RIGHTS AGREEMENT
This Rights Agreement (this "Agreement"), is dated as of August 9th,
2000, between NEW VISUAL ENTERTAINMENT, INC., a Utah corporation (the
"COMPANY"), and FIRST UNION NATIONAL BANK (the "RIGHTS AGENT"). Capitalized
terms included in this Agreement shall have the meaning set forth herein.
W I T N E S S E T H:
WHEREAS, on July 27, 2000 the Board of Directors of the Company (i)
authorized the issuance and declared a dividend of one right (a "RIGHT") for
each share of the Common Stock, par value $.01 per share ("Common Stock"), of
the Company outstanding as of the close of business on August 21, 2000 (the
"RECORD Date"), each Right representing the right to purchase, on the terms and
conditions contained herein, one one-thousandth of a share (subject to
adjustment) of Series A Junior Participating Preferred Stock, par value $.01 per
share ("SERIES A PREFERRED STOCK"), of the Company having the rights and
preferences set forth in the form of Certificate of Designation attached hereto
as EXHIBIT A, and (ii) further authorized the issuance of one Right (subject to
adjustment) with respect to each share of Common Stock that shall become
outstanding (whether originally issued or delivered from the Company's treasury)
between the Record Date and the Distribution Date (as defined below); PROVIDED,
HOWEVER, that Rights may be issued with respect to shares of Common Stock that
shall become outstanding after the Distribution Date and prior to the Expiration
Date in accordance with Section 22.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements set forth herein, the parties agree as follows:
SECTION 1. CERTAIN DEFINITIONS.
For purposes of this Agreement, the following terms shall have the
meanings indicated:
(a) "ACQUIRING PERSON" shall mean any Person who or which shall be the
Beneficial Owner of 20% or more of the shares of Common Stock then outstanding,
but shall not include an Exempt Person; PROVIDED, HOWEVER, that
(i) if the Board of Directors of the Company determines in
good faith that a Person who would otherwise be an "Acquiring Person"
became such inadvertently (including, without limitation, because:
(A) such Person was unaware that it beneficially
owned a percentage of Common Stock that would otherwise cause
such Person to be an "Acquiring Person;" or
(B) such Person was aware of the extent of its
Beneficial Ownership of Common Stock but had no actual
knowledge of the consequences of such Beneficial Ownership
under this Agreement)
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and without any intention of changing or influencing control of the Company, and
if such Person as promptly as practicable divested or divests itself of
Beneficial Ownership of a sufficient number of shares of Common Stock so that
such Person would no longer be an "Acquiring Person," then such Person shall not
be deemed to be or to have become an "Acquiring Person" for any purposes of this
Agreement;
(ii) if, as of the date hereof, any Person is the Beneficial
Owner of 20% or more of the shares of Common Stock outstanding, such
Person shall not be or become an "Acquiring Person" unless and until
such time as such Person shall become the Beneficial Owner of
additional shares of Common Stock (other than pursuant to a dividend or
distribution paid or made by the Company on the outstanding Common
Stock in shares of Common Stock or pursuant to a split or subdivision
of the outstanding Common Stock), unless, upon becoming the Beneficial
Owner of such additional shares of Common Stock, such Person is not
then the Beneficial Owner of 20% or more of the shares of Common Stock
then outstanding; and
(iii) no Person shall become an "Acquiring Person" as the
result of an acquisition of shares of Common Stock by the Company
which, by reducing the number of shares outstanding increases the
proportionate number of shares of Common Stock beneficially owned by
such Person to 20% or more of the shares of Common Stock then
outstanding, PROVIDED, HOWEVER, that if a Person shall become the
Beneficial Owner of 20% or more of the shares of Common Stock then
outstanding by reason of such share acquisitions by the Company and
shall thereafter become the Beneficial Owner of any additional shares
of Common Stock (other than pursuant to a dividend or distribution paid
or made by the Company on the outstanding Common Stock in shares of
Common Stock or pursuant to a split or subdivision of the outstanding
Common Stock), then such Person shall be deemed to be an "Acquiring
Person" unless upon becoming the Beneficial Owner of such additional
shares of Common Stock such Person does not beneficially own 20% or
more of the shares of Common Stock then outstanding. For all purposes
of this Agreement, any calculation of the number of shares of Common
Stock outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding shares of
Common Stock of which any Person is the Beneficial Owner, shall be made
in accordance with the last sentence of Rule 13d-3(d)(1)(i) of the
General Rules and Regulations under the Exchange Act, as in effect on
the date hereof.
(b) "ADJUSTMENT SHARES" shall have the meaning set forth in Section
11(a)(ii) hereof.
(c) "AFFILIATE" and "ASSOCIATE" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Exchange Act as in effect on the date of this Agreement.
(d) A Person shall be deemed the "BENEFICIAL OWNER" of, and shall be
deemed to "BENEFICIALLY own," any shares of Common Stock:
RIGHTS AGREEMENT - PAGE 2
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(i) that such Person or any of such Person's Affiliates or
Associates beneficially owns, directly or indirectly (as determined
pursuant to Rule 13d-3 of the General Rules and Regulations under the
Exchange Act, as in effect on the date of this Agreement);
(ii) that 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,
whether or not in writing, or upon the exercise of conversion
rights, exchange rights, rights, warrants or options, or
otherwise; PROVIDED, HOWEVER, that a Person shall not be
deemed the "Beneficial Owner" of, or to "beneficially own,"
(x) securities tendered pursuant to a tender or
exchange offer made by such Person or any of such
Person's Affiliates or Associates until such tendered
securities are accepted for purchase or exchange,
(y) securities that such Person has a right to
acquire on the exercise of Rights at any time prior
to the occurrence of a Section 11(a)(ii) Event, or
(z) securities issuable upon exercise of Rights from
and after the occurrence of a Section 11(a)(ii) Event
if such Rights were acquired by such Person or any of
such Person's Affiliates or Associates prior to the
Distribution Date or pursuant to Section 22 hereof
("ORIGINAL RIGHTS") or pursuant to Section 11(i) or
Section 11(o) hereof with respect to an adjustment to
Original Rights; or
(B) the right to vote pursuant to any agreement,
arrangement or understanding (whether or not in writing);
PROVIDED, HOWEVER, that a Person shall not be deemed the
"Beneficial Owner" of, or to "beneficially own," any security
if the agreement, arrangement or understanding to vote such
security arises solely from a revocable proxy or consent given
in response to a public proxy or consent solicitation made
pursuant to, and in accordance with, the applicable General
Rules and Regulations under the Exchange Act; or
(iii) that are beneficially owned, directly or indirectly (as
determined pursuant to Rule 13d-3 of the General Rules and Regulations
under the Exchange Act, as in effect on the date of this Agreement), by
any other Person with which such Person or any of such Person's
Affiliates or Associates has any agreement, arrangement or
understanding, whether or not in writing, for the purpose of acquiring,
holding, voting (except as described in clause (B) of subparagraph (ii)
of this paragraph (d)) or disposing of any securities of the Company.
RIGHTS AGREEMENT - PAGE 3
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Notwithstanding anything in this paragraph (d) to the contrary,
(A) a Person engaged in the business of underwriting
securities shall not be deemed the "Beneficial Owner" of, or
to "beneficially own," any securities acquired in good faith
in a firm commitment underwriting until the expiration of 40
days after the date of such acquisition, and
(B) no Person who is an officer, director or employee
of an Exempt Person shall be deemed, solely by reason of such
Person's status or authority as such, to be the "Beneficial
Owner" of, to have "Beneficial Ownership" of or to
"beneficially own" any securities that are "beneficially
owned" (as defined in this Section 1(d)), including, without
limitation, in a fiduciary capacity, by an Exempt Person or by
any other such officer, director or employee of an Exempt
Person.
(e) "BOARD OF DIRECTORS" shall mean the Board of Directors of the
Company or any duly authorized committee thereof.
(f) "BUSINESS DAY" shall mean any day other than a Saturday, Sunday, or
a day on which banking institutions in the State of California are authorized or
obligated by law or executive order to close.
(g) "CLOSE OF BUSINESS" on any given date shall mean 5:00 p.m., San
Diego, California time, on such date; PROVIDED, HOWEVER, that if such date is
not a Business Day it shall mean 5:00 p.m., San Diego, California time, on the
next succeeding Business Day.
(h) "COMMON STOCK" when used with reference to the Company shall mean
the Common Stock (currently par value $.001 per share) of the Company. "COMMON
STOCK" when used with reference to any Person other than the Company which shall
be organized in corporate form shall mean the capital stock or other equity
security with the greatest per share voting power of such Person. "COMMON STOCK"
when used with reference to any Person other than the Company which shall not be
organized in corporate form shall mean units of beneficial interest that shall
represent the right to participate in profits, losses, deductions and credits of
such Person and that shall be entitled to exercise the greatest voting power per
unit of such Person.
(i) "COMMON STOCK EQUIVALENTS" shall have the meaning set forth in
Section 11(a)(iii) hereof.
(j) "CURRENT MARKET PRICE" shall have the meaning set forth in Section
11(d) hereof.
(k) "CURRENT VALUE" shall have the meaning set forth in Section
11(a)(iii) hereof.
(l) "DISTRIBUTION DATE" shall have the meaning set forth in Section
3(a) hereof.
RIGHTS AGREEMENT - PAGE 4
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(m) "EQUIVALENT SERIES A PREFERRED STOCK" shall have the meaning set
forth in Section 11(b) hereof.
(n) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
(o) "EXCHANGE RATIO" shall have the meaning set forth in Section 24(a)
hereof.
(p) "EXEMPT PERSON" shall mean the Company, any Subsidiary of the
Company, any employee benefit plan or employee stock plan of the Company or of
any Subsidiary of the Company, or any person or entity organized, appointed or
established for or pursuant to the terms of any such plan or for the purpose of
funding any such plan or funding other employee benefits for employees of the
Company or of any Subsidiary of the Company.
(q) "EXPIRATION DATE" shall have the meaning set forth in Section 7(a)
hereof.
(r) "FINAL EXPIRATION DATE" shall have the meaning set forth in Section
7(a) hereof.
(s) "INVALIDATION TIME" shall have the meaning set forth in Section
11(a)(ii) hereof.
(t) "NASDAQ" shall mean the National Association of Securities Dealers,
Inc. Automated Quotations System.
(u) "ORIGINAL RIGHTS" shall have the meaning set forth in Section
1(d)(ii) hereof.
(v) "PERSON" shall mean any individual, firm, corporation, partnership
or other entity.
(w) "PRINCIPAL PARTY" shall have the meaning set forth in Section 13(b)
hereof.
(x) "PURCHASE PRICE" shall have the meaning set forth in Section 4
hereof.
(y) "RECORD DATE," with respect to the initial issuance of the Rights
shall be August 21, 2000.
(z) "REDEMPTION PRICE" shall have the meaning set forth in Section
23(a)(ii) hereof.
(aa) "RIGHT CERTIFICATE" shall have the meaning set forth in Section
3(a) hereof.
(ab) "SECTION 11(a)(ii) EVENT" shall mean any instance in which any
Person, alone or together with its Affiliates and Associates, shall become an
Acquiring Person.
(ac) "SECTION 11(a)(ii) TRIGGER DATE" shall have the meaning set forth
in Section 11(a)(iii) hereof.
(ad) "SECTION 13 EVENT" shall mean any event described in clause (i),
(ii) or (iii) of Section 13(a) hereof.
(ae) "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
RIGHTS AGREEMENT - PAGE 5
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(af) "SERIES A PREFERRED STOCK" shall have the meaning set forth in the
recitals hereof.
(ag) "SPREAD" shall have the meaning set forth in Section 11(a)(iii)
hereof.
(ah) "STOCK ACQUISITION DATE" shall mean the first date of public
announcement (which for purposes of this definition shall include, without
limitation, a report filed pursuant to the Exchange Act) by the Company or an
Acquiring Person that an Acquiring Person has become such or such earlier date
as a majority of the Board of Directors shall become aware of the existence of
an Acquiring Person.
(ai) "SUBSTITUTION PERIOD" shall have the meaning set forth in Section
11(a)(iii) hereof.
(aj) "SUBSIDIARY" of a Person shall mean any corporation or other
entity which securities or other ownership interests having ordinary voting
power sufficient to elect a majority of the board of directors or other persons
performing similar functions are beneficially owned, directly or indirectly, by
such Person and any corporation or other entity that is otherwise controlled by
such Person.
(ak) "SUMMARY OF RIGHTS" shall have the meaning set forth in Section
3(b) hereof.
(al) "TRADING DAY" shall have the meaning set forth in Section 11(d)(i)
hereof.
(am) "TRIGGERING EVENT" shall mean any Section 11(a)(ii) Event or
Section 13 Event.
SECTION 2. APPOINTMENT OF RIGHTS AGENT.
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The Company hereby appoints the Rights Agent to act as agent for the
Company in accordance with the terms and conditions hereof, and the Rights Agent
hereby accepts such appointment. The Company may from time to time appoint such
co-Rights Agent as it may deem necessary or desirable. The Rights Agent shall
have no duty to supervise, and shall in no event be liable for, the acts or
omissions of any such co-Rights Agent. In the event the Company appoints one or
more co-Rights Agents, the respective duties of the Rights Agents and any
co-Rights Agents will be as the Company may determine.
SECTION 3. ISSUANCE OF RIGHT CERTIFICATES.
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(a) Until the Close of Business on the day (the "DISTRIBUTION DATE")
which is the earlier of
(i) the tenth day after the Stock Acquisition Date or
(ii) the tenth Business Day (or such later day as may be
determined by action of the Board of Directors taken prior to the Close
of Business on such tenth Business Day and prior to such time as any
Person becomes an Acquiring Person) following the commencement by any
Person (other than an Exempt Person) of, or the first public
announcement of the intent of any Person (other than an Exempt Person)
to commence, a tender or exchange offer upon the successful
consummation of which such Person would be the Beneficial Owner of 20%
or more of the outstanding Common Stock (irrespective of whether any
shares are actually purchased pursuant to any such offer),
RIGHTS AGREEMENT - PAGE 6
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(x) the Rights will be evidenced (subject to the
provisions of Section 3(c) hereof) by the certificates for the
Common Stock registered in the names of the holders of the
Common Stock and not be separate Right Certificates, and
(y) each Right will be transferable only in
connection with the transfer of a share (subject to adjustment
as hereinafter provided) of Common Stock; PROVIDED, HOWEVER,
that if the Distribution Date would be prior to the Record
Date, the Record Date shall be the Distribution Date; and
PROVIDED FURTHER, that if a tender offer or exchange offer
referred to in clause (ii) above is canceled or withdrawn
prior to the Distribution Date, such offer shall be deemed,
for purposes of this Agreement, never to have been made.
