<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
COMMISSION FILE NUMBER ______________
WIT CAPITAL GROUP, INC.
(exact name of registrant as specified in its charter)
DELAWARE 13-3900397
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
826 BROADWAY, NEW YORK, NEW YORK 10003
(Address of principal executive offices) (Zip Code)
(212) 253-4400
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 of 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months, and (2) has been subject to such filing
requirements for the past ninety days: Yes ( ) No (X)
As of August 6, 1999, there were 71,985,351 shares of the Registrant's common
stock outstanding.
<PAGE>
PART I - Financial Information
<TABLE>
<S> <C>
Item 1-Consolidated Financial Statements
Consolidated Statements of Financial Condition.............................. 1
Consolidated Statements of Operations for the three and six
months ended June 30, 1999 an 1998........................................ 2
Consolidated Statement of Changes in Stockholders' Equity
for the three months ended June 30, 1999.................................. 3
Consolidated Statements of Cash Flows for the six months
ended June 30, 1999 and 1998.............................................. 4
Notes to Consolidated Financial Statements.................................. 5
Item 2 - Management's Discussion and Analysis of Results of
Operations and Financial Condition..................................... 9
PART II - Other Information
Item 1 - Legal Proceedings........................................................ 15
Item 2 - Changes in Securities and Use of Proceeds................................ 16
Item 3 - Default upon Senior Securities........................................... 16
Item 4 - Submission of Matters to a Vote of Security Holders...................... 16
Item 5 - Other Information........................................................ 16
Item 6 - Exhibits and Reports on form 8-K......................................... 18
Signatures........................................................................ 18
</TABLE>
<PAGE>
PART I
ITEM 1- CONSOLIDATED FINANCIAL STATEMENTS
WIT CAPITAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS 1999 1998
------ ------------- -------------
(Unaudited)
<S> <C> <C>
CASH AND CASH EQUIVALENTS $ 137,292,797 $ 18,110,146
RECEIVABLE FROM CLEARING BROKER 729,475 119,312
SECURITIES OWNED, at market or fair value 1,207,785 758,293
PREPAID EXPENSES 1,054,669 144,430
INVESTMENT BANKING FEES RECEIVABLE 3,989,510 512,952
FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, net of accumulated depreciation
and amortization of $481,207 and $243,527 at June 30, 1999 and December 31,
1998, respectively 2,559,670 615,181
COMPUTER SOFTWARE, net of accumulated amortization of $821,631 and $560,277 at
June 30, 1999 and December 31, 1998, respectively 1,903,848 1,614,735
OTHER ASSETS 2,770,249 421,357
------------- -------------
Total assets $ 151,508,003 $ 22,296,406
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
LIABILITIES:
Accounts payable and accrued expenses $ 7,094,794 $ 1,032,463
Deferred advisory fees 383,528 595,486
Other liabilities 44,278 60,203
------------- -------------
Total liabilities 7,522,600 1,688,152
------------- -------------
COMMITMENTS
STOCKHOLDERS' EQUITY:
Series A Preferred Stock, $.01 par value, 9,000,000 shares authorized,
8,997,952 shares issued and outstanding at December 31, 1998 -- 89,980
Series B Preferred Stock, $.01 par value, 3,000,000 shares authorized,
2,304,982 shares issued and outstanding at December 31, 1998 -- 23,050
Series C Preferred Stock, $.01 par value, 7,445,000 shares authorized,
5,902,750 shares issued and outstanding at December 31, 1998 -- 59,028
Series D Preferred Stock, $.01 par value, 10,000,000 shares authorized,
9,933,334 shares issued and outstanding at December 31, 1998 -- 99,333
Common Stock, $.01 par value, 60,000,000 shares authorized, 11,264,600 shares
issued and outstanding at December 31, 1998 -- 112,647
Common Stock, $.01 par value, 500,000,000 shares
authorized, 8,740,000 shares issued and outstanding at June 30, 1999 87,400 --
Common Stock, Class B, $.01 par value, 75,000,000 shares
authorized, 11,666,667 shares issued and outstanding at June 30, 1999 116,667 --
Common Stock, Class C, $.01 par value, 159,000,000 shares
authorized, 51,544,989 shares issued and outstanding at June 30, 1999 515,450 --
Additional paid-in capital 179,857,430 39,534,657
Notes receivable from stockholders (15,333,070) (5,750,000)
Accumulated deficit (21,258,474) (13,560,441)
------------- -------------
Total stockholders' equity 143,985,403 20,608,254
------------- -------------
Total liabilities and stockholders' equity $ 151,508,003 $ 22,296,406
============= =============
</TABLE>
The accompanying notes are an integral part of these
consolidated statements.
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<PAGE>
WIT CAPITAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ----------------
June 30, June 30, June 30, June 30,
1999 1998 1999 1998
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
REVENUES:
Investment banking $ 8,246,614 $ 180,330 $ 11,369,034 $ 214,198
Brokerage 1,567,584 76,880 2,001,791 99,381
Interest 1,176,599 25,780 1,368,269 45,467
Other 289,507 - 444,331 -
--------------- --------------- --------------- --------------
Total revenues 11,280,304 282,990 15,183,425 359,046
--------------- --------------- --------------- ---------------
EXPENSES:
Compensation and benefits 8,588,459 689,950 15,146,585 1,239,085
Brokerage and clearance 1,114,507 41,165 1,375,135 55,319
Professional services 1,085,302 171,069 1,766,811 264,642
Data processing and communications 884,043 120,472 1,183,654 270,775
Technology development 526,088 232,454 861,883 283,354
Marketing 421,736 307,109 472,742 537,989
Depreciation and amortization 278,558 269,459 499,053 427,489
Occupancy 213,496 46,282 303,503 88,682
Other 965,982 244,693 1,272,092 429,462
--------------- --------------- --------------- ---------------
Total expenses 14,078,171 2,122,653 22,881,458 3,596,797
--------------- --------------- --------------- ---------------
Net loss $ (2,797,867) $ (1,839,663) $ (7,698,033) $ (3,237,751)
=============== =============== =============== ===============
BASIC AND DILUTED NET LOSS PER SHARE:
$ (.11) $ (.26) $ (.48) $ (.46)
WEIGHTED AVERAGE SHARES USED IN
THE COMPUTATION OF BASIC AND
DILUTED NET LOSS PER SHARE: 24,486,238 7,109,971 15,923,484 7,083,182
</TABLE>
The accompanying notes are an integral part of these
consolidated statements.
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<PAGE>
WIT CAPITAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
Common Common Common Common
Preferred Stock Stock Stock Stock
Stock (Old) (New) Class B Class C
------------ ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
STOCKHOLDERS' EQUITY, March 31, 1999 $ 485,392 $ 131,765 $ - $ - $ -
Issuance of Series E Preferred Stock 116,667 - - - -
Issuance of common stock for notes receivable - 29,745 - - -
Issuance of common stock for exercise of stock
options - 14,062 - - 105
Conversion of Series E Preferred Stock to
Class B Common (116,667) - - 116,667 -
Conversion of Preferred Series A,B,C, and D
Preferred Stock to Class C Common (485,392) - - - 339,773
Conversion of common stock to Class C Common
Stock - (175,572) - - 175,572
Initial public offering of common stock, net
of underwriter's discount and offering
expenses - - 87,400 - -
Net loss - - - - -
------------ ---------- ---------- ---------- -----------
STOCKHOLDERS' EQUITY, June 30, 1999 $ - $ - $ 87,400 $ 116,667 $ 515,450
============ ========== ========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
Notes
Additional Receivable
Paid-in Accumulated from
Capital Deficit Stockholders Total
-------------- --------------- ------------- -----------
<S> <C> <C> <C> <C>
STOCKHOLDERS' EQUITY, March 31, 1999 $ 74,918,108 $ (18,460,607) $ (9,575,000) $ 47,499,658
Issuance of Series E Preferred Stock 24,741,546 - - 24,858,213
Issuance of common stock for notes
receivable 5,112,492 - (5,758,070) (615,833)
Issuance of common stock for exercise
of stock options 2,244,334 - - 2,258,501
Conversion of Series E Preferred Stock
Class B Common - - - -
Conversion of Preferred Series A,B,C, and
D Preferred Stock to Class C Common 145,619 - - -
Conversion of common stock to Class C
Common Stock - - - -
Initial public offering of common stock
net of underwriters discount and
offering expenses 72,695,331 - - 72,782,731
Net loss - (2,797,867) - (2,797,867)
-------------- --------------- ------------- -----------
STOCKHOLDERS' EQUITY, June 30, 1999 $ 179,857,430 $ (21,258,474) $(15,333,070) $143,985,403
============== =============== ============= ==============
</TABLE>
The accompanying notes are an integral part of these
consolidated statements.
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<PAGE>
WIT CAPITAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-------------------------------
1999 1998
-------------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (7,698,033) $ (3,237,751)
Adjustments to reconcile net loss to net cash used
in operating activities-
Noncash expenses - 421,052
Depreciation and amortization 499,053 427,485
(Increase) decrease in operating assets-
Receivable from clearing broker (610,163) (269,801)
Securities owned (449,492) (1,239,936)
Prepaid expenses (910,239) 298,606
Investment banking fees receivable (3,476,558) (28,666)
Other assets (2,348,892) (36,871)
Increase (decrease) in operating liabilities-
Accounts payable and accrued expenses 6,062,329 (518,483)
Deferred advisory fees (211,958) -
Other liabilities (15,925) (11,484)
-------------- --------------
Net cash used in operating activities (9,159,878) (4,195,849)
CASH FLOWS FROM INVESTING ACTIVITIES:
Computer software purchased (550,484) (61,819)
Payments for purchases of furniture, equipment and
leasehold improvements (2,182,169) (152,512)
------------- -------------
Cash used in investing activities (2,732,653) (214,331)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Notes receivable from stockholders (615,833) -
Net proceeds from initial public offering of common stock 72,782,731 -
Proceeds from issuance of common stock 2,473,542 50,000
Net proceeds from issuance of preferred stock 56,434,742 3,595,165
------------- --------------
Net cash provided by financing activities 131,075,182 3,645,165
------------- --------------
Net increase (decrease) in cash and cash equivalents 119,182,651 (765,015)
Cash and cash equivalents, beginning of period 18,110,146 1,110,787
------------- --------------
Cash and cash equivalents, end of period $ 137,292,797 $ 345,772
============= ==============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for-
Interest $ - $ 4,000
Taxes 18,000 21,081
NON-CASH TRANSACTIONS:
Issuance of common stock for web site development $ - $ 73,650
Issuance of common stock to stockholders for notes receivable 8,967,237 5,750,000
Issuance of common stock for consulting services 40,613 -
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
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<PAGE>
WIT CAPITAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
Wit Capital Group, Inc. ("WCG" or the "Company") was incorporated on March 27,
1996 and commenced operations in September 1997. The accompanying unaudited
consolidated financial statements include the accounts of WCG and its wholly
owned subsidiaries, Wit Capital Corporation ("WCC"), BidPlus Corporation
("BidPlus") and Arista Capital Management, LLC. All significant intercompany
balances and transactions have been eliminated in consolidation.
On April 1, 1999, the Company formed Arista Capital Management, LLC (a Delaware
limited liability company) (the "LLC") to act as the general partner of Arista
Capital Partners, LP, a newly formed Delaware limited partnership.
Wit Capital Group, Inc. is currently the sole member of the LLC.
These financial statements have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission (the "SEC") and, in the
opinion of management, reflect all adjustments necessary for a fair presentation
of the results for the periods presented in conformity with generally accepted
accounting principles. These financial statements should be read in conjunction
with the Company's audited financial statements included in the Company's
prospectus filed with the SEC on June 4, 1999. Results of the interim periods
are not necessarily indicative of results to be obtained for a full fiscal year.
As discussed in Note 2, all references in the financial statements to the number
of shares of Class C Common Stock and Series E Preferred Stock and rights and
per share amounts have been retroactively restated to reflect a 7 for 10 reverse
stock split effected June 2, 1999.
2. STOCKHOLDERS' EQUITY
WCG has extended to certain of its executive officers and other employees,
including its Co-Chief Executive Officers, partial recourse, interest bearing
loans totaling $14,717,237 with which they purchased 8,784,488 shares of common
stock for either $1.43 or $2.14 per share. Interest on the loans is recourse and
nonrefundable. In the event these executive officers or employees cease to be
employed by the Company, the Company has the right to purchase the unvested
portion of such shares at the lower of the fair market value or $1.43 or $2.14
per share, as the case may be. The shares vest incrementally over specified
periods following their respective issuances. With the exception of shares owned
by Robert H. Lessin, the Company's Chairman and Co-Chief Executive Officer, none
of the shares will be repurchasable by the Company after March 31, 2003; none of
Mr. Lessin's shares will be repurchasable by the Company after March 31, 2001.
In addition, the loans may be repaid at any time by these executive officers and
their maturities will accelerate in the event of employment termination. The
loans are collateralized by the Company's stock and will be reflected as notes
receivable in stockholders' equity until repaid.
-5-
<PAGE>
In April 1999, the Company authorized an additional 64,000,000 shares of common
stock, increasing the number of authorized common shares to 184,000,000 of which
159,000,000 represent shares of common stock and 25,000,000 represent shares of
Class B Common Stock. Additionally, the Company authorized an additional
44,000,000 shares of preferred stock, increasing the number of authorized
preferred shares to 104,000,000 of which 11,666,667 were designated as Series E
Preferred Stock and 5,790,542 were reserved for issuance upon exercise of
warrants to purchase Series E Preferred Stock.
In April 1999, the Company issued 11,666,667 shares of Series E Preferred Stock
to The Goldman Sachs Group, Inc. for $25,000,000. They also received warrants to
purchase 5,637,295 shares of Series E Preferred Stock.
In May 1999, the Board of Directors authorized and the stockholders approved the
creation of a new class of common stock to be sold in the Company's initial
public offering ("New Common Stock"). Additionally, on May 26, 1999, all
outstanding common stock ("Old Common Stock") was converted into a newly created
Class C Common Stock.
In May 1999, the Company authorized and the stockholders approved an additional
391,000,000 shares of New Common Stock, increasing the number of authorized
common shares to 734,000,000 of which 500,000,000 represent shares of New Common
Stock, 75,000,000 represent shares of non-voting Class B Common Stock (the
"Class B Common Stock") and 159,000,000 represent voting Class C Common Stock
(the "Class C Common Stock"). Additionally, the Company authorized 30,000,000
shares of preferred stock. The New Common Stock, the Class B Common Stock and
the Class C Common Stock are economically equivalent except that the Class B
Common Stock is non-voting and the Class C Common Stock is not transferable
until it automatically converts into New Common Stock 180 days after the
consummation of the initial public offering of the Company's New Common Stock.
On June 2, 1999, a 7 for 10 reverse stock split of Class C Common Stock and
Series E Preferred Stock was effected. Accordingly, all references in the
financial statements to the number of shares of Class C Common Stock and Series
E Preferred Stock and rights and per share amounts have been retroactively
restated to reflect this reverse split. The conversion rate of Series A, B, C
and D Preferred Stock into Class C Common Stock after giving effect to the
reverse split is 1.43 to 1.
In June 1999, the Company completed an initial public offering and issued
8,740,000 shares of its New Common Stock at a price of $9.00 per share. The
Company received approximately $72.8 million in proceeds, net of underwriting
discounts and other offering costs. Simultaneously with the closing of the
initial public offering, each outstanding share of Series A, B, C and D
Preferred Stock was converted into Class C Common Stock. All outstanding shares
of Series E Preferred Stock were converted into an equivalent number of shares
of Class B Common Stock.
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<PAGE>
3. NET LOSS PER SHARE
The following table sets forth the calculation of shares used in the computation
of basic and diluted net loss per share:
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------ ------------------------------
1999 1998 1999 1998
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Shares used in computations:
Weighted average common shares 24,486,238 7,109,971 15,923,484 7,083,182
used in computation of basic net
loss per share
Dilutive effect of common stock - - - -
equivalents ------------- ------------- ------------- ------------
Weighted average shares used 24,486,238 7,109,971 15,923,484 7,083,182
in computation of diluted ============= ============= ============= ============
net loss per share
</TABLE>
Because the Company reported a net loss in each of the periods above, the
calculation of diluted earnings per share does not include convertible preferred
stock, options, warrants and common stock collateralizing the notes receivable
from stockholders, as they are anti-dilutive and would result in a reduction of
net loss per share. If the Company had reported net income, there would have
been an additional 50,076,270 and 6,433,701 shares for the quarters ended June
30, 1999 and 1998, respectively, and an additional 32,453,380 and 6,153,947
shares for the six months ended June 30, 1999 and 1998, respectively included in
the calculation of diluted earnings per share.
4. STOCK OPTION PLAN
WCG has adopted a stock option plan and restricted stock purchase plan (the
"Plan"). Under the Plan, key employees, directors and certain consultants of WCG
are eligible to receive grants of stock options intended to qualify as incentive
stock options (within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended), or which are nonqualified stock options. An aggregate of
17,500,000 shares were reserved for issuance under the Plan as of June 30, 1999.
The exercise price of any share covered by an option granted to a person owning
more than 10% of the voting power of all classes of stock of WCG cannot be less
than 110% of the fair market value on the day of the grant. The exercise price
of any share covered by an option granted to any person cannot be less than 85%
of the fair value on the day of the grant. Options expire five or ten years from
the date of grant, with the majority of the options expiring in the year 2008.
As permitted by Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation," ("SFAS No. 123") WCG has accounted for options
granted to employees using the intrinsic value method prescribed by Accounting
Practice Bulletin ("APB") Opinion No. 25, "Accounting for Stock Issued to
Employees." WCG has granted options with exercise prices that are equal to or
greater than management's estimate of the fair value of such common stock at the
date of grant, and accordingly, the Company has recorded no related compensation
expense.
During the period from January 1, 1999 to June 30, 1999, the Company granted
options to purchase 6,405,151 shares to new employees at exercise prices between
$1.43 and $27.06 per share.
5. WARRANTS
The Company has 6,642,726 outstanding warrants as of June 30, 1999 with a range
of exercise prices between $1.43 and $5.57. These warrants are exercisable for
1,005,431 shares of Class C Common Stock (prior to December 7, 1999, and New
Common Stock thereafter) and 5,637,295 shares of Class B Common Stock.
-7-
<PAGE>
6. CONTINGENCIES
The Company is currently subject to claims and legal proceedings arising in the
normal course of its business. In the opinion of management, based on
discussions with legal counsel, the resolution of such legal proceedings should
not have a material adverse effect on the financial position, results of
operations or liquidity of the Company.
Additionally, a person formerly associated with the Company has asserted a right
to purchase 560,000 shares of common stock at $1.43 per share. In the opinion of
management, such assertion is without merit, and the Company intends to contest
any lawsuit filed against it. These 560,000 shares of common stock have been
reported as forfeited stock options in 1998.
7. CAPITAL REQUIREMENT
WCC is subject to the SEC's Uniform Net Capital Rule 15c3-1. WCC's net capital,
as defined, is required to be the greater of $100,000 or the minimum net capital
required based on aggregate indebtedness. As of June 30, 1999 and December 31,
1998, WCC's ratio of aggregate indebtedness to net capital was .16 to 1 and .12
to 1 and its net capital was $34,408,084 and $10,769,266, which was $34,050,096
and $10,669,266 in excess of the minimum net capital requirements, respectively.
8. SUBSEQUENT EVENTS
In July 1999, the Company entered into a joint venture agreement with Trans
Cosmos, Inc. and an investment agreement with Mitsubishi Corporation to
establish a Japanese Internet investment banking firm, to be known as Wit
Capital Japan. Wit Capital Japan will be based in Tokyo and plans to be
incorporated by September 1999. Start of operations is anticipated to be early
2000. Under the terms of the agreements, Mitsubishi Corporation and Trans Cosmos
will capitalize Wit Capital Japan with a total of $8.6 million in a first round
of financing. WCG will provide know-how and play an active role in the
management of the new company. WCG will own 60 percent of the outstanding equity
upon the initial financing, and will have an option to increase its ownership.
Also in July 1999, the Company entered into an agreement with America Online,
Inc. ("AOL"), whereby Wit Capital, through its planned digital trading
facility, will become the first company to provide information in AOL's After
Hours Center, which is currently in development. AOL users will be able to
view the digital trading facility's order book for after hours trading and
access online brokers to open accounts and place orders. For the first six
months after AOL launches its After Hours Center in its Personal Finance
Channel, Wit Capital's site will be the exclusive tenant on the After Hours
Center. Over the life of the contract, Wit Capital will maintain premier
status on the After Hours Center and will receive greater or more prominent
content integration than any other third-party provider of content. In
addition to the content relationship, AOL will introduce and promote a series
of live chat events in AOL's Personal Finance Channel with Wit Capital's
research analysts, and also provide free access to Wit Capital's
-8-
<PAGE>
institutional quality research. In consideration for the above, the Company
has agreed to pay AOL a total of $1 million under this agreement. Under a
related arrangement, AOL will also represent Wit Capital for the sale of
advertising on all of Wit Capital's web sites.
ITEM 2- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
Founded in 1996, Wit Capital is an Internet-based investment banking firm. With
offices in New York and San Francisco, Wit Capital offers investment banking
services including public underwriting, private equity services, strategic
advisory, and institutional quality research. Wit Capital also offers individual
investors online brokerage services which include access to IPOs and other
securities offerings.
During the first six months of 1998, Wit Capital was in an early stage of its
operations and generated only minimal revenues from its investment banking and
brokerage activities. Accordingly, the Company does not believe that the period
to period comparisons of its operating results below are necessarily meaningful
and should not be relied upon as indicators of future performance.
RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1999 AS
COMPARED TO THE THREE AND SIX MONTHS ENDED JUNE 30, 1998
REVENUES
The Company's total revenues for the three months ended June 30, 1999 were $11.3
million compared to $283,000 for the three months ended June 30, 1998. The
Company's total revenues for the six months ended June 30, 1999 were $15.2
million compared to $359,000 for the six months ended June 30, 1998.
Investment banking revenue for the three months ended June 30, 1999 increased to
$8.2 million from $180,000 for the three months ended June 30, 1998. For the six
months ended June 30, 1999, revenue from investment banking increased to $11.4
million from $214,000 for the six months ended June 30, 1998. Historically, the
revenue the Company generated from underwriting activities was limited since the
Company received none or negligible portions of management fees paid to
co-managing underwriters and our underwriting sales credits reflected our
limited allocations of the shares being underwritten. Recently, the Company has
begun to receive management fees and larger allocations of the shares in the
offerings in which the Company is participating and has experienced an increase
in the number of offerings in which the Company participates. Wit Capital's
revenues related to financial advisory services have also increased as a result
of an increased number in strategic advisory relationships and frequency of
transactions.
The Company participated in a total of 42 securities offerings in the second
quarter of 1999, 21 as co-manager and 21 as syndicate member, compared to the
second quarter of 1998 during which the Company participated in 12 offerings as
syndicate member. For the second quarter of 1999, total shares underwritten by
Wit Capital were 6.48 million, compared to 555,625 shares underwritten during
the second quarter of 1998. Of the shares underwritten above, during the second
quarter of 1999 Wit Capital retained 5.97 million shares for sale to its
customers compared to 252,800 shares in the second quarter of 1998. These
figures do not include 2.28 million shares of its own stock distributed to
customers during the Company's initial public offering in June 1999.
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<PAGE>
The Company participated in a total of 61 securities offerings during the
first six months of 1999, 29 as co-manager and 32 as syndicate member
compared to the second quarter of 1998 during which the Company participated
in 18 offerings as syndicate member. For the first six months of 1999, total
shares underwritten by Wit Capital were 7.88 million, compared to 745,375
shares underwritten during the first six months of 1998. Of the shares
underwritten above, during the first six months of 1999 Wit Capital retained
7.46 million shares for sale to its customers compared to 263,800 shares in
the first six months of 1998. These figures do not include 2.28 million
shares of its own stock distributed to customers during the Company's initial
public offering in June 1999.
Brokerage revenue for the three months ended June 30, 1999 increased to $1.6
million from $77,000 for the three months ended June 30, 1998. For the six
months ended June 30, 1999, revenue from brokerage activities increased to $2.0
million from $99,000 for the six months ended June 30, 1998. Wit Capital charges
its customers a brokerage commission of $14.95 for market orders and $19.95 for
limit orders. The increase in this revenue resulted primarily from an increase
in the number of customer accounts opened and an increase number of trades
executed for Wit Capital's customers. The average daily number of trades
executed for the three and six month periods ended June 30, 1999 was 1,377 and
884 compared to 24 and 18 for the three and six month periods ended June 30,
1998. During the second quarter of 1999, Wit Capital added 40,697 new accounts
bringing total accounts to 66,800 compared to 2,244 accounts added during the
second quarter of 1998. During the first six months of 1999, Wit Capital added
55,928 new accounts compared to 4,017 accounts added during the first six months
of 1998. As of June 30, 1999, total active accounts numbered 27,060.
Interest income for the three months ended June 30, 1999 increased to $1.2
million from $26,000 for the three months ended June 30, 1998. For the six
months ended June 30, 1999, interest income increased to $1.4 million from
$45,000 for the six months ended June 30, 1998. The Company earns interest
income from the investment of cash balances raised through financing activities
until the funds are used in its business. During the first six months of 1999,
the Company's average monthly cash balance was $56.4 million as compared to a
monthly average of $1.0 million for the first six months of 1998.
Other revenue for the three months ended June 30, 1999 increased to $290,000
from $0 for the three months ended June 30, 1998. For the six months ended June
30, 1999, other revenue increased to $444,000 from $0 for the six months ended
June 30, 1998. For the three and six month periods ended June 30, 1999, other
revenue primarily consists of unrealized gains on equity securities that the
Company received as consideration for financial advisory services.
EXPENSES
Compensation and benefits expense for the three months ended June 30, 1999
increased to $8.6 million from $690,000 for the three months ended June 30,
1998. For the six months ended June 30, 1999, compensation and benefits expense
increased to $15.1 million from $1.2 million for the six months ended June 30,
1998. Compensation and benefits expense consists of salaries, bonuses and other
benefits paid or provided to Wit Capital's employees. The increase in
compensation expense primarily relates to an increase in the number of
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employees from 44 as of June 30, 1998 to 169 as of June 30, 1999. Additionally,
in February 1999, the Company entered into employment contracts with several
professionals which entitled them to a total of $5.5 million in upfront
payments. The Company recognized compensation expense of $2.6 million related to
those portions of the amounts paid for which no future service by the employees
was required. As Wit Capital hires more investment banking and research
professionals and participates in more transactions, it expects its compensation
expense to grow significantly.
Marketing expense for the three months ended June 30, 1999 increased to $422,000
from $307,000 for the three months ended June 30, 1998. For the six months ended
June 30, 1999, marketing expense decreased to $473,000 from $538,000 for the six
months ended June 30, 1998. During 1998 marketing expense related to developing
Wit Capital's brand name recognition. During 1999, the Company focused on
acquiring customers simply by offering access to initial public offerings.
Marketing expense in 1999 primarily relates to the planned roll-out of the
digital trading facility, and the Company expects these expenses to increase
significantly in connection with the continued development of that business.
Occupancy expense for the three months ended June 30, 1999 increased to $213,000
from $46,000 for the three months ended June 30, 1998. For the six months ended
June 30, 1999, occupancy expense increased to $304,000 from $89,000 for the six
months ended June 30, 1998. Occupancy expense includes costs related to leasing
office space in New York and San Francisco and the increase reflects the
Company's growth and need for expanded office facilities. Wit Capital opened its
San Francisco office in 1998, and leased additional space in its New York office
in the first quarter of 1999. As Wit Capital continues to grow and expand its
business, it expects occupancy expense will increase.
Data Processing and communications expense for the three months ended June 30,
1999 increased to $884,000 from $120,000 for the three months ended June 30,
1998. For the six months ended June 30, 1999, data processing and communications
expense increased to $1.2 million from $271,000 for the six months ended June
30, 1998. Data processing and communications expense includes costs related to
market data services, transaction processing, and telephone and other
communication charges. These expenses have increased as a result of an increased
number of customer accounts and an increased volume of transactions processed.
The Company expects these costs will continue to grow as transaction volume
increases.
Technology development expense for the three months ended June 30, 1999
increased to $526,000 from $232,000 for the three months ended June 30, 1998.
For the six months ended June 30, 1999, technology development expense increased
to $862,000 from $283,000 for the six months ended June 30, 1998. This increase
resulted from enhancements to Wit Capital's brokerage system and the continued
roll-out of the digital trading facility. The Company expects technology
development expense to increase as operations continue to grow and as it
continues to develop the digital trading facility.
Professional services expense for the three months ended June 30, 1999 increased
to $1.1 million from $171,000 for the three months ended June 30, 1998. For the
six months ended June 30, 1999, professional services expense increased to $1.8
million from $265,000 for the six months ended June 30, 1998. Professional
services expense includes legal, accounting, consulting and recruiting fees
which have all increased as the Company hires additional personnel, develops the
digital trading facility, and increases its brokerage and investment banking
operations.
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Depreciation and amortization for the three months ended June 30, 1999 increased
to $279,000 from $269,000 for the three months ended June 30, 1998. For the six
months ended June 30, 1999, depreciation and amortization increased to $499,000
from $427,000 for the six months ended June 30, 1998. Depreciation and
amortization consists primarily of depreciation and amortization of property,
equipment and leasehold improvements and amortization of computer software. The
increases in depreciation and amortization reflect the increased investments the
Company has made in its equipment and developing its facilities. The Company
expects these expenses to continue to grow with the roll-out of the digital
trading facility.
Brokerage and clearance expense for the three months ended June 30, 1999
increased to $1.1 million from $41,000 for the three months ended June 30, 1998.
For the six months ended June 30, 1999, brokerage and clearance expense
increased to $1.4 million from $55,000 for the six months ended June 30, 1998.
This expense primarily consists of amounts paid to the Company's clearing agent
for processing and clearing customers' trades. The increase in brokerage and
clearance expense reflects the increased volume and growth of the Company's
brokerage operations.
Other expenses for the three months ended June 30, 1999 increased to $966,000
from $245,000 for the three months ended June 30, 1998. For the six months ended
June 30, 1999, other expenses increased to $1.3 million from $429,000 for the
six months ended June 30, 1998. Other expenses include travel and entertainment,
office supplies, registrations and other administrative expenses. Other expenses
in 1998 includes write-downs of $164,000 related to media credits the Company
had previously acquired but which in view of a revised marketing strategy in
1998, decided not to use. In 1998 and through the second quarter of 1999, the
Company experienced an increase in travel and entertainment expenses related to
expanding its investment banking business and an increase in general and
administrative expenses.
LIQUIDITY AND CAPITAL RESOURCES
Historically, Wit Capital has satisfied its cash requirements primarily through
private placements of common stock and convertible preferred stock. During June
1999, the Company completed an initial public offering in which it issued
8,740,000 shares of its common stock at $9.00 per share. The Company received
approximately $72.8 million in cash proceeds, net of underwriting discounts and
offering costs. The Company believes that that its existing cash balances will
be sufficient to meet anticipated cash requirements for at least the next twelve
months. Wit Capital may, nonetheless, seek additional financing to support its
activities during the next twelve months or thereafter. There can be no
assurance, however, that additional capital will be available on reasonable
terms, if at all, when needed or desired.
Net cash used in operating activities was $9.2 million for the six months
ended June 30, 1999, compared to $4.2 million during the same period in the
preceding year. Cash used in operating activities for the six months ended
June 30, 1999 was primarily from a net loss of $7.7 million, an increase in
operating assets of $7.8 million offset by a net increase in operating
liabilities of $5.8 million. Cash used in operating activities for the six
months ended June 30, 1998 was primarily from a net loss of $3.2 million, a
net increase in operating assets of $1.3 million and a decrease in operating
liabilities of $530,000.
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Cash used in investing activities was $2.7 million for the six months ended June
30, 1999, compared to $214,000 for the six months ended June 30, 1998. Cash used
in investing activities for the six months ended June 30, 1999 was primarily
from purchases of fixed assets of $2.2 million and to a lesser extent from
purchases of computer software of $550,000. Cash used in investing activities
for the six months ended June 30, 1998 resulted from purchases of fixed assets
of $153,000 and from purchases of computer software of $62,000.
Cash provided by financing activities was $131.1 million for the six months
ended June 30, 1999, compared to $3.6 million for the six months ended June 30,
1998. Cash provided by financing activities resulted primarily from net proceeds
of $72.8 million received from the initial public offering of our common stock
and, to a lesser extent, from $24.9 million in net proceeds received from the
issuance of Series E Preferred Stock, now Class B Common Stock, and the grant of
warrants to The Goldman Sachs Group, Inc. and from $31.5 million received from
issuances of our Series D Preferred Stock, now Class C Common Stock, to
accredited investors. Cash provided by financing activities for the six months
ended June 30, 1998, was primarily from issuances of our Series A and B
Preferred Stock, now Class C Common Stock, to accredited investors.
The Company made significant improvements to its customer care services during
the second quarter through an investment of approximately $525,000, which was
used to increase the number of call center representatives, improve response
time to customer inquiries, and upgrade its processing software and
telecommunications equipment. The Company is currently upgrading and expanding
the capabilities of its systems infrastructure which at times has been strained
by rapid growth. Wit Capital expects infrastructure expenditures to continue as
it improves and enhances its online brokerage systems, expands its affinity
programs, and continues development of its digital trading facility.
YEAR 2000
The Year 2000 issue involves the potential for system processing and failures of
date-related data resulting from computer-controlled systems using two digits
rather than four to define the applicable year. For example, computer programs
that contain time-sensitive software may recognize a date using two digits of
"00" as the year 1900 rather than the year 2000. This could result in system
failure or miscalculations causing disruptions of our operations, including
among other things, a temporary inability to process transactions in connection
with our investment banking and brokerage activities.
Because the Company is dependent to a very substantial degree upon the proper
functioning of computer systems, the failure of any computer system to be Year
2000 compliant could have a materially adverse affect on the Company. Failure of
this kind could, for example, cause settlement of trades to fail, lead to
incomplete or inaccurate accounting, recording or processing of trades in
securities, result in generation of erroneous results or give rise to
uncertainty about exposure to trading risks and the Company's need for
liquidity. If not remedied, potential risks include business interruption or
shutdown, financial loss, regulatory actions, reputational harm and legal
liability.
The Company has formed a committee, the Y2K steering committee, to investigate
and resolve Year 2000 compliance issues. This committee's mandate is to guide
and coordinate the efforts of the various core
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business units which are working on Year 2000 compliance and to manage the
assessment, planning, testing and implementation of Year 2000 compliant systems
for the entire company. The Y2K steering committee created a process for
developing an inventory of all information systems that the Company uses. The
inventory included all internal and external systems that were mission critical.
To determine whether a mission critical system posed a potential problem, the
Company:
- - interviewed vendors;
- - analyzed the system with testing software;
- - interviewed programmers and developers; and
- - reviewed program code.
During the planning stage of the project, the Company received additional
investments from stockholders which, among other things, permitted the Company
to accelerate its replacement strategy. Information systems originally in need
of remediation for Year 2000 compliance have been replaced as well as tested for
Year 2000 compliance. These systems include:
- - telephone switch and all related instruments;
- - internal LAN and router environment;
- - internal hosted Web site; and
- - the Company's servers.
The Company has completed its internal information technology and
non-information technology assessment, remediation and testing efforts and
believes that its internal software and hardware systems will function properly
with respect to dates in the year 2000 and thereafter. Costs to date related to
Year 2000 assessment and remediation plans are $25,000, and the Company
estimates that it will have additional remediation costs of $100,000.
In addition, the Company depends upon the proper functioning of third-party
computer and non-information technology systems. These parties include
depositories, clearing agencies, clearing houses, commercial banks and other
vendors. The Company has contacted every material vendor with whom the Company
has important financial or operational relationships to determine the extent to
which they are vulnerable to the Year 2000 issue. The Company has carefully
assessed the responses to the Year 2000 questions asked to these vendors. Each
vendor has participated in and passed the Year 2000 compliance tests formulated
by the Securities Industry Association. These vendors have also provided the
Company with written documentation that they are Year 2000 compliant and
confirmed that they have passed the SIA sponsored industry test. Since the
Company does not require unique services from any of these vendors, the Company
believes the SIA testing indicates general Year 2000 compliance. In the event
any of these vendors prove not to be Year 2000 compliant, the Company believes
that it could find a replacement vendor who is Year 2000 compliant, although not
without significant expense or delay. However, based on management's current
information, the Company expects to incur no significant costs in the future for
Year 2000 problems.
The Company's contingency planning efforts focus on creating operating plans in
the case of internal system errors or failures or those of third party vendors
which provide critical services. Management's worst case
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scenario in connection with Year 2000 issues is that there will be a failure on
the part of one or more important vendors and that the Company will experience
difficulties in finding replacement vendors. If these vendors are not Year 2000
compliant despite their internal and external testing, the Company, as well as
many of their other clients, will face system and processing failures until
these issues can be resolved. The Company anticipates that its contingency plan
will be completed in the relatively near future.
Disruption or suspension of activity in the world's financial markets is also
possible. In addition, uncertainty about the success of remediation efforts
generally may cause many market participants to reduce the level of their market
activities temporarily as they assess the effectiveness of these efforts during
a "phase-in" period beginning in late 1999 and early 2000. This turn could
result in a general reduction in trading and other market activities (and lost
revenues) as well as reduced funding availability in late 1999 and early 2000.
The Company cannot predict the impact that such reduction would have on its
business.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company had no holdings of market risk sensitive instruments at June 30,
1999. The Company is, however, exposed to financial market risks, including
changes in interest rates and concerns over inflation.
PART II
ITEM 1- LEGAL PROCEEDINGS
The Company is currently subject to claims and legal proceedings arising in the
normal course of its business. In the opinion of management, based on
discussions with legal counsel, the resolution of such legal proceedings should
not have a material adverse effect on the financial position, results of
operations or liquidity of the Company.
Additionally, a person formerly associated with the Company has asserted a right
to purchase 560,000 shares of common stock at $1.43 per share. In the opinion of
management, such assertion is without merit, and the Company intends to contest
any lawsuit filed against it. These 560,000 shares of common stock have been
reported as forfeited stock options in 1998.
On June 28, 1999, certain customers of the Company filed a purported class
action lawsuit in the Superior Court of the State of Delaware in and for New
Castle County styled ARTHUR E. BENNING, SR., ET AL. V. WIT CAPITAL GROUP, INC.
AND WIT CAPITAL CORPORATION, C.A. No. 99C-06-170 HLA. The seven count complaint
alleges the Company with (i) breach of contract for alleged failure to comply
with the "anti-flipping policy" contained in the Company's account agreement
with its customers; (ii) breach of the implied covenant of good faith and fair
dealing by allegedly violating the anti-flipping policy and alleged failure to
"maintain adequate computer, communications, personnel, accounting, bookkeeping,
and/or other support systems and facilities"; (iii) fraud by reason of the fact
that the Company allegedly violated its own anti-flipping policy and its alleged
first-come/first-served policy in connection with IPOs; (iv) negligent
misrepresentation in its method of allocation of participation in IPOs; (v)
breach of fiduciary duty as a broker; (vi) negligence in handling accounts; and
(vii) violation of Delaware's Consumer Fraud Act. The Company intends to defend
the lawsuit vigorously. The Company does not believe that the lawsuit should
have a material adverse effect
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on the financial position, results of operations or liquidity of the Company.
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS
In connection with the Company's initial public offering of its common stock, in
May 1999 the Company:
(1) converted all outstanding shares of Old Common Stock into an equivalent
number of shares of Class C Common Stock;
(2) created the New Common Stock to be sold in the Company's initial public
offering;
(3) authorized 30,000,000 shares of preferred stock;
(4) authorized an additional 391,000,000 shares of New Common Stock.
At the time of the Company's initial public offering, the number of authorized
shares of common equity was 734,000,000, consisting of 500,000,000 shares of New
Common Stock, 75,000,000 shares of Class B Common Stock and 159,000,000 shares
of Class C Common Stock. The New Common Stock, the Class B Common Stock and the
Class C Common Stock are economically equivalent except that the Class B Common
Stock is non-voting and the Class C Common Stock is not transferable until it
automatically converts into New Common Stock 180 days after the initial public
offering of the Company's New Common Stock.
On June 4, 1999, the Company completed an initial public offering of 8,740,000
shares of its New Common Stock. The managing underwriters in the offering were
Bear, Stearns & Co. Inc., Wit Capital Corporation and Thomas Weisel Partners LLC
(the "Underwriters"). The shares of common stock sold were registered under the
Securities Act of 1933, as amended, by means of a Registration Statement on Form
S-1 (File No. 333-74619) which was declared effective on June 3, 1999. The
aggregate purchase price of the shares was $78,660,000. Underwriting discounts
amounted to $5,506,200, of which $1,295,000 was paid to Wit Capital Corporation.
Expenses related to the offering totaled $1,666,000. After deducting the
underwriting discount and the offering expenses described above, the Company
received net proceeds of $72,782,800. From the time of receipt through June 30,
1999, the proceeds were all applied to working capital.
