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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-A
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g)
OF THE SECURITIES EXCHANGE ACT OF 1934
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ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
(Exact name of registrant as specified in its charter)
Colorado 84-0910696
(State of incorporation) (I.R.S. employer identification number)
265 Turner Drive
Durango, Colorado 81301
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(970) 259-0554
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
None
If this Form relates to the registration of a class of securities pursuant to
Section 12(b) of the Exchange Act and is effective pursuant to General
Instruction A.(c), check the following box. [ ]
If this Form relates to the registration of a class of securities pursuant to
Section 12(g) of the Exchange Act and is effective pursuant to General
Instruction A.(d), please check the following box. [X]
Securities Act registration statement file number to which this form relates:
_________________ (if applicable).
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Preferred Stock Purchase Rights
(Title of Class)
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ITEM 1. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED.
On May 18, 1999, the Board of Directors of Rocky Mountain Chocolate
Factory, Inc. (the "Company") authorized and declared a dividend of one Right
(a "Right") for each outstanding share of Common Stock, par value $0.03 per
share ("Common Stock"), of the Company (the "Common Shares"). The dividend is
payable on May 28, 1999 (the "Record Date") to the holders of record of the
Common Shares at the close of business on that date. In addition, the Company
has authorized the issuance of one Right with respect to each share of Common
Stock that shall become outstanding between the Record Date and the earliest of
the Distribution Date, the Redemption Date and the Final Expiration Date (as
such terms are hereinafter defined). When exercisable each Right entitles the
registered holder to purchase from the Company one one-hundredth of a share of
Series A Junior Participating Preferred Stock, par value $0.10 per share, of
the Company (the "Preferred Shares"), at a price of $30 per one one-hundredth
of a Preferred Share (the "Purchase Price"), subject to adjustment. The
description and terms of the Rights are set forth in a Rights Agreement (the
"Rights Agreement") between the Company and American Securities Transfer &
Trust, Inc., as Rights Agent (the "Rights Agent").
Until the earlier to occur of (i) 10 days following a public
announcement that a person or group of affiliated or associated persons (an
"Acquiring Person") has acquired beneficial ownership of 15 percent or more of
the outstanding Common Shares and (ii) 10 business days (or such later date as
may be determined by action of the Board of Directors of the Company prior to
such time as any person or group of affiliated or associated persons becomes an
Acquiring Person) following the commencement of, or first public announcement
of an intention to commence, a tender offer or exchange offer the consummation
of which would result in the beneficial ownership by a person or group of
affiliated or associated persons of 15 percent or more of the outstanding
Common Shares (the earlier of such dates being herein referred to as the
"Distribution Date"), the Rights will be evidenced, with respect to any of the
Common Share certificates outstanding as of the Record Date, by such Common
Share certificate with a copy of a Summary of Rights to Purchase Preferred
Shares ("Summary of Rights"), in substantially the form attached to the Rights
Agreement as Exhibit C, attached thereto. No person who is the beneficial owner
of 15 percent or more of the Common Shares of the Company on the date of the
Rights Agreement shall be deemed to be an Acquiring Person unless and until
such person becomes the beneficial owner of any additional Common Shares of the
Company and, immediately after the acquisition of such additional shares, is
the beneficial owner of 15 percent or more of the Common Shares of the Company.
The Rights Agreement provides that, until the Distribution Date (or
earlier redemption or expiration of the Rights), the Rights will be transferred
with and only with the Common Shares. Until the Distribution Date (or earlier
redemption or expiration of the Rights), new Common Share certificates issued
after the Record Date, upon transfer or new issuance of Common Shares, will
contain a notation incorporating the Rights Agreement by reference. Until the
Distribution Date (or earlier redemption or expiration of the Rights), the
surrender for transfer of any certificates for Common Shares outstanding on or
after the Record Date, even without such notation or a copy of the Summary of
Rights being attached thereto, will also constitute the transfer of the Rights
associated with the Common Shares represented by such certificate. As soon as
practicable following the Distribution Date, separate certificates evidencing
the Rights ("Right Certificates") will be mailed to holders of record of the
Common Shares as of the close of business on the Distribution Date and such
separate Right Certificates alone will evidence the Rights.
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The Rights are not exercisable until the Distribution Date. The Rights
will expire on May 28, 2009 (the "Final Expiration Date"), unless the Final
Expiration Date is extended or unless the Rights are earlier redeemed or
exchanged by the Company, in each case, as described below.
The Purchase Price payable, and the number of Preferred Shares or
other securities or property issuable, upon exercise of the Rights are subject
to adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the
Preferred Shares, (ii) upon the grant to holders of the Preferred Shares of
certain rights or warrants to subscribe for or purchase Preferred Shares at a
price, or securities convertible into Preferred Shares with a conversion price,
less than the then current market price of the Preferred Shares or (iii) upon
the distribution to holders of the Preferred Shares of evidences of
indebtedness or assets (excluding regular periodic cash dividends paid out of
earnings or retained earnings or dividends payable in Preferred Shares) or of
subscription rights or warrants (other than those referred to above).
The number of outstanding Rights and the number of one one-hundredths
of a Preferred Share issuable upon exercise of each Right are also subject to
adjustment in the event of a stock split of the Common Shares or a stock
dividend on the Common Shares payable in Common Shares or subdivisions,
consolidations or combinations of the Common Shares occurring, in any such
case, prior to the Distribution Date.
Preferred Shares purchasable upon exercise of the Rights will not be
subject to redemption by the Company. Each Preferred Share will be entitled to
a minimum preferential quarterly dividend payment of $.01 per share but will be
entitled to an aggregate dividend of 100 multiplied times the dividend declared
per Common Share. In the event of liquidation, the holder of the Preferred
Shares will be entitled to a minimum preferential liquidation payment of $1.00
per share but will be entitled to an aggregate payment of 100 multiplied times
the payment made per Common Share. Each Preferred Share will have 100 votes,
voting together with the Common Shares. Finally, in the event of any merger,
consolidation or other transaction in which Common Shares are exchanged, each
Preferred Share will be entitled to receive 100 multiplied times the amount
received per Common Share. These rights are protected by customary antidilution
provisions.
Because of the nature of the Preferred Shares' dividend, liquidation
and voting rights, the value of the one one-hundredth interest in a Preferred
Share purchasable upon exercise of each Right should approximate the value of
one Common Share.
In the event that any person or group of affiliated or associated
persons becomes an Acquiring Person, proper provision shall be made so that
each holder of a Right, other than Rights beneficially owned by the Acquiring
Person (which will thereafter be null and void and nontransferable), will
thereafter have the right to receive upon exercise that number of Common Shares
of the Company having a market value of two times the exercise price of the
Right. In the event that the Company is acquired in a merger or other business
combination transaction or 50 percent or more of its consolidated assets or
earning power are sold after a person or group of affiliated or associated
persons has become an Acquiring Person, proper provision will be made so that
each holder of a Right will thereafter have the right to receive, upon the
exercise thereof at the then current exercise price of the Right, that number
of shares of common stock of the acquiring company which at the time of such
transaction will have a market value of two times the exercise price of the
Right.
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At any time after any person or group of affiliated or associated
persons becomes an Acquiring Person and prior to the acquisition by such person
or group of 50 percent or more of the outstanding Common Shares, the Board of
Directors of the Company may exchange the Rights (other than Rights owned by
such person or group which will have become null and void and nontransferable),
in whole or in part, at an exchange ratio of one Common Share, or one
one-hundredth of a Preferred Share (or of a share of a class or series of the
Company's preferred stock having equivalent rights, preferences and
privileges), per Right (subject to adjustment).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least one
percent in such Purchase Price. The Company may, but shall not be required to,
issue fractions of a Preferred Share (other than one one-hundredth of a
Preferred Share or any integral multiple thereof, which may, at the election of
the Company, be evidenced by depositary receipts) and in lieu thereof, an
adjustment in cash will be made based on the market price of the Preferred
Shares on the last trading day prior to the date of exercise.
At any time prior to the close of business on the tenth day following
a public announcement that an Acquiring Person has become such an Acquiring
Person, the Board of Directors of the Company may redeem the Rights in whole,
but not in part, at a price of $.01 per Right (the "Redemption Price"). The
redemption of the Rights may be made effective at such time, on such basis and
with such conditions as the Board of Directors in its sole discretion may
establish. The time at which the Rights are redeemed by the Company is herein
referred to as the "Redemption Date." Immediately upon any redemption of the
Rights, the right to exercise the Rights will terminate and the only right
thereafter of the holders of Rights will be to receive the Redemption Price.
At any time prior to the Distribution Date and subject to the last
sentence of this paragraph, the terms of the Rights may be amended by the Board
of Directors of the Company without the consent of the holders of the Rights,
including without limitation an amendment to lower certain thresholds described
above to not less than the greater of (i) the sum of 0.001 percent and the
largest percentage of the outstanding Common Shares then known by the Company
to be beneficially owned by any person or group of affiliated or associated
persons and (ii) 10 percent. From and after the Distribution Date and subject
to applicable law, the terms of the Rights may be amended by the Board of
Directors of the Company without the consent of the holders of the Rights to,
among other things, make any other provisions in regard to matters under the
Rights Agreement that the Company may deem necessary or desirable and that
shall not adversely affect the interests of the holders of the Rights (other
than an Acquiring Person or an affiliate or associate of an Acquiring Person).
The terms of the Rights may not be amended to (i) reduce the Redemption Price
(except as required by antidilution provisions) or (ii) provide for an earlier
Final Expiration Date.
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.
The Preferred Shares shall rank, with respect to the payment of
dividends and as to distributions of assets upon liquidation, dissolution or
winding up of the Company, junior to all other series of preferred stock of the
Company, unless the Board of Directors of the Company shall specifically
determine otherwise in fixing the powers, preferences and relative,
participating, optional and other special rights of the shares of any such
other series and the qualifications, limitations and restrictions thereof.
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As of May 18, 1998, there were 2,599,599 Common Shares issued and
outstanding, and an aggregate of an additional 228,000 Common Shares reserved
for issuance under the Company's employee stock option plans and non-employee
director stock option plan. One Right will be distributed to holders of the
Common Stock for each Common Share owned of record by them on May 28, 1999. One
Right will be issued with respect to each Common Share that shall become
outstanding between the Record Date and the earliest of the Distribution Date,
the Redemption Date and the Final Expiration Date. In certain circumstances,
the Company may issue Rights with respect to Common Shares issued following the
Distribution Date and prior to the earlier of the Redemption Date and the Final
Expiration Date. The Company's Board of Directors has initially reserved for
issuance upon exercise of the Rights 50,000 Preferred Shares, which number is
subject to adjustment from time to time in accordance with the Rights
Agreement.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
in a manner or on terms not approved by the Board of Directors. The Rights,
however, should not deter any prospective offeror willing to negotiate in good
faith with the Board of Directors, nor should the Rights interfere with any
merger or business combination approved by the Board of Directors of the
Company prior to an Acquiring Person's acquiring 15 percent or more of the
Common Shares.
A copy of the Rights Agreement between the Company and the Rights
Agent specifying the terms of the Rights is filed as an exhibit to this
Registration Statement and incorporated herein by reference. The foregoing
description of the Rights does not purport to be complete and is qualified in
its entirety by reference to the Rights Agreement.
ITEM 2. EXHIBITS.
4. Rights Agreement, dated as of May 18, 1999, between Rocky
Mountain Chocolate Factory, Inc. and American Securities
Transfer & Trust, Inc., which includes as Exhibit B the Form
of Right Certificate.
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SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, as amended, the registrant has duly caused this registration
statement to be signed on its behalf by the undersigned, thereto duly
authorized.
ROCKY MOUNTAIN CHOCOLATE FACTORY,
INC.
Date: May 21, 1999 By: /s/ FRANKLIN E. CRAIL
-------------------------------------
Franklin E. Crail, President
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<S> <C>
4 Rights Agreement, dated as of May 18, 1999, between
Rocky Mountain Chocolate Factory, Inc. and American
Securities Transfer & Trust, Inc., which includes as
Exhibit B thereto the Form of Right Certificate.
</TABLE>
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EXHIBIT 4
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ROCKY MOUNTAIN CHOCOLATE FACTORY, INC..
and
AMERICAN SECURITIES TRANSFER & TRUST, INC.
Rights Agent
RIGHTS AGREEMENT
Dated as of May 18, 1999
- -------------------------------------------------------------------------------
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
Section 1. Certain Definitions.............................................................................1
Section 2. Appointment of Rights Agent.....................................................................5
Section 3. Issue of Rights and Right Certificates..........................................................5
Section 4. Form of Right Certificates......................................................................7
Section 5. Execution, Countersignature and Registration....................................................7
Section 6. Transfer, Split-up, Combination and Exchange of Right Certificates; Mutilated,
Destroyed, Lost or Stolen Right Certificates....................................................8
Section 7. Exercise of Rights; Expiration Date of Rights...................................................9
Section 8. Cancellation and Destruction of Right Certificates.............................................10
Section 9. Reservation and Availability of Capital Stock..................................................11
Section 10. Preferred Shares Record Date...................................................................12
Section 11. Adjustment of Purchase Price, Number of Shares or Number of Rights.............................12
Section 12. Certificate of Adjustment......................................................................19
Section 13. Consolidation, Merger, or Sale or Transfer of Assets or Earning Power..........................19
Section 14. Fractional Rights and Fractional Shares........................................................21
Section 15. Rights of Action...............................................................................22
Section 16. Agreement of Right Holders.....................................................................22
Section 17. Right Certificate Holder Not Deemed a Stockholder..............................................23
Section 18. Concerning the Rights Agent....................................................................23
Section 19. Merger or Consolidation or Change of Name of Rights Agent......................................24
</TABLE>
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<TABLE>
<S> <C> <C>
Section 20. Duties of Rights Agent.........................................................................24
Section 21. Change of Rights Agent.........................................................................26
Section 22. Issuance of New Right Certificates and Additional Rights.......................................27
Section 23. Redemption.....................................................................................28
Section 24. Exchange.......................................................................................28
Section 25. Notice of Certain Events.......................................................................30
Section 26. Notices........................................................................................30
Section 27. Supplements and Amendments.....................................................................31
Section 28. Successors.....................................................................................32
Section 29. Benefits of this Agreement.....................................................................32
Section 30. Severability...................................................................................32
Section 31. Governing Law..................................................................................32
Section 32. Counterparts...................................................................................32
Section 33. Descriptive Headings...........................................................................32
Signatures.......................................................................................................33
</TABLE>
Exhibit A - Form of Statement of Resolution of Rocky Mountain Chocolate
Factory, Inc.
