SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________
FORM 8-A
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934
Sterling House Corporation
--------------------------
(Exact name of registrant as specified in
its charter)
Kansas 48-1097141
- ------ ----------
(State of incorporation or
organization) (IRS Employer
Identification No.)
453 S. Webb Road, Suite 500, Wichita, Kansas67207
- -------------------------------------------------
(Address of principal executive offices)(ZipCode)
If this Form relates to the If this Form
registration of a class of relates to the
debt securities and is registration of a
effective upon filing class of debt
pursuant to General securities and is
Instruction A(c)(l), please to become effective
check the following box. simultaneously with
the effectieness of
a concurrent regis-
tration statement
under the
Securities Act of
1933 pursuant to
General Instruction
A(c)(2), please
check the following
box.
Securities to be registered pursuant to Section
12(b) of the Act:
Title of each class Name of each exchange on
to be so registered which each class is to be
registered
- ------------------- -------------------------
Preferred Share American Stock Exchange
Purchase Rights
Securities to be registered pursuant to Section
12(g) of the Act:
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None
- -----------------------------------------------
(Title of Class)
<PAGE>
Item 1. Description of Securities to be
Registered.
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
<PAGE>
reference and (c) the surrender 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
<PAGE>
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 (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
<PAGE>
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% 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,
<PAGE>
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 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
<PAGE>
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.
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 Shares (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 2. Exhibits
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.
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 12 of
the Securities Exchange Act of 1934, the
registrant has duly caused this registration
statement to be signed on its behalf by the
undersigned, thereto duly authorized.
Date: June 25, 1997
STERLING HOUSE CORPORATION
By: /s/ R. Gail Knott
----------------------
R. Gail Knott,
Secretary
<PAGE>
EXHIBIT INDEX
Exhibit Number Description Page
- -------------- ----------- ----
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.
______________________________________________________________________________
EXECUTION COPY
STERLING HOUSE CORPORATION
and
ChaseMellon Shareholder Services, L.L.C.
Rights Agent
___________________
Rights Agreement
Dated as of June 25, 1997
______________________________________________________________________________
Table of Contents
<PAGE>
Section Page
Section 1. Certain Definitions 1
Section 2. Appointment of Rights Agent 6
Section 3. Issue of Rights Certificates 6
Section 4. Form of Rights Certificates 8
Section 5. Countersignature and Registration 9
Section 6. Transfer, Split Up, Combination and Exchange of Rights
Certificates;Mutilated, Destroyed, Lost or Stolen Rights
Certificates. 9
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights 10
Section 8. Cancellation and Destruction of Rights Certificates 12
Section 9. Reservation and Availability of Capital Stock 13
Section 10. Preferred Stock Record Date 14
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or
Number of Right 15
Section 12. Certificate of Adjusted Purchase Price or Number of Shares 24
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning
Power 24
Section 14. Fractional Rights and Fractional Shares 27
Section 15. Rights of Action 28
Section 16. Agreement of Rights Holders 28
Section 17. Rights Certificate Holder Not Deemed a Stockholder 29
Section 18. Concerning the Rights Agent 29
Section 19. Merger or Consolidation or Change of Name of Rights Agent 30
Section 20. Duties of Rights Agent 31
Section 21. Change of Rights Agent 33
Section 22. Issuance of New Rights Certificates 33
Section 23. Redemption and Termination 34
Section 24. Exchange 35
Section 25. Notice of Certain Events 36
Section 26. Notices 37
Section 27. Supplements and Amendments 38
Section 28. Successors 38
Section 29. Determinations and Actions by the Board of Directors, etc. 38
Section 30. Benefits of This Agreement 39
Section 31. Severability 39
Section 32. Governing Law 39
Section 33. Counterparts 40
Section 34. Descriptive Headings 40
Exhibit A Certificate of Designation, Preferences and Rights
Exhibit B Form of Rights Certificate
<PAGE>
RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of June 25, 1997 (the "Agreement"), between
Sterling House Corporation, a Kansas corporation (the "Company"), and
ChaseMellon Shareholder Services, L.L.C., a New Jersey limited liability
company (the "Rights Agent").
W I T N E S S E T H
WHEREAS, on June 25, 1997 (the "Rights Dividend Declaration Date"), the
Board of Directors of the Company authorized and declared a dividend
distribution of one Right for each share of common stock, par value $.01 per
share, of the Company (the "Common Stock") outstanding at the close of
business on July 3, 1997 (the "Record Date"), and has authorized the issuance
of one Right (as such number may hereinafter be adjusted pursuant to the
provisions of Section 11(p) hereof) for each share of Common Stock of the
Company issued between the Record Date (whether originally issued or delivered
from the Company's treasury) and the Distribution Date, each Right initially
representing the right to purchase one one-hundredth (1/100th) of a share of
Series A Junior Participating Preferred Stock (the "Preferred Stock") of the
Company having the rights, powers and preferences set forth in the form of
Certificate of Designation, Preferences and Rights attached hereto as Exhibit
A, upon the terms and subject to the conditions hereinafter set forth (the
"Rights");
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or which,
together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of 20% or more of the shares of Common Stock then
outstanding, but shall not include (i) the Company, (ii) any Subsidiary
of the Company, (iii) any employee benefit plan of the Company or of any
Subsidiary of the Company or (iv) any Person or entity organized,
appointed or established by the Company for or pursuant to the terms of
any such plan. 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 a Person to 20%
or more of the Common Stock of the Company then outstanding as
determined above; provided, however, that if a Person becomes the
Beneficial Owner of 20% or more of the Common Stock of the Company then
outstanding (as determined above) solely by reason of purchases of
Common Stock by the Company and shall, after such purchases by the
Company, become the Beneficial Owner of any additional shares of Common
Stock by any means whatsoever, then such Person shall be deemed to be an
"Acquiring Person." Notwithstanding the foregoing, if the Board of
Directors of the Company determines in good faith that a Person who
would otherwise be an "Acquiring Person," as defined pursuant to the
foregoing provisions of this paragraph (a), has become such
inadvertently, 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
<PAGE>
provisions of this paragraph (a), then such Person shall not be deemed
to be an "Acquiring Person" for any purposes of this Agreement.
(b) "Act" shall have the meaning set forth in Section 9(c)
hereof.
(c) "Adjustment Shares" shall have the meaning set forth in
Section 11(a)(ii) hereof.
(d) "Adverse Person" shall mean any Person declared to be an
Adverse Person by the Board of Directors upon determination that the
criteria set forth in Section 11(a)(ii)(B) apply to such Person;
provided, however, that the Board of Directors shall not declare any
Person who is the Beneficial Owner of 10% or more (but less than 20%) of
the outstanding Common Stock of the Company to be an Adverse Person if
such Person has reported or is required to report such ownership on
Schedule 13G under the Securities Exchange Act of 1934, as amended and
in effect on the date of this Agreement (the "Exchange Act") (or any
comparable or successor report) or on Schedule 13D under the Exchange
Act (or any comparable or successor report) which Schedule 13D does not
state any intention to or reserve the right to control or influence the
management or policies of the Company or engage in any of the actions
specified in Item 4 of such Schedule (other than the disposition of the
Common Stock) so long as such Person neither reports nor is required to
report such ownership other than as described in this paragraph (d).
(e) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act.
