Exhibit 4.1
Noodle Kidoodle, Inc.
and
ChaseMellon Shareholder Services, L.L.C.
Rights Agent
RIGHTS AGREEMENT
Dated as of May 1, 1998
TABLE OF CONTENTS
Page
Section 1. Certain Definitions. 1
Section 2. Appointment of Rights Agent 8
Section 3. Issuance of Rights Certificates 9
Section 4. Form of Rights Certificates 10
Section 5. Execution, Countersignature and Registration 11
Section 6. Transfer, Division, Combination and Exchange of Rights
Certificates;Mutilated, Destroyed, Lost or Stolen Rights Certificates 12
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights 13
Section 8. Cancellation and Destruction of Rights Certificates 15
Section 9. Reservation and Availability of Preferred Stock. 15
Section 10. Preferred Stock Record Date 16
Section 11. Adjustments to Purchase Price, Number of Shares or Number of Rights 17
Section 12. Certification of Adjustments 24
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power 24
Section 14. Fractional Rights and Fractional Shares 27
Section 15. Rights of Action 29
Section 16. Agreement of Rights Holders Concerning Transfer and Ownership of Rights 29
Section 17. Rights Holder Not Deemed a Stockholder 30
Section 18. Concerning the Rights Agent 30
Section 19. Merger or Consolidation or Change of Name of Rights Agent 30
Section 20. Duties of Rights Agent 31
Section 21. Change of Rights Agent 33
Section 22. Issuance of New Rights Certificates 34
Section 23. Redemption 34
Section 24. Notice of Certain Events 35
Section 25. Notices 36
Section 26. Amendments and Supplements 37
Section 27. Successors. 37
Section 28. Benefits of this Agreement; Determinations and Actions by the Board of
Directors 37
Section 29. Severability 38
Section 30. Governing Law 38
Section 31. Counterparts 38
Section 32. Descriptive Headings 38
Section 33. Grammatical Construction 38
RIGHTS AGREEMENT
Rights Agreement dated as of May 1, 1998, between
Noodle Kidoodle, Inc., a Delaware corporation (the "Company"), and
ChaseMellon Shareholder Services, L.L.C. (the "Rights Agent").
R E C I T A L S
The Board of Directors of the Company has authorized
and declared the payment of a dividend of one preferred share
purchase right (the "Right") for each share of Common Stock (as
defined in Section 1) outstanding on the Record Date (as defined
in Section 1) and has authorized the issuance of one Right for
each share of Common Stock issued between the Record Date and the
Distribution Date (as defined in Section 1), and, in certain cases
following the Distribution Date. Each Right represents, as of the
Record Date, the right to purchase one one-hundredth of a share of
Preferred Stock (as defined in Section 1) upon the terms and
subject to the conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and
the mutual agreements set forth in this Agreement, the parties
hereby agree as follows:
Section 1. Certain Definitions. For purposes of this
Agreement, the following terms have the meanings indicated:
(a) (i) "Acquiring Person" means (1) any Person who
or which, together with all Affiliates and Associates of such
Person, without the prior approval of the Board of Directors, is
(or has previously been, at any time after the date of this
Agreement, whether or not such Person(s) continues to be) the
Beneficial Owner of 15% or more of the Common Stock then
outstanding (determined without taking into account any securities
exercisable or exchangeable for, or convertible into, Common
Stock, other than any such securities beneficially owned by the
Acquiring Person and Affiliates and Associates of such Person); or
(2) any Person who would have otherwise constituted an Acquiring
Person under clause (1) hereof except for the prior approval of
the Board of Directors, who, without prior approval of the Board
of Directors, (A) together with all Affiliates and Associates of
such Person, shall be the Beneficial Owner of any securities
representing shares of Common Stock in excess of the number of
shares approved by the Board of Directors, whether or not such
Person continues to be the Beneficial Owner of such securities;
(B) as a result of any reclassification of the Company's
securities (including any reverse stock split) or recapitalization
of the Company or any merger or consolidation of the Company with
any subsidiary of the Company, or any other transaction involving
the Company, shall have increased by more than 1% the
proportionate share of the outstanding shares of Common Stock
which is beneficially owned by such Person, together with all
Affiliates or Associates of such Person; or (C) shall, or any of
such Person's Affiliates or Associates shall, engage with the
Company in any of the transactions enumerated in Section 13(a) (in
which case such Person shall, for the purposes of Section 13(a),
be deemed to have become an Acquiring Person immediately prior to
the time that any such transaction shall take place); provided,
however, that at such time as there shall be an Adverse Person,
the Board of Directors of the Company may reduce the percentage
specified above from 15% to a percentage equal to the greater of
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(x) any percentage greater than the largest percentage of the
outstanding securities of the Company with Voting Power then known
to the Company to be beneficially owned by any Person (other than
the Company, any subsidiary of the Company, any employee benefit
plan of the Company or any of its subsidiaries or any entity
holding securities of the Company organized, operated or
established by the Company or any of its subsidiaries for or
pursuant to the terms of any such plan), and (y) 10% of the shares
of Common Stock then outstanding. However, "Acquiring Person"
shall not include any Exempt Person.
(ii) A Person does not become an "Acquiring
Person" solely as the result of (A) an acquisition of Common Stock
by the Company or any of its Subsidiaries which, by reducing the
number of shares outstanding, increases the proportionate number
of shares beneficially owned by such Person to 15% or more of the
Common Stock then outstanding as determined pursuant to Section
1(a)(i), or (B) such Person becoming the Beneficial Owner of 15%
or more of the Common Stock then outstanding as determined
pursuant to Section 1(a)(i) solely as a result of an Exempt Event;
provided, however, that if a Person becomes the Beneficial Owner
of 15% or more of the Common Stock then outstanding as determined
pursuant to Section 1(a)(i) solely by reason of such a share
acquisition by the Company or the occurrence of such an Exempt
Event and such Person shall, after becoming the Beneficial Owner
of such Common Stock, become the Beneficial Owner of additional
shares of Common Stock constituting 1% or more of the then
outstanding shares of Common Stock by any means whatsoever (other
than as a result of the subsequent occurrence of an Exempt Event,
a stock dividend or a subdivision of the Common Stock into a
larger number of shares or a similar transaction), then such
Person shall be deemed to be an "Acquiring Person; or (C) the
inadvertent acquisition of beneficial ownership of 15% or more of
the Common Stock of the Company if the Board of Directors
determines in good faith that such acquisition was inadvertent and
such Person immediately divests itself of a sufficient number of
shares of Common Stock so that such Person could no longer be an
"Acquiring Person"; or (D), if such Person is an Institutional
Investor, such Institutional Investor becoming the Beneficial
Owner of 15% or more of the Common Stock then outstanding as
determined pursuant to Section 1(a)(i) solely by reason of such
Institutional Investor's Regular Trading Activities; provided,
however, that if an Institutional Investor becomes the Beneficial
Owner of 20% or more of the Common Stock other than solely as the
result of the events described in clause (B) or (C) of this
Section 1(a)(ii) (and in the case of clause (C), such
Institutional Investor immediately divests itself of a sufficient
number of shares of Common Stock as that it is no longer the
Beneficial Owner of 20% or more of the Common Stock), then such
Institutional Investor shall be deemed an "Acquiring Person."
(b) "Adverse Person" shall mean any Person that the
Board of Directors of the Company, determines that, alone or
together with its Affiliates and Associates, has, at any time
after the Record Date, become the Beneficial Owner of an amount of
Common Stock that the Board of Directors of the Company determines
to be substantial, and that the Board of Directors of the Company
determines, after reasonable inquiry and investigation (which may
include a review of the public record regarding such Person and
any information such directors may request from such Person and
consultation with such Persons as the Board of Directors shall
deem appropriate), that (i) such beneficial ownership is intended
to cause the Company to repurchase the Common Stock beneficially
owned by such Person or to cause pressure on the Company to take
action or enter into a transaction or series of transactions
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intended to provide such Person with short-term financial gain
under circumstances where the Board of Directors determines that
the best long-term interests of the Company (taking into account
any impact on any constituency which Delaware law permits
directors to consider in discharging their fiduciary duty) would
not be served by taking such action or entering into such
transactions or series of transactions at that time or (ii) such
beneficial ownership is causing or reasonably likely to cause a
material adverse impact (including, but not limited to, impairment
of relationships with customers or impairment of the Company's
ability to maintain its competitive position) on the business,
financial condition or prospects of the Company.
(c) "Affiliate" of a Person has the meaning given to
such term in Rule 12b-2 of the General Rules and Regulations under
the Exchange Act, as in effect on the date of this Agreement.
(d) "Associate" of a Person has the meaning given to
such term in Rule 12b-2 of the General Rules and Regulations under
the Exchange Act, as in effect on the date of this Agreement.
(e) Except as provided below, a Person is the
"Beneficial Owner" of, and "beneficially owns," any securities:
(i) which such Person or any Affiliate or
Associate of such Person beneficially owns, directly or
indirectly;
(ii) which such Person or any Affiliate or
Associate of such Person has, directly or indirectly, the right or
obligation (whether or not then exercisable or effective) to
acquire pursuant to any agreement, arrangement or understanding
(whether or not in writing), or upon the exercise of conversion
rights, exchange rights, rights (other than these Rights),
warrants or options, or otherwise; provided, however, that a
Person will not be deemed the Beneficial Owner of, or to
beneficially own, securities tendered pursuant to a tender or
exchange offer made by or on behalf of such Person or any
Affiliate or Associate of such Person until such tendered
securities are accepted for purchase or exchange; and provided
further, that prior to the occurrence of a Triggering Event, a
Person will not be deemed the Beneficial Owner of, or to
beneficially own, securities obtainable upon exercise of the
Rights;
(iii) which such Person or any Affiliate or
Associate of such Person has, directly or indirectly, the right
(whether or not then exercisable or effective) to vote, or to
direct the voting of, pursuant to any agreement, arrangement or
understanding (whether or not in writing); provided, however, that
a Person shall not be deemed the Beneficial Owner of, or to
beneficially own, any security pursuant to this clause (iii) if
the agreement, arrangement or understanding to vote, or to direct
the voting of, such security (A) arises solely from a revocable
proxy or consent given in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the
Exchange Act and applicable rules and regulations thereunder and
(B) is not also then reportable on Schedule 13D under the Exchange
Act (or any comparable or successor schedule or report);
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(iv) which such Person or any Affiliate or
Associate of such Person has "beneficial ownership" of (as
determined pursuant to Rule 13d-3 of the General Rules and
Regulations under the Exchange Act or any successor provision); or
(v) which are beneficially owned, directly or
indirectly, by any other Person or any Affiliate or Associate of
such other Person with whom such Person or any Affiliate or
Associate of such Person 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 subparagraph (iii) of this Section 1(e)) or
disposing of any securities of the Company.
Nothing in this Section 1(e) causes a Person engaged in
business as an underwriter of securities to be the "Beneficial
Owner" of, or to "beneficially own," any securities acquired
through such Person's participation in good faith in a firm
commitment underwriting until the expiration of 40 days after the
date of such acquisition.
Notwithstanding anything in this Agreement to the
contrary, for purposes of this Agreement, no Person is to be
treated as the "Beneficial Owner" of, or to "beneficially own,"
any securities owned by any other Person that is an Exempt Person.
(f) "Board of Directors" means the Board of Directors
of the Company, as the same is constituted from time to time, or
if the Company ceases to exist as a result of a Business
Combination or otherwise, the board of directors of the Company's
successor, if any.
(g) "Business Combination" has the meaning set forth
in Section 13(a).
(h) "Business Day" means any day other than a
Saturday, Sunday or a day on which banking institutions in the
State of New York are authorized or obligated by law or executive
order to close.
(i) "Close of Business" on any given date means 5:00
p.m., New York City time, on such date; provided, however, that if
such date is not a Business Day it shall mean 5:00 p.m., New York
City on the next succeeding Business Day.
(j) "Common Stock" when used in any context applicable
prior to a Business Combination means the Common Stock, par value
$.001 per share, of the Company (as the same may be changed by
reason of any combination, subdivision or reclassification of the
Common Stock). "Common Stock" when used with reference to any
Person (other than the Company prior to a Business Combination)
means shares of capital stock of such Person (if such Person is a
corporation) of any class or series, or units of equity interests
in such Person (if such Person is not a corporation) of any class
or series, the terms of which shares or units do not limit (as a
fixed amount and not merely in proportional terms) the amount of
dividends or income payable or distributable on such shares or
units or the amount of assets distributable on such shares or
units upon any voluntary or involuntary liquidation, dissolution
or winding up of such Person and do not provide that such shares
or units are subject to redemption at the option of such Person,
or any shares of capital stock or units of equity interests into
which the foregoing shall be reclassified or changed; provided,
however, that if at any time there are more than one such class or
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series of capital stock of or equity interests in such Person,
"Common Stock" of such Person will include all such classes and
series substantially in the proportion of the total number of
shares or other units of each such class or series outstanding at
such time.
(k) "Current Market Price" per share of Common Stock,
Preferred Stock or Equivalent Shares on any date is the average of
the daily closing prices per share of such Common Stock, Preferred
Stock or Equivalent Shares for the 30 consecutive Trading Days (as
such term is hereinafter defined) ending on the last Trading Day
immediately prior to such date for the purpose of any computation
under this Agreement except computations made pursuant to Section
11(a)(iii), and for only the last Trading Day immediately prior to
such date for the purpose of any computation under Section
11(a)(iii); provided, however, that in the event that the Current
Market Price per share of Common Stock, Preferred Stock or
Equivalent Shares is determined during a period following the
announcement by the issuer of such Common Stock, Preferred Stock
or Equivalent Shares of (i) a dividend or distribution on such
Common Stock, Preferred Stock or Equivalent Shares other than a
regular quarterly cash dividend, or (ii) any subdivision,
combination or reclassification of such Common Stock, Preferred
Stock or Equivalent Shares, and prior to the expiration of 30
Trading Days after the "ex-dividend" date for such dividend or
distribution or the record date for such subdivision, combination
or reclassification, then, and in each such case, the "Current
Market Price" must be appropriately adjusted to take into account
such dividend, distribution, subdivision, combination or
reclassification. The closing price for each Trading Day shall be
the last sale price, regular way, on such day, or, in case no such
sale takes place on such day, the average of the closing bid and
asked prices, regular way, on such day, in either case as reported
in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New
York Stock Exchange ("NYSE") or, if the Common Stock, Preferred
Stock or Equivalent Shares are not listed or admitted to trading
on the NYSE, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the
principal United States national securities exchange, including
for these purposes the Nasdaq Stock Market, on which the Common
Stock, Preferred Stock or Equivalent Shares are listed or admitted
to trading or, if the Common Stock, Preferred Stock or Equivalent
Shares are not listed or admitted to trading on any United States
national securities exchange, the last quoted sale price on such
day or, if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market on such day, as
reported by the National Association of Securities Dealers, Inc.
Automated Quotation System ("Nasdaq") or such other system then in
use. If on any such day the Common Stock, Preferred Stock or
Equivalent Shares are not quoted by any such organization, the
average of the closing bid and asked prices on such day as
furnished by a professional market maker making a market in the
Common Stock, Preferred Stock or Equivalent Shares selected by a
majority of the Board of Directors shall be used. If no such
market maker is making a market, the fair market value of such
shares on such day as determined in good faith by a majority of
the Board of Directors or the Board of Directors of the issuer of
such Common Stock, Preferred Stock or Equivalent Shares must be
used, which determination must be described in a statement filed
with the Rights Agent and shall be final, binding and conclusive
for all purposes. The term "Trading Day" means a day on which the
principal United States national securities exchange on which the
Common Stock, Preferred Stock or Equivalent Shares are listed or
admitted to trading is open for the transaction of business or, if
the Common Stock, Preferred Stock of Equivalent Shares are not
listed or admitted to trading on any United States national
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securities exchange, but are traded in the over-the-counter market
and reported by Nasdaq, then any day for which Nasdaq reports the
high bid and low asked prices in the over-the-counter market, or
if the Common Stock, Preferred Stock or Equivalent Shares are not
traded in the over-the-counter market and reported by Nasdaq, then
a Business Day. If the Common Stock, Preferred Stock or
Equivalent Shares have not been so listed or admitted to trading
for 30 or more Trading Days or traded in the over-the-counter
market and reported by Nasdaq for 30 or more Trading Days,
"Current Market Price" per share means the fair market value per
share as determined in good faith by a majority of the Board of
Directors, whose determination must be described in a statement
filed with the Rights Agent and shall be final, binding and
conclusive for all purposes.