As soon as practicable after the Distribution Date, the Rights Agent
will mail, by first-class, postage-prepaid mail, to each record holder of the
Common Stock as of the Close of Business on the Distribution Date, as shown by
the records of the Company, at the address of such holder shown on such records,
a Right Certificate in substantially the form of EXHIBIT B hereto ("RIGHT
CERTIFICATE"), evidencing one Right for each share of Common Stock so held,
subject to adjustment as provided herein. In the event that an adjustment in the
number of Rights per share of Common Stock has been made pursuant to Section
11(i) or Section 11(o) hereof, at the time of distribution of the Right
Certificates, the Company shall make the necessary and appropriate rounding
adjustments (in accordance with Section 14(a) hereof) so that Right Certificates
representing only whole numbers of Rights are distributed and cash is paid in
lieu of any fractional Rights. As of and after the Distribution Date, the Rights
will be evidenced solely by such Right Certificates.
(b) On the Record Date or as soon as practicable thereafter, the
Company will send a copy of a Summary of Rights to Purchase Series A Junior
Participating Preferred Stock, substantially in the form attached hereto as
EXHIBIT C ("SUMMARY OF RIGHTS"), by first-class, postage-prepaid mail, to each
record holder of Common Stock as of the Close of Business on the Record Date at
the address of such holder shown on the records of the Company.
(c) With respect to certificates for Common Stock outstanding as of the
Record Date, until the Distribution Date (or, if earlier, the Expiration Date),
the Rights will be evidenced by such certificates for Common Stock registered in
the names of the holders thereof together with a copy of the Summary of Rights.
Until the Distribution Date (or, if earlier, the Expiration Date), the surrender
for transfer of any certificate for Common Stock outstanding on the Record Date,
with or without a copy of the Summary of Rights, shall (subject to the
provisions of Section 11(a)(ii) and the other provisions hereof) also constitute
the surrender for transfer of the Rights associated with the Common Stock
represented thereby.
RIGHTS AGREEMENT - PAGE 7
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(d) Subject to the provisions of Section 11(a)(ii) and the other
provisions hereof, Rights shall be issued in respect of all shares of Common
Stock that become outstanding after the Record Date but prior to the earlier of
the Distribution Date or the Expiration Date and, in certain circumstances
provided for in Section 22 hereof, may be issued in respect of shares of Common
Stock that become outstanding after the Distribution Date. Certificates issued
for Common Stock (including without limitation certificates issued upon original
issuance, disposition from the Company's treasury or transfer or exchange of
Common Stock) after the Record Date but prior to the earlier of the Distribution
Date or the Expiration Date (or, in certain circumstances as provided in Section
22 hereof, after the Distribution 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
New Visual Entertainment, Inc. and First Union National Bank,
as Rights Agent, dated as of August 9th, 2000 and as amended
from time to time (the "AGREEMENT"), the terms of which are
incorporated herein by reference and a copy of which is on
file at the principal executive office of New Visual
Entertainment, Inc. Under certain circumstances, as set forth
in the Agreement, such Rights will be evidenced by separate
certificates and will no longer be evidenced by this
certificate. First Union National Bank will mail to the holder
of this certificate a copy of the Agreement without charge
promptly after receipt by it of a written request therefor.
Rights issued to or beneficially owned by a Person who is or
becomes an Acquiring Person or an Affiliate or Associate of
such Acquiring Person (as such terms are defined in the
Agreement) or, under certain circumstances, transferees
thereof, will become void as provided in Section 11(a)(ii) of
the Agreement and thereafter may not be transferred to any
Person.
With respect to such certificates containing the foregoing legend, the
Rights associated with the Common Stock represented by such certificates shall,
until the Distribution Date, be evidenced by such certificates alone, and the
surrender for transfer of any such certificate shall (subject to the provisions
of Section 11(a)(ii) and the other provisions hereof) also institute the
surrender for transfer of the Rights associated with the Common Stock
represented thereby.
Notwithstanding this paragraph (d), the omission of a legend shall not
affect the enforceability of any part of this Agreement or the rights of any
holder of the Rights.
RIGHTS AGREEMENT - PAGE 8
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SECTION 4. FORM OF RIGHT CERTIFICATES.
--------------------------
The Right Certificates (including the forms of assignment and election
to purchase to be printed on the reverse thereof), when, as and if issued, shall
be substantially in the form set forth in EXHIBIT B hereto and may have such
marks of identification or designation and such legends, summaries or
endorsements printed thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this Agreement, or as may be required to
comply with any law or with any rule or regulation made pursuant thereto or with
any rule or regulation of any stock exchange or automated quotation system on
which the Rights may from time to time be listed, or to conform to usage.
Subject to the provisions of Sections 11 and 22 hereof, the Right Certificates,
whenever issued, evidencing the Rights issued on the Record Date shall be dated
as of the Record Date, and Right Certificates evidencing Rights issued after the
Record Date shall be dated as of the date of such issuance, and on their face
Right Certificates shall entitle the holders thereof to purchase one
one-thousandth of one share of Series A Preferred Stock, or other securities or
property as provided herein, as the same may from time to time be adjusted as
provided herein, at the price per one one-thousandth of a share set forth
therein, as the same may from time to time be adjusted as provided herein (the
"PURCHASE PRICE").
SECTION 5. COUNTERSIGNATURE AND REGISTRATION.
---------------------------------
(a) The Right Certificates shall be executed on behalf of the Company
by its Chairman of the Board, President, Chief Executive Officer or any Vice
President, either manually or by facsimile signature, and have affixed thereto
the Company's seal or a facsimile thereof which shall be attested by the
Secretary or 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.
In case any officer of the Company 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,
issued and delivered with the same force and effect as though the Person who
signed such Right Certificates had not ceased to be such officer of the Company;
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 Agreement any such Person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its principal office, 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 Right Certificate, the date of each Right
Certificate, and the certificate number for each Right Certificate.
RIGHTS AGREEMENT - PAGE 9
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SECTION 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHT CERTIFICATES;
MUTILATED, DESTROYED, LOST OR STOLEN RIGHT CERTIFICATES.
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(a) Subject to the provisions of Section 11(a)(ii) and the other
provisions hereof, at any time after the Close of Business on the Distribution
Date and at or prior to the Close of Business on the Expiration Date, any Right
Certificate or Right Certificates may be transferred or 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 share of
Series A Preferred Stock as the Right Certificate or Right Certificates
surrendered then entitled such holder to purchase. Any registered holder
desiring to transfer any Right Certificate shall surrender the Right Certificate
at the principal office of the Rights Agent with the form of assignment on the
reverse side thereof duly endorsed (or enclose with such Right Certificate a
written instrument of transfer in form satisfactory to the Company and the
Rights Agent), duly executed by the registered holder thereof or his attorney
duly authorized in writing, and with such signature duly guaranteed. Any
registered holder desiring to split up, combine or exchange any Right
Certificate shall make such request in writing delivered to the Rights Agent,
and shall surrender the Right Certificate or Right Certificates to be split up,
combined or exchanged at the principal office of the Rights Agent. Thereupon the
Rights Agent, subject to the provisions of Section 11(a)(ii) and the other
provisions hereof, shall countersign (by manual signature) 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) Subject to the provisions of Section 11(a)(ii) and the other
provisions hereof, upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Right Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and, if requested by the Company,
reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender to the Rights Agent and cancellation of the Right Certificate if
mutilated, the Company will execute and deliver a new Right Certificate of like
tenor to the Rights Agent for delivery to the registered owner in lieu of the
Right Certificate so lost, stolen, destroyed or mutilated.
SECTION 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS.
-------------------------------------------------------------
(a) Except as otherwise provided herein, the Rights shall become
exercisable at the Close of Business on the Distribution Date, and thereafter
may be exercised in whole or in part to purchase shares of Series A Preferred
Stock upon surrender of the Right Certificate, with the form of election to
purchase on the reverse side thereof duly executed (with such signature duly
guaranteed), to the Rights Agent at its principal office, together with payment
of the aggregate Purchase Price (subject to adjustment as hereinafter provided)
with respect to the number of one one-thousandths of a share of Series A
Preferred Stock (except as otherwise provided herein) as to which such
surrendered Rights are then being exercised, at or prior to the Close of
Business on the date (the "EXPIRATION DATE") which is the earliest of (i) August
21, 2004 (the "FINAL EXPIRATION DATE"), (ii) the time at which the Rights are
redeemed as provided in Section 23 hereof, or (iii) the time at which the Rights
are exchanged as provided in Section 24 hereof.
(b) The Purchase Price shall initially be $200 for each one
one-thousandth of a share of Series A Preferred Stock issued pursuant to the
exercise of a Right. The Purchase Price and the number of one one-thousandths of
a share of Series A Preferred Stock or other securities to be acquired upon
exercise of a Right shall be subject to adjustment from time to time as provided
in Sections 11 and 13 hereof. The Purchase Price shall be payable in lawful
money of the United States of America, in accordance with Section 7(c) hereof.
RIGHTS AGREEMENT - PAGE 10
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(c) Except as otherwise provided herein, upon receipt of a Right
Certificate representing exercisable Rights with the form of election to
purchase duly executed, accompanied by payment of the aggregate Purchase Price
for the number of one one-thousandths of a share of Series A Preferred Stock to
be purchased and an amount equal to any applicable transfer tax, by cash,
certified or official bank check or money order payable to the order of the
Company or the Rights Agent, the Rights Agent shall, subject to Section 20(j)
and Section 20(k) hereof, thereupon promptly
(i) requisition from any transfer agent of the Series A
Preferred Stock certificates for the number of shares of Series A
Preferred Stock so elected to be purchased (and/or requisition from the
depository agent depository receipts representing interests in such
number of fractional shares of Series A Preferred Stock as are to be
purchased, in which case certificates for the fractional shares of
Series A Preferred Stock so represented shall be deposited with the
depository agent) and the Company will comply and hereby authorizes and
directs such transfer agent (and any such depository agent) to comply
with all such requests,
(ii) requisition from the Company the amount of cash to be
paid in lieu of issuance of fractional shares in accordance with
Section 14(b) hereof, and
(iii) promptly after receipt of such Series A Preferred Stock
certificates, 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, or, when
appropriate, after receipt promptly deliver such depository receipts
and cash to or upon the order of the registered holder of such Right
Certificate; PROVIDED, HOWEVER, that in the case of a purchase of
securities, other than Series A Preferred Stock, pursuant to Section 11
or Section 13 hereof, the Rights Agent shall promptly take the
appropriate actions corresponding to the foregoing clauses (i) through
(iii).
In the event that the Company is obligated to issue other securities of
the Company, pay cash and/or distribute other property pursuant to Section 11(a)
hereof, the Company will make all arrangements necessary so that such other
securities, cash and/or other property are available for distribution by the
Rights Agent, if and when appropriate.
(d) Except as otherwise provided herein, in case the registered holder
of any Right Certificate shall exercise less than all the Rights evidenced
thereby, a new Right Certificate evidencing Rights equivalent to the Rights
remaining unexercised shall be issued by the Rights Agent to the registered
holder of such Right Certificate or to his duly authorized assigns, subject to
the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary, neither
the Rights Agent nor the Company shall be obligated to undertake any action with
respect to a registered holder upon the occurrence of any purported exercise as
set forth in this Section 7 unless such registered holder shall have
(i) completed and signed the certificate contained in the form
of election to purchase set forth on the reverse side of the Right
Certificate surrendered for such exercise and
RIGHTS AGREEMENT - PAGE 11
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(ii) provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request.
SECTION 8. CANCELLATION AND DESTRUCTION OF RIGHT CERTIFICATES.
--------------------------------------------------
All Right Certificates surrendered for the purpose of exercise,
transfer, split up, combination or exchange shall, if surrendered to the Company
or to any of its agents, be delivered to the Rights Agent for cancellation or in
canceled form or, if surrendered to the Rights Agent, shall be canceled by it,
and no Right Certificates shall be issued in lieu thereof except as expressly
permitted by any of the provisions of this Agreement. The Company shall deliver
to the Rights Agent for cancellation and retirement, and the Rights Agent shall
so cancel and retire, any Right Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
canceled Right Certificates to the Company or shall, at the written request of
the Company, destroy such canceled Right Certificates, and in such case shall
deliver a certificate of destruction thereof to the Company.
SECTION 9. RESERVATION AND AVAILABILITY OF SHARES OF SERIES A PREFERRED STOCK.
------------------------------------------------------------------
(a) The Company covenants and agrees that at all times it will cause to
be reserved and kept available, out of and to the extent of its authorized and
unissued shares of Series A Preferred Stock not reserved for another purpose
(and, following the occurrence of a Triggering Event, shares of Common Stock and
other securities) or shares of Series A Preferred Stock (and, following the
occurrence of a Triggering Event, shares of Common Stock and other securities)
held in its treasury, the number of shares of Series A Preferred Stock (and,
following the occurrence of a Triggering Event, shares of Common Stock and other
securities) that, as provided in this Agreement, including Section 11(a)(iii)
hereof, will be sufficient to permit the exercise in full of all outstanding
Rights, provided that the Company shall not be required to reserve and keep
available shares of Common Stock or other securities sufficient to permit the
exercise in full of all outstanding Rights pursuant to the adjustments set forth
in Section 11(a)(ii), Section 11(a)(iii) or Section 13 hereof unless the Rights
become exercisable pursuant to such adjustments, and then only to the extent the
Rights become exercisable pursuant to such adjustments.
(b) So long as the shares of Series A Preferred Stock (and, following
the occurrence of a Triggering Event, shares of Common Stock and other
securities) issuable and deliverable upon the exercise of Rights may be listed
on any national securities exchange or automated quotation system, as the case
may be, 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 automated quotation system, as the case may be,
upon official notice of issuance upon such exercise.
