EXHIBIT 1
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Salton, Inc.
and
UMB Bank, N.A.
as Rights Agent
Rights Agreement
dated as of June 28, 2004
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TABLE OF CONTENTS
PAGE
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Section 1. Certain Definitions.................................................. 1
Section 2. Appointment of Rights Agent.......................................... 6
Section 3. Issue of Right Certificates.......................................... 7
Section 4. Form of Right Certificates........................................... 9
Section 5. Countersignature and Registration.................................... 9
Section 6. Transfer, Split Up, Combination and Exchange of Right Certificates;
Mutilated, Destroyed, Lost or Stolen Right Certificates.............. 10
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights........ 11
Section 8. Cancellation and Destruction of Right Certificates................... 13
Section 9. Reservation and Availability of Shares............................... 14
Section 10. Preferred Shares Record Date......................................... 16
Section 11. Adjustment of Purchase Price, Number of Shares or Number of Rights... 16
Section 12. Certificate of Adjusted Purchase Price or Number of Shares........... 28
Section 13. Consolidation, Merger, Sale or Transfer of Assets or Earning Power... 28
Section 14. Fractional Rights and Fractional Shares.............................. 31
Section 15. Rights of Action..................................................... 33
Section 16. Agreement of Right Holders........................................... 34
Section 17. Right Certificate Holder Not Deemed a Stockholder.................... 34
Section 18. Concerning the Rights Agent.......................................... 35
Section 19. Merger or Consolidation or Change of Name of Rights Agent............ 35
Section 20. Duties of Rights Agent............................................... 36
Section 21. Change of Rights Agent............................................... 39
Section 22. Issuance of New Right Certificates................................... 40
Section 23. Redemption........................................................... 40
Section 24. Exchange............................................................. 42
Section 25. Notice of Certain Events............................................. 43
Section 26. Notices.............................................................. 45
Section 27. Supplements and Amendments........................................... 45
Section 28. Successors........................................................... 46
Section 29. Determinations and Actions by the Board of Directors................. 46
Section 30. Benefits of this Agreement........................................... 47
Section 31. Severability......................................................... 47
Section 32. Governing Law........................................................ 47
Section 33. Counterparts......................................................... 47
Section 34. Descriptive Headings................................................. 48
Exhibit A Form of Certificate of Designation
Exhibit B Form of Right Certificate
Exhibit C Summary of Stockholder Rights Agreement
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RIGHTS AGREEMENT
Rights Agreement, dated as of June 28, 2004 (the "Agreement"), between
Salton, Inc., a Delaware corporation (the "Company"), and UMB Bank, N.A., as
Rights Agent (the "Rights Agent").
The Board of Directors of the Company has authorized and declared a
dividend of one Preferred Share Purchase Right (a "Right") for each Common Share
(as defined in Section 1 hereof) of the Company outstanding on the Record Date
(as defined in Section 1 hereof), each Right representing the right to purchase
one one-thousandth of a Preferred Share (as defined in Section 1 hereof) of the
Company, upon the terms and subject to the conditions set forth in this
Agreement, and has further authorized and directed the issuance of one Right
(subject to adjustment as provided herein) with respect to each Common Share
that shall become outstanding (i) between the Record Date and the earliest of
the Distribution Date, the Redemption Date and the Final Expiration Date (as
such terms are defined in Sections 3 and 7 hereof) or (ii) between the
Distribution Date and the earlier of the Redemption Date and the Final
Expiration Date as a result of the conversion into Common Shares of any
convertible securities of the Company or any of its Subsidiaries or as a result
of the exercise of any options, warrants or other rights to purchase Common
Shares of the Company, which convertible securities, options, warrants or other
rights were outstanding on the Distribution Date.
Accordingly, in consideration of 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) "Acquiring Person" means any Person who or which, together with
all Affiliates and Associates of such Person, shall be the Beneficial
Owner of 20% or more of the aggregate number of Common Shares of the
Company then outstanding; provided, however that (i) in no event shall any
Exempt Person be deemed to be an Acquiring Person, (ii) no Person shall
become an "Acquiring Person" as the result of an acquisition of Common
Shares by the Company which, by reducing the number of the Company's
Common Shares outstanding, increases the
proportionate number of shares beneficially owned by such Person to 20% or
more of the Common Shares then outstanding; provided, however, that if a
Person shall become the Beneficial Owner of 20% or more of the Common
Shares of the Company then outstanding by reason of share acquisitions by
the Company and shall, after such share acquisitions by the Company, (A)
acquire, in one or more transactions, beneficial ownership of an
additional number of Common Shares which exceeds 0.25% of the
then-outstanding Common Shares and (B) beneficially own after such
acquisition 20% or more of the aggregate number of Common Shares of the
Company then outstanding, then such Person shall be deemed to be an
"Acquiring Person," (iii) no Person who or which, together with all
Affiliates and Associates of such Person, was the Beneficial Owner of 20%
or more of the aggregate number of Common Shares of the Company issued and
outstanding as of 5:00 p.m., New York time, on June 28, 2004 shall be
deemed to be an "Acquiring Person" for purposes of this Agreement;
provided, however, that if such Person or any of its Affiliates and
Associates, after 5:00 p.m., New York time, on June 28, 2004, (A)
acquires, in one or more transactions, beneficial ownership of an
additional number of Common Shares which exceeds 0.25% of the
then-outstanding Common Shares and (B) beneficially owns after such
acquisition 20% or more of the aggregate number of Common Shares of the
Company then outstanding, then such Person shall be deemed to be an
"Acquiring Person," and (iv) if the Board of Directors determines in good
faith that a Person who would otherwise be an Acquiring Person, as defined
pursuant to the foregoing provisions of this paragraph (a), has become
such inadvertently, and such Person divests as promptly as practicable a
sufficient number of Common Shares so that such Person would no longer be
an Acquiring Person, as defined pursuant to the foregoing provisions of
this paragraph (a), then such Person shall not be deemed to be an
"Acquiring Person" for any purposes of this Agreement.
(b) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations
of the SEC under the Exchange Act, as
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in effect on the date of this Agreement, provided that, notwithstanding
any provision of such Rule 12b-2 to the contrary, neither the Company nor
any Subsidiary of the Company shall be deemed, and none of their
respective directors, officers and agents shall be deemed solely by virtue
of their relationship with the Company or a Subsidiary of the Company, to
be an "Affiliate" or an "Associate" of any stockholder of the Company for
purposes of this Agreement.
(c) A Person shall be deemed the "Beneficial Owner" of and shall be
deemed to "beneficially own" any securities:
(i) which such Person or any of such Person's Affiliates or
Associates beneficially owns, directly or indirectly;
(ii) which such Person or any of such Person's Affiliates or
Associates has (A) the right to acquire (whether such right is
exercisable immediately or only after the passage of time) pursuant
to any agreement, arrangement or understanding (other than customary
agreements with and among underwriters and selling group members
with respect to a bona fide public offering of securities), 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 shall 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 of such Person's Affiliates or Associates
until such tendered securities are accepted for purchase or
exchange; or (B) the right to vote (whether such right is
exercisable immediately or only after the passage of time) pursuant
to any agreement, arrangement or understanding; provided, however,
that a Person shall not be deemed the Beneficial Owner of, or to
beneficially own, any security if the agreement, arrangement or
understanding to vote such security (1) arises solely from a
revocable proxy or consent given to such Person or any of such
Person's
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Affiliates or Associates in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the
applicable rules and regulations of the SEC promulgated under the
Exchange Act and (2) is not then reportable on Schedule 13D under
the Exchange Act (or any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by
any other Person (or any Affiliate or Associate of such other
Person) with which such Person or any of such Person's Affiliates or
Associates has any agreement, arrangement or understanding (other
than customary agreements with and among underwriters and selling
group members with respect to a bona fide public offering of
securities), whether or not in writing, for the purpose of
acquiring, holding, voting (other than pursuant to a revocable proxy
or consent as described in the proviso to Section 1(c)(ii)(B)
hereof) or disposing of any securities of the Company.
Notwithstanding anything in this definition of "Beneficial Ownership" to
the contrary, the phrases "then outstanding" or "issued and outstanding,"
when used with reference to a Person's Beneficial Ownership of securities
of the Company, means the number of such securities then issued and
outstanding together with the number of such securities not then issued
and outstanding which such Person would be deemed to beneficially own
hereunder.
(d) "Board of Directors" means the Board of Directors of the
Company.
(e) "Business Day" means any day other than a Saturday, a Sunday, or
a day on which banking institutions in the City of New York are authorized
or obligated by law or executive order to close.
(f) "Close of Business" on any given date means 5:00 p.m., New York
time, on such date; provided, however, that if such date is not a Business
Day it shall mean 5:00 p.m., New York time, on the next succeeding
Business Day.
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(g) "Common Shares", when used with reference to the Company, means
the common stock, $.01 par value, of the Company or, when used with
reference to any Person other than the Company, means the capital stock
(or other equity interest) with the greatest voting power of such other
Person or, if such Person is a Subsidiary of another Person, of the Person
or Persons which ultimately controls or control such first-mentioned
Person.
(h) "Company" means Salton, Inc., a Delaware corporation.
(i) "Distribution Date" is defined in Section 3.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(k) "Exempt Person" means (i) the Company, (ii) any Subsidiary of
the Company, and (iii) any employee benefit plan of the Company or any
Subsidiary of the Company, or any entity holding Common Shares of the
Company for or pursuant to the terms of any such plan or related trust.
(l) "Final Expiration Date" is defined in Section 7.
(m) "Person" means any individual, firm, corporation, limited
liability company, partnership or other entity, and shall include any
successor (by merger or otherwise) of such entity.
(n) "Preferred Shares" means the Series B Junior Participating
Preferred Stock, par value $.01, of the Company having the rights,
preferences and limitations thereof set forth in the Form of Certificate
of Designation attached to this Agreement as Exhibit A.
(o) "Purchase Price" is defined in Section 4.
(p) "Record Date" means the Close of Business on July 9, 2004.
(q) "Redemption Date" is defined in Section 7.
(r) "Redemption Price" is defined in Section 23.
(s) "Right Certificate" is defined in Section 3(a).
(t) "Rights Agent" means UMB Bank, N.A. or any successor thereto
appointed in accordance with the provisions of this Agreement.
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(u) "SEC" means the Securities and Exchange Commission.
(v) "Securities Act" means the Securities Act of 1933, as amended.
(w) "Shares Acquisition Date" means the first date of public
announcement (which, for purposes of this definition, shall include,
without limitation, a filing with the SEC pursuant to Section 13(d) or
13(g) under the Exchange Act) by the Company or an Acquiring Person (or
any Affiliate or Associate of such Acquiring Person) that an Acquiring
Person has become such.
(x) "Subsidiary" of any Person means any corporation or other entity
of which a majority of either the voting power of the voting equity
securities or the equity interest is owned, directly or indirectly, by
such Person.
(y) "Summary of Rights" is defined in Section 3(b).
(z) The term "Trading Day" means a day on which the principal
national securities exchange on which the Common Shares are listed or
admitted to trading is open for the transaction of business or, if the
Common Shares are not listed or admitted to trading on any national
securities exchange, a day on which the Common Shares are quoted on the
Nasdaq Stock Market ("Nasdaq") or such other system then in use or, if the
Common Shares are not quoted by any such system, a Business Day.
(aa) "Triggering Event" means any event described in Section
11(a)(ii) or Section 13(a) of this Agreement.
Any determination or interpretation required in connection with any of the
definitions contained in this Section 1 shall be made by the Board of
Directors in its good faith judgment, which determination shall be final
and binding.
Section 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company and the holders of the Rights (who,
in accordance with Section 3 hereof, shall prior to the Distribution Date also
be the holders of the Common Shares of the Company) in accordance with the terms
and conditions hereof, and the Rights Agent hereby accepts such appointment.
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The Company may from time to time appoint such co-Rights Agents as it may deem
necessary or desirable, the respective duties of which shall be determined by
the Company.
Section 3. Issue of Right Certificates.
(a) Until the earlier of (i) the Close of Business on the tenth day
after the Shares Acquisition Date or (ii) the Close of Business on the
tenth Business Day (or such later date as may be determined by action of
the Board of Directors taken before any Person becomes an Acquiring
Person) after the date of the commencement of, or the first public
announcement of the intent to commence, a tender or exchange offer by any
Person (other than any Exempt Person), the consummation of which would
result in any Person becoming an Acquiring Person (including with respect
to both clauses (i) and (ii) any such date which is after the date of this
Agreement and prior to the issuance of the Rights; the Close of Business
on the earlier of such dates being herein referred to as the "Distribution
Date"), (x) the Rights will be evidenced (subject to the provisions of
paragraph (b) of this Section 3) by the certificates for Common Shares
registered in the names of the holders thereof (which certificates shall
also be deemed to be Right Certificates) and not by separate Right
Certificates, and (y) the Rights will be transferable only in connection
with and will be transferred by the transfer of Common Shares. As soon as
practicable after the Distribution Date, the Company will prepare and
execute, the Rights Agent will countersign, and the Company will send or
cause to be sent (and the Rights Agent will, if requested by the Company,
send) by first-class, postage prepaid mail, to each record holder of
Common Shares as of the Close of Business on the Distribution Date, at the
address of such holder shown on the records of the Company, a Right
Certificate, in substantially the form of Exhibit B hereto (a "Right
Certificate"), evidencing one Right for each Common Share so held, subject
to adjustment as provided in this Agreement. As of and after the Close of
Business on the Distribution Date, the Rights will be evidenced solely by
such Right Certificates.
