SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
FORM 8-A/A
For Registration of Certain Classes of Securities
Pursuant to Section 12(b) or 12(g) of the
Securities Exchange Act of 1934
MUSICLAND STORES CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 41-1623376
(State of Incorporation or Organization) (IRS Employer Identification No.)
10400 Yellow Circle Drive, Minnetonka, MN 55343
(Address of Principal Executive Offices) (Zip Code)
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered: each class is to be registered:
Preferred Share Purchase Rights New York Stock Exchange, Inc.
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. [x]
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), check the following box. [ ]
Securities Act registration statement file number to which this form relates:
N/A
Securities to be registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
Total of 7 Pages
Exhibit Index Located on Page 7
<PAGE>
Item 1. Description of Securities to be Registered
As of March 13, 2000, Musicland Stores Corporation (the "Company")
executed the Amended and Restated Rights Agreement (the "Rights Amendment")
between the Company and Norwest Bank Minnesota, National Association, as Rights
Agent (the "Rights Agent"), to amend the Rights Agreement dated as of March 14,
1995 between the same parties (as amended and restated, the "Rights Agreement").
The Rights Amendment modifies the requirement that a majority of the Continuing
Directors (as hereinafter defined) approve (i) the adjustment of purchase price
of the Rights (as hereinafter defined), the number of Common Shares (as
hereinafter defined) issuable upon the exercise of the Rights or the number of
Rights, (ii) the determination of the amount of cash in lieu of fractional
Rights, (iii) the redemption of the Rights, (iv) the exchange of the Rights
after any Person becomes an Acquiring Person (as hereinafter defined) for Common
Shares and (v) an amendment or supplement to the Rights Agreement. The Rights
Amendment further deletes all references in the Rights Agreement to "Continuing
Directors." As used herein, the term "Continuing Director" means a member of the
Board of Directors of the Company who was a member of the Board on March 14,
1995, or who subsequently became or becomes a member of the Board of Directors
of the Company with the recommendation or approval of a majority of the
Continuing Directors. Continuing Directors do not include any Acquiring Person
or affiliate or associate of an Acquiring Person. A summary of the Rights and
the Rights Agreement, as amended, follows.
On March 14, 1995, the Board of Directors of Musicland Stores
Corporation (the "Company"), declared a dividend of one preferred share purchase
right (a "Right") per share for each outstanding share of Common Stock, par
value $.01 (the "Common Shares"), of the Company. The dividend was paid on March
20, 1995 (the "Record Date") to shareholders of record on that date.
Each Right entitles the registered holder to purchase from the Company
one one-hundredth of a share of Series A Junior Participating Preferred Stock,
par value $.01 (the "Preferred Shares"), of the Company at a price of $70.00 per
one-hundredth of a Preferred Share (the "Purchase Price"), subject to
adjustment. The description and terms of the Rights are set forth in the Rights
Agreement.
Initially, the Rights attached to all certificates representing Common
Shares then outstanding and no separate Right Certificates were distributed. The
Rights will separate from the Common Shares, and a Distribution Date for the
Rights will occur, upon the earlier of: (i) the close of business on the 20th
day following a public announcement that a person or group of affiliated or
associated persons has become an "Acquiring Person" (i.e., has become, subject
to certain exceptions, the beneficial owner of 17.5% or more of the outstanding
Common Shares) and (ii) the close of business on the 20th day following the
commencement or public announcement of a tender offer or exchange offer, the
consummation of which would result in a person or group of affiliated or
associated persons becoming, subject to certain exceptions, the beneficial owner
of 17.5% or more of the outstanding Common Shares (or such later date as may be
determined by the Board of Directors of the Company prior to a person or group
of affiliated or associated persons becoming an Acquiring Person) (the earlier
of such dates being called the "Distribution Date").
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Until the Distribution Date, (i) the Rights will be evidenced by the
Common Share certificates and will be transferred with and only with the Common
Shares, (ii) new Common Share certificates issued after the Record Date upon
transfer or new issuance of the Common Shares will contain a notation
incorporating the Rights Agreement by reference, and (iii) the surrender for
transfer of any Common Share certificate, even without such notation or a copy
of this Summary of Rights attached thereto, will also constitute the transfer of
the Rights associated with the Common Shares represented by such certificate.
As promptly 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 March 20, 2005, unless extended or earlier redeemed or exchanged
by the Company 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, options or warrants to subscribe for or purchase Preferred Shares or
convertible securities at 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 or dividends payable in Preferred Shares) or of subscription rights or
warrants (other than those described in clause (ii) of this paragraph). With
certain exceptions, no adjustment in the Purchase Price will be required until
cumulative adjustments require an adjustment of at least 1% in the Purchase
Price.
No fraction of a Preferred Share (other than fractions in integral
multiples of one one-hundredth of a share) will be issued and, in lieu thereof,
an adjustment in cash will be made based on the closing price on the last
trading date prior to the date of exercise.
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
redeemable. Each Preferred Share will be entitled to a minimum preferential
quarterly dividend payment of $1.00 per share but will be entitled to an
aggregate dividend of 100 times the dividend declared per Common Share. In the
event of liquidation, the holders of the Preferred Shares will be entitled to a
minimum preferential liquidation payment of $100.00 per share but will be
entitled to an aggregate payment of 100 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
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Preferred Share will be entitled to receive 100 times the amount received per
Common Share. These rights are subject to adjustment in the event of a stock
dividend on the Common Shares or a subdivision, combination or consolidation of
the Common Shares.
Holders of Rights will have the right, exercisable following the
expiration of the Company's right to redeem the Rights, to receive upon exercise
thereof at the then current exercise price of the Right that number of Common
Shares having a market value of two times the exercise price of the Right,
subject to certain possible adjustments, in the event that: (i) any person
becomes an Acquiring Person other than pursuant to a tender offer or an exchange
offer for all outstanding Common Shares at a price and on terms determined by
the Board of Directors of the Company to be fair to shareholders and otherwise
in the best interests of the Company and its shareholders and which the Board of
Directors recommends to the shareholders, or (ii) during such time as there is
an Acquiring Person, there shall be a reclassification of securities or a
recapitalization or reorganization of the Company or other transaction which has
the effect of increasing by more than 1% the proportionate share of the
outstanding shares of any class of equity securities of the Company or any of
its subsidiaries beneficially owned by an Acquiring Person.
Other than a transaction for at least the same per-share consideration
with a person who acquired Common Shares through a tender offer or exchange
offer for all outstanding Common Shares approved by the Board of Directors of
the Company in accordance with the preceding paragraph, in the event that the
Company is acquired in certain mergers or other business combination
transactions or 50% or more of the assets or earning power of the Company and
its subsidiaries (taken as a whole) are sold after the Distribution Date or
within 20 days prior thereto, holders of the Rights will thereafter have the
Right to receive, upon exercise thereof at the then current exercise price of
the Right, that number of Common Shares of the acquiring company (or, in certain
cases, one of its affiliates) having a market value of two times the exercise
price of the Right.
At any time after a person becomes an Acquiring Person (subject to
certain exceptions), and prior to the acquisition by a person of 50% or more of
the outstanding Common Shares, the Board of Directors of the Company may
exchange all or part of the Rights for Common Shares at an exchange ratio per
Right equal to the result obtained by dividing the exercise price of a Right by
the current per share market price of the Common Shares, subject to adjustment.
At any time prior to the close of business on the 20th day after a
public announcement that a person has become an Acquiring Person, the Board of
Directors of the Company may redeem the Rights in whole, but not in part, at a
price of $.001 per Right (the "Redemption Price"), subject to adjustment,
payable in cash, Common Shares or any other form of consideration deemed
appropriate by the Board of Directors. The redemption of the Rights may be made
effective at such time, on such basis and with such conditions as the Board of
Directors in its sole discretion may establish.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including without limitation, the right
to vote or to receive dividends.
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Item 2. Exhibits
1. Amended and Restated Rights Agreement, dated as of March 13, 2000,
between Musicland Stores Incorporated and Norwest Bank Minnesota,
National Association, which includes as Exhibit B thereto the form
of Right Certificate.
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<PAGE>
Signature
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant has duly caused this amendment to be signed on its
behalf by the undersigned, thereto duly authorized.
Date: March 15, 2000
MUSICLAND STORES CORPORATION
By /s/ Keith A. Benson
--------------------
Keith A. Benson
Vice Chairman, Chief Financial
Officer and Director
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<PAGE>
EXHIBIT INDEX
Exhibit Description of Exhibit
- --------------------------------------------------------------------------------
1. Amended and Restated Rights Agreement, dated as of March 13, 2000,
between Musicland Stores Corporation and Norwest Bank Minnesota,
National Association, as Rights Agent
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MUSICLAND STORES CORPORATION
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
Rights Agent
AMENDED AND RESTATED
RIGHTS AGREEMENT
Dated as of March 13, 2000
<PAGE>
TABLE OF CONTENTS
Page
Section 1. Certain Definitions..............................................-1-
Section 2. Appointment of Rights Agent......................................-4-
Section 3. Issue of Right Certificates......................................-5-
Section 4. Form of Right Certificates.......................................-6-
Section 5. Countersignature and Registration................................-6-
Section 6. Transfer, Split Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right
Certificates...................................................-7-
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights....-8-
Section 8. Cancellation and Destruction of Right Certificates...............-9-
Section 9. Availability of Preferred Shares.................................-9-
Section 10. Preferred Shares Record Date...................................-10-
Section 11. Adjustment of Purchase Price, Number of Shares or Number of
Rights.......................................................-11-
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.....-20-
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power................................................-20-
Section 14. Fractional Rights and Fractional Shares........................-23-
Section 15. Rights of Action...............................................-25-
Section 16. Agreement of Right Holders.....................................-25-
Section 17. Right Certificate Holder Not Deemed a Stockholder..............-26-
Section 18. Concerning the Rights Agent....................................-26-
Section 19. Merger or Consolidation or Change of Name of Rights Agent......-26-
Section 20. Duties of Rights Agent.........................................-27-
Section 21. Change of Rights Agent.........................................-29-
Section 22. Issuance of New Right Certificates.............................-30-
Section 23. Redemption.....................................................-30-
Section 24. Exchange.......................................................-31-
Section 25. Notice of Certain Events.......................................-32-
Section 26. Notices........................................................-33-
Section 27. Supplements and Amendments.....................................-34-
Section 28. Successors.....................................................-34-
Section 29. Benefits of this Agreement.....................................-34-
Section 30. Severability...................................................-34-
Section 31. Governing Law..................................................-34-
Section 32. Counterparts...................................................-34-
Section 33. Descriptive Headings...........................................-35-
i
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Exhibit A - Certificate of Designation of Series A Junior Participating
Preferred Stock
Exhibit B - Form of Right Certificate
Exhibit C - Summary of Rights to Purchase Preferred Shares
ii
<PAGE>
AMENDED AND RESTATED
RIGHTS AGREEMENT
AGREEMENT, dated as of March 13, 2000, between Musicland Stores
Corporation, a Delaware corporation (the "Company"), and Norwest Bank Minnesota,
National Association (the "Rights Agent").
The Board of Directors of the Company has authorized and declared a
dividend of one preferred share purchase right (a "Right") for each Common Share
(as such term is hereinafter defined) of the Company outstanding at the Close of
Business on March 20, 1995 (the "Record Date"), each Right representing the
right to purchase one one-hundredth of a Preferred Share (as such term is
hereinafter defined), upon the terms and subject to the conditions herein set
forth, and has further authorized and directed the issuance of one Right with
respect to each Common Share that shall become outstanding between the Record
Date and the earliest of the Distribution Date, the Redemption Date, the
Exchange Date and the Final Expiration Date (as such terms are hereinafter
defined).