RIGHTS AGREEMENT - PAGE 12
<PAGE>
(c) From and after such time as the Rights become exercisable, the
Company shall use its best efforts to, if then necessary to permit the issuance
of shares of Series A Preferred Stock (and, following the occurrence of a
Triggering Event, shares of Common Stock and other securities) upon the exercise
of Rights, register the offering and issuance of and qualify such shares of
Series A Preferred Stock (and, following the occurrence of a Triggering Event,
shares of Common Stock and other securities) under the Securities Act and any
applicable state securities or "blue sky" laws (to the extent exemptions
therefrom are not available), cause the related registration statement and
qualifications to become effective as soon as possible after such filing and
keep such registration and qualifications effective until the earlier of the
date as of which the Rights are no longer exercisable for such securities and
the Expiration Date. The Company may temporarily suspend, for a period of time
not to exceed 90 days, the exercisability of the Rights in order to prepare and
file a registration statement under the Securities Act and permit it to become
effective. In the event of any such suspension, the Company shall issue a public
announcement stating that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement at such time as the suspension is no
longer in effect. Notwithstanding any provision of this Agreement to the
contrary, the Rights shall not be exercisable in any jurisdiction unless the
requisite qualification in such jurisdiction shall have been obtained and until
a registration statement under the Securities Act (if required) shall have been
declared effective.
(d) The Company covenants and agrees that it will take all such action
as may be necessary to insure that all shares of Series A Preferred Stock (and,
following the occurrence of a Triggering Event, shares of Common Stock and other
securities) delivered upon exercise of Rights shall, to the extent applicable,
at the time of delivery of the certificates for such securities (subject to
payment of the aggregate Purchase Price in respect thereof), be duly and validly
authorized and issued and fully paid and nonassessable securities in accordance
with applicable law.
(e) The Company further covenants and agrees that it will pay when due
and payable any and all federal and state transfer taxes and charges that may be
payable in respect of the issuance or delivery of the Right Certificates or of
any shares of Series A Preferred Stock (or other securities, as the case may be)
upon the exercise of Rights; PROVIDED, HOWEVER, that the Company shall not be
required to pay any transfer tax that 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 for Series A Preferred Stock (or other securities, as
the case may be) upon exercise of rights in a name other than that of, the
registered holder of the Right Certificate, and the Company shall not be
required to issue or deliver a Right Certificate or certificate for Series A
Preferred Stock (or other securities, as the case may be) to a Person other than
such registered holder until any such tax shall have been paid (any such tax
being payable by the holder of such Right Certificate at the time of surrender)
or until it has been established to the Company's satisfaction that no such tax
is due.
SECTION 10. SERIES A PREFERRED STOCK RECORD DATE.
------------------------------------
Each Person in whose name any certificate for shares of Series A
Preferred Stock (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 Series A Preferred Stock (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 aggregate Purchase Price therefor (and any applicable transfer taxes) was
made, PROVIDED, HOWEVER, that if the date of such surrender and payment is a
date upon which the Preferred Stock transfer books of the Company are closed,
such Person shall be deemed to have become the record holder of such shares on,
and such certificate shall be dated, the next succeeding Business Day on which
the Preferred Stock 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 Stock for which the
Rights shall be exercisable, including, without limitation, the right to vote or
to receive dividends or other distributions, and shall not be entitled to
receive any notice of any proceedings of the Company except as provided herein.
RIGHTS AGREEMENT - PAGE 13
<PAGE>
SECTION 11. ADJUSTMENTS TO NUMBER AND KIND OF SHARES, NUMBER OF RIGHTS OR
PURCHASE PRICE.
-------------------------------------------------------------
The number and kind of shares subject to purchase upon the exercise of
each Right, the number of Rights outstanding and the Purchase Price are subject
to adjustment from time to time as provided in this Section 11.
(a) CHANGES IN COMPANY CAPITALIZATION; SUBSTITUTIONS.
------------------------------------------------
(i) In the event that the Company shall at any time after the
Record Date
(A) declare or pay any dividend on Series A Preferred
Stock payable in shares of Series A Preferred Stock,
(B) subdivide or split the outstanding shares of
Series A Preferred Stock into a greater number of shares,
(C) combine or consolidate the outstanding shares of
Series A Preferred Stock into a smaller number of shares or
effect a reverse split of the outstanding shares of Series A
Preferred Stock or
(D) issue any shares of its capital stock in a
reclassification of the Series A Preferred Stock (including
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), 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 Series A Preferred Stock or capital stock, as the
case may be, issuable upon exercise of a Right on such date, shall be
proportionately adjusted so that the holder of any Right exercised after such
time shall be entitled to receive, upon payment of an amount equal to (x) the
Purchase Price in effect immediately prior to the record date or effective date
of such dividend, subdivision, combination or reclassification, multiplied by
(y) the number of one one-thousandths of a share of Series A Preferred Stock, or
shares of capital stock, as the case may be, as to which a Right was exercisable
immediately prior to such date, the aggregate number and kind of shares of
Series A Preferred Stock or capital stock, as the case may be, which, if such
Right had been exercised immediately prior to such date, the holder thereof
would have owned upon such exercise and been entitled to receive, or would be
deemed to have owned, by virtue of such dividend, subdivision, combination or
reclassification.
RIGHTS AGREEMENT - PAGE 14
<PAGE>
(ii) Subject to Section 24 of this Agreement, in the event any
Person becomes an Acquiring Person (the first occurrence of such event
being referred to hereinafter as the "SECTION 11(A)(II) EVENT"), then
(A) the Purchase Price shall be adjusted to be the
Purchase Price in effect immediately prior to the Section
11(a)(ii) Event multiplied by the number of one
one-thousandths (1/1,000) of a share of Series A Preferred
Stock for which a Right was exercisable immediately prior to
such Section 11(a)(ii) Event, whether or not such Right was
then exercisable, and
(B) each holder of a Right, except as otherwise
provided in this Section 11(a)(ii) and Section 11(a)(iii)
hereof, shall thereafter have the right to receive upon
exercise thereof at a price equal to the Purchase Price (as so
adjusted), in accordance with the terms of this Agreement and
in lieu of shares of Series A Preferred Stock, such number of
shares of Common Stock (the "Adjustment Shares") as shall
equal the result obtained by dividing the Purchase Price (as
so adjusted) by 50% of the current per share market price of
the Common Stock (determined pursuant to Section 11(d) hereof)
on the date of such Section 11(a)(ii) Event;
PROVIDED, HOWEVER, that the Purchase Price (as so adjusted) and the number of
Adjustment Shares so receivable upon exercise of a Right shall, following the
Section 11(a)(ii) Event, be subject to further adjustment as appropriate in
accordance with Section 11(f) hereof. Notwithstanding anything in this Agreement
to the contrary, however, from and after the Section 11(a)(ii) Event
("INVALIDATION TIME"), any Rights that are beneficially owned by (x) any
Acquiring Person (or Affiliate or Associate of any Acquiring Person), (y) a
transferee of any Acquiring Person (or such Affiliate or Associate) who becomes
a transferee after the Section 11(a)(ii) Event or (z) a transferee of any
Acquiring Person (or any such Affiliate or Associate) who became a transferee
prior to or concurrently with the Section 11(a)(ii) Event pursuant to either (I)
a transfer from the Acquiring Person to holders of its equity securities or to
any Person with whom it has any continuing agreement, arrangement or
understanding regarding the transferred Rights or (II) a transfer that the Board
of Directors has determined is part of a plan, arrangement or understanding that
has the purpose or effect of avoiding the provisions of this paragraph, and
subsequent transferees of such Persons, shall be void without any further action
and any holder of such Rights shall thereafter have no rights whatsoever with
respect to such Rights under any provision of this Agreement. The Company shall
use all reasonable efforts to ensure that the provisions of this Section
11(a)(ii) 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. From and after the Section 11(a)(ii) Event, no Right
Certificate shall be issued pursuant to Section 3 or Section 6 hereof that
represents Rights that are or have become void pursuant to the provisions of
this paragraph, and any Right Certificate delivered to the Rights Agent that
represents Rights that are or have become void pursuant to the provisions of
this paragraph shall be canceled. From and after the occurrence of an event
specified in Section 13(a) hereof, any Rights that theretofore have not been
exercised pursuant to this Section 11(a)(ii) shall thereafter be exercisable
only in accordance with Section 13 and not pursuant to this Section 11(a)(ii).
RIGHTS AGREEMENT - PAGE 15
<PAGE>
(iii) The Company may at its option substitute for a share of
Common Stock issuable upon the exercise of Rights in accordance with
the foregoing subparagraph (ii) a number of shares of Series A
Preferred Stock or fraction thereof such that the current per share
market price of one share of Series A Preferred Stock multiplied by
such number or fraction is equal to the current per share market price
of one share of Common Stock. In the event that the number of shares of
Common Stock that are authorized by the Company's Articles of
Incorporation but not outstanding or reserved for issuance for purposes
other than upon exercise of the Rights is not sufficient to permit the
exercise in full of the Rights in accordance with Section 11(a)(ii)
hereof and the Rights shall become so exercisable, the Board of
Directors shall, to the extent permitted by applicable law and any
material agreements then in effect to which the Company is a party,
(A) determine the excess of (1) the value of the
Adjustment Shares issuable upon the exercise of a
Right (computed using the Current Market Price used
to determine the number of Adjustment Shares) (the
"CURRENT VALUE"), over (2) the then current Purchase
Price times the number of one one-thousandths of a
share of Series A Preferred Stock for which a Right
was exercisable immediately prior to the first
occurrence of a Section 11(a)(ii) Event (such excess,
the "SPREAD") and
(B) with respect to each Right (other than Rights
which have become void pursuant to Section 11(a)(ii)
hereof), make adequate provision to substitute for
any or all such Adjustment Shares (1) cash, (2)
shares of Series A Preferred Stock or other equity
securities of the Company (including, without
limitation, shares, or units of shares, of preferred
stock which, by virtue of having dividend, voting or
liquidation rights substantially comparable to those
of the Common Stock, are deemed in good faith by the
Board of Directors to have substantially the same
value as shares of Common Stock (such shares of
Series A Preferred Stock and shares or units of
shares of preferred stock are herein called "COMMON
STOCK EQUIVALENTS")), (3) debt securities of the
Company, (4) other assets, (5) a reduction of the
Purchase Price, or (6) any combination of the
foregoing, having a value which, when added to the
value of the shares of Common Stock actually issued
upon exercise of such Right, shall have an aggregate
value equal to the Current Value, where such
aggregate value has been determined in good faith by
the Board of Directors based upon the advice of a
nationally recognized independent investment banking
firm selected in good faith by the Board of
Directors;
RIGHTS AGREEMENT - PAGE 16
<PAGE>
PROVIDED, HOWEVER, that if the Company shall not have made adequate provision to
deliver value pursuant to clause (B) above within 30 days following the date
(the "SECTION 11(A)(II) TRIGGER DATE") of the first occurrence of a Section
11(a)(ii) Event, then the Company shall be obligated to deliver, to the extent
permitted by applicable law and any material agreements then in effect to which
the Company is a party, upon the surrender for exercise of a Right and without
requiring payment of the Purchase Price, shares of Common Stock (to the extent
available) and then, if necessary, shares of Series A Preferred Stock and then,
if necessary, cash, which shares and cash have an aggregate value equal to the
Spread. If, upon the occurrence of a Section 11(a)(ii) Event, the number of
shares of Common Stock authorized by the Company's Articles of Incorporation but
not outstanding or reserved for issuance for purposes other than upon exercise
of the Rights is not sufficient to permit exercise in full of the Rights in
accordance with Section 11(a)(ii) hereof, and if the Board of Directors shall
determine in good faith that it is likely that sufficient additional shares of
Common Stock could be authorized for issuance upon exercise in full of the
Rights, then, if the Board of Directors so elects, the 30 day period set forth
above may be extended to the extent necessary, but not more than 90 days after
the Section 11(a)(ii) Trigger Date, in order that the Company may seek
shareholder approval for the authorization of such additional shares (such 30
day period, as it may be extended, is herein called the "SUBSTITUTION PERIOD").
To the extent that the Company determines that some action must be taken
pursuant to the first or second sentence of this Section 11(a)(iii), the Company
(x) shall provide, subject to Section 11(a)(ii) hereof and the last sentence of
this Section 11(a)(iii), that such action shall apply uniformly to all
outstanding Rights and (y) may suspend the exercisability of the Rights until
the expiration of the Substitution Period in order to seek any authorization of
additional shares and/or to decide the appropriate form of distribution to be
made pursuant to such first sentence and to determine the value thereof. In the
event of any such suspension, the Company shall issue a public announcement
stating that the exercisability of the Rights has been temporarily suspended, as
well as a public announcement at such time as the suspension is no longer in
effect. For purposes of this Section 11(a)(iii), the value of the Common Stock
shall be the Current Market Price per share of the Common Stock on the Section
11(a)(ii) Trigger Date and the per share or per unit value of any Common Stock
Equivalent shall be deemed to be equal to the Current Market Price per share of
the Common Stock on such date. The Board of Directors may, but shall not be
required to, establish procedures to allocate the right to receive Common Stock
upon the exercise of the Rights among holders of Rights pursuant to this Section
11(a)(iii).
(b) In case the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Series A Preferred Stock entitling
them to subscribe for or purchase (for a period expiring within 45 calendar days
after such record date) shares of Series A Preferred Stock, shares having the
same rights, privileges and preferences as Series A Preferred Stock ("EQUIVALENT
SERIES A PREFERRED STOCK") or securities convertible into Series A Preferred
Stock or Equivalent Series A Preferred Stock at a price per share of Series A
Preferred Stock or Equivalent Series A Preferred Stock (or having a conversion
price per share, if a security convertible into Series A Preferred Stock or
Equivalent Series A Preferred Stock) less than the Current Market Price per
share of Series A Preferred Stock on such record date, the Purchase Price to be
in effect after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the number of shares of Series A Preferred Stock
outstanding on such record date, plus the number of shares of Series A Preferred
Stock which the aggregate offering price of the total number of shares of Series
A Preferred Stock and Equivalent Series A Preferred Stock (and the aggregate
initial conversion price of the convertible securities so to be offered,
including the price required to be paid to purchase such convertible security)
would purchase at such Current Market Price, and the denominator of which shall
be the number of shares of Series A Preferred Stock outstanding on such record
date, plus the number of additional shares of Series A Preferred Stock or
Equivalent Series A Preferred Stock to be offered for subscription or purchase
(or into which the convertible securities so to be offered are initially
RIGHTS AGREEMENT - PAGE 17
<PAGE>
convertible). In case such subscription price may be paid by delivery of
consideration part or all of which may be in a form other than cash, the value
of such noncash 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. Shares of Series A Preferred Stock owned by or held for the
account of the Company shall not be deemed outstanding for the purpose of any
such computation. Such adjustment shall be made successively whenever such a
record date is fixed, and in the event that such rights, options, warrants or
convertible securities are not so issued, the Purchase Price shall be adjusted
to be the Purchase Price that would then be in effect if such record date had
not been fixed.