(b) On the Record Date or as soon as practicable thereafter, the
Company will send a copy of a Summary of Stockholder Rights Agreement, in
substantially the form attached hereto as
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Exhibit C (the "Summary of Rights"), by first-class, postage prepaid mail,
to each record holder of Common Shares as of the Close of Business on the
Record Date, at the address of such holder shown on the records of the
Company. With respect to certificates for Common Shares outstanding as of
the Record Date, until the Distribution Date, the Rights will be evidenced
by such certificates for Common Shares registered in the names of the
holders thereof together with a copy of the Summary of Rights. Until the
Close of Business on the Distribution Date (or, if earlier than the
Distribution Date, the earlier of the Redemption Date or the Final
Expiration Date), the surrender for transfer of any certificate for Common
Shares 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 Shares represented thereby.
(c) Certificates issued for Common Shares (including, without
limitation, certificates issued in respect of reacquired Common Shares
referred to in the last sentence of this paragraph (c)) after the Record
Date but prior to the earliest of the Distribution Date, the Redemption
Date or the Final Expiration Date shall have impressed on, printed on,
written on or otherwise affixed to them the following legend:
This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in a Rights Agreement between Salton,
Inc., a Delaware corporation (the "Company"), and UMB Bank, N.A., as
Rights Agent (the "Rights Agent"), dated as of June 28, 2004 (the
"Rights Agreement"), the terms of which are hereby incorporated
herein by reference and a copy of which is on file at the principal
executive offices of the Company. Under certain circumstances, as
set forth in the Rights Agreement, such rights will be evidenced by
separate certificates and will no longer be evidenced by this
certificate. The Company will mail to the holder of this certificate
a copy of the Rights Agreement without charge after receipt of a
written request therefor. UNDER CERTAIN CIRCUMSTANCES SET FORTH IN
THE RIGHTS AGREEMENT, RIGHTS HELD BY A PERSON WHO IS OR BECOMES AN
ACQUIRING PERSON OR ANY AFFILIATE OR ASSOCIATE THEREOF (AS SUCH
TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND CERTAIN TRANSFEREES
THEREOF, WHETHER CURRENTLY HELD BY OR ON BEHALF OF SUCH PERSON OR BY
ANY SUBSEQUENT HOLDER, SHALL BECOME NULL AND VOID.
With respect to such certificates containing the foregoing legend, until
the earlier of (i) the Distribution Date or (ii) the Final Expiration
Date, the Rights associated with the Common Shares
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represented by such certificates shall be evidenced by such certificates
alone, and the surrender for transfer of any such certificate shall also
constitute the transfer of the Rights associated with the Common Shares
represented thereby. If the Company purchases or otherwise acquires any
Common Shares after the Record Date but before the Distribution Date, any
Rights associated with such Common Shares shall be deemed cancelled and
retired so that the Company shall not be entitled to exercise any Rights
associated with the Common Shares which are no longer outstanding.
Section 4. Form of Right Certificates. The Right Certificates (and the
forms of election to purchase Preferred Shares and of assignment to be printed
on the reverse thereof) shall be substantially the same as 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 applicable 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 to conform to usage. Subject to the
provisions of Section 22 hereof, the Right Certificates shall entitle the
holders thereof to purchase such number of one one-thousandths of a Preferred
Share as shall be set forth therein at the price per one one-thousandth of a
Preferred Share set forth therein (the "Purchase Price"), but the number and
type of securities purchasable upon the exercise of each Right and the Purchase
Price thereof shall be subject to adjustment as provided herein.
Section 5. Countersignature and Registration.
(a) The Right Certificates shall be executed on behalf of the
Company by its Chairman of the Board, its President, any of its Vice
Presidents or its Treasurer, either manually or by facsimile signature,
and have affixed thereto the Company's seal or a facsimile thereof, and
shall be attested by the Secretary or an Assistant Secretary of the
Company, either manually or by facsimile signature. The Right Certificates
shall be manually countersigned by the Rights Agent and shall not be valid
for any purpose unless so countersigned. If any officer of the Company
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who shall have signed any of the Right Certificates shall cease to be such
officer of the Company before countersignature by the Rights Agent and
issuance and delivery by the Company, such Right Certificates,
nevertheless, may be countersigned by the Rights Agent and issued and
delivered by the Company with the same force and effect as though the
Person who signed such Right Certificates had not ceased to be such
officer of the Company; and any Right Certificate may be signed on behalf
of the Company by any Person who, at the actual date of the execution of
such Right Certificate, shall be a proper officer of the Company to sign
such Right Certificate, although at the date of the execution of this
Rights Agreement any such Person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at an office or agency designated for such purpose,
books for registration and transfer of the Right Certificates issued
hereunder. Such books shall show the names and addresses of the respective
holders of the Right Certificates, the number of Rights evidenced on its
face by each of the Right Certificates and the date of each of the Right
Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates.
(a) Subject to the provisions of Section 11(a)(iii) and Section 14
of this Agreement, at any time after the Close of Business on the
Distribution Date, and at or prior to the Close of Business on the earlier
of the Redemption Date or the Final Expiration Date, any Right Certificate
or Certificates (other than Right Certificates representing Rights that
have been exchanged pursuant to Section 24 of this Agreement) may be
transferred, split up, combined or exchanged for another Right Certificate
or Right Certificates, entitling the registered holder to purchase a like
number of one one-thousandths of a Preferred Share (or, following the
occurrence of a Triggering Event, Common Shares, and/or other securities,
cash or other property, as the case may be) as the Right Certificate or
Right Certificates surrendered then entitled such holder to purchase. Any
registered holder desiring to transfer, split up, combine or exchange any
Right
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Certificate or Right Certificates shall make such request in writing
delivered to the Rights Agent, and shall surrender the Right Certificate
or Right Certificates to be transferred, split up, combined or exchanged
at the office or agency of the Rights Agent designated for such purpose.
Notwithstanding anything in this Agreement to the contrary, neither the
Rights Agent nor the Company shall be obligated to take any action
whatsoever with respect to the transfer of any such surrendered Rights
Certificate until the registered holder shall have completed and signed
the certificate contained in 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 former Beneficial Owner) or
Affiliates or Associates thereof as the Company shall reasonably request.
Thereupon the Rights Agent shall countersign and deliver to the Person
entitled thereto a Right Certificate or Right Certificates, as the case
may be, as so requested. The Company may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer, split up, combination or exchange of Right
Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or
mutilation of a Right Certificate, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to them,
and, at the Company's request, reimbursement to the Company and the Rights
Agent of all reasonable expenses incidental thereto, and upon surrender to
the Rights Agent and cancellation of the Right Certificate if mutilated,
the Company will make and deliver a new Right Certificate of like tenor to
the Rights Agent for delivery to the registered holder in lieu of the
Right Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.
(a) Subject to the provisions of Section 11(a)(iii) of this
Agreement, the registered holder of any Right Certificate may exercise the
Rights evidenced thereby (except as otherwise provided herein) in whole or
in part at any time after the Distribution Date upon surrender of the
Right Certificate, with the form of election to purchase and the
certificate on the reverse side
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thereof duly executed, to the Rights Agent at the office or agency of the
Rights Agent designated for such purpose, together with payment of the
Purchase Price for each one one-thousandth of a Preferred Share (or,
following the occurrence of a Triggering Event, Common Shares and/or other
securities, cash or other property, as the case may be) as to which the
Rights are exercised, at or prior to the earlier of the Close of Business
on (i) June 28, 2014 (the "Final Expiration Date"), (ii) the time at which
the Rights are redeemed as provided in Section 23 of this Agreement (the
"Redemption Date"), or (iii) the time at which such Rights are exchanged
as provided in Section 24 of this Agreement.
(b) The Purchase Price for each one one-thousandth of a Preferred
Share purchasable pursuant to the exercise of a Right shall initially be
$45.00 and shall be subject to adjustment from time to time as provided in
Sections 11 and 13 hereof and shall be payable in lawful money of the
United States of America in accordance with paragraph (c) of this Section
7.
(c) Upon receipt of a Right Certificate representing exercisable
Rights, with the form of election to purchase duly executed, accompanied
by payment of the Purchase Price for the shares (or, following the
occurrence of a Triggering Event, Common Shares and/or other securities,
cash or other property, as the case may be) to be purchased and an amount
equal to any applicable transfer tax required to be paid by the holder of
such Right Certificate in accordance with Section 9 hereof by certified
check, cashier's check or money order payable to the order of the Company,
the Rights Agent shall thereupon promptly (i) requisition from any
transfer agent of the Preferred Shares (or make available, if the Rights
Agent is the transfer agent) certificates for the number of Preferred
Shares to be purchased and the Company hereby irrevocably authorizes its
transfer agent to comply with all such requests, (ii) if the Company shall
have elected to deposit the Preferred Shares issuable upon exercise of the
Rights with a depositary agent, requisition from the depositary agent
depositary receipts representing such number of one one-thousandths of a
Preferred Share as are to be purchased in which case certificates for the
Preferred Shares represented by such receipts shall be deposited by the
transfer agent with the
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depositary agent and the Company hereby directs the depositary agent to
comply with such request, (iii) when appropriate, requisition from the
Company the amount of cash to be paid in lieu of issuance of fractional
shares in accordance with Section 14 hereof, (iv) promptly after receipt
of such certificates or depositary receipts, cause the same to be
delivered to or upon the order of the registered holder of such Right
Certificate, registered in such name or names as may be designated by such
holder and (v) when appropriate, after receipt, promptly deliver such cash
to or upon the order of the registered holder of such Right Certificate.
If the Company elects or is obligated to issue other securities (including
Common Shares) of the Company, pay cash and/or distribute other property
pursuant to Section 11(a) of this Agreement, the Company will make all
arrangements necessary so that such other securities, cash and/or property
are available for distribution by the Rights Agent, if and when
appropriate.
(d) If the registered holder of any Right Certificate shall exercise
less than all the Rights evidenced thereby, a new Right Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be
issued by the Rights Agent to the registered holder of such Right
Certificate or to his duly authorized assigns, subject to the provisions
of Sections 11(a)(iii) and 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to take any
action whatsoever with respect to a registered holder upon the occurrence
of any purported exercise as set forth in this Section 7 until the
registered holder shall have completed and signed the certificate
contained in the form of election to purchase on the reverse side of the
Rights Certificate surrendered for such exercise and the Company shall
have been provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Right Certificates. All Right
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to
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the Company or to any of its agents, be delivered to the Rights Agent for
cancellation or in cancelled form, or, if surrendered to the Rights Agent, shall
be cancelled by it, and no Right Certificates shall be issued in lieu thereof
except as expressly permitted by any of the provisions of this Rights Agreement.
The Company shall deliver to the Rights Agent for cancellation and retirement,
and the Rights Agent shall so cancel and retire, any other Right Certificate
purchased or acquired by the Company otherwise than upon the exercise thereof.
The Rights Agent shall deliver all cancelled Right Certificates to the Company,
or shall, at the written request of the Company, destroy such cancelled Right
Certificates, and in such case shall deliver a certificate of destruction
thereof to the Company.
Section 9. Reservation and Availability of Shares. The Company will cause
to be reserved and kept available for the exercise of Rights, out of its
authorized but unissued Preferred Shares (and, following the occurrence of a
Triggering Event, Common Shares and/or other securities) or any Preferred Shares
(and, following the occurrence of a Triggering Event, Common Shares and/or other
securities) held in its treasury, such number of Preferred Shares (and,
following the occurrence of a Triggering Event, Common Shares and/or other
securities) as will be sufficient to permit the exercise in full of all
outstanding Rights.
So long as any securities purchasable upon the exercise of Rights are
listed on any national securities exchange, the Company shall use its best
efforts to cause, from and after such time as the Rights become exercisable, all
shares reserved for such issuance to be listed on such exchange or approved for
listing on such exchange upon official notice of issuance.
The Company shall use its best efforts to (i) file, as soon as practicable
after the occurrence of a Triggering Event pursuant to Section 11(a)(ii) for
which the consideration to be delivered by the Company upon the exercise of the
Rights has been determined in accordance with Section 11(a)(iv) hereof, or as
soon as required by law following the Distribution Date, a registration
statement on an appropriate form under the Securities Act with respect to the
securities purchasable upon exercise of the Rights, (ii) cause such registration
statement to become effective as soon as practicable after such filing, and
(iii) cause such registration statement to remain effective (with a prospectus
at all times meeting the
-14-
requirements of the Securities Act) until the earlier of (A) the date as of
which the Rights are no longer exercisable or (B) the Final Expiration Date. The
Company will also take such action as may be appropriate under, or to ensure
compliance with, the securities or "blue sky" laws of the various states in
connection with the exercise of the Rights. The Company may temporarily suspend,
for a period of time not to exceed 120 days after the Distribution Date, 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 issue a public announcement stating that the exercisability of the
Rights has been temporarily suspended, as well as a public announcement at such
time as the suspension is no longer in effect. Notwithstanding any provision of
this Agreement to the contrary, the Rights shall not be exercisable in any
jurisdiction unless the requisite registration or qualification in such
jurisdiction shall have been obtained.