Exhibit B - Form of Rights Certificate
Exhibit C - Summary of Rights to Purchase Preferred Shares
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AGREEMENT
This AGREEMENT, dated as of May 18, 1999 (the "Agreement"), between
ROCKY MOUNTAIN CHOCOLATE FACTORY, INC., a Colorado corporation (the "Company"),
and AMERICAN SECURITIES TRANSFER & TRUST, INC., as Rights Agent (the "Rights
Agent"),
W I T N E S S E T H:
WHEREAS, the Board of Directors of the Company has authorized and
declared a dividend of one Right for each share of Common Stock, par value $0.03
per share, of the Company (the "Common Stock") outstanding at the close of
business on May 28, 1999 (the "Record Date"), and has authorized the issuance of
one Right (as such number may hereafter be adjusted pursuant to the provisions
of this Agreement) with respect to each share of Common Stock that shall become
outstanding between the Record Date and the earliest of the Distribution Date,
the Redemption Date and the Final Expiration Date; provided, however, that
Rights may be issued with respect to shares of Common Stock that shall become
outstanding after the Distribution Date and prior to the earlier of the
Redemption Date and the Final Expiration Date in accordance with the provisions
of Section 22 of this Agreement. Each Right shall initially represent the right
to purchase one one-hundredth of a share of Series A Junior Participating
Preferred Stock, par value $0.10 per share, of the Company (the "Preferred
Shares"), having the powers, rights and preferences set forth in the Statement
of Resolution attached to this Agreement as Exhibit A;
NOW THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated, whether their use precedes or
follows the definition thereof in this Agreement:
"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 percent or more of the Common Shares of the Company then outstanding, but
shall not include the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or of any Subsidiary of the Company, or any entity
holding Common Shares of the Company for or pursuant to the terms of any such
plan. Notwithstanding the foregoing, no Person shall become an Acquiring Person
as the result of an acquisition of Common Shares of the Company by the Company
which, by reducing the number of such shares outstanding, increases the
proportionate number of shares beneficially owned by such Person to 15 percent
or more of the Common Shares of the Company then outstanding; provided, however,
that if a Person shall become the Beneficial Owner of 15 percent or more of the
Common Shares of the Company then outstanding by reason of share purchases by
the Company and shall, after such share purchases by the Company, become the
Beneficial Owner of any additional Common Shares of the Company, then such
Person shall be deemed to be an Acquiring Person. Notwithstanding the foregoing,
if the Board of Directors of the
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Company, within 10 days after the first date on which the Company shall become
aware that any Person, together with all Affiliates and Associates of such
Person, is the Beneficial Owner of shares of Common Stock of the Company such
that such person (but for this sentence) would be an Acquiring Person,
determines in good faith that such Person has inadvertently exceeded the
thresholds set forth in this definition of Acquiring Person, and such Person
divests as promptly as practicable a sufficient number of Common Shares of the
Company so that such Person would no longer be an Acquiring Person, as defined
pursuant to the foregoing provisions of this definition, then such Person shall
not be deemed to be an Acquiring Person for any purposes of this Agreement. No
Person who is the Beneficial Owner of 15 percent or more of the Common Shares of
the Company on the date of this Agreement shall be deemed to be an Acquiring
Person unless and until such Person becomes the Beneficial Owner of any
additional Common Shares of the Company and, immediately after the acquisition
of such additional shares, is the Beneficial Owner of 15 percent or more of the
Common Shares of the Company.
"Adjustment Shares" shall have the meaning set forth in Section
11(a)(ii) hereof.
"Affiliate" and "Associate," when used with reference to any Person,
shall have the respective meanings ascribed to such terms in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act, as in effect on the date
of this Agreement.
A Person shall be deemed the "Beneficial Owner" of, and shall be deemed
to "beneficially own," and shall be deemed to have "Beneficial Ownership" of,
any securities:
(i) which such Person or any of such Person's Affiliates or Associates
beneficially owns, directly or indirectly;
(ii) which such Person or any of such Person's Affiliates or Associates
has (A) the right to acquire (whether such right is exercisable immediately or
only after the passage of time) pursuant to any agreement, arrangement or
understanding (other than customary agreements with and between underwriters and
selling group members with respect to a bona fide public offering of
securities), or upon the exercise of conversion rights, exchange rights, rights
(other than the Rights), warrants or options, or otherwise; provided, however,
that a Person shall not be deemed the Beneficial Owner of, or to beneficially
own, securities tendered pursuant to a tender or exchange offer made by or on
behalf of such Person or any of such Person's Affiliates or Associates until
such tendered securities are accepted for purchase or exchange; or (B) the right
to vote pursuant to any agreement, arrangement or understanding; provided,
however, that a Person shall not be deemed the Beneficial Owner of, or to
beneficially own, any security if the agreement, arrangement or understanding to
vote such security (1) arises solely from a revocable proxy or consent given to
such Person in response to a public proxy or consent solicitation made pursuant
to, and in accordance with, the applicable rules and regulations promulgated
under the Exchange Act and (2) is not also then reportable on Schedule 13D under
the Exchange Act (or any comparable or successor report); or
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(iii) which are beneficially owned, directly or indirectly, by any
other Person with which such Person or any of such Person's Affiliates or
Associates has any agreement, arrangement or understanding (other than customary
agreements with and between underwriters and selling group members with respect
to a bona fide public offering of securities) for the purpose of acquiring,
holding, voting (except to the extent contemplated by the proviso in clause
(ii)(B) of this definition) or disposing of any securities of the Company.
Notwithstanding anything in this definition of Beneficial Ownership to the
contrary, the phrase "then outstanding," when used with reference to a Person's
Beneficial Ownership of securities of the Company, shall mean the number of such
securities then issued and outstanding together with the number of such
securities not then actually issued and outstanding which such Person would be
deemed to own beneficially hereunder.
"Business Day" shall mean any day other than a Saturday, a Sunday or a
day on which banking institutions in the Borough of Manhattan, The City of New
York are authorized or obligated by law or executive order to close.
"Close of business" on any given date shall mean 5:00 P.M., New York
City time, on such date; provided, however, that if such date is not a Business
Day it shall mean 5:00 P.M., New York City time, on the next succeeding Business
Day.
"Common Shares" when used with reference to the Company shall mean the
shares of Common Stock of the Company. "Common Shares" when used with reference
to any Person other than the Company shall mean the capital stock (or equity
interest) with the greatest voting power of such other Person or, if such other
Person is a Subsidiary of another Person, the Person or Persons which ultimately
control such first-mentioned Person.
"Common share equivalents" shall have the meaning set forth in Section
11(a)(iii) hereof.
"Common Stock" shall have the meaning set forth in the introductory
paragraph of this Agreement.
"Distribution Date" shall have the meaning set forth in Section 3(b)
hereof.
"Equivalent preferred shares" shall have the meaning set forth in
Section 11(b) hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as in
effect on the date in question, unless otherwise specifically provided.
"Exchange Ratio" shall have the meaning set forth in Section 24(a)
hereof.
"Final Expiration Date" shall have the meaning set forth in Section
7(a) hereof.
"Flip-In Event" shall have the meaning set forth in Section 11(a)(ii)
hereof.
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"Flip-In Trigger Date" shall have the meaning set forth in Section
11(a)(iii) hereof.
"Flip-Over Event" shall have the meaning set forth in Section 13(a)
hereof.
"Person" shall mean any individual, firm, corporation or other entity,
and shall include any successor (by merger or otherwise) of such entity.
"Preferred Shares" shall have the meaning set forth in the introductory
paragraph of this Agreement. Any reference in this Agreement to Preferred Shares
shall be deemed to include any authorized fraction of a Preferred Share, unless
the context otherwise requires.
"Principal Party" shall have the meaning set forth in Section 13(b)
hereof.
"Purchase Price" with respect to each Right shall mean $30.00, as such
amount may from time to time be adjusted as provided herein, and shall be
payable in lawful money of the United States of America. All references herein
to the Purchase Price shall mean the Purchase Price as in effect at the time in
question.
"Record Date" shall have the meaning set forth in the introductory
paragraph of this Agreement.
"Redemption Date" shall have the meaning set forth in Section 7(a)
hereof.
"Redemption Price" shall have the meaning set forth in Section 23
hereof.
"Right Certificate" shall mean a certificate evidencing a Right in
substantially the form attached to this Agreement as Exhibit B.
"Rights" shall mean the rights to purchase Preferred Shares (or other
securities) as provided in this Agreement.
"Securities Act" shall mean the Securities Act of 1933, as in effect on
the date in question, unless otherwise specifically provided.
"Shares Acquisition Date" shall mean the first date of public
announcement by the Company or an Acquiring Person that an Acquiring Person has
become such.
"Statement of Resolution" shall mean the Statement of Resolution
Establishing a Series of Shares of the Company setting forth the powers,
preferences, rights, qualifications, limitations and restrictions of Series A
Junior Participating Preferred Stock of the Company, a copy of the form of which
is attached to this Agreement as Exhibit A.
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"Subsidiary" of any Person shall mean any corporation or other entity
of which a majority of the voting power of the voting equity securities or
equity interest is owned, directly or indirectly, by such Person.
"Substitution Period" shall have the meaning set forth in Section
11(a)(iii) hereof.
"Trading Day" shall have the meaning set forth in Section 11(d)(i)
hereof.
Section 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company and the holders of the Rights (who,
in accordance with Section 3 hereof, shall, prior to the Distribution Date, also
be the holders of the Common Shares) 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 and Right Certificates.
(a) One Right shall be associated with each Common Share outstanding on
the Record Date, each additional Common Share that shall become outstanding
between the Record Date and the earliest of the Distribution Date, the
Redemption Date and the Final Expiration Date, and each additional Common Share
with which Rights are issued after the Distribution Date and prior to the
earlier of the Redemption Date and the Final Expiration Date as provided in
Section 22 hereof; provided, however, that, if the number of outstanding Rights
are combined into a smaller number of outstanding Rights pursuant to Section 11
hereof, the appropriate fractional Right determined pursuant to such Section
shall thereafter be associated with each such Common Share.
(b) Until the earlier of (i) the tenth day after the Shares Acquisition
Date and (ii) the tenth Business Day (or such later date as may be determined by
action of the Board of Directors of the Company prior to such time as any Person
becomes an Acquiring Person) after the date of the commencement by any Person
(other than the Company, any Subsidiary of the Company, any employee benefit
plan of the Company or of any Subsidiary of the Company, or any entity holding
Common Shares of the Company for or pursuant to the terms of any such plan) of,
or of the first public announcement of the intention of any Person (other than
the Company, any Subsidiary of the Company, any employee benefit plan of the
Company or of any Subsidiary of the Company, or any entity holding Common Shares
of the Company for or pursuant to the terms of any such plan) to commence, a
tender or exchange offer the consummation of which would result in any Person
becoming the Beneficial Owner of Common Shares aggregating 15 percent or more of
the then outstanding Common Shares (including any such date which is after the
date of this Agreement and prior to the issuance of the Rights; the earlier of
such dates being herein referred to as the "Distribution Date"), (x) the Rights
will be evidenced (subject to the provisions of Section 3(c) hereof) by the
certificates for Common Shares registered in the names of the holders thereof
(which certificates shall also be deemed to be Right Certificates) and not by
separate Right Certificates, and (y) the Rights, including the right to receive
Right Certificates, will be transferable only in connection with the transfer of
Common Shares. As soon as practicable after
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the Distribution Date, the Company will prepare and execute, the Rights Agent
will countersign, and the Company will send or cause to be sent (and the Rights
Agent will, if requested, 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, at the address of such holder shown on the records of the
Company, a Right Certificate evidencing one whole Right for each Common Share
(or for the number of Common Shares with which one whole Right is then
associated if the number of Rights per Common Share held by such record holder
has been adjusted in accordance with the provision in Section 3(a) hereof) so
held. If the number of Rights associated with each Common Share has been
adjusted in accordance with the proviso in Section 3(a) hereof, at the time of
distribution of the Right Certificates, the Company may make any necessary and
appropriate rounding adjustments so that Right Certificates representing only
whole numbers of Rights are distributed and cash is paid in lieu of any
fractional Right in accordance with Section 14 hereof. As of and after the
Distribution Date, the Rights will be evidenced solely by such Right
Certificates.
(c) On the Record Date, or as soon as practicable thereafter, the
Company will send a copy of a Summary of Rights to Purchase Preferred Shares, in
substantially the form attached to this Agreement as Exhibit C (the "Summary of
Rights"), by first-class, postage-prepaid mail, to each record holder of Common
Shares as of the close of business on the Record Date, at the address of such
holder shown on the records of the Company. With respect to any certificate for
Common Shares outstanding as of the Record Date, until the earliest of the
Distribution Date, the Redemption Date and the Final Expiration Date, the Rights
will be evidenced by such certificates registered in the names of the holders
thereof together with a copy of the Summary of Rights attached thereto. Until
the earliest of the Distribution Date, the Redemption Date and the Final
Expiration Date, the surrender for transfer of any certificate for Common Shares
outstanding on the Record Date, with or without a copy of the Summary of Rights
attached thereto, shall also constitute the transfer of the Rights associated
with the Common Shares represented thereby.
(d) Certificates issued for Common Shares after the Record Date, but
prior to the earliest of the Distribution Date, the Redemption Date and the
Final Expiration Date, shall have impressed on, printed on, written on or
otherwise affixed to them the following legend:
THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER HEREOF TO
CERTAIN RIGHTS AS SET FORTH IN A RIGHTS AGREEMENT DATED AS OF MAY 18,
1999, AS IT MAY BE AMENDED FROM TIME TO TIME (THE "RIGHTS AGREEMENT"),
BETWEEN ROCKY MOUNTAIN CHOCOLATE FACTORY, INC. AND AMERICAN SECURITIES
TRANSFER & TRUST, INC., AS RIGHTS AGENT, THE TERMS OF WHICH ARE HEREBY
INCORPORATED HEREIN BY REFERENCE AND A COPY OF WHICH IS ON FILE AT THE
PRINCIPAL EXECUTIVE OFFICES OF ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT, SUCH
RIGHTS WILL BE EVIDENCED BY SEPARATE CERTIFICATES AND WILL NO LONGER BE
EVIDENCED BY THIS CERTIFICATE. ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
WILL MAIL TO THE HOLDER OF THIS CERTIFICATE A COPY OF THE RIGHTS
AGREEMENT WITHOUT CHARGE AFTER RECEIPT OF A WRITTEN REQUEST THEREFOR.
UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT,
RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR ITS AFFILIATES OR
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<PAGE> 10
ASSOCIATES (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND BY
ANY SUBSEQUENT HOLDER OF SUCH RIGHTS ARE NULL AND VOID AND
NONTRANSFERABLE.
With respect to such certificates containing the foregoing legend, until the
earliest of the Distribution Date, the Redemption Date and the Final Expiration
Date, the Rights associated with the Common Shares represented by such
certificates shall be evidenced by such certificates alone, and the surrender
for transfer of any such certificate shall also constitute the transfer of the
Rights associated with the Common Shares represented thereby. In the event that
the Company purchases or acquires any Common Shares after the Record Date but
prior to the Distribution Date, any Rights associated with such Common Shares
shall be deemed canceled and retired so that the Company shall not be entitled
to exercise any Rights associated with the Common Shares which are no longer
outstanding.
Section 4. Form of Right Certificates. The Right Certificates (and the
form of election to purchase and form of assignment to be printed on the reverse
side thereof) shall be in substantially the form attached to this Agreement as
Exhibit B 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
securities exchange on which the Rights may from time to time be listed or of
any automated quotations system of a national securities association on which
the Rights may from time to time be registered or quoted, or to conform to
usage. Subject to the provisions of Section 22 hereof, the Right Certificates,
whenever issued, on their face shall entitle the holders thereof to purchase
such number of one one-hundredths of a Preferred Share as shall be set forth
therein for the Purchase Price per one one-hundredth of a Preferred Share,
subject to adjustment from time to time as herein provided.
