EXHIBIT 4.1
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THE FIRST YEARS INC.
and
EQUISERVE TRUST COMPANY, N.A.
as Rights Agent
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Common Stock Rights Agreement
Dated as of November 19, 2001
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Section 1. Certain Definitions...................................................... 1
Section 2. Appointment of Rights Agent.............................................. 6
Section 3. Issue of Rights Certificates............................................. 6
Section 4. Form of Rights Certificates.............................................. 7
Section 5. Countersignature and Registration........................................ 8
Section 6. Transfer, Split Up, Combination and Exchange of Rights Certificates;
Mutilated, Destroyed, Lost or Stolen Rights Certificates................. 8
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights............ 9
Section 8. Cancellation and Destruction of Rights Certificates...................... 11
Section 9. Reservation and Availability of Shares of Common Stock; Other Covenants.. 11
Section 10. Common Stock Record Date; Etc............................................ 12
Section 11. Antidilution Adjustments................................................. 13
Section 12. Certificate of Adjustments............................................... 20
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power..... 21
Section 14. Fractional Rights and Fractional Shares.................................. 23
Section 15. Rights of Action......................................................... 24
Section 16. Agreement of Rights Holders.............................................. 24
Section 17. Rights Certificate Holder Not Deemed a Stockholder....................... 25
Section 18. Concerning the Rights Agent.............................................. 25
Section 19. Merger or Consolidation or Change of Name of Rights Agent................ 26
Section 20. Duties of Rights Agent................................................... 26
Section 21. Change of Rights Agent................................................... 29
Section 22. Issuance of New Rights Certificates...................................... 29
Section 23. Redemption and Termination............................................... 30
Section 24. Exchange................................................................. 31
Section 25. Notice of Proposed Actions............................................... 31
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Section 26. Notices.................................................................. 32
Section 27. Supplements and Amendments............................................... 33
Section 28. Successors............................................................... 33
Section 29. Determinations and Actions by the Board; etc............................. 34
Section 30. Benefits of This Agreement............................................... 34
Section 31. Severability............................................................. 34
Section 32. Governing Law............................................................ 34
Section 33. Counterparts............................................................. 34
Section 34. Descriptive Headings..................................................... 34
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COMMON STOCK RIGHTS AGREEMENT
This Agreement dated as of November 19, 2001 is between The First
Years Inc., a Massachusetts corporation (the "Company"), and EquiServe Trust
Company, N.A., a national banking association having its principal offices in
Canton, Massachusetts (the "Rights Agent").
W I T N E S S E T H
WHEREAS, on November 19, 2001, the Board of Directors of the Company
(the "Board") authorized the issuance of rights (collectively, the "Rights", and
individually a "Right") to purchase, on the terms and subject to the provisions
of this Agreement, shares of the Company's Common Stock; and
WHEREAS, on November 19, 2001 (the "Declaration Date") the Board (a)
authorized and declared a dividend distribution of one Right for every share of
Common Stock of the Company outstanding at the Close of Business on November
30, 2001 (the "Dividend Record Date") and (b) authorized the issuance of, and
agreed to issue, one Right (as such number may be adjusted in accordance with
Section 11(1) hereof) for every share of Common Stock of the Company issued
between the Dividend Record Date and the Distribution Date (as hereinafter
defined).
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions.
For purposes of this Agreement, the following terms have the meanings
indicated:
(a) "Acquiring Person" shall mean any Person who or which, together
with all Affiliates of such Person, shall be the Beneficial Owner of 15% or more
of the shares of Common Stock then outstanding, but shall not include (i) the
Company, (ii) any Subsidiary of the Company, (iii) any employee benefit plan of
the Company or of any Subsidiary of the Company, or any trustee in respect
thereof acting in such capacity or (iv) any Person organized, appointed or
established by the Company or any Subsidiary of the Company for or pursuant to
the terms of any such employee benefit plan. Notwithstanding the foregoing, if
the Board determines in good faith that a person who would otherwise be an
"Acquiring Person" has become such inadvertently (including, without limitation,
because (a) such Person was unaware that he, she or it was the Beneficial Owner
of a percentage of Common Stock of the Company that would otherwise cause such
Person to be an Acquiring Person or (b) such Person was aware of the extent of
his, her or its Beneficial Ownership but had no actual knowledge of the
consequences of such Beneficial Ownership under this Agreement) and without
intention of changing or influencing control, management or policies of the
Company or of engaging in any of the actions specified in Item 4 of Schedule 13D
under the Exchange Act, and within 10 Business Days of being requested by the
Company to advise it regarding the same, certifies to the Company with respect
to the foregoing (provided that if the Person requested to so certify fails to
do so within 10 Business Days, then such Person shall become an Acquiring Person
on the day immediately following the last day of such 10 Business Day period),
and if such Person
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as promptly as practicable divested or divests himself, herself or itself of
Beneficial Ownership of a sufficient number of shares of Common Stock of the
Company so that such Person would no longer be an Acquiring Person, then such
Person shall not be deemed to be or to have become an Acquiring Person for any
purpose of this Agreement.
No Person shall become an Acquiring Person as the result of an
acquisition of Common Stock by the Company which, by reducing the number of
shares outstanding, increases the proportionate number of shares beneficially
owned by such Person to 15% (or such other percentage as would otherwise result
in such person becoming an Acquiring Person) or more of the Common Stock of the
Company then outstanding, provided, however that if a Person shall so become the
Beneficial Owner of 15% (or such other percentage) or more of the Common Stock
then outstanding by reason of an acquisition of Common Stock by the Company and
shall, after such share purchases by the Company, become the Beneficial Owner of
an additional 1% of the outstanding Common Stock of the Company, then such
Person shall be deemed to be an Acquiring Person.
(b) "Act" shall mean the Securities Act of 1933 (or any successor act),
as amended and as may from time to time be in effect.
(c) "Affiliate", with respect to any Person, shall mean any other
Person who is, or who would be deemed to be, an "affiliate" or an "associate" of
such Person within the respective meanings ascribed to such terms in Rule 12b-2
of the General Rules and Regulations under the Exchange Act, as such Rule is in
effect on the Declaration Date.
(d) A Person shall be deemed the "Beneficial Owner" of, and shall be
deemed to "beneficially own" or have "Beneficial Ownership" of, any securities:
which such Person or any of such Person's Affiliates has "beneficial ownership"
of within the meaning of Rule 13d-3 of the General Rules and Regulations under
the Exchange Act, as such Rule is in effect on the Declaration Date;
which such Person or any of such Person's Affiliates has, directly or
indirectly, the right to acquire (whether such right is exercisable immediately
or after the passage of time), pursuant to any agreement, arrangement or
understanding (whether or not in writing) or upon the exercise of conversion,
exchange or other rights, warrants or options, or otherwise;
which such Person or any of such Person's Affiliates has, directly or
indirectly, the right to vote or dispose of, including pursuant to any
agreement, arrangement or understanding (whether or not in writing); provided,
however, that a Person shall not be deemed the "Beneficial Owner" of, or to
"beneficially own," any security for purposes of this Section 1(d) (iii) as a
result of an agreement, arrangement or understanding to vote such security if
such agreement, arrangement or understanding: (A) arises solely from a revocable
proxy given in response to a public proxy or consent solicitation made pursuant
to, and in accordance with, the applicable proxy solicitation rules and
regulations promulgated under the Exchange Act or (B) is made in connection
with, or is to otherwise participate in, a proxy or consent solicitation made,
or to be made, pursuant to, and in accordance with, the applicable proxy
solicitation rules and regulations promulgated under the Exchange Act, in either
case described in clause (A) or (B) above,
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whether or not such agreement, arrangement or understanding is also then
reportable by such Person on Schedule 13D under the Exchange Act (or any
comparable or successor report); or
which are beneficially owned, directly or indirectly, by any other Person or any
Affiliate thereof with which such Person or any of such Person's Affiliates has
an agreement, arrangement or understanding (whether or not in writing), for the
purpose of acquiring, holding, voting (except pursuant to a revocable proxy or
in connection with a proxy or consent solicitation described in clause (A) or
(B) of the proviso to Section l(d)(iii) hereof) or disposing of any securities
of the Company;
provided, however, that for purposes of this Section 1(d) a Person shall not be
deemed the "Beneficial Owner" of, or to "beneficially own", (A) securities
tendered pursuant to a tender or exchange offer made by such Person or any of
such Person's Affiliates until such tendered securities are accepted for
purchase or exchange, (B) securities issuable upon exercise of Rights at any
time prior to the occurrence of a Common Stock Event, or (C) securities issuable
upon exercise of Rights which were held by a Person or its Affiliates prior to
the Distribution Date as long as such Person is not responsible for the
occurrence of the Common Stock Event giving rise to the Distribution Date;
provided, further, however, that nothing in this Section 1(d) shall cause a
Person engaged in business as an underwriter of securities to be the "Beneficial
Owner" of, or to "beneficially own", any securities acquired through such
person's participation in good faith in a firm commitment underwriting until the
expiration of 40 days after the date of such acquisition.
For all purposes of this Agreement, any calculation of the number of
shares of Common Stock outstanding at any particular time, including for
purposes of determining the particular percentage of such outstanding shares of
Common Stock of which any Person is the Beneficial Owner, shall be made in
accordance with the last sentence of Rule 13d-3(d)(1)(i) of the General Rules
and Regulations under the Exchange Act.
(e) "Board" shall mean have the meaning set forth in the preamble to
this Agreement.
(f) "Business Day" shall mean any day other than a Saturday, Sunday or
a day on which banking institutions in The Commonwealth of Massachusetts are
authorized or obligated by law or executive order to close.
(g) "Close of Business" on any given date shall mean 5:00 P.M., Boston
time, on such date provided, however, that if such date is not a Business Day it
shall mean 5:00 P.M., Boston time, on the next succeeding Business Day.
(h) "Closing Price" shall have the meaning set forth in Section 11(d)
hereof,
(i) "Common Stock" shall mean the Common Stock, with a par value of
$0.10 per share, of the Company, except that "Common Stock" when used with
respect to any Person other than the Company shall mean the common stock (or
other capital stock) of such Person with the greatest voting power, or the
equity securities or other equity interests having power to control or direct
the management and affairs of such Person, or if such Person is a Subsidiary of
another Person, the Person who ultimately controls such Person who is the
Subsidiary and which has outstanding such common stock (or such other equity
securities or interests).
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(j) "Common Stock Equivalents" shall have the meaning net forth in
Section 11(a) (iii) hereof.
(k) "Common Stock Event" shall mean the occurrence of (i) any event
described in Section 11(a)(ii) hereof or (ii) clause (a), (b) or (c) of the
first sentence of Section 13 hereof.
(l) "Company" shall have the meaning set forth in the preamble to this
Agreement.
(m) "Current Market Price" shall have the meaning set forth in Section
11(d) hereof.
(n) "Current Value" shall have the meaning set forth in Section 11(a)
(iii) hereof.
(o) "Declaration Date" shall have the meaning set forth in the preamble
to this Agreement.
(p) "Disqualified Transferee" shall mean any Person who is a direct or
indirect Transferee of any Right from an Acquiring Person or an Affiliate of an
Acquiring Person and became such a transferee (x) after the occurrence of a
Common Stock Event or (y) prior to or concurrently with the Acquiring Person
becoming such and received such Right pursuant to a transfer (whether or not for
value) (A) from the Acquiring Person to holders of its Common Stock or other
equity securities or to any Person with whom the Acquiring Person has any
continuing agreement, arrangement, or understanding (whether or not in writing)
regarding the transferred Right, or (B) which a majority of the Board reasonably
determine is part of a plan, arrangement, or understanding (whether or not in
writing) which has as a primary purpose or effect, the avoidance of Section 7(e)
hereof.
(q) "Distribution Date" shall mean (A) the earlier of (x) the 10th
Business Day following the Stock Acquisition Date or (y) the 10th Business Day
following the Offer Commencement Date or (B) such later date thereafter, as may
be determined by action of the Board.
(r) "Dividend Record Date" shall have the meaning set forth in the
preamble to this Agreement.
(s) "Excess Amount" shall have the meaning set forth in Section
11(a)(iii) hereof.
(t) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended (or any successor act), as in effect on the Declaration Date.
(u) "Exchange Ratio" shall have the meaning set forth in Section 24(a)
hereof.
(v) "Expiration Date" shall have the meaning set forth in Section 7(a)
hereof.
(w) "Final Expiration Date" shall mean the Close of Business on
November 19, 2006.
(x) "Offer Commencement Date" shall mean the date of the commencement
by any Person, other than the Company, a Subsidiary of the Company, or any
employee benefit plan of
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the Company or of any Subsidiary of the Company or any Person organized,
appointed, or established by the Company or such Subsidiary pursuant to the
terms of any such plan, of a tender or exchange offer (including when such offer
is first published or sent or given within the meaning of Rule 14d-2(a) of the
General Rules and Regulations under the Exchange Act) if upon consummation
thereof the Person and Affiliates thereof would be the Beneficial Owner of 15%
or more of the then outstanding shares of Common Stock (including any such date
which is after the date of this Agreement and prior to the issuance of the
Rights on the Dividend Record Date or thereafter).