Accordingly, 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:
"Acquiring Person" shall mean any Person (as such term is hereinafter
defined) who or which, together with all Affiliates and Associates (as such
terms are hereinafter defined) of such Person, shall be the Beneficial Owner
(as such term is hereinafter defined) of 17.5% (the "Threshold Percentage")
or more of the Common Shares (as such t shall not include (i) the Company,
(ii) any Subsidiary (as such term is hereinafter defined) of the Company,
(iii) any employee benefit plan of the Company or any Subsidiary of the
Company or (iv) any entity holding Common Shares 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
by the Company which, by reducing the number of shares outstanding,
increases the proportionate number of shares beneficially owned by such
Person to the Threshold Percentage or more of the Common Shares of the
Company then outstanding; provided, however, that if a Person shall become
the Beneficial Owner of the Threshold Percentage 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, increase the
number of Common Shares of the Company beneficially owned by such Person
above the number of Common Shares of the Company beneficially owned by such
Person at the time of the last such share purchase by the Company, then such
Person shall be deemed to be an Acquiring Person.
<PAGE>
"Affiliate" and "Associate" shall have the respective meanings ascribed
to such terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as in
effect on the date of this Agreement. Notwithstanding anything in this
definition of Affiliate or Associate to the contrary, no trustee or other
Person holding Common Shares for or pursuant to the terms of any employee
benefit plan of the Company or of any Subsidiary of the Company shall be
deemed an Affiliate or Associate of any employee benefit plan because of the
trustee's or other Person's position, capacity, power or action as a trustee
or holder of Common Shares for or pursuant to the terms of any employee
benefit plan of the Company or of any Subsidiary of the Company, and no such
employee benefit plan shall be deemed an Affiliate or Associate of such
trustee or other Person (or of any Affiliate or Associate of such trustee or
other Person) because of such trustee's or other Person's position,
capacity, power or action as a trustee or holder of Common Shares for or
pursuant to the terms of such employee benefit plan.
A Person shall be deemed the "Beneficial Owner" of and shall be deemed
to "beneficially own" any securities:
(i) which such Person or any of such Person's Affiliates or
Associates beneficially owns, directly or indirectly, including without
limitation securities with respect to which such Person or any such
Person's Affiliates or Associates has "beneficial ownership" pursuant
to Rule 13d-3 of the General Rules and Regulations under the Exchange
Act, as in effect on the date of this Agreement;
(ii) 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
these Rights), warrants or options, or otherwise; provided, however,
that a Person shall not be deemed the Beneficial Owner of, or to
beneficially own, securities tendered pursuant to a tender or exchange
offer made by or on behalf of such Person or any of such Person's
Affiliates or Associates until such tendered securities are accepted
for purchase or exchange; or (B) the right to vote 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 to Section 1(c)(ii)(B)) 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.
Further, notwithstanding anything in this definition of Beneficial
Ownership to the contrary, no trustee or other Person holding Common Shares
for or pursuant to the terms of any employee benefit plan of the Company or
of any Subsidiary of the Company (and no Affiliate or Associate of such
trustee or other Person) shall be deemed the Beneficial Owner of, or to
beneficially own, any Common Shares of the Company beneficially owned by any
employee benefit plan of the Company or of any Subsidiary of the Company
(including without limitation Common Shares held of record by such trustee
or other Person for or pursuant to the terms of any such employee benefit
plan) because of such trustee's or other Person's position, capacity, power
or action as a trustee or holder of Common Shares for or pursuant to the
terms of such employee benefit plan, and no such employee benefit plan shall
be deemed to be the Beneficial Owner of, or to beneficially own, any Common
Shares of the Company beneficially owned by such trustee or other Person, or
Affiliates or Associates of such trustee or other Person, because of such
trustee's or other Person's position, capacity, power or action as a trustee
or holder of Common Shares for or pursuant to the terms of such employee
benefit plan.
"Business Day" shall mean any day other than a Saturday, a Sunday or a
day on which banking institutions in the State of Minnesota are authorized
or obligated by law or executive order to close.
"Close of Business" on any given date shall mean 5:00 P.M., prevailing
Minnesota time, on such date; provided, however, that if such date is not a
Business Day, it shall mean 5:00 P.M., prevailing Minnesota time, on the
next succeeding Business Day.
"Common Shares," when used with reference to the Company, shall mean
the shares of Common Stock, par value $.01 per share, 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.
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"Distribution Date" shall have the meaning set forth in Section 3
hereof.
"Exchange Date" shall have the meaning set forth in Section 7 hereof.
"Final Expiration Date" shall have the meaning set forth in Section 7
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 mean shares of Series A Junior Participating
Preferred Stock, par value $.01, of the Company having the rights and
preferences set forth in the form of Certificate of Designation attached to
this Agreement as Exhibit A.
"Redemption Date" shall have the meaning set forth in Section 7 hereof.
"Section 11(a)(ii) Event" shall mean any event described in clauses (A)
or (B) of Section 11(a)(ii).
"Section 13 Event" shall mean any event described in clauses (w), (x),
(y) or (z) of Section 13(a).
"Share Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to Section 13(d) of the Exchange Act) by
the Company or any Person that such Person has become an Acquiring Person.
"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.
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.
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Section 3. Issue of Right Certificates.
(a) Until the earlier of (i) the Close of Business on the twentieth
day after the Share Acquisition Date (or, if the twentieth day following such
Share Acquisition Date occurs before the Record Date, the Close of Business on
the Record Date) or (ii) the Close of Business on the twentieth day (or such
later date as may be determined by action of the Board of Directors 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 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 for or pursuant to the terms of any such plan) to commence
(which intention shall not have been withdrawn within five days after such
public announcement), a tender or exchange offer the consummation of which would
result in any Person becoming the Beneficial Owner of Common Shares aggregating
the Threshold Percentage or more of the then outstanding Common Shares (or, if
the twentieth day following the date of commencement or public announcement of
any such tender or exchange offer occurs before the Record Date, the Close of
Business on the Record Date) (the earlier of such dates being referred to herein
as the "Distribution Date"), (A) the Rights will be evidenced (subject to the
provisions of Section 3(b) 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 (B)
the right to receive Right Certificates will be transferable only in connection
with the transfer of Common Shares. As soon as practicable after the
Distribution Date, the Company will prepare and execute, the Rights Agent will
countersign, and the Company will send or cause to be sent (and the Rights Agent
will, if requested, send) by first-class, postage-prepaid mail, to each record
holder of Common Shares as of the Close of Business on the Distribution Date, at
the address of such holder shown on the records of the Company, a Right
Certificate, in substantially the form of Exhibit B hereto (a "Right
Certificate"), evidencing one Right for each Common Share so held. As of the
Distribution Date, the Rights will be evidenced solely by such Right
Certificates.
(b) With respect to certificates for Common Shares outstanding as of
the Close of Business on the Record Date, until the Distribution Date, the
Rights will be evidenced by such certificates registered in the names of the
holders thereof. Until the Distribution Date (or the earlier of the Redemption
Date, the Exchange Date or the Final Expiration Date if occurring prior to the
Distribution Date), the surrender for transfer of any certificate for Common
Shares outstanding on the Record Date shall also constitute the transfer of the
Rights associated with the Common Shares represented thereby.
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(c) Certificates for Common Shares which become outstanding
(including, without limitation, reacquired Common Shares referred to in the last
sentence of this paragraph (c)) after the Record Date but prior to the earliest
of the Distribution Date, the Redemption Date, the Exchange Date or the Final
Expiration Date shall have impressed on, printed on, written on or otherwise
affixed to them the a legend in substantially the form indicated below:
This certificate also evidences and entitles the holder hereof to certain
rights as set forth in the Amended and Restated Rights Agreement between
Musicland Stores Corporation and Norwest Bank Minnesota, National
Association, dated as of March 13, 2000 (the "Rights Agreement"), the terms
of which are hereby incorporated herein by referenc and a copy of which is
on file at the principal executive offices of Musicland Stores Corporation.
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. Musicland Stores Corporation 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 issued to any Person who becomes
an Acquiring Person or an Associate or Affiliate thereof (as defined in the
Rights Agreement), or certain transferees of such Person, may become null
and void.
With respect to such certificates containing the foregoing legend, until the
Distribution 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 cancelled and retired so that the Company shall
not be entitled to exercise any Rights associated with the Common Shares which
are no longer outstanding.
Section 4. Form of Right Certificates. The Right Certificates (and the
forms of election to purchase Preferred Shares and of assignment to be printed
on the reverse thereof) shall be substantially the same as Exhibit B hereto and
may have such marks of identification or designation and such legends, summaries
or endorsements printed thereon as the Company may deem appropriate and as are
not inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange on which the Rights
may from time to time be listed, or to conform to usage. Subject to the
provisions of Section 11 and Section 22 hereof, the Right Certificates shall
entitle the holders thereof to purchase such number of one one-hundredths of a
Preferred Share as shall be set forth therein at the price per one one-hundredth
of a Preferred Share set forth therein (the "Purchase Price"), but the number of
such one one-hundredths of a Preferred Share and the Purchase Price shall be
subject to adjustment as provided herein.
Section 5. Countersignature and Registration. The Right Certificates
shall be executed on behalf of the Company by its Chairman of the Board, its
Vice Chairman, its President, any of its Executive Vice Presidents, any of its
Vice Presidents, its Treasurer or its Controller either manually or by facsimile
signature and shall be attested by the Secretary or an Assistant Secretary of
the Company, either manually or by facsimile signature. The Right Certificates
shall be manually
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<PAGE>
countersigned by the Rights Agent for purposes of authorization only and shall
not be valid 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 officer of the Company before countersignature by the Rights Agent and
issuance and delivery by the Company, such Right Certificates, nevertheless, may
be countersigned by the Rights Agent and issued and delivered by the Company
with the same force and effect as though the person who signed such Right
Certificates had not ceased to be such officer of the Company; and any Right
Certificate may be signed on behalf of the Company by any person who, at the
actual date of the execution of such Right Certificate, shall be a proper
officer of the Company to sign such Right Certificate, although at the date of
the execution of this Rights Agreement any such person was not such an officer.
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 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. Subject
to the provisions of Section 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, the Exchange Date or the Final Expiration Date,
any Right Certificate or Right Certificates (other than Right Certificates
representing Rights that have become void pursuant to Section 11(a)(ii) hereof)
may be transferred, split up, combined or exchanged for another Right
Certificate or Right Certificates, entitling the registered holder to purchase a
like number of one one-hundredths of a Preferred Share as the Right Certificate
or Right Certificates surrendered then entitled such holder to purchase. Any
registered holder desiring to transfer, split up, combine or exchange any Right
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 of the Rights Agent. Thereupon the Rights Agent shall countersign and
deliver to the person entitled thereto a Right Certificate or Right
Certificates, as the case may be, as so requested. The Company may require
payment of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer, split up, combination or exchange of
Right Certificates.
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 issue, execute and deliver
a new Right Certificate of like tenor to the Rights Agent for countersignature
and delivery to the registered holder in lieu of the Right Certificate so lost,
stolen, destroyed or mutilated.
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Section 7. Exercise of Rights; Purchase Price; Expiration Date of
Rights.