Section 5. Execution, Countersignature and Registration.
(a) The Right Certificates shall be executed on behalf of the Company
by its Chairman of the Board, its President, its Chief Executive Officer, or any
of its Vice Presidents, or its Treasurer, either manually or by facsimile
signature, shall have affixed thereto the Company's seal or a facsimile thereof,
and shall be attested by the Secretary or an Assistant Secretary of the Company,
either manually or by facsimile signature. The Right Certificates shall be
countersigned manually or by facsimile signature by the Rights Agent and shall
not be valid or obligatory for any purpose unless countersigned. In case any
officer of the Company who shall have signed any of the Right Certificates shall
cease to be such an officer of the Company before countersignature by the Rights
Agent and issuance and delivery by the Company, such Right Certificates,
nevertheless, may be countersigned by the Rights Agent and issued and delivered
by the Company with the same force and effect as though the person who signed
such Right Certificates had not ceased to be such an officer of the Company; and
any Right Certificate may be signed on behalf of the Company by any person who,
at the actual date of the execution of such Right Certificate, shall be a proper
officer of the Company to sign such Right Certificate, although at the date of
the execution of this Agreement any such person was not such an officer.
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<PAGE> 11
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its principal office, books for registration and transfer
of the Right Certificates issued hereunder. Such books shall show the names and
addresses of the respective holders of the Right Certificates, the number of
Rights evidenced on its face by each of the Right Certificates, the certificate
number of each of the Right Certificates and the date of each of the Right
Certificates.
Section 6. Transfer, Split-up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates.
(a) Subject to the provisions of Sections 7(e) and 14 hereof, at any
time after the close of business on the Distribution Date, and at or prior to
the close of business on the earlier of the Redemption Date and the Final
Expiration Date, any Right Certificate or Right Certificates (except for Right
Certificates representing Rights that have become null and void and
nontransferable pursuant to Section 7(e) hereof or that have been exchanged
pursuant to Section 24 hereof or as otherwise provided herein) may be
transferred, split-up, combined or exchanged for another Right Certificate or
Right Certificates representing, in the aggregate, the same number of Rights as
the Right Certificate or Right Certificates surrendered then represented. Any
registered holder desiring to transfer, split-up, combine or exchange any Right
Certificate or Right Certificates shall make such request in writing delivered
to the Rights Agent, and shall surrender the Right Certificate or Right
Certificates to be transferred, split-up, combined or exchanged at the principal
office or offices of the Rights Agent designated for such purpose; provided,
however, that neither the Rights Agent nor the Company shall be obligated to
take any action whatsoever with respect to the transfer of any Right Certificate
surrendered for transfer until the registered holder shall have completed and
signed the certification of status contained in the form of assignment on the
reverse side of such Right Certificate and shall have provided such additional
evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or
Affiliates or Associates thereof as the Company shall reasonably request.
Thereupon the Rights Agent shall, subject to Sections 7(e) and 14 hereof,
countersign and deliver to the Person entitled thereto a Right Certificate or
Right Certificates, as the case may be, as so requested. The Company may require
payment of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer, split-up, combination or exchange of
Right Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Right Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and, at the Company's request,
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Right Certificate if mutilated, the Company will make a new Right
Certificate of like tenor and deliver such new Right Certificate to the Rights
Agent for delivery to the registered holder in lieu of the Right Certificate so
lost, stolen, destroyed or mutilated.
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<PAGE> 12
Section 7. Exercise of Rights; Expiration Date of Rights.
(a) Subject to Section 7(e) hereof and except as otherwise provided
herein (including Section 24 hereof), each Right shall entitle the registered
holder thereof, upon exercise thereof as provided herein, to purchase for the
Purchase Price, at any time after the Distribution Date and at or prior to the
earliest of (i) the close of business on May 28, 2009 (the "Final Expiration
Date"), (ii) the time at which the Rights are redeemed as provided in Section 23
hereof (the "Redemption Date") and (iii) the time at which such Rights are
exchanged as provided in Section 24 hereof, one one-hundredth of a Preferred
Share, subject to adjustment from time to time as provided in Section 11 or 13
hereof.
(b) The registered holder of any Right Certificate may exercise the
Rights evidenced thereby (except as otherwise provided herein) in whole or in
part at any time after the Distribution Date, upon surrender of the Right
Certificate, with the form of election to purchase on the reverse side thereof
duly executed, to the Rights Agent at the principal office or offices of the
Rights Agent designated for such purpose, together with payment of the Purchase
Price for each one one-hundredth of a Preferred Share as to which the Rights are
exercised, at or prior to the earliest of (i) the Final Expiration Date, (ii)
the Redemption Date and (iii) the time at which such Rights are exchanged as
provided in Section 24 hereof.
(c) Upon receipt of a Right Certificate representing exercisable
Rights, with the form of election to purchase duly executed, accompanied by
payment of the Purchase Price for the Preferred Shares (or other securities) to
be purchased and an amount equal to any applicable transfer tax required to be
paid by the holder of such Right Certificate in accordance with Section 9
hereof, in lawful money of the United States of America, in cash or by certified
check, cashier's check or money order payable to the order of the Company, the
Rights Agent shall thereupon (i) either (A) promptly requisition from any
transfer agent of the Preferred Shares (or make available, if the Rights Agent
is a transfer agent for such shares) certificates for the number of Preferred
Shares to be purchased, and the Company hereby irrevocably authorizes its
transfer agent to comply with all such requests, or (B) if the Company shall
have elected to deposit the Preferred Shares with a depositary agent under a
depositary arrangement, promptly requisition from the depositary agent
depositary receipts representing the number of one one-hundredths of a Preferred
Share to be purchased (in which case certificates for the Preferred Shares
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 all such requests, (ii) when appropriate, promptly requisition from the
Company the amount of cash to be paid in lieu of issuance of fractional shares
in accordance with Section 14 hereof, (iii) promptly after receipt of such
certificates or depositary receipts, cause the same to be delivered to or upon
the order of the registered holder of such Right Certificate, registered in such
name or names as may be designated by such holder, and (iv) when appropriate,
after receipt, promptly deliver such cash to or upon the order of the registered
holder of such Right Certificate.
(d) In case the registered holder of any Right Certificate shall
exercise fewer than all the Rights evidenced thereby, a new Right Certificate
evidencing Rights equivalent to the Rights
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<PAGE> 13
remaining unexercised shall be issued by the Rights Agent and delivered to the
registered holder of such Right Certificate or to his duly authorized assigns,
subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary, any
Rights that are at any time beneficially owned by an Acquiring Person or any
Affiliate or Associate of an Acquiring Person shall be null and void and
nontransferable, and any holder of any such Right (including any purported
transferee or subsequent holder) shall not have any right to exercise or
transfer any such Right.
(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 of any Right Certificate upon the occurrence of
any purported exercise unless such registered holder shall have (i) completed
and signed the certification of status contained in the form of election to
purchase set forth on the reverse side of the Right 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.
(g) The Company may temporarily suspend, for a period of time not to
exceed 90 calendar days after the Distribution Date, the exercisability of the
Rights in order to prepare and file a Registration Statement under the
Securities Act, on appropriate form, with respect to the Preferred Shares
purchasable upon exercise of the Rights and permit such Registration Statement
to become effective; provided, however, that no such suspension shall remain
effective after, and the Rights shall without any further action by the Company
or any other Person become exercisable immediately upon, the effectiveness of
such Registration Statement. Upon any such suspension, the Company shall issue a
public announcement stating that the exercisability of the Rights has been
temporarily suspended and shall issue a further public announcement at such time
as the suspension is no longer in effect. Notwithstanding any provision herein
to the contrary, the Rights shall not be exercisable in any jurisdiction if the
requisite qualification under the Blue Sky or securities laws of such
jurisdiction shall not have been obtained or the exercise of the Rights shall
not be permitted under applicable law.
Section 8. Cancellation and Destruction of Right Certificates. All
Right Certificates surrendered for the purpose of exercise, transfer, split-up,
combination or exchange shall, and any Right Certificate representing Rights
that have become null and void and nontransferable pursuant to Section 7(e)
hereof surrendered or presented for any purpose shall, if surrendered or
presented to the Company or to any of its agents, be delivered to the Rights
Agent for cancellation or in canceled form, or, if surrendered or presented to
the Rights Agent, shall be canceled by it, and no Right Certificates shall be
issued in lieu thereof except as expressly permitted by any of the provisions of
this Agreement. The Company shall deliver to the Rights Agent for cancellation
and retirement, and the Rights Agent shall so cancel and retire, any Right
Certificate purchased or acquired by the Company. The Rights Agent shall deliver
all canceled Right Certificates to the Company, or shall, at the written request
of the Company, destroy such canceled Right Certificates, and in either such
case shall deliver a certificate of destruction thereof or a certificate of
cancellation thereof, as may be appropriate, to the Company.
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<PAGE> 14
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 Preferred Shares, free
from preemptive rights or any right of first refusal, a number of Preferred
Shares sufficient to permit the exercise in full of all outstanding Rights in
accordance with Section 7 hereof.
(b) In the event that there shall not be sufficient Preferred Shares
authorized but unissued to permit the exercise or exchange of Rights in
accordance with Section 11 or 24 hereof, as the case may be, the Company
covenants and agrees that it will take all such action as may be necessary to
authorize additional Preferred Shares for issuance upon the exercise or exchange
of Rights pursuant to Section 11 or 24 hereof, as the case may be; provided,
however, that if the Company is unable to cause the authorization of additional
Preferred Shares, then the Company shall, or in lieu of seeking any such
authorization, the Company may, to the extent necessary and permitted by
applicable law and any agreements or instruments in effect prior to the
Distribution Date to which it is a party, (i) upon surrender of a Right, pay
cash equal to the Purchase Price in lieu of issuing Preferred Shares and
requiring payment therefor, (ii) upon due exercise of a Right and payment of the
Purchase Price for each Preferred Share as to which such Right is exercised,
issue equity securities having a value equal to the value of the Preferred
Shares which otherwise would have been issuable pursuant to Section 11 or 24
hereof, which value shall be determined by a nationally recognized investment
banking firm selected by the Board of Directors of the Company, or (iii) upon
due exercise of a Right and payment of the Purchase Price for each Preferred
Share as to which such Right is exercised, distribute a combination of Preferred
Shares, cash and/or other equity and/or debt securities having an aggregate
value equal to the value of the Preferred Shares which otherwise would have been
issuable pursuant to Section 11 or 24 hereof, which value shall be determined by
a nationally recognized investment banking firm selected by the Board of
Directors of the Company. To the extent that any legal or contractual
restrictions (pursuant to agreements or instruments in effect prior to the
Distribution Date to which it is a party) prevent the Company from paying the
full amount payable in accordance with the foregoing sentence, the Company shall
pay to holders of the Rights as to which such payments are being made all
amounts which are not then restricted on a pro rata basis as such payments
become permissible under such legal or contractual restrictions until such
payments have been paid in full.
(c) The Company covenants and agrees that it will take all such action
as may be necessary to ensure that all Preferred Shares delivered upon exercise
or exchange of Rights shall, at the time of delivery of the certificates for
such Preferred Shares (subject to payment of the Purchase Price), be duly and
validly authorized and issued and fully paid and nonassessable.
(d) So long as the Preferred Shares issuable upon the exercise or
exchange of Rights may be listed on any national securities exchange or
automated quotations system of a registered national securities association on
which the Preferred Shares may from time to time be listed, traded or quoted,
the Company covenants and agrees that it will use reasonable efforts to cause,
from and after such time as the Rights become exercisable or exchangeable, all
Preferred Shares
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<PAGE> 15
reserved for such issuance to be listed on such exchange or approved for
quotation in such quotation system, upon official notice of issuance upon such
exercise.
(e) The Company further covenants and agrees, subject to the provisions
of this Agreement, that it will pay when due and payable any and all federal and
state transfer taxes and charges which may be payable in respect of the issuance
or delivery of Right Certificates or of any Preferred Shares or Common Shares or
other securities upon the exercise or exchange of the Rights. The Company shall
not, however, be required to pay any transfer tax which may be payable in
respect of any transfer or delivery of Right Certificates to a Person other
than, or in respect of the issuance or delivery of certificates for Preferred
Shares or Common Shares or other securities, as the case may be, in a name other
than that of, the registered holder of the Right Certificate evidencing Rights
surrendered for exercise or exchange or to issue or deliver any certificates for
Preferred Shares or Common Shares or other securities, as the case may be, upon
the exercise or exchange of any Rights until such tax shall have been paid (any
such tax being payable by the holder of such Right Certificate at the time of
surrender) or until it has been established to the Company's satisfaction that
no such tax is due.
Section 10. Preferred Shares Record Date. Each Person in whose name any
certificate for Preferred Shares or Common Shares or other securities is issued
upon the exercise or exchange of Rights shall for all purposes be deemed to have
become the holder of record of the Preferred Shares or Common Shares or other
securities, as the case may be, represented thereby on, and such certificate
shall be dated, the date upon which the Right Certificate evidencing such Rights
was duly surrendered and payment of any Purchase Price (and any applicable
transfer taxes) was made; provided, however, that, if the date of such surrender
and payment is a date upon which the transfer books of the Company for the
Preferred Shares or Common Shares or other securities, as the case may be, are
closed, such Person shall be deemed to have become the record holder of such
Preferred Shares or Common Shares or other securities, as the case may be, on,
and such certificate shall be dated, the next succeeding Business Day on which
the transfer books of the Company for the Preferred Shares or Common Shares or
other securities, as the case may be, are open. Prior to the exercise of the
Rights evidenced thereby, the holder of a Right Certificate shall not be
entitled to any rights of a 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 of Shares or Number of
Rights. The Purchase Price, the number of Preferred Shares covered by each Right
and the number of Rights outstanding are subject to adjustment from time to time
as provided in this Section 11.
(a)(i) In the event the Company shall at any time after the
date of this Agreement (A) declare a dividend on the Preferred Shares
payable in Preferred Shares, (B) subdivide the outstanding Preferred
Shares, (C) combine the outstanding Preferred Shares into a smaller
number of Preferred Shares or (D) issue any shares of its capital stock
in a reclassification of the Preferred Shares (including any such
reclassification in connection
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<PAGE> 16
with a consolidation or merger in which the Company is the continuing
or surviving corporation), except as otherwise provided in this Section
11(a), the Purchase Price in effect 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 capital stock
issuable on such date, shall be proportionately adjusted so that the
holder of any Right exercised after such time shall be entitled to
receive the aggregate number and kind of shares of capital stock which,
if such Right had been exercised immediately prior to such date and at
a time when the transfer books of the Company for the Preferred Shares
were open, he would have owned upon such exercise and been entitled to
receive by virtue of such dividend, subdivision, combination or
reclassification; provided, however, that in no event shall the
consideration to be paid upon the exercise of one Right be less than
the aggregate par value of the shares of capital stock of the Company
issuable upon exercise of one Right. If an event occurs that would
require an adjustment under both this Section 11(a)(i) and Section
11(a)(ii) hereof, the adjustment provided for in this Section 11(a)(i)
shall be in addition to, and shall be made prior to, any adjustment
required pursuant to Section 11(a)(ii) hereof.