(l) "Distribution Date" means the earlier of (i) the
day after the Stock Acquisition Date, and (ii) the tenth Business
Day after the Tender Offer Date or the date of a business
combination. The Board of Directors of the Company may, at its
election, defer the date set forth in clause (ii) of the preceding
sentence to a specified later date or to an unspecified later date
to be determined by a subsequent action or event.
(m) "Equivalent Shares" means any class or series of
capital stock of the Company, other than the Preferred Stock,
which is entitled to participate on a proportional basis with the
Preferred Stock in dividends and other distributions, including
distributions upon the liquidation, dissolution or winding up of
the Company. In calculating the number of any class or series of
Equivalent Shares for purposes of Section 11, the number of
shares, or fractions of a share, of such class or series of
capital stock that is entitled to the same dividend or
distribution as a whole share of Preferred Stock shall be deemed
to be one share.
(n) "Exchange Act" means the Securities Exchange Act
of 1934, as amended, and any successor statute.
(o) "Exchange Date" means the time at which the Rights
are exchanged pursuant to Section 11(a)(iv).
(p) "Exempt Event" means with respect to any Person,
the acquisition by such Person of Beneficial Ownership of Common
Stock of the Company solely as a result of the occurrence of a
Triggering Event and the effect of such Triggering Event on the
last proviso of clause (ii) of the definition of Beneficial Owner,
other than a Triggering Event in which such Person becomes an
Acquiring Person.
(q) "Exempt Person" means (i) the Company, (ii) any
Subsidiary of the Company, (ii) any employee benefit plan of the
Company or of any Subsidiary of the Company, and (iv) any Person
holding Common Stock for any such employee benefit plan or for
employees of the Company or of any Subsidiary of the Company
pursuant to the terms of any such employee benefit plan.
(r) "Expiration Date" means the Close of Business on
May 15, 2008.
(s) "Institutional Investor" shall mean a Person who
is principally engaged in the business of managing investment
funds for unaffiliated securities investors and, as part of such
Person's duties as agent for fully managed accounts, holds or
exercises voting or dispositive power over shares of Common Stock.
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(t) "Person" means any individual, firm, corporation,
limited liability company, partnership, joint venture,
association, trust, unincorporated organization or other entity,
and shall include any "group" as that term is used in Rule
13d-5(b) under the Exchange Act (or any successor provision).
(u) "Preferred Stock" means the Company's Series A
Junior Participating Preferred Stock, par value $.001 per share,
having the rights and preferences set forth in the Certificate of
Incorporation of the Company.
(v) "Principal Party" means (i) in the case of any
Business Combination described in clause (i), (ii) or (iii) of the
first sentence of Section 13(a), (A) the Person that is the issuer
of any securities into which shares of Common Stock of the Company
are converted or for which they are exchanged in such Business
Combination or, if there is more than one such issuer, the issuer
of the Common Stock which has the greatest aggregate market value
or (B) if no securities are so issued, the Person that survives or
results from such Business Combination or, if there is more than
one such Person, the Person the Common Stock of which has the
greatest aggregate market value; and (ii) in the case of any
Business Combination described in clause (iv) of the first
sentence in Section 13(a), the Person that receives the greatest
portion of the assets or earning power transferred pursuant to
such Business Combination or, if each Person that is a party to
such Business Combination receives the same portion of the assets
or earning power so transferred or if the Person receiving the
greatest portion of the assets or earning power cannot reasonably
be determined, whichever of such Persons is the issuer of the
Common Stock which has the greatest aggregate market value;
provided, however, that in any such case, if the Common Stock of
such Person is not at such time and has not been continuously over
the preceding 12-month period registered under Section 12 of the
Exchange Act and such Person is a direct or indirect Subsidiary of
one or more other Persons, then (x) "Principal Party" refers to
whichever of such other Persons has Common Stock that is and has
been continuously over the preceding 12-month period registered
under Section 12 of the Exchange Act; (y) if the Common Stocks of
two or more of such other Persons are and have been so registered,
"Principal Party" refers to whichever of such other Persons is the
issuer of the Common Stock which has the greatest aggregate market
value; or (z) if the Common Stock of none of such other Persons
has been so registered, "Principal Party" refers to whichever of
such other Persons (other than an individual) is the Person which
has the equity securities with the greatest aggregate market
value. In case such Person is owned, directly or indirectly, by a
joint venture formed by two or more Persons that are not owned,
directly or indirectly, by the same Person, the rules set forth
above apply to each of the chains of ownership having an interest
in such joint venture as if such Person were a Subsidiary of both
or all of such joint venturers and the Principal Parties in each
such chain shall bear the obligations set forth in Section 13 in
the same ratio as their direct or indirect interests in such
Person bear to the total of such interests.
(w) "Purchase Price" with respect to each Right is
initially $25.00 per one one-hundredth of a share of Preferred
Stock, shall be subject to adjustment from time to time as
provided in Sections 11 and 13, and shall be payable in lawful
money of the United States of America in cash or by certified
check or bank draft payable to the order of the Company.
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(x) "Record Date" means the Close of Business on May
15, 1998.
(y) "Redemption Date" means the time at which the
Rights are scheduled to be redeemed as provided in Section 23.
(z) "Redemption Price" has the meaning given to such
term in Section 23.
(aa) "Regular Trading Activities" means trading
activities undertaken in the Institutional Investor's normal
course of business and not for the purpose of exercising, either
alone or in concert with any other Person, power to direct or
cause the direction of the management and policies of the Company.
(bb) "Rights Agent" means ChaseMellon Shareholder
Services, L.L.C., or any Co-Rights Agent or Successor Rights Agent
appointed by the Company pursuant to Section 2.
(cc) "Securities Act" means the Securities Act of 1933,
as amended, and any successor statute.
(dd) "Stock Acquisition Date" means the first date
(including, without limitation, any such date which is on or after
the date of this Agreement and prior to the issuance of the
Rights) of public disclosure by the Company, an Acquiring Person
or otherwise that a Person has become an Acquiring Person.
(ee) "Subsidiary" has the meaning given to such term in
Rule 12b-2 of the General Rules and Regulations under the Exchange
Act, as in effect on the date of this Agreement.
(ff) "Tender Offer Date" means the date of commencement
or public disclosure of an intention to commence (including any
such commencement or public disclosure which occurs on or after
the date of this Agreement and prior to the issuance of the
Rights) a tender offer or exchange offer by a Person if, after
acquiring the maximum number of securities sought pursuant to such
offer, such Person, or any Affiliate or Associate of such Person,
would be an Acquiring Person.
(gg) "Triggering Event" occurs when a Person becomes an
Acquiring Person.
(hh) "Voting Power" means the voting power of all
securities of the Company then outstanding generally entitled to
vote for the election of directors of the Company.
Section 2. Appointment of Rights Agent. The Company
hereby appoints the Rights Agent to act as agent for the Company
in accordance with the terms and conditions hereof, and the Rights
Agent hereby accepts such appointment. The Company may from time
to time appoint such co-Rights Agents as it may deem necessary or
desirable.
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Section 3. Issuance of Rights Certificates.
(a) Until the Distribution Date: (i) the Rights shall
be issued in respect of and shall be evidenced by the certificates
representing the shares of Common Stock issued and outstanding on
the Record Date and shares of Common Stock issued or which become
outstanding after the Record Date and prior to the earliest of the
Distribution Date, the Redemption Date, the Exchange Date and the
Expiration Date (which certificates for Common Stock shall be
deemed to also be certificates evidencing the Rights), and not by
separate certificates; (ii) the registered holders of such shares
of Common Stock shall also be the registered holders of the Rights
associated with such shares; and (iii) the Rights shall be
transferable only in connection with the transfer of shares of
Common Stock and the surrender for transfer of any certificate for
such shares of Common Stock shall also constitute the surrender
for transfer of the Rights associated with the shares of Common
Stock represented thereby. As soon as practicable after the
Company has notified the Rights Agent of the occurrence of the
Distribution Date, the Company will prepare and execute, and the
Company will deliver to the Rights Agent to be countersigned,
which the Rights Agent shall do, and the Rights Agent shall mail,
by first-class, insured, postage prepaid mail, to each record
holder of the Common Stock as of the Close of Business on the
Distribution Date, as shown by the records of the Company, at the
address of such holder shown on such records, one or more
certificates evidencing the Rights ("Rights Certificates"), in
substantially the form of Exhibit B hereto, evidencing one Right
(as adjusted from time to time pursuant to this Agreement) for
each share of Common Stock so held. From and after the
Distribution Date, the Rights will be evidenced solely by such
Rights Certificates. In the event that an adjustment in the
number of Rights per share of Common Stock has been made pursuant
to Section 11(o), at the time of distribution of the Rights
Certificates, the Company may make the necessary and appropriate
adjustments (in accordance with Section 14(a)) so that Rights
Certificates representing only whole numbers of Rights are
distributed and cash is paid in lieu of any fractional Rights.
(b) On the Record Date, or as soon as practicable
thereafter, the Company will send a copy of a Summary of Rights to
Purchase Preferred Stock, in substantially the form of Exhibit C
hereto (the "Summary of Rights"), by first-class, postage-prepaid
mail, to each record holder of Common Stock as of the close of
business on the Record Date (other than any Acquiring Person or
any Associate or Affiliate of any Acquiring Person), at the
address of such holder shown on the records of the Company. With
respect to certificates for Common Stock outstanding as of the
Record Date, until the Distribution Date, the Rights will be
evidenced by such certificates registered in the names of the
holders thereof together with the Summary of Rights. Until the
Distribution Date (or the earlier of the Redemption Date and the
Expiration Date), the surrender for transfer of any certificate
for Common Stock outstanding on the Record Date, with or without a
copy of the Summary of Rights, shall also constitute the transfer
of the Rights associated with the Common Stock represented
thereby.
(c) Rights shall be issued in respect of all shares of
Common Stock which are issued or sold by the Company after the
Record Date but prior to the earliest of the Distribution Date,
the Redemption Date, the Exchange Date or the Expiration Date. In
addition, in connection with the issuance or sale of Common Stock
by the Company following the Distribution Date and prior to the
earliest of the Redemption Date, the Exchange Date or the
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Expiration Date, the Company shall, with respect to Common Stock
so issued or sold pursuant to (i) the exercise of stock options
issued prior to the Distribution Date or under any employee plan
or arrangement created prior to the Distribution Date, or (ii)
upon the exercise, conversion or exchange of securities issued by
the Company prior to the Distribution Date, issue Rights and
Rights Certificates representing the appropriate number of Rights
in connection with such issuance or sale; provided, however, that
(x) no such Rights and Rights Certificates 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
Certificates would be issued; and (y) no such Rights and Rights
Certificates shall be issued, if, and to the extent that,
appropriate adjustment shall otherwise have been made in lieu of
the issuance thereof. Certificates issued after the Record Date
representing shares of Common Stock outstanding on the Record Date
or shares of Common Stock issued after the Record Date but prior
to the earliest of the Distribution Date, the Redemption Date, the
Exchange Date and the Expiration Date shall have impressed,
printed, or written on, or otherwise affixed to them a legend
substantially in the following form:
This certificate also evidences and entitles the
holder hereof to certain Rights as set forth in a
Rights Agreement between Noodle Kidoodle, Inc. and
ChaseMellon Shareholder Services, L.L.C., as Rights
Agent, dated as of May 1, 1998 (the "Rights
Agreement"), the terms of which are hereby incorporated
herein by reference and a copy of which is on file at
the principal executive offices of Noodle Kidoodle,
Inc. Under certain circumstances, as set forth in the
Rights Agreement, such Rights will be evidenced by
separate certificates and will no longer be evidenced
by this certificate. Noodle Kidoodle, Inc. will mail
to the holder of this certificate a copy of the Rights
Agreement without charge after receipt of a written
request therefor. Under certain circumstances, as set
forth in the Rights Agreement, Rights that were, are or
become beneficially owned by Acquiring Persons or their
Associates or Affiliates (as such terms are defined in
the Rights Agreement) may become null and void and the
holder of any of such Rights (including any subsequent
holder) shall not have any right to exercise such
Rights.
Section 4. Form of Rights Certificates.
(a) The Rights Certificates (and the form of election
to purchase shares and form of assignment to be printed on the
reverse thereof) shall be in substantially the form of Exhibit B
hereto and may have such marks of identification or designation
and such legends, summaries or endorsements printed thereon as the
Company may deem appropriate and as are not inconsistent with the
provisions of this Agreement, or as may be required to comply with
any law or with any rule or regulation made pursuant thereto or
with any rule or regulation of any stock exchange on which the
Rights may from time to time be listed or any securities
association on whose interdealer quotation system the Rights may
be from time to time authorized for quotation, or to conform to
usage. Subject to the provisions of this Agreement, the Rights
Certificates, whenever issued, shall be dated as of the
Distribution Date, and on their face shall entitle the holders
thereof to purchase such number of shares of Preferred Stock as
shall be set forth therein at the Purchase Price set forth
therein, but the number and kind of such securities and the
Purchase Price shall be subject to adjustment as provided in this
Agreement.
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(b) Notwithstanding any other provision of this
Agreement, (i) any Rights Certificate issued pursuant to this
Agreement that represents Rights beneficially owned or formerly
beneficially owned, on or after the earlier of the Distribution
Date and the Stock Acquisition Date, by a Person known by the
Company to be: (A) an Acquiring Person or an Associate or
Affiliate of an Acquiring Person; (B) a direct or indirect
transferee of an Acquiring Person (or of an Associate or Affiliate
of such Acquiring Person) who becomes or becomes entitled to be a
transferee after the Acquiring Person becomes such; or (C) a
direct or indirect transferee of an Acquiring Person (or of an
Associate or Affiliate of such Acquiring Person) who becomes or
becomes entitled to be a transferee prior to or concurrently with
the Acquiring Person becoming such and receives such Rights
pursuant to either (x) a direct or indirect transfer (whether or
not for consideration) from the Acquiring Person (or from an
Associate or Affiliate of such Acquiring Person) to holders of
equity interests in such Acquiring Person (or to holders of equity
interests in an Associate or Affiliate of such Acquiring Person)
or to any Person with whom such Acquiring Person (or an Associate
or Affiliate of such Acquiring Person) has any continuing
agreement, arrangement or understanding regarding the transferred
Rights, or (y) a direct or indirect transfer which a majority of
the Board of Directors has determined is part of a plan,
arrangement or understanding which has as a primary purpose or
effect the avoidance of Section 7(e); or (ii) any Rights
Certificate issued pursuant to this Agreement upon transfer,
exchange, replacement or adjustment of any other Rights
Certificate beneficially owned by a Person referred to in this
Section 4(b), shall contain (to the extent feasible) the following
legend:
The Rights represented by this Rights Certificate
are or were beneficially owned by a Person who was or
became an Acquiring Person or an Affiliate or Associate
of an Acquiring Person (as such terms are defined in
the Rights Agreement). Accordingly, this Rights
Certificate and the Rights represented hereby may
become null and void in the circumstances specified in
Section 7(e) of the Rights Agreement.
