Document:

Exhibit 4.1

 

Execution Version

	
 
    	
 
    

 

Sanchez Energy Corporation

 

and

 

Continental Stock Transfer & Trust Company

 

as Rights Agent

 

Rights Agreement

 

Dated as of July 28, 2015

	
 
    	
 
    

 

 

RIGHTS AGREEMENT

 

Rights Agreement, dated as of July 28, 2015 (this “Agreement”), between Sanchez Energy Corporation, a Delaware corporation (the “Company”), Continental Stock Transfer & Trust Company, a stock transfer agent, as Rights Agent (the “Rights Agent”).

 

RECITALS

 

WHEREAS, on July 27, 2015, the Board of Directors (the “Board”) of the Company adopted this Agreement, and has authorized and declared a dividend of one preferred stock purchase right (a “Right”) for each share of Common Stock (as defined in Section 1.6) of the Company outstanding at the Close of Business (as defined in Section 1.5) on August 7, 2015 (the “Record Date”) and has authorized and directed the issuance of one Right (subject to adjustment as provided herein) with respect to each share of Common Stock that shall become outstanding between the Record Date and the earliest of the Distribution Date and the Expiration Date (as such terms are defined in Sections 3.1 and 7.1, respectively), each Right initially representing the right to purchase one one-thousandth (subject to adjustment) of a share of Series C Junior Participating Preferred Stock (the “Preferred Stock”) of the Company having the rights, powers and preferences set forth in the form of Certificate of Designations of Series C Junior Participating Preferred Stock attached hereto as Exhibit A, upon the terms and subject to the conditions hereinafter set forth, provided, however, that Rights may be issued with respect to Common Stock that shall become outstanding after the Distribution Date and prior to the Expiration Date in accordance with Section 22;

 

WHEREAS, if the Company experiences an “ownership change,” as defined in Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), its ability to use its net operating losses and certain other tax attributes (collectively, “NOLs”) for income tax purposes could be substantially limited or lost altogether; and

 

WHEREAS, the Company views its NOLs as a valuable asset of the Company, which is likely to inure to the benefit of the Company and its stockholders, and the Company believes that it is in the best interests of the Company and its stockholders that the Company provide for the protection of the Company’s NOLs on the terms and conditions set forth herein.

 

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:

 

1.1.                            “Acquiring Person” shall mean, subject to Section 29 of this Agreement, any Person (including an Existing Holder (as defined hereinafter)) who or which becomes the Beneficial Owner (as defined in Section 1.3) of 4.9% or more of the Common Stock then outstanding, but shall not include (i) an Exempt Person (as defined hereinafter), (ii) any Person (as defined hereinafter) who or which becomes the Beneficial Owner of 4.9% or more of the Common Stock (or, in the case of an Existing Holder, a percentage of the Common Stock then outstanding that is more than the Exempt Ownership Percentage (as defined hereinafter) of such

 

 

Existing Holder) solely as a result of equity compensation awards granted to such Person by the Company or as a result of an adjustment to the number of shares of Common Stock represented by such equity compensation award pursuant to the terms thereof, unless and until such time, in the case of this clause (ii), as such Person or one or more of its Affiliates or Associates thereafter acquires Beneficial Ownership of one additional share of Common Stock (other than any Common Stock acquired as described in this clause (ii)) or (iii) any Existing Holder, unless and until such time as such Existing Holder shall become the Beneficial Owner of (A) a percentage of the Common Stock then outstanding that is more than the aggregate percentage of the outstanding Common Stock that such Existing Holder Beneficially Owns immediately prior to the first public announcement of the adoption of this Agreement (such aggregate amount being the “Exempt Ownership Percentage”) other than an acquisition of Common Stock pursuant to clause (ii) of this Section 1.1 or (B) less than 4.9% of the Common Stock then outstanding (after which time, if such Person shall be the Beneficial Owner of 4.9% or more of the Common Stock then outstanding (excluding any acquisition of Common Stock pursuant to clause (ii) of this Section 1.1), such Person shall be or become deemed an “Acquiring Person”).

 

Notwithstanding the foregoing, 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 4.9% (or, in the case of an Existing Holder, the Exempt Ownership Percentage) or more of the Common Stock then outstanding; provided, however, that if a Person shall become the Beneficial Owner of 4.9% (or, in the case of an Existing Holder, the Exempt Ownership Percentage) or more of the Common Stock then outstanding solely by reason of share purchases by the Company and shall, after such share purchases by the Company, become the Beneficial Owner of one or more additional shares of Common Stock (other than pursuant to a dividend or distribution paid or made by the Company on the outstanding Common Stock in Common Stock or pursuant to a split or subdivision of the outstanding Common Stock), then such Person shall be deemed to be an “Acquiring Person” unless, upon becoming the Beneficial Owner of such additional Common Stock, such Person does not Beneficially Own 4.9% (or, in the case of an Existing Holder, the Exempt Ownership Percentage) or more of the Common Stock then outstanding.  Notwithstanding the foregoing, if the Board determines in good faith that a Person who would otherwise be an “Acquiring Person,” as defined pursuant to the foregoing provisions of this Section 1.1, has become such inadvertently (including, without limitation, because (A) such Person was unaware that it Beneficially Owned a percentage of Common Stock that would otherwise cause such Person to be an “Acquiring Person” or (B) such Person was aware of the extent of its Beneficial Ownership of Common Stock but had no actual knowledge of the consequences of its Beneficial Ownership under this Agreement), and such Person divests as promptly as practicable a sufficient number of shares of Common Stock so that such Person would no longer be an Acquiring Person, as defined pursuant to the foregoing provisions of this Section 1.1, then such Person shall no longer be deemed to be an “Acquiring Person” at the time of such divestment for any purposes of this Agreement, and if the Board in its sole discretion determines that treating such Person as other than an Acquiring Person prior to such Person’s aforementioned divestment would not jeopardize or endanger the availability to the Company of the NOLs, then such Person shall at the time of such determination by the Board be treated as never having been an “Acquiring Person” for any purposes of this Agreement.

 

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1.2.                            “Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as in effect on the date of this Agreement, and to the extent not included within the foregoing clause of this Section 1.2, shall also include, with respect to any Person, any other Person (other than an Exempt Person or an Existing Holder) whose Common Stock would be deemed constructively owned by such first Person for purposes of Section 382 of the Code and Treasury Regulations (as defined hereinafter) promulgated thereunder.

 

1.3.                            A Person shall be deemed the “Beneficial Owner” of and shall be deemed to “Beneficially Own” or have “Beneficial Ownership” of any securities (i) such Person owns directly, indirectly or constructively (as determined for purposes of Section 382 of the Code, or any successor provision or replacement provision), including any deemed ownership for purposes of Section 382 of the Code (e.g., deemed ownership under Section 1.382-10(a) of the Treasury Regulations), (ii) such Person possesses (through any contract, arrangement, understanding, relationship, or otherwise (whether or not in writing)) the right to receive or power to direct the dividends from, or proceeds from the sale thereof, or (iii) of which such Person would otherwise be deemed to be the beneficial owner pursuant to Rule 13d-3 under the Exchange Act.

 

1.4.                            “Business Day” shall mean any day other than a Saturday, Sunday, or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close.

 

1.5.                            “Close of Business” on any given date shall mean 5:00 p.m., New York time, on such date; provided, however, that if such date is not a Business Day it shall mean 5:00 p.m., New York time, on the next succeeding Business Day.

 

1.6.                            “Common Stock” shall mean the common stock, par value $0.01 per share, of the Company.

 

1.7.                            “Exempt Person” shall mean (i) the Company, any Subsidiary of the Company, in each case including, without limitation, the officers and directors on the Board thereof acting in their fiduciary capacity, or any employee benefit plan of the Company or of any Subsidiary of the Company or any entity or trustee holding shares of capital stock of the Company for or pursuant to the terms of any such plan, or for the purpose of funding other employee benefits for employees of the Company or any Subsidiary of the Company, (ii) any Person deemed to be an “Exempt Person” in accordance with Section 28, (iii) a Person who is a transferee from the estate of an Exempt Person and who receives Common Stock as a bequest or inheritance from such Exempt Person, but only so long as such transferee continues to be the Beneficial Owner of 4.9% or more of the then outstanding shares of Common Stock, and (iv) any other Person whose Beneficial Ownership of 4.9% or more of the then-outstanding Common Stock (or, in the case of an Existing Holder, shares of Common Stock in excess of the Exempt Ownership Percentage) will not, as determined by the Board in its sole discretion, jeopardize or endanger the availability to the Company of the NOLs; provided, however, that any Person deemed to be an “Exempt Person” pursuant to this subclause (iv) will cease to be an “Exempt

 

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Person” if the Board makes a contrary determination with respect to the effect of such Person’s Beneficial Ownership upon the availability to the Company of its NOLs.

 

If the Board determines that a Person is an Exempt Person under Section 1.7(iv) above, then the Board, in its sole discretion, may also add any stock acquired by such Person on or after the first public announcement of the adoption of this Agreement with stock Beneficially Owned prior to the first public announcement of the adoption of this Agreement in determining the Exempt Ownership Percentage with respect to such Person.

 

1.8.                            “Existing Holder” shall mean any Person who or which, together with all Affiliates and Associates of such Person, immediately prior to the first public announcement of the adoption of this Agreement (the “Announcement”), is the Beneficial Owner of 4.9% or more of the Common Stock then outstanding.  Any Existing Holder who, together with such Existing Holder’s Affiliates and Associates, after the Announcement becomes the Beneficial Owner of less than 4.9% of the Common Stock then outstanding shall cease to be an Existing Holder and shall be subject to all the provisions of this Agreement in the same manner as any Person who is not and was not an Existing Holder.

 

1.9.                            “Person” shall mean any individual, partnership, joint venture, limited liability company, firm, corporation, unincorporated association, trust, syndicate or other entity (including, but not limited to, a group of persons making a “coordinated acquisition” of Common Stock or otherwise treated as an “entity” within the meaning of Section 1.382-3(a)(1) of the Treasury Regulations), and shall include any successor (by merger or otherwise) of such entity.

 

1.10.                     “Right to Acquire” shall mean a legal, equitable or contractual right to acquire any securities (whether directly or indirectly and whether exercisable immediately, or only after the passage of time, compliance with regulatory requirements, fulfillment of a condition or otherwise), pursuant to any agreement, arrangement or understanding, whether or not in writing (excluding customary agreements entered into in good faith with and between an underwriter and selling group members in connection with a firm commitment underwriting registered under the Securities Act of 1933, as amended (the “Securities Act”)), or upon the exercise of any option, warrant or right, through conversion of a security, pursuant to the power to revoke a trust, discretionary account or similar arrangement, pursuant to the power to terminate a repurchase or similar so-called “stock borrowing” agreement or arrangement, or pursuant to the automatic termination of a trust, discretionary account or similar arrangement.

 

1.11.                     “Stock Acquisition Date” shall mean the first date of public announcement (which, for purposes of this definition, shall include, without limitation, the filing of a report pursuant to Section 13(d) of the Exchange Act or pursuant to a comparable successor statute) by the Company or an Acquiring Person that an Acquiring Person has become such or that discloses information which reveals the existence of an Acquiring Person or such earlier date as a majority of the Board shall become aware of the existence of an Acquiring Person.

 

1.12.                     “Subsidiary” of any Person shall mean any partnership, joint venture, limited liability company, firm, corporation, unincorporated association, trust or other entity of which an amount of voting securities, equity interests, and/or other ownership interests having a

 

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majority of the voting power is owned, of record or beneficially, directly or indirectly, by such Person.

 

1.13.                     “Treasury Regulations” U.S. Treasury Regulations promulgated under Section 382 of the Code.

 

1.14.                     A “Trigger Event” shall be deemed to have occurred upon any Person becoming an Acquiring Person.

 

1.15.                     The following terms shall have the meanings defined for such terms in the Sections set forth below:

 

	
Term
    	
 
    	
Section
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Adjustment   Shares
    	
 
    	
11.1.2
    	
 
    
	
Agreement
    	
 
    	
Preamble
    	
 
    
	
Board
    	
 
    	
Recitals
    	
 
    
	
Book Entry   Shares
    	
 
    	
3.1
    	
 
    
	
Code
    	
 
    	
Recitals
    	
 
    
	
Common Stock   Equivalent
    	
 
    	
11.1.3
    	
 
    
	
Company
    	
 
    	
Preamble
    	
 
    
	
Current Per   Share Market Price
    	
 
    	
11.4.1
    	
 
    
	
Current Value
    	
 
    	
11.1.3
    	
 
    
	
Distribution   Date
    	
 
    	
3.1
    	
 
    
	
Equivalent   Preferred Stock
    	
 
    	
11.2
    	
 
    
	
Exchange Act
    	
 
    	
1.2
    	
 
    
	
Exchange   Consideration
    	
 
    	
27.1
    	
 
    
	
Exempt Ownership   Percentage
    	
 
    	
1.1
    	
 
    
	
Exemption   Request
    	
 
    	
28
    	
 
    
	
Expiration Date
    	
 
    	
7.1
    	
 
    
	
Final Expiration   Date
    	
 
    	
7.1
    	
 
    
	
NOLs
    	
 
    	
Recitals
    	
 
    
	
Preferred Stock
    	
 
    	
Recitals
    	
 
    
	
Purchase Price
    	
 
    	
4
    	
 
    
	
Record Date
    	
 
    	
Recitals
    	
 
    
	
Redemption Price
    	
 
    	
23.1
    	
 
    
	
Requesting   Person
    	
 
    	
28
    	
 
    
	
Right
    	
 
    	
Recitals
    	
 
    
	
Right   Certificate
    	
 
    	
3.1
    	
 
    
	
Rights Agent
    	
 
    	
Preamble
    	
 
    
	
Securities Act
    	
 
    	
1.10
    	
 
    
	
Security
    	
 
    	
11.4.1
    	
 
    
	
Spread
    	
 
    	
11.1.3
    	
 
    
	
Substitution   Period
    	
 
    	
11.1.3
    	
 
    
	
Summary of   Rights
    	
 
    	
3.2
    	
 
    
	
Trading Day
    	
 
    	
11.4.1
    	
 
    

 

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Trust
    	
 
    	
27.1
    	
 
    
	
Trust Agreement
    	
 
    	
27.1
    	
 
    

 

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, 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 appoint such co-Rights Agents as it may deem necessary or desirable.  In the event the Company appoints one or more co-Rights Agents, the respective duties of the Rights Agent and any co-Rights Agent shall be as the Company shall determine.  Contemporaneously with such appointment, if any, the Company shall notify the Rights Agent thereof.

 

Section 3.                                           Issuance of Right Certificates.

 

3.1.                            Rights Evidenced by Stock Certificates.  Until the earlier of (i) the tenth (10th) Business Day after the Stock Acquisition Date or (ii) the tenth (10th) Business Day after the date of the commencement of, or first public announcement of, the intent of any Person (other than an Exempt Person) to commence, a tender or exchange offer the consummation of which would result in any Person (other than an Exempt Person) becoming the Beneficial Owner of Common Stock aggregating 4.9% or more of the then outstanding Common Stock (the earlier of (i) and (ii) being herein referred to as the “Distribution Date”), (x) the Rights (unless earlier expired, redeemed or terminated) will be evidenced (subject to the provisions of Section 3.2) by the certificates for Common Stock registered in the names of the holders thereof or, in the case of uncertificated shares of Common Stock registered in book entry form (“Book Entry Shares”), by notation in book entry (which certificates for Common Stock and Book Entry Shares shall also be deemed to be Right Certificates) and not by separate certificates, and (y) the Rights (and the right to receive certificates therefor) will be transferable only in connection with the transfer of the underlying Common Stock.  The preceding sentence notwithstanding, prior to the occurrence of a Distribution Date specified as a result of an event described in clause (ii) (or such later Distribution Date as the Board may select pursuant to this sentence), the Board may postpone, one or more times, the Distribution Date which would occur as a result of an event described in clause (ii) beyond the date set forth in such clause (ii).  Nothing herein shall permit such a postponement of a Distribution Date after a Person becomes an Acquiring Person, except as a result of the operation of the third sentence of Section 1.1.  As soon as practicable after the Distribution Date, the Company will prepare and execute, the Rights Agent will countersign and the Company (or, if requested, the Rights Agent) will send, by first-class, postage-prepaid mail, to each record holder of Common Stock as of the Close of Business on the Distribution Date (other than any Acquiring Person or any Associate or Affiliate of an Acquiring Person), at the address of such holder shown on the records of the Company, one or more certificates for Rights, in substantially the form of Exhibit B hereto (a “Right Certificate”), evidencing one Right (subject to adjustment as provided herein) for each share of Common Stock so held.  As of the Distribution Date, the Rights will be evidenced solely by such Right Certificates.

 

3.2.                            Summary of Rights.  On the Record Date or as soon as practicable thereafter, the Company will send or cause to be sent a copy of a Summary of Rights to Purchase Preferred Stock, in substantially the form attached hereto as Exhibit C (the “Summary of

 

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Rights”), by first-class, postage-prepaid mail, to each record holder of Common Stock as of the Close of Business on the Record Date (other than any Acquiring Person or any Associate or Affiliate of any Acquiring Person), at the address of such holder shown on the records of the Company.  With respect to certificates for Common Stock and Book Entry Shares outstanding as of the Close of Business on the Record Date, until the Distribution Date (or the earlier Expiration Date), the Rights will be evidenced by such certificates for Common Stock registered in the names of the holders thereof or Book Entry Shares, as applicable, together with a copy of the Summary of Rights and the registered holders of the Common Stock shall also be registered holders of the associated Rights.  Until the Distribution Date (or the earlier Expiration Date), the surrender for transfer of any certificate for Common Stock or Book Entry Shares outstanding at the Close of Business on the Record Date, with or without a copy of the Summary of Rights, shall also constitute the transfer of the Rights associated with the Common Stock represented thereby and the Book Entry Shares, as applicable.

 

3.3.                            New Certificates and Uncertificated Shares After Record Date.  Certificates for Common Stock which become outstanding after the Record Date but prior to the earliest of the Distribution Date or the Expiration Date, shall have impressed, printed, stamped, written or otherwise affixed onto them the following legend:

 

This certificate also evidences and entitles the holder hereof to certain rights as set forth in an Agreement between Sanchez Energy Corporation, a Delaware corporation (the “Company”), and Continental Stock Transfer & Trust Company, a stock transfer agent, as Rights Agent, dated as of July 28, 2015, as the same may be amended from time to time (the “Agreement”), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal executive offices of the Company.  Under certain circumstances, as set forth in the Agreement, such Rights will be evidenced by separate certificates and will no longer be evidenced by this certificate.  The Company will mail to the holder of this certificate a copy of the Agreement without charge after receipt of a written request therefor.  As described in the Agreement, Rights which are owned by, transferred to or have been owned by Acquiring Persons or Associates or Affiliates thereof (as defined in the Agreement) shall become null and void and will no longer be transferable.

 

With respect to any Book Entry Shares, such legend shall be included in a notice to the record holder of such shares in accordance with applicable law.  Until the Distribution Date (or the earlier Expiration Date), the Rights associated with the Common Stock represented by such certificates and such Book Entry Shares shall be evidenced by such certificates and the Book Entry Shares alone, and the surrender for transfer of any such certificates or Book Entry Shares, except as otherwise provided herein, shall also constitute the transfer of the Rights associated with the Common Stock represented thereby.  In the event that the Company purchases or acquires any Common Stock after the Record Date but prior to the Distribution Date, any Rights associated with such Common Stock shall be deemed canceled and retired so that the Company shall not be entitled to exercise any Rights associated with the shares of Common Stock that are no longer outstanding.

 

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Notwithstanding this Section 3.3, neither the omission of the legend, nor the failure to provide the notice thereof, shall affect the enforceability of any part of this Agreement or the rights of any holder of the Rights.

 

Section 4.                                           Form of Right Certificates.  The Right Certificates (and the forms of election to purchase shares, certification and assignment to be printed on the reverse thereof) shall be substantially the same as Exhibit B hereto and may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange or trading system on which the Rights may from time to time be listed or quoted, or to conform to usage.  Subject to the terms and conditions hereof, the Right Certificates, whenever issued, shall be dated as of the Record Date, and shall show the date of countersignature by the Rights Agent, and on their face shall entitle the holders thereof to purchase such number of one one-thousandths of a share of Preferred Stock as shall be set forth therein at the price per one one-thousandth of a share of Preferred Stock set forth therein (the “Purchase Price”), but the number of such one one-thousandths of a share of Preferred Stock and the Purchase Price shall be subject to adjustment as provided herein.

 

Section 5.                                           Countersignature and Registration.  The Right Certificates shall be executed on behalf of the Company by the President and Chief Executive Officer, the Treasurer, the Secretary or any Vice President, shall have affixed thereto the Company’s seal or a facsimile thereof, and shall be attested by the Corporate Secretary or any Assistant Secretary of the Company or by such other officers as the Board may designate, either manually or by facsimile signature.  The Right Certificates shall be countersigned, either manually or by facsimile signature, by an authorized signatory of the Rights Agent, but it shall not be necessary for the same signatory to countersign all of the Right Certificates hereunder.  No Right Certificate shall be valid for any purpose unless so countersigned.  In case any officer of the Company who shall have signed any of the Right Certificates shall cease to be such officer of the Company before countersignature by the Rights Agent and issuance and delivery by the Company, such Right Certificates, nevertheless, may be countersigned by the Rights Agent, and issued and delivered by the Company with the same force and effect as though the person who signed such Right Certificates had not ceased to be such officer of the Company; and any Right Certificate may be signed on behalf of the Company by any person who, at the actual date of the execution of such Right Certificate, shall be a proper officer of the Company to sign such Right Certificate, although at the date of the execution of this Agreement any such person was not such an officer.