(ii) Subject to Section 24 of this Agreement and the last
sentence of Section 23(a) of this Agreement, in the event any Person
becomes an Acquiring Person (a "Flip-In Event"), each holder of a
Right, except as provided in Section 7(e) hereof, shall thereafter have
a right to receive, upon exercise thereof at a price equal to the then
current Purchase Price multiplied times the number of one
one-hundredths of a Preferred Share for which a Right is then
exercisable, in accordance with the terms of this Agreement and in lieu
of Preferred Shares, such number of Common Shares of the Company (such
number of Common Shares being referred to herein as the "Adjustment
Shares") as shall equal the result obtained by (x) multiplying the then
current Purchase Price times the number of one one-hundredths of a
Preferred Share for which a Right is then exercisable and dividing that
product by (y) 50 percent of the then current per share market price of
the Company's Common Shares (determined pursuant to Section 11(d)
hereof) on the date of the occurrence of such event. In the event that
any Person shall become an Acquiring Person and the Rights shall then
be outstanding, the Company shall not take any action which would
eliminate or diminish the benefits intended to be afforded by the
Rights.
(iii) In the event that there shall not be sufficient Common
Shares authorized but unissued to permit the exercise in full of the
Rights in accordance with Section 11(a)(ii) hereof, 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 (the "Current Value") over (2) the Purchase Price
(such excess to be referred to hereinafter as the "Spread"), and (B)
with respect to each Right, make adequate provision to substitute for
the Adjustment Shares, upon payment of the applicable Purchase Price,
(1) cash, (2) a reduction in the Purchase Price, (3) other equity
securities of the Company (including, without limitation, shares, or
units of shares, of preferred stock which the Board of Directors of the
Company has deemed to have the same value as the Common Shares (such
shares of preferred stock being referred to herein as "common share
13
<PAGE> 17
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 as determined by the Board of Directors of the
Company; provided, however, that if the Company shall not have made
adequate provision to deliver value pursuant to clause (B) above within
30 days following the first occurrence of a Flip-In Event (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, Common Shares (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
determines in good faith that it is likely that sufficient additional
Common Shares 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 to more than 120 days after the Flip-In
Trigger Date, in order that 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 the Company
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 deliver a notice to the Rights
Agent and issue a public announcement stating that the exercisability
of the Rights has been temporarily suspended, as well as a notice to
the Rights Agent and 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 Shares shall be the current per
share market price (as determined pursuant to Section 11(d) hereof) of
the Common Shares on the Flip-In Trigger Date, and the value of any
common share equivalent shall be deemed to have the same value as the
Common Shares 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 Shares entitling them
(for a period expiring within 45 calendar days after such record date) to
subscribe for or purchase Preferred Shares (or shares having the same rights,
privileges and preferences as the Preferred Shares ("equivalent preferred
shares")) or securities convertible into Preferred Shares or equivalent
preferred shares at a price per Preferred Share or equivalent preferred share
(or having a conversion price per share, if a security convertible into
Preferred Shares or equivalent preferred shares) less than the then current per
share market price of the Preferred Shares (as defined in Section 11(d) hereof)
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 times a fraction, the numerator of which shall be the
number of Preferred Shares outstanding on such record date plus the number of
Preferred Shares which the aggregate offering price of the total number of
Preferred Shares and/or equivalent preferred shares so to be offered (and/or the
aggregate initial conversion price of the convertible securities so to be
offered) would purchase at such current market price and the denominator of
which shall be the number of Preferred Shares outstanding on such record date
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<PAGE> 18
plus the number of additional Preferred Shares and/or equivalent preferred
shares to be offered for subscription or purchase (or into which the convertible
securities so to be offered are initially convertible); provided, however, that
in no event shall the consideration to be paid upon the exercise of one Right be
less than the aggregate par value of the shares of capital stock of the Company
issuable upon exercise of one Right. In case such subscription price may be paid
in 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. Preferred Shares owned by or held for the account
of the Company shall not be deemed outstanding for the purpose of any such
computation. Such adjustment shall be made successively whenever such a record
date is fixed; and in the event that such rights, options or warrants are not so
issued, the Purchase Price shall be adjusted to be the Purchase Price which
would then be in effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for the making of a
distribution to all holders of the Preferred Shares (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) of evidences of indebtedness
or assets (other than a regular quarterly cash dividend or a dividend payable in
Preferred Shares) 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 times a fraction, the numerator of which
shall be the then current per share market price of the Preferred Shares on such
record date, less the fair market value (as determined in good faith by the
Board of Directors of the Company, whose determination shall be described in a
statement filed with the Rights Agent) of the portion of the assets or evidences
of indebtedness so to be distributed or of such subscription rights or warrants
applicable to one Preferred Share and the denominator of which shall be such
current per share market price of the Preferred Shares; provided, however, that
in no event shall the consideration to be paid upon the exercise of one Right be
less than the aggregate par value of the shares of capital stock of the Company
to be issued upon exercise of one Right. 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 again be adjusted to be
the Purchase Price which would then be in effect if such record date had not
been fixed.
(d)(i) For the purpose of any computation hereunder, other
than computations made pursuant to Section 11(a)(iii) hereof, the
"current per share market price" of any security (a "Security" for the
purpose of this Section 11(d)(i)) on any date shall be deemed to be the
average of the daily closing prices per share of such Security for the
30 consecutive Trading Days (as such term is hereinafter defined)
immediately prior to such date, and for purposes of computations made
pursuant to Section 11(a)(iii) hereof, the "current per share market
price" of a Security on any date shall be deemed to be the average of
the daily closing prices per share of such Security for the 10
consecutive Trading Days immediately following such date; provided,
however, that in the event that the current per share market price of
the Security is determined during a period following the announcement
by the issuer of such Security of (A) a dividend or distribution on
such
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<PAGE> 19
Security payable in shares of such Security or securities convertible
into shares of such Security (other than the Rights), or (B) any
subdivision, combination or reclassification of such Security, 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 per share market price" shall be appropriately adjusted to
reflect the current market price per share equivalent of such Security.
The closing price for each day shall be the last sale price, regular
way, or, in case no such sale takes place on such day, the average of
the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system
with respect to securities listed or admitted to trading on the New
York Stock Exchange or, if the Security is not listed or admitted to
trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the
Security is listed or admitted to trading or, if the Security is not
listed or admitted to trading on any national securities exchange, the
last quoted price or, if not so quoted, the average of the high bid and
low asked prices in the over-the-counter market, as reported by the
National Association of Securities Dealers, Inc. Automated Quotations
System ("NASDAQ") or such other system then in use, or, if on any such
date the Security is not quoted by any such organization, the average
of the closing bid and asked prices as furnished by a professional
market maker making a market in the Security selected by the Board of
Directors of the Company. The term "Trading Day" shall mean a day on
which the principal national securities exchange on which the Security
is listed or admitted to trading is open for the transaction of
business or, if the Security is not listed or admitted to trading on
any national securities exchange, a Business Day.
(ii) For the purpose of any computation hereunder, the
"current per share market price" of the Preferred Shares shall be
determined in accordance with the method set forth in Section 11(d)(i)
hereof. If the Preferred Shares are not publicly traded, the "current
per share market price" of the Preferred Shares shall be conclusively
deemed to be the current per share market price of the Common Shares,
as determined pursuant to Section 11(d)(i) hereof (appropriately
adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof), multiplied times 100. If
neither the Common Shares nor the Preferred Shares are publicly held or
so listed or traded, "current per share market price" shall mean the
fair value per share as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a
statement filed with the Rights Agent.
(e) Except as hereinafter provided, no adjustment in the Purchase Price
shall be required unless such adjustment would require an increase or decrease
of at least one percent in the Purchase Price; provided, however, that any
adjustments which by reason of this Section 11(e) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations under this Section 11 shall be made to the nearest cent or to
the nearest one one-millionth of a Preferred Share or one ten-thousandth of any
other share or
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<PAGE> 20
security, as the case may be. Notwithstanding the first sentence of this Section
11(e), any adjustment required by this Section 11 shall be made no later than
the earlier of (i) three years from the date of the transaction which requires
such adjustment and (ii) the date of the expiration of the right to exercise any
Rights.
(f) If as a result of an adjustment made pursuant to Section 11(a)
hereof, the holder of any Right thereafter exercised shall become entitled to
receive any shares of capital stock of the Company other than Preferred Shares,
thereafter the number of such other shares so receivable upon exercise of any
Right shall be subject to adjustment from time to time in a manner and on terms
as nearly equivalent as practicable to the provisions with respect to the
Preferred Shares contained in Section 11(a) through (c) hereof, inclusive, and
the provisions of Sections 7, 9, 10 and 13 hereof with respect to the Preferred
Shares shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-hundredths of a
Preferred Share purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided in
Section 11(i) hereof, upon each adjustment of the Purchase Price as a result of
the calculations made in Sections 11(b) and (c) hereof, each Right outstanding
immediately prior to the making of such adjustment shall thereafter evidence the
right to purchase, at the adjusted Purchase Price, that number of one
one-hundredths of a Preferred Share (calculated to the nearest one one-millionth
of a Preferred Share) obtained by (i) multiplying (x) the number of one
one-hundredths of a share covered by a Right immediately prior to this
adjustment times (y) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price, and (ii) dividing the product so obtained by
the Purchase Price in effect immediately after such adjustment of the Purchase
Price.
(i) The Company may elect on or after the date of any adjustment of the
Purchase Price to adjust the number of Rights, in substitution for any
adjustment in the number of one one-hundredths of a Preferred Share purchasable
upon the exercise of a Right. Each of the Rights outstanding after such
adjustment of the number of Rights shall be exercisable for the number of one
one-hundredths of a Preferred Share for which a Right was exercisable
immediately prior to such adjustment. Each Right held of record prior to such
adjustment of the number of Rights shall become that number of Rights
(calculated to the nearest one ten-thousandth) obtained by dividing the Purchase
Price in effect immediately prior to adjustment of the Purchase Price by the
Purchase Price in effect immediately after adjustment of the Purchase Price. The
Company shall make a public announcement of its election to adjust the number of
Rights, indicating the record date for the adjustment, and, if known at the
time, the amount of the adjustment to be made. This record date may be the date
on which the Purchase Price is adjusted or any day thereafter, but, if the Right
Certificates have been issued, shall be at least 10 days later than the date of
the public announcement. If Right Certificates have been issued, upon each
adjustment of the number of Rights pursuant to this Section 11(i), the Company
shall, as promptly as practicable, cause to be
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<PAGE> 21
distributed to holders of record of Right Certificates on such record date Right
Certificates evidencing, subject to Section 14 hereof, the additional Rights to
which such holders shall be entitled as a result of such adjustment, or, at the
option of the Company, shall cause to be distributed to such holders of record
in substitution and replacement for the Right Certificates held by such holders
prior to the date of adjustment, and upon surrender thereof, if required by the
Company, new Right Certificates evidencing all the Rights to which such holders
shall be entitled after such adjustment. Right Certificates so to be distributed
shall be issued, executed and countersigned in the manner provided for herein
and shall be registered in the names of the holders of record of Right
Certificates on the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or
the number of one one-hundredths of a Preferred Share issuable upon the exercise
of the Rights, the Right Certificates theretofore and thereafter issued may
continue to express the Purchase Price and the number of one one-hundredths of a
Preferred Share which were expressed in the initial Right Certificates issued
hereunder.
(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below one one-hundredth of the then par value, if any, of the
Preferred Shares issuable upon exercise of the Rights, the Company shall take
any corporate action which may, in the opinion of its counsel, be necessary in
order that the Company may validly and legally issue fully paid and
nonassessable Preferred Shares at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuing to the holder of any Right exercised after such record date of
the Preferred Shares and other capital stock or securities of the Company, if
any, issuable upon such exercise over and above the Preferred Shares and other
capital stock or securities of the Company, if any, issuable upon such exercise
on the basis of the Purchase Price in effect prior to such adjustment; provided,
however, that the Company shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such additional
shares 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 it in its sole discretion shall determine to be advisable in
order that any (i) consolidation or subdivision of the Preferred Shares, (ii)
issuance wholly for cash of any Preferred Shares at less than the current market
price, (iii) issuance wholly for cash of Preferred Shares or securities which by
their terms are convertible into or exchangeable for Preferred Shares, (iv)
dividends on Preferred Shares payable in Preferred Shares, or (v) issuance of
rights, options or warrants referred to hereinabove in Section 11(b), hereafter
made by the Company to holders of its Preferred Shares, shall not be taxable to
such stockholders.
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<PAGE> 22
(n) Anything in this Agreement to the contrary notwithstanding, in the
event that at any time after the date of this Agreement and prior to the
Distribution Date, the Company shall (i) declare or pay any dividend on the
Common Shares payable in Common Shares or (ii) effect a subdivision, combination
or consolidation of the Common Shares (by reclassification or otherwise than by
payment of dividends in Common Shares) into a greater or lesser number of Common
Shares, then in any such case (A) the number of one one-hundredths of a
Preferred Share purchasable after such event upon proper exercise of each Right
shall be determined by multiplying the number of one one-hundredths of a
Preferred Share so purchasable immediately prior to such event times a fraction,
the numerator of which is the number of Common Shares outstanding immediately
before such event and the denominator of which is the number of Common Shares
outstanding immediately after such event, and (B) each Common Share outstanding
immediately after such event shall have issued with respect to it that number of
Rights which each Common Share outstanding immediately prior to such event had
issued with respect to it. The adjustments provided for in this Section 11(n)
shall be made successively whenever such a dividend is declared or paid or such
a subdivision, combination or consolidation is effected.