(f) A Person shall be deemed the "Beneficial Owner" of, and
shall be deemed to "beneficially own," any securities:
(i) which such Person or any of such Person's Affiliates
or Associates, directly or indirectly, has the right to acquire
(whether such right is exercisable immediately or only after the
passage of time) pursuant to any agreement, arrangement or
understanding (whether or not in writing) or upon the exercise of
conversion rights, exchange rights, rights, warrants or options,
or otherwise; provided, however, that a Person shall not be deemed
the "Beneficial Owner" of, or to "beneficially own," (A)
securities tendered pursuant to a tender or exchange offer made by
such Person or any of such Person's Affiliates or Associates until
such tendered securities are accepted for purchase or exchange, or
(B) securities issuable upon exercise of Rights at any time prior
to the occurrence of a Triggering Event, or (C) securities
issuable upon exercise of Rights from and after the occurrence of
a Triggering Event which Rights were acquired by such Person or
any of such Person's Affiliates or Associates prior to the
Distribution Date or pursuant to Section 3(a) or Section 22 hereof
(the "Original Rights") or pursuant to Section 11(i) hereof in
connection with an adjustment made with respect to any Original
Rights;
(ii) which such Person or any of such Person's Affiliates
or Associates, directly or indirectly, has the right to vote or
dispose of or has "beneficial ownership" of (as determined
pursuant to Rule 13d-3 of the General Rules and Regulations under
the Exchange Act), including pursuant to any agreement,
<PAGE>
arrangement or understanding, whether or not in writing; provided,
however, that a Person shall not be deemed the "Beneficial Owner"
of, or to "beneficially own," any security under this subparagraph
(ii) as a result of an agreement, arrangement or understanding to
vote such security if such agreement, arrangement or
understanding: (A) arises solely from a revocable proxy given in
response to a public proxy or consent solicitation made pursuant
to, and in accordance with, the applicable provisions of the
General Rules and Regulations under the Exchange Act, and (B) is
not also then reportable by such Person on Schedule 13D under the
Exchange Act (or any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly,
by any other Person (or any Affiliate or Associate thereof) with
which such Person (or any of such Person's Affiliates or
Associates) has any agreement, arrangement or understanding
(whether or not in writing), for the purpose of acquiring,
holding, voting (except pursuant to a revocable proxy as described
in the proviso to subparagraph (ii) of this paragraph (f)) or
disposing of any voting securities of the Company;
provided, however, that nothing in this paragraph (f) shall cause a
person engaged in business as an underwriter of securities to be the
"Beneficial Owner" of, or to "beneficially own," any securities acquired
through such person's participation in good faith in a firm commitment
underwriting until the expiration of forty days after the date of such
acquisition.
(g) "Business Day" shall mean any day other than a Saturday,
Sunday or a day on which banking institutions in the State of New York
or Kansas are authorized or obligated by law or executive order to
close.
(h) "Close of business" on any given date shall mean 5:00 P.M.,
New York City time, on such date; provided, however, that if such date
is not a Business Day it shall mean 5:00 P.M., New York City time, on
the next succeeding Business Day.
(i) "Common Stock" shall mean the common stock, no par value per
share, of the Company, except that "Common Stock" when used with
reference to any Person other than the Company shall mean the capital
stock of such Person with the greatest voting power, or the equity
securities or other equity interest having power to control or direct
the management, of such Person.
(j) "Common Stock Equivalents" shall have the meaning set forth
in Section 11(a)(iii) hereof.
(k) "Current Market Price" shall have the meaning set forth in
Section 11(d)(i) hereof.
(l) "Current Value" shall have the meaning set forth in Section
11(a)(iii) hereof.
(m) "Distribution Date" shall have the meaning set forth in
Section 3(a) hereof.
(n) "Equivalent Preferred Stock" shall have the meaning set
forth in Section 11(b) hereof.
<PAGE>
(o) "Exchange Act" shall have the meaning set forth in Section
1(d) hereof.
(p) "Exchange Ratio" shall have the meaning set forth in Section
24 hereof.
(q) "Expiration Date" shall have the meaning set forth in
Section 7(a) hereof.
(r) "Final Expiration Date" shall have the meaning set forth in
Section 7(a) hereof.
(s) "Person" shall mean any individual, firm, corporation,
partnership or other entity.
(t) "Preferred Stock" shall mean shares of Series A Junior
Participating Preferred Stock, no par value per share, of the Company,
and, to the extent that there are not a sufficient number of shares of
Series A Junior Participating Preferred Stock authorized to permit the
full exercise of the Rights, any other series of Preferred Stock of the
Company designated for such purpose containing terms substantially
similar to the terms of the Series A Junior Participating Preferred
Stock.
(u) "Principal Party" shall have the meaning set forth in
Section 13(b) hereof.
(v) "Purchase Price" shall have the meaning set forth in Section
4(a) hereof.
(w) "Qualifying Offer" shall have the meaning set forth in
Section 11(a)(ii)(A) hereof.
(x) "Record Date" shall have the meaning set forth in the
WHEREAS clause at the beginning of this Agreement.
(y) "Redemption Price" shall have the meaning set forth in
Section 23(a) hereof.
(z) "Rights" shall have the meaning set forth in the WHEREAS
clause at the beginning of the Agreement.
(aa) "Rights Agent" shall have the meaning set forth in the
parties clause at the beginning of this Agreement.
(ab) "Rights Certificates" shall have the meaning set forth in
Section 3(a) hereof.
(ac) "Rights Dividend Declaration Date" shall have the meaning
set forth in the WHEREAS clause at the beginning of this Agreement.
(ad) "Section 11(a)(ii) Event" shall mean any event described in
Section 11(a)(ii) hereof.
(ae) "Section 11(a)(ii) Trigger Date" shall have the meaning set
forth in Section 11(a)(iii) hereof.
(af) "Section 13 Event" shall mean any event described in clauses
(x), (y) or (z) of Section 13(a) hereof.
<PAGE>
(ag) "Spread" shall have the meaning set forth in Section
11(a)(iii) hereof.
(ah) "Stock Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include,
without limitation, a report filed pursuant to Section 13(d) under the
Exchange Act) by the Company or an Acquiring Person that an Acquiring
Person has become such.
(ai) "Subsidiary" shall mean, with reference to any Person, any
corporation of which an amount of voting securities sufficient to elect
at least a majority of the directors of such corporation is beneficially
owned, directly or indirectly, by such Person, or otherwise controlled
by such Person.
(aj) "Substitution Period" shall have the meaning set forth in
Section 11(a)(iii) hereof.
(ak) "Trading Day" shall have the meaning set forth in Section
11(d)(i) hereof.
(al) "Triggering Event" shall mean any Section 11(a)(ii) Event or
any Section 13 Event.
Section 2. Appointment of Rights Agent.
The Company hereby appoints the Rights Agent
to act as agent for the Company 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.
Section 3. Issue of Rights Certificates.
(a) Until the earliest of (i) the close of business on the tenth
day after the Stock Acquisition Date (or, if the tenth day after the
Stock Acquisition Date occurs before the Record Date, the close of
business on the Record Date), (ii) the close of business on the tenth
Business Day (or such later date as the Board shall determine) after the
date that a tender or exchange offer by any Person (other than the
Company, any Subsidiary of the Company, any employee benefit plan of the
Company or of any Subsidiary of the Company, or any Person or entity
organized, appointed or established by the Company for or pursuant to
the terms of any such plan) is first published or sent or given within
the meaning of Rule 14d-2(a) of the General Rules and Regulations under
the Exchange Act, if upon consummation thereof, such Person would be the
Beneficial Owner of 20% or more of the shares of Common Stock then
outstanding or (iii) the close of business on the tenth Business Day
after the Board of Directors determines, pursuant to the criteria set
forth in Section 11(a)(ii)(B) hereof, that a Person is an Adverse Person
(the earliest of (i), (ii) and (iii) being herein referred to as the
"Distribution Date"), (x) the Rights will be evidenced (subject to the
provisions of paragraph (b) of this Section 3) by the certificates for
the Common Stock registered in the names of the holders of the Common
Stock (which certificates for Common Stock shall be deemed also to be
certificates for Rights) and not by separate certificates, and (y) the
Rights will be transferable only in connection with the transfer of the
underlying shares of Common Stock (including a transfer to the Company).
As soon as practicable after the Distribution Date, the Rights Agent
<PAGE>
will send by first-class, insured, postage prepaid mail, to each record
holder of the Common Stock as of the close of business on the
Distribution Date, at the address of such holder shown on the records of
the Company, one or more rights certificates, in substantially the form
of Exhibit B hereto (the "Rights Certificates"), evidencing one Right
for each share of Common Stock so held, subject to adjustment as
provided herein. In the event that an adjustment in the number of Rights
per share of Common Stock has been made pursuant to Section 11(p)
hereof, at the time of distribution of the Rights Certificates, the
Company shall make the necessary and appropriate rounding adjustments
(in accordance with Section 14(a) hereof) so that Rights Certificates
representing only whole numbers of Rights are distributed and cash is
paid in lieu of any fractional Rights. As of and after the Distribution
Date, the Rights will be evidenced solely by such Rights Certificates.