(c) In case the Company shall fix a record date for a distribution to
all holders of Series A Preferred Stock (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, cash (other than a
regular quarterly cash dividend out of the earnings or retained earnings of the
Company), assets (other than a dividend payable in Series A Preferred Stock, but
including any dividend payable in stock other than Series A Preferred Stock) or
subscription rights or warrants (excluding those referred to in Section 11(b)
hereof), the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the Current Market
Price per share of Series A Preferred Stock on such record date, less the fair
market value (as determined in good faith by the Board of Directors of the
Company, whose determination shall be described in a statement filed with the
Rights Agent) of the portion of the cash, assets, subscription rights or
warrants applicable to a share of Series A Preferred Stock and the denominator
of which shall be such Current Market Price per share of Series A Preferred
Stock. Such adjustments shall be made successively whenever such a record date
is fixed, and in the event that such distribution is not so made, the Purchase
Price shall be adjusted to be the Purchase Price which would then be in effect
if such record date had not been fixed.
(d) CURRENT MARKET PRICE.
(i) For the purpose of any computation hereunder (including
computations pursuant to Section 14 hereof), other than computations
made pursuant to Section 11(a)(iii) hereof, the "CURRENT MARKET PRICE"
per share of Common Stock on any date shall be deemed to be the average
of the daily closing prices per share of such stock for the 30
consecutive Trading Days immediately prior to such date, and for
purpose of computations made pursuant to Section 11(a)(iii) hereof, the
"CURRENT MARKET PRICE" per share of Common Stock on any date shall be
deemed to be the average of the daily closing prices per share of such
stock for the 10 consecutive Trading Days immediately following such
date; PROVIDED, HOWEVER, that in the event the Current Market Price per
share of Common Stock is determined during a period following the
announcement by the issuer of such stock of (i) any dividend or
distribution on such stock (other than a regular quarterly cash
RIGHTS AGREEMENT - PAGE 18
<PAGE>
dividend) or (ii) any subdivision, combination or reclassification of
the stock, and prior to the expiration of the requisite 30 Trading Day
or 10 Trading Day period, as set forth above, the ex-dividend date for
such dividend or distribution, or the effective date of such
subdivision, combination or reclassification, occurs, then, and in each
such case, the Current Market Price shall be properly adjusted to take
into account ex-dividend trading. The closing price for each day shall
be the last sale price, regular way, or, in case no such sale takes
place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed on the
principal national securities exchange on which the shares of Common
Stock are listed or admitted to trading or, if the shares of Common
Stock are not listed or admitted to trading on any national securities
exchange, the last quoted sale price or, if not so quoted, the average
of the high bid and low asked prices in the over-the-counter market, as
reported by the Nasdaq or such other system as may then be in use, or,
if on any such date the prices of shares of Common Stock are not
reported by any such organization, the average of the closing bid and
asked prices as furnished by a professional market maker making a
market in such stock selected by the Board of Directors. If on any such
date no market maker is making a market in the Common Stock, the fair
value of such shares on such date as determined in good faith by the
Board of Directors shall be used. The term "TRADING DAY" shall mean a
day on which the principal national securities exchange on which the
shares of Common Stock are listed or admitted to trading is open for
the transaction of business or, if the shares of Common Stock are not
listed or admitted to trading on any national securities exchange, a
Business Day. If the Common Stock is not publicly held or not so listed
or traded, "CURRENT MARKET PRICE" per share shall mean the fair value
per share 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 MARKET PRICE" per share of Series A Preferred Stock shall be
determined in the same manner as set forth above for the Common Stock
in clause (i) of this Section 11(d) (other than the last sentence
thereof). If the Current Market Price per share of Series A Preferred
Stock cannot be determined in the manner provided above or if the
Series A Preferred Stock is not publicly held or listed or traded in a
manner described in clause (i) of this Section 11(d), the "CURRENT
MARKET PRICE" per share of Series A Preferred Stock shall be
conclusively deemed to be an amount equal to one thousand (as such
number may be appropriately adjusted for such events as stock splits,
stock dividends and recapitalizations with respect to the Common Stock
occurring after the date of this Agreement) multiplied by the Current
Market Price per share of the Common Stock. If neither the Common Stock
nor the Series A Preferred Stock is publicly held or so listed or
traded, "CURRENT MARKET PRICE" per share of the Series A Preferred
RIGHTS AGREEMENT - PAGE 19
<PAGE>
Stock shall mean the fair value per share as determined in good faith
by the Board of Directors, which determination shall be described in a
statement filed with the Rights Agent. For all purposes of this
Agreement, the "CURRENT MARKET PRICE" of one one-thousandth of a share
of Series A Preferred Stock shall be equal to the "CURRENT MARKET
PRICE" of one share of Series A Preferred Stock divided by one thousand
(subject to adjustment as provided above). The "CURRENT MARKET PRICE"
per share of Equivalent Series A Preferred Stock shall be determined in
the same manner as set forth above for the Series A Preferred Stock.
(e) Anything herein to the contrary notwithstanding, no adjustment in
the Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least 1% in the Purchase Price; PROVIDED, HOWEVER,
that any adjustments which by reason of this Section 11(e) are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 11 shall be made to the nearest
cent or to the nearest one-thousandth of a share, 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 after the date of the transaction that mandates such adjustment or (ii)
one month prior to the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section 11(a) or
Section 13(a) hereof, the holder of any Right thereafter exercised shall become
entitled to receive any shares of capital stock other than Series A Preferred
Stock, thereafter the number of such other shares so receivable upon exercise of
any Right and the Purchase Price thereof shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to the
applicable provisions with respect to the shares of Series A Preferred Stock
contained in Sections 7, 9, 10, 11, 13 and 14 hereof, and such provisions 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
share of Series A Preferred Stock purchasable from time to time hereunder upon
exercise of the Rights, all subject to further adjustments as provided herein.
(h) Unless the Company shall have exercised its election as provided in
Section 11(i) hereof, upon each adjustment of the Purchase Price as a result of
the calculations made in Section 11(b) and (c) hereof, each Right outstanding
immediately prior to the making of such adjustment shall thereafter evidence the
right to purchase, at the adjusted Purchase Price, that number of one
one-thousandths of a share of Series A Preferred Stock (calculated to the
nearest one-thousandth) obtained by (i) multiplying (x) the number of one
one-thousandths of a share covered by a Right immediately prior to such
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.
RIGHTS AGREEMENT - PAGE 20
<PAGE>
(i) The Company may elect, on or after the date of any adjustment of
the Purchase Price, to adjust the number of Rights in substitution for any
adjustment in the number of one one-thousandths of a share of Series A Preferred
Stock purchasable upon the exercise of a Right. Each of the Rights outstanding
after the adjustment in the number of Rights shall be exercisable for the number
of one one-thousandths of a share of Series A Preferred Stock for which a Right
was exercisable immediately prior to such adjustment. Each Right held of record
prior to such adjustment in the number of Rights shall become that number of
Rights (calculated to the nearest one-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 hereof, the additional Rights to which such holders shall
be entitled as a result of such adjustment, or, at the option of the Company,
shall cause to be distributed to such holders of record in substitution and
replacement for the Right Certificates held by such holders prior to the date of
adjustment, and upon surrender thereof, if required by the Company, new Right
Certificates evidencing all the Rights to which such 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 share of Series A Preferred Stock
issuable upon the exercise of the Rights, the Right Certificates theretofore and
thereafter issued may continue to express the Purchase Price and the number of
one one-thousandths of a share that 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 fraction of Series A
Preferred Stock or other shares of capital stock issuable upon exercise of a
Right, the Company shall take any corporate action which may, in the opinion of
its counsel, be necessary in order that the Company may validly and legally
issue fully paid and nonassessable shares of Series A Preferred Stock 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 issuance to the holder of any Right exercised after such record date
the shares of Series A Preferred Stock and cash, other capital stock or
securities of the Company, if any, issuable upon such exercise over and above
the shares of Series A Preferred Stock and cash, 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 that the Company
shall deliver to such holder a due bill or other appropriate instrument
evidencing such holder's right to receive such additional shares of Series A
Preferred Stock and cash, other capital stock or securities, if any, upon the
occurrence of the event requiring such adjustment.
RIGHTS AGREEMENT - PAGE 21
<PAGE>
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent in their good faith judgment the Board of Directors shall determine
to be advisable in order that any
(i) consolidation or subdivision of the Series A Preferred
Stock,
(ii) issuance for cash of any shares of Series A Preferred
Stock,
(iii) issuance for cash of securities that by their terms are
convertible into or exchangeable for shares of Series A Preferred
Stock,
(iv) stock dividends, or
(v) issuance of rights, options or warrants referred to in
this Section 11, hereafter made by the Company,
shall not be taxable to holders of its Series A Preferred Stock.
(n) The Company covenants and agrees that, after the earlier of the
Distribution Date or the Stock Acquisition Date, it will not, except as
permitted by Sections 23, 24 or 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 eliminate the
benefits intended to be afforded by the Rights.
(o) Anything in this Agreement to the contrary notwithstanding, in the
event that the Company shall at any time after the Record Date and prior to the
Distribution Date
(i) declare a dividend on the outstanding shares of Common
Stock payable in shares of Common Stock,
(ii) subdivide the outstanding shares of Common Stock,
(iii) combine the outstanding shares of Common Stock into a
smaller number of shares, or
(iv) issue any shares of its capital stock in a
reclassification of the outstanding Common Stock,
the number of Rights associated with each share of Common Stock then
outstanding, or issued or delivered thereafter, shall be proportionately
adjusted so that the number of Rights thereafter associated with each share of
Common Stock following any such event shall equal the result obtained by
multiplying the number of Rights associated with each share of Common Stock
immediately prior to such event by a fraction, the numerator of which shall be
the total number of shares of Common Stock outstanding immediately prior to the
occurrence of the event and the denominator of which shall be the total number
of shares of Common Stock outstanding immediately following the occurrence of
such event.
RIGHTS AGREEMENT - PAGE 22
<PAGE>
SECTION 12. CERTIFICATE OF ADJUSTMENTS.
--------------------------
Whenever an adjustment is made as provided in Sections 11 and 13
hereof, the Company shall
(a) promptly prepare a certificate setting forth such adjustment and a
brief statement of the facts giving rise to such adjustment,
(b) promptly file with the Rights Agent and with each transfer agent
for the Common Stock a copy of such certificate, and
(c) mail a brief summary thereof to each record holder of a Right (or,
if prior to the Distribution Date, to each holder of Common Stock) in accordance
with Section 26 hereof.
Notwithstanding the foregoing sentence, the failure of the Company to
give such notice shall not affect the validity of or the force or effect of or
the requirement for such adjustment. The Rights Agent shall be fully protected
in relying upon any certificate prepared by the Company pursuant to this Section
12 hereof and on any adjustment therein described and shall not be obligated or
responsible for calculating any adjustment nor shall it be deemed to have
knowledge of any such adjustment unless and until it shall have received such a
certificate.
SECTION 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR EARNING
POWER.
--------------------------------------------------------------
(a) In the event that, directly or indirectly, at any time after the
Section 11(a)(ii) Event
(i) the Company shall consolidate with or shall merge into any
other Person,
(ii) any Person shall 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 Stock
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 earnings power aggregating 50% or more of
the assets or earning power of the Company and its Subsidiaries (taken
as a whole) to any other Person (other than the Company or one or more
wholly owned Subsidiaries of the Company),
then upon the first occurrence of such event, proper provision shall
be made so that:
RIGHTS AGREEMENT - PAGE 23
<PAGE>
(A) each holder of a Right (other than Rights which
have become void pursuant to Section 11(a)(ii) hereof) shall
thereafter have the right to receive, upon the exercise
thereof at the Purchase Price (as theretofore adjusted in
accordance with Section 11 hereof), in accordance with the
terms of this Agreement and in lieu of shares of Series A
Preferred Stock or Common Stock of the Company, such number of
validly authorized and issued, fully paid, nonassessable and
freely tradable shares of Common Stock of the Principal Party
(as such term is hereinafter defined), not subject to any
liens, encumbrances, rights of first refusal or other adverse
claims, as shall equal the result obtained by dividing the
Purchase Price as theretofore adjusted in accordance with
Section 11 hereof) by 50% of the current per share market
price of the Common Stock of such Principal Party (determined
pursuant to Section 11(d) hereof) on the date of consummation
of such consolidation, merger, sale or transfer; PROVIDED,
HOWEVER, that the Purchase Price (as theretofore adjusted in
accordance with Section 11 hereof) and the number of shares of
Common Stock of such Principal Party so receivable upon
exercise of a Right shall be subject to further adjustment as
appropriate in accordance with Section 11(f) hereof to reflect
any events occurring in respect of the Common Stock of such
Principal Party after the occurrence of such consolidation,
merger, sale or transfer;
(B) such Principal Party shall thereafter be liable
for, and shall assume, by virtue of such consolidation,
merger, sale or transfer, all the obligations and duties of
the Company pursuant to this Rights Agreement;
(C) the term "COMPANY" shall thereafter be deemed to
refer to such Principal Party; and
(D) such Principal Party shall take such steps
(including, but not limited to, the reservation of a
sufficient number of its shares of Common Stock in accordance
with Section 9 hereof) in connection with such consummation of
any such transaction as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as
reasonably may be, in relation to the shares of its Common
Stock thereafter deliverable upon the exercise of the Rights;
provided that, upon the subsequent occurrence of any
consolidation, merger, sale or transfer of assets or other
extraordinary transaction in respect of such Principal Party,
each holder of a Right shall thereupon be entitled to receive,
upon exercise of a Right and payment of the Purchase Price as
provided in this Section 13(a), such cash, shares, rights,
warrants and other property which such holder would have been
entitled to receive had such holder, at the time of such
transaction, owned the Common Stock of the Principal Party
receivable upon the exercise of a Right pursuant to this
Section 13(a), and such Principal Party shall take such steps
(including, but not limited to, reservation of shares of
stock) as may be necessary to permit the subsequent exercise
of Rights in accordance with the terms hereof for such cash,
shares, rights, warrants and other property.