(a) 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 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 (or such other number of Preferred
Shares, Common Shares, preferred share equivalents (as such term is defined in
Section 11(b)) or common share equivalents (as such term is defined in Section
11(a)(iii)(3)(C)) as shall then be issuable upon exercise of such Right as
provided in Sections 11 and 13 hereof) as to which the Rights are exercised, at
or prior to the earliest of (i) the Close of Business on March 20, 2005 (the
"Final Expiration Date"), (ii) the time at which the Rights are redeemed as
provided in Section 23 hereof (the "Redemption Date") or (iii) the time at
which such Rights are exchanged as provided in Section 24 hereof (the "Exchange
Date").
(b) The Purchase Price for each one one-hundredth of a Preferred Share
(or such other number of Preferred Shares, Common Shares, preferred share
equivalents or common share equivalents as shall be issuable upon exercise of
such Right as provided in Sections 11 and 13 hereof) pursuant to the exercise of
a Right shall initially be $70.00, shall be subject to adjustment from time to
time as provided in Sections 11 and 13 hereof and shall be payable in lawful
money of the United States of America in accordance with paragraph (c) below.
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(c) Upon receipt of a Right Certificate representing exercisable
Rights, with the form of election to purchase duly executed, accompanied by
payment of the Purchase Price for the shares to be purchased and an amount equal
to any applicable transfer tax required to be paid by the holder of such Right
Certificate in accordance with Section 9 hereof by certified check, cashier's
check or money order payable to the order of the Company, the Rights Agent shall
thereupon promptly (i) (A) requisition from any transfer agent for the Preferred
Shares (or such other number of Preferred Shares, Common Shares, preferred share
equivalents or common share equivalents as shall be issuable upon exercise of
such Right as provided in Sections 11 and 13 hereof) certificates for the number
of Preferred Shares (or such other number of Preferred Shares, Common Shares,
preferred share equivalents or common share equivalents as shall be issuable
upon exercise of such Right as provided in Sections 11 and 13 hereof) to be
purchased and the Company hereby irrevocably authorizes its transfer agent to
comply with all such requests, or (B) requisition from the Company or the
depositary agent, as the case may be, scrip or depositary receipts representing
such number of one one-hundredths of a Preferred Share as are to be purchased
(and, in the case of depositary receipts, the Company shall cause certificates
for the Preferred Shares represented by such receipts to be deposited by the
transfer agent with the depositary agent) and the Company hereby directs the
depositary agent to comply with such request, (ii) when appropriate, requisition
from the Company the amount of cash to be paid in lieu of issuance of fractional
shares in accordance with Section 14 hereof, (iii) after receipt of such
certificates, scrip 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, 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 less than all of the Rights evidenced thereby, a new Right Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent to the registered holder of such Right Certificate or to his
duly authorized assigns, subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a registered holder upon the occurrence of any purported
exercise as set forth in this Section unless such registered holder shall have
(i) duly completed and executed 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) of such Right Certificate or Affiliates or Associates
thereof as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Right Certificates. All
Right Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be canceled by it, and no Right
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Rights Agreement. The Company shall deliver to the
Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any other Right Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall deliver
all canceled Right Certificates to the Company.
Section 9. Availability of Preferred Shares.
(a) The Company covenants and agrees that it will cause to be reserved
and kept available out of its authorized and unissued Preferred Shares, or any
Preferred Shares held in its treasury, the number of Preferred Shares that will
be sufficient to permit the exercise in full of all outstanding Rights.
(b) At such time, if any, as the Preferred Shares issuable upon the
exercise of Rights may be listed on any national securities exchange, the
Company shall use its best efforts to cause, from and after such time as the
Rights become exercisable (but only to the extent that it is reasonably likely
that the Rights will be exercised), all shares reserved for such issuance to be
listed on such exchange upon official notice of issuance upon such exercise.
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(c) The Company will prepare and file, as soon as practicable
following expiration of the Company's right of redemption pursuant to Section
23, a registration statement under the Securities Act of 1933, as amended (the
"Act"), with respect to the Rights and the securities purchasable upon exercise
of the Rights on an appropriate form, and use its best efforts to cause such
registration statement to (i) become effective as soon as practicable after such
filing, and (ii) remain effective (with a prospectus at all times meeting the
requirements of the Act) until the earlier of (A) the date as of which the
Rights are no longer exercisable for such securities or (B) the Final Expiration
Date. The Company will also take such action as may be appropriate under, or to
ensure compliance with, the securities or "blue sky" laws of the various states
in connection with the exercisability of the Rights. The Company may temporarily
suspend, for a period of time not to exceed 90 days after the date the
registration statement is filed, the exercisability of the Rights in order to
permit the registration statement to become effective. Upon any such suspension,
the Company shall issue a public announcement stating that the exercisability of
the Rights has been temporarily suspended, as well as a public announcement at
such time as the suspension is no longer in effect. Notwithstanding any
provision of this Agreement to the contrary, the Rights shall not be exercisable
in any jurisdiction if the requisite qualification in such jurisdiction shall
not have been obtained or the exercise thereof is not permitted under applicable
law.
(d) 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
of Rights shall, at the time of delivery of the certificates for such Preferred
Shares (subject to payment of the Purchase Price and any applicable transfer
taxes), be duly and validly authorized and issued and fully paid and
nonassessable shares.
(e) The Company further covenants and agrees that it will pay when due
and payable any and all federal and state transfer taxes and charges which may
be payable in respect of the issuance or delivery of the Right Certificates or
of any Preferred Shares (or Common Shares, preferred share equivalents or common
share equivalents, if applicable) upon the exercise of Rights. The Company shall
not, however, be required to pay any transfer tax which may be payable in
respect of any transfer or delivery of Right Certificates to a person other
than, or the issuance or delivery of certificates, scrip or depositary receipts
for the Preferred Shares (or Common Shares, preferred share equivalents or
common share equivalents, if applicable) in a name other than that of the
registered holder of the Right Certificate evidencing Rights surrendered for
exercise, or to issue or to deliver any certificates, scrip or depositary
receipts for Preferred Shares (or Common Shares, preferred share equivalents or
common share equivalents, if applicable) upon the exercise of any Rights until
any such tax shall have been paid (any such tax being payable by the holder of
such Right Certificate at the time of surrender) or until it has been
established to the Company's reasonable 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, preferred share equivalents
or common share equivalents, if applicable) is issued upon the exercise of
Rights shall for all purposes be deemed to have become the holder of record of
the Preferred Shares (or Common Shares, preferred share equivalents or common
share equivalents, if applicable) represented thereby on, and such certificate
shall be dated, the date upon which the Right Certificate evidencing such Rights
was duly surrendered and payment of the Purchase Price (and any applicable
transfer taxes) was made; provided, however, that if the date of such surrender
and payment is a date upon which the transfer
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books of the Company for the Preferred Shares (or Common Shares, preferred share
equivalents or common share equivalents, if applicable) are closed, such person
shall be deemed to have become the record holder of such shares on, and such
certificate shall be dated, the next succeeding Business Day on which such
transfer books are open. Prior to the exercise of the Rights evidenced thereby,
the holder of a Right Certificate shall not be entitled to any rights of a
holder of Preferred Shares (or Common Shares, preferred share equivalents or
common share equivalents, if applicable) 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 and kind of 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 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
Preferred Shares transfer books of the Company were open, such holder would
have owned upon such exercise and been entitled to receive by virtue of such
dividend, subdivision, combination or reclassification; provided, however,
that in no event shall the consideration to be paid upon the exercise of one
Right be less than the aggregate par value of the shares of capital stock of
the Company issuable upon exercise of one Right. If an event occurs which
would require an adjustment under both Section 11(a)(i) and Section
11(a)(ii), the adjustment provided for in this Section 11(a)(i) shall be in
addition to, and shall be made prior to, any adjustment required pursuant to
Section 11(a)(ii).
(ii) In the event
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(A) any person shall become an Acquiring Person, other than (1)
pursuant to any transaction set forth in Section 13(a) or (2) as a
result of an acquisition of Common Shares of the Company pursuant to a
tender offer or an exchange offer for all outstanding Common Shares of
the Company, after receiving advice from one or more investment banking
firms, to be (a) fair to shareholders (taking into account all factors
which the Board of Directors deems relevant), and (b) otherwise in the
best interests of the Company and its shareholders and which the Board
of Directors determines to recommend to the shareholders of the
Company, or
(B) during such time as there is an Acquiring Person, there shall
be any reclassification of securities (including any reverse stock
split) or recapitalization or reorganization of the Company or other
transaction or series of related transactions involving the Company or
any Subsidiary of the Company (whether or not with or into or otherwise
involving an Acquiring Person or any Affiliate or Associate thereof)
which has the effect, directly or indirectly, of increasing by more
than 1% the proportionate share of the outstanding shares of any class
of equity securities or of securities exercisable for or convertible
into equity securities of the Company or any of its Subsidiaries that
is directly or indirectly beneficially owned in the aggregate by any
Acquiring Person and its Associates or Affiliates,
then, and in each such case, proper provision shall be made so that each
holder of a Right, subject to Section 11(a)(iii), shall thereafter have a
right to receive, upon exercise thereof by payment of the amount equal to
the product of the number of one-hundredths of a Preferred Share which would
otherwise be issuable upon exercise of a Right and the then current Purchase
Price in accordance with the terms of this Agreement, in lieu of Preferred
Shares, such number of Common Shares of the Company as shall equal the
result obtained by (x) multiplying the then current Purchase Price by the
number of one one-hundredths of a Preferred Share for which a Right is
exercisable immediately prior to the first occurrence of a Section 11(a)(ii)
Event and (y) dividing that product by 50% of the current per share market
price of the Company's Common Shares (determined pursuant to Section 11(d))
on the date of such first occurrence. The Company shall not enter into any
transaction of the kind listed in subparagraph (ii)(B) if at the time of
such transaction there are any rights, warrants, instruments or securities
outstanding or any agreements or arrangements which, as a result of the
consummation of such transaction, would substantially diminish or otherwise
eliminate the benefits intended to be afforded by the Rights.
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From and after the first occurrence of a Section 11(a)(ii) Event, any
Rights that are beneficially owned by (i) any Acquiring Person or any
Associate or Affiliate of such Acquiring Person, (ii) a transferee of an
Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee after the Acquiring Person becomes such, or (iii) a transferee of
an Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee prior to or concurrently with the Acquiring Person becoming such
and receives suchRights pursuant to either (A) a transfer (whether or not
for consideration) from the Acquiring Person to holders of equity interests
in such Acquiring Person or to any Person with whom the Acquiring Person has
any continuing agreement, arrangement or understanding regarding the
transferred Rights or (B) a transfer which the Board of Directors of the
Company has determined is part of a plan, arrangement or understanding which
has as a primary purpose or effect the avoidance of this paragraph, shall
become null and void without any further action and no holder of such Rights
shall have any rights whatsoever with respect to such Rights, whether under
any provision of this Agreement or otherwise. The Company shall use all
reasonable efforts to insure that the provisions hereof are complied with,
but shall have no liability to any holder of a Right Certificate or other
Person as a result of its failure to make any determinations with respect to
an Acquiring Person or its Affiliates, Associates or transferees.
(iii)If, on the date of the first occurrence of a Section 11(a)(ii)
Event (the "Adjustment Date"), the Company does not have sufficient
authorized, unissued and unreserved Common Shares available to permit the
exercise in full of all Rights that are exercisable on the Adjustment Date
for the number of Common Shares per Right provided for in Section 11(a)(ii),
then the Exercise Price (as such term is defined below) and the number of
Common Shares to be delivered by the Company upon exercise of a Right shall
be further adjusted as provided in this subparagraph (iii).