The Company will take all such action as may be necessary to ensure that
all Preferred Shares (or Common Shares and/or other securities, as the case may
be) delivered upon exercise of Rights shall, at the time of delivery of the
certificates for such Preferred Shares (or Common Shares and/or other
securities, as the case may be), subject to payment of the Purchase Price, be
duly and validly authorized and issued and fully paid and non-assessable.
The Company will pay when due and payable any and all federal and state
transfer taxes and charges which may be payable in respect of the issuance or
delivery of the Right Certificates or of any Preferred Shares (or Common Shares
and/or other securities, as the case may be) upon the exercise of Rights. The
Company shall not, however, be required to pay any transfer tax which may be
payable in respect of any transfer or delivery of Right Certificates to a Person
other than, or the issuance or delivery of certificates or depositary receipts
for the Preferred Shares (or Common Shares and/or other securities, as the case
may be) in a name other than that of, the registered holder of the Right
Certificate evidencing Rights surrendered for exercise, or to issue or deliver
any certificates or depositary receipts for Preferred Shares (or Common Shares
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 Right Certificate
-15-
at the time of surrender) or until it has been established to the Company's
satisfaction that no such tax is due.
Section 10. Preferred Shares Record Date. Each Person in whose name any
certificate for Preferred Shares (or Common Shares 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 Shares (or Common
Shares and/or other securities, as the case may be) represented thereby on, and
such certificate shall be dated, the date upon which the Right Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and any applicable transfer taxes) was made; provided, however, that if the
date of such surrender and payment is a date upon which the Preferred Shares (or
Common Shares 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 securities on, and such certificate shall be dated, the next
succeeding Business Day on which the Preferred Shares (or Common Shares and/or
other securities, as the case may be) transfer books of the Company are open.
Prior to the exercise of the Rights evidenced thereby, the holder of a Right
Certificate shall not be entitled to any rights of a holder of Preferred Shares
(or Common Shares and/or other securities, as the case may be) for which the
Rights shall be exercisable, including, without limitation, the right to vote,
to receive dividends or other distributions or to exercise any preemptive
rights, and shall not be entitled to receive any notice of any proceedings of
the Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number of Shares or Number of
Rights. The Purchase Price, the number of Preferred Shares purchasable upon the
exercise of each Right and the number of Rights outstanding are subject to
adjustment from time to time as provided in this Section 11.
(a) (i) In the event the Company shall at any time after the date of
this Agreement (A) declare a dividend on the Preferred Shares payable in
Preferred Shares, or in securities convertible into, or exercisable for,
Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C)
combine the outstanding Preferred Shares into a smaller number of
Preferred Shares or (D) issue any shares of its capital stock in a
reclassification of the Preferred Shares (including
-16-
any such reclassification in connection with a consolidation or merger in
which the Company is the continuing or surviving corporation), except as
otherwise provided in this Section 11(a), then the Purchase Price in
effect immediately prior to the time of the record date for such dividend
or of the effective date of such subdivision, combination or
reclassification, and the number and kind of shares of capital stock then
issuable upon the exercise of a Right shall be proportionately adjusted so
that the holder of any Right exercised after such time shall be entitled
to receive the aggregate number and kind of shares of capital stock (or
securities convertible into, or exercisable for, capital stock) which, if
such Right had been exercised immediately prior to such time and at a time
when the Preferred Shares transfer books of the Company were open, such
holder would have owned upon such exercise and been entitled to receive by
virtue of such dividend, subdivision, combination or reclassification;
provided, however, that in no event shall the consideration to be paid
upon the exercise of one Right be less than the aggregate par value of the
shares of capital stock of the Company issuable upon exercise of one
Right. If an event occurs that would require an adjustment under both this
Section 11(a)(i) and Section 11(a)(ii) of this Agreement, the adjustment
provided for in this Section 11(a)(i) shall be in addition to, and shall
be made before, any adjustment required pursuant to Section 11(a)(ii) of
this Agreement.
(ii) Subject to Section 24 of this Agreement, if any Person,
either alone or together with its Affiliates and Associates, shall
become an Acquiring Person, then each holder of a Right (except as
provided below) shall thereafter have a right to receive, upon
exercise thereof and in lieu of Preferred Shares, at a price equal
to the then-current Purchase Price multiplied by the number of one
one-thousandths of a Preferred Share for which a Right is then
exercisable in accordance with the terms of this Agreement, such
number of Common Shares of the Company as shall equal the result
obtained by (x) multiplying the then-current Purchase Price by the
number of one one-thousandths of a Preferred Share for which a Right
is then exercisable and dividing that product by (y) 50% of the
then-current per share market price of the Company's Common Shares
-17-
(determined pursuant to Section 11(d) of this Agreement) on the date
of the occurrence of such event. In the event that any Person shall
become an Acquiring Person and the Rights shall then be outstanding,
the Company shall not take any action which would eliminate or
diminish the benefits intended to be afforded by the Rights.
(iii) Notwithstanding any other provisions of this Agreement
to the contrary, from and after the occurrence of a Triggering
Event, any Rights that are beneficially owned by (A) an Acquiring
Person or any Associate or Affiliate of an Acquiring Person, (B) a
transferee of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee after the Acquiring Person
becomes such, or (C) a transferee of an Acquiring Person (or of any
such Associate or Affiliate) who became a transferee prior to or
concurrently with the Acquiring Person becoming such and received
such Rights pursuant to either (x) a transfer (whether or not for
consideration) from the Acquiring Person (or of any such Associate
or Affiliate) to holders of equity interests in such Acquiring
Person (or of any such Associate or Affiliate) or to any Person with
whom the Acquiring Person (or of any such Associate or Affiliate)
has any continuing agreement, arrangement or understanding regarding
the transferred Rights or (y) a transfer which the Board of
Directors has reasonably determined is part of a plan, arrangement
or understanding which has as a primary purpose or effect the
avoidance of this Section 11(a)(iii), shall become null and void
without any further action and no holder of such Rights shall
thereafter have any right to exercise such Rights under any
provision of this Agreement. No Right Certificate shall be issued at
any time upon the transfer of any Rights to any Person whose Rights
would be void pursuant to the preceding sentence or any Associate or
Affiliate thereof or to any nominee of such Person, Associate or
Affiliate; and any Right Certificate delivered to the Rights Agent
for transfer to any Person whose Rights would be void pursuant to
the preceding sentence shall be cancelled.
-18-
The Company may require (or cause the Rights Agent to require)
any Person who purports to exercise any Rights to establish to the
reasonable satisfaction of the Company that he, she or it is not a Person
whose Rights would be void pursuant to the first sentence of the preceding
paragraph of this Section 11(a)(iii).
The Company shall use all reasonable efforts to insure that
the provisions of this Section 11(a)(iii) are complied with, but shall
have no liability to any holder of Right Certificates or other Person as a
result of its failure to make any determinations with respect to an
Acquiring Person or its Affiliates, Associates or transferees hereunder.
(iv) In lieu of issuing Common Shares of the Company in
accordance with Section 11(a)(ii) hereof, the Company may, in the
sole discretion of the Board of Directors, elect to (and, in the
event that the Board of Directors has not exercised the exchange
right contained in Section 24 hereof and there are not sufficient
issued but not outstanding and authorized but unissued Common Shares
to permit the exercise in full of the Rights in accordance with the
foregoing subparagraph (ii), the Company shall) take all such action
as may be necessary to authorize, issue or pay, upon the exercise of
the Rights, cash (including by way of a reduction of the Purchase
Price), property, other securities or any combination thereof having
an aggregate value equal to the value of the Common Shares of the
Company which otherwise would have been issuable pursuant to Section
11(a)(ii), which aggregate value shall be determined by a majority
of the Board of Directors. For purposes of the preceding sentence,
the value of the Common Shares shall be determined pursuant to
Section 11(d) hereof and the value of any equity securities which a
majority of the Board of Directors determines to be a "common stock
equivalent" (including the Preferred Shares, in such ratio as the
Board of Directors shall determine) shall be deemed to have the same
value as the Common Shares. Any such election by the Board of
Directors must be made and publicly announced within 60 days
following the date on which the event described in Section 11(a)(ii)
shall have occurred.
-19-
Following the occurrence of the event described in Section
11(a)(ii), a majority of the Board of Directors then in office may
suspend the exercisability of the Rights for a period of up to 60
days following the date on which the event described in Section
11(a)(ii) shall have occurred to the extent that such directors have
not determined whether to exercise the Company's right of election
under this Section 11(a)(iv). 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.
(b) If the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Preferred Shares entitling
them (for a period expiring within 45 calendar days after such record
date) to subscribe for or purchase Preferred Shares (or shares having the
same rights, privileges and preferences as the Preferred Shares
("equivalent preference shares")) or securities convertible into Preferred
Shares or equivalent preference shares (or having a conversion price per
share, if a security convertible into Preferred Shares or equivalent
preference shares) less than the then-current per share market price of
the Preferred Shares (determined pursuant to Section 11(d) of this
Agreement) 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 Preferred Shares and equivalent preference
shares outstanding on such record date plus the number of Preferred Shares
and equivalent preference shares which the aggregate offering price of the
total number of Preferred Shares and/or equivalent preference shares so to
be offered (and/or the aggregate initial conversion price of the
convertible securities so to be offered) would purchase at such current
market price and the denominator of which shall be the number of Preferred
Shares and equivalent preference shares outstanding on such record date
plus the number of additional Preferred Shares and/or equivalent
preference shares to be offered for subscription or purchase (or into
which the convertible securities so to be offered are initially
convertible); provided, however, that in no event shall the consideration
to be paid upon the
-20-
exercise of one Right be less than the aggregate par value of the shares
of capital stock of the Company issuable upon exercise of one Right. If
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 the Board of Directors, whose
determination shall be described in a statement filed with the Rights
Agent. Preferred Shares and equivalent preference shares owned by or held
for the account of the Company shall not be deemed outstanding for the
purpose of any such computation. Such adjustment shall be made
successively whenever such a record date is fixed; and if such rights,
options or warrants are not so issued, the Purchase Price shall be
adjusted to be the Purchase Price which would then be in effect if such
record date had not been fixed.
(c) If the Company shall fix a record date for the making of a
distribution to all holders of the Preferred Shares (including any such
distribution made in connection with a consolidation or merger in which
the Company is the continuing or surviving corporation) of evidences of
indebtedness, assets or shares of capital stock (other than a regular cash
dividend or a dividend payable in Preferred Shares) or subscription rights
or warrants (excluding those referred to in Section 11(b) of this
Agreement), 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 then-current per share market price of the Preferred
Shares (as defined in Section 11(d) of this Agreement) on such record
date, less the fair market value (as determined in good faith by the Board
of Directors, whose determination shall be described in a statement filed
with the Rights Agent) of the portion of the evidences of indebtedness,
assets or shares of capital stock so to be distributed or of such
subscription rights or warrants applicable to one Preferred Share and the
denominator of which shall be such current per share market price (as
defined in Section 11(d) of this Agreement) of the Preferred Shares;
provided, however, that in no event shall the consideration to be paid
upon the exercise of one Right be less than the aggregate par value of the
shares of capital stock of the
-21-
Company issuable upon exercise of one Right. Such adjustments shall be made
successively whenever such a record date is fixed; and if such distribution
is not so made, the Purchase Price shall again be adjusted to be the
Purchase Price which would then be in effect if such record date had not
been fixed.
(d) (i) For the purpose of any computation hereunder, other than under
Section 11(a)(iv), the "current per share market price" of any security
(a "Security" for the purpose of this Section 11(d)) on any date shall
be deemed to be the average of the daily closing prices per share
equivalent of such Security for the 30 consecutive Trading Days
immediately prior to such date, and for purposes of Section 11(a)(iv)
hereof, the "current per share market price" of a Security on any date
shall be deemed to be the average of the daily closing prices per share
equivalent of such Security for the 30 consecutive Trading Days
immediately following such date; provided, however, that if the current
per share equivalent market price of the Security is determined with
respect to a date, which date follows the announcement by the issuer of
such Security of (A) a dividend or distribution on such Security
payable in such Security or securities convertible into such Security
(other than the Rights) or (B) any subdivision, combination or
reclassification of such Security, and which date precedes 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 per share market price shall be appropriately adjusted to
reflect the current market price per share equivalent of such Security.