Section 12. Certificate of Adjustment. Whenever an adjustment is made
as provided in Section 11 or 13 hereof, the Company shall (a) promptly prepare a
certificate setting forth such adjustment and a brief statement of the facts
accounting for such adjustment, (b) promptly file with the Rights Agent and with
each transfer agent for the Common Shares or the Preferred Shares a copy of such
certificate and mail a brief summary thereof to each holder of a Right
Certificate (or, prior to the Distribution Date, of the Common Shares) 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, directly or indirectly, at any time after a Person
has become an Acquiring Person, (i) the Company shall consolidate with, or merge
with and into, any other Person, (ii) any Person shall consolidate with the
Company, or merge with and into the Company and the Company shall be the
continuing or surviving corporation of such merger and, in connection with such
merger, all or part of the Common Shares shall be changed into or exchanged for
capital stock or other securities of any other Person (or the Company) or cash
or any other property, or (iii) the Company shall sell or otherwise transfer (or
one or more of its Subsidiaries shall sell or otherwise transfer), in one or
more transactions, assets or earning power aggregating 50 percent or more of the
assets or earning power of the Company and its Subsidiaries (taken as a whole)
to any other Person other than the Company or one or more of its wholly-owned
Subsidiaries (any such event described in clauses (i), (ii) or (iii) being
referred to herein as a "Flip-Over Event"), then, and in each such case, proper
provision shall be made so that (A) each holder of a Right (except as otherwise
provided herein) shall thereafter have the right to receive, upon the exercise
thereof at a price equal to the then current Purchase Price multiplied times the
number of one one-hundredths of a Preferred Share for which a Right is then
exercisable, in accordance with the terms of this Agreement and in lieu of
Preferred Shares, such number of validly authorized and issued, fully paid,
nonassessable and freely tradable Common
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<PAGE> 23
Shares of the Principal Party (as such term is hereinafter defined), free and
clear of liens, encumbrances or other adverse claims, as shall equal the result
obtained by (1) multiplying the then current Purchase Price times the number of
one one-hundredths of a Preferred Share for which a Right is exercisable
immediately prior to the first occurrence of a Flip-Over Event (or, if a Flip-In
Event has occurred prior to the first occurrence of a Flip-Over Event,
multiplying the number of such one one-hundredths of a share for which a Right
was exercisable immediately prior to the first occurrence of a Flip-In Event
times the Purchase Price in effect immediately prior to such first occurrence),
and dividing that product (which, following the first occurrence of a Flip-Over
Event, shall be referred to as the "Purchase Price" for each Right and for all
purposes of this Agreement) by (2) 50 percent of the then current per share
market price of the Common Shares of such Principal Party (determined pursuant
to Section 11(d) hereof) on the date of consummation of such consolidation,
merger, sale or transfer; (B) such Principal Party shall thereafter be liable
for, and shall assume, by virtue of such consolidation, merger, sale or
transfer, all the obligations and duties of the Company pursuant to this
Agreement; (C) 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; (D) such Principal Party shall take such steps
(including, but not limited to, the reservation of a sufficient number of its
Common Shares in accordance with Section 9 hereof) in connection with such
consummation as may be necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in relation to the
Common Shares thereafter deliverable upon the exercise of the Rights; and (E)
the provisions of Section 11(a)(ii) hereof shall be of no effect following the
first occurrence of any Flip-Over Event. The Company shall not consummate any
such consolidation, merger, sale or transfer unless prior thereto the Company
and such Principal Party shall have executed and delivered to the Rights Agent a
supplemental agreement so providing. The Company shall not enter into any
transaction of the kind referred to in this Section 13 if at the time of such
transaction there are any rights, warrants, instruments or securities
outstanding or any agreements or arrangements which, as a result of the
consummation of such transaction, would eliminate or substantially diminish the
benefits intended to be afforded by the Rights. The provisions of this Section
13 shall similarly apply to successive mergers or consolidations or sales or
other transfers.
(b) "Principal Party" shall mean
(i) in the case of any transaction described in clause (i) or
(ii) of the first sentence of Section 13(a) hereof, the Person that is
the issuer of any securities into which Common Shares of the Company
are converted in such transaction, or if there is more than one issuer,
the issuer of Common Shares with the greatest aggregate market value,
and if no securities are so issued, the Person that is the other party
to such transaction, or if there is more than one such Person, the
Person having Common Shares with the greatest aggregate market value;
and
(ii) in the case of any transaction described in clause (iii)
of the first sentence of Section 13(a) hereof, the Person that is the
party receiving the greatest portion of the assets or earning power
transferred pursuant to such transaction or transactions;
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<PAGE> 24
provided, however, that in any such case, (1) if the Common Shares of
such Person are not at such time and have not been continuously over
the preceding twelve-month period registered under Section 12 of the
Exchange Act, and such Person is a direct or indirect Subsidiary of any
Person the Common Shares of which are and have been so registered,
"Principal Party" shall refer to such other Person; and (2) in case
such Person is a Subsidiary, directly or indirectly, of more than one
Person, the Common Shares of two or more of which are and have been so
registered, "Principal Party" shall refer to whichever of such Persons
is the issuer of the Common Shares having the greatest aggregate market
value.
Section 14. Fractional Rights and Fractional Shares.
(a) The Company may, but shall not be required to, issue fractions of
Rights or distribute Right Certificates which evidence fractional Rights. In
lieu of such fractional Rights, the Company may pay to the registered holders of
the Right Certificates with regard to which such fractional Rights would
otherwise be issuable an amount in cash equal to the same fraction of the
current market value of a whole Right. For purposes of this Section 14(a), the
current market value of a whole Right shall be the closing price of the Rights
for the Trading Day immediately prior to the date on which such fractional
Rights would have been otherwise issuable. The closing price for any day shall
be the last sale price, regular way, or, in case no such sale takes place on
such day, the average of the closing bid and asked prices, regular way, in
either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the New York
Stock Exchange or, if the Rights are not listed or admitted to trading on the
New York Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed or admitted to trading on the
principal national securities exchange on which the Rights are listed or
admitted to trading or, if the Rights are not listed or admitted to trading on
any national securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter market,
as reported by NASDAQ or such other system then in use or, if on any such date
the Rights are not quoted by any such organization, the average of the closing
bid and asked prices as furnished by a professional market maker making a market
in the Rights selected by the Board of Directors of the Company. If on any such
date no such market maker is making a market in the Rights, the fair value of
the Rights on such date as determined in good faith by the Board of Directors of
the Company shall be used.
(b) The Company may, but shall not be required to, issue fractions of
Preferred Shares upon exercise of the Rights or distribute certificates which
evidence fractional Preferred Shares. In lieu of fractional Preferred Shares,
the Company may elect to (i) utilize a depository arrangement as provided by the
terms of the Preferred Shares or (ii) in the case of a fraction of a Preferred
Share (other than one one-hundredth of a Preferred Share or any integral
multiple thereof), pay to the registered holders of Right Certificates at the
time such Rights are exercised as herein provided an amount in cash equal to the
same fraction of the current market value of a whole Preferred Share, if any are
outstanding and publicly traded (or the Formula Number (as such term is defined
in Section 2 of the Statement of Resolutions) then in effect times the current
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<PAGE> 25
market value of a whole Common Share if the Preferred Shares are not outstanding
and publicly traded). For purposes of this Section 14(b), the current market
value of a Preferred Share (or Common Share) shall be the closing price of a
Preferred Share (or Common Share) (as determined pursuant to the second sentence
of Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of
such exercise. If, as a result of an adjustment made pursuant to Section 11
hereof, the holder of any Right thereafter exercised shall become entitled to
receive any securities other than Preferred Shares, the provisions of this
Section 14(b) shall apply, as nearly as reasonably may be, on like terms to such
other securities.
(c) 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 or exchange of a Right except as provided in this Section 14.
Section 15. Rights of Action. All rights of action in respect of this
Agreement, excepting the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares); and any registered holder of any Right Certificate (or, prior to
the Distribution Date, of the Common Shares), without the consent of the Rights
Agent or of the holder of any other Right Certificate (or, prior to the
Distribution Date, of the Common Shares), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Right Certificate in the manner provided
in such Right Certificate and in this Agreement. Without limiting the foregoing
or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and will be entitled to specific performance of
the obligations hereunder, and injunctive relief against actual or threatened
violations of the obligations of any Person subject to, this Agreement.
Section 16. Agreement of Right Holders. Every holder of a Right, by
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of the Common Shares;
(b) after the Distribution Date, the Right Certificates will be
transferable, subject to Section 7(e) hereof, only on the registry books of the
Rights Agent if surrendered at the principal office of the Rights Agent, duly
endorsed or accompanied by a proper instrument of transfer;
(c) the Company and the Rights Agent may deem and treat the person in
whose name the Right Certificate (or, prior to the Distribution Date, the
associated Common Shares certificate) is registered as the absolute owner
thereof and of the Rights evidenced thereby (notwithstanding any notations of
ownership or writing on the Right Certificate or the associated Common Shares
certificate made by anyone other than the Company or the Rights Agent) for all
purposes
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<PAGE> 26
whatsoever, and neither the Company nor the Rights Agent shall be affected by
any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the contrary, neither
the Company nor the Rights Agent shall have any liability to any holder of a
Right or other person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligations; provided, however, the Company must use
reasonable efforts to have any such order, decree or ruling lifted or otherwise
overturned as soon as reasonably practicable.
Section 17. Right Certificate Holder Not Deemed a Stockholder. No
holder, as such, of any Right Certificate shall be entitled to vote or receive
dividends or be deemed, for any purpose, the holder of the Preferred Shares or
any other securities of the Company which may at any time be issuable on the
exercise of the Rights represented thereby, nor shall anything contained herein
or in any Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a stockholder of the Company,
including, without limitation, any right to vote for the election of directors
or upon any other 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 other distributions or subscription
rights, or otherwise, until the Right or Rights evidenced by such Right
Certificate shall have been exercised in accordance with the provisions hereof.
Section 18. Concerning the Rights Agent.
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
other disbursements incurred in the administration and execution of this
Agreement and the exercise and performance of its duties hereunder.
(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 Right
Certificate or certificate for the Preferred Shares or Common Shares or for
other securities of the Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement, or other paper or document believed by it to be genuine
and to be signed, executed and, where necessary, verified or acknowledged, by
the proper person or persons, or otherwise upon the advice of counsel as set
forth in Section 20 hereof.
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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
stock transfer or corporate trust powers of the Rights Agent or any successor
Rights Agent, shall be the successor to the Rights Agent under this Agreement
without the execution or filing of any paper or any further act on the part of
any of the parties hereto; provided, that such corporation would be eligible for
appointment as a successor Rights Agent under the provisions of Section 21
hereof. In case, at the time such successor Rights Agent shall succeed to the
agency created by this Agreement, any of the Right Certificates shall have been
countersigned but not delivered, any such successor Rights Agent may adopt the
countersignature of the predecessor Rights Agent and deliver such Right
Certificates so countersigned; and in case at that time any of the Right
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Right Certificates either in the name of the predecessor Rights
Agent or in the name of the successor Rights Agent; and in all such cases such
Right Certificates shall have the full force provided in the Right Certificates
and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be changed
and at such time any of the Right Certificates shall have been countersigned but
not delivered, the Rights Agent may adopt the countersignature under its prior
name and deliver Right Certificates so countersigned; and in case at that time
any of the Right Certificates shall not have been countersigned, the Rights
Agent may countersign such Right Certificates either in its prior name or in its
changed name; and in all such cases such Right Certificates shall have the full
force provided in the Right Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Right Certificates
(or, prior to the Distribution Date, of the Common Shares), 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 be
proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the Chairman of the Board, the
Chief Executive Officer, the President, any Vice President, the Treasurer or the
Secretary of the Company and delivered to the Rights Agent; and such certificate
shall be full authorization to the
24
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Rights Agent for any action taken or suffered in good faith by it under the
provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the Company and any
other Person only for its own negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Right
Certificates (except its countersignature thereof) or be required to verify the
same, but all such statements and recitals are and shall be deemed to have been
made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect
of the validity of this Agreement or the execution and delivery hereof (except
the due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Right Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Right Certificate; nor shall it
be responsible for any change in the exercisability of the Rights (including the
Rights becoming null and void and nontransferable pursuant to Section 7(e)
hereof) or any adjustment in the terms of the Rights (including the manner,
method or amount thereof) provided for in Section 3, 11, 13, 23 or 24 hereof, or
the ascertaining of the existence of facts that would require any such change or
adjustment (except with respect to the exercise of Rights evidenced by Right
Certificates after actual notice that such change or adjustment is required);
nor shall it by any act hereunder be deemed to make any representation or
warranty as to the authorization or reservation of any Preferred Shares or
Common Shares to be issued pursuant to this Agreement or any Right Certificate
or as to whether any Preferred Shares or Common Shares 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 any
one of the Chairman of the Board, the Chief Executive Officer, the President,
any Vice President, the Secretary or the Treasurer of the Company, and to apply
to such officers for advice or instructions in connection with its duties, and
it shall not be liable for any action taken or suffered by it in good faith in
accordance with instructions of any such officer or for any delay in acting
while waiting for those instructions.
(h) The Rights Agent and any stockholder, director, officer or employee
of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights
25
<PAGE> 29
Agent under this Agreement. Nothing in this Agreement shall preclude the Rights
Agent from acting in any other capacity for the Company or for any other legal
entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct, provided reasonable care was exercised in the selection
and continued employment thereof.
(j) The Company agrees to indemnify and to hold the Rights Agent
harmless against any loss, liability or expense (including reasonable fees and
expenses of counsel) that the Rights Agent may incur resulting from its actions
as Rights Agent pursuant to this Agreement; provided, however, that the Rights
Agent shall not be indemnified or held harmless with respect to any such loss,
liability, damage or expense incurred by the Rights Agent as a result of, or
arising out of, its own negligence, bad faith or willful misconduct. In no case
shall the Company be liable with respect to any action, proceeding, suit or
claim against the Rights Agent unless the Rights Agent shall have notified the
Company, by letter or by facsimile confirmed by letter, of the assertion of any
action, proceeding, suit or claim against the Rights Agent, promptly after the
Rights Agent shall have notice of any such assertion of an action, proceeding,
suit or claim or have been served with the summons or other first legal process
giving information as to the nature and basis of the action, proceeding, suit or
claim. The Company shall be entitled to participate at its own expense in the
defense of any such action, proceeding, suit or claim, and, if the Company so
elects, the Company shall assume the defense of any such action, proceeding,
suit or claim. In the event that the Company assumes such defense, the Company
shall not thereafter be liable for the fees and expenses of any additional
counsel retained by the Rights Agent, so long as the Company shall retain
counsel satisfactory to the Rights Agent, in the exercise of its reasonable
judgment, to defend such action, proceeding, suit or claim. The Rights Agent
agrees not to settle any litigation in connection with any action, proceeding,
suit or claim with respect to which it may seek indemnification from the Company
without the prior written consent of the Company.
Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days' notice in writing mailed to the Company and to each transfer agent
of the Common Shares or Preferred Shares by registered or certified mail, and to
the holders of the Right Certificates (or, prior to the Distribution Date, of
the Common Shares) by first-class mail. The Company may remove the Rights Agent
or any successor Rights Agent upon 30 days' notice in writing, mailed to the
Rights Agent or successor Rights Agent, as the case may be, and to each transfer
agent of the Common Shares or Preferred Shares by registered or certified mail,
and to the holders of the Right Certificates (or, prior to the Distribution
Date, of the Common Shares) by first-class mail. If the Rights Agent shall
resign or be removed or shall otherwise become incapable of acting, the Company
shall appoint a successor to the Rights Agent. If the Company shall fail to make
such appointment within a period of 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
26
<PAGE> 30
or by the holder of a Right Certificate (or, prior to the Distribution Date, of
the Common Shares) (who shall, with such notice, submit his Right Certificate
or, prior to the Distribution Date, the certificate representing his Common
Shares, for inspection by the Company), then the registered holder of any Right
Certificate (or, prior to the Distribution Date, of the Common Shares) may apply
to any court of competent jurisdiction for the appointment of a new Rights
Agent. Any successor Rights Agent, whether appointed by the Company or by such a
court, shall be a corporation organized and doing business under the laws of the
United States or 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, having an
office or agency in the State of New York, which is authorized under such laws
to exercise stock transfer or corporate trust powers and is subject to
supervision or examination by federal or state authority and which has at the
time of its appointment as Rights Agent a combined capital and surplus of at
least $50 million; provided that the principal transfer agent for the Common
Shares shall in any event be qualified to be the Rights Agent. After
appointment, the successor Rights Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as Rights
Agent without further act or deed; but the predecessor Rights Agent shall
deliver and transfer to the successor Rights Agent any property at the time held
by it hereunder, and execute and deliver any further assurance, conveyance, act
or deed necessary for the purpose. Not later than the effective date of any such
appointment, the Company shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Common Shares or
Preferred Shares, and mail a notice thereof in writing to the registered holder
of the Right Certificates (or, prior to the Distribution Date, of the Common
Shares). Failure to give any notice provided for in this Section 21, however, or
any defect therein, shall not affect the legality or validity of the resignation
or removal of the Rights Agent or the appointment of the successor Rights Agent,
as the case may be.
