding on the
Company, the Rights Agent, the holders of the Rights and all other parties, and
(y) not subject the Board of Directors or any member thereof to any liability to
the holders of the Rights.
Section 30. Benefits of this Agreement. Nothing in this Agreement shall
be construed to give to any Person other than the Company, the Rights Agent and
the registered holders of the Rights Certificates (and, prior to the
Distribution Date, registered holders of shares of Company Common Stock) any
legal or equitable right, remedy or claim under this agreement; but this
Agreement shall be for the sole and exclusive benefit of the Company, the Rights
Agent and the registered holders of the Rights Certificates (and, prior to the
Distribution Date, registered holders of shares of Company Common Stock).
Section 31. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant
33
37
or restriction is held by such court or authority to be invalid, void or
unenforceable and the Board of Directors determines in its good faith judgment
that severing the invalid language from this Agreement would adversely affect
the purpose or effect of this Agreement and the Rights shall not then be
redeemable, the right of redemption set forth in Section 23 hereof shall be
reinstated and shall not expire until the Close of Business on the tenth day
following the date of such determination by the Board of Directors.
Section 32. Governing Law. This Agreement, each Right and each Rights
Certificate issued hereunder shall be governed by, and construed in accordance
with, the laws of the State of Tennessee applicable to contracts executed in and
to be performed entirely in such State.
Section 33. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original, but all of which taken
together shall constitute one and the same instrument.
Section 34. Descriptive Headings. The headings contained in this
Agreement are for descriptive purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, all as of the date first above written.
SERVICE MERCHANDISE COMPANY, INC.
By: /s/ C. ▇▇▇▇▇▇ ▇▇▇▇▇
---------------------------------------
Name: C. ▇▇▇▇▇▇ ▇▇▇▇▇
Title: Vice President
▇▇▇▇▇▇ TRUST AND SAVINGS BANK, as Rights
Agent
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
34
38
EXHIBIT A
[Form of Rights Certificate]
Certificate No. __________ Rights
NOT EXERCISABLE AFTER THE EXPIRATION DATE (AS DEFINED IN THE RIGHTS
AGREEMENT). THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY,
ON THE TERMS SET FORTH IN THE AGREEMENT UNDER CERTAIN CIRCUMSTANCES (SPECIFIED
IN THE RIGHTS AGREEMENT). RIGHTS BENEFICIALLY OWNED BY ACQUIRING PERSONS (AS
DEFINED IN THE RIGHTS AGREEMENT) OR ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY
BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR
WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN
AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE
RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS
REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN
SECTION 7(e) OF SUCH AGREEMENT].1
Rights Certificate
SERVICE MERCHANDISE COMPANY, INC.
This certifies that _____________________________________, or
registered assigns, is the registered holder of the number of Rights set forth
above, each of which entitles the registered holder thereof, subject to the
terms and conditions of the Amended and Restated Rights Agreement dated November
___, 1998 (the "Rights Agreement") between Service Merchandise Company, Inc., a
Tennessee corporation (the "Company"), and ▇▇▇▇▇▇ Trust and Savings Bank, as
Rights Agent (the "Rights Agent", which term shall include any successor Rights
Agent under the Rights Agreement), to purchase from the Company at any time
after the Distribution Date (as such term is defined in the Rights Agreement)
and prior to the Expiration Date (as such term is defined in the Rights
Agreement) at the office of the Rights Agent or its successor designated for
such purpose, one one-
--------
1The portion of the legend in brackets shall be inserted only if
applicable and shall replace the preceding sentence.
39
hundredth of a fully paid nonassessable share of Series A Junior Preferred
Stock, par value $1.00 per share (the "Preferred Stock"), of the Company at the
Purchase Price initially of $10.00 per one one-hundredth share (each such one
one-hundredth of a share being a "Unit") of Preferred Stock, upon presentation
and surrender of this Rights Certificate with the Election to Purchase and
related certificate duly executed. The number of Rights evidenced by this Rights
Certificate (and the number of Units which may be purchased upon exercise
thereof) set forth above, and the Purchase Price per Unit set forth above shall
be subject to adjustment in certain events as provided in the Rights Agreement.
Upon the occurrence of a Section ll(a)(ii) Event (as such term is
defined in the Rights Agreement), if the Rights evidenced by this Rights
Certificate are beneficially owned by an Acquiring Person or an Affiliate or
Associate of any such Acquiring Person (as such terms are defined in the Rights
Agreement) or, under certain circumstances described in the Rights Agreement, a
transferee of any such Acquiring Person, Associate or Affiliate, such Rights
shall become null and void and no holder hereof shall have any right with
respect to such Rights from and after the occurrence of such Section ll(a)(ii)
Event.