(y) "Officers' Certificate" has the meaning set forth in Section 20(b)
hereof.
(z) "Other Consideration" has the meaning set forth in Section 6(a)
hereof.
(aa) "Person" shall mean a company, corporation, association,
partnership, joint venture, trust, organization, business, entity or individual.
(bb) "Principal Office" shall have the meaning set forth in Section 5
hereof.
(cc) "Purchase Price" shall have the meaning set forth in Section 7(b)
hereof.
(dd) "Redemption Price" shall have the meaning set forth in Section 23
hereof.
(ee) "Rights" shall have the meaning set forth in the preamble to this
Agreement.
(ff) "Rights Agent" shall have the meaning set forth in the preamble of
this Agreement subject to the appointment of a Co-Rights Agent or successor
Rights Agent pursuant to Section 1 hereof.
(gg) "Rights Certificates" shall have the meaning set forth in Section
3(a) hereof.
(hh) "Stock Acquisition Date" shall mean the later of (i) the date of
the first public announcement by an Acquiring Person or the Company that an
Acquiring Person has become such (including the first date on which any filing
with any governmental authority disclosing that an Acquiring Person has become
such becomes available to the public), or (ii) the date on which an executive
officer of the Company has actual knowledge that an Acquiring Person has become
such.
(ii) "Subsidiary" shall mean, as of any date, any Person of which the
Company (or other specified parent) owns directly, or indirectly through a
Subsidiary or Subsidiaries, at least a majority of the outstanding capital stock
entitled to vote generally, or holds directly, or indirectly through a
Subsidiary or Subsidiaries, at least a majority of partnership or similar
interests, or is a general partner or of which the Company (or other specified
parent) owns voting securities sufficient to elect at least a majority of the
directors of such Person.
(jj) "Substitution Period" stall have the meaning set forth in Section
11(a) (iii) hereof.
(kk) "Summary of Rights" shall have the meaning set forth in Section
3(b) hereof.
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(ll) "Trading Day" shall have the meaning set forth in Section 11(d)
hereof.
Section 2. Appointment of Rights Agent.
The Company hereby appoints the Rights Agent to act as agent for the
Company and the holders of the Rights (who, in accordance with Section 3 hereof,
shall prior to the Distribution Date also be the holders of the Common Stock) in
accordance with the terms and conditions hereof, and the Rights Agent hereby
accepts such appointment. The Company may from time to time, upon prior written
notice to the Rights Agent, appoint such Co-Rights Agents as it may deem
necessary or desirable upon ten (10) days' prior written notice to the Rights
Agent. The Rights Agent shall have no duty to supervise, and shall in no event
be liable for, the acts or omissions of any such Co-Rights Agent.
Section 3. Issue of Rights Certificates.
(a) Until the Distribution Date, (i) the Rights will be evidenced
(subject to the provisions of Section 3(b) hereof) by the certificates
representing shares of Common Stock registered in the names of holders of the
Common Stock (which certificates shall be deemed also to be certificates for the
associated Rights) and not by separate rights certificates, and (ii) the Rights
will be transferable only in connection with the transfer of the associated
shares of Common Stock. As soon as practicable after the Distribution Date, the
Rights Agent will send by first-class, insured, postage prepaid mail, to each
record holder of the Common Stock as of the Close of Business on the
Distribution Date, at the address of such holder shown on the records of the
Company, one or more rights certificates, in substantially the form of Exhibit A
hereto (the "Rights Certificates"), evidencing in the aggregate that number of
Rights to which such holder is entitled in accordance with the provisions of
this Agreement. As of and after the Distribution Date, the Rights will be
evidenced solely by such Rights Certificates. The Rights are exercisable only in
accordance with the provisions of Section 7 hereof and are redeemable only in
accordance with Section 23 hereof.
(b) As soon as practicable after the Dividend Record Date, the Company
will cause a copy of a Summary of Common Stock Purchase Rights, in substantially
the form attached hereto as Exhibit B (the "Summary of Rights"), to be sent by
first-class, postage prepaid mail, to each record holder of the Common Stock as
of the Close of Business on the Dividend Record Date, at the address of such
holder shown on the stock transfer records of the Company. With respect to
certificates for the Common Stock outstanding as of the Dividend Record Date,
until the Distribution Date, the Rights associated with the shares of Common
Stock represented by such certificates will be evidenced by such certificates
for the Common Stock and the registered holders of the Common Stock shall also
be the registered holders of the associated Rights. Until the Distribution Date
(or the earlier redemption, exchange in accordance with Section 24 hereof,
expiration or termination of the Rights), the surrender for transfer of any of
the certificates representing shares of the Common Stock outstanding on the
Dividend Record Date, with or without a copy of the Summary of Rights, shall
also constitute the transfer of the Rights associated with the Common Stock
represented by such certificate.
(c) Rights shall be issued in respect of all shares of Common Stock
issued (whether originally issued or delivered from the Company's treasury)
after the Dividend Record Date but
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prior to the earliest of (i) the Distribution Date, (ii) the Expiration Date, or
(iii) the redemption or exchange in accordance with Section 24 hereof of the
Rights. Certificates representing such shares of Common Stock and certificates
issued on transfer of such shares of Common Stock prior to the Distribution Date
(or earlier expiration or redemption of the Rights) shall be deemed also to be
certificates for the associated Rights and commencing as soon as reasonably
practicable following the Dividend Record Date shall bear the following legend
(or a legend substantially in the form thereof):
This certificate also evidences and entitles the holder to Rights set
forth in a Common Stock Rights Agreement between the issuer and
EquiServe Trust Company, N.A. as Rights Agent (the "Rights Agent"),
dated as of November 19, 2001 the "Rights Agreement"), the terms of
which are incorporated herein by reference and a copy of which is on
file at the principal offices of both the issuer and the Rights Agent.
The Rights Agent will mail to the registered holder of this certificate
a copy of the Rights Agreement without charge upon written request.
Under certain circumstances set forth in the Rights Agreement, such
Rights will be evidenced by separate certificates and will no longer be
evidenced by this certificate. Under certain circumstances set forth in
the Rights Agreement, Rights issued to, or held by any Person who is,
was or becomes, or acquires shares from, an Acquiring Person or any
Affiliate of an Acquiring Person (as each such term is defined in the
Rights Agreement and generally relating to the ownership or purchase of
large shareholdings), whether currently held by or on behalf of such
Person or Affiliate or by certain subsequent holders, may become null
and void.
Until the Distribution Date (or the earlier redemption, exchange in
accordance with Section 24 hereof, expiration or termination of the Rights), the
Rights associated with the Common Stock shall be evidenced by the Common Stock
certificates alone and the registered holders of Common Stock shall also be the
registered holders of the associated Rights, and the surrender for transfer of
any of such certificates shall also constitute the transfer of the Rights
associated with the Common stock represented by such certificate. Rights shall
be issued to the extent provided in Section 22 hereof after the Distribution
Date and prior to the Expiration Date.
Section 4. Form of Rights Certificates.
(a) The Rights Certificates (and the form of assignment and the form of
exercise notice and certificate to be printed on the reverse thereof) shall each
be substantially in the form set forth in Exhibit A hereto and may have such
marks of identification or designation and such legends, summaries or
endorsements printed thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange or over-the-counter
market on which the Rights may from time to time be listed, or to conform to
usage. The form of the Rights Certificate shall be in a format reasonably
satisfactory to the Rights Agent. Subject to the provisions of Sections 11 and
22 hereof, the Rights Certificates, whenever distributed, shall be dated as of
the Dividend Record Date, (or, if the shares pursuant to which the Rights are
attached are issued thereafter, such date of issuance) shall include the date of
countersignature and on their face shall entitle the holders thereof to purchase
such number of shares of Common Stock as shall be set forth therein at the
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Purchase Price, but the amount and type of securities issuable upon the exercise
of each Right and the Purchase Price shall be subject to adjustment as provided
herein.
(b) Any Rights Certificate issued pursuant to Sections 3(a), 11(i) or
22 hereof that represents Rights beneficially owned by (i) any Acquiring Person
or any Affiliate of an Acquiring Person, or (ii) any Disqualified Transferee,
and any other Rights Certificate issued pursuant to Sections 6 or 11 hereof upon
the transfer, split up, combination, exchange, replacement, or adjustment of any
such Rights Certificate shall contain (to the extent feasible) the following
legend (or a legend substantially in the form hereof):
The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became and an Acquiring
Person or an Affiliate (which includes both affiliates and associates)
of an Acquiring Person (as each such term is defined in the Rights
Agreement). Accordingly, this Rights Certificate and the Rights
represented hereby may become null and void in the circumstances
specified in Section 7(e) of the Rights Agreement.
Section 5. Countersignature and Registration.
The Rights Certificates shall be executed on behalf of the Company by
its Chairman of the Board, President, Chief Financial Officer, or any Vice
President, either manually or by facsimile signature, and shall have affixed
thereto the Company's seal or facsimile thereof which shall he attested by the
Treasurer or an Assistant Treasurer of the Company, either manually or by
facsimile signature. The Rights Certificates shall be countersigned, either
manually or by facsimile signature, by the Rights Agent and shall not be valid
for any purpose unless so countersigned. In case any officer of the Company who
shall have signed any of the Rights Certificates shall cease to be such officer
of the Company before countersignature by the Rights Agent and issuance and
delivery by the Company, such Rights Certificates, nevertheless, may be
countersigned by the Rights Agent, issued, and delivered with the same force and
effect as though the person who signed such Rights Certificates had not ceased
to be such officer of the Company; and any Rights Certificate may be signed on
behalf of the Company by any person who, at the actual date of the execution of
such Rights Certificate, shall be the proper officer of the Company to sign such
Rights Certificate, although at the date of the execution of this Agreement any
such person was not such an officer.
Following the Distribution Date, the Rights Agent will keep or cause to
be kept, at that office of the Rights Agent at the address set forth in Section
26 hereof (its "Principal Office"), books for registration and transfer of the
Rights Certificates issued hereunder. Such books shall show the names and
addresses of the respective holders of the Rights Certificates, the number of
Rights evidenced on its face by each of the Rights Certificates, and the date of
countersignature thereof by the Rights Agent.
Section 6. Transfer, Split Up, Combination and Exchange of Rights Certificates;
Mutilated, Destroyed, Lost or Stolen Rights Certificates.
(a) Subject to the provisions of Sections 4(b), 7(e), and 14 hereof, at
any time after the Close of Business on the Distribution Date, and at or prior
to the earlier of the Close of
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Business on the Expiration Date or the redemption of the Rights, any Rights
Certificate may be transferred, split up, combined or exchanged for another
Rights Certificate or Rights Certificates, entitling the registered holder to
purchase a like number of shares of Common Stock (or, following a Common Stock
Event, Common Stock and/or such other securities, cash, or other assets as shall
be issuable in respect of the Rights in accordance with the terms of this
Agreement (such other securities, cash or other assets being referred to herein
as "Other Consideration")) as the Rights Certificate surrendered then entitled
such holder (or former holder in the case of a transfer) to purchase. Any
registered holder desiring to transfer, split up, combine or exchange any Rights
Certificate shall make such request in writing delivered to the Rights Agent,
and shall surrender the Rights Certificate to be transferred, split up,
combined, or exchanged at the Principal Office of the Rights Agent, accompanied
by a signature guarantee and such other documentation as the Rights Agent may
reasonably request. Neither the Rights Agent nor the Company shall be obligated
to take any action whatsoever with respect to the transfer of any such
surrendered Rights Certificate until the registered holder shall have completed
and signed the certificate contained in the form of assignment on the reverse
side of such Rights certificate and shall have provided such additional evidence
of the identity of the Beneficial Owner from whom the Rights evidenced by such
Rights Certificate are to be transferred (or the Beneficial Owner to whom such
Rights are to be transferred) or Affiliates thereof as the Company shall
reasonably request. Thereupon, subject to Sections 4(b), 7(e) and 14 hereof, the
Company shall execute and the Rights Agent shall countersign and deliver to the
Person entitled thereto a Rights Certificate or Rights Certificates, as the case
may be, as so requested. The Company may require payment by the holders of
Rights of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer, split up, combination or exchange of
Rights Certificates which the Company is not required to pay in accordance with
Section 9(d) hereof.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Rights Certificate, and, in case of loss, theft or destruction, of indemnity
or security satisfactory to them, and reimbursement to the Company and the
Rights Agent of all reasonable expenses incidental thereto, and upon surrender
to the Rights Agent and cancellation of the Rights Certificate, if mutilated,
accompanied by a signature guarantee and such other documentation as the Rights
Agent may reasonably request, the Company will execute and deliver a new Rights
Certificate of like tenor to the Rights Agent for countersignature and delivery
to the registered owner in lieu of the Rights Certificate so lost, stolen,
destroyed, or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.