(b) With respect to certificates for the Common Stock
outstanding as of the Record Date, until the Distribution Date, the
Rights will be evidenced by such certificates for the Common Stock and
the registered holders of the Common Stock shall also be the registered
holders of the associated Rights. Until the earlier of the Distribution
Date or the Expiration Date (as such term is defined in Section 7
hereof), the transfer of any certificates representing shares of Common
Stock in respect of which Rights have been issued shall also constitute
the transfer of the Rights associated with such shares of Common Stock.
(c) Rights shall be issued in respect of all shares of Common
Stock which are issued (whether originally issued or from the Company's
treasury) after the Record Date but prior to the earlier of the
Distribution Date or the Expiration Date or in certain circumstances
provided in Section 22 hereof, after the Distribution Date.
Certificates representing such shares of Common Stock shall also be
deemed to be certificates for Rights, and shall bear the following
legend:
This certificate also evidences and entitles the
holder hereof to certain Rights as set forth in the
Rights Agreement between Sterling House Corporation
(the "Company") and ChaseMellon Shareholder Services,
L.L.C. (the "Rights Agent"), dated as of June 25,
1997, as amended from time to time (the "Rights
Agreement"), the terms of which are hereby
incorporated herein by reference and a copy of which
is on file at the principal offices of the Company.
Under certain circumstances, as set forth in the
Rights 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 Rights
Agreement, as in effect on the date of mailing,
without charge promptly after receipt of a written
request therefor. Under certain circumstances set
forth in the Rights Agreement, Rights issued to, or
held by, any Person who is, was or becomes an
Acquiring Person or an Adverse Person or any Affiliate
or Associate thereof (as such terms are defined in the
Rights Agreement), whether currently held by or on
behalf of such Person or by any subsequent holder, may
become null and void.
<PAGE>
With respect to such certificates containing the foregoing legend, until
the earlier of (i) the Distribution Date or (ii) the Expiration Date,
the Rights associated with the Common Stock represented by such
certificates shall be evidenced by such certificates alone and
registered holders of Common Stock shall also be the registered holders
of the associated Rights, and the transfer of any of such certificates
shall also constitute the transfer of the Rights associated with the
Common Stock represented by such certificates.
Section 4. Form of Rights Certificates.
(a) The Rights Certificates (and the forms of election to
purchase and of assignment to be printed on the reverse thereof) shall
each be substantially in the form set forth in 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 on which the Rights may from time to
time be listed, or to conform to usage. Subject to the provisions of
Section 11 and Section 22 hereof, the Rights Certificates, whenever
distributed, shall be dated as of the Record Date and on their face
shall entitle the holders thereof to purchase such number of one one-
hundredths (1/100ths) of a share of Preferred Stock as shall be set
forth therein at the price set forth therein (such exercise price per
one one-hundredth (1/100th) of a share, the "Purchase Price"), but the
amount and type of securities purchasable upon the exercise of each
Right and the Purchase Price thereof shall be subject to adjustment as
provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(a) or
Section 22 hereof that represents Rights beneficially owned by: (i) an
Acquiring Person or Adverse Person or any Associate or Affiliate of an
Acquiring Person or Adverse Person, (ii) a transferee of an Acquiring
Person or Adverse Person (or of any such Associate or Affiliate) who
becomes a transferee after the Acquiring Person or Adverse Person
becomes such, or (iii) a transferee of an Acquiring Person or Adverse
Person (or of any such Associate or Affiliate) who becomes a transferee
prior to or concurrently with the Acquiring Person or Adverse Person
becoming such and receives such Rights pursuant to either (A) a transfer
(whether or not for consideration) from the Acquiring Person or Adverse
Person to holders of equity interests in such Acquiring Person or
Adverse Person or to any Person with whom such Acquiring Person or
Adverse Person has any continuing agreement, arrangement or
understanding regarding the transferred Rights or (B) a transfer which
the Board of Directors of the Company has determined is part of a plan,
arrangement or understanding which has as a primary purpose or effect
avoidance of Section 7(e) hereof, and any Rights Certificate issued
pursuant to Section 6 or Section 11 hereof upon transfer, exchange,
replacement or adjustment of any other Rights Certificate referred to in
this sentence, shall contain (to the extent feasible) the following
legend:
The Rights represented by this Rights
Certificate are or were beneficially owned by a Person
who was or became an Acquiring Person or Adverse
Person or an Affiliate or Associate of an Acquiring
<PAGE>
Person or Adverse Person (as such terms are defined in
the Rights Agreement). Accordingly, this Rights
Certificate and the Rights represented hereby may
become null and void in the circumstances specified in
Section 7(e) of such Agreement.
Section 5. Countersignature and Registration.
(a) The Rights Certificates shall be executed on behalf of the
Company by its Chairman of the Board, its President or any Vice
President, either manually or by facsimile signature, and shall have
affixed thereto the Company's seal or a facsimile thereof which shall be
attested by the Secretary or an Assistant Secretary of the Company,
either manually or by facsimile signature. The Rights Certificates
shall be countersigned by the Rights Agent, either manually or by
facsimile signature, and shall not be valid for any purpose unless so
countersigned. In case any officer of the Company who shall have signed
any of the Rights Certificates shall cease to be such officer of the
Company before countersignature by the Rights Agent and issuance and
delivery by the Company, such Rights Certificates, nevertheless, may be
countersigned by the Rights Agent and issued and delivered by the
Company with the same force and effect as though the person who signed
such Rights Certificates had not ceased to be such officer of the
Company; and any Rights Certificates may be signed on behalf of the
Company by any person who, at the actual date of the execution of such
Rights Certificate, shall be a proper officer of the Company to sign
such Rights Certificate, although at the date of the execution of this
Rights Agreement any such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep
or cause to be kept, at its principal office or offices designated as
the appropriate place for surrender of Rights Certificates upon exercise
or transfer, books for registration and transfer of the Rights
Certificates issued hereunder. Such books shall show the names and
addresses of the respective holders of the Rights Certificates, the
number of Rights evidenced on its face by each of the Rights
Certificates and the date of each of the Rights Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights
Certificates.
(a) Subject to the provisions of Section 4(b), Section 7(e) and
Section 14 hereof, 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 Rights Certificate or Certificates (other than
Rights Certificates representing Rights that have been exchanged
pursuant to Section 24 hereof) may be transferred, split up, combined or
exchanged for another Rights Certificate or Certificates, entitling the
registered holder to purchase a like number of one one-hundredths
(1/100ths) of a share of Preferred Stock (or, following a Triggering
Event, Common Stock, other securities, cash or other assets, as the case
may be) as the Rights Certificate or Certificates surrendered then
entitled such holder (or former holder in the case of a transfer) to
purchase. Any registered holder desiring to transfer, split up, combine
or exchange any Rights Certificate or Certificates shall make such
<PAGE>
request in writing delivered to the Rights Agent, and shall surrender
the Rights Certificate or Certificates to be transferred, split up,
combined or exchanged at the principal office or offices 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 Rights Certificate until the
registered holder shall have completed and signed the certificate
contained in the form of assignment on the reverse side of such Rights
Certificate and shall have provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or
Affiliates or Associates thereof as the Company shall reasonably
request. Thereupon the Rights Agent shall, subject to Section 4(b),
Section 7(e), Section 14 and Section 24 hereof, countersign and deliver
to the Person entitled thereto a Rights Certificate or Rights
Certificates, as the case may be, as so requested. The Company may
require payment of a sum sufficient to cover any tax or governmental
charge that may be imposed in connection with any transfer, split up,
combination or exchange of Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or
mutilation of a Rights Certificate, and, in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to them,
and reimbursement to the Company and the Rights Agent of all reasonable
expenses incidental thereto, and upon surrender to the Rights Agent and
cancellation of the Rights Certificate if mutilated, the Company will
execute and deliver a new Rights Certificate of like tenor to the Rights
Agent for countersignature and delivery to the registered owner in lieu
of the Rights Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of
Rights.