Section 5. Execution, Countersignature and Registration.
(a) Each Rights Certificate shall be executed on
behalf of the Company by the Company's Chairman of the Board, Vice
Chairman of the Board, President or any Vice President, either
manually or by facsimile signature, and shall have affixed thereto
the Company's seal or a facsimile thereof which shall be attested
by the Company's Secretary or an Assistant Secretary, either
manually or by facsimile signature. Each Rights Certificate shall
be countersigned by the Rights Agent either manually or, if
permitted by the Company, by facsimile signature and shall not be
valid for any purpose unless so countersigned. In case any
officer of the Company who shall have signed a Rights Certificate
shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by
the Company, such Rights Certificate nevertheless may be
countersigned by the Rights Agent and issued and delivered with
the same force and effect as though the Person who signed such
Rights Certificate had not ceased to be such officer of the
Company; and any Rights Certificate may be signed on behalf of the
Company by any Person who, at the actual date of the execution of
such Rights Certificate, shall be a proper officer of the Company
to sign such Rights Certificate, although at the date of the
execution of this Agreement any such Person was not such an
officer.
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(b) Following the Distribution Date, the Rights Agent
shall keep or cause to be kept, at its principal corporate trust
office, books for registration and transfer of the Rights
Certificates issued hereunder. Such books shall show the names
and addresses of the respective holders of the Rights
Certificates, the number of Rights evidenced by each Rights
Certificate, and the certificate number and the date of issuance
of each Rights Certificate.
Section 6. Transfer, Division, Combination and
Exchange of Rights Certificates; Mutilated, Destroyed, Lost or
Stolen Rights Certificates.
(a) Subject to the provisions of Section 14, at any
time after the Close of Business on the Distribution Date and at
or prior to the Close of Business on the earliest of the
Redemption Date, the Exchange Date or the Expiration Date, any
Rights Certificate or Rights Certificates may be transferred,
divided, combined or exchanged for another Rights Certificate or
Rights Certificates, entitling the registered holder to purchase a
like number of shares of Preferred Stock (or, following a
Triggering Event or a Business Combination, other securities, cash
or other property, as the case may be) as the Rights Certificate
or Rights Certificates surrendered then entitled such holder to
purchase. Any registered holder desiring to transfer, divide,
combine or exchange any Rights Certificate shall make such request
in writing delivered to the Rights Agent, and shall surrender the
Rights Certificate or Rights Certificates to be transferred,
divided, combined or exchanged at the principal corporate office
of the Rights Agent. Thereupon the Rights Agent shall countersign
and deliver to the Person entitled thereto a Rights Certificate or
Rights Certificates, as the case may be, as so requested. As a
condition to such transfer, division, combination or exchange, the
Company may require payment by the surrendering holder of a sum
sufficient to cover any tax or governmental charge that may be
imposed in connection therewith. 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 duly completed and executed
the form of assignment on the reverse side of such Rights
Certificate and shall have provided such additional evidence of
the identity of the Beneficial Owner (or such former or proposed
Beneficial Owner) thereof or such Beneficial Owner's Affiliates or
Associates as the Company shall reasonably request.
(b) Upon receipt by the Company and the Rights Agent
of evidence reasonably satisfactory to them of the loss, theft,
destruction or mutilation of a Rights Certificate, and, in case of
loss, theft or destruction, of indemnity or security reasonably
satisfactory to them, and reimbursement to the Company and the
Rights Agent of all reasonable expenses incidental thereto, and
upon surrender to the Rights Agent and cancellation of the Rights
Certificate if mutilated, the Company will make and deliver a new
Rights Certificate of like tenor to the Rights Agent for
countersignature by the Rights Agent and delivery to the
registered owner in lieu of the Rights Certificate so lost,
stolen, destroyed or mutilated.
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Section 7. Exercise of Rights; Purchase Price;
Expiration Date of Rights.
(a) Each Right shall entitle (except as otherwise
provided in this Agreement) the registered holder thereof, upon
the exercise thereof as provided in this Agreement, to purchase,
for the Purchase Price, at any time after the Distribution Date
and prior to the earliest of the Expiration Date, the Exchange
Date or the Redemption Date, one one-hundredth (1/100) of a share
of Preferred Stock (or, following a Triggering Event or a Business
Combination, other securities, cash or other assets, as the case
may be), subject to adjustment from time to time as provided in
Sections 11 and 13.
(b) The registered holder of any Rights Certificate
may exercise the Rights evidenced thereby (except as otherwise
provided in this Agreement) in whole or in part (except that no
fraction of a Right may be exercised) at any time after the
Distribution Date and prior to the earliest of the Expiration
Date, the Exchange Date or the Redemption Date, by surrendering
the Rights Certificate, with the form of election to purchase on
the reverse side thereof duly executed, to the Rights Agent at the
principal corporate trust office of the Rights Agent, together
with payment of the Purchase Price for each one one-hundredth of a
share of Preferred Stock (or, following a Triggering Event or a
Business Combination, other securities, cash or other assets, as
the case may be) as to which the Rights are exercised.
(c) Upon receipt of a Rights Certificate representing
exercisable Rights, with the form of election to purchase duly
executed, accompanied by payment of the Purchase Price for each
one one-hundredth of a share of Preferred Stock (or, following a
Triggering Event or a Business Combination, other securities, cash
or other assets, as the case may be) to be purchased and an amount
in cash, certified bank check or bank draft payable to the order
of the Company equal to any applicable transfer tax required to be
paid by the surrendering holder pursuant to Section 9(d), the
Rights Agent shall, subject to the provisions of this Agreement,
thereupon promptly (i)(A) requisition from any transfer agent for
the Preferred Stock (or make available, if the Rights Agent is the
transfer agent for the Preferred Stock) certificates for the total
number of one one-hundredths of a share of Preferred Stock to be
purchased (and the Company hereby irrevocably authorizes its
transfer agent to comply with all such requests), or (B) if the
Company shall have elected to deposit the total number of shares
of Preferred Stock issuable upon exercise of the Rights with a
depositary agent, requisition from the depositary agent depositary
receipts representing such number of one one-hundredths of a share
of Preferred Stock as are to be purchased (in which case
certificates for the Preferred Stock represented by such receipts
shall be deposited by the transfer agent with the depositary
agent) and the Company shall direct the depositary agent to comply
with such request; (ii) after receipt of such certificates or
depositary receipts, cause the same to be delivered to or upon the
order of the registered holder of such Rights Certificate,
registered in such name or names as may be designated by such
holder; and (iii) if appropriate, requisition from the Company the
amount of cash to be paid in lieu of issuance of fractional shares
in accordance with Section 14 and, promptly after receipt thereof,
cause the same to be delivered to or upon the order of the
registered holder of such Rights Certificate. In the event that
the Company is obligated to issue other securities (including
shares of Common Stock) of the Company, pay cash and/or distribute
other property pursuant to this Agreement, the Company will make
all arrangements necessary so that such other securities, cash
and/or other property are available for distribution by the Rights
Agent, if and when appropriate.
-13-
(d) In case the registered holder of any Rights
Certificate shall exercise less than all the Rights evidenced
thereby, a new Rights Certificate evidencing Rights equivalent to
the Rights remaining unexercised shall be issued by the Rights
Agent and delivered to, or upon the order of, the registered
holder of such Rights Certificate or to his duly authorized
assigns, subject to the provisions of Section 6 and Section 14.
(e) Notwithstanding anything in this Agreement to the
contrary, any Rights that are or were formerly beneficially owned
on or after the earlier of the Distribution Date and the Stock
Acquisition Date by (i) an Acquiring Person or any Associate or
Affiliate of an Acquiring Person; (ii) a direct or indirect
transferee of an Acquiring Person (or of an Associate or Affiliate
of such Acquiring Person) who becomes or becomes entitled to be a
transferee after the Acquiring Person becomes such; or (iii) a
direct or indirect transferee of an Acquiring Person (or of an
Associate or Affiliate of such Acquiring Person) who becomes or
becomes entitled to be a transferee prior to or concurrently with
the Acquiring Person becoming such and receives such Rights
pursuant to either (A) a direct or indirect transfer (whether or
not for consideration) from the Acquiring Person (or from an
Associate or Affiliate of such Acquiring Person) to holders of
equity interests in such Acquiring Person (or to holders of equity
interests in any Associate or Affiliate of such Acquiring Person)
or to any Person with whom the Acquiring Person (or an Associate
or Affiliate of such Acquiring Person) has any continuing
agreement, arrangement or understanding regarding the transferred
Rights, or (B) a direct or indirect transfer which a majority of
the Board of Directors of the Company determines is part of a
plan, arrangement or understanding which has as a primary purpose
or effect the avoidance of this Section 7(e), shall, immediately
upon the occurrence of a Triggering Event and without any further
action, be null and void and no holder of such Rights shall have
any rights whatsoever with respect to such Rights whether under
this Agreement or otherwise; provided, however, that, in the case
of transferees described in clause (ii) or clause (iii) of this
Section 7(e), any Rights beneficially owned by such transferee
shall be null and void only if and to the extent such Rights were
formerly beneficially owned by a Person who was, at the time such
Person beneficially owned such Rights, or who later became, an
Acquiring Person or an Affiliate or Associate of such Acquiring
Person. The Company shall use all reasonable efforts to ensure
that the provisions of this Section 7(e) and Section 4(b) are
complied with, but shall have no liability to any holder of a
Rights Certificate or to any other Person as a result of the
Company's failure to make, or any delay in making (including any
such failure or delay by the Board of Directors of the Company),
any determinations with respect to an Acquiring Person or its
Affiliates, Associates or transferees under this Section 7(e) or
any other provision of this Agreement.
(f) Notwithstanding anything in this Agreement to the
contrary, neither the Rights Agent nor the Company shall be
obligated to undertake any action with respect to the registered
holder of a Rights Certificate upon the occurrence of any
purported exercise as set forth in this Section 7 unless such
registered holder shall have (i) completed and signed the
certificate contained in the form of election to purchase set
forth on the reverse side of the Rights Certificate surrendered
for such exercise, and (ii) provided such additional evidence of
the identity of the Beneficial Owner (or former or proposed
Beneficial Owner) thereof or the Affiliates or Associates of such
Beneficial Owner (or former or proposed Beneficial Owner) as the
Company shall reasonably request.
-14-
Section 8. Cancellation and Destruction of Rights
Certificates. All Rights Certificates surrendered for the purpose
of exercise, transfer, division, combination or exchange shall, if
surrendered to the Company or to any of its agents, be delivered
to the Rights Agent for cancellation or in canceled form, or, if
surrendered to the Rights Agent, shall be canceled by it, and no
Rights Certificates shall be issued in lieu therefor except as
expressly permitted by the provisions of this Agreement. The
Company shall deliver to the Rights Agent for cancellation and
retirement, and the Rights Agent shall so cancel and retire, any
other Rights Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall
deliver all canceled Rights Certificates to the Company, or shall,
at the written request of the Company, destroy such canceled
Rights Certificates, and in such case shall deliver a certificate
of destruction thereof to the Company.
Section 9. Reservation and Availability of Preferred Stock.
(a) The Company covenants and agrees that it will
cause to be reserved and kept available at all times out of its
authorized and unissued shares of Preferred Stock or its
authorized and issued shares of Preferred Stock held in its
treasury (and, following the occurrence of a Triggering Event or a
Business Combination, out of its authorized and unissued shares of
Common Stock and/or other securities or out of its authorized and
issued shares of Common Stock and/or other securities held in its
treasury) free from preemptive rights or any right of first
refusal, a sufficient number of shares of Preferred Stock (and,
following the occurrence of a Triggering Event or a Business
Combination, shares of Common Stock and/or other securities) to
permit the exercise in full of all Rights from time to time
outstanding.
(b) The Company further covenants and agrees, so long
as the Preferred Stock (and, following the occurrence of a
Triggering Event or a Business Combination, shares of Common Stock
and/or other securities) issuable upon the exercise of Rights may
be listed on any United States national securities exchange or
quoted on any automated quotation system, to use its best efforts
to cause, from and after the time that the Rights become
exercisable, all such shares and/or other securities reserved for
such issuance to be listed on such exchange or quoted on such
automated quotation system upon official notice of issuance upon
such exercise.
(c) The Company further covenants and agrees that it
will take all such action as may be necessary to ensure that all
shares of Preferred Stock (and, following the occurrence of a
Triggering Event or a Business Combination, shares of Common Stock
and/or other securities) delivered upon the exercise of Rights
shall, at the time of delivery of the certificates for such shares
and/or such other securities (subject to payment of the Purchase
Price), be duly and validly authorized and issued, fully paid,
nonassessable, freely tradeable, not subject to liens or
encumbrances, and free of preemptive rights, rights of first
refusal or any other restrictions or limitations on the transfer
or ownership thereof, of any kind or nature whatsoever.
(d) The Company further covenants and agrees that it
will pay when due and payable any and all federal and state
transfer taxes and charges which may be payable in respect of the
original issuance or delivery of the Rights Certificates or of any
certificates for shares of Preferred Stock (or Common Stock and/or
other securities, as the case may be) upon the exercise of Rights.
The Company shall not, however, be required to (i) pay any
transfer tax which may be payable in respect of any transfer
involved in the issuance or delivery of any Rights Certificates or
the issuance or delivery of any certificates for shares of
-15-
Preferred Stock (or Common Stock and/or other securities as the
case may be) to a Person other than, or in a name other than that
of, the registered holder of the Rights Certificate evidencing
Rights surrendered for exercise; or (ii) transfer or deliver any
Rights Certificate or issue or deliver any certificates for shares
of Preferred Stock (or Common Stock and/or other securities as the
case may be) upon the exercise of any Rights until any such tax
shall have been paid (any such tax being payable by the holder of
such Rights Certificate at the time of surrender) or until it has
been established to the Company's satisfaction that no such tax is
due.
(e) The Company shall use its best efforts (i) as soon
as practicable following a Triggering Event (provided the
consideration to be delivered by the Company upon exercise of the
Rights has been determined in accordance with Section 11(a)(iii)),
or as soon as is required by law following the Distribution Date,
as the case may be, to prepare and file a registration statement
on an appropriate form under the Securities Act with respect to
the securities purchasable upon exercise of the Rights; (ii) to
cause such registration statement to become effective as soon as
practicable after such filing; and (iii) to cause such
registration statement to remain effective (with a prospectus at
all times meeting the requirements of the Securities Act) until
the earlier of (A) the date as of which Rights are no longer
exercisable for such securities or (B) the Expiration Date. The
Company shall also use its best efforts to take such action as may
be necessary or appropriate under, or to ensure compliance with,
the securities or "blue sky" laws of the various states in
connection with the exercise of the Rights. The Company may
temporarily suspend, for a period of time not to exceed 90 days
after the date of a Triggering Event, the exercisability of the
Rights in order to prepare and file such registration statement
and permit it to become effective. Upon any such suspension, the
Company shall make a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as
well as a public announcement at such time as the suspension is no
longer in effect. Notwithstanding any provision of this Agreement
to the contrary, the Rights shall not be exercisable in any
jurisdiction unless the requisite qualification in such
jurisdiction shall have been obtained and until a registration
statement has been declared effective under the Securities Act.
Section 10. Preferred Stock Record Date. Each Person
in whose name any certificate for shares of Preferred Stock (or
Common Stock and/or other securities, as the case may be) is
issued upon the exercise of Rights shall for all purposes be
deemed to have become the holder of record of the Preferred Stock
(or Common Stock and/or other securities, as the case may be)
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 Common Stock and/or other securities, as the
case may be) transfer books of the Company are closed, such Person
shall be deemed to have become the record holder of such shares
(or Common Stock and/or such other securities, as the case may be)
on, and such certificate shall be dated, the next succeeding
Business Day on which the Preferred Stock (or Common Stock and/or
other securities, as the case may be) transfer books of the
Company are open.