 

Following the Distribution Date, the Rights Agent will keep or cause to be kept, at its principal office, books for registration and transfer of the Right Certificates issued hereunder.  Such books shall show the names and addresses of the respective holders of the Right Certificates, the number of Rights evidenced on its face by each of the Right Certificates, the certificate number of each of the Right Certificates and the date of each of the Right Certificates.

 

Section 6.                                           Transfer, Split Up, Combination and Exchange of Right Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates.  Subject to the provisions of Sections 11.1.2 and 14, at any time after the Close of Business on the Distribution Date, and at or prior to the Close of Business on the Expiration Date, any Right Certificate or Right Certificates

 

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(other than Right Certificates representing Rights that have become void pursuant to Section 11.1.2 or that have been exchanged pursuant to Section 27) may be transferred, split up or combined or exchanged for another Right Certificate or Right Certificates, entitling the registered holder to purchase a like number of one one-thousandths of a share of Preferred Stock as the Right Certificate or Right Certificates surrendered then entitled such holder to purchase.  Any registered holder desiring to transfer, split up or combine or exchange any Right Certificate shall make such request in writing delivered to the Rights Agent, and shall surrender, together with any required form of assignment and certificate duly completed, the Right Certificate or Right Certificates to be transferred, split up or combined or exchanged at the office of the Rights Agent designated for such purpose.  Neither the Rights Agent nor the Company shall be obligated to take any action whatsoever with respect to the transfer of any such surrendered Right Certificate or Right Certificates until the registered holder shall have completed and signed the certificate contained in the form of assignment on the reverse side of such Right Certificate or Right Certificates and shall have provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Company shall reasonably request.  Thereupon, the Rights Agent shall countersign and deliver to the person entitled thereto a Right Certificate or Right Certificates, as the case may be, as so requested.  The Company may require payment from the holders of Right Certificates of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer, split up or combination or exchange of such Right Certificates.

 

Subject to the provisions of Section 11.1.2, at any time after the Distribution Date and prior to the Expiration Date, upon receipt by the Company and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Right Certificate, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to them, and, at the Company’s request, reimbursement to the Company and the Rights Agent of all reasonable expenses incidental thereto, and upon surrender to the Rights Agent and cancellation of the Right Certificate if mutilated, the Company will make and deliver a new Right Certificate of like tenor to the Rights Agent for countersignature and delivery to the registered owner in lieu of the Right Certificate so lost, stolen, destroyed or mutilated.

 

Section 7.                                           Exercise of Rights; Purchase Price; Expiration Date of Rights.

 

7.1.                            Exercise of Rights.  Subject to Section 11.1.2 and except as otherwise provided herein, the registered holder of any Right Certificate may exercise the Rights evidenced thereby in whole or in part at any time after the Distribution Date upon surrender of the Right Certificate, with the form of election to purchase and certification on the reverse side thereof 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 for the total number of one one-thousandths of a share of Preferred Stock (or other securities, cash or other assets) as to which the Rights are exercised, at or prior to the time (the “Expiration Date”) that is the earliest of (i) the Close of Business on July 27, 2018 (the “Final Expiration Date”), (ii) the time at which the Rights are redeemed as provided in Section 23, (iii) the time at which the Rights are exchanged as provided in Section 27, (iv) the time at which the Board determines that the NOLs are fully utilized or no longer available under Section 382 of the Code, or (v) the effective date of the

 

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repeal of Section 382 of the Code if the Board determines that this Agreement is no longer necessary or desirable for the preservation of NOLs.

 

7.2.                            Purchase.  The Purchase Price for each one one-thousandth of a share of Preferred Stock pursuant to the exercise of a Right shall be initially $32.00, shall be subject to adjustment from time to time as provided in Sections 11 and 26 and shall be payable in lawful money of the United States of America in accordance with Section 7.3.

 

7.3.                            Payment Procedures.  Upon receipt of a Right Certificate representing exercisable Rights, with the form of election to purchase and certification duly executed, accompanied by payment of the aggregate Purchase Price for the total number of one one-thousandths of a share of Preferred Stock to be purchased and an amount equal to any applicable transfer tax required to be paid by the holder of such Right Certificate in accordance with Section 9, by wired funds, certified or cashier’s check or money order payable to the order of the Company, the Rights Agent shall thereupon promptly (i)(A) requisition from any transfer agent of the Preferred Stock (or make available, if the Rights Agent is the transfer agent) certificates for the number of shares of Preferred Stock to be purchased and the Company hereby irrevocably authorizes its transfer agent to comply with all such requests, or (B) if the Company shall have elected to deposit the total number of shares of Preferred Stock issuable upon exercise of the Rights hereunder with a depository agent, requisition from the depositary agent depositary receipts representing interests in such number of one one-thousandths of a share of Preferred Stock as are to be purchased (in which case certificates for the Preferred Stock represented by such receipts shall be deposited by the transfer agent with the depositary agent) and the Company hereby directs the depositary agent to comply with all such requests, (ii) when appropriate, requisition from the Company the amount of cash to be paid in lieu of the issuance of fractional shares in accordance with Section 14 or otherwise in accordance with Section 11.1.3, (iii) promptly after receipt of such certificates or depositary receipts, cause the same to be delivered to or upon the order of the registered holder of such Right Certificate, registered in such name or names as may be designated by such holder and (iv) when appropriate, after receipt, promptly deliver such cash to or upon the order of the registered holder of such Right Certificate.  In the event that the Company is obligated to issue other securities of the Company, pay cash and/or distribute other property pursuant to Section 11.1.3, the Company will make all arrangements necessary so that such other securities, cash and/or other property are available for distribution by the Rights Agent, if and when appropriate.

 

7.4.                            Partial Exercise.  In case the registered holder of any Right Certificate shall exercise less than all the Rights evidenced thereby, a new Right Certificate evidencing Rights equivalent to the Rights remaining unexercised shall be issued by the Rights Agent and delivered to the registered holder of such Right Certificate or to his or her duly authorized assigns, subject to the provisions of Section 14.

 

7.5.                            Full Information Concerning Ownership.  Notwithstanding anything in this Agreement to the contrary, neither the Rights Agent nor the Company shall be obligated to undertake any action with respect to a registered holder of Rights upon the occurrence of any purported exercise as set forth in this Section 7 unless the certificate contained in the form of election to purchase set forth on the reverse side of the Right Certificate surrendered for such exercise shall have been duly completed and executed by the registered holder thereof and the

 

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Company shall have been provided with such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Company shall reasonably request.

 

Section 8.                                           Cancellation and Destruction of Right Certificates.  All Right Certificates surrendered for the purpose of exercise, transfer, split up, combination or exchange shall, if surrendered to the Company or to any of its agents, be delivered to the Rights Agent for cancellation or in canceled form, or, if surrendered to the Rights Agent, shall be canceled by it, and no Right Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Agreement.  The Company shall deliver to the Rights Agent for cancellation and retirement, and the Rights Agent shall so cancel and retire, any other Right Certificate purchased or acquired by the Company otherwise than upon the exercise thereof.  The Rights Agent shall deliver all canceled Right Certificates to the Company, or shall, at the written request of the Company, destroy such canceled Right Certificates, and in such case shall deliver a certificate of destruction thereof to the Company.

 

Section 9.                                           Reservation and Availability of Capital Stock.  The Company covenants and agrees that, from and after the Distribution Date, it will cause to be reserved and kept available out of its authorized and unissued Preferred Stock (and, following the occurrence of a Trigger Event, out of its authorized and unissued Common Stock or other securities or out of its shares held in its treasury) the number of shares of Preferred Stock (and, following the occurrence of a Trigger Event, Common Stock and/or other securities) that will be sufficient to permit the exercise in full of all outstanding Rights.

 

So long as the Preferred Stock (and, following the occurrence of a Trigger Event, Common Stock and/or other securities) issuable upon the exercise of Rights may be listed on any national securities exchange or traded in the over-the-counter market, the Company shall use its best efforts to cause, from and after such time as the Rights become exercisable, all shares reserved for such issuance to be listed or admitted to trading on such exchange or market upon official notice of issuance upon such exercise.

 

The Company covenants and agrees that it will take all such action as may be necessary to ensure that all Preferred Stock (and, following the occurrence of a Trigger Event, Common Stock and/or other securities) delivered upon exercise of Rights shall, at the time of delivery of the certificates for such shares (subject to payment of the Purchase Price), be duly and validly authorized and issued and fully paid and nonassessable shares.

 

From and after such time as the Rights become exercisable, the Company shall use its best efforts, if then necessary to permit the issuance of Preferred Stock upon the exercise of Rights, to register and qualify such Preferred Stock under the Securities Act and any applicable state securities or “Blue Sky” laws (to the extent exemptions therefrom are not available), cause such registration statement and qualifications to become effective as soon as possible after such filing and keep such registration and qualifications effective until the earlier of the date as of which the Rights are no longer exercisable for such securities and the Expiration Date.  The Company may temporarily suspend, for a period of time not to exceed one hundred twenty (120) days, the exercisability of the Rights in order to prepare and file a registration statement under the Securities Act and permit it to become effective.  Upon any such suspension,

 

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the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement at such time as the suspension is no longer in effect.  Notwithstanding any provision of this Agreement to the contrary, the Rights shall not be exercisable in any jurisdiction unless the requisite qualification in such jurisdiction shall have been obtained and until a registration statement under the Securities Act (if required) shall have been declared effective.

 

The Company further covenants and agrees that it will pay when due and payable any and all federal and state transfer taxes and charges which may be payable in respect of the issuance or delivery of the Right Certificates or of any Preferred Stock (or Common Stock and/or other securities, as the case may be) upon the exercise of Rights.  The Company shall not, however, be required to pay any transfer tax which may be payable in respect of any transfer or delivery of Right Certificates to a person other than, or the issuance or delivery of certificates for the Preferred Stock (or Common Stock and/or other securities, as the case may be) in a name other than that of, the registered holder of the Right Certificate evidencing Rights surrendered for exercise or to issue or deliver any certificates for Preferred Stock (or Common Stock and/or other securities, as the case may be) in a name other than that of the registered holder upon the exercise of any Rights until any such tax shall have been paid (any such tax being payable by the registered holder of such Right Certificate at the time of surrender) or until it has been established to the Company’s satisfaction that no such tax is due.

 

Section 10.                                    Preferred Stock Record Date.  Each person in whose name any certificate for Preferred Stock (or Common Stock and/or other securities, as the case may be) is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of the Preferred Stock (or Common Stock and/or other securities, as the case may be) represented thereby on, and such certificate shall be dated, the date upon which the Right Certificate evidencing such Rights was duly surrendered and payment of the Purchase Price (and any applicable transfer taxes) was made; provided, however, that if the date of such surrender and payment is a date upon which the Preferred Stock (or Common Stock and/or other securities, as the case may be) transfer books of the Company are closed, such person shall be deemed to have become the record holder of such shares (fractional or otherwise) on, and such certificate shall be dated, the next succeeding Business Day on which the Preferred Stock (or Common Stock and/or other securities, as the case may be) transfer books of the Company are open.  Prior to the exercise of the Rights evidenced thereby, the holder of a Right Certificate shall not be entitled to any rights of a holder of Preferred Stock for which the Rights shall be exercisable, including, without limitation, the right to vote or to receive dividends or other distributions, and shall not be entitled to receive any notice of any proceedings of the Company, except as provided herein.

 

Section 11.                                    Adjustment of Purchase Price, Number of Shares or Number of Rights.  The Purchase Price, the number of shares of Preferred Stock or other securities or property purchasable upon exercise of each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 11.

 

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11.1.                     Post-Execution Events.

 

11.1.1.           Corporate Dividends, Reclassifications, Etc.  In the event the Company shall, at any time after the date of this Agreement, (A) declare and pay a dividend on the Preferred Stock payable in Preferred Stock, (B) subdivide the outstanding Preferred Stock, (C) combine the outstanding Preferred Stock into a smaller number of shares of Preferred Stock or (D) issue any shares of its capital stock in a reclassification of the Preferred Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving corporation), except as otherwise provided in this Section 11.1.1, the Purchase Price in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination or reclassification, and the number and kind of shares of capital stock issuable on such date, shall be proportionately adjusted so that the holder of any Right exercised after such time shall be entitled to receive the aggregate number and kind of shares of capital stock which, if such Right had been exercised immediately prior to such date and at a time when the Preferred Stock transfer books of the Company were open, he would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, combination or reclassification; provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company issuable upon exercise of one Right.  If an event occurs which would require an adjustment under both Sections 11.1.1 and 11.1.2, the adjustment provided for in this Section 11.1.1 shall be in addition to, and shall be made prior to, the adjustment required pursuant to, Section 11.1.2.

 

11.1.2.           Acquiring Person Events; Triggering Events.  Subject to Section 27, in the event that a Trigger Event occurs, then, from and after the first occurrence of such event, each holder of a Right, except as provided below, shall thereafter have a right to receive, upon exercise thereof at a price per Right equal to the then current Purchase Price multiplied by the number of one one-thousandths of a share of Preferred Stock for which a Right is then exercisable (without giving effect to this Section 11.1.2), in accordance with the terms of this Agreement and in lieu of Preferred Stock, such number of shares of Common Stock as shall equal the result obtained by (x) multiplying the then current Purchase Price by the then number of one one-thousandths of a share of Preferred Stock for which a Right is then exercisable (without giving effect to this Section 11.1.2) and (y) dividing that product by 50% of the Current Per Share Market Price of the Common Stock (determined pursuant to Section 11.4) on the first of the date of the occurrence of, or the date of the first public announcement of, a Trigger Event (the “Adjustment Shares”); provided that the Purchase Price and the number of Adjustment Shares shall thereafter be subject to further adjustment as appropriate in accordance with Section 11.6.  Notwithstanding the foregoing, upon the occurrence of a Trigger Event, any Rights that are or were acquired or Beneficially Owned by (1) any Acquiring Person or any Associate or Affiliate thereof, (2) a transferee of any Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee after the Acquiring Person becomes such, or (3) a transferee of any Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee prior to or concurrently with the Acquiring Person becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person to holders of equity interests in such Acquiring Person or to any Person with whom the Acquiring Person has any continuing agreement, arrangement or understanding regarding the transferred Rights or (B) a transfer which the Board has determined is part of a plan, arrangement or understanding which

 

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has as a primary purpose or effect avoidance of this Section 11.1.2, and subsequent transferees, shall become void without any further action, and any holder (whether or not such holder is an Acquiring Person or an Associate or Affiliate of an Acquiring Person) of such Rights shall thereafter have no right to exercise such Rights under any provision of this Agreement or otherwise.  From and after the Trigger Event, no Right Certificate shall be issued pursuant to Sections 3 or 6 that represents Rights that are or have become void pursuant to the provisions of this paragraph, and any Right Certificate delivered to the Rights Agent that represents Rights that are or have become void pursuant to the provisions of this paragraph shall be canceled.

 

The Company shall use all reasonable efforts to ensure that the provisions of this Section 11.1.2 are complied with, but shall have no liability to any holder of Right Certificates or any other Person as a result of its failure to make any determinations with respect to any Acquiring Person or its Affiliates, Associates or transferees hereunder.

 

11.1.3.           Insufficient Shares.  The Company may at its option substitute for Common Stock issuable upon the exercise of Rights in accordance with the foregoing Section 11.1.2 a number of shares of Preferred Stock or fraction thereof such that the Current Per Share Market Price of one share of Preferred Stock multiplied by such number or fraction is equal to the Current Per Share Market Price of one share of Common Stock.  In the event that upon the occurrence of a Trigger Event there shall not be sufficient Common Stock authorized but unissued, or held by the Company as treasury shares, to permit the exercise in full of the Rights in accordance with the foregoing Section 11.1.2, the Company shall take all such action as may be necessary to authorize additional Common Stock for issuance upon exercise of the Rights, provided, however, that if the Company determines that it is unable to cause the authorization of a sufficient number of additional shares of Common Stock, then, in the event the Rights become exercisable, the Company, with respect to each Right and to the extent necessary and permitted by applicable law and any agreements or instruments in effect on the date hereof to which it is a party, shall:  (A) determine the excess of (1) the value of the Adjustment Shares issuable upon the exercise of a Right (the “Current Value”), over (2) the Purchase Price (such excess, the “Spread”) and (B) with respect to each Right (other than Rights which have become void pursuant to Section 11.1.2), make adequate provision to substitute for the Adjustment Shares, upon payment of the applicable Purchase Price, (1) cash, (2) a reduction in the Purchase Price, (3) Preferred Stock, (4) other equity securities of the Company (including, without limitation, shares, or fractions of shares, of preferred stock which, by virtue of having dividend, voting and liquidation rights substantially comparable to those of the Common Stock, the Board has deemed in good faith to have substantially the same value as the Common Stock) (each such share of preferred stock or fractions of shares of preferred stock constituting a “Common Stock Equivalent”)), (5) debt securities of the Company, (6) other assets or (7) any combination of the foregoing having an aggregate value equal to the Current Value, where such aggregate value has been determined by the Board based upon the advice of a nationally recognized investment banking firm selected in good faith by the Board; provided, however, that if the Company shall not have made adequate provision to deliver value pursuant to clause (B) above within thirty (30) days following the occurrence of a Trigger Event, then the Company shall be obligated to deliver, to the extent necessary and permitted by applicable law and any agreements or instruments in effect on the date hereof to which it is a party, upon the surrender for exercise of a Right and without requiring payment of the Purchase Price, Common Stock (to the extent available) and then, if necessary, such number or fractions of Preferred Stock (to the extent

 

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available) and then, if necessary, cash, which shares and/or cash have an aggregate value equal to the Spread.  If the Board shall determine in good faith that it is unlikely that sufficient additional Common Stock would be authorized for issuance upon exercise in full of the Rights, the thirty (30) day period set forth above may be extended and re-extended to the extent necessary, but not more than ninety (90) days following the occurrence of a Trigger Event, in order that the Company may seek stockholder approval for the authorization of such additional shares (such period as may be extended, the “Substitution Period”).  To the extent that the Company determines that some actions need be taken pursuant to the second and/or third sentences of this Section 11.1.3, the Company (x) shall provide that such action shall apply uniformly to all outstanding Rights, and (y) may suspend the exercisability of the Rights until the expiration of the Substitution Period in order to seek any authorization of additional shares and/or to decide the appropriate form of distribution to be made pursuant to such first sentence and to determine the value thereof.  In the event of any such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended as well as a public announcement at such time as the suspension is no longer in effect.  For purposes of this Section 11.1.3, the value of a share of Common Stock shall be the Current Per Share Market Price (as determined pursuant to Section 11.4) on the date of the occurrence of a Trigger Event and the value of any “Common Stock Equivalent” shall be deemed to have the same value as the Common Stock on such date.  The Board may, but shall not be required to, establish procedures to allocate the right to receive Common Stock upon the exercise of the Rights among holders of Rights pursuant to this Section 11.1.3.

 

11.2.                     Dilutive Rights Offering.  In case the Company shall fix a record date for the issuance of rights, options or warrants to all holders of Preferred Stock entitling them (for a period expiring within forty-five (45) calendar days after such record date) to subscribe for or purchase Preferred Stock (or securities having the same rights, privileges and preferences as the Preferred Stock (“Equivalent Preferred Stock”)) or securities convertible into Preferred Stock or Equivalent Preferred Stock at a price per share of Preferred Stock or per share of Equivalent Preferred Stock (or having a conversion or exercise price per share, if a security convertible into or exercisable for Preferred Stock or Equivalent Preferred Stock) less than the Current Per Share Market Price of the Preferred Stock (as determined pursuant to Section 11.4) on such record date, the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of shares of Preferred Stock and shares of Equivalent Preferred Stock outstanding on such record date plus the number of shares of Preferred Stock and shares of Equivalent Preferred Stock which the aggregate offering price of the total number of shares of Preferred Stock and/or shares of Equivalent Preferred Stock to be offered (and/or the aggregate initial conversion price of the convertible securities so to be offered) would purchase at such Current Per Share Market Price and the denominator of which shall be the number of shares of Preferred Stock and shares of Equivalent Preferred Stock outstanding on such record date plus the number of additional Preferred Stock and/or shares of Equivalent Preferred Stock to be offered for subscription or purchase (or into which the convertible securities so to be offered are initially convertible); provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company issuable upon exercise of one Right.  In case such subscription price may be paid in a consideration part or all of which shall be in a form other than cash, the value of such consideration shall be as determined in good faith by the Board, whose determination shall be

 

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described in a statement filed with the Rights Agent and shall be binding on the Rights Agent and the holders of the Rights.  Preferred Stock and shares of Equivalent Preferred Stock owned by or held for the account of the Company or any Subsidiary of the Company shall not be deemed outstanding for the purpose of any such computation.  Such adjustments 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 adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed.

 

11.3.                     Distributions.  In case the Company shall fix a record date for the making of a distribution to all holders of the Preferred Stock (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing or surviving corporation) of evidences of indebtedness, cash, securities or assets (other than a regular periodic cash dividend at a rate not in excess of 125% of the rate of the last regular periodic cash dividend theretofore paid or, in case regular periodic cash dividends have not theretofore been paid, at a rate not in excess of 50% of the average net income per share of the Company for the four quarters ended immediately prior to the payment of such dividend, or a dividend payable in Preferred Stock (which dividend, for purposes of this Agreement, shall be subject to the provisions of Section 11.1.1(A))) or convertible securities, or subscription rights or warrants (excluding those referred to in Section 11.2), the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the Current Per Share Market Price of the Preferred Stock (as determined pursuant to Section 11.4) on such record date, less the fair market value (as determined in good faith by the Board, whose determination shall be described in a statement filed with the Rights Agent) of the portion of the cash, assets, securities or evidences of indebtedness so to be distributed or of such subscription rights or warrants applicable to one share of Preferred Stock and the denominator of which shall be such Current Per Share Market Price of the Preferred Stock (as determined pursuant to Section 11.4); provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company to be issued upon exercise of one Right.  Such adjustments shall be made successively whenever such a record date is fixed; and in the event that such distribution is not so made, the Purchase Price shall again be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed.