ITEM 3 - DEFAULT UPON SENIOR SECURITIES
None
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5 - OTHER INFORMATION
FORWARD-LOOKING STATEMENTS
The Company has included in this Form 10-Q filing, and from time to time its
management may make,
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statements which may constitute forward-looking statements within the meaning of
the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. These forward-looking statements are not historical facts but instead
represent only the Company's beliefs regarding future events, many of which, by
their nature, are inherently uncertain and outside of the Company's or its
management's control. It is possible that its actual results may differ,
possibly materially, from the anticipated results indicated in these
forward-looking statements. Important factors that could cause actual results to
differ from those in the Company's specific forward-looking statements include:
- - a decline in general economic conditions or the United States
securities markets;
- - the failure of the Company's e-Dealer network to function as
anticipated;
- - the inability to secure share allotments in underwritten offerings in
which the Company participates sufficient to satisfy its customers'
demand and generate revenue;
- - the inability to ensure sufficient revenue to cover its costs and
create profits;
- - problems brought about by the Year 2000 issue; and
- - increasing competitive pressures.
Additional information regarding these and other important factors that could
cause actual results to differ from those in the Company's forward-looking
statements is contained under the section entitled "Risk Factors" in the
Company's Registration Statement on Form S-1 (File No. 333-74619), as filed with
the SEC in connection with the Company's initial public offering of common
stock. The Company hereby incorporates by reference those risk factors (other
than those contained under the headings "Our common stock has never been
publicly traded so we cannot predict the extent to which a market will develop
for our common stock or how volatile that market will be" and "This offering
will cause immediate dilution") into this Form 10-Q.
PROPOSALS OF STOCKHOLDERS
Proposals, if any, of stockholders of the Company intended to be presented at
the 2000 Annual Meeting of Stockholders must be received by the Company for
inclusion in the appropriate proxy materials no later than January 20, 2000.
SALES OF UNREGISTERED SECURITIES
From May 31, 1999 to June 30, 1999, we issued a total of 151,666 shares of Class
C Common Stock to two of our employees upon exercise of their stock options for
$1.43 per share.
From May 31,1999 to June 30, 1999, we issued a total of 10,500 shares of Class C
Common Stock to a consultant upon exercise of its warrants to purchase common
stock for $1.64 per share.
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ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
3.1 --Amended and Restated Certificate of Incorporation of Wit Capital Group,
Inc.
3.2 -- Amended and Restated By-Laws of Wit Capital Group, Inc.
4.1 --Rights Agreement between Wit Capital Group, Inc. and American Stock
Transfer & Trust Company, as Rights Agent
10.1 --Stock Incentive Plan of Wit Capital Group, Inc.
27.1 --Financial Data Schedule
(b) Reports on Form 8-K:
The Company did not file any reports on Form 8-K during the six months
ended June 30, 1999.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Wit Capital Group, Inc.
Dated: August 13, 1999
By: /s/ Ronald Readmond
----------------------------------------
Ronald Readmond
President and Co-Chief Executive Officer
By: /s/ M. Bernard Siegel
----------------------------------------
M. Bernard Siegel
Chief Financial Officer
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Exhibit 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
WIT CAPITAL GROUP, INC.
-----------------------------------------------
The name of the Corporation is "Wit Capital Group, Inc."
The original Certificate of Incorporation was filed with the Secretary
of State of the State of Delaware on July 2, 1998.
The text of the Certificate of Incorporation is hereby amended and
restated to read in its entirety as follows:
FIRST: NAME. The name of the Corporation is Wit Capital Group, Inc.
SECOND: REGISTERED AGENT. The address of its registered office in the
State of Delaware is 1013 Centre Road, in the City of Wilmington, County of New
Castle. The name of its registered agent at such address is Corporation Service
Company.
THIRD: PURPOSE. The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH: Section 1. CAPITAL STOCK. The total number of shares of capital
stock which the Corporation shall have authority to issue is 764,000,000 shares,
consisting of (i) 500,000,000 shares of Common Stock, par value $0.01 per share
(the "COMMON STOCK"), (ii) 75,000,000 shares of Class B Common Stock, par value
$0.01 per share (the "CLASS B COMMON STOCK"), (iii) 159,000,000 shares of Class
C Common Stock, par value $.01 per share (the "CLASS C COMMON STOCK") and (iv)
30,000,000 shares of Preferred Stock, par value $0.001 per share (the "PREFERRED
STOCK"). Shares of any class of capital stock of the Corporation may be issued
for such consideration and for such corporate purposes as the Board of Directors
of the Corporation may from time to time determine.
The following is a statement of the designations and the powers,
preferences and rights, and the qualifications, limitations or restrictions
thereof, in respect of the Preferred Stock which the Board of Directors is
herein authorized to fix and the designations and the powers, preferences and
rights, and the qualifications, limitations or restrictions thereof, in respect
of the Common Stock, the Class B Common Stock and the Class C Common Stock.
<PAGE>
Section 2. PREFERRED STOCK. The Board of Directors is expressly
authorized, by resolution or resolutions, to provide, out of the unissued shares
of the Preferred Stock, for series of the Preferred Stock. Before any shares of
any such series are issued, the Board of Directors shall fix, and is expressly
empowered to fix, by resolution or resolutions, the provisions of the shares
thereof, including, as appropriate:
(a) the designation of such series, the number of shares to
constitute such series and the stated value thereof if different from
the par value thereof;
(b) whether the shares of such series shall have voting
rights, in addition to any voting rights provided by law, and, if so,
the terms of such voting rights (which may be special voting rights)
and the preference or relation which such voting rights shall bear to
the voting rights of any other class or any other series of this class;
(c) the rate of dividends (or method of determining such
rate), if any, payable on such series, the conditions and the date or
dates (or method of determining the date or dates) upon which such
dividends shall be payable, the preference or relation which such
dividends shall bear to the dividends payable on any other class or any
other series of this class;
(d) whether dividends on the shares of such series shall be
cumulative and, in the case of shares of a series having cumulative
dividend rights, the date or dates (or method of determining the date
or dates) from which dividends on the shares of such series shall be
cumulative;
(e) whether the shares of such series shall be subject to
redemption or purchase by the Corporation and, if so, whether such
redemption or purchase shall occur at the option of the Corporation or
the holder of such shares, upon the occurrence of any event or at a
date or dates (or method of determining the date or dates), the times
and prices (or method of determining the times and prices) of such
redemption or purchase, the form of payment of such prices (which may
be cash, property or rights, including securities of the Corporation or
another corporation or other entity) and any other terms and conditions
of such redemption or purchase;
(f) the amount or amounts payable upon shares of such series
upon, and the rights of the holders of such series in, the voluntary or
involuntary liquidation, dissolution or winding up of the Corporation;
(g) whether the shares of such series shall be subject to the
operation of a retirement or sinking fund and, if so, the extent to and
manner in which any such retirement or sinking fund shall be applied to
the purchase or redemption of the shares of such series for retirement
or other corporate purposes and the terms and provisions relative to
the operation thereof;
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<PAGE>
(h) whether the shares of such series shall be convertible
into, or exchangeable for, at the option of the holder or the
Corporation or upon the happening of a specified event, shares of stock
of any other class or of any other series of this class and, if so, the
price or prices or the rate or rates of conversion or exchange and the
method, if any, of adjusting the same;
(i) the limitations and restrictions, if any, to be effective
while any shares of such series are outstanding upon the payment of
dividends or the making of other distributions on, and upon the
purchase, redemption or other acquisition by the Corporation of, the
Common Stock, the Class B Common Stock, the Class C Common Stock, any
other series of the Preferred Stock or any other class of capital
stock;
(j) the conditions or restrictions, if any, upon the creation
of indebtedness of the Corporation or upon the issue of any additional
stock, including additional shares of such series or of any other
series of the Preferred Stock or of any other class of capital stock;
and
(k) any other powers, preferences or rights, or any
qualifications, limitations or restrictions thereof.
Except as otherwise provided by such resolution or resolutions, all
shares of the Preferred Stock shall be of equal rank. All shares of any one
series of the Preferred Stock shall be identical in all respects with all other
shares of such series, except that shares of any one series issued at different
times may differ as to the dates from which dividends thereon shall be
cumulative.
Section 3. COMMON STOCK AND CLASS C COMMON STOCK.
(a) VOTING RIGHTS. Except as otherwise provided herein or as otherwise
required by law, the entire voting power and all voting rights shall be vested
exclusively in the Common Stock and the Class C Common Stock, the holders of
which shall vote together on all matters to be voted on by the stockholders of
the Corporation. Each outstanding share of Common Stock and each outstanding
share of Class C Common Stock shall entitle the holder thereof to one vote, in
person or by proxy, on all matters submitted to a vote of the stockholders of
the Corporation. The Common Stock and Class C Common Stock shall vote together
as a single class.
(b) TRANSFER RESTRICTIONS. Prior to the Transfer Restriction
Termination Date (as hereinafter defined), no holder of Class C Common Stock may
transfer or dispose of any share of Class C Common Stock or any interest in any
such share. Any purported transfer or disposition of a share of Class C Common
Stock in violation of the aforesaid restriction shall be null and void and the
Corporation shall not be required to register the same or otherwise give effect
thereto. Certificates evidencing shares of Class C Common Stock shall bear a
legend evidencing the foregoing restriction. For purposes hereof, the term
"Transfer Restriction Termination Date" shall mean the earlier of (i) the date
which is 180 days following the closing
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<PAGE>
by the Corporation of an initial public offering of shares of the Common Stock
registered under the Securities Act of 1933, as amended, in which (a) the
aggregate net proceeds to the Corporation are at least $5,000,000 and (b) the
per share price to the public is not less than $3.00 (appropriately adjusted for
any stock splits, combinations or stock dividends) and (ii) February 1, 2000.
(c) CONVERSION. Each share of Class C Common Stock shall be
automatically and irrevocably converted into one share of Common Stock, without
further action on the part of the holder thereof, upon the Transfer Restriction
Termination Date and thereafter all rights of the holders of shares of Class C
Common Stock, as holders of Class C Common Stock, shall cease and such holders
shall be treated for all purposes as having become the holders of shares of
Common Stock.
(d) CORPORATION TO RESERVE SHARES OF COMMON STOCK FOR CONVERSION OF
CLASS C COMMON Stock. The Corporation shall at all times reserve and keep
available out of its authorized but unissued shares of Common Stock, solely for
the purpose of issuance upon conversion or exchange of the shares of Class C
Common Stock, at least the number of shares of Common Stock that is equal to the
number of shares of Class C Common Stock then outstanding plus the number of
shares of Class C Common Stock issuable upon exercise of warrants, options and
rights to acquire shares of Class C Common Stock then outstanding or upon
conversion or exchange of other securities exercisable for or exchangeable into
shares of Class C Common Stock then outstanding.
(e) CLASS C COMMON STOCK TO RECEIVE EQUAL TREATMENT. The Class C Common
Stock shall, with respect to any reclassification, recapitalization, stock split
or similar transaction and in any merger, consolidation or share exchange, be
treated in all respects identical to the Common Stock except as otherwise
required by law.
Section 4. CLASS B COMMON STOCK.
(a) VOTING RIGHTS. The Class B Common Stock shall have no voting rights
except (i) as may be required by law, (ii) such rights as may be otherwise
provided herein and (iii) the right, as a separate class, to approve any
amendment or repeal of any provision of this Amended and Restated Certificate of
Incorporation (including, without limitation, by way of a merger or
consolidation of the Corporation) that would adversely affect the voting powers,
designations, preferences and rights of the Class B Common Stock; PROVIDED that
a merger or consolidation that (x) constitutes a Corporate Transaction and (y)
in which all holders of Class B Common Stock receive in such merger or
consolidation the same consideration they would have received had their Class B
Common Stock been converted into Common Stock immediately prior to the record
date for such transaction, shall not be deemed to adversely affect the voting
powers, designations, preferences and rights of the holders of the Class B
Common Stock.
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(b) DIVIDENDS AND DISTRIBUTIONS.
(i) Subject to the provisions of this Article FOURTH, the Corporation
shall not pay dividends or make distributions to any holder of Common Stock
unless simultaneously with such dividend or distribution, as the case may be,
the Corporation makes the same dividend or distribution with respect to each
outstanding share of Class B Common Stock.
(ii) In the case of any dividend or other distribution on any share of
Common Stock payable in Common Stock (including, without limitation,
distributions pursuant to stock splits or divisions of Common Stock), shares of
Class B Common Stock shall be distributed with respect to each outstanding share
of Class B Common Stock. In each case the number of shares of Class B Common
Stock payable per share of Class B Common Stock shall be equal to the number of
shares of Common Stock payable per share of Common Stock.
(iii) In the case of any dividend or other distribution on any share of
Common Stock consisting of other voting securities of the Corporation or of
voting securities of any Subsidiary of the Corporation, the Corporation shall
declare and pay each such dividend in securities of two separate classes,
identical in all respects, except that: (A) the voting rights of each such
security paid to the holders of Class B Common Stock shall have the same voting
rights as the Class B Common Stock; (B) such security paid to the holders of the
Class B Common Stock shall convert into the security paid to the holders of the
Common Stock on the same terms and conditions applicable to the conversion of
the Class B Common Stock into the Common Stock; and (C) with respect only to
dividends or distributions of voting securities of any Person that is a
Subsidiary of the Corporation, the respective voting rights of each such
security paid to the holders of the Class B Common Stock shall otherwise be as
comparable as is practicable to those of the Class B Common Stock.
(iv) In the case of any dividend or distribution on any share of Common
Stock consisting of securities convertible into, or exchangeable for, voting
securities of the Corporation or voting securities of a Subsidiary of the
Corporation, the Corporation shall declare and pay such dividend or distribution
in securities of two separate classes, and provide that such convertible or
exchangeable securities and the underlying securities be identical in all
respects, except that (A) the voting rights of each security underlying the
convertible or exchangeable security paid to the holders of Class B Common Stock
shall have the same voting rights as the Class B Common Stock and (B) such
underlying securities issuable to the holders of the Class B Common Stock shall
convert into the underlying securities paid to the holders of the Common Stock
on the same terms and conditions applicable to the conversion of the Class B
Common Stock into the Common Stock.
(c) CLASS B COMMON STOCK TO RECEIVE EQUAL TREATMENT. The Class B Common
Stock shall, with respect to any reclassification, recapitalization, stock split
or similar
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transaction and in any merger, consolidation or share exchange, be treated in
all respects identical to the Common Stock except as otherwise required by law.
(d) CONVERSION. Upon any Transfer of shares of Class B Common Stock to
any Person other than a GS Holder such transferred shares of Class B Common
Stock shall be automatically and irrevocably converted into an equal number of
shares of common stock, and thereafter all rights of the holder of such
transferred shares of Class B Common Stock as a holder of Class B Common Stock
shall cease and the Person or Persons in whose name or names the certificate or
certificates of common stock are to be issued shall be treated for all purposes
as having become the holder or holders of such shares of common stock.
(e) CORPORATION TO RESERVE SHARES OF COMMON STOCK FOR CONVERSION OF
CLASS B COMMON STOCK. The Corporation shall at all times reserve and keep
available out of its authorized but unissued shares of common stock, solely for
the purpose of issuance upon conversion or exchange of the shares of Class B
Common Stock at least such number of shares of common stock as is equal to the
number of shares of Class B Common Stock then outstanding plus the number of
shares of Class B Common Stock issuable upon exercise of warrants or options
exercisable for or exchangeable into shares of Class B Common Stock then
outstanding or upon conversion or exchange of other securities exercisable for
or exchangeable into shares of Class B Common Stock then outstanding.
(f) NO PREEMPTIVE OR PREFERENTIAL RIGHTS. No stockholder shall, by
reason of the holding of shares of any class or series of capital stock of the
Corporation, have a preemptive or preferential right to acquire or subscribe for
any shares or securities of any class, whether now or hereafter authorized,
which may at any time be issued, sold or offered for sale by the Corporation,
unless specifically provided for in a resolution by the Board of Directors with
respect to a series of Preferred Stock.
(g) CUMULATIVE VOTING. Cumulative voting of shares of any class or
series of capital stock having voting rights is prohibited unless specifically
provided for in a resolution by the Board of Directors with respect to a series
of Preferred Stock.
(h) DEFINITIONS. For purposes of this Article FOURTH, the following
terms shall have the following meanings:
"AFFILIATE" means, with respect to any Person, any Person who, directly or
indirectly, controls, is controlled by or is under common control with that
Person. For purposes of this definition, "control" when used with respect to any
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise;
"COMMON STOCK EQUIVALENT" means any security of the Corporation which is
convertible into, exercisable for or exchangeable for, directly or indirectly,
Common Stock or Class B Common
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Stock of the Corporation, whether at the time of issuance or upon the passage of
time or the occurrence of some future event;
"CORPORATE TRANSACTION" means a consolidation or merger of the Corporation into
or with any other corporation or corporations, or the sale or transfer by the
Corporation of all or substantially all of its assets, in each case under
circumstances in which the holders of a majority in voting power of the
outstanding capital stock of the Corporation, immediately prior to such a
merger, consolidation or sale, own less than a majority in voting power of the
outstanding capital stock of the Corporation or the surviving or resulting
corporation or acquirer, as the case may be, immediately following such a
merger, consolidation or sale;
"GS HOLDER" means The Goldman Sachs Group, L.P. and any Affiliate of such Person
to which The Goldman Sachs Group, L.P., directly or indirectly, transfers Common
Stock, Class B Common Stock or Common Stock Equivalents and any successive
transferees thereafter that are Affiliates of The Goldman Sachs Group, L.P.;
"PERSON" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization or government or other agency or political subdivision thereof;
"SUBSIDIARY" of any Person means (x) a corporation a majority of whose
outstanding shares of capital stock or other equity interests with voting power,
under ordinary circumstances, to elect directors, is at the time, directly or
indirectly, owned by such Person, by one or more Subsidiaries of such Person or
by such Person and one or more Subsidiaries of such Person, and (y) any other
Person (other than a corporation) in which such Person, a Subsidiary of such
Person or such Person and one or more Subsidiaries of such Person, directly or
indirectly, at the date of determination thereof, has (i) at least a majority
ownership interest or (ii) the power to elect or direct the election of the
directors or other governing body of such Person; and
"TRANSFER" means any sale or other disposition, whether voluntary or
involuntary, of beneficial ownership of any Class B Common Stock.
FIFTH: (a) DIRECTORS. The business and affairs of the Corporation shall
be managed by or under the direction of the Board of Directors.
(b) NUMBER, ELECTION AND TERMS OF DIRECTORS. The number of directors
which shall constitute the whole Board of Directors shall be fixed from time to
time by a majority of the directors then in office, subject to an increase in
the number of directors by reason of any provisions contained in or established
pursuant to Article FOURTH, but in any event shall not be less than one. The
Board of Directors shall be classified, with respect to the time for which the
directors severally hold office, into three classes as nearly equal in number as
possible, with the term of those directors of the first class to expire at the
annual meeting of stockholders to be held in 2000, the term of those directors
of the second class to expire at the
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annual meeting of stockholders to be held in 2001, and the term of those
directors of the third class to expire at the annual meeting of stockholders to
be held in 2002, with each class to hold office until its successor is duly
elected and qualified. At each succeeding annual meeting of stockholders,
directors elected to succeed those directors whose terms then expire shall be
elected for a term of office to expire at the third succeeding annual meeting of
stockholders after their election, with each director to hold office until such
person=s successor shall have been duly elected and qualified. Any amendment or
alteration to this Amended and Restated Certificate of Incorporation relating to
the classification of the Board of Directors must be authorized by the
affirmative vote of holders of at least two-thirds of the voting power of all
outstanding shares of capital stock of the Corporation entitled to vote thereon.
Each director shall serve until his successor shall have been duly elected and
qualified or until his earlier death, resignation or removal. Election of
directors need not be by written ballot unless the By-Laws of the Corporation
shall so provide. Advance notice of nominations for the election of directors by
stockholders and of the proposal of business by stockholders shall be given in
the manner provided in the By-Laws of the Corporation.
(c) REMOVAL OF DIRECTORS. No director of the Corporation shall be
removed from office as a director by vote or other action of the stockholders or
otherwise except for cause, and then only by the affirmative vote of the holders
of at least a majority of the voting power of all outstanding shares of capital
stock of the Corporation generally entitled to vote in the election of
directors, voting together as a single class. Except as may otherwise be
provided by law, cause for removal of a director shall be deemed to exist only
if: (i) the director whose removal is proposed has been convicted, or the
director is granted immunity to testify where another person has been convicted,
of a felony by a court of competent jurisdiction and such conviction is no
longer subject to direct appeal (for this purpose, the entry by a director of a
plea of NOLO CONTENDERE shall be deemed to be a conviction not subject to
appeal); (ii) such director has been found by the affirmative vote of a majority
of the entire Board of Directors at any regular or special meeting of the Board
of Directors called for that purpose or by a court of competent jurisdiction to
have been grossly negligent or guilty of misconduct in the performance of his
duties to the Corporation in a matter of substantial importance to the
Corporation; or (iii) such director has been adjudicated by a court of competent
jurisdiction to be mentally incompetent, which mental incompetency directly
affects his ability to function as a director of the Corporation.
Notwithstanding the foregoing, whenever holders of outstanding shares of one or
more series of Preferred Stock are entitled to elect members of the Board of
Directors pursuant to the provisions applicable in the case of arrearages in the
payment of dividends or other defaults contained in a resolution by the Board of
Directors providing for the establishment of any series of Preferred Stock, any
such director of the Corporation so elected may be removed in accordance with
the provision of such resolution by the Board of Directors.
(d) NEWLY CREATED DIRECTORSHIPS AND VACANCIES. Except as provided in
this Article FIFTH, newly created directorships resulting from any increase in
the number of directors and any vacancies on the Board of Directors resulting
from the death, resignation or removal of a director or from any other cause
shall be filled by the affirmative vote of a majority
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of the remaining directors then in office, even though less than a quorum of the
Board of Directors, and not by the stockholders. Any director elected in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the class of directors in which the new directorship was
created or the vacancy occurred and until such director=s successor is elected
and qualified. No decrease in the number of directors constituting the Board of
Directors shall shorten the term of any incumbent director.
(e) DIRECTORS ELECTED BY PREFERRED STOCKHOLDERS. Notwithstanding the
foregoing, in the event that the holders of any class or series of Preferred
Stock of the Corporation shall be entitled, voting separately as a class, to
elect any directors of the Corporation, then the number of directors that may be
elected by such holders voting separately as a class shall be in addition to the
number fixed pursuant to a resolution of the Board of Directors of the
Corporation. Except as otherwise provided in the terms of such class or series,
(i) the terms of the directors elected by such holders voting separately as a
class shall expire at the annual meeting of stockholders next succeeding their
election without regard to the classification of other directors and (ii) any
director or directors elected by such holders voting separately as a class may
be removed, with or without cause, by the holders of a majority of the voting
power of all outstanding shares of stock of the Corporation entitled to vote
separately as a class in an election of such directors.
(f) AMENDMENT, REPEAL, ETC. Notwithstanding anything contained herein
to the contrary, the affirmative vote of the holders of at least two-thirds of
the voting power of all outstanding shares of capital stock of the Corporation
entitled to vote generally for the election of directors shall be required to
alter, amend, adopt any provision inconsistent with or repeal this Article
FIFTH.
SIXTH: STOCKHOLDER ACTION. From and after the first date as of which
the Corporation has a class or series of capital stock registered under the
Securities Exchange Act of 1934, any action required or permitted to be taken by
the stockholders of the Corporation must be effected at a duly called annual or
special meeting of stockholders of the Corporation and may not be effected by
any consent in writing by such stockholders. Except as otherwise required by
law, or as may be prescribed in a resolution by the Board of Directors, special
meetings of stockholders of the Corporation may be called only by the chief
executive officer or by the Board of Directors pursuant to a resolution approved
by the affirmative vote of a majority of the entire Board of Directors. No
business shall be transacted and no corporate action shall be taken at any
special meeting of stockholders other than that stated in the notice of the
meeting or brought before the meeting by or at the direction of the Board of
Directors. Notwithstanding this Article SIXTH, the holders of any series of
Preferred Stock of the Corporation shall be entitled to take action by written
consent to such extent, if any, as may be provided in the terms of such series.
SEVENTH: BY-LAWS. In furtherance and not in limitation of the powers
conferred by statute, the Board of Directors is expressly authorized to make,
amend, alter or repeal by-laws of the Corporation. If not otherwise authorized
by the Board of Directors, the stockholders of the
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Corporation may make, amend, alter or repeal by-laws of the Corporation by the
affirmative vote of holders of at least two-thirds of the voting power of all
outstanding shares of capital stock of the Corporation entitled to vote
generally for the election of directors.
EIGHTH: (a) INDEMNIFICATION. The Corporation shall, to the fullest
extent permitted by law, indemnify any and all persons whom it shall have power
to indemnify from and against any and all of the expenses, liabilities and other
matters, and the indemnification provided for herein shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any statute, By-Law, agreement, vote of stockholders or of disinterested
directors, or otherwise, both as to action in his or her official capacity and
as to action in another capacity while holding such office, and shall continue
as to a person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of the heirs, executors and administrators of such
person.
(b) LIMITED LIABILITY OF DIRECTORS. No director of the Corporation
shall be personally liable to the Corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, except to the extent that
such exemption from liability or limitation thereof is not permitted under the
General Corporation Law of the State of Delaware as currently in effect or as
the same may hereafter be amended. For purposes of this Article EIGHTH,
"fiduciary duty as a director" shall include any fiduciary duty arising out of
serving at the Corporation=s request as a director of, or performing other
services at the Corporation=s request for, another corporation, limited
liability company, partnership, joint venture, trust, employee benefit plan or
other enterprise, and "personal liability to the Corporation or its
stockholders" shall include any liability to such other corporation, limited
liability company, partnership, joint venture, trust, employee benefit plan or
other enterprise, and any liability to the Corporation in its capacity as a
security holder, joint venturer, partner, beneficiary, creditor or investor of
or in any such other corporation, limited liability company, partnership, joint
venture, trust, employee benefit plan or other enterprise.
(c) INSURANCE. The Corporation may maintain insurance, at its expense,
to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise against any such expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under applicable law.
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IN WITNESS WHEREOF, this Amended and Restated Certificate of
Incorporation which restates and integrates and further amends the provisions of
the Certificate of Incorporation of this Corporation, and which has been duly
adopted in accordance with Sections 242 and 245 of the General Corporation Law
of the State of Delaware, has been executed by its duly authorized officer this
7th day of June, 1999.
WIT CAPITAL GROUP, INC.
/s/ Ronald Readmond
---------------------------------
Name: Ronald Readmond
Title: Co-Chief Executive Officer
Attest: /s/ Robert C. Mendelson
-------------------------------
Name: Robert C. Mendelson
Title:Secretary
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CERTIFICATE OF DESIGNATIONS
of
CLASS 1 SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
WIT CAPITAL GROUP, INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
WIT CAPITAL GROUP, INC., a corporation organized and existing under the
General Corporation Law of the State of Delaware, in accordance with the
provisions of Section 103 thereof, DOES HEREBY CERTIFY:
That pursuant to the authority vested in the Board of Directors in
accordance with the provisions of the Certificate of Incorporation of the said
Corporation, the said Board of Directors on May 17, 1999 adopted the following
resolution creating a series of 13,500,000 shares of Preferred Stock designated
as "Class 1 Series A Junior Participating Preferred Stock":
RESOLVED, that pursuant to the authority vested in the Board
of Directors of this Corporation in accordance with the provisions of
the Certificate of Incorporation, a series of Preferred Stock, par
value $.001 per share, of the Corporation be and hereby is created, and
that the designation and number of shares thereof and the voting and
other powers, preferences and relative, participating, optional or
other rights of the shares of such series and the qualifications,
limitations and restrictions thereof are as follows:
CLASS 1 SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
1. DESIGNATION AND AMOUNT. There shall be a series of Preferred Stock
that shall be designated as "Class 1 Series A Junior Participating Preferred
Stock," and the number of shares constituting such series shall be 13,500,000.
Such number of shares may be increased or decreased by resolution of the Board
of Directors; PROVIDED, HOWEVER, that no decrease shall reduce the number of
shares of Class 1 Series A Junior Participating Preferred Stock to less than the
number of shares then issued and outstanding plus the number of shares issuable
upon exercise of outstanding rights, options or warrants or upon conversion of
outstanding securities issued by the Corporation.
<PAGE>
2. DIVIDENDS AND DISTRIBUTIONS.
(A) Subject to the prior and superior rights of the holders of any
shares of any series of Preferred Stock ranking prior and superior to the shares
of Class 1 Series A Junior Participating Preferred Stock with respect to
dividends, the holders of shares of Class 1 Series A Junior Participating
Preferred Stock, in preference to the holders of shares of any class or series
of stock of the Corporation ranking junior to the Class 1 Series A Junior
Participating Preferred Stock, shall be entitled to receive, when, as and if
declared by the Board of Directors out of funds legally available for the
purpose, quarterly dividends payable in cash on the first day of 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 fraction of a share of Class
1 Series A Junior Participating Preferred Stock, in an amount per share (rounded
to the nearest cent) equal to the greater of (a) $10 or (b) the Adjustment
Number (as defined below) times the aggregate per share amount of all cash
dividends, and the Adjustment Number 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, par value $.01 per share, of the Corporation (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 Class 1 Series A Junior Participating
Preferred Stock. The "Adjustment Number" shall initially be 100. In the event
the Corporation shall at any time after June 9, 1999 (the "Rights Declaration
Date") (i) declare any dividend on Common Stock, Class C Common Stock, par value
$.01 per share, of the Corporation (the "Class C Common Stock") or Class B
Common Stock, par value $.01 per share, of the Corporation (the "Class B Common
Stock"), payable in shares of Common Stock or Class B Common Stock, as the case
may be, (ii) subdivide the outstanding Common Stock, Class C Common Stock or
Class B Common Stock or (iii) combine the outstanding Common Stock, Class C
Common Stock or Class B Common Stock into a smaller number of shares, then in
each such case the Adjustment Number in effect immediately prior to such event
shall be adjusted by multiplying such Adjustment Number by a fraction the
numerator of which is the sum of the number of shares of Common Stock
outstanding immediately after such event plus the number of shares of Class C
Common Stock outstanding immediately after such event plus the number of shares
of Class B Common Stock outstanding immediately after such event and the
denominator of which is the sum of the number of shares of Common Stock that
were outstanding immediately prior to such event plus the number of shares of
Class C Common Stock that were outstanding immediately prior to such event plus
the number of shares of Class B Common Stock that were outstanding immediately
prior to such event.
(B) The Corporation shall declare a dividend or distribution on the
Class 1 Series A Junior Participating Preferred Stock as provided in paragraph
(A) above immediately after it declares a dividend or distribution on the Common
Stock (other than a dividend payable in shares of Common Stock, Class C Common
Stock or Class B Common Stock, as the case may
<PAGE>
be); 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 $10 per share on the Class 1 Series A Junior Participating 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 Class 1 Series A Junior Participating Preferred Stock from the
Quarterly Dividend Payment Date next preceding the date of issue of such shares
of Class 1 Series A Junior Participating Preferred Stock, 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 Class 1 Series A Junior Participating
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 Class 1 Series A Junior Participating 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 Class 1 Series A Junior Participating
Preferred Stock entitled to receive payment of a dividend or distribution
declared thereon, which record date shall be no more than thirty (30) days prior
to the date fixed for the payment thereof.
3. VOTING RIGHTS. The holders of shares of Class 1 Series A Junior
Participating Preferred Stock shall have the following voting rights:
(A) Each share of Class 1 Series A Junior Participating Preferred Stock
shall entitle the holder thereof to a number of votes equal to the Adjustment
Number on all matters submitted to a vote of the stockholders of the Corporation
entitled to vote thereon.
(B) Except as otherwise provided herein, in the Certificate of
Incorporation or by law, the holders of shares of Class 1 Series A Junior
Participating Preferred Stock, the holders of shares of any other class or
series entitled to vote with the Common Stock and the holders of shares of
Common Stock shall vote together as one class on all matters submitted to a vote
of stockholders of the Corporation.
(C)(i) If at any time dividends on any Class 1 Series A Junior
Participating Preferred Stock shall be in arrears in an amount equal to six (6)
quarterly dividends thereon, the occurrence of such contingency shall mark the
beginning of a period (herein called a "default period") that shall extend until
such time when all accrued and unpaid dividends for all previous quarterly
dividend periods and for the current quarterly dividend period on all shares of
Class 1 Series A Junior Participating Preferred Stock then outstanding shall
have been declared and paid
<PAGE>
or set apart for payment. During each default period, (1) the number of
directors shall be increased by two (2), effective as of the time of election of
such directors as herein provided, and (2) the holders of Preferred Stock
(including holders of the Class 1 Series A Junior Participating Preferred Stock)
upon which these or like voting rights have been conferred and are exercisable
(the "Voting Preferred Stock") with dividends in arrears in an amount equal to
six (6) quarterly dividends thereon, voting as a class, irrespective of series,
shall have the right to elect such two (2) directors.
(ii) During any default period, such voting right of the
holders of Class 1 Series A Junior Participating Preferred Stock may be
exercised initially at a special meeting called pursuant to subparagraph (iii)
of this Section 3(C) or at any annual meeting of stockholders, and thereafter at
annual meetings of stockholders, provided that such voting right shall not be
exercised unless the holders of at least one-third in number of the shares of
Voting Preferred Stock outstanding shall be present in person or by proxy. The
absence of a quorum of the holders of Common Stock and Class C Common Stock
shall not affect the exercise by the holders of Voting Preferred Stock of such
voting right.
(iii) Unless the holders of Voting Preferred Stock shall,
during an existing default period, have previously exercised their right to
elect directors, the Board of Directors may order, or any stockholder or
stockholders owning in the aggregate not less than ten percent (10%) of the
total number of shares of Voting Preferred Stock outstanding, irrespective of
series, may request, the calling of a special meeting of the holders of Voting
Preferred Stock, which meeting shall thereupon be called by the Chairman of the
Board or the President of the Corporation. Notice of such meeting and of any
annual meeting at which holders of Voting Preferred Stock are entitled to vote
pursuant to this paragraph (C)(iii) shall be given to each holder of record of
Voting Preferred Stock by mailing a copy of such notice to him at his last
address as the same appears on the books of the Corporation. Such meeting shall
be called for a time not earlier than twenty (20) days and not later than sixty
(60) days after such order or request or, in default of the calling of such
meeting within sixty (60) days after such order or request, such meeting may be
called on similar notice by any stockholder or stockholders owning in the
aggregate not less than ten percent (10%) of the total number of shares of
Voting Preferred Stock outstanding. Notwithstanding the provisions of this
paragraph (C)(iii), no such special meeting shall be called during the period
within sixty (60) days immediately preceding the date fixed for the next annual
meeting of the stockholders.
(iv) In any default period, after the holders of Voting
Preferred Stock shall have exercised their right to elect directors voting as a
class, (x) the directors so elected by the holders of Voting Preferred Stock
shall continue in office until their successors shall have been elected by such
holders or until the expiration of the default period, and (y) any vacancy in
the Board of Directors may be filled by vote of a majority of the remaining
directors theretofore elected by the holders of the class or classes of stock
which elected the director whose office shall have become vacant. References in
this paragraph (C) to directors elected by the holders of
<PAGE>
a particular class or classes of stock shall include directors elected by such
directors to fill vacancies as provided in clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default period, (x) the right
of the holders of Voting Preferred Stock as a class to elect directors shall
cease, (y) the term of any directors elected by the holders of Voting Preferred
Stock as a class shall terminate and (z) the number of directors shall be such
number as may be provided for in the Certificate of Incorporation or By-Laws
irrespective of any increase made pursuant to the provisions of paragraph (C) of
this Section 3 (such number being subject, however, to change thereafter in any
manner provided by law or in the Certificate of Incorporation or By-Laws). Any
vacancies in the Board of Directors effected by the provisions of clauses (y)
and (z) in the preceding sentence may be filled by a majority of the remaining
directors.
(D) Except as set forth herein, holders of Class 1 Series A Junior
Participating Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for taking any corporate
action.
4. CERTAIN RESTRICTIONS.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Class 1 Series A Junior Participating 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 Class 1
Series A Junior Participating Preferred Stock outstanding shall have been paid
in full, the Corporation shall not:
(i) declare or pay dividends on, make any other distributions
on, or redeem or purchase or otherwise acquire for consideration any
shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Class 1 Series A Junior
Participating Preferred Stock;
(ii) declare or pay dividends on 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
Class 1 Series A Junior Participating Preferred Stock, except dividends
paid ratably on the Class 1 Series A Junior Participating 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; or
(iii) redeem or purchase or otherwise acquire for
consideration any shares of Class 1 Series A Junior Participating
Preferred Stock, or any shares of stock ranking on a parity with the
Class 1 Series A Junior Participating 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 Class 1 Series
A Junior Participating Preferred
<PAGE>
Stock, or to all such holders and the holders of any such shares
ranking on a parity therewith, 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 and 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.
5. REACQUIRED SHARES. Any shares of Class 1 Series A Junior
Participating Preferred Stock purchased or otherwise acquired by the Corporation
in any manner whatsoever shall be retired and canceled 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 to be created by resolution or resolutions of
the Board of Directors, subject to any conditions and restrictions on issuance
set forth herein.
6. LIQUIDATION, DISSOLUTION OR WINDING UP. (A) Upon any
liquidation (voluntary or otherwise), dissolution or winding up of the
Corporation, no distribution shall be made to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Class 1 Series A Junior Participating Preferred Stock unless,
prior thereto, the holders of shares of Class 1 Series A Junior Participating
Preferred Stock shall have received $100 per share, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not declared,
to the date of such payment (the "Class 1 Series A Liquidation Preference").
Following the payment of the full amount of the Class 1 Series A Liquidation
Preference, no additional distributions shall be made to the holders of shares
of Class 1 Series A Junior Participating Preferred Stock unless, prior thereto,
the holders of shares of Common Stock shall have received an amount per share
(the "Common Adjustment") equal to the quotient obtained by dividing (i) the
Class 1 Series A Liquidation Preference by (ii) the Adjustment Number. Following
the payment of the full amount of the Class 1 Series A Liquidation Preference
and the Common Adjustment in respect of all outstanding shares of Class 1 Series
A Junior Participating Preferred Stock and Common Stock, respectively, holders
of Class 1 Series A Junior Participating Preferred Stock and holders of shares
of Common Stock shall, subject to the prior rights of all other series of
Preferred Stock, if any, ranking prior thereto, receive their ratable and
proportionate share of the remaining assets to be distributed in the ratio of
the Adjustment Number to one (1) with respect to such Class 1 Series A Junior
Participating Preferred Stock and Common Stock, on a per share basis,
respectively.
(B) In the event, however, that there are not sufficient
assets available to permit payment in full of the Class 1 Series A Liquidation
Preference and the liquidation preferences of all other series of Preferred
Stock, if any, that rank on a parity with the Class 1 Series A Junior
Participating Preferred Stock, then such remaining assets shall be distributed
<PAGE>
ratably to the holders of such parity shares in proportion to their respective
liquidation preferences. In the event, however, that there are not sufficient
assets available to permit payment in full of the Common Adjustment, then such
remaining assets shall be distributed ratably to the holders of Common Stock.
(C) Neither the merger or consolidation of the Corporation
into or with another corporation nor the merger or consolidation of any other
corporation into or with the Corporation shall be deemed to be a liquidation,
dissolution or winding up of the Corporation within the meaning of this Section
6, but the sale, lease or conveyance of all or substantially all the
Corporation=s assets shall be deemed to be a liquidation, dissolution or winding
up of the Corporation within the meaning of this Section 6.
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 and/or shares of Class C 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 Class 1 Series A Junior Participating
Preferred Stock shall at the same time be similarly exchanged or changed in an
amount per share equal to the Adjustment Number 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 and/or Class C Common
Stock is changed or exchanged.
8. REDEMPTION. (A) The Corporation, at its option, may redeem
shares of the Class 1 Series A Junior Participating Preferred Stock in whole at
any time and in part from time to time, at a redemption price equal to the
Adjustment Number times the current per share market price (as such term is
hereinafter defined) of the Common Stock on the date of the mailing of the
notice of redemption, together with unpaid accumulated dividends to the date of
such redemption. The "current per share market price" on any date shall be
deemed to be the average of the closing price per share of such Common Stock for
the ten (10) consecutive Trading Days (as such term is hereinafter
defined)immediately prior to such date; PROVIDED, HOWEVER, that in the event
that the current per share market price of the Common Stock is determined during
a period following the announcement of (A) a dividend or distribution on the
Common Stock other than a regular quarterly cash dividend or (B) any
subdivision, combination or reclassification of such Common Stock and the
ex-dividend date for such dividend or distribution, or the record date for such
subdivision, combination or reclassification, shall not have occurred prior to
the commencement of such ten Trading Day period, then, and in each such case,
the current per share market price shall be properly adjusted to take into
account ex-dividend trading. The closing price for each day shall be the last
sales 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 transaction reporting system with respect to
securities listed or admitted to trading on the New York Stock Exchange, or, if
the Common Stock is not listed or admitted to trading on the New York Stock
Exchange, on the principal national securities exchange on which the Common
Stock is listed or admitted to trading, or, if the Common Stock is not listed or
admitted to trading on any national securities exchange but
<PAGE>
sales price information is reported for such security, as reported by the
National Association of Securities Dealers, Inc. Automated Quotations System
("NASDAQ") or such other self-regulatory organization or registered securities
information processor (as such terms are used under the Securities Exchange Act
of 1934, as amended) that then reports information concerning the Common Stock,
or, if sales price information is not so reported, the average of the high bid
and low asked prices in the over-the-counter market on such day, as reported by
NASDAQ or such other entity, or, if on any such date the Common Stock is not
quoted by any such entity, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the Common Stock
selected by the Board of Directors of the Corporation. If on any such date no
such market maker is making a market in the Common Stock, the fair value of the
Common Stock on such date as determined in good faith by the Board of Directors
of the Corporation shall be used. The term "Trading Day" shall mean a day on
which the principal national securities exchange on which the Common Stock is
listed or admitted to trading is open for the transaction of business, or, if
the Common Stock is not listed or admitted to trading on any national securities
exchange but is quoted by NASDAQ, a day on which NASDAQ reports trades, or, if
the Common Stock is not so quoted, a Monday, Tuesday, Wednesday, Thursday or
Friday on which banking institutions in the State of New York are not authorized
or obligated by law or executive order to close.