-16-
Section 11. Adjustments to Purchase Price, Number of
Shares or Number of Rights. The Purchase Price, the number and
kind of securities, cash and other property obtainable upon
exercise of each Right and the number of Rights outstanding shall
be subject to adjustment from time to time as provided in this
Section 11.
(a) (i) In the event the Company shall at any time on
or after the date of this Agreement (A) pay a dividend or make a
distribution on the Preferred Stock payable in shares of Preferred
Stock, (B) subdivide (by a stock split or otherwise) the
outstanding Preferred Stock into a larger number of shares, (C)
combine (by a reverse stock split or otherwise) the outstanding
Preferred Stock into a smaller number of shares, or (D) issue any
securities in a reclassification of the Preferred Stock (including
any such reclassification in connection with a consolidation or
merger in which the Company is the surviving corporation), then in
each such event the Purchase Price and the Redemption Price set
forth in Section 23, as each is in effect at the time of the
record date for such dividend or distribution, or of the effective
date of such subdivision, combination or reclassification, shall
be proportionately adjusted by multiplying the Purchase Price and
such Redemption Price by a fraction the numerator of which shall
be the total number of shares of Preferred Stock outstanding
immediately prior to the occurrence of such event and the
denominator of which shall be the total number of shares of
Preferred Stock outstanding immediately following the occurrence
of such event. If an event occurs which would require an
adjustment under both this Section 11(a)(i) and Section 11(a)(ii),
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).
(ii) Upon the first occurrence of a Triggering
Event, proper provision shall be made so that each holder of a
Right, except as otherwise provided in this Agreement, shall
thereafter have the right to receive, and the Company shall issue,
upon exercise thereof at the then-current Purchase Price required
to be paid in order to exercise a Right in accordance with the
terms of this Agreement, in lieu of the number of one
one-hundredths of a share of Preferred Stock or other securities
receivable upon exercise of a Right prior to the occurrence of the
Triggering Event, such number of shares of Common Stock of the
Company as shall equal the result obtained by (x) multiplying the
then-current Purchase Price by the number of one-hundredths of a
share of Preferred Stock or other securities for which a Right was
then exercisable (without giving effect to such Triggering Event)
and (y) dividing that product by the lesser of (I) 50% of the
Current Market Price per share of Common Stock on the date of the
occurrence of the Triggering Event and (II) the then-current
Purchase Price (such number of shares being referred to as the
"Adjustment Shares"); provided, however, that if the transaction
or event that would otherwise give rise to the foregoing
adjustment is also subject to the provisions of Section 13, then
only the provisions of Section 13 shall apply and no adjustment
shall be made pursuant to this Section 11(a)(ii). Upon the
occurrence of such Triggering Event, the Purchase Price required
to be paid in order to exercise a Right shall be unchanged, and
the Purchase Price shall be appropriately adjusted to reflect, and
shall thereafter mean, the amount required to be paid per share of
Common Stock upon exercise of a Right.
(iii) In lieu of issuing shares of Common Stock
in accordance with Section 11(a)(ii), the Company may, if a
majority of the Board of Directors of the Company determines that
such action is necessary or appropriate and not contrary to the
interests of holders of Rights (and, in the event that the number
of shares of Common Stock which are authorized by the Company's
certificate of incorporation, but which are not outstanding or
-17-
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 Section 11(a)(ii), the Company shall)
take one or more of the following actions: (A) reduce (but in no
event less than the Current Market Price per share of Common
Stock) the Purchase Price required to be paid in order to exercise
a Right by any amount (the "Reduction Amount"), in which event the
number of Adjustment Shares and/or the amount of any Substitute
Consideration (as hereinafter defined) issuable in respect of each
Right (the Adjustment Shares, if any, and the Substitute
Consideration, if any, issuable in respect of a Right are herein
collectively referred to as the "Total Consideration") shall be
reduced so that the aggregate value of the Total Consideration
issuable in respect of each Right is equal to the Current Value
(as hereinafter defined) less the Reduction Amount (such
difference, the "Adjusted Current Value"); and/or (B) make
adequate provision with respect to each Right to substitute for
all or part of the Adjustment Shares otherwise obtainable upon
exercise of a Right: (1) cash, (2) other equity securities of the
Company (including, without limitation, shares, or units of
shares, of preferred stock which a majority of the Board of
Directors of the Company have determined (which determination
shall be final, binding and conclusive for all purposes) to have
the same value as shares of Common Stock (such shares or units of
preferred stock being referred to as "Common Stock Equivalents")),
(3) debt securities of the Company, (4) other assets, or (5) any
combination of the foregoing (collectively, "Substitute
Consideration") having an aggregate value which, when added to the
value of the Adjustment Shares (if any) in respect of which no
substitution is being made, is equal to the Adjusted Current
Value. If a majority of the Board of Directors determines to
issue or deliver any equity securities (other than Common Stock or
Common Stock Equivalents), debt securities and/or other assets
pursuant to this Section 11(a)(iii), the value of such securities
and/or assets shall be determined by a majority of the Board of
Directors of the Company based upon the advice of a nationally
recognized investment banking firm selected by a majority of the
Board of Directors of the Company (which determination shall be
final, binding and conclusive for all purposes). If the Company
is required to make adequate provision to deliver value pursuant
to the first sentence of this Section 11(a)(iii) and the Company
shall not have made such adequate provision to deliver value
within ninety (90) days following the first occurrence of a
Triggering Event (the "Substitution Period"), then notwithstanding
any provision of Section 11(a)(ii) or this Section 11(a)(iii) to
the contrary, the Company shall be obligated to deliver, upon the
surrender for exercise of a Right and without requiring payment of
the Purchase Price, shares of Common Stock (to the extent
available) and then, if necessary, cash, which shares and/or cash
have an aggregate value equal to the excess of the Current Value
over the Purchase Price. If both Common Stock and cash are to be
delivered pursuant to the preceding sentence, amounts of both
Common Stock and cash shall be delivered upon surrender of each
Right in a ratio of Common Stock to cash that bears the same ratio
as the total value of all Common Stock to be delivered (as
determined pursuant to this Section 11(a)(iii)) bears to the total
value of all cash to be delivered; provided, however, that the
Company may adjust such ratio to avoid issuing any fractional
shares of Common Stock so long as the method of adjustment is
applied consistently to each holder of Rights entitled to receive
value thereon pursuant to this Section 11(a)(iii). To the extent
that the Company determines that some action is to be taken
pursuant to the first and/or third sentences of this Section
11(a)(iii), the Company (x) shall provide, subject to Section 7(e)
hereof, that such action shall apply uniformly to all outstanding
Rights, and (y) may suspend the exercisability of the Rights but
in no event to a time later than the expiration of the
Substitution Period. In the event of any such suspension, the
Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as
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well as a public announcement at such time as the suspension is no
longer in effect. Upon any change in the Adjustment Shares
obtainable upon exercise of a Right pursuant to this Section
11(a)(iii), the Purchase Price shall thereafter mean the amount,
if any, required to be paid upon exercise of a Right for the
Adjustment Shares, if any, and the Substitute Consideration, if
any, then issuable or deliverable upon exercise of a Right, and a
majority of the Board of Directors of the Company shall make any
necessary provisions to ensure that the provisions of Section
11(e) shall thereafter apply as appropriate to the Total
Consideration. For purposes of this Section 11(a)(iii), (A)
"Current Value" shall be the product derived by multiplying (x)
the number of Adjustment Shares issuable in respect of each Right
determined under Section 11(a)(ii), by (y) the Current Market
Price per share of Common Stock on the date of the Triggering
Event; and (B) the value of each share of Common Stock and each
share or unit of any "Common Stock Equivalent" shall be deemed
conclusively to be equal to the Current Market Price per share of
the Common Stock on the date of the Triggering Event.
(iv) A majority of the Board of Directors of the
Company may, at its option, at any time and from time to time
after the first occurrence of a Triggering Event, cause the
Company to exchange, for all or part of the then-outstanding and
exercisable Rights (which shall not include Rights that have
become void pursuant to the provisions of Section 7(e)), shares of
Common Stock or Common Stock Equivalents at an exchange ratio of
one share of Common Stock or one Common Stock Equivalent per
Right, appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date of this
Agreement (such exchange ratio being hereinafter referred to as
the "Exchange Ratio"). Any partial exchange shall be effected on
a pro rata basis based on the number of Rights (other than Rights
which have become void pursuant to the provisions of Section 7(e))
held by each holder of Rights.
Immediately upon the action of a majority of the Board
of Directors of the Company ordering the exchange of any Rights
pursuant to this Section 11(a)(iv) 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 Common Stock and/or
Common Stock Equivalents 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 and, in
addition, the Company shall promptly mail a notice of any such
exchange to all of the holders of such Rights in accordance with
Section 25; provided, however, that the failure to give, any delay
in giving or any defect in, such notice shall not affect the
validity of such exchange. Each such notice of exchange will
state the method by which the exchange of the Common Stock or
Common Stock Equivalents for Rights will be effected and, in the
event of any partial exchange, the number of Rights which will be
exchanged. In the event that the number of shares of Common Stock
which is authorized but not outstanding or reserved for issuance
for a purpose other than exercise of the Rights is not sufficient
to permit any exchange of Rights as contemplated in accordance
with this Section 11(a)(iv), the Board of Directors of the Company
shall take all such action within its power as may be necessary to
authorize additional shares of Common Stock for issuance upon
exchange of the Rights. The Company shall not be required to
issue fractions of shares of Common Stock or Common Stock
Equivalents or to distribute certificates which evidence
fractional shares of Common Stock or Common Stock Equivalents. In
lieu of such fractional shares of Common Stock or Common Stock
Equivalents, the Company shall pay to the registered holders of
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the Rights Certificates with regard to which such fractional
shares of Common Stock or Common Stock Equivalents would otherwise
be issuable an amount in cash equal to the product derived by
multiplying (x) the subject fraction, by (y) the last sale price
of the Company's Common Stock on the fifth Trading Day following
the public announcement of the exchange by the Company, or, in
case no such sale takes place on such day, the average of the
closing bid and asked prices on such day, in either case on a when
issued basis (taking into account the exchange), as reported in
the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the NYSE
(or, if the Company's Common Stock is not so listed or traded,
then as determined in the manner provided under the definition of
"Current Market Price," adjusted to take into account the
exchange). For the purposes of this Section 11(a)(iv), the value
of any Common Stock Equivalent on any date shall be the same as
the value of the Common Stock, as determined pursuant to the
previous sentence, on such date.
(b) If the Company shall at any time on or after the
date of this Agreement fix a record date for the issuance of
rights, options or warrants to holders of Preferred Stock
entitling them to subscribe for or purchase Preferred Stock or
Equivalent Shares (or securities convertible into or exchangeable
for Preferred Stock or Equivalent Shares) at a price per share of
Preferred Stock or Equivalent Shares (or, in the case of a
convertible or exchangeable security, having a conversion or
exchange price per share of Preferred Stock or Equivalent Shares)
less than the Current Market Price per share of Preferred Stock on
such record date, the Purchase Price to be in effect after such
record date shall be determined by multiplying the Purchase Price
in effect immediately prior to such record date by a fraction, the
numerator of which shall be the number of shares of Preferred
Stock and Equivalent Shares (if any) outstanding on such record
date, plus the number of shares of Preferred Stock or Equivalent
Shares, as the case may be, which the aggregate exercise,
conversion and/or exchange price for the total number of shares of
Preferred Stock or Equivalent Shares, as the case may be, which
are obtainable upon exercise, conversion and/or exchange of such
rights, options, warrants or convertible or exchangeable
securities would purchase at such Current Market Price, and the
denominator of which shall be the number of shares of Preferred
Stock and Equivalent Shares (if any) outstanding on such record
date, plus the number of additional shares of Preferred Stock or
Equivalent Shares, as the case may be, which may be obtained upon
exercise, conversion and/or exchange of such rights, options,
warrants or convertible or exchangeable securities. In case such
subscription price may be paid in a consideration part or all of
which shall be in a form other than cash, the value of such
consideration shall be as determined in good faith by a majority
of the Board of Directors of the Company, whose determination
shall be described in a statement filed with the Rights Agent and
shall be final, binding and conclusive for all purposes.
Preferred Stock and Equivalent Shares owned by or held for the
account of the Company or any Subsidiary of the Company shall not
be deemed outstanding for the purpose of any such computation.
Such adjustment shall be made successively whenever such a record
date is fixed; and in the event that such rights, options or
warrants are not issued following such adjustment, the Purchase
Price shall be readjusted to be the Purchase Price that would have
been in effect if such record date had not been fixed.
(c) In case the Company shall at any time after the
date of this Agreement fix a record date for the making of a
distribution to holders of Preferred Stock (including any such
distribution made in connection with a reclassification of the
Preferred Stock or a consolidation or merger in which the Company
is the surviving corporation) of securities (other than Preferred
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Stock and rights, options, warrants or convertible or exchangeable
securities referred to in Section 11(b)), cash (other than a
regular periodic cash dividend at an annual rate not in excess of:
(x) 125% of the annual rate of the regular cash dividend paid on
the Preferred Stock during the immediately preceding fiscal year
(or, if the Preferred Stock was not outstanding during such
preceding fiscal year, then 125% of the annual rate of the regular
cash dividend paid on the Common Stock during such year), or (y)
in the event that a regular cash dividend was not paid on the
Preferred Stock (or Common Stock) during such preceding fiscal
year, 5% of the Current Market Value of the Preferred Stock on the
date such regular cash dividend was first declared), property,
evidences of indebtedness, or assets, 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 per share of Preferred Stock on such record date, less the
fair market value (as determined in good faith by a majority of
the Board of Directors of the Company, whose determination shall
be described in a statement filed with the Rights Agent and shall
be final, binding and conclusive for all purposes) of the portion
of such securities, cash, property, evidences of indebtedness or
assets to be so distributed in respect of one share of Preferred
Stock, and the denominator of which shall be such Current Market
Price per share of Preferred Stock on such record date. Such
adjustments shall be made successively whenever such a record date
is fixed; and in the event that such distribution is not made
following such adjustment, the Purchase Price shall be readjusted
to be the Purchase Price that would have been in effect if such
record date had not been fixed.
(d) Except as provided below, no adjustment in the
Purchase Price shall be required unless such adjustment would
require an increase or decrease of at least 1% in the Purchase
Price; provided, however, that any adjustments which by reason of
this Section 11(d) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All
calculations under this Section 11 shall be made to the nearest
cent, to the nearest one hundred-thousandth of a share of Common
Stock, or to the nearest one ten-thousandths of a share of
Preferred Stock. Notwithstanding the first sentence of this
Section 11(d), any adjustment required by this Section 11 shall be
made no later than the earlier of (i) three years from the date of
the transaction which requires such adjustment and (ii) the
Expiration Date.
(e) If, as a result of an adjustment made pursuant to
Section 11(a) or Section 13(a), the holder of any Right thereafter
exercised shall become entitled to receive any securities of the
Company other than shares of Preferred Stock, thereafter the
Purchase Price and the number of such other securities so
receivable upon exercise of any Right 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
shares of Preferred Stock contained in this Section 11 and the
provisions of Sections 7, 9, 10, 12, 13, 14 and 24 with respect to
the shares of Preferred Stock shall apply on like terms to any
such other securities.
(f) All Rights originally issued by the Company
subsequent to any adjustment made to the Purchase Price hereunder
shall evidence the right to purchase, at the adjusted Purchase
Price, the number of shares of Preferred Stock or other
securities, cash or other property purchasable from time to time
hereunder upon exercise of the Rights, all subject to further
adjustment as provided in this Agreement.