 

11.4.                     Current Per Share Market Value.

 

11.4.1.           General.  For the purpose of any computation hereunder, the “Current Per Share Market Price” of any security (a “Security” for the purpose of this Section 11.4.1) on any date shall be deemed to be the average of the daily closing prices per share of such Security for the thirty (30) consecutive Trading Days (as such term is hereinafter defined) immediately prior to such date; provided, however, that in the event that the Current Per Share Market Price of the Security is determined during any period following the announcement by the issuer of such Security of (i) a dividend or distribution on such Security payable in shares of such Security or securities convertible into such shares or (ii) any subdivision, combination or reclassification of such Security, and prior to the expiration of thirty (30) Trading Days after the ex-dividend date for such dividend or distribution, or the record date for such subdivision, combination or reclassification, then, and in each such case, the “Current Per Share Market Price” shall be

 

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appropriately adjusted to reflect the current market price per share equivalent of such Security.  The closing price for each day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Security is listed or admitted to trading or, if the Security is not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported thereby or such other system then in use, or, if on any such date the Security is not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Security selected by the Board.  If on any such date no such market maker is making a market in the Security, the fair value of the Security on such date as determined in good faith by the Board shall be used.  The term “Trading Day” shall mean a day on which the principal national securities exchange on which the Security is listed or admitted to trading is open for the transaction of business or, if the Security is not listed or admitted to trading on any national securities exchange, a Business Day.  If the Security is not publicly held or not so listed or traded, or if on any such date the Security is not so quoted and no such market maker is making a market in the Security, “Current Per Share Market Price” shall mean the fair value per share as determined in good faith by the Board or, if at the time of such determination there is an Acquiring Person, by a nationally recognized investment banking firm selected by the Board, which shall have the duty to make such determination in a reasonable and objective manner, whose determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes.

 

11.4.2.           Preferred Stock.  Notwithstanding Section 11.4.1, for the purpose of any computation hereunder, the “Current Per Share Market Price” of the Preferred Stock shall be determined in the same manner as set forth above in Section 11.4.1 (other than the last sentence thereof).  If the Current Per Share Market Price of the Preferred Stock cannot be determined in the manner described in Section 11.4.1, the “Current Per Share Market Price” of the Preferred Stock shall be conclusively deemed to be an amount equal to 1,000 (as such number may be appropriately adjusted for such events as stock splits, stock dividends and recapitalizations with respect to the Common Stock occurring after the date of this Agreement) multiplied by the Current Per Share Market Price of the Common Stock (as determined pursuant to Section 11.4.1). If neither the Common Stock nor the Preferred Stock are publicly held or so listed or traded, or if on any such date neither the Common Stock nor the Preferred Stock are so quoted and no such market maker is making a market in either the Common Stock or the Preferred Stock, “Current Per Share Market Price” of the Preferred Stock shall mean the fair value per share as determined in good faith by the Board, or, if at the time of such determination there is an Acquiring Person, by a nationally recognized investment banking firm selected by the Board, which shall have the duty to make such determination in a reasonable and objective manner, which determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes.  For purposes of this Agreement, the “Current Per Share Market Price” of one one-thousandth of a share of Preferred Stock shall be equal to the “Current Per Share Market Price” of one share of Preferred Stock divided by 1,000.

 

11.5.                     Insignificant Changes.  No adjustment in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at least 1% in the

 

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Purchase Price.  Any adjustments which by reason of this Section 11.5 are not required to be made shall be carried forward and taken into account in any subsequent adjustment.  All calculations under this Section 11 shall be made to the nearest cent or to the nearest one-hundred thousandth of a share of Preferred Stock or the nearest one-hundredth of a share of Common Stock or other share or security, as the case may be.

 

11.6.                     Shares Other Than Preferred Stock.  If as a result of an adjustment made pursuant to Section 11.1, the holder of any Right thereafter exercised shall become entitled to receive any shares of capital stock of the Company other than Preferred Stock, thereafter the number of such other shares so receivable upon exercise of any Right shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Preferred Stock contained in Sections 11.1, 11.2, 11.3, 11.5, 11.8, 11.9 and 11.13, and the provisions of Sections 7, 9, 10 and 14 with respect to the Preferred Stock shall apply on like terms to any such other shares.

 

11.7.                     Rights Issued Prior to Adjustment.  All Rights originally issued by the Company subsequent to any adjustment made to the Purchase Price hereunder shall evidence the right to purchase, at the adjusted Purchase Price, the number of one one-thousandths of a share of Preferred Stock purchasable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein.

 

11.8.                     Effect of Adjustments.  Unless the Company shall have exercised its election as provided in Section 11.9, upon each adjustment of the Purchase Price as a result of the calculations made in Sections 11.2 and 11.3, each Right outstanding immediately prior to the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted Purchase Price, that number of one one-thousandths of a share of Preferred Stock (calculated to the nearest one-hundred thousandth of a share of Preferred Stock) obtained by (i) multiplying (x) the number of one one-thousandths of a share of Preferred Stock 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.

 

11.9.                     Adjustment in Number of Rights.  The Company may elect on or after the date of any adjustment of the Purchase Price to adjust the number of Rights, in substitution for any adjustment in the number of one one-thousandths of a share of Preferred Stock issuable upon the exercise of a Right.  Each of the Rights outstanding after such adjustment of the number of Rights shall be exercisable for the number of one one-thousandths of a share of Preferred 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 ten-thousandth) obtained by dividing the Purchase Price in effect immediately prior to adjustment of the Purchase Price by the Purchase Price in effect immediately after adjustment of the Purchase Price.  The Company shall make a public announcement of its election to adjust the number of Rights, indicating the record date for the adjustment, and, if known at the time, the amount of the adjustment to be made.  This record date may be the date on which the Purchase Price is adjusted or any day thereafter, but, if the Right Certificates have been issued, shall be at least ten (10) days later than the date of the public announcement.  If Right Certificates have been issued, upon each adjustment of the number of

 

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Rights pursuant to this Section 11.9, the Company may, as promptly as practicable, cause to be distributed to holders of record of Right Certificates on such record date Right Certificates evidencing, subject to Section 14, the additional Rights to which such holders shall be entitled as a result of such adjustment, or, at the option of the Company, shall cause to be distributed to such holders of record in substitution and replacement for the Right Certificates held by such holders prior to the date of adjustment, and upon surrender thereof, if required by the Company, new Right Certificates evidencing all the Rights to which such holders shall be entitled after such adjustment.  Right Certificates so to be distributed shall be issued, executed and countersigned in the manner provided for herein (and may bear, at the option of the Company, the adjusted Purchase Price) and shall be registered in the names of the holders of record of Right Certificates on the record date specified in the public announcement.

 

11.10.              Right Certificates Unchanged.  Irrespective of any adjustment or change in the Purchase Price or the number of one one-thousandths of a share of Preferred Stock issuable upon the exercise of the Rights, the Right Certificates theretofore and thereafter issued may continue to express the Purchase Price per share and the number of one one-thousandths of a share of Preferred Stock which were expressed in the initial Right Certificates issued hereunder.

 

11.11.              Par Value Limitations.  Before taking any action that would cause an adjustment reducing the Purchase Price below one one-thousandth of the then par value, if any, of the Preferred Stock or other shares of capital 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 fully paid and nonassessable Preferred Stock or other such shares at such adjusted Purchase Price.

 

11.12.              Deferred Issuance.  In any case in which this Section 11 shall require that an adjustment in the Purchase Price be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event the issuance to the holder of any Right exercised after such record date of that number of shares of Preferred Stock and shares of other capital stock or securities of the Company, if any, issuable upon such exercise over and above the Preferred Stock and shares of other capital stock or other securities, assets or cash of the Company, if any, issuable upon such exercise on the basis of the Purchase Price in effect prior to such adjustment; provided, however, that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder’s right to receive such additional shares upon the occurrence of the event requiring such adjustment.

 

11.13.              Reduction in Purchase Price.  Anything in this Section 11 to the contrary notwithstanding, the Company shall be entitled to make such reductions in the Purchase Price, in addition to those adjustments expressly required by this Section 11, as and to the extent that it in its sole discretion shall determine to be advisable in order that any consolidation or subdivision of the Preferred Stock, issuance wholly for cash of any of the Preferred Stock at less than the current market price, issuance wholly for cash of Preferred Stock or securities which by their terms are convertible into or exchangeable for Preferred Stock, dividends on Preferred Stock payable in Preferred Stock or issuance of rights, options or warrants referred to hereinabove in this Section 11, hereafter made by the Company to holders of its Preferred Stock shall not be taxable to such stockholders.

 

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11.14.              Company Not to Diminish Benefits of Rights.  The Company covenants and agrees that after the earlier of the Stock Acquisition Date or Distribution Date it will not, except as permitted by Sections 23, 26 or 27, take (or permit any Subsidiary to take) any action if at the time such action is taken it is reasonably foreseeable that such action will substantially diminish or otherwise eliminate the benefits intended to be afforded by the Rights.

 

11.15.              Adjustment of Rights Associated with Common Stock.  Notwithstanding anything contained in this Agreement to the contrary, in the event that the Company shall at any time after the date hereof and prior to the Distribution Date (i) declare or pay any dividend on the outstanding Common Stock payable in shares of Common Stock, (ii) effect a subdivision or consolidation of the outstanding Common Stock (by reclassification or otherwise than by the payment of dividends payable in shares of Common Stock), or (iii) combine the outstanding Common Stock into a greater or lesser number of shares of Common Stock, then in any such case, the number of Rights associated with each share of Common Stock then outstanding, or issued or delivered thereafter but prior to the Distribution Date or in accordance with Section 22 shall be proportionately adjusted so that the number of Rights thereafter associated with each share of Common Stock following any such event shall equal the result obtained by multiplying the number of Rights associated with each share of Common Stock immediately prior to such event by a fraction, the numerator of which shall be the total number of shares of Common Stock outstanding immediately prior to the occurrence of the event and the denominator of which shall be the total number of shares of Common Stock outstanding immediately following the occurrence of such event.  The adjustments provided for in this Section 11.15 shall be made successively whenever such a dividend is declared or paid or such a subdivision, combination or consolidation is effected.

 

Section 12.                                    Certificate of Adjusted Purchase Price or Number of Shares.  Whenever an adjustment is made as provided in Section 11, the Company shall (a) promptly prepare a certificate setting forth such adjustment, and a brief statement of the facts accounting for such adjustment, (b) promptly file with the Rights Agent and with each transfer agent for the Common Stock or the Preferred Stock a copy of such certificate and (c) mail a brief summary thereof to each holder of a Right Certificate in accordance with Section 25.  The Rights Agent shall be fully protected in relying on any such 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 certificate.

 

Section 13.                                    [Reserved].

 

Section 14.                                    Fractional Rights and Fractional Shares.

 

14.1.                     Cash in Lieu of Fractional Rights.  The Company shall not be required to issue fractions of Rights or to distribute Right Certificates which evidence fractional Rights (except prior to the Distribution Date in accordance with Section 11.15).  In lieu of such fractional Rights, there shall be paid to the registered holders of the Right Certificates with regard to which such fractional Rights would otherwise be issuable an amount in cash equal to the same fraction of the current market value of a whole Right.  For the purposes of this Section 14.1, the current market value of a whole Right shall be the closing price of the Rights for the Trading Day immediately prior to the date on which such fractional Rights would have been

 

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otherwise issuable.  The closing price for any day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Rights are listed or admitted to trading or, if the Rights are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by such 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 current market value of the Rights on such date shall be the fair value of the Rights as determined in good faith by the Board, or, if at the time of such determination there is an Acquiring Person, by a nationally recognized investment banking firm selected by the Board, which shall have the duty to make such determination in a reasonable and objective manner, which determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes.

 

14.2.                     Cash in Lieu of Fractional Shares of Preferred Stock.  The Company shall not be required to issue fractions of shares of Preferred Stock (other than fractions which are integral multiples of one one-thousandth of a share of Preferred Stock) upon exercise or exchange of the Rights or to distribute certificates which evidence fractional shares of Preferred Stock (other than fractions which are integral multiples of one one-thousandth of a share of Preferred Stock).  Interests in fractions of shares of Preferred Stock in integral multiples of one one-thousandth of a share of Preferred Stock may, at the election of the Company, be evidenced by depositary receipts, pursuant to an appropriate agreement between the Company and a depositary selected by it; provided, that such agreement shall provide that the holders of such depositary receipts shall have all the rights, privileges and preferences to which they are entitled as Beneficial Owners of the Preferred Stock represented by such depositary receipts.  In lieu of fractional shares of Preferred Stock that are not integral multiples of one one-thousandth of a share of Preferred Stock, the Company shall pay to the registered holders of Right Certificates at the time such Rights are exercised or exchanged as herein provided an amount in cash equal to the same fraction of the Current Per Share Market Price of one share of Preferred Stock (as determined in accordance with Section 14.1) for the Trading Day immediately prior to the date of such exercise or exchange.

 

14.3.                     Cash in Lieu of Fractional Shares of Common Stock.  The Company shall not be required to issue fractions of shares of Common Stock or to distribute certificates which evidence fractional shares of Common Stock upon the exercise or exchange of Rights.  In lieu of such fractional shares of Common Stock, the Company shall pay to the registered holders of the Right Certificates with regard to which such fractional shares of Common Stock would otherwise be issuable an amount in cash equal to the same fraction of the current market value of a whole share of Common Stock (as determined in accordance with Section 14.1) for the Trading Day immediately prior to the date of such exercise or exchange.

 

14.4.                     Waiver of Right to Receive Fractional Rights or Shares.  The holder of a Right by the acceptance of the Rights expressly waives his right to receive any fractional Rights

 

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or any fractional shares upon exercise or exchange of a Right, except as permitted by this Section 14.

 

Section 15.                                    Rights of Action.  All rights of action in respect of this Agreement, except the rights of action given to the Rights Agent under Section 18, are vested in the respective registered holders of the Right Certificates (and, prior to the Distribution Date, the registered holders of the Common Stock); and any registered holder of any Right Certificate (or, prior to the Distribution Date, of the Common Stock), without the consent of the Rights Agent or of the holder of any other Right Certificate (or, prior to the Distribution Date, of the Common Stock), may, in his own behalf and for his own benefit, enforce this Agreement, and may institute and maintain any suit, action or proceeding against the Company to enforce this Agreement, or otherwise enforce or act in respect of his right to exercise the Rights evidenced by such Right Certificate (or, prior to the Distribution Date, such Common Stock) in the manner provided in such Right Certificate and in this Agreement.  Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Agreement and shall be entitled to specific performance of the obligations under, and injunctive relief against actual or threatened violations of, the obligations of any Person (including, without limitation, the Company) subject to this Agreement.

 

Section 16.                                    Agreement of Right Holders.  Every holder of a Right by accepting the same consents and agrees with the Company and the Rights Agent and with every other holder of a Right that:

 

(a)                                 prior to the Distribution Date, the Rights will be transferable only in connection with the transfer of the Common Stock;

 

(b)                                 as of and after the Distribution Date, the Right Certificates are transferable only on the registry books of the Rights Agent if surrendered at the office of the Rights Agent designated for such purpose, duly endorsed or accompanied by a proper instrument of transfer with all required certifications completed; and

 

(c)                                  the Company and the Rights Agent may deem and treat the Person in whose name the Right Certificate (or, prior to the Distribution Date, the associated Common Stock certificate) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Right Certificates or 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.

 

Section 17.                                    Right Certificate Holder Not Deemed a Stockholder.  No holder, as such, of any Right Certificate shall be entitled to vote, receive dividends or be deemed for any purpose the holder of the Preferred Stock or any other securities of the Company which may at any time be issuable on the exercise of the Rights represented thereby, nor shall anything contained herein or in any Right Certificate be construed to confer upon the holder of any Right Certificate, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to

 

22

 

give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders (except as provided in Section 24), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by such Right Certificate shall have been exercised in accordance with the provisions hereof.

 

Section 18.                                    Concerning the Rights Agent.  The Company agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder in accordance with a fee schedule to be mutually agreed upon and, from time to time, on demand of the Rights Agent, its reasonable expenses and counsel fees and other disbursements incurred in the administration and execution of this Agreement and the exercise and performance of its duties hereunder.  The Company shall indemnify and hold harmless the Rights Agent from any and all liability, including attorney’s fees and court costs, for any action taken by the Rights Agent in connection with its appointment and conduct as the Rights Agent, except for the Rights Agent’s own willful misconduct or gross negligence, and shall, at the request of the Rights Agent, defend any action brought against the Rights Agent hereunder.

 

The Rights Agent shall be protected and shall incur no liability for or in respect of any action taken, suffered or omitted by it in connection with its administration of this Agreement in reliance upon any Right Certificate or certificate for the Preferred Stock or the 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, executed and, where necessary, verified or acknowledged, by the proper Person or Persons.

 

Section 19.                                    Merger or Consolidation or Change of Name of Rights Agent.  Any corporation, limited liability company or other entity into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any corporation, limited liability company or other entity resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any corporation or limited liability company succeeding to the corporate trust or stock transfer business of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto, provided that such corporation, limited liability company or other entity would be eligible for appointment as a successor Rights Agent under the provisions of Section 21.  In case at the time such successor Rights Agent shall succeed to the agency created by this Agreement, any of the Right Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of the predecessor Rights Agent and deliver such Right Certificates so countersigned; and in case at that time any of the Right Certificates shall not have been countersigned, any successor Rights Agent may countersign such Right Certificates either in the name of the predecessor Rights Agent or in the name of the successor Rights Agent; and in all such cases such Right Certificates shall have the full force provided in the Right Certificates and in this Agreement.

 

In case at any time the name of the Rights Agent shall be changed and at such time any of the Right Certificates shall have been countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver Right Certificates so countersigned; and in case at that time any of the Right Certificates shall not have been

 

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countersigned, the Rights Agent may countersign such Right Certificates either in its prior name or in its changed name; and in all such cases such Right Certificates shall have the full force provided in the Right Certificates and in this Agreement.

 

Section 20.                                    Duties of Rights Agent.  The Rights Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which the Company and the holders of Right Certificates, by their acceptance thereof, shall be bound:

 

20.1.                     Legal Counsel.  The Rights Agent may consult with legal counsel selected by it (who may be legal counsel for the Company), and the opinion of such counsel shall be full and complete authorization and protection to the Rights Agent as to any action taken or omitted by it in good faith and in accordance with such opinion.

 

20.2.                     Certificates as to Facts or Matters.  Whenever in the performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by any one of the President and Chief Executive Officer, the Treasurer, the Secretary or any Vice President of the Company and delivered to the Rights Agent; and such certificate shall be full authorization to the Rights Agent for any action taken or suffered in good faith by it under the provisions of this Agreement in reliance upon such certificate.

 

20.3.                     Standard of Care.  The Rights Agent shall be liable hereunder only for its own negligence, bad faith or willful misconduct.

 

20.4.                     Reliance on Agreement and Right Certificates.  The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Right Certificates (except as to its countersignature thereof) or be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by the Company only.

 

20.5.                     No Responsibility as to Certain Matters.  The Rights Agent shall not be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution hereof by the Rights Agent) or in respect of the validity or execution of any Right Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Right Certificate; nor shall it be responsible for any change in the exercisability of the Rights (including the Rights becoming void pursuant to Section 11.1.2) or any adjustment required under the provisions of Sections 3, 11, 23 or 27 or responsible for the manner, method or amount of any such adjustment or the ascertaining of the existence of facts that would require any such adjustment (except with respect to the exercise of Rights evidenced by Right Certificates after actual notice of any such change or adjustment); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any Preferred Stock or other securities to be issued pursuant to this Agreement or

 

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any Right Certificate or as to whether any Preferred Stock will, when so issued, be validly authorized and issued, fully paid and nonassessable.

 

20.6.                     Further Assurance by Company.  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.

 

20.7.                     Authorized Company Officers.  The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from any one of the President and Chief Executive Officer, the Treasurer, the Secretary or any Vice President, and to apply to such officers for advice or instructions in connection with its duties under this Agreement, and it shall not be liable for any action taken or suffered to be taken by it in good faith in accordance with instructions of any such officer or for any delay in acting while waiting for these instructions.  Any application by the Rights Agent for written instructions from the Company may, at the option of the Rights Agent, set forth in writing any action proposed to be taken or omitted by the Rights Agent with respect to its duties or obligations under this Agreement and the date on and/or after which such action shall be taken or such omission shall be effective.  The Rights Agent shall not be liable to the Company for any action taken by, or omission of, the Rights Agent in accordance with a proposal included in any such application on or after the date specified therein (which date shall not be less than three (3) 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 of any such action (or the effective date in the case of omission), the Rights Agent shall have received written instructions in response to such application specifying the action to be taken or omitted.

 

20.8.                     Freedom to Trade in Company Securities.  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 obtain a pecuniary interest in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Rights Agent under this Agreement.  Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Company or for any other legal entity.

 

20.9.                     Reliance on Attorneys and Agents.  The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys or agents, and the Rights Agent shall not be answerable or accountable for any act, omission, default, neglect or misconduct of any such attorneys or agents or for any loss to the Company resulting from any such act, omission, default, neglect or misconduct, provided that reasonable care was exercised in the selection and continued employment thereof.

 

20.10.              Incomplete Certificate.  If, with respect to any Right Certificate surrendered to the Rights Agent for exercise or transfer, the certificate contained in the form of assignment or the form of election to purchase set forth on the reverse thereof, as the case may be, has not been completed to certify the holder is not an Acquiring Person (or an Affiliate or

 

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Associate thereof), the Rights Agent shall not take any further action with respect to such requested exercise or transfer without first consulting with the Company.

