Item 3.03. Material Modification
to Rights of Security Holders.
On May 2, 2021,
the board of directors (the “Board”) of Westwood Holdings Group, Inc., a Delaware corporation (the “Company”),
adopted a stockholder rights agreement and declared a dividend of one right (a “Right”) for each outstanding
share of common stock of the Company, par value $0.01 per share (“Common Stock”), to stockholders of
record at the close of business on May 12, 2021 (the “Record Date”). Each Right entitles its holder,
subject to the terms of the Rights Agreement (as defined below), to purchase from the Company one one-thousandth of a share of
Series A Junior Participating Preferred Stock, par value $0.01 per share (“Preferred Stock”), of
the Company at an exercise price of $108.00 per Right, subject to adjustment. The description and terms of the Rights are set forth
in a stockholder rights agreement, dated as of May 2, 2021 (the “Rights Agreement”), between the Company
and American Stock Transfer & Trust Company, LLC, as rights agent (and any successor rights agent, the “Rights
Agent”).
The adoption of the Rights Agreement is intended to enable all stockholders of the Company to realize the full potential value of their investment in the Company and to protect the interests of the Company and its stockholders by reducing the likelihood that any person or group gains control of the Company through open market accumulation or other tactics without paying an appropriate control premium. The Rights Agreement should not interfere with any merger or other business combination approved by the Board.
The Rights.
Rights will attach to any shares of Common Stock that become outstanding after the Record Date and prior to the earlier of the
Distribution Time (as defined below) and the Expiration Time (as defined below), and in certain other circumstances described in
the Rights Agreement.
Until the Distribution
Time, the Rights are associated with Common Stock and evidenced by Common Stock certificates or, in the case of uncertificated
shares of Common Stock, the book-entry account that evidences record ownership of such shares, which will contain a notation incorporating
the Rights Agreement by reference, and the Rights are transferable with and only with the underlying shares of Common Stock.
Until the Distribution
Time, the surrender for transfer of any shares of Common Stock will also constitute the transfer of the Rights associated with
those shares. As soon as practicable after the Distribution Time, separate rights certificates will be mailed to holders of record
of Common Stock as of the Distribution Time. From and after the Distribution Time, the separate rights certificates alone will
represent the Rights.
The Rights are not
exercisable until the Distribution Time. Until a Right is exercised, its holder will have no rights as a stockholder of the Company,
including the right to vote or to receive dividends.
Separation
and Distribution of Rights; Exercisability. Subject to certain exceptions, the Rights become exercisable and trade separately
from Common Stock only upon the “Distribution Time,” which occurs upon the earlier of:
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the close of business on the tenth (10th) day after the “Stock
Acquisition Date” (which is defined as (a) the first date of public announcement that any person or group has become
an “Acquiring Person,” which is defined as a person or group that, together with its affiliates and associates,
beneficially owns the Specified Percentage (as defined below) or more of the outstanding shares of Common Stock (with certain exceptions,
including those described below) or (b) such other date, as determined by the Board, on which a person or group has become an Acquiring
Person) or
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the close of business on the tenth (10th) business day (or such later
date as may be determined by the Board prior to such time as any person or group becomes an Acquiring Person) after the commencement
of a tender offer or exchange offer that, if consummated, would result in a person or group becoming an Acquiring Person.
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“Specified Percentage” means (a) twenty
percent (20%) when referring to the beneficial ownership of any person that is a passive investor but only for so long as such
person is a passive investor and (b) ten percent (10%) when referring to the beneficial ownership of any person that is not
a passive investor.
An Acquiring Person does not include:
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the Company or any subsidiary of the Company;
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any officer, director or employee of the Company or any subsidiary
of the Company in his or her capacity as such;
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any employee benefit plan of the Company or of any subsidiary of
the Company or any entity or trustee holding (or acting in a fiduciary capacity in respect of) 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; or
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any person or group that, together with its affiliates and associates,
as of immediately prior to the first public announcement of the adoption of the Rights Agreement, beneficially owns the Specified
Percentage or more of the outstanding shares of Common Stock so long as such person or group continues to beneficially own at least
the Specified Percentage of the outstanding shares of Common Stock and does not acquire shares of Common Stock to beneficially
own an amount equal to or greater than the greater of the Specified Percentage and the sum of the lowest beneficial ownership of
such person or group since the public announcement of the adoption of the Rights Agreement plus one share of Common Stock.
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In addition, the
Rights Agreement provides that no person or group will become an Acquiring Person as a result of share purchases or issuances directly
from the Company or through an underwritten offering approved by the Board. Also, a person or group will not be an Acquiring Person
if the Board determines that such person or group has become an Acquiring Person inadvertently and such person or group as promptly
as practicable divests a sufficient number of shares so that such person or group would no longer be an Acquiring Person.
Certain synthetic
interests in securities created by derivative positions, whether or not such interests are considered to be ownership of the underlying
Common Stock or are reportable for purposes of Regulation 13D of the Securities Exchange Act of 1934, as amended, are treated as
beneficial ownership of the number of shares of Common Stock equivalent to the economic exposure created by the derivative position,
to the extent actual shares of Common Stock are directly or indirectly held by counterparties to the derivatives contracts.