(B) In the event that fewer than all the outstanding shares of
the Class 1 Series A Junior Participating Preferred Stock are to be redeemed,
the number of shares to be redeemed shall be determined by the Board of
Directors and the shares to be redeemed shall be determined by lot or pro rata
as may be determined by the Board of Directors or by any other method that may
be determined by the Board of Directors in its sole discretion to be equitable.
(C) Notice of any such redemption shall be given by mailing to
the holders of the shares of Class 1 Series A Junior Participating Preferred
Stock to be redeemed a notice of such redemption, first class postage prepaid,
not later than the fifteenth (15th) day and not earlier than the (60th) sixtieth
day before the date fixed for redemption, at their last address as the same
shall appear upon the books of the Corporation. Each such notice shall state:
(i) the redemption date; (ii) the number of shares to be redeemed and, if fewer
than all the shares held by such holder are to be redeemed, the number of such
shares to be redeemed from such holder; (iii) the redemption price; (iv) the
place or places where certificates for such shares are to be surrendered for
payment of the redemption price; and (v) that dividends on the shares to be
redeemed will cease to accrue on the close of business on such redemption date.
Any notice that is mailed in the manner herein provided shall be conclusively
presumed to have been duly given, whether or not the stockholder received such
notice, and failure duly to give such notice by mail, or any defect in such
notice, to any holder of Class 1 Series A Junior Participating Preferred Stock
shall not affect the validity of the proceedings for the redemption of any other
shares of Class 1 Series A Junior Participating Preferred Stock that are to be
redeemed. On or after the date fixed for redemption as stated in such notice,
each holder of the shares called for redemption shall surrender the certificate
evidencing such shares to the Corporation at the place designated in such notice
and shall thereupon be entitled to receive payment of the redemption price. If
fewer than
<PAGE>
all the shares represented by any such surrendered certificate are redeemed, a
new certificate shall be issued representing the unredeemed shares.
(D) The shares of Class 1 Series A Junior Participating
Preferred Stock shall not be subject to the operation of any purchase,
retirement or sinking fund.
9. RANKING. The Class 1 Series A Junior Participating
Preferred Stock shall rank PARI PASSU with the Class 2 Series A Junior
Participating Preferred Stock as to any reclassification, recapitalization,
stock split or similar transaction, and as to any payment of dividends and
distribution of assets, and in any merger, consolidation or share exchange,
except as otherwise required by law. The Class 1 Series A Junior Participating
Preferred Stock shall rank junior to all other series of the Corporation=s
Preferred Stock, excluding the Class 2 Series A Junior Participating Preferred
Stock, as to the payment of dividends and the distribution of assets, unless the
terms of any such series shall provide otherwise, and shall rank senior to the
Common Stock, the Class C Common Stock and the Class B Common Stock as to such
matters.
10. AMENDMENT. At any time that any shares of Class 1 Series A
Junior Participating Preferred Stock are outstanding, the Certificate 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
Class 1 Series A Junior Participating Preferred Stock so as to affect them
adversely without the affirmative vote of the holders of two-thirds or more of
the outstanding shares of Class 1 Series A Junior Participating Preferred Stock,
voting separately as a class.
11. FRACTIONAL SHARES. Class 1 Series A Junior Participating
Preferred Stock may be issued in fractions of a share that shall entitle the
holder, in proportion to such holder=s fractional shares, to exercise voting
rights, receive dividends, participate in distributions and to have the benefit
of all other rights of holders of Class 1 Series A Junior Participating
Preferred Stock.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this
Certificate and does affirm the foregoing as true this ____ day of June, 1999.
/s/ Ronald Readmond
---------------------------------
Name: Ronald Readmond
Title: Co-Chief Executive Officer
Attest: /s/ Robert C. Mendelson
-------------------------------
Name: Robert C. Mendelson
Title:Secretary
<PAGE>
CERTIFICATE OF DESIGNATIONS,
PREFERENCES AND RIGHTS
OF
CLASS 2 SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
OF
WIT CAPITAL GROUP, INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
WIT CAPITAL GROUP, INC., a corporation organized and existing under the
General Corporation Law of the State of Delaware, in accordance with the
provisions of Section 103 thereof, DOES HEREBY CERTIFY:
That pursuant to the authority vested in the Board of Directors in
accordance with the provisions of the Certificate of Incorporation of the said
Corporation, the said Board of Directors on May 17, 1999 adopted the following
resolution creating a series of 1,500,000 shares of Preferred Stock designated
as "Class 2 Series A Junior Participating Preferred Stock":
RESOLVED, that pursuant to the authority vested in the Board
of Directors of this Corporation in accordance with the provisions of
the Certificate of Incorporation, a series of Preferred Stock, par
value $.001 per share, of the Corporation be and hereby is created, and
that the designation and number of shares thereof and the voting and
other powers, preferences and relative, participating, optional or
other rights of the shares of such series and the qualifications,
limitations and restrictions thereof are as follows:
CLASS 2 SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
1. DESIGNATION AND AMOUNT. There shall be a series of
Preferred Stock that shall be designated as "Class 2 Series A Junior
Participating Preferred Stock," and the number of shares constituting such
series shall be 1,500,000. Such number of shares may be increased or decreased
by resolution of the Board of Directors; PROVIDED, HOWEVER, that no decrease
shall reduce the number of shares of Class 2 Series A Junior Participating
Preferred Stock to less than the number of shares then issued and outstanding
plus the number of shares issuable upon exercise of outstanding rights, options
or warrants or upon conversion of outstanding securities issued by the
Corporation.
<PAGE>
2. DIVIDENDS AND DISTRIBUTIONS.
(A) Subject to the prior and superior rights of the holders of any
shares of any series of Preferred Stock ranking prior and superior to the shares
of Class 2 Series A Junior Participating Preferred Stock with respect to
dividends, the holders of shares of Class 2 Series A Junior Participating
Preferred Stock, in preference to the holders of shares of any class or series
of stock of the Corporation ranking junior to the Class 2 Series A Junior
Participating Preferred Stock, shall be entitled to receive, when, as and if
declared by the Board of Directors out of funds legally available for the
purpose, quarterly dividends payable in cash on the first day of 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 fraction of a share of Class
2 Series A Junior Participating Preferred Stock, in an amount per share (rounded
to the nearest cent) equal to the greater of (a) $10 or (b) the Adjustment
Number (as defined below) times the aggregate per share amount of all cash
dividends, and the Adjustment Number 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 Class B Common Stock or a subdivision of the
outstanding shares of Class B Common Stock (by reclassification or otherwise),
declared on the Class B Common Stock, par value $.01 per share, of the
Corporation (the "Class B 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 Class 2 Series A Junior Participating Preferred Stock. The "Adjustment
Number" shall initially be 100. In the event the Corporation shall at any time
after June 9, 1999 (the "Rights Declaration Date") (i) declare any dividend on
Common Stock, par value $.01 per share, of the Corporation (the "Common Stock"),
the Class C Common Stock, par value $.01 per share, of the Corporation (the
"Class C Common Stock") or Class B Common Stock, payable in shares of Common
Stock or Class B Common Stock, as the case may be, (ii) subdivide the
outstanding Common Stock, the Class C Common Stock or Class B Common Stock or
(iii) combine the outstanding Common Stock, the Class C Common Stock or Class B
Common Stock into a smaller number of shares, then in each such case the
Adjustment Number in effect immediately prior to such event shall be adjusted by
multiplying such Adjustment Number by a fraction the numerator of which is the
sum of the number of shares of Common Stock outstanding immediately after such
event plus the number of shares of Class B Common Stock outstanding immediately
after such event plus the number of shares of Class C Common Stock outstanding
immediately after such event and the denominator of which is the sum of the
number of shares of Common Stock that were outstanding immediately prior to such
event plus the number of shares of Class C Common Stock that were outstanding
immediately prior to such event plus the number of shares of Class B Common
Stock that were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the
Class 2 Series A Junior Participating Preferred Stock as provided in paragraph
(A) above immediately after it declares a dividend or distribution on the Class
B Common Stock (other than a dividend payable in shares of Class B Common
Stock); provided that, in the event no dividend or
<PAGE>
distribution shall have been declared on the Class B Common Stock during the
period between any Quarterly Dividend Payment Date and the next subsequent
Quarterly Dividend Payment Date, a dividend of $10 per share on the Class 2
Series A Junior Participating 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 Class 2 Series A Junior Participating Preferred Stock from the
Quarterly Dividend Payment Date next preceding the date of issue of such shares
of Class 2 Series A Junior Participating Preferred Stock, 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 Class 2 Series A Junior Participating
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 Class 2 Series A Junior Participating 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 Class 2 Series A Junior Participating
Preferred Stock entitled to receive payment of a dividend or distribution
declared thereon, which record date shall be no more than thirty (30) days prior
to the date fixed for the payment thereof.
3. VOTING RIGHTS. The holders of shares of Class 2 Series A Junior
Participating Preferred Stock shall have the following voting rights:
(A) Each share of Class 2 Series A Junior Participating Preferred Stock
shall entitle the holder thereof to a number of votes equal to the Adjustment
Number on all matters submitted to a vote of the holders of the Class B Common
Stock.
(B) Except as otherwise provided herein, in the Certificate of
Incorporation or by law, shares of Class 2 Series A Junior Participating
Preferred Stock shall have identical voting rights as shares of Class B Common
Stock.
(C) Except as set forth herein, holders of Class 2 Series A Junior
Participating 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 Class B Common Stock as set forth herein) for taking any
corporate action.
4. CERTAIN RESTRICTIONS.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Class 2 Series A Junior Participating Preferred Stock as provided
in Section 2 are in
<PAGE>
arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Class 2 Series A Junior
Participating Preferred Stock outstanding shall have been paid in full, the
Corporation shall not:
(i) declare or pay dividends on, make any other distributions
on, or redeem or purchase or otherwise acquire for consideration any
shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Class 2 Series A Junior
Participating Preferred Stock;
(ii) declare or pay dividends on 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
Class 2 Series A Junior Participating Preferred Stock, except dividends
paid ratably on the Class 2 Series A Junior Participating 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; or
(iii) redeem or purchase or otherwise acquire for
consideration any shares of Class 2 Series A Junior Participating
Preferred Stock, or any shares of stock ranking on a parity with the
Class 2 Series A Junior Participating 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 Class 2 Series
A Junior Participating Preferred Stock, or to all such holders and the
holders of any such shares ranking on a parity therewith, 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 and
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.
5. REACQUIRED SHARES. Any shares of Class 2 Series A Junior
Participating Preferred Stock purchased or otherwise acquired by the Corporation
in any manner whatsoever shall be retired and canceled 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 to be created by resolution or resolutions of
the Board of Directors, subject to any conditions and restrictions on issuance
set forth herein.
6. LIQUIDATION, DISSOLUTION OR WINDING UP. (A) Upon any
liquidation (voluntary or otherwise), dissolution or winding up of the
Corporation, no distribution shall be made to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Class 2 Series A Junior Participating Preferred Stock unless,
<PAGE>
prior thereto, the holders of shares of Class 2 Series A Junior Participating
Preferred Stock shall have received $100 per share, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not declared,
to the date of such payment (the "Class 2 Series A Liquidation Preference").
Following the payment of the full amount of the Class 2 Series A Liquidation
Preference, no additional distributions shall be made to the holders of shares
of Class 2 Series A Junior Participating Preferred Stock unless, prior thereto,
the holders of shares of Class B Common Stock shall have received an amount per
share (the "Class B Common Adjustment") equal to the quotient obtained by
dividing (i) the Class 2 Series A Liquidation Preference by (ii) the Adjustment
Number. Following the payment of the full amount of the Class 2 Series A
Liquidation Preference and the Class B Common Adjustment in respect of all
outstanding shares of Class 2 Series A Junior Participating Preferred Stock and
Class B Common Stock, respectively, holders of Class 2 Series A Junior
Participating Preferred Stock and holders of shares of Class B Common Stock
shall, subject to the prior rights of all other series of Preferred Stock, if
any, ranking prior thereto, receive their ratable and proportionate share of the
remaining assets to be distributed in the ratio of the Adjustment Number to one
(1) with respect to such Class 2 Series A Junior Participating Preferred Stock
and Class B Common Stock, on a per share basis, respectively.
(B) In the event, however, that there are not sufficient
assets available to permit payment in full of the Class 2 Series A Liquidation
Preference and the liquidation preferences of all other series of Preferred
Stock, if any, that rank on a parity with the Class 2 Series A Junior
Participating Preferred Stock, then such remaining assets shall be distributed
ratably to the holders of such parity shares in proportion to their respective
liquidation preferences. In the event, however, that there are not sufficient
assets available to permit payment in full of the Class B Common Adjustment,
then such remaining assets shall be distributed ratably to the holders of Class
B Common Stock.
(C) Neither the merger or consolidation of the Corporation
into or with another corporation nor the merger or consolidation of any other
corporation into or with the Corporation shall be deemed to be a liquidation,
dissolution or winding up of the Corporation within the meaning of this Section
6, but the sale, lease or conveyance of all or substantially all the
Corporation=s assets shall be deemed to be a liquidation, dissolution or winding
up of the Corporation within the meaning of this Section 6.
7. CONSOLIDATION, MERGER, ETC. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Class B 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 Class 2 Series A Junior Participating Preferred Stock shall at the same time
be similarly exchanged or changed in an amount per share equal to the Adjustment
Number 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 Class B Common Stock is changed or exchanged.
<PAGE>
8. REDEMPTION. (A) The Corporation, at its option, may redeem shares of
the Class 2 Series A Junior Participating Preferred Stock in whole at any time
and in part from time to time, at a redemption price equal to the Adjustment
Number times the current per share market price (as such term is hereinafter
defined) of the Class B Common Stock on the date of the mailing of the notice of
redemption, together with unpaid accumulated dividends to the date of such
redemption. The "current per share market price" on any date shall be deemed to
be the average of the closing price per share of such Common Stock for the ten
(10) consecutive Trading Days (as such term is hereinafter defined) immediately
prior to such date; PROVIDED, HOWEVER, that in the event that the current per
share market price of the Common Stock is determined during a period following
the announcement of (A) a dividend or distribution on the Common Stock other
than a regular quarterly cash dividend or (B) any subdivision, combination or
reclassification of such Common Stock and the ex-dividend date for such dividend
or distribution, or the record date for such subdivision, combination or
reclassification, shall not have occurred prior to the commencement of such ten
(10) Trading Day period, then, and in each such case, the current per share
market price shall be properly adjusted to take into account ex-dividend
trading. The closing price for each day shall be the last sales 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 transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange, or, if the Common Stock is
not listed or admitted to trading on the New York Stock Exchange, on the
principal national securities exchange on which the Common Stock is listed or
admitted to trading, or, if the Common Stock is not listed or admitted to
trading on any national securities exchange but sales price information is
reported for such security, as reported by the National Association of
Securities Dealers, Inc. Automated Quotations System ("NASDAQ") or such other
self-regulatory organization or registered securities information processor (as
such terms are used under the Securities Exchange Act of 1934, as amended) that
then reports information concerning the Common Stock, or, if sales price
information is not so reported, the average of the high bid and low asked prices
in the over-the-counter market on such day, as reported by NASDAQ or such other
entity, or, if on any such date the Common Stock is not quoted by any such
entity, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Common Stock selected by the
Board of Directors of the Corporation. If on any such date no such market maker
is making a market in the Common Stock, the fair value of the Common Stock on
such date as determined in good faith by the Board of Directors of the
Corporation shall be used. The term "Trading Day" shall mean a day on which the
principal national securities exchange on which the Common Stock is listed or
admitted to trading is open for the transaction of business, or, if the Common
Stock is not listed or admitted to trading on any national securities exchange
but is quoted by NASDAQ, a day on which NASDAQ reports trades, or, if the Common
Stock is not so quoted, a Monday, Tuesday, Wednesday, Thursday or Friday on
which banking institutions in the State of New York are not authorized or
obligated by law or executive order to close.
(B) In the event that fewer than all the outstanding shares of the
Class 2 Series A Junior Participating Preferred Stock are to be redeemed, the
number of shares to be redeemed
<PAGE>
shall be determined by the Board of Directors and the shares to be redeemed
shall be determined by lot or pro rata as may be determined by the Board of
Directors or by any other method that may be determined by the Board of
Directors in its sole discretion to be equitable.
(C) Notice of any such redemption shall be given by mailing to the
holders of the shares of Class 2 Series A Junior Participating Preferred Stock
to be redeemed a notice of such redemption, first class postage prepaid, not
later than the fifteenth (15th) day and not earlier than the (60th) sixtieth day
before the date fixed for redemption, at their last address as the same shall
appear upon the books of the Corporation. Each such notice shall state: (i) the
redemption date; (ii) the number of shares to be redeemed and, if fewer than all
the shares held by such holder are to be redeemed, the number of such shares to
be redeemed from such holder; (iii) the redemption price; (iv) the place or
places where certificates for such shares are to be surrendered for payment of
the redemption price; and (v) that dividends on the shares to be redeemed will
cease to accrue on the close of business on such redemption date. Any notice
that is mailed in the manner herein provided shall be conclusively presumed to
have been duly given, whether or not the stockholder received such notice, and
failure duly to give such notice by mail, or any defect in such notice, to any
holder of Class 2 Series A Junior Participating Preferred Stock shall not affect
the validity of the proceedings for the redemption of any other shares of Class
2 Series A Junior Participating Preferred Stock that are to be redeemed. On or
after the date fixed for redemption as stated in such notice, each holder of the
shares called for redemption shall surrender the certificate evidencing such
shares to the Corporation at the place designated in such notice and shall
thereupon be entitled to receive payment of the redemption price. If fewer than
all the shares represented by any such surrendered certificate are redeemed, a
new certificate shall be issued representing the unredeemed shares.
(D) The shares of Class 2 Series A Junior Participating Preferred Stock
shall not be subject to the operation of any purchase, retirement or sinking
fund.
9. RANKING. The Class 2 Series A Junior Participating Preferred Stock
shall rank PARI PASSU with the Class 1 Series A Junior Participating Preferred
Stock as to any reclassification, recapitalization, stock split or similar
transaction, and as to any payment of dividends and distribution of assets, and
in any merger, consolidation or share exchange, except as otherwise required by
law. The Class 2 Series A Junior Participating Preferred Stock shall rank junior
to all other series of the Corporation=s Preferred Stock, excluding the Class 1
Series A Junior Participating Preferred Stock, as to the payment of dividends
and the distribution of assets, unless the terms of any such series shall
provide otherwise, and shall rank senior to the Common Stock, the Class C Common
Stock and the Class B Common Stock as to such matters.
10. AMENDMENT. At any time that any shares of Class 2 Series A Junior
Participating Preferred Stock are outstanding, the Certificate 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 Class 2 Series
A Junior Participating Preferred Stock so as to affect them adversely without
the affirmative vote of the holders of two-thirds or more of the
<PAGE>
outstanding shares of Class 2 Series A Junior Participating Preferred Stock,
voting separately as a class.
11. FRACTIONAL SHARES. Class 2 Series A Junior Participating Preferred
Stock may be issued in fractions of a share that shall entitle the holder, in
proportion to such holder=s fractional shares, to exercise voting rights,
receive dividends, participate in distributions and to have the benefit of all
other rights of holders of Class 2 Series A Junior Participating Preferred
Stock.
12. CONVERSION. Upon any Transfer of shares of Class 2 Series A Junior
Participating Preferred Stock to any Person other than a GS Holder, such
transferred shares of Class 2 Series A Junior Participating Preferred Stock
shall be automatically and irrevocably converted into an equal number of shares
of Class 1 Series A Junior Participating Preferred Stock, and thereafter, all
rights of the holder of such transferred shares of Class 2 Series A Junior
Participating Preferred Stock as a holder of Class 2 Series A Junior
Participating Preferred Stock shall cease and the Person or Persons in whose
name or names the certificate or certificates of Class 1 Series A Junior
Participating Preferred Stock are to be issued shall be treated for all purposes
as having become the holder or holders of such shares of Class 1 Series A Junior
Participating Preferred Stock. "GS Holder" means The Goldman Sachs Group, L.P.
and any Affiliate of such Person to which The Goldman Sachs Group, L.P.,
directly or indirectly, transfers beneficial ownership in the capital stock of
the Corporation and any successive transferees thereafter that are Affiliates of
The Goldman Sachs Group, L.P. "Transfer" means any sale or other disposition,
whether voluntary or involuntary, of beneficial ownership of any capital stock
of the Corporation. "Person" means any individual, corporation, partnership,
limited liability company, joint venture, association, joint stock company,
trust, unincorporated organization or government or other agency or political
subdivision thereof. "Affiliate" means, with respect to any Person, any Person
who, directly or indirectly, controls, is controlled by or is under common
control with that Person. For purposes of this definition, "control" when used
with respect to any Person, means the power to direct the management and
policies of such Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Certificate and
does affirm the foregoing as true this ___ day of June, 1999.
/s/ Ronald Readmond
---------------------------------
Name: Ronald Readmond
Title: Co-Chief Executive Officer
Attest: /s/ Robert C. Mendelson
-------------------------------
Name: Robert C. Mendelson
Title:Secretary
<PAGE>
Exhibit 3.2
BY-LAWS
OF
WIT CAPITAL GROUP, INC.
-----------------------
ARTICLE I
STOCKHOLDERS
SECTION 1. ANNUAL MEETING. The annual meeting of the stockholders of
the Corporation shall be held on such date, at such time and at such place
within or without the State of Delaware as may be designated by the Board of
Directors, for the purpose of electing directors and for the transaction of such
other business as may be properly brought before the meeting.
SECTION 2. SPECIAL MEETINGS. Except as otherwise provided in the
Certificate of Incorporation, a special meeting of the stockholders of the
Corporation may be called at any time by the Chief Executive Officer or the
Board of Directors pursuant to a resolution adopted by the affirmative vote of a
majority of the entire Board. Any special meeting of the stockholders shall be
held on such date, at such time and at such place within or without the State of
Delaware as the Board of Directors or the officer calling the meeting may
designate. At a special meeting of the stockholders, no business shall be
transacted and no corporate action shall be taken other than that stated in the
notice of the meeting or brought before the meeting by or at the direction of
the Board of Directors.
<PAGE>
SECTION 3. NOTICE OF STOCKHOLDER BUSINESS AND NOMINATIONS.
Nominations of persons for election to the Board of Directors of the
Corporation and the proposal of business to be considered by the stockholders
may be made at an annual meeting of stockholders by or at the direction of the
Board of Directors or by any stockholder of the Corporation who was a
stockholder of record on the record date established for the giving of notice of
such meeting, who is entitled to vote at the meeting and who complies with the
notice procedures set forth in these By-Laws.
In the event the Corporation calls a special meeting of stockholders
for the purpose of electing directors, nominations of persons for election to
the Board of Directors may be made by or at the direction of the Board of
Directors or by any stockholder of the Corporation who was a stockholder of
record at the record date for the giving of notice of such meeting, who was a
stockholder of record on the record date established for the giving of notice of
such meeting, who is entitled to vote at the meeting and who complies with the
notice procedures set forth in these By-Laws.
A notice to be given by a stockholder shall set forth: (a) as to each
person whom the stockholder proposes to nominate for election as a director, all
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors in an election contest, or is
otherwise required, in each case pursuant to Regulation 14A under the Securities
Exchange Act of 1934 and Rule 14a-11 thereunder (including such person's written
consent to being named in the proxy statement as a nominee and to serving as a
director if elected); (b) as to any other business that the stockholder proposes
to bring before the meeting, a brief description of such business, the reasons
for conducting such business at the meeting and any material interest in such
business of such stockholder and the beneficial owner, if any, on
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whose behalf the proposal is made; and (c) as to the stockholder giving the
notice and the beneficial owner, if any, on whose behalf the nomination or
proposal is made, (i) the name and address of such stockholder, as they appear
on the Corporation's books, and of such beneficial owner and (ii) the class and
number of shares of the Corporation which are owned beneficially and of record
by such stockholder and such beneficial owner.
For nominations or other business to be properly brought before an
annual meeting of stockholders by a stockholder, the stockholder must have given
timely notice thereof in writing to the Secretary of the Corporation and such
other business must otherwise be a proper matter for stockholder action. To be
timely, a stockholder's notice shall be given to the Secretary at the principal
executive offices of the Corporation not later than the close of business on the
ninetieth (90th) day nor earlier than the close of business on the one hundred
twentieth (120th) day prior to first anniversary of the date of the annual
meeting for the preceding year (or, in the case of the annual meeting of
stockholders to be held in 2000, not fewer than ninety (90) nor more than one
hundred twenty (120) days prior to May 1, 2000). In the event that the date of
an annual meeting is more than thirty (30) days before or more than sixty (60)
days after the date of the annual meeting in the preceding year, notice by a
stockholder to be timely shall be given not earlier than the close of business
on the one hundred twentieth (120th) day prior to such annual meeting and not
later than the close of business on the later of the ninetieth (90th) day prior
to such annual meeting or the tenth (10th) day following the day on which public
announcement or disclosure of the date of such meeting is first made by the
Corporation. In no event shall the public announcement of an adjournment of an
annual meeting commence a new time period for the giving of notice by a
stockholder as described in these By-Laws.
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Notwithstanding any provision of this Section 3 to the contrary, in the
event that the number of directors to be elected to the Board of Directors of
the Corporation at an annual meeting of stockholders is increased by virtue of
an increase in the size of the Board of Directors and either all of the nominees
for director at such annual meeting of stockholders or the size of the increased
Board of Directors is not publicly announced or disclosed by the Corporation at
least one hundred (100) days prior to the first anniversary of the annual
meeting in the preceding year (or, in the case of the annual meeting of
stockholders to be held in 2000, at least one hundred (100) days prior to May 1,
2000), a notice given by a stockholder, containing the information set forth
above, shall also be considered timely hereunder, but only with respect to
nominees to stand for election at the annual meeting as the result of any new
positions created by such increase, if it shall be delivered to the Secretary at
the principal executive offices of the Corporation not later than the close of
business on the tenth (10th) day following the first day on which all such
nominees or the size of the increased Board of Directors shall have been
publicly announced or disclosed.
For nominations by a stockholder to be properly brought before a
special meeting of stockholders called for the purpose of electing directors,
the stockholder must have given a timely notice in writing, containing the
information set forth above, to the Secretary of the Corporation. To be timely,
a stockholder's notice shall be given to the Secretary at the principal
executive offices of the Corporation not later than the close of business on the
ninetieth (90th) day nor earlier than the close of business on the one hundred
twentieth (120th) day prior to such special meeting, or the tenth (10th) day
following the day on which the public announcement or disclosure is first made
of the date of the special meeting. In no event shall the public
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announcement or disclosure of an adjournment of a special meeting commence a new
time period for the giving of notice by a stockholder as described in these
By-Laws.
Only such persons who are nominated in accordance with the procedures
set forth in these By-Laws shall be eligible to serve as directors and only such
business shall be conducted at a meeting of stockholders as shall have been
brought before the meeting in accordance with these By-Laws. Except as otherwise
provided by law, the Certificate of Incorporation or these By-Laws, the Chairman
of the meeting shall have the power and duty to determine whether a nomination
or any business proposed to be brought before the meeting was made or proposed,
as the case may be, in accordance with the procedures set forth herein and, if
any proposed nomination or business is not in compliance with procedures set
forth herein, to declare that such defective proposal or nomination shall be
disregarded.
Nothing herein shall be deemed to limit or restrict the procedures
required to be followed in connection with stockholder proposals to be brought
before a meeting of stockholders pursuant to Regulation 14A under the Securities
Exchange Act of 1934 and Rule 14a-8 thereunder.
SECTION 4. NOTICE OF MEETINGS. Except as otherwise provided in these
By-Laws or by law, a written notice of each meeting shall be given not fewer
than ten (10) days nor more than sixty (60) days before the date of the meeting
to each stockholder of record entitled to vote at such meeting. The notice shall
state the place, date and hour of the meeting and, in the case of a special
meeting, the purpose or purposes for which the meeting is called. If mailed,
such notice shall be deemed to be given when deposited in the United States
mail, postage prepaid, directed to a stockholder at his or her address as it
appears on the records of the Corporation.
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<PAGE>
SECTION 5. QUORUM. At any meeting of the stockholders, the holders of a
majority in number of the total outstanding shares of stock of the Corporation
entitled to vote at such meeting, present in person or represented by proxy,
shall constitute a quorum of the stockholders for all purposes, unless the
representation of a larger number of shares shall be required by law, by the
Certificate of Incorporation or by these By-Laws, in which case the
representation of the number of shares so required shall constitute a quorum;
provided that at any meeting of the stockholders at which the holders of any
class of stock of the Corporation shall be entitled to vote separately as a
class, the holders of a majority in number of the outstanding shares of such
class, present in person or represented by proxy, shall constitute a quorum for
purposes of such class vote unless the representation of a larger number of
shares of such class shall be required by law, by the Certificate of
Incorporation or by these By-Laws.
SECTION 6. ADJOURNED MEETINGS. Whether or not a quorum shall be present
in person or represented at any meeting of the stockholders, the holders of a
majority in number of the shares of stock of the Corporation present in person
or represented by proxy and entitled to vote at such meeting may adjourn from
time to time; provided, however, that if the holders of any class of stock of
the Corporation are entitled to vote separately as a class upon any matter at
such meeting, any adjournment of the meeting in respect of action by such class
upon such matter shall be determined by the holders of a majority of the shares
of such class present in person or represented by proxy and entitled to vote at
such meeting. When a meeting is adjourned to another time or place, notice need
not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned
meeting, the stockholders, or the holders of any class of stock entitled to vote
separately as a class, as the case may be, may transact any business which might
have been
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<PAGE>
transacted by them at the original meeting. If the adjournment is for more than
thirty (30) days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the adjourned meeting.
SECTION 7. ORGANIZATION. The Chief Executive Officer or, in the absence
of the Chief Executive Officer, the Chairman of the Board or, in the absence of
the Chairman of the Board, the Chief Operating Officer shall call all meetings
of the stockholders to order, and shall act as a Chairman of such meetings. In
the absence of the Chairman of the Board and the Chief Operating Officer, the
holders of a majority in number of the shares of stock of the Corporation
present in person or represented by proxy and entitled to vote at such meeting
shall elect a Chairman.
The Secretary of the Corporation or, in the absence of the Secretary,
the Assistant Secretary of the Corporation shall act as Secretary of all
meetings of the stockholders, but in the absence of the Secretary and the
Assistant Secretary, the Chairman may appoint any person to act as Secretary of
the meeting. It shall be the duty of the Secretary to prepare and make, at least
ten (10) days before every meeting of stockholders, a complete list of
stockholders entitled to vote at such meeting, arranged in alphabetical order
and showing the address of each stockholder and the number of shares registered
in the name of each stockholder. Such list shall be open during ordinary
business hours, either at a place within the city where the meeting is to be
held, which place shall be specified in the notice of the meeting or, if not so
specified, at the place where the meeting is to be held, for the ten (10) days
next preceding the meeting, to the examination of any stockholder for any
purpose germane to the meeting, and shall be produced and kept at the time
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<PAGE>
and place of the meeting during the whole time thereof and subject to the
inspection of any stockholder who may be present.
SECTION 8. VOTING AND ELECTION OF DIRECTORS. Except as otherwise
provided in the Certificate of Incorporation or by law, each stockholder shall
be entitled to one vote for each share of the capital stock of the Corporation
entitled to vote registered in the name of such stockholder upon the books of
the Corporation. Each stockholder entitled to vote at a meeting of stockholders
may authorize another person or persons to act for him or her by proxy executed
in writing by the stockholder or by such person's duly authorized
attorney-in-fact, but no such proxy shall be voted or acted upon after three (3)
years from its date, unless the proxy provides for a longer period.
Except as otherwise provided by law or by the Certificate of
Incorporation and subject to the rights of the holders of any class of capital
stock to elect directors, directors shall be elected by a plurality of the votes
cast at a meeting of stockholders by the stockholders entitled to vote in the
election and, whenever any corporate action, other than the election of
directors is to be taken, it shall be authorized by a majority of the votes cast
at a meeting of stockholders by the stockholders entitled to vote generally for
the election of directors.
Shares of the capital stock of the Corporation belonging to the
Corporation or to another corporation, if a majority of the shares entitled to
vote in the election of directors of such other corporation is held, directly or
indirectly, by the Corporation, shall neither be entitled to vote nor be counted
for quorum purposes.
SECTION 9. INSPECTORS OF ELECTIONS; OPENING AND CLOSING THE POLLS.
When required by law or directed by the presiding officer or upon the demand of
any stockholder entitled to vote, but not otherwise, the polls shall be opened
and closed, the proxies shall be received and
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<PAGE>
taken in charge, and all questions touching the qualification of voters, the
validity of proxies and the acceptance or rejection of votes shall be decided at
any meeting of the stockholders by one or more inspectors who may be appointed
by the Board of Directors before the meeting, or if not so appointed, shall be
appointed by the presiding officer at the meeting. If any person so appointed
fails to appear or act, the vacancy may be filled by appointment in like manner.
The Chairman of the meeting may fix and announce at the meeting the date and
time of the opening and the closing of the polls for each matter upon which the
stockholders will vote at a meeting.
SECTION 10. NO STOCKHOLDER ACTION BY WRITTEN CONSENT. Any action
required or permitted to be taken by the stockholders of the Corporation must be
effected at a duly called annual or special meeting of the stockholders, upon
due notice and in accordance with the other provisions of these By-Laws and may
not be effected by any consent in writing by the stockholders.
SECTION 11. RECORD DATE. In order that the Corporation may determine
the stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, or to receive payment of any dividend or other
distribution or allotment of any rights, or to exercise any rights in respect of
any change, conversion or exchange of stock or for the purpose of any other
lawful action, as the case may be, the Board of Directors may fix, in advance, a
record date, which shall not be more than sixty (60) days nor fewer than ten
(10) days before the date of such meeting, or more than sixty (60) days prior to
any other action.
If no record date is fixed, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day next preceding the day on which notice is
given or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held; and the record date for
determining
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<PAGE>
stockholders for any other purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
ARTICLE II
BOARD OF DIRECTORS
SECTION 1. NUMBER AND TERM OF OFFICE. The business and affairs of the
Corporation shall be managed under the direction of the Board of Directors, none
of whom need be stockholders of the Corporation. Except as otherwise provided by
the Certificate of Incorporation, the number of the directors of the Corporation
shall be fixed from time to time exclusively pursuant to a resolution adopted by
a majority of the Board of Directors. The Board of Directors shall be
classified, with respect to the time for which the directors severally hold
office, into three classes as nearly equal in number as possible, with the term
of those directors of the first class to expire at the next annual meeting of
stockholders, the term of those directors of the second class to expire at the
next succeeding annual meeting of stockholders, and the term of those directors
of the third class to expire at the second succeeding annual meeting of
stockholders, with each director to hold office until his successor is elected
and qualified. At each succeeding annual meeting of stockholders, directors
elected to succeed those directors whose terms then expire shall be elected for
a term of office to expire at the third succeeding
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annual meeting of stockholders after their election, with each director to hold
office until his successor is elected and qualified or until his earlier death,
resignation or removal.
SECTION 2. REMOVAL, VACANCIES AND ADDITIONAL DIRECTORS. The
stockholders may, at any special meeting the notice of which shall state that it
is called for that purpose, remove for cause any director and fill the vacancy;
provided that whenever any director shall have been elected by the holders of
any class of stock of the Corporation voting separately as a class under the
provisions of the Certificate of Incorporation, such director may be removed,
with or without cause, and the vacancy filled only by the holders of that class
of stock voting separately as a class. Vacancies caused by any such removal and
not filled by the stockholders at the meeting at which such removal shall have
been made, or any vacancy caused by the death or resignation of any director or
for any other reason, and any newly created directorship resulting from any
increase in the authorized number of directors, may be filled by the affirmative
vote of a majority of the directors then in office, although less than a quorum,
and not by the stockholders. Any director so elected to fill any such vacancy or
newly created directorship shall hold office until his successor is elected and
qualified or until his earlier resignation or removal. No decrease in the number
of directors constituting the Board shall shorten the term of any incumbent
director.
Except as may otherwise be provided by law, cause for removal of a
director shall be deemed to exist only if: (i) the director whose removal is
proposed has been convicted, or the director is granted immunity to testify in a
case where another person has been convicted, of a felony by a court of
competent jurisdiction and such conviction is no longer subject to direct appeal
(for this purpose, the entry by a director of a plea of NOLO CONTENDERE shall be
deemed to be a conviction not subject to appeal); (ii) such director has been
found by the affirmative vote of a majority of the entire Board of Directors at
any regular or special meeting of the Board of
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Directors called for that purpose or by a court of competent jurisdiction to
have been grossly negligent or guilty of misconduct in the performance of his
duties to the Corporation in a matter of substantial importance to the
Corporation; or (iii) such director has been adjudicated by a court of competent
jurisdiction to be mentally incompetent, which mental incompetency directly
affects his ability to function as a director of the Corporation.
SECTION 3. PLACE OF MEETINGS. The Board of Directors may hold its
meetings in such place or places in the State of Delaware or outside the State
of Delaware as the Board from time to time shall determine.
SECTION 4. REGULAR MEETINGS. Regular meetings of the Board of Directors
shall be held at such times and places as the Board from time to time by
resolution shall determine. No notice shall be required for any regular meeting
of the Board of Directors; but a copy of every resolution fixing or changing the
time or place of regular meetings shall be mailed to every director at least
five (5) days before the first meeting held in pursuance thereof.
SECTION 5. SPECIAL MEETINGS. Special meetings of the Board of Directors
shall be held whenever called by direction of the Chief Executive Officer, the
Chairman of the Board, the Chief Operating Officer, the President of the
Corporation or by any two of the directors then in office. The person or persons
authorized to call special meetings of the Board of Directors may fix the place
and time of the meetings.
Notice of the day, hour and place of holding of each special meeting
shall be given by mailing the same at least two (2) days before the meeting or
by causing the same to be given by facsimile, electronic communication,
telegraph or telephone at least one day before the meeting to each director.
Unless otherwise indicated in the notice thereof, any and all business other
than an amendment of these By-Laws may be transacted at any special meeting, and
an amendment of
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these By-Laws may be acted upon if the notice of the meeting shall have stated
that the amendment of these By-Laws is one of the purposes of the meeting. At
any meeting at which every director shall be present, even though without any
notice, any business may be transacted, including the amendment of these
By-Laws.
SECTION 6. QUORUM. Subject to the provisions of Section 1 of this
Article II, a majority of the members of the Board of Directors in office (but,
unless the Board shall consist solely of one director, in no case less than
one-third of the entire Board nor fewer than two directors) shall constitute a
quorum for the transaction of business and the vote of the majority of the
directors present at any meeting of the Board of Directors at which a quorum is
present shall be the act of the Board of Directors. If at any meeting of the
Board there is less than a quorum present, a majority of those present may
adjourn the meeting from time to time.
SECTION 7. ORGANIZATION. The Chairman of the Board or, in the absence
or at the request of the Chairman of the Board, the Chief Executive Officer
shall preside at all meetings of the Board of Directors. In the absence of the
Chairman of the Board and the Chief Executive Officer, a Chairman shall be
elected from the directors present. The Secretary of the Corporation or, in the
absence of the Secretary of the Corporation, the Assistant Secretary of the
Corporation shall act as Secretary of all meetings of the Board of Directors;
but in the absence of the Secretary and the Assistant Secretary, the Chairman
may appoint any person to act as Secretary of the meeting.
SECTION 8. COMMITTEES AND EXECUTIVE COMMITTEE.
(A) COMMITTEES.
The Board of Directors may, by a majority of the total number of
directors, designate one or more committees, each committee to consist of one or
more of the directors of the
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Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. In the absence or disqualification of a
member of a committee, the member or members present at any meeting of the
committee and not disqualified from voting, whether or not he or they constitute
a quorum, may unanimously appoint another member of the Board of Directors to
act at the meeting in the place of any such absent or disqualified member.
Unless otherwise restricted by the Certificate of Incorporation or by these
By-Laws, any such committee, to the extent provided in the resolution of the
Board of Directors, shall have and may exercise all the powers and authority of
the Board of Directors in the management of the business and affairs of the
Corporation and may authorize the seal of the Corporation to be affixed to all
papers that may require it.
A majority of any committee may determine its action and fix the time
and place of its meetings, unless the Board shall otherwise provide. Notice of
such meetings shall be given to each member of the committee in the manner
provided for in this Article II of these By-Laws. The Board shall have power at
any time to fill vacancies in, to change the membership of, or to dissolve any
such committee. Nothing herein shall be deemed to prevent the Board from
appointing one or more committees consisting in whole or in part of persons who
are not directors of the Corporation; provided, however, that no such committee
shall have or may exercise any authority of the Board.
Each Committee shall keep regular minutes of its meetings and, on no
less than a quarterly basis, report such minutes to the Board of Directors.
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(B) EXECUTIVE COMMITTEE.