 

20.11.              Rights Holders List.  At any time and from time to time after the Distribution Date, upon the request of the Company, the Rights Agent shall promptly deliver to the Company a list, as of the most recent practicable date (or as of such earlier date as may be specified by the Company), of the holders of record of Rights.

 

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 thirty (30) days’ notice in writing mailed to the Company and to each transfer agent of the Common Stock and/or Preferred Stock, as applicable, by registered or certified mail.  Following the Distribution Date, the Company shall promptly notify the holders of the Right Certificates by first-class mail of any such resignation.  The Company may remove the Rights Agent or any successor Rights Agent upon thirty (30) days’ notice in writing, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the Common Stock and/or Preferred Stock, as applicable, by registered or certified mail, and to the holders of the Right Certificates by first-class mail.  If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the resigning, removed, or incapacitated Rights Agent shall remit to the Company, or to any successor Rights Agent designated by the Company, all books, records, funds, certificates or other documents or instruments of any kind then in its possession which were acquired by such resigning, removed or incapacitated Rights Agent in connection with its services as Rights Agent hereunder, and shall thereafter be discharged from all duties and obligations hereunder.  Following notice of such removal, resignation or incapacity, the Company shall appoint a successor to such Rights Agent.  If the Company shall fail to make such appointment within a period of thirty (30) days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Right Certificate (who shall, with such notice, submit his Right Certificate for inspection by the Company), then the registered holder of any Right Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights Agent.  Any successor Rights Agent, whether appointed by the Company or by such a court, shall be a corporation organized and doing business under the laws of the State of New York or the State of Delaware (or any other state of the United States so long as such corporation is authorized to do business as a banking institution in the State of New York or the State of Delaware) in good standing, having an office in the State of New York or the State of Delaware, which is authorized under such laws to exercise stock transfer or corporate trust powers and is subject to supervision or examination by federal or state authority and which has at the time of its appointment as Rights Agent a combined capital and surplus of at least $100 million.  After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose.  Not later than the effective date of any such appointment the Company shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Common Stock and/or Preferred Stock, as applicable, and, following the Distribution Date, mail a notice thereof in writing to the registered holders of the Right Certificates. Failure to give any notice provided for in this Section 21, however, or any defect

 

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therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be.

 

Section 22.                                    Issuance of New Right Certificates.  Notwithstanding any of the provisions of this Agreement or of the Rights to the contrary, the Company may, at its option, issue new Right Certificates evidencing Rights in such form as may be approved by its Board to reflect any adjustment or change in the Purchase Price and the number or kind or class of shares or other securities or property purchasable under the Right Certificates made in accordance with the provisions of this Agreement.  In addition, in connection with the issuance or sale of Common Stock following the Distribution Date and prior to the Expiration Date, the Company shall, with respect to Common Stock so issued or sold pursuant to the exercise of stock options or under any employee plan or arrangement, granted or awarded, or upon exercise, conversion or exchange of securities hereinafter issued by the Company, in each case existing prior to the Distribution Date, issue Right Certificates representing the appropriate number of Rights in connection with such issuance or sale; provided, however, that (i) no such Right Certificate shall be issued if, and to the extent that, the Company shall be advised by counsel that such issuance would create a significant risk of material adverse tax consequences to the Company (including, but not limited to, any prejudice to the availability to the Company of the NOLs) or the Person to whom such Right Certificate would be issued and (ii) no such Right Certificate shall be issued if, and to the extent that, appropriate adjustment shall otherwise have been made in lieu of the issuance thereof.

 

Section 23.                                    Redemption.

 

23.1.                     Right to Redeem.  The Board may, at its option, at any time prior to a Trigger Event, redeem all but not less than all of the then outstanding Rights at a redemption price of $0.01 per Right, appropriately adjusted to reflect any stock split, stock dividend, recapitalization or similar transaction occurring after the date hereof (such redemption price being hereinafter referred to as the “Redemption Price”), and the Company may, at its option, pay the Redemption Price in Common Stock (based on the “Current Per Share Market Price,” determined pursuant to Section 11.4, of the Common Stock at the time of redemption), cash or any other form of consideration deemed appropriate by the Board.  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.

 

23.2.                     Redemption Procedures.  Immediately upon the action of the Board ordering the redemption of the Rights (or at such later time as the Board may establish for the effectiveness of such redemption), and without any further action and without any notice, the right to exercise the Rights will terminate and the only right thereafter of the holders of Rights shall be to receive the Redemption Price for each Right so held.  The Company shall promptly give public notice of such redemption; provided, however, that the failure to give, or any defect in, any such notice shall not affect the validity of such redemption.  The Company shall promptly give, or cause the Rights Agent to give, notice of such redemption to the holders of the then outstanding Rights by mailing such notice to all such holders at their last addresses as they appear upon the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the transfer agent for the Common Stock.  Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice.

 

27

 

Each such notice of redemption shall state the method by which the payment of the Redemption Price will be made.  Neither the Company nor any of its Affiliates or Associates may redeem, acquire or purchase for value any Rights at any time in any manner other than that specifically set forth in this Section 23 or in Section 27, and other than in connection with the purchase, acquisition or redemption of Common Stock prior to the Distribution Date.

 

Section 24.                                    Notice of Certain Events.  In case the Company shall propose at any time after the earlier of the Stock Acquisition Date and the Distribution Date (a) to pay any dividend payable in stock of any class to the holders of Preferred Stock or to make any other distribution to the holders of Preferred Stock (other than a regular periodic cash dividend at a rate not in excess of 125% of the rate of the last regular periodic cash dividend theretofore paid or, in case regular periodic cash dividends have not theretofore been paid, at a rate not in excess of 50% of the average net income per share of the Company for the four quarters ended immediately prior to the payment of such dividends, or a stock dividend on, or a subdivision, combination or reclassification of the Common Stock), or (b) to offer to the holders of Preferred Stock rights or warrants to subscribe for or to purchase any additional Preferred Stock or shares of stock of any class or any other securities, rights or options, or (c) to effect any reclassification of its Preferred Stock (other than a reclassification involving only the subdivision of outstanding Preferred Stock), or (d) to effect any consolidation or merger into or with, or to effect any sale or other transfer (or to permit one or more of its Subsidiaries to effect any sale or other transfer), in one or more transactions, of 50% or more of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to, any other Person (other than pursuant to a merger or other acquisition agreement of the type excluded from the definition of “Beneficial Ownership” in Section 1.3), or (e) to effect the liquidation, dissolution or winding up of the Company, or (f) to declare or pay any dividend on the Common Stock payable in Common Stock or to effect a subdivision, combination or consolidation of the Common Stock (by reclassification or otherwise than by payment of dividends in Common Stock), then, in each such case, the Company shall give to the Rights Agent and to each holder of a Right Certificate, in accordance with Section 25, 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 the Preferred Stock and/or 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 ten (10) days prior to the record date for determining holders of the Preferred Stock for purposes of such action, and in the case of any such other action, at least ten (10) days prior to the date of the taking of such proposed action or the date of participation therein by the holders of the Preferred Stock and/or Common Stock, whichever shall be the earlier.

 

In case any event set forth in Section 11.1.2 shall occur, then, in any such case, (i) the Company shall as soon as practicable thereafter give to the Rights Agent and to each holder of a Right Certificate, in accordance with Section 25, a notice of the occurrence of such event, which notice shall describe the event and the consequences of the event to holders of Rights under Section 11.1.2, and (ii) all references in this Section 24 to Preferred Stock shall be deemed thereafter to refer to Common Stock and/or, if appropriate, other securities.

 

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Section 25.                                    Notices.  Notices or demands authorized by this Agreement to be given or made by the Rights Agent or by the holder of any Right Certificate to or on the Company shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Rights Agent) as follows:

 

Sanchez Energy Corporation

1000 Main Street

Suite 3000

Houston, TX 77002

Attention:  Antonio R. Sanchez, III

 

Subject to the provisions of Sections 21 and 24, any notice or demand authorized by this Agreement to be given or made by the Company or by the holder of any Right Certificate to or on the Rights Agent shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Company) as follows:

 

Continental Stock Transfer & Trust Company

17 Battery Place

New York, NY 10004
 Attention:  Margaret Villani

 

Notices or demands authorized by this Agreement to be given or made by the Company or the Rights Agent to the holder of any Right Certificate (or, prior to the Distribution Date, to the holder of any certificate representing Common Stock) shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed to such holder at the address of such holder as shown on the registry books of the Company; provided that prior to the Distribution Date a filing by the Company with the Securities and Exchange Commission shall constitute sufficient notice to the holders of securities of the Company, including the Rights, for purposes of this Agreement and no other notice need be given.

 

Section 26.                                    Supplements and Amendments.  For so long as the Rights are then redeemable, the Company may in its sole and absolute discretion, and the Rights Agent shall, if the Company so directs, supplement or amend any provision of this Agreement in any respect without the approval of any holders of Rights or Common Stock.  From and after the time that the Rights are no longer redeemable, the Company may, and the Rights Agent shall, if the Company so directs, from time to time supplement or amend this Agreement without the approval of any holders of Rights (i) to cure any ambiguity or to correct or supplement any provision contained herein which may be defective or inconsistent with any other provisions herein or (ii) to make any other changes or provisions in regard to matters or questions arising hereunder which the Company may deem necessary or desirable, including but not limited to extending the Final Expiration Date; provided, however, that no such supplement or amendment shall adversely affect the interests of the holders of Rights as such (other than an Acquiring Person or an Affiliate or Associate of an Acquiring Person), and no such supplement or amendment may cause the Rights again to become redeemable or cause this Agreement again to become amendable as to an Acquiring Person or an Affiliate or Associate of an Acquiring Person

 

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other than in accordance with this sentence; provided further, that the right of the Board to extend the Distribution Date shall not require any amendment or supplement hereunder.  Upon the delivery of a certificate from an appropriate officer of the Company which states that the proposed supplement or amendment is in compliance with the terms of this Section 26, the Rights Agent shall execute such supplement or amendment.

 

Section 27.                                    Exchange.

 

27.1.                     Exchange of Common Stock for Rights.  The Board may, at its option, at any time after the occurrence of a Trigger Event, exchange Common Stock for all or part of the then outstanding and exercisable Rights (which shall not include Rights that have become void pursuant to the provisions of Section 11.1.2) by exchanging 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 date hereof (such amount per Right being hereinafter referred to as the “Exchange Consideration”).  Notwithstanding the foregoing, the Board shall not be empowered to effect such exchange at any time after any Acquiring Person shall have become the Beneficial Owner of 50% or more of the Common Stock then outstanding.  The exchange of the Rights by the Board may be made effective at such time, on such basis and with such conditions as the Board in its sole discretion may establish.  Without limiting the foregoing, prior to effecting an exchange pursuant to this Section 27, the Board may direct the Company to enter into a Trust Agreement in such form and with such terms as the Board shall then approve (the “Trust  Agreement”).  If the Board so directs, the Company shall enter into the Trust Agreement and shall issue to the trust created by such agreement (the “Trust”) all of the shares of Common Stock issuable pursuant to the exchange (or any portion thereof that have not theretofore been issued in connection with the exchange).  From and after the time at which such shares are issued to the Trust, all stockholders then entitled to receive shares pursuant to the exchange shall be entitled to receive such shares (and any dividends or distributions made thereon after the date on which such shares are deposited in the Trust) only from the Trust and solely upon compliance with the relevant terms and provisions of the Trust Agreement.  Any shares of Common Stock issued at the direction of the Board in connection herewith shall be validly issued, fully paid and nonassessable shares of Common Stock, and the Company shall be deemed to have received as consideration for such issuance a benefit having a value that is at least equal to the aggregate par value of the shares so issued.

 

27.2.                     Exchange Procedures.  Immediately upon the action of the Board ordering the exchange for any Rights pursuant to Section 27.1 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 the Exchange Consideration.  The Company shall promptly give public notice of any such exchange; provided, however, that the failure to give, or any defect in, such notice shall not affect the validity of such exchange.  The Company promptly shall mail a notice of any such exchange to all of the holders of such Rights at their last addresses as they appear upon the registry books of the Rights Agent.  Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice.  Each such notice of exchange shall state the method by which the exchange of the Common Stock for Rights will be effected and, in the event of any partial exchange, the number of Rights which will be exchanged.  Any partial exchange shall be effected pro rata based on the

 

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number of Rights (other than the Rights that have become void pursuant to the provisions of Section 11.1.2) held by each holder of Rights.

 

27.3.                     Insufficient Shares.  The Company may at its option substitute, and, in the event that there shall not be sufficient Common Stock issued but not outstanding or authorized but unissued to permit an exchange of Rights for Common Stock as contemplated in accordance with this Section 27, the Company shall substitute to the extent of such insufficiency, for each share of Common Stock that would otherwise be issuable upon exchange of a Right, a number of shares of Preferred Stock or fraction thereof (or Equivalent Preferred Stock, as such term is defined in Section 11.2) such that the Current Per Share Market Price (determined pursuant to Section 11.4) of one share of Preferred Stock (or Equivalent Preferred Stock) multiplied by such number or fraction is equal to the Current Per Share Market Price of one share of Common Stock (determined pursuant to Section 11.4) as of the date of such exchange.  In the case of a substitution described in the immediately preceding sentence, instances of “Common Stock” shall be replaced with “Preferred Stock” where applicable throughout Section 27 of this Agreement and any other provisions where appropriate to effect and properly reflect such substitution.

 

Section 28.                                    Process to Seek Exemption.  Any Person who desires to effect any acquisition of Common Stock that would, if consummated, result in such Person (together with its Affiliates and Associates) beneficially owning 4.9% or more of the then outstanding Common Stock (or, in the case of an Existing Holder, shares of Common Stock in excess of the Exempt Ownership Percentage) (a “Requesting Person”) may, prior to the Stock Acquisition Date and in accordance with this Section 28, request that the Board grant an exemption with respect to such acquisition under this Agreement so that such Person would be deemed to be an “Exempt Person” under subsection (ii) of Section 1.7 hereof for purposes of this Agreement (an “Exemption Request”).  An Exemption Request shall be in proper form and shall be delivered by registered mail, return receipt requested, to the Secretary of the Company at the principal executive office of the Company.  To be in proper form, an Exemption Request shall set forth (i) the name and address of the Requesting Person, (ii) the number and percentage of shares of Common Stock then Beneficially Owned by the Requesting Person, together with all Affiliates and Associates of the Requesting Person, and (iii) a reasonably detailed description of the transaction or transactions by which the Requesting Person would propose to acquire Beneficial Ownership of Common Stock aggregating 4.9% or more of the then outstanding Common Stock (or, in the case of an Existing Holder, shares of Common Stock in excess of the Exempt Ownership Percentage) and the maximum number and percentage of shares of Common Stock that the Requesting Person (together with its Affiliates and Associates, and any person which could be aggregated with such Requesting Person as an “entity” under Section 1.382-3(a)(1) of the Treasury Regulations) proposes to acquire.  The Board shall make a determination whether to grant an exemption in response to an Exemption Request as promptly as practicable (and, in any event, within ten (10) Business Days) after receipt thereof but first may request further information from such Requesting Person (e.g., information with respect to such Person or its proposed acquisition of Common Stock) in which case such determination shall be made as promptly as practicable (and, in any event, within five (5) Business Days) after receipt of the written response to such request; provided, that the failure of the Board to make a determination within such period shall be deemed to constitute the denial by the Board of the Exemption Request.  The Board shall only grant an exemption in response to an Exemption Request if the

 

31

 

Board determines in its sole discretion that the acquisition of Beneficial Ownership of Common Stock by the Requesting Person will not jeopardize or endanger the availability to the Company of the NOLs.  Any exemption granted hereunder may be granted in whole or in part, and may be subject to limitations or conditions (including a requirement that the Requesting Person agree that it will not acquire Beneficial Ownership of shares of Common Stock in excess of the maximum number and percentage of shares approved by the Board), in each case as and to the extent the Board shall determine necessary or desirable to provide for the protection of the Company’s NOLs.  Any Exemption Request may be submitted on a confidential basis and, except to the extent required by applicable law, the Company shall maintain the confidentiality of such Exemption Request and the Board’s determination with respect thereto.

 

Section 29.                                    Notwithstanding the definition of “Acquiring Person” under this Agreement, the Board may also determine that any Person is an “Acquiring Person” under this Agreement if such Person becomes the Beneficial Owner of 4.9% (by value) of the stock of the Company then outstanding (as the term “stock” is defined in Treasury Regulations Sections 1.382-2(a)(3) and 1.382-2T(f)(18)).  For purposes of this Section 29, the calculation of the number of shares of stock of the Company then outstanding for purposes of determining the percentage of such outstanding stock of the Company of which any Person is the Beneficial Owner shall be made pursuant to and in accordance with Section 382 of the Code and the Treasury Regulations promulgated thereunder.

 

Section 30.                                    Successors.  All the covenants and provisions of this Agreement by or for the benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder.

 

Section 31.                                    Benefits of this Agreement.  Nothing in this Agreement shall be construed to give to any Person other than the Company, the Rights Agent and the registered holders of the Right Certificates (and, prior to the Distribution Date, the Common Stock) any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent and the registered holders of the Right Certificates (and, prior to the Distribution Date, the Common Stock).

 

Section 32.                                    Determination and Actions by the Board.  The Board shall have the exclusive power and authority to administer this Agreement and to exercise the 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 (including, without limitation, a determination to redeem or not redeem the Rights or amend this Agreement).  All such actions, calculations, interpretations and determinations that are done or made by the Board in good faith shall be final, conclusive and binding on the Company, the Rights Agent, the holders of the Rights, as such, and all other parties.

 

Section 33.                                    Severability.  If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this

 

32

 

Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated.

 

Section 34.                                    Governing Law.  This Agreement and each Right Certificate issued hereunder shall be deemed to be a contract made under the internal laws of the State of Delaware and for all purposes shall be governed by and construed in accordance with the laws of such State applicable to contracts to be made and performed entirely within such State.

 

Section 35.                                    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 36.                                    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.

 

[Signature Page Follows]

 

33

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, as of the day and year first above written.

 

	
 
    	
SANCHEZ ENERGY CORPORATION
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ A.R.   Sanchez, Jr.
    
	
 
    	
 
    	
Name: A. R.   Sanchez, Jr.
    
	
 
    	
 
    	
Title: Executive   Chairman of the Board of Directors
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
CONTINENTAL STOCK   TRANSFER &
    
	
 
    	
TRUST COMPANY, as Rights Agent
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Margaret Villani
    
	
 
    	
 
    	
Name: Margaret Villani
    
	
 
    	
 
    	
Title: Vice   President & Director of Account Administration
    

 

 

EXHIBIT A

 

FORM OF

 

CERTIFICATE OF DESIGNATIONS

 

of

 

SERIES C JUNIOR PARTICIPATING PREFERRED STOCK

 

of

 

SANCHEZ ENERGY CORPORATION

 

(Pursuant to Section 151 of the

Delaware General Corporation Law)

 

 

Sanchez Energy Corporation, a corporation organized and existing under the General Corporation Law of the State of Delaware (hereinafter called the “Corporation”), hereby certifies that the following resolution was adopted by the Board of Directors of the Corporation as required by Section 151 of the General Corporation Law at a meeting duly called and held on July 27, 2015.

 

RESOLVED, that pursuant to the authority granted to and vested in the Board of Directors of this Corporation (hereinafter called the “Board of Directors” or the “Board”) in accordance with the provisions of the Amended and Restated Certificate of Incorporation of this Corporation the Board of Directors hereby creates a series of Preferred Stock, par value $0.01 per share (the “Preferred Stock”), of the Corporation and hereby states the designation and number of shares, and fixes the relative rights, powers and preferences, and qualifications, limitations and restrictions thereof as follows:

 

Section 1.                                           Designation and Amount.  The shares of such series shall be designated as “Series C Junior Participating Preferred Stock” (the “Series C Preferred Stock”) and the number of shares constituting the Series C Preferred Stock shall be 150,000.  Such number of shares may be increased or decreased by resolution of the Board of Directors; provided, that no decrease shall reduce the number of shares of Series C Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Corporation convertible into Series C Preferred Stock.

 

Section 2.                                           Dividends and Distributions.

 

(A)                               Subject to the prior and superior rights of the holders of any shares of any class or series of stock of this Corporation ranking prior and superior to the Series C Preferred Stock with respect to dividends, the holders of shares of Series C Preferred

 

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Stock, in preference to the holders of Common Stock, par value $0.01 per share (the “Common Stock”), of the Corporation, and of any other stock ranking junior to the Series C Preferred Stock, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the first day of March, June, September and December in each year (each such date being referred to herein as a “Quarterly Dividend Payment Date”), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series C Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $1.00 or (b) subject to the provision for adjustment hereinafter set forth, 1,000 times the aggregate per share amount of all cash dividends, and 1,000 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series C Preferred Stock. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision, combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount to which holders of shares of Series C Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

 

(B)                               The Corporation shall declare a dividend or distribution on the Series C Preferred Stock as provided in paragraph (A) of this Section 2 immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per share on the Series C Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date.

 

(C)                               Dividends shall begin to accrue and be cumulative on outstanding shares of Series C Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series C Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date.  Accrued but unpaid dividends shall not bear interest.  Dividends paid on the shares of Series C Preferred Stock in an amount less than the total

 

A- 2

 

amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding.  The Board of Directors may fix a record date for the determination of holders of shares of Series C Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than sixty (60) days prior to the date fixed for the payment thereof.