The closing price for each day shall be the last sale price, regular
way, or, if no such sale takes place on such day, the average of the
closing bid and asked prices, regular way, in either case as reported
in the principal consolidated transaction reporting system with respect
to a Security listed or admitted to trading on the New York Stock
Exchange or, if the Security is not listed or admitted to trading on
the New York Stock Exchange, as reported in the principal consolidated
transaction reporting
-22-
system with respect to securities listed on the principal national
securities exchange on which the Security is listed or admitted to
trading or, if the Security is not listed or admitted to trading on
any national securities exchange, the last quoted price or, if not
so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by Nasdaq or such other system
then in use, or, if on any such date the Security is not quoted by
any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market
in the Security selected by the Board of Directors. If on any such
date no market maker is making a market in the Security, the fair
value of such Security on such date as determined in good faith by
the Board of Directors shall be used. If the Security is not
publicly held or not so listed or traded, "current per share market
price" shall mean the fair value per share equivalent as determined
in good faith by the Board of Directors, whose determination shall
be described in a statement filed with the Rights Agent.
(ii) For the purpose of any computation hereunder, the
"current per share market price" of the Preferred Shares shall be
determined in accordance with the method set forth in Section
11(d)(i) (other than the last sentence thereof). If the Preferred
Shares are not publicly traded, the "current per share market price"
of the Preferred Shares shall be conclusively deemed to be the
current per share market price of the Common Shares as determined
pursuant to Section 11(d)(i) (other than the last sentence thereof)
(appropriately adjusted to reflect any stock split, stock dividend
or similar transaction occurring after the date hereof), multiplied
by one thousand. If neither the Common Shares nor the Preferred
Shares are publicly held or so listed or traded, "current per share
market price" shall mean the fair value per share as determined in
good faith by the Board of Directors, whose determination shall be
described in a statement filed with the Rights Agent.
-23-
(e) Notwithstanding any provision of this Agreement to the contrary,
no adjustment in the Purchase Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in such
price; provided, however, that any adjustments which by reason of this
Section 11(e) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under
this Section 11 shall be made to the nearest cent or to the nearest one
ten-millionth of a Preferred Share or one ten-thousandth of any other
share or security as the case may be. Notwithstanding the first sentence
of this Section 11(e), any adjustment required by this Section 11 shall be
made no later than the earlier of (i) three years from the date of the
transaction which requires such adjustment or (ii) the date of the
expiration of the right to exercise any Rights.
(f) If as a result of an adjustment made pursuant to Section 11(a)
or Section 13(a) of this Agreement, the holder of any Right thereafter
exercised shall become entitled to receive any Common Shares or other
securities of the Company other than Preferred Shares, thereafter the
number of such other shares or 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 Preferred Shares contained in this Section 11 and the
provisions of Sections 7, 9, 10, 13 and 14 of this Agreement with respect
to the Preferred Shares shall apply on like terms to any such other
shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right
to purchase, at the adjusted Purchase Price, the number of one
one-thousandths of a Preferred Share purchasable from time to time
hereunder upon exercise of the Rights, all subject to further adjustment
as provided herein.
(h) Unless the Company shall have exercised its election as provided
in Section 11(i), upon each adjustment of the Purchase Price as a result
of the calculations made in Sections 11(b) and (c), each Right outstanding
immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that
-24-
number of one one-thousandths of a Preferred Share (calculated to the
nearest one ten-millionth of a Preferred Share) obtained by (i)
multiplying (x) the number of one one-thousandths of a share covered by a
Right immediately prior to this adjustment by (y) the Purchase Price in
effect immediately prior to such adjustment of the Purchase Price and (ii)
dividing the product so obtained by the Purchase Price in effect
immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment of
the Purchase Price as a result of the calculations made in Section 11(b)
and (c) to adjust the number of Rights, in substitution for any adjustment
pursuant to Section 11(h), in the number of one one-thousandths of a
Preferred Share 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-thousandths of a Preferred Share for
which a Right was exercisable immediately prior to such adjustment. Each
Right held of record prior to such adjustment of the number of Rights
shall become that number of Rights (calculated to the nearest one one
hundred-thousandth) obtained by dividing the Purchase Price in effect
immediately prior to adjustment of the Purchase Price by the Purchase
Price in effect immediately after adjustment of the Purchase Price. The
Company shall make a public announcement of its election to adjust the
number of Rights, indicating the record date for the adjustment, and, if
known at the time, the amount of the adjustment to be made. This record
date may be the date on which the Purchase Price is adjusted or any day
thereafter, but, if the Right Certificates have been issued, shall be at
least 10 days later than the date of the public announcement. If Right
Certificates have been issued, upon each adjustment of the number of
Rights pursuant to this Section 11(i), the Company shall, as promptly as
practicable, cause to be distributed to holders of record of Right
Certificates on such record date Right Certificates evidencing, subject to
Section 14 of this Agreement, the additional Rights to which such holders
shall be entitled as a result of such adjustment, or, at the option of the
Company, shall cause to be distributed to such holders of record in
substitution and replacement for the Right Certificates held by such
holders prior to the date of adjustment, and
-25-
upon surrender thereof, if required by the Company, new Right Certificates
evidencing all the Rights to which such holders shall be entitled after
such adjustment. Right Certificates so to be distributed shall be issued,
executed and countersigned in the manner provided for herein (and may
bear, at the option of the Company, the adjusted Purchase Price) and shall
be registered in the names of the holders of record of Right Certificates
on the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price
or the number of one one-thousandths of a Preferred Share issuable upon
the exercise of the Rights, the Right Certificates theretofore and
thereafter issued may continue to express the Purchase Price and the
number of one one-thousandths of a Preferred Share which were expressed in
the initial Right Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below the then par value, if any, of the Preferred
Shares or other shares of capital 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 non-assessable Preferred Shares or other
such shares at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for
a specified event, the Company may elect to defer until the occurrence of
such event the issuing to the holder of any Right exercised after such
record date of the Preferred Shares and other capital stock or securities
of the Company, if any, issuable upon such exercise over and above the
Preferred Shares and other capital stock or securities of the Company, if
any, issuable upon such exercise on the basis of the Purchase Price in
effect prior to such adjustment; provided, however, that the Company shall
deliver to such holder a due ββββ or other appropriate instrument
evidencing such holder's right to receive such additional shares upon the
occurrence of the event requiring such adjustment.
-26-
(m) After the earlier of the time that any Person becomes an
Acquiring Person and the Distribution Date, the Company will not, except
as permitted by Sections 23, 24 and 27 hereof, take (or permit any
Subsidiary to take) any action if at the time such action is taken it is
reasonably foreseeable that such action will diminish substantially or
otherwise eliminate the benefits intended to be afforded by the Rights.
(n) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price,
in addition to those adjustments expressly required by this Section 11, as
and to the extent that it in its sole discretion shall determine to be
advisable in order that any consolidation or subdivision of the Preferred
Shares, issuance wholly for cash of any Preferred Shares at less than the
current market price, issuance wholly for cash of Preferred Shares or
securities which by their terms are convertible into or exchangeable for
Preferred Shares, dividends on Preferred Shares payable in Preferred
Shares or issuance of rights, options or warrants referred to hereinabove
in this Section 11, hereafter made by the Company to holders of its
Preferred Shares shall not be taxable to such stockholders.
(o) In the event that at any time after the date of this Agreement
and prior to the Distribution Date, the Company shall (i) declare or pay
any dividend on the Common Shares payable in Common Shares or (ii) effect
a subdivision, combination or consolidation of the Common Shares (by
reclassification or otherwise than by payment of dividends in Common
Shares) into a greater or lesser number of Common Shares, then in any such
case (A) the number of one one-thousandths of a Preferred Share
purchasable after such event upon proper exercise of each Right shall be
determined by multiplying the number of one one-thousandths of a Preferred
Share so purchasable immediately prior to such event by a fraction, the
numerator of which is the number of Common Shares outstanding immediately
before such event and the denominator of which is the number of Common
Shares outstanding immediately after such event, and (B) each Common Share
outstanding immediately after such event shall have issued with respect to
it that number of Rights which each Common Share outstanding immediately
prior to such event had
-27-
issued with respect to it. The adjustments provided for in this Section
11(o) shall be made successively whenever such a dividend is declared or
paid or such a subdivision, combination or consolidation is effected.
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Section 11 or 13 hereof, the
Company shall (a) promptly prepare a certificate setting forth such adjustment,
and a brief statement of the facts accounting for such adjustment, (b) promptly
file with the Rights Agent and with each transfer agent for the Common Shares or
the Preferred Shares a copy of such certificate and (c) mail a brief summary
thereof to each holder of a Right in accordance with Section 25 hereof. The
Rights Agent shall be fully protected in relying on any such certificate and
shall not be deemed to have knowledge of any such adjustment unless and until it
shall have received such certificate.
Section 13. Consolidation, Merger, Sale or Transfer of Assets or Earning
Power.
(a) If, directly or indirectly, at any time after the time that any
Person becomes an Acquiring Person, (i) the Company shall consolidate
with, or merge with and into, any other Person, (ii) any Person shall
consolidate with the Company, or merge with and into the Company and the
Company shall be the continuing or surviving corporation of such merger
and, in connection with such merger, all or part of the Common Shares of
the Company shall be changed into or exchanged for stock or other
securities of any other Person (or of the Company) or cash or any other
property, or (iii) the Company shall sell or otherwise transfer (or one or
more of its Subsidiaries shall sell or otherwise transfer), in one or more
transactions, assets or earning power aggregating 50% or more of the
assets or earning power of the Company and its Subsidiaries (taken as a
whole) to any Person or Persons (other than the Company or one or more of
its wholly-owned Subsidiaries), then, and in each such case, proper
provision shall be made so that (A) each holder of a Right (except any
Person whose Rights shall have become void pursuant to Section 11(a)(iii)
of this Agreement) shall thereafter have the right to receive, upon the
exercise thereof at a price equal to the then-current Purchase Price
multiplied by the number of one one-
-28-
thousandths of a Preferred Share for which a Right is then exercisable, in
accordance with the terms of this Agreement and in lieu of Preferred
Shares, such number of validly authorized and issued, fully paid,
non-assessable and freely tradable Common Shares of the Principal Party
(as hereinafter defined), free and clear of all liens, rights of call or
first refusal, encumbrances or other adverse claims, as shall be equal to
the result obtained by (x) multiplying the then-current Purchase Price by
the number of one one-thousandths of a Preferred Share for which a Right
was exercisable immediately prior to the time that any Person became an
Acquiring Person and dividing that product by (y) 50% of the current per
share market price of the Common Shares of such Principal Party
(determined pursuant to Section 11(d) hereof) on the date of consummation
of such consolidation, merger, sale or transfer; (B) the issuer of such
Common Shares shall thereafter be liable for, and shall assume, by virtue
of such consolidation, merger, sale or transfer, all the obligations and
duties of the Company pursuant to this Agreement; (C) the term "Company"
shall thereafter be deemed to refer to such issuer; and (D) such issuer
shall take such steps (including, but not limited to, the reservation of a
sufficient number of its Common Shares in accordance with Section 9
hereof) in connection with such consummation as may be necessary to assure
that the provisions hereof shall thereafter be applicable, as nearly as
reasonably may be, in relation to the Common Shares thereafter deliverable
upon the exercise of the Rights. The provisions of this Section 13 shall
similarly apply to successive mergers or consolidations or sales or other
transfers.
(b) The Company shall not enter into any transaction of the kind
listed in Section 13(a) if at the time of such transaction there are any
rights, warrants, instruments or securities outstanding or any agreements
or arrangements which, as a result of the consummation of such
transaction, would substantially diminish or eliminate the benefits
intended to be afforded by the Rights.
(c) The Company shall not consummate any such consolidation, merger,
sale or transfer unless prior thereto the Company and such issuer shall
have executed and delivered to the
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Rights Agent a supplemental agreement providing for the terms set forth in
paragraphs (a) and (b) of this Section 13 and further providing that, as
soon as practicable after the date of any consolidation, merger, sale or
transfer mentioned in paragraph (a) of this Section 13, such issuer will:
(i) prepare and file 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,
and will use its best efforts to cause such registration statement
to (A) become effective as soon as practicable after such filing and
(B) remain effective (with a prospectus at all times meeting the
requirements of the Securities Act) until the Expiration Date;
(ii) deliver to holders of the Rights historical financial
statements for such issuer and each of its Affiliates which comply
in all respects with the requirements for registration on Form 10
under the Exchange Act; and
(iii) take such actions as may be necessary or appropriate
under the blue sky laws of the various states.
(d) "Principal Party" means:
(i) in the case of any transaction described in clauses (i) or
(ii) of the first sentence of Section 13(a), the Person that is the
issuer of any securities into which Common Shares of the Company are
converted in such merger or consolidation, and if no securities are
so issued, the Person that is the surviving entity of such merger or
consolidation (including the Company if applicable); and
(ii) in the case of any transaction described in clause (iii)
of the first sentence of Section 13(a), the Person that is the party
receiving the greatest portion of the assets or earning power
transferred pursuant to such transaction or transactions;
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provided, however, that in any such case described in clauses (d)(i) or (d)(ii)
of this Section 13: (x) if the Common Shares of such Person are not at such time
and have not been continuously over the preceding 12-month period registered
under Section 12 of the Exchange Act, and such Person is a direct or indirect
Subsidiary of another Person the Common Shares of which are and have been so
registered, "Principal Party" shall refer to such other Person; (y) in case such
Person is a Subsidiary, directly or indirectly, of more than one Person, the
Common Shares of two or more of which are and have been so registered,
"Principal Party" shall refer to whichever of such Persons is the issuer of
Common Shares having the greatest aggregate market value; and (z) 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 in (x) and (y) above shall 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 this Section 13 in the
same ratio as their direct or indirect interests in such Person bear to the
total of such interests.