Section 22. Issuance of New Right Certificates and Additional Rights.
Notwithstanding any of the provisions of this Agreement or of the Rights to the
contrary, the Company may, at its option, issue new Right Certificates
evidencing Rights in such form as may be approved by its Board of Directors of
the Company to reflect any adjustment or change made in accordance with the
provisions of this Agreement. In addition, in connection with the issuance or
sale of Common Shares following the Distribution Date and prior to the earlier
of the Redemption Date and the Final Expiration Date, the Company (i) shall,
with respect to Common Shares so issued or sold pursuant to the exercise of
stock options or under any employee plan or arrangement, or upon the exercise,
conversion or exchange of securities, notes or debentures issued by the Company,
and (ii) may, in any other case, if deemed necessary or appropriate by the Board
of Directors of the Company, issue Right Certificates representing the
appropriate number of Rights in connection with such issuance or sale; provided,
however, that no such Right Certificate shall be issued if, and to the extent
that, the Company shall be advised by counsel that such issuance would create a
significant risk of material adverse tax consequences to the Company or the
Person to whom such Right Certificate would be issued, and no such Right
Certificate shall be issued if, and to the extent that, appropriate adjustment
shall otherwise have been made in lieu of the issuance thereof.
27
<PAGE> 31
Section 23. Redemption.
(a) A majority of 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
tenth day following the Shares Acquisition Date (or, if the Shares Acquisition
Date shall have occurred prior to the Record Date, the close of business on the
tenth day following the Record Date) and (ii) the Final Expiration Date, redeem
all but not less than all the then outstanding Rights at a redemption price of
$.01 per Right, appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date hereof (such redemption
price being hereinafter referred to as the "Redemption Price"). The redemption
of the Rights by the Board of Directors of the Company may be made effective at
such time, on such basis and with such conditions as the Board of Directors of
the Company in its sole discretion may establish. Notwithstanding anything
contained in this Agreement to the contrary, the Rights shall not be exercisable
pursuant to Section 11(a)(ii) prior to the expiration of the Company's right of
redemption hereunder.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights pursuant to paragraph (a) of this
Section 23, 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. Within 10 Business Days
after the action of the Board of Directors of the Company ordering the
redemption of the Rights, the Company shall give notice of such redemption to
the holders of the then outstanding Rights by mailing such notice to all such
holders at their last addresses as they appear upon the registry books of the
Rights Agent or, prior to the Distribution Date, on the registry books of the
transfer agent for the Common Shares. Each such notice of redemption will state
the method by which payment of the Redemption Price will be made. The notice, if
mailed in the manner herein provided, shall be conclusively presumed to have
been duly given, whether or not the holder of Rights receives such notice. In
any case, failure to give such notice by mail, or any defect in the notice, to
any particular holder of Rights shall not affect the sufficiency of notice to
other holders of Rights. Neither the Company nor any of its Affiliates or
Associates may redeem, acquire or purchase for value any Rights at any time in
any manner other than that specifically set forth in this Section 23 or in
Section 24 hereof, and other than in connection with the purchase of Common
Shares prior to the Distribution Date.
Section 24. Exchange.
(a) The Board of Directors of the Company may, at its option, at any
time after any Person becomes an Acquiring Person, mandatorily exchange all or
part of the then outstanding and exercisable Rights (which shall not include
Rights that shall have become null and void and nontransferable pursuant to the
provisions of Section 7(e) hereof) for Common Shares at an exchange ratio of one
Common Share per Right, appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date hereof (such exchange
ratio being hereinafter referred to as the "Exchange Ratio"). Notwithstanding
the foregoing, the Board of Directors of the Company shall not be empowered to
effect such exchange at any time after any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of
28
<PAGE> 32
the Company or of any such Subsidiary, or any entity holding Common Shares of
the Company for or pursuant to the terms of any such plan), together with all
Affiliates and Associates of such Person, becomes the Beneficial Owner of 50
percent or more of the Common Shares then outstanding.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the exchange of any Rights pursuant to paragraph (a) of this
Section 24, and without any further action and without any notice, the right to
exercise such Rights shall terminate and the only right thereafter of a holder
of such Rights shall be to receive that number of Common Shares equal to the
number of such Rights held by such holder multiplied times the Exchange Ratio.
The Company shall promptly give public notice of any such exchange; provided,
however, that the failure to give, or any defect in, such notice shall not
affect the validity of such exchange. The Company promptly shall mail a notice
of any such exchange to all the holders of such Rights at their last addresses
as they appear upon the registry books of the Rights Agent. Any notice which is
mailed in the manner herein provided shall be deemed given, whether or not the
holder receives the notice. Each such notice of exchange will state the method
by which the exchange of the Common Shares for Rights will be effected and, in
the event of any partial exchange, the number of Rights which will be exchanged.
Any partial exchange shall be effected pro rata based on the number of Rights
(other than Rights which have become null and void and nontransferable pursuant
to the provisions of Section 7(e) hereof) held by each holder of Rights.
(c) In any exchange pursuant to this Section 24, the Company, at its
option, may substitute Preferred Shares (or equivalent preferred shares) for
Common Shares exchangeable for Rights, at the initial rate of one one-hundredth
of a Preferred Share (or equivalent preferred share) for each Common Share, as
appropriately adjusted to reflect adjustments in the voting rights of the
Preferred Shares pursuant to the terms thereof, so that the fraction of a
Preferred Share delivered in lieu of each Common Share shall have the same
voting rights as one Common Share.
(d) In the event that the number of Common Shares or Preferred Shares
which are authorized but unissued are not sufficient to permit any 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
Common Shares or Preferred Shares.
(e) The Company may, but shall not be required to, issue fractions of
Common Shares upon exchange of Rights pursuant to this Section 24 or distribute
certificates which evidence fractional Common Shares. In lieu of such fractional
Common Shares, the Company may pay to the registered holders of the Right
Certificates with regard to which such fractional Common Shares would otherwise
be issuable an amount in cash equal to the same fraction of the current market
value of a whole Common Share for the Trading Day immediately prior to the date
of exchange pursuant to this Section 24. For purposes of this paragraph (e), the
current market value of a whole Common Share shall be the closing price of a
Common Share (as determined pursuant to the second sentence of Section 11(d)(i)
hereof).
29
<PAGE> 33
Section 25. Notice of Certain Events.
(a) In case the Company shall propose (i) to pay any dividend payable
in capital stock of any class to the holders of its Preferred Shares or to make
any other distribution to the holders of its Preferred Shares (other than a
regular quarterly cash dividend), (ii) to offer to the holders of its Preferred
Shares rights or warrants to subscribe for or to purchase any additional
Preferred Shares or shares of capital stock of any class or any other
securities, rights or options, (iii) to effect any reclassification of its
Preferred Shares (other than a reclassification involving only the subdivision
of outstanding Preferred Shares), (iv) to effect any consolidation or merger
into or with, or to effect any sale or other transfer (or to permit one or more
of its Subsidiaries to effect any sale or other transfer), in one or more
transactions, of 50 percent or more of the assets or earning power of the
Company and its Subsidiaries (taken as a whole) to, any other Person, (v) to
effect the liquidation, dissolution or winding up of the Company, or (vi) to
declare or pay any dividend on the Common Shares payable in Common Shares or to
effect a subdivision, combination or consolidation of the Common Shares (by
reclassification or otherwise than by payment of dividends in Common Shares),
then, in each such case, the Company shall give to each holder of a Right
Certificate (or, prior to the Distribution Date, of the Common Shares), 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 or distribution
of rights or warrants, or the date on which such reclassification,
consolidation, merger, sale, transfer, liquidation, dissolution, or winding up
is to take place and the date of participation therein by the holders of the
Common Shares and/or Preferred Shares, if any such date is to be fixed, and such
notice shall be so given in the case of any action covered by clause (i) or (ii)
above at least 10 days prior to the record date for determining holders of the
Preferred Shares for purposes of such action, and in the case of any such other
action, at least 10 days prior to the date of the taking of such proposed action
or the date of participation therein by the holders of the Common Shares and/or
Preferred Shares, whichever shall be the earlier.
(b) In case a Flip-In Event shall occur, then the Company shall as soon
as practicable thereafter give to each holder of a Right Certificate (or, prior
to the Distribution Date, of Common Shares), in accordance with Section 26
hereof, a notice of the occurrence of such event, which notice shall describe
such event and the consequences of such event to holders of Rights under Section
11(a)(ii) hereof.
Section 26. Notices. Notices or demands authorized by this Agreement to
be given or made by the Rights Agent or by the holder of any Right Certificate
to or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:
Rocky Mountain Chocolate Factory, Inc.
265 Turner Drive
Durango, Colorado 81301
Attention: President
30
<PAGE> 34
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Right Certificate to or on the Rights Agent shall be sufficiently given or made
if sent by first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Company) as follows:
American Securities Transfer & Trust, Inc.
1825 Lawrence Street, Suite 444
Denver, Colorado 80202
Attention: Mr. Gregg Tubbs
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate 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. At any time prior to the
Distribution Date and subject to the last sentence of this Section 27, the
Company may by action of its Board of Directors, and the Rights Agent shall if
the Company so directs, supplement or amend any provision of this Agreement
(including, without limitation, the date upon which the Distribution Date shall
occur, the time during which the Rights may be redeemed pursuant to Section 23
or any provision of the Statement of Resolutions) in any manner without the
approval of any holder of the Rights. From and after the Distribution Date and
subject to applicable law, the Company may by action of its Board of Directors,
and the Rights Agent shall if the Company so directs, from time to time
supplement or amend this Agreement without the approval of any holders of Right
Certificates in order (i) to cure any ambiguity or to correct or supplement any
provision contained in this Agreement which may be defective or inconsistent
with any other provision of this Agreement or (ii) to make any other provisions
in regard to matters or questions arising hereunder which the Company may deem
necessary or desirable and which shall not adversely affect the interests of the
holders of the Rights or Right Certificates (other than an Acquiring Person or
any Affiliate or Associate of an Acquiring Person). Any supplement or amendment
adopted during any period after any Person has become an Acquiring Person but
prior to the Distribution Date shall be null and void unless such supplement or
amendment could have been adopted under the preceding sentence from and after
the Distribution Date. Without limiting the foregoing, the Company may at any
time prior to the Distribution Date amend this Agreement to lower the thresholds
set forth in the definition of Acquiring Person in Section 1 hereof and in
Section 3(b) hereof to not less than the greater of (i) the sum of 0.001 percent
and the largest percentage of the outstanding Common Shares then known by the
Company to be beneficially owned by any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or of any
Subsidiary of the Company, or any entity holding Common Shares of the Company
for or pursuant to the terms of any such plan) and (ii) 10 percent. 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 which affects its own
31
<PAGE> 35
rights, duties or immunities under this Agreement. Prior to the Distribution
Date, the interests of the holders of Rights shall be deemed coincident with the
interests of the holders of the Common Shares of the Company. In addition,
notwithstanding anything to the contrary contained in this Agreement, no
supplement or amendment to this Agreement shall be made which (i) reduces the
Redemption Price (except as required hereunder by appropriate adjustment to
reflect any stock split, stock dividend or similar transaction occurring after
the date of this Agreement) or (ii) provides for an earlier Final Expiration
Date.
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. Benefits of this Agreement. Nothing in this Agreement shall
be construed to give to any Person other than the Company, the Rights Agent and
the registered holders of the Right Certificates (and, prior to the Distribution
Date, of the Common Shares) any legal or equitable right, remedy or claim under
this Agreement; but this Agreement shall be for the sole and exclusive benefit
of the Company, the Rights Agent and the registered holders of the Right
Certificates (and, prior to the Distribution Date, of the Common Shares).
Section 30. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
Section 31. GOVERNING LAW. THIS AGREEMENT AND EACH RIGHT CERTIFICATE
ISSUED HEREUNDER SHALL BE DEEMED TO BE A CONTRACT MADE UNDER LAWS OF THE STATE
OF COLORADO AND FOR ALL PURPOSES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF SUCH STATE APPLICABLE TO CONTRACTS TO BE MADE AND
PERFORMED ENTIRELY WITHIN SUCH STATE.
Section 32. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall for all purposes be deemed to be an
original, and all such counterparts shall together constitute but one and the
same instrument.
Section 33. Descriptive Headings. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions of this
Agreement.
32
<PAGE> 36
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested, all as of the day and year first above written.
ROCKY MOUNTAIN CHOCOLATE
FACTORY, INC.
Attest:
By: /s/ BRYAN J. MERRYMAN By: /s/ FRANKLIN E. CRAIL
------------------------------ --------------------------------
Name: Bryan J. Merryman Name: Franklin E. Crail
----------------------- -------------------------
Title: COO & CFO Title: President
---------------------- ------------------------
AMERICAN SECURITIES TRANSFER
& TRUST, INC.
Attest:
By: /s/ MARGO ANKELE By: /s/ GREGG D. TUBBS
------------------------------ --------------------------------
Name: Margo Ankele Name: Gregg D. Tubbs
----------------------- -------------------------
Title: Marketing Officer Title: Senior Vice President
---------------------- ------------------------
33
<PAGE> 37
EXHIBIT A
FORM
of
STATEMENT OF RESOLUTION
ESTABLISHING A SERIES OF SHARES
OF
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
OF
ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
To the Secretary of State
of the State of Colorado
Pursuant to Section 7-106-102 of the Colorado Business Corporation Act
("CBCA"), and pursuant to Article XII of its Articles of Incorporation, as
amended (the "Articles of Incorporation"), the undersigned, Rocky Mountain
Chocolate Factory, Inc., a corporation organized and existing under the CBCA
(the "Corporation"), hereby submits the following statement for the purpose of
establishing and designating a series of shares and fixing and determining the
relative rights and preferences thereof:
1. The name of the corporation is Rocky Mountain Chocolate
Factory, Inc.
2. The following resolution establishing and designating a series
of shares and fixing and determining the relative rights and
preferences thereof was duly adopted by the Board of Directors
of the Corporation as of May __, 1999:
RESOLVED, that, pursuant to the authority vested in the Board
of Directors of the Corporation in accordance with the provisions of
the Articles of Incorporation, a series of Preferred Stock, par value
$0.10 per share, of the Corporation is hereby established and created,
and that the designation and number of shares thereof and the voting
and other powers, preferences and relative, participating, optional and
other special rights of the shares of such series, and the
qualifications, limitations and restrictions thereof, are as follows:
A-1
<PAGE> 38
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
Section 1. Designation and Amount. The shares of such series shall be
designated as "Series A Junior Participating Preferred Stock" (the "Series A
Preferred Stock"). The number of shares initially constituting the Series A
Preferred Stock shall be 50,000; provided, however, that if more than a total of
50,000 shares of Series A Preferred Stock shall be issuable upon the exercise of
Rights (the "Rights") issued pursuant to the Rights Agreement dated as of May
____, 1999 between the Corporation and American Transfer & Trust, Inc., as
Rights Agent (the "Rights Agreement"), the Board of Directors of the Corporation
shall direct by resolution or resolutions that a certificate be properly
executed, acknowledged, filed and recorded providing for the total number of
shares of Series A Preferred Stock authorized to be issued to be increased (to
the extent that the Articles of Incorporation then permits) to the largest
number of whole shares (rounded up to the nearest whole share) issuable upon
exercise of such Rights.