<PAGE>
(b) "PRINCIPAL PARTY" shall mean
(i) in the case of any transaction described in clause (i) or
(ii) of the first sentence of Section 13(a) hereof:
(A) the Person that is the issuer of the securities
into which shares of Common Stock of the Company are converted
in such merger or consolidation, or, if there is more than one
such issuer, the issuer the Common Stock of which has the
greatest aggregate market value of shares outstanding, or
(B) if no securities are so issued,
(x) the Person that is the other party to the merger,
if such Person survives the merger, or, if there is
more than one such Person, the Person the Common
Stock of which has the greatest aggregate market
value of shares outstanding, or
(y) if the Person that is the other party to the
merger does not survive the merger, the Person that
does survive the merger (including the Company if it
survives), or
(z) the Person resulting from the consolidation; and
(ii) in the case of any transaction described in clause (iii)
of the first sentence of Section 13(a) hereof, the Person that is the
party receiving the greatest portion of the assets or earning power
transferred pursuant to such transaction or transactions, or, if each
Person that is a party to such transaction or transactions receives the
same portion of the assets or earning power so transferred or if the
Person receiving the greatest portion of the assets or earning power
cannot be determined, whichever of such Persons as is the issuer of
Common Stock having the greatest aggregate market value of shares
outstanding; PROVIDED, HOWEVER, that in any such case described in the
foregoing clause (b)(i) or (b)(ii),
(A) if the Common Stock of such Person is not at such
time or has not been continuously over the preceding 12-month
period registered under Section 12 of the Exchange Act, and if
such Person is a direct or indirect Subsidiary of another
Person the Common Stock of which is and has been so
registered, the term "PRINCIPAL PARTY" shall refer to such
other Person, or
(B) if such Person is a Subsidiary, directly or
indirectly, of more than one Person, the Common Stocks of all
of which are and have been so registered, the term "PRINCIPAL
PARTY" shall refer to whichever of such Persons is the issuer
of the Common Stock having the greatest aggregate market value
of shares outstanding, or
RIGHTS AGREEMENT - PAGE 25
<PAGE>
(C) if such Person is owned, directly or indirectly,
by a joint venture formed by two or more Persons that are not
owned, directly or indirectly, by the same Person, the rules
set forth in clauses (A) and (B) above shall apply to each of
the owners having an interest in the venture as if the Person
owned by the joint venture was a Subsidiary of both or all of
such joint venturers, and the Principal Party in each such
case shall bear the obligations set forth in this Section 13
in the same ratio as its interest in such Person bears to the
total of such interests.
(c) The Company shall not consummate any consolidation, merger, sale or
transfer referred to in Section 13(a) hereof unless prior thereto the Company
and the Principal Party involved therein shall have executed and delivered to
the Rights Agent an agreement confirming that the requirements of Section 13(a)
and (b) hereof shall promptly be performed in accordance with their terms and
that such consolidation, merger, sale or transfer of assets shall not result in
a default by the Principal Party under this Agreement as the same shall have
been assumed by the Principal Party pursuant to Sections 13(a) and (b) hereof
and providing that, as soon as practicable after executing such agreement
pursuant to this Section 13, the Principal Party will:
(i) prepare and file a registration statement under the
Securities Act, if necessary, with respect to the Rights and the
offering and sale of the securities purchasable upon exercise of the
Rights on an appropriate form, use its best efforts to cause such
registration statement to become effective as soon as practicable after
such filing and use its best efforts to cause such registration
statement to remain effective (with a prospectus at all times meeting
the requirements of the Securities Act) until the Expiration Date, and
similarly comply with applicable state securities laws;
(ii) use its best efforts, if the Common Stock of the
Principal Party shall be listed on a national securities exchange, to
list (or continue the listing of) the Rights and the securities
purchasable upon exercise of the Rights on such securities exchange
and, if the Common Stock of the Principal Party shall not be listed on
a national securities exchange, to cause the Rights and the securities
purchasable upon exercise of the Rights to be reported by Nasdaq or
such other system as may then be in use;
(iii) deliver to holders of the Rights historical financial
statements for the Principal Party that comply in all respects with the
requirements for registration on Form 10 (or any successor form) under
the Exchange Act; and
(iv) obtain waivers of any rights of first refusal or
preemptive rights in respect of the shares of Common Stock of the
Principal Party subject to purchase upon exercise of outstanding
Rights.
RIGHTS AGREEMENT - PAGE 26
<PAGE>
In the event that any of the transactions described in Section 13(a)
hereof shall occur, the Rights which have not theretofore been exercised
pursuant to either Section 7 or Section 11(a)(ii) hereof shall thereafter be
exercisable only in the manner described in Section 13(a) hereof.
(d) Furthermore, in case the Principal Party that is to be a party to a
transaction referred to in this Section 13 has provision in any of its
authorized securities or in its Certificate or Articles of Incorporation or
Bylaws or other instrument governing its corporate affairs, which provision
would have the effect of
(i) causing such Principal Party to issue (other than to
holders of Rights pursuant to this Section 13), in connection with, or
as a consequence of, the consummation of a transaction referred to in
this Section 13, shares of Common Stock of such Principal Party at less
than the then Current Market Price per share (determined pursuant to
Section 11(d) hereof) or securities exercisable for, or convertible
into, Common Stock of such Principal Party at less than such then
Current Market Price, or
(ii) providing for any special payment, tax or similar
provisions in connection with the issuance of the Common Stock of such
Principal Party pursuant to the provisions of Section 13,
then, in such event, the Company hereby agrees with each holder of Rights that
it shall not consummate any such transaction unless prior thereto the Company
and such Principal Party shall have executed and delivered to the Rights Agent a
supplemental agreement providing that the provision in question of such
Principal Party shall have been canceled, waived or amended, or that the
authorized securities shall be redeemed, so that the applicable provision will
have no effect in connection with, or as a consequence of, the consummation of
the proposed transaction.
(e) The Company covenants and agrees that it shall not, at any time
after the occurrence of a Section 11(a)(ii) Event, enter into any transaction of
the type contemplated by clauses (i) through (iii) of Section 13(a) hereof if:
(x) at the time of or immediately after such
consolidation, merger, sale or other transaction
there are any rights, warrants or other instruments
or securities outstanding or agreements in effect
that would substantially diminish or otherwise
eliminate the benefits intended to be afforded by the
Rights; or
(y) prior to, simultaneously with or immediately
after such consolidation, merger, sale or other
transaction, the shareholders of the Person who
constitutes, or would constitute, the "Principal
Party" for purposes of Section 13(a) hereof shall
have received a distribution of Rights previously
owned by such Person or any of its Affiliates or
Associates; or
RIGHTS AGREEMENT - PAGE 27
<PAGE>
(z) the form or nature of organization of the
Principal Party would preclude or limit the
exercisability of the Rights.
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. If the
Company shall not issue fractions of Rights, in lieu of such fractional Rights,
there shall be paid to the holders of record of the Right Certificates with
regard to which such fractional Rights would otherwise be issuable an amount in
cash equal to the same fraction of the then current market value of a whole
Right. For the purposes of this Section 14(a), the then current market value of
a Right shall be the closing price of the Rights for the Trading Day immediately
prior to the date on which fractional Rights would have been issuable,
determined in the same manner as the closing price of a share of Common Stock
shall be determined pursuant to Section 11(d) hereof.
(b) The Company shall not be required to issue fractions of shares of
Series A Preferred Stock or other securities of the Company upon exercise of the
Rights (other than fractions of shares of Series A Preferred Stock that are
integral multiples of one one-thousandth of a share) or to distribute
certificates that evidence interests in fractional shares (other than fractions
of shares of Series A Preferred Stock that are integral multiples of one
one-thousandth of a share); provided that in lieu of issuing fractions of shares
of Series A Preferred Stock, the Company may, at its election, issue depository
receipts evidencing interests in fractions of shares pursuant to an appropriate
agreement between the Company and a depository selected by it, but only if such
agreement shall provide that the holders of such depository receipts shall have
all of the rights, privileges and preferences to which they would be entitled as
beneficial owners of the Series A Preferred Stock. With respect to fractional
shares that are not integral multiples of one one-thousandth of a share, if the
Company does not issue such fractional shares or depository receipts in lieu
thereof, there shall be paid to the holders of record of Right Certificates at
the time the Rights evidenced by such Certificates are exercised as herein
provided an amount in cash equal to the same fraction of the then current market
value of a share of Series A Preferred Stock or other securities of the Company.
For purposes of this Section 14(b), the then current market value of a share of
Series A Preferred Stock or other securities of the Company shall be the closing
price thereof for the Trading Day immediately prior to the date of such
exercise, as determined pursuant to Section 11(d) hereof or in the same manner
as the closing price of a share of Series A Preferred Stock shall be determined
pursuant to Section 11(d)(ii) hereof, as the case may be.
(c) Following the occurrence of a Triggering Event, the Company shall
not be required to issue fractions of shares of Common Stock upon exercise of
the Rights or to distribute certificates that evidence fractional shares of
Common Stock. In lieu of fractional shares of Common Stock, 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 share of Common Stock. For purposes of this Section
14(c), the current market value of one share of Common Stock shall be the
closing price of one share of Common Stock (as determined pursuant to Section
11(d)(i) hereof) for the Trading Day immediately prior to the date of such
exercise.
RIGHTS AGREEMENT - PAGE 28
<PAGE>
(d) The holder of a Right by the acceptance of a Right expressly waives
his right to receive any fractional Right or any fractional share of Series A
Preferred Stock or other securities of the Company upon exercise of a Right,
except as provided by this Section 14.
SECTION 15. RIGHTS OF ACTION.
----------------
All rights of action in respect of this Agreement are vested in the
respective holders of record of the Right Certificates (and, prior to the
Distribution Date, the holders of record of the Common Stock); and any holder of
record of any Right Certificate (or, prior to the Distribution Date, of the
Common Stock), without the consent of the Rights Agent or of the holder of any
other Right Certificate (or, prior to the Distribution Date, of the Common
Stock), may, in his own behalf for his own benefit, enforce, and may institute
and maintain any suit, action or proceeding against the Company or any other
Person to enforce, or otherwise act in respect of, his right to exercise the
Rights evidenced by such 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, accordingly, that they 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.
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 not be evidenced by
a Right Certificate and will be transferable only in connection with the
transfer of Common Stock;
(b) after the Distribution Date, the Right Certificates will be
transferable only on the registry books of the Rights Agent if surrendered at
the designated office of the Rights Agent, duly endorsed or accompanied by a
proper instrument of transfer;
(c) the Company and the Rights Agent may deem and treat the Person in
whose name the Right Certificate (or, prior to the Distribution Date, the
associated Common Stock certificate) is registered as the absolute owner thereof
and of the Rights evidenced thereby (notwithstanding any notations of ownership
or writing on the Right Certificate or the associated Common Stock certificate
made by anyone other than the Company or the Rights Agent or the transfer agent
of the Common Stock) for all purposes whatsoever, and neither the Company nor
the Rights Agent shall be affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the contrary, neither
the Company nor the Rights Agent shall have any liability to any holder of a
Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligations; provided that the Company must use its best
efforts to have any such order, decree or ruling lifted or otherwise overturned
as soon as possible.
RIGHTS AGREEMENT - PAGE 29
<PAGE>
SECTION 17. RIGHT CERTIFICATE HOLDER NOT DEEMED A SHAREHOLDER.
-------------------------------------------------
No holder of a Right, as such, shall be entitled to vote, receive
dividends in respect of or be deemed for any purpose to be the holder of Series
A Preferred Stock or any other securities of the Company that may at any time be
issuable upon the exercise of the Rights, nor shall anything contained herein or
in any Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a shareholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
shareholders, or to receive dividends or subscription rights in respect of any
such stock or securities, or otherwise, until the Right or Rights evidenced by
such Right Certificate shall have been exercised in accordance with the
provisions hereof.
SECTION 18. CONCERNING THE RIGHTS AGENT.
---------------------------
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its 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, its directors, officers, employees
and agents for, and to hold each of them harmless against, any loss, liability
or expense incurred without gross negligence, bad faith or willful misconduct on
the part of the Rights Agent for anything done or omitted to be done by the
Rights Agent or such other indemnified party in connection with the acceptance
and administration of this Agreement or the performance of the Rights Agent's
duties hereunder, including the cost and expenses of defending against any claim
of liability in the premises.
(b) The Rights Agent shall be protected and shall incur no liability
for or in respect of any action taken, suffered or omitted by it in connection
with its administration of this Agreement or the performance of the Rights
Agent's duties hereunder, in reliance upon any Right Certificate, certificate
for Series A Preferred Stock or 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,
guaranteed, verified or acknowledged, by the proper Person or Persons.
(c) The indemnity provided in this Section 18 shall survive the
expiration of the Rights, the resignation or removal of the Rights Agent and the
termination of this Agreement.
RIGHTS AGREEMENT - PAGE 30
<PAGE>
SECTION 19. MERGER, CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT.
-------------------------------------------------------
(a) Any corporation into which the Rights Agent or any successor Rights
Agent may be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any corporation succeeding to the
corporate trust or stock transfer business of the Rights Agent or any successor
Rights Agent, shall be the successor to the Rights Agent under this Agreement
without the execution or filing of any paper or any further act on the part of
any of the parties hereto; provided that such corporation would be eligible for
appointment as a successor Rights Agent under the provisions of Section 21
hereof. In case at the time such successor Rights Agent shall succeed to the
agency created by this 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 Rights
Certificates so countersigned, and in case at that time any of the Right
Certificates shall not have been countersigned, any successor 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.