(1) Definitions:
(A) The "Aggregate Market Value" is the product of (i) the
number of Available Shares and (ii) the current per share market
price of the Common Shares on the Adjustment Date, determined as
provided in Section 11(d).
(B) The "Available Shares" are all unreserved Common Shares
which are authorized and unissued immediately prior to the
Adjustment Date.
(C) The "Exercise Price" is the amount of the payment that
must be made by the holder of a Right in connection with the
exercise of one Right immediately prior to the Adjustment Date.
(D) The "Deficiency" is the amount by which (i) two times
the Exercise Price exceeds (ii) the quotient obtained by dividing
the Aggregate Market Value by the number of Rights remaining
outstanding immediately prior to the Adjustment Date (the
"Remaining Rights") (which number shall not include the Rights
that are or were beneficially owned by any Acquiring Person (or
any Associate or Affiliate or certain transferees thereof) that
shall have become void pursuant to Section 11(a)(ii)).
(2) If the Deficiency is less than or equal to the Exercise
Price, then
(A) the number of Common Shares to be delivered by the
Company upon exercise of a Right shall be adjusted to be equal to
the number of Available Shares divided by the number of Remaining
Rights; and
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<PAGE>
(B) the amount of cash required to be delivered by the
holder of a Right upon the exercise thereof shall be adjusted (the
"New Exercise Price") to equal the Exercise Price minus the
Deficiency; provided, however, that in no event will the New
Exercise Price be less than the aggregate par value of the Common
Shares required to be delivered upon the exercise of one Right
pursuant to subparagraph (2)(A) above.
(3) If the Deficiency is greater than the Exercise Price, then
(A) the number of Common Shares to be delivered by the
Company upon exercise of a Right shall be adjusted to equal the
quotient obtained by dividing the Exercise Price by the current
per share market price of the Common Shares on the Adjustment
Date;
(B) the New Exercise Price shall equal the aggregate par
value of the Common Shares required to be delivered upon the
exercise of one Right pursuant to subparagraph (3)(A) above; and
(C) in lieu of issuing Common Shares (in whole or in part
upon the exercise of Rights) the Company may issue, upon the
exercise of Rights at the New Exercise Price, other equity
securities of the Company (including, without limitation, shares
or units or fractions of shares, of preferred stock which the
Board of Directors of the Company has determined to have
substantially the same value as Common Shares (such equity
securities are herein called "common share equivalents")). To the
extent that such common share equivalents (or fractions thereof)
are substituted for Common Shares upon exercise of the Rights
following the occurrence of a Section 11(a)(ii) Event, they shall
be substituted on a pro rata basis with respect to all Rights
(other than Rights that are or were beneficially owned by any
Acquiring Person (or any Associate or Affiliate or certain
transferees thereof) that shall have become void pursuant to
Section 11(a)(ii)). Such common share equivalents shall not be
included in Available Shares, and all of the Available Shares
shall be reserved, as of the Adjustment Date, for issuance, on a
pro-rata basis, upon exercise of the Rights and may be substituted
for with common share equivalents upon the exercise of any Right
except to the extent that the number of Common Shares required to
be delivered under subparagraph (3)(A) upon the exercise of such
Right exceeds the quotient of the number of Available Shares
divided by the number of Remaining Rights.
(4) If, at the time any adjustment is required pursuant to this
Section 11(a)(iii), the Common Shares shall have no par value, then for
the purposes of this Section 11(a)(iii) the par value of the Common
Shares shall be deemed to be $.01 per share.
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(5) In the event that there shall not be sufficient authorized
but unissued and unreserved Common Shares (or common share equivalents
the issuance of which is permitted under Section 11(a)(iii)(3)(C)) to
permit the exercise in full of the Rights in accordance with this
subparagraph (iii), the Company shall use its best efforts to cause the
authorization of sufficient additional Common Shares or common share
equivalents to permit such exercise and, if the Board of Directors of
the Company shall have determined in good faith that it is likely that
sufficient additional Common Shares or common share equivalents could
be authorized to permit such exercise, the Company may suspend the
exercisability of the Rights for a period not to exceed 90 days in
order to seek any authorization of additional Common Shares or other
common share equivalents. In the event of any such suspension, the
Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended as well as
a public announcement at such time as the suspension is no longer in
effect.
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(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 (such shares are
herein called "preferred share equivalents")) or securities convertible into
Preferred Shares or preferred share equivalents at a price per Preferred
Share or preferred share equivalent (or having a conversion price per share,
if a security convertible into Preferred Shares or preferred share
equivalents) less than the then current per share market price (as such term
is defined in Section 11(d)) of the Preferred Shares on such record date,
the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to
such record date by a fraction, the numerator of which shall be the number
of Preferred Shares 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 preferred share equivalents 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 plus the number of additional Preferred Shares and/or preferred share
equivalents 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 a consideration part or all of which
shall be in a form other than cash, the value of such consideration shall be
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent
and shall be binding on the Rights Agent and the holders of the Rights.
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 by 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.
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(d) (i) For the purpose of any computation hereunder, 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; 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 Security payable in shares of such Security or
securities convertible into such shares, or (B) any subdivision, combination
or reclassification of such Security and prior to the expiration of 30
Trading Days after the ex-dividend date for such dividend or distribution,
or the record date for such subdivision, combination or reclassification,
then, and in each such case, the current 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 a furnished by
a professional market maker making a market in the Security selected by the
Board of Directors of the Company. If on any such day no market maker is
making a market in the Common Shares, the fair value of such share on such
day as determined in good faith by the Board of Directors of the Company
shall be used in lieu of the closing pricefor such day. 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). 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)
(appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof), multiplied by one
hundred. If neither the Common Shares nor the Preferred Shares are publicly
held or so listed or traded, "current per share market price" of the
Preferred Shares shall mean the fair value per share as determined in good
faith by a the Board of Directors of the Company, whose determination shall
be described in a statement filed with the Rights Agent.
(e) No adjustment in the Purchase Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in the
Purchase Price; provided, however, that any adjustments which by reason of
this Section 11(e) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under this
Section 11 shall be made to the nearest cent or to the nearest one
one-millionth of a Preferred Share or one ten-thousandth of any other share
or security as the case may be. Notwithstanding the first sentence of this
Section 11(e), any adjustment required by this Section 11 shall be made no
later than the earlier of (i) three years from the date of the transaction
which requires such adjustment or (ii) the date of the expiration of the
right to exercise any Rights.
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(f) If as a result of an adjustment made pursuant to Section 11(a) and
13(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), inclusive, and the provisions of Sections 7, 9, 10, 13 and 14
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 (or other securities) 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), subject to the provisions of Sections 11(a) and 13 hereof,
upon each adjustment of the Purchase Price as a result of the calculations
made in Sections 11(b) and (c), each Right outstanding immediately prior to
the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of 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 by (y) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price and (ii) dividing the product so obtained
by the Purchase Price in effect immediately after such adjustment of the
Purchase Price.
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(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 ten days later than the date of the public
announcement. If Right Certificates have been issued, upon each adjustment
of the number of Rights pursuant to this Section 11(i), the Company shall,
as promptly as practicable, cause to be distributed to holders of record of
Right Certificates on such record date Right Certificates evidencing,
subject to Section 14 hereof, the additional Rights to which such holders
shall be entitled as a result of such adjustment, or, at the option of the
Company, shall cause to be distributed to such holders of record in
substitution and replacement for the Right Certificates held by such holders
prior to the date of adjustment, and upon surrender thereof, if required by
the Company, new Right Certificates evidencing all the Rights to which such
holders shall be entitled after such adjustment. Right Certificates so to be
distributed shall be issued, executed and countersigned in the manner
provided for herein, may bear, at the option of the Company, the adjusted
Purchase Price, and shall be registered in the names of the holders of
record of Right Certificates on the record date specified in the public
announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or
the number of one one-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 upon the occurrence of the
event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and
to the extent that in their sole discretion the Board of Directors of the
Company 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 shareholders.
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(n) The Company covenants and agrees that, after the Distribution
Date, it will not, except as permitted by Section 23, 24 or 27, take (or
permit any Subsidiary of the Company to take) any action if at the time such
action is taken it is reasonably foreseeable that such action will diminish
substantially or otherwise eliminate the benefits intended to be afforded by
the Rights unless such action is approved by the Board of Directors of the
Company.
(o) Anything in this Agreement or the Rights 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 (i)
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 by a fraction, the numerator of which is the
number of Common Shares outstanding immediately before such event and the
denominator of which is the number of Common Shares outstanding immediately
after such event, and (ii) 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. If an event occurs
which would require an adjustment under Section 11(a)(ii) and this Section
11(o), the adjustments provided for in this Section 11(o) shall be in
addition and prior to any adjustment required pursuant to Section 11(a)(ii).
(p) If any adjustment in the Purchase Price pursuant to paragraph (b)
or (c) of this Section 11 would not be permitted by law, under the Company's
Certificate of Incorporation or under the Certificate of Designation
establishing the Preferred Shares, no such issuance of securities or
distribution of evidences of indebtedness or other assets or subscription
rights or warrants, as the case may be, that would require such an
adjustment but for the limitations established by law, the Company's
Certificate of Incorporation or such Certificate of Designation shall be
made by the Company.
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Sections 11 and 13 hereof, the
Company shall promptly (a) prepare a certificate setting forth such adjustment,
and a brief statement of the facts accounting for such adjustment, (b) file with
the Rights Agent and with each transfer agent for the Common Shares or the
Preferred Shares a copy of such certificate and (c) mail a brief summary thereof
to each holder of a Right Certificate in accordance with Section 25 hereof.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power.
(a) In the event, after the Distribution Date, or within 20 days prior
thereto, directly or indirectly,
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(w) the Company shall consolidate with, or merge with and into,
any other Person and the Company shall not be the continuing or
surviving corporation of such consolidation or merger,
(x) any Person (other than a Subsidiary of the Company) shall
consolidate with, or merge with and into, the Company and the Company
shall be the continuing or surviving corporation of such consolidation
or merger and, in connection with such consolidation or merger, all or
part of the outstanding Common Shares of the Company held by existing
shareholders of the Company shall be changed into or exchanged for
stock or other securities of any other Person (or the Company) or cash
or any other property,
(y) the Company shall effect a statutory share exchange with the
outstanding Common Shares of the Company being exchanged for stock or
other securities of any other Person, cash or property, or
(z) the Company shall sell or otherwise transfer (or one or more
of its Subsidiaries shall sell or otherwise transfer), in one or more
transactions, assets or earning power aggregating 50% or more of the
assets or earning power, respectively, 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,
then, and in each such case except as contemplated by Section 13(e), proper
provision shall be made so that (i) each holder of a Right (except as otherwise
provided in this Agreement) shall thereafter have the right to receive, upon the
exercise thereof by payment of the amount equal to the product of the number of
one one-hundredths of a Preferred Share which would otherwise be issuable upon
exercise of a Right and the then current Purchase Price 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 tradeable Common
Shares of the Principal Party (as such term is hereinafter defined), not subject
to any liens, encumbrances, rights of first refusal or adverse claims, as shall
be equal to the result obtained by (x) multiplying the then current Purchase
Price by the number of one one-hundredths of a Preferred Share for which a Right
is, immediately prior to the first occurrence of a Section 13 Event, exercisable
and (y) dividing that product by 50% of the current per share market price of
the Common Shares of such Principal Party (determined pursuant to Section 11(d))
on the date of consummation of such Section 13 Event; (ii) such Principal Party
shall thereafter be liable for, and shall assume, by virtue of such merger,
consolidation, statutory share exchange, sale or transfer, all the obligations
and duties of the Company pursuant to this Agreement; (iii) the term "Company"
shall thereafter be deemed to refer to such Principal Party; and (iv) such
Principal Party shall take such steps (including, but not limited to, the
reservation of a sufficient number of its Common Shares to permit the exercise
of all outstanding Rights) in connection with the consummation of any such
transaction as may be necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in relation to its
Common Shares thereafter deliverable upon the exercise of the Rights.