-21-
(g) Unless the Company shall have exercised its
election as provided in Section 11(h), upon each adjustment of the
Purchase Price as a result of any calculation made pursuant to
Sections 11(a)(i), 11(b) and 11(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 one one-hundredths of a share of
Preferred Stock (calculated to the nearest one ten-thousandths of
a share of Preferred Stock) obtained by (i) multiplying the number
of one one-hundredths of a share of Preferred Stock covered by a
Right immediately prior to adjustment pursuant to this Section
11(g) by the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price and (ii) dividing the product so
obtained by the Purchase Price in effect immediately after such
adjustment of the Purchase Price.
(h) The Company may elect, on or after the date of any
adjustment of the Purchase Price or any adjustment to the number
of shares of Preferred Stock for which a Right may be exercised,
to adjust the number of Rights, in lieu of an adjustment in the
number of one one-hundredths of a share of Preferred Stock
purchasable upon the exercise of a Right. Each of the Rights
outstanding after such adjustment of the number of Rights shall be
exercisable for the number of one one-hundredths of a share of
Preferred Stock for which a Right was exercisable immediately
prior to such adjustment. Each Right outstanding prior to such
adjustment of the number of Rights shall become that number of
Rights (calculated to the nearest one hundred-thousandth) obtained
by dividing the Purchase Price in effect immediately prior to such
adjustment by the Purchase Price in effect immediately after such
adjustment. 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 10
days after the date of the public announcement. If Rights
Certificates have been issued, upon each adjustment of the number
of Rights pursuant to this Section 11(h) the Company shall, as
promptly as practicable, cause to be distributed to holders of
record of Rights Certificates on such record date a new Rights
Certificate evidencing, subject to Section 14, 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 in this Agreement
(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.
(i) Irrespective of any adjustment or change in the
Purchase Price or the number or kind of shares issuable upon the
exercise of the Rights, the Rights Certificates theretofore and
thereafter issued may continue to express the Purchase Price per
one one-hundredth of a share of Preferred Stock and the number of
shares of Preferred Stock which were expressed in the initial
Rights Certificates issued hereunder.
-22-
(j) Before taking any action that would cause an
adjustment reducing the Purchase Price below the then par value,
if any, of one one-hundredth of a share 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
fully paid and nonassessable one one-hundredth shares of such
Preferred Stock at such adjusted Purchase Price.
(k) In any case in which this Section 11 shall require
that an adjustment be made effective as of a record date for a
specified event, the Company may elect to defer until the
occurrence of such event the issuance to the holder of any Right
exercised after such record date the shares of Preferred Stock and
other securities, cash or property of the Company, if any,
issuable upon such exercise over and above the shares of Preferred
Stock and other securities, cash or property 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 ββββ or other
appropriate instrument evidencing such holder's right to receive
such additional shares (fractional or otherwise) or other
securities, cash or property upon the occurrence of the event
requiring such adjustment.
(l) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make such
reductions in the Purchase Price, in addition to those adjustments
expressly required by this Section 11, as and to the extent that
the Board of Directors of the Company in its sole discretion shall
determine to be advisable in order that any combination or
subdivision of the Preferred Stock, issuance wholly for cash of
any Preferred Stock at less than the Current Market Price per
share of Preferred Stock, issuance wholly for cash of Preferred
Stock or securities which by their terms are convertible into or
exchangeable or exercisable for Preferred Stock, stock dividends
or 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 stockholders.
(m) The Company covenants and agrees that it shall not
(i) consolidate with, (ii) merge with or into, or (iii) directly
or indirectly sell, lease or otherwise transfer or dispose of (in
one transaction or a series of related transactions) assets or
earning power aggregating more than 50% of the assets or earning
power of the Company and its Subsidiaries taken as a whole, to any
other Person if (A) at the time of or immediately after such
consolidation, merger, sale, lease, transfer or disposition there
are any rights, warrants, securities or other instruments
outstanding or agreements in effect which would substantially
diminish or otherwise eliminate the benefits intended to be
afforded by the Rights; (B) prior to, simultaneously with or
immediately after such consolidation, merger, sale, lease,
transfer or disposition the stockholders (or equity holders) of
the Person who constitutes, or would constitute, the Principal
Party in such transaction shall have received a distribution of
Rights previously owned by such Person or any of its Affiliates or
Associates; or (C) the form or nature of organization of the
Principal Party would preclude or limit the exercisability of the
Rights. The Company shall not consummate any such consolidation,
merger, sale, lease, transfer or disposition unless prior thereto
the Company and such other Person shall have executed and
delivered to the Rights Agent a supplemental agreement evidencing
compliance with this Section 11(m).
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(n) The Company covenants and agrees that, after the
Stock Acquisition Date, it will not, except as permitted by
Section 11(a)(iv), 26 or 29(b), 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, directly or
indirectly, diminish or otherwise eliminate the benefits intended
to be afforded by the Rights.
(o) Anything in this Agreement to the contrary
notwithstanding, if the Company shall at any time prior to the
Distribution Date (i) pay a dividend or distribution on the
outstanding shares of Common Stock payable in shares of Common
Stock, (ii) subdivide the outstanding Common Stock, or (iii)
combine the outstanding Common Stock into a smaller number of
shares, then the number of Rights associated with each share of
Common Stock then outstanding, or issued or delivered thereafter
but prior to the Distribution Date, and the Purchase Price under,
and the number of one one-hundredths of a share of Preferred Stock
issuable in respect of, the Rights, shall be proportionately
adjusted, so that following such event one Right (with the
Purchase Price and the number of one one-hundredths of a share of
Preferred Stock proportionately adjusted thereunder) shall
thereafter be associated with each share of Common Stock then
outstanding, or issued or delivered thereafter but prior to the
Distribution Date. For example, if the Company effects a
two-for-one stock split at a time when each Right (if it becomes
exercisable) would entitle the holder to purchase one
one-hundredth of a share of Preferred Stock for a Purchase Price
of $"Z", then following such stock split each previous Right would
be split into two current Rights and thereafter each such current
Right, upon becoming exercisable, would (subject to further
adjustment) entitle the holder to purchase one one-hundredth of a
share of Preferred Stock at a Purchase Price of 1/2 x $"Z".
Section 12. Certification of Adjustments. Whenever an
adjustment is made as provided in Section 11 or 13, 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 a copy of such certificate,
and (c) mail or cause the Rights Agent to mail a brief summary
thereof to each holder of a Rights Certificate (or, if no Rights
Certificates have been issued, to each holder of a certificate
representing shares of Common Stock) in accordance with Section
25. Notwithstanding the foregoing sentence, the failure of the
Company to give such notice shall not affect the validity of or
the force or effect of or the requirement for such adjustment.
Any adjustment to be made pursuant to Section 11 or 13 shall be
effective as of the date of the event giving rise to such
adjustment.
Section 13. Consolidation, Merger or Sale or Transfer
of Assets or Earning Power.
(a) A "Business Combination" shall be deemed to occur
in the event that, on or following a Triggering Event, (i) the
Company shall, directly or indirectly, consolidate with, or merge
with and into, any other Person (other than a Subsidiary of the
Company in a transaction that complies with Section 11(m) and
Section 11(n)) in a transaction in which the Company is not the
continuing, resulting or surviving corporation of such merger or
consolidation; (ii) any Person (other than a Subsidiary of the
Company in a transaction that complies with Section 11(m) and
Section 11(n)) shall, directly or indirectly, consolidate with the
-24-
Company, or shall merge with and into the Company, in a
transaction in which the Company is the continuing, resulting or
surviving corporation of such merger or consolidation and, in
connection with such merger or consolidation, all or part of the
Common Stock shall be changed (including, without limitation, any
conversion into or exchange for securities of the Company or of
any other Person, cash or any other property); (iii) the Company
shall, directly or indirectly, effect a share exchange in which
all or part of the Common Stock shall be changed (including,
without limitation, any conversion into or exchange for securities
of any other Person, cash or any other property); or (iv) the
Company shall, directly or indirectly, sell, lease, exchange,
mortgage, pledge (other than mortgages or pledges in the course of
the Company's financing activities) or otherwise transfer or
dispose of (or one or more of its Subsidiaries shall directly or
indirectly sell, lease, exchange, mortgage, pledge (other than
mortgages or pledges in the course of the Company's financing
activities) or otherwise transfer or dispose of), in one
transaction or a series of related transactions, assets or earning
power aggregating more than 50% of the assets or earning power of
the Company and its Subsidiaries (taken as a whole) to any other
Person (other than the Company or any of its Subsidiaries in one
or more transactions each and all of which comply with Section
11(m) and Section 11(n)).
In the event of a Business Combination, proper
provision shall be made so that (i) each holder of a Right (except
as otherwise provided in this Agreement) shall thereafter have the
right to receive, upon the exercise thereof at the Purchase Price
immediately prior to the first occurrence of a Triggering Event
multiplied by the number of one one-hundredths of a share of
Preferred Stock for which a Right was exercisable immediately
prior to the first occurrence of a Triggering Event (without
giving effect to the Triggering Event) in accordance with the
terms of this Agreement, such number of shares of Common Stock of
the Principal Party as shall be equal to the result obtained by
(x) multiplying the Purchase Price immediately prior to the first
occurrence of a Triggering Event by the number of one one-
hundredths of a share of Preferred Stock for which a Right was
exercisable immediately prior to the first occurrence of a
Triggering Event (without giving effect to the Triggering Event),
and (y) dividing that product by the lesser of (I) 50% of the
Current Market Price per share of the Common Stock of such
Principal Party immediately prior to the consummation of such
Business Combination and (II) the Purchase Price immediately prior
to the first occurrence of a Triggering Event, and (ii) the rights
of the holder of Rights to purchase shares of the Common Stock of
such Principal Party shall be entitled to protection from dilution
equitably equivalent to that set forth in Section 11 hereof. All
shares of Common Stock of any Person for which any Right may be
exercised after consummation of a Business Combination as provided
in this Section 13(a) shall, when issued upon exercise thereof in
accordance with this Agreement, be duly and validly authorized and
issued, fully paid, nonassessable, freely tradeable, not subject
to liens or encumbrances, and free of preemptive rights, rights of
first refusal or any other restrictions or limitations on the
transfer or ownership thereof of any kind or nature whatsoever.
(b) After consummation of any Business Combination,
(i) the Principal Party shall be liable for, and shall assume, by
virtue of such Business Combination and without the necessity of
any further act, all the obligations and duties of the Company
pursuant to this Agreement, (ii) the term "Company" as used in
this Agreement shall thereafter be deemed to refer to such
Principal Party, and (iii) such Principal Party shall take all
steps (including, but not limited to, the reservation of a
sufficient number of shares of its Common Stock in accordance with
-25-
Section 9) in connection with such Business Combination as is
necessary to ensure that the provisions of this Agreement shall
thereafter be applicable, as nearly equivalent as practicable, in
relation to the shares of its Common Stock thereafter deliverable
upon the exercise of the Rights.
(c) The Company shall not consummate any Business
Combination unless prior thereto (i) the Principal Party shall
have a sufficient number of authorized shares of its Common Stock
which have not been issued or reserved for issuance (other than
shares reserved for issuance pursuant to this Agreement to the
holders of Rights) to permit the exercise in full of the Rights in
accordance with this Section 13; (ii) the Company and such
Principal Party shall have executed and delivered to the Rights
Agent a supplemental agreement providing for the fulfillment of
the Principal Party's obligations and the terms as set forth in
paragraphs (a) and (b) of this Section 13 and further providing
that, as soon as practicable on or after the date of such Business
Combination, the Principal Party, at its own expense, shall (A)
prepare and file, if necessary, a registration statement on an
appropriate form under the Securities Act with respect to the
Rights and the securities purchasable upon exercise of the Rights;
(B) use its best efforts to cause such registration statement to
become effective as soon as practicable after such filing and
remain effective (with a prospectus at all times meeting the
requirements of the Securities Act) until the Expiration Date; (C)
deliver to holders of the Rights historical financial statements
for the Principal Party and each of its Affiliates which comply in
all respects with the requirements for registration on Form 10 (or
any successor form) under the Exchange Act; (D) use its best
efforts to qualify or register the Rights and the securities
purchasable upon exercise of the Rights under the state securities
or "blue sky" laws of such jurisdictions as may be necessary or
appropriate; (E) use its best efforts to list the Rights and the
securities purchasable upon exercise of the Rights on a United
States national securities exchange; and (F) obtain waivers of any
rights of first refusal or preemptive rights in respect of the
Common Stock of the Principal Party subject to purchase upon
exercise of outstanding Rights; (iii) the Company and the
Principal Party shall have furnished to the Rights Agent an
opinion of independent counsel stating that such supplemental
agreement is a legal, valid and binding agreement of the Principal
Party enforceable against the Principal Party in accordance with
its terms; and (iv) the Company and the Principal Party shall have
filed with the Rights Agent a certificate of a nationally
recognized firm of independent accountants setting forth the
number of shares of Common Stock of such issuer which may be
purchased upon the exercise of each Right after the consummation
of such Business Combination.
(d) The provisions of this Section 13 shall similarly
apply to successive Business Combinations. In the event a
Business Combination shall be consummated at any time after the
occurrence of a Triggering Event, the Rights which have not
theretofore been exercised shall thereafter be exercisable for the
consideration and in the manner described in Section 13(a).
Following a Business Combination, the provisions of Section
11(a)(ii) shall be of no effect.
(e) Notwithstanding any other provision of this
Agreement, no adjustment to the number of shares of Preferred
Stock (or fractions of a share) or other securities, cash or other
property for which a Right is exercisable or the number of Rights
outstanding or associated with each share of Common Stock or any
similar or other adjustment shall be made or be effective if such
adjustment would have the effect of reducing or limiting the
benefits the holders of the Rights would have had absent such
adjustment, including, without limitation, the benefits under
Sections 11 and 13, unless the terms of this Agreement are amended
so as to preserve such benefits.
-26-
(f) The Company covenants and agrees that it shall not
effect any Business Combination if at the time of, or immediately
after such Business Combination, there are any rights, options,
warrants or other instruments outstanding which would diminish or
otherwise eliminate the benefits intended to be afforded by the
Rights.
(g) Without limiting the generality of this Section
13, in the event the nature of the organization of any Principal
Party shall preclude or limit the acquisition of Common Stock of
such Principal Party upon exercise of the Rights as required by
Section 13(a) as a result of a Business Combination, it shall be a
condition to such Business Combination that such Principal Party
shall take such steps (including, but not limited to, a
reorganization) as may be necessary to ensure that the benefits
intended to be derived under this Section 13 upon the exercise of
the Rights are assured to the holders thereof.
(h) In addition to, and without limiting, any other
provision of this Section 13, 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
certificate of incorporation or by-laws or other instrument
governing its corporate affairs, which provision would have the
effect of (i) causing such Principal Party to issue (other than to
holders of Rights pursuant to this Section 13), in connection
with, or as a consequence of, the consummation of a transaction
referred to in this Section 13, Common Stock of such Principal
Party at less than the then Current Market Price per share or
securities exercisable for, or convertible into, Common Stock of
such Principal Party at less than such then Current Market Price,
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 this Section
13, then, in such event, the Company hereby agrees with each
holder of Rights that it shall not consummate any such transaction
unless prior thereto the Company and such Principal Party shall
have executed and delivered to the Rights Agent a supplemental
agreement providing that the provision in question of such
Principal Party shall have been cancelled, waived or amended, or
that the authorized securities shall be redeemed, so that the
applicable provision will have no effect in connection with, or as
a consequence of, the consummation of the proposed transaction.