(b) In case at any time the name of the Rights Agent shall be changed
and at such time any of the Right Certificates shall have been countersigned but
not delivered, the Rights Agent may adopt the countersignature under its prior
name and deliver such Right Certificates so countersigned; and in case at that
time any of the Right Certificates shall not have been countersigned, the Rights
Agent may countersign such Right Certificates either in its prior name or in its
changed name; and in all such cases such Right Certificates shall have the full
force provided in the Right Certificates and in this Agreement.
SECTION 20. DUTIES OF RIGHTS AGENT.
----------------------
The Rights Agent undertakes the duties and obligations imposed by this
Agreement upon the following terms and conditions, by all of which the Company
and the holders of Right Certificates, by their acceptance thereof, shall be
bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the advice or opinion of such counsel shall be
full and complete authorization and protection to the Rights Agent as to any
action taken or omitted to be taken by it in good faith and in accordance with
such advice or opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter
(including without limitation the identity of any Acquiring Person and the
determination of Current Market Price) be proved or established by the Company
prior to taking or suffering to be taken any action hereunder, such fact or
matter (unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and established by a
certificate signed by the Chairman of the Board, the President, the Chief
Executive Officer, any Vice President 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 to be taken in good faith
by it under the provisions of this Agreement in reliance upon such certificate.
RIGHTS AGREEMENT - PAGE 31
<PAGE>
(c) The Rights Agent shall be liable hereunder only for its own gross
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 (i) be responsible for (A) the validity
of this Agreement or the execution and delivery hereof (except the due execution
hereof by the Rights Agent) or the validity or execution of any Right
Certificate (except its countersignature thereof), (B) any breach by the Company
of any covenant or condition contained in this Agreement or in any Right
Certificate, (C) any adjustment required under the provisions of Section 11 or
13 hereof or (D) the manner, method or amount of any such adjustment or the
ascertaining of the existence of facts that would require any such adjustment
(except with respect to the exercise of Rights evidenced by Right Certificates
after actual notice of any such adjustment) or (ii) by any act hereunder be
deemed to make any representation or warranty as to the authorization or
reservation of any shares of Series A Preferred Stock to be issued pursuant to
this Agreement or any Right Certificate or as to whether any shares of Series A
Preferred Stock will, when issued, be validly authorized and issued, fully paid
and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
Chairman of the Board, the President, the Chief Executive Officer, any Vice
President, or the Secretary of the Company, and to apply to such officers for
advice or instructions in connection with its duties, and it shall not be liable
for any action taken or suffered to be taken by it in good faith in accordance
with instructions of any such officer, or for any delay in acting while awaiting
instructions. Any application by the Rights Agent for written instructions from
the Company may, at the option of the Rights Agent, set forth in writing any
action proposed to be taken or omitted by the Rights Agent under this Agreement
and the date on or after which such action shall be taken or such omission shall
be effective. The Rights Agent shall not be liable for any action taken by, or
omission of, the Rights Agent in accordance with a proposal included in any such
application on or after the date specified in such application (which date shall
not be less than five Business Days after the date any officer of the Company
actually receives such application, unless any such officer shall have consented
in writing to an earlier date) unless, prior to taking any such action (or the
effective date in the case of an omission), the Rights Agent shall have received
written instructions in response to such application specifying the action to be
taken or omitted.
RIGHTS AGREEMENT - PAGE 32
<PAGE>
(h) The Rights Agent and any shareholder, director, officer or employee
of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not the Rights
Agent under this Agreement. Nothing herein shall preclude the Rights Agent from
acting in any other capacity for the Company or for any other entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct; provided that the Rights Agent was not grossly negligent
in the selection thereof.
(j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
there shall be reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.
(k) If, with respect to any Right Certificate surrendered to the Rights
Agent for exercise or transfer, the certificate contained in the form of
election to purchase or the form of assignment set forth on the reverse thereof,
as the case may be, has either not been completed or indicates an affirmative
response to clause 1 or 2 thereof, the Rights Agent shall not take any further
action with respect to such requested exercise or transfer without first
consulting with the Company.
(l) The Rights Agent undertakes only the express duties and obligations
imposed on it by this Agreement and no implied duties or obligations shall be
read into this Agreement against the Rights Agent.
(m) Anything in this Agreement to the contrary withstanding, in no
event shall the Rights Agent be liable for special, indirect or consequential
loss or damage of any kind whatsoever (including but not limited to lost
profits).
SECTION 21. CHANGE OF RIGHTS AGENT.
----------------------
(a) The Rights Agent or any successor Rights Agent may resign and be
discharged from its duties under this Agreement upon 30 days' notice in writing
mailed to the Company and to each transfer agent of the Common Stock by
registered or certified mail, and to the holders of the Right Certificates by
first-class mail. The Company may remove the Rights Agent or any successor
Rights Agent (with or without cause) upon 30 days' notice in writing, mailed to
the Rights Agent or successor Rights Agent, as the case may be, and to each
transfer agent of the Common Stock by registered or certified mail, and to the
holders of the Right Certificates by first-class mail. If the Rights Agent shall
resign or be removed or shall otherwise become incapable of acting, the Company
shall appoint a successor to the Rights Agent. Notwithstanding the foregoing
provisions of this Section 21, in no event shall the resignation or removal of a
RIGHTS AGREEMENT - PAGE 33
<PAGE>
Rights Agent be effective until a successor Rights Agent shall have been
appointed and have accepted such appointment. If the Company shall fail to make
such appointment within a period of 30 days after such removal or after it has
been notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Right Certificate (who shall,
with such notice, submit his Right Certificate for inspection by the Company),
then the incumbent Rights Agent or the holder of record of any Right Certificate
may apply to any court of competent jurisdiction for the appointment of a new
Rights Agent. Any successor Rights Agent, whether appointed by the Company or by
such a court, shall be
(i) a corporation organized and doing business under the laws
of the United States or any State thereof, in good standing, which is
authorized under such laws to exercise corporate trust or stock
transfer powers and is subject to supervision or examination 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 $50,000,000 or
(ii) an Affiliate controlled by a corporation described in
clause (a) of this sentence.
(b) 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 Stock, and mail a notice thereof in writing to the registered holders
of the Right Certificates. The failure to give any notice required by this
Section 21 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 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 and the number or kind or
class of shares of stock or other securities or property purchasable under the
Right Certificates made in accordance with the provisions of this Agreement. In
addition, in connection with the issuance or sale of shares of Common Stock
following the Distribution Date and prior to a Triggering Event or the
redemption or expiration of the Rights, the Company may, with respect to shares
of Common Stock so issued or sold pursuant to the exercise of employee stock
options or under any employee plan or arrangement, or upon the exercise,
conversion or exchange of securities hereafter issued by the Company, or in any
other case, if deemed necessary or appropriate by the Board of Directors, issue
Right Certificates representing the appropriate number of Rights in connection
with such issuance or sale; provided that
RIGHTS AGREEMENT - PAGE 34
<PAGE>
(i) no such Right Certificate shall be issued if, and to the
extent that, the Company shall be advised by counsel that such issuance
would create a significant risk of material adverse tax consequences to
the Company or the Person to whom such Right Certificate would be
issued, and
(ii) no such Right Certificate shall be issued if, and to the
extent that, appropriate adjustment shall otherwise have been made in
lieu of the issuance thereof.
SECTION 23. REDEMPTION.
----------
(a) The Board of Directors may, at its option, at any time prior to the
earlier of
(i) the first occurrence of a Section 11(a)(ii) Event, and
(ii) the Close of Business on the Expiration Date,
cause the Company to redeem all but not less than all of the then outstanding
Rights at a redemption price of $0.001 per Right, as such amount may be
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such redemption price being
hereinafter referred to as the "REDEMPTION PRICE").
(b) Immediately upon the effective time of the redemption of the Rights
as specified by the action of the Board of Directors ordering the redemption of
the Rights, 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, without any interest
thereon. Promptly after the effective time of the redemption of the Rights as
specified by the action of the Board of Directors ordering the redemption of the
Rights, the Company shall give notice of such redemption to the holders of the
then outstanding Rights by mailing such notice to all such holders at their last
addresses as they appear upon the registry books of the Rights Agent or, prior
to the Distribution Date, on the registry books of the transfer agent of the
Common Stock. Any notice which is mailed in the manner provided herein shall be
deemed given, whether or not the holder receives the notice. Each such notice of
redemption will state the effective time of the redemption, the method by which
the payment of the Redemption Price will be made and the time for such payment.
The failure to give any notice required by this Section 23(b) or any defect
therein shall not affect the legality or validity of the action taken by the
Company.
SECTION 24. EXCHANGE.
--------
(a) The Board of Directors may, at its option, at any time after the
first occurrence of a Section 11(a)(ii) Event, exchange all or part of the then
outstanding and exercisable Rights (which shall not include Rights that have
become void pursuant to the provisions of Section 11(a)(ii) hereof) for shares
of Common Stock at an exchange ratio of one share of Common Stock per Right
(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 than an Exempt Person),
together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of 50% or more of the Common Stock then outstanding.
RIGHTS AGREEMENT - PAGE 35
<PAGE>
(b) Immediately upon the effective time of the exchange of the Rights
as specified by the action of the Board of Directors ordering the exchange of
any Rights pursuant to Section 24(a) hereof and without any further action and
without any notice, the right to exercise such Rights shall terminate and the
only right thereafter of a holder of such Rights shall be to receive that number
of shares of Common Stock equal to the number of such Rights held by such holder
multiplied by the Exchange Ratio. The Company shall promptly give notice of any
such exchange; provided 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
that 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 shares of Common Stock for Rights will be
effected and, in the event of any partial exchange, the number of Rights that
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)(ii) hereof) held by each holder of Rights.
(c) In the event that there shall not be sufficient shares of Common
Stock issued but not outstanding or authorized but unissued to permit any
exchange of Rights as contemplated by this Section 24, the Company shall take
all such action as may be necessary to authorize additional shares of Common
Stock for issuance upon exchange of the Rights. In the event that the Company
shall, after good faith effort, be unable to take all such action as may be
necessary to authorize such additional shares of Common Stock, the Company shall
substitute, for each share of Common Stock that would otherwise be issuable upon
exchange of a Right, a number of shares (or fractions thereof) of Series A
Preferred Stock (or Equivalent Series A Preferred Stock), having an aggregate
Current Market Price equal to the Current Market Price per share of Common Stock
as of the date of issuance of such shares (or a fraction thereof) of Series A
Preferred Stock (or Equivalent Series A Preferred Stock).
(d) In any exchange pursuant to Section 24(a) hereof, the Company shall
not be required to issue fractions of shares of Common Stock or to distribute
certificates that evidence fractional shares of Common Stock. In lieu of such
fractional shares of Common Stock, the Company shall pay to the registered
holders of the Right Certificates with regard to which such fractional shares of
Common Stock would otherwise be issuable an amount in cash equal to the same
fraction of the current market value of a whole share of Common Stock. For the
purposes of this Section 24(d), the current market value of a whole share of
Common Stock shall be the Current Market Price of a share of Common Stock (as
determined pursuant to the second sentence of Section 11(d)(i) hereof) for the
Trading Day immediately prior to the date of exchange pursuant to Section 24(a)
hereof.
SECTION 25. NOTICE OF PROPOSED ACTIONS.
--------------------------
(a) In case the Company, after the earlier of the Distribution Date or
the Stock Acquisition Date, shall propose to
RIGHTS AGREEMENT - PAGE 36
<PAGE>
(i) effect any of the transactions referred to in Section
11(a)(i) hereof or to pay any dividend to the holders of record of
Series A Preferred Stock payable in stock of any class or to make any
other distribution to the holders of record of Series A Preferred Stock
(other than a regular quarterly cash dividend), or
(ii) offer to the holders of record of Series A Preferred
Stock options, warrants, or other rights to subscribe for or to
purchase shares of Series A Preferred Stock (including any security
convertible into or exchangeable for Series A Preferred Stock) or
shares of stock of any class or any other securities, options,
warrants, convertible or exchangeable securities or other rights, or
(iii) effect any reclassification of the Series A Preferred
Stock or any recapitalization or reorganization of the Company, or
(iv) to effect the liquidation, dissolution or winding up of
the Company, then, in each such case, the Company shall give to each
holder of record of a Right Certificate, in accordance with Section 26
hereof,
notice of such proposed action, which shall specify the record date for the
purposes of such transaction referred to in Section 11(a)(i), or such dividend
or distribution, or the date on which such reclassification, recapitalization,
reorganization, liquidation, dissolution or winding up is to take place and the
record date for determining participation therein by the holders of record of
Series A Preferred Stock, if any such date is to be fixed, and such notice shall
be so given in the case of any action covered by clause (i) or (ii) above at
least 10 days prior to the record date for determining holders of record of
Series A Preferred Stock for purposes of such action, and in the case of any
such other action, at least 10 days prior to the date of the taking of such
proposed action or the date of participation therein by the holders of record of
Series A Preferred Stock, whichever shall be the earlier. The failure to give
any notice required by this Section 25 or any defect therein shall not affect
the legality or validity of the action taken by the Company or the vote upon any
such action.
(b) If a Section 11(a)(ii) Event shall occur, then the Company shall,
as soon as practicable thereafter, give to each holder of Rights, in accordance
with Section 26 hereof, a notice of the occurrence of such event, which notice
shall describe such event and the consequences of such event to the holders of
Rights under Section 11(a)(ii) hereof.
(c) In case any of the transactions referred to in Section 13 hereof
are proposed, then, in any such case, (i) the Company shall give to each holder
of Rights, in accordance with Section 26 hereof, notice of the proposal of such
transaction at least 10 days prior to consummating such transaction, which
notice shall specify the proposed event and the consequences of the event to
holders of Rights under Section 13 hereof, and, upon consummating such
transaction, shall similarly give notice thereof to each holder of Rights and
(ii) all references in the preceding paragraph (a) to Series A Preferred Stock
shall be deemed thereafter to refer to Common Stock or other securities of the
Principal Party, as appropriate.
RIGHTS AGREEMENT - PAGE 37
<PAGE>
SECTION 26. NOTICES.