In certain circumstances described in the Rights Agreement, the Rights
evidenced hereby may entitle the registered holder thereof to purchase capital
stock of an entity other than the Company or receive cash or other assets, all
as provided in the Rights Agreement.
This Rights Certificate is subject to all of the terms and conditions
of the Rights Agreement, which terms and conditions are hereby incorporated
herein by reference and made a part hereof and to which Rights Agreement
reference is hereby made for a full description of the rights, limitations of
rights, obligations, duties and immunities hereunder of the Rights Agent, the
Company and the
2
40
holders of the Rights Certificates. Copies of the Rights Agreement are on file
at the principal office of the Company and are available from the Company upon
written request.
This Rights Certificate, with or without other Rights Certificates,
upon surrender at the office of the Rights Agent designated for such purpose,
may be exchanged for another Rights Certificate or Rights Certificates of like
tenor and date evidencing an aggregate number of Rights equal to the aggregate
number of Rights evidenced by the Rights Certificate or Rights Certificates
surrendered. If this Rights Certificate shall be exercised in part, the
registered holder shall be entitled to receive, upon surrender hereof, another
Rights Certificate or Rights 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 under certain circumstances
at its option at a redemption price of $.01 per Right, payable at the Company's
option in cash or in common stock of the Company, subject to adjustment in
certain events as provided in the Rights Agreement.
No fractional shares of Preferred Stock will be issued upon the
exercise of any Right or Rights evidenced hereby (other than fractions which are
integral multiples of one one-hundredth of a share of Preferred Stock), but in
lieu thereof a cash payment will be made, as provided in the Rights Agreement.
No holder of this Rights Certificate, as such, shall be entitled to
vote or receive dividends or be deemed for any purpose the holder of Preferred
Stock or of any other securities which may at any time be issuable on the
exercise hereof, nor shall anything contained in the Rights Agreement or herein
be construed to confer upon the holder hereof, as such, any of the rights of a
shareholder of the Company or any right to vote for the election of directors or
upon any matter submitted to
3
41
shareholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
shareholders (except as provided in the Rights Agreement), or to receive
dividends or subscription rights, or otherwise, until the Rights evidenced by
this Rights Certificate shall have been exercised as provided in the Rights
Agreement.
This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company.
Dated as of ___________________.
ATTEST: SERVICE MERCHANDISE COMPANY, INC.
By:
-------------------------------- -----------------------------------
Title: Title:
------------------------- --------------------------------
Countersigned:
▇▇▇▇▇▇ TRUST AND SAVINGS BANK
By
-----------------------------
Authorized Signature
4
42
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if
such holder desires to transfer the
Rights Certificate)
FOR VALUE RECEIVED ______________________________________________hereby sells,
assigns and transfers unto __________________________________________
(Please print name and address of transferee)
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint __________________________
Attorney, to transfer the within Rights Certificate on the books of the
within-named Company, with full power of substitution.
Dated: __________________________.
--------------------------------------
Signature
Signature Guaranteed:
43
Certificate
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Rights Certificate [ ] is [ ]is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of any such Acquiring Person (as such terms are defined
pursuant to the Rights Agreement); and
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate from
any Person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person.
Dated:
------------------- --------------------------------------
Signature
Signature Guaranteed:
--------------------------------------------------------------------------------
NOTICE
This signature to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
Signature must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.
In the event the certification set forth above is not completed, the
Company will deem the beneficial owner of the Rights evidenced by this Rights
Certificate to be an Acquiring Person or an Affiliate or Associate thereof (as
defined in the Rights Agreement) and, in the case of an Assignment, will affix a
legend to that effect on any Rights Certificates issued in exchange for this
Rights Certificate.
2
44
FORM OF ELECTION TO PURCHASE
(To be executed if the registered holder
desires to exercise Rights represented
by the Rights Certificate)
To: SERVICE MERCHANDISE COMPANY, INC.
The undersigned hereby irrevocably elects to exercise
________________________ Rights represented by this Rights Certificate to
purchase the Units of Preferred Stock, issuable upon the exercise of the Rights
(or such other securities of the Company or of any other person which may be
issuable upon the exercise of the Rights) and requests that certificates for
such Units be issued in the name of and delivered to:
--------------------------------------------------------------------------------
(Please print name and address)
--------------------------------------------------------------------------------
Please insert social security or other identifying number:
---------------------
If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
--------------------------------------------------------------------------------
(Please print name and address)
--------------------------------------------------------------------------------
Please insert social security or other identifying number:
---------------------
Dated:
----------------------
--------------------------------------
Signature
Signature Guaranteed:
--------------------------------------------------------------------------------
45
Certificate
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not
beneficially owned by an Acquiring Person of an Affiliate or an Associate
thereof (as defined in the Rights Agreement); and
(2) after due inquiry and to the best knowledge of the undersigned, the
undersigned [ ] did [ ] did not acquire the Rights evidenced by this Rights
Certificate from any person who is, was or subsequently became an Acquiring
Person or an Affiliate or Associate thereof.