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(b) "Principal Party" shall mean:
(i) in the case of any transaction described in clauses (w),(x) or (y)
of the first sentence of Section 13(a), the Person that is the issuer of any
securities into which Common Shares of the Company are converted in such
merger, consolidation or exchange, or if no securities are so issued, the
Person that is the other party to such merger, consolidation or exchange;
and
(ii) in the case of any transaction described in clause (z) of the
first sentence of Section 13(a), the Person that is the party receiving the
greatest portion of the assets or earning power transferred pursuant to such
transaction or transactions;
provided, however, that in any such case, (1) if the Common Shares of such
Person are not at such time or have not been continuously over the preceding 12
month period registered under Section 12 of the Exchange Act, and such Person is
a direct or indirect Subsidiary of another Person the Common Shares of which are
and have been so registered, "Principal Party" shall refer to such other Person,
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.
(c) The Company shall not consummate any Section 13 Event unless the
Principal Party shall have a sufficient number of authorized, unreserved Common
Shares which have not been issued or are held in treasury to permit the exercise
in full of the Rights in accordance with this Section 13 and unless prior
thereto the Company and such Principal Party shall have executed and delivered
to the Rights Agent a supplemental agreement providing for the terms set forth
in paragraphs (a) and (b) of this Section 13 and further providing that, as
soon as practicable after the date of any Section 13 Event, the Principal Party
will:
(i) prepare and file a registration statement under the Act, with
respect to the Rights and the securities purchasable upon exercise of the
Rights, on an appropriate form, and use its best efforts to cause such
registration statement to (A) become effective as soon as practicable after
such filing and (B) remain effective (with a prospectus at all times meeting
the requirements of the Act) until the earlier of (1)the date as of which
the Rights are no longer exercisable for such securities or (2) the Final
Expiration Date;
(ii) take such action as may be appropriate under, or to ensure
compliance with, the securities or "blue sky" laws of the various states in
connection with the exercisability of the Rights; and
(iii)deliver to holders of the Rights historical financial statements
for the Principal Party and each of its Affiliates which comply in all
respects with the requirements for registration on Form 10 under the
Exchange Act.
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<PAGE>
(d) 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
substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights. Without limiting the generality of the preceding
sentence, in case the Principal Party which is to be a party to a transaction of
the kind referred to in this Section 13 has a provision in any of its authorized
securities or in its Certificate of incorporation or bylaws or other instrument
governing its corporate affairs, which provision would have the effect of (i)
causing such Principal Party to issue, in connection with, or as a consequence
of, the consummation of a transaction of the kind referred to in this Section
13, Common Shares of such Principal Party at less than the then current per
share market price (determined pursuant to Section 11(d)) or securities
exercisable for or convertible into common shares of such Principal Party at
less than such then current market price (other than to holders of Rights
pursuant to this Section 13) or (ii) providing for any special payment, tax or
similar provisions in connection with the issuance of Common Shares of such
Principal Party pursuant to the provisions of Section 13; then, in such event,
the Company shall not consummate any such transaction unless prior thereto the
provision in question of such Principal Party shall have been canceled, waived
or amended so as to avoid any of the effects referred to in clauses (i) and (ii)
of this paragraph, or the authorized securities shall have been redeemed, so
that the applicable provision will have no effect in connection with, or as a
consequence of, the consummation of the proposed transaction.
(e) Notwithstanding anything in this Agreement to the contrary,
Section 13 shall not be applicable to a transaction described in clauses (w),
(x) (y) or (z) of Section 13(a) if (i) such transaction is consummated with a
Person or Persons who acquired Common Shares pursuant to a tender offer or
exchange offer for all outstanding Common Shares which complies with the
provisions of clause (2) of Section 11(a)(ii)(A) (or a wholly owned Subsidiary
of any such Person or Persons), (ii) the price per Common Share offered in such
transaction is not less than the price per Common Share paid to all holders of
Common Shares whose shares were purchased pursuant to such tender offer or
exchange offer and (iii) the form of consideration being offered to the
remaining holders of Common Shares pursuant to such transaction is the same as
the form of consideration paid pursuant to such tender offer or exchange offer.
Upon consummation of any such transaction contemplated by this Section 13(e),
all Rights hereunder shall expire.
(f) The provisions of this Section 13 shall similarly apply to
successive mergers, consolidations, statutory share exchanges or sale or other
transfers.
Section 14. Fractional Rights and Fractional Shares.
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(a) The Company shall not be required to issue fractions of Rights or
to distribute Right Certificates which evidence fractional Rights. In lieu of
such fractional Rights, there shall be paid to the registered holders of the
Right Certificates with regard to which such fractional Rights would otherwise
be issuable an amount in cash equal to the same fraction of the current market
value of a whole Right. For the purposes of this Section 14(a), the current
market value of a whole Right shall be the closing price of the Rights for the
Trading Day immediately prior to the date on which such fractional Rights would
have been otherwise issuable. The closing price for any day shall be the last
sale price, regular way, or, 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 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 shall not be required to issue fractions of Preferred
Shares (other than fractions which are integral multiples of one one-hundredth
of a Preferred Share) upon exercise of the Rights or to distribute certificates
which evidence fractional Preferred Shares (other than fractions which are
integral multiples of one one-hundredth of a Preferred Share). Fractions of
Preferred Shares in integral multiples of one one-hundredth of a Preferred Share
may, at the election of the Company, be evidenced by depositary receipts
pursuant to an appropriate agreement between the Company and a depositary
selected by it, or by scrip; provided, however, that (i) if the Company issues
such scrip, then such scrip shall not confer upon the holder any voting or other
rights of a stockholder of the Company, but the Company shall from time to time,
upon demand of any holder of such scrip and the surrender of scrip for
fractional Preferred Shares aggregating one whole Preferred Share, issue one
whole Preferred Share to such holder and (ii) if the Company issues depositary
receipts pursuant to any such agreement, such agreement shall provide that the
holders of such depositary receipts shall have all the rights, privileges and
preferences to which they are entitled as beneficial owners of the Preferred
Shares represented by such depositary receipts. In lieu of fractional Preferred
Shares that are not integral multiples of one one-hundredth of a Preferred
Share, the Company shall pay to the registered holders of Right Certificates at
the time such Rights are exercised as herein provided an amount in cash equal to
the same fraction of the current market value of one Preferred Share. For the
purposes of this Section 14(b), the current market value of a Preferred Share
shall be the closing price of a Preferred Share (as determined pursuant to
Section 11(d)(ii) hereof) for the Trading Day immediately prior to the date of
such exercise.
(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 of a Right (except as provided above).
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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 such holder's own behalf and
for such holder's own benefit, enforce, and may institute and maintain any suit,
action or proceeding against the Company to enforce, or otherwise act in respect
of, such holder's right to exercise the Rights evidenced by such Right
Certificate in the manner provided in such Right Certificate and in this
Agreement. Without limiting the foregoing or any remedies available to the
holders of Rights, it is specifically acknowledged that the holders of Rights
would not have an adequate remedy at law for any breach of this Agreement and
will be entitled to specific performance of the obligations under, and
injunctive relief against actual or threatened violations of the obligations of
any Person subject to, this Agreement.
Section 16. Agreement of Right Holders. Every holder of a Right, by
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of the Common Shares;
(b) after the Distribution Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if surrendered
at the 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 Certificates or the associated Common
Shares certificate made by anyone other than the Company or the Rights
Agent) for all purposes whatsoever, and neither the Company nor the Rights
Agent shall be affected by any notice to the contrary;
(d) the Company may issue Rights after the Record Date but prior to
the Distribution Date as provided in this Agreement; and
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(e) notwithstanding anything in this Agreement or the Rights to the
contrary, the Company, the Rights Agent and the Board of Directors of the
Company shall not have any liability to any holder of a Right or other
Person as a result of the inability of the Company or the Rights Agent to
perform any of its obligations under this Agreement by reason of any
preliminary or permanent injunction or other order, decree or ruling issued
by a court of competent jurisdiction or by a governmental, regulatory or
administrative agency or commission, or any statute, rule, regulation or
executive order promulgated or enacted by any governmental authority
prohibiting or otherwise restraining performance of such obligation.
Section 17. Right Certificate Holder Not Deemed a Stockholder. No
holder, as such, of any Right Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of 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 shareholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
shareholders (except as provided in Section 25 hereof), or to receive dividends
or subscription rights, or otherwise, until the Right or Rights evidenced by
such Right Certificate shall have been exercised in accordance with the
provisions hereof.
Section 18. Concerning the Rights Agent.
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
other disbursements incurred in the administration and execution of this
Agreement and the exercise and performance of its duties hereunder. The Company
also agrees to indemnify the Rights Agent for, and to hold it harmless against,
any loss, liability, or expense, incurred without negligence, bad faith or
willful misconduct on the part of the Rights Agent, for anything done or omitted
by the Rights Agent in connection with the acceptance and administration of this
Agreement, including the costs and expenses of defending against any claim of
liability in the premises.
(b) The Rights Agent shall be protected and shall incur no liability
for, or in respect of any action taken, suffered or omitted by it in connection
with, its administration of this Agreement in reliance upon any Right
Certificate or certificate for the Preferred Shares (or for scrip or depositary
receipts evidencing fractional interests in 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.
Section 19. Merger or Consolidation or Change of Name of Rights Agent.
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(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 business of the Rights Agent or any
successor Rights Agent, shall be the successor to the Rights Agent under this
Agreement without the execution or filing of any paper or any further act on the
part of any of the parties hereto, provided that such corporation would be
eligible for appointment as a successor Rights Agent under the provisions of
Section 21 hereof. In case at the time such successor Rights Agent shall succeed
to the agency created by this Agreement any of the Right Certificates shall have
been countersigned but not delivered, any such successor Rights Agent may adopt
the countersignature of the predecessor Rights Agent and deliver such 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,
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, the Vice
Chairman, the President, any Executive Vice President, any Vice President,
the Treasurer, the Secretary or the Controller of the Company and delivered
to the Rights Agent; and such certificate shall be full authorization to the
Rights Agent for any action taken or suffered in good faith by it under the
provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the Company and any
other Person only for its own negligence, bad faith or willful misconduct.
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(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 void pursuant to
Section 11(a)(ii) 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, 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 receipt of actual notice
from the Company stating that a change or adjustment is required and
specifying the manner and amount thereof); nor shall it by any act hereunder
be deemed to make any representation or warranty as to the authorization or
reservation of any Preferred Shares to be issued pursuant to this Agreement
or any Right Certificate or as to whether any Preferred Shares will, when
issued, be validly authorized and issued, fully paid and 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 Agents 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 Vice Chairman, the President, any
Executive Vice President, any Vice President, the Secretary, the Treasurer
or the Controller of the Company, and to apply to such officers for advice
or instructions in connection with its duties, and it shall not be liable
for any action taken or suffered to be taken by it in good faith in
accordance with instructions of any such officer or for any delay in acting
while waiting for those instructions.