Section 14. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue
fractional Rights or to distribute Rights Certificates which
evidence fractional Rights. In lieu of such fractional Rights,
the Company may at its option pay to the registered holders of the
Rights Certificates with respect to which such fractional Rights
would otherwise be issuable an amount in cash equal to the same
fraction of the current market value of a whole Right. For the
purposes of this Section 14(a), the current market value of a
whole Right shall be the closing price of a Right for the Trading
Day immediately prior to the date on which such fractional Rights
otherwise would have been issuable. The closing price for any
Trading Day shall be the last sale price on such day, regular way,
or, in case no such sale takes place on such day, the average of
the closing bid and asked prices, regular way, on such day, in
either case as reported in the principal consolidated transaction
-27-
reporting system with respect to securities listed or admitted to
trading on the NYSE or, if the Rights are not listed or admitted
to trading on the NYSE, as reported in the principal consolidated
transaction reporting system with respect to securities listed on
the principal United States 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 United States national
securities exchange, the last quoted sale price on such day or, if
not so quoted, the average of the high bid and low asked prices on
such day in the over-the-counter market, as reported by Nasdaq or
such other system then in use or, if on such day the Rights are
not quoted by any such system, the average of the closing bid and
asked prices on such day as furnished by a professional market
maker making a market in the Rights selected by a majority of the
Board of Directors of the Company. If on such day no such market
maker is making a market in the Rights, the current market value
of the Rights on such day shall be determined in good faith by a
majority of the Board of Directors of the Company, whose
determination shall be described in a statement filed with the
Rights Agent and shall be final, binding and conclusive for all
purposes.
(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 fractional shares of Preferred Stock
(other than fractions which are integral multiples of one one-
hundredth of a share of Preferred Stock). Fractions of shares of
Preferred Stock may, at the election of the Company, be evidenced
by depositary receipts pursuant to an appropriate agreement
between the Company and a depositary selected by it, provided that
such agreement shall provide that the holders of such depositary
receipts shall have all the rights, privileges and preferences to
which they are entitled as beneficial owners of the Preferred
Stock. In lieu of fractional shares of Preferred Stock that are
not integral multiples of one one-hundredth of a share of
Preferred Stock, the Company may at its option (i) issue scrip or
warrants in registered form (either represented by a certificate
or uncertificated) or in bearer form (represented by a
certificate) which shall entitle the holder to receive a full one
one-hundredth of a share of Preferred Stock upon the surrender of
such scrip or warrants aggregating a full one one-hundredth of a
share of Preferred Stock, or (ii) pay to the registered holders of
Rights Certificates at the time such Rights Certificates are
exercised as provided in this Agreement an amount in cash equal to
the same fraction of the current market value of a share of
Preferred Stock. For purposes of this Section 14(b), the current
market value of a share of Preferred Stock shall be the closing
price of a share of Preferred Stock (as determined pursuant to the
second sentence of the definition of "Current Market Price" in
Section 1) for the Trading Day immediately prior to the date of
such exercise.
(c) The Company shall not be required to issue
fractions of shares of Common Stock or Common Stock Equivalents or
to distribute certificates which evidence fractional shares of
Common Stock or Common Stock Equivalents. In lieu of such
fractional shares of Common Stock or Common Stock Equivalents, the
Company shall pay to the registered holders of the Rights
Certificates with regard to which such fractional shares of Common
Stock or Common Stock Equivalents would otherwise be issuable an
amount in cash equal to the product derived by multiplying (x) the
subject fraction, by (y) Current Market Price of the Company's
Common Stock.
-28-
(d) The holder of a Right by his acceptance thereof
expressly waives any right to receive any fractional Rights or any
fractional shares upon exercise of a Right (except as otherwise
provided in this Agreement).
Section 15. Rights of Action. Except as otherwise
provided, all rights of action in respect of this Agreement are
vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, any registered
holders of associated Common Stock); and any registered holder of
any Rights Certificate (or, prior to the Distribution Date, any
share of associated Common Stock), without the consent of the
Rights Agent or of the holder of any other Right, may, on his own
behalf and for his own benefit, enforce, and may institute and
maintain any suit, action or proceeding against the Company or any
Principal Party to enforce, or otherwise act in respect of, his
rights pursuant to this Agreement. Without limiting the foregoing
or any remedies available to the holders of Rights, it is
specifically acknowledged that the holders of Rights would not
have an adequate remedy at law for any breach of this Agreement
and will be entitled to specific performance of the obligations
under, and injunctive relief against any actual or threatened
violation of the obligations of any Person subject to, this
Agreement.
Section 16. Agreement of Rights Holders Concerning
Transfer and Ownership of Rights. Every holder of a Right by
accepting the same consents and agrees with the Company and the
Rights Agent and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of Common Stock;
(b) after the Distribution Date, the Rights
Certificates will be transferable on the registry books of the
Rights Agent only if surrendered at the principal corporate trust
office of the Rights Agent, duly endorsed or accompanied by a
proper instrument of transfer;
(c) 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 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 Certificate or the associated Common Stock
certificate made by anyone other than the Company, the transfer
agent for the Common Stock or the Rights Agent) for all purposes
whatsoever, and neither the Company nor the Rights Agent shall be
affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the
contrary, neither the Company nor the Rights Agent shall have any
liability to any holder of a Right or other Person as a result of
its inability to perform any of its obligations under this
Agreement by reason of any preliminary or permanent injunction or
other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative
agency or commission, or any statute, rule, regulation or
executive order promulgated or enacted by any governmental
authority, prohibiting or otherwise restraining performance of
such obligation; provided, however, the Company must use its best
efforts to have any such order, decree or ruling lifted or
otherwise overturned as soon as possible.
-29-
Section 17. Rights Holder Not Deemed a Stockholder.
No holder, as such, of any Rights Certificate shall be entitled to
vote or to receive dividends or distributions or shall be deemed
for any purpose the holder of Preferred Stock or any other
securities, cash or other property which may at any time be
issuable on the exercise of the Rights represented thereby, nor
shall anything contained in this Agreement or in any Rights
Certificate be construed to confer upon the holder of any Rights
Certificate, as such, any of the rights of a stockholder of the
Company, including, without limitation, any right (i) to vote for
the election of directors or upon any matter submitted to
stockholders at any meeting thereof, (ii) to give or withhold
consent to any corporate action, (iii) to receive notice of
meetings or other actions affecting stockholders (except as
provided in Section 24), (iv) to receive dividends, distributions
or subscription rights, (v) to institute, as a holder of Preferred
Stock or other securities issuable on exercise of the Rights
represented by any Rights Certificate, any derivative action on
behalf of the Company, or otherwise, until and only to the extent
that the Right or Rights evidenced by such Rights Certificate
shall have been exercised in accordance with the provisions of
this Agreement.
Section 18. Concerning the Rights Agent. The Company
agrees to pay to the Rights Agent reasonable compensation for all
services rendered by it hereunder and, from time to time, on
demand of the Rights Agent, its reasonable expenses and counsel
fees and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of
its duties hereunder. The Company also agrees to indemnify the
Rights Agent for, and to hold it harmless against, any loss,
liability or expense 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, including the
costs and expenses of defending against any claim of liability in
the premises. Anything to the contrary notwithstanding, in no
event shall the Rights Agent be liable for special, indirect,
consequential or incidental 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 damages. This
indemnification shall survive the termination of this Agreement.
The Rights Agent shall be protected and shall incur no
liability for or in respect of any action taken, suffered or
omitted by it in connection with its administration of this
Agreement in reliance upon any Rights Certificate or certificate
for Preferred Stock or Common 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 reasonably
believed by it to be genuine and to be signed, executed and, when
necessary, verified or acknowledged, by the proper Person or
Persons, or otherwise upon the advice of counsel as set forth in
Section 20.
Section 19. Merger or Consolidation or Change of Name
of Rights Agent. Any corporation into which the Rights Agent or
any successor Rights Agent may be merged or with which it may be
consolidated, or any corporation resulting from any merger or
consolidation to which the Rights Agent or any successor Rights
Agent shall be a party, or any corporation succeeding to the
corporate trust business of the Rights Agent or any successor
Rights Agent, shall be the successor to the Rights Agent under
this Agreement without the execution or filing of any document or
any further act on the part of any of the parties hereto, provided
-30-
that such corporation would be eligible for appointment as a
successor Rights Agent under Section 21. In case at the time such
successor Rights Agent shall succeed to the agency created by this
Agreement any of the Rights Certificates shall have been
countersigned but not delivered, any such successor Rights Agent
may adopt the countersignature of the predecessor Rights Agent and
deliver such Rights Certificate 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 Certificate either in the name of the predecessor Rights
Agent or in the name of the successor Rights Agent; and in all
such cases such Rights Certificates shall have the full force
provided in the Rights Certificates and in this Agreement.
In case at any time the name of the Rights Agent shall
be changed and at such time any of the Rights Certificates shall
have been countersigned but not delivered, the Rights Agent may
adopt the countersignature under its prior name and deliver Rights
Certificates so countersigned; and in case at that time any of the
Rights Certificates shall not have been countersigned, the Rights
Agent may countersign such Rights Certificates either in its prior
name or in its changed name; and in all such cases such Rights
Certificates shall have the full force provided in the Rights
Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent
undertakes and agrees to perform the duties and obligations
imposed by this Agreement upon the following terms and conditions,
by all of which the Company and the holders of Rights
Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel
(who may be legal counsel for the Company), and the opinion of
such counsel shall be full and complete authorization and
protection to the Rights Agent as to any action taken or omitted
to be taken 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 or any Affiliate or Associate
of an Acquiring Person or 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 specifically prescribed in this
Agreement) may be deemed to be conclusively proved and established
by a certificate signed by the Chairman of the Board, any Vice
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; and
such certificate shall be full authorization to the Rights Agent
for any action taken or omitted by it in good faith under this
Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only
for the negligence, bad faith or willful misconduct by it or its
attorneys or agents.
(d) The Rights Agent shall not be liable for or by
reason of any of the statements of fact or recitals contained in
this Agreement or in the Rights Certificates (except its
countersignature thereof) or be required to verify the same, but
all such statements and recitals are and shall be deemed to have
been made by the Company only.
-31-
(e) The Rights Agent shall not be under any
responsibility in respect of the validity of this Agreement or the
execution and delivery of this Agreement (except the due execution
and delivery of this Agreement by the Rights Agent) or in respect
of the validity or execution of any Rights Certificate (except its
countersignature thereof); nor shall it be responsible for any
breach by the Company of any covenant or condition contained in
this Agreement or in any Rights Certificate; nor shall it be
responsible for any change in the transferability or
exercisability of the Rights or any change or adjustment in the
terms of the Rights (including the manner, method or amount
thereof) provided for in Section 3, 11, 13 or 23 or any other
provision of this Agreement or the ascertaining of the existence
of facts that would require any such change or adjustment (except
with respect to the exercise of Rights evidenced by Rights
Certificates after actual notice of any change or adjustment is
required); nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation
of any shares of Preferred Stock, Common Stock or other securities
to be issued pursuant to this Agreement or any Rights Certificate
or as to whether any shares of Preferred Stock, Common Stock or
other securities will, when issued, be validly authorized and
issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed,
acknowledged and delivered all such further and other acts,
instruments and assurances as may reasonably be required by the
Rights Agent for the carrying out or performance by the Rights
Agent of its duties and obligations under this Agreement.
(g) The Rights Agent is hereby authorized and directed
to accept instructions with respect to the performance of its
duties hereunder from the Chairman of the Board, any Vice 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 for any action taken or omitted to be taken by it in good
faith in accordance with instructions of any such officer or for
any delay in acting while waiting for such instructions. When
applying to any such officer for instructions, the Rights Agent
may set forth in writing (i) any proposed action or omission of
the Rights Agent with respect to its duties or obligations under
this Agreement and (ii) the date on or after which the Rights
Agent proposes such action will be taken or omitted. Such date
shall not be less than three Business Days after any such officer
receives such application for instructions from the Rights Agent.
Unless the Rights Agent has received written instructions from
the Company (including any such officer) with respect to such
proposed action or omission prior to such date (or, if longer, in
the case of a proposed action to be taken, prior to the Rights
Agent actually taking such action), the Rights Agent shall not be
liable for the actions or omissions set forth in such application,
provided that such action or omission does not violate any express
provision of this Agreement.
(h) The Rights Agent and any stockholder, director,
officer or employee of the Rights Agent may buy, sell or deal in
any of the Rights or other securities of the Company or become
pecuniarily interested in any transaction in which the Company may
-32-
be interested, or contract with or lend money to the Company or
otherwise act as fully and freely as though the Rights Agent were
not serving as such under this Agreement. Nothing in this
Agreement shall preclude the Rights Agent from acting in any other
capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of
the rights or powers hereby vested in it or perform any duty
hereunder either itself or by or through its attorneys or agents,
and the Rights Agent shall not be answerable or accountable for
any act, default, neglect or misconduct of such attorney or agent,
provided that the Rights Agent exercised reasonable care in the
selection and continued employment of such attorney or agent.
(j) No provision of this Agreement shall require the
Rights Agent to expend or risk its own funds or otherwise incur
any financial liability in the performance of any of its duties
hereunder or in the exercise of its rights hereunder if there
shall be reasonable grounds for believing that repayment of such
funds or adequate indemnification against such risk or liability
is not reasonably assured to the Rights Agent.
(k) If, with respect to any Rights Certificate
surrendered to the Rights Agent for exercise or transfer, the
certificate attached to the form of assignment or form of election
to purchase, as the case may be, has either not been completed or
indicates an affirmative response to clause 1 and/or 2 thereof,
the Rights Agent shall not take any further action with respect to
such requested exercise or transfer without first consulting with
the Company.
Section 21. Change of Rights Agent. The Rights Agent
or any successor Rights Agent may resign and be discharged from
its duties under this Agreement upon 30 days' notice in writing
mailed to the Company and to each transfer agent of the Common
Stock or Preferred Stock by registered or certified mail, and to
the holders of the Rights Certificates by first-class mail. The
Company may remove the Rights Agent or any successor Rights Agent
upon 30 days' notice in writing, mailed to the Rights Agent or
successor Rights Agent, as the case may be, and to each transfer
agent of the Common Stock or Preferred 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. Notwithstanding any
other provision of this Agreement, in no event shall the
resignation or removal of a Rights Agent be effective until a
successor Rights Agent shall have been appointed and have accepted
such appointment. If the Company shall fail to make such
appointment within a period of 30 days after such removal or after
it has been notified in writing of such resignation or incapacity
by the resigning or incapacitated Rights Agent or by any holder of
a Rights Certificate (who shall, with such notice, submit his
Rights Certificate for inspection by the Company), then the
incumbent Rights Agent or the registered holder of any Rights
Certificate may apply to any court of competent jurisdiction for
the appointment of a new Rights Agent. Any successor Rights
Agent, whether appointed by the Company or by such a court, shall
be a corporation organized and doing business under the laws of
the United States or any state of the United States so long as
such corporation is authorized to conduct a corporate trust or
banking business under the laws of the State of New York which is
authorized under such laws to exercise corporate trust powers and
is subject to supervision or examination by federal or state
authority and which has at the time of its appointment as Rights
-33-
Agent a combined capital and surplus of at least $100,000,000.
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 such purpose. Not later
than the effective date of any such appointment, the Company shall
file notice thereof in writing with the predecessor Rights Agent
and each transfer agent of the Common Stock or Preferred Stock and
mail a notice thereof in writing to the registered holders of the
Rights Certificates. Neither the failure to give any notice
provided for in this Section 21, however, nor any defect therein,
shall affect the legality or validity of the resignation or
removal of the Rights Agent or the appointment of the successor
Rights Agent, as the case may be.
Section 22. Issuance of New Rights Certificates.