Dated:
------------------------- --------------------------------------
Signature
Signature Guaranteed:
--------------------------------------------------------------------------------
NOTICE
The signature in the foregoing Election to Purchase and Certificate
must conform to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
Signature must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.
In the event the certification set forth above is not completed, the
Company will deem the beneficial owner of the Rights evidenced by this Rights
Certificate to be an Acquiring Person or an Affiliate or Associate thereof (as
defined in the Rights Agreement) and, in the case of an Assignment, will affix a
legend to that effect on any Rights Certificates issued in exchange for this
Rights Certificate.
2
46
EXHIBIT B
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED STOCK
The Board of Directors of Service Merchandise Company, Inc. (the
"Company") has declared a distribution of one Right for each outstanding share
of Common Stock, par value $.50 per share (the Company Common Stock"), to
shareholders of record at the close of business on February 22, 1988 and for
each share of Company Common Stock issued (including shares distributed from
Treasury) by the Company thereafter and prior to the Distribution Date. Each
Right entitles the registered holders subject to the terms of the Rights
Agreement, to purchase from the Company one one-hundredth of a share (a "Unit")
of Series A Junior Preferred Stock, par value $1.00 per share (the "Preferred
Stock"), at a Purchase Price of $35 per Unit, subject to adjustment. The
Purchase Price is payable in cash or by certified or bank check or bank draft
payable to the order of the Company. The description and terms of the Rights are
set forth in a Rights Agreement executed by the Company and Third National Bank
in Nashville, as the Rights Agent, dated February 8, 1988 (▇▇▇ ▇▇▇▇▇▇▇
Agreement.).
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. A
copy of the Rights Agreement is available free of charge from the Company. This
summary description of the Rights and the Preferred Stock does not purport to be
complete and is qualified in its entirety by reference to all the provisions of
the Rights Agreement and the exhibits thereto, including the definitions therein
of certain terms, which Rights Agreement and exhibits are incorporated herein by
reference.
The Rights Agreement
Initially, the Rights will attach to all certificates representing
shares of outstanding Company Common Stock, and no separate Rights Certificates
will be distributed. The Rights will separate from the Company Common Stock, and
the Distribution Date will occur, upon the earlier of (i) 10 days following
public announcement (the date of such announcement being the Stock Acquisition
Date.) that a person or group of affiliated or associated persons (other than
the Company, any Subsidiary of the Company or any employee benefit plan of the
Company or such Subsidiary) (an Acquiring Person.) has acquired, obtained the
right to acquire, or otherwise obtained beneficial ownership of 20% or more of
the then outstanding shares of Company Common Stock, or (ii) 10 days following
the commencement of a tender offer or exchange offer that would result in a
person or group beneficially owning 30% or more of the then outstanding shares
of Company Common Stock. Until the Distribution Date, (i) the Rights will be
evidenced by Company Common Stock certificates and will be transferred with and
only with such Company Common Stock certificates, (ii) new Company Common Stock
certificates issued after February 22, 1988 (also including shares distributed
from Treasury) will contain a notation incorporating the Rights Agreement by
reference, and (iii) the
47
surrender for transfer of any certificates representing outstanding Company
Common Stock will also constitute the transfer of the Rights associated with the
Company Common Stock represented by such certificate.
The Rights are not exercisable until the Distribution Date and will
expire at the close of business on the tenth anniversary of the Rights Agreement
unless earlier redeemed by the Company as described below.
As soon as practicable after the Distribution Date, Rights Certificates
will be-mailed to holders of record of Company Common Stock as of the close of
business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights.
In the event that (i) the Company is the surviving corporation in a
merger with an Acquiring Person and shares of Company Common Stock shall remain
outstanding, (ii) a Person becomes the beneficial owner of 30% or more of the
then outstanding shares of Company Common Stock, (iii) an Acquiring Person
engages in one or more "self-dealing" transactions as set forth in the Rights
Agreement, or (iv) during such time as there is an Acquiring Person, as event
occurs which results in such Acquiring Person's ownership interest being
increased by more than 1% (e.g., by means of a reverse stock split or
recapitalization), then, in each such case, each holder of a Right will
thereafter have the right to receive, upon exercise, Units of Preferred Stock
(or, in certain circumstances, Company Common Stock, cash, property or other
securities of the Company) having a value equal to two times the exercise price
of the Right. The exercise price is the Purchase Price multiplied by the number
of Units of Preferred Stock issuable upon exercise of a Right prior to the
events described in this paragraph. Notwithstanding any of the foregoing,
following the occurrence of any of the events set forth in this paragraph, all
Rights that are, or (under certain circumstances specified in the Rights
Agreement) were, beneficially owned by any Acquiring Person will be null and
void.