 

Section 3.                                           Voting Rights.  The holders of shares of Series C Preferred Stock shall have the following voting rights:

 

(A)                               Subject to the provision for adjustment hereinafter set forth, each share of Series C Preferred Stock shall entitle the holder thereof to 1,000 votes on all matters submitted to a vote of the stockholders of the Corporation.  In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision, combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the number of votes per share to which holders of shares of Series C Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

 

(B)                               Except as otherwise provided herein, in any other Certificate of Designations creating a series of Preferred Stock or any similar stock, or by law, the holders of shares of Series C Preferred Stock and the holders of shares of Common Stock and any other capital stock of the Corporation having general voting rights shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation.

 

(C)                               Except as set forth herein, or as otherwise provided by law, holders of Series C Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action.

 

(D)                               If, at the time of any annual meeting of stockholders for the election of directors, the equivalent of six quarterly dividends (whether or not consecutive) payable on any share or shares of Series C Preferred Stock are in default, the number of directors constituting the Board of Directors of the Corporation shall be increased by two.  In addition to voting together with the holders of Common Stock for the election of other directors of the Corporation, the holders of record of the Series C Preferred Stock, voting separately as a class to the exclusion of the holders of Common Stock, shall be entitled at such meeting of stockholders (and at each subsequent annual meeting of stockholders), unless all dividends in arrears on the Series C Preferred Stock have been paid or declared and set apart for payment prior thereto, to vote for the election of two directors of the Corporation, the holders of any Series C Preferred Stock being entitled to cast a number

 

A- 3

 

of votes per share of Series C Preferred Stock as is specified in paragraph (A) of this Section 3.  Each such additional director shall serve until the next annual meeting of stockholders for the election of directors, or until his successor shall be elected and shall qualify, or until his right to hold such office terminates pursuant to the provisions of this Section 3(D).  Until the default in payments of all dividends which permitted the election of said directors shall cease to exist, any director who shall have been so elected pursuant to the provisions of this Section 3(D) may be removed at any time, without cause, only by the affirmative vote of the holders of the shares of Series C Preferred Stock at the time entitled to cast a majority of the votes entitled to be cast for the election of any such director at a special meeting of such holders called for that purpose, and any vacancy thereby created may be filled by the vote of such holders.  If and when such default shall cease to exist, the holders of the Series C Preferred Stock shall be divested of the foregoing special voting rights, subject to revesting in the event of each and every subsequent like default in payments of dividends.  Upon the termination of the foregoing special voting rights, the terms of office of all persons who may have been elected directors pursuant to said special voting rights shall forthwith terminate, and the number of directors constituting the Board of Directors shall be reduced by two.  The voting rights granted by this Section 3(D) shall be in addition to any other voting rights granted to the holders of the Series C Preferred Stock in this Section 3.

 

Section 4.                                           Certain Restrictions.

 

(A)                               Whenever quarterly dividends or other dividends or distributions payable on the Series C Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series C Preferred Stock outstanding shall have been paid in full, the Corporation shall not:

 

(i)                                     declare or pay dividends, or make any other distributions, on any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series C Preferred Stock;

 

(ii)                                  declare or pay dividends, or make any other distributions, on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series C Preferred Stock, except dividends paid ratably on the Series C Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled;

 

(iii)                               redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series C Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Corporation ranking junior (both as to dividends and upon dissolution, liquidation or winding up) to the Series C Preferred Stock; or

 

A- 4

 

(iv)                              redeem or purchase or otherwise acquire for consideration any shares of Series C Preferred Stock, or any shares of stock ranking on a parity with the Series C Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes.

 

(B)                               The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner.

 

Section 5.                                           Reacquired Shares.  Any shares of Series C Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof.  All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock subject to the conditions and restrictions on issuance set forth herein, in the Amended and Restated Certificate of Incorporation or in any other Certificate of Designations creating a series of Preferred Stock or any similar stock or as otherwise required by law.

 

Section 6.                                           Liquidation, Dissolution or Winding Up.

 

(A) Upon any liquidation, dissolution or winding up of the Corporation, voluntary or otherwise no distribution shall be made (i) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series C Preferred Stock unless, prior thereto, the holders of Series C Preferred Stock shall have received an amount per share (the “Series C Liquidation Preference”) equal to $10 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, provided that the holders of shares of Series C Preferred Stock shall be entitled to receive an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to 1,000 times the aggregate amount to be distributed per share to holders of Common Stock, or (ii) to the holders of shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series C Preferred Stock, except distributions made ratably on the Series C Preferred Stock and all such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up.  In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision, combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the aggregate amount to which holders of Series C Preferred Stock were entitled immediately prior to such event under the proviso in clause (i) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of

 

A- 5

 

which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that are outstanding immediately prior to such event.

 

(B)                               In the event, however, that there are not sufficient assets available to permit payment in full of the Series C Liquidation Preference and the liquidation preferences of all other classes and series of stock of the Corporation, if any, that rank on a parity with the Series C Preferred Stock in respect thereof, then the assets available for such distribution shall be distributed ratably to the holders of the Series C Preferred Stock and the holders of such parity shares in proportion to their respective liquidation preferences.

 

(C)                               Neither the merger or consolidation of the Corporation into or with another corporation nor the merger or consolidation of any other corporation into or with the Corporation shall be deemed to be a liquidation, dissolution or winding up of the Corporation within the meaning of this Section 6.

 

Section 7.                                           Consolidation, Merger, etc.  In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each share of Series C Preferred Stock shall at the same time be similarly exchanged or changed into an amount per share, subject to the provision for adjustment hereinafter set forth, equal to 1,000 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged.  In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision, combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series C Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

 

Section 8.                                           No Redemption.  The Series C Preferred Stock shall not be redeemable by the Corporation.

 

Section 9.                                           Rank.  The Series C Preferred Stock shall rank, with respect to the payment of dividends and the distribution of assets upon liquidation, dissolution or winding up, junior to all series of any other class of the Corporation’s Preferred Stock, except to the extent that any such other series specifically provides that it shall rank on a parity with or junior to the Series C Preferred Stock.

 

Section 10.                                    Amendment.  At any time any shares of Series C Preferred Stock are outstanding, the Amended and Restated Certificate of Incorporation of the Corporation shall

 

A- 6

 

not be further amended in any manner which would materially alter or change the powers, preferences or special rights of the Series C Preferred Stock so as to affect them adversely without the affirmative vote of the holders of at least two-thirds of the outstanding shares of Series C Preferred Stock, voting separately as a single class.

 

Section 11.                                    Fractional Shares.  Series C Preferred Stock may be issued in fractions of a share that shall entitle the holder, in proportion to such holder’s fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series C Preferred Stock.

 

*                           *                           *

 

A- 7

 

IN WITNESS WHEREOF, this Certificate of Designations is executed on behalf of the Corporation by the undersigned this 28th day of July, 2015.

 

	
 
    	
SANCHEZ   ENERGY CORPORATION
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
Title:
    	
 
    

 

A- 8

 

EXHIBIT B

 

Form of Right Certificate

 

	
Certificate No. R-
    	
         Rights
    

 

NOT EXERCISABLE AFTER JULY 27, 2018 OR EARLIER IF NOTICE OF REDEMPTION OR EXCHANGE IS GIVEN, OR IF THE BOARD OF DIRECTORS DETERMINES THAT THE NOLs (AS DEFINED IN THE AGREEMENT) ARE FULLY UTILIZED OR ARE NO LONGER AVAILABLE.  THE RIGHTS ARE SUBJECT TO REDEMPTION AT $0.01 PER RIGHT AND TO EXCHANGE ON THE TERMS SET FORTH IN THE AGREEMENT.  UNDER CERTAIN CIRCUMSTANCES (SPECIFIED IN SECTION 11.1.2 OF THE AGREEMENT), RIGHTS BENEFICIALLY OWNED BY OR TRANSFERRED TO AN ACQUIRING PERSON (AS DEFINED IN THE AGREEMENT), OR ANY SUBSEQUENT HOLDER OF SUCH RIGHTS WILL BECOME NULL AND VOID AND WILL NO LONGER BE TRANSFERABLE.

 

Right Certificate

 

SANCHEZ ENERGY CORPORATION

 

This certifies that                 , or registered assigns, is the registered owner of the number of Rights set forth above, each of which entitles the owner thereof, subject to the terms, provisions and conditions of the Rights Agreement, dated as of July 28, 2015, as the same may be amended from time to time (the “Agreement”), between Sanchez Energy Corporation, a Delaware corporation (the “Company”), and Continental Stock Transfer & Trust Company, a stock transfer agent, as Rights Agent (the “Rights Agent”), to purchase from the Company at any time after the Distribution Date and prior to 5:00 P.M. (New York time) on July 27, 2018, at the offices of the Rights Agent, or its successors as Rights Agent, designated for such purpose, one one-thousandth of a fully paid, nonassessable share of Series C Junior Participating Preferred Stock, par value $0.01 per share (the “Preferred Stock”), of the Company, at a purchase price of $32.00 per one one-thousandth of a share of Preferred Stock, subject to adjustment (the “Purchase Price”), upon presentation and surrender of this Right Certificate with the Form of Election to Purchase and certification duly executed.  The number of Rights evidenced by this Right Certificate (and the number of one one-thousandths of a share of Preferred Stock which may be purchased upon exercise thereof) set forth above, and the Purchase Price set forth above, are the number and Purchase Price as of August 7, 2015 based on the Preferred Stock as constituted at such date.  Capitalized terms used in this Right Certificate without definition shall have the meanings ascribed to them in the Agreement.  As provided in the Agreement, the Purchase Price and the number of shares of Preferred Stock which may be purchased upon the exercise of the Rights evidenced by this Right Certificate are subject to modification and adjustment upon the happening of certain events.

 

This Right Certificate is subject to all of the terms, provisions and conditions of the Agreement, which terms, provisions and conditions are hereby incorporated herein by

 

B- 1

 

reference and made a part hereof and to which Agreement reference is hereby made for a full description of the rights, limitations of rights, obligations, duties and immunities hereunder of the Rights Agent, the Company and the holders of the Right Certificates.  Copies of the Agreement are on file at the principal offices of the Company and the Rights Agent.

 

This Right Certificate, with or without other Right Certificates, upon surrender at the offices of the Rights Agent designated for such purpose, may be exchanged for another Right Certificate or Right Certificates of like tenor and date evidencing Rights entitling the holder to purchase a like aggregate number of one one-thousandths of a share of Preferred Stock as the Rights evidenced by the Right Certificate or Right Certificates surrendered shall have entitled such holder to purchase.  If this Right Certificate shall be exercised in part, the holder shall be entitled to receive upon surrender hereof another Right Certificate or Right Certificates for the number of whole Rights not exercised.

 

Subject to the provisions of the Agreement, the Board may, at its option, (i) redeem the Rights evidenced by this Right Certificate at a redemption price of $0.01 per Right or (ii) exchange Common Stock or Preferred Stock for the Rights evidenced by this Certificate, in whole or in part.

 

No fractional Preferred Stock will be issued upon the exercise of any Right or Rights evidenced hereby (other than fractions of Preferred Stock which are integral multiples of one one-thousandth of a share of Preferred Stock, which may, at the election of the Company, be evidenced by depository receipts), but in lieu thereof a cash payment will be made, as provided in the Agreement.

 

No holder of this Right Certificate, as such, shall be entitled to vote or receive dividends or be deemed for any purpose the holder of the Preferred 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 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 Agreement), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by this Right Certificate shall have been exercised as provided in the Agreement.

 

If any term, provision, covenant or restriction of the Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of the Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated.

 

This Right Certificate shall not be valid or binding for any purpose until it shall have been countersigned by the Rights Agent.

 

B- 2

 

WITNESS the facsimile signature of the proper officers of the Company and its corporate seal.

 

Dated as of           , 20  .

 

 

	
Attest:
    	
 
    	
SANCHEZ ENERGY CORPORATION
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    	
 
    	
Name:
    
	
 
    	
Title:
    	
 
    	
 
    	
Title:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Countersigned:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
CONTINENTAL STOCK TRANSFER &
    	
 
    	
 
    
	
TRUST COMPANY, as Rights Agent
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    	
 
    
	
 
    	
Authorized Signature
    	
 
    	
 
    

 

B- 3

 

Form of Reverse Side of Right Certificate

 

FORM OF ASSIGNMENT

 

(To be executed by the registered holder if such holder

desires to transfer the Right Certificate.)

 

	
FOR VALUE RECEIVED
    	
 
    
	
hereby sells, assigns   and transfers unto
    	
 
    
	
 
    
	
 
    
			

 

(Please print name and address of transferee)

 

Rights evidenced by this Right Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint                                         Attorney, to transfer the within Right Certificate on the books of the within-named Company, with full power of substitution.

 

	
Dated:
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Signature
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Signature   Guaranteed:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
						

 

Signatures must be guaranteed by an “eligible guarantor institution” as defined in Rule 17Ad-15 promulgated under the Securities Exchange Act of 1934, as amended.

 

B- 4

 

The undersigned hereby certifies that:

 

(1)                                 the Rights evidenced by this Right Certificate are not Beneficially Owned by and are not being assigned to an Acquiring Person or an Affiliate or an Associate thereof; and

 

(2)                                 after due inquiry and to the best knowledge of the undersigned, the undersigned did not acquire the Rights evidenced by this Right Certificate from any person who is, was or subsequently became an Acquiring Person or an Affiliate or Associate thereof.

 

	
Dated:
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Signature
    

 

B- 5

 

FORM OF ELECTION TO PURCHASE

 

(To be executed if holder desires to
 exercise the Right Certificate.)

 

To Sanchez Energy Corporation:

 

The undersigned hereby irrevocably elects to exercise                                              Rights represented by this Right Certificate to purchase the Preferred Stock issuable upon the exercise of such Rights (or such other securities or property of the Company or of any other Person which may be issuable upon the exercise of the Rights) and requests that certificates for such stock be issued in the name of:

 

	
 
    	
 
    
	
(Please print name and   address)
    	
 
    
	
 
    
	
 
    	
 
    
			

 

If such number of Rights shall not be all the Rights evidenced by this Right Certificate, a new Right Certificate for the balance remaining of such Rights shall be registered in the name of and delivered to:

 

Please insert social security or other identifying number

 

	
 
    	
 
    
	
(Please print name and   address)
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    
	
Dated:
    	
 
    	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Signature
    
	
 
    	
 
    
	
 
    	
 
    
	
Signature Guaranteed:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
							

 

Signatures must be guaranteed by an “eligible guarantor institution” as defined in Rule 17Ad-15 promulgated under the Securities Exchange Act of 1934, as amended.

 

B- 6

 

The undersigned hereby certifies that:

 

(1)                                 the Rights evidenced by this Right Certificate are not Beneficially Owned by and are not being assigned to an Acquiring Person or an Affiliate or an Associate thereof; and

 

(2)                                 after due inquiry and to the best knowledge of the undersigned, the undersigned did not acquire the Rights evidenced by this Right Certificate from any person who is, was or subsequently became an Acquiring Person or an Affiliate or Associate thereof.

 

	
Dated:
    	
 
    	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Signature
    

 

NOTICE

 

The signature in the foregoing Form of Assignment and Form of Election to Purchase must conform to the name as written upon the face of this Right Certificate in every particular, without alteration or enlargement or any change whatsoever.

 

In the event the certification set forth above in the Form of Assignment or Form of Election to Purchase is not completed, the Company will deem the Beneficial Owner of the Rights evidenced by this Right Certificate to be an Acquiring Person or an Affiliate or Associate hereof and such Assignment or Election to Purchase will not be honored.

 

B- 7

 

EXHIBIT C

 

AS DESCRIBED IN THE RIGHTS AGREEMENT, UNDER CERTAIN CIRCUMSTANCES, RIGHTS WHICH ARE HELD BY OR HAVE BEEN HELD BY AN ACQUIRING PERSON OR ASSOCIATES OR AFFILIATES THEREOF (AS DEFINED IN THE RIGHTS AGREEMENT) AND CERTAIN TRANSFEREES THEREOF SHALL BECOME NULL AND VOID AND WILL NO LONGER BE TRANSFERABLE.

 

SUMMARY OF RIGHTS TO PURCHASE

PREFERRED SHARES

 

On July 28, 2015 the Board of Directors of Sanchez Energy Corporation, a Delaware corporation (the “Company”), declared a dividend of one preferred stock purchase right (a “Right”) for each share of common stock, par value $0.01 per share (the “Common Stock”), of the Company outstanding at the close of business on August 7, 2015 (the “Record Date”).  As long as the Rights are attached to the Common Stock, the Company will issue one Right (subject to adjustment) with each new share of Common Stock so that all such shares will have attached Rights.  When exercisable, each Right will entitle the registered holder to purchase from the Company one one-thousandth of a share of Series C Junior Participating Preferred Stock (the “Preferred Stock”) at a price of $32.00 per one one-thousandth of a share of Preferred Stock, subject to adjustment (the “Purchase Price”).  The description and terms of the Rights are set forth in a Rights Agreement, dated as of July 28, 2015, as the same may be amended from time to time (the “Agreement”), between the Company and Continental Stock Transfer & Trust Company, a stock transfer agent, as Rights Agent (the “Rights Agent”).

 

By adopting the rights agreement, the Board of Directors is seeking to protect the Company’s ability to carry forward its net operating losses and certain other tax attributes (collectively, “NOLs”).  The Company has experienced and may continue to experience substantial operating losses, and for federal and state income tax purposes, the Company may “carry forward” net operating losses in certain circumstances to offset current and future taxable income, which will reduce federal and state income tax liability, subject to certain requirements and restrictions.  These federal and state NOLs can be a valuable asset of the Company, which may inure to the benefit of the Company and its stockholders.  However, if the Company experiences an “ownership change,” as defined in Section 382 of the Internal Revenue Code (the “Code”), its ability to use the NOLs could be substantially limited, and the timing of the usage of the NOLs could be substantially delayed, which could significantly impair the value of the Company’s NOL asset.  Generally, an “ownership change” occurs if the percentage of the Company’s stock owned by one or more “five percent stockholders” increases by more than fifty percentage points over the lowest percentage of stock owned by such stockholders at any time during the prior three-year period or, if sooner, since the last “ownership change” experienced by the Company.  An NOL rights agreement with a 4.9% “trigger” threshold is intended to act as a deterrent to any person acquiring 4.9% or more of the outstanding shares of Common Stock (as defined in the Agreement) without the approval of the Board of Directors.  This would protect the Company’s NOL asset because changes in ownership by a person owning less than 4.9% of

 

 

the Common Stock are not included in the calculation of “ownership change” for purposes of Section 382 of the Code.

 

Until the earlier to occur of (i) the tenth business day following a public announcement that a person or group of affiliated or associated persons has acquired beneficial ownership of 4.9% or more of the Common Stock (an “Acquiring Person”) or (ii) ten business days (or such later date as may be determined by action of the Board of Directors prior to such time as any person or group of affiliated persons becomes an Acquiring Person) following the commencement or announcement of an intention to make a tender offer or exchange offer the consummation of which would result in the beneficial ownership by a person or group of 4.9% or more of the Common Stock (the earlier of (i) and (ii) being called the “Distribution Date”), the Rights will be evidenced, with respect to any of the Common Stock certificates outstanding as of the Record Date, by such Common Stock certificate (or, with respect to any shares of Common Stock held in book entry form, by the notation in book entry) together with a copy of this Summary of Rights.  The Agreement provides that any person who beneficially owned 4.9% or more of the Common Stock on the date the Agreement was adopted, together with any affiliates and associates of that person (each an “Existing Holder”), shall not be deemed to be an “Acquiring Person” for purposes of the Agreement unless the Existing Holder becomes the beneficial owner of (x) a percentage of the Common Stock then outstanding that is more than the aggregate percentage of the outstanding Common Stock that such Existing Holder beneficially owns as of the date of the Agreement or (y) less than 4.9% of the Common Stock then outstanding (after which, if the Existing Holder becomes the beneficial owner of 4.9% or more of the Common Stock then outstanding, the Existing Holder shall be deemed to be an “Acquiring Person”).  The Agreement includes a procedure whereby the Board of Directors will consider requests to exempt certain proposed acquisitions of Common Stock from the applicable ownership trigger if the Board determines that the requested acquisition will not jeopardize or endanger the availability of the NOLs to the Company.

 

The Agreement provides that until the Distribution Date (or earlier redemption, exchange, termination or expiration of the Rights), the Rights will be transferred with and only with the Common Stock.  Until the Distribution Date (or earlier redemption, exchange, termination or expiration of the Rights), new Common Stock certificates issued after the close of business on the Record Date upon transfer or new issuance of the Common Stock will contain a notation incorporating the Agreement by reference, and the Company will deliver a notice to that effect upon the transfer or new issuance of book entry shares.  Until the Distribution Date (or earlier redemption, exchange, termination or expiration of the Rights), the surrender for transfer of any certificates for Common Stock or any book entry shares, with or without such notation, notice or a copy of this Summary of Rights, will also constitute the transfer of the Rights associated with the Common Stock represented by such certificate or the book entry shares.  As soon as practicable following the Distribution Date, separate certificates evidencing the Rights (“Right Certificates”) will be mailed to holders of record of the Common Stock as of the close of business on the Distribution Date and such separate Right Certificates alone will evidence the Rights.

 

The Rights are not exercisable until the Distribution Date.  The Rights will expire on July 27, 2018, subject to the Company’s right to extend such date (the “Final Expiration Date”), unless earlier redeemed or exchanged by the Company or terminated.