Expiration
Time. The Rights will expire on the earliest to occur of (a) the close of business on May 1, 2022 (the “Final
Expiration Time”), (b) the time at which the Rights are redeemed or exchanged by the Company (as described below),
or (c) upon the closing of any merger or other acquisition transaction involving the Company pursuant to a merger or other acquisition
agreement that has been approved by the Board before any person or group becomes an Acquiring Person (the earliest of (a), (b),
and (c) being herein referred to as the “Expiration Time”).
Flip-in Event.
In the event that any person or group (other than certain exempt persons) becomes an Acquiring Person (a “Flip-in Event”),
each holder of a Right (other than such Acquiring Person, any of its affiliates or associates or certain transferees of such Acquiring
Person or of any such affiliate or associate, whose Rights automatically become null and void) will have the right to receive,
upon exercise, Common Stock having a value equal to two times the exercise price of the Right.
For example, at
an exercise price of $108.00 per Right, each Right not owned by an Acquiring Person (or by certain related parties) following a
Flip-in Event would entitle its holder to purchase $216.00 worth of Common Stock for $108.00. Assuming that Common Stock had a
per share value of $18.00 at that time, the holder of each valid Right would be entitled to purchase 12 shares of Common Stock
for $9.00.
Flip-over
Event. In the event that, at any time following the Stock Acquisition Date, any of the following occurs (each, a “Flip-over
Event”):
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the Company consolidates with, or merges with and into, any other
entity, and the Company is not the continuing or surviving entity;
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any entity engages in a share exchange with or consolidates with,
or merges with or into, the Company, and the Company is the continuing or surviving entity and, in connection with such share exchange,
consolidation or merger, all or part of the outstanding shares of Common Stock are changed into or exchanged for stock or other
securities of any other entity or cash or any other property; or
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the Company sells or otherwise transfers, in one transaction or a
series of related transactions, fifty percent (50%) or more of the Company’s assets, cash flow or earning power,
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each holder of a Right (except Rights
which previously have been voided as described above) will have the right to receive, upon exercise, common stock of the acquiring
company having a value equal to two times the exercise price of the Right.
Preferred
Stock Provisions. Each share of Preferred Stock, if issued: will not be redeemable, will entitle the holder thereof,
when, as and if declared, to quarterly dividend payments equal to the greater of $1,000 per share and 1,000 times the amount of
all cash dividends plus 1,000 times the amount of non-cash dividends or other distributions paid on one share of Common Stock,
will entitle the holder thereof to receive $1,000 plus accrued and unpaid dividends per share upon liquidation, will have the same
voting power as 1,000 shares of Common Stock and, if shares of Common Stock are exchanged via merger, consolidation or a similar
transaction, will entitle the holder thereof to a per share payment equal to the payment made on 1,000 shares of Common Stock.
Anti-dilution
Adjustments. The exercise 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:
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in the event of a stock dividend on, or a subdivision, combination
or reclassification of, the Preferred Stock,
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if holders of the Preferred Stock are granted certain rights, options
or warrants to subscribe for Preferred Stock or convertible securities at less than the current market price of the Preferred Stock
or
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upon the distribution to holders of the Preferred Stock of evidences
of indebtedness or assets (excluding regular quarterly cash dividends) or of subscription rights or warrants (other than those
referred to above).
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With certain exceptions,
no adjustment in the exercise price will be required until cumulative adjustments amount to at least one percent (1%) of the exercise
price. No fractional shares of Preferred Stock will be issued and, in lieu thereof, an adjustment in cash will be made based on
the market price of the Preferred Stock on the last trading day prior to the date of exercise.
Redemption;
Exchange. At any time prior to the earlier of (a) the tenth (10th) day following the Stock Acquisition Date or (b)
the Final Expiration Time, the Company may redeem the Rights in whole, but not in part, at a price of $0.001 per Right (subject
to adjustment and payable in cash, Common Stock or other consideration deemed appropriate by the Board). Immediately upon the action
of the Board authorizing any redemption or at a later time as the Board may establish for the effectiveness of the redemption,
the Rights will terminate and the only right of the holders of Rights will be to receive the redemption price.
At any time after
any Acquiring Person, together with all of its affiliates and associates, becomes the beneficial owner of fifty percent (50%) or
more of the outstanding shares of Common Stock, the Company may exchange the Rights (other than Rights owned by the Acquiring Person,
any of its affiliates or associates or certain transferees of Acquiring Person or of any such affiliate or associate, whose Rights
will have become null and void), in whole or in part, at an exchange ratio of one share of Common Stock, or one one-thousandth
of a share of Preferred Stock (or of a share of a class or series of the Company’s preferred stock having equivalent rights,
preferences and privileges), per Right (subject to adjustment).
Amendment
of the Rights Agreement. The Company and the Rights Agent may from time to time amend or supplement the Rights Agreement
without the consent of the holders of the Rights. However, on or after the Stock Acquisition Date, no amendment can materially
adversely affect the interests of the holders of the Rights (other than the Acquiring Person, any of its affiliates or associates
or certain transferees of Acquiring Person or of any such affiliate or associate ).
Miscellaneous.
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 Common Stock (or other consideration)
or for common stock of the acquiring company or in the event of the redemption of the Rights as described above.
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The foregoing description of the Rights
Agreement and the Rights does not purport to be complete and is qualified in its entirety by reference to the Rights Agreement,
which is filed as Exhibit 4.1 to this Current Report and is incorporated herein by reference.