(a) Subject to Section 7(e) hereof, the registered holder of any Rights
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein including, without limitation, the restrictions set forth in
Section 9(e), Section 11(a)(iii) and Section 23(a) hereof) in whole or in part
at any time after the Distribution Date upon surrender of the Rights
Certificate, with the form of election to purchase set forth on the reverse side
thereof and the certificate contained therein completed and duly executed, to
the Rights Agent at the office of the Rights Agent designated for such purpose,
together with payment of the aggregate Purchase Price with respect to the total
number of Common Stock (or other securities, cash or other assets, as the case
may be) as to which such surrendered Rights are then
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exercisable, at or prior to the earlier of (i) the Final Expiration Date, (ii)
the time at which the Rights are redeemed as provided in Section 23 hereof (the
"Redemption Date", (iii) the time at which the Rights expire pursuant to Section
13(d) hereof or (iv) the time at which such Rights are exchanged as provided in
Section 24 hereof (the earliest of (i), (ii), (iii) or (iv) being herein
referred to as the "Expiration Date").
(b) The purchase price for each share of Common Stock issuable pursuant
to the exercise of a Right (the "Purchase Price") shall initially be $25.00,
shall be subject to adjustment as provided in Section 11 hereof, and shall be
payable in lawful money of the United States of America.
(c) Upon receipt of a Rights Certificate representing the Rights, with
the form of election to purchase set forth on the reverse side thereof and the
certificate contained therein duly executed, accompanied by payment of the
Purchase Price, with respect to each Right so exercised, the Rights Agent,
subject to Sections 7(e), 1l(a)(iii) and 20(k) hereof, shall thereupon promptly
(i) requisition from any transfer agent of the Common stock (or from the Company
if there shall be no such transfer agent, or make available if the Rights Agent
is such transfer agent) certificates for the total number of shares of Common
Stock to be purchased and the Company hereby irrevocably authorizes such
transfer agent to comply with any such request, (ii) after receipt of such
certificates, cause the same to be delivered to or upon the order of the
registered holder of such Rights Certificate, registered in such name or names
as may be designated by such holder, and (iii) when appropriate, requisition
from the company the amount of cash to be paid in lieu of issuance of a
fractional share in accordance with Section 14 hereof and after receipt promptly
deliver such cash to or upon the order of the registered holder of such Rights
Certificate. After the occurrence of a Common Stock Event, the Company will make
all necessary arrangements so that any Other Consideration then deliverable in
respect of the Rights is available for distribution by the Rights Agent. For
purposes of this Section 7, the Rights Agent shall be entitled to rely, and
shall be protected in relying, on an Officers' Certificate from the Company to
the effect that the Distribution Date has occurred.
(d) Subject to Sections 4(b), 7(e) and 14 hereof, in case the
registered holder of any Rights Certificate shall exercise less than all the
Rights evidenced thereby, a new Rights Certificate evidencing Rights equivalent
to the Rights remaining unexercised shall be executed and delivered by the
Company to the Rights Agent and countersigned and delivered by the Rights Agent
to the registered holder of such Rights Certificate or to his duly authorized
assigns.
(e) Notwithstanding anything in this Agreement to the contrary, from
and after the first occurrence of a Common Stock Event, any Rights beneficially
owned by (i) an Acquiring Person or an Affiliate of an Acquiring Person, or (ii)
a Disqualified Transferee 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 ensure that the provisions of this
Section 7(e) and Section 4(b) hereof are complied with, but the Company shall
have no liability to any holder of Rights Certificates or other Person and none
of the terms of this Agreement or the Rights shall be deemed to be waived with
respect to such holder or other Person as a result of any failure by the Company
to make any determinations with respect to an Acquiring Person or
10
any Affiliate of an Acquiring Person or Disqualified Transferee hereunder or any
failure to have a legend placed on any Rights Certificate in accordance with
Section 4(b) hereof.
(f) Notwithstanding anything in this Agreement to the contrary, neither
the Rights Agent nor the Company shall be obligated to undertake any action with
respect to a holder of any Rights Certificate upon the occurrence of any
purported exercise thereof unless such holder shall have (i) completed and
signed the certificate contained in the form of election to purchase set forth
on the reverse side of the Rights Certificate surrendered for such exercise, and
(ii) provided such additional evidence of the identity of the Beneficial Owner
from whom the Rights evidenced by such Rights Certificate are to be transferred
(or the Beneficial Owner to whom such Rights are to be transferred) or
Affiliates thereof as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Rights Certificates.
All Rights Certificates surrendered for the purpose of and accepted for
exercise, or surrendered for the purpose of redemption, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents (other than the Rights Agent), be delivered to the Rights Agent for
cancellation or in cancelled form, or, if surrendered to the Rights Agent, shall
be cancelled by it, and no Rights Certificates shall be issued in lieu thereof
except as expressly permitted by any of the provisions of this Agreement. The
Rights Agent shall deliver all cancelled Rights certificates to the Company, or
may, at the written request of the Company, but shall not be required to,
destroy such cancelled Rights Certificates, and in such case shall deliver a
certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of Shares of Common Stock;
Other Covenants.
(a) The Company covenants and agrees that on and after the Distribution
Date, it will use reasonable efforts to cause to be reserved and kept available,
out of its authorized and unissued shares of Common Stock, the number of shares
of Common Stock that, except as provided in Section 11(a) (iii) hereof, would
then be sufficient to permit the exercise in full of all outstanding Rights;
provided, however, that the reservation of such shares shall be subject and
subordinate to any other reservation of such shares made by the Company at any
time for any lawful purpose; provided, further, however, that in no event shall
such failure to so reserve shares affect the rights of any holder of Rights
hereunder.
(b) The Company covenants and agrees that on and after the Distribution
Date, so long as the Common Stock and/or Other Consideration issuable upon the
exercise of Rights may be listed on any national securities exchange, the
Company shall use its best efforts to cause all shares (or similar units)
reserved for such issuance to be listed on such exchange upon official notice of
issuance upon such exercise.
(c) The Company covenants and agrees that it will take all such action
as may be necessary to ensure that each whole share of Common Stock or other
unit of Common Stock and/or other securities delivered upon exercise of Rights
shall, at the time of delivery of the certificates for such shares (or units),
subject to payment of the Purchase Price, be duly and validly authorized and
issued and fully paid and nonassessable.
11
(d) The Company 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 Rights Certificates or of
any shares of Common Stock or all shares or similar units of Common Stock and/or
Other Consideration upon the exercise of Rights; provided, however, that the
Company shall not be required to pay any transfer tax which may be payable in
respect of any transfer involved in the transfer or delivery of Rights
Certificates or in the issuance or delivery of certificates for any shares of
Common Stock or shares or similar units of Common Stock and/or Other
Consideration in a name other than that of the registered holder of the Rights
Certificate evidencing Rights surrendered for exercise, or to issue or deliver
any certificates for any shares of Common Stock and all shares or similar units
of Common Stock and/or Other Consideration upon the exercise of any Rights until
any such tax shall have been paid (any such tax being payable by the holder of
such Rights Certificate at the time of surrender) or until it has been
established to the Company's satisfaction that no such tax is due.
(e) The Company shall use its best efforts to (i) file, as soon as
practicable following the earliest date after the first occurrence of a Common
Stock Event on which the consideration to be delivered by the Company upon
exercise of the Rights has been determined in accordance with this Agreement, or
as soon as is required by law following the Distribution Date, as the case may
be, a registration statement under the Act, with respect to the securities
purchasable upon exercise of the Rights on an appropriate form, (ii) cause such
registration statement to become effective as soon as practicable after such
filing, and (iii) cause such registration statement to remain effective (with a
prospectus at all times meeting the requirements of the Act) until the earlier
of (A) the date as of which the Rights are no longer exercisable for such
securities, or (B) the Expiration Date or earlier redemption of the Rights. The
Company will also take such action as may be appropriate under, or to ensure
compliance with, the securities or "blue sky" 1aws of the various states in
connection with the exercisability of the Rights; provided, however, that the
Company shall not be required to consent to general service of process for all
purposes in any jurisdiction where it is not then qualified. The Company may
temporarily suspend, for a period of time not to exceed ninety (90) days after
the date set forth in clause (i) of the first sentence of this Section 9(e), the
exercisability of the Rights in order to prepare and file such registration
statement or to permit it to become effective. Upon any such suspension, the
Company shall issue a public announcement stating that the exercisability of the
Rights has been temporarily suspended. The Company shall thereafter issue a
public announcement at such time as the suspension is no longer in effect.
Notwithstanding any provision of this Agreement to the contrary, the Rights
shall not be exercisable in any jurisdiction unless the requisite qualification
in such jurisdiction shall have been obtained.
Section 10. Common Stock Record Date; Etc.
Each person in whose name any certificate for any shares of Common
Stock (or shares or similar units of Common Stock and/or Other Consideration) is
issued upon the exercise of Rights shall for all purposes be deemed to have
become the holder of record of such shares of Common stock (or such shares and
similar units of Common Stock and/or Other Consideration, as the case may be)
represented thereby, and such certificate shall be dated the date which is the
later of (i) the date upon which the Rights Certificate evidencing such Rights
was duly surrendered, or (ii) the date upon which payment of the Purchase Price
(and any applicable transfer taxes) in respect thereof was made; provided,
however, that if such date is a date upon which the relevant transfer
12
books at the Company are closed, such person shall be deemed to have become the
record holder of such shares (or Other Consideration) on, and such certificate
shall be dated, the next succeeding Business Day on which such transfer books of
the Company are open; provided, further, that the Company covenants and agrees
that it shall not close such transfer books for a period exceeding ten
consecutive days. Prior to the exercise of the Rights evidenced thereby (which
shall be deemed to have occurred on the date such certificate for shares of
Common Stock shall be dated in accordance with this Section 10), the holder of a
Rights Certificate, as such, shall not be entitled to any rights of a security
holder of the Company with respect to the shares of Common Stock (or such shares
and similar units of Common Stock and/or Other Consideration) 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 expressly provided herein.
Section 11. Antidilution Adjustments.
The Purchase Price and the number and kind of securities 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 that the Company shall at any time after the date
of this Agreement (A) declare and pay a dividend on the Common Stock payable in
shares of Common Stock, (B) subdivide the outstanding Common Stock, (C) combine
the outstanding Common Stock into a smaller number of shares, or (D) issue,
change, or alter any of its shares of capital stock in a reclassification or
recapitalization (including any such reclassification in connection with a
consolidation or merger in which the company is the continuing or surviving
Person), except as otherwise provided in this Section 11(a) and Section 7(e)
hereof, then, and in each such case, the Purchase Price in effect at the time of
the record date for such dividend or the effective time of such subdivision,
combination, reclassification or recapitalization, and the number and kind of
shares of capital stock issuable at such time, 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 Common Stock or other capital
stock which, if such Right had been exercised immediately prior to such time at
the Purchase Price then in effect and at a time when the transfer books for the
Common Stock (or other capital stock) 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, reclassification or recapitalization.
If an event occurs which would require an adjustment under both this Section
l1(a)(i) and Section 11(a) (ii) hereof, the adjustment provided in this Section
1l(a)(i) shall be in addition to, and shall be made prior to, any adjustment
required pursuant to Section 11(a)(ii) hereof.