(a) Subject to Section 7(e) hereof, the registered holder of any
Rights Certificate may exercise the Rights evidenced thereby (except as
otherwise provided herein including, without limitation, the
restrictions on exercisability set forth in Section 9(c), Section
11(a)(iii) and Section 23(a) hereof) in whole or in part at any time
after the Distribution Date upon surrender of the Rights Certificate,
with the form of election to purchase and the certificate on the reverse
side thereof duly executed, to the Rights Agent at the principal office
or offices of the Rights Agent designated for such purpose, together
with payment of the aggregate Purchase Price with respect to the total
number of one one-hundredths (1/100ths) of a share (or other securities,
cash or other assets, as the case may be) as to which such surrendered
Rights are then exercisable, at or prior to the earliest of (i) the
close of business on June 25, 2007 (the "Final Expiration Date"), (ii)
the time at which the Rights are redeemed as provided in Section 23
hereof or (iii) the time at which such Rights are exchanged pursuant to
Section 24 hereof (the earliest of (i), (ii) and (iii) being herein
referred to as the "Expiration Date").
(b) The Purchase Price for each one one-hundredth (1/100th) of a
share of Preferred Stock pursuant to the exercise of a Right shall
initially be $80.00, and shall be subject to adjustment from time to
time as provided in Sections 11 and 13(a) hereof and shall be payable in
accordance with paragraph (c) below.
<PAGE>
(c) Upon receipt of a Rights Certificate representing
exercisable Rights, with the form of election to purchase and the
certificate duly executed, accompanied by payment, with respect to each
Right so exercised, of the Purchase Price per one one-hundredth
(1/100th) of a share of Preferred Stock (or other shares, securities,
cash or other assets, as the case may be) to be purchased as set forth
below and an amount equal to any applicable transfer tax, the Rights
Agent shall, subject to Section 20(k) hereof, thereupon promptly (i) (A)
requisition from any transfer agent of the shares of Preferred Stock (or
make available, if the Rights Agent is the transfer agent for such
shares) certificates for the total number of one one-hundredths
(1/100ths) of a share 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 depositary agent, requisition from the depositary agent
depositary receipts representing such number of one one-hundredths
(1/100ths) of a share of Preferred Stock as are to be purchased (in
which case certificates for the shares of Preferred Stock represented by
such receipts shall be deposited by the transfer agent with the
depositary agent) and the Company will direct the depositary agent to
comply with such request, (ii) requisition from the Company the amount
of cash, if any, to be paid in lieu of fractional shares in accordance
with Section 14 hereof, (iii) 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 Rights Certificate, registered in such
name or names as may be designated by such holder, and (iv) after
receipt thereof, deliver such cash, if any, to or upon the order of the
registered holder of such Rights Certificate. The payment of the
Purchase Price (as such amount may be reduced pursuant to Section
11(a)(iii) hereof) shall be made in cash or by certified bank check or
bank draft payable to the order of the Company. In the event that the
Company is obligated to issue other securities (including Common Stock)
of the Company, pay cash and/or distribute other property pursuant to
Section 11(a) hereof, 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. The
Company reserves the right to require prior to the occurrence of a
Triggering Event that, upon any exercise of Rights, a number of Rights
be exercised so that only whole shares of Preferred Stock would be
issued.
(d) In case the registered holder of any Rights Certificate
shall exercise less than all the Rights evidenced thereby, a new Rights
Certificate evidencing Rights equivalent to the Rights remaining
unexercised shall be issued by the Rights Agent and delivered to, or
upon the order of, the registered holder of such Rights Certificate,
registered in such name or names as may be designated by such holder,
subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary,
from and after the first occurrence of a Section 11(a)(ii) Event, any
Rights beneficially owned by (i) an Acquiring Person or Adverse Person
or an Associate or Affiliate of an Acquiring Person or Adverse Person,
(ii) a transferee of an Acquiring Person or Adverse Person (or of any
such Associate or Affiliate) who becomes a transferee after the
Acquiring Person or Adverse Person becomes such, or (iii) a transferee
of an Acquiring Person or Adverse Person (or of any such Associate or
Affiliate) who becomes a transferee prior to or concurrently with the
<PAGE>
Acquiring Person or Adverse Person becoming such and receives such
Rights pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person or Adverse Person to holders of
equity interests in such Acquiring Person or Adverse Person or to any
Person with whom the Acquiring Person or Adverse Person has any
continuing agreement, arrangement or understanding regarding the
transferred Rights or (B) a transfer which the Board of Directors of the
Company has determined is part of a plan, arrangement or understanding
which has as a primary purpose or effect the avoidance of this Section
7(e), shall become null and void without any further action and no
holder of such Rights shall have any rights whatsoever with respect to
such Rights, whether under any provision of this Agreement or otherwise.
The Company shall use all reasonable efforts to insure that the
provisions of this Section 7(e) and Section 4(b) hereof are complied
with, but shall have no liability to any holder of Rights Certificates
or other Person as a result of its failure to make any determinations
with respect to an Acquiring Person or Adverse Person or any of their
respective Affiliates, Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake
any action with respect to a registered holder upon the occurrence of
any purported exercise as set forth in this Section 7 unless such
registered holder shall have (i) completed and signed the certificate
contained in the form of election to purchase set forth on the reverse
side of the Rights Certificate surrendered for such exercise, and (ii)
provided such additional evidence of the identity of the Beneficial
Owner (or former Beneficial Owner) or Affiliates or Associates thereof
as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Rights Certificates
All Rights Certificates surrendered for the purpose of exercise, transfer,
split up, combination or exchange shall, if surrendered to the Company or any
of its agents, be delivered to the Rights Agent for cancellation or in
cancelled form, or, if surrendered to the Rights Agent, shall be cancelled by
it, and no Rights Certificates shall be issued in lieu thereof except as
expressly permitted by any of the provisions of this Agreement. The Company
shall deliver to the Rights Agent for cancellation and retirement, and the
Rights Agent shall so cancel and retire, any other Rights Certificate
purchased or acquired by the Company otherwise than upon the exercise thereof.
The Rights Agent shall deliver all cancelled Rights Certificates to the
Company, or shall, at the written request of the Company, destroy such
cancelled Rights Certificates, and in such case shall deliver a certificate of
destruction thereof to the Company.
Section 9. Reservation and Availability of Capital Stock.
(a) The Company covenants and agrees that it will cause to be
reserved and kept available out of its authorized and unissued shares of
Preferred Stock (and, following the occurrence of a Triggering Event,
out of its authorized and unissued shares of Common Stock and/or other
securities or out of its authorized and issued shares held in its
treasury), the number of shares of Preferred Stock (and, following the
occurrence of a Triggering Event, Common Stock and/or other securities)
that, as provided in this Agreement including Section 11(a)(iii) hereof,
will be sufficient to permit the exercise in full of all outstanding
Rights.
<PAGE>
(b) So long as the shares of Preferred Stock (and, following the
occurrence of a Triggering Event, Common Stock and/or other securities)
issuable and deliverable upon the exercise of the Rights may be listed
on any national securities exchange, 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 on such
exchange upon official notice of issuance upon such exercise.
(c) The Company shall use its best efforts to (i) file, as soon
as practicable following the earliest date after the first occurrence of
a Section 11(a)(ii) Event on which the consideration to be delivered by
the Company upon exercise of the Rights has been determined in
accordance with Section 11(a)(iii) hereof, a registration statement
under the Securities Act of 1933 (the "Act"), with respect to the
securities purchasable upon exercise of the Rights on an appropriate
form, (ii) cause such registration statement to become effective as soon
as practicable after such filing, and (iii) cause such registration
statement to remain effective (with a prospectus at all times meeting
the requirements of the Act) until the earlier of (A) the date as of
which the Rights are no longer exercisable for such securities, and (B)
the date of the expiration of the Rights. The Company will also take
such action as may be appropriate under, or to ensure compliance with,
the securities or "blue sky" laws of the various states in connection
with the exercisability of the Rights. The Company may temporarily
suspend, for a period of time not to exceed ninety (90) days after the
date set forth in clause (i) of the first sentence of this Section 9(c),
the exercisability of the Rights in order to prepare and file such
registration statement and permit it to become effective. Upon any such
suspension, the Company shall issue a public announcement stating that
the exercisability of the Rights has been temporarily suspended, as well
as a public announcement at such time as the suspension is no longer in
effect. In addition, if the Company shall determine that a registration
statement is required following the Distribution Date, the Company may
temporarily suspend the exercisability of the Rights until such time as
a registration statement has been declared effective. Notwithstanding
any provision of this Agreement to the contrary, the Rights shall not be
exercisable in any jurisdiction if the requisite qualification in such
jurisdiction shall not have been obtained, the exercise thereof shall
not be permitted under applicable law or a registration statement shall
not have been declared effective.