Notwithstanding any of the provisions of this Agreement or of the
Rights Certificates to the contrary, the Company may, at its
option, issue new Rights Certificates evidencing new Rights in
such form as may be approved by a majority of the Board of
Directors of the Company to reflect any adjustment or change in
the Purchase Price per share and the number or kind or class of
securities, cash or other property purchasable under the Rights
Certificates made in accordance with the provisions of this
Agreement. In addition, in connection with the issuance or sale
of Common Stock following the Distribution Date and prior to the
earlier of the Redemption Date and the Expiration Date, the
Company may with respect to Common Stock so issued or sold
pursuant to (i) the exercise of stock options, (ii) under any
employee plan or arrangement, (iii) upon the exercise, conversion
or exchange of securities notes or debentures issued by the
Company or (iv) a contractual obligation of the Company, in each
case existing prior to the Distribution Date, issue Rights
Certificates representing the appropriate number of Rights in
connection with such issuance or sale.
Section 23. Redemption
(a) The Board of Directors of the Company may, at its
option, at any time prior to the earlier of (i) the Stock
Acquisition Date and (ii) the Expiration Date, redeem all but not
less than all of the then-outstanding Rights at a redemption price
of $.001 per Right (the "Redemption Price") appropriately adjusted
to reflect any stock split, stock dividend or similar transaction
occurring after the date of this Agreement. The Company may, at
its option, pay the Redemption Price in cash, shares (including
fractional shares) of Common Stock (based on the Current Market
Price of the Common Stock at the time of redemption) or any other
form of consideration deemed appropriate by the Board of
Directors.
(b) At the time and date of effectiveness set forth in
any resolution of the Board of Directors of the Company ordering
the redemption of the Rights (the "Redemption Date"), without any
further action and without any further 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;
provided, however, that such resolution of the Board of Directors
of the Company may be revoked, rescinded or otherwise modified at
any time prior to the time and date of effectiveness set forth in
such resolution, in which event the right to exercise will not
terminate at the time and date originally set for such termination
by the Board of Directors of the Company. As soon as practicable
after the action of the Board of Directors of the Company ordering
-34-
the redemption of the Rights, the Company shall give notice of
such redemption to the Rights Agent and to the holders of the
then-outstanding Rights by mailing such notice to all such holders
at their last addresses as they appear upon the registry books of
the Rights Agent or, prior to the issuance of Rights Certificates,
on the registry books of the transfer agent for the Common Stock.
Any notice which is mailed in the manner provided in this
Agreement 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. In any case, failure to give such notice by mail, or any
defect in the notice, to any particular holder of Rights shall not
affect the sufficiency of the notice to other holders of Rights.
In the case of a redemption permitted under this Section 23, the
Company may, at its option, discharge all of its obligations with
respect to the Rights by (i) issuing a press release announcing
the manner of redemption of the Rights and (ii) mailing payment of
the Redemption Price to the registered holders of the Rights at
their last addresses as they appear on the registry books of the
Rights Agent or, prior to the issuance of the Rights Certificates,
on the registry books of the transfer agent for the Common Stock,
and upon such action, all outstanding Rights Certificates shall be
null and void without any further action by the Company. Neither
the Company nor any of its Affiliates or Associates may redeem,
acquire or purchase for value any Rights at any time in any manner
other than as specifically set forth in this Section 23, and other
than in connection with the purchase of shares of Common Stock
prior to the earlier of the Distribution Date and the Expiration
Date.
Section 24. Notice of Certain Events. In case the
Company, on or after the Distribution Date, shall propose to
(a) pay any dividend payable in stock of any class to the holders
of its Preferred Stock or to make any other distribution to the
holders of its Preferred Stock (other than a regular periodic cash
dividend at an annual rate not in excess of 125% of the annual
rate of the cash dividend paid on the Preferred Stock during the
immediately preceding fiscal year, or if the Preferred Stock was
not outstanding during such preceding fiscal year, then 125% of
the annual rate of the cash dividend paid on the Common Stock
during such year); or (b) offer to the holders of its Preferred
Stock rights, options 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; or (c) effect
any reclassification of the Preferred Stock (other than a
reclassification involving only the subdivision of outstanding
shares of Preferred Stock, a change in the par value of such
Preferred Stock or a change from par value to no par value); or
(d) directly or indirectly effect any consolidation or merger into
or with, or effect any sale, lease, exchange or other transfer or
disposition (or to permit one or more of its Subsidiaries to
effect any sale, lease, exchange or other transfer or
disposition), in one transaction or a series of related
transactions, of more than 50% of the assets or earning power of
the Company and its Subsidiaries (taken as a whole) to, any other
Person; or (e) effect the liquidation, dissolution or winding up
of the Company, then, in each such case, the Company shall give to
each holder of a Right, in accordance with Section 25, a notice of
such proposed action, which shall specify any record date for the
purposes of such stock dividend, distribution or rights, or the
date on which such reclassification, consolidation, merger, sale,
lease, exchange, transfer, disposition, liquidation, dissolution,
or winding up is to take place and if such holders will or may
participate therein, the date of participation therein by the
holders of Common Stock and/or Preferred Stock, if any such date
is to be fixed, and such notice shall be so given in the case of
any action covered by clause (a) or (b) above at least 20 days
prior to the record date for determining holders of the Preferred
-35-
Stock for purposes of such action, and in the case of any such
other action, at least 20 days prior to the date of the taking of
such proposed action or the date of participation therein, if any,
by the holders of Preferred Stock, whichever shall be the earlier.
In case any Triggering Event or Business Combination
shall occur, then, in any such case, the Company shall as soon as
practicable thereafter give to each holder of a Rights
Certificate, in accordance with Section 25, notice of the
occurrence of such Triggering Event or Business Combination, which
shall specify the Triggering Event or Business Combination and
include a description of the consequences of such event to holders
of Rights under Section 11(a)(ii) or 13.
The failure to give notice as required by this Section
24 or any defect therein shall not affect the legality or validity
of the action taken by the Company or the vote upon any such
action.
Section 25. Notices. Notices or demands authorized by
this Agreement to be given or made by the Rights Agent or by the
holder of any Rights Certificate to or on the Company shall be
sufficiently given or made if sent by first-class mail, postage
prepaid, addressed (until another address (or another person's
attention) is filed in writing with the Rights Agent) as follows:
Noodle Kidoodle, Inc.
ββββ βββββββ ββββββββ
βββββ βββ
βββββββ, βββ ββββ βββββ-ββββ
Attention: Secretary
Subject to the provisions of Section 21, any notice or demand
authorized by this Agreement to be given or made by the Company or
by the holder of any Rights Certificate to or on the Rights Agent
shall be sufficiently given or made if sent by first-class mail,
postage prepaid, addressed (until another address (or another
person's attention) is filed in writing with the Company) as
follows:
ChaseMellon Shareholder Services, L.L.C.
βββ ββββ ββββ ββββββ
ββββ βββββ
βββ ββββ, βββ ββββ βββββ
Attention: ββ. ββββββ ββββββββ
Notices or demands authorized by this Agreement to be given or
made by the Company or the Rights Agent to the holder of any
Rights Certificate shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed to such holder at the
address of such holder as shown on the registry books of the
Company (or, if no Rights Certificates have been issued, if sent
by first-class mail, postage prepaid, addressed to the holder of a
certificate representing shares of Common Stock at the address of
such holder as shown on the Company's Common Stock registry
books).
-36-
Section 26. Amendments and Supplements. This
Agreement may not be amended or supplemented except as permitted
in Section 26(a) or 26(b) or as contemplated by Section
11(a)(iii).
(a) At any time prior to the Distribution Date, a
majority of the Board of Directors of the Company may, and the
Rights Agent shall, if so directed, amend or supplement any
provision of this Agreement without the approval of any holders of
Rights.
(b) From and after the Distribution Date, a majority
of the Board of Directors of the Company may, and the Rights Agent
shall, if so directed, amend or supplement this Agreement without
the approval of any holders of Rights Certificates (i) to cure any
ambiguity, (ii) to correct or supplement any provision contained
in this Agreement which may be defective or inconsistent with any
other provision of this Agreement, or (iii) to change or
supplement the provisions hereunder in any manner which the
Company may deem necessary or desirable and which shall not
adversely affect the interests of the holders of Rights
Certificates (other than an Acquiring Person or an Affiliate or
Associate of an Acquiring Person).
(c) Immediately upon the action of a majority of the
Board of Directors providing for any amendment or supplement
pursuant to this Section 26, and without any further action and
without notice, such amendment or supplement shall be deemed
effective. Promptly following the adoption of any amendment or
supplement pursuant to this Section 26, the Company shall deliver
to the Rights Agent a copy, certified by the Secretary or any
Assistant Secretary of the Company, of resolutions of a majority
of the Board of Directors of the Company adopting such amendment
or supplement. Upon such delivery, the amendment or supplement
shall be administered by the Rights Agent as part of this
Agreement in accordance with the terms of this Agreement, as so
amended or supplemented.
Section 27. 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 28. Benefits of this Agreement; Determinations
and Actions by the Board of Directors. Nothing in this Agreement
shall be construed to give to any Person other than the Company,
the Rights Agent and the registered holders of Rights any legal or
equitable right, remedy or claim under this Agreement; and this
Agreement shall be for the sole and exclusive benefit of the
Company, the Rights Agent and the registered holders of the
Rights.
For purposes of this Agreement, any calculation of the
number of shares of Common Stock outstanding at any particular
time shall be made in accordance with the last sentence of Rule
13d-3(d)(1)(i) of the General Rules and Regulations under the
Exchange Act (or any successor provision); provided, however, that
any such calculation made for purposes of determining the
particular percentage of outstanding shares of Common Stock of
which any Person is the Beneficial Owner shall also include any
such other securities not then actually issued and outstanding
which such Person would be deemed to be the Beneficial Owner of,
-37-
or to "beneficially own," pursuant to Section 1(d). 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 of Directors of the
Company, or as may be necessary or advisable in the administration
of this Agreement, including, without limitation, the right and
power to (i) interpret the provisions of this Agreement, and (ii)
make all determinations deemed necessary or advisable for the
administration of this Agreement (including a determination to
redeem or not redeem the Rights, to exchange or not exchange the
Rights for Common Stock or other securities of the Company, or to
amend or supplement 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 of the
Company in good faith, shall (x) be final, conclusive and binding
on the Company, the Rights Agent, the holders of the Rights and
all other Persons, and (y) not subject the Board of Directors of
the Company to any liability to the holders of the Rights.
Section 29. Severability.
(a) If any term, provision, covenant or restriction of
this Agreement or the application thereof to any Person or to any
circumstance 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.
(b) If legal counsel to the Company delivers to the
Company a written opinion to the effect that, as a result of
changes in federal law or Delaware law, any term, provision,
covenant or restriction of this Agreement may be invalid, void or
unenforceable, then, notwithstanding any other provision of this
Agreement, the Company and the Rights Agent may amend this
Agreement to modify, revise or delete such term, provision,
covenant or restriction to the extent necessary to comply with
such law as so changed.
Section 30. Governing Law. This Agreement and each
Rights Certificate issued hereunder shall be deemed to be a
contract made under the laws of the State of Delaware and for all
purposes shall be governed by and construed in accordance with the
internal laws of such state applicable to contracts to be made and
performed entirely within such State.
Section 31. Counterparts. This Agreement may be
executed in counterparts and each of such counterparts shall for
all purposes be deemed to be an original, and both such
counterparts shall together constitute but one and the same
instrument.
Section 32. Descriptive Headings. Descriptive
headings of the several Sections of this Agreement are inserted
for convenience only and shall not control or affect the meaning
or construction of any of the provisions of this Agreement.
Section 33. Grammatical Construction. Throughout this
Agreement, where such meanings would be appropriate, (a) any
pronouns used herein shall include the corresponding masculine,
feminine or neuter forms (e.g., references to "he" shall also
include "she" and "it" and references to "who" and "whom" shall
also include "which"), (b) the plural form of nouns and pronouns
-38-
shall include the singular and vice-versa, (c) reference to a
Section means a Section of this Agreement, and (d) the word
"including" means "including, without limitation," whether
expressly stated or not.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and their respective corporate seals
to be hereunto affixed and attested, all as of the day and year
first above written.
NOODLE KIDOODLE, INC.
Attest:
/s/βββββββ ββββ By:/s/ βββββββ β. βββββββ
Assistant Secretary Name:βββββββ β. βββββββ
Title:Vice President, Chief Financial Officer
and Secretary
[Corporate Seal] ChaseMellon Shareholder Services, L.L.C.
Attest:
/s/βββββ βββββ By:/s/βββββ β. βββββ
Secretary Name:βββββ β. βββββ
Title:Vice President
[Corporate Seal]
- 39-
Exhibit A
[Form of Rights Certificate]
Certificate No. R- ________ Rights
NOT EXERCISABLE AFTER MAY 15, 2008 OR EARLIER IF NOTICE OF
REDEMPTION OR EXCHANGE IS GIVEN. THE RIGHTS ARE SUBJECT TO
REDEMPTION OR EXCHANGE, AT THE OPTION OF THE COMPANY, ON THE TERMS
SET FORTH IN THE RIGHTS AGREEMENT. [THE RIGHTS REPRESENTED BY
THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON
WHO WAS OR BECAME AN ACQUIRING PERSON OR AN ASSOCIATE OR AFFILIATE
OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS
AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS
REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES
SPECIFIED IN SECTION 7(e) OF THE RIGHTS AGREEMENT.]
Rights Certificate
NOODLE KIDOODLE, INC.
This certifies that _________________________, or
registered assigns, is the registered owner of the number of
Rights set forth above, each of which entitles the owner thereof,
subject to the terms, provisions and conditions of the Rights
Agreement dated as of May 1, 1998 (the "Rights Agreement") between
Noodle Kidoodle, Inc., a Delaware corporation (the "Company"), and
ChaseMellon Shareholder Services, L.L.C. (the "Rights Agent"),
unless notice of redemption shall have been previously given by
the Company, to purchase from the Company at any time after the
Distribution Date (as such term is defined in the Rights
Agreement) and prior to 5:00 P.M., New York City time on May 15,
2008, at the principal corporate trust office of the Rights Agent,
or at the office of its successor as Rights Agent, one one-
hundredth of a fully paid and nonassessable share of the Series A
Junior Participating Preferred Stock, par value $.001 per share,
of the Company (the "Preferred Stock"), at a purchase price (the
"Purchase Price") of $25.00 per one one-hundredth share, upon
presentation and surrender of this Rights Certificate with the
Form of Election to Purchase duly executed. The Purchase Price
may be paid in cash or by certified bank check or bank draft
payable to the order of the Company.
As provided in the Rights Agreement, the Purchase Price
and the number of shares of Preferred Stock or other securities,
cash or other property which may be purchased upon the exercise of
the Rights evidenced by this Rights Certificate are subject to
modification and adjustment upon the happening of certain events.
If the Rights evidenced by this Rights Certificate are
or were formerly beneficially owned, on or after the earlier of
the Distribution Date and the Stock Acquisition Date, by (i) an
Acquiring Person or any Associate or Affiliate of an Acquiring
Person, or (ii) a direct or indirect transferee of an Acquiring
Person (or of any Associate or Affiliate of an Acquiring Person),
such Rights may become null and void, in which event the holder of
any such Right (including any subsequent holder) shall not have
any rights with respect to such Right.
-1-
This Rights Certificate is subject to all of the terms,
provisions and conditions of the Rights Agreement, which terms,
provisions and conditions are hereby incorporated herein by
reference and made a part hereof and to which Rights Agreement
reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities
hereunder of the Rights Agent, the Company and the holders of the
Rights Certificates. Capitalized terms used but not defined in
this Rights Certificate that are defined in the Rights Agreement
shall have the same meanings ascribed to them in the Rights
Agreement. Copies of the Rights Agreement are on file at the
principal executive offices of the Company and the above-mentioned
office of the Rights Agent.