 

 

Each share of Preferred Stock purchasable upon exercise of the Rights will be entitled, when, as and if declared, to a minimum preferential quarterly dividend payment of the greater of (a) $1.00 per share, or (b) an aggregate dividend of 1,000 times the dividend, if any, declared per share of Common Stock.  In the event of liquidation, dissolution or winding up of the Company, the holders of the Preferred Stock will be entitled to a minimum preferential liquidation payment of $10 per share (plus any accrued but unpaid dividends), provided that such holders of the Preferred Stock will be entitled to an aggregate payment of 1,000 times the payment made per share of Common Stock.  Each share of Preferred Stock will have 1,000 votes and will vote together with the Common Stock.  Finally, in the event of any merger, consolidation or other transaction in which Common Stock are exchanged, each share of Preferred Stock will be entitled to receive 1,000 times the amount received per share of Common Stock.  Preferred Stock will not be redeemable.  These rights are protected by customary antidilution provisions.  Because of the nature of the Preferred Stock’s dividend, liquidation and voting rights, the value of one one-thousandth of a share of Preferred Stock purchasable upon exercise of each Right should approximate the value of one share of Common Stock.

 

The Purchase Price payable, and the number of shares of Preferred Stock or other securities or property issuable, upon exercise of the Rights are subject to adjustment from time to time to prevent dilution (i) in the event of a stock dividend on, or a subdivision, combination or reclassification of the Preferred Stock, (ii) upon the grant to holders of the Preferred Stock of certain rights or warrants to subscribe for or purchase Preferred Stock or convertible securities at less than the current market price of the Preferred Stock or (iii) upon the distribution to holders of the Preferred Stock of evidences of indebtedness, cash, securities or assets (excluding regular periodic cash dividends at a rate not in excess of 125% of the rate of the last regular periodic cash dividend theretofore paid or, in case regular periodic cash dividends have not theretofore been paid, at a rate not in excess of 50% of the average net income per share of the Company for the four quarters ended immediately prior to the payment of such dividend, or dividends payable in Preferred Stock (which dividends will be subject to the adjustment described in clause (i) above)) or of subscription rights or warrants (other than those referred to above).

 

In the event that a Person becomes an Acquiring Person or if the Company were the surviving corporation in a merger with an Acquiring Person or any affiliate or associate of an Acquiring Person and the Common Stock were not changed or exchanged, each holder of a Right, other than Rights that are or were acquired or beneficially owned by the Acquiring Person (which Rights will thereafter be void), will thereafter have the right to receive upon exercise that number of shares of Common Stock having a market value of two times the then current Purchase Price of the Right.

 

At any time after a Person becomes an Acquiring Person and prior to the earlier of one of the events described in the last sentence of the previous paragraph or the acquisition by such Acquiring Person of 50% or more of the outstanding Common Stock, the Board of Directors may cause the Company to exchange the Rights (other than Rights owned by an Acquiring Person which will have become void), in whole or in part, for Common Stock at an exchange rate per Right of the number of shares of Common Stock having an aggregate value equal to the difference between the value of the Common Stock issuable upon the exercise of a Right and the Purchase Price of a Right (subject to adjustment).

 

 

No adjustment in the Purchase Price will be required until cumulative adjustments require an adjustment of at least 1% in such Purchase Price.  No fractional Preferred Stock or Common Stock will be issued (other than fractions of Preferred Stock which are integral multiples of one one-thousandth of a share of Preferred Stock, which may, at the election of the Company, be evidenced by depository receipts), and in lieu thereof, a payment in cash will be made based on the market price of the Preferred Stock or Common Stock on the last trading date prior to the date of exercise.

 

The Rights may be redeemed in whole, but not in part, at a price of $0.01 per Right (the “Redemption Price”) by the Board of Directors at any time prior to the time that an Acquiring Person has become such.  The redemption of the Rights may be made effective at such time, on such basis and with such conditions as the Board of Directors in its sole discretion may establish.  Immediately upon any redemption of the Rights, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive the Redemption Price.

 

Until a Right is exercised, the holder thereof, as such, will have no rights as a stockholder of the Company beyond those as an existing stockholder, including, without limitation, the right to vote or to receive dividends.

 

Any of the provisions of the Agreement may be amended by the Board of Directors for so long as the Rights are then redeemable, and after the Rights are no longer redeemable, the Company may amend or supplement the Agreement in any manner that does not adversely affect the interests of the holders of the Rights (other than an Acquiring Person or an affiliate or associate of an Acquiring Person).

 

A copy of the Agreement has been filed with the Securities and Exchange Commission as an Exhibit to a Current Report on Form 8-K.  A copy of the Agreement is available free of charge from the Company.  This summary description of the Rights does not purport to be complete and is qualified in its entirety by reference to the Agreement, which is incorporated herein by reference.Exhibit 4.4

 

WARRANT AGREEMENT

 

THIS WARRANT AGREEMENT
(this “Agreement”), dated as of July 23, 2015, is by and between JM Global Holding Company, a Delaware
corporation (the “Company”), and Continental Stock Transfer & Trust Company, a New York corporation,
as warrant agent (the “Warrant Agent”) also referred to as the “Transfer Agent”).

     

WHEREAS, the Company has
entered into that certain Placement Unit Subscription Agreement dated May 4, 2015, with Zhong Hui Holding Limited (the “Sponsor”),
pursuant to which the Sponsor will purchase an aggregate of up to 268,750 Units (as defined below) (including up to 18,750 Units
in the event the Over-allotment Option (as defined below) is exercised in full) for an aggregate purchase price of up to $2,687,000
(the “Placement Units”), each Unit consisting of one share of Common Stock (as defined below) (the “Placement
Shares”) and one warrant to purchase one-half of one Placement Share (the “Placement Warrants”)
of the Company, bearing the legend set forth in Exhibit B hereto, to be sold to the Sponsor simultaneously with the closing
of the Offering (as defined below); and

         

WHEREAS, the Company
is engaged in an initial public offering (the “Offering”) of units of the Company’s equity securities,
each such unit comprised of one share of Common Stock and one-half of one Public Warrant (as defined below) (the “Public
Units”, and together with the Placement Units, the “Units”), and, in connection therewith,
has determined to issue and deliver up to (i) 5,750,000 Warrants (including up to 750,000 warrants that may be issuable upon the
exercise of a forty-five (45) day over-allotment option granted to the underwriters (the “Over-allotment
Option”)) to investors in the Offering (the “Public Warrants”) and (ii) 400,000 warrants
(underlying unit purchase options) (“Cantor Warrants” and, together with the Private Warrants and Public
Warrants, the “Warrants”) to Cantor Fitzgerald & Co. (“Cantor”). Each
Warrant entitles the holder thereof to purchase one-half of one share of common stock of the Company, par value $0.0001 per share
(“Common Stock”), for $5.75 per half share, subject to adjustment as described herein; and

 

WHEREAS, the Company has
filed with the Securities and Exchange Commission (the “Commission”) a registration statement on Form S-1,
No. 333-204995 (the “Registration Statement”) and prospectus (the “Prospectus”)
under the Securities Act of 1933, as amended (the “Securities Act”), with respect to the Public Units
and the Public Warrants and Common Stock included in the Public Units;

 

WHEREAS, the Company desires
the Warrant Agent to act on behalf of the Company, and the Warrant Agent is willing so to act, in connection with the issuance,
registration, transfer, exchange, redemption and exercise of the Warrants;

     

WHEREAS, the Company desires
to provide for the form and provisions of the Warrants, the terms upon which they shall be issued and exercised, and the respective
rights, duties, obligations and immunities of the Company, the Warrant Agent, and the holders of the Warrants; and

     

WHEREAS, all acts and
things have been done and performed which are necessary to make the Warrants, when executed on behalf of the Company and countersigned
by or on behalf of the Warrant Agent, as provided herein, the valid, binding and legal obligations of the Company, and to authorize
the execution and delivery of this Agreement.

 

NOW, THEREFORE, in consideration
of the mutual agreements herein contained, the parties hereto agree as follows:

 

1.        Appointment
of Warrant Agent. The Company hereby appoints the Warrant Agent to act as agent for the Company in connection with the Warrants,
and the Warrant Agent hereby accepts such appointment and agrees to perform the same in accordance with the terms and conditions
set forth in this Agreement.

 

    	

    	 

    

 

2.        Warrants.

 

2.1        Form
of Warrant. Each Warrant shall be issued in registered form only and shall be in substantially the form of  Exhibit A
hereto, the provisions of which are incorporated herein and shall be signed by, or bear the original or facsimile signature of,
the Chairman of the Board, President, Chief Executive Officer, Chief Financial Officer, Secretary or other principal officer of
the Company. In the event the person whose original or facsimile signature has been placed upon any Warrant shall have ceased to
serve in the capacity in which such person signed the Warrant before such Warrant is issued, it may be issued with the same effect
as if he or she had not ceased to be such at the date of issuance.

 

2.2         Effect
of Countersignature. Unless and until countersigned by the Warrant Agent pursuant to this Agreement, a Warrant shall be invalid
and of no effect and may not be exercised by the holder thereof.

 

2.3         Registration.

          

2.3.1        Warrant
Register. The Warrant Agent shall maintain books (the “Warrant Register”), for the registration of
original issuance and the registration of transfer of the Warrants. Upon the initial issuance of the Warrants, the Warrant Agent
shall issue and register the Warrants in the names of the respective holders thereof in such denominations and otherwise in accordance
with instructions delivered to the Warrant Agent by the Company.

 

2.3.2         Registered
Holder. Prior to due presentment for registration of transfer of any Warrant, the Company and the Warrant Agent may deem and
treat the person in whose name such Warrant is registered in the Warrant Register (the “Registered Holder”)
as the absolute owner of such Warrant and of each Warrant represented thereby (notwithstanding any notation of ownership or other
writing on the Warrant Certificate (as defined below) made by anyone other than the Company or the Warrant Agent), for the purpose
of any exercise thereof, and for all other purposes, and neither the Company nor the Warrant Agent shall be affected by any notice
to the contrary.

  

2.4        Detachability
of Warrants. The Common Stock and Public Warrants comprising the Public Units shall begin separate trading on the 52nd day
following the date of the Prospectus, or, if such 52nd day is not on a Business Day (as defined below), then on the immediately
succeeding Business Day following such date (the “Detachment Date” ), unless Cantor Fitzgerald
& Co., acting as representative of the Underwriters, informs the Company of its decision to allow earlier separate trading,
but in no event shall the Common Stock and the Public Warrants comprising the Units be separately traded until (A) the Company
has filed a Current Report on Form 8-K with the SEC that includes an audited balance sheet reflecting its receipt of the gross
proceeds of the Offering and (B) the Company issues a press release announcing when such separate trading shall begin; provided,
however, that, if the Over-allotment Option is exercised following the filing of the initial Current Report on Form 8-K, a second
or amended Current Report on Form 8-K shall be filed by the Company to provide updated financial information to reflect the exercise
of the Over-allotment Option. As used herein, “Business Day” shall mean any day other than a Saturday,
a Sunday or a legal holiday or a day on which banking institutions or trust companies are authorized or obligated by law to close
in New York City.

 

2.5         Warrant
Attributes.

 

2.5.1        Placement
Warrants. The Placement Warrants shall be identical to the Public Warrants, except that, so long as they are held by the Sponsor
or any of its Permitted Transferees (as defined below), the Placement Warrants: (i) may be exercised for cash or on a cashless
basis, pursuant to subsection 3.3.1(c) hereof, (ii) shall not be redeemable by the Company and (iii) may not be transferred,
assigned or sold until thirty (30) days after the completion by the Company of an initial Business Combination (as defined
below) except to a Permitted Transferee.  A “Permitted Transferee” is hereby defined as any transferee receiving
securities in the following transactions:

   

 (a)    to the Company’s officers, directors or
Sponsor (the “Initial Stockholders”);

 

(b)    to an affiliate or
immediate family member of any of the Company’s officers, directors and Initial Stockholders;

 

(c)    to any member,
officer or director of the Sponsor, or any immediate family member, partner, affiliate or employee of a member of the Sponsor;

 

    	2

    	 

    

  

(d)    by gift to any
permitted transferee under any of the immediately preceding subsections (a) through (c), a trust, the beneficiaries of which are
one or more permitted transferees under any of the immediately preceding subsections (a) through (c), or a charitable organization;

 

(e)    by
virtue of laws of descent and distribution upon death of any of the Company’s officers, directors, Initial Stockholders or
members of the Sponsor or Permitted Transferee;

 

(f)    pursuant
to a qualified domestic relations order;

 

(g)   by
private sales or transfers made in connection with the consummation of a business combination at prices no greater than the price
at which the Placement Warrants were originally purchased;

 

(h)   in
the event of the Company’s liquidation prior to consummation of its initial business combination;

 

(i)    by
virtue of the laws of the Republic of the Seychelles, the Sponsor’s memorandum and articles of association upon dissolution
of the Sponsor;

 

(j)    subsequent
to the Company’s initial business combination, upon and in connection with a liquidation, merger, stock exchange or other
similar transaction which results in all of the Company’s stockholders having the right to exchange their shares of Common
Stock for cash, securities or other property or; or

 

(k)   subsequent
to the Company’s initial business combination, in the event of a consolidation merger, stock exchange or similar transaction
in which the Company is the surviving entity that results in a change in the majority of the Company’s board of directors
or management team;

 

provided, however, that
in the case of clauses (a) through (g) these Permitted Transferees must enter into a written agreement agreeing to be bound by
the restrictions on transfer in this Agreement.

 

2.6       Cantor Warrants. Unless
otherwise provided in this Agreement, the Cantor Warrants shall have the same terms and be in the same form as the Public Warrants.

 

3.        Terms
and Exercise of Warrants.

 

3.1        Warrant
Price. Each Warrant shall, when countersigned by the Warrant Agent, entitle the Registered Holder thereof, subject to the provisions
of such Warrant and of this Agreement, to purchase from the Company the number of shares of Common Stock stated therein, at the
price of $5.75 per half share, subject to the adjustments provided in Section 4 hereof and in the last sentence of this Section 3.1.
The term “Warrant Price” as used in this Agreement shall mean the price per share at which a share of
Common Stock may be purchased pursuant to the Warrant at the time such Warrant is exercised. The Company in its sole discretion
may reduce the Warrant Price at any time prior to the Expiration Date (as defined below) for a period of not less than twenty (20) Business
Days, by providing at least twenty (20) days prior written notice of such reduction to each Registered Holder. Any such reduction
shall be identical among all of the Warrants.

 

3.2         Duration
of Warrants. A Warrant may be exercised only during the period (the “Exercise Period”) commencing
on the later of: (a)  thirty (30) days after the first date on which the Company consummates an acquisition, through
a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or
more businesses (a “Business Combination”), or (b)  twelve (12) months from the date of the
completion of the Offering (excluding any exercise of the underwriters’ over-allotment option), and terminating at 5:00
p.m., New York City time, on the earlier of (x) five (5) years after the date on which the Company consummates its initial
Business Combination, (y) the liquidation of the Company or, if the Company fails to consummate a Business Combination, 24
months from the date of completion of the Offering (excluding any exercise of the underwriters’ over-allotment option),
or (z)  with respect to all the Warrants except the Placement Warrants, the Redemption Date (as defined below) (the “Expiration
Date”); provided, however, that the exercise of any Warrant shall be subject to the restrictions on exercise
set forth in subsection 3.3.2 . Each Warrant not exercised on or before the Expiration Date shall become void, and all rights
thereunder and all rights in respect thereof under this Agreement shall cease, at 5:00 p.m. New York City time on the Expiration
Date with the exception of rights of holders of Warrants (except for Placement Warrants) to receive the Redemption Price (as defined
below) upon a redemption in accordance with Section 6. The Company in its sole discretion may extend the term of the Warrants
by providing at least twenty (20) days prior written notice of any such extension, including the new Expiration Date, to
each Registered Holder. Any such extension shall be identical in duration among the Warrants.

 

    	3

    	 

    

 

3.3        Exercise
of Warrants.

 

3.3.1        Payment.
Subject to the provisions of the Warrant and this Agreement, a Warrant, when countersigned by the Warrant Agent, may be exercised
by the Registered Holder thereof by surrendering it at the office of the Warrant Agent in the Borough of Manhattan, City and State
of New York, or at the office of its successor as Warrant Agent, with the subscription form, as set forth in the Warrant, duly
executed, and paying in full the Warrant Price for each full share of Common Stock as to which the Warrant is exercised and any
and all applicable taxes due in connection with the exercise of the Warrant, the exchange of the Warrant for the shares of Common
Stock and the issuance of such shares of Common Stock, as follows:

 

(a)   by
wire transfer of immediately available funds in good certified check or good bank draft payable to the order of the Warrant Agent;

 

(b)   upon
a redemption pursuant to Section 6 hereof in which the Company’s board of directors (the “Board”)
has elected to require all holders of the Warrants to exercise such Warrants on a “cashless basis,” by surrendering
the Warrant for that number of shares of Common Stock equal to the quotient obtained by dividing (x) the product of the number
of shares of Common Stock underlying the Warrant, multiplied by the difference between the Warrant Price and the “Fair Market
Value” (as defined in this subsection 3.3.1(b)) by (y) the Fair Market Value. Solely for purposes of this subsection
3.3.1(b) and Section 6.3, “Fair Market Value” shall mean the average reported last sale price of the shares of
Common Stock for the ten (10) trading day period ending on the third trading day prior to the date on which the notice of
redemption is sent to the holders of the Warrants;

 

(c)   with
respect to any Placement Warrant exercised on a “cashless basis,” so long as such Placement Warrant is held by the
Sponsor or its Permitted Transferees, by surrendering the Warrants for that number of shares of Common Stock equal to the quotient
obtained by dividing (x) the product of the number of shares of Common Stock underlying the Warrants, multiplied by the difference
between the Warrant Price and the “Fair Market Value”, as defined in this subsection 3.3.1(c), by (y) the Fair
Market Value. Solely for purposes of this subsection 3.3.1(c), the “Fair Market Value” shall mean the average last
sale price of the Common Stock for the ten (10) trading day period ending on the third trading day prior to the date on which
notice of exercise of the Warrant is sent to the Warrant Agent;

 

(d)   as
provided in Section 7.4 hereof.

 

3.3.2        Issuance
of Shares of Common Stock on Exercise. As soon as practicable after the exercise of any Warrant and the clearance of the funds
in payment of the Warrant Price (if payment is pursuant to subsection 3.3.1(a)), the Company shall issue to the Registered Holder
of such Warrant a certificate or certificates for the number of full shares of Common Stock to which he, she or it is entitled,
registered in such name or names as may be directed by him, her or it, and if such Warrant shall not have been exercised in full,
a new countersigned Warrant for the number of shares as to which such Warrant shall not have been exercised. Subject to and except
as set forth in Section 7.4, no Warrant shall be exercisable and the Company shall not be obligated to settle a Warrant exercise
or issue Common Stock upon exercise of a Warrant unless a registration statement under the Securities Act with respect to the Common
Stock underlying the Public Warrants is then effective and a prospectus relating thereto is current and the Common Stock issuable
upon such Warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence
of the Registered Holder of the Warrants. In the event that the conditions in the immediately preceding sentence are not satisfied
with respect to a Warrant, the holder of such Warrant shall not be entitled to exercise such Warrant and such Warrant may have
no value and expire worthless, in which case the purchaser of a Unit containing such Public Warrants shall have paid the full purchase
price for the Unit solely for the shares of Common Stock underlying such Unit. Subject to Section 4.6 of this Agreement,
a Registered Holder of Warrants may exercise its Warrants only for a whole number of shares of Common Stock (i.e., only an even
number of Warrants may be exercised at any given time by a Registered Holder). In no event will the Company be required to net
cash settle the Warrant exercise. The Company may require holders of Public Warrants to settle the Warrant on a “cashless
basis” pursuant to Section 7.4. If, by reason of any exercise of warrants on a “cashless basis”, the holder
of any Warrant would be entitled, upon the exercise of such Warrant, to receive a fractional interest in a share, the Company shall
round down to the nearest whole number, the number of shares to be issued to such holder.

 

    	4

    	 

    

 

3.3.3        Valid
Issuance. All Common Stock issued upon the proper exercise of a Warrant in conformity with this Agreement shall be validly
issued, fully paid and nonassessable.

 

3.3.4        Date
of Issuance. Each person in whose name any certificate for Common Stock is issued shall for all purposes be deemed to have
become the holder of record of such Common Stock on the date on which the Warrant was surrendered and payment of the Warrant Price
was made, irrespective of the date of delivery of such certificate, except that, if the date of such surrender and payment is a
date when the share transfer books of the Company are closed, such person shall be deemed to have become the holder of such shares
at the close of business on the next succeeding date on which the share transfer books are open.

 

3.3.5        Maximum
Percentage. A holder of a Warrant may notify the Company in writing if it elects to be subject to the provisions contained
in this subsection 3.3.5; provided, however, that no holder of a Warrant shall be subject to this subsection 3.3.5 unless he, she
or it makes such election. If the election is made by a holder, the Warrant Agent shall not effect the exercise of the holder’s
Warrant, and such holder shall not have the right to exercise such Warrant, to the extent that after giving effect to such exercise,
such person (together with such person’s affiliates), to the Warrant Agent’s actual knowledge, would beneficially own
in excess of 9.8% (the “Maximum Percentage”) of the Common Stock outstanding immediately after giving
effect to such exercise. For purposes of the foregoing sentence, the aggregate number of shares of Common Stock beneficially owned
by such person and its affiliates shall include the number of shares of Common Stock issuable upon exercise of the Warrant with
respect to which the determination of such sentence is being made, but shall exclude Common Stock that would be issuable upon (x) exercise
of the remaining, unexercised portion of the Warrant beneficially owned by such person and its affiliates and (y) exercise
or conversion of the unexercised or unconverted portion of any other securities of the Company beneficially owned by such person
and its affiliates (including, without limitation, any convertible notes or convertible preferred stock or warrants) subject to
a limitation on conversion or exercise analogous to the limitation contained herein. Except as set forth in the preceding sentence,
for purposes of this paragraph, beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”). For purposes of the Warrant, in determining the number
of outstanding shares of Common Stock, the holder may rely on the number of outstanding shares of Common Stock as reflected in
(1) the Company’s most recent annual report on Form 10-K, quarterly report on Form 10-Q, current report on Form 8-K or other
public filing with the Commission as the case may be, (2) a more recent public announcement by the Company, or (3) any other
notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. For any reason at any
time, upon the written request of the holder of the Warrant, the Company shall, within two (2) Business Days, confirm orally
and in writing to such holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares
of Common Stock shall be determined after giving effect to the conversion or exercise of equity securities of the Company by the
holder and its affiliates since the date as of which such number of outstanding shares of Common Stock was reported. By written
notice to the Company, the holder of a Warrant may from time to time increase or decrease the Maximum Percentage applicable to
such holder to any other percentage specified in such notice; provided, however, that any such increase shall not be effective
until the sixty-first (61st) day after such notice is delivered to the Company.

