SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
F O R M 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): June 25, 1997
STERLING HOUSE CORPORATION
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(Exact name of registrant as specified
in its charter)
Kansas
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(State or other jurisdiction of incorporation)
1-14022 48-1097141
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(Commission File Number) (IRS Employer
Identification No.)
453 S. Webb Road, Suite 500, Wichita, Kansas 67207
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (316) 684-8300
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(Former name or former address, if changed since
last report)
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Item 5. Other Events
On June 25, 1997, the Board of Directors of
Sterling House Corporation (the "Company") declared
a dividend distribution of one Right for each
outstanding share of the Company's Common Stock, no
par value per share (the "Common Stock"), to the
holders of record on July 3, 1997 (the "Record
Date"). Each Right entitles the registered holder
to purchase from the Company one one-hundredth
(1/100th) of a share of Series A Junior
Participating Stock no par value per share (the
"Series A Preferred Stock"), or, in some
circumstances, Common Stock, other securities, cash
or other assets as summarized below, at a price of
$80.00 per one one-hundredth of a share (the
"Purchase Price"), with both shares and price being
subject to adjustment in certain events. The
complete terms and conditions of the Rights are set
forth in a Rights Agreement (the "Rights
Agreement") between the Company and ChaseMellon
Shareholder Services, Inc., as Rights Agent, dated
as of June 25, 1997, as it may be amended from time
to time. Capitalized terms not defined herein are
defined in the Rights Agreement.
Initially, the Rights will attach to all
certificates representing outstanding shares of
Common Stock and no separate certificates for the
Rights ("Rights Certificates") will be distributed.
The Rights will separate from the Common Stock upon
the "Distribution Date," which will occur upon the
earlier of (i) 10 days following a public
announcement that a person or group (an "Acquiring
Person") has acquired beneficial ownership of 20%
or more of the outstanding shares of Common Stock
(the date of such announcement, the "Stock
Acquisition Date") or (ii) 10 business days
following the commencement of a tender offer or
exchange offer, the consummation of which would
result in a person becoming an Acquiring Person or
(iii) 10 business days following a determination by
the Company's Board of Directors that a person has
become the beneficial owner of more than 10% of the
outstanding shares of Common Stock and (a) has
acquired such beneficial ownership to cause the
Company to repurchase the shares owned by such
person or to pressure the Company to take some
action that would provide such person with short-
term financial gain under circumstances where the
Board determines that the best long-term interests
of the Company would not be served by taking such action or
(b) such beneficial ownership is causing
or is reasonably likely to cause a material adverse
impact on the business or prospects of the Company
(any such person, an "Adverse Person"). Until the
Distribution Date, (a) the Rights will be evidenced
by Common Stock certificates and may be transferred
only with such certificates, (b) Common Stock
certificates will contain a legend incorporating
the Rights Plan by reference and (c) the surrender
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for transfer of any certificate for Common Stock
will also constitute the transfer of the Rights
associated with the stock represented by such
certificate.
The Rights are not exercisable until the
Distribution Date and will expire at the close of
business on June 25, 2007 (the "Final Expiration
Date"), unless earlier redeemed by the Company as
described below.
As soon as practicable after the Distribution
Date, certificates representing the rights (the
"Rights Certificates") will be mailed to holders of
record of Common Stock as of the close of business
on the Distribution Date, and from the Distribution
Date the Rights Certificates alone will represent
the Rights.
In the event (a "Flip-In Event") that (i) a
person or group becomes an Acquiring Person (except
pursuant to a tender or exchange offer for all
outstanding shares of Common Stock which at least a
majority of disinterested Directors, after
receiving advice from one or more investment
banking firms, determines to be at a price which is
fair to stockholders and otherwise in the best
interests of the Company and its stockholders (a
"Qualifying Offer")) or (ii) the Board determines
that a person is an Adverse Person, each holder of
a Right will have the right to receive, upon
exercise of such Right, a number of shares of
Common Stock (or, in certain circumstances, cash,
property or other securities of the Company) having
a then current market value of twice the Purchase
Price (i.e. at a 50% discount to the then current
market value). Notwithstanding the foregoing,
following the occurrence of any Flip-In Event, all
Rights that are, or (under certain circumstances
specified in the Rights Agreement) were,
beneficially owned by any Acquiring Person or an
Adverse Person (or by certain related parties) will
be null and void in the circumstances set forth in
the Rights Agreement. However, Rights will not be
exercisable following the occurrence of any Flip-In
Event until such time as the Rights are no longer
redeemable by the Company as set forth below.