(ii) In the event:
(A) any Acquiring Person or any Affiliate of any Acquiring
Person, at any time after the date of this Agreement, directly or indirectly,
(1) shall merge into the Company or otherwise combine with the Company and the
Company shall be the continuing or surviving corporation of such merger or
combination and the Common Stock of the Company shall remain outstanding and
unchanged, (2) shall merge or otherwise combine
13
with any Subsidiary of the Company, (3) shall, in one transaction or a series of
transactions, transfer any assets to the Company or to any of its Subsidiaries
in exchange (in whole or in part) for shares of Common Stock, for shares of
other equity securities of the Company or any Subsidiary of the Company, or for
securities exercisable for or convertible into shares of equity securities of
the Company or any Subsidiary of the Company (Common Stock or otherwise) or
otherwise obtain from the Company, with or without consideration, any additional
shares of equity securities of the Company or securities exercisable for or
convertible into shares of such equity securities of the Company (other than
pursuant to a pro rata distribution to all holders of Common Stock or upon the
exercise of a convertible security of the Company or any Subsidiary of the
Company in accordance with its terms), (4) shall sell, purchase, lease,
exchange, mortgage, pledge, transfer or otherwise acquire or dispose of, in one
transaction or a series of transactions, to, from or with (as the case may be)
the Company or any of its Subsidiaries, assets on terms and conditions less
favorable to the Company than the Company would be able to obtain in arm's
length negotiations with an unaffiliated third party, other than pursuant to a
transaction set forth in Section 13(a) hereof, (5) shall sell, purchase, lease,
exchange, mortgage, pledge, transfer or otherwise acquire or dispose of in one
transaction or a series of transactions, to, from or with (as the case may be)
the Company or any of its Subsidiaries assets having an aggregate fair market
value of more than $1,000,000, other than pursuant to a transaction set forth in
Section 13(a) hereof and other than pursuant to a transaction or series of
transactions that have been approved by the Board, (6) shall receive any
compensation from the Company or any of the Company's Subsidiaries other than
compensation for full-time employment as a regular employee at rates in
accordance with the Company's (or its Subsidiaries') past practices, or (7)
shall receive the benefit, directly or indirectly (except proportionately as a
stockholder and except if resulting from a requirement of law or governmental
regulation), of any loans, advances, guarantees, pledges or other financial
assistance or any tax credits or other tax advantages provided by the Company or
any of its Subsidiaries, or
(B) 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 Person or entity organized, appointed or established by the
Company for or pursuant to the terms of any such plan), alone or together with
any Affiliates of such Person, shall, at any time after the Dividend Declaration
Date, become the Beneficial Owner of 15% or more of the shares of Common Stock
then outstanding, unless the event causing the 15% threshold to be met or
surpassed is a transaction set forth in Section 13(a) hereof, or is an
acquisition of shares of Common Stock pursuant to a tender offer or an exchange
offer for all outstanding shares of Common Stock at a price and on terms
determined by the Board, after receiving advice from one or more investment
banking firms, to be (a) at a price that is fair to stockholders (taking into
account all factors which such members of the Board deem relevant including,
without limitation, prices which could reasonably be achieved if the Company or
its assets were sold on an orderly basis designed to realize maximum value) and
(b) otherwise in the best interest of the Company and its stockholders, or
(C) during such time as there is an Acquiring Person, there
shall be any reclassification of securities (including any reverse stock split),
or recapitalization of the Company, or any merger or consolidation of the
Company with any of its Subsidiaries or any other transaction or series of
transactions involving the Company or any of its Subsidiaries (whether or not
with or into or otherwise involving an Acquiring Person), other than a
14
transaction or transactions to which the provisions of Section 13(a) hereof
apply (whether or not with or into or otherwise involving an Acquiring Person),
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
of the Company or any of its Subsidiaries which is directly or indirectly
beneficially owned by any Acquiring Person or any Associate or Affiliate of any
Acquiring Person,
then, immediately upon the occurrence of any event described in
Section 11(a)(ii)(A) or (C) hereof, and upon the Close of Business ten (10) days
after the occurrence of any event described in Section 11(a)(ii)(B) hereof,
proper provision shall be made so that each holder of a Right (except as
provided below and in Section 7(e) hereof) shall thereafter have the right to
receive, upon exercise thereof at the Purchase Price in effect at the time of
exercise in accordance with the terms of this Agreement, such number of shares
of Common Stock of the Company as shall equal the result obtained by (x)
multiplying an amount equal to the then current Purchase Price by an amount
equal to the number of shares of Common Stock for which a Right was or would
have been exercisable immediately prior to the first occurrence of any such
event whether or not such Right was then exercisable, and (y) dividing that
product by 50% of the Current Market Price per share of the Common Stock of the
Company (as defined in Section 11(d) hereof) determined as of the date of such
first occurrence.
(iii) In the event (x) that the number of shares of Common Stock which
are authorized by the Company's restated articles of organization and not
outstanding or subscribed for, or reserved or otherwise committed for issuance
for purposes other than upon exercise of the Rights are not sufficient to permit
the exercise in full of the Rights, in accordance with Section 11(a)(ii) hereof,
or (y) should the Board determine that it would be appropriate and not contrary
to the interests of the holders of Rights (other than any Acquiring Person or
Disqualified Transferee or any Affiliate of the Acquiring Person or Disqualified
Transferee), the Company shall (A) determine an amount, if any, (the "Excess
Amount") equal to the excess of (1) the value of the shares of Common Stock
issuable upon the exercise of a Right (calculated as provided in the last
sentence of this Section 11(a)(iii)) in accordance with Section 11(a)(ii) hereof
(the "Current Value"), over (2) the Purchase Price, and (B) with respect to each
Right, (subject to Section 7(e) hereof) make adequate provision to substitute
for such shares of Common Stock, upon payment of the applicable Purchase Price,
any one or more of the following having an aggregate value determined by the
Board to be equal to the Current Value: (1) cash, (2) a reduction in the
Purchase Price, (3) Common Stock or other equity securities of the Company
(including, without limitation, shares or units of preferred stock which the
Board has deemed in good faith to have the same value as a share of Common Stock
(such shares of preferred stock being referred to herein as "Common Stock
Equivalents")), (4) debt securities of the Company, (5) other assets, or (6) any
combination of the foregoing (which would include the additional consideration
provided to any holder by reducing the Purchase Price) having an aggregate value
equal to the Current Value, where such aggregate value has been determined by
the Board; provided, however, subject to the provisions of Section 9(e) hereof,
that if the company shall not have made adequate provision to deliver value
pursuant to clause (B) above within 30 days following the Close of Business 10
Business Days after the first occurrence of a Common Stock Event described in
Section 11(a) (ii) hereof (a "Section 11(a)(ii) Trigger Date"), then the Company
shall be obligated to deliver, upon the surrender for exercise of a Right and
without requiring payment of the Purchase Price, shares of Common Stock (to the
extent available) and then, if
15
necessary, cash, securities, and/or assets which in the aggregate are equal to
the Excess Amount. If the Board shall determine in good faith that it is likely
that sufficient additional shares of Common Stock or Common Stock Equivalents
could be authorized for issuance upon exercise in full of the Rights, the 30-day
period set forth above may be extended to the extent necessary, but not more
than 90 days after the Section 11(a)(ii) Trigger Date in order that the Company
may seek stockholder approval for the authorization of such additional shares
(such period as it may be extended, the "Substitution Period"). To the extent
that the Company determines that some action is to be taken pursuant to the
preceding provisions of this Section 11(a)(iii), the Company (x) shall provide,
subject to Section 7(e) hereof, that (except as to the form of consideration
which shall be determined as appropriate by the Board) such action shall apply
uniformly to all outstanding Rights which shall not have become null and void,
and (y) may suspend the exercisability to the Rights until the expiration of the
Substitution Period in order to seek any authorization of additional shares
and/or to decide the appropriate form of distribution to be made pursuant to
such provisions and to determine the value thereof. In the event of any such
suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended. The Company shall
thereafter issue a public announcement at such time as the suspension is no
longer effect. For purposes of this Section 11(a)(iii), the value of the Common
Stock issuable upon exercise of a Right in accordance with Section 11(a)(ii)
hereof shall be the Current Market Price per share of the Common Stock (as
determined pursuant to Section 11(d) hereof) on the Section 11(a)(ii) Trigger
Date and the value of any Common Stock Equivalent shall be deemed to be equal to
the Current Market Price per share of the Common Stock on such date.
(b) In the event the Company shall after the Dividend Record Date fix a
record date for the issuance of any options, warrants, or other rights to all
holders of Common Stock entitling them (for a period expiring within 45 calendar
days after such record date) to subscribe for or purchase Common Stock or
securities convertible into Common Stock at a price per share of Common Stock
(or having a conversion price per share of Common Stock, if a security is
convertible into Common Stock) less than the Current Market Price per share of
Common Stock (determined In accordance with Section 11(d) hereof) determined as
of such record date, the Purchase Price to be in effect after such record date
shall be determined by multiplying the Purchase price in effect immediately
prior to such record date, by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding on such record date plus the number
of shares of Common Stock which the aggregate minimum offering price of the
total number of shares of Common Stock so to be offered (and/or the aggregate
minimum conversion price of such convertible securities so to be offered) would
purchase at such Current Market Price, and the denominator of which shall be the
number of shares of Common Stock outstanding on such record date plus the
maximum number of additional shares of Common Stock to be offered for
subscription or purchase (and/or the maximum number of shares into which such
convertible securities so to be offered are convertible). In case such
subscription price may be paid by delivery of consideration part or all of which
shall be in a form other than cash, for purposes of this Section 11(b) the value
or such consideration shall be the fair market value thereof) determined in good
faith by the Board (which determination shall be described in an Officers'
Certificate filed with the Rights Agent). Shares of Common Stock owned by or
held for the account of the Company shall not be deemed outstanding for the
purpose of any such computation. Such adjustment shall be made successively
whenever such a record date is fixed; and in the event that such rights or
warrants are not so issued, the Purchase Price shall be
16
adjusted to be the Purchase Price which would then be in effect if such record
date had not been fixed (subject, however, to such other adjustments as are
provided herein).
(c) In the event that the Company shall, after the Dividend Record
Date, fix a record date for the making of a distribution to all holders of
Common Stock (including any such distribution made in connection with a
consolidation or merger in which the Company is the surviving or continuing
Person) of evidences of indebtedness, cash (other than cash dividends paid out
of the earnings or retained earnings of the Company and its subsidiaries
determined on a consolidated basis in accordance with generally accepted
accounting principles consistently applied), other property (other than a
dividend payable in shares of Common Stock, but including any dividend payable
in capital stock other than Common Stock), or subscription rights or warrants
(excluding those referred to in Section 11(b) hereof), the Purchase Price to be
in effect after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, of which
the numerator shall be the Current Market Price per share of Common Stock (as
defined in Section 11(d) hereof) determined as of such record date, less the sum
of that portion of cash plus the fair market value, as determined in good faith
by the Board (which determination shall be described in an Officers' Certificate
filed with the Rights Agent) of that portion of such evidences of indebtedness,
such other property, and/or such subscription rights or warrants applicable to
one share of Common Stock and the denominator of which shall be such Current
Market Price per share of the Common Stock. Such adjustments shall be made
successively whenever such a record date is fixed; and in the event 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 (subject, however, to such other adjustments as are provided herein).
(d) For purposes of any computation pursuant to Section 11(a) (iii)
hereof, the "Current Market Price" per share (or unit) of any security on any
date shall be deemed be the average of the daily Closing Price of such security
for the 10 consecutive Trading Days immediately after such date and for the
purpose of any other computation hereunder, the "Current Market Price" per share
(or unit) of any security on any date shall be deemed to be the average of the
daily Closing Price of such security for the 20 consecutive Trading Days
immediately prior to such date; provided, however, that in the event that the
Current Market Price per share (or unit) of such security is determined during a
period fol1owing the announcement by the issuer of such security of (i) a
dividend or distribution on such security or securities convertible into shares
(or units) of such security, or (ii) any subdivision, combination or
reclassification of such security, and prior to the expiration of such 10
Trading Days or 20 Trading Days, as the case may be, after (A) the ex-dividend
date for such dividend or distribution, or (B) the record date for such
subdivision, combination or reclassification, as the case may be, then, and in
each such case, the "Current Market Price" shall be the Closing Price of such
security on the last day of such respective 10 Trading Day or 20 Trading Day
period. The term "Trading Day" shall mean a day on which the principal national
securities exchange on which such security is listed or admitted to trading is
open for the transaction of business or, if such security is not listed or
admitted to trading on any national securities exchange, a day which is a
Business Day. For purposes of this Agreement, the "Closing Price" of any
security on any day shall be the last sale price, regular way, with respect to
shares of Common Stock, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, with respect to such
security, in either case as reported in the principal consolidated
17
transaction reporting system with respect to securities listed on the principal
national securities exchange on which the shares of Common Stock are listed or
admitted to trading, or if the shares of Common Stock are not listed or admitted
to trading on any national securities exchange, the last quoted price, or if not
so quoted, the average of the high bid and low asked prices in the over-the-
counter market, as reported by the Nasdaq National Market or such other system
then in use; or, if on any such date the shares of Common Stock are not quoted
by any such organization, the average of the closing bid and asked prices with
respect to such shares, as furnished by a professional market maker making a
market in the Common Stock selected by the Board; or, if no such market maker is
available, the fair market value of the shares of Common Stock as of such day as
determined in good faith by the Board (which determination shall be described in
an Officers' Certificate filed with the Rights Agent).
(e) No adjustment in the Purchase Price shall be required unless
adjustment would require an increase or decrease of at least 1% in such price;
provided, however, that any adjustments which by reason of this Section 11(e)
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this Section 11 shall be made
to the nearest cent or to the nearest share of Common Stock. Notwithstanding the
first sentence of this Section 11(e), any adjustment required by this Section 11
shall be made no later than the earlier of (i) three years from the date of the
transaction which mandates the adjustment or (ii) the date of the expiration of
the right to exercise the Rights.