The Board of Directors may, by resolution passed by a majority of the
Board of Directors, designate an Executive Committee consisting of the Chief
Executive Officer (or Chief Executive Officers if there are more than one) and
such number of other directors, not fewer than one, as the Board may appoint.
Vacancies occurring on the Executive Committee for any reason may be filled by
the Board of Directors at any time. Any member of the Executive Committee shall
be subject to removal, with or without cause, at any time by the Board of
Directors or by a majority in voting interest of the stockholders.
The Executive Committee, subject to any limitation prescribed by the
Board of Directors, shall possess and may exercise, during the intervals between
meetings of the Board of Directors, all the powers and authority of the Board of
Directors in the management of the business and affairs of the Corporation, and
may authorize the seal of the Corporation to be affixed to all papers that
require it; provided, however, that the Executive Committee shall not have such
power or authority in reference to amending the Certificate of Incorporation of
the Corporation, adopting an agreement of merger or consolidation, recommending
to the stockholders the sale, lease or exchange of all or substantially all of
the Corporation's property and assets, recommending to the stockholders a
dissolution of the Corporation or a revocation of a dissolution, filling
vacancies on the Board of Directors, changing the membership or filling
vacancies on the Executive Committee or amending these By-Laws. The Executive
Committee shall not have the power and authority to declare dividends, to
authorize the issuance of stock of the Corporation or to adopt a certificate of
merger unless such power and authority shall be expressly delegated to it by a
resolution passed by the Board of Directors.
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A majority of the Executive Committee shall constitute a quorum, and
the vote of a majority of those members of the Executive Committee present at
any meeting thereof at which a quorum is present shall be necessary for the
passage of any resolution or act of the Executive Committee. The Board of
Directors may designate a chairman for the Executive Committee, who shall
preside at meetings thereof, and a vice-chairman, who shall preside at such
meetings in the absence of the chairman.
SECTION 9. COMPENSATION OF DIRECTORS. Directors, as such, except as may
be otherwise provided by the Board, shall not receive any stated salary for
their services but, by resolution of the Board of Directors, a specific sum
fixed by the Board plus expenses may be allowed for attendance at each regular
or special meeting of the Board or any committee thereof; provided, however,
that nothing herein contained shall be construed to preclude any director from
serving the Corporation or any parent or subsidiary corporation thereof in any
other capacity and receiving compensation therefor.
SECTION 10. CONFERENCE TELEPHONE MEETINGS. Unless otherwise restricted
by the Certificate of Incorporation or by these By-Laws, the members of the
Board of Directors or any committee designated by the Board, may participate in
a meeting of the Board or such committee, as the case may be, by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and such participation
shall constitute presence in person at such meeting.
SECTION 11. CONSENT OF DIRECTORS OR COMMITTEE IN LIEU OF MEETING.
Unless otherwise restricted by the Certificate of Incorporation or by these
By-Laws, any action required or permitted to be taken at any meeting of the
Board of Directors, or of any committee thereof, may be taken without a meeting
if all members of the Board or committee, as the case may be,
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consent thereto in writing and the writing or writings are filed with the
minutes of proceedings of the Board or committee, as the case may be.
ARTICLE III
OFFICERS
SECTION 1. OFFICERS. The Corporation shall have such officers including
a Chairman of the Board, one or more Chief Executive Officers, a Chief Operating
Officer, a President, one or more Vice Presidents, a Secretary and a Treasurer
as shall be elected by the Board of Directors pursuant to this Article III. The
Chairman of the Board, if elected, shall be elected from among the directors.
The officers shall be elected by the Board of Directors at its first meeting
after each annual meeting of the stockholders. The failure to hold such election
shall not of itself terminate the term of office of any officer. All officers
shall hold office at the pleasure of the Board of Directors. Any officer may
resign at any time upon written notice to the Corporation. Officers may, but
need not, be directors. Any number of offices may be held by the same person.
All officers, agents and employees shall be subject to removal, with or
without cause, at any time by the Board of Directors. The removal of an officer
without cause shall be without prejudice to his contract rights, if any. The
election or appointment of an officer shall not of itself create contract
rights. All agents and employees other than officers elected by the Board of
Directors shall also be subject to removal, with or without cause, at any time
by the officers appointing them.
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Any vacancy caused by the death, resignation or removal of any officer,
or otherwise, may be filled by the Board of Directors, and any officer so
elected shall hold office at the pleasure of the Board of Directors.
In addition to the powers and duties of the officers of the Corporation
as set forth in these By-Laws, the officers shall have such authority and shall
perform such duties as from time to time may be determined by the Board of
Directors.
SECTION 2. CHIEF EXECUTIVE OFFICER. The Board of Directors shall
designate one of the officers of the Corporation to be the Chief Executive
Officer of the Corporation, or one or more of the officers of the Corporation,
each to be a Chief Executive Officer of the Corporation. Subject to the control
of the Board of Directors, the Chief Executive Officer shall have general charge
and control of all the business and affairs of the Corporation and shall have
all powers and shall perform all duties incident to the position of Chief
Executive Officer. The Chief Executive Officer shall make reports to the Board
of Directors and to the stockholders, and shall see that all orders and
resolutions of the Board of Directors and of any committee thereof are carried
into effect. The Chief Executive Officer shall preside at all meetings of the
stockholders and shall have such other powers and perform such other duties as
may from time to time be assigned by these By-Laws or by the Board of Directors.
Any reference to the Chief Executive Officer in these By-Laws shall be
deemed to mean, if there are Co-Chief Executive Officers, each Co-Chief
Executive Officer, each of whom may individually exercise the full power and
authority of the office of the Chief Executive Officer.
SECTION 3. CHIEF OPERATING OFFICER. The Board of Directors may
designate one of the officers of the Corporation to be the Chief Operating
Officer of the Corporation. Subject to
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the control of the Board of Directors and the Chief Executive Officer, the Chief
Operating Officer may have general charge and control of all the operations of
the Corporation and may have all powers and may perform all duties incident to
the position of Chief Operating Officer. The Chief Operating Officer may act in
a general executive capacity and assist the Chief Executive Officer in the
administration and operation of the Corporation's business and general
supervision of its policies and affairs. The Chief Operating Officer may have
such other powers and perform such other duties as may from time to time be
assigned by these By-Laws or by the Board of Directors or by the Chief Executive
Officer.
SECTION 4. CHIEF FINANCIAL OFFICER. The Board of Directors shall
designate one of the officers of the Corporation to be the Chief Financial
Officer of the Corporation. Subject to the control of the Board of Directors,
the Chief Executive Officer and the Chief Operating Officer, the Chief Financial
Officer shall (a) keep and maintain, or cause to be kept and maintained,
adequate and correct books and records of accounts of the properties and
business transactions of the Corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital, retained earnings
and shares; (b) deposit all money and other valuables in the name and to the
credit of the Corporation with such depositories as may be designated by the
Board of Directors; (c) disburse the funds of the Corporation as may be directed
by the Board of Directors, the Chief Executive Officer or the Chief Operating
Officer; and (d) render to the Chief Executive Officer, to the Chief Operating
Officer or to the Board of Directors, whenever requested, an account of all of
transactions by the Chief Financial Officer and of the financial condition and
results of operations of the Corporation. The Chief Financial Officer shall have
such other powers and perform such other duties as may from time to time be
assigned by these By-Laws, by the Board of Directors, by the Chief Executive
Officer or by the
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Chief Operating Officer. The books of account shall at all reasonable times
during business hours be open to inspection by any director.
SECTION 5. CHAIRMAN OF THE BOARD. The Chairman of the Board shall
perform all duties incident to the office of Chairman of the Board. The Chairman
shall preside at all meetings of the Board of Directors and shall have such
other powers and perform such other duties as may from time to time be assigned
by these By-Laws or by the Board of Directors.
SECTION 6. PRESIDENT AND VICE PRESIDENTS. The President and each Vice
President shall have such powers which are incidental to their respective
positions and which are required by law and shall have such other powers and
perform such duties as may from time to time be assigned by these By-Laws, by
the Board of Directors, by the Chief Executive Officer or by the Chief Operating
Officer.
SECTION 7. TREASURER. The Treasurer shall have all powers and shall
perform all duties incident to the position of Treasurer which may be required
by law and shall have such other powers and perform such other duties as may
from time to time be assigned by these By-Laws, by the Board of Directors, by
the Chief Executive Officer, by the Chief Operating Officer or by the Chief
Financial Officer.
SECTION 8. SECRETARY. The Secretary shall keep the minutes of all
meetings of the Board of Directors and the minutes of all meetings of the
stockholders in books provided for that purpose. The Secretary shall attend to
the giving or serving of all notices of the Corporation; shall have custody of
the corporate seal of the Corporation and shall affix the same to such documents
and other papers as the Board of Directors or the Chief Executive Officer shall
authorize and direct; shall have charge of the stock certificate books, transfer
books and stock ledgers and such other books and papers as the Board of
Directors or the Chief Executive Officer
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shall direct, all of which shall at all reasonable times be open to the
examination of any director, upon application, at the office of the Corporation
during business hours; and whenever required by the Board of Directors or the
Chief Executive Officer shall render statements of such accounts. The Secretary
shall have all powers and shall perform all duties incident to the office of
Secretary and shall also have such other powers and shall perform such other
duties as may from time to time be assigned by these By-Laws or by the Board of
Directors, by the Chief Executive Officer or by the Chief Operating Officer.
SECTION 9. ADDITIONAL OFFICERS. The Board of Directors may from time to
time elect such other officers (who may but need not be directors), including
one or more Vice Chairmen of the Board, a Controller, one or more Assistant
Controllers, one or more Assistant Secretaries and one or more Assistant
Treasurers, as the Board may deem advisable and such officers shall have such
authority and shall perform such duties as may from time to time be assigned by
the Board of Directors, the Chief Executive Officer, the Chief Operating Officer
or, in the case of a Controller, an Assistant Controller or an Assistant
Treasurer, by the Chief Financial Officer, or if appropriate, the Treasurer.
The Board of Directors may from time to time by resolution delegate to
any Assistant Treasurer or Assistant Treasurers any of the powers or duties
herein assigned to the Treasurer, and may similarly delegate to any Assistant
Secretary or Assistant Secretaries any of the powers or duties herein assigned
to the Secretary.
SECTION 10. VOTING UPON STOCKS. Unless otherwise ordered by the Board
of Directors, the Chairman of the Board, the Chief Executive Officer, the Chief
Operating Officer, the President, any Vice President, the Chief Financial
Officer, the Treasurer or the Secretary shall have full power and authority on
behalf of the Corporation to attend and to act and to vote, or in
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the name of the Corporation to execute proxies to vote, at any meeting of
stockholders of any corporation in which the Corporation may hold stock, and at
any such meeting shall possess and may exercise, in person or by proxy, any and
all rights, powers and privileges incident to the ownership of such stock. The
Board of Directors may from time to time, by resolution, confer like powers upon
any other person or persons.
SECTION 11. COMPENSATION OF OFFICERS. The officers of the Corporation
shall be entitled to receive such compensation for their services as shall from
time to time be determined by the Board of Directors or by persons appointed by
the Board of Directors.
ARTICLE IV
INDEMNIFICATION OF DIRECTORS AND OFFICERS
SECTION 1. NATURE OF INDEMNITY. The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he or she
is or was or has agreed to become a director or officer of the Corporation, or
is or was serving or has agreed to serve at the request of the Corporation as a
director or officer of another corporation, limited liability company,
partnership, joint venture, trust, employee benefit plan or other enterprise, or
by reason of any action alleged to have been taken or omitted in such capacity,
and may indemnify any person who was or is a party or is threatened to be made a
party to such an action, suit or proceeding by reason of the fact that he or she
is or was or has agreed to become an employee or agent of the Corporation, or is
or was serving or has agreed to serve at the request of the Corporation as an
employee or agent of another corporation,
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limited liability company, partnership, joint venture, trust, employee benefit
plan or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person or on his or her behalf in connection with such action, suit or
proceeding and any appeal therefrom, if the person acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful;
except that in the case of an action or suit by or in the right of the
Corporation to procure a judgment in its favor (1) such indemnification shall be
limited to expenses (including attorneys' fees) actually and reasonably incurred
by such person in the defense or settlement of such action or suit, and (2) no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Delaware Court of Chancery or the court
in which such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Delaware Court of Chancery or such other court shall deem
proper. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of NOLO CONTENDERE or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he or she reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his or her
conduct was unlawful.
SECTION 2. SUCCESSFUL DEFENSE. To the extent that a director,
officer, employee or agent of the Corporation has been successful on the merits
or otherwise in defense of any action,
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suit or proceeding referred to in Section 1 of this Article IV or in defense of
any claim, issue or matter therein, he or she shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him or
her in connection therewith.
SECTION 3. DETERMINATION THAT INDEMNIFICATION IS PROPER. Any
indemnification of a director or officer of the Corporation under Section 1 of
this Article IV (unless ordered by a court) shall be made by the Corporation
unless a determination is made that indemnification of the director or officer
is not proper in the circumstances because he or she has not met the applicable
standard of conduct set forth in Section 1. Any indemnification of an employee
or agent of the Corporation under Section 1 (unless ordered by a court) may be
made by the Corporation upon a determination that indemnification of the
employee or agent is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in Section 1. Any such determination
shall be made (1) by a majority vote of the directors who are not parties to
such action, suit or proceeding, even though less than a quorum, or (2) if there
are no such directors, or if such directors so direct, by independent legal
counsel in a written opinion, or (3) by the stockholders.
SECTION 4. ADVANCE PAYMENT OF EXPENSES. Unless the Board of Directors
otherwise determines in a specific case, expenses incurred by a director or
officer in defending a civil or criminal action, suit or proceeding shall be
paid by the Corporation in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of the director or
officer to repay such amount if it shall ultimately be determined that he or she
is not entitled to be indemnified by the Corporation as authorized in this
Article IV. Such expenses incurred by other employees and agents may be so paid
upon such terms and conditions, if any, as the Board of Directors deems
appropriate. The Board of Directors may
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authorize the Corporation's legal counsel to represent such director, officer,
employee or agent in any action, suit or proceeding, whether or not the
Corporation is a party to such action, suit or proceeding.
SECTION 5. SURVIVAL; PRESERVATION OF OTHER RIGHTS. The foregoing
indemnification provisions shall be deemed to be a contract between the
Corporation and each director, officer, employee and agent who serves in any
such capacity at any time while these provisions as well as the relevant
provisions of the General Corporation Law are in effect and any repeal or
modification thereof shall not affect any right or obligation then existing with
respect to any state of facts then or previously existing or any action, suit,
or proceeding previously or thereafter brought or threatened based in whole or
in part upon any such state of facts. Such a contract right may not be modified
retroactively without the consent of such director, officer, employee or agent.
The indemnification provided by this Article IV shall not be deemed
exclusive of any other rights to which a person indemnified may be entitled
under the Certificate of Incorporation, any By-Law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
or her official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person. The Corporation may enter into an
agreement with any of its directors, officers, employees or agents providing for
indemnification and advancement of expenses, including attorneys fees, that may
change, enhance, qualify or limit any right to indemnification or advancement of
expenses created by this Article IV.
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SECTION 6. SEVERABILITY. If this Article IV or any portion hereof shall
be invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each director or officer and may
indemnify each employee or agent of the Corporation as to costs, charges and
expenses (including attorneys' fees), judgment, fines and amounts paid in
settlement with respect to any action, suit or proceeding, whether civil,
criminal, administrative or investigative, including an action by or in the
right of the Corporation, to the fullest extent permitted by any applicable
portion of this Article IV that shall not have been invalidated and to the
fullest extent permitted by the Certificate of Incorporation or applicable law.
SECTION 7. SUBROGATION. In the event of payment of indemnification to a
person described in Section 1 of this Article IV, the Corporation shall be
subrogated to the extent of such payment to any right of recovery such person
may have and such person, as a condition of receiving indemnification from the
Corporation, shall execute all documents and do all things that the Corporation
may deem necessary or desirable to perfect such right of recovery, including the
execution of such documents necessary to enable the Corporation effectively to
enforce any such recovery.
SECTION 8. NO DUPLICATION OF PAYMENTS. The Corporation shall not be
liable under this Article IV or the Certificate of Incorporation to make any
payment in connection with any claim made against a person described in Section
1 of this Article IV to the extent such person has otherwise received payment
(under any insurance policy, By-Law or otherwise) of the amounts otherwise
payable as indemnity hereunder.
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ARTICLE V
STOCK-SEAL-FISCAL YEAR
SECTION 1. CERTIFICATES FOR SHARES OF STOCK. The certificates for
shares of stock of the Corporation shall be in such form, not inconsistent with
the Certificate of Incorporation, as shall be approved by the Board of
Directors. All certificates shall be signed by the Chairman of the Board, the
Chief Executive Officer, the Chief Operating Officer, the President or a Vice
President and by the Secretary or an Assistant Secretary or the Treasurer or an
Assistant Treasurer, and shall not be valid unless so signed. Any and all the
signatures on a certificate may be facsimile.
In case any officer or officers who shall have signed or whose
facsimile signature has been placed upon any such certificate or certificates
shall cease to be such officer or officers of the Corporation, whether because
of death, resignation or otherwise, before such certificate or certificates
shall have been delivered by the Corporation, such certificate or certificates
may nevertheless be issued and delivered as though the person or persons who
signed such certificate or certificates had not ceased to be such officer or
officers of the Corporation.
All certificates for shares of stock shall be consecutively numbered as
the same are issued. The name of the person owning the shares represented
thereby with the number of such shares and the date of issue thereof shall be
entered on the books of the Corporation.
Except as hereinafter provided, all certificates surrendered to the
Corporation for transfer shall be canceled, and no new certificates shall be
issued until former certificates for the same number of shares have been
surrendered and canceled.
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SECTION 2. LOST, STOLEN OR DESTROYED CERTIFICATES. Whenever a person
owning a certificate for shares of stock of the Corporation alleges that it has
been lost, stolen or destroyed, he or she shall file in the office of the
Corporation an affidavit setting forth, to the best of his or her knowledge and
belief, the time, place and circumstances of the loss, theft or destruction,
and, if required by the Board of Directors, a bond of indemnity or other
indemnification sufficient in the opinion of the Board of Directors to indemnify
the Corporation and its agents against any claim that may be made against it or
them on account of the alleged loss, theft or destruction of any such
certificate or the issuance of a new certificate in replacement therefor.
Thereupon the Corporation may cause to be issued to such person a new
certificate in replacement for the certificate alleged to have been lost, stolen
or destroyed. Upon the stub of every new certificate so issued shall be noted
the fact of such issue and the number, date and the name of the registered owner
of the lost, stolen or destroyed certificate in lieu of which the new
certificate is issued.
SECTION 3. TRANSFER OF SHARES. Shares of stock of the Corporation shall
be transferred on the books of the Corporation by the holder thereof, in person
or by his attorney duly authorized in writing, upon surrender and cancellation
of certificates for the number of shares of stock to be transferred, except as
provided in Section 2 of this Article V.
SECTION 4. REGULATIONS. The Board of Directors shall have power and
authority to make such rules and regulations as it may deem expedient concerning
the issue, transfer and registration of certificates for shares of stock of the
Corporation.
SECTION 5. DIVIDENDS. Subject to the provisions of the Certificate of
Incorporation, the Board of Directors shall have power to declare and pay
dividends upon shares of stock of the Corporation, but only out of funds
available for the payment of dividends as provided by law.
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Subject to the provisions of the Certificate of Incorporation, any
dividends declared upon the stock of the Corporation shall be payable on such
date or dates as the Board of Directors shall determine. If the date fixed for
the payment of any dividend shall in any year fall upon a legal holiday, then
the dividend payable on such date shall be paid on the next day not a legal
holiday.
SECTION 6. CORPORATE SEAL. The Board of Directors shall provide a
suitable seal, containing the name of the Corporation, which seal shall be kept
in the custody of the Secretary. A duplicate of the seal may be kept and be used
by any officer of the Corporation designated by the Board of Directors.
SECTION 7. FISCAL YEAR. The fiscal year of the Corporation shall be
such fiscal year as the Board of Directors from time to time by resolution shall
determine.
ARTICLE VI
MISCELLANEOUS PROVISIONS
SECTION 1. CHECKS, NOTES, ETC. All checks, drafts, bills of exchange,
acceptances, notes or other obligations or orders for the payment of money shall
be signed and, if so required by the Board of Directors, countersigned by such
officers of the Corporation and/or other persons as the Board of Directors from
time to time shall designate.
Checks, drafts, bills of exchange, acceptances, notes, obligations and
orders for the payment of money made payable to the Corporation may be endorsed
for deposit to the credit of the Corporation with a duly authorized depository
by the Chief Financial Officer, the Treasurer and/or such other officers or
persons as the Board of Directors from time to time may designate.
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SECTION 2. LOANS. No loans and no renewals of any loans shall be
contracted on behalf of the Corporation except as authorized by the Board of
Directors. When authorized so to do, any officer or agent of the Corporation may
effect loans and advances for the Corporation from any bank, trust company or
other institution or from any firm, corporation or individual, and for such
loans and advances may make, execute and deliver promissory notes, bonds or
other evidences of indebtedness of the Corporation. When authorized so to do,
any officer or agent of the Corporation may pledge, hypothecate or transfer, as
security for the payment of any and all loans, advances, indebtedness and
liabilities of the Corporation, any and all stocks, securities and other
personal property at any time held by the Corporation, and to that end may
endorse, assign and deliver the same. Such authority may be general or confined
to specific instances.
SECTION 3. CONTRACTS. Except as otherwise provided in these By-Laws or
by law or as otherwise directed by the Board of Directors, the Chairman of the
Board, the Chief Executive Officer, the Chief Operating Officer, the President,
the Chief Financial Officer or any Vice President shall be authorized to execute
and deliver, in the name and on behalf of the Corporation, all agreements,
bonds, contracts, deeds, mortgages, and other instruments, either for the
Corporation's own account or in a fiduciary or other capacity, and the seal of
the Corporation, if appropriate, shall be affixed thereto by any of such
officers or the Secretary or an Assistant Secretary. The Board of Directors, the
Chief Executive Officer, the Chief Operating Officer, the President, the Chief
Financial Officer or any Vice President designated by the Board of Directors,
the Chairman of the Board, the Chief Executive Officer, the Chief Operating
Officer, the President or the Chief Financial Officer, may authorize any other
officer, employee or agent to execute and deliver, in the name and on behalf of
the Corporation, agreements, bonds, contracts, deeds, mortgages, and other
instruments, either for the Corporation's own account or
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in a fiduciary or other capacity, and, if appropriate, to affix the seal of the
Corporation thereto. The grant of such authority by the Board or any such
officer may be general or confined to specific instances.
SECTION 4. WAIVERS OF NOTICE. Whenever any notice whatever is required
to be given by law, by the Certificate of Incorporation or by these By-Laws to
any person or persons, a waiver thereof in writing, signed by the person or
persons entitled to the notice, whether before or after the time stated therein,
shall be deemed equivalent thereto.
SECTION 5. OFFICES OUTSIDE OF DELAWARE. Except as otherwise required by
the laws of the State of Delaware, the Corporation may have an office or offices
and keep its books, documents and papers outside of the State of Delaware at
such place or places as from time to time may be determined by the Board of
Directors or the Chief Executive Officer.
ARTICLE VII
AMENDMENTS
These By-Laws and any amendment thereof may be altered, amended or
repealed, or new By-Laws may be adopted, by the Board of Directors at any
regular or special meeting by the affirmative vote of a majority of all of the
members of the Board, provided in the case of any special meeting at which all
of the members of the Board are not present, that the notice of such meeting
shall have stated that the amendment of these By-Laws was one of the purposes of
the meeting; but these By-Laws and any amendment thereof, may be altered,
amended or repealed or new By-Laws may be adopted by the holders of two-thirds
of the voting power of all outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors at
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any annual meeting or at any special meeting, provided, in the case of any
special meeting, that notice of such proposed alteration, amendment, repeal or
adoption is included in the notice of the meeting.
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Exhibit 4.1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
WIT CAPITAL GROUP, INC.
AND
AMERICAN STOCK TRANSFER & TRUST COMPANY,
AS RIGHTS AGENT
------------------
RIGHTS AGREEMENT
DATED AS OF June 7, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1-NY/851002.9
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TABLE OF CONTENTS
Section 1. Certain Definitions..............................................1
Section 2. Appointment of Rights Agent......................................9
Section 3. Issue of Rights Certificates.....................................9
Section 4. Form of Rights Certificates.....................................11
Section 5. Countersignature and Registration...............................12
Section 6. Transfer, Split-Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights
Certificates....................................................12
Section 7. Exercise of Rights; Purchase Price..............................13
Section 8. Cancellation and Destruction of Rights Certificates.............15
Section 9. Reservation and Availability of Capital Stock...................15
Section 10. Preferred Stock Record Date.....................................17
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or
Number of Rights................................................18
Section 12. Certificate of Adjusted Purchase Price or Number of Shares......27
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power...................................................27
Section 14. Fractional Rights and Fractional Shares.........................30
Section 15. Rights of Action................................................31
Section 16. Agreement of Rights Holders.....................................31
Section 17. Rights Certificate Holder Not Deemed a Stockholder..............32
Section 18. Concerning the Rights Agent.....................................33
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Section 19. Merger or Consolidation or Change of Name of Rights Agent.......33
Section 20. Duties of Rights Agent..........................................34
Section 21. Change of Rights Agent..........................................36
Section 22. Issuance of New Rights Certificates.............................37
Section 23. Redemption and Termination......................................37
Section 24. Exchange........................................................38
Section 25. Notice of Certain Events........................................40
Section 26. Notices.........................................................41
Section 27. Supplements and Amendments......................................41
Section 28. Successors......................................................42
Section 29. Determinations and Actions by the Board of Directors, Etc.......42
Section 30. Benefits of This Agreement......................................42
Section 31. Severability....................................................42
Section 32. Governing Law...................................................43
Section 33. Counterparts....................................................43
Section 34. Descriptive Headings............................................43
Exhibit A-1 Form of Certificate of Designations of Class 1 Series A Junior
Participating Preferred Stock
Exhibit A-2 Form of Certificate of Designations of Class 2 Series A Junior
Participating Preferred Stock
Exhibit B-1 Form of Voting Class Rights Certificate
Exhibit B-2 Form of Class B Common Rights Certificate
Exhibit C - Summary of Rights to Purchase Preferred Stock
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RIGHTS AGREEMENT
This Rights Agreement, dated as of June 7, 1999 (the"Agreement"),
between Wit Capital Group, Inc., a Delaware corporation (the "Company"), and
American Stock Transfer & Trust Company (the"Rights Agent"),
WITNESSETH:
WHEREAS, on May 17, 1999 (the "Rights Dividend Declaration Date"),
the Board of Directors of the Company authorized (i) the issuance of one voting
class right for each share of Voting Common Stock ("Voting Class Right")
outstanding upon the closing of the Company's Initial Public Offering; (ii) the
issuance of one Voting Class Right for each share of Class C Common Stock of the
Company outstanding at the close of business on May 18, 1999 (the "Record
Date"); and (iii) the issuance of one nonvoting class right for each share of
Class B Common Stock ("Class B Common Right") of the Company outstanding at the
Record Date, and has authorized the issuance of one Voting Class Right (as such
numbers may hereinafter be adjusted pursuant to the provisions of Section 11(p)
hereof) for each share of Voting Common Stock and Class C Common Stock and one
Class B Common Right for each share of Class B Common Stock, respectively,
issued (whether originally issued or delivered from the Company's treasury)
between the Record Date and the earlier of the Distribution Date (as hereinafter
defined) and the Expiration Date (as hereinafter defined), and, in certain
circumstances provided for in Section 22 hereof, after the Distribution Date,
each Voting Class Right initially representing the right to purchase one
Fractional Share (as hereinafter defined) of Class 1 Series A Junior
Participating Preferred Stock of the Company, and each Class B Right initially
representing the right to purchase one Fractional Share of Class 2 Series A
Junior Participating Preferred Stock of the Company, upon the terms and subject
to the conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms shall have the meanings indicated:
"Acquiring Person" shall mean any Person who or which, together with
all Affiliates and Associates of such Person, shall be the Beneficial Owner of
15% or more of the shares of Common Stock then outstanding, PROVIDED, HOWEVER,
that a Person shall not be or become an Acquiring Person if such Person,
together with its Affiliates and Associates, shall become the Beneficial Owner
of 15% or more of the shares of Common Stock then outstanding solely as a result
of a reduction in the number of shares of Common Stock outstanding due to the
repurchase of Common Stock by the Company, unless and until such time as such
Person or any Affiliate or Associate of such Person shall purchase or otherwise
become the Beneficial Owner
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of additional shares of Common Stock constituting 1% or more of the then
outstanding shares of Common Stock or any other Person (or Persons) who is (or
collectively are) the Beneficial Owner of shares of Common Stock constituting 1%
or more of the then outstanding shares of Common Stock shall become an Affiliate
or Associate of such Person, unless, in either such case, such Person, together
with all Affiliates and Associates of such Person, is not then the Beneficial
Owner of 15% or more of the shares of Common Stock then outstanding; and
PROVIDED, FURTHER, that if the Board of Directors, with the concurrence of a
majority of the members of the Board of Directors who are not, and are not
representatives, nominees, Affiliates or Associates of, such Person or an
Acquiring Person, determines in good faith that a Person that would otherwise be
an "Acquiring Person" has become such inadvertently (including, without
limitation, because (i) 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 (ii) 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) 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.
Notwithstanding anything in this definition of "Acquiring Person" to
the contrary; (i) no Exempt Person shall be deemed to be or become an "Acquiring
Person" or an Affiliate or Associate of an Acquiring Person; (ii) so long as the
Existing Stockholder, together with its Affiliates and Associates thereof, does
not become the Beneficial Owner of 25% or more of the Fully-Diluted Common
Shares, the Existing Stockholder, together with its Affiliates and Associates,
shall not be or become an Acquiring Person; and (iii) so long as a GS Holder,
together with all Affiliates or Associates, does not become the Beneficial Owner
of 25% or more of the Fully-Diluted Common Shares, a GS Holder, together with
its Affiliates and Associates, shall not be or become an Acquiring Person.
At any time that the Rights are redeemable, the Board of Directors
may, generally or with respect to any specified Person or Persons, determine to
increase to a specified percentage greater than that set forth herein or
decrease to a specified percentage lower than that set forth herein or determine
a number of shares to be (but in no event less than or equal to the percentage
or number of shares of Common Stock then beneficially owned by such Person), the
level of Beneficial Ownership of Common Stock at which a Person or such Person
or Persons becomes an Acquiring Person.
Notwithstanding anything in this Agreement to the contrary, no
Person shall be or become an Acquiring Person until after the consummation of
the Company's Initial Public Offering of the Common Stock.
"Adjustment Shares" shall have the meaning set forth in
Section 11(a)(ii) hereof.
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"Affiliate" shall mean a Person that directly, or indirectly through
one or more intermediaries, controls or is controlled by, or is under common
control with, the Person specified.
"Associate" shall mean, with reference to any Person, (i) any
corporation, firm, partnership, association, unincorporated organization or
other entity (other than the Company or a Subsidiary of the Company) of which
such Person is an officer or general partner (or officer or general partner of a
general partner) or is, directly or indirectly, the Beneficial Owner of 10% or
more of any class of equity securities, (ii) any trust or other estate in which
such Person has a substantial beneficial interest or as to which such Person
serves as trustee or in a similar fiduciary capacity and (iii) any relative or
spouse of such Person, or any relative of such spouse, who has the same home as
such Person.
A Person shall be deemed the "Beneficial Owner" of, and shall be
deemed to "beneficially own," any securities:
(i) that such Person or any of such Person's Affiliates or
Associates, directly or indirectly, is the "beneficial owner" of (as
determined pursuant to Rule 13d-3 under the Exchange Act as in effect on
the date of this Agreement) or otherwise has the right to vote or dispose
of, including 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
under this subparagraph (i) as a result of an agreement, arrangement or
understanding to vote such security if such agreement, arrangement or
understanding: (A) arises solely from a revocable proxy or consent given
in response to a public (I.E., not including a solicitation exempted by
Rule 14a-2(b)(2) under the Exchange Act as in effect on the date of this
Agreement) proxy or consent solicitation made pursuant to, and in
accordance with, the applicable provisions rules under the Exchange Act
and (B) is not then reportable by such Person on Schedule 13D under the
Exchange Act (or any comparable or successor report);
(ii) that such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right or obligation to acquire
(whether such right or obligation is exercisable or effective immediately
or only after the passage of time or the occurrence of an event) pursuant
to any agreement, arrangement or understanding (whether or not in writing)
or upon the exercise of conversion rights, exchange rights, other rights,
warrants or options, or otherwise; PROVIDED, HOWEVER, that a Person shall
not be deemed the "Beneficial Owner" of, or to "beneficially own," (A)
securities tendered pursuant to a tender or exchange offer made by such
Person or any of such Person's Affiliates or Associates until such
tendered securities are accepted for purchase or exchange, (B) securities
issuable upon exercise of Rights at any time prior to the occurrence of a
Triggering Event or (C) securities issuable upon exercise of Rights from
and after the occurrence of a Triggering Event which Rights were acquired
by such Person or any of such Person's Affiliates or Associates prior to
the Distribution Date or pursuant to
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Section 3(a) or Section 22 hereof (the "Original Rights") or pursuant to
Section 11(i) or (p) hereof in connection with an adjustment made with
respect to any Original Rights; or
(iii) that are beneficially owned, directly or indirectly, by (A)
any other Person (or any Affiliate or Associate thereof) with which such
Person or any of such Person's Affiliates or Associates has any agreement,
arrangement or understanding (whether or not in writing) for the purpose
of acquiring, holding, voting (except pursuant to a revocable proxy or
consent as described in the proviso to subparagraph (i) of this
definition) or disposing of any voting securities of the Company or (B)
any group (as that term is used in Rule 13d-5(b) under the Exchange Act)
of which such Person is a member;
PROVIDED, HOWEVER, that nothing in this definition shall cause a Person engaged
in business as an underwriter of securities to be the "Beneficial Owner" of, or
to "beneficially own," any securities acquired through such Person's
participation in good faith in a firm commitment underwriting (including,
without limitation, securities acquired pursuant to stabilizing transactions to
facilitate a public offering in accordance with Regulation M promulgated under
the Exchange Act or to cover overallotments created in connection with a public
offering) until the expiration of forty days after the date of such acquisition.
For purposes of this Agreement, "voting" a security shall include voting,
granting a proxy, acting by consent, making a request or demand relating to
corporate action (including, without limitation, calling a stockholder meeting)
or otherwise giving an authorization (within the meaning of Section 14(a) of the
Exchange Act as in effect on the date of this Agreement) in respect of such
security.
"Business Day" shall mean any day other than a Saturday, Sunday or a
day on which banking institutions in the State of New York are authorized or
obligated by law or executive order to close.
"Class B Common Right" shall have the meaning set forth in the
Recitals.
"Class B Common Stock" shall mean the Class B Common Stock, par
value $.01 per share, of the Company.
"Class C Common Stock" shall mean the Class C Common Stock, par
value $.01 per share, of the Company.
"close of business" on any given date shall mean 5:00 p.m., New York
time, on such date; PROVIDED, HOWEVER, that if such date is not a Business Day,
it shall mean 5:00 p.m., New York time, on the next succeeding Business Day.
"Closing Price" of a security for any day shall mean the last sales
price, regular way, on such day or, in case no such sale takes place on such
day, the average of the closing bid and asked prices, regular way, on such day,
in either case as reported in the principal transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
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Exchange, or, if such security is not listed or admitted to trading on the New
York Stock Exchange, on the principal national securities exchange on which such
security is listed or admitted to trading, or, if such security is not listed or
admitted to trading on any national securities exchange but sales price
information is reported for such security, as reported by NASDAQ or such other
self-regulatory organization or registered securities information processor or
alternative trading system (as such terms are used under the Exchange Act) that
then reports information concerning such security, or, if sales price
information is not so reported, the average of the high bid and low asked prices
in the over-the-counter market on such day, as reported by NASDAQ or such other
entity, or, if on such day such security is not quoted by any such entity, the
average of the closing bid and asked prices as furnished by a professional
market maker making a market in such security selected by the Board of Directors
of the Company. If on such day no market maker is making a market in such
security, the fair value of such security on such day as determined in good
faith by the Board of Directors of the Company shall be used.
"Common Shares" shall mean the shares of Voting Common Stock, Class
C Common Stock and Class B Common Stock of the Company.
"Common Share Equivalents" shall have the meaning set forth in
Section 11(a)(iii) hereof.
"Common Stock" shall mean the Voting Common Stock and the Class C
Common Stock, collectively, except that "common stock" when used with reference
to equity interests issued by any Person other than the Company shall mean the
capital stock of such Person with the greatest voting power, or the equity
securities or other equity interest having power to control or direct the
management, of such Person.
"Company" shall mean the Person named as the "Company" in the
Preamble of this Agreement until a successor Person shall have become such or
until a Principal Party shall assume, and thereafter be liable for, all
obligations and duties of the Company hereunder, pursuant to the applicable
provisions of this Agreement, and thereafter "Company" shall mean such successor
Person or Principal Party.
"Current Market Price" shall have the meaning set forth in
Section 11(d) hereof.
"Current Value" shall have the meaning set forth in Section
11(a)(iii) hereof.
"Distribution Date" shall mean the earlier of (i) the close of
business on the tenth day (or, if such Stock Acquisition Date results from the
consummation of a Permitted Offer, such later date as may be determined by the
Company's Board of Directors as set forth below before the Distribution Date
occurs) after the Stock Acquisition Date (or, if the tenth day after the Stock
Acquisition Date occurs before the Record Date, the close of business on the
Record Date) or (ii) the close of business on the tenth Business Day (or such
later date as may be determined by the Company's Board of Directors as set forth
below before the Distribution Date occurs) after the
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date that a tender offer or exchange offer by any Person (other than any Exempt
Person) is first published or sent or given within the meaning of Rule 14d-2(a)
under the Exchange Act as then in effect, if upon consummation thereof, such
Person would be an Acquiring Person, other than a tender or exchange offer that
is determined before the Distribution Date occurs to be a Permitted Offer. The
Board of Directors of the Company may, to the extent set forth in the preceding
sentence, defer the date set forth in clause (i) or (ii) of the preceding
sentence to a specified later date or to an unspecified later date to be
determined by a subsequent action or event (but in no event to a date later than
the close of business on the tenth day after the first occurrence of a
Triggering Event).
"Equivalent Preferred Stock" shall have the meaning set forth in
Section 11(b) hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Exchange Ratio" shall have the meaning set forth in Section 24
hereof.
"Exempt Person" shall mean the Company, any Subsidiary of the
Company, any employee benefit plan of the Company or of any Subsidiary of the
Company, and any Person organized, appointed or established by the Company 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 any
Subsidiary of the Company.
"Existing Stockholder" shall mean Capital Z Financial Services Fund
II, L.P. and any Affiliate or Associate thereof.
"Expiration Date" shall mean the earliest of (i) the Final
Expiration Date, (ii) the time at which the Rights are redeemed as provided in
Section 23 hereof, (iii) the time at which the Rights expire pursuant to Section
13(d) hereof and (iv) the time at which all Rights then outstanding and
exercisable are exchanged pursuant to Section 24 hereof.
"Final Expiration Date" shall mean the close of business on
September 30, 2009.
"Flip-In Event" shall mean an event described in Section 11(a)(ii)
hereof.
"Flip-In Trigger Date" shall have the meaning set forth in Section
11(a)(iii) hereof.
"Flip-Over Event" shall mean any event described in clause (x), (y)
or (z) of Section 13(a) hereof, that occurs from and after the time when an
Acquiring Person has become such, but excluding any transaction described in
Section 13(d) hereof that causes the Rights to expire.
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"Fractional Share" with respect to the Preferred Stock shall mean
one one-hundredth of a share of Preferred Stock.
"Fully-Diluted Common Shares" means, at any time of determination,
all then outstanding Common Shares plus (without duplication) all Common Shares
issuable, whether at such time or upon the passage of time or the occurrence of
future events, upon the conversion, exercise or exchange of all then outstanding
securities that are convertible into, exercisable for or exchangeable into,
directly or indirectly, Common Shares.
"GS Holder" shall mean The Goldman Sachs Group, L.P. and any
Affiliate or Associate thereof.
"Initial Public Offering" means the underwritten public offering of
the Company's Voting Common Stock pursuant to a registration statement under the
Securities Act where both (i) the proceeds of the Company (prior to deducting
any underwriters' discounts and commissions) equal or exceed twenty million
dollars ($20,000,000) and (ii) the initial price per share at which such Voting
Common Stock is sold to the public in such offering is at least $4.50 (subject
to equitable adjustment for stock splits, stock combinations, recapitalizations
and similar occurrences).
"NASDAQ" shall mean the trading system operated by the NASDAQ Stock
Market, Inc.
"Original Rights" shall have the meaning set forth in the definition
of "Beneficial Owner."
"Permitted Offer" shall mean a tender offer or an exchange offer for
all outstanding shares of Common Stock at a price and on terms determined by at
least a majority of the members of the Board of Directors, and concurred in by a
majority of those members who are not officers or employees of the Company and
who are not, and are not representatives, Affiliates or Associates of, an
Acquiring Person or the person making the offer, after receiving advice from one
or more investment banking firms, to be (a) at a price and on terms that are
fair to stockholders (taking into account all factors that such members of the
Board deem relevant including, without limitation, prices that could reasonably
be achieved if the Company or its assets were sold on an orderly basis designed
to realize maximum value) and (b) otherwise in the best interests of the Company
and its stockholders.