In the event that, at any time following the Stock Acquisition Date, (i) the
Company is acquired in a merger or-other business combination transaction and
the Company is not the surviving corporation (other than a merger described in
the preceding paragraph), (ii) any Person effects a share exchange or merges
with the Company and all or part of Company Common Stock is converted or
exchanged for securities, cash or property of any other Person or (iii) 50% or
more of the Company's assets or earning power is sold or transferred, each
holder of a Right (except Rights which previously have been voided as described
above) shall thereafter have the right to receive, upon exercise, common stock
of the Acquiring Person having a value equal to two times the exercise price of
the Right.
The Purchase Price payable, and the number of Units of Preferred Stock
issuable, upon exercise of the Rights are subject to adjustment from time to
time to prevent dilution (i) in the event of a stock dividend on, or a
subdivision, combination or reclassification of, the Preferred Stock, (ii) if
holders of the Preferred Stock are granted certain rights or warrants to
subscribe for Preferred Stock or convertible securities at less than the current
market price of the Preferred Stock, or (iii) upon the distribution to the
holders of the Preferred Stock of evidences of indebtedness or assets
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(excluding regular quarterly cash dividends) or of subscription rights or
warrants (other than those referred to above).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. The Company is not required to issue fractional Units. In lieu thereof,
an adjustment in cash may be made based on the market price of the Preferred
Stock prior to the date of exercise.
At any time until ten days following the Stock Acquisition Date, a
majority of the Independent Directors may redeem the Rights in whole, but not in
part, at a price of $.01 per Right (the "Redemption Price"), payable, at the
election of such majority of Independent Directors, in cash or shares of Company
Common Stock. Immediately upon the action of a majority of the Independent
Directors ordering the redemption of the Rights, the Rights will terminate and
the only right of the holders of Rights will be to receive the Redemption Price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including, without limitation, the right
to vote or to receive dividends. While the distribution of the Rights will not
be taxable to shareholders or to the Company, shareholders may, depending upon
the circumstances, recognize taxable income in the event that the Rights become
exercisable for Units of Preferred Stock (or other consideration).
Any of the provisions of the Rights Agreement may be supplemented or
amended at any time prior to the Distribution Date without the consent of the
holders of the certificates representing shares of Company Common Stock. After
the Distribution Date, the provisions of the Rights Agreement may be
supplemented or amended without the consent of the holders of the Rights in
order to cure any ambiguity, defect or inconsistency, to make changes which are
consistent with the objectives of the Board in adopting the Rights Agreement
(except that from and after such time as any Person becomes an Acquiring Person,
no such amendment may adversely affect the interests of holders of Rights), or
to shorten or lengthen any time period under the Rights Agreement; provided,
however, that no amendment to adjust the time period governing redemption shall
be made at such time as the Rights are not redeemable.
Description of Preferred Stock
The Units of Preferred Stock that may be acquired upon exercise of the
Rights will be nonredeemable and subordinate to any other shares of preferred
stock that may be issued by the Company. Each Unit of Preferred Stock will have
a minimum preferential quarterly dividend rate of $.02 per Unit but will, in any
event, be entitled to a dividend equal to the per share dividend declared on the
Company Common Stock.
In the event of liquidation, the holder of a Unit of Preferred Stock
will receive a preferred liquidation payment equal to the greater of $.01 per
Unit or the per share amount paid in respect of a share of Company Common Stock.
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Each Unit of Preferred Stock will have one vote, voting together with
the Company Common Stock. The holders of Units of Preferred Stock, voting as a
separate class, shall be entitled to elect two directors if dividends on the
Preferred Stock are in arrears for six fiscal quarters.
In the event of any merger, share exchange or other transaction in
which shares of Company Common Stock are exchanged, each Unit of Preferred Stock
will be entitled to receive the per share amount paid in respect of each share
of Company Common Stock.
The rights of holders of the Preferred Stock to dividends, liquidation
and voting, and in the event of mergers and share exchanges, are protected by
customary antidilution provisions.
Because of the nature of the Preferred Stock's dividend, liquidation
and voting rights, the economic value of one Unit of Preferred Stock that may be
acquired upon the exercise of each Right should approximate the economic value
of one share of Company Common Stock.
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