(d) The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all one one-hundredths
(1/100ths) of a share of Preferred Stock (and, following the occurrence
of a Triggering 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.
(e) 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 Rights Certificates and of any certificates for a number of one one-
hundredths (1/100ths) of a share of 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
Rights Certificates to a Person other than, or the issuance or delivery
<PAGE>
of a number of one one-hundredths (1/100ths) of a share of Preferred
Stock (or Common Stock and/or other securities, as the case may be) in
respect of a name other than that of, the registered holder of the
Rights Certificates evidencing Rights surrendered for exercise or to
issue or deliver any certificates for a number of one one-hundredths
(1/100ths) of a share of 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 such tax shall
have been paid (any such tax being payable by the holder of such Rights
Certificate at the time of surrender) or until it has been established
to the Company's satisfaction that no such tax is due.
Section 10. Preferred Stock Record Date TC "Section 10. Preferred
Stock Record Date" \f C \l "1" . Each person in whose name any certificate
for a number of one one-hundredths (1/100ths) of a share of 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 such fractional shares of 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 Rights Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and all 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 Rights Certificate shall not be entitled to
any rights of a stockholder of the Company with respect to shares for which
the Rights shall be exercisable, including, without limitation, the right to
vote, to receive dividends or other distributions or to exercise any
preemptive rights, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or
Number of Rights. The Purchase Price, the
number and kind of shares covered by each Right and the number of Rights
outstanding are subject to adjustment from time to time as provided in this
Section 11.
(a) (i) In the event the Company shall at any time after the
date of this Agreement (A) declare a dividend on the Preferred
Stock payable in shares of Preferred Stock, (B) subdivide the
outstanding Preferred Stock, (C) combine the outstanding Preferred
Stock into a smaller number of shares, 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(a) and Section 7(e) hereof, 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 Preferred
Stock or capital stock, as the case may be, issuable on such date,
shall be proportionately adjusted so that the holder of any Right
exercised after such time shall be entitled to receive, upon
<PAGE>
payment of the Purchase Price then in effect, the aggregate number and
kind of shares of Preferred Stock or capital stock, as the case
may be, 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 or she would have owned upon such
exercise and been entitled to receive by virtue of such dividend,
subdivision, combination or reclassification. If an event occurs
which would require an adjustment under both this Section 11(a)(i)
and Section 11(a)(ii) hereof, the adjustment provided for in this
Section 11(a)(i) shall be in addition to, and shall be made prior
to, any adjustment required pursuant to Section 11(a)(ii) hereof.
(ii) In the event that:
(A) any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the
Company or of any Subsidiary of the Company, or any Person
or entity organized, appointed or established by the Company
for or pursuant to the terms of any such plan), alone or
together with its Affiliates and Associates, shall, at any
time after the Rights Dividend Declaration Date, become an
Acquiring Person, unless the event causing the Person to
become an Acquiring Person is (1) a transaction set forth in
Section 13(a) hereof or (2) an acquisition of shares of
Common Stock pursuant to a tender offer or an exchange offer
for all outstanding shares of Common Stock at a price and on
terms determined by at least a majority of the members of
the Board of Directors who are not officers of the Company
and who are not representatives, nominees, Affiliates or
Associates of an Acquiring Person, after receiving advice
from one or more investment banking firms, to be (a) at a
price which is fair to stockholders (taking into account all
factors which such members of the Board deem relevant
including, without limitation, prices which could reasonably
be achieved if the Company or its assets were sold on an
orderly basis designed to realize maximum value) and (b)
otherwise in the best interests of the Company and its
stockholders (a "Qualifying Offer") or (B) the Board of
Directors of the Company shall declare any Person to be an
Adverse Person, upon a determination that such Person, alone
or together with its Affiliates and Associates, has, at any
time after this Agreement has been filed with the Securities
and Exchange Commission as an exhibit to a filing under the
Exchange Act, become the Beneficial Owner of a number of
shares of Common Stock which the Board of Directors of the
Company determines to be substantial (which number of shares
shall in no event represent less than 10% of the outstanding
shares of Common Stock) and a determination by the Board of
Directors of the Company, after reasonable inquiry and
investigation, including consultation with such Persons as
such directors shall deem appropriate and consideration of
such factors as are permitted by applicable law, that (a)
such Beneficial Ownership by such Person is intended to
cause the Company to repurchase the shares of Common Stock
beneficially owned by such Person or to cause pressure on
the Company to take action or enter into a transaction or
series of transactions intended to provide such Person with
short-term financial gain under circumstances where the
Board of Directors determines that the best long-term
<PAGE>
interests of the Company would not be served by taking such action
or entering into such transaction or series of transactions
at the time or (b) such Beneficial Ownership is causing or
reasonably likely to cause a material adverse impact
(including, but not limited to, impairment of relationships
with customers or impairment of the Company's ability to
maintain its competitive position) on the business or
prospects of the Company;
then, promptly following the occurrence of any event described in
Section 11(a)(ii)(A) or (B) hereof, proper provision shall be made
so that each holder of a Right (except as provided below and in
Section 7(e) hereof) shall thereafter have the right to receive,
upon exercise thereof at the then current Purchase Price in
accordance with the terms of this Agreement, in lieu of a number
of one one-hundredths (1/100ths) of a share of Preferred Stock,
such number of shares of Common Stock of the Company as shall
equal the result obtained by (x) multiplying the then current
Purchase Price by the then number of one one-hundredths (1/100ths)
of a share of Preferred Stock for which a Right was exercisable
immediately prior to the first occurrence of a Section 11(a)(ii)
Event, and (y) dividing that product (which, following such first
occurrence, shall thereafter be referred to as the "Purchase
Price" for each Right and for all purposes of this Agreement) by
50% of the Current Market Price (determined pursuant to Section
11(d) hereof) per share of Common Stock on the date of such first
occurrence (such number of shares, the "Adjustment Shares").
(iii) In the event that the number of shares of Common Stock
which are authorized by the Company's Certificate of Incorporation
but not outstanding or reserved for issuance for purposes other
than upon exercise of the Rights are not sufficient to permit the
exercise in full of the Rights in accordance with the foregoing
subparagraph (ii) of this Section 11(a), the Company shall
(A) determine the value of the Adjustment Shares issuable upon the
exercise of a Right (the "Current Value"), and (B) with respect
to each Right (subject to Section 7(e) hereof), make adequate
provision to substitute for the Adjustment Shares, upon the
exercise of a Right and payment of the applicable Purchase Price,
(1) cash, (2) a reduction in the Purchase Price, (3) Common Stock
or other equity securities of the Company (including, without
limitation, shares, or units of shares, of preferred stock, such
as the Preferred Stock, which the Board has deemed to have
essentially the same value or economic rights as shares of Common
Stock (such shares of preferred stock being referred to as "Common
Stock Equivalents")), (4) debt securities of the Company, (5)
other assets, or (6) any combination of the foregoing, having an
aggregate value equal to the Current Value (less the amount of any
reduction in the Purchase Price), where such aggregate value has
been determined by the Board based upon the advice of a nationally
recognized investment banking firm selected 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 later of (x) the first
occurrence of a Section 11(a)(ii) Event and (y) the date on which
the Company's right of redemption pursuant to Section 23(a)
expires (the later of (x) and (y) being referred to herein as the
"Section 11(a)(ii) Trigger Date"), then the Company shall be
obligated to deliver, upon the surrender for exercise of a Right
<PAGE>
and without requiring payment of the Purchase Price, shares of
Common Stock (to the extent available) and then, if necessary,
cash, which shares and/or cash have an aggregate value equal to
the Spread. For purposes of the preceding sentence, the term
"Spread" shall mean the excess of (i) the Current Value over (ii)
the Purchase Price. If the Board determines in good faith that it
is likely that sufficient additional shares of Common Stock could
be authorized for issuance upon exercise in full of the Rights,
the thirty (30) day period set forth above may be extended to the
extent necessary, but not more than ninety (90) days after the
Section 11(a)(ii) Trigger Date, in order that the Company may seek
shareholder approval for the authorization of such additional
shares (such thirty (30) day period, as it may be extended, is
herein called the "Substitution Period"). To the extent that
action is to be taken pursuant to the first and/or third sentences
of this Section 11(a) (iii), the Company (1) shall provide,
subject to Section 7(e) hereof, that such action shall apply
uniformly to all outstanding Rights, and (2) may suspend the
exercisability of the Rights until the expiration of the
Substitution Period in order to seek such shareholder approval for
such 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(a)(iii), the value of each Adjustment Share shall be the
Current Market Price per share of the Common Stock on the Section
11(a)(ii) Trigger Date and the per share or per unit value of any
Common Stock Equivalent shall be deemed to equal the Current
Market Price per share of the Common Stock on such date.