"Person" shall mean any individual, firm, corporation, partnership,
limited liability company, association, trust, unincorporated organization or
other entity.
"Preferred Stock" shall mean in the case of the Voting Class Rights,
the Class 1 Series A Junior Participating Preferred Stock, par value $.001 per
share, of the Company having the rights, powers and preferences set forth in the
form of Certificate of Designations attached
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hereto as Exhibit A-1 and, in the case of the Class B Common Rights, the Class 2
Series A Junior Participating Preferred Stock, par value $.001 per share, of the
Company having the rights, powers and preferences set forth in the form of
Certificate of Designations attached hereto as Exhibit A-2, and to the extent
that there is not a sufficient number of shares of Class 1 Series A Junior
Participating Preferred Stock or Class 2 Series A Junior Participating Preferred
Stock, as the case may be, authorized to permit the full exercise of the Rights,
any other series of Preferred Stock, par value $.001 per share, of the Company
designated for such purpose containing terms substantially similar to the terms
of the Class 1 Series A Junior Participating Preferred Stock or the Class 2
Series A Junior Participating Preferred Stock, as the case may be.
"Principal Party" shall have the meaning set forth in Section 13(b)
hereof.
"Purchase Price" shall have the meaning set forth in Section 4(a)
hereof.
"Record Date" shall have the meaning set forth in the Recitals at
the beginning of this Agreement.
"Redemption Price" shall have the meaning set forth in Section 23(a)
hereof.
"Right" shall mean in the case of the Common Stock, a Voting Class
Right, and in the case of the Class B Common Stock, a Class B Common Right.
"Rights Agent" shall mean the Person named as the "Rights Agent" in
the Preamble of this Agreement until a successor Rights Agent shall have become
such pursuant to the applicable provisions hereof, and thereafter "Rights
Agent"shall mean such successor Rights Agent. If at any time there is more than
one Person appointed by the Company as Rights Agent pursuant to the applicable
provisions of this Agreement, "Rights Agent" shall mean and include each such
Person.
"Rights Certificates" shall mean the certificates evidencing the
Rights.
"Rights Dividend Declaration Date" shall have the meaning set forth
in the Recitals at the beginning of this Agreement.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Spread" shall have the meaning set forth in Section 11(a)(iii)
hereof.
"Stock Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition and Section 23, shall
include, without limitation, a report filed pursuant to Section 13(d) of the
Exchange Act) by the Company or an Acquiring Person that an Acquiring Person has
become such.
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"Subsidiary" shall mean, with reference to any Person, any
corporation or other Person of which an amount of voting securities sufficient
to elect at least a majority of the directors or other persons performing
similar functions is beneficially owned, directly or indirectly, by such Person,
or otherwise controlled by such Person.
"Substitution Period" shall have the meaning set forth in Section
11(a)(iii) hereof.
"Summary of Rights" shall mean the Summary of Rights to Purchase
Preferred Stock sent pursuant to Section 3(b) hereof.
"Trading Day" with respect to a security shall mean a day on which
the principal national securities exchange on which such security is listed or
admitted to trading is open for the transaction of business, or, if such
security is not listed or admitted to trading on any national securities
exchange but is quoted by NASDAQ, a day on which NASDAQ reports trades, or, if
such security is not so quoted, a Business Day.
"Triggering Event" shall mean any Flip-In Event or any Flip-Over
Event.
"Voting Common Stock" shall mean the class of common stock, par
value $.01 per share, of the Company that is registered pursuant to Section 12
of the Securities Exchange Act of 1934, as amended.
"Voting Class Right" shall have the meaning set forth in the
Recitals.
Section 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints
the Rights Agent to act as agent for the Company and to take certain actions in
respect of the holders of the Rights in accordance with the terms and conditions
hereof, and the Rights Agent hereby accepts such appointment. The Company may
from time to time appoint such Co-Rights Agents as it may deem necessary or
desirable.
Section 3. ISSUE OF RIGHTS CERTIFICATES.
(a) Until the Distribution Date, (x) the Rights will be evidenced
(subject to the provisions of paragraph (b) of this Section 3) by the
certificates for Common Shares registered in the names of the holders of Common
Shares and not by separate certificates, and (y) the Rights will be transferable
only in connection with the transfer of the underlying shares of Common Shares
(including a transfer to the Company). As soon as practicable after the
Distribution Date, the Rights Agent will send by first-class, insured, postage
prepaid mail, to each record holder of Common Shares as of the close of business
on the Distribution Date (other than any Person referred to in the first
sentence of Section 7(e)), at the address of such holder shown on the records of
the Company, one or more Rights Certificates, evidencing one Right for each
Common Share so held, subject to adjustment as provided herein. In the event
that an adjustment in the number of Rights per Common Share has been made
pursuant to Section 11(p)
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hereof, at the time of distribution of the Rights Certificates, the Company
shall make the necessary and appropriate rounding adjustments (in accordance
with Section 14(a) hereof) so that Rights Certificates representing only whole
numbers of Rights are distributed and cash is paid in lieu of any fractional
Rights. As of and after the Distribution Date, the Rights will be evidenced
solely by such Rights Certificates.
(b) As promptly as practicable following the Record Date, the
Company will send a copy of a Summary of Rights to Purchase Preferred Stock, in
substantially the form attached hereto as Exhibit C, by first-class, postage
prepaid mail, to each record holder of Common Shares as of the close of business
on the Record Date, at the address of such holder shown on the records of the
Company. With respect to certificates for Common Shares outstanding as of the
Record Date, until the Distribution Date or the earlier surrender for transfer
thereof or the Expiration Date, the Rights associated with the Common Shares
represented by such certificates shall be evidenced by such certificates for
Common Shares together with the Summary of Rights, and the registered holders of
the Common Shares shall also be the registered holders of the associated Rights.
Until the earlier of the Distribution Date or the Expiration Date, the transfer
of any of the certificates for Common Shares outstanding on the Record Date,
with or without a copy of the Summary of Rights, shall also constitute the
transfer of the Rights associated with the Common Shares represented by such
certificates.
(c) Rights shall be issued in respect of all Common Shares that are
issued (whether originally issued or delivered from the Company's treasury)
after the Record Date but prior to the earlier of the Distribution Date or the
Expiration Date or, in certain circumstances provided in Section 22 hereof,
after the Distribution Date. Certificates issued for Common Shares that shall so
become outstanding or shall be transferred or exchanged after the Record Date
but prior to the earlier of the Distribution Date or the Expiration Date shall
also be deemed to be certificates for Rights, and shall bear the following
legend (which legend may be modified as necessary on the certificates for the
Common Stock or Class B Common Stock, as the case may be, to reflect the
application of this Agreement to the Common Stock or the Class B Common Stock,
as the case may be):
This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in the Rights Agreement between Wit Capital
Group, Inc. (the "Company") and American Stock Transfer & Trust Company
(the "Rights Agent") as it may from time to time be supplemented or
amended (the "Rights Agreement"), the terms of which are hereby
incorporated herein by reference and a copy of which is on file at the
principal offices of the Company. Under certain circumstances, as set
forth in the Rights Agreement, such Rights may be redeemed, may be
exchanged, may expire or may be evidenced by separate certificates and
will no longer be evidenced by this certificate. The Company will mail to
the holder of this certificate a copy of the Rights Agreement, as in
effect on the date of mailing, without charge promptly after receipt of a
written request therefor. UNDER CERTAIN CIRCUMSTANCES SET FORTH IN THE
RIGHTS AGREEMENT, RIGHTS BENEFICIALLY OWNED BY OR TRANSFERRED TO
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ANY PERSON WHO IS, WAS OR BECOMES AN ACQUIRING PERSON OR AN AFFILIATE OR
ASSOCIATE THEREOF (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT), AND
CERTAIN TRANSFEREES THEREOF, WILL BECOME NULL AND VOID AND WILL NO LONGER
BE TRANSFERABLE.
With respect to such certificates containing the foregoing legend, until the
earlier of the Distribution Date or the Expiration Date, the Rights associated
with the Common Shares represented by such certificates shall be evidenced by
such certificates alone, and registered holders of Common Shares shall also be
the registered holders of the associated Rights, and the transfer of any of such
certificates shall also constitute the transfer of the Rights associated with
the Common Shares represented by such certificates.
Section 4. FORM OF RIGHTS CERTIFICATES.
(a) The Rights Certificates (and the forms of election to purchase
and of assignment to be printed on the reverse thereof), when, as and if issued,
shall be substantially in the form set forth in Exhibit B hereto and may have
such marks of identification or designation and such legends, summaries or
endorsements printed thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange or quotation system
on which the Rights may from time to time be listed or quoted, or to conform to
usage. Subject to the provisions of Section 11 and Section 22 hereof, the Rights
Certificates, whenever issued, shall be dated as of the Record Date and on their
face shall entitle the holders thereof to purchase such number of Fractional
Shares of Preferred Stock as shall be set forth therein at the price set forth
therein (such exercise price per Fractional Share (or, as set forth in this
Agreement, for other securities), the"Purchase Price"), but the amount and type
of securities purchasable upon the exercise of each Right and the Purchase Price
thereof shall be subject to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(a) or
Section 22 hereof that represents Rights beneficially owned by a Person
described in the first sentence of Section 7(e), and any Rights Certificate
issued pursuant to Section 6 or Section 11 hereof upon transfer, exchange,
replacement or adjustment of any such Rights, shall contain (to the extent
feasible) the following legend, modified as applicable to apply to such Person:
The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person (as such terms are defined
in the Rights Agreement). Accordingly, this Rights Certificate and the
Rights represented hereby will have become null and void in the
circumstances and with the effect specified in Section 7(e) of such
Agreement.
The provisions of Section 7(e) of this Agreement shall be operative whether or
not the foregoing legend is contained on any such Rights Certificate. The
Company shall give notice to the Rights
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Agent promptly after it becomes aware of the existence of any Acquiring Person
or any Associate or Affiliate thereof.
Section 5. COUNTERSIGNATURE AND REGISTRATION.
(a) The Rights Certificates shall be executed on behalf of the
Company by its Chairman of the Board, its Chief Executive Officer, its Chief
Operating Officer, its President or any Vice President, either manually or by
facsimile signature, and shall have affixed thereto the Company's seal or a
facsimile thereof, which shall be attested by the Secretary or an Assistant
Secretary of the Company, either manually or by facsimile signature. The Rights
Certificates shall be countersigned by the Rights Agent, either manually or by
facsimile signature, and shall not be valid for any purpose unless so
countersigned. In case any officer of the Company who shall have signed any of
the Rights Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Rights Certificates, nevertheless, may be countersigned by the Rights Agent
and issued and delivered by the Company with the same force and effect as though
the person who signed such Rights Certificates had not ceased to be such officer
of the Company; and any Rights Certificate may be signed on behalf of the
Company by any person who, at the actual date of the execution of such Rights
Certificate, shall be a proper officer of the Company to sign such Rights
Certificate, although at the date of the execution of this Rights Agreement any
such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its principal office or offices designated as the
appropriate place for surrender of Rights Certificates upon exercise or
transfer, books for registration and transfer of the Rights Certificates issued
hereunder. Such books shall show the names and addresses of the respective
holders of the Rights Certificates, the number of Rights evidenced on its face
by each of the Rights Certificates and the certificate number and the date of
each of the Rights Certificates.
Section 6. TRANSFER, SPLIT-UP, COMBINATION AND EXCHANGE OF RIGHTS
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHTS CERTIFICATES.
(a) Subject to the provisions of Section 4(b), Section 7(e), Section
13(d), Section 14 and Section 24 hereof, at any time after the close of business
on the Distribution Date, and at or prior to the close of business on the
Expiration Date, any Rights Certificate or Rights Certificates may be
transferred, split up, combined or exchanged for another Rights Certificate or
Rights Certificates, entitling the registered holder to purchase a like number
of Fractional Shares of Preferred Stock (or, following a Triggering Event,
Common Shares, other securities, cash or other assets, as the case may be) as
the Rights Certificate or Rights Certificates surrendered then entitled such
holder (or former holder in the case of a transfer) to purchase. Any registered
holder desiring to transfer, split up, combine or exchange any Rights
Certificate or Rights Certificates shall make such request in writing delivered
to the Rights Agent, and shall surrender the Rights Certificate or Rights
Certificates to be transferred, split up, combined or exchanged at
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the principal office or offices of the Rights Agent designated for such purpose.
Neither the Rights Agent nor the Company shall be obligated to take any action
whatsoever with respect to the transfer of any such surrendered Rights
Certificate until the registered holder shall have completed and signed the
certificate contained in the form of assignment on the reverse side of such
Rights Certificate and shall have provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) thereof or of the
Affiliates or Associates thereof as the Company shall reasonably request.
Thereupon the Rights Agent shall, subject to Section 4(b), Section 7(e), Section
13(d), Section 14 and Section 24 hereof, countersign and deliver to the Person
entitled thereto a Rights Certificate or Rights Certificates, as the case may
be, as so requested. The Company may require payment by the holder 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 Rights
Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Rights Certificate, and, in case of loss, theft or destruction, of indemnity
or security reasonably satisfactory to them, and reimbursement to the Company
and the Rights Agent of all reasonable expenses incidental thereto, and upon
surrender to the Rights Agent and cancellation of the Rights Certificate if
mutilated, the Company will, subject to Section 4(b), Section 7(e), Section
13(d), Section 14 and Section 24, execute and deliver a new Rights Certificate
of like tenor to the Rights Agent for countersignature and delivery to the
registered owner in lieu of the Rights Certificate so lost, stolen, destroyed or
mutilated.
Section 7. EXERCISE OF RIGHTS; PURCHASE PRICE.
(a) Subject to Section 7(e) hereof, the registered holder of any
Rights Certificate may exercise the Rights evidenced thereby (except as
otherwise provided herein including, without limitation, the restrictions on
exercisability set forth in Section 9(c), Section 11(a)(iii) and Section 23(a)
hereof) in whole or in part at any time after the Distribution Date upon
surrender of the Rights Certificate, with the form of election to purchase and
the certificate on the reverse side thereof duly completed and executed, to the
Rights Agent at the principal office or offices of the Rights Agent designated
for such purpose, together with payment of the aggregate Purchase Price with
respect to the total number of Fractional Shares of Preferred Stock (or other
securities, cash or other assets, as the case may be) as to which such
surrendered Rights are then exercisable, at or prior to the Expiration Date.
(b) The Purchase Price for each Fractional Share of Preferred Stock
pursuant to the exercise of a Right shall initially be $65.00, and shall be
subject to adjustment from time to time as provided in Sections 11 and 13(a)
hereof and shall be payable in accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing exercisable
Rights, with the form of election to purchase and the certificate on the reverse
side thereof duly executed,
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accompanied by payment, with respect to each Right so exercised, of the Purchase
Price per Fractional Share of Preferred Stock (or other shares, securities, cash
or other assets, as the case may be) to be purchased as set forth below and an
amount equal to any applicable transfer tax, the Rights Agent shall, subject to
Section 20(k) hereof, thereupon promptly (i)(A) requisition from any transfer
agent of the shares of Preferred Stock (or make available, if the Rights Agent
is the transfer agent for such shares) certificates for the total number of
Fractional Shares of Preferred Stock to be purchased, and the Company hereby
irrevocably authorizes its transfer agent to comply with all such requests, or
(B) if the Company, in its sole discretion, shall have elected to deposit the
shares of Preferred Stock issuable upon exercise of the Rights hereunder with a
depositary agent, requisition from the depositary agent depositary receipts
representing interests in such number of Fractional Shares of Preferred Stock as
are to be purchased (in which case certificates for the shares of Preferred
Stock represented by such receipts shall be deposited by the transfer agent with
the depositary agent) and the Company will direct the depositary agent to comply
with such request, (ii) requisition from the Company the amount of cash, if any,
to be paid in lieu of fractional shares in accordance with Section 14 hereof,
(iii) after receipt of such certificates or depositary receipts, cause the same
to be delivered to or upon the order of the registered holder of such Rights
Certificate, registered in such name or names as may be designated by such
holder and (iv) after receipt thereof, deliver such cash, if any, to or upon the
order of the registered holder of such Rights Certificate. The payment of the
Purchase Price (as such amount may be reduced pursuant to Section 11(a)(iii)
hereof) may be made in cash or by certified check, cashier's or official bank
check or bank draft payable to the order of the Company or the Rights Agent. In
the event that the Company is obligated to issue other securities (including
Common Shares) of the Company, pay cash and/or distribute other property
pursuant to Section 11(a) or Section 13(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. The
Company reserves the right to require prior to the occurrence of a Triggering
Event that, upon exercise of Rights, a number of Rights be exercised so that
only whole shares of Preferred Stock would be issued.
(d) In case the registered holder of any Rights Certificate shall
exercise fewer than all the Rights evidenced thereby, a new Rights Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent and delivered to, or upon the order of, the registered
holder of such Rights Certificate, registered in such name or names as may be
designated by such holder, subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary, from
and after the first occurrence of a Triggering Event, any Rights beneficially
owned by or transferred to (i) an Acquiring Person or an Associate or Affiliate
of an Acquiring Person other than any such Person that became such pursuant to a
Permitted Offer and the Board of Directors in good faith determines was not
involved in and did not cause or facilitate, directly or indirectly, such
Triggering Event, (ii) a direct or indirect transferee of such Rights from such
Acquiring Person (or any such Associate or Affiliate) who becomes a transferee
after such Triggering Event or (iii) a direct or indirect transferee of such
Acquiring Person (or of any such Associate or Affiliate)
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who becomes a transferee prior to or concurrently with such Triggering Event and
receives such Rights pursuant to either (A) a transfer (whether or not for
consideration) from such Acquiring Person (or such Affiliate or Associate) to
holders of equity interests in such Acquiring Person (or such Affiliate or
Associate) or to any Person with whom such Acquiring Person (or such Affiliate
or Associate) has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer that the Board of Directors
of the Company determines is part of a plan, arrangement or understanding that
has as a primary purpose or effect the avoidance of this Section 7(e), shall
become null and void without any further action, no holder of such Rights shall
have any rights whatsoever with respect to such Rights, whether under any
provision of this Agreement or otherwise, and such Rights shall not be
transferable. The Company shall use all reasonable efforts to ensure that the
provisions of this Section 7(e) and Section 4(b) hereof are complied with, but
shall have no liability to any holder of Rights 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.
(f) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a 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 Rights Certificate surrendered for
such exercise and (ii) provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request.
Section 8. CANCELLATION AND DESTRUCTION OF RIGHTS CERTIFICATES. All
Rights Certificates surrendered for the purpose of exercise, transfer, split-up,
combination or exchange shall, if surrendered to the Company or any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be canceled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
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 other Rights Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
canceled Rights Certificates to the Company, or shall, at the written request of
the Company, destroy such canceled Rights Certificates, and in such case shall
deliver a certificate of destruction thereof to the Company.
Section 9. RESERVATION AND AVAILABILITY OF CAPITAL STOCK.
(a) The Company covenants and agrees that it will cause to be
reserved and kept available out of its authorized and unissued shares of
Preferred Stock (and, following the occurrence of a Triggering Event, out of its
authorized and unissued Common Shares and/or other securities or out of its
authorized and issued shares held in its treasury), the number of shares of
Preferred Stock (and, following the occurrence of a Triggering Event, Common
Shares
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and/or 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.
(b) So long as any shares of Preferred Stock (and, following the
occurrence of a Triggering Event, Common Shares and/or other securities)
issuable and deliverable upon the exercise of the Rights are listed on any
national securities exchange or quoted on any trading system, 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 quoted on such system, upon official notice of issuance upon such
exercise. Following the occurrence of a Triggering Event, the Company will use
its best efforts to list (or continue the listing of) the Voting Class Rights
and the securities issuable and deliverable upon the exercise of the Voting
Class Rights on one or more national securities exchanges or to cause the Rights
and the securities purchasable upon exercise of the Voting Class Rights to be
reported by NASDAQ or such other transaction reporting system then in use.
(c) The Company shall use its best efforts to (i) prepare and file,
as soon as practicable following the first occurrence of a Flip-In Event or, if
applicable, as soon as practicable following the earliest date after the first
occurrence of a Flip-In Event on which the consideration to be delivered by the
Company upon exercise of the Rights has been determined pursuant to this
Agreement (including in accordance with Section 11(a)(iii) hereof), a
registration statement on an appropriate form under the Securities Act with
respect to the securities purchasable upon exercise of the Voting Class Rights,
(ii) cause such registration statement to become effective as soon as
practicable after such filing, and (iii) cause such registration statement to
remain effective (with a prospectus at all times meeting the requirements of the
Securities Act) until the earlier of (A) the date as of which the Voting Class
Rights are no longer exercisable for such securities and (B) the Expiration
Date. The Company will also take such action as may be appropriate under, or to
ensure compliance with, the securities or "blue sky" laws of the various states
in connection with the exercisability of the Voting Class Rights. The Company
may temporarily suspend, for a period of time not to exceed 90 days after the
date set forth in clause (i) of the first sentence of this Section 9(c), the
exercisability of the Voting Class Rights in order to prepare and file such
registration statement and permit it to become effective. In addition, if the
Company shall determine that the Securities Act requires an effective
registration statement under the Securities Act following the Distribution Date,
the Company may temporarily suspend the exercisability of the Voting Class
Rights until such time as such a registration statement has been declared
effective. Upon any such suspension, the Company shall issue a public
announcement stating that the exercisability of the Voting Class Rights have
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 Voting Class Rights shall not be exercisable in
any jurisdiction if the requisite qualification in such jurisdiction shall not
have been obtained, the exercise thereof shall not be permitted under applicable
law or any required registration statement shall not have been declared
effective.
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(d) The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all Fractional Shares of Preferred
Stock (and, following the occurrence of a Triggering Event, Common Shares and/or
other securities) delivered upon exercise of Rights shall, at the time of
delivery of the certificates for such shares (subject to payment of the Purchase
Price), be duly and validly authorized and issued and fully paid and
nonassessable.
(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 Rights Certificates
and of any certificates for a number of Fractional Shares of Preferred Stock (or
Common Shares and/or other securities, as the case may be) upon the exercise of
Rights. The Company shall not, however, be required to pay any transfer tax that
may be payable in respect of any transfer or delivery of Rights Certificates to
a Person other than, or the issuance or delivery of a number of Fractional
Shares of Preferred Stock (or Common Shares and/or other securities, as the case
may be) in respect of a name other than that of, the registered holder of the
Rights Certificates evidencing Rights surrendered for exercise or to issue or
deliver any certificates for a number of Fractional Shares of Preferred Stock
(or Common Shares and/or other securities, as the case may be) in a name other
than that of the registered holder upon the exercise of any Rights until such
tax shall have been paid (any such tax being payable by the holder of such
Rights Certificate at the time of surrender) or until it has been established to
the Company's satisfaction that no such tax is due.
Section 10. PREFERRED STOCK RECORD DATE. Each Person in whose name
any certificate for a number of Fractional Shares of Preferred Stock (or Common
Shares and/or other securities, as the case may be) is issued upon the exercise
of Rights shall for all purposes be deemed to have become the holder of record
of such shares (fractional or otherwise) of Preferred Stock (or Common Shares
and/or other securities, as the case may be) represented thereby on, and such
certificate shall be dated, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and all applicable transfer taxes) was made; PROVIDED, HOWEVER, that if the
date of such surrender and payment is a date upon which the Preferred Stock (or
Common Shares and/or other securities, as the case may be) transfer books of the
Company are closed, such Person shall be deemed to have become the record holder
of such shares (fractional or otherwise) on, and such certificate shall be
dated, the next succeeding Business Day on which the Preferred Stock (or Common
Shares and/or other securities, as the case may be) transfer books of the
Company are open. Prior to the exercise of the Rights evidenced thereby, the
holder of a Rights Certificate, as such, shall not be entitled to any rights of
a stockholder of the Company with respect to shares for which the Rights shall
be exercisable, including, without limitation, the right to vote, to receive
dividends or other distributions or to exercise any preemptive rights, and shall
not be entitled to receive any notice of any proceedings of the Company, except
as provided herein.
Section 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER AND KIND OF SHARES
OR NUMBER OF RIGHTS. The Purchase Price, the number and kind of shares or other
securities subject
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to purchase upon exercise of each Right and the number of Rights outstanding are
subject to adjustment from time to time as provided in this Section 11.
(a)(i)In the event the Company shall at any time after the
Rights Dividend Declaration Date (A) declare a dividend on the outstanding
shares of Preferred Stock payable in shares of Class 1 Series A Junior
Participating Preferred Stock or Class 2 Series A Junior Participating
Preferred Stock, as the case may be, (B) subdivide the outstanding shares
of Preferred Stock, (C) combine the outstanding shares of Preferred Stock
into a smaller number of shares of Class 1 Series A Junior Participating
Preferred Stock or Class 2 Series A Junior Participating Preferred Stock,
as the case may be, or (D) otherwise reclassify the outstanding shares of
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)
and Section 7(e) hereof, the Purchase Price in effect at the time of the
record date for such dividend or of the effective date of such
subdivision, combination or reclassification, and the number and kind of
shares of Preferred Stock or Common Shares, as the case may be, issuable
on such date, shall be proportionately adjusted so that the holder of any
Voting Class Right or Class B Common Right, as the case may be, exercised
after such time shall be entitled to receive, upon payment of the Purchase
Price then in effect, the aggregate number and kind of shares of Preferred
Stock or Common Shares, as the case may be, which, if such Voting Class
Right or Class B Common Right, as the case may be, had been exercised
immediately prior to such date and at a time when the Preferred Stock
transfer books of the Company were open, he would have owned upon such
exercise and been entitled to receive by virtue of such dividend,
subdivision, combination or reclassification. If an event occurs that
would require an adjustment under both this Section 11(a)(i) and Section
11(a)(ii) hereof, the adjustment provided for in this Section 11(a)(i)
shall be in addition to, and shall be made prior to, any adjustment
required pursuant to Section 11(a)(ii) hereof.
(ii) Subject to Sections 23 and 24 of this Agreement, in the
event any Person shall, at any time after the Rights Dividend Declaration
Date, become an Acquiring Person, unless the event causing such Person to
become an Acquiring Person is (1) a Flip-Over Event or (2) an acquisition
of shares of Common Shares pursuant to a Permitted Offer (PROVIDED that
this clause (2) shall cease to apply if such Acquiring Person thereafter
becomes the Beneficial Owner of any additional shares of Common Shares
other than pursuant to such Permitted Offer or a transaction set forth in
Section 13(a) or 13(d) hereof), then (x) the Purchase Price shall be
adjusted to be the Purchase Price immediately prior to the first
occurrence of a Flip-In Event multiplied by the number of Fractional
Shares of Preferred Stock for which a Right was exercisable immediately
prior to such first occurrence and (y) each holder of a Right (except as
provided below in Section 11(a)(iii) and in Section 7(e) hereof) shall
thereafter have the right to receive, upon exercise thereof at a price
equal to the Purchase Price in accordance with the terms of this
Agreement, in lieu of shares of Preferred Stock, such number of
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shares of Voting Common Stock or Class B Common Stock, as the case may be,
as shall equal the result obtained by dividing the Purchase Price by 50%
of the Current Market Price per share of Voting Common Stock on the date
of such first occurrence (such number of shares, the "Adjustment Shares");
PROVIDED that the Purchase Price and the number of Adjustment Shares shall
be further adjusted as provided in this Agreement to reflect any events
occurring after the date of such first occurrence.
(iii) In the event that the number of shares of Common Stock
or Class B Common Stock that are authorized by the Company's certificate
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 Voting Class Rights or Class B Common Rights, as
the case may be, in accordance with the foregoing subparagraph (ii) of
this Section 11(a), the Company shall, to the extent permitted by
applicable law and regulation, (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 Purchase Price (such excess is
herein referred to as the "Spread"), and (B) with respect to each Right,
make adequate provision to substitute for the Adjustment Shares, upon the
exercise of the Rights and payment of the applicable Purchase Price, (1)
cash, (2) a reduction in the Purchase Price, (3) Voting Common Stock in
the case of holders of Voting Class Rights and Class B Common Stock in the
case of holders of Class B Common Rights or other equity securities of the
Company (including, without limitation, shares, or units of shares, of
preferred stock (including, without limitation, the Preferred Stock) that
the Board of Directors of the Company has determined to have the same
value as shares of Voting Common Stock or Class B Common Stock, as the
case may be (such shares of preferred stock are herein referred to as
"Common Share Equivalents")), (4) debt securities of the Company, (5)
other assets or (6) any combination of the foregoing, having an aggregate
value equal to the Current Value, where such aggregate value has been
determined by the Board of Directors of the Company based upon the advice
of a nationally recognized investment banking firm selected by the Board
of Directors of the Company; PROVIDED, HOWEVER, if the Company shall not
have made adequate provision to deliver value pursuant to clause (B) above
within 30 days following the later of (x) the first occurrence of a
Flip-In Event and (y) the date on which the Company's right of redemption
pursuant to Section 23(a) expires (the later of (x) and (y) being referred
to herein as the "Flip-In Trigger Date"), then the Company shall be
obligated to deliver, upon the surrender for exercise of a Right and
without requiring payment of the Purchase Price, shares of Voting Common
Stock in the case of the holders of Voting Class Rights and Class B Common
Stock in the case of holders of Class B Common Rights (to the extent
available) and then, if necessary, cash, which shares and/or cash have an
aggregate value equal to the Spread. If the Board of Directors of the
Company 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, the 30-day period set forth above may be
extended to the extent necessary, but not more than 90 days after the
Flip-In Trigger Date, in order that
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the Company may seek stockholder approval for the authorization of such
additional shares (such period, as it may be extended, the "Substitution
Period"). To the extent that the Company or the Board of Directors
determines that some action need be taken pursuant to the first and/or
second sentences of this Section 11(a)(iii), the Company (x) shall
provide, subject to Section 7(e) hereof, that such action shall apply
uniformly to all outstanding Rights, and (y) may suspend the
exercisability of the Rights 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 or, if applicable, the Class B Common Stock shall be the
Current Market Price per share of the Voting Common Stock or, if
applicable, the Current Market Price per share of the Class B Common
Stock, in each case on the Flip-In Trigger Date and the value of any
Common Share Equivalent shall be deemed to have the same value as the
Voting Common Stock or, if applicable, the Class B Common Stock on such
date.
(b) In case the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Preferred Stock entitling them to
subscribe for or purchase (for a period expiring within 45 calendar days after
such record date) Preferred Stock (or shares having the same rights, privileges
and preferences as the shares of Preferred Stock ("Equivalent Preferred Stock"))
or securities convertible into Preferred Stock or Equivalent Preferred Stock at
a price per share of Preferred Stock or per share of Equivalent Preferred Stock
(or having a conversion price per share, if a security convertible into
Preferred Stock or Equivalent Preferred Stock) less than the Current Market
Price per share of Preferred Stock on such record date, the Purchase Price to be
in effect after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the number of shares of Preferred Stock outstanding
on such record date, plus the number of shares of Preferred Stock that the
aggregate offering price of the total number of shares of Preferred Stock and/or
Equivalent Preferred Stock so to be offered (and/or the aggregate initial
conversion price of the convertible securities so to be offered) would purchase
at such Current Market Price, and the denominator of which shall be the number
of shares of Preferred Stock outstanding on such record date, plus the number of
additional shares of Preferred Stock and/or Equivalent Preferred Stock to be
offered for subscription or purchase (or into which the convertible securities
so to be offered are initially convertible). In case such subscription price may
be paid by delivery of consideration, part or all of which may be in a form
other than cash, the value of such consideration shall be as determined in good
faith by the Board of Directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent and shall be binding on the
Rights Agent and the holders of the Rights. Shares of Preferred Stock owned by
or held for the account of the Company shall not be deemed outstanding for the
purpose of any such computation. Such adjustment shall be made successively
whenever such a record date is fixed, and in the event that such rights or
warrants
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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 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 Preferred Stock, but
including any dividend payable in stock other than Preferred Stock) or
subscription rights or warrants (excluding those referred to in Section 11(b)
hereof), the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the Current Market
Price per share of 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 and shall be binding on the Rights Agent) of the portion of the cash,
assets or evidences of indebtedness so to be distributed or of such subscription
rights or warrants applicable to a share of Preferred Stock and the denominator
of which shall be such Current Market Price per share of Preferred Stock. Such
adjustments shall be made successively whenever such a record date is fixed, and
in the event that such distribution is not so made, the Purchase Price shall be
adjusted to be the Purchase Price that would have been in effect if such record
date had not been fixed.
(d) (iFor the purpose of any computation hereunder, other than
computations made pursuant to Section 11(a)(iii) hereof, the "Current
Market Price" per share of Common Stock or Class B Common Stock on any
date shall be deemed to be the average of the daily Closing Prices per
share of such Voting Common Stock or Class B Common Stock, as the case may
be, for the 30 consecutive Trading Days immediately prior to such date,
and for purposes of computations made pursuant to Section 11(a)(iii)
hereof, the "Current Market Price" per share of Common Stock or Class B
Common Stock on any date shall be deemed to be the average of the daily
Closing Prices per share of such Voting Common Stock or Class B Common
Stock, as the case may be, for the 10 consecutive Trading Days immediately
following such date; PROVIDED, HOWEVER, that in the event that the Current
Market Price per share of Common Stock or Class B Common Stock is
determined during a period following the announcement of (A) a dividend or
distribution on such Common Stock or Class B Common Stock, as the case may
be, other than a regular quarterly cash dividend or the dividend of the
Voting Class Rights or Class B Common Rights, as the case may be, or (B)
any subdivision, combination or reclassification of such Common Stock or
Class B Common Stock, and the ex-dividend date for such dividend or
distribution, or the record date for such subdivision, combination or
reclassification, shall not have occurred prior to the commencement of the
requisite 30 Trading Day or 10 Trading Day period, as set forth above,
then, and in each such case, the Current Market Price shall be properly
adjusted to take into account ex-dividend trading. If the Voting Common
Stock is not publicly held or so listed or
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traded, "Current Market Price" per share of the Common Stock shall mean
the fair value per share of Voting Common Stock 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 and shall be
conclusive for all purposes. If the Class B Common Stock is not listed or
admitted to trading on a national securities exchange or traded in the
over-the-counter market, the Current Market Price per share of the Class B
Common Stock on any date shall be the same as the Current Market Price per
share of the Common Stock on such date.
(ii) For the purpose of any computation hereunder, the
"Current Market Price" per share (or Fractional Share) of Class 1 Series A
Junior Participating Preferred Stock shall be determined in the same
manner as set forth for the Common Stock in this Section 11(d) and the
"Current Market Price" per share (or Fractional Share) of Class 2 Series A
Junior Participating Preferred Stock shall be determined in the same
manner as set forth for the Class B Common Stock in this Section 11(d). If
the Current Market Price per share (or Fractional Share) of Class 1 Series
A Junior Participating Preferred Stock cannot be determined in the manner
provided above or if the Class 1 Series A Junior Participating 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
Class 1 Series A Junior Participating Preferred Stock or Class 2 Junior
Participating Preferred Stock, as the case may be, shall be conclusively
deemed to be an amount equal to 100 (as such number may be appropriately
adjusted for such events as stock splits, stock dividends and
recapitalizations with respect to the Common Stock or the Class B Common
Stock, as the case may be, occurring after the date of this Agreement)
multiplied by the Current Market Price per share of the Common Stock in
the case of the Class 1 Series A Junior Participating Preferred Stock or
the Current Market Price per share of the Class B Common Stock in the case
of the Class 2 Series A Junior Participating Preferred Stock. If neither
the Common Stock nor the Class 1 Series A Junior Participating Preferred
Stock is publicly held or so listed or traded, Current Market Price per
share of each of the Class 1 Series A Junior Participating Preferred Stock
and Class 2 Series A Junior Participating Preferred Stock shall mean the
fair value per share of Class 1 Series A Junior Participating Preferred
Stock and the fair value per share of Class 2 Series A Junior
Participating Preferred Stock, in each case 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 and shall be
conclusive for all purposes. For all purposes of this Agreement, the
Current Market Price of a Fractional Share of Preferred Stock shall be
equal to the Current Market Price of one share of Preferred Stock divided
by 100.
(e) Anything herein to the contrary notwithstanding, no adjustment
in the Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least 1% in the Purchase Price; PROVIDED, HOWEVER,
that any adjustments that by reason of this Section 11(e) are not required to be
made shall be carried forward and taken into account in any
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subsequent adjustment. All calculations under this Section 11 shall be made to
the nearest cent or to the nearest ten-thousandth of a share of Common Stock or
Class B Common Stock or other share or to the nearest ten- thousandth of a
Fractional Share of Class 1 Series A Junior Participating Preferred Stock and
Class 2 Series A Junior Participating Preferred Stock, as the case may be.
Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than the earlier of (i) three
years from the date of the transaction which mandates such adjustment or (ii)
the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section 11(a)
or Section 13(a) hereof, the holder of any Right thereafter exercised shall
become entitled to receive in respect of such Right any shares of capital stock
other than Preferred Stock, thereafter the number of such other shares so
receivable upon exercise of any Right and the Purchase Price thereof shall be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Preferred Stock
contained in Sections 11(a), (b), (c), (e), (f), (g), (h), (i), (j), (k) and (m)
hereof, and the provisions of Sections 7, 9, 10, 13 and 14 hereof with respect
to the Preferred Stock shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of Fractional Shares of
Preferred Stock purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided
in Section 11(i), upon each adjustment of the Purchase Price as a result of the
calculations made in Sections 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of Fractional Shares of
Class 1 Series A Junior Participating Preferred Stock or Class 2 Series A Junior
Participating Preferred Stock, as the case may be (calculated to the nearest one
ten-thousandth of a Fractional Share) obtained by (i) multiplying (x) the number
of Fractional Shares of Class 1 Series A Junior Participating Preferred Stock or
Class 2 Series A Junior Participating Preferred Stock, as the case may be,
covered by a Right immediately prior to this adjustment by (y) the Purchase
Price in effect immediately prior to such adjustment of the Purchase Price, and
(ii) dividing the product so obtained by the Purchase Price in effect
immediately after such adjustment of the Purchase Price.
(i) The Company may elect, on or after the date of any adjustment of
the Purchase Price, to adjust the number of Voting Class Rights or Class B
Common Rights as the case may be, in lieu of any adjustment in the number of
Fractional Shares of Class 1 Series A Junior Participating Preferred Stock or
Class 2 Series A Junior Participating Preferred Stock, as the case may be,
purchasable upon the exercise of Voting Class Rights or Class B Common Rights,
as the case may be. Each of the Rights outstanding after the adjustment in the
number of Rights shall be exercisable for the number of Fractional Shares of
Class 1 Series A Junior
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Participating Preferred Stock or Class 2 Series A Junior Participating Preferred
Stock, as the case may be, for which a Voting Class Right or Class B Common
Right, as the case may be, was exercisable immediately prior to such adjustment.
Each Voting Class Right or Class B Common Right held of record prior to such
adjustment of the number of Voting Class Rights or Class B Common Rights shall
become that number of Voting Class Rights or Class B Common Rights (calculated
to the nearest ten-thousandth) obtained by dividing the Purchase Price in effect
immediately prior to adjustment of the Purchase Price by the Purchase Price in
effect immediately after adjustment of the Purchase Price. The Company shall
make a public announcement of its election to adjust the number of Voting Class
Rights or Class B Common Rights, indicating the record date for the adjustment,
and, if known at the time, the amount of the adjustment to be made. This record
date may be the date on which the Purchase Price is adjusted or any day
thereafter, but, if the Rights Certificates have been issued, shall be at least
10 days later than the date of the public announcement. If Rights Certificates
have been issued, upon each adjustment of the number of Voting Class Rights or
Class B Common Rights pursuant to this Section 11(i), the Company shall, as
promptly as practicable, cause to be distributed to holders of record of Rights
Certificates on such record date Rights Certificates evidencing, subject to
Section 14 hereof, the additional Voting Class Rights or Class B Common Rights
to which such holders shall be entitled as a result of such adjustment, or, at
the option of the Company, shall cause to be distributed to such holders of
record in substitution and replacement for the Rights Certificates held by such
holders prior to the date of adjustment, and upon surrender thereof, if required
by the Company, new Rights Certificates evidencing all the Voting Class Rights
or Class B Common Rights to which such holders shall be entitled after such
adjustment. Rights 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 Rights Certificates on the record date
specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price
or the number of Fractional Shares of Preferred Stock issuable upon the exercise
of the Rights, the Rights Certificates theretofore and thereafter issued may
continue to express the Purchase Price per Fractional Share and the number of
Fractional Shares that were expressed in the initial Rights Certificates issued
hereunder.
(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below the then par value, if any, or the stated capital of
the number of Fractional Shares of Preferred Stock or of the number of shares of
Common Stock or Class B Common Stock, as the case may be, or other securities
issuable upon exercise of a Voting Class Right or Class B Common Right, as the
case may be, the Company shall take any corporate action that may, in the
opinion of its counsel, be necessary in order that the Company may validly and
legally issue fully paid and nonassessable such number of Fractional Shares of
Class 1 Series A Junior Participating Preferred Stock or Class 2 Series A Junior
Participating Preferred Stock, as the case may be, or such number of shares of
Common Stock or Class B Common Stock, as the case may be, or other securities at
such adjusted Purchase Price.