-------
Notices or demands authorized by this Agreement to be given or made by
the Rights Agent or by the holder of record of any Right Certificate or Right to
or on behalf of 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:
New Visual Entertainment, Inc.
5920 Friars Road, Suite 104
San Diego, California 92108
Attn: Corporate Secretary
Subject to the provisions of Section 21 hereof, any notice or demand
authorized by this Agreement to be given or made by the Company or by the holder
of record of any Right Certificate or Right to or on the Rights Agent shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed (until another address is filed in writing with the Company) as
follows:
First Union National Bank
1525 West W. T. Harris Boulevard, 3C3
Charlottte, North Carolina 28288-1153
Attn: Shareholder Services Group
Notices or demands authorized by this Agreement to be given or made by
the Company or the Rights Agent to the holder of record of any Right Certificate
or Right shall be sufficiently given or made if sent by first-class mail,
postage prepaid, addressed to such holder at the address of such holder as it
appears upon the registry books of the Rights Agent or, prior to the
Distribution Date, on the registry books of the transfer agent of the Common
Stock.
SECTION 27. SUPPLEMENTS AND AMENDMENTS.
--------------------------
For as long as the Rights are redeemable, and except as provided in the
last sentence of this Section 27, the Company may, in its sole and absolute
discretion, and the Rights Agent shall, if the Company so directs, supplement or
amend any provision of this Agreement in any respect without the approval of any
holders of the Rights or the Common Stock. At any time when the Rights are not
redeemable, and except as provided in the last sentence of this Section 27, the
Company may, and the Rights Agent shall if the Company so directs, supplement or
amend this Agreement without the approval of any holders of Right Certificates
in order to:
(a) cure any ambiguity;
(b) correct or supplement any provision contained herein that may be
defective or inconsistent with any other provisions herein; or
(c) change or supplement the provisions hereunder in any manner that
the Company may deem necessary or desirable;
RIGHTS AGREEMENT - PAGE 38
<PAGE>
provided that no such supplement or amendment shall adversely affect the
interests of the holders of Right Certificates as such; and provided that this
Agreement may not be so supplemented or amended to:
(i) lengthen a time period relating to when the Rights may be
redeemed or this Agreement amended at the sole and absolute discretion
of the Company at such time as the Rights are not redeemable; or
(ii) lengthen or shorten any other time period unless such
lengthening or shortening of such other time period is for the purpose
of protecting, enhancing or clarifying the rights of, or the benefits
to, the holders of Rights as such (other than any Acquiring Person or
an Affiliate or Associate of such an Acquiring Person).
Upon the delivery of a certificate from an officer of the Company that
states that the proposed supplement or amendment is in compliance with the terms
of this Section 27, the Rights Agent shall execute such supplement or amendment.
Notwithstanding anything contained in this Agreement to the contrary, no
supplement or amendment shall be made that changes the Redemption Price or the
number of one one-thousandth of a share of Series A Preferred Stock for which a
Right is exercisable; and no supplement or amendment that changes the rights or
duties of the Rights Agent under this Agreement shall be effective without the
consent of the Rights Agent.
SECTION 28. SUCCESSORS.
----------
All of 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. BENEFITS OF THIS AGREEMENT.
--------------------------
Nothing in this Agreement shall be construed to give any Person other
than the Company, the Rights Agent and the registered holders of the Rights
Certificates (and, prior to the Distribution Date, the Common Stock) any legal
or equitable right, remedy or claim under this Agreement, and this Agreement
shall be for the sole and exclusive benefit of the Company, the Rights Agent and
the holders of record of the Right Certificates (and, prior to the Distribution
Date, the Common Stock).
SECTION 30. CHOICE OF LAW.
-------------
This Agreement and each Right Certificate issued hereunder shall be
deemed to be a contract made under the laws of the State of Utah 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.
RIGHTS AGREEMENT - PAGE 39
<PAGE>
SECTION 31. COUNTERPARTS.
------------
This Agreement may be executed in any number of counterparts, each of
such counterparts shall for all purposes be deemed to be an original, and all
such counterparts shall together constitute but one and the same instrument.
SECTION 32. DESCRIPTIVE HEADINGS.
--------------------
Descriptive headings of the several sections of this Agreement are
inserted for convenience only and shall not control or affect the meaning or
construction of any of the provisions hereof.
SECTION 33. SEVERABILITY.
------------
If any provision of this Agreement is held to be illegal, invalid or
unenforceable under present or future laws effective during the term hereof,
such provision shall be fully severable and this Agreement shall be construed
and enforced as if such illegal, invalid or unenforceable provision never
comprised a part hereof; and the remaining provisions hereof shall remain in
full force and effect and shall not be affected by the illegal, invalid or
unenforceable provision or by its severance herefrom. Furthermore, in lieu of
such illegal, invalid or unenforceable provision, there shall be added
automatically as part of this Agreement a provision as similar in its terms to
such illegal, invalid or unenforceable provision as may be possible and be
legal, valid and enforceable.
SECTION 34. DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS.
----------------------------------------------------
The Board of Directors of the Company shall have the exclusive power
and authority to administer this Agreement and to exercise the rights and powers
specifically granted to the Board of Directors of the Company or to the Company,
or as may be necessary or advisable in the administration of this Agreement,
including, without limitation, the right and power to (i) interpret the
provisions of this Agreement, and (ii) make all determinations deemed necessary
or advisable for the administration of this Agreement (including, without
limitation, a determination to redeem or not redeem the Rights or to amend this
Agreement). All such actions, calculations, interpretations and determinations
(including, for purposes of clause (y) below, all omissions with respect to the
foregoing) that are done or made by the Board of Directors of the Company in
good faith shall (x) be final, conclusive and binding on the Company, the Rights
Agent, the holders of the Rights, as such, and all other parties, and (y) not
subject the Board of Directors to any liability to the holders of the Rights.
[SIGNATURE PAGE FOLLOWS]
RIGHTS AGREEMENT - PAGE 40
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, all as of the day and year first above written.
NEW VISUAL ENTERTAINMENT, INC.
By: /s/ Ray Willenberg, Jr.
-------------------------------
Name: Ray Willenberg, Jr.
-------------------------------
Title: Chief Executive Officer
-------------------------------
FIRST UNION NATIONAL BANK
By: /s/ Kenneth E. Staab
-------------------------------
Name: Kenneth E. Staab
-------------------------------
Title: Vice President
-------------------------------
RIGHTS AGREEMENT - PAGE 41
<PAGE>
EXHIBIT A
CERTIFICATE OF DESIGNATION
OF
NEW VISUAL ENTERTAINMENT, INC.
(Pursuant to Section 16-10a-602 of the
Utah Revised Business Corporation Act)
New Visual Entertainment, Inc., a Utah corporation (hereinafter called
the "CORPORATION"), hereby certifies that the following resolution was adopted
by the Board of Directors of the Corporation as required by Section 16-10a-602
of the Utah Revised Business Corporation Act at a meeting duly called and held
on July 27, 2000:
RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of the Corporation in accordance with the provisions of the
Articles of Incorporation, as amended and restated (the "ARTICLES OF
INCORPORATION"), the Board of Directors hereby creates a series of Preferred
Stock, par value $.01 per share (the "PREFERRED STOCK"), of the Corporation and
hereby states the designation and number of shares, and fixes the relative
rights, preferences and limitations thereof as follows:
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK:
Section 1. DESIGNATION OF AMOUNT. The shares of such series shall be
designated as "Series A Junior Participating Preferred Stock" (the "SERIES A
PREFERRED STOCK") and the number of shares constituting the Series A Preferred
Stock shall be 100,000. 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 A Preferred Stock to a number less than the
number of shares then outstanding plus the number of shares reserved for
issuance upon the exercise of outstanding options, rights or warrants, or upon
the conversion of any outstanding securities issued by the Corporation
convertible into Series A Preferred Stock.
Section 2. DIVIDENDS AND DISTRIBUTIONS.
(A) Subject to the rights of the holders of any shares of any series of
Preferred Stock (or any similar stock) ranking prior and superior to the Series
A Preferred Stock with respect to dividends, the holders of shares of Series A
Preferred Stock, in preference to the holders of Common Stock of the Corporation
(the "COMMON STOCK"), 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 last day
of March, June, September and December 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
<PAGE>
fraction of a share of Series A 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 A Preferred Stock.
In the event the Corporation 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 A 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) The Corporation shall declare a dividend or distribution on the
Series A Preferred Stock as provided in paragraph (A) of this Section 2
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock); provided, that, in
the event no dividend or distribution shall have been declared on the Common
Stock during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $1 per share on the
Series A Preferred Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A 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 A 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 A Preferred Stock in an amount less than the total
amount of such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at the time
outstanding. The Board of Directors may fix a record date for the determination
of holders of shares of Series A 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 A Preferred
Stock shall have the following voting rights:
2
<PAGE>
(A) Subject to the provision for adjustment hereinafter set forth, each
share of Series A Preferred Stock shall entitle the holder thereof to 1,000
votes on all matters submitted to a vote of the shareholders of the Corporation.
In the event the Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of voting 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 voting Common
Stock, then in each such case the number of votes per share to which holders of
shares of Series A 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 of shares of voting Common Stock outstanding immediately
after such event and the denominator of which is the number of shares of voting
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 any similar stock, or by
law, the holders of shares of Series A Preferred Stock and the holders of shares
of voting Common Stock and any other capital stock of the Corporation having
general voting rights shall vote together as one class on all matters submitted
to a vote of shareholders of the Corporation.
(C) Except as set forth herein, or as otherwise provided by law,
holders of Series A 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 voting 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 A 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 A Preferred Stock outstanding shall have
been paid in full, the Corporation 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 A 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 A Preferred Stock, except dividends paid ratably on the Series A
Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which the
holders of all such shares are then entitled;
3
<PAGE>
(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
A Preferred Stock, provided that the Corporation may at any time
redeem, purchase or otherwise acquire shares of any such junior stock
in exchange for shares of any stock of the Corporation ranking junior
(either as to dividends or upon dissolution, liquidation or winding up)
to the Series A Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for consideration
any shares of Series A Preferred Stock, or any shares of stock ranking
on a parity with the Series A Preferred Stock, except in accordance
with a purchase offer made in writing or by publication (as determined
by the Board of Directors) to all holders of such shares upon such
terms as the Board of Directors, after consideration of the respective
annual dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will
result in fair and equitable treatment among the respective series or
classes.
(B) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
Section 5. REACQUIRED SHARES. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation 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
Articles 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 Corporation, no distribution shall
be made (1) to the holders of shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series A
Preferred Stock unless, prior thereto, the holders of shares of Series A
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 A
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 (2) 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 A Preferred Stock, except distributions made ratably on the Series A
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 Corporation 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
4
<PAGE>
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 A Preferred Stock were entitled immediately prior to
such event under the proviso in clause (1) 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 Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Series A 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 Corporation 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 A Preferred Stock will 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 A Preferred Stock shall
not be redeemable.
Section 9. RANK. The Series A Preferred Stock shall rank, with respect
to the payment of dividends and the distribution of assets, junior to all series
of any other class of the Corporation's Preferred Stock.
Section 10. AMENDMENT. The Articles of Incorporation of the Corporation
shall not be amended in any manner which would materially alter or change the
powers, preferences or special rights of the Series A Preferred Stock so as to
affect them adversely without the affirmative vote of the holders of at least
two-thirds of the outstanding shares of Series A Preferred Stock, voting
together as single class.
Section 11. FRACTIONAL SHARES. Series A Preferred Stock may be issued
in fractions of a share, which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and have the benefit of all other rights of holders
of Series A Preferred Stock.
5
<PAGE>
IN WITNESS WHEREOF, this Certificate of Designation is executed on
behalf of the Corporation by its Chief Executive Officer and attested by its
Secretary this 8th day of August, 2000.
/S/ RAY WILLENBERG, JR.
-------------------------------------
Ray Willenberg, Jr.
Chief Executive Officer
Attest:
/S/ C. RICH WILSON III
-----------------------------
C. Rich Wilson III
Secretary
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<PAGE>
EXHIBIT B
[FORM OF RIGHT CERTIFICATE]
Certificate No. _______ ________ Rights
NOT EXERCISABLE AFTER AUGUST 21, 2004 OR EARLIER IF REDEEMED OR EXCHANGED. THE
RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF NEW VISUAL ENTERTAINMENT,
INC., AT $0.001 PER RIGHT (SUBJECT TO ADJUSTMENT) ON THE TERMS SET FORTH IN THE
RIGHTS AGREEMENT. RIGHTS ISSUED TO OR BENEFICIALLY OWNED BY A PERSON WHO IS OR
BECOMES AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF SUCH ACQUIRING
PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) OR, UNDER CERTAIN
CIRCUMSTANCES, TRANSFEREES THEREOF, WILL BECOME VOID AS PROVIDED IN SECTION
11(a)(ii) OF THE RIGHTS AGREEMENT AND THEREAFTER MAY NOT BE TRANSFERRED TO ANY
PERSON.
Right Certificate
New Visual Entertainment, 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 August 9, 2000, as the same may be amended from
time to time ("Rights Agreement"), between New Visual Entertainment, Inc., a
Utah corporation (the "Company"), and First Union National Bank (the "Rights
Agent"), to purchase from the Company at any time after the Distribution Date
(as that term is defined in the Rights Agreement) and prior to 5:00 P.M. (San
Diego time) on August 21, 2004 at the principal office of the Rights Agent, or
its successor as Rights Agent, one one-thousandth (1/1000) of a fully paid and
nonassessable share of Series A Junior Participating Preferred Stock, par value
$.01 per share ("Series A Preferred Stock"), of the Company at a purchase price
of $200 per one one-thousandth of a share, as the same may from time to time be
adjusted in accordance with the Rights Agreement (the "Purchase Price"), upon
presentation and surrender of this Right Certificate with the Form of Election
to Purchase duly executed. The number of Rights evidenced by this Right
Certificate (and the number of one one-thousandths of a share of Series A
Preferred Stock which may be purchased upon exercise hereof) set forth above,
and the Purchase Price set forth above, are the number and Purchase Price as of
August 21, 2000.