 

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4.        Adjustments.

 

4.1        Stock
Dividends.

 

4.1.1        Split-Ups.
If after the date hereof, and subject to the provisions of Section 4.6 below, the number of outstanding shares of Common Stock
is increased by a stock dividend payable in Common Stock, or by a split-up of the Common Stock or other similar event, then, on
the effective date of such stock dividend, split-up or similar event, the number of shares of Common Stock issuable on exercise
of each Warrant shall be increased in proportion to such increase in the outstanding shares of Common Stock. A rights offering
to holders of the Common Stock entitling holders to purchase Common Stock at a price less than the “Fair Market Value”
(as defined below) shall be deemed a stock dividend of a number of shares of Common Stock equal to the product of (i) the
number of shares of Common Stock actually sold in such rights offering (or issuable under any other equity securities sold in such
rights offering that are convertible into or exercisable for the Common Stock) multiplied by (ii) one (1) minus the quotient
of (x) the price per share of Common Stock paid in such rights offering divided by (y) the Fair Market Value. For purposes
of this subsection 4.1.1, (i) if the rights offering is for securities convertible into or exercisable for Common Stock, in
the determination of the price payable for Common Stock shall take into account any consideration received for such rights, as
well as any additional amount payable upon exercise or conversion and (ii) “Fair Market Value” means, for purposes
of this subsection 4.1.1 only, the volume weighted average price of the Common Stock as reported during the ten (10) trading
day period ending on the trading day prior to the first date on which the Common Stock trades on the applicable exchange or in
the applicable market, regular way, without the right to receive such rights.

  

4.1.2        Extraordinary
Dividends. If at any time while the Warrants are outstanding and unexpired, the Company shall pay a dividend or make a distribution
in cash, securities or other assets to the holders of the Common Stock on account of such Common Stock (or other shares of the
Company’s capital stock into which the Warrants are convertible), other than (a) as described in subsection 4.1.1 above,
(b) Ordinary Cash Dividends (as defined below), (c) to satisfy the redemption rights of the holders of the Common Stock
in connection with a proposed initial Business Combination, (d) as a result of the repurchase of Common Stock by the Company
if a proposed initial Business Combination is presented to the stockholders of the Company for approval or (e) in connection
with the Company’s liquidation and the distribution of its assets upon its failure to consummate a Business Combination (any
such non-excluded event being referred to herein as an (“Extraordinary Dividend”), then the Warrant Price
shall be decreased, effective immediately after the effective date of such Extraordinary Dividend, by the amount of cash and/or
the fair market value (as determined by the Board, in good faith) of any securities or other assets paid on each share of Common
Stock in respect of such Extraordinary Dividend. For purposes of this subsection 4.1.2, “Ordinary Cash Dividends”
means any cash dividend or cash distribution which, when combined on a per share basis, with the per share amounts of all other
cash dividends and cash distributions paid on the Common Stock during the 365-day period ending on the date of declaration of such
dividend or distribution (as adjusted to appropriately reflect any of the events referred to in other subsections of this Section 4
and excluding cash dividends or cash distributions that resulted in an adjustment to the Warrant Price or to the number of shares
of Common Stock issuable on exercise of each Warrant) does not exceed $0.50 (being 5% of the offering price of the Units in the
Offering).

 

4.2        Aggregation
of Shares. If at any time while the Warrants are outstanding and unexpired, , subject to the provisions of Section 4.6
hereof, the number of outstanding shares of Common Stock is decreased by a consolidation, combination, reverse stock split or reclassification
of Common Stock or other similar event, then, on the effective date of such consolidation, combination, reverse stock split, reclassification
or similar event, the number of shares of Common Stock issuable on exercise of each Warrant shall be decreased in proportion to
such decrease in outstanding shares of Common Stock.

 

4.3        Adjustments
in Exercise Price. Whenever the number of shares of Common Stock issuable upon the exercise of the Warrants is adjusted, as
provided in subsection 4.1.1 or 4.2 above, the Warrant Price shall be adjusted (to the nearest cent) by multiplying such Warrant
Price immediately prior to such adjustment by a fraction (x) the numerator of which shall be the number of shares of Common
Stock issuable upon the exercise of the Warrants immediately prior to such adjustment, and (y) the denominator of which shall
be the number of shares of Common Stock so issuable immediately thereafter.

  

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4.4        Replacement
of Securities upon Reorganization, etc. In the event of (a) any reclassification or reorganization of the outstanding Common
Stock (other than a change under subsections 4.1.1 or 4.1.2 or Section 4.2 hereof or that solely affects the par value of
such Common Stock), (b) any merger or consolidation of the Company with or into another corporation (other than a consolidation
or merger in which the Company is the continuing corporation and that does not result in any reclassification or reorganization
of the outstanding Common Stock) or (c) the sale or conveyance of all or substantially all of the Company’s assets in one
transaction or a series of related transactions in connection with which the Company is dissolved, the holders of the Warrants
shall thereafter have the right to purchase and receive, upon the basis and upon the terms and conditions specified in the Warrants
and in lieu of the Common Stock of the Company immediately theretofore purchasable and receivable upon the exercise of the rights
represented thereby, the kind and amount of shares of stock or other securities or property (including cash) receivable upon such
reclassification, reorganization, merger or consolidation, or upon a dissolution following any such sale or transfer, that the
holder of the Warrants would have received if such holder had exercised his, her or its Warrant(s) immediately prior to such event
(the “Alternative Issuance”); provided, however, that (i) if the holders of the Common Stock were
entitled to exercise a right of election as to the kind or amount of securities, cash or other assets receivable upon such consolidation
or merger, then the kind and amount of securities, cash or other assets constituting the Alternative Issuance for which each Warrant
shall become exercisable shall be deemed to be the weighted average of the kind and amount received per share by the holders of
the Common Stock in such consolidation or merger that affirmatively make such election, and (ii) if a tender, exchange or
redemption offer shall have been made to, and accepted by, the holders of the Common Stock (other than a tender, exchange or redemption
offer made by the Company in connection with redemption rights held by stockholders of the Company as provided for in the Company’s
amended and restated certificate of incorporation or as a result of the repurchase of Common Stock by the Company if a proposed
initial Business Combination is presented to the stockholders of the Company for approval) under circumstances in which, upon completion
of such tender or exchange offer, the maker thereof, together with members of any group (within the meaning of Rule 13d-5(b)(1)
under the Exchange Act) of which such maker is a part, and together with any affiliate or associate of such maker (within the meaning
of Rule 12b-2 under the Exchange Act) and any members of any such group of which any such affiliate or associate is a part,
own beneficially (within the meaning of Rule 13d-3 under the Exchange Act) more than 50% of the outstanding Common Stock,
the holder of a Warrant shall be entitled to receive as the Alternative Issuance, the highest amount of cash, securities or other
property to which such holder would actually have been entitled as a stockholder if such Warrant holder had exercised the Warrant
prior to the expiration of such tender or exchange offer, accepted such offer and all of the Common Stock held by such holder had
been purchased pursuant to such tender or exchange offer, subject to adjustments (from and after the consummation of such tender
or exchange offer) as nearly equivalent as possible to the adjustments provided for in this  Section 4; provided
further, however, that if less than 70% of the consideration receivable by the holders of the Common Stock in the applicable event
is payable in the form of common stock in the successor entity that is listed for trading on a national securities exchange or
is quoted in an established over-the-counter market, or is to be so listed for trading or quoted immediately following such event,
and if the Registered Holder properly exercises the Warrant within thirty (30) days following the public disclosure of the consummation
of such applicable event by the Company pursuant to a Current Report on Form 8-K filed with the SEC, the Warrant Price shall be
reduced by an amount (in dollars) equal to the difference of (i) the Warrant Price in effect prior to such reduction minus (ii)
(A) the Per Share Consideration (as defined below) (but in no event less than zero) minus (B) the Black-Scholes Warrant Value (as
defined below). The “Black-Scholes Warrant Value” means the value of a Warrant immediately prior to the
consummation of the applicable event based on the Black-Scholes Warrant Model for a Capped American Call on Bloomberg Financial
Markets (“Bloomberg”). For purposes of calculating such amount, (1) Section 6 of this Agreement
shall be taken into account, (2) the price of each share of Common Stock shall be the volume weighted average price of the Common
Stock as reported during the ten (10) trading day period ending on the trading day prior to the effective date of the applicable
event, (3) the assumed volatility shall be the 90 day volatility obtained from the HVT function on Bloomberg determined as of the
trading day immediately prior to the day of the announcement of the applicable event, and (4) the assumed risk-free interest rate
shall correspond to the U.S. Treasury rate for a period equal to the remaining term of the Warrant. “Per Share
Consideration” means (i) if the consideration paid to holders of the Common Stock consists exclusively of cash, the
amount of such cash per share of Common Stock, and (ii) in all other cases, the volume weighted average price of the Common Stock
as reported during the ten (10) trading day period ending on the trading day prior to the effective date of the applicable event.
If any reclassification or reorganization also results in a change in shares of Common Stock covered by subsection 4.1.1,
then such adjustment shall be made pursuant to subsection 4.1.1 or Sections 4.2, 4.3 and this Section
4.4. The provisions of this Section 4.4 shall similarly apply to successive reclassifications, reorganizations, mergers
or consolidations, sales or other transfers.

 

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4.5        Notices
of Changes in Warrant. Upon every adjustment of the Warrant Price or the number of shares issuable upon exercise of a Warrant,
the Company shall give written notice thereof to the Warrant Agent, which notice shall state the Warrant Price resulting from such
adjustment and the increase or decrease, if any, in the number of shares purchasable at such price upon the exercise of a Warrant,
setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. Upon the occurrence
of any event specified in Sections 4.1, 4.2, 4.3 or 4.4, the Company shall give written notice of the occurrence of such event
to each holder of a Warrant, at the last address set forth for such holder in the Warrant Register, of the record date or the effective
date of the event. Failure to give such notice, or any defect therein, shall not affect the legality or validity of such event.

 

4.6        No
Fractional Shares. Notwithstanding any provision contained in this Agreement to the contrary, the Company shall not issue fractional
shares upon exercise of Warrants. If, by reason of any adjustment made pursuant to this Section 4, the holder of any Warrant
would be entitled, upon the exercise of such Warrant, to receive a fractional interest in a share, the Company shall, upon such
exercise, round down to the nearest whole number, the number of the shares of Common Stock to be issued to such holder.

  

4.7        Form
of Warrant. The form of Warrant need not be changed because of any adjustment pursuant to this  Section 4, and
Warrants issued after such adjustment may state the same Warrant Price and the same number of shares as is stated in the Warrants
initially issued pursuant to this Agreement; provided, however, that the Company may at any time in its sole discretion make any
change in the form of Warrant that the Company may deem appropriate and that does not affect the substance thereof, and any Warrant
thereafter issued or countersigned, whether in exchange or substitution for an outstanding Warrant or otherwise, may be in the
form as so changed.

 

4.8        Other
Events. In case any event shall occur affecting the Company as to which none of the provisions of preceding subsections of
this Section 4 are strictly applicable, but which would require an adjustment to the terms of the Warrants in order to (i) avoid
an adverse impact on the Warrants and (ii) effectuate the intent and purpose of this Section 4, then, in each such case,
the Company shall appoint a firm of independent public accountants, or an investment banking or other appraisal firm of recognized
national standing, which shall give its opinion as to whether or not any adjustment to the rights represented by the Warrants is
necessary to effectuate the intent and purpose of this Section 4 and, if they determine that an adjustment is necessary, the
terms of such adjustment; provided, however, that the Warrants shall not be adjusted pursuant to this Section 4 as a result of
any issuance of securities in connection with an initial Business Combination. The Company shall adjust the terms of the Warrants
in a manner that is consistent with any adjustment recommended in such opinion.

 

5.        Transfer
and Exchange of Warrants.

     

5.1        Registration
of Transfer. The Warrant Agent shall register the transfer, from time to time, of any outstanding Warrant upon the Warrant
Register, upon surrender of such Warrant for transfer, properly endorsed with signatures properly guaranteed and accompanied by
appropriate instructions for transfer. Upon any such transfer, a new Warrant representing an equal aggregate number of Warrants
shall be issued and the old Warrant shall be cancelled by the Warrant Agent. The Warrants so cancelled shall be delivered by the
Warrant Agent to the Company from time to time upon request.

 

5.2        Procedure
for Surrender of Warrants. Warrants may be surrendered to the Warrant Agent, together with a written request for exchange or
transfer, and thereupon the Warrant Agent shall issue in exchange therefor one or more new Warrants as requested by the Registered
Holder of the Warrants so surrendered, representing an equal aggregate number of Warrants; provided, however, that, if a Warrant
surrendered for transfer bears a restrictive legend (as in the case of the Placement Warrants), the Warrant Agent shall not cancel
such Warrant and issue new Warrants in exchange thereof until the Warrant Agent has received an opinion of counsel for the Company
stating that such transfer may be made and indicating whether the new Warrants must also bear a restrictive legend.

 

5.3        Fractional
Warrants. The Warrant Agent shall not be required to effect any registration of transfer or exchange which shall result in
the issuance of a warrant certificate for a fraction of a warrant.

 

5.4        Service
Charges. No service charge shall be made for any exchange or registration of transfer of Warrants.

 

5.5        Warrant
Execution and Countersignature. The Warrant Agent is hereby authorized to countersign and to deliver, in accordance with the
terms of this Agreement, the Warrants required to be issued pursuant to the provisions of this Section 5, and the Company,
whenever required by the Warrant Agent, shall supply the Warrant Agent with Warrants duly executed on behalf of the Company for
such purpose.

 

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5.6        Transfer
of Warrants. Prior to the Detachment Date, the Public Warrants may be transferred or exchanged only together with the Unit
in which such Warrant is included, and only for the purpose of effecting, or in conjunction with, a transfer or exchange of such
Unit. Furthermore, each transfer of a Unit on the register relating to such Units shall operate also to transfer the Warrants included
in such Unit. Notwithstanding the foregoing, the provisions of this Section 5.6 shall have no effect on any transfer of Warrants
on and after the Detachment Date.

   

6.        Redemption.

 

6.1        Redemption.
Subject to Section 6.4 hereof, not less than all of the outstanding Warrants may be redeemed at the option of the Company,
at any time while they are exercisable and prior to their expiration, at the office of the Warrant Agent, upon notice to the Registered
Holders of the Warrants, as described in Section 6.2 below, at a price of $0.01 per Warrant (the “Redemption Price”);
provided, that the last sales price of the Common Stock (or the closing bid price of the Common Stock if shares of the Common Stock
are not traded on any specific trading day) reported has been at least $24.00 per share (subject to adjustment in compliance with
Section 4 hereof), on each of twenty (20) trading days within the thirty (30) trading-day period ending on the third
Business Day prior to the date on which notice of the redemption is given; and, provided further that there is an effective registration
statement covering the Common Stock issuable upon exercise of the Warrants, and a current prospectus relating thereto, available
throughout the 30-day Redemption Period (as defined in Section 6.2 below) or the Company has elected to require the exercise
of the Warrants on a “cashless basis” pursuant to subsection 3.3.1.

 

6.2        Date
Fixed for, and Notice of, Redemption. In the event that the Company elects to redeem all of the Warrants, the Company shall
fix a date for the redemption (the “Redemption Date”). Notice of redemption shall be mailed by first
class mail, postage prepaid, by the Company not less than thirty (30) days prior to the Redemption Date (such 30-day period,
the “Redemption Period”) to the Registered Holders of the Warrants to be redeemed at their last addresses
as they shall appear on the registration books. Any notice mailed in the manner herein provided shall be conclusively presumed
to have been duly given whether or not the Registered Holder received such notice.

 

6.3        Exercises
After Notice of Redemption. The Warrants may be exercised for cash (or on a “cashless basis” in accordance with
subsection 3.3.1(b)) at any time after notice of redemption shall have been given by the Company pursuant to Section 6.2 hereof
and prior to the Redemption Date. In the event that the Company determines to require all holders of Warrants to exercise their
Warrants on a “cashless basis” pursuant to subsection 3.3.1, the notice of redemption shall contain the information
necessary to calculate the number of shares of Common Stock to be received upon exercise of the Warrants, including the “Fair
Market Value” (as such term is defined in subsection 3.3.1(b)) in such case. On and after the Redemption Date, the record
holder of the Warrants shall have no further rights except to receive, upon surrender of the Warrants, the Redemption Price.

 

6.4        Exclusion
of Placement Warrants. The Company agrees that the redemption rights provided in this Section 6 shall not apply to the
Placement Warrants if at the time of the redemption such Placement Warrants continue to be held by the Sponsor or its Permitted
Transferees; provided, however, that once such Placement Warrants are transferred (other than to Permitted Transferees under subsection
2.5), the Company may redeem the Placement Warrants, provided that the criteria for redemption are met, including the opportunity
of the holder of such Placement Warrants to exercise the Placement Warrants prior to redemption pursuant to Section 6.3. Placement
Warrants that are transferred to persons other than Permitted Transferees shall upon such transfer cease to be Placement Warrants
and shall become Public Warrants under this Agreement. The provisions of this Section 6.4 may not be modified, amended or deleted
without the prior written consent of Cantor.

 

7.        Other
Provisions Relating to Rights of Holders of Warrants.

     

7.1        No
Rights as Stockholder. A Warrant does not entitle the Registered Holder thereof to any of the rights of a stockholder of the
Company, including, without limitation, the right to receive dividends, or other distributions, exercise any preemptive rights
to vote or to consent or to receive notice as stockholders in respect of the meetings of stockholders or the election of directors
of the Company or any other matter.

 

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7.2        Lost,
Stolen, Mutilated, or Destroyed Warrants. If any Warrant is lost, stolen, mutilated, or destroyed, the Company and the Warrant
Agent may on such terms as to indemnity or otherwise as they may in their discretion impose (which shall, in the case of a mutilated
Warrant, include the surrender thereof), issue a new Warrant of like denomination, tenor, and date as the Warrant so lost, stolen,
mutilated, or destroyed. Any such new Warrant shall constitute a substitute contractual obligation of the Company, whether or not
the allegedly lost, stolen, mutilated, or destroyed Warrant shall be at any time enforceable by anyone.

 

7.3        Reservation
of Common Stock. The Company shall at all times reserve and keep available a number of its authorized but unissued Common Stock
that shall be sufficient to permit the exercise in full of all outstanding Warrants issued pursuant to this Agreement.

 

7.4        Registration
of Common Stock; Cashless Exercise at Company’s Option.

 

7.4.1        Registration
of Common Stock. The Company agrees that as soon as practicable, but in no event later than thirty (30) Business Days
after the closing of its initial Business Combination, it shall use its best efforts to file with the Commission a post-effective
amendment to the Registration Statement, or a new registration statement, for the registration, under the Securities Act, of the
Common Stock issuable upon exercise of the Warrants, and it shall use its best efforts to take such action as is necessary to
register or qualify for sale, in those states in which the Warrants were initially offered by the Company, the Common Stock issuable
upon exercise of the Warrants, to the extent an exemption is not available. The Company shall use its best efforts to cause the
same to become effective and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto,
until the expiration of the Warrants in accordance with the provisions of this Agreement. If any such post-effective amendment
or registration statement has not been declared effective by the ninetieth (90th) Business Day following the closing of the Business
Combination, holders of the Warrants shall have the right, during the period beginning on the ninety-first (91st) Business Day
after the closing of the Business Combination and ending upon such post-effective amendment or registration statement being declared
effective by the Commission, and during any other period when the Company shall fail to have maintained an effective registration
statement covering the Common Stock issuable upon exercise of the Warrants, to exercise such Warrants on a “cashless basis,”
by exchanging the Warrants (in accordance with Section 3(a)(9) of the Securities Act or another exemption) for that number
of shares of Common Stock equal to the quotient obtained by dividing (x) the product of the number of shares of Common Stock
underlying the Warrants, multiplied by the difference between the Warrant Price and the “Fair Market Value” (as defined
below) by (y) the Fair Market Value . Solely for purposes of this Section 7.4, “Fair Market Value” shall
mean the volume weighted average price of the Common Stock as reported during the ten (10) trading day period ending on the
trading day prior to the date that notice of exercise is received by the Warrant Agent from the holder of such Warrants or its
securities broker or intermediary. The date that notice of cashless exercise is received by the Warrant Agent shall be conclusively
determined by the Warrant Agent. In connection with the “cashless exercise” of a Public Warrant, the Company shall,
upon request, provide the Warrant Agent with an opinion of counsel for the Company (which shall be an outside law firm with securities
law experience) stating that (i) the exercise of the Warrants on a cashless basis in accordance with this Section 7.4
is not required to be registered under the Securities Act and (ii) the Common Stock issued upon such exercise shall be freely
tradable under United States federal securities laws by anyone who is not an affiliate (as such term is defined in Rule 144
under the Securities Act) of the Company and, accordingly, shall not be required to bear a restrictive legend. For the avoidance
of any doubt, unless and until all of the Warrants have been exercised, the Company shall continue to be obligated to comply with
its registration obligations under the first three sentences of this Section 7.4.1.