(f) In the event that at any time, as a result of an adjustment made in
respect of a Common Stock Event, the holder of any Right thereafter exercised
shall become entitled to receive any shares of capital stock of the Company
other than shares of Common Stock, thereafter the number of such other shares so
receivable upon exercise of any Right and the Purchase Price thereof shall be
subject to adjustment from time to time in manner and on terms as nearly
equivalent as practicable to the provisions with respect to the shares of the
Common Stock contained in Sections 11(a), (b), (c), (e), (g), (h), (i), (j), (k)
and (m) hereof, and the provisions of Sections 7, 9, 10, 11(d) and 13 hereof
with respect to the shares of Common Stock shall apply on like terms to any such
other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of shares of Common Stock
purchasable from time to time hereunder upon exercise of the Rights represented
thereby, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided in
Section 11(i) hereof, upon each adjustment of the Purchase Price as a result of
the calculations made pursuant to Section 11(b) and 11(c) hereof, each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of
shares of Common Stock (calculated to the nearest share) obtained by (i)
multiplying (x) the number of shares 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.
18
(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 shares of Common Stock 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 shares of Common Stock 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 share) obtained by dividing the Purchase
Price in effect immediately prior to such adjustment of the Purchase Price by
the Purchase Price in effect immediately after such 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 Rights Certificates have been issued, shall be at least 10 days later
than the date of the public announcement. If Rights Certificates have been
issued, upon each adjustment of the number of Rights pursuant to this Section
11(i) the company shall, as promptly as practicable, cause to be distributed to
holders of record of Rights Certificates on such record date Rights Certificates
evidencing, subject to Section 14 hereof, the additional Rights to which such
holders shall be entitled as a result of such adjustment, or, at the option of
the Company, shall cause to be distributed to such holders of record in
substitution and replacement for the Rights Certificates held by such holders
prior to the date of adjustment, and upon surrender thereof, if required by the
Company, new Rights Certificates evidencing all the rights to which such holders
shall be entitled after such adjustment. Rights Certificates so to be
distributed shall be issued, executed, and countersigned in the manner provided
for herein (and may bear, at the option of the Company, the adjusted Purchase
Price) and shall be registered in the names of the holders of record of Rights
Certificates on the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or
the number of shares of Common Stock issuable upon exercise of such Rights, the
Rights Certificates theretofore and thereafter issued may continue to express
the Purchase Price per share and the number of whole or fractional shares which
were expressed in the initial Rights Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below the then par value, if any, of the number shares of
Common Stock issuable upon exercise of the Rights, the company shall take any
corporate action which may, in the opinion of its counsel, be necessary in order
that the Company may validly and legally issue such number of fully paid and
nonassessable shares of Common Stock 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,
the number of shares of Common Stock and other capital stock or securities of
the Company, if any, issuable upon such exercise over and above the number of
whole or fractional shares of Common Stock or 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
19
appropriate instrument evidencing such holder's right, to receive such
additional securities upon the occurrence of the event requiring such
adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that it, by means of a resolution of the Board acting in good faith
(which resolution shall be conclusive on all concerned if approved by a majority
of the Board), shall determine to be advisable in order that any (i)
consolidation or subdivision of the Common Stock, (ii) issuance wholly for cash
of any Common Stock at less than the Current Market Price thereof, (iii)
issuance wholly for cash of Common Stock (or other securities which by their
terms are convertible into or exercisable or exchangeable for Common Stock),
(iv) dividends payable in shares of Common Stock or other capital stock, (v) or
issuance of rights, options, or warrants referred to hereinabove in this Section
11, hereafter made or declared by the Company to the holders of its Common
Stock, shall not be taxable to such holders.
(n) The Company covenants and agrees that it shall not, at any time
after the Distribution Date, (i) consolidate with any other Person (other than a
Subsidiary of the Company in a transaction that complies with Section 11(o)
hereof), (ii) merge with or into any other Person (other than a Subsidiary of
the Company in a transaction which complies with Section 11(o) hereof), or (iii)
sell or transfer (or permit any Subsidiary of the Company to sell or transfer),
in one transaction or a series of related transactions, more than 50% of (A) the
assets (taken at net asset value as stated on the books of the Company and
determined on a consolidated basis in accordance with generally accepted
accounting principles consistently applied) or (B) the earning power of the
Company and its Subsidiaries (determined on a consolidated basis in accordance
with generally accepted accounting principles consistently applied) to any other
Person or Persons (other than the Company or any of its Subsidiaries in one or
more transactions each of which complies with Section 11(o) hereof), if (x) at
the time of or immediately after such consolidation, merger or sale, there are
any rights, options, warrants or other instruments or securities outstanding or
agreements (whether or not in writing) in effect that would substantially
diminish or otherwise eliminate the benefits intended to be afforded by the
Rights or (y) prior to, simultaneously with or immediately after such
consolidation, merger or sale, the stockholders of such other Person shall have
received a distribution of Rights previously owned by such other Person or any
of its Affiliates.
(o) The Company covenants and agrees that, after the Distribution Date,
it will not, except as permitted by Section 23, 24 or 27 hereof, 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.
Section 12. Certificate of Adjustments.
Whenever an adjustment is made as provided in Section 11 or 13 hereof,
the Company shall (a) promptly prepare an Officers' Certificate setting forth
such adjustment, including any adjustment in Purchase Price, the number of
shares of Common Stock or Other Consideration payable, and a brief statement of
the facts accounting for such adjustment, (b) promptly file with
20
the Rights Agent and with each transfer agent for the Common Stock a copy of
such Officers' Certificate, and (c) mail a brief summary thereof to each
registered holder of a Rights Certificate in accordance with Section 26 hereof.
The Rights Agent shall be fully protected in relying on any such Officers'
certificate and on any adjustment therein contained, and shall not be deemed to
have knowledge of any such adjustment unless and until it shall have received
such an Officers' Certificate.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power.
(a) In the event that, following the Stock Acquisition Date, directly
or indirectly, (x) the Company shall consolidate with, or merge with and into,
any other Person (other than a Subsidiary of the Company in a transaction that
complies with Section 11(o) hereof) and the Company shall not be the continuing
or surviving Person of such consolidation or merger, (y) any Person (other than
a Subsidiary of the company in a transaction that complies with Section 11(o)
hereof) shall consolidate with, or merge with and into, the Company, and the
Company shall be the continuing or surviving Person of such consolidation or
merger and, in connection with such consolidation or merger, all or part of the
Common Stock of the Company shall be changed or otherwise transformed into other
stock or other securities of any other Person (or the Company) or cash or any
other property, or (c) the Company shall sell or otherwise transfer (or one or
more of its Subsidiaries shall sell or otherwise transfer), in one transaction
or a series of related transactions, more than 50% of (A) the assets (taken at
net asset value as stated on the books of the Company and determined on a
consolidated basis in accordance with generally accepted accounting principles
consistently applied) or (B) the earning power of the Company and its
Subsidiaries (determined on a consolidated basis in accordance with generally
accepted accounting principles consistently applied) to any Person (other than
the Company or any Subsidiary of the Company in one or more transactions each of
which complies with Section 11(o) hereof),
then, from and after such event, proper provision shall be made so
that (i) each holder of a Right, except as provided in Section 7(e) hereof,
shall thereafter have the right to receive, upon the exercise thereof at the
then current Purchase Price in effect at the time of such exercise in accordance
with the terms of this Agreement, such number of shares of validly authorized
and issued, fully paid, non-assessable, and freely tradable Common Stock of the
Principal Party (as such term is defined below), free and clear of any liens,
encumbrances, rights of first refusal, or other adverse claims, as shall be
equal to the result obtained by (x) multiplying the then current Purchase Price
in effect immediately prior to the first occurrence of any Common Stock Event
under this Section 13, by the number of shares of Common Stock for which a Right
is exercisable immediately prior to such first occurrence (and without taking
into account any prior adjustment made pursuant to 1l(a)(ii)) and (y) dividing
that product by 50% of the Current Market Price per share (as defined in Section
11(d) hereof) of the Common Stock of such Principal Party determined as of the
date of consummation of such consolidation, merger, sale, or transfer; (ii) such
Principal Party shall thereafter be liable for, and shall assume, by virtue of
such consolidation, merger, sale, or transfer, all the obligations and duties of
the Company pursuant to this Agreement; (iii) the term "Company" shall
thereafter be deemed, for all purposes of this Agreement, to refer to such
Principal Party, it being specifically intended that the provisions of Section
11 hereof (other than Section l1(a)(ii) hereof) shall apply only to such
Principal Party following the first occurrence of a Common Stock Event under
this Section 13;
21
(iv) such Principal Party shall take such steps (including, but not limited to,
the reservation of a sufficient number of shares of its Common Stock) in
connection with such consummation as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably may
be, in relation to the shares of its Common Stock thereafter deliverable upon
the exercise of the Rights; and (v) the provisions of Section 11(a) (ii) hereof
shall be of no effect following the first occurrence of any Common Stock Event
described in clauses (a), (b) or (c) of this Section 13.
(b) "Principal Party" shall mean
in the case of any transaction described in clause (a) or (b) of the first
sentence of Section 13(a) hereof, the Person that is the issuer of any
securities into which shares of Common Stock of the Company are converted in
such merger or consolidation, and if no securities are so issued, the Person
that is the other party to such merger or consolidation; and
in the case of any transaction described in clause (c) of the first sentence of
Section 13(a) hereof, the Person that is the party receiving the greatest
portion of the assets or earning power transferred pursuant to such transaction
to or transactions;
provided, however, that in any such case, (1) if the common stock of such Person
is not at such time and has not been continuously over the preceding twelve (12)
month period registered under section 12 of the Exchange Act, an such Person is
a direct or indirect Subsidiary of another Person the common stock of which is
and has been so registered, "Principal Party" shall refer to such other Person;
and (2) in case such Person is a Subsidiary, directly or indirectly, of more
than one Person, the common stock 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 stock having the greatest market value.
(c) The Company shall not consummate any such consolidation, merger,
sale or transfer unless (i) the Principal Party shall have a sufficient number
of authorized shares of its Common Stock which have not been issued or reserved
for issuance as will permit the exercise in full of the Rights in accordance
with this Section 13, and (ii) prior thereto the Company and such Principal
Party shall have executed and delivered to the Rights Agent a supplemental
agreement so providing and further providing that as soon as practicable after
the date of any Common Stock Event described above in this Section 13 such
Principal Party will;
a. 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 will 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
Expiration Date; and
22
will deliver to holders of the Rights historical financial statements
of such Principal Party and each of its Affiliates which comply in all
respects with the requirements for registration on Form 10 under the
Exchange Act.
Furthermore, in case the Principal Party has any provision in any of
its authorized securities or in its charter or by-laws or other agreement or
instrument governing its affairs, which provision would have the effect of
causing such the Principal Party to issue, in connection with, or as a
consequence of, the consummation of a Common Stock Event described in clauses
(a), (b), or (c) of this Section 13, shares of Common Stock of such the
Principal Party at less than the then Current Market Price per share thereof
(as defined in Section 11(d) hereof), or to issue securities exercisable for,
or convertible into Common Stock of such the Principal Party at less than such
then Current Market Price, then, in such event, the Company hereby agrees with
each holder of the Rights that it shall not consummate any such transaction
unless prior thereto the Company and such Principal Party shall have executed
and delivered to the Rights Agent a supplemental agreement providing that such
provision in question shall have been cancelled, waived, or amended so that it
will have no effect in connection with, or as a consequence of the consummation
of the proposed transaction.
The provisions of this Section 13 shall similarly apply to successive
mergers or consolidations or sales or other transfers. In the event that a
Common Stock Event described in this Section 13 shall occur at any time after
the occurrence of a Common Stock Event described in Section 11(a) (ii) hereof,
the Rights which have not therefore been exercised shall thereafter become
exercisable, except as provided in Section 7(e) hereof, in the manner described
in this Section 13.
(d) Notwithstanding anything in this Agreement to the contrary, Section
13 shall not be applicable to a transaction described in subparagraphs (x) and
(y) of Section 13(a) if (i) such transaction is consummated with a Person or
Persons who acquired shares of Common Stock pursuant to a tender offer or
exchange offer for all outstanding shares of Common Stock which complies with
the provisions of Section 11(a)(ii)(B) hereof (or a wholly owned subsidiary of
any such Person or Persons), (ii) the price per share of Common Stock offered
in such transaction is not less than the price per share of Common Stock paid
to all holders of shares of Common Stock 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 shares of Common Stock 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(d), all Rights hereunder shall expire.
Section 14. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue fractions of Rights or
to distribute Rights Certificates which evidence fractional Rights. In lieu of
issuing such fractional Rights, at the election of the Company, there shall be
paid to the registered holders of the Rights 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
23
been otherwise issuable. The closing price of the Rights for any day shall be
the last sale price, regular way, or, in case no sale takes place on such day,
the average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed on the principal national securities exchange on which the
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 priced in the
over-the-counter market, as reported by the Nasdaq National Market 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.
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
shall be used.