(b) In case the Company shall fix a record date for the issuance
of rights (other than the Rights), options or warrants to all holders of
Preferred Stock entitling them to subscribe for or purchase (for a
period expiring within forty-five (45) calendar days after such record
date) Preferred Stock (or shares having the same rights, privileges and
preferences as the shares of 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 price per share, if a
security convertible into Preferred Stock or Equivalent Preferred Stock)
less than the Current Market Price (as determined pursuant to Section
11(d) hereof) per share of Preferred Stock 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 outstanding on such record date,
plus the number of shares of Preferred Stock which the aggregate
offering price of the total number of shares of Preferred Stock and/or
Equivalent Preferred Stock so to be offered (and/or the aggregate
initial conversion price of the convertible securities so to be offered)
would purchase at such Current Market Price, and the denominator of
which shall be the number of shares of Preferred Stock outstanding on
such record date, plus the number of additional shares of Preferred
Stock and/or Equivalent Preferred Stock to be offered for subscription
or purchase (or into which the convertible securities so to be offered
are initially convertible). In case such subscription price may be paid
<PAGE>
by delivery of consideration part or all of which may be in a form other
than cash, the value of such consideration shall be as determined in
good faith by the Board of Directors of the Company, whose determination
shall be described in a statement filed with the Rights Agent and shall
be binding on the Rights Agent and the holders of the Rights. Shares of
Preferred Stock owned by or held for the account of the Company shall
not be deemed outstanding for the purpose of any such computation. Such
adjustment shall be made successively whenever such a record date is
fixed, and in the event that such rights or warrants are not so issued,
the Purchase Price shall be adjusted to be the Purchase Price which
would then be in effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for a
distribution to all holders of Preferred Stock (including any such
distribution made in connection with a consolidation or merger in which
the Company is the continuing corporation) of evidences of indebtedness,
cash (other than a regular quarterly cash dividend out of the earnings
or retained earnings of the Company), assets (other than a dividend
payable in Preferred Stock, but including any dividend payable in stock
other than Preferred Stock) or subscription rights or warrants
(excluding those referred to in Section 11(b) hereof), the Purchase
Price to be in effect after such record date shall be determined by
multiplying the Purchase Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the Current
Market Price (as determined pursuant to Section 11(d) hereof) per share
of Preferred Stock on such record date, less the fair market value (as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights
Agent and shall be binding on the Rights Agent and the holders of the
Rights) of the portion of the cash, assets or evidences of indebtedness
so to be distributed or of such subscription rights or warrants
applicable to a share of Preferred Stock and the denominator of which
shall be such Current Market Price (as determined pursuant to Section
11(d) hereof) per share of Preferred Stock. 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 be
adjusted to be the Purchase Price which would have been in effect if
such record date had not been fixed.
(d) (i) For the purpose of any computation hereunder, other
than computations made pursuant to Section 11(a)(iii) hereof, the
"Current Market Price" per share of Common Stock on any date shall
be deemed to be the average of the daily closing prices per share
of such Common Stock for the thirty (30) consecutive Trading Days
immediately prior to such date, and for purposes of computations
made pursuant to Section 11(a)(iii) hereof, the Current Market
Price per share of Common Stock on any date shall be deemed to be
the average of the daily closing prices per share of such Common
Stock for the ten (10) consecutive Trading Days immediately
following such date; provided, however, that in the event that the
Current Market Price per share of the Common Stock is determined
during a period following the announcement by the issuer of such
Common Stock of (A) a dividend or distribution on such Common
Stock payable in shares of such Common Stock or securities
convertible into shares of such Common Stock (other than the
Rights), or (B) any subdivision, combination or reclassification
of such Common Stock, and the ex-dividend date for such dividend
or distribution, or the record date for such subdivision,
combination or reclassification shall not have occurred prior to
<PAGE>
the commencement of the requisite thirty (30) Trading Day or ten (10)
Trading Day period, as set forth above, then, and in each such
case, the Current Market Price shall be properly adjusted to take
into account ex-dividend trading. 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 or admitted to trading on the New York Stock
Exchange or, if the shares of Common Stock are not listed or
admitted to trading on the New York Stock Exchange, as reported in
the principal consolidated transaction reporting system with
respect to securities listed on the principal national securities
exchange on which the shares of Common Stock are listed or
admitted to trading or, if the shares of Common Stock are not
listed or admitted to trading on any national securities exchange,
the last quoted price or, if not so quoted, the average of the
high bid and low asked prices in the over-the-counter market, as
reported by the National Association of Securities Dealers, Inc.
Automated Quotation System ("NASDAQ") or such other system then in
use, or, if on any such date the shares of Common Stock are not
quoted by any such organization, the average of the closing bid
and asked prices as furnished by a professional market maker
making a market in the Common Stock selected by the Board. If on
any such date no market maker is making a market in the Common
Stock, the fair value of such shares 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 shares of Common Stock are listed or
admitted to trading is open for the transaction of business or, if
the shares of Common Stock are not listed or admitted to trading
on any national securities exchange, a Business Day. If the
Common Stock is not publicly held or not so listed or traded,
Current Market Price per share shall mean the fair value per share
as determined in good faith by the Board, whose determination
shall be described in a statement filed with the Rights Agent and
shall be conclusive for all purposes.
(ii) For the purpose of any computation hereunder, the
Current Market Price per share of Preferred Stock shall be
determined in the same manner as set forth above for the Common
Stock in clause (i) of this Section 11(d) (other than the last
sentence thereof). If the Current Market Price per share of
Preferred Stock cannot be determined in the manner provided above
or if the Preferred Stock is not publicly held or listed or traded
in a manner described in clause (i) of this Section 11(d), the
Current Market Price per share of Preferred Stock shall be
conclusively deemed to be an amount equal to 100 (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 Market Price per share of the Common Stock. If
neither the Common Stock nor the Preferred Stock is publicly held
or so listed or traded, Current Market Price per share of the
Preferred Stock shall mean the fair value per share as determined
in good faith by the Board, whose determination shall be described
in a statement filed with the Rights Agent and shall be conclusive
for all purposes.
<PAGE>
(e) Anything herein to the contrary not withstanding, no
adjustment in the Purchase Price shall be required unless such
adjustment would require an increase or decrease of at least one percent
(1%) in the Purchase Price; provided, however, that any adjustments
which by reason of this Section 11(e) are not required to be made shall
be carried forward and taken into account in any subsequent adjustment.
All calculations under this Section 11 shall be made to the nearest cent
or to the nearest ten-thousandth of a share of Common Stock or other
share or one-millionth of a share of Preferred Stock, as the case may
be. Notwithstanding the first sentence of this Section 11(e), any
adjustment required by this Section 11 shall be made no later than the
earlier of (i) three (3) years from the date of the transaction which
mandates such adjustment, or (ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section
11(a)(ii) or Section 13(a) hereof, the holder of any Right thereafter
exercised shall become entitled to receive any shares of capital stock
other than Preferred Stock, thereafter the number of such other shares
so receivable upon exercise of any Right and the Purchase Price thereof
shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect
to the Preferred Stock contained in Sections 11(a), (b), (c), (e), (g),
(h), (i), (j), (k) and (m), and the provisions of Sections 7, 9, 10, 13
and 14 hereof with respect to the Preferred Stock shall apply on like
terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to
any adjustment made to the Purchase Price hereunder shall evidence the
right to purchase, at the adjusted Purchase Price, the number of one
one-hundredths (1/100ths) 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.