In the event (a "Flip-Over Event") that, at
any time on or after the Stock Acquisition Date,
(i) the Company is acquired in a merger or other
business combination in which the Company is not
the surviving corporation, (ii) the Company is the
continuing or surviving corporation in a merger but
all or part of the outstanding shares of Common
Stock of the Company is changed into or exchanged
for stock or securities of any other person or cash
or other property, or (iii) 50% or more of the
Company's assets, earning power or cash flow is
sold or transferred, then each holder of a Right
(except Rights that have been voided as set forth
above) thereafter shall have the right to receive,
upon exercise at the then current Purchase Price
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(as set forth in the Rights Agreement), a number
of shares of common stock of the acquiring company
having a then current market value of twice such
Purchase Price (i.e. at a 50% discount). The
Company may not engage in a transaction with an
Acquiring Person constituting a Flip-Over Event
unless the Acquiring Person meets certain
conditions. If the Acquiring Person's (or its
affiliated entity's) common stock has not been
registered under the Securities Exchange Act of
1934, as amended, for the preceding twelve months,
but it is a direct or indirect subsidiary of
another company which has registered common stock,
the Rights shall be exercisable as described above
to purchase the common stock of such parent
company. Moreover, the Company may not engage in a
Flip-Over transaction unless the Acquiring Person
(or its affiliated entity or parent, as applicable)
(i) has sufficient shares of common stock
authorized to permit the full exercise of the
Rights and (ii) enters into an agreement containing
the terms set forth above and providing that, as
soon as practicable after the date of the Flip-Over
Event, the Acquiring Person will register the
Rights and the securities issuable upon exercise of
the Rights under the Securities Act of 1933, as
amended, and maintain the effectiveness of such
registration statement until the Expiration Date of
the Rights Plan. Notwithstanding the foregoing,
the Flip-Over provision would not be applicable to
a "clean-up" merger which would take place after
the consummation of a Qualifying Offer if, pursuant
to the terms of such merger, (i) the price per share
of Common Stock offered in such transaction is not less
than the price paid to holders of
Common Stock whose shares were purchased in the
Qualifying Offer and (ii) the form of consideration
offered in the transaction is the same as the form
of consideration paid pursuant to the Qualifying
Offer.
The Purchase Price payable, and the number of
shares of Series A 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 (payable in shares of the Series
A Preferred Stock), or a subdivision, combination
or reclassification of, the Series A Preferred
Stock, (ii) if holders of the Series A Preferred
Stock are granted certain rights, options or
warrants to subscribe for or purchase Series A
Preferred Stock at less than the current market
price of the Series A Preferred Stock or (iii) upon
the distribution to holders of the Series A
Preferred Stock of evidences of indebtedness or
cash (other than a regular quarterly cash dividend
out of the earnings or retained earnings of the
Company) or assets (excluding regular quarterly
cash dividends and dividends payable in shares of
Series A Preferred Stock) or of subscription
rights, options or warrants (other than those
referred to above). With certain exceptions, no
adjustment in the Purchase Price will be required
until cumulative adjustments amount to at least 1%
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of the Purchase Price. Fractional shares of Series
A Preferred Stock in integral multiples of one one-hundredth
of a share of Series A Preferred Stock
will be issuable. In lieu of fractional shares
other than fractions that are multiples of one one-hundredth
of a share, an adjustment in cash may be
made based on the market price of the Series A
Preferred Stock on the last trading date prior to
the date of exercise.
At any time prior to the expiration of 10 days
following the Stock Acquisition Date, the Company
may redeem the Rights in whole, but not in part, at
a price of $.01 (subject to certain adjustments as
set forth in the Rights Plan) per Right. The Board
may not, however, redeem any Rights following a
determination by the Board that a person is an
Adverse Person. Additionally, the 10 day period
following the Stock Acquisition Date during which
the Rights may be redeemed may be extended by the
Directors during such 10 day period. However, if
the Rights are not so redeemed during such 10 day period
(or any extension thereof), the Rights shall
become non-redeemable for the duration of the
Rights Plan. Immediately upon the effectiveness of
the action of the Board of Directors ordering
redemption of the Rights, the Rights will terminate
and the only right of the holders of Rights will be
to receive the $.01 redemption price.
In the event that a majority of the Board of
Directors of the Company serving following a
meeting of stockholders or stockholder action by
written consent are not nominated by the Board of
Directors serving immediately prior to such meeting
or action, then for 180 days following such meeting
or action the Rights may not be redeemed if such
redemption is reasonably likely to have the purpose
or effect of allowing any person to become an
Acquiring Person, otherwise facilitating the
occurrence of a Flip-In Event or a Flip-Over Event
or a transaction with an Acquiring Person.
The Series A Preferred Stock purchasable upon
exercise of the Rights will be junior to any other
series of preferred stock the Company may issue
(unless otherwise provided in the terms of such
series). Each whole share of Series A Preferred
Stock will entitle the holder thereof to receive a
quarterly cumulative dividend in an amount equal to
the greater of $2.00 or 100 (as adjusted pursuant
to the terms of the Certificate of Designations of
the Series A Preferred Stock, the "Formula Number")
times the dividends and other distributions
declared on each share of Common Stock. In the
event of liquidation, the holders of the Series A
Preferred Stock will receive a preferred
liquidation payment equal to $80.00 per share, plus
an amount equal to accrued and unpaid dividends
thereon to the date of such payment (the "Series A
Liquidation Preference"). Following such payment,
the holders of Common Stock will receive an amount
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per share equal to the quotient obtained by
dividing (i) the Series A Liquidation Preference by
(ii) the Formula Number (the "Adjustment Amount").