(b) The Company shall not be required to issue fractions of shares of
its capital stock upon exercise of the Rights or to distribute certificates
which evidence fractional shares. In lieu of fractional shares, at the election
of the Company, there shall be paid to the registered holders of Rights at the
time such Rights are exercised as herein provided an amount in cash equal to the
same fraction of the current market value of a share of such capital stock. For
purposes of this Section 14(b), the current market value of a share of such
capital stock shall be the Closing Price of such capital stock for the Trading
Day immediately prior to the date of such exercise.
(c) The holder of a Right, by the acceptance of such Right expressly
waives such holder's right to receive any fractional Rights or (except as
provided in Section 14(b) hereof) any fractional Rights upon exercise of a
Right.
Section 15. Rights of Action.
Excepting the rights of action given the Rights Agent under Section 18
hereof and except as set forth in Section 20(l) hereof, all rights of action in
respect of this Agreement are vested in the registered holder of each Right; and
any registered holder of any Right, without the consent of the Rights Agent or
of the holder of any other Right, may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action, or proceeding
against the Company to enforce, or otherwise act in respect of, his right to
exercise the rights evidenced by such Right in the manner provided in such
Rights Certificate and in this Agreement, and the Company hereby agrees to
reimburse such registered holder for all expenses (including reasonable
attorneys' fees) incurred by such registered holder in connection therewith.
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 the obligations hereunder, and
shall be entitled to injunctive relief against actual or threatened violations
of the obligations hereunder of any Person subject to this Agreement.
Section 16. Agreement of Rights Holders.
Every holder of a Right by accepting the same consents and agrees with
the Company and the Rights Agent and with every other holder of a Right that:
24
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of Common Stock;
(b) after the Distribution Date, the Rights 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 with a form of assignment and certificate set
forth on the reverse side thereof duly executed, accompanied by a signature
guarantee and such other documentation as the Rights Agent may reasonably
request;
(c) subject to Sections 6(a) and 7(f) hereof, the Company and the
Rights Agent may deem and treat the person in whose name a Rights Certificate
(or, prior to the Distribution Date, the associated Common Stock certificate) is
registered as the absolute owner thereof and of the Rights evidenced thereby
(notwithstanding any notations of ownership or writing on the Rights Certificate
or, prior to the Distribution Date, the associated Common Stock certificate,
made by anyone other than the Company or the Rights Agent) for all purposes
whatsoever, and neither the company nor the Rights Agent shall be affected by
any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the contrary, neither
the Company nor the Rights Agent shall have any liability to any holder of a
Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority prohibiting or otherwise restraining
performance of such obligation; provided, however, the Company shall use its
best efforts to have any such order, decree or ruling lifted or otherwise
overturned as soon as possible.
Section 17. Rights Certificate Holder Not Deemed a Stockholder.
No holder, as such, of any Rights Certificate shall be entitled to
vote, receive dividends, or otherwise be deemed for any purpose the holder of
any shares of Common Stock or the shares or similar units of any other
securities of the Company which may be issuable on the exercise of the Rights
represented thereby, nor shall anything contained herein or in any Rights
Certificate be construed to confer upon the holder of any Rights Certificate, as
such, any of the rights of a stockholder of the Company or any right to vote in
the election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any action by the Company, or
to receive notice of meetings or other actions affecting stockholders (except as
provided in Section 25 hereof), or to receive dividends or preemptive rights, or
otherwise, until the time specified in Section 10 hereof.
Section 18. Concerning the Rights Agent.
(a) The Company agrees to pay to the Rights Agent such reasonable
compensation as shall be agreed to in writing between the Company and the Rights
Agent for all services rendered by it hereunder and, from time to time, on
demand of the Rights Agent, its reasonable expenses and counsel fees and
disbursements and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder. The
25
Company also agrees to indemnify the Rights Agent for, and to hold it harmless
against, any and all loss, liability, damages, claims or expense, incurred
without gross 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 (including reasonable attorneys' fees and expenses) of defending
against any claim of liability in the premises.
(b) The Rights Agent shall be protected and shall incur no liability
for or in respect of any action taken, suffered, or omitted by it in connection
with its administration of this Agreement in reliance upon any Rights
Certificate or certificate for any shares of Common Stock or for other
securities of the Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, instruction, direction,
consent, certificate, statement, or other paper or document believed by it to be
genuine and to be signed and executed by the proper Person or Persons, and
verified or acknowledged as required by this Agreement.
Section 19. Merger or Consolidation or Change of Name of Rights Agent.
(a) Any corporation into which the 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 shall be a party, or any corporation
succeeding to the shareholder services business of the Rights Agent, shall be
the successor to the Rights agent under this Agreement without the execution or
filing of any paper or any further act on the part of any of the parties hereto;
provided, however, that such corporation would be eligible for appointment as a
successor Rights Agent under the provisions of Section 21 hereof. In case at the
time such successor Rights Agent shall succeed to the agency created by this
Agreement and any of the Rights Certificates shall have been countersigned but
not delivered, any such successor Rights Agent may adopt the countersignature of
the predecessor Rights Agent and deliver such Rights Certificates so
countersigned; and in case at that time any of the Rights Certificates shall not
have been countersigned, any successor Rights Agent may countersign Rights
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 Rights Certificates
shall have the full force provided in the Rights Certificates and in this
Agreement.
(b) In case at any time the name of the Rights Agent shall be changed
and at such time any of the Rights Certificates shall have been countersigned
but not delivered, the Rights Agent may adopt the countersignature under its
prior name and deliver Each Rights Certificates so countersigned; and in case at
that time any of the Rights Certificates shall not have been countersigned, the
Rights Agent may countersign such Rights Certificates either in its prior name
or in its changed name; and in all such cases such Rights Certificates shall
have the full force provided in the Rights Certificates and in this Agreement.
Section 20. Duties of Rights Agent.
The Rights Agent undertakes only the duties and obligations expressly
imposed upon it by this Agreement and no implied duties or obligations shall be
read into this Agreement against the Rights Agent. The Rights Agent shall
perform its duties and obligations hereunder upon the
26
following terms and conditions by all of which the Company and the holders of
Rights Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel of its selection
(who may be legal counsel to the Company), and the opinion of such counsel shall
be full and complete authorization and protection to the Rights Agent as to any
action taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person 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 (an "Officers' Certificate") signed by a person believed by the
Rights Agent to be the Chairman of the Board, the President or any Vice
President and by the Treasurer or any Assistant Treasurer or the Clerk or any
Assistant Clerk of the Company and delivered to the Rights Agent; and such
Officers' 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 only be liable hereunder only for its own
gross negligence, bad faith, or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Rights
Certificates (except its countersignature on such Rights Certificate) 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 Rights 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 Rights Certificate; nor shall it
be responsible for any adjustment required under the provisions of Sections 11
or 13 hereof or be responsib1e for the manner, method or amount of any such
adjustment or procedures or the ascertaining of the existence of facts that
would require any such adjustment or procedure (except with respect to the
exercise of Rights evidenced by Rights Certificates after receipt of a
certificate describing any such adjustment or procedures); nor shall it by any
act hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any Common Stock or other securities to be
issued pursuant to this Agreement or any Rights Certificate or as to whether any
shares of Common Stock, or other shares or similar units of other securities,
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.
27
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
person believed by the Rights Agent to be the Chairman of the Board, the
President or any Vice President or the Clerk or any Assistant Clerk or the
Treasurer or any Assistant Treasurer of the Company, and to apply to such
officers for advice or instructions in connection with its duties, and it shall
not be liable for any action taken or suffered to be taken by it in good faith
in accordance with instructions of any such officer. Any application by the
Rights Agent for written instructions from the Company may, at the option of the
Rights Agent, set forth in writing any action proposed to be taken or omitted by
the Rights Agent with respect to its duties or obligations under this Agreement
and the date on/or after which such action shall be taken or omitted and the
Rights Agent shall not be liable for any action taken or omitted in accordance
with a proposal included in any such application on or after the date specified
therein (which date shall not be less than three Business Days after the date
any such officer actually receives such application, unless any such officer
shall have consented in writing to an earlier date) unless, prior to taking or
omitting any such action, the Rights Agent has received written instructions
from the company in response to such application specifying the action to be
taken or omitted.
(h) The Rights Agent and any stockholder, director, officer, or
employee of the Rights Agent may buy, sell, or deal in any of the Rights or
other securities of the company or become peculiarly 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 entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or from 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, however, that reasonable care was exercised in
the selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
there shall be reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.
(k) If, with respect to any Rights Certificate surrendered to the
Rights Agent for exercise or transfer, the certification appearing on the
reverse side thereof following the form of election to purchase has either not
been completed or indicates an affirmative response to clause 1 or 2 thereof,
the Rights Agent shall not take any further action with respect to such
requested exercise of transfer without first consulting with the Company.
(l) The provisions of this Section 20 are solely for the benefit of the
Rights Agent or the Company and any failure or omission under this Section 20
shall not affect the rights of the Company under this Agreement and the Rights
Agent or the Company shall have no liability to any holder of Rights or other
Person on account of such failure or omission.
28
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 Stock by
registered or certified mail, and, subsequent to the Distribution Date, 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, to each transfer agent of the Common Stock by
registered or certified mail, and, subsequent to the Distribution Date, to the
holders of the Rights 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
Rights Certificate (who shall, with such notice, submit his Rights Certificate
for inspection by the Company) , then the registered holder of any Rights
Certificate may apply to any court of competent jurisdiction for the appointment
of a new Rights Agent. Any successor Rights Agent, whether appointed by the
Company or by such a court, shall be a corporation organized and doing business
under the laws of the United states, or any state of the United States, in good
standing, having any office in the Commonwealth of Massachusetts, 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 Commonwealth or Massachusetts, in good
standing, having a Principal Office in the Commonwealth of Massachusetts, which
is authorized under such laws to exercise corporate trust powers and is subject
to supervision or examination by federal or state authority and which has at the
time of its appointment as Rights Agent a combined capital and surplus of at
least $50,000,000. 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; and,
except as the context herein otherwise requires, such successor Rights Agent
shall he deemed to be the "Rights Agent" for all purposes or this Agreement. Not
later than the effective date of any such appointment the Company shall file
notice thereof in writing with the predecessor Rights Agent and each transfer
agent of the Common Stock, and mail a notice thereof in writing to the
registered holders of the Rights certificates. Failure to give any notice
provided for in this Section 21, however, or any defect therein, shall not
affect the legality or validity of the resignation or removal of the Rights
Agent or the Appointment of the successor Rights Agent, as the case may be.
Section 22. Issuance of New Rights Certificates.
Notwithstanding any of the provisions of this Agreement or of the
Rights to the contrary, the Company may, at its option, issue new Rights
Certificates evidencing Rights in such form as may be approved by the Board to
reflect any adjustment or change in the Purchase Price per share and the number
or kind or class of shares of stock or other securities or property purchasable
under the Rights Certificates made in accordance with the provisions of this
Agreement. In addition, in connection with the issuance or sale by the Company
of shares of Common Stock following the Distribution Date and prior to the
redemption or expiration of the
29
Rights, the company shall, with respect to shares of Common Stock so issued or
sold pursuant to the exercise of stock options or under any employee plan or
arrangement, or upon the exercise, conversion or exchange of securities
hereinafter issued by the Company, and (b) may, in any other case, if deemed
necessary or appropriate by the Board, issue Rights Certificates representing
the appropriate number of Rights in connection with such issuance or sale;
provided, however, that (i) no such Rights evidenced by a Rights Certificate
shall he issued if, and to the extent that, the Company shall be advised by
counsel that such issuance would create a significant risk of material adverse
tax consequences to the Company or the Person to whom such Rights would be
issued, and (ii) no such Rights Certificate shall be issued if, and to the
extent that, appropriate adjustment shall otherwise have been made in lieu of
the issuance thereof.
Section 23. Redemption and Termination.
(a) The Board may, at its option, at any time prior to the earlier of
(i) the Close of Business on the tenth day following the Stock Acquisition Date
(or if the Stock Acquisition Date shall have occurred prior to the Dividend
Record Date, the Close of Business on the tenth day following the Dividend
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 $0.10 per Right,
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such redemption price being
hereinafter referred to as the "Redemption Price"). The redemption of the Rights
by the Board may be made effective at such time, on such basis and subject to
such conditions as the Board in its sole discretion may establish.
Notwithstanding anything contained in this Agreement to the contrary, the Rights
shall not be exercisable after the first occurrence of any event described in
Section 11(a)(ii)(A)(B) or (C) hereof until such time as the Company's right of
redemption set forth in the first sentence of Section 23(a) has expired.
(b) Immediately upon the time of the effectiveness of the redemption of
the Rights pursuant to paragraph (a) of this Section 23 or such earlier time as
may be determined by the Board in the action ordering such redemption (although
not earlier than the time of such action) (such time the "Redemption Date"), and
without any further action and without any notice, the right to exercise the
Rights shall terminate and the only right thereafter of the holders of Rights
shall be to receive the Redemption Price. The Company shall promptly give public
notice of any such redemption; provided, however, that the failure to give, or
any defect in, any such notice shall not affect the validity of such redemption.