(h) Unless the Company shall have exercised its election as
provided in Section 11(i), upon each adjustment of the Purchase Price as
a result of the calculations made in Sections 11(b) and (c), 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-hundredths (1/100ths) of a share of
Preferred Stock (calculated to the nearest one-millionth) obtained by
(i) multiplying (x) the number of one one-hundredths (1/100ths) of a
share 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.
(i) The Company may elect on or after the date of any adjustment
of the Purchase Price to adjust the number of Rights, in lieu of any
adjustment in the number of one one-hundredths (1/100ths) of a share of
Preferred Stock purchasable upon the exercise of a Right. Each of the
Rights outstanding after the adjustment in the number of Rights shall be
exercisable for the number of one one-hundredths (1/100ths) 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 one 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
<PAGE>
Purchase Price. The Company shall make a public announcement of its
election to adjust the number of Rights, indicating the record date for
the adjustment, and, if known at the time, the amount of the adjustment
to be made. This record date may be the date on which the Purchase
Price is adjusted or any day thereafter, but, if the Rights Certificates
have been issued, shall be at least ten (10) days later than the date of
the public announcement. If Rights Certificates have been issued, upon
each adjustment of the number of Rights pursuant to this Section 11(i),
the Company shall, as promptly as practicable, cause to be distributed
to holders of record of Rights Certificates on such record date Rights
Certificates evidencing, subject to Section 14 hereof, the additional
Rights to which such holders shall be entitled as a result of such
adjustment, or, at the option of the Company, shall cause to be
distributed to such holders of record in substitution and replacement
for the Rights Certificates held by such holders prior to the date of
adjustment, and upon surrender thereof, if required by the Company, new
Rights Certificates evidencing all the Rights to which such holders
shall be entitled after such adjustment. Rights Certificates so to be
distributed shall be issued, executed and countersigned in the manner
provided for herein (and may bear, at the option of the Company, the
adjusted Purchase Price) and shall be registered in the names of the
holders of record of Rights Certificates on the record date specified in
the public announcement.
(j) Irrespective of any adjustment or change in the Purchase
Price or the number of one one-hundredths (1/100ths) of a share of
Preferred Stock issuable upon the exercise of the Rights, the Rights
Certificates theretofore and thereafter issued may continue to express
the Purchase Price per one one-hundredths (1/100ths) of a share and the
number of one one-hundredths (1/100ths) of a share which were expressed
in the initial Rights Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment
reducing the Purchase Price below the then stated value, if any, of the
number of one one-hundredths (1/100ths) of a share of Preferred 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 such number of one one-hundredths (1/100ths) of a share of
Preferred Stock at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date
for a specified event, the Company may elect to defer until the
occurrence of such event the issuance to the holder of any Right
exercised after such record date the number of one one-hundredths
(1/100ths) of a share of Preferred Stock and other capital stock or
securities of the Company, if any, issuable upon such exercise over and
above the number of one one-hundredths (1/100ths) of a share of
Preferred Stock and other capital stock or securities of the Company, if
any, issuable upon such exercise on the basis of the Purchase Price in
effect prior to such adjustment; provided, however, that the Company
shall deliver to such holder a due bill or other appropriate instrument
evidencing such holder's right to receive such additional shares
(fractional or otherwise) or securities upon the occurrence of the event
requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding,
the Company shall be entitled to make such reductions in the Purchase
<PAGE>
Price, in addition to those adjustments expressly required by this
Section 11, as and to the extent that in their good faith judgment the
Board of Directors of the Company shall determine to be advisable in
order that any (i) consolidation or subdivision of the Preferred Stock,
(ii) issuance wholly for cash of any shares of Preferred Stock at less
than the Current Market Price, (iii) issuance wholly for cash of shares
of Preferred Stock or securities which by their terms are convertible
into or exchangeable for shares of Preferred Stock, (iv) stock dividends
or (v) issuance of rights, options or warrants referred to in this
Section 11, hereafter made by the Company to holders of its Preferred
Stock shall not be taxable to such stockholders.
(n) The Company covenants and agrees that it shall not, at any
time after the Distribution Date, (i) consolidate with any other Person
(other than a Subsidiary of the Company in a transaction which complies
with Section 11(o) hereof), (ii) merge with or into any other Person
(other than a Subsidiary of the Company in a transaction which complies
with Section 11(o) hereof), or (iii) sell or transfer (or permit any
Subsidiary to sell or transfer), in one transaction, or a series of
related transactions, assets or earning power aggregating more than 50%
of the assets or earning power of the Company and its Subsidiaries
(taken as a whole) to any other Person or Persons (other than the
Company and/or any of its Subsidiaries in one or more transactions each
of which complies with Section 11(o) hereof), if (x) at the time of or
immediately after such consolidation, merger or sale there are any
rights, warrants or other instruments or securities outstanding or
agreements in effect which would substantially diminish or otherwise
eliminate the benefits intended to be afforded by the Rights or (y)
prior to, simultaneously with or immediately after such consolidation,
merger or sale, the shareholders of the Person who constitutes, or would
constitute, the "Principal Party" for purposes of Section 13(a) hereof
shall have received a distribution of Rights previously owned by such
Person or any of its Affiliates and Associates.
(o) The Company covenants and agrees that, after the
Distribution Date, it will not, except as permitted by Section 23 or
Section 27 hereof, 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 diminish substantially or otherwise eliminate the benefits
intended to be afforded by the Rights.
(p) Anything in this Agreement to the contrary notwithstanding,
in the event that the Company shall at any time after the Rights
Dividend Declaration Date and prior to the Distribution Date (i) declare
a dividend on the outstanding shares of Common Stock payable in shares
of Common Stock, (ii) subdivide the outstanding shares of Common Stock,
or (iii) combine the outstanding shares of Common Stock into a smaller
number of shares, the number of Rights associated with each share of
Common Stock then outstanding, or issued or delivered thereafter but
prior to the Distribution Date, 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 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.
<PAGE>
(q) The failure of the Board of Directors to declare a Person to
be an Adverse Person following such Person becoming the Beneficial Owner
of shares of Common Stock representing 10% or more of the outstanding
shares of Common Stock shall not imply that such Person is not an
Adverse Person or limit the Board of Directors' right at any time in the
future to declare such Person to be an Adverse Person.
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Section 11 and
Section 13 hereof, 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 Preferred Stock and the Common Stock, a copy of such
certificate, and (c) mail a brief summary thereof to each holder of a Rights
Certificate (or, if prior to the Distribution Date, to each holder of a
certificate representing shares of Common Stock) in accordance with Section 26
hereof. The Rights Agent shall be fully protected in relying on any such
certificate and on any adjustment therein contained.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power.