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(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 Voting Class Right or Class B Common
Right, as the case may be, exercised after such record date the number of
Fractional Shares of Class 1 Series A Junior Participating Preferred Stock or
Class 2 Series A Junior Participating Preferred Stock, as the case may be, and
other capital stock or securities of the Company, if any, issuable upon such
exercise over and above the number of Fractional Shares of Class 1 Series A
Junior Participating Preferred Stock or Class 2 Series A Junior Participating
Preferred Stock, as the case may be, and other capital stock or securities of
the Company, if any, issuable upon such exercise on the basis of the Purchase
Price in effect prior to such adjustment; PROVIDED, HOWEVER, that the Company
shall deliver to such holder a due bill or other appropriate instrument
evidencing such holder's right to receive such additional shares (fractional or
otherwise) or securities upon the occurrence of the event requiring such
adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that in their good faith judgment the Board of Directors of the
Company shall determine to be advisable in order that any (i) consolidation or
subdivision of the Class 1 Series A Junior Participating Preferred Stock or
Class 2 Series A Junior Participating Preferred Stock, as the case may be, (ii)
issuance wholly for cash of any shares of Class 1 Series A Junior Participating
Preferred Stock or Class 2 Series A Junior Participating Preferred Stock, as the
case may be, at less than the current market price, (iii) issuance wholly for
cash of shares of Class 1 Series A Junior Participating Preferred Stock or Class
2 Series A Junior Participating Preferred Stock, as the case may be, or
securities that by their terms are convertible into or exchangeable for shares
of Class 1 Series A Junior Participating Preferred Stock or Class 2 Series A
Junior Participating Preferred Stock, as the case may be, (iv) stock dividends
or (v) issuance of rights, options or warrants referred to in this Section 11
hereafter made by the Company to holders of its Preferred Stock shall not be
taxable to such stockholders.
(n) The Company covenants and agrees that it shall not, at any time
that there is an Acquiring Person, (i) consolidate with any other Person, (ii)
merge with or into any other Person, or (iii) sell, lease or transfer (or permit
one or more Subsidiaries to sell, lease or transfer), in one transaction or a
series of related transactions, assets or earning power aggregating more than
50% of the assets or earning power of the Company and its Subsidiaries (taken as
a whole) to any other Person or Persons, if (x) at the time of or immediately
after such consolidation, merger, sale, lease or transfer there are any rights,
warrants or other instruments or securities of the Company or any other Person
outstanding or agreements, arrangements or understandings in effect that would
substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights, (y) prior to, simultaneously with or immediately after
such consolidation, merger, sale, lease or transfer, the stockholders or other
equity owners 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
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Associates, or (z) the identity, form or nature of organization of the Principal
Party (including without limitation the selection of the Person that will be the
Principal Party as a result of the Company's entering into one or more
consolidations, mergers, sales, leases, transfers or transactions with more than
one party) would preclude or limit the exercise of Rights or otherwise diminish
substantially or eliminate the benefits intended to be afforded by the Rights.
(o) The Company covenants and agrees that, after the Distribution
Date, it will not, except as permitted by Section 23, Section 24 or Section 27
hereof, take (or permit any Subsidiary to take) any action if the purpose of
such action is to, or 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, other than Rights that have
become null and void pursuant to Section 7(e) hereof.
(p) Notwithstanding Section 3(c) hereof or any other provision of
this Agreement to the contrary, in the event that the Company shall at any time
after the Rights Dividend Declaration Date and prior to the Distribution Date
(i) declare a dividend on the outstanding shares of Common Stock or Class B
Common Stock, as the case may be, payable in shares of Common Stock or Class B
Common Stock, as the case may be, (ii) subdivide the outstanding shares of
Common Stock or Class B Common Stock, as the case may be, (iii) combine the
outstanding shares of Common Stock or Class B Common Stock, as the case may be,
into a smaller number of shares or (iv) otherwise reclassify the outstanding
shares of Common Stock or Class B Common Stock, as the case may be, (including
any such reclassification in connection with a consolidation or merger in which
the Company is the continuing or surviving corporation), the number of Voting
Class Rights associated with each share of Common Stock then outstanding or the
number of Class B Common Rights associated with each share of Class B Common
Stock then outstanding, or issued or delivered thereafter but prior to the
Distribution Date, shall be proportionately adjusted so that the number of
Voting Class Rights thereafter associated with each share of Common Stock or the
number of Class B Common Rights associated with each share of Class B Common
Stock following any such event shall equal the result obtained by multiplying
the number of Voting Class Rights associated with each share of Common Stock, or
the number of Class B Common Rights associated with each share of Class B Common
Stock, as the case may be, immediately prior to such event by a fraction (the
"Adjustment Fraction") the numerator of which shall be the total number of
shares of Common Stock, in the case of an adjustment of Voting Class Rights, or
Class B Common Stock, in the case of an adjustment of Class B Common Rights,
outstanding immediately prior to the occurrence of the event and the denominator
of which shall be the total number of shares of Common Stock, in the case of an
adjustment of Voting Class Rights, or Class B Common Stock, in the case of an
adjustment of Class B Common Rights, outstanding immediately following the
occurrence of such event. In lieu of such adjustment in the number of Voting
Class Rights associated with each share of Common Stock or of such adjustment in
the number of Class B Voting Rights associated with each share of Class B Common
Stock, the Company may elect to adjust the number of Fractional Shares of Class
1 Series A Junior Preferred Stock or Class 2 Series A Junior Preferred Stock, as
the case may be, purchasable upon the exercise of one Right
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and the Purchase Price. If the Company makes such election, the number of Voting
Class Rights associated with each share of Common Stock or the number of Class B
Common Rights associated with each share of Class B Common Stock shall, in
either case, remain unchanged, and the number of Fractional Shares of Preferred
Stock purchasable upon exercise of one Right and the Purchase Price shall be
proportionately adjusted so that (i) the number of Fractional Shares of
Preferred Stock purchasable upon exercise of a Right following such adjustment
shall equal the product of the number of Fractional Shares of Preferred Stock
purchasable upon exercise of a Right immediately prior to such adjustment
multiplied by the Adjustment Fraction and (ii) the Purchase Price following such
adjustment shall equal the product of the Purchase Price immediately prior to
such adjustment multiplied by the Adjustment Fraction.
Section 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF
SHARES. Whenever an adjustment is made as provided in Section 11 or Section 13
hereof, the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent, and with each transfer agent for the
Preferred Stock and the Common Shares, a copy of such certificate and (c) mail a
brief summary thereof to each registered holder of a Rights Certificate (or, if
prior to the Distribution Date, to each registered holder of a certificate
representing shares of Common Stock) in accordance with Section 26 hereof. The
Rights Agent shall be fully protected in relying on any such certificate and on
any adjustment therein contained.
Section 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR
EARNING POWER.
(a) In the event that, from and after the time an Acquiring Person
has become such, directly or indirectly, (x) the Company shall consolidate with,
or merge with and into, any other Person, and the Company shall not be the
continuing or surviving corporation of such consolidation or merger, (y) any
Person shall consolidate with, or merge with or into, the Company, and the
Company shall be the continuing or surviving corporation of such consolidation
or merger, and, in connection with such consolidation or merger, all or part of
the outstanding Common Shares shall be changed into or exchanged for stock or
other securities of the Company or any other Person or cash or any other
property, or (z) the Company shall sell, lease or otherwise transfer (or one or
more of its Subsidiaries shall sell, lease or otherwise transfer), in one
transaction or a series of related transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any Person or Persons (other than the Company
or any wholly owned Subsidiary of the Company or any combination thereof in one
or more transactions each of which complies (and all of which together comply)
with Section 11(o) hereof), then, and in each such case (except as may be
contemplated by Section 13(d) hereof), proper provision shall be made so that:
(i) the Purchase Price shall be adjusted to be the Purchase Price immediately
prior to the first occurrence of a Triggering Event multiplied by the number of
Fractional Shares of Preferred Stock for which a Right was exercisable
immediately prior to such first occurrence; (ii) on and after the Distribution
Date, each holder of a Right, except as provided in Section 7(e)
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hereof, shall thereafter have the right to receive, upon the exercise thereof at
the Purchase Price in accordance with the terms of this Agreement, in lieu of
shares of Preferred Stock or Common Shares of the Company, such number of
validly authorized and issued, fully paid, nonassessable and freely tradeable
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 be equal to the result obtained by dividing the
Purchase Price by 50% of the Current Market Price per share of the Common Stock
of such Principal Party on the date of consummation of such Flip-Over Event;
PROVIDED that the Purchase Price and the number of shares of Common Stock of
such Principal Party issuable upon exercise of each Right shall be further
adjusted as provided in this Agreement to reflect any events occurring after the
date of such first occurrence of a Triggering Event or after the date of such
Flip-Over Event, as applicable; (iii) such Principal Party shall thereafter be
liable for, and shall assume, by virtue of such Flip-Over Event, all the
obligations and duties of the Company pursuant to this Agreement; (iv) the term
"Company" shall thereafter be deemed to refer to such Principal Party, it being
specifically intended that the provisions of Section 11 hereof shall apply only
to such Principal Party following the first occurrence of a Flip-Over Event; (v)
such Principal Party shall take such steps (including, but not limited to, the
reservation of a sufficient number of shares of its Common Stock) in connection
with the consummation of any such transaction as may be necessary to assure that
the provisions hereof shall thereafter be applicable, as nearly as reasonably
may be, in relation to its shares of Common Stock thereafter deliverable upon
the exercise of the Rights; and (vi) the provisions of Section 11(a)(ii) hereof
shall be of no effect following the occurrence of any Flip-Over Event.
(b) "Principal Party" shall mean
(i) in the case of any transaction described in clause (x) or (y) of
the first sentence of Section 13(a), (A) the Person that is the issuer of
any securities into which Common Shares 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, or (B) if no securities are so issued, (x) the Person that survives
such consolidation or is the other party to the merger and survives such
merger, or, if there is more than one such Person, the Person the Common
Stock of which has the greatest aggregate market value 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); and
(ii) in the case of any transaction described in clause (z) of the
first sentence of Section 13(a), the Person that is the party receiving
the 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, the Person
the Common Stock of which has the greatest aggregate market value;
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PROVIDED, HOWEVER, that in any such case, if the Common Stock of such Person is
not at such time and has not been continuously over the preceding twelve-month
period registered under Section 12 of the Exchange Act, and if (1) such Person
is a direct or indirect Subsidiary of another Person the Common Stock of which
is and has been so registered, "Principal Party" shall refer to such other
Person; (2) 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,"Principal Party" shall refer to whichever of such Persons is the
issuer of the Common Stock having the greatest aggregate market value; and (3)
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 (1) and (2) above shall apply to each of the chains of
ownership having an interest in such joint venture as if such party were a
"Subsidiary" of both or all of such joint venturers and the Principal Parties in
each such chain shall bear the obligations set forth in this Section 13 in the
same ratio as their direct or indirect interests in such Person bear to the
total of such interests.
(c) The Company shall not consummate any Flip-Over Event unless each
Principal Party (or Person that may become a Principal Party as a result of such
Flip-Over Event) shall have a sufficient number of authorized shares of its
Common Stock that have not been issued or reserved for issuance to permit the
exercise in full of the Rights in accordance with this Section 13 and unless
prior thereto the Company and each such Principal Party shall have executed and
delivered to the Rights Agent a supplemental agreement providing for the terms
set forth in paragraphs (a) and (b) of this Section 13 and further providing
that, as soon as practicable after the date of such Flip-Over Event, the
Principal Party at its own expense will
(i) prepare and file a registration statement under the Securities
Act with respect to the Rights and the securities purchasable upon
exercise of the Rights on an appropriate form, and will use its best
efforts to cause such registration statement to (A) become effective as
soon as practicable after such filing and (B) remain effective (with a
prospectus at all times meeting the requirements of the Securities Act)
until the Expiration Date;
(ii) use its best efforts to qualify or register the Rights and the
securities purchasable upon exercise of the Rights under the "blue sky"
laws of such jurisdictions as may be necessary or appropriate;
(iii) use its best efforts, if the Common Stock of the Principal
Party is or shall become 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 transaction reporting
system then in use; and
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(iv) deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates that comply
in all respects with the requirements for registration on Form 10 under
the Exchange Act.
The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. In the event that a Flip-Over Event
shall occur at any time after the occurrence of a Flip-In Event, the Rights that
have not theretofore been exercised shall thereafter become exercisable in the
manner described in Section 13(a).
(d) Notwithstanding anything in this Agreement to the contrary,
Section 13 shall not be applicable to a transaction described in subparagraphs
(x) and (y) of Section 13(a) if (i) such transaction is consummated with a
Person or Persons who acquired Common Shares pursuant to a Permitted Offer (or a
wholly owned subsidiary of any such Person or Persons), (ii) the price per share
of Common Shares offered in such transaction is not less than the price per
share of Common Shares paid to all holders of Common Shares whose shares were
purchased pursuant to such Permitted Offer, and (iii) the form of consideration
being offered to the remaining holders of Common Shares pursuant to such
transaction is the same as the form of consideration paid pursuant to such
Permitted Offer. Upon consummation of any such transaction contemplated by this
Section 13(d), all Rights hereunder shall expire.
Section 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
(a) The Company shall not be required to issue fractions of Rights,
except prior to the Distribution Date as provided in Section 11(p) hereof, or to
distribute Rights Certificates or scrip evidencing fractional Rights. In lieu of
such fractional Rights, there shall be paid to the registered holders of the
Rights Certificates with regard to which such fractional Rights would otherwise
be issuable, an amount in cash equal to the same fraction of the Closing Price
of one Right for the Trading Day immediately prior to the date on which such
fractional Rights would have been otherwise issuable.
(b) The Company shall not be required to issue fractions of shares
of Preferred Stock (other than, except as provided in Section 7(c) hereof,
fractions that are integral multiples of a Fractional Share of Preferred Stock)
upon exercise of the Rights or to distribute certificates or scrip evidencing
fractional shares of Preferred Stock (other than, except as provided in Section
7(c) hereof, fractions that are integral multiples of a Fractional Share of
Preferred Stock). Interests in fractions of shares of Preferred Stock in
integral multiples of a Fractional Share of Preferred Stock may, at the election
of the Company in its sole discretion, be evidenced by depositary receipts,
pursuant to an appropriate agreement between the Company and a depositary
selected by it, provided that such agreement shall provide that the holders of
such depositary receipts shall have all the rights, privileges and preferences
to which they are entitled as beneficial owners of the shares of Preferred Stock
represented by such depositary receipts. In lieu of fractional shares of
Preferred Stock that are not integral multiples of a Fractional Share of
Preferred Stock, the Company may pay to the registered holders of Rights
Certificates at the time
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such Rights are exercised as herein provided an amount in cash equal to the same
fraction of one one-hundredth of the Closing Price of one share of Class 1
Series A Junior Participating Preferred Stock or Class 2 Series A Junior
Participating Preferred Stock, as applicable, for the Trading Day immediately
prior to the date of such exercise.
(c) Following the occurrence of a Triggering Event, the Company
shall not be required to issue fractions of shares of Common Shares upon
exercise of the Rights or to distribute certificates or scrip evidencing
fractional shares of Common Shares. In lieu of fractional shares of Common
Shares, the Company may pay to the registered holders of Rights Certificates at
the time such Rights are exercised as herein provided an amount in cash equal to
the same fraction of the Closing Price of one share of Common Stock or Class B
Common Stock, as applicable, for the Trading Day immediately prior to the date
of such exercise.
(d) The holder of a Right by the acceptance of the Right expressly
waives his right to receive any fractional Rights or any fractional shares upon
exercise of a Right, except as permitted by this Section 14.
Section 15. RIGHTS OF ACTION. All rights of action in respect of
this Agreement, other than rights of action vested in the Rights Agent pursuant
to Section 18 hereof, are vested in the respective registered holders of the
Rights and, where applicable, the Company; and any registered holder of any
Voting Class Rights or Class B Common Rights, as the case may be, without the
consent of the Rights Agent or of the holders of any other Voting Class Rights
or Class B Common Rights, as the case may be, may, in such holder's own behalf
and for such holder's own benefit and the benefit of other holders of Voting
Class Rights or Class B Common Rights, as the case may be, enforce, and may
institute and maintain any suit, action or proceeding against the Company to
enforce, or otherwise act in respect of, his right to exercise such holder's
Rights evidenced by such Rights Certificate in the manner provided in such
Rights Certificate and in this Agreement. Without limiting the foregoing or any
remedies available to the holders of Rights, it is specifically acknowledged
that the holders of Rights would not have an adequate remedy at law for any
breach of this Agreement and shall be entitled to specific performance of the
obligations hereunder and injunctive relief against actual or threatened
violations of the obligations hereunder of any Person subject to this Agreement.
After a Triggering Event, holders of Rights shall be entitled to recover the
reasonable costs and expenses, including attorneys' fees, incurred by them in
any action to enforce the provisions of this Agreement.
Section 16. AGREEMENT OF RIGHTS HOLDERS. Every holder of a Right by
accepting the same consents and agrees with the Company and the Rights Agent and
with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will not be evidenced
by Rights Certificates and will be transferable only in connection with the
transfer of Common Shares;
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(b) after the Distribution Date, the Rights Certificates will be
transferable only on the registry books of the Rights Agent if surrendered at
the principal office or offices of the Rights Agent designated for such
purposes, duly endorsed or accompanied by a proper instrument of transfer and
with the form of assignment set forth on the reverse side thereof and the
certificate contained therein duly completed and fully executed;
(c) subject to Section 6(a) and Section 7(f) hereof, the Company and
the Rights Agent may deem and treat the Person in whose name a Rights
Certificate (or, prior to the Distribution Date, the associated Common Share
certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the
Rights Certificates or the associated Common Share certificate made by anyone
other than the Company or the Rights Agent) for all purposes whatsoever, and
neither the Company nor the Rights Agent shall be affected by any notice to the
contrary; and
(d) notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Rights Agent shall have any liability to any holder
of a Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; PROVIDED, HOWEVER, the Company must use its best
efforts to have any such order, decree or ruling lifted or otherwise overturned
as soon as possible.
Section 17. RIGHTS CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER. No
holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the number of Fractional
Shares of Preferred Stock or any other securities of the Company that may at any
time be issuable upon the exercise of the Rights represented thereby, nor shall
anything contained herein or in any Rights Certificate be construed to confer
upon the holder of any Rights Certificate, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting stockholders (except as provided in Section 25 hereof),
or to receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by such Rights Certificate shall have been exercised in
accordance with the provisions hereof.
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
disbursements and other reasonable disbursements incurred in the administration
and execution of this Agreement and the exercise and performance
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of its duties hereunder. The Company also agrees to indemnify the Rights Agent
for, and to hold it harmless against, any loss, liability or expense, incurred
without negligence, bad faith or willful misconduct on the part of the Rights
Agent, for anything done or omitted by the Rights Agent in connection with the
acceptance and administration of this Agreement, including the costs and
expenses of defending against any claim of liability in the premises.
(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 in reliance upon any Rights
Certificate or certificate for Common Shares or for other securities of the
Company, instrument of assignment or transfer, power of attorney, endorsement,
affidavit, letter, notice, direction, consent, certificate, statement or other
paper or document believed by it, after proper inquiry or examination, to be
genuine and to be signed, executed and, where necessary, guaranteed, verified or
acknowledged, by the proper Person or Persons.
Section 19. MERGER OR 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, HOWEVER, that such corporation
would be eligible for appointment as a successor Rights Agent under the
provisions of Section 21 hereof. In case at the time such successor Rights Agent
shall succeed to the agency created by this Agreement, any of the Rights
Certificates shall have been countersigned but not delivered, any such successor
Rights Agent may adopt the countersignature of a predecessor Rights Agent and
deliver such Rights Certificates so countersigned; and in case at that time any
of the Rights Certificates shall not have been countersigned, any successor
Rights Agent may countersign such Rights Certificates either in the name of the
predecessor or in the name of the successor Rights Agent; and in all such cases
such Rights Certificates shall have the full force provided in the Rights
Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be
changed and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver Rights Certificates so countersigned; and in
case at that time any of the Rights Certificates shall not have been
countersigned, the Rights Agent may countersign such Rights Certificates either
in its prior name or in its changed name; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.
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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 Rights Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be
legal counsel for the Company), and the opinion of such counsel shall be full
and complete authorization and protection to the Rights Agent as to any action
taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement
the Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person and the
determination of "Current Market Price") be proved or established by the Company
prior to taking or suffering any action hereunder, such fact or matter (unless
other evidence in respect thereof be herein specifically prescribed) may be
deemed to be conclusively proved and established by a certificate signed by the
Chairman of the Board, the Chief Executive Officer, the Chief Operating Officer,
the President, the Chief Financial Officer, any Vice President, the Treasurer,
any Assistant Treasurer, the Secretary or any Assistant Secretary of the Company
and delivered to the Rights Agent; and such certificate shall be full
authorization to the Rights Agent for any action taken or suffered in good faith
by it under the provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its own
negligence, bad faith or willful misconduct. In no event shall the Rights Agent
be liable for special, indirect or consequential loss or damage of any kind
whatsoever (including but not limited to lost profits), even if the Rights Agent
has been advised of the likelihood of such loss or damage and regardless of the
form of action.
(d) The Rights Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement or in the Rights
Certificates or be required to verify the same (except as to its
countersignature on such Rights Certificates), but all such statements and
recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Rights Certificate (except its counter signature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Rights Certificate;
nor shall it be responsible for any adjustment required under the provisions of
Section 11 or Section 13 hereof or responsible for the manner, method or amount
of any such adjustment or the ascertaining of the existence of facts that would
require any such adjustment (except with respect to the exercise of Rights
evidenced by Rights Certificates after receipt of actual knowledge of any such
adjustment); nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any shares
of Preferred Stock or Common Shares or
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other securities to be issued pursuant to this Agreement or any Rights
Certificate or as to whether any shares of Preferred Stock or Common Stock or
other securities will, when so 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 Chief Executive Officer, the Chief Operating Officer,
the President, the Chief Financial Officer, any Vice President, the Secretary,
any Assistant Secretary, the Treasurer or any Assistant Treasurer of the
Company, and to apply to such officers for advice or instructions in connection
with its duties, and it shall not be liable for any action taken or suffered to
be taken by it in good faith in accordance with instructions of any such
officer.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from acting
in any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, omission, default, neglect or misconduct of any such
attorneys or agents or for any loss to the Company resulting from any such act,
omission, default, neglect or misconduct; PROVIDED, HOWEVER, that reasonable
care was exercised in the selection and continued employment 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 Rights Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise or transfer without first consulting with the Company.
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Section 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon 30 days' notice in writing mailed to the Company, and to each
transfer agent of the Common Shares and the Preferred Stock, by registered or
certified mail, and to the registered holders, if any, of the Rights
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 Shares and the Preferred Stock, by registered
or certified mail, and to the registered holders of the Rights Certificates, if
any, 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 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 giving notice of such removal or after it has
been notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the registered holder of a Rights Certificate
(who shall, with such notice, submit his Rights Certificate for inspection by
the Company), then the Rights Agent or the registered holder of any Rights
Certificate may apply to any court of competent jurisdiction for the appointment
of a new Rights Agent. Any successor Rights Agent, whether appointed by the
Company or by such a court, shall be (a) a corporation organized and doing
business under the laws of the United States or of the State of New York (or of
any other state of the United States so long as such corporation is authorized
to conduct a stock transfer or corporate trust business in the State of New
York), 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
$100,000,000 or (b) an affiliate of a corporation described in clause (a) of
this sentence. After appointment, the successor Rights Agent shall be vested
with the same powers, rights, duties and responsibilities as if it had been
originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment, the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Shares and the Preferred Stock, and mail a notice thereof in writing
to the registered holders of the Rights Certificates. Failure to give any notice
provided for in this Section 21, however, or any defect therein, shall not
affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.
Section 22. ISSUANCE OF NEW RIGHTS CERTIFICATES. Notwithstanding any
of the provisions of this Agreement or of the Rights to the contrary, the
Company may, at its option, issue new Rights Certificates evidencing Rights in
such form as may be approved by its Board of Directors to reflect any adjustment
or change in the Purchase Price and the number or kind or class of shares or
other securities or property purchasable under the Rights Certificates made in
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accordance with the provisions of this Agreement. In addition, in connection
with the issuance or sale of shares of Common Stock or Class B Common Stock, as
the case may be, following the Distribution Date and prior to the Expiration
Date, the Company (a) shall, with respect to shares of Common Stock or Class B
Common Stock, as the case may be, so issued or sold pursuant to the exercise of
stock options or under any employee plan or arrangement granted or awarded on or
prior to the Distribution Date, or upon the exercise, conversion or exchange of
securities issued by the Company on or prior to the Distribution Date, and (b)
may, in any other case, if deemed necessary or appropriate by the Board of
Directors of the Company, issue Rights Certificates representing the appropriate
number of Voting Class Rights or Class B Common Rights, as the case may be, in
connection with such issuance or sale; PROVIDED, HOWEVER, that (i) no such
Rights Certificate shall be issued if, and to the extent that, the Company shall
be advised by counsel that such issuance would create a significant risk of
material adverse tax consequences to the Company or the Person to whom such
Rights Certificate would be issued, and (ii) no such Rights Certificate shall be
issued if, and to the extent that, appropriate adjustment shall otherwise have
been made in lieu of the issuance thereof.
Section 23. REDEMPTION AND TERMINATION.
(a) The Board of Directors of the Company may, at its option, at any
time prior to the earlier of (i) the close of business on the date of the first
public announcement of the occurrence of a Flip-In Event (or, if such date shall
have occurred prior to the Record Date, the close of business on the tenth day
following the Record Date) and (ii) the Expiration Date, cause the Company to
redeem all but not less than all the then outstanding Rights at a redemption
price of $.01 per Right, as such amount may be appropriately adjusted, if
necessary, to reflect any stock split, stock dividend or similar transaction
occurring after the Rights Dividend Declaration Date (such redemption price
being hereinafter referred to as the "Redemption Price"). Notwithstanding
anything contained in this Agreement to the contrary, the Rights shall not be
exercisable after the first occurrence of a Flip-In Event until such time as the
Company's right of redemption hereunder has expired. The Company may, at its
option, pay the Redemption Price in cash, shares of Voting Common Stock, in the
case of holders of Voting Class Rights, or shares of Class B Common Stock, in
the case of holders of Class B Common Rights (based on the Current Market Price
of the Voting Common Stock or the Class B Common Stock, as the case may be, at
the time of redemption), or any other form of consideration deemed appropriate
by the Board of Directors.
(b) Immediately upon the effectiveness of the action of the Board of
Directors of the Company ordering the redemption of the Rights (the
effectiveness of which action may be conditioned on the occurrence of one or
more events or on the existence of one or more facts or may be effective at some
future time), evidence of which shall be filed with the Rights Agent and without
any further action and without any notice, the right to exercise the Rights will
terminate and the only right thereafter of the holders of Rights shall be to
receive the Redemption Price for each Right so held. Promptly after the
effectiveness of the action of the Board of Directors ordering the redemption of
the Rights, the Company shall give notice of such redemption to the
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Rights Agent and the registered holders of the then outstanding Rights by
mailing such notice to all such holders at each holder's last address as it
appears upon the registry books of the Rights Agent or, prior to the
Distribution Date, on the registry books of the Company for the Common Shares.
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 redemption
shall state the method by which the payment of the Redemption Price will be
made.
(c) In the event that prior to the Distribution Date, the Class B
Common Stock is converted, in whole or in part, into Common Stock or Class C
Common Stock, as the case may be, in accordance with the applicable provisions
of the Amended and Restated Certificate of Incorporation of the Company, the
Class B Common Rights attached to the shares of Class B Common Stock so
converted shall be converted to Voting Class Rights pursuant to a conversion
ratio equivalent to the conversion ratio used for converting the Class B Common
Stock to Common Stock. In the event that on or after the Distribution Date, all
outstanding shares of Class B Common Stock are converted into shares of Common
Stock or Class C Common Stock, as the case may be, in accordance with the
applicable provisions of the Amended and Restated Certificate of Incorporation
of the Company, all Class B Common Rights then outstanding shall be converted to
Voting Class Rights pursuant to a conversion ratio equivalent to the conversion
ratio used for converting the Class B Common Stock to Common Stock or Class C
Common Stock, as the case may be.
Section 24. EXCHANGE.
(a) The Board of Directors of the Company may, at its option, at any
time and from time to time after the occurrence of a Flip-In Event, exchange all
or part of the then outstanding and exercisable Voting Class Rights or Class B
Common Rights (which shall not, in either case, include Rights that have become
void pursuant to the provisions of Section 7(e) hereof) (i) for shares of Common
Stock or Common Share Equivalents (which Common Share Equivalents shall not
include any security convertible into, exercisable for or exchangeable for
shares of Class B Common Stock) or any combination thereof, in the case of an
exchange for Voting Class Rights, or (ii) for shares of Class B Common Stock or
Common Share Equivalents (which Common Share Equivalents shall not include
securities convertible into, exercisable for or exchangeable for shares of
Common Stock) or any combination thereof, in the case of an exchange for Class B
Common Rights, at an exchange ratio of one share of Common Stock or Class B
Common Stock, as the case may be, or such number of Common Share Equivalents or
units representing fractions thereof as would be deemed to have the same value
as one share of Common Stock, per Voting Class Right, or one share of Class B
Common Stock, per Class B Common Right, appropriately adjusted, if necessary, to
reflect any stock split, stock dividend or similar transaction occurring after
the Rights Dividend Declaration Date (such exchange ratio being hereinafter
referred to as the "Exchange Ratio").
(b) Immediately upon the effectiveness of the action of the Board of
Directors of the Company ordering the exchange of any Rights pursuant to and in
accordance with
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subsection (a) of this Section 24 (the effectiveness of which action may be
conditioned on the occurrence of one or more events or on the existence of one
or more facts or may be effective at some future time) and without any further
action and without any notice, the right to exercise such Rights shall terminate
and the only right thereafter of a holder of such Rights shall be to receive
that number of shares of Common Stock and/or Common Share Equivalents or Class B
Common Stock, and/or Common Share Equivalents, as the case may be, equal to the
number of such Voting Class Rights or Class B Common Rights, as the case may be,
held by such holder multiplied by the applicable Exchange Ratio. The Company
shall promptly give public notice of any such exchange; PROVIDED, HOWEVER, that
the failure to give, or any defect in, such notice shall not affect the validity
of such exchange. The Company promptly shall mail a notice of any such exchange
to all of the registered holders of such Rights at their last addresses as they
appear upon the registry books of the Rights Agent. Any notice which is mailed
in the manner herein provided shall be deemed given, whether or not the holder
receives the notice. Each such notice of exchange will state the method by which
the exchange of the shares of Common Stock and/or Common Share Equivalents or
Class B Common Stock, and/or Common Share Equivalents, as the case may be, for
Voting Class Rights or Class B Common Rights, as the case may be, 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 as nearly pro rata as
possible based on the number of Rights (other than Rights that have become void
pursuant to the provisions of Section 7(e) hereof) held by each holder of
Rights.
(c) In the event that the number of shares of Common Shares that are
authorized by the Company's certificate of incorporation but not outstanding or
reserved for issuance for purposes other than upon exercise of the Rights is not
sufficient to permit an exchange of Rights as contemplated in accordance with
this Section 24, the Company may, at its option, take all such action as may be
necessary to authorize additional shares of Common Shares for issuance upon
exchange of the Rights.
(d) The Company shall not be required to issue fractions of shares
of Common Shares. In lieu of such fractional shares of Common Shares, the
Company shall, in the sole discretion of the Board of Directors, either (i) pay
to the registered holders of Rights with regard to which such fractional shares
of Common Shares would otherwise be issuable an amount in cash equal to the same
fraction of the value of a whole share of (x) Voting Common Stock for holders of
Voting Class Rights or (y) Class B Common Stock for holders of Class B Common
Rights or (ii) issue scrip or warrants in registered form (either represented by
a certificate or uncertificated) or in bearer form (represented by a
certificate) which shall entitle the holder to receive a full share upon the
surrender of such scrip or warrants aggregating a full share. For purposes of
this Section 24, the value of a whole share of Voting Common Stock and the value
of a whole share of Class B Common Stock shall be the Closing Price per share of
Voting Common Stock for the Trading Day immediately prior to the date of
exchange pursuant to this Section 24, and the value of any Common Share
Equivalent shall be deemed to have the same value as the Voting Common Stock on
such date.
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Section 25. NOTICE OF CERTAIN EVENTS.
(a) In case the Company shall propose, at any time after the
Distribution Date, (i) to pay any dividend payable in stock of any class to the
holders of Preferred Stock or to make any other distribution to the holders of
Preferred Stock (other than a regular quarterly cash dividend out of earnings or
retained earnings of the Company), or (ii) to offer to the holders of Preferred
Stock rights or warrants to subscribe for or to purchase any additional shares
of Preferred Stock or shares of stock of any class or any other securities,
rights or options, or (iii) to effect any reclassification of its Preferred
Stock (other than a reclassification involving only the subdivision of
outstanding shares of Preferred Stock), or (iv) to effect any consolidation or
merger into or with any other Person (other than a wholly owned Subsidiary of
the Company in a transaction that complies with Section 11(o) hereof), or to
effect any sale, lease or other transfer of all or substantially all the
Company's assets to any other Person or Persons (other than a wholly owned
Subsidiary of the Company in a transaction that complies with Section 11(o)
hereof), or (v) to effect the liquidation, dissolution or winding up of the
Company, then, in each such case, the Company shall give to each holder of
record of a Rights Certificate, to the extent feasible and in accordance with
Section 26 hereof, a notice of such proposed action, which shall specify the
record date for the purposes of such stock dividend, distribution of rights or
warrants, or the date on which such reclassification, consolidation, merger,
sale, lease, transfer, liquidation, dissolution or winding up is to take place
and the date of participation therein by the holders of the shares of Preferred
Stock, if any such date is to be fixed, and such notice shall be so given in the
case of any action covered by clause (i) or (ii) above at least 20 days prior to
the record date for determining holders of the shares of Preferred Stock for
purposes of such action, and in the case of any such other action, at least 20
days prior to the date of the taking of such proposed action or the date of
participation therein by the holders of the shares of Preferred Stock, whichever
shall be the earlier. The failure to give 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) In case any Flip-In Event or Flip-Over Event shall occur, then
(i) the Company shall as soon as practicable thereafter give to each registered
holder of a Rights Certificate (or if occurring prior to the Distribution Date,
the registered holders of Common Shares), in accordance with Section 26 hereof,
a notice of the occurrence of such event, which shall specify the event and the
consequences of the event to holders of Rights under Section 11(a)(ii) or
Section 13(a) hereof, and (ii) all references in the preceding paragraph to
Preferred Stock shall be deemed thereafter to refer to Common Stock and Class B
Common Stock and/or, if appropriate, other securities.
Section 26. NOTICES. Notices or demands authorized by this Agreement
to be given or made by the Rights Agent or by the holder of any Rights
Certificate to or on the Company shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Rights Agent) as follows:
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Wit Capital Group, Inc.
826 Broadway, Sixth Floor
New York, NY 10003
Attention: Secretary
Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Company) as follows:
American Stock Transfer & Trust Company
40 Wall Street
New York, NY 10005
Attention: Corporate Trust Department
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Common Stock) shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed to such holder at the address of
such holder as shown on the registry books of the Company.
Section 27. SUPPLEMENTS AND AMENDMENTS. Except as provided in the
last sentence of this Section 27, at any time when the Rights are then
redeemable, 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 Rights or
holders of Common Shares. At any time when the Rights are not redeemable, 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 Rights in order (i) to cure any
ambiguity, (ii) to correct or supplement any provision contained herein that may
be defective or inconsistent with any other provisions herein, (iii) to shorten
or lengthen any time period hereunder or (iv) to change or supplement the
provisions hereunder in any manner that the Company may deem necessary or
desirable; PROVIDED that no such amendment or supplement shall materially
adversely affect the interests of the holders of Rights (other than an Acquiring
Person or an Affiliate or Associate of an Acquiring Person); and FURTHER
PROVIDED that this Agreement may not be supplemented or amended pursuant to this
sentence to lengthen (A) a time period relating to when the Rights may be
redeemed or (B) any other time period unless the lengthening of such other time
period is for the purpose of protecting, enhancing or clarifying the rights of,
and/or the benefits to, the holders of Rights (other than any Acquiring Person
and its Affiliates and Associates). Upon the delivery of a certificate from an
appropriate officer of the Company which states that the proposed supplement or
amendment is in compliance with the terms of this Section 27, the Rights Agent
shall execute such supplement or amendment; PROVIDED, HOWEVER, that the Rights
Agent may, but shall not be obligated to, enter into any such supplement or
amendment that affects the Rights
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<PAGE>
Agent's own rights, duties or immunities under this Agreement. Notwithstanding
anything contained in this Agreement to the contrary, no supplement or amendment
shall be made that decreases the Redemption Price.
Section 28. SUCCESSORS. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 29. DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS,
ETC. For all purposes of this Agreement, any calculation of the number of Common
Shares outstanding at any particular time, including for purposes of determining
the particular percentage of such outstanding Common Shares of which any Person
is the Beneficial Owner, shall be made in accordance with the last sentence of
Rule 13d-3(d)(1)(i) under the Exchange Act as in effect on the date of this
Agreement. The Board of Directors of the Company (or, as set forth herein,
certain specified members thereof) shall have the exclusive power and authority
to administer this Agreement and to exercise all rights and powers specifically
granted to the Board of Directors of the Company or 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.
Section 30. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement
shall be construed to give to any Person other than the Company, the Rights
Agent and the registered holders of the Rights Certificates (and, prior to the
Distribution Date, registered holders of the Common Stock) any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the Distribution
Date, registered holders of the Common Shares).
Section 31. SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated;
PROVIDED, HOWEVER, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board of
Directors of the Company determines in its good faith judgment that severing the
invalid language from this Agreement would adversely affect the
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<PAGE>
purpose or effect of this Agreement, then the right of redemption set forth in
Section 23 hereof shall be reinstated and shall not expire until the close of
business on the tenth day following the date of such determination by the Board
of Directors of the Company or, if earlier, immediately prior to any such
merger. Without limiting the foregoing, if any provision requiring that a
determination be made by less than the entire Board of Directors of the Company,
or by the Board of Directors of the Company with the concurrence of a majority
of certain members of the Board of Directors, is held by a court of competent
jurisdiction or other authority to be invalid, void or unenforceable, such
determination shall then be made by the entire Board of Directors of the
Company.
Section 32. GOVERNING LAW. This Agreement, each Right and each
Rights Certificate issued hereunder shall be deemed to be a contract made under
the laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts made
and to be performed entirely within such State.
Section 33. COUNTERPARTS. This Agreement may be executed in any
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
Section 34. DESCRIPTIVE HEADINGS. Descriptive headings of the
several Sections of this Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions
hereof.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
WIT CAPITAL GROUP, INC.
By: ________________________________
Name:Ronald Readmond
Title:Co-Chief Executive Officer
AMERICAN STOCK TRANSFER & TRUST COMPANY
By: ________________________________
Name:
Title:
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<PAGE>
EXHIBIT A-1
FORM OF
CERTIFICATE OF DESIGNATIONS
of
CLASS 1 SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
WIT CAPITAL GROUP, INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
WIT CAPITAL GROUP, INC., a corporation organized and existing under
the General Corporation Law of the State of Delaware, in accordance with the
provisions of Section 103 thereof, DOES HEREBY CERTIFY:
That pursuant to the authority vested in the Board of Directors in
accordance with the provisions of the Certificate of Incorporation of the said
Corporation, the said Board of Directors on May 17, 1999 adopted the following
resolution creating a series of 13,500,000 shares of Preferred Stock designated
as "Class 1 Series A Junior Participating Preferred Stock":
RESOLVED, that pursuant to the authority vested in the Board of
Directors of this Corporation in accordance with the provisions of the
Certificate of Incorporation, a series of Preferred Stock, par value $.001
per share, of the Corporation be and hereby is created, and that the
designation and number of shares thereof and the voting and other powers,
preferences and relative, participating, optional or other rights of the
shares of such series and the qualifications, limitations and restrictions
thereof are as follows:
CLASS 1 SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
1. DESIGNATION AND AMOUNT. There shall be a series of Preferred
Stock that shall be designated as "Class 1 Series A Junior Participating
Preferred Stock," and the number of shares constituting such series shall be
13,500,000. Such number of shares may be increased or decreased by resolution of
the Board of Directors; PROVIDED, HOWEVER, that no decrease shall reduce the
number of shares of Class 1 Series A Junior Participating Preferred Stock to
less than the number of shares then issued and outstanding plus the number of
shares issuable upon exercise of outstanding rights, options or warrants or upon
conversion of outstanding securities issued by the Corporation.