Within 10 days after such action of the Board ordering the redemption of the
Rights pursuant to paragraph (a), 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
Stock. Any notice which is mailed in the manner herein provided shall be deemed
given, whether or not the holder receives the notice. If the payment of the
Redemption Price is not included with such notice, each such notice shall state
the method by which the payment of the Redemption Price will be made. Neither
the Company nor any of its Affiliates 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, other than in connection with the
purchase of Common Stock prior to the Distribution Date.
30
(c) The Company may, at its option, pay the Redemption Price in cash,
shares of Common Stock (based on the Current Market Price, as defined in Section
11(d) hereof, of the Common Stock at the time of redemption) or any other form
of consideration deemed appropriate by the Board.
Section 24. Exchange.
(a) The Board may, at its option, at any time after any Person becomes
an Acquiring Person, exchange all or part of the then outstanding and
exercisable Rights for shares of Common Stock at an exchange ratio of one share
of Common Stock per Right, appropriately adjusted to reflect any stock split,
stock dividend, combination of shares of similar transaction occurring after the
date hereof (such exchange ratio being hereinafter referred to as the "Exchange
Ratio"). Notwithstanding the foregoing, the Board 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 Person holding Common Stock for or pursuant to the terms of
any such plan), together with all Affiliates of such Person, becomes the
Beneficial owner of 50% or more of the Common Stock then outstanding.
(b) Immediately upon the action of the Board ordering the exchange of
any Rights pursuant to subsection (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 shares of Common Stock equal to the number of such Rights held by
such holder multiplied by the Exchange Ratio. The Company shall promptly give
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 to 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 Stock for Rights will be affected and, in the event of any partial
exchange, the number of Rights which will be exchanged. Any partial exchange
shall be affected pro rata based on the number of Rights (other than Rights
which have become void pursuant to the provisions of Section 7(e) hereof) then
held by each holder of Rights.
(c) In the event that there shall not be sufficient shares of Common
Stock issued but not outstanding or authorized but unissued to permit any
exchange of rights as contemplated in accordance with this Section 24, the
Company shall take all such action as may be necessary to authorize additional
Common Stock for issuance upon exchange of the Rights.
Section 25. Notice of Proposed Actions.
(a) In case the Company shall after the Distribution Date propose (a)
to pay any dividend payable in stock of any class to the holders of its Common
Stock or to make any other distribution to the holder of its Common Stock (other
than a cash dividend out of earnings or the retained earnings of the Company),
or (b) to offer to the holders of its Common Stock (i) rights or warrants to
subscribe for or to purchase any additional shares Common Stock or (ii) shares
of
31
stock of any class or (iii) any other securities, rights, or options, or (c) to
effect any reclassification of the Common Stock (other than a reclassification
involving only the subdivision of outstanding shares of Common Stock), or (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 transaction or a series of related transactions, of more
than 50% of (i) the assets of the company and its Subsidiaries (taken at net
asset value as stated on the books of the Company and determined on a
consolidated basis in accordance with generally accepted accounting principles
consistently applied) or (ii) the earning power of the company and its
Subsidiaries (determined on a consolidated basis in accordance with generally
accepted accounting principles consistently applied) to any other Person or
Persons, or (e) to effect the liquidation, dissolution or winding up of the
Company, then, in each such case, the Company shall give to the Rights Agent and
each holder of a Right, in accordance with Section 26 hereof, a notice of such
proposed action, which shall specify the record date for the purposes of such
stock dividend, distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of Common Stock, if any such date is to be fixed, and
such notice shall be so given in the case of any action covered by clause (a) or
(b) above at least [twenty] days prior to the record date for determining
holders of the Common Stock for purposes of such action, and in the case of any
such other action, at least twenty days prior to the date of the taking of such
proposed action or the date of participation therein by the holders of Common
Stock whichever shall be the earlier. The failure to give notice required by
this Section 25 or any defect therein shall not affect the legality or validity
of the action taken by the Company or the vote upon any such action.
(b) In case any Common Stock Event described in Section 11(a) (ii)
hereof shall occur, then, in any such case, the Company shall as soon as
practicable thereafter give to the Rights Agent and each holder of a Right
Certificate, in accordance with Section 26 hereof, a notice of the occurrence of
such Common Stock Event, which shall specify such event and the consequences of
the 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 Rights Certificate to 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 in
accordance with this Section 26) as follows:
The First Years Inc.
One Kiddie Drive
Avon, Massachusetts 02322
Attn: Ronald J. Sidman
Chairman, President and Chief Executive Officer
Copy to:
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
32
Boston, MA 02111
Attn: Stanford N. Goldman
Subject to the provisions of Sections 19 and 21 hereof, any notice or
demand authorized by this Agreement to be given or made by the Company or by the
holder of any Rights Certificate to or on the Rights Agent shall be sufficiently
given or made if sent by first-class mail, postage prepaid, addressed (until
another address is filed in writing with that Company in accordance with this
Section 26) as follows:
EquiServe Trust Company, N.A.
c/o EquiServe Limited Partnership
150 Royall Street
Canton, MA 02021
Attn: General Counsel
Notices or demands authorized by this Agreement to be given or made by
the Company or the Rights Agent to the holder of any Rights Certificate shall be
sufficiently given or mailed if sent by first class mail, postage prepaid,
addressed to such holder at the address of such holder as shown in the registry
books of the Company.
Section 27. Supplements and Amendments.
Prior to the Distribution Date, the Company may from time to time
supplement or amend this Agreement without the approval of any holders of the
Rights. From and after the Distribution Date, the Company may from time to time
amend this Agreement without the approval of any holders of the Rights in order
(i) to cure any ambiguity, (ii) to correct or supplement any provision contained
herein which may be defective or inconsistent with any other provisions herein,
(iii) to change any time period governing redemption of the Rights or any other
time period or (iv) to make any other provisions in regard to matters or
questions arising hereunder which the Company may deem necessary or desirable
and which shall not adversely affect the interests of the holders of the Rights
(other than any Acquiring Person or Disqualified Transferee or any Affiliate of
an Acquiring Person or Disqualified Transferee). Any amendment made pursuant to
this Section 27 after a Stock Acquisition Date shall require the approval of a
majority of the Board. The Rights Agent shall join with the Company in the
execution and delivery of any such supplement or amendment, unless such
supplement or amendment affects any of the rights, duties, or obligation of the
Rights Agent hereunder, in which case the Rights Agent may, but sha1l not be
required to, join in such execution and delivery.
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.
33
Section 29. Determinations and Actions by the Board; etc.
The Board shall have the exclusive power and authority to administer
this Agreement and to exercise all rights and powers specifically granted to the
Board, or to the company, or as may be necessary or advisable in the
administration of this Agreement, including, without limitation, the right and
power to (i) interpret the provisions of this Agreement and (ii) make all
determinations deemed necessary or advisable for the administration of this
Agreement.
Section 30. Benefits of This Agreement.
Nothing in this Agreement shall be construed to give to any Person
other than the Company, the Rights Agent, and the registered holders of the
Rights Certificates (and, prior to the Distribution Date, the associated shares
of Common Stock) any legal or equitable right, remedy, or claim under this
Agreement or the Rights; but this Agreement shall be for the sole and exclusive
benefit of the company, the Rights Agent, and the registered holders of the
Rights (and, prior to the Distribution Date, the associated Common Stock).
Section 31. Severability.
The invalidity or unenforceability of any term or provision hereof
shall not affect the validity or enforceability of any other term or provision
hereof.
Section 32. Governing Law.
This Agreement and each Rights Certificate issued hereunder shall be
deemed to be a contract made under the laws of The Commonwealth of Massachusetts
and for all purposes shall be governed by and construed in accordance with the
laws of said Commonwealth applicable to contracts to be made and performed
entirely within said Commonwealth.
Section 33. Counterparts.
This Agreement may be executed in any number of counterparts and each
of such counterparts shall for all purposes be deemed to be an original, and all
such counterparts shall together constitute but one and the same instrument.
Section 34. Descriptive Headings.
Descriptive headings of the several Sections of this Agreement are
inserted for convenience only and shall not control or affect the meaning or
construction of any of the provisions hereof.
34
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and set their respective hands and seals, all as of the day and
year first above written.
THE FIRST YEARS INC.
By: /s/ John R. Beals
----------------------------------
Name: John R. Beals
Title: Senior Vice President,
Chief Financial Officer and
Treasurer
Attest:
By: /s/ Susan D. Novins
-------------------------------
Name: Susan D. Novins
Title: General Counsel
EQUISERVE TRUST COMPANY, N.A.
as Rights Agent
Attest: By: /s/ Tyler Haynes
---------------------------------
Name: Tyler Haynes
Title: Managing Director
By: /s/ Jennifer Proulx
-------------------------------
Name: Jennifer Proulx
EXHIBIT A
FORM OF RIGHTS CERTIFICATE
Certificate No. R- _______________ Rights
NOT EXERCISABLE AFTER NOVEMBER 19, 2006 OR EARLIER IF ORDER OF
REDEMPTION IS GIVEN. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE
OPTION OF THE COMPANY, AT $25.00 PER RIGHT ON THE TERMS SET FORTH IN
THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY
OWNED BY AN ACQUIRING PERSON OR AN AFFILIATE (WHICH INCLUDES
AFFILIATES AND ASSOCIATES) OF AN ACQUIRING PERSON (AS EACH SUCH TERM
IS DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH
RIGHTS MAY BECOME NULL AND VOID. THE RIGHTS SHALL NOT BE EXERCISABLE,
AND SHALL BE VOID SO LONG AS HELD BY A HOLDER IN ANY JURISDICTION
WHERE THE REQUISITE QUALIFICATION TO THE ISSUANCE TO SUCH HOLDER, OR
THE EXERCISE BY SUCH HOLDER, OF THE RIGHTS IN SUCH JURISDICTION SHALL
NOT HAVE BEEN OBTAINED OR BE OBTAINABLE. (THE RIGHTS REPRESENTED BY
THIS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR
BECAME AN ACQUIRING PERSON OR AN AFFILIATE (WHICH INCLUDES AFFILIATES
AND ASSOCIATES) OF AN ACQUIRING PERSON (AS EACH SUCH TERM IS DEFINED
IN THE RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE
RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE
CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF THE RIGHTS AGREEMENT.
Rights Certificate
THE FIRST YEARS INC.
This certifies that, ________________________________________________,
or its 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 Common Stock Rights Agreement dated as of
November 19, 2001 (the "Rights Agreement") between The First Years Inc., a
Massachusetts corporation (the "Company"), and EquiServe Trust Company, N.A., a
national banking 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. (Boston time) on November 19, 2006 (the
"Expiration Date") at the Principal Office (as such term is defined in the
Rights Agreement) of the Rights Agent, or its successors as Rights Agent, in
Canton, Massachusetts, one share of the Common Stock, with a par value of $.10
per share ("Common Stock"), of the Company per each Right represented hereby, at
a purchase price of $25.00 per share (the "Purchase Price") upon presentation
and surrender of this Rights Certificate with the Form of Election to Purchase
set forth on the reverse side hereof and the certificate contained therein duly
executed, accompanied by a signature guarantee and such other
A-36
documentation as the Rights Agent may reasonably request. The number of Rights
evidenced by this Rights Certificate (and the number of whole shares which may
be purchased upon exercise thereof) set forth above, and the Purchase Price per
share set forth above, are the number and Purchase Price as of __________, 2001,
based on the shares of Common Stock of the Company as constituted at such date.
As more fully set forth in the Rights Agreement, upon the occurrence
of a Common Stock Event (as such term is defined in the Rights Agreement), if
the Rights evidenced by this Rights Certificate are beneficially owned by (i) an
Acquiring Person or an Affiliate of an Acquiring Person (as each such term is
defined in the Rights Agreement) or (ii) a Disqualified Transferee (as defined
in the Rights Agreement), such Rights shall automatically become null and void
and no holder hereof shall have any right with respect to such Rights from and
after the occurrence of such Common Stock Event.
The Rights evidenced by this Rights Certificate shall not be
exercisable, and shall be void so long as held, by a holder in any jurisdiction
where the requisite qualification to the issuance to such holder, or the
exercise by such holder, of the Rights in such jurisdiction shall not have been
obtained or be obtainable.
As provided in the Rights Agreement, the Purchase Price and the number
of shares of Common Stock which may be purchased upon the exercise of the Rights
evidenced by this Rights Certificate are subject to modification and adjustment
upon the happening of certain events.
In the circumstances described in Section 13 of the Rights Agreement,
the securities issuable upon the exercise of the Rights evidenced hereby shall
be the common stock or similar equity securities or equity interests of an
entity other than the Company.