(a) In the event that, following the Stock Acquisition Date,
directly or indirectly, (x) the Company shall consolidate with, or merge
with and into, any other Person (other than a Subsidiary of the Company
in a transaction which complies with Section 11(o) hereof), and the
Company shall not be the continuing or surviving corporation of such
consolidation or merger, (y) any Person (other than a Subsidiary of the
Company in a transaction which complies with Section 11(o) hereof) shall
consolidate with, or merge with or into, the Company, and the Company
shall be the continuing or surviving corporation of such consolidation
or merger and, in connection with such consolidation or merger, all or
part of the outstanding shares of Common Stock shall be changed into or
exchanged for stock or other securities of any other Person or cash or
any other property, or (z) the Company shall sell or otherwise transfer
(or one or more of its Subsidiaries shall sell or otherwise transfer),
in one transaction or a series of related transactions, assets or
earning power aggregating more than 50% of the assets or earning power
of the Company and its Subsidiaries (taken as a whole) to any Person or
Persons (other than the Company or any Subsidiary of the Company in one
or more transactions each of which complies with Section 11(o) hereof),
then, and in each such case (except as may be contemplated by Section
13(d) hereof), proper provision shall be made so that: (i) each holder
of a Right, except as provided in Section 7(e) hereof, shall thereafter
have the right to receive, upon the exercise thereof at the then current
Purchase Price in accordance with the terms of this Agreement, such
number of validly authorized and issued, fully paid, non-assessable and
freely tradable shares of Common Stock of the Principal Party (as such
term is hereinafter defined), not subject to any liens, encumbrances,
rights of first refusal or other adverse claims, as shall be equal to
the result obtained by (1) multiplying the then current Purchase Price
by the number of one one-hundredths (1/100ths) of a share of Preferred
Stock for which a Right is exercisable immediately prior to the first
occurrence of a Section 13 Event (or, if a Section 11(a)(ii) Event has
occurred prior to the first occurrence of a Section 13 Event,
multiplying the number of such one one-hundredths (1/100ths) of a share
for which a Right was exercisable immediately prior to the first
<PAGE>
occurrence of a Section 11(a)(ii) Event by the Purchase Price in effect
immediately prior to such first occurrence), and dividing that product
(which, following the first occurrence of a Section 13 Event, shall be
referred to as the "Purchase Price" for each Right and for all purposes
of this Agreement) by (2) 50% of the Current Market Price (determined
pursuant to Section 11(d)(i) hereof) per share of the Common Stock of
such Principal Party on the date of consummation of such Section 13
Event; (ii) such Principal Party shall thereafter be liable for, and
shall assume, by virtue of such Section 13 Event, all the obligations
and duties of the Company pursuant to this Agreement; (iii) the term
"Company" shall thereafter be deemed to refer to such Principal Party,
it being specifically intended that the provisions of Section 11 hereof
shall apply only to such Principal Party following the first occurrence
of a Section 13 Event; (iv) such Principal Party shall take such steps
(including, but not limited to, the reservation of a sufficient number
of shares of its Common Stock) in connection with the consummation of
any such transaction as may be necessary to assure that the provisions
hereof shall thereafter be applicable, as nearly as reasonably may be,
in relation to its shares of Common Stock thereafter deliverable upon
the exercise of the Rights; and (v) the provisions of Section 11(a)(ii)
<PAGE>
hereof shall be of no effect following the first occurrence of any
Section 13 Event.
(b) "Principal Party" shall mean:
(i) in the case of any transaction described in clause (x)
or (y) of the first sentence of Section 13(a), the Person that is
the issuer of any securities into which shares of Common Stock of
the Company are converted in such merger or consolidation, and if
no securities are so issued, the Person that is the other party to
such merger or consolidation; and
(ii) in the case of any transaction described in clause (z)
of the first sentence of Section 13(a), the Person that is the
party receiving the greatest portion of the assets or earning
power transferred pursuant to such transaction or transactions;
provided, however, that in any such case, (1) if the Common Stock of
such Person is not at such time and has not been continuously over the
preceding twelve (12) month period registered under Section 12 of the
Exchange Act, and such Person is a direct or indirect Subsidiary of
another Person the Common Stock of which is and has been so registered,
"Principal Party" shall refer to such other Person; and (2) in case such
Person is a Subsidiary, directly or indirectly, of more than one Person,
the Common Stocks of two or more of which are and have been so
registered, "Principal Party" shall refer to whichever of such Persons
is the issuer of the Common Stock having the greatest aggregate market
value.
(c) The Company shall not consummate any such consolidation,
merger, sale or transfer unless the Principal Party shall have a
sufficient number of authorized shares of its Common Stock which have
not been issued or reserved for issuance to permit the exercise in full
of the Rights in accordance with this Section 13 and unless prior
thereto the Company and such Principal Party shall have executed and
delivered to the Rights Agent a supplemental agreement providing for the
terms set forth in paragraphs (a) and (b) of this Section 13 and further
providing that, as soon as practicable after the date of any
consolidation, merger or sale of assets mentioned in paragraph (a) of
this Section 13, the Principal Party will:
(i) prepare and file a registration statement under the
Act, with respect to the Rights and the securities purchasable
upon exercise of the Rights on an appropriate form, and will use
its best efforts to cause such registration statement to (A)
become effective as soon as practicable after such filing and (B)
remain effective (with a prospectus at all times meeting the
requirements of the Act) until the Expiration Date; and
(ii) will deliver to holders of the Rights historical
financial statements for the Principal Party and each of its
Affiliates which comply in all respects with the requirements for
registration on Form 10 under the Exchange Act.
The provisions of this Section 13 shall similarly apply to successive
mergers or consolidations or sales or other transfers. In the event
that a Section 13 Event shall occur at any time after the occurrence of
a Section 11(a)(ii) Event, the Rights which have not theretofore been
<PAGE>
exercised shall thereafter become exercisable in the manner described in
Section 13(a).
(d) Notwithstanding anything in this Agreement to the contrary,
Section 13 shall not be applicable to a transaction described in
subparagraphs (x) and (y) of Section 13(a) if (i) such transaction is
consummated with a Person or Persons who acquired shares of Common Stock
pursuant to a Qualifying Offer (or a wholly owned subsidiary of any such
Person or Persons), (ii) the price per share of Common Stock offered in
such transaction is not less than the price per share of Common Stock
paid to all holders of shares of Common Stock whose shares were
purchased pursuant to such Qualifying Offer and (iii) the form of
consideration being offered to the remaining holders of shares of Common
Stock pursuant to such transaction is the same as the form of
consideration paid pursuant to such Qualifying Offer. Upon consummation
of any such transaction contemplated by this Section 13(d), all Rights
hereunder shall expire.
Section 14. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue fractions of
Rights, except prior to the Distribution Date as provided in Section
11(p) hereof, or to distribute Rights Certificates which evidence
fractional Rights. In lieu of such fractional Rights, there shall be
paid to the registered holders of the Rights 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 purposes of this Section 14(a), the current market value of
a whole Right shall be the closing price of the Rights for the Trading
Day immediately prior to the date on which such fractional Rights would
have been otherwise issuable. The closing price of the Rights 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 or admitted to trading on the New York Stock Exchange or, if the
Rights are not listed or admitted to trading on the New York Stock
Exchange, 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 NASDAQ or such other system then in
use or, if on any such date the Rights are not quoted by any such
organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the Rights
selected by the Board of Directors of the Company. If on any such date
no such market maker is making a market in the Rights the fair value of
the Rights on such date as determined in good faith by the Board of
Directors of the Company shall be used.
(b) The Company shall not be required to issue fractions of
shares of Preferred Stock (other than fractions which are integral
multiples of one one-hundredth (1/100th) of a share of Preferred Stock)
upon exercise of the Rights or to distribute certificates which evidence
fractional shares of Preferred Stock (other than fractions which are
integral multiples of one one-hundredth (1/100th) of a share of
<PAGE>
Preferred Stock). In lieu of fractional shares of Preferred Stock that
are not integral multiples of one one-hundredth (1/100th) of a share of
Preferred Stock, the Company may pay to the registered holders of Rights
Certificates at the time such Rights are exercised as herein provided an
amount in cash equal to the same fraction of the current market value of
one one-hundredth (1/100th) of a share of Preferred Stock. For purposes
of this Section 14(b), the current market value of one one-hundredth
(1/100th) of a share of Preferred Stock shall be one one-hundredth
(1/100th) of the closing price of a share of Preferred Stock (as
determined pursuant to Section 11(d)(ii) hereof) for the Trading Day
immediately prior to the date of such exercise.
(c) Following the occurrence of a Triggering Event, the Company
shall not be required to issue fractions of shares of Common Stock upon
exercise of the Rights or to distribute certificates which evidence
fractional shares of Common Stock. In lieu of fractional shares of
Common Stock, the Company may pay to the registered holders of Rights
Certificates at the time such Rights are exercised as herein provided an
amount in cash equal to the same fraction of the current market value of
one (1) share of Common Stock. For purposes of this Section 14(c), the
current market value of one share of Common Stock shall be the closing
price of one share of Common Stock (as determined pursuant to Section
11(d)(i) hereof) for the Trading Day immediately prior to the date of
such exercise.
(d) The holder of a Right by the acceptance of the Rights
expressly waives his or her right to receive any fractional Rights or
any fractional shares upon exercise of a Right, except as permitted by
this Section 14.
Section 15. Rights of Action.
All rights of action in respect of this Agreement are vested in the
respective registered holders of the Rights