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<PAGE>
2. DIVIDENDS AND DISTRIBUTIONS.
(A) Subject to the prior and superior rights of the holders of any
shares of any series of Preferred Stock ranking prior and superior to the shares
of Class 1 Series A Junior Participating Preferred Stock with respect to
dividends, the holders of shares of Class 1 Series A Junior Participating
Preferred Stock, in preference to the holders of shares of any class or series
of stock of the Corporation ranking junior to the Class 1 Series A Junior
Participating Preferred Stock, shall be entitled to receive, when, as and if
declared by the Board of Directors out of funds legally available for the
purpose, quarterly dividends payable in cash on the first day of 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 fraction of a share of Class
1 Series A Junior Participating Preferred Stock, in an amount per share (rounded
to the nearest cent) equal to the greater of (a) $10 or (b) the Adjustment
Number (as defined below) times the aggregate per share amount of all cash
dividends, and the Adjustment Number 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, par value $.01 per share, of the Corporation (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 Class 1 Series A Junior Participating
Preferred Stock. The "Adjustment Number" shall initially be 100. In the event
the Corporation shall at any time after June 9, 1999 (the"Rights Declaration
Date") (i) declare any dividend on Common Stock, Class C Common Stock, par value
$.01 per share, of the Corporation (the "Class C Common Stock") or Class B
Common Stock, par value $.01 per share, of the Corporation (the "Class B Common
Stock"), payable in shares of Common Stock or Class B Common Stock, as the case
may be, (ii) subdivide the outstanding Common Stock, Class C Common Stock or
Class B Common Stock or (iii) combine the outstanding Common Stock, Class C
Common Stock or Class B Common Stock into a smaller number of shares, then in
each such case the Adjustment Number in effect immediately prior to such event
shall be adjusted by multiplying such Adjustment Number by a fraction the
numerator of which is the sum of the number of shares of Common Stock
outstanding immediately after such event plus the number of shares of Class C
Common Stock outstanding immediately after such event plus the number of shares
of Class B Common Stock outstanding immediately after such event and the
denominator of which is the sum of the number of shares of Common Stock that
were outstanding immediately prior to such event plus the number of shares of
Class C Common Stock that were outstanding immediately prior to such event plus
the number of shares of Class B Common Stock that were outstanding immediately
prior to such event.
(B) The Corporation shall declare a dividend or distribution on the
Class 1 Series A Junior Participating Preferred Stock as provided in paragraph
(A) above immediately after it declares a dividend or distribution on the Common
Stock (other than a dividend payable in shares of Common Stock, Class C Common
Stock or Class B Common Stock, as the case may
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<PAGE>
be); 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 $10 per share on the Class 1 Series A Junior Participating 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 Class 1 Series A Junior Participating Preferred Stock from the
Quarterly Dividend Payment Date next preceding the date of issue of such shares
of Class 1 Series A Junior Participating Preferred Stock, 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 Class 1 Series A Junior Participating
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 Class 1 Series A Junior Participating 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 Class 1 Series A Junior Participating
Preferred Stock entitled to receive payment of a dividend or distribution
declared thereon, which record date shall be no more than thirty (30) days prior
to the date fixed for the payment thereof.
3. VOTING RIGHTS. The holders of shares of Class 1 Series A Junior
Participating Preferred Stock shall have the following voting rights:
(A) Each share of Class 1 Series A Junior Participating Preferred
Stock shall entitle the holder thereof to a number of votes equal to the
Adjustment Number on all matters submitted to a vote of the stockholders of the
Corporation entitled to vote thereon.
(B) Except as otherwise provided herein, in the Certificate of
Incorporation or by law, the holders of shares of Class 1 Series A Junior
Participating Preferred Stock, the holders of shares of any other class or
series entitled to vote with the Common Stock and the holders of shares of
Common Stock shall vote together as one class on all matters submitted to a vote
of stockholders of the Corporation.
(C)(i)If at any time dividends on any Class 1 Series A Junior
Participating Preferred Stock shall be in arrears in an amount equal to six (6)
quarterly dividends thereon, the occurrence of such contingency shall mark the
beginning of a period (herein called a "default period") that shall extend until
such time when all accrued and unpaid dividends for all previous quarterly
dividend periods and for the current quarterly dividend period on all shares of
Class 1 Series A Junior Participating Preferred Stock then outstanding shall
have been declared and paid
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<PAGE>
or set apart for payment. During each default period, (1) the number of
directors shall be increased by two (2), effective as of the time of election of
such directors as herein provided, and (2) the holders of Preferred Stock
(including holders of the Class 1 Series A Junior Participating Preferred Stock)
upon which these or like voting rights have been conferred and are exercisable
(the "Voting Preferred Stock") with dividends in arrears in an amount equal to
six (6) quarterly dividends thereon, voting as a class, irrespective of series,
shall have the right to elect such two (2) directors.
(ii) During any default period, such voting right of the holders of
Class 1 Series A Junior Participating Preferred Stock may be exercised initially
at a special meeting called pursuant to subparagraph (iii) of this Section 3(C)
or at any annual meeting of stockholders, and thereafter at annual meetings of
stockholders, provided that such voting right shall not be exercised unless the
holders of at least one-third in number of the shares of Voting Preferred Stock
outstanding shall be present in person or by proxy. The absence of a quorum of
the holders of Common Stock and Class C Common Stock shall not affect the
exercise by the holders of Voting Preferred Stock of such voting right.
(iii) Unless the holders of Voting Preferred Stock shall, during an
existing default period, have previously exercised their right to elect
directors, the Board of Directors may order, or any stockholder or stockholders
owning in the aggregate not less than ten percent (10%) of the total number of
shares of Voting Preferred Stock outstanding, irrespective of series, may
request, the calling of a special meeting of the holders of Voting Preferred
Stock, which meeting shall thereupon be called by the Chairman of the Board or
the President of the Corporation. Notice of such meeting and of any annual
meeting at which holders of Voting Preferred Stock are entitled to vote pursuant
to this paragraph (C)(iii) shall be given to each holder of record of Voting
Preferred Stock by mailing a copy of such notice to him at his last address as
the same appears on the books of the Corporation. Such meeting shall be called
for a time not earlier than twenty (20) days and not later than sixty (60) days
after such order or request or, in default of the calling of such meeting within
sixty (60) days after such order or request, such meeting may be called on
similar notice by any stockholder or stockholders owning in the aggregate not
less than ten percent (10%) of the total number of shares of Voting Preferred
Stock outstanding. Notwithstanding the provisions of this paragraph (C)(iii), no
such special meeting shall be called during the period within sixty (60) days
immediately preceding the date fixed for the next annual meeting of the
stockholders.
(iv) In any default period, after the holders of Voting Preferred
Stock shall have exercised their right to elect directors voting as a class, (x)
the directors so elected by the holders of Voting Preferred Stock shall continue
in office until their successors shall have been elected by such holders or
until the expiration of the default period, and (y) any vacancy in the Board of
Directors may be filled by vote of a majority of the remaining directors
theretofore elected by the holders of the class or classes of stock which
elected the director whose office shall have become vacant. References in this
paragraph (C) to directors elected by the holders of
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<PAGE>
a particular class or classes of stock shall include directors elected by such
directors to fill vacancies as provided in clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default period, (x) the
right of the holders of Voting Preferred Stock as a class to elect directors
shall cease, (y) the term of any directors elected by the holders of Voting
Preferred Stock as a class shall terminate and (z) the number of directors shall
be such number as may be provided for in the Certificate of Incorporation or
By-Laws irrespective of any increase made pursuant to the provisions of
paragraph (C) of this Section 3 (such number being subject, however, to change
thereafter in any manner provided by law or in the Certificate of Incorporation
or By-Laws). Any vacancies in the Board of Directors effected by the provisions
of clauses (y) and (z) in the preceding sentence may be filled by a majority of
the remaining directors.
(D) Except as set forth herein, holders of Class 1 Series A Junior
Participating Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for taking any corporate
action.
4. CERTAIN RESTRICTIONS.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Class 1 Series A Junior Participating 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 Class 1
Series A Junior Participating Preferred Stock outstanding shall have been paid
in full, the Corporation shall not:
(i) declare or pay dividends on, make any other distributions
on, or redeem or purchase or otherwise acquire for consideration any
shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Class 1 Series A Junior
Participating Preferred Stock;
(ii) declare or pay dividends on 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 Class 1
Series A Junior Participating Preferred Stock, except dividends paid
ratably on the Class 1 Series A Junior Participating 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; or
(iii) redeem or purchase or otherwise acquire for
consideration any shares of Class 1 Series A Junior Participating
Preferred Stock, or any shares of stock ranking on a parity with the
Class 1 Series A Junior Participating 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 Class 1 Series A
Junior Participating Preferred
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<PAGE>
Stock, or to all such holders and the holders of any such shares ranking
on a parity therewith, 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 and 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.
5. REACQUIRED SHARES. Any shares of Class 1 Series A Junior
Participating Preferred Stock purchased or otherwise acquired by the Corporation
in any manner whatsoever shall be retired and canceled 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 to be created by resolution or resolutions of
the Board of Directors, subject to any conditions and restrictions on issuance
set forth herein.
6. LIQUIDATION, DISSOLUTION OR WINDING UP. (A) Upon any liquidation
(voluntary or otherwise), dissolution or winding up of the Corporation, no
distribution shall be made to the holders of shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or winding up) to the
Class 1 Series A Junior Participating Preferred Stock unless, prior thereto, the
holders of shares of Class 1 Series A Junior Participating Preferred Stock shall
have received $100 per share, plus an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment (the "Class 1 Series A Liquidation Preference"). Following the
payment of the full amount of the Class 1 Series A Liquidation Preference, no
additional distributions shall be made to the holders of shares of Class 1
Series A Junior Participating Preferred Stock unless, prior thereto, the holders
of shares of Common Stock shall have received an amount per share (the "Common
Adjustment") equal to the quotient obtained by dividing (i) the Class 1 Series A
Liquidation Preference by (ii) the Adjustment Number. Following the payment of
the full amount of the Class 1 Series A Liquidation Preference and the Common
Adjustment in respect of all outstanding shares of Class 1 Series A Junior
Participating Preferred Stock and Common Stock, respectively, holders of Class 1
Series A Junior Participating Preferred Stock and holders of shares of Common
Stock shall, subject to the prior rights of all other series of Preferred Stock,
if any, ranking prior thereto, receive their ratable and proportionate share of
the remaining assets to be distributed in the ratio of the Adjustment Number to
one (1) with respect to such Class 1 Series A Junior Participating Preferred
Stock and Common Stock, on a per share basis, respectively.
(B) In the event, however, that there are not sufficient assets
available to permit payment in full of the Class 1 Series A Liquidation
Preference and the liquidation preferences of all other series of Preferred
Stock, if any, that rank on a parity with the Class 1 Series A Junior
Participating Preferred Stock, then such remaining assets shall be distributed
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<PAGE>
ratably to the holders of such parity shares in proportion to their respective
liquidation preferences. In the event, however, that there are not sufficient
assets available to permit payment in full of the Common Adjustment, then such
remaining assets shall be distributed ratably to the holders of Common Stock.
(C) Neither the merger or consolidation of the Corporation into or
with another corporation nor the merger or consolidation of any other
corporation into or with the Corporation shall be deemed to be a liquidation,
dissolution or winding up of the Corporation within the meaning of this Section
6, but the sale, lease or conveyance of all or substantially all the
Corporation's assets shall be deemed to be a liquidation, dissolution or winding
up of the Corporation within the meaning of this Section 6.
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 and/or shares of Class C 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 Class 1 Series A Junior Participating Preferred
Stock shall at the same time be similarly exchanged or changed in an amount per
share equal to the Adjustment Number 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 and/or Class C Common
Stock is changed or exchanged.
8. REDEMPTION. (A) The Corporation, at its option, may redeem shares
of the Class 1 Series A Junior Participating Preferred Stock in whole at any
time and in part from time to time, at a redemption price equal to the
Adjustment Number times the current per share market price (as such term is
hereinafter defined) of the Common Stock on the date of the mailing of the
notice of redemption, together with unpaid accumulated dividends to the date of
such redemption. The "current per share market price" on any date shall be
deemed to be the average of the closing price per share of such Common Stock for
the ten (10) consecutive Trading Days (as such term is hereinafter
defined)immediately prior to such date; PROVIDED, HOWEVER, that in the event
that the current per share market price of the Common Stock is determined during
a period following the announcement of (A) a dividend or distribution on the
Common Stock other than a regular quarterly cash dividend or (B) any
subdivision, combination or reclassification of such Common Stock and the
ex-dividend date for such dividend or distribution, or the record date for such
subdivision, combination or reclassification, shall not have occurred prior to
the commencement of such ten Trading Day period, then, and in each such case,
the current per share market price shall be properly adjusted to take into
account ex-dividend trading. The closing price for each day shall be the last
sales 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 transaction reporting system with respect to
securities listed or admitted to trading on the New York Stock Exchange, or, if
the Common Stock is not listed or admitted to trading on the New York Stock
Exchange, on the principal national securities exchange on which the Common
Stock is listed or admitted to trading, or, if the Common Stock is not listed or
admitted to trading on any national securities exchange but
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<PAGE>
sales price information is reported for such security, as reported by the
National Association of Securities Dealers, Inc. Automated Quotations System
("NASDAQ") or such other self-regulatory organization or registered securities
information processor (as such terms are used under the Securities Exchange Act
of 1934, as amended) that then reports information concerning the Common Stock,
or, if sales price information is not so reported, the average of the high bid
and low asked prices in the over-the-counter market on such day, as reported by
NASDAQ or such other entity, or, if on any such date the Common Stock is not
quoted by any such entity, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the Common Stock
selected by the Board of Directors of the Corporation. If on any such date no
such market maker is making a market in the Common Stock, the fair value of the
Common Stock on such date as determined in good faith by the Board of Directors
of the Corporation shall be used. The term "Trading Day" shall mean a day on
which the principal national securities exchange on which the Common Stock is
listed or admitted to trading is open for the transaction of business, or, if
the Common Stock is not listed or admitted to trading on any national securities
exchange but is quoted by NASDAQ, a day on which NASDAQ reports trades, or, if
the Common Stock is not so quoted, a Monday, Tuesday, Wednesday, Thursday or
Friday on which banking institutions in the State of New York are not authorized
or obligated by law or executive order to close.
(B) In the event that fewer than all the outstanding shares of the
Class 1 Series A Junior Participating Preferred Stock are to be redeemed, the
number of shares to be redeemed shall be determined by the Board of Directors
and the shares to be redeemed shall be determined by lot or pro rata as may be
determined by the Board of Directors or by any other method that may be
determined by the Board of Directors in its sole discretion to be equitable.
(C) Notice of any such redemption shall be given by mailing to the
holders of the shares of Class 1 Series A Junior Participating Preferred Stock
to be redeemed a notice of such redemption, first class postage prepaid, not
later than the fifteenth (15th) day and not earlier than the (60th) sixtieth day
before the date fixed for redemption, at their last address as the same shall
appear upon the books of the Corporation. Each such notice shall state: (i) the
redemption date; (ii) the number of shares to be redeemed and, if fewer than all
the shares held by such holder are to be redeemed, the number of such shares to
be redeemed from such holder; (iii) the redemption price; (iv) the place or
places where certificates for such shares are to be surrendered for payment of
the redemption price; and (v) that dividends on the shares to be redeemed will
cease to accrue on the close of business on such redemption date. Any notice
that is mailed in the manner herein provided shall be conclusively presumed to
have been duly given, whether or not the stockholder received such notice, and
failure duly to give such notice by mail, or any defect in such notice, to any
holder of Class 1 Series A Junior Participating Preferred Stock shall not affect
the validity of the proceedings for the redemption of any other shares of Class
1 Series A Junior Participating Preferred Stock that are to be redeemed. On or
after the date fixed for redemption as stated in such notice, each holder of the
shares called for redemption shall surrender the certificate evidencing such
shares to the Corporation at the place designated in such notice and shall
thereupon be entitled to receive payment of the redemption price. If fewer than
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all the shares represented by any such surrendered certificate are redeemed, a
new certificate shall be issued representing the unredeemed shares.
(D) The shares of Class 1 Series A Junior Participating Preferred
Stock shall not be subject to the operation of any purchase, retirement or
sinking fund.
9. RANKING. The Class 1 Series A Junior Participating Preferred
Stock shall rank PARI PASSU with the Class 2 Series A Junior Participating
Preferred Stock as to any reclassification, recapitalization, stock split or
similar transaction, and as to any payment of dividends and distribution of
assets, and in any merger, consolidation or share exchange, except as otherwise
required by law. The Class 1 Series A Junior Participating Preferred Stock shall
rank junior to all other series of the Corporation's Preferred Stock, excluding
the Class 2 Series A Junior Participating Preferred Stock, as to the payment of
dividends and the distribution of assets, unless the terms of any such series
shall provide otherwise, and shall rank senior to the Common Stock, the Class C
Common Stock and the Class B Common Stock as to such matters.
10. AMENDMENT. At any time that any shares of Class 1 Series A
Junior Participating Preferred Stock are outstanding, the Certificate 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
Class 1 Series A Junior Participating Preferred Stock so as to affect them
adversely without the affirmative vote of the holders of two-thirds or more of
the outstanding shares of Class 1 Series A Junior Participating Preferred Stock,
voting separately as a class.
11. FRACTIONAL SHARES. Class 1 Series A Junior Participating
Preferred Stock may be issued in fractions of a share that shall entitle the
holder, in proportion to such holder's fractional shares, to exercise voting
rights, receive dividends, participate in distributions and to have the benefit
of all other rights of holders of Class 1 Series A Junior Participating
Preferred Stock.
IN WITNESS WHEREOF, the undersigned has executed this Certificate
and does affirm the foregoing as true this 9th day of June, 1999.
_____________________________________
Name:Ronald Readmond
Title: Co-Chief Executive Officer
Attest:_________________________
Name:Robert C. Mendelson
Title:Secretary
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EXHIBIT A-2
FORM OF
CERTIFICATE OF DESIGNATIONS,
PREFERENCES AND RIGHTS
OF
CLASS 2 SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
OF
WIT CAPITAL GROUP, INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
WIT CAPITAL GROUP, INC., a corporation organized and existing under
the General Corporation Law of the State of Delaware, in accordance with the
provisions of Section 103 thereof, DOES HEREBY CERTIFY:
That pursuant to the authority vested in the Board of Directors in
accordance with the provisions of the Certificate of Incorporation of the said
Corporation, the said Board of Directors on May 17, 1999 adopted the following
resolution creating a series of 1,500,000 shares of Preferred Stock designated
as "Class 2 Series A Junior Participating Preferred Stock":
RESOLVED, that pursuant to the authority vested in the Board of
Directors of this Corporation in accordance with the provisions of the
Certificate of Incorporation, a series of Preferred Stock, par value $.001
per share, of the Corporation be and hereby is created, and that the
designation and number of shares thereof and the voting and other powers,
preferences and relative, participating, optional or other rights of the
shares of such series and the qualifications, limitations and restrictions
thereof are as follows:
CLASS 2 SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
1. DESIGNATION AND AMOUNT. There shall be a series of Preferred
Stock that shall be designated as "Class 2 Series A Junior Participating
Preferred Stock," and the number of shares constituting such series shall be
1,500,000. Such number of shares may be increased or decreased by resolution of
the Board of Directors; PROVIDED, HOWEVER, that no decrease shall reduce the
number of shares of Class 2 Series A Junior Participating Preferred Stock to
less than the number of shares then issued and outstanding plus the number of
shares issuable upon
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exercise of outstanding rights, options or warrants or upon conversion of
outstanding securities issued by the Corporation.
2. DIVIDENDS AND DISTRIBUTIONS.
(A) Subject to the prior and superior rights of the holders of any
shares of any series of Preferred Stock ranking prior and superior to the shares
of Class 2 Series A Junior Participating Preferred Stock with respect to
dividends, the holders of shares of Class 2 Series A Junior Participating
Preferred Stock, in preference to the holders of shares of any class or series
of stock of the Corporation ranking junior to the Class 2 Series A Junior
Participating Preferred Stock, shall be entitled to receive, when, as and if
declared by the Board of Directors out of funds legally available for the
purpose, quarterly dividends payable in cash on the first day of 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 fraction of a share of Class
2 Series A Junior Participating Preferred Stock, in an amount per share (rounded
to the nearest cent) equal to the greater of (a) $10 or (b) the Adjustment
Number (as defined below) times the aggregate per share amount of all cash
dividends, and the Adjustment Number 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 Class B Common Stock or a subdivision of the
outstanding shares of Class B Common Stock (by reclassification or otherwise),
declared on the Class B Common Stock, par value $.01 per share, of the
Corporation (the "Class B 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 Class 2 Series A Junior Participating Preferred Stock. The "Adjustment
Number" shall initially be 100. In the event the Corporation shall at any time
after June 9, 1999 (the"Rights Declaration Date") (i) declare any dividend on
Common Stock, par value $.01 per share, of the Corporation (the "Common Stock"),
the Class C Common Stock, par value $.01 per share, of the Corporation (the
"Class C Common Stock") or Class B Common Stock, payable in shares of Common
Stock or Class B Common Stock, as the case may be, (ii) subdivide the
outstanding Common Stock, the Class C Common Stock or Class B Common Stock or
(iii) combine the outstanding Common Stock, the Class C Common Stock or Class B
Common Stock into a smaller number of shares, then in each such case the
Adjustment Number in effect immediately prior to such event shall be adjusted by
multiplying such Adjustment Number by a fraction the numerator of which is the
sum of the number of shares of Common Stock outstanding immediately after such
event plus the number of shares of Class B Common Stock outstanding immediately
after such event plus the number of shares of Class C Common Stock outstanding
immediately after such event and the denominator of which is the sum of the
number of shares of Common Stock that were outstanding immediately prior to such
event plus the number of shares of Class C Common Stock that were outstanding
immediately prior to such event plus the number of shares of Class B Common
Stock that were outstanding immediately prior to such event.
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(B) The Corporation shall declare a dividend or distribution on the
Class 2 Series A Junior Participating Preferred Stock as provided in paragraph
(A) above immediately after it declares a dividend or distribution on the Class
B Common Stock (other than a dividend payable in shares of Class B Common
Stock); provided that, in the event no dividend or distribution shall have been
declared on the Class B Common Stock during the period between any Quarterly
Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a
dividend of $10 per share on the Class 2 Series A Junior Participating 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 Class 2 Series A Junior Participating Preferred Stock from the
Quarterly Dividend Payment Date next preceding the date of issue of such shares
of Class 2 Series A Junior Participating Preferred Stock, 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 Class 2 Series A Junior Participating
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 Class 2 Series A Junior Participating 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 Class 2 Series A Junior Participating
Preferred Stock entitled to receive payment of a dividend or distribution
declared thereon, which record date shall be no more than thirty (30) days prior
to the date fixed for the payment thereof.
3. VOTING RIGHTS. The holders of shares of Class 2 Series A Junior
Participating Preferred Stock shall have the following voting rights:
(A) Each share of Class 2 Series A Junior Participating Preferred
Stock shall entitle the holder thereof to a number of votes equal to the
Adjustment Number on all matters submitted to a vote of the holders of the Class
B Common Stock.
(B) Except as otherwise provided herein, in the Certificate of
Incorporation or by law, shares of Class 2 Series A Junior Participating
Preferred Stock shall have identical voting rights as shares of Class B Common
Stock.
(C) Except as set forth herein, holders of Class 2 Series A Junior
Participating 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 Class B Common Stock as set forth herein) for taking any
corporate action.
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4. CERTAIN RESTRICTIONS.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Class 2 Series A Junior Participating 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 Class 2
Series A Junior Participating Preferred Stock outstanding shall have been paid
in full, the Corporation shall not:
(i) declare or pay dividends on, make any other distributions
on, or redeem or purchase or otherwise acquire for consideration any
shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Class 2 Series A Junior
Participating Preferred Stock;
(ii) declare or pay dividends on 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 Class 2
Series A Junior Participating Preferred Stock, except dividends paid
ratably on the Class 2 Series A Junior Participating 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; or
(iii) redeem or purchase or otherwise acquire for
consideration any shares of Class 2 Series A Junior Participating
Preferred Stock, or any shares of stock ranking on a parity with the Class
2 Series A Junior Participating 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 Class 2 Series A Junior
Participating Preferred Stock, or to all such holders and the holders of
any such shares ranking on a parity therewith, 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 and 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.
5. REACQUIRED SHARES. Any shares of Class 2 Series A Junior
Participating Preferred Stock purchased or otherwise acquired by the Corporation
in any manner whatsoever shall be retired and canceled 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 to be created by resolution or resolutions of
the Board of Directors, subject to any conditions and restrictions on issuance
set forth herein.
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6. LIQUIDATION, DISSOLUTION OR WINDING UP. (A) Upon any liquidation
(voluntary or otherwise), dissolution or winding up of the Corporation, no
distribution shall be made to the holders of shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or winding up) to the
Class 2 Series A Junior Participating Preferred Stock unless, prior thereto, the
holders of shares of Class 2 Series A Junior Participating Preferred Stock shall
have received $100 per share, plus an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment (the "Class 2 Series A Liquidation Preference"). Following the
payment of the full amount of the Class 2 Series A Liquidation Preference, no
additional distributions shall be made to the holders of shares of Class 2
Series A Junior Participating Preferred Stock unless, prior thereto, the holders
of shares of Class B Common Stock shall have received an amount per share (the
"Class B Common Adjustment") equal to the quotient obtained by dividing (i) the
Class 2 Series A Liquidation Preference by (ii) the Adjustment Number. Following
the payment of the full amount of the Class 2 Series A Liquidation Preference
and the Class B Common Adjustment in respect of all outstanding shares of Class
2 Series A Junior Participating Preferred Stock and Class B Common Stock,
respectively, holders of Class 2 Series A Junior Participating Preferred Stock
and holders of shares of Class B Common Stock shall, subject to the prior rights
of all other series of Preferred Stock, if any, ranking prior thereto, receive
their ratable and proportionate share of the remaining assets to be distributed
in the ratio of the Adjustment Number to one (1) with respect to such Class 2
Series A Junior Participating Preferred Stock and Class B Common Stock, on a per
share basis, respectively.
(B) In the event, however, that there are not sufficient assets
available to permit payment in full of the Class 2 Series A Liquidation
Preference and the liquidation preferences of all other series of Preferred
Stock, if any, that rank on a parity with the Class 2 Series A Junior
Participating Preferred Stock, then such remaining assets shall be distributed
ratably to the holders of such parity shares in proportion to their respective
liquidation preferences. In the event, however, that there are not sufficient
assets available to permit payment in full of the Class B Common Adjustment,
then such remaining assets shall be distributed ratably to the holders of Class
B Common Stock.
(C) Neither the merger or consolidation of the Corporation into or
with another corporation nor the merger or consolidation of any other
corporation into or with the Corporation shall be deemed to be a liquidation,
dissolution or winding up of the Corporation within the meaning of this Section
6, but the sale, lease or conveyance of all or substantially all the
Corporation's assets shall be deemed to be a liquidation, dissolution or winding
up of the Corporation within the meaning of this Section 6.
7. CONSOLIDATION, MERGER, ETC. In case the Corporation shall enter
into any consolidation, merger, combination or other transaction in which the
shares of Class B 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
Class 2 Series A Junior Participating Preferred Stock shall at the same time be
similarly exchanged or changed in an amount per share equal to the Adjustment
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Number 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 Class B Common Stock is changed or exchanged.
8. REDEMPTION. (A) The Corporation, at its option, may redeem shares
of the Class 2 Series A Junior Participating Preferred Stock in whole at any
time and in part from time to time, at a redemption price equal to the
Adjustment Number times the current per share market price (as such term is
hereinafter defined) of the Class B Common Stock on the date of the mailing of
the notice of redemption, together with unpaid accumulated dividends to the date
of such redemption. The "current per share market price" on any date shall be
deemed to be the average of the closing price per share of such Common Stock for
the ten (10) consecutive Trading Days (as such term is hereinafter defined)
immediately prior to such date; PROVIDED, HOWEVER, that in the event that the
current per share market price of the Common Stock is determined during a period
following the announcement of (A) a dividend or distribution on the Common Stock
other than a regular quarterly cash dividend or (B) any subdivision, combination
or reclassification of such Common Stock and the ex-dividend date for such
dividend or distribution, or the record date for such subdivision, combination
or reclassification, shall not have occurred prior to the commencement of such
ten (10) Trading Day period, then, and in each such case, the current per share
market price shall be properly adjusted to take into account ex-dividend
trading. The closing price for each day shall be the last sales 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 transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange, or, if the Common Stock is
not listed or admitted to trading on the New York Stock Exchange, on the
principal national securities exchange on which the Common Stock is listed or
admitted to trading, or, if the Common Stock is not listed or admitted to
trading on any national securities exchange but sales price information is
reported for such security, as reported by the National Association of
Securities Dealers, Inc. Automated Quotations System ("NASDAQ") or such other
self-regulatory organization or registered securities information processor (as
such terms are used under the Securities Exchange Act of 1934, as amended) that
then reports information concerning the Common Stock, or, if sales price
information is not so reported, the average of the high bid and low asked prices
in the over-the-counter market on such day, as reported by NASDAQ or such other
entity, or, if on any such date the Common Stock is not quoted by any such
entity, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Common Stock selected by the
Board of Directors of the Corporation. If on any such date no such market maker
is making a market in the Common Stock, the fair value of the Common Stock on
such date as determined in good faith by the Board of Directors of the
Corporation shall be used. The term "Trading Day" shall mean a day on which the
principal national securities exchange on which the Common Stock is listed or
admitted to trading is open for the transaction of business, or, if the Common
Stock is not listed or admitted to trading on any national securities exchange
but is quoted by NASDAQ, a day on which NASDAQ reports trades, or, if the Common
Stock is not so quoted, a Monday, Tuesday,
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Wednesday, Thursday or Friday on which banking institutions in the State of New
York are not authorized or obligated by law or executive order to close.
(B) In the event that fewer than all the outstanding shares of the
Class 2 Series A Junior Participating Preferred Stock are to be redeemed, the
number of shares to be redeemed shall be determined by the Board of Directors
and the shares to be redeemed shall be determined by lot or pro rata as may be
determined by the Board of Directors or by any other method that may be
determined by the Board of Directors in its sole discretion to be equitable.
(C) Notice of any such redemption shall be given by mailing to the
holders of the shares of Class 2 Series A Junior Participating Preferred Stock
to be redeemed a notice of such redemption, first class postage prepaid, not
later than the fifteenth (15th) day and not earlier than the (60th) sixtieth day
before the date fixed for redemption, at their last address as the same shall
appear upon the books of the Corporation. Each such notice shall state: (i) the
redemption date; (ii) the number of shares to be redeemed and, if fewer than all
the shares held by such holder are to be redeemed, the number of such shares to
be redeemed from such holder; (iii) the redemption price; (iv) the place or
places where certificates for such shares are to be surrendered for payment of
the redemption price; and (v) that dividends on the shares to be redeemed will
cease to accrue on the close of business on such redemption date. Any notice
that is mailed in the manner herein provided shall be conclusively presumed to
have been duly given, whether or not the stockholder received such notice, and
failure duly to give such notice by mail, or any defect in such notice, to any
holder of Class 2 Series A Junior Participating Preferred Stock shall not affect
the validity of the proceedings for the redemption of any other shares of Class
2 Series A Junior Participating Preferred Stock that are to be redeemed. On or
after the date fixed for redemption as stated in such notice, each holder of the
shares called for redemption shall surrender the certificate evidencing such
shares to the Corporation at the place designated in such notice and shall
thereupon be entitled to receive payment of the redemption price. If fewer than
all the shares represented by any such surrendered certificate are redeemed, a
new certificate shall be issued representing the unredeemed shares.
(D) The shares of Class 2 Series A Junior Participating Preferred
Stock shall not be subject to the operation of any purchase, retirement or
sinking fund.
9. RANKING. The Class 2 Series A Junior Participating Preferred
Stock shall rank PARI PASSU with the Class 1 Series A Junior Participating
Preferred Stock as to any reclassification, recapitalization, stock split or
similar transaction, and as to any payment of dividends and distribution of
assets, and in any merger, consolidation or share exchange, except as otherwise
required by law. The Class 2 Series A Junior Participating Preferred Stock shall
rank junior to all other series of the Corporation's Preferred Stock, excluding
the Class 1 Series A Junior Participating Preferred Stock, as to the payment of
dividends and the distribution of assets, unless the terms of any such series
shall provide otherwise, and shall rank senior to the Common Stock, the Class C
Common Stock and the Class B Common Stock as to such matters.
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10. AMENDMENT. At any time that any shares of Class 2 Series A
Junior Participating Preferred Stock are outstanding, the Certificate 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
Class 2 Series A Junior Participating Preferred Stock so as to affect them
adversely without the affirmative vote of the holders of two-thirds or more of
the outstanding shares of Class 2 Series A Junior Participating Preferred Stock,
voting separately as a class.
11. FRACTIONAL SHARES. Class 2 Series A Junior Participating
Preferred Stock may be issued in fractions of a share that shall entitle the
holder, in proportion to such holder's fractional shares, to exercise voting
rights, receive dividends, participate in distributions and to have the benefit
of all other rights of holders of Class 2 Series A Junior Participating
Preferred Stock.
12. CONVERSION. Upon any Transfer of shares of Class 2 Series A
Junior Participating Preferred Stock to any Person other than a GS Holder, such
transferred shares of Class 2 Series A Junior Participating Preferred Stock
shall be automatically and irrevocably converted into an equal number of shares
of Class 1 Series A Junior Participating Preferred Stock, and thereafter, all
rights of the holder of such transferred shares of Class 2 Series A Junior
Participating Preferred Stock as a holder of Class 2 Series A Junior
Participating Preferred Stock shall cease and the Person or Persons in whose
name or names the certificate or certificates of Class 1 Series A Junior
Participating Preferred Stock are to be issued shall be treated for all purposes
as having become the holder or holders of such shares of Class 1 Series A Junior
Participating Preferred Stock. "GS Holder" means The Goldman Sachs Group, L.P.
and any Affiliate of such Person to which The Goldman Sachs Group, L.P.,
directly or indirectly, transfers beneficial ownership in the capital stock of
the Corporation and any successive transferees thereafter that are Affiliates of
The Goldman Sachs Group, L.P. "Transfer" means any sale or other disposition,
whether voluntary or involuntary, of beneficial ownership of any capital stock
of the Corporation. "Person" means any individual, corporation, partnership,
limited liability company, joint venture, association, joint stock company,
trust, unincorporated organization or government or other agency or political
subdivision thereof. "Affiliate" means, with respect to any Person, any Person
who, directly or indirectly, controls, is controlled by or is under common
control with that Person. For purposes of this definition, "control" when used
with respect to any Person, means the power to direct the management and
policies of such Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise.
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IN WITNESS WHEREOF, the undersigned has executed this Certificate
and does affirm the foregoing as true this 9th day of June, 1999.
______________________________________
Name:Ronald Readmond
Title:Co-Chief Executive Officer
Attest:_________________________
Name:Robert C. Mendelson
Title:Secretary
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EXHIBIT B-1
Form of Voting Class Rights Certificates
Certificate No. VCR- _______ Rights
NOT EXERCISABLE AFTER SEPTEMBER 30, 2009 OR EARLIER IF REDEEMED OR EXCHANGED BY
THE COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY,
AT $.01 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS BENEFICIALLY OWNED BY OR
TRANSFERRED TO ANY PERSON WHO IS, WAS OR BECOMES AN ACQUIRING PERSON OR AN
AFFILIATE OR ASSOCIATE THEREOF (AS SUCH TERMS ARE DEFINED IN THE RIGHTS
AGREEMENT) AND CERTAIN TRANSFEREES THEREOF WILL BECOME NULL AND VOID AND WILL NO
LONGER BE TRANSFERABLE.
VOTING CLASS RIGHTS CERTIFICATE
WIT CAPITAL GROUP, INC.
This certifies that , or registered assigns, is the registered owner
of the number of Rights set forth above, each of which entitles the owner
thereof, subject to the terms, provisions and conditions of the Rights
Agreement, dated as of June 7, 1999 as it may from time to time be supplemented
or amended (the "Rights Agreement"), between Wit Capital Group, Inc., a Delaware
corporation (the "Company"), and American Stock Transfer &Trust Company (the
"Rights Agent"), to purchase from the Company at any time prior to 5:00 p.m.
(New York time) on June 9, 1999 at the principal office or offices of the Rights
Agent designated for such purpose, or its successors as Rights Agent, one
one-hundredth of a fully paid, nonassessable share (a "Fractional Share") of
Class 1 Series A Junior Participating Preferred Stock (the "Class 1 Series A
Junior Participating Preferred Stock") of the Company, at a purchase price of
$65.00 per one one-hundredth of a share (the "Purchase Price"), upon
presentation and surrender of this Rights Certificate with the Form of Election
to Purchase and related Certificate set forth on the reverse hereof duly
executed. The Purchase Price may be paid in cash or by certified check,
cashier's or official bank check or bank draft payable to the order of the
Company or the Rights Agent. The number of Rights evidenced by this Rights
Certificate (and the number of shares which may be purchased upon exercise
thereof) set forth above, and the Purchase Price per Fractional Share set forth
above, are the number and Purchase Price as of June 9, 1999, based on the Class
1 Series A Junior Participating Preferred Stock as constituted at such date. The
Company reserves the right to require prior to the occurrence of a Triggering
Event (as such term is defined in the Rights Agreement) that a number of Rights
be exercised so that only whole shares of Class 1 Series A Junior Participating
Preferred Stock will be issued.
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From and after the first occurrence of a Triggering Event (as such
term is defined in the Rights Agreement), if the Rights evidenced by this Rights
Certificate are beneficially owned by or transferred to (i) an Acquiring Person
or an Associate or Affiliate of an Acquiring Person (as such terms are defined
in the Rights Agreement), (ii) a transferee of any such Acquiring Person,
Associate or Affiliate, or (iii) under certain circumstances specified in the
Rights Agreement, a transferee of a person who, concurrently with or after such
transfer, became an Acquiring Person or an Affiliate or Associate of an
Acquiring Person, such Rights shall, with certain exceptions, become null and
void in the circumstances set forth in the Rights Agreement, and no holder
hereof shall have any rights whatsoever with respect to such Rights from and
after the occurrence of such Triggering Event.
As provided in the Rights Agreement, the Purchase Price and the
number and kind of shares of Class 1 Series A Junior Participating Preferred
Stock or other securities or assets that may be purchased upon the exercise of
the Rights evidenced by this Rights Certificate are subject to modification and
adjustment upon the happening of certain events, including Triggering Events.
This Rights Certificate is subject to all of the terms, provisions
and conditions of the Rights Agreement, which terms, provisions and conditions
are hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the above-mentioned office of the
Rights Agent and are also available upon written request to the Company.
This Rights Certificate, with or without other Rights Certificates,
upon surrender at the principal office or offices of the Rights Agent designated
for such purpose, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of Fractional Shares of Class 1 Series A Junior
Participating Preferred Stock as the Rights evidenced by the Rights Certificate
or Rights Certificates surrendered shall have entitled such holder to purchase.
If this Rights Certificate shall be exercised in part, the holder shall be
entitled to receive upon surrender hereof another Rights Certificate or Rights
Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate (i) may be redeemed by the Company at its option
at a redemption price of $.01 per Right, payable, at the election of the
Company, in cash or shares of Common Stock, par value $.01 per share, of the
Company ("Common Stock") or such other consideration as the Board of Directors
may determine, at any time prior to the earlier of the close of business on (a)
the date of the first public announcement of the occurrence of a Flip- In Event
(as such time period may be extended or shortened pursuant to the Rights
Agreement) and (b) the Expiration Date (as such
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term is defined in the Rights Agreement) or (ii) may be exchanged in whole or in
part for shares of the Common Stock and/or other equity securities of the
Company deemed to have the same value as shares of Common Stock, at any time
prior to a person's becoming the beneficial owner of 50% or more of the
aggregate of the shares of Common Stock and the shares of Class C Common Stock
outstanding or the occurrence of a Flip-Over Event.
No fractional shares of Class 1 Series A Junior Participating
Preferred Stock are required to be issued upon the exercise of any Right or
Rights evidenced hereby (other than, except asset forth above, fractions that
are integral multiples of a Fractional Share of Class 1 Series A Junior
Participating Preferred Stock, which may, at the election of the Company, be
evidenced by depositary receipts), but in lieu thereof a cash payment may be
made, as provided in the Rights Agreement.
No holder of this Rights Certificate, as such, shall be entitled to
vote or receive dividends or be deemed for any purpose the holder of shares of
Class 1 Series A Junior Participating 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 Rights Certificate shall have been exercised as
provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
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WITNESS the facsimile signature of the proper officers of the
Company and its corporate seal.
Dated as of ___________, ____
ATTEST: WIT CAPITAL GROUP, INC.
________________________________ By______________________________
Secretary Title:
Countersigned:
AMERICAN STOCK TRANSFER & TRUST COMPANY
By______________________________
Authorized Signature
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Form of Reverse Side of Voting Class Rights Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to
transfer any Rights evidenced by the Rights Certificate.)
FOR VALUE RECEIVED ______________________________________ hereby sells, assigns
and transfers unto ____________________________________________________________
(Please print name and address of transferee)
______ Rights evidenced by this Rights Certificate, together with all right,
title and interest therein, and does hereby irrevocably constitute and appoint
____________________________ Attorney, to transfer the said Rights on the books
of the within-named Company, with full power of substitution.
Dated: _____________, ____
__________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a national securities
exchange, a member of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the United
States or another eligible guarantor institution (as defined pursuant to Rule
17Ad-15 under the Securities Exchange Act of 1934, as amended).
B-5
<PAGE>
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Rights Certificate are not being
sold, assigned and transferred by or on behalf of a Person who is or was an
Acquiring Person or an Affiliate or Associate of an Acquiring Person (as such
terms are defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned,
it did not acquire the Rights evidenced by this Rights Certificate from any
Person who is, was or subsequently became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person or who is a direct or indirect transferee of an
Acquiring Person or of an Affiliate or Associate of an Acquiring Person.
Dated: ___________, ____ _______________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a national securities
exchange, a member of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the United
States or another eligible guarantor institution (as defined pursuant to Rule
17Ad-15 under the Securities Exchange Act of 1934, as amended).
NOTICE
The signatures to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
B-6
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise
Rights represented by the Rights Certificate.)
To: WIT CAPITAL GROUP, INC.