This Rights Certificate, with or without other Rights
Certificates, upon surrender at the principal corporate trust
office of the Rights Agent, may be exchanged for another Rights
Certificate or Rights Certificates of like tenor and date
evidencing Rights entitling the holder to purchase a like
aggregate number of shares of Preferred Stock or other property as
the Rights evidenced by the Rights Certificate or Rights
Certificates surrendered entitled such holder to purchase. If
this Rights Certificate shall be exercised in part, the holder
shall be entitled to receive upon surrender hereof another Rights
Certificate or Rights Certificates for the number of whole Rights
not exercised.
Subject to the provisions of the Rights Agreement, the
Rights evidenced by this Certificate (a) may be redeemed by the
Board of Directors of the Company at its option at a redemption
price of $.001 per Right, subject to adjustment, payable, at the
election of the Company, in cash or shares (including fractional
shares) of Common Stock or such other consideration as the Board
of Directors may determine at any time prior to the earlier of (i)
12:00 a.m. (midnight, New York, New York time) on the Stock
Acquisition Date, and (ii) the Expiration Date, or (b) may be
exchanged after the Stock Acquisition Date by the Board of
Directors of the Company at its option in whole or in part for
shares of the Company's Common Stock or other Company securities.
No fractional shares of Preferred Stock (other than
fractions that are integral multiples of one one-hundredth of a
share of Preferred Stock, which may, at the election of the
Company, be evidenced by depository receipts) are required to be
issued upon the exercise of any Right or Rights evidenced hereby,
but in lieu thereof the Company may elect to (i) evidence
fractional shares by depositary receipts, (ii) issue scrip or
warrants in registered form (either represented by a certificate
or uncertificated) or in bearer form (represented by a certifi-
cate) which shall entitle the holder to receive a full share upon
the surrender of such scrip or warrants aggregating a full share,
or (iii) make a cash payment, as provided in the Rights Agreement.
No holder of this Rights Certificate, as such, shall be
entitled to vote or to receive dividends on, or shall be deemed
for any purpose the holder of, Preferred Stock or of any other
securities, cash or property which may at any time be issuable on
the exercise hereof, nor shall anything contained in the Rights
Agreement or this Certificate be construed to confer upon the
holder hereof, as such, any of the rights of a stockholder of the
Company, including, without limitation, any right to vote for the
election of directors or upon any matter submitted to stockholders
-2-
at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other
actions affecting stockholders (except as provided in the Rights
Agreement), or to receive dividends or subscription rights, or to
institute, as a holder of Preferred Stock or other securities
issuable on the exercise of the Rights represented by this
Certificate, any derivative action, or otherwise, until and only
to the extent the Right or Rights evidenced by this Rights
Certificate shall have been exercised as provided in the Rights
Agreement.
This Rights Certificate shall not be valid or
obligatory for any purpose until it shall have been countersigned
by the Rights Agent.
WITNESS the facsimile signature of the proper officers
of the Company and its corporate seal. Dated as of _______ __, ____.
NOODLE KIDOODLE, INC.
By: ______________________________
Name:
Title:
Countersigned:
ChaseMellon Shareholder Services, L.L.C.
By: __________________________
Authorized Officer
[Form of Reverse Side of Rights Certificate]
-3-
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED the undersigned ________________
hereby sells, assigns and transfers unto
(Please print name and address of transferee) _________ Rights
evidenced by this Rights Certificate, together with all right,
title and interest therein, and does hereby irrevocably constitute
and appoint ________________________ with a power of Attorney to
transfer the said Rights and a Rights Certificate evidencing such
Rights on the books of Noodle Kidoodle, Inc., with full power of
substitution.
A new Rights Certificate evidencing the remaining
balance, if any, of such Rights not hereby sold, assigned and
transferred shall be mailed to and registered in the name of the
undersigned unless such person requests that such Rights
Certificate be registered in the name of and mailed to (complete
only if a Rights Certificate evidencing any remaining balance of
Rights is to be registered in a name other than the name of the
undersigned):
Please insert Social Security or
other identifying number of transferee: _________________________
_________________________________________________________________
(Please print name and address)
_________________________________________________________________
-4-
Certificate
The undersigned hereby certifies by checking the
appropriate boxes that:
(1) this Rights Certificate or any Rights evidenced
hereby __ are __ are not being sold, assigned and transferred by
or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of an Acquiring Person (as such terms are
defined in the Rights Agreement); and
(2) after due inquiry and to the best knowledge of the
undersigned, the undersigned __ did __did not acquire any of the
Rights evidenced by this Rights Certificate from any Person who is
or was an Acquiring Person or an Affiliate or Associate of an
Acquiring Person.
Dated: ___________________________ ______________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by an eligible guarantor institution
with membership in a recognized signature guarantee medallion
program as approved by the Stock Transfer Association.
- 5-
NOTICE
The signature on the foregoing Form of Assignment 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.
In the event the certification set forth above in the
Form of Assignment is not completed, the Company will deem the
beneficial owner of the Rights evidenced by this Right 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
or other transfer of this Rights Certificate or any Rights
evidenced hereby, will affix a legend to that effect on any Rights
Certificate issued in whole or partial exchange for this Rights
Certificate.
-6-
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise
the Rights represented by this Rights Certificate)
To: Noodle Kidoodle, Inc.
The undersigned hereby irrevocably elects to exercise
____________________ Rights represented by this Rights Certificate
to purchase the shares of Preferred Stock or other securities,
cash or other property issuable upon the exercise of such Rights
and requests that certificates for such shares or other securities
be issued in the name of, and such cash or other property be paid
to:
Please insert social security
or other identifying number: ________________________
_________________________________________________________________
(Please print name and address)
_________________________________________________________________
A new Rights Certificate evidencing the remaining
balance, if any, of such Rights not hereby exercised shall be
mailed to and registered in the name of the undersigned unless
such person requests that such Rights Certificate be registered in
the name of and mailed to (complete only if Rights Certificate
evidencing any remaining balance of Rights is to be registered in
a name other than the name of the undersigned):
Please insert social security
or other identifying number: ________________________
_________________________________________________________________
(Please print name and address)
_________________________________________________________________
-7-
Certificate
The undersigned hereby certifies by checking the
appropriate boxes that:
(1) the Rights evidenced by this Rights Certificate
__are __are not being exercised by or on behalf of a Person who is
or was an Acquiring Person or an Affiliate or Associate of an
Acquiring Person (as such terms are 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 or was
an Acquiring Person or an Affiliate or Associate of an Acquiring
Person.
Dated: __________________________ ____________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by an eligible guarantor institution
with membership in a recognized signature guarantee medallion
program as approved by the Stock Transfer Association.
-8-
NOTICE
The signature on the foregoing Form of Election to
Purchase 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.
In the event the certification set forth above in the
Form of Election to Purchase 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 or other transfer of this Rights Certificate or any
Rights evidenced hereby, will affix a legend to that effect on any
Rights Certificate issued in whole or partial exchange for this
Rights Certificate.
-9-
Exhibit B
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED SHARES
On March 11, 1998, the Board of Directors of Noodle
Kidoodle, Inc. (the "Company") authorized the issuance of one
preferred share purchase right (a "Right") for each outstanding
share of common stock, par value $.001 per share (the "Common
Stock"), of the Company. The distribution is payable to the
stockholders of record at the close of business on May 15, 1998 (the
"Record Date"), which is also the payment date, and with respect to
all shares of Common Stock that become outstanding after the Record
Date and prior to the earliest of the Distribution Date (as defined
below), the redemption of the Rights, the exchange of the Rights, or
the expiration of the Rights (and, in certain cases, following the
Distribution Date). Each Right entitles the registered holder to
purchase from the Company one one-hundredth of a share of Series A
Junior Participating Preferred Stock, par value $.001 per share, of
the Company (the "Preferred Stock") at an exercise price of $25.00
per one one-hundredth of a share of Preferred Stock (the "Purchase
Price"), subject to adjustment. The description and terms of the
Rights, and certain defined terms used herein, are set forth in a
Rights Agreement (the "Rights Agreement") between the Company and
ChaseMellon Shareholder Services, L.L.C. as Rights Agent (the
"Rights Agent"), dated as of May 1, 1998.
Until the earlier to occur of (i) the expiration of the
Company's redemption rights on the date of public disclosure that a
person or group other than certain Exempt Persons (an "Acquiring
Person"), together with persons affiliated or associated with such
Acquiring Person (other than those that are Exempt Persons), without
the approval of the Board of Directors (including a majority of the
directors not affiliated with an Acquiring Person), has acquired, or
obtained the right to acquire, beneficial ownership of 15% or more
(20% or more in the case of certain acquisitions by institutional
investors and 10% or more in the case of certain acquisitions by
persons determined to be "adverse" by the Board of Directors) of the
outstanding Common Stock (the "Stock Acquisition Date") and (ii) the
tenth business day after the date (the "Tender Offer Date") of
commencement or public disclosure of an intention to commence a
tender offer or exchange offer by a person other than an Exempt
Person if, upon consummation of the offer, such person could acquire
beneficial ownership of 15% or more of the outstanding Common Stock
(the earlier of such dates being called the "Distribution Date"),
the Rights will be evidenced by Common Stock certificates and not by
separate certificates. The Rights Agreement provides that, until
the Distribution Date (or earlier redemption, exchange or expiration
of the Rights), the Rights will be transferred with and only with
the Common Stock. Until the Distribution Date (or earlier
redemption, exchange or expiration of the Rights), new Common Stock
certificates issued after May 15, 1998, upon transfer or new
issuance of shares of Common Stock, will contain a notation
incorporating the Rights Agreement by reference. Until the
Distribution Date (or earlier redemption, exchange or expiration of
the Rights) the surrender for transfer of any certificate for Common
Stock will also constitute the transfer of the Rights associated
with the Common Stock represented by such certificate. As soon as
practicable following the Distribution Date, separate certificates
evidencing the Rights ("Right Certificates") will be mailed to
holders of record of the Common Stock as of the close of business on
the Distribution Date, and such separate Right Certificates alone
will evidence the Rights.
The Rights will first become exercisable on the Stock
Acquisition Date (unless sooner redeemed or exchanged). The Rights
will expire at the close of business on May 15, 2008 (the
"Expiration Date"), unless earlier redeemed or exchanged by the
Company as described below.
-10-
The Purchase Price payable, and the number of shares of
Preferred Stock or other securities, cash or other property
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 or distribution on, or a subdivision, combination or
reclassification of, the Preferred Stock, (ii) upon the grant to
holders of the Preferred Stock of certain rights, options or
warrants to subscribe for Preferred Stock or securities convertible
into or exchangeable for Preferred Stock at less than the current
market price of the Preferred Stock or (iii) upon the distribution
to holders of the Preferred Stock of evidences of indebtedness or
assets (excluding regular periodic cash dividends, subject to
certain limitations set forth in the Rights Agreement) or of
subscription rights or warrants (other than those referred to
above). In addition, the Purchase Price payable, and the number of
shares of Preferred Stock purchasable, on exercise of a Right is
subject to adjustment in the event that the Company should (i)
declare or pay any dividend on the Common Stock payable in Common
Stock or (ii) effect a subdivision or combination of the Common
Stock into a different number of shares of Common Stock.
With certain exceptions, no adjustment in the Purchase
Price will be required until cumulative adjustments require an
adjustment of at least 1% in such Purchase Price. No fractional
shares of Preferred Stock will be issued (other than fractions which
are integral multiples of one one-hundredth of a share of Preferred
Stock, which may, at the election of the Company, be evidenced by
depositary receipts) and in lieu thereof, an adjustment in cash will
be made based on the market price of the Preferred Stock on the last
trading date prior to the date of exercise.
In the event that there is public disclosure that an
Acquiring Person has become such, proper provision would be made so
that each holder of a Right, other than Rights that are or were
beneficially owned by the Acquiring Person and certain related
persons and transferees (which will thereafter be void), will
thereafter have the right to receive upon exercise the greater of
(i) that number of shares of Common Stock (or other securities)
having at the time of such transaction a market value of two times
the Purchase Price of the Right of (ii) one share of Common Stock
(or other securities). In addition, the Company's Board of
Directors has the option of exchanging all or part of the Rights
(excluding void Rights) for an equal number of shares of Common
Stock in the manner described in the Rights Agreement.
In the event that, at any time following public disclosure
that an Acquiring Person has become such, the Company is involved in
a merger or other business combination transaction where the Company
is not the surviving corporation or where the Common Stock is
changed or exchanged or in a transaction or transactions as a result
of which 50% or more of its consolidated assets or earning power are
sold, proper provision would be made so that each holder of a Right
(other than such Acquiring Person and certain related persons or
transferees) shall thereafter have the right to receive, upon the
exercise thereof at the then current Purchase Price of the Right,
the greater of (i) that number of shares of common stock of the
acquiring company or the Company, as the case may be, which at the
time of such transaction would have a market value of two times the
Purchase Price of the Right and (ii) one share of such common stock,
and so that the Rights would continue to have anti-dilution
protections equivalent to those applicable prior to such business
combination.
At any time prior to public disclosure that an Acquiring
Person has become such, the Board of Directors of the Company may
redeem the Rights in whole, but not in part, at a price of $.001 per
Right (the "Redemption Price"), payable in cash, shares (including
fractional shares) of Common Stock or any other form of
consideration deemed appropriate by the Board of Directors.
- 11-
At any time prior to the Distribution Date, the Board of
Directors of the Company may amend or supplement the Rights
Agreement without the approval of the Rights Agent or any holder of
the Rights. From and after the Distribution Date, the Board of
Directors of the Company may generally only amend or supplement the
Rights Agreement without such approval only to cure ambiguity,
correct or supplement any defective or inconsistent provision or
change or supplement the Rights Agreement in any manner which shall
not adversely affect the interests of the holders of the Rights
(other than an Acquiring Person or an affiliate or associate
thereof). Immediately upon the action of the Board of Directors
providing for any amendment or supplement, such amendment or
supplement will be deemed effective.
The Preferred Stock purchasable upon exercise of the
Rights will not be redeemable. Each share of Preferred Stock will
be entitled to a minimum preferential quarterly dividend payment,
when, as and if declared by the Board of Directors of the Company,
equal to the greater of $1.00 per share and 100 times the dividend
declared per Common Stock. In the event of liquidation, the holders
of the Preferred Stock will be entitled to a preferential
liquidation payment equal to $25 and 100 times the payment to be
made per share of Common Stock, plus accrued and unpaid dividends.
Each share of Preferred Stock will have one vote per share, voting
together with the Common Stock.
Exempt Persons include (i) the Company, (ii) any
Subsidiary of the Company, (iii) any employee benefit plan of the
Company or of any Subsidiary of the Company and (iv) any Person
holding Common Stock for any such employee benefit plan or for
employees of the Company or of any Subsidiary of the Company
pursuant to the terms of any such employee benefit plan.
The Rights may have certain anti-takeover effects. The
Rights may cause substantial dilution to a person or group (except
as described above with respect to an Exempt Person) that attempts
to acquire the Company on terms not approved by the Board. The
Rights should not interfere with any merger or other business
combination approved by the Board of Directors prior to the time a
person or group other than an Exempt Person has acquired beneficial
ownership of 15% or more of the Common Stock, because until such
time the Rights may generally be redeemed by the Company at $.001
per Right.
Until a Right is exercised, the holder thereof, as such,
will have no rights as a stockholder of the Company, including,
without limitation, the right to vote or to receive dividends.
A copy of the Rights Agreement has been filed with the
Securities and Exchange Commission as an Exhibit to an Application
for Registration on Form 8-A and as an Exhibit to the Company's
Current Report on Form 8-K. A copy of the Rights Agreement is
available free of charge from the Company. This summary description
of the Rights does not purport to be complete and is qualified in
its entirety by reference to the Rights Agreement, which is hereby
incorporated herein by reference.
-12-