Section 14. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue fractions of Rights
or to distribute Right Certificates which evidence fractional Rights. In
lieu of such fractional Rights, there may be paid to the registered
holders of the Right Certificates with regard to which such fractional
Rights would otherwise be issuable an amount in cash equal to the same
fraction of the current market value of a whole Right. For the purposes of
this Section 14(a), the current market value of a whole Right shall be the
closing price of the Rights for the Trading Day immediately prior to the
date on which such fractional Rights would have been otherwise issuable.
The closing price for any day shall be the last sale price, regular way,
or, if no such sale takes place on such day, the average of the closing
bid and asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect to
securities listed or admitted to trading on the New York Stock Exchange
or, if the Rights are not listed or admitted to trading on the New York
Stock Exchange, as reported in the principal consolidated transaction
reporting
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system with respect to securities listed on the principal national
securities exchange on which the Rights are listed or admitted to trading
or, if the Rights are not listed or admitted to trading on any national
securities exchange, the last quoted price or, if not so quoted, the
average of the high bid and low asked prices in the over-the-counter
market, as reported by Nasdaq or such other system then in use or, if on
any such date the Rights are not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a professional
market maker making a market in the Rights selected by the Board of
Directors. If on any such date no such market maker is making a market in
the Rights the fair value of the Rights on such date as determined in good
faith by the Board of Directors shall be used.
(b) The Company shall not be required to issue fractions of
Preferred Shares (other than fractions which are integral multiples of one
one-thousandth of a Preferred Share) upon exercise of the Rights or to
distribute certificates which evidence fractional Preferred Shares (other
than fractions which are integral multiples of one one-thousandth of a
Preferred Share). Fractions of Preferred Shares in integral multiples of
one one-thousandth of a Preferred Share 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 Shares represented
by such depositary receipts. In lieu of fractional Preferred Shares that
are not integral multiples of one one-thousandth of a Preferred Share, the
Company may pay to the registered holders of Right Certificates at the
time such Rights are exercised as herein provided an amount in cash equal
to the same fraction of the current market value of one Preferred Share.
For purposes of this Section 14(b), the current market value of a
Preferred Share shall be the closing price of a Preferred Share (as
determined pursuant to Section 11(d) hereof) for the Trading Day
immediately prior to the date of such exercise.
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(c) Following the occurrence of a Triggering Event, the Company
shall not be required to issue fractions of Common Shares upon exercise of
the Rights or to distribute certificates which evidence fractional Common
Shares. In lieu of fractional Common Shares, the Company may pay the
registered holders of Right Certificates at the time such Rights are
exercised as provided herein an amount in cash equal to the same fraction
of the current market value of one Common Share. For purposes of this
Section 14(c), the current market value of one Common Share shall be the
closing price of one Common Share (as determined pursuant to the second
sentence of Section 11(d)(i) hereof) for the Trading Day immediately prior
to the date of such exercise.
(d) The holder of a Right by the acceptance of the Right expressly
waives his right to receive any fractional Rights or any fractional shares
upon exercise of a Right (except as provided above).
Section 15. Rights of Action. All rights of action in respect of this
Agreement, excepting the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares); and any registered holder of any Right Certificate (or, prior to
the Distribution Date, of the Common Shares), without the consent of the Rights
Agent or of the holder of any other Right Certificate (or, prior to the
Distribution Date, of the Common Shares), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, and may otherwise act in respect of, his right
to exercise the Rights evidenced by such Right Certificate in the manner
provided in such Right Certificate and in this 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 actual or threatened
violations of the obligations of any Person subject to, this Agreement.
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Section 16. Agreement of Right Holders. Every holder of a Right, by
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of the Common Shares;
(b) after the Distribution Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if surrendered
at the office or agency of the Rights Agent designated for such purpose,
duly endorsed or accompanied by a proper instrument of transfer; and
(c) the Company and the Rights Agent may deem and treat the Person
in whose name the Right Certificate (or, prior to the Distribution Date,
the associated Common Shares certificate) is registered as the absolute
owner thereof and of the Rights evidenced thereby (notwithstanding any
notations of ownership or writing on the Right Certificates or the
associated Common Shares certificate made by anyone other than the Company
or the Rights Agent) for all purposes whatsoever, and neither the Company
nor the Rights Agent shall be affected by any notice to the contrary.
(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
injunction, order, decree or ruling lifted or otherwise overturned as soon
as possible.
Section 17. Right Certificate Holder Not Deemed a Stockholder. No holder,
as such, of any Right Certificate shall be entitled to vote, receive dividends
or be deemed for any purpose the holder of
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the Preferred Shares or any other securities of the Company which may at any
time be issuable on the exercise of the Rights represented thereby, nor shall
anything contained herein or in any Right Certificate be construed to confer
upon the holder of any Right Certificate, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting stockholders (except as provided in Section 25 of this
Agreement), or to receive dividends or subscription rights, or otherwise, until
the Right or Rights evidenced by such Right Certificate shall have been
exercised in accordance with the provisions hereof.
Section 18. Concerning the Rights Agent. 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, without limitation, reasonable
counsel fees and other costs and expenses of defending against any claim of
liability in the premises.
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 Right Certificate or
certificate for the Preferred Shares or Common Shares or for other securities of
the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement, or other paper or document believed by it to be genuine and to be
signed, executed and, where necessary, verified or acknowledged, by the proper
Person or Persons, or otherwise upon the advice of its counsel as set forth in
Section 20 hereof.
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
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consolidated, or any corporation resulting from any merger or consolidation to
which the Rights Agent or any successor Rights Agent shall be a party, or any
corporation succeeding to the corporate trust or stock transfer powers 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 paper
or any further act on the part of any of the parties hereto, provided that such
corporation would be eligible for appointment as a successor Rights Agent under
the provisions of Section 21 hereof. If at the time such successor Rights Agent
shall succeed to the agency created by this Agreement, any of the Right
Certificates shall have been countersigned but not delivered, any such successor
Rights Agent may adopt the countersignature of the predecessor Rights Agent and
deliver such Right Certificates so countersigned; and if at that time any of the
Right Certificates shall not have been countersigned, any successor Rights Agent
may countersign such Right Certificates either in the name of the predecessor
Rights Agent or in the name of the successor Rights Agent; and in all such cases
such Right Certificates shall have the full force provided in the Right
Certificates and in this Agreement.
If at any time the name of the Rights Agent shall be changed and at such
time any of the Right Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Right Certificates so countersigned; and if at that time any of the
Right Certificates shall not have been countersigned, the Rights Agent may
countersign such Right Certificates either in its prior name or in its changed
name; and in all such cases such Right Certificates shall have the full force
provided in the Right Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the duties
and obligations imposed by the express terms of this Agreement upon the
following terms and conditions, by all of which the Company and the holders of
Right Certificates, by their acceptance thereof, shall be bound, and no implied
covenants or obligations shall be read into this Agreement against the Rights
Agent:
(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
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protection to the Rights Agent as to any action taken or omitted by it in
good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement
the Rights Agent shall deem it necessary or desirable that any fact or
matter be proved or established by the Company prior to taking or
suffering any action hereunder, such fact or matter (unless other evidence
in respect thereof be herein specifically prescribed) may be deemed to be
conclusively proved and established by a certificate signed by any one of
the Chairman of the Board, the Chief Executive Officer, the President, a
Vice-President, the Treasurer or the Secretary of the Company and
delivered to the Rights Agent; and such certificate shall be full
authorization to the Rights Agent for any action taken or suffered in good
faith by it under the provisions of this Agreement in reliance upon such
certificate.
(c) The Rights Agent shall be liable hereunder to the Company and
any other Person only for its own negligence, bad faith or willful
misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement or in the
Right Certificates (except its countersignature thereof) or be required to
verify the same, but all such statements and recitals are and shall be
deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery
hereof (except the due execution hereof by the Rights Agent) or in respect
of the validity or execution of any Right Certificate (except its
countersignature thereof); nor shall it be responsible for any breach by
the Company of any covenant or condition contained in this Agreement or in
any Right Certificate; nor shall it be responsible for any changes in the
exercisability of the Rights (including the Rights becoming void pursuant
to Section 11(a)(iii) of this Agreement) or any adjustments in the terms
of the Rights (including the manner, method or amount thereof), including
those provided for in Sections 3, 11, 13, 23 or 24 of this Agreement or
the ascertaining of the existence of facts that
-37-
would require any such change or adjustment (except with respect to the
exercise of Rights evidenced by Right Certificates after actual notice
that such 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 Preferred Shares to be issued pursuant
to this Agreement or any Right Certificate or as to whether any Preferred
Shares will, when issued, be validly authorized and issued, fully paid and
non-assessable.
(f) The Company agrees that it will perform, execute, acknowledge
and deliver or cause to be performed, executed, acknowledged and delivered
all such further and other acts, instruments and assurances as may
reasonably be required by the Rights Agent for the carrying out or
performing by the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from
any one of the Chairman of the Board, the Chief Executive Officer, the
President, a Vice President, the Secretary or the Treasurer of the
Company, and to apply to such officers for advice or instructions in
connection with its duties, and it shall not be liable for any action
taken or suffered to be taken by it in good faith in accordance with
instructions of any such officer or for any delay in acting while waiting
for those instructions.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or
other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or
lend money to the Company or otherwise act as fully and freely as though
it were not Rights Agent under this Agreement. Nothing herein shall
preclude the Rights Agent from acting in any other capacity for the
Company or for any other legal entity.
(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
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misconduct of any such attorneys or agents or for any loss to the Company
resulting from any such act, default, neglect or misconduct, provided
reasonable care was exercised in the selection and continued employment
thereof.
(j) If, with respect to any Right Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the
form of assignment or form of election to purchase, as the case may be,
has either not been completed or indicates an affirmative response to
clause 1 and/or 2 thereof, the Rights Agent shall not take any further
action with respect to such requested exercise of transfer without first
consulting with the Company.
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 Shares or Preferred Shares by registered or certified mail,
postage prepaid, return receipt requested, and to the registered holders of the
Right Certificates by first-class mail, postage prepaid. 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 Shares or Preferred Shares by registered or
certified mail, postage prepaid, return receipt requested, and to the registered
holders of the Right Certificates by first-class mail, postage prepaid. If the
Rights Agent shall resign or be removed or shall otherwise become incapable of
acting, the Company shall appoint a successor to the Rights Agent. If the
Company shall fail to make such appointment within a period of 30 days after
giving notice of such removal or after it has been notified in writing of such
resignation or incapacity by the resigning or incapacitated Rights Agent or by
the holder of a Right Certificate (who shall, with such notice, submit his Right
Certificate for inspection by the Company), then the registered holder of any
Right Certificate or the resigning, removed or incapacitated Rights Agent may
apply to any court of competent jurisdiction for the appointment of a new Rights
Agent. Any successor Rights Agent, whether appointed by the Company or by such a
court, shall be (a) a corporation organized and doing business under the laws of
the United States or of the States of Delaware, Illinois or New York (or of any
other state of the United States
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so long as such corporation is authorized to do business as a banking
institution in the States of Delaware, Illinois or New York), in good standing,
having an office in the States of Delaware, Illinois or New York, which is
authorized under such laws to exercise corporate trust or stock transfer powers
and is subject to supervision or examination by federal or state authority and
which has at the time of its appointment as Rights Agent a combined capital and
surplus of at least $50 million or (b) an affiliate of a corporation described
in clause (a) of this sentence. After appointment, the successor Rights Agent
shall be vested with the same powers, rights, duties and responsibilities as if
it had been originally named as Rights Agent without further act or deed; but
the predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Shares or Preferred Shares, and mail a notice thereof in writing to
the registered holders of the Right Certificates. Failure to give any notice
provided for in this Section 21, however, or any defect therein, shall not
affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.
Section 22. Issuance of New Right Certificates. Notwithstanding any of the
provisions of this Agreement or of the Rights to the contrary, the Company may,
at its option, issue new Right Certificates evidencing Rights in such form as
may be approved by the Board of Directors to reflect any adjustment or change in
the Purchase Price per share and the number or kind or class of shares or other
securities or property purchasable under the Right Certificates made in
accordance with the provisions of this Agreement.
Section 23. Redemption.
(a) The Board of Directors may, at its option, at any time prior to
such time as any Person becomes an Acquiring Person, redeem all but not
less than all the then outstanding Rights at a redemption price of $.01
per Right, appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date hereof (such
redemption price being
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hereinafter referred to as the "Redemption Price"). The Company may, at
its option, pay the Redemption Price in cash, Common Shares (based on the
current per share market price of the Common Shares at the time of
redemption) or any other form of consideration deemed appropriate by the
Board of Directors. The redemption of the Rights by the Board of Directors
may be made effective at such time, on such basis and with such conditions
as the Board of Directors in its sole discretion may establish.