The undersigned hereby irrevocably elects to exercise Rights
represented by this Rights Certificate to purchase the shares of Class 1 Series
A Junior Participating Preferred Stock issuable upon the exercise of the Rights
(or such other securities of the Company or of any other person that may be
issuable upon the exercise of the Rights) and requests that certificates for
such shares (or other securities) be issued in the name of and delivered to:
Please insert social security
or other identifying number
(Please print name and address)
If such number of Rights shall not be all the Rights evidenced by
this Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
(Please print name and address)
Dated: _____________, ____
___________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a national securities
exchange, a member of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the United
States or another eligible guarantor institution (as defined pursuant to Rule
17Ad-15 under the Securities Exchange Act of 1934, as amended).
B-7
<PAGE>
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Rights Certificate are not being
exercised by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of an Acquiring Person (as such terms are defined
pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned,
it did not acquire the Rights evidenced by this Rights Certificate from any
Person who is, was or became an Acquiring Person or an Affiliate or Associate of
an Acquiring Person or who is a direct or indirect transferee of an Acquiring
Person or of an Affiliate or Associate of an Acquiring Person.
Dated: _____________, ____ ______________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a national securities
exchange, a member of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the United
States or another eligible guarantor institution (as defined pursuant to Rule
17Ad-15 under the Securities Exchange Act of 1934, as amended).
NOTICE
The signatures to the foregoing Election to Purchase and Certificate
must correspond to the name as written upon the face of this Rights Certificate
in every particular, without alteration or enlargement or any change whatsoever.
B-8
<PAGE>
EXHIBIT B-2
Form of Class B Common Rights Certificates
Certificate No. CBCR- _______ Rights
NOT EXERCISABLE AFTER SEPTEMBER 30, 2009 OR EARLIER IF REDEEMED OR EXCHANGED BY
THE COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY,
AT $.01 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS BENEFICIALLY OWNED BY OR
TRANSFERRED TO ANY PERSON WHO IS, WAS OR BECOMES AN ACQUIRING PERSON OR AN
AFFILIATE OR ASSOCIATE THEREOF (AS SUCH TERMS ARE DEFINED IN THE RIGHTS
AGREEMENT) AND CERTAIN TRANSFEREES THEREOF WILL BECOME NULL AND VOID AND WILL NO
LONGER BE TRANSFERABLE.
CLASS B COMMON RIGHTS CERTIFICATE
WIT CAPITAL GROUP, INC.
This certifies that , or registered assigns, is the registered owner
of the number of Rights set forth above, each of which entitles the owner
thereof, subject to the terms, provisions and conditions of the Rights
Agreement, dated as of June 7, 1999 as it may from time to time be supplemented
or amended (the "Rights Agreement"), between Wit Capital Group, Inc., a Delaware
corporation (the "Company"), and American Stock Transfer &Trust Company (the
"Rights Agent"), to purchase from the Company at any time prior to 5:00 p.m.
(New York time) on June 9, 1999 at the principal office or offices of the Rights
Agent designated for such purpose, or its successors as Rights Agent, one
one-hundredth of a fully paid, nonassessable share (a "Fractional Share") of
Class 2 Series A Junior Participating Preferred Stock (the "Class 2 Series A
Junior Participating Preferred Stock") of the Company, at a purchase price of
$65.00 per one one-hundredth of a share (the "Purchase Price"), upon
presentation and surrender of this Rights Certificate with the Form of Election
to Purchase and related Certificate set forth on the reverse hereof duly
executed. The Purchase Price may be paid in cash or by certified check,
cashier's or official bank check or bank draft payable to the order of the
Company or the Rights Agent. The number of Rights evidenced by this Rights
Certificate (and the number of shares which may be purchased upon exercise
thereof) set forth above, and the Purchase Price per Fractional Share set forth
above, are the number and Purchase Price as of June 9, 1999, based on the Class
2 Series A Junior Participating Preferred Stock as constituted at such date. The
Company reserves the right to require prior to the occurrence of a Triggering
Event (as such term is defined in the Rights Agreement) that a number of Rights
be exercised so that only whole shares of Class 2 Series A Junior Participating
Preferred Stock will be issued.
B-9
<PAGE>
From and after the first occurrence of a Triggering Event (as such
term is defined in the Rights Agreement), if the Rights evidenced by this Rights
Certificate are beneficially owned by or transferred to (i) an Acquiring Person
or an Associate or Affiliate of an Acquiring Person (as such terms are defined
in the Rights Agreement), (ii) a transferee of any such Acquiring Person,
Associate or Affiliate, or (iii) under certain circumstances specified in the
Rights Agreement, a transferee of a person who, concurrently with or after such
transfer, became an Acquiring Person or an Affiliate or Associate of an
Acquiring Person, such Rights shall, with certain exceptions, become null and
void in the circumstances set forth in the Rights Agreement, and no holder
hereof shall have any rights whatsoever with respect to such Rights from and
after the occurrence of such Triggering Event.
As provided in the Rights Agreement, the Purchase Price and the
number and kind of shares of Class 2 Series A Junior Participating Preferred
Stock or other securities or assets that may be purchased upon the exercise of
the Rights evidenced by this Rights Certificate are subject to modification and
adjustment upon the happening of certain events, including Triggering Events.
This Rights Certificate is subject to all of the terms, provisions
and conditions of the Rights Agreement, which terms, provisions and conditions
are hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the above-mentioned office of the
Rights Agent and are also available upon written request to the Company.
This Rights Certificate, with or without other Rights Certificates,
upon surrender at the principal office or offices of the Rights Agent designated
for such purpose, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of Fractional Shares of Class 2 Series A Junior
Participating Preferred Stock as the Rights evidenced by the Rights Certificate
or Rights Certificates surrendered shall have entitled such holder to purchase.
If this Rights Certificate shall be exercised in part, the holder shall be
entitled to receive upon surrender hereof another Rights Certificate or Rights
Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate (i) may be redeemed by the Company at its option
at a redemption price of $.01 per Right, payable, at the election of the
Company, in cash or shares of Class B Common Stock, par value $.01 per share, of
the Company ("Class B Common Stock") or such other consideration as the Board of
Directors may determine, at any time prior to the earlier of the close of
business on (a) the date of the first public announcement of the occurrence of a
Flip- In Event (as such time period may be extended or shortened pursuant to the
Rights Agreement) and (b) the Expiration
B-10
<PAGE>
Date (as such term is defined in the Rights Agreement) or (ii) may be exchanged
in whole or in part for shares of the Class B Common Stock and/or other equity
securities of the Company deemed to have the same value as shares of Class B
Common Stock, at any time prior to a person's becoming the beneficial owner of
50% or more of the aggregate of the shares of Common Stock and the shares of
Class C Common Stock outstanding or the occurrence of a Flip-Over Event.
In the event that prior to the Distribution Date (as such term is
defined in the Rights Agreement), the Class B Common Stock is converted, in
whole or in part, into Common Stock or Class C Common Stock, as the case may be,
in accordance with the applicable provisions of the Amended and Restated
Certificate of Incorporation of the Company, the Class B Common Rights attached
to the shares of Class B Common Stock so converted shall be converted to Voting
Class Rights pursuant to a conversion ratio equivalent to the conversion ratio
used for converting the Class B Common Stock to Common Stock. In the event that
on or after the Distribution Date, all outstanding shares of Class B Common
Stock are converted into shares of Common Stock or Class C Common Stock, as the
case may be, in accordance with the applicable provisions of the Amended and
Restated Certificate of Incorporation of the Company, all Class B Common Rights
then outstanding shall be converted to Voting Class Rights pursuant to a
conversion ratio equivalent to the conversion ratio used for converting the
Class B Common Stock to Common Stock or Class C Common Stock, as the case may
be.
No fractional shares of Class 2 Series A Junior Participating
Preferred Stock are required to be issued upon the exercise of any Right or
Rights evidenced hereby (other than, except asset forth above, fractions that
are integral multiples of a Fractional Share of Class 2 Series A Junior
Participating Preferred Stock, which may, at the election of the Company, be
evidenced by depositary receipts), but in lieu thereof a cash payment may be
made, as provided in the Rights Agreement.
No holder of this Rights Certificate, as such, shall be entitled to
vote or receive dividends or be deemed for any purpose the holder of shares of
Class 2 Series A Junior Participating 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 Rights Certificate shall have been exercised as
provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
B-11
<PAGE>
WITNESS the facsimile signature of the proper officers of the
Company and its corporate seal.
Dated as of ___________, ____
ATTEST: WIT CAPITAL GROUP, INC.
______________________________ By______________________________
Secretary Title:
Countersigned:
AMERICAN STOCK TRANSFER & TRUST COMPANY
By____________________________
Authorized Signature
B-12
<PAGE>
Form of Reverse Side of Class B Common Rights Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to
transfer any Rights evidenced by the Rights Certificate.)
FOR VALUE RECEIVED ______________________________________ hereby sells, assigns
and transfers unto _____________________________________________________________
(Please print name and address of transferee)
______ Rights evidenced by this Rights Certificate, together with all right,
title and interest therein, and does hereby irrevocably constitute and appoint
____________________________ Attorney, to transfer the said Rights on the books
of the within-named Company, with full power of substitution.
Dated: _____________, ____
______________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a national securities
exchange, a member of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the United
States or another eligible guarantor institution (as defined pursuant to Rule
17Ad-15 under the Securities Exchange Act of 1934, as amended).
B-13
<PAGE>
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Rights Certificate are not being
sold, assigned and transferred by or on behalf of a Person who is or was an
Acquiring Person or an Affiliate or Associate of an Acquiring Person (as such
terms are defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned,
it did not acquire the Rights evidenced by this Rights Certificate from any
Person who is, was or subsequently became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person or who is a direct or indirect transferee of an
Acquiring Person or of an Affiliate or Associate of an Acquiring Person.
Dated: ___________, ____ ______________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a national securities
exchange, a member of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the United
States or another eligible guarantor institution (as defined pursuant to Rule
17Ad-15 under the Securities Exchange Act of 1934, as amended).
NOTICE
The signatures to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
B-14
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise
Rights represented by the Rights Certificate.)
To: WIT CAPITAL GROUP, INC.
The undersigned hereby irrevocably elects to exercise Rights
represented by this Rights Certificate to purchase the shares of Class 2 Series
A Junior Participating Preferred Stock issuable upon the exercise of the Rights
(or such other securities of the Company or of any other person that may be
issuable upon the exercise of the Rights) and requests that certificates for
such shares (or other securities) be issued in the name of and delivered to:
Please insert social security
or other identifying number
(Please print name and address)
If such number of Rights shall not be all the Rights evidenced by
this Rights Certificate, a new Rights Certificate for the balance 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: _____________, 199_
______________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a national securities
exchange, a member of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the United
States or another eligible guarantor institution (as defined pursuant to Rule
17Ad-15 under the Securities Exchange Act of 1934, as amended).
B-15
<PAGE>
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Rights Certificate are not being
exercised by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of an Acquiring Person (as such terms are defined
pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned,
it did not acquire the Rights evidenced by this Rights Certificate from any
Person who is, was or became an Acquiring Person or an Affiliate or Associate of
an Acquiring Person or who is a direct or indirect transferee of an Acquiring
Person or of an Affiliate or Associate of an Acquiring Person.
Dated: _____________, ____ ______________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a national securities
exchange, a member of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the United
States or another eligible guarantor institution (as defined pursuant to Rule
17Ad-15 under the Securities Exchange Act of 1934, as amended).
NOTICE
The signatures to the foregoing Election to Purchase and Certificate
must correspond to the name as written upon the face of this Rights Certificate
in every particular, without alteration or enlargement or any change whatsoever.
B-16
<PAGE>
EXHIBIT C
UNDER CERTAIN CIRCUMSTANCES SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS
BENEFICIALLY OWNED BY OR TRANSFERRED TO ANY PERSON WHO IS, WAS OR BECOMES AN
ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE THEREOF (AS SUCH TERMS ARE DEFINED
IN THE RIGHTS AGREEMENT), AND CERTAIN TRANSFEREES THEREOF, WILL BECOME NULL AND
VOID AND WILL NO LONGER BE TRANSFERABLE.
SUMMARY OF RIGHTS TO PURCHASE PREFERRED STOCK
On May 17, 1999, the Board of Directors of Wit Capital Group, Inc.
(the "Company") authorized the issuance of one voting class right ("Voting Class
Right") for each outstanding share of the Company's Common Stock, par value $.01
per share ("Common Stock"), authorized the issuance of one Voting Class Right
for each outstanding share of the Company's Class C Common Stock, par value $.01
per share ("Class C Common Stock"), and also authorized the issuance of one
nonvoting class right ("Class B Right") for each outstanding share of the
Company's Class B Common Stock, par value $.01 per share ("Class B Common
Stock") to the stockholders of record at the close of business on May 18, 1999.
The Voting Class Rights and the Class B Common Rights are referred to
collectively herein as the "Rights". Each Voting Class Right entitles the
registered holder to purchase from the Company a unit consisting of one
one-hundredth of a share (a "Fractional Share") of Class 1 Series A Junior
Participating Preferred Stock, par value $.001 per share, and each Class B
Common Right entitles the registered holder to purchase from the Company a unit
consisting of a Fractional Share of Class 2 Series A Junior Participating
Preferred Stock, par value $.001 per share (the Class 1 Series A Junior
Participating Preferred Stock and the Class 2 Series A Junior Participating
Preferred Stock collectively referred to as the "Preferred Stock"), at a
purchase price of $__.00 per Fractional Share, subject to adjustment
(the"Purchase Price"). The description and terms of the Rights are set forth in
a Rights Agreement dated as of _________, 1999 as it may from time to time be
supplemented or amended (the "Rights Agreement") between the Company and
American Stock Transfer & Trust Company, as Rights Agent.
Initially, the Voting Class Rights will be attached to all
certificates representing outstanding shares of Common Stock and Class C Common
Stock, and the Class B Common Rights will be attached to all certificates
representing outstanding shares of Class B Common Stock, and no separate
certificates for the Rights ("Rights Certificates") will be distributed. The
Voting Rights will separate from the Common Stock and Class C Common Stock and
the Class B Common Rights will separate from the Class B Common Stock and a
"Distribution Date" will occur, with certain exceptions, upon the earlier of (i)
ten days following a public announcement that a person or group of affiliated or
associated persons (an"Acquiring Person") has acquired, or obtained the right to
acquire, beneficial ownership of 15% or more of the aggregate of outstanding
shares of Common Stock and Class C Common Stock (the date of the announcement
C-1
<PAGE>
being the "Stock Acquisition Date"), or (ii) ten business days following the
commencement of a tender offer or exchange offer that would result in a person's
becoming an Acquiring Person.
Notwithstanding the foregoing, so long as Capital Z Financial
Services Fund II, L.P. ("Capital Z"), together with all its affiliates and
associates, does not become the beneficial owner of 25% or more of the aggregate
of the fully-diluted Common Stock and the fully-diluted Class C Common Stock,
Capital Z, together with its affiliates and associates, shall not be or become
an Acquiring Person. Furthermore, so long as The Goldman Sachs Group, L.P.
("Goldman Sachs"), together with all its affiliates and associates, does not
become the beneficial owner of 25% or more of the aggregate of the fully-diluted
Common Stock and the fully-diluted Class C Common Stock, Goldman Sachs, together
with its affiliates and associates, shall not be or become an Acquiring Person.
In certain circumstances, the Distribution Date may be deferred by the Board of
Directors. Certain inadvertent acquisitions will not result in a person's
becoming an Acquiring Person if the person promptly divests itself of sufficient
Common Stock and/or Class C Common Stock.
Until the Distribution Date, (a) the Voting Class Rights will be
evidenced by the Common Stock certificates and the Class C Common Stock
certificates and the Class B Common Rights will be evidenced by the Class B
Common Stock certificates and both will be transferred with and only with such
Common Stock certificates and such Class C Common Stock certificates or Class B
Common Stock certificates, as the case may be, (b) Common Stock certificates,
Class C Common Stock certificates and Class B Common Stock certificates will
contain a notation incorporating the Rights Agreement by reference and (c) the
surrender for transfer of any certificate for Common Stock will also constitute
the transfer of the Rights associated with either the Common Stock or the Class
B Common Stock represented by such certificate.
The Rights are not exercisable until the Distribution Date and will
expire at the close of business on September 30, 2009, unless earlier redeemed
or exchanged by the Company as described below.
As soon as practicable after the Distribution Date, Rights
Certificates will be mailed to holders of record of Common Stock, Class C Common
Stock and Class B Common Stock as of the close of business on the Distribution
Date and, from and after the Distribution Date, the separate Rights Certificates
alone will represent the Rights. All shares of Common Stock, Class C Common
Stock and Class B Common Stock issued prior to the Distribution Date will be
issued with the appropriate Rights. Shares of Common Stock, Class C Common Stock
and Class B Common Stock issued after the Distribution Date in connection with
certain employee benefit plans or upon conversion of certain securities will be
issued with appropriate Rights. Except as otherwise determined by the Board of
Directors, no other shares of Common Stock, Class C Common Stock or Class B
Common Stock issued after the Distribution Date will be issued with Rights.
C-2
<PAGE>
In the event (a "Flip-In Event") that a person becomes an Acquiring
Person (except pursuant to a tender or exchange offer for all outstanding shares
of Common Stock and Class C Common Stock at a price and on terms that a majority
of the independent directors of the Company determines to be fair to and
otherwise in the best interests of the Company and its stockholders (a
"Permitted Offer")), each holder of a Voting Class Right will thereafter have
the right to receive, upon exercise of such Right, a number of shares of Common
Stock and each holder of a Class B Common Right will thereafter have the right
to receive, upon exercise of such Right, a number of shares of Class B Common
Stock (or, in certain circumstances, cash, property or other securities of the
Company) having a Current Market Price (as defined in the Rights Agreement)
equal to approximately two times the exercise price of the Right.
Notwithstanding the foregoing, following the occurrence of any Triggering Event,
all Rights that are, or (under certain circumstances specified in the Rights
Agreement) were, beneficially owned by or transferred to an Acquiring Person (or
by certain related parties) will be null and void in the circumstances set forth
in the Rights Agreement. However, Rights are not exercisable following the
occurrence of any Flip-In Event until such time as the Rights are no longer
redeemable by the Company as set forth below.
In the event (a "Flip-Over Event") that, at any time from and after
the time an Acquiring Person becomes such, (i) the Company is acquired in a
merger or other business combination transaction (other than certain mergers
that follow a Permitted Offer), or (ii) 50% or more of the Company's assets or
earning power is sold or transferred, each holder of a Right (except Rights that
are voided as set forth above) shall thereafter have the right to receive, upon
exercise, a number of shares of common stock of the acquiring company having a
Current Market Price equal to two times the exercise price of the Right. Flip-In
Events and Flip-Over Events are collectively referred to as "Triggering Events."
The number of outstanding Rights associated with a share of Common
Stock, Class C Common Stock or Class B Common Stock, or the number of Fractional
Shares of Preferred Stock issuable upon exercise of a Right and the Purchase
Price, are subject to adjustment in the event of a stock dividend on, or a
subdivision, combination or reclassification of, the Common Stock, Class C
Common Stock or Class B Common Stock occurring prior to the Distribution Date.
The Purchase Price payable, and the number of Fractional Shares of Preferred
Stock or other securities or property issuable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution in the event of
certain transactions affecting the Preferred Stock.
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. No fractional shares of Preferred Stock that are not integral multiples
of a Fractional Share are required to be issued and, in lieu thereof, an
adjustment in cash may be made based on the market price of the Preferred Stock
on the last trading date prior to the date of exercise or certificates of scrip
or warrants maybe issued entitling the holders thereof to receive a full share
in return for such scrip or warrants aggregating a full share. Pursuant to the
Rights Agreement, the Company reserves the
C-3
<PAGE>
right to require prior to the occurrence of a Triggering Event that, upon any
exercise of Rights, a number of Rights be exercised so that only whole shares of
Preferred Stock will be issued.
At any time until the date of the first date of public announcement
of the occurrence of a Flip-In Event, the Company may redeem the Rights in
whole, but not in part, at a price of $.01 per Right, payable, at the option of
the Company, in cash, shares of Common Stock, in the case of holders of Voting
Class Rights, or Class B Common Stock, in the case of holders of Class B Common
Rights, or such other consideration as the Board of Directors may determine.
Immediately upon the effectiveness of the action of the Board of Directors
ordering redemption of the Rights, the Rights will terminate and the only right
of the holders of Rights will be to receive the $.01 redemption price.
In the event that prior to the Distribution Date, the Class B Common
Stock is converted, in whole or in part, into Common Stock or Class C Common
Stock, as the case may be, the Class B Common Rights attached to the shares of
Class B Common Stock will be converted to Voting Class Rights pursuant to a
conversion ratio equivalent to the conversion ratio used for converting the
Class B Common Stock to Common Stock. In the event that on or after the
Distribution Date, all outstanding shares of Class B Common Stock are converted
into shares of Common Stock or Class C Common Stock, as the case may be, all
Class B Common Rights then outstanding will be converted to Voting Class Rights
pursuant to a conversion ratio equivalent to the conversion ratio used for
converting the Class B Common Stock to Common Stock or Class C Common Stock, as
the case may be.
At any time after the occurrence of a Flip-In Event and prior to a
person's becoming the beneficial owner of 50% or more of the aggregate of the
shares of Common Stock and Class C Common Stock then outstanding or the
occurrence of a Flip-Over Event, the Company may exchange the Rights (other than
Rights owned by an Acquiring Person or an Affiliate or an associate of an
Acquiring Person, which will have become void),in whole or in part, at an
exchange ratio of one share of Common Stock, in the case of holders of Voting
Class Rights, or Class B Common Stock, in the case of holders of Class B Common
Rights, and/or other equity securities deemed to have the same value as one
share of Common Stock, per Voting Class Right, or one share of Class B Common
Stock, per Class B Common Right, subject to adjustment.
Until a Right is exercised, the holder thereof, as such, will have
no rights as a stockholder of the Company, including, without limitation, the
right to vote or to receive dividends. While the distribution of the Rights
should not be taxable to stockholders or to the Company, stockholders may,
depending upon the circumstances, recognize taxable income in the event that the
Rights become exercisable for Common Stock or Class B Common Stock (or other
consideration) of the Company or for the common stock of the acquiring company
as set forth above or are exchanged as provided in the preceding paragraph.
C-4
<PAGE>
Other than the redemption price, any of the provisions of the Rights
Agreement may be amended by the Board of Directors of the Company as long as the
Rights are redeemable. Thereafter, the provisions of the Rights Agreement other
than the redemption price may be amended by the Board of Directors in order to
cure any ambiguity, defect or inconsistency, to make changes that do not
materially adversely affect the interests of holders of Rights (excluding the
interests of any Acquiring Person), or to shorten or lengthen any time period
under the Rights Agreement; PROVIDED, HOWEVER, that no amendment to lengthen the
time period governing redemption shall be made at such time as the Rights are
not redeemable.
A copy of the Rights Agreement has been filed with the Securities
and Exchange Commission as an exhibit to the Company's Registration Statement on
Form S-1. A copy of the Rights Agreement is available free of charge from the
Company. This summary description of the Rights does not purport to be complete
and is qualified in its entirety by references to the Rights Agreement, which is
incorporated herein by reference.
C-5
<PAGE>
Exhibit 10.1
WIT CAPITAL GROUP, INC.
STOCK INCENTIVE PLAN(1)
1. RESTATEMENT, PURPOSE AND TYPES OF AWARDS
Wit Capital Group, Inc., a Delaware corporation (the "Corporation"),
maintained the Wit Capital Group, Inc. and Its Subsidiaries Stock Option and
Restricted Stock Purchase Plan (the "Prior Plan"). The Prior Plan is hereby
amended and restated, as set forth herein (the "Plan"), effective March 1, 1999,
subject to the approval of the shareholders of the Corporation within twelve
months of such effective date. Notwithstanding anything herein to the contrary,
nothing in this Plan shall adversely affect the rights or obligations, under any
Award granted under the Prior Plan, of any grantee or holder of the Award
without such person's approval.
The purpose of the Plan is to promote the long-term growth and
profitability of the Corporation by: (i) providing key people with incentives to
improve stockholder value and to contribute to the growth and financial success
of the Corporation; and (ii) enabling the Corporation to attract, retain and
reward the best-available persons.
The Plan permits the granting of stock options (including incentive
stock options qualifying under Code section 422 and nonqualified stock options),
stock appreciation rights, restricted or unrestricted stock awards, phantom
stock, performance and other awards, or any combination of the foregoing.
2. DEFINITIONS
Under this Plan, except where the context otherwise indicates, the
following definitions apply:
(a) "AFFILIATE" shall mean any entity, whether now or hereafter
existing, which controls, is controlled by, or is under common control with, the
Corporation (including, but not limited to, joint ventures, limited liability
companies, and partnerships). For this purpose, "control" shall mean ownership
of 50% or more of the total combined voting power or value of all classes of
stock or interests of the entity.
(b) "AWARD" shall mean any stock option, stock appreciation right,
stock award, phantom stock award, or performance award.
(c) "BOARD" shall mean the Board of Directors of the Corporation.
(d) "CODE" shall mean the Internal Revenue Code of 1986, as amended,
and any regulations promulgated thereunder.
(e) "COMMON STOCK" shall mean shares of common stock of the
Corporation, $.01 par value.
- ----------
(1) Adjusted to reflect increase in authorized shares from 20,000,000 to
25,000,000 approved by shareholders on May 28, 1999 and 7 for 10
reverse split on June 2, 1999.
<PAGE>
(f) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
(g) "FAIR MARKET VALUE" of a share of the Corporation's Common Stock
for any purpose at particular date shall be determined by the Administrator
using such methods and procedures as it shall from time to time determine in
good faith; provided, however, that (i) if the shares of the Common Stock are
traded on a registered national securities exchange or through a market operated
by the Nasdaq Stock Market, Inc., (including the OTC Bulletin Board), the last
regular way sales price for the primary trading session reported through any
applicable consolidated or other transaction reporting plan approved by the SEC
pursuant to the Exchange Act or (ii) if there was no such sale on a given day,
the average of the closing bid and asked prices reported through any applicable
quotation reporting plan approved by the SEC.
(h) "GRANT AGREEMENT" shall mean a written document memorializing the
terms and conditions of an Award granted pursuant to the Plan and shall
incorporate the terms of the Plan.
(i) "PARENT" shall mean a corporation, whether now or hereafter
existing, within the meaning of the definition of "parent corporation" provided
in Code section 424(e), or any successor thereto.
(j) "SUBSIDIARY" AND "SUBSIDIARIES" shall mean only a corporation or
corporations, whether now or hereafter existing, within the meaning of the
definition of "subsidiary corporation" provided in Section 424(f) of the Code,
or any successor thereto.
3. ADMINISTRATION
(a) ADMINISTRATION OF THE PLAN. The Plan shall be administered by the
Board or by such committee or committees as may be appointed by the Board from
time to time (the Board, committee or committees hereinafter referred to as the
"Administrator").
(b) POWERS OF THE ADMINISTRATOR. The Administrator shall have all the
powers vested in it by the terms of the Plan, such powers to include authority,
in its sole and absolute discretion, to grant Awards under the Plan, prescribe
Grant Agreements evidencing such Awards and establish programs for granting
Awards.
The Administrator shall have full power and authority to take all other
actions necessary to carry out the purpose and intent of the Plan, including,
but not limited to, the authority to: (i) determine the eligible persons to
whom, and the time or times at which Awards shall be granted; (ii) determine the
types of Awards to be granted; (iii) determine the number of shares to be
covered by or used for reference purposes for each Award; (iv) impose such
terms, limitations, restrictions and conditions upon any such Award as the
Administrator shall deem appropriate; (v) modify, amend, extend or renew
outstanding Awards, or accept the surrender of outstanding Awards and substitute
new Awards (provided however, that, except as provided in Section 7(d) of the
Plan, any modification that would materially adversely affect any outstanding
Award shall not be made without the consent of the holder); (vi) accelerate or
otherwise change the time in which an Award may be exercised or becomes payable
and to waive or accelerate the lapse, in whole or in part, of any restriction or
condition with respect to such Award, including, but not limited to, any
restriction or condition with respect to the
2
<PAGE>
vesting or exercisability of an Award following termination of any grantee's
employment or other relationship with the Corporation; and (vii) establish
objectives and conditions, if any, for earning Awards and determining whether
Awards will be paid after the end of a performance period.
The Administrator shall have full power and authority, in its sole and
absolute discretion, to administer and interpret the Plan and to adopt and
interpret such rules, regulations, agreements, guidelines and instruments for
the administration of the Plan and for the conduct of its business as the
Administrator deems necessary or advisable.
(c) NON-UNIFORM DETERMINATIONS. The Administrator's determinations
under the Plan (including without limitation, determinations of the persons to
receive Awards, the form, amount and timing of such Awards, the terms and
provisions of such Awards and the Grant Agreements evidencing such Awards) need
not be uniform and may be made by the Administrator selectively among persons
who receive, or are eligible to receive, Awards under the Plan, whether or not
such persons are similarly situated.
(d) LIMITED LIABILITY. To the maximum extent permitted by law, no
member of the Administrator shall be liable for any action taken or decision
made in good faith relating to the Plan or any Award thereunder.
(e) INDEMNIFICATION. To the maximum extent permitted by law and by the
Corporation's charter and by-laws, the members of the Administrator shall be
indemnified by the Corporation in respect of all their activities under the
Plan.
(f) EFFECT OF ADMINISTRATOR'S DECISION. All actions taken and decisions
and determinations made by the Administrator on all matters relating to the Plan
pursuant to the powers vested in it hereunder shall be in the Administrator's
sole and absolute discretion and shall be conclusive and binding on all parties
concerned, including the Corporation, its stockholders, any participants in the
Plan and any other employee, consultant, or director of the Corporation, and
their respective successors in interest.
4. SHARES AVAILABLE FOR THE PLAN; MAXIMUM AWARDS
Subject to adjustments as provided in Section 7(d), the shares of
Common Stock that may be issued with respect to Awards granted under the Plan
(including, for purposes of this Section 4, the Prior Plan) shall not exceed an
aggregate of 17,500,000 shares of Common Stock. The Corporation shall reserve
such number of shares for Awards under the Plan, subject to adjustments as
provided in Section 7(d). If any Award, or portion of an Award, under the Plan
expires or terminates unexercised, becomes unexercisable or is forfeited or
otherwise terminated, surrendered or canceled as to any shares, or if any shares
of Common Stock are surrendered to the Corporation in connection with any Award
(whether or not such surrendered shares were acquired pursuant to any Award),
the shares subject to such Award and the surrendered shares shall thereafter be
available for further Awards under the Plan; provided, however, that any such
shares that are surrendered to the Corporation in connection with any Award or
that are forfeited after issuance shall not be available for purchase pursuant
to incentive stock options intended to qualify under Code section 422.
5. PARTICIPATION
3
<PAGE>
Participation in the Plan shall be open to all employees, officers,
directors, and consultants of the Corporation, or of any Affiliate of the
Corporation, as may be selected by the Administrator from time to time.
6. AWARDS
The Administrator, in its sole discretion, establishes the terms of all
Awards granted under the Plan. Awards may be granted individually or in tandem
with other types of Awards. All Awards are subject to the terms and conditions
provided in the Grant Agreement.
(a) STOCK OPTIONS. The Administrator may from time to time grant to
eligible participants Awards of incentive stock options as that term is defined
in Code section 422 or nonqualified stock options; provided, however, that
Awards of incentive stock options shall be limited to employees of the
Corporation or of any Parent or Subsidiary of the Corporation. Options intended
to qualify as incentive stock options under Code section 422 must have an
exercise price at least equal to Fair Market Value on the date of grant, but
nonqualified stock options may be granted with an exercise price less than Fair
Market Value. No stock option shall be an incentive stock option unless so
designated by the Administrator at the time of grant or in the Grant Agreement
evidencing such stock option.
(b) STOCK APPRECIATION RIGHTS. The Administrator may from time to time
grant to eligible participants Awards of Stock Appreciation Rights ("SAR"). An
SAR entitles the grantee to receive, subject to the provisions of the Plan and
the Grant Agreement, a payment having an aggregate value equal to the product of
(i) the excess of (A) the Fair Market Value on the exercise date of one share of
Common Stock over (B) the base price per share specified in the Grant Agreement,
times (ii) the number of shares specified by the SAR, or portion thereof, which
is exercised. Payment by the Corporation of the amount receivable upon any
exercise of an SAR may be made by the delivery of Common Stock or cash, or any
combination of Common Stock and cash, as determined in the sole discretion of
the Administrator. If upon settlement of the exercise of an SAR a grantee is to
receive a portion of such payment in shares of Common Stock, the number of
shares shall be determined by dividing such portion by the Fair Market Value of
a share of Common Stock on the exercise date. No fractional shares shall be used
for such payment and the Administrator shall determine whether cash shall be
given in lieu of such fractional shares or whether such fractional shares shall
be eliminated.
(c) STOCK AWARDS. The Administrator may from time to time grant
restricted or unrestricted stock Awards to eligible participants in such
amounts, on such terms and conditions, and for such consideration, including no
consideration or such minimum consideration as may be required by law, as it
shall determine. A stock Award may be paid in Common Stock, in cash, or in a
combination of Common Stock and cash, as determined in the sole discretion of
the Administrator.
(d) PHANTOM STOCK. The Administrator may from time to time grant Awards
to eligible participants denominated in stock-equivalent units ("phantom stock")
in such amounts and on such terms and conditions as it shall determine. Phantom
stock units granted to a participant shall be credited to a bookkeeping reserve
account solely for accounting purposes and shall not require a segregation of
any of the Corporation's assets. An Award of phantom stock may be settled in
Common Stock, in cash, or in a combination of Common Stock and cash, as
determined in the sole discretion of the Administrator. Except as otherwise
provided in the applicable Grant Agreement, the grantee shall not
4
<PAGE>
have the rights of a stockholder with respect to any shares of Common Stock
represented by a phantom stock unit solely as a result of the grant of a phantom
stock unit to the grantee.
(e) PERFORMANCE AWARDS. The Administrator may, in its discretion, grant
performance awards which become payable on account of attainment of one or more
performance goals established by the Administrator. Performance awards may be
paid by the delivery of Common Stock or cash, or any combination of Common Stock
and cash, as determined in the sole discretion of the Administrator. Performance
goals established by the Administrator may be based on the Corporation's or an
Affiliate's operating income or one or more other business criteria selected by
the Administrator that apply to an individual or group of individuals, a
business unit, or the Corporation or an Affiliate as a whole, over such
performance period as the Administrator may designate.
(f) OTHER AWARDS. The Administrator may, in its discretion, grant other
awards in such number, and upon such terms, and at any time and from time to
time, as shall be determined by the Administrator. Such awards may be
denominated in cash, in shares of Common Stock, in share-equivalent units, in
share appreciation units, in securities or debentures convertible into Common
Stock or in a combination of the foregoing and may be paid in cash or in shares
of Common Stock, all as determined by the Administrator. Such awards may be
issued alone or in tandem with other awards as described above, may be granted
based on or subject to performance measures, and may relate to annual bonus or
long-term performance awards.
7. MISCELLANEOUS
(a) WITHHOLDING OF TAXES. Grantees and holders of Awards shall pay to
the Corporation or its Affiliate, or make provision satisfactory to the
Administrator for payment of, any taxes required to be withheld in respect of
Awards under the Plan no later than the date of the event creating the tax
liability. The Corporation or its Affiliate may, to the extent permitted by law,
deduct any such tax obligations from any payment of any kind otherwise due to
the grantee or holder of an Award. In the event that payment to the Corporation
or its Affiliate of such tax obligations is made in shares of Common Stock, such
shares shall be valued at Fair Market Value on the applicable date for such
purposes.
(b) LOANS. The Corporation or its Affiliate may make or guarantee loans
to grantees to assist grantees in exercising Awards and satisfying any
withholding tax obligations.
(c) TRANSFERABILITY. Except as otherwise determined by the
Administrator, and in any event in the case of an incentive stock option or a
stock appreciation right granted with respect to an incentive stock option, no
Award granted under the Plan shall be transferable by a grantee otherwise than
by will or the laws of descent and distribution. Unless otherwise determined by
the Administrator in accord with the provisions of the immediately preceding
sentence, an Award may be exercised during the lifetime of the grantee, only by
the grantee or, during the period the grantee is under a legal disability, by
the grantee's guardian or legal representative.
(d) ADJUSTMENTS; BUSINESS COMBINATIONS. In the event of changes in the
Common Stock of the Corporation by reason of any stock dividend, spin-off,
split-up, recapitalization, merger, consolidation, business combination or
exchange of shares and the like, the Administrator shall, in its discretion,
make appropriate adjustments to the maximum number and kind of shares reserved
for issuance or with respect to which Awards
5
<PAGE>
may be granted under the Plan as provided in Section 4 of the Plan and to the
number, kind and price of shares covered by outstanding Awards, and shall, in
its discretion and without the consent of holders of Awards, make any other
adjustments in outstanding Awards, including but not limited to reducing the
number of shares subject to Awards or providing or mandating alternative
settlement methods such as settlement of the Awards in cash or in shares of
Common Stock or other securities of the Corporation or of any other entity, or
in any other matters which relate to Awards as the Administrator shall, in its
sole discretion, determine to be necessary or appropriate.
Notwithstanding anything in the Plan to the contrary and without the
consent of holders of Awards, the Administrator, in its sole discretion, may
make any modifications to any Awards, including but not limited to cancellation,
forfeiture, surrender or other termination of the Awards in whole or in part
regardless of the vested status of the Award, in order to facilitate any
business combination that is authorized by the Board to comply with requirements
for treatment as a pooling of interests transaction for accounting purposes
under generally accepted accounting principles.
The Administrator is authorized to make, in its discretion and without
the consent of holders of Awards, adjustments in the terms and conditions of,
and the criteria included in, Awards in recognition of unusual or nonrecurring
events affecting the Corporation, or the financial statements of the Corporation
or any Affiliate, or of changes in applicable laws, regulations, or accounting
principles, whenever the Administrator determines that such adjustments are
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan.
(e) SUBSTITUTION OF AWARDS IN MERGERS AND ACQUISITIONS. Awards may be
granted under the Plan from time to time in substitution for Awards held by
employees or directors of entities who become or are about to become employees
or directors of the Corporation or an Affiliate as the result of a merger or
consolidation of the employing entity with the Corporation or an Affiliate, or
the acquisition by the Corporation or an Affiliate of the assets or stock of the
employing entity. The terms and conditions of any substitute Awards so granted
may vary from the terms and conditions set forth herein to the extent that the
Administrator deems appropriate at the time of grant to conform the substitute
Awards to the provisions of the awards for which they are substituted.
(f) TERMINATION, AMENDMENT AND MODIFICATION OF THE PLAN. The Board may
terminate, amend or modify the Plan or any portion thereof at any time.
(g) NON-GUARANTEE OF EMPLOYMENT OR SERVICE. Nothing in the Plan or in
any Grant Agreement thereunder shall confer any right on an individual to
continue in the service of the Corporation or shall interfere in any way with
the right of the Corporation to terminate such service at any time with or
without cause or notice.
(h) NO TRUST OR FUND CREATED. Neither the Plan nor any Award shall
create or be construed to create a trust or separate fund of any kind or a
fiduciary relationship between the Corporation and a grantee or any other
person. To the extent that any grantee or other person acquires a right to
receive payments from the Corporation pursuant to an Award, such right shall be
no greater than the right of any unsecured general creditor of the Corporation.
(i) GOVERNING LAW. The validity, construction and effect of the Plan,
of Grant Agreements
6
<PAGE>
entered into pursuant to the Plan, and of any rules, regulations, determinations
or decisions made by the Administrator relating to the Plan or such Grant
Agreements, and the rights of any and all persons having or claiming to have any
interest therein or thereunder, shall be determined exclusively in accordance
with applicable federal laws and the laws of the State of New York without
regard to its conflict of laws principles.
(j) EFFECTIVE DATE; TERMINATION DATE. The Plan is effective as of March
1, 1999, the date on which the Plan, as an amendment and restatement of the
Prior Plan, was approved by the Board, subject to the approval of the
stockholders of the Corporation within twelve months of such effective date. No
Award shall be granted under the Plan after the close of business March 1 2009.
Subject to other applicable provisions of the Plan, all Awards made under the
Plan prior to such termination of the Plan shall remain in effect until such
Awards have been satisfied or terminated in accordance with the Plan and the
terms of such Awards.
Date Approved by the Stockholders: April 6, 1999
7
\
<TABLE> <S> <C>
<PAGE>
<ARTICLE> BD
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 137,293
<RECEIVABLES> 729
<SECURITIES-RESALE> 0
<SECURITIES-BORROWED> 0
<INSTRUMENTS-OWNED> 1,208
<PP&E> 2,560
<TOTAL-ASSETS> 151,508
<SHORT-TERM> 0
<PAYABLES> 7,095
<REPOS-SOLD> 0
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 0
<LONG-TERM> 0
0
0
<COMMON> 719
<OTHER-SE> 143,266
<TOTAL-LIABILITY-AND-EQUITY> 151,508
<TRADING-REVENUE> 0
<INTEREST-DIVIDENDS> 1,368
<COMMISSIONS> 2,002
<INVESTMENT-BANKING-REVENUES> 11,369
<FEE-REVENUE> 0
<INTEREST-EXPENSE> 0
<COMPENSATION> 15,147
<INCOME-PRETAX> (7,698)
<INCOME-PRE-EXTRAORDINARY> (7,698)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,698)
<EPS-BASIC> (.48)
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</TABLE>