(h) The Rights Agent and any shareholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or
other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or lend
money to the Company or otherwise act as fully and freely as though it were
not Rights Agent under this Agreement. Nothing herein shall preclude the
Rights Agent from acting in any other capacity for the Company or for any
other legal entity.
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(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) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties under this Agreement or in the exercise
of its rights or powers if there shall be reasonable grounds for believing
that repayment of such funds or adequate indemnification against such risk
or liability is not reasonably assured to it.
(k) If, with respect to any Right Certificate surrendered to the
Rights Agent for exercise or transfer, the form of assignment or form of
election to purchase, as the case may be, has either not been duly completed
and executed or indicates an affirmative response to enumerated clause (1)
and/or (2) on the reverse side of the applicable Right Certificate, the
Rights Agent shall not take any further action with respect to such
requested exercise or transfer without first consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days' notice in writing mailed to the Company and to each transfer agent
of the Common Shares and Preferred Shares by registered or certified mail, and
to the holders of the Rights Certificates by first-class mail. The Company may
remove the Rights Agent or any successor Rights Agent upon 30 days' notice in
writing, mailed to the Rights Agent or successor Rights Agent, as the case may
be, and to each transfer agent of the Common Shares and Preferred Shares by
registered or certified mail, and to the holders of the Right Certificates by
first-class mail. If the Rights Agent shall resign or be removed or shall
otherwise become incapable of acting, the Company shall appoint a successor to
the Rights Agent. If the Company shall fail to make such appointment within a
period of 30 days after giving notice of such removal or after it has been
notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Right Certificate (who shall,
with such notice, submit his Right Certificate for inspection by the Company),
then the registered holder of any Right Certificate may apply to any court of
competent jurisdiction for the appointment of a new Rights Agent. Any successor
Rights Agent, whether appointed by the Company or by such a court, shall be (a)
a corporation organized and doing business under the laws of the United States
or of the State of Minnesota or New York (or of any other state of the United
States so long as such corporation is authorized to do business as a banking
institution in the State of Minnesota or New York), in good standing, having an
office in the State of Minnesota or New York, which is authorized under such
laws to exercise corporate trust or stock transfer powers and is subject to
supervision or examination by federal or state authority and which has or is a
subsidiary of a corporation which has at the time of its appointment as Rights
Agent a combined capital and surplus of at least $50 million, or (b) an
affiliate of a corporation described in clause (a) of this sentence.
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After appointment, the successor Rights Agent shall be vested with the same
powers, rights, duties and responsibilities as if it had been originally named
as Rights Agent without further act or deed; but the predecessor Rights Agent
shall deliver and transfer to the successor Rights Agent any property at the
time held by it hereunder, and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose. Not later than the effective
date of any such appointment the Company shall file notice thereof in writing
with the predecessor Rights Agent and each transfer agent of the Common Shares
and Preferred Shares, and mail a notice thereof in writing to the registered
holders of the Right Certificates. Failure to give any notice provided for in
this Section 21, however, or any defect therein, shall not affect the legality
or validity of the resignation or removal of the Rights Agent or the appointment
of the successor Rights Agent, as the case may be.
Section 22. Issuance of New Right Certificates. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Right Certificates evidencing Rights in such form
as may be approved by its Board of Directors to reflect any adjustment or change
in the Purchase Price and the number or kind or class of shares or other
securities or property purchasable under the Right Certificates made in
accordance with the provisions of this Agreement.
Section 23. Redemption.
(a) Subject to the provisions of Section 27, 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 twentieth day after the Share Acquisition Date (or, if
the twentieth day following such Share Acquisition Date occurs before the Record
Date, the Close of Business on the Record Date) or (ii) the Final Expiration
Date, redeem all but not less than all of the then outstanding Rights at a
redemption price of $.001 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").
Notwithstanding anything contained in this Agreement to the contrary, the Rights
shall not be exercisable after the first occurrence of a Section 11(a)(ii) Event
until such time as the Company's right of redemption set forth in the first
sentence of this Section 23(a) has expired. The Company may, at its option, pay
the Redemption Price in cash, Common Shares of the Company (based on the current
per share market price of the Common Shares at the time of redemption) or any
other form of consideration deemed appropriate by the Board of Directors. The
redemption of the Rights by the Board of Directors may be made effective at such
time and on such basis and with such conditions as the Board of Directors in its
sole discretion may establish. The Board of Directors and the Company shall not
have any liability to any Person as a result of the redemption of Rights
pursuant to the terms of this Section 23.
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(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. The Company shall promptly
give public notice of any such redemption; provided, however, that the failure
to give, or any defect in, any such notice shall not affect the validity of such
redemption. Within ten days after such action of the Board of Directors ordering
the redemption of the Rights, the Company shall mail a notice of redemption to
all the holders of the then outstanding Rights at their last addresses as they
appear upon the registry books of the Rights Agent or, prior to the Distribution
Date, on the registry books of the transfer agent for the Common Shares. Any
notice which is mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice. Each such notice of redemption
will state the method by which the payment of the Redemption Price will be made.
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 the Adjustment Date (as such term is defined in Section 11(a)(iii)),
exchange all or part of the then outstanding and exercisable Rights (which shall
not include Rights that have become void pursuant to the provisions of Section
11(a)(ii) hereof) for Common Shares, with each Right to be exchanged for such
number of Common Shares as shall equal the result obtained by dividing (x) the
Exercise Price (as such term is defined in Section 11(a)(iii)) by (y) the
current per share market price of the Common Shares (determined pursuant to
Section 11(d) on the Adjustment Date (such number of shares being hereinafter
referred to as the "Exchange Ratio")). The Exchange Ratio shall be appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
affecting the Common Shares that occurs after the Adjustment Date.
Notwithstanding the foregoing, the Board of Directors 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 the Company or any such
Subsidiary, or any entity holding Common Shares 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% or more of the Common Shares then
outstanding.
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(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 by the Exchange Ratio. The
Company shall promptly give public notice of any such exchange; provided,
however, that the failure to give, or any defect in, such notice shall not
affect the validity of such exchange. The Company promptly shall mail a notice
of any such exchange to all of the holders of such Rights at their last
addresses as they appear upon the registry books of the Rights Agent. Any notice
which is mailed in the manner herein provided shall be deemed given, whether or
not the holder receives the notice. Each such notice of exchange will state the
method by which the exchange of the Common Shares for Rights will be effected
and, in the event of any partial exchange, the number of Rights which will be
exchanged. Any partial exchange shall be effected pro rata based on the number
of outstanding and exercisable Rights (other than Rights which have become void
pursuant to the provisions of Section 11(a)(ii) hereof) held by each holder of
Rights.
(c) In any exchange pursuant to this Section 24, the Company, at its
option, may substitute Preferred Shares (or preferred share equivalents, as such
term is defined in Section 11(b), or common share equivalents, as such term is
defined in Section 11(a)(iii)(3)(C)) for Common Shares exchangeable for Rights,
at the initial rate of one one-hundredth of a Preferred Share (or preferred
share equivalent) or one common share equivalent for each Common Share, as
appropriately adjusted to reflect adjustments in the voting rights of the
Preferred Shares pursuant to the terms thereof, so that the product of (i) the
fraction of a Preferred Share delivered in lieu of each Common Share multiplied
by (ii) the number of votes to which a whole Preferred Share is then entitled
shall equal the number of votes to which one Common Share is then entitled.
(d) In the event that there shall not be sufficient Common Shares,
Preferred Shares, preferred share equivalents or common share equivalents issued
but not outstanding or authorized but unissued and unreserved to permit any
exchange of Rights as contemplated in accordance with this Section 24, the
Company shall take all such action as may be necessary to authorize additional
Common Shares, Preferred Shares, preferred share equivalents or common share
equivalents for issuance upon exchange of the Rights.
(e) The Company shall not be required to issue fractions of Common
Shares or to distribute certificates which evidence fractional Common Shares. In
lieu of such fractional Common Shares, the Company shall pay to the registered
holders of the Right Certificates with regard to which such fractional Common
Shares would otherwise be issuable an amount in cash equal to the same fraction
of the current market value of a whole Common Share. For the purposes of this
paragraph (e), the current market value of a whole Common Share shall be the
closing price of a Common Share (as determined pursuant to the second sentence
of Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of
exchange pursuant to this Section 24. The Board of Directors of the Company
shall not have any liability to any Person as a result of the exchange of Rights
pursuant to the terms of this Section.
Section 25. Notice of Certain Events.
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(a) In case the Company shall propose (i) to pay any dividend payable
in 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 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% 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 any statutory share exchange with the
outstanding Common Shares of the Company being exchanged for stock or other
securities of any other corporation or cash or other property, (vi) to effect
the liquidation, dissolution or winding up of the Company, or (vii) to declare
or pay any dividend on the Common Shares payable in Common Shares or to effect a
subdivision, combination or consolidation of the Common Shares (by
reclassification or otherwise than by payment of dividends in Common Shares),
then, in each such case, the Company shall give to each holder of a Right
Certificate, in accordance with Section 26 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) of this paragraph at least ten 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 ten 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 any of the events set forth in Section 11(a)(ii) hereof
shall occur, then the Company shall as soon as practicable thereafter give to
each holder of a Right Certificate, 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:
Musicland Stores Corporation
10400 Yellow Circle Drive
Minnetonka, Minnesota 55343
Attn: General Counsel
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:
Norwest Bank Minnesota, National Association
161 North Concord Exchange
South St. Paul, Minnesota 55075-0738
Attn: Stock Transfer Department
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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. The Company may from time to
time supplement or amend this Agreement without the approval of any holders of
Right Certificates in order (i) to extend the Final Expiration Date or, provided
that at the time of such amendment no Person has become an Acquiring Person, the
period during which the Rights may be redeemed, notwithstanding anything to the
contrary provided in clause (iv) hereof, (ii) to cure any ambiguity, to correct
or supplement any provision contained herein which may be defective or
inconsistent with any other provisions of this Agreement, (iii) prior to the
Distribution Date, to otherwise change or supplement any provision in this
Agreement in any manner which the Company may deem necessary or desirable, or
(iv) subject to clause (i) hereof, following the Distribution Date, to
otherwise change or supplement any provision in this Agreement in any manner
which the Company may deem necessary or desirable and which shall not adversely
affect the interests of the holders of Right Certificates (other than an
Acquiring Person or an Affiliate or Associate of an Acquiring Person).
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 or corporation other than the Company, the
Rights Agent and the registered holders of the Right Certificates (and, prior to
the Distribution Date, 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, 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 the laws of the
State of Delaware and for all purposes shall be governed by and construed in
accordance with the laws of such State applicable to contracts to be made and
performed entirely within such State.
Section 32. Counterparts. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
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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 hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, all as of the day and year first above written.