Following the full payment of the Series A
Liquidation Preference and the Adjustment Amount,
holders of Series A Preferred Stock and Common
Stock shall receive their ratable and proportionate
share of the remaining assets to be distributed in
the ratio of the Formula Number to one with respect
to such Preferred Stock and Common Stock, on a per
share basis, respectively.
Each share of Series A Preferred Stock will have
the number of votes equal to the Formula
Number, voting together with the shares of Common
Stock. In the event six quarterly cumulative
dividends, whether consecutive or not, on the
Series A Preferred Stock are in arrears, the
holders of Series A Preferred Stock will have the
right, voting as a class, to elect two members of
the Board of Directors of the Company (in addition
to the normal voting rights) until all unpaid
dividends on the Series A Preferred Stock have been
paid in full.
In the event of any consolidation, merger or
other transaction in which shares of Common Stock
are exchanged, each share of Series A Preferred
Stock will be entitled to receive 100 times the
amount and type of consideration received per share
of Common Stock. The rights of the Series A
Preferred Stock as to dividends, liquidation
payments and voting, and in the event of mergers or
consolidations, are protected by customary anti-dilution provisions.
Except as provided above, any of the
provisions of the Rights Agreement may be amended
by the Board of Directors of the Company prior to
the Distribution Date. Thereafter, the provisions
of the Rights Agreement may be amended by the Board
of Directors in order to cure any ambiguity, defect
or inconsistency, to make changes that do not
adversely affect the interests of holders of Rights
(excluding the interest of any Acquiring Person or
Adverse Person), or to shorten or lengthen any time
period under the Rights Plan; provided, however,
that an amendment to lengthen the time period
governing redemption may be made only if the Rights
are redeemable and an amendment to lengthen any
other time period may be made only for the purpose
of protecting, enhancing or clarifying the rights
of, and/or benefits to, the holders of Rights
(other than any Acquiring Person or Adverse
Person). Until a Right is exercised, the holder
thereof, as such, will have no rights as a
stockholder of the Company, including, without
limitation, the right to vote or to receive
dividends.
The Rights may have the effect of impeding a
change of control of the Company without the prior
approval of the Company's Board of Directors.
The Rights will have certain anti-takeover effects.
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The Rights will cause substantial dilution to any
person or group that attempts to acquire the
Company without the approval of the Company's Board
of Directors. As a result, the overall effect of
the Rights may be to render more difficult or
discourage any attempt to acquire the Company even
if such acquisition may be favorable to the
interests of the Company's stockholders. Because
the Company's Board of Directors can redeem the
Rights or approve a Qualifying Offer, the Rights
should not interfere with a tender offer, merger or
other business combination approved by the Board of
Directors of the Company.
The distribution of the Rights should not be
taxable to shareholders of the Company. However,
depending upon the circumstances, shareholders may
recognize taxable income if the Rights become
exercisable or upon the occurrence of certain
events thereafter.
The Rights Agreement between the Company
and the Rights Agent specifying the terms of the
Rights, which includes as Exhibit B the Form of
Rights Certificate, the press release announcing
the declaration of the Rights and a letter to the
holders of the Company's Common Stock (together
with a summary of the Rights attached thereto) are
attached hereto as exhibits and are incorporated
herein by reference. The foregoing description of
the Rights does not purport to be complete and is
qualified in its entirety by reference to such
exhibits.
Item 7. Exhibits
Exhibit Number Description
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4 Rights Agreement, dated as of
June 25, 1997, between Sterling
House Corporation and ChaseMellon
Shareholder Services, as Rights
Agent
20* Letter to the holders of
Sterling House Corporation
Common Stock, dated July 3, 1997
(including Summary of Rights)
99* Press Release, dated June 25, 1997
* Filed herewith by direct transmission via EDGAR.
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SIGNATURES
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.
STERLING HOUSE CORPORATION
By:/s/ R. Gail Knott
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R. Gail Knott, Secretary
Dated: June 25, 1997
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EXHIBIT INDEX
Exhibit Number Description Page
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4 Rights Agreement, dated as of June 25, 1997,
between Sterling House Corporation and ChaseMellon
Shareholder Services, as Rights Agent. Filed as
Exhibit 4 to the Form 8-A dated June 25, 1997.
20 Letter to the holders of Sterling House Corporation
Common Stock, dated July 3, 1997 (including Summary
of Rights). Filed as Exhibit 20 to the Form 8-A
dated June 25, 1997.
99 Press Release, dated June 25, 1997. Filed as
Exhibit 99 to the Form 8-A dated June 25, 1997.
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