Section 2. Dividends and Distributions.
(a) Subject to the prior and superior rights of the holders of shares
of any other series of Preferred Stock or other class of stock of the
Corporation ranking prior and superior to the Series A Preferred Stock with
respect to dividends, the holders of shares of Series A Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors, out of
the assets of the Corporation legally available therefor, (i) quarterly
dividends payable in cash on the last day of each fiscal quarter in each year,
or such other dates as the Board of Directors of the Corporation shall approve
(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 a fraction of a share of Series A Preferred Stock, in the
amount of $.01 per whole share (rounded to the nearest cent) less the amount of
all cash dividends declared on the Series A Preferred Stock pursuant to the
following clause (ii) since the immediately preceding Quarterly Dividend Payment
Date or, with respect to the first Quarterly Dividend Payment Date, since the
first issuance of any share or fraction of a share of Series A Preferred Stock
(the total of which shall not, in any event, be less than zero) and (ii)
dividends payable in cash on the payment date for each cash dividend declared on
the Common Stock in an amount per whole share (rounded to the nearest cent)
equal to the Formula Number (as hereinafter defined) then in effect multiplied
times the cash dividends then to be paid on each share of Common Stock. In
addition, if the Corporation shall pay any dividend or make any distribution on
the Common Stock payable in assets, securities or other forms of noncash
consideration (other than dividends or distributions solely in shares of Common
Stock), then, in each such case, the Corporation shall simultaneously pay or
make on each outstanding whole share of Series A Preferred Stock a dividend or
distribution in like kind equal to the Formula Number then in effect multiplied
times such dividend or distribution on each share of the Common Stock. As used
herein, the "Formula Number" shall be 100; provided, however, that, if at any
time after May ___, 1999, the Corporation shall (x) declare or pay any dividend
on the Common Stock payable in shares of Common Stock or make any distribution
on the Common Stock in shares of Common Stock, (y) subdivide (by a stock split
or otherwise) the outstanding shares of Common Stock into a larger number of
shares of Common Stock or (z) combine (by a reverse stock split or otherwise)
the outstanding shares of Common
A-2
<PAGE> 39
Stock into a smaller number of shares of Common Stock, then in each such event
the Formula Number shall be adjusted to a number determined by multiplying the
Formula Number in effect immediately prior to such event by a fraction, the
numerator of which is the number of shares of Common Stock that are outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that are outstanding immediately prior to such event (and
rounding the result to the nearest whole number); and provided further, that, if
at any time after May ___, 1999, the Corporation shall issue any shares of its
stock in a merger, reclassification, or change of the outstanding shares of
Common Stock, then in each such event the Formula Number shall be appropriately
adjusted to reflect such merger, reclassification or change so that each share
of Series A Preferred Stock continues to be the economic equivalent of a Formula
Number of shares of Common Stock prior to such merger, reclassification or
change.
(b) The Corporation shall declare a dividend or distribution on the
Series A Preferred Stock as provided in paragraph (a) of this Section
immediately prior to or at the same time it declares a dividend or distribution
on the Common Stock (other than a dividend or distribution solely in shares of
Common Stock); provided, however, that, in the event no dividend or distribution
(other than a dividend or distribution solely in shares of Common Stock) 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 $.01 per share on the Series A Preferred Stock shall nevertheless be
payable on such subsequent Quarterly Dividend Payment Date. The Board of
Directors may fix a record date for the determination of holders of shares of
Series A Preferred Stock entitled to receive a dividend or distribution declared
thereon, which record date shall be not more than 60 days prior to the date
fixed for the payment thereof.
(c) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Preferred Stock from and after the Quarterly Dividend Payment
Date next preceding the date of original issue of such shares of Series A
Preferred Stock; provided, however, that dividends on such shares which are
originally issued after the record date for the determination of holders of
shares of Series A Preferred Stock entitled to receive a quarterly dividend and
on or prior to the next succeeding Quarterly Dividend Payment Date shall begin
to accrue and be cumulative from and after such Quarterly Dividend Payment Date.
Notwithstanding the foregoing, dividends on shares of Series A Preferred Stock
which are originally issued prior to the record date for the determination of
holders of shares of Series A Preferred Stock entitled to receive a quarterly
dividend on the first Quarterly Dividend Payment Date shall be calculated as if
cumulative from and after the last day of the fiscal quarter next preceding the
date of original issuance of such shares. Accrued but unpaid dividends shall not
bear interest. Dividends paid on the shares of Series A Preferred Stock in an
amount less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding.
(d) So long as any shares of the Series A Preferred Stock are
outstanding, no dividends or other distributions shall be declared, paid or
distributed, or set aside for payment or distribution, on the Common Stock
unless, in each case, the dividend required by this Section 2 to be declared on
the Series A Preferred Stock shall have been declared.
A-3
<PAGE> 40
(e) The holders of the shares of Series A Preferred Stock shall not be
entitled to receive any dividends or other distributions except as provided
herein.
Section 3. Voting Rights. The holders of shares of Series A Preferred
Stock shall have the following voting rights:
(a) Each holder of Series A Preferred Stock shall be entitled to a
number of votes equal to the Formula Number then in effect, for each share of
Series A Preferred Stock held of record on each matter on which holders of the
Common Stock or stockholders generally are entitled to vote, multiplied times
the maximum number of votes per share which any holder of the Common Stock or
stockholders generally then have with respect to such matter (assuming any
holding period or other requirement to vote a greater number of shares is
satisfied).
(b) Except as otherwise provided herein or by applicable law, the
holders of shares of Series A Preferred Stock and the holders of shares of
Common Stock shall vote together as one class for the election of directors of
the Corporation and on all other matters submitted to a vote of stockholders of
the Corporation.
(c) If, at the time of any annual meeting of stockholders for the
election of directors, the equivalent of six quarterly dividends (whether or not
consecutive) payable on any share or shares of Series A Preferred Stock are in
default, the number of directors constituting the Board of Directors of the
Corporation shall be increased by two. In addition to voting together with the
holders of Common Stock for the election of other directors of the Corporation,
the holders of record of the Series A Preferred Stock, voting separately as a
class to the exclusion of the holders of Common Stock, shall be entitled at said
meeting of stockholders (and at any subsequent annual meeting of stockholders),
unless all dividends in arrears have been paid or declared and set apart for
payment prior thereto, to vote for the election of two directors of the
Corporation, the holders of any Series A Preferred Stock being entitled to cast
a number of votes per share of Series A Preferred Stock equal to the Formula
Number. Until the default in payments of all dividends which permitted the
election of said directors shall cease to exist, any director who shall have
been so elected pursuant to the next preceding sentence may be removed at any
time, either with or without cause, only by the affirmative vote of the holders
of the shares of Series A Preferred Stock at the time entitled to cast a
majority of the votes entitled to be cast for the election of any such director
at a special meeting of such holders called for that purpose, and any vacancy
thereby created may be filled by the vote of such holders. If and when such
default shall cease to exist, the holders of the Series A Preferred Stock shall
be divested of the foregoing special voting rights, subject to revesting in the
event of each and every subsequent like default in payments of dividends. Upon
the termination of the foregoing special voting rights, the terms of office of
all persons who have been elected directors pursuant to said special voting
rights shall forthwith terminate, and the number of directors constituting the
Board of Directors shall be reduced by two. The voting rights granted by this
Section 3(c) shall be in addition to any other voting rights granted to the
holders of the Series A Preferred Stock in this Section 3.
A-4
<PAGE> 41
(d) Except as provided in this Section 3, in Section 11 or by
applicable law, holders of Series A Preferred Stock shall have no special voting
rights and their consent shall not be required (except to the extent they are
entitled to vote with holders of Common Stock as set forth herein) for
authorizing or taking any corporate action.
Section 4. Certain Restrictions.
(a) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Series A Preferred Stock outstanding shall have
been paid in full, the Corporation shall not:
(i) declare or pay dividends 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 Series A Preferred
Stock;
(ii) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the
Series A Preferred Stock, except dividends paid ratably on the Series A
Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which the
holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the
Series A Preferred Stock; provided that the Corporation may at any time
redeem, purchase or otherwise acquire shares of any such parity stock
in exchange for shares of any stock of the Corporation ranking junior
(either as to dividends or upon dissolution, liquidation or winding up)
to the Series A Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any
shares of Series A Preferred Stock, or any shares of stock ranking on a
parity with the Series A Preferred Stock, except in accordance with a
purchase offer made in writing or by publication (as determined by the
Board of Directors) to all holders of such shares upon such terms as
the Board of Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will
result in fair and equitable treatment among the respective series or
classes.
(b) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (a) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
A-5
<PAGE> 42
Section 5. Reacquired Shares. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled upon the acquisition thereof in accordance with
the CBCA. All such shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock, without designation as to series, and may
thereafter be issued as part of a new series of Preferred Stock subject to the
conditions and restrictions on issuance set forth herein, in the Certificate of
Incorporation, or in any other Certificate of Designations creating a series of
Preferred Stock or any similar stock of the Corporation or as otherwise required
by law.
Section 6. Liquidation, Dissolution or Winding Up. Upon the
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, no distribution shall be made (i) to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Preferred Stock unless, prior thereto, the holders
of shares of Series A Preferred Stock shall have received an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not declared,
to the date of such payment, plus an amount equal to the greater of (x) $1.00
per whole share and (y) an aggregate amount per share equal to the Formula
Number then in effect multiplied times the aggregate amount to be distributed
per share to holders of Common Stock, or (ii) to the holders of stock ranking on
a parity (either as to dividends or upon liquidation, dissolution or winding up)
with the Series A Preferred Stock, except distributions made ratably on the
Series A Preferred Stock and all such parity stock in proportion to the total
amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up.
Section 7. Consolidation, Merger, etc. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash or any other property, or any combination thereof, then in any
such case the then outstanding shares of Series A Preferred Stock shall at the
same time be similarly exchanged for or changed into an amount per share equal
to the Formula Number then in effect multiplied times the aggregate amount of
stock, securities, cash or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is exchanged or changed.
In the event both this Section 7 and Section 2 appear to apply to a transaction,
this Section 7 shall control.
Section 8. No Redemption; No Sinking Fund.
(a) The shares of Series A Preferred Stock shall not be subject to
redemption by the Corporation; provided, however, that the Corporation may
purchase or otherwise acquire outstanding shares of Series A Preferred Stock in
the open market or by offer to any holder or holders of shares of Series A
Preferred Stock.
(b) The shares of Series A Preferred Stock shall not be subject to or
entitled to the operation of a retirement or sinking fund.
A-6
<PAGE> 43
Section 9. Ranking. The Series A Preferred Stock shall rank, with
respect to the payment of dividends and as to distributions of assets upon
liquidation, dissolution or winding up of the Corporation, junior to all other
series of Preferred Stock of the Corporation, unless the Board of Directors
shall specifically determine otherwise in fixing the powers, preferences and
relative, participating, optional and other special rights of the shares of any
such other series and the qualifications, limitations and restrictions thereof.
Section 10. Fractional Shares. The Series A Preferred Stock shall be
issuable upon exercise of the Rights issued pursuant to the Rights Agreement in
whole shares or in any fraction of a share that is one one-hundredth of a share
or any integral multiple of such fraction which shall entitle the holder, in
proportion to such holder's fractional shares, to receive dividends, exercise
voting rights, participate in distributions and to have the benefit of all other
rights of holders of Series A Preferred Stock. In lieu of fractional shares, the
Corporation, prior to the first issuance of a share or a fraction of a share of
Series A Preferred Stock, may elect (i) to make a cash payment as provided in
the Rights Agreement for fractions of a share other than one one-hundredth of a
share or any integral multiple thereof or (ii) to issue depository receipts
evidencing such authorized fraction of a share of Series A Preferred Stock
pursuant to an appropriate agreement between the Corporation and a depository
selected by the Corporation; provided that such agreement shall provide that the
holders of such depository receipts shall have all the rights, privileges and
preferences to which they are entitled as holders of the Series A Preferred
Stock.
Section 11. Amendment. None of the powers, preferences or relative,
participating, optional or other special rights of the Series A Preferred Stock
as provided herein or in the Articles of Incorporation shall be amended in any
manner that would alter or change the powers, preferences, rights or privileges
of the holders of Series A Preferred Stock so as to affect them adversely
without the affirmative vote of the holders of at least 66-2/3 percent of the
outstanding shares of Series A Preferred Stock, voting as a separate class.
IN WITNESS WHEREOF, the Corporation has caused this Statement of
Resolution to be duly executed in its corporate name on this ___ day of May,
1999.
ROCKY MOUNTAIN CHOCOLATE FACTORY,
INC.
By
--------------------------------
Franklin E. Crail,
Chairman of the Board,
President and Treasurer
A-7
<PAGE> 44
EXHIBIT B
[Form of Right Certificate]
Certificate No. R- _______ Rights
NOT EXERCISABLE AFTER MAY 28, 2009, OR EARLIER IF REDEEMED 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. RIGHTS BENEFICIALLY OWNED
BY AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS
SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND BY ANY SUBSEQUENT HOLDER OF
SUCH RIGHTS ARE NULL AND VOID AND NONTRANSFERABLE.
Right Certificate
ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
This certifies that ____________________________, or registered
assigns, is the registered owner of the number of Rights set forth above, each
of which entitles the owner thereof, subject to the terms, provisions and
conditions of the Rights Agreement, dated as of May 18, 1999 (the "Rights
Agreement"), between Rocky Mountain Chocolate Factory, Inc., a Colorado
corporation (the "Company"), and American Securities Transfer & Trust, Inc., as
Rights Agent (the "Rights Agent"), unless the Rights evidenced hereby have been
previously redeemed by the Company, to purchase from the Company at any time
after the Distribution Date (as defined in the Rights Agreement) and prior to
5:00 P.M., New York City time, on May 28, 2009 (the "Final Expiration Date"), at
the principal office or agency of the Rights Agent, or its successors as Rights
Agent, in the City of New York, one one-hundredth of a fully paid, nonassessable
share of Series A Junior Participating Preferred Stock, par value $0.10 per
share, of the Company (the "Preferred Shares"), at a purchase price per one
one-hundredth of a share equal to $30.00 (the "Purchase Price"), upon
presentation and surrender of this Right Certificate with the Form of Election
to Purchase duly executed.
The Purchase Price and the number and kind of shares that may be
purchased upon exercise of each Right evidenced by this Right Certificate, as
set forth above, are the Purchase Price and the number and kind of shares that
may be purchased as of , 19 . As provided in the Rights Agreement, the Purchase
Price and the number and kind of shares that may be purchased upon the exercise
of each Right evidenced by this Right Certificate are subject to modification
and adjustment upon the happening of certain events.