As provided in the Rights Agreement, the Purchase Price and the number
of shares of Series A Preferred Stock that may be purchased upon the exercise of
the Rights evidenced by this Right Certificate are subject to modification and
adjustment upon the happening of certain events and, upon the happening of
certain events, securities other than shares of Series A Preferred Stock, or
other property, may be acquired upon exercise of the Rights evidenced by this
Right Certificate, as provided by the Rights Agreement.
<PAGE>
This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, as amended from time to time, which terms,
provisions and conditions are incorporated herein by reference and made a part
hereof, and reference to the Rights Agreement is made for a full description of
the rights, limitations of rights, obligations, duties and immunities of the
Rights Agent, the Company and the holders of record of Right Certificates.
Copies of the Rights Agreement are on file at the principal executive office of
the Company.
This Right Certificate, with or without other Right Certificates, upon
surrender at the principal office of the Rights Agent designated for that
purpose, may be exchanged for another Right Certificate or Right Certificates of
like tenor and date evidencing Rights entitling the holder of record to purchase
the same aggregate number of shares of Series A Preferred Stock as the Rights
evidenced by the Right Certificate or Right Certificates surrendered entitled
that holder to purchase. If this Right Certificate is exercised in part, the
holder shall be entitled to receive, upon surrender hereof, another Right
Certificate or Right Certificates for the number of whole rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced
by this right Certificate may be (i) redeemed by the Company by action of the
Board of Directors at its option at a redemption price of $0.001 per Right, or
(ii) exchanged in whole or in part for shares of the Common Stock, par value
$.01 per share, of the Company.
No fractional shares of Series A Preferred Stock or other securities of
the Company are required to be issued upon the exercise of any Right or Rights
evidenced hereby (other than fractions of shares of Series A Preferred Stock
that are integral multiples of one one-thousandth of a share), and in lieu
thereof, as provided in the Rights Agreement, a cash payment may be made. As
provided in the Rights Agreement, interests in fractions of shares of Series A
Preferred Stock may, at the election of the Company, be evidenced by depository
receipts.
No holder of this Right Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of Series A Preferred
Stock or of any other securities of the Company that 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.
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
The Board of Directors shall have the exclusive power and authority to
administer the Rights Plan in accordance with the Rights Agreement and to
exercise the rights and powers specifically granted to the Board of Directors or
the Company, or as may be necessary or advisable in the administration of the
Rights Plan.
[SIGNATURE PAGE FOLLOWS]
2
<PAGE>
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal.
Dated as of ________________________, 20__.
ATTEST: NEW VISUAL ENTERTAINMENT, INC.
By:
----------------------------- --------------------------
C. Rich Wilson III, Secretary Ray Willenberg, Jr.,
Chief Executive Officer
COUNTERSIGNED:
FIRST UNION NATIONAL BANK
as Rights Agent
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
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<PAGE>
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder
desires to transfer the Rights evidenced by this
Right Certificate.)
FOR VALUE RECEIVED _______________________________________ hereby
sells, assigns and transfers unto ______________________________________________
(Please print name and address of transferee)
_____________________________________________________________________ rights
evidenced by this Right Certificate, together with all right, title and interest
therein, and does hereby irrevocably constitute and appoint
______________________ Attorney, to transfer such Rights on the books of the
within-named company, with full power of substitution.
Dated:____________________________
_____________________________________________
Signature
MEDALLION SIGNATURE GUARANTEE:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.
________________________________________________________________________________
The undersigned hereby certifies that the Rights evidenced by this
Right Certificate are not beneficially owned by and were not acquired by the
undersigned from, and are not being assigned to, an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement).
___________________________________
Signature
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed by the registered holder if such holder
desires to exercise the Rights evidenced by this
Right Certificate.)
To: New Visual Entertainment, Inc.
The undersigned hereby irrevocably elects to exercise _______ Rights
evidenced by this Right Certificate to purchase the securities or other property
due upon the exercise of such Rights and requests that certificates for any such
securities be issued in the name of:
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 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
<PAGE>
MEDALLION SIGNATURE GUARANTEE:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.
The undersigned hereby certifies that the Rights evidenced by this
Right Certificate are not beneficially owned by, and were not acquired by the
undersigned from, an Acquiring Person or an Affiliate or Associate thereof (as
defined in the Rights Agreement).
__________________________________
Signature
<PAGE>
________________________________________________________________________________
NOTICE
The signature in the Form of Assignment or Form of Election to
Purchase, as the case may be, must conform to the name as written upon the face
of this Right Certificate in every particular, without alteration or enlargement
or any change whatsoever.
In the event the certification set forth above in the Form of
Assignment or the Form of Election to Purchase, as the case may be, is not
completed, the Company and the Rights Agent will deem the beneficial owner of
the Rights evidenced by this Right Certificate to be an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement) and such
Assignment or Election to Purchase will not be honored.
<PAGE>
EXHIBIT C
UNDER CERTAIN CIRCUMSTANCES AS PROVIDED IN THE RIGHTS AGREEMENT DATED
AS OF AUGUST 9, 2000, BETWEEN NEW VISUAL ENTERTAINMENT, INC. AND FIRST
UNION NATIONAL BANK, AS RIGHTS AGENT (THE "RIGHTS AGREEMENT"), RIGHTS
ISSUED TO OR BENEFICIALLY OWNED BY A PERSON WHO IS OR BECOMES AN
ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF SUCH ACQUIRING PERSON
(AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) OR, UNDER CERTAIN
CIRCUMSTANCES, TRANSFEREES THEREOF, WILL BECOME VOID AS PROVIDED IN
SECTION 11(a)(ii) OF THE RIGHTS AGREEMENT AND THEREAFTER MAY NOT BE
TRANSFERRED TO ANY PERSON.
SUMMARY OF RIGHTS TO PURCHASE
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
On July 27, 2000, the Board of Directors of New Visual Entertainment,
Inc., a Utah corporation (the "Company"), declared a dividend of one Right for
each outstanding share of Common Stock, par value $.01 per share, of the Company
(the "Common Stock"). The dividend is payable to holders of record of Common
Stock at the close of business on August 21, 2000 (the "Record Date"). Each
Right entitles the registered holder to purchase from the Company one
one-thousandth (1/1,000) of a share of Series A Junior Participating Preferred
Stock, par value $.01 per share (the "Series A Preferred Stock"), at a Purchase
Price of $200. The terms and conditions of the Rights are contained in a Rights
Agreement between the Company and First Union National Bank, as Rights Agent.
As discussed below, initially the Rights will not be exercisable,
certificates for the Rights will not be issued and the Rights will automatically
trade with the Common Stock.
Until the close of business on the earlier of (i) the tenth day
following the public announcement that a person or group of affiliated or
associated persons ("Acquiring Person") other than the Company, any subsidiary
of the Company or any employee benefit plan or employee stock plan of the
Company or of any subsidiary of the Company ("Exempt Person") has acquired, or
obtained the right to acquire, beneficial ownership of 20% or more of the
outstanding Common Stock (the "Stock Acquisition Date") or (ii) the tenth
business day following the commencement by any person (other than an Exempt
Person) of, or the announcement of the intention to commence, a tender or
exchange offer that would result in the ownership of 20% or more of the
outstanding Common Stock (the earlier of such dates in clauses (i) and (ii)
being called the "Distribution Date"), the Rights will be evidenced, with
respect to any of the Common Stock certificates outstanding as of August 21,
2000, by such Common Stock certificate, together with a copy of this Summary of
Rights.
<PAGE>
The Rights Agreement provides that, until the Distribution Date (or the
earlier redemption or expiration of the Rights), the Rights will be represented
by and transferred with, and only with, the Common Stock. Until the Distribution
Date (or the earlier redemption or expiration of the Rights), new Common Stock
certificates issued after the Record Date upon transfer or new issuance of
shares of Common Stock will contain a legend incorporating the Rights Agreement
by reference. Until the Distribution Date (or the earlier redemption or
expiration of the Rights), the surrender for transfer of any of the Company's
Common Stock certificates, with or without such legend or a copy of this Summary
of Rights, will also constitute the surrender for transfer of the Rights
associated with the Common Stock evidenced by such certificates. As soon as
practicable following the Distribution Date, separate Right Certificates will be
mailed to holders of record of Common Stock at the close of business on the
Distribution Date, and thereafter the Right Certificates alone will evidence the
Rights and the Rights will be transferable separate and apart from the Common
Stock.
The Rights are not exercisable until the Distribution Date. The Rights
will expire at the close of business on August 21, 2004, unless redeemed or
exchanged earlier as described below.
The Series A Preferred Stock will not be redeemable and, unless
otherwise provided in connection with the creation of a subsequent series of
preferred stock, will be subordinate to all other series of the Company's
preferred stock. Each share of Series A Preferred Stock will represent the right
to receive, when, as and if declared, a quarterly dividend at an annual rate
equal to the greater of $1.00 per share or 1,000 times the quarterly per share
cash dividends declared on the Company's Common Stock during the immediately
preceding fiscal year. In addition, each share of Series A Preferred Stock will
represent the right to receive 1,000 times any noncash dividends (other than
dividends payable in Common Stock) declared on the Common Stock, in like kind.
In the event of the liquidation, dissolution or winding up of the Company, each
share of Series A Preferred Stock will represent the right to receive a
liquidation payment in an amount equal to the greater of $1.00 per share or
1,000 times the liquidation payment made per share of Common Stock. Each share
of Series A Preferred Stock will have 1,000 votes, voting together with the
Common Stock. In the event of any merger, consolidation or other transaction in
which common shares are exchanged, each share of Series A Preferred Stock will
be entitled to receive 1,000 times the amount received per share of Common
Stock. The rights of the Series A Preferred Stock as to dividends, liquidation,
voting rights and merger participation are protected by anti-dilution
provisions.
The Purchase Price payable and the number of shares of Series A
Preferred Stock 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 Series A Preferred Stock, (ii) upon the grant to
holders of the Series A Preferred Stock of certain rights or warrants to
subscribe for Series A Preferred Stock or convertible securities at less than
the current market price of the Series A Preferred Stock or (iii) upon the
distribution to holders of the Series A Preferred Stock of evidences of
indebtedness or assets (excluding regular cash dividends and dividends payable
in Series A Preferred Stock) or of subscription rights or warrants.
2
<PAGE>
If any Person (other than an Exempt Person) becomes the beneficial
owner of 20% or more of the then outstanding shares of Common Stock, each holder
of a Right, other than the Acquiring Person and/or its affiliates, associates
and transferees, will have the right to receive, upon payment of the Purchase
Price, in lieu of Series A Preferred Stock, a number of shares of Common Stock
having a market value equal to twice the Purchase Price. In the event that
insufficient shares of Common Stock are available for the exercise in full of
the Rights, the Company shall, in lieu of issuing shares of Common Stock upon
exercise of Rights, to the extent permitted by applicable law and any material
agreements then in effect to which the Company is a party, issue shares of
Series A Preferred Stock, cash, property or other securities of the Company
(which may be accompanied by a reduction in the Purchase Price), in proportions
determined by the Company, so that the aggregate value of such cash, property or
other securities received is equal to twice the Purchase Price. After the
acquisition of shares of Common Stock by an Acquiring Person as described in
this paragraph, Rights that are (or, under certain circumstances, Rights that
were) beneficially owned by an Acquiring Person and/or its affiliates,
associates and transferees will be void.
The Board of Directors may, at its option, at any time after a person
becomes an Acquiring Person, authorize the Company to exchange all or part of
the then outstanding and exercisable Rights for shares of Common Stock or Series
A Preferred Stock at an exchange ratio of one share of Common Stock for one
one-thousandth of a share of Series A Preferred Stock per Right, provided that
the Board of Directors may not effect such exchange after the time that any
Person (other than an Exempt Person) becomes the beneficial owner of 50% or more
of the Common Stock then outstanding. In the event that insufficient shares of
Common Stock are available for such exchange, the Board of Directors may
substitute, in lieu thereof, shares of Series A Preferred Stock or equivalent
preferred stock of equal value.
Unless the Rights are earlier redeemed, if, after the Stock Acquisition
Date, the Company is acquired in a merger or other business combination (in
which any shares of the Common Stock are changed into or exchanged for other
securities or assets) or more than 50% of the assets or earning power of the
Company and its subsidiaries (taken as a whole) is sold or transferred in one or
more transactions, other than a transfer to a lender (or an assignee of a
lender) of the Company pursuant to material agreements then in effect to which
the Company is a party, the Rights Agreement provides that proper provision
shall be made so that each holder of record of a Right will from and after that
time have the right to receive, upon payment of the Purchase Price, that number
of shares of common stock of the acquiring company which has a current market
price at the time of such transaction equal to twice the Purchase Price.
Interests in fractions of shares of Series A Preferred Stock may, at
the election of the Company, be evidenced by depository receipts. The Company
may also issue cash in lieu of fractional shares of Series A Preferred Stock
that are not integral multiples of one one-thousandth of a share.
3
<PAGE>
At any time until a person becomes an Acquiring Person, the Board of
Directors may cause the Company to redeem the Rights in whole, but not in part,
at a price of $0.001 per Right, subject to adjustment. Immediately upon the
effective time of the redemption authorized by the Board of Directors the right
to exercise the Rights will terminate, and the holders of the Rights will only
be entitled to receive the redemption price without any interest thereon.
As long as the Rights are redeemable, the Company may, except with
respect to the redemption price or the number of shares of Series A Preferred
Stock for which a Right is exercisable, amend the Rights in any manner. At any
time when the Rights are not redeemable, the Company may amend the Rights in any
manner that does not adversely affect the interests of holders of the Rights as
such.
Until a Right is exercised, the holder, as such, will have no rights as
a stockholder of the Company, including without limitation the right to vote or
to receive dividends.
The Board of Directors shall have the exclusive power and authority to
administer the Rights Plan and to exercise the rights and powers specifically
granted to the Board of Directors or the Company, or as may be necessary or
advisable in the administration of the Rights Plan.
4
<PAGE>
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A. A
copy of the Rights Agreement is available free of charge from the Company by
written request sent to 5920 Friars Road, Ste. 104, San Diego, CA 92108, Attn:
Secretary. This summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement,
as amended from time to time, which is incorporated in this summary description
by reference. In the event of a conflict between this summary description and
the Rights Agreement, the Rights Agreement will prevail.
5