MUSICLAND STORES CORPORATION
By /s/ Jack W. Eugster
------------------------------------------
Its Chairman, CEO and President
---------------------------------------
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
By /s/ Beverly Robinson
------------------------------------------
Its Officer/Account Manager
---------------------------------------
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Exhibit A
CERTIFICATE OF DESIGNATION
OF
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
OF
MUSICLAND STORES CORPORATION
(Pursuant to Delaware General Corporation Law, Section 151(g))
The undersigned hereby certifies that the Board of Directors of Musicland
Stores Corporation (the "Corporation"), a corporation organized and existing
under the Delaware General Corporation Law, in accordance with Section 151(g)
thereof on March 14, 1995, duly adopted the following resolution:
RESOLVED, that a series of preferred stock of the Corporation is hereby
created, and the designation and amount thereof and the relative rights and
preferences of the shares of such series, are as follows:
Section 1. Designation and Amount. The shares of such series shall be
designated as "Series A Junior Participating Preferred Stock" (the "Preferred
Shares") and the number of shares constituting the Preferred Shares shall be
750,000. Such number of shares may be increased or decreased by resolution of
the Board of Directors and any necessary shareholder approval; provided,
however, that no decrease shall reduce the number of shares of Preferred Shares
to a number less than the number of shares then outstanding plus the number of
shares reserved for issuance upon the exercise of outstanding options, rights or
warrants or upon the conversion of any outstanding securities issued by the
Corporation convertible into Preferred Shares.
Section 2. Dividends and Distributions.
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(a) Subject to the rights of the holders of any shares of any series
of preferred stock (or any similar stock) ranking prior and superior to the
Preferred Shares with respect to dividends, the holders of Preferred Shares, in
preference to the holders of Common Stock, par value $.01 (the "Common Stock"),
of the Corporation, and of any other junior stock, shall be entitled to receive,
when, as and if declared by the Board of Directors out of funds legally
available for the purpose, quarterly dividends payable in cash on the first day
of March, June, September and December in each year (each such date being
referred to herein as a "Quarterly Dividend Payment Date"), commencing on the
first Quarterly Dividend Payment Date after the first issuance of a share or
fraction of a share of Preferred Shares, in an amount per share (rounded to the
nearest cent) equal to the greater of (a) $1.00 or (b) subject to the provision
for adjustment hereinafter set forth, 100 times the aggregate per share amount
of all cash dividends, and 100 times the aggregate per share amount (payable in
kind) of all non-cash dividends or other distributions, other than a dividend
payable in shares of Common Stock or a subdivision of the outstanding shares of
Common Stock (by reclassification or otherwise), declared on the Common Stock
since the immediately preceding Quarterly Dividend Payment Date or, with respect
to the first Quarterly Dividend Payment Date, since the first issuance of any
share or fraction of a share of Preferred Shares. In the event the Corporation
shall at any time after March 20, 1995, declare or pay any dividend on the
Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise) into a greater or lesser number of shares of
Common Stock, then in each such case the amount to which holders of shares of
Preferred Shares were entitled immediately prior to such event under clause (b)
of the preceding sentence shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
(b) The corporation shall declare a dividend or distribution on the
Preferred Shares as provided in paragraph (A) of this Section immediately after
it declares a dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock or a subdivision of the outstanding
Common Stock); provided that, in the event no dividend or distribution shall
have been declared on the Common Stock during the period between any Quarterly
Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a
dividend of $1.00 per share on the Preferred Shares shall nevertheless be
payable, out of funds legally available for such purpose, on such subsequent
Quarterly Dividend Payment Date.
(c) Dividends shall begin to accrue and be cumulative on outstanding
shares of Preferred Shares from their date of issue. Accrued but unpaid
dividends shall not bear interest. Dividends paid on the shares of Preferred
Shares in an amount less than the total amount of such dividends at the time
accrued and payable on such shares shall be allocated pro rata on a share-by-
share basis among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders of Preferred
Shares entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be not more than 60 days prior to the date
fixed for the payment thereof.
Section 3. Voting Rights.
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(a) Subject to the provision for adjustment hereinafter set forth,
each preferred share shall entitle the holder thereof to 100 votes on all
matters submitted to a vote of the stockholders of the Corporation. In the event
the Corporation shall at any time after March 20, 1995, declare or pay any
dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise) into a greater or lesser number of
shares of Common Stock, then in each such case the number of votes per share to
which holders of shares of Preferred Shares were entitled immediately prior to
such event shall be adjusted by multiplying such number by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(b) Except as otherwise provided herein or by law, the holders of
Preferred Shares and the holders of Common Stock and any other capital stock of
the Corporation having general voting rights shall vote together as one class on
all matters submitted to a vote of shareholders of the Corporation.
(c) Except as set forth herein by law, holders of Preferred Shares
shall have no special voting rights and their consent shall not be required
(except to the extent they are entitled to vote with holders of Common Stock as
set forth herein) for taking any corporate action.
Section 4. Certain Restrictions.
(a) Whenever quarterly dividends or other dividends or distributions
payable on the Preferred Shares 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 Preferred Shares outstanding shall have been paid
in full, the Corporation shall not:
(i) declare or pay dividends, or make any other distributions, on any
shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Preferred Shares;
(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 Preferred Shares, except
dividends paid ratably on the Preferred Shares and all such parity stock on
which dividends are payable or in arrears in proportion to the total amounts
to which the holders of all such shares are then entitled;
(iii)redeem or purchase or otherwise acquire for consideration shares
of any stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Preferred Shares; provided, however, that
the Corporation may at any time redeem, purchase or otherwise acquire shares
of any such junior stock in exchange for shares of any stock of the
Corporation ranking junior (either as to dividends or upon dissolution,
liquidation or winding up) to the Preferred Shares; or
(iv) redeem or purchase or otherwise acquire for consideration any
Preferred Shares, or any stock ranking on a parity with the Preferred
Shares, 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.
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(b) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Preferred Shares purchased
or otherwise acquired by the Corporation in any manner whatsoever shall be
retired and cancelled promptly after the acquisition thereof. All such shares
shall upon their cancellation become authorized but unissued shares of preferred
stock and may be reissued as part of a new series of preferred stock subject to
the conditions and restrictions on issuance set forth herein, in the Articles of
Incorporation, or in any other certificate of designation creating a series of
preferred stock or any similar stock or as otherwise required by law.
Section 6. Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the Corporation, no distribution shall
be made (1) to the holders of shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Preferred
Shares unless, prior thereto, the holders of Preferred Shares shall have
received the greater of (i) $100 per share, plus an amount equal to accrued and
unpaid dividends and distributions thereon, whether or not declared, to the date
of such payment, or (ii) an aggregate amount per share, subject to the provision
for adjustment hereinafter set forth, equal to 100 times the aggregate amount to
be distributed per share to holders of Common Stock, or (2) to the holders of
stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Preferred Shares, except distributions made
ratably on the Preferred Shares and all such parity stock in proportion to the
total amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up. In the event the Corporation shall at
any time after March 20, 1995, declare or pay any dividend on the Common Stock
payable in shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by reclassification or
otherwise) into a greater or lesser number of shares of Common Stock, then in
each such case the aggregate amount to which holders of shares of Preferred
Shares were entitled immediately prior to such event under clause (1)(ii) of the
preceding sentence shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
A-4
<PAGE>
Section 7. Consolidation, Merger, etc. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Preferred Shares shall at the same time be similarly exchanged or changed into
an amount per share, subject to the provision for adjustment hereinafter set
forth, equal to 100 times the aggregate amount of stock, securities, cash and/or
any other property (payable in kind), as the case may be, into which or for
which each share of Common Stock is changed or exchanged. In the event the
Corporation shall at any time after March 20, 1995, declare or pay any dividend
on the Common Stock payable in shares of Common Stock, or effect a subdivision
or combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise) into a greater or lesser number of shares of
Common Stock, then in each such case the amount set forth in the preceding
sentence with respect to the exchange or change of shares of Preferred Shares
shall be adjusted by multiplying such amount by a fraction, the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
Section 8. No Redemption. The shares of Preferred Shares shall not be
redeemable.
Section 9. Rank. The Preferred Shares shall rank, with respect to the
payment of dividends and the distribution of assets, junior to all series of any
other class of the Corporation's preferred stock.
Section 10. Fractional Shares. Preferred Shares may be issued in
fractions of a share which are integral multiples of one one-hundredth of a
share which shall entitle the holder, in proportion to such holder's fractional
shares, to receive dividends, participate in distributions and to have the
benefit of all other rights of holders of Preferred Shares.
Section 11. Amendment. The Articles of Incorporation of the Corporation
shall not be amended in any manner which would materially alter or change the
powers, preferences or rights of the Preferred Shares so as to affect them
adversely without the affirmative vote of the holders of at least two-thirds of
the outstanding shares of Preferred Shares, voting together as a single class.
A-5
<PAGE>
IN WITNESS WHEREOF, I have subscribed my name this 14th day of March,
1995.
MUSICLAND STORES CORPORATION
By:
-----------------------------------
Harvey Thomas McLain
Vice President, General Counsel
and Secretary
A-6
<PAGE>
Exhibit B
FORM OF RIGHT CERTIFICATES
Certificate No. R-_____ -----------Rights
NOT EXERCISABLE AFTER __________ OR EARLIER IF REDEMPTION OR EXCHANGE OCCURS.
THE RIGHTS ARE SUBJECT TO REDEMPTION AT $______ PER RIGHT (SUBJECT TO
ADJUSTMENT) AND TO EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.
UNDER CERTAIN CIRCUMSTANCES SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS
BENEFICIALLY OWNED BY A PERSON WHO IS, WAS OR BECOMES AN ACQUIRING PERSON OR AN
AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE
RIGHTS AGREEMENT) AND SUBSEQUENT HOLDERS OF SUCH RIGHTS MAY BECOME NULL AND
VOID.
RIGHT CERTIFICATE
MUSICLAND STORES CORPORATION
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
Amended and Restated Rights Agreement, dated as of March 13, 2000 (the "Rights
Agreement"), between Musicland Stores Corporation, a Delaware corporation (the
"Company"), and Norwest Bank Minnesota, National Association (the "Rights
Agent"), to purchase from the Company at any time after the Distribution Date
(as such term is defined in the Rights Agreement) and prior to 5:00 P.M.,
Minneapolis time, on March 20, 2005 at the office or offices of the Rights Agent
designated for such purpose, or of its successor as Rights Agent, one
one-hundredth of a fully paid non-assessable share of Series A Junior
Participating Preferred Stock, par value $.01 per share (the "Preferred
Shares"), of the Company, at a purchase price of $70.00 (the "Purchase Price"),
upon presentation and surrender of this Right Certificate with the Form of
Election to Purchase duly executed. The number of Rights evidenced by this Right
Certificate (and the number of one one-hundredths of a Preferred Share which may
be purchased upon exercise hereof) set forth above, and the Purchase Price set
forth above, are the number and Purchase Price as of March 13, 2000, based on
the Preferred Shares as constituted at such date. As provided in the Rights
Agreement, the Purchase Price and the number of one one-hundredths of a
Preferred Share which may be purchased upon the exercise of the Rights evidenced
by this Right Certificate are subject to modification and adjustment upon the
happening of certain events.
B-1
<PAGE>
This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Right Certificates (which
limitations of rights include the suspension of the exercisability of the Rights
under certain circumstances specified in the Rights Agreement). Copies of the
Rights Agreement are on file at the principal executive offices of the Company
and the above-mentioned office or offices of the Rights Agent and will be mailed
without charge by the Company or the Rights Agent to the holder of this
certificate promptly following receipt by the Company or the Rights Agent of a
written request therefor.
Upon the occurrence of a Section 11(a)(ii) Event (as such term is
defined in the Rights Agreement), any Rights evidenced by this Right Certificate
that are beneficially owned by (i) an Acquiring Person or an Associate or
Affiliate of such Acquiring Person (as such terms are defined in the Rights
Agreement), (ii) a transferee of any such Acquiring Person, Associate or
Affiliate who becomes a transferee after the Acquiring Person becomes such or
(iii) under certain circumstances specified in the Rights Agreement, a
transferee of such Acquiring Person, Associate or Affiliate who becomes a
transferee prior to or concurrently with the Acquiring Person becoming such,
shall be null and void from and after the occurrence of such Section 11(a)(ii)
Event.
