SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported)
MAY 17, 2001
FAIRMARKET, INC.
(Exact name of registrant as specified in charter)
DELAWARE 000-29423 04-3551937
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(State or other jurisdiction (Commission file number) (IRS employer
of incorporation) identification no.)
500 UNICORN PARK DRIVE
WOBURN, MA 01801
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (781) 376-5600
ITEM 5. OTHER EVENTS
On May 17, 2001 the Board of Directors of FairMarket, Inc. (the
"Company") adopted a shareholder rights plan, as set forth in the Shareholder
Rights Agreement, dated May 17, 2001, between the Company and EquiServe Trust
Company, N.A., as Rights Agent (the "Rights Agreement"). The following
description of the terms of the Rights Agreement does not purport to be complete
and is qualified in its entirety by reference to the Rights Agreement which is
attached hereto as an exhibit and is incorporated herein by reference.
Pursuant to the terms of the Rights Agreement, the Board of Directors
declared a dividend distribution of one Preferred Stock Purchase Right (a
"Right") for each outstanding share of Common Stock of the Company (the "Common
Stock") to shareholders of record as of the close of business on May 18, 2001
(the "Record Date"). In addition, one Right will automatically attach to each
share of Common Stock issued between the Record Date and the Distribution Date
(as hereinafter defined). Each Right entitles the registered holder thereof to
purchase from the Company a unit consisting of one ten-thousandth of a share (a
"Unit") of Series A Junior Participating Cumulative Preferred Stock, par value
$0.001 per share, of the Company (the "Preferred Stock") at a cash exercise
price of $10.00 per Unit (the "Exercise Price"), subject to adjustment, under
certain conditions specified in the Rights Agreement and summarized below.
Initially, the Rights are not exercisable and are attached to and trade
with all shares of Common Stock outstanding as of, and issued subsequent to, the
Record Date. The Rights will separate from the Common Stock and will become
exercisable upon the earlier of (i) the close of business on the tenth calendar
day following the first public announcement that a person or group of affiliated
or associated persons (an "Acquiring Person") has acquired beneficial ownership
of 15% or more of the outstanding shares of Common Stock, other than as a result
of repurchases of stock by the Company or certain inadvertent actions by a
shareholder (the date of said announcement being referred to as the "Stock
Acquisition Date"), or (ii) the close of business on the tenth business day (or
such later day as the Board of Directors may determine) following the
commencement of a tender offer or exchange offer that could result upon its
consummation in a person or group becoming the beneficial owner of 15% or more
of the outstanding shares of Common Stock (the earlier of such dates being
herein referred to as the "Distribution Date").
Notwithstanding the foregoing, with respect to any person who
beneficially owns (for purposes of the Rights Agreement) 15% or more of the
outstanding shares of Common Stock as of May 18, 2001 (such person being
referred to in the Rights Agreement as a "Grandfathered Person"), the
Distribution Date will not occur unless such Grandfathered Person has acquired
beneficial ownership of shares of Common Stock representing an additional 1/2%
of the outstanding shares of Common Stock.
In the event that a Stock Acquisition Date occurs, proper provision
will be made so that each holder of a Right (other than an Acquiring Person or
its associates or affiliates, whose Rights shall become null and void) will
thereafter have the right to receive upon exercise that number of Units of
Preferred Stock of the Company having a market value of two times the
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exercise price of the Right (such right being referred to as the "Subscription
Right"). In the event that, at any time following the Stock Acquisition Date,
(i) the Company consolidates with, or merges with and into, any other person,
and the Company is not the continuing or surviving corporation, (ii) any person
consolidates with the Company, or merges with and into the Company and the
Company is the continuing or surviving corporation of such merger and, in
connection with such merger, all or part of the shares of Common Stock are
changed into or exchanged for stock or other securities of any other person or
cash or any other property, or (iii) 50% or more of the Company's assets or
earning power is sold, mortgaged or otherwise transferred, each holder of a
Right (other than an Acquiring Person or its associates or affiliates, whose
Rights shall become null and void) will thereafter have the right to receive,
upon exercise, common stock of the acquiring company having a market value equal
to two times the exercise price of the Right (such right being referred to as
the "Merger Right"). The holder of a Right will continue to have the Merger
Right whether or not such holder has exercised the Subscription Right. Rights
that are or were beneficially owned by an Acquiring Person may (under certain
circumstances specified in the Rights Agreement) become null and void.
The Rights may be redeemed in whole, but not in part, at a price of
$0.01 per Right (payable in cash, Common Stock or other consideration deemed
appropriate by the Board of Directors) by the Board of Directors only until the
earlier of (i) the time at which any person becomes an Acquiring Person or (ii)
the expiration date of the Rights Agreement. Immediately upon the action of the
Board of Directors ordering redemption of the Rights, the Rights will terminate
and thereafter the only right of the holders of Rights will be to receive the
redemption price.
The Rights Agreement may be amended by the Board of Directors in its
sole discretion until the time at which any person becomes an Acquiring Person.
After such time the Board of Directors may, subject to certain limitations set
forth in the Rights Agreement, amend the Rights Agreement only to cure any
ambiguity, defect or inconsistency, to shorten or lengthen any time period, or
to make changes that do not adversely affect the interests of Rights holders
(excluding the interests of an Acquiring Person or its associates or
affiliates). In addition, the Board of Directors may at any time prior to the
time at which any person becomes an Acquiring Person, amend the Rights Agreement
to lower the threshold at which a person becomes an Acquiring Person to not less
than the greater of (i) the sum of .001% and the largest percentage of the
outstanding Common Stock then owned by any person and (ii) 10%.
Until a Right is exercised, the holder will have no rights as a
stockholder of the Company (beyond those as an existing stockholder), including
the right to vote or to receive dividends. While the distribution of the Rights
will not be taxable to stockholders or to the Company, stockholders may,
depending upon the circumstances, recognize taxable income in the event that the
Rights become exercisable for Units, other securities of the Company, other
consideration or for common stock of an acquiring company.
The Rights are not exercisable until the Distribution Date and will
expire at the close of business on May 18, 2011 (the "Expiration Date"), unless
previously redeemed or exchanged by the Company as described below.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
Exhibit 3.1 - Certificate of Designations, Preferences and Rights of
a Series of Preferred Stock of FairMarket, Inc.
classifying and designating the Series A Junior
Participating Cumulative Preferred Stock.
Exhibit 4.1 - Shareholder Rights Agreement, dated as of May 17, 2001,
between FairMarket, Inc. and EquiServe Trust Company,
N.A., as Rights Agent.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FAIRMARKET, INC.
Date: May 21, 2001 By: /s/ Janet Smith
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Name: Janet Smith
Title: Chief Financial Officer
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
3.1 Certificate of Designations, Preferences and Rights of a Series
of Preferred Stock of FairMarket, Inc. classifying and
designating the Series A Junior Participating Cumulative
Preferred Stock.
4.1 Shareholder Rights Agreement, dated as of May 17, 2001, between
FairMarket, Inc. and EquiServe Trust Company, as Rights Agent.
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