 

7.4.1        Cashless
Exercise at Company’s Option. If the Common Stock is at the time of any exercise of a Warrant not listed on a national
securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities
Act, the Company may, at its option, (i) require holders of Public Warrants who exercise Public Warrants to exercise such Public
Warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act as described in subsection
7.4.1 and (ii) in the event the Company so elects, the Company shall not be required to file or maintain in effect a registration
statement for the registration, under the Securities Act, of the Common Stock issuable upon exercise of the Warrants, notwithstanding
anything in this Agreement to the contrary. If the Company does not elect at the time of exercise to require a holder of Public
Warrants who exercises Public Warrants to exercise such Public Warrants on a “cashless basis,” it agrees to use its
best efforts to register or qualify for sale the Common Stock issuable upon exercise of the Public Warrant under the blue sky laws
of the state of residence (in those states in which the Warrants were initially offered by the Company) of the exercising Public
Warrant holder to the extent an exemption is not available

 

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8.        Concerning
the Warrant Agent and Other Matters.

 

8.1        Payment
of Taxes. The Company shall from time to time promptly pay all taxes and charges that may be imposed upon the Company or the
Warrant Agent in respect of the issuance or delivery of Common Stock upon the exercise of the Warrants, but the Company shall not
be obligated to pay any transfer taxes in respect of the Warrants or such shares.

 

8.2        Resignation,
Consolidation, or Merger of Warrant Agent.

  

8.2.1        Appointment
of Successor Warrant Agent. The Warrant Agent, or any successor to it hereafter appointed, may resign its duties and be discharged
from all further duties and liabilities hereunder after giving sixty (60) days’ notice in writing to the Company. If
the office of the Warrant Agent becomes vacant by resignation or incapacity to act or otherwise, the Company shall appoint in writing
a successor Warrant Agent in place of the Warrant Agent. If the Company shall fail to make such appointment within a period of
thirty (30) days after it has been notified in writing of such resignation or incapacity by the Warrant Agent or by the holder
of a Warrant (who shall, with such notice, submit his Warrant for inspection by the Company), then the holder of any Warrant may
apply to the Supreme Court of the State of New York for the County of New York for the appointment of a successor Warrant Agent
at the Company’s cost. Any successor Warrant Agent, whether appointed by the Company or by such court, shall be a corporation
organized and existing under the laws of the State of New York, in good standing and having its principal office in the Borough
of Manhattan, City and State of New York, and authorized under such laws to exercise corporate trust powers and subject to supervision
or examination by federal or state authority. After appointment, any successor Warrant Agent shall be vested with all the authority,
powers, rights, immunities, duties, and obligations of its predecessor Warrant Agent with like effect as if originally named as
Warrant Agent hereunder, without any further act or deed; but if for any reason it becomes necessary or appropriate, the predecessor
Warrant Agent shall execute and deliver, at the expense of the Company, an instrument transferring to such successor Warrant Agent
all the authority, powers, and rights of such predecessor Warrant Agent hereunder; and upon request of any successor Warrant Agent
the Company shall make, execute, acknowledge, and deliver any and all instruments in writing for more fully and effectually vesting
in and confirming to such successor Warrant Agent all such authority, powers, rights, immunities, duties, and obligations.

 

8.2.2        Notice
of Successor Warrant Agent. In the event a successor Warrant Agent shall be appointed, the Company shall give notice thereof
to the predecessor Warrant Agent and the Transfer Agent for the Common Stock not later than the effective date of any such appointment.

 

8.2.3        Merger
or Consolidation of Warrant Agent. Any corporation into which the Warrant Agent may be merged or with which it may be consolidated
or any corporation resulting from any merger or consolidation to which the Warrant Agent shall be a party shall be the successor
Warrant Agent under this Agreement without any further act.

  

8.3        Fees
and Expenses of Warrant Agent.

 

8.3.1        Remuneration.
The Company agrees to pay the Warrant Agent reasonable remuneration for its services as such Warrant Agent hereunder and shall,
pursuant to its obligations under this Agreement, reimburse the Warrant Agent upon demand for all expenditures that the Warrant
Agent may reasonably incur in the execution of its duties hereunder.

 

8.3.2        Further
Assurances. The Company agrees to 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 Warrant Agent
for the carrying out or performing of the provisions of this Agreement.

 

    	11

    	 

    

 

8.4        Liability
of Warrant Agent.

 

8.4.1        Reliance
on Company Statement. Whenever in the performance of its duties under this Agreement, the Warrant Agent shall deem it necessary
or desirable that any fact or matter be proved or established by the Company prior to taking or suffering any action hereunder,
such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively
proved and established by a statement signed by the President, Chief Executive Officer or Chairman of the Board of the Company
and delivered to the Warrant Agent. The Warrant Agent may rely upon such statement for any action taken or suffered in good faith
by it pursuant to the provisions of this Agreement.

 

8.4.2        Indemnity.
The Warrant Agent shall be liable hereunder only for its own gross negligence, willful misconduct or bad faith. The Company agrees
to indemnify the Warrant Agent and save it harmless against any and all liabilities, including judgments, costs and reasonable
counsel fees, for anything done or omitted by the Warrant Agent in the execution of this Agreement, except as a result of the Warrant
Agent’s gross negligence, willful misconduct or bad faith.

 

8.4.3        Exclusions.
The Warrant Agent shall have no responsibility with respect to the validity of this Agreement or with respect to the validity or
execution of any Warrant (except its countersignature thereof). The Warrant Agent shall not be responsible for any breach by the
Company of any covenant or condition contained in this Agreement or in any Warrant. The Warrant Agent shall not be responsible
to make any adjustments required under the provisions of Section 4 hereof or responsible for the manner, method, or amount
of any such adjustment or the ascertaining of the existence of facts that would require any such adjustment; 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 to be
issued pursuant to this Agreement or any Warrant or as to whether any Common Stock shall, when issued, be valid and fully paid
and nonassessable.

 

8.5        Acceptance
of Agency. The Warrant Agent hereby accepts the agency established by this Agreement and agrees to perform the same upon the
terms and conditions herein set forth and among other things, shall account promptly to the Company with respect to Warrants exercised
and concurrently account for, and pay to the Company, all monies received by the Warrant Agent for the purchase of the Common Stock
through the exercise of the Warrants.

 

8.6        Waiver.
The Warrant Agent has no right of set-off or any other right, title, interest or claim of any kind (“Claim”)
in, or to any distribution of, the Trust Account (as defined in that certain Investment Management Trust Agreement, dated as of
the date hereof, by and between the Company and the Warrant Agent as trustee thereunder) and hereby agrees not to seek recourse,
reimbursement, payment or satisfaction for any Claim against the Trust Account for any reason whatsoever. The Warrant Agent hereby
waives any and all Claims against the Trust Account and any and all rights to seek access to the Trust Account.

 

9.        Miscellaneous
Provisions.

 

9.1        Successors.
All the covenants and provisions of this Agreement by or for the benefit of the Company or the Warrant Agent shall bind and inure
to the benefit of their respective successors and assigns.

 

9.2        Notices.
Any notice, statement or demand authorized by this Agreement shall be sufficiently given (i) when so delivered if by hand or overnight
delivery, (ii) upon receipt of by the intended recipient if by facsimile, or (ii) if sent by certified mail or private courier
service within five (5) days after deposit of such notice, postage prepaid, addressed (until another address is filed in writing
with the Warrant Agent) as follows:

 

If to the Company:

 

JM Global Holding Company

1615 South Congress Avenue, Suite 103

Delray Beach, FL 33445

Attention: Tim Richerson, Chief Executive Officer

 

    	12

    	 

    

  

If to the Warrant Agent:

 

Continental Stock Transfer & Trust Company

17 Battery Place

New York, New York 10004

Fax: 212-616-7615

Attention: Compliance Department

 

with a copy in each case (which shall not constitute
service) to:

 

Elenoff Grossman & Schole LLP

1345 Avenue of the Americas

New York, NY 10105

Fax: 212-370-7889

Attention:  Stuart Neuhauser, Esq.

 

9.3        Applicable
Law. The validity, interpretation, and performance of this Agreement and of the Warrants shall be governed in all respects
by the laws of the State of New York and without giving effect to conflicts of law principles that would result in the application
of the substantive laws of another jurisdiction. The Company hereby agrees that any action, proceeding or claim against it arising
out of or relating in any way to this Agreement shall be brought and enforced in the courts of the State of New York or the United
States District Court for the Southern District of New York, and irrevocably submits to such jurisdiction, which jurisdiction shall
be exclusive. The Company hereby waives any objection to such exclusive jurisdiction and that such courts represent an inconvenient
forum.

 

9.4        Persons
Having Rights under this Agreement. Nothing in this Agreement shall be construed to confer upon, or give to, any person or
corporation other than the parties hereto and the Registered Holders of the Warrants any right, remedy, or claim under or by reason
of this Agreement or of any covenant, condition, stipulation, promise, or agreement hereof. All covenants, conditions, stipulations,
promises, and agreements contained in this Agreement shall be for the sole and exclusive benefit of the parties hereto and their
successors and assigns and of the Registered Holders of the Warrants.

 

9.5        Examination
of the Agreement. A copy of this Agreement shall be available at all reasonable times at the office of the Warrant Agent in
the Borough of Manhattan, City and State of New York, for inspection by the Registered Holder of any Warrant. The Warrant Agent
may require any such holder to submit his Warrant for inspection by it.

 

9.6        Counterparts.
This Agreement may be executed in any number of original or facsimile 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.

 

9.7        Effect
of Headings. The section headings herein are for convenience only and are not part of this Agreement and shall not affect the
interpretation thereof.

 

9.8        Amendments.
This Agreement may be amended by the parties hereto without the consent of any Registered Holder for the purpose of curing any
ambiguity, or curing, correcting or supplementing any defective provision contained herein or adding or changing any other provisions
with respect to matters or questions arising under this Agreement as the parties may deem necessary or desirable and that the parties
deem shall not adversely affect the interest of the Registered Holders. All other modifications or amendments, including any amendment
to increase the Warrant Price or shorten the Exercise Period and any amendment to the terms of only the Placement Warrants, shall
require the vote or written consent of the Registered Holders of 90% of the then outstanding Warrants. Notwithstanding the foregoing,
the Company may lower the Warrant Price or extend the duration of the Exercise Period pursuant to Sections 3.1 and 3.2, respectively,
without the consent of the Registered Holders.

 

9.9        Severability.
This Agreement shall be deemed severable, and the invalidity or unenforceability of any term or provision hereof shall not affect
the validity or enforceability of this Agreement or of any other term or provision hereof. Furthermore, in lieu of any such invalid
or unenforceable term or provision, the parties hereto intend that there shall be added as a part of this Agreement a provision
as similar in terms to such invalid or unenforceable provision as may be possible and be valid and enforceable.

 

[Remainder of page intentionally left blank.
Signature page follows.]

 

    	13

    	 

    

  

IN WITNESS WHEREOF, the
parties hereto have caused this Agreement to be duly executed as of the date first above written.

 

	 	JM GLOBAL HOLDING COMPANY
	 	 
	 	By:	/s/ Tim Richerson
	 	 	Name: Tim Richerson 
	 	 	Title:   Chief Executive Officer

 

	 	
        CONTINENTAL STOCK TRANSFER &

        TRUST COMPANY,

        as Warrant Agent  

	 	 
	 	By:	/s/ Margaret B. Lloyd
	 	 	Name: Margaret B. Lloyd   
	 	 	Title:    Vice President  

 

    	14

    	 

    

 

EXHIBIT A

 

[Form of Warrant Certificate]

 

[FACE]

 

Number

 

Warrants

 

THIS WARRANT SHALL BE VOID IF NOT EXERCISED
PRIOR TO

 THE EXPIRATION
OF THE EXERCISE PERIOD PROVIDED FOR

 IN THE WARRANT
AGREEMENT DESCRIBED BELOW

 

JM GLOBAL HOLDING COMPANY

 A Delaware corporation

 

CUSIP ______

 

Warrant Certificate

 

This Warrant Certificate
certifies that                                        ,
or registered assigns, is the registered holder of                        warrant(s)
(the “Warrant” and each, a “Warrant”) to purchase shares of common stock,
$0.0001 par value (the “Common Stock”), of JM Global Holding Company (the “Company”).
Each Warrant entitles the holder, upon exercise during the period set forth in the Warrant Agreement referred to below, to receive
from the Company that number of fully paid and nonassessable shares of Common Stock (each, a “Warrant”)
as set forth below, at the exercise price (the “Exercise Price”) as determined pursuant to the Warrant
Agreement, payable in lawful money (or through “cashless exercise” as provided for in the Warrant Agreement)
of the United States of America upon surrender of this Warrant Certificate and payment of the Exercise Price at the office or
agency of the Warrant Agent referred to below, subject to the conditions set forth herein and in the Warrant Agreement. Defined
terms used in this Warrant Certificate but not defined herein shall have the meanings given to them in the Warrant Agreement (as
defined on the reverse hereof).

 

Each Warrant is initially
exercisable for one-half of one fully paid and non-assessable share of Common Stock. The number of shares of Common Stock issuable
upon exercise of the Warrants is subject to adjustment upon the occurrence of certain events set forth in the Warrant Agreement.
 

 

The initial Exercise Price
per share of Common Stock for any Warrant is equal to $5.75 per half share. The Exercise Price is subject to adjustment upon the
occurrence of certain events set forth in the Warrant Agreement.

 

Subject to the conditions
set forth in the Warrant Agreement, the Warrants may be exercised only during the Exercise Period and to the extent not exercised
by the end of such Exercise Period, such Warrants shall become void.

 

Reference is hereby made
to the further provisions of this Warrant Certificate set forth on the reverse hereof and such further provisions shall for all
purposes have the same effect as though fully set forth at this place.

  

This Warrant Certificate
shall not be valid unless countersigned by the Warrant Agent, as such term is used in the Warrant Agreement.

 

This Warrant Certificate
shall be governed by and construed in accordance with the internal laws of the State of New York, without regard to conflicts of
laws principles thereof.

 

	 	JM GLOBAL HOLDING COMPANY
	 	 
	 	By:	
	 	 	 Name: Tim Richerson
	 	 	 Title:   Chief Executive Officer

 

	 	
        CONTINENTAL STOCK TRANSFER &

        TRUST COMPANY,

        as Warrant Agent  

	 	 
	 	By:	
	 	 	Name:
	 	 	Title:

 

    	15

    	 

    

 

[Form of Warrant Certificate]

 

[REVERSE]

 

The Warrants
evidenced by this Warrant Certificate are part of a duly authorized issue of Warrants entitling the holder on exercise to
receive shares of Common Stock and are issued or to be issued pursuant to a Warrant Agreement dated as of July 23,, 2015 (the
“Warrant Agreement”), duly executed and delivered by the Company to Continental Stock Transfer
& Trust Company, a New York corporation, as warrant agent (the “Warrant Agent”), which Warrant
Agreement is hereby incorporated by reference in and made a part of this instrument and is hereby referred to for a
description of the rights, limitation of rights, obligations, duties and immunities thereunder of the Warrant Agent, the
Company and the holders (the words
“holders” or “holder” meaning the Registered Holders or
Registered Holder) of the Warrants. A copy of the Warrant Agreement may be obtained by the holder hereof upon written request
to the Company. Defined terms used in this Warrant Certificate but not defined herein shall have the meanings given to them
in the Warrant Agreement.

 

Warrants may be exercised
at any time during the Exercise Period set forth in the Warrant Agreement. The holder of Warrants evidenced by this Warrant Certificate
may exercise them by surrendering this Warrant Certificate, with the form of election to purchase set forth hereon properly completed
and executed, together with payment of the Exercise Price as specified in the Warrant Agreement (or through “cashless
exercise” if permitted by the Warrant Agreement) at the principal corporate trust office of the Warrant Agent. In
the event that upon any exercise of Warrants evidenced hereby the number of Warrants exercised shall be less than the total number
of Warrants evidenced hereby, there shall be issued to the holder hereof or his, her or its assignee, a new Warrant Certificate
evidencing the number of Warrants not exercised.

 

Notwithstanding anything
else in this Warrant Certificate or the Warrant Agreement, no Warrant may be exercised unless at the time of exercise (i) a
registration statement covering the shares of Common Stock to be issued upon exercise is effective under the Securities Act and
(ii) a prospectus thereunder relating to the shares of Common Stock is current, except through “cashless exercise”
if permitted by the Warrant Agreement.  Additionally, if the Corporation fails to enter into a merger, capital stock
exchange, asset acquisition, stock purchase, reorganization or similar business combination, involving the Corporation and one
or more businesses by July 29, 2017, the Warrants evidenced by this Warrant Certificate shall expire worthless.

 

The Warrant Agreement
provides that, upon the occurrence of certain events, the number of the Warrants set forth on the face hereof may, subject to certain
conditions, be adjusted. If, upon exercise of a Warrant, the holder hereof would be entitled to receive a fractional interest in
a share of Common Stock, the Company shall, upon exercise, round down to the nearest whole number of shares of Common Stock to
be issued to the holder of the Warrant.

 

Warrant Certificates,
when surrendered at the principal corporate trust office of the Warrant Agent by the Registered Holder thereof in person or by
legal representative or attorney duly authorized in writing, may be exchanged, in the manner and subject to the limitations provided
in the Warrant Agreement, but without payment of any service charge, for another Warrant Certificate or Warrant Certificates of
like tenor evidencing in the aggregate a like number of Warrants.

 

Upon due presentation
for registration of transfer of this Warrant Certificate at the office of the Warrant Agent a new Warrant Certificate or Warrant
Certificates of like tenor and evidencing in the aggregate a like number of Warrants shall be issued to the transferee(s) in exchange
for this Warrant Certificate, subject to the limitations provided in the Warrant Agreement, without charge except for any tax or
other governmental charge imposed in connection therewith.

 

The Company and the Warrant
Agent may deem and treat the Registered Holder(s) thereof as the absolute owner(s) of this Warrant Certificate (notwithstanding
any notation of ownership or other writing hereon made by anyone), for the purpose of any exercise hereof, of any distribution
to the holder(s) hereof, and for all other purposes, and neither the Company nor the Warrant Agent shall be affected by any notice
to the contrary. Neither the Warrants nor this Warrant Certificate entitles any holder hereof to any rights of a stockholder of
the Company.

 

    	16

    	 

    

  

Election to Purchase

 

(To Be Executed Upon Exercise of Warrant)

 

The undersigned hereby
irrevocably elects to exercise the right, represented by this Warrant Certificate, to receive                        shares
of Common Stock and herewith tenders payment for such shares to the order of JM Global Holding Company (the “Company”) in the amount of $                    
  in accordance with the terms hereof. The undersigned requests that a certificate for such shares be registered in
the name of                     
, whose address is                        and
that such shares be delivered to                        whose
address is                      
.. If said number of shares is less than all of the shares of Common Stock purchasable hereunder, the undersigned requests that
a new Warrant Certificate representing the remaining balance of such shares be registered in the name of                      
, whose address is                      
, and that such Warrant Certificate be delivered to                      
, whose address is                      
..

 

In the event that the
Warrant has been called for redemption by the Company pursuant to Section 6 of the Warrant Agreement and the Company has required
cashless exercise pursuant to Section 6.3 of the Warrant Agreement, the number of shares that this Warrant is exercisable
for shall be determined in accordance with subsection 3.3.1(b) and Section 6.3 of the Warrant Agreement.

 

In the event that the
Warrant is a Placement Warrant that is to be exercised on a “cashless basis” pursuant
to subsection 3.3.1(c) of the Warrant Agreement, the number of shares that this Warrant is exercisable for shall be determined
in accordance with subsection 3.3.1(c) of the Warrant Agreement.

 

In the event that the
Warrant is to be exercised on a “cashless basis” pursuant to Section 7.4 of the Warrant
Agreement, the number of shares that this Warrant is exercisable for shall be determined in accordance with Section 7.4 of
the Warrant Agreement.

 

In the event that the
Warrant may be exercised, to the extent allowed by the Warrant Agreement, through cashless exercise (i) the number of shares
that this Warrant is exercisable for would be determined in accordance with the relevant section of the Warrant Agreement which
allows for such cashless exercise and (ii) the holder hereof shall complete the following sentence: The undersigned hereby
irrevocably elects to exercise the right, represented by this Warrant Certificate, through the cashless exercise provisions of
the Warrant Agreement, to receive shares of Common Stock. If said number of shares is less than all of the shares of Common Stock
purchasable hereunder (after giving effect to the cashless exercise), the undersigned requests that a new Warrant Certificate representing
the remaining balance of such shares be registered in the name of, whose address is, and that such Warrant Certificate be delivered
to, whose address is ________.

 

Date:                    ,
20

 

	 	(Signature)
	 	 
	 	(Address)
	 	 
	 	 
	 	(Tax Identification Number)

 

Signature Guaranteed:

 

THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN
ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED
SIGNATURE GUARANTEE MEDALLION PROGRAM, PURSUANT TO S.E.C. RULE 17Ad-15).

 

    	17

    	 

    

 

EXHIBIT B

 

LEGEND

 

THE SECURITIES REPRESENTED HEREBY HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS AND
NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR SUCH LAWS OR AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT AND SUCH LAWS WHICH, IN THE OPINION OF COUNSEL FOR THIS CORPORATION, IS AVAILABLE.

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE
ARE SUBJECT TO A LOCKUP AGREEMENT AND MAY ONLY BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED DURING THE TERM OF
THAT LOCKUP AGREEMENT PURSUANT TO THE TERMS SET FORTH THEREIN.

 

	 	 	 
	No.	 	Warrants

 

 

18

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