This Right Certificate, with or without other Right Certificates, upon
surrender at the office or offices of the Rights Agent designated for such
purpose, may be exchanged for another Right Certificate or Right Certificates of
like tenor and date evidencing Rights entitling the holder to purchase a like
aggregate number of Preferred Shares as the Rights evidenced by the Right
Certificate or Right Certificates surrendered shall have entitled such holder to
purchase. If this Right Certificate shall be exercised in part, the holder shall
be entitled to receive upon surrender hereof another Right Certificate or Right
Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced
by this certificate (i) may, but are not required to, be redeemed by the Company
at a redemption price of $.001 per Right, subject to adjustment as provided in
the Rights Agreement, payable in cash, Common Shares (as such term is defined in
the Rights Agreement) or any other form of consideration deemed appropriate by
the Board of Directors, and (ii) may, but are not required to, be exchanged by
the Company in whole or in part for Common Shares. The Board of Directors of the
Company and the Company shall not have any liability to any person as a result
of the redemption or exchange of the Rights pursuant to the provisions of the
Rights Agreement.
No fractional Preferred Shares will be issued upon the exercise of any
Right or Rights evidenced hereby (other than fractions which are integral
multiples of one one-hundredth of a Preferred Share, which may, at the election
of the Company, be evidenced by scrip or depositary receipts), but in lieu
thereof a cash payment will be made, as provided in the Rights Agreement.
B-2
<PAGE>
No holder of this Right Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of the Preferred
Shares or of any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a shareholder of the Company or any right to vote for the
election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting shareholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Right
Certificate shall have been exercised as provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the manual or facsimile signature of the proper officer of the
Company.
Dated:
MUSICLAND STORES CORPORATION
By:
-----------------------------------
[Name and Title]
Countersigned for purposes
of authentication only:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
By
-------------------------------------
Authorized Signature
B-3
<PAGE>
Form of 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 ------------------- (print name of transferee)
- ---------------------- (print address of transferee) this Right Certificate,
together with all right, title and interest therein, and does hereby irrevocably
constitute and appoint ____________________ Attorney, to transfer the within
Right Certificate on the books of the within-named Company, with full power of
substitution.
Please insert social security
number taxpayer identification
number or other identifying number:
-----------------------------------
Dated:
-------------------------
Signature Guaranteed:
-----------------------------------------------------------
The signature(s) should be guaranteed by an eligible guarantor
institution (banks, stockbrokers, savings and loan associations and credit
unions with membership in an approved signature guarantee medallion program),
pursuant to S.E.C. Rule 17Ad-15.
B-4
<PAGE>
Form of Reverse Side of Right Certificate--continued
CERTIFICATE
The undersigned hereby certifies (after due inquiry and to the best of
its knowledge) by checking the appropriate boxes that:
(1) this Right Certificate
[ ] is
or
[ ] is not
being sold, assigned and transferred by or on behalf of a Person who is or was
an Acquiring Person or an Affiliate or Associate of an Acquiring Person (as such
terms are defined in the Rights Agreement); and
(2) the undersigned
[ ] did
or
[ ] 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 of
an Acquiring Person.
Signature
NOTICE
The signature of the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Right Certificate in
every particular, with out alteration or enlargement or any change whatsoever.
B-5
<PAGE>
Form of Reverse Side of Right Certificate--continued
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to
exercise the Right Certificate.)
To: Musicland Stores Corporation
The undersigned hereby irrevocably elects to exercise _____________
Rights represented by this Right Certificate to purchase the Preferred Shares
issuable upon the exercise of such Rights and requests that certificates for
such Preferred Shares be issued in the name of:
Please insert social security
number, taxpayer identification
number 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,
taxpayer identification number
or other identifying number:
----------------------------------------------------
(Please print name and address)
Dated:
-------------------
Signature
Signature Guaranteed:
--------------------------------
B-6
<PAGE>
The signature(s) should be guaranteed by an eligible guarantor
institution (banks, stockbrokers, savings and loan associations and credit
unions with membership in an approved signature guarantee medallion program),
pursuant to S.E.C. Rule 17Ad-15.
B-7
<PAGE>
Form of Reverse Side of Right Certificate--continued
CERTIFICATE
The undersigned hereby certifies (after due inquiry and to the best of
its knowledge) by checking the appropriate boxes that:
(1) this Right Certificate
[ ] is
or
[ ] is not
being exercised by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of an Acquiring Person (as such terms are defined in
the Rights Agreement); and
(2) the undersigned
[ ] did
or
[ ] 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 of
an Acquiring Person.
Signature
NOTICE
The signature of the foregoing Election to Purchase and Certificate
must correspond to the name as written upon the face of this Right Certificate
in every particular, with out alteration or enlargement or any change
whatsoever.
In the event the certification set forth above in the foregoing
Assignment or Election to Purchase, as the case may be, is not completed, the
Company and the Rights Agent will deem the beneficial owner of the Rights
evidenced by this Right Certificate to be an Acquiring Person or an Affiliate or
Associate thereof (as defined in the Rights Agreement) and such Assignment or
Election to Purchase will not be honored.
B-8
<PAGE>
Exhibit C
MUSICLAND STORES CORPORATION
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED SHARES
On March 14, 1995, the Board of Directors of Musicland Stores
Corporation (the "Company"), declared a dividend of one preferred share purchase
right (a "Right") per share for each outstanding share of Common Stock, par
value $.01 (the "Common Shares"), of the Company. The dividend was paid on
March 20, 1995 (the "Record Date") to shareholders of record on that date.
Each Right entitles the registered holder to purchase from the Company
one one-hundredth of a share of Series A Junior Participating Preferred Stock,
par value $.01 (the "Preferred Shares"), of the Company at a price of $70.00 per
one-hundredth of a Preferred Share (the "Purchase Price"), subject to
adjustment. The description and terms of the Rights are set forth in an Amended
and Restated Rights Agreement (the "Rights Agreement"), dated as of March 13,
2000, between the Company and Norwest Bank Minnesota, National Association, as
Rights Agent (the "Rights Agent").
Initially, the Rights will attach to all certificates representing
Common Shares then outstanding and no separate Right Certificates will be
distributed. The Rights will separate from the Common Shares, and a Distribution
Date for the Rights will occur upon the earlier of: (i) the close of business on
the twentieth day following a public announcement that a person or group of
affiliated or associated persons has become an "Acquiring Person" (i.e. has
become, subject to certain exceptions, the beneficial owner of 17.5% or more of
the outstanding Common Shares) and (ii) the close of business on the 20th day
following the commencement or public announcement of a tender offer or exchange
offer, the consummation of which would result in a person or group of affiliated
or associated persons becoming, subject to certain exceptions, the beneficial
owner of 17.5% or more of the outstanding Common Shares (or such later date as
may be determined by the Board of Directors of the Company prior to a person or
group of affiliated or associated persons becoming an Acquiring Person).
Until the Distribution Date, (i) the Rights will be evidenced by the
Common Share certificates and will be transferred with and only with the Common
Shares, (ii) new Common Share certificates issued after the Record Date upon
transfer or new issuance of the Common Shares will contain a notation
incorporating the Rights Agreement by reference, and (iii) the surrender for
transfer of any Common Share certificate, even without such notation or a copy
of this Summary of Rights attached thereto, will also constitute the transfer of
the Rights associated with the Common Shares represented by such certificate.
C-1
<PAGE>
As promptly 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 March 20, 2005, unless extended or earlier redeemed or exchanged
by the Company 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, options or warrants to subscribe for or purchase Preferred Shares or
convertible securities at 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 or dividends payable in Preferred Shares) or of subscription rights or
warrants (other than those described in clause (ii) of this paragraph). With
certain exceptions, no adjustment in the Purchase Price will be required until
cumulative adjustments require an adjustment of at least 1% in the Purchase
Price.
No fraction of a Preferred Share (other than fractions in integral
multiples of one one-hundredth of a share) will be issued and, in lieu thereof,
an adjustment in cash will be made based on the closing price on the last
trading date prior to the date of exercise.
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
redeemable. Each Preferred Share will be entitled to a minimum preferential
quarterly dividend payment of $1.00 per share but will be entitled to an
aggregate dividend of 100 times the dividend declared per Common Share. In the
event of liquidation, the holders of the Preferred Shares will be entitled to a
minimum preferential liquidation payment of $100.00 per share but will be
entitled to an aggregate payment of 100 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 times the amount received per Common Share. These rights are subject
to adjustment in the event of a stock dividend on the Common Shares or a
subdivision, combination or consolidation of the Common Shares.
C-2
<PAGE>
Holders of Rights will have the right, exercisable following the
expiration of the Company's right to redeem the Rights, to receive upon exercise
thereof at the then current exercise price of the Right that number of Common
Shares having a market value of two times the exercise price of the Right,
subject to certain possible adjustments, in the event that: (i) any person
becomes an Acquiring Person other than pursuant to a tender offer or an exchange
offer for all outstanding Common Shares at a price and on terms determined by
the Board of Directors of the Company to be fair to shareholders and otherwise
in the best interests of the Company and its shareholders and which the Board of
Directors recommends to the shareholders), or (ii) during such time as there is
an Acquiring Person, there shall be a reclassification of securities or a
recapitalization or reorganization of the Company or other transaction which has
the effect of increasing by more than 1% the proportionate share of the
outstanding shares of any class of equity securities of the Company or any of
its subsidiaries beneficially owned by an Acquiring Person.
In the event that the Company is acquired in certain mergers or other
business combination transactions (other than a transaction for at least the
same per-share consideration with a person who acquired Common Shares through a
tender offer or exchange offer for all outstanding Common Shares approved by the
Board of Directors of the Company in accordance with the preceding paragraph or
50% or more of the assets or earning power of the Company and its subsidiaries
(taken as a whole) are sold after the Distribution Date or within 20 days prior
thereto, holders of the Rights will thereafter have the Right to receive, upon
exercise thereof at the then current exercise price of the Right, that number of
Common Shares of the acquiring company (or, in certain cases, one of its
Affiliates) having a market value of two times the exercise price of the Right.
At any time after a person becomes an Acquiring Person (subject to
certain exceptions), and prior to the acquisition by a person of 50% or more of
the outstanding Common Shares, the Board of Directors of the Company may
exchange all or part of the Rights for Common Shares at an exchange ratio per
Right equal to the result obtained by dividing the exercise price of a Right by
the current per share market price of the Common Shares, subject to adjustment.
At any time prior to the close of business on the 20th day after a
public announcement that a person has become an Acquiring Person, the Board of
Directors of the Company may redeem the Rights in whole, but not in part, at a
price of $.001 per Right (the "Redemption Price"), subject to adjustment,
payable in cash, Common Shares or any other form of consideration deemed
appropriate by the Board of Directors. The redemption of the Rights may be made
effective at such time, on such basis and with such conditions as the Board of
Directors in its sole discretion may establish.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including without limitation, the right
to vote or to receive dividends.
C-3
<PAGE>
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to an amendment to a Registration Statement on
Form 8-A dated March 13, 2000. A copy of the Rights Agreement is available free
of charge from the Company by contacting the Secretary at Musicland Stores
Corporation at 10400 Yellow Circle Drive, Minnetonka, Minnesota 55343. 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.
C-4
<PAGE>