This Right Certificate is subject to all 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
reference to the Rights Agreement is hereby made for a full
B-1
<PAGE> 45
description of the rights, limitations of rights, obligations, duties and
immunities hereunder of the Rights Agent, the Company and the holders of the
Right Certificates. Copies of the Rights Agreement are on file at the
above-mentioned office and agency of the Rights Agent and are also available
from the Company upon request.
If the Rights evidenced by this Right Certificate are at any time
beneficially owned by an Acquiring Person or an Associate or Affiliate of an
Acquiring Person (as such terms are defined in the Rights Agreement), such
Rights shall be null and void and nontransferable and the holder of any such
Right (including any purported transferee or subsequent holder) shall not have
any right to exercise or transfer any such Right.
This Right Certificate, with or without other Right Certificates, upon
surrender at the principal stock transfer or corporate trust office of the
Rights Agent, may be exchanged for another Right Certificate or Right
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number and kind of shares as the Rights evidenced by
the Right Certificate or Right Certificates surrendered shall have entitled such
holder to purchase. If this Right Certificate shall be exercised in part, the
holder shall be entitled to receive upon surrender hereof another Right
Certificate or Right Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Right Certificate may be redeemed by the Company at its option at a
redemption price (in cash or shares of Common Stock or other securities of the
Company deemed by the Board of Directors of the Company to be at least
equivalent in value) of $.01 per Right (which amount may be subject to
adjustment as provided in the Rights Agreement) at any time prior to the earlier
of (i) the close of business on the tenth day following the first date of public
announcement by the Company or an Acquiring Person that an Acquiring Person has
become such and (ii) the Final Expiration Date.
The Company may, but shall not be required to, issue fractions of a
Preferred Share (other than one one-hundredth of a Preferred Share or any
integral multiple thereof) or distribute certificates which evidence fractions
of a Preferred Share upon the exercise of any Right or Rights evidenced hereby.
In lieu of issuing fractional shares, the Company may elect to make a cash
payment as provided in the Rights Agreement for fractions of a share other than
one one-hundredth of a share or any integral multiple thereof or to issue
certificates or utilize a depository arrangement as provided in the terms of the
Rights Agreement and the Preferred Shares.
No holder of this Right Certificate, as such, shall be entitled to vote
or receive dividends or be deemed, for any purpose, the holder of the Preferred
Shares or any other securities of the Company which may at any time be issuable
on the exercise hereof, nor shall anything contained in the Rights Agreement or
herein be construed to confer upon the holder hereof, as such, any of the rights
of a stockholder of the Company, including, without limitation, any right to
vote for the election of directors or upon any other 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
B-2
<PAGE> 46
dividends or other distributions or subscription rights, or otherwise, until the
Right or Rights evidenced by this Right Certificate shall have been exercised as
provided in accordance with the provisions of the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal.
Dated as of:
[CORPORATE SEAL]
ATTEST: ROCKY MOUNTAIN CHOCOLATE
FACTORY, INC.
By
- ----------------------------------- -------------------------------------
Name: Name:
Title: Title:
Countersigned:
AMERICAN SECURITIES TRANSFER
& TRUST, INC.
By
--------------------------------
Authorized Signature
B-3
<PAGE> 47
[On Reverse Side of Right Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate.)
FOR VALUE RECEIVED ______________________________ hereby sells, assigns
and transfers unto_____________________________________________________________
_______________________________________________________________________________
(Please print name and address of transferee)
_______________________________________________________________________________
this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint _________________________________
Attorney-in-Fact, to transfer the within Right Certificate on the books of the
within-named Company, with full power of substitution.
Dated:
------------------------
--------------------------------------------
Signature
Signature Guaranteed:
Signatures must be guaranteed by a participant in a Securities Transfer
Association recognized signature program.
CERTIFICATION OF STATUS
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) this Right Certificate [ ] is [ ] is not being sold, assigned or
transferred by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate thereof (as such terms are defined in the Rights
Agreement); and
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Right Certificate from
any person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate thereof (as such terms are defined in the Rights
Agreement).
--------------------------------------------
Signature
Dated:
------------------------
B-4
<PAGE> 48
[On Reverse Side of Right Certificate -- continued]
FORM OF ELECTION TO PURCHASE
(To be executed by the registered holder if such holder desires
to exercise the Rights represented by the Right Certificate.)
To: ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
The undersigned hereby irrevocably elects to exercise ________________
Rights represented by this Right Certificate to purchase the Preferred Shares
(or other shares) issuable upon the exercise of such Rights and requests that
certificates for such shares be issued in the name of:
Please insert social security
or other identifying number
-----------------------------------------------------
- -------------------------------------------------------------------------------
(Please print name and address)
- -------------------------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
-----------------------------------------------------
- -------------------------------------------------------------------------------
(Please print name and address)
- -------------------------------------------------------------------------------
Dated:
------------------------
--------------------------------------------
Signature
B-5
<PAGE> 49
[On Reverse Side of Right Certificate -- continued]
Signature Guaranteed:
Signatures must be guaranteed by a participant in a Securities Transfer
Association recognized signature program.
CERTIFICATION OF STATUS
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) this Right Certificate [ ] is [ ] is not being exercised by or on
behalf of a Person who is or was an Acquiring Person or an Affiliate or
Associate thereof (as such terms are defined in the Rights Agreement); and
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Right Certificate from
any person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate thereof (as such terms are defined in the Rights
Agreement).
--------------------------------------------
Signature
Dated:
------------------------
NOTICE
The signature in the Form of Assignment or Form of Election to
Purchase, as the case may be, must conform to the name as written upon the face
of this Right Certificate in every particular, without alteration or enlargement
or any change whatsoever.
In the event the Certification of Status set forth above in the Form of
Assignment or the Form of Election to Purchase, as the case may be, is not
completed, the Company and the Rights Agent will deem the beneficial owner of
the Rights evidenced by this Right Certificate to be an Acquiring Person or an
Affiliate or Associate thereof (as such terms are defined in the Rights
Agreement) and such Assignment or Election to Purchase will not be honored.
B-6
<PAGE> 50
EXHIBIT C
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED SHARES
On May 18, 1999, the Board of Directors of Rocky Mountain Chocolate
Factory, Inc. (the "Company") authorized and declared a dividend of one Right (a
"Right") for each outstanding share of Common Stock, par value $0.03 per share
("Common Stock"), of the Company (the "Common Shares"). The dividend is payable
on May 28, 1999 (the "Record Date") to the holders of record of the Common
Shares at the close of business on that date. In addition, the Company has
authorized the issuance of one Right with respect to each share of Common Stock
that shall become outstanding between the Record Date and the earliest of the
Distribution Date, the Redemption Date and the Final Expiration Date (as such
terms are hereinafter defined). When exercisable each Right entitles the
registered holder to purchase from the Company one one-hundredth of a share of
Series A Junior Participating Preferred Stock, par value $0.10 per share, of the
Company (the "Preferred Shares"), at a price of $30 per one one-hundredth of a
Preferred Share (the "Purchase Price"), subject to adjustment. The description
and terms of the Rights are set forth in a Rights Agreement (the "Rights
Agreement") between the Company and American Securities Transfer & Trust, Inc.,
as Rights Agent (the "Rights Agent").
Until the earlier to occur of (i) 10 days following a public
announcement that a person or group of affiliated or associated persons (an
"Acquiring Person") has acquired beneficial ownership of 15 percent or more of
the outstanding Common Shares and (ii) 10 business days (or such later date as
may be determined by action of the Board of Directors of the Company prior to
such time as any person or group of affiliated or associated persons becomes an
Acquiring Person) following the commencement of, or first public announcement of
an intention to commence, a tender offer or exchange offer the consummation of
which would result in the beneficial ownership by a person or group of
affiliated or associated persons of 15 percent or more of the outstanding Common
Shares (the earlier of such dates being herein referred to as the "Distribution
Date"), the Rights will be evidenced, with respect to any of the Common Share
certificates outstanding as of the Record Date, by such Common Share certificate
with a copy of this Summary of Rights attached thereto. No person who is the
beneficial owner of 15 percent or more of the Common Shares of the Company on
the date of the Rights Agreement shall be deemed to be an Acquiring Person
unless and until such person becomes the beneficial owner of any additional
Common Shares of the Company and, immediately after the acquisition of such
additional shares, is the beneficial owner of 15 percent or more of the Common
Shares of the Company.
The Rights Agreement provides that, until the Distribution Date (or
earlier redemption or expiration of the Rights), the Rights will be transferred
with and only with the Common Shares. Until the Distribution Date (or earlier
redemption or expiration of the Rights), new Common Share certificates issued
after the Record Date, upon transfer or new issuance of Common Shares, will
contain a notation incorporating the Rights Agreement by reference. Until the
Distribution Date (or earlier redemption or expiration of the Rights), the
surrender for transfer of any
C-1
<PAGE> 51
certificates for Common Shares outstanding on or after the Record Date, even
without such notation or a copy of this Summary of Rights being attached
thereto, will also constitute the transfer of the Rights associated with the
Common Shares represented by such certificate. As soon as practicable following
the Distribution Date, separate certificates evidencing the Rights ("Right
Certificates") will be mailed to holders of record of the Common Shares as of
the close of business on the Distribution Date and such separate Right
Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date. The Rights
will expire on May 28, 2009 (the "Final Expiration Date"), unless the Final
Expiration Date is extended or unless the Rights are earlier redeemed or
exchanged by the Company, in each case, as described below.
The Purchase Price payable, and the number of Preferred Shares or other
securities or property issuable, upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Preferred
Shares, (ii) upon the grant to holders of the Preferred Shares of certain rights
or warrants to subscribe for or purchase Preferred Shares at a price, or
securities convertible into Preferred Shares with a conversion price, less than
the then current market price of the Preferred Shares or (iii) upon the
distribution to holders of the Preferred Shares of evidences of indebtedness or
assets (excluding regular periodic cash dividends paid out of earnings or
retained earnings or dividends payable in Preferred Shares) or of subscription
rights or warrants (other than those referred to above).
The number of outstanding Rights and the number of one one-hundredths
of a Preferred Share issuable upon exercise of each Right are also subject to
adjustment in the event of a stock split of the Common Shares or a stock
dividend on the Common Shares payable in Common Shares or subdivisions,
consolidations or combinations of the Common Shares occurring, in any such case,
prior to the Distribution Date.
Preferred Shares purchasable upon exercise of the Rights will not be
subject to redemption by the Company. Each Preferred Share will be entitled to a
minimum preferential quarterly dividend payment of $.01 per share but will be
entitled to an aggregate dividend of 100 multiplied times the dividend declared
per Common Share. In the event of liquidation, the holder of the Preferred
Shares will be entitled to a minimum preferential liquidation payment of $1.00
per share but will be entitled to an aggregate payment of 100 multiplied times
the payment made per Common Share. Each Preferred Share will have 100 votes,
voting together with the Common Shares. Finally, in the event of any merger,
consolidation or other transaction in which Common Shares are exchanged, each
Preferred Share will be entitled to receive 100 multiplied times the amount
received per Common Share. These rights are protected by customary antidilution
provisions.
Because of the nature of the Preferred Shares' dividend, liquidation
and voting rights, the value of the one one-hundredth interest in a Preferred
Share purchasable upon exercise of each Right should approximate the value of
one Common Share.
C-2
<PAGE> 52
In the event that any person or group of affiliated or associated
persons becomes an Acquiring Person, proper provision shall be made so that each
holder of a Right, other than Rights beneficially owned by the Acquiring Person
(which will thereafter be null and void and nontransferable), will thereafter
have the right to receive upon exercise that number of Common Shares of the
Company having a market value of two times the exercise price of the Right. In
the event that the Company is acquired in a merger or other business combination
transaction or 50 percent or more of its consolidated assets or earning power
are sold after a person or group of affiliated or associated persons has become
an Acquiring Person, proper provision will be made so that each holder of a
Right will thereafter have the right to receive, upon the exercise thereof at
the then current exercise price of the Right, that number of shares of common
stock of the acquiring company which at the time of such transaction will have a
market value of two times the exercise price of the Right.
At any time after any person or group of affiliated or associated
persons becomes an Acquiring Person and prior to the acquisition by such person
or group of 50 percent or more of the outstanding Common Shares, the Board of
Directors of the Company may exchange the Rights (other than Rights owned by
such person or group which will have become null and void and nontransferable),
in whole or in part, at an exchange ratio of one Common Share, or one
one-hundredth of a Preferred Share (or of a share of a class or series of the
Company's preferred stock having equivalent rights, preferences and privileges),
per Right (subject to adjustment).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least one
percent in such Purchase Price. The Company may, but shall not be required to,
issue fractions of a Preferred Share (other than one one-hundredth of a
Preferred Share or any integral multiple thereof, which may, at the election of
the Company, be evidenced by depositary receipts) and in lieu thereof, an
adjustment in cash will be made based on the market price of the Preferred
Shares on the last trading day prior to the date of exercise.
At any time prior to the close of business on the tenth day following a
public announcement that an Acquiring Person has become such an Acquiring
Person, the Board of Directors of the Company may redeem the Rights in whole,
but not in part, at a price of $.01 per Right (the "Redemption Price"). The
redemption of the Rights may be made effective at such time, on such basis and
with such conditions as the Board of Directors in its sole discretion may
establish. The time at which the Rights are redeemed by the Company is herein
referred to as the "Redemption Date." Immediately upon any redemption of the
Rights, the right to exercise the Rights will terminate and the only right
thereafter of the holders of Rights will be to receive the Redemption Price.
At any time prior to the Distribution Date and subject to the last
sentence of this paragraph, the terms of the Rights may be amended by the Board
of Directors of the Company without the consent of the holders of the Rights,
including without limitation an amendment to lower certain thresholds described
above to not less than the greater of (i) the sum of 0.001 percent and the
largest percentage of the outstanding Common Shares then known by the Company to
be
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<PAGE> 53
beneficially owned by any person or group of affiliated or associated persons
and (ii) 10 percent. From and after the Distribution Date and subject to
applicable law, the terms of the Rights may be amended by the Board of Directors
of the Company without the consent of the holders of the Rights to, among other
things, make any other provisions in regard to matters under the Rights
Agreement that the Company may deem necessary or desirable and that shall not
adversely affect the interests of the holders of the Rights (other than an
Acquiring Person or an affiliate or associate of an Acquiring Person). The terms
of the Rights may not be amended to (i) reduce the Redemption Price (except as
required by antidilution provisions) or (ii) provide for an earlier Final
Expiration Date.
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.
The Preferred Shares shall rank, with respect to the payment of
dividends and as to distributions of assets upon liquidation, dissolution or
winding up of the Company, junior to all other series of preferred stock of the
Company, unless the Board of Directors of the Company shall specifically
determine otherwise in fixing the powers, preferences and relative,
participating, optional and other special rights of the shares of any such other
series and the qualifications, limitations and restrictions thereof.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A dated
____________________, 1999. A copy of the Rights Agreement is available free of
charge from the Company. This summary description of the Rights does not purport
to be complete and is qualified in its entirety by reference to the Rights
Agreement, which is hereby incorporated herein by reference.
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