This Rights Certificate is subject to all of the terms, provisions,
and conditions of the Rights Agreement, which terms, provisions, and conditions
are hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties, and immunities hereunder of the
Rights Agent, the Company, and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the Principal Office of the Rights
Agent and may be obtained by the holder of any Rights upon written request to
the Rights Agent.
This Rights Certificate, with or without other Rights Certificates,
upon surrender at the Principal Office of the Rights Agent, accompanied by a
signature guarantee and such other documentation as the Rights Agent may
reasonably request, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of shares of Common Stock as the Rights
evidenced by the Rights Certificate or Rights Certificates surrendered shall
have entitled such holder to purchase. If this Rights Certificate shall be
exercised in part, the holder shall be entitled to receive upon surrender
hereof, another Rights Certificate or Rights Certificates for the number of
whole Rights not exercised.
A-37
Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Certificate may be redeemed by the Company at the option of the Board at
a redemption price of $0.10 per Right at any time prior to the earlier of (i)
the close of business on the tenth day following the Stock Acquisition Date (or,
if the Stock Acquisition Date shall have occurred prior to the Record Date, the
close of business on the tenth day following the Record Date), and (ii) the
Final Expiration Date.
The Company is not obligated to issue shares of Common Stock (or other
securities) upon the exercise of any Right or Rights evidenced hereby, but in
lieu thereof a cash payment may be made at the election of the Company, as
provided in the Rights Agreement.
No holder of this Rights Certificate, as such, shall be entitled to
vote or receive dividends or be deemed for any purpose the holder of shares of
Common Stock or of any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Rights
Certificate shall have been exercised as provided in the Rights Agreement.
A-38
This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature and seal of the proper officers of the
Company. Dated as of __________, ___.
THE FIRST YEARS INC.
________________________________________
Name:
Title:
ATTEST:
________________________________________
Name:
Title:
Countersigned:
________________________________________
________________________________________
By______________________________________
Authorized Signatory
Date of Countersignature:
A-39
(Form of Reverse Side of Rights Certificate)
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
Rights Certificate)
FOR VALUE RECEIVED _____________________ hereby sells, assigns and
transfers unto ________________________________________________________________
(Please print name and address of transferee)
_______________________________________________________________________________
whose social security or tax identification number, is: ____________ the Rights
evidenced by this Rights Certificate, whether with all right, title and interest
herein, and does hereby irrevocably constitute and appoint ____________________
Attorney, to transfer the within Rights Certificate on the books of the
within-named Company, with full power of substitution.
Dated: _____________________________
________________________________________
Signature
Signature Guaranteed:2/
- --------
2/ Signature must be guaranteed by a member firm of The New York Stock Exchange,
Inc. or a commercial bank or trust company having an office correspondent in New
York City.
A-40
Certificate
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) this Rights Certificate [ ] is [ ] is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate of an Acquiring Person (as each such term is defined in the Rights
Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by the Rights Certificate from
any Person who is, was or subsequently became an Acquiring Person or an
Affiliate of an Acquiring person.
Dated: _____________________ _________________________________________
Signature
Signature Guaranteed:
____________________________
NOTICE
The signature to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
A-41
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise the Right Certificate)
To THE FIRST YEARS INC.:
The undersigned hereby irrevocably elects to exercise ________________
Rights represented by this Rights Certificate to purchase the number of whole
shares of Common Stock (or other securities) issuable upon the exercise of such
Rights and requests that certificates for such shares be issued in the name of:
Please insert social security
or other identifying number
______________________________________
________________________________________________________________________________
(Please print name and address)
If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance remaining of such
Rights shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
______________________________________
________________________________________________________________________________
(Please print name and address)
Dated: ________________________________, _______
______________________________________
Signature
(Signature must conform in all
respects to name of holder as
specified on the face of this Rights
Certificate)
Signature Guaranteed:**
______________________________________
- --------
** Signature must be guaranteed by a member firm of the New York Stock Exchange,
Inc. or a commercial bank or trust company having an office or correspondent in
New York City.
A-42
Exhibit B
THE FIRST YEARS INC
(THE "COMPANY")
SUMMARY OF COMMON STOCK PURCHASE RIGHTS
(THE "RIGHTS PLAN")
Summary of Terms
Distribution: On November 19, 2001 the Board of Directors (the
"Board") of the First Years Inc. the "Company")
declared a dividend distribution of one common stock
purchase right (the "Right") for every outstanding
share of the Company's common stock, $.10 par value
per share (the "Common Stock").
Rights: The Rights will be distributed on or about November
30, 2001 to shareholders of record as of the close of
business on November 30, 2001 (the "Dividend Record
Date"). The terms of the Rights are set forth in a
Common Stock Rights Agreement (the "Rights Agreement")
between the Company and EquiServe Trust Company, N.A.
(the "Rights Agent"). The Rights Agreement provides
for the issuance of one Right for every share of
Common Stock issued and outstanding on the Dividend
Record Date and for each share of Common Stock which
is issued after that date and prior to the
Distribution Date (as defined below). Each Right
entitles the holders, at any time following the
Distribution Date, to purchase one share of Common
Stock at a price of $25.00 per share, subject to
adjustment in certain circumstances (the "Purchase
Price").
Exercisability: The Rights become exercisable after the Distribution
Date. The Rights, in all likelihood, would still not
be exercised by the holders after the Distribution
Date unless and until a Flip-In Event or a Flip-Over
Event has occurred or does occur.
Transferability: Until the Distribution Date, the Rights are attached
to the certificates representing outstanding shares of
Common Stock and can only be transferred in connection
with the underlying shares of Common Stock. Until the
Distribution Date, new Common Stock certificates
issued after the Dividend Record Date upon transfer or
A-43
new issuance of the Company's Common Stock will
contain a notation incorporating the Rights Agreement
by reference, and the surrender for transfer of any of
the Company's Common Stock certificates will also
constitute transfer of the Rights associated with the
Common Stock represented by such Certificate. After
the Distribution Date, the Rights will separate from
the Common Stock, Separate Rights Certificates will be
issued and the Rights will be separately tradable.
Distribution Date: Unless otherwise determined by the Board, the
Distribution Date will be the earliest to occur of the
following:
(1) the tenth business day following the later date of
(a) a public announcement that a person or entity, or
group of affiliated or associated persons and/or
entities (an "Acquiring Person"), has acquired or
obtained the right to acquire beneficial ownership of
15% or more of the Common Stock then outstanding or
(b) the date on which an executive officer of the
Company has actual knowledge that an Acquiring Person
has become such (the "Stock Acquisition Date"); or
(2) the tenth business day, or such specified later
date as determined by the Board, following the
commencement of a tender offer or exchange offer for
the Common Stock that would result in a person or
group becoming an Acquiring Person.
In such event, separate certificates evidencing the
Rights (the "Rights Certificates") will be mailed to
holders of record of the Company's Common Stock as of
the close of business on the Distribution Date and
such separate Rights Certificates alone will evidence
the Rights.
Flip-In Events: In the event, following any Distribution Date, (1) any
person or entity becomes an Acquiring Person, except
pursuant to an offer for all outstanding shares that
the Board determines to be fair to, and otherwise in
the best interests of, the Company and its
stockholders, (2) the Company is the surviving
corporation in a merger or consolidation with an
Acquiring Person and the Common Stock is not changed
or exchanged, (3) an Acquiring Person engages in one
or more self-dealing transactions specified in the
Rights Agreement, or (4) during such time as there is
an Acquiring Person, an event occurs which results in
such Acquiring Person's proportionate ownership
interest being increased by more than 1% (e.g., a
reverse stock split) (collectively, "Flip-In Events"),
then ten days after the occurrence of a Flip-In Event
specified in (1) above, and immediately upon the
occurrence of a Flip-In Event specified in (2), (3) or
(4) above, each of the Rights (other than Rights held
by the Acquiring Person, or its affiliates,
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associates and certain transferees) becomes a Right to
acquire shares of the Company's Common Stock having a
market value of two times the exercise price of the
Rights. For example, if the exercise price is $25.00,
the holder of each Right would be entitled to receive
$50.00 in market value of the Company's Stock for
$25.00 (but such Right is not exercisable while the
Rights are redeemable). In sum, then, a bidder's
attainment of the status of a non-board-approved owner
of that level of stock, irrespective of the bidder's
intentions regarding the possible use of the stock,
triggers the Rights Plan so that all stockholders
other than the bidder automatically acquire the right
to purchase additional voting stock of the Company at
a 50% discount to market price.
In lieu of issuing Common Stock, if the Board
determines that it is necessary or appropriate and not
contrary to the interests of the holders of Rights
(other than any Acquiring Person or its affiliates or
associates), the Company may substitute value in the
form of cash, or other assets, or debt or equity
securities, or any combination of the foregoing, in an
aggregate amount equal to the value of the Common
Stock that would otherwise be issuable.
Flip-Over Events: If, following the Stock Acquisition Date, the Company
is acquired in a merger or other business combination
(i.e., the Company does not survive or the Common
Stock is changed or exchanged), or more than 50% of
its assets or earning power (on a consolidated basis)
is sold or transferred in one transaction or a series
of related transactions (together, "Flip-Over
Events"), each Right becomes a Right to acquire that
number of shares of common stock (or other equity
securities) of the other entity to the transaction
having a market value equal to twice the exercise
price of the Right. The Rights Agreement prohibits the
Company from entering into any such transaction unless
the other party agrees to comply with the provisions
of the Rights Agreement.
Exclusion of Acquiror: Rights held by an Acquiring Person and certain related
persons are voided after a Flip-In Event but (if no
Flip-In Event has occurred) not after a Flip-Over
Event.
Exchange The Board may, at its option, at any time after any
Person becomes an Acquiring Person, exchange all or
part of the then outstanding and exercisable Rights
for shares of Common Stock at an exchange ratio of one
share of Common Stock per Right, appropriately
adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the Declaration
Date (the "Exchange Ratio"). However, the Board may
not effect an exchange at any time after any Person
other than the Company, any subsidiary of
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the Company, any employee benefit plan of the Company
or any such subsidiary, or any entity holding Common
Stock for or pursuant to the terms of any such plan),
together with all Affiliates of such Person, becomes
the Beneficial Owner of 50% or more of the Common
Stock then outstanding. Immediately upon the action of
the Board ordering the exchange of any Rights and
without any further action or notice, the right to
exercise such Rights will terminate and the only right
thereafter of a holder of such Rights will be to
receive that number of shares of Common Stock equal to
the number of such Rights held by the holder
multiplied by the Exchange Ratio.
Redemption: At any time prior to the earlier of (1) ten days
following the Stock Acquisition Date or (2) the Final
Expiration Date, the Board may redeem the Rights in
whole, but not in part, at a price of $.10 per Right
(the "Redemption Price"). The redemption price is
payable in cash, stock or other consideration deemed
appropriate by the Board.
Amendment: In general, the provisions of the Rights Agreement may
be amended by the Board (1) prior to the Distribution
Date in any manner (including to shorten or lengthen
any time period such as the redemption period), and
(2) from or after the Distribution Date in certain
respects, including to cure any ambiguity, defect or
inconsistency, to make changes which do not adversely
affect the interests of holders of Rights (excluding
the interests of any Acquiring Person), or to change
any time period for redemption or any other time
period under the Rights Agreement.
Voting Rights: Rights holders have no rights as stockholders of the
Company, including the right to vote and to receive
dividends.
Expiration: The Rights will expire in five years (the "Final
Expiration Date") unless earlier redeemed by the
Company.
Adjustment: The exercise price of the Rights, and the number of
shares of the common stock or other securities or
property issuable upon exercise of the Rights are
subject to adjustment from time to time to prevent
dilution (i) in the event of a stock dividend on, or a
subdivision, combination or reclassification of, the
Common Stock, (ii) upon the grant to holders of the
Common Stock of certain rights or warrants to
subscribe for shares of the Common Stock or
convertible securities at less than the current market
price of the Common Stock or (iii) upon the
distribution to holders of the Common Stock of
evidences of indebtedness or assets (excluding cash
dividends paid out of the earnings or retained
earnings of the
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Company and certain other distributions) or of
subscription rights or warrants (other than those
referred to above).
With certain exceptions, no adjustment in the exercise
price of the Rights will be required until cumulative
adjustments equal at least 1% of such price. The
Company is not obligated to issue fractional shares of
any securities upon the exercise or the Rights.
Rather, at the election of the Company an adjustment
in cash may be made based on the market price of such
securities on the list trading date prior to the date
of exercise.
Common Stock
Rights Agreement Filed: A copy of the Rights Agreement has been filed with the
Securities and Exchange Commission as an Exhibit to
the Company's Registration Statement on Form 8-A. A
copy of the Rights Agreement is available to
shareholders free of charge from the Rights Agent at
the following address: EquiServe Trust Company, N.A.,
c/o EquiServe Limited Partnership, 150 Royall Street,
Canton, MA 02021, Attention: Reorganization
Department. 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 incorporated herein by reference.
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