(b) Subject to the last sentence of Section 23(a) of this Agreement,
immediately upon the action of the Board of Directors ordering the
redemption of the Rights pursuant to Section 23(a) (or at such later time
as the Board of Directors may establish for the effectiveness of such
redemption), and without any further action and without any notice, the
right to exercise the Rights will terminate and the only right thereafter
of the holders of Rights shall be to receive the Redemption Price. The
Company shall promptly give public notice of any such redemption;
provided, however, that the failure to give, or any defect in, any such
notice shall not affect the validity of such redemption. Within 10 days
after the action of the Board of Directors ordering the redemption of the
Rights or the effectiveness of the redemption of the Rights pursuant to
Section 23(a), as the case may be, the Company shall mail a notice of such
redemption to all the holders of the then outstanding Rights at their last
addresses as they appear upon the registry books of the Rights Agent or,
prior to the Distribution Date, on the registry books of the transfer
agent for the Common Shares. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives
the notice. Each such notice of redemption will state the method by which
the payment of the Redemption Price will be made. Except in connection
with the purchase of Common Shares prior to the Distribution Date, 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 that
specifically set forth in this Section 23 or in Section 24 of this
Agreement.
-41-
Section 24. Exchange.
(a) The Board of Directors may, at its option, at any time after the
occurrence of a Triggering Event, exchange 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 11(a)(iii) of this
Agreement) for Common Shares at an exchange ratio of one Common Share 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").
Notwithstanding the foregoing, the Board of Directors shall not be
empowered to effect such exchange at any time after any Person (other an
Exempt Person) together with all Affiliates and Associates of such Person,
becomes the Beneficial Owner of 50% or more of the Common Shares then
outstanding.
(b) Immediately upon the action of the Board of Directors ordering
the exchange of any Rights pursuant to Section 24(a) 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 Common Shares equal to the number of
such Rights held by such holder multiplied by the Exchange Ratio. The
Company shall promptly give public notice of any such exchange; provided,
however, that the failure to give, or any defect in, such notice shall not
affect the validity of such exchange. The Company promptly shall mail a
notice of any such exchange to all of the holders of such Rights at their
last addresses as they appear upon the registry books of the Rights Agent.
Any notice which is mailed in the manner herein provided shall be deemed
given, whether or not the holder receives the notice. Each such notice of
exchange will state the method by which the exchange of the Common Shares
for Rights will be effected and, in the event of any partial exchange, the
number of Rights which will be exchanged. Any partial exchange shall be
effected pro rata based on the number of Rights (other than Rights which
have become void pursuant to the provisions of Section 11(a)(iii) of this
Agreement) held by each holder of Rights.
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(c) In any exchange pursuant to this Section 24, the Company, at its
option, may substitute Preferred Shares (or equivalent preference shares,
as such term is defined in Section 11(b) hereof) or any other equity
securities which a majority of the Board of Directors determines to be a
Common Share equivalent, for Common Shares exchangeable for Rights, at the
initial rate of one one-thousandth of a Preferred Share (or equivalent
preference share or other equity security determined to be a Common Share
equivalent) for each Common Share, as appropriately adjusted to reflect
adjustments in the voting rights of the Preferred Shares pursuant to the
terms thereof, so that the fraction of a Preferred Share delivered in lieu
of each Common Share shall have the same voting rights as one Common
Share.
(d) If there shall not be sufficient Common Shares or Preferred
Shares issued but not outstanding or authorized but unissued to permit any
exchange of Rights as contemplated in accordance with this Section 24, the
Company shall take all such action as may be necessary to authorize
additional Common Shares or Preferred Shares for issuance upon exchange of
the Rights.
(e) The Company shall not be required to issue fractions of Common
Shares or to distribute certificates which evidence fractional Common
Shares upon any exchange of Rights. In lieu of such fractional Common
Shares, the Company shall pay to the registered holders of the Right
Certificates with regard to which such fractional Common Shares would
otherwise be issuable an amount in cash equal to the same fraction of the
current market value of a whole Common Share. For the purposes of this
paragraph (e), the current market value of a whole Common Share shall be
the closing price of a Common Share (as determined pursuant to the second
sentence of Section 11(d)(i) of this Agreement) for the Trading Day
immediately prior to the date of exchange pursuant to this Section 24.
Section 25. Notice of Certain Events.
(a) If the Company shall propose at any time after the Distribution
Date (i) to declare any dividend payable in stock of any class to the
holders of its Preferred Shares or to make any
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other distribution to the holders of its Preferred Shares (other than a
regular cash dividend), (ii) to offer to the holders of its Preferred
Shares rights or warrants to subscribe for or to purchase any additional
Preferred Shares or shares of any class or any other securities, rights or
options, (iii) to effect any reclassification of its Preferred Shares
(other than a reclassification involving only the subdivision of
outstanding Preferred Shares), (iv) to effect any consolidation or merger
into or with, or to effect any sale or other transfer (or to permit one or
more of its Subsidiaries to effect any sale or other transfer), in one or
more transactions, of 50% or more of the assets or earning power of the
Company and its Subsidiaries (taken as a whole) to, any other Person, (v)
to effect the liquidation, dissolution or winding up of the Company, or
(vi) to declare or pay any dividend on the Common Shares payable in Common
Shares or to effect a subdivision, combination or consolidation of the
Common Shares (by reclassification or otherwise than by payment of
dividends in Common Shares), then, in each such case, the Company shall
give to each holder of a Right Certificate, in accordance with Section 26
of this Agreement, a notice of such proposed action, which shall specify
the record date for the purposes of such stock dividend, or distribution
of rights or warrants, or the date on which such reclassification,
consolidation, merger, sale, transfer, liquidation, dissolution, or
winding up is to take place and the date of participation therein by the
holders of the Common Shares and/or Preferred Shares, if any such date is
to be fixed, and such notice shall be so given in the case of any action
covered by clause (i) or (ii) above at least 20 days prior to the record
date for determining holders of the Preferred Shares for purposes of such
action, and in the case of any such other action, at least 20 days prior
to the date of the taking of such proposed action or the date of
participation therein by the holders of the Common Shares and/or Preferred
Shares, whichever shall be the earlier. Failure to give any notice
provided for in this Section 25, however, or any defect therein, shall not
affect the legality or validity of any such action taken by the Company.
(b) If any of the events set forth in Section 11(a)(ii) or Section
13(a) of this Agreement shall occur, then, in any such case, the Company
shall as soon as practicable
-44-
thereafter give to each holder of a Right Certificate, in accordance with
Section 26 of this Agreement, a notice of the occurrence of such event,
which shall specify the event and the consequences of the event to holders
of Rights under Section 11(a)(ii) or Section 13(a) of this Agreement.
Section 26. Notices. Notices or demands authorized by this Agreement to be
given or made by the Rights Agent or by the holder of any Right Certificate to
or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:
Salton, Inc.
ββββ β. βββββ βββββ
ββββ ββββββ, ββββββββ βββββ
Attention: Corporate Secretary
Subject to the provisions of Section 21 of this Agreement, any notice or demand
authorized by this Agreement to be given or made by the Company or by the holder
of any Right Certificate to or on the Rights Agent shall be effective upon
receipt by the Rights Agent and shall be sufficiently given or made if sent by
registered or certified mail, postage prepaid, return receipt requested,
addressed (until another address is filed in writing with the Company) as
follows:
UMB Bank, N.A., as Rights Agent
ββββ βββββ ββββ.
ββββββ ββββ, ββββββββ βββββ
Attention: Corporate Trust Department
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate and shall be
sufficiently given or made if sent by first class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
Section 27. Supplements and Amendments.
(a) The Company may from time to time supplement or amend this
Agreement without the approval of the Rights Agent, any holders of Common
Shares or any holders of Right
-45-
Certificates in order to cure any ambiguity, to correct or supplement any
provision contained herein which may be defective or inconsistent with any
other provisions herein, or to make any other provisions with respect to
the Rights which the Company may deem necessary or desirable; provided,
however, (i) that no such amendment or supplement shall be effected
without the written consent of the Rights Agent if it would adversely
affect any right or create any additional obligation of the Rights Agent
under this Agreement and (ii) that from and after such time as any Person
becomes an Acquiring Person, this Agreement shall not be amended (A) so as
to make the Rights redeemable if the Rights are not then redeemable in
accordance with Section 23(a) of this Agreement or (b) in any manner which
would adversely affect the interests of the holders of Rights (other than
holders of Rights which have become void pursuant to Section 11(a)(iii) of
this Agreement).
(b) To effect any amendment or supplement pursuant to this Section
27, the Company shall deliver to the Rights Agent a copy, certified by the
Secretary or any Assistant Secretary of the Company, of resolutions of the
Board of Directors adopting such amendment or supplement. Upon such
delivery, the amendment or supplement shall be deemed effective and shall
be administered by the Rights Agent as part of this Agreement in
accordance with its terms.
Section 28. Successors. All the covenants and provisions of this Agreement
by or for the benefit of the Company or the Rights Agent shall bind and inure to
the benefit of their respective successors and assigns hereunder.
Section 29. Determinations and Actions by the Board of Directors. The
Board of Directors 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, or the Company, or as may be necessary or advisable in the
administration of this Agreement, including, without limitation, the right and
power to (a) interpret the provisions of this Agreement, and (b) make all
determinations deemed necessary or advisable for the administration of this
Agreement (including a determination to redeem or not redeem the Rights or to
amend the Agreement). All such actions, calculations, interpretations and
determinations
-46-
(including, for purpose of clause (y) below, all omissions with respect to the
foregoing) which are done or made by the Board of Directors in good faith, shall
(x) be final, conclusive and binding on the Company, the Rights Agent, the
holders of the Right Certificates and all other interested parties, and (y) not
subject the Board of Directors to any liability to the holders of the Right
Certificates.
Section 30. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any Person other than the Company, the Rights Agent and the
registered holders of the Right Certificates (and, prior to the Distribution
Date, the Common Shares) (and, after the Distribution Date, also the holders of
(i) securities of the Company or any of its Subsidiaries convertible into Common
Shares and (ii) any options, warrants or other rights to purchase Common Shares,
which convertible securities, options, warrants or other rights were outstanding
on the Distribution Date) any legal or equitable right, remedy or claim under
this Agreement; but this Agreement shall be for the sole and exclusive benefit
of the Company, the Rights Agent and the registered holders of the Right
Certificates (and, prior to the Distribution Date, the Common Shares) (and,
after the Distribution Date, also any holder of any such convertible securities,
options, warrants or other rights).
Section 31. Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated.
Section 32. Governing Law. This Agreement and each Right Certificate
issued hereunder shall be deemed to be a contract made under the laws of the
State of Delaware and for all purposes shall be governed by and construed in
accordance with the laws of such State applicable to contracts to be made and
performed entirely within such State.
Section 33. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
-47-
Section 34. 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 hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first written above.
SALTON, INC.
Attest:
By: /s/ ββββ ββββββββββ By: /s/ βββββ ββββββ
------------------------------ ------------------------------
Name: ββββ ββββββββββ Name: βββββ ββββββ
Title: Assistant Secretary Title: Executive Vice President, Chief
Administrative Officer and
Senior Financial Officer
UMB BANK, N.A. as Rights Agent
Attest:
By: /s/ βββββ β. Keep By: /s/ K. βββββ βββββββ
------------------------------ ------------------------------
Name: βββββ β. Keep Name: K. βββββ βββββββ
Title: Assistant Secretary Title: Vice President
-48-
EXHIBIT A
FORM
OF
CERTIFICATE OF DESIGNATION
OF
SERIES B JUNIOR PARTICIPATING PREFERRED STOCK
OF
SALTON, INC.
(Pursuant to Section 151 of the
Delaware General Corporation Law)
Salton, Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware (hereinafter called the "Company"),
hereby certifies that the following resolution was adopted by the Board of
Directors of the Company as required by Section 151 of the General Corporation
Law at a meeting duly called and held on June 28, 2004:
RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of the Company (hereinafter called the "Board of Directors"
or the "Board") in accordance with the provisions of the Restated Certificate of
Incorporation, as amended to date (hereinafter called the "Certificate of
Incorporation"), the Board of Directors hereby creates a series of Preferred
Stock, par value $.01 per share (the "Preferred Stock"), of the Company and
hereby states the designation and number of shares, and fixes the relative
rights, preferences, and limitations thereof as follows:
Section 1. Designation and Amount. The shares of such series shall be
designated as "Series B Junior Participating Preferred Stock" (the "Series B
Preferred Stock") and the number of shares constituting the Series B Preferred
Stock shall be 500,000. Such number of shares may be increased or decreased by
resolution of the Board of Directors; provided, that no decrease shall reduce
the number of shares of Series B Preferred Stock to a number less than the
number of shares then outstanding plus the number of shares reserved for
issuance upon the exercise of outstanding options, rights or warrants or upon
the conversion of any outstanding securities issued by the Company convertible
into Series B Preferred Stock.
Section 2. Dividends and Distributions.
(A) Subject to the rights of the holders of any shares of any series
of Preferred Stock, par value $.01 per share (the "Preferred Stock"), of
the Company or Preferred Stock (or any similar stock) ranking prior and
superior to the Series B Preferred Stock with respect to dividends, the
holders of shares of Series B Preferred Stock, in preference to the
holders of Common Stock, par value $.01 per share (the "Common Stock"), of
the Company, and of any other junior stock, shall
be entitled to receive, when, as and if declared by the Board of Directors
out of funds legally available for the purpose, quarterly dividends
payable in cash on the first day of January, April, July and October in
each year (each such date being referred to herein as a "Quarterly
Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or fraction of a share of
Series B Preferred Stock, in an amount per share (rounded to the nearest
cent) equal to the greater of (a) $1 or (b) subject to the provision for
adjustment hereinafter set forth, 1,000 times the aggregate per share
amount of all cash dividends, and 1,000 times the aggregate per share
amount (payable in kind) of all non-cash dividends or other distributions,
other than a dividend payable in shares of Common Stock or a subdivision
of the outstanding shares of Common Stock (by reclassification or
otherwise), declared on the Common Stock since the immediately preceding
Quarterly Dividend Payment Date or, with respect to the first Quarterly
Dividend Payment Date, since the first issuance of any share or fraction
of a share of Series B Preferred Stock. In the event the Company shall at
any time declare or pay any dividend on the Common Stock payable in shares
of Common Stock, or effect a subdivision or combination or consolidation
of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case
the amount to which holders of shares of Series B Preferred Stock were
entitled immediately prior to such event under clause (b) of the preceding
sentence shall be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such
event.
(B) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series B Preferred Stock from the Quarterly Dividend Payment
Date next preceding the date of issue of such shares, unless the date of
issue of such shares is prior to the record date for the first Quarterly
Dividend Payment Date, in which case dividends on such shares shall begin
to accrue from the date of issue of such shares, or unless the date of
issue is a Quarterly Dividend Payment Date or is a date after the record
date for the determination of holders of shares of Series B Preferred
Stock entitled to receive a quarterly dividend and before such Quarterly
Dividend Payment Date, in either of which events such dividends shall
begin to accrue and be cumulative from such Quarterly Dividend Payment
Date. Accrued but unpaid dividends shall not bear interest. Dividends paid
on the shares of Series B Preferred Stock in an amount less than the total
amount of such dividends at the time accrued and payable on such shares
shall be allocated pro rata on a share-by-share basis among all such
shares at the time outstanding. The Board of Directors may fix a record
date for the determination of holders of shares of Series B Preferred
Stock entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be not more than 60 days prior to the
date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series B Preferred
Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth,
each share of Series B Preferred Stock shall entitle the holder thereof to
1,000 votes on all matters submitted to a vote of the stockholders of the
Company. In the event the Company shall at any time declare or pay any
dividend on the Common Stock payable in shares of Common Stock, or effect
a subdivision or combination or consolidation of the outstanding shares of
Common Stock (by reclassification or otherwise than by payment of a
dividend in shares of Common Stock) into a greater or lesser number of
shares of Common Stock, then in each such case the number of votes per
share to which holders of shares of Series B Preferred Stock were entitled
immediately prior to such event shall be adjusted by multiplying such
number by a fraction, the numerator of which is the number
-2-
of shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) Except as otherwise provided herein, in any other Certificate of
Designation creating a series of Preferred Stock or Preferred Stock or any
similar stock, or by law, the holders of shares of Series B Preferred
Stock and the holders of shares of Common Stock and any other capital
stock of the Company having general voting rights shall vote together as
one class on all matters submitted to a vote of stockholders of the
Company.
(C) Except as set forth herein, or as otherwise provided by law,
holders of Series B Preferred Stock shall have no special voting rights
and their consent shall not be required (except to the extent they are
entitled to vote with holders of Common Stock as set forth herein) for
taking any corporate action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series B Preferred Stock as provided in Section 2 are in
arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series B Preferred
Stock outstanding shall have been paid in full, the Company shall not:
(i) declare or pay dividends, or make any other distributions,
on any shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series B
Preferred Stock;
(ii) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a parity (either as
to dividends or upon liquidation, dissolution or winding up) with
the Series B Preferred Stock, except dividends paid ratably on the
Series B Preferred Stock and all such parity stock on which
dividends are payable or in arrears in proportion to the total
amounts to which the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Series B Preferred Stock, provided that the Company may at any time
redeem, purchase or otherwise acquire shares of any such junior
stock in exchange for shares of any stock of the Company ranking
junior (as to dividends or upon dissolution, liquidation and winding
up) to the Series B Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for consideration
any shares of Series B Preferred Stock, or any shares of stock
ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series B Preferred Stock, except
in accordance with a purchase offer made in writing or by
publication (as determined by the Board of Directors) to all holders
of such shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and
classes, shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.
-3-
(B) The Company shall not permit any subsidiary of the Company to
purchase or otherwise acquire for consideration any shares of stock of the
Company unless the Company could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series B Preferred Stock
purchased or otherwise acquired by the Company in any manner whatsoever shall be
retired and cancelled promptly after the acquisition thereof. All such shares
shall upon their cancellation become authorized but unissued shares of Preferred
Stock and may be reissued as part of a new series of Preferred Stock subject to
the conditions and restrictions on issuance set forth herein, in the Certificate
of Incorporation, or in any other Certificate of Designation creating a series
of Preferred Stock or any similar stock or as otherwise required by law.
Section 6. Liquidation, Dissolution or Winding Up. Upon any liquidation,
dissolution or winding up of the Company, no distribution shall be made (A) to
holders of shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series B Preferred Stock unless,
prior thereto, the holders of shares of Series B Preferred Stock shall have
received $1,000 per share, plus an amount equal to accrued and unpaid dividends
and distributions thereon, whether or not declared, to the date of such payment,
provided that the holders of shares of Series B Preferred Stock shall be
entitled to receive an aggregate amount per share, subject to the provision for
adjustment hereinafter set forth, equal to 1,000 times the aggregate amount to
be distributed per share to holders of shares of Common Stock, or (B) to the
holders of shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series B Preferred Stock,
except distributions made ratably on the Series B Preferred Stock and all such
parity stock in proportion to the total amounts to which the holders of all such
shares are entitled upon such liquidation, dissolution or winding up. In the
event the Company shall at any time declare or pay any dividend on the Common
Stock payable in shares of Common Stock, or effect a subdivision or combination
or consolidation of the outstanding shares of Common Stock (by reclassification
or otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the
aggregate amount to which holders of shares of Series B Preferred Stock were
entitled immediately prior to such event under the proviso in clause (A) of the
preceding sentence shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the Company shall enter
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Series B Preferred Stock shall at the same time be similarly exchanged or
changed into an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 1,000 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Company shall at any time declare or pay any dividend on the
Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series B Preferred Stock shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 8. No Redemption. The shares of Series B Preferred Stock shall not
be redeemable.
-4-
Section 9. Rank. The Series B Preferred Stock shall rank, with respect to
the payment of dividends and the distribution of assets, junior to all series of
any other class of Preferred Stock.
Section 10. Amendment. If any proposed amendment to the Certificate of
Incorporation would materially alter or change the preferences, special rights
or powers given to the Series B Preferred Stock so as to affect the Series B
Preferred Stock adversely, then the holders of the Series B Preferred Stock
shall be entitled to vote as a series upon such amendment, and the affirmative
vote of two-thirds of the outstanding shares of Series B Preferred Stock shall
be necessary to the adoption thereof, in addition to such other vote as may be
required by the General Corporation Law of the State of Delaware.
Section 11. Fractional Shares. Fractional shares of Series B Preferred
Stock may be issued, but, unless the Board of Directors of the Company shall
otherwise determine, only in multiples of one one-thousandth of a share. The
holder of any fractional share of Series B Preferred Stock shall be entitled to
receive dividends, participate in distributions, exercise voting rights and have
the benefit of all other powers, preferences and rights relating to the Series B
Preferred Stock in the same proportion as such fractional share bears to a whole
share of Series B Preferred Stock.
IN WITNESS WHEREOF, this Certificate of Designation is executed on behalf
of the Company and attested to this 28th day of June, 2004.
/s/ βββββ ββββββ
--------------------------
Name: βββββ ββββββ
Title: Executive Vice President,
Chief Administrative Officer and
Senior Financial Officer
Attest:
/s/ ββββ ββββββββββ
---------------------
Name: ββββ ββββββββββ
Title: Assistant Secretary
-5-
EXHIBIT B
[FORM OF RIGHT CERTIFICATE]
Certificate No. R- ______ Rights
NOT EXERCISABLE AFTER JUNE 28, 2014 OR EARLIER IF REDEEMED OR EXCHANGED IN
ACCORDANCE WITH THE RIGHTS AGREEMENT. THE RIGHTS ARE SUBJECT TO
REDEMPTION, AT THE OPTION OF THE COMPANY, AT $.01 PER RIGHT AND TO
EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS HELD BY A PERSON
WHO IS OR BECOMES AN ACQUIRING PERSON OR ANY AFFILIATE OR ASSOCIATE
THEREOF (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND CERTAIN
TRANSFEREES THEREOF, WHETHER CURRENTLY HELD BY OR ON BEHALF OF SUCH PERSON
OR BY ANY SUBSEQUENT HOLDER, SHALL BECOME NULL AND VOID.
Right Certificate
SALTON, 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 June 28, 2004 (the "Rights Agreement") between Salton, Inc., a
Delaware corporation (the "Company"), and UMB Bank, N.A., as Rights Agent (the
"Rights Agent"), to purchase from the Company at any time after the Distribution
Date (as such term is defined in the Rights Agreement), and prior to 5:00 p.m.,
New York time, on June 28, 2014 at the office or agency of the Rights Agent
designated for such purpose, or of its successor as Rights Agent, one
one-thousandth of a fully paid non-assessable share of Series B Junior
Participating Preferred Stock, par value $.01 per share (a "Preferred Share"),
of the Company, at a purchase price of $45.00 per one one-thousandth of a
Preferred Share (the "Purchase Price"), upon presentation and surrender of this
Right Certificate with the Form of Election to Purchase duly executed. The
number of Rights evidenced by this Right Certificate (and the number of one
one-thousandths of a Preferred Share which may be purchased upon exercise
thereof) set forth above, and the Purchase Price per share set forth above, are
the number and Purchase Price as of June 28, 2004, based on the Preferred Shares
as constituted at such date, and are subject to adjustment as provided in the
Rights Agreement.
Upon the occurrence of a Triggering Event, if the Rights evidenced by this
Right Certificate are beneficially owned by (i) an Acquiring Person or an
Affiliate or Associate of an Acquiring Person (as such terms are defined in the
Rights Agreement), (ii) a transferee from an Acquiring Person or an Affiliate or
Associate of an Acquiring Person who becomes a transferee after the Acquiring
Person becomes such, or (iii) under certain circumstances specified in the
Rights Agreement, a transferee from an Acquiring Person or an Affiliate or
Associate of an Acquiring Person who becomes a transferee prior to or
concurrently with the Acquiring Person becoming such, such Rights shall become
null and void and no holder thereof shall have any right with respect to such
Rights from and after the occurrence of any such Triggering Event.
As provided in the Rights Agreement, the Purchase Price and the number of
one one-thousandths of a Preferred Share which may be purchased upon the
exercise of the Rights evidenced by this Right Certificate are subject to
modification and adjustment upon the happening of certain events.
This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, as the same may be amended from time to
time, 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 Right Certificates. Copies of the Rights Agreement are on
file at the principal executive offices of the Company and the above-mentioned
office or agency of the Rights Agent.
This Right Certificate, with or without other Right Certificates, upon
surrender at the office or agency of the Rights Agent designated for such
purpose, may be exchanged for another Right Certificate or Right Certificates of
like tenor and date evidencing Rights entitling the holder to purchase a like
aggregate number of Preferred Shares as the Rights evidenced by the Right
Certificate or Right Certificates surrendered shall have entitled such holder to
purchase. If this Right Certificate shall be exercised in part, the holder shall
be entitled to receive upon surrender hereof another Right Certificate or Right
Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Right Certificate (i) may be redeemed by the Company at its option at a
redemption price of $.01 per Right, (ii) entitle the holder to purchase the
number of Common Shares and/or, under certain circumstances, the number of
Preferred Shares, cash, other property or other securities with a value of twice
the exercise price, or (iii) may be exchanged, in whole or in part, by the
Company at its option for the number of Preferred Shares, Common Shares or other
securities with a market value equal to 50% of fair market value.
No fractional Preferred Shares will be issued upon the exercise of any
Right or Rights evidenced hereby (other than fractions which are integral
multiples of one one-thousandth of a Preferred Share, which may, at the election
of the Company, be evidenced by depositary receipts), but in lieu thereof a cash
payment will be made, as provided in the Rights Agreement.
No holder of this Right Certificate, as such, shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of the Preferred
Shares or of any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Right
Certificate shall have been exercised as provided in the Rights Agreement.
-2-
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal. Dated as of _____________, ______.
ATTEST: SALTON, INC.
______________________________ By: ______________________________
Secretary Title:
Countersigned:
UMB BANK, N.A.,
as Rights Agent
By ______________________________
Authorized Signature
-3-
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to
exercise Rights represented by the Right Certificate.)
To SALTON, INC.:
The undersigned hereby irrevocably elects to exercise __________ Rights
represented by this Right Certificate to purchase the Preferred Shares issuable
upon the exercise of such Rights (or such other securities of the Company or of
any other Person which may be issuable upon exercise of the Rights) and requests
that certificates for such securities be issued in the name of and delivered to:
Please insert Social Security
or other identifying number
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
If such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert Social Security
or other identifying number
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
Dated: ______________, ____
________________________________
Signature
Signature Guaranteed:
(Signature must be guaranteed by an eligible guarantor institution (a bank,
stockbroker, savings and loan association or credit union with membership in an
approved signature guarantee medallion program) pursuant to Rule 17Ad-15 of the
Securities Exchange Act of 1934.)
Certificate
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Right Certificate [ ] are/ [ ] are not
being exercised by or on behalf of a person who is, was or became an Acquiring
Person or an Affiliate or Associate thereof (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 Right
Certificate from any Person who is, was or became an Acquiring Person or an
Affiliate or Associate thereof.
________________________________
Signature
Signature Guaranteed:
(Signature must be guaranteed by an eligible guarantor institution (a bank,
stockbroker, savings and loan association or credit union with membership in an
approved signature guarantee medallion program) pursuant to Rule 17Ad-15 of the
Securities Exchange Act of 1934.)
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[Form of Reverse Side of Right Certificate--continued]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate.)
FOR VALUE RECEIVED ______________ hereby sells, assigns and
transfers unto
(Please print name and address of transferee)
________________________________________________________________________________
this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint____________ Attorney, to transfer
the within Right Certificate on the books of the within-named Company, with full
power of substitution.
Dated:__________, __ _____________________________________
Signature
Signature Guaranteed:
(Signature must be guaranteed by an eligible guarantor institution (a bank,
stockbroker, savings and loan association or credit union with membership in an
approved signature guarantee medallion program) pursuant to Rule 17Ad-15 of the
Securities Exchange Act of 1934.)
Certificate
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Right Certificate [ ] is/ [ ] is not being sold, assigned or
transferred by or on behalf of a Person who is, was or became an Acquiring
Person or an Affiliate or Associate thereof (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 purchase or otherwise acquire the Rights
evidenced by this Right Certificate from any Person who is, was or became an
Acquiring Person or an Affiliate or Associate thereof.
_____________________________________
Signature
Signature Guaranteed:
(Signature must be guaranteed by an eligible guarantor institution (a bank,
stockbroker, savings and loan association or credit union with membership in an
approved signature guarantee medallion program) pursuant to Rule 17Ad-15 of the
Securities Exchange Act of 1934.)
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NOTICE
Each signature to the foregoing Form of Assignment, the Form of Election
to Purchase, and the related Certificates, as the case may be, must correspond
to the name as written upon the face of this Right Certificate in every
particular, without alteration or enlargement or any change whatsoever.
If the Certificate set forth above in the Form of Assignment or the Form
of Election to Purchase, as the case may be, is not completed and signed, the
Company and the Rights Agent will deem the Rights evidenced by this Right
Certificate to be void as provided in Section 11(a)(iii) of the Rights Agreement
and such Form of Assignment or Form of Election to Purchase will not be honored.
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EXHIBIT C
UNDER CERTAIN CIRCUMSTANCES SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS HELD
BY A PERSON WHO IS OR BECOMES AN ACQUIRING PERSON OR ANY AFFILIATE OR
ASSOCIATE THEREOF (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND
CERTAIN TRANSFEREES THEREOF, WHETHER CURRENTLY HELD BY OR ON BEHALF OF
SUCH PERSON OR BY ANY SUBSEQUENT HOLDER, SHALL BECOME NULL AND VOID.
SALTON, INC.
SUMMARY OF STOCKHOLDER RIGHTS AGREEMENT
Background. On June 28, 2004, the Board of Directors of Salton, Inc., a
Delaware corporation (the "Company"), declared a dividend of one preferred share
purchase right ("Right") on each outstanding share of the Company's common
stock, $.01 par value per share (the "Common Shares"), payable to stockholders
of record at the close of business on July 9, 2004 (the "Record Date"). Except
as described below, each Right, when exercisable, entitles the holder thereof to
purchase from the Company one one-thousandth of a share of Series B Junior
Participating Preferred Shares, par value $.01 per share (the "Preferred
Shares"), of the Company at an exercise price of $45.00 per one one-thousandth
of a Preferred Share (the "Purchase Price"), subject to adjustment. The terms of
the Rights are set forth in a Rights Agreement (the "Rights Agreement") between
the Company and UMB Bank, N.A., as Rights Agent.
Distribution Date. Until the earlier to occur of (i) 10 days following a
public announcement that a person or group of affiliated or associated persons
has become an "Acquiring Person" (as defined below) or (ii) 10 business days (or
such later date as may be determined by action of the Board of Directors prior
to such time as any person or group becomes an Acquiring Person) following the
commencement of, or announcement of an intention to make, a tender offer or
exchange offer the consummation of which would result in a person or group
becoming an Acquiring Person (the earlier of such dates being called the
"Distribution Date"), the Rights will be evidenced by Common Share certificates.
Acquiring Person. An "Acquiring Person" is a person or group of affiliated
or associated persons who have acquired beneficial ownership of 20% or more of
the outstanding Common Shares, other than the Company, any subsidiary of the
Company, or any employee benefit plan of the Company or its subsidiaries
("Exempt Persons"); provided, however that (i) in no event shall any Exempt
Person be deemed to be an Acquiring Person, (ii) no person shall become an
Acquiring Person as the result of an acquisition of Common Shares by the Company
which increases the proportionate number of shares beneficially owned by such
person and its affiliates and associates to 20% or more of the Common Shares
then outstanding (provided, however, that if such person becomes the beneficial
owner of 20% or more of the Common Shares then outstanding by reason of share
acquisitions by the Company and, after such share acquisitions, (A) acquires
beneficial ownership of an additional number of Common Shares which exceeds
0.25% of the then-outstanding Common Shares and (B) beneficially owns after such
acquisition 20% or more of the aggregate number of Common Shares then
outstanding, then such person shall be deemed to be an Acquiring Person), (iii)
no person who, together with its affiliates and associates, was the beneficial
owner of 20% or more of the aggregate number of Common Shares of the Company
outstanding as of 5:00 p.m., New York time, on June 28, 2004 shall be deemed an
Acquiring Person (provided, however, that if such person or any of its
affiliates and associates, after 5:00 p.m., New York time, on June 28, 2004, (A)
acquires beneficial ownership of an additional number of Common Shares which
exceeds 0.25% of the then-outstanding Common Shares and (B) beneficially owns
after such acquisition 20% or more of the aggregate number of Common Shares of
the Company then outstanding, then such person shall be deemed to be an
Acquiring Person), and (iv) if the Board of Directors of the Company determines
in good faith that a person who would otherwise be an
Acquiring Person has become such inadvertently, and such person divests as
promptly as practicable a sufficient number of Common Shares so that such person
would no longer be an Acquiring Person, then such person shall not be deemed to
be an Acquiring Person for any purposes of the Rights Agreement.
Trading of Rights. The Rights Agreement provides that, until the
Distribution Date (or earlier redemption or expiration of the Rights), the
Rights will be transferred with and only with the Common Shares. Until the
Distribution Date (or earlier redemption or expiration of the Rights), new
Common Share certificates issued after the Record Date will contain a notation
incorporating the Rights Agreement by reference. Until the Distribution Date (or
earlier redemption or expiration of the Rights), the surrender for transfer of
any certificates for Common Shares will also constitute the transfer of the
Rights associated with the Common Shares 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 Shares as of the close of business on the Distribution Date and
such separate Right Certificates alone will evidence the Rights.
Exercisability. The Rights are not exercisable until the Distribution
Date. The Rights will expire on June 28, 2014 (the "Final Expiration Date"),
unless the Rights are earlier redeemed or exchanged by the Company, as described
below.
Exercise Price. The Purchase Price payable, and the number of Preferred
Shares or other securities or 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 on, or a subdivision, combination or reclassification of, the
Preferred Shares, (ii) upon the grant to holders of the Preferred Shares of
certain rights or warrants to subscribe for or purchase Preferred Shares at a
price, or securities convertible into Preferred Shares with a conversion price,
less than the then-current market price of the Preferred Shares or (iii) upon
the distribution to holders of the Preferred Shares of evidences of
indebtedness, assets or capital stock (excluding regular periodic cash dividends
paid out of earnings or retained earnings or dividends payable in Preferred
Shares) or of subscription rights or warrants (other than those referred to
above). With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. The Company will not be required to issue fractional Common
Shares or Preferred Shares (other than fractions which are integral multiples of
one one-thousandth of a Preferred Share, which may, at the election of the
Company, be evidenced by depositary receipts) and in lieu thereof, an adjustment
in cash may be made based on the market price of the Common Shares or Preferred
Shares on the last trading day prior to the date of exercise.
Preferred Shares. Because of the nature of the Preferred Shares' dividend,
liquidation and voting rights, the value of the one one-thousandth interest in a
Preferred Share purchasable upon exercise of each Right should approximate the
value of one Common Share. Preferred Shares purchasable upon exercise of the
Rights will not be redeemable. Each Preferred Share will be entitled to the
greater of (1) a preferential quarterly dividend payment of $1.00 per share, or
(2) an aggregate dividend of 1,000 times the dividend declared per Common Share.
In the event of liquidation, the holders of the Preferred Shares will be
entitled to a preferential liquidation payment of $1,000 per share, plus an
amount equal to 1,000 times the aggregate amount to be distributed per Common
Share. Each Preferred Share will have 1,000 votes, voting together with the
Common Shares except as otherwise required by law. Finally, in the event of any
merger, consolidation or other transaction in which Common Shares are exchanged,
each Preferred Share will be entitled to receive 1,000 times the amount received
per Common Share. These rights are protected by customary antidilution
provisions.
Flip-In. If any person or group becomes an Acquiring Person, then each
holder of a Right (other than Rights beneficially owned by the Acquiring Person,
any Associate or Affiliate thereof (as such terms are defined in the Rights
Agreement), and certain transferees thereof, which will be void) will have the
right to receive upon exercise of such Right that number of Common Shares (or,
in certain circumstances,
-2-
cash, property or other securities of the Company) having a market value of two
times the exercise price of the Right.
Flip-Over. If at any time after the time that any person or group becomes
an Acquiring Person, the Company is acquired in a merger or other business
combination transaction or 50% or more of its consolidated assets or earning
power are sold, proper provision will be made so that each holder of a Right
(other than Rights beneficially owned by the Acquiring Person, any Associate or
Affiliate thereof, and certain transferees thereof, which will be void) will
thereafter have the right to receive, upon the exercise thereof at the
then-current exercise price of the Right, that number of shares of common stock
of the acquiring company which at the time of such transaction will have a
market value of two times the exercise price of the Right.
Exchange of Rights. At any time after the time that any person or group
becomes an Acquiring Person and prior to the acquisition by such person or group
of 50% or more of the outstanding Common Shares, the Board of Directors of the
Company may exchange the Rights (other than Rights beneficially owned by such
person or group, any Associate or Affiliate thereof, and certain transferees
thereof, which will be void), in whole or in part, at an exchange ratio of one
Common Share or one one-thousandth of a Preferred Share (or of a share of a
class or series of the Company's preferred stock having equivalent rights,
preferences and privileges) per Right (subject to adjustment).
Redemption of Rights. At any time prior to the time that any person
becomes an Acquiring Person, the Board of Directors of the Company may redeem
the Rights in whole, but not in part, at a price of $.01 per Right, subject to
adjustment (the "Redemption Price"), which may (at the option of the Company) be
paid in cash, Common Shares or other consideration deemed appropriate by the
Board of Directors. The redemption of the Rights may be made effective at such
time, on such basis and with such conditions as the Board of Directors in its
sole discretion may establish; provided, however, that no redemption will be
permitted or required after the time that any person becomes an Acquiring
Person. Immediately upon any redemption of the Rights, the right to exercise the
Rights will terminate and the only right of the holders of the Rights will be to
receive the Redemption Price.
Amendment. The terms of the Rights may be amended by the Board of
Directors of the Company without the consent of the holders of the Rights,
except that from and after such time as any person becomes an Acquiring Person
no such amendment may make the Rights redeemable if the Rights are not then
redeemable in accordance with the terms of the Rights Agreement or may adversely
affect the interests of the holders of the Rights.
No Rights as Stockholder. 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.
Rights Agreement Governs. This Summary is subject to all of the terms,
provisions and conditions of the Rights Agreement, as the same may be amended
from time to time, 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 Right Certificates. A copy of
the Rights Agreement has been filed with the Securities and Exchange Commission
as an exhibit to a Registration Statement on Form 8-A dated June __, 2004.
Copies of the Rights Agreement are also on file at the principal executive
offices of the Company and the principal office of the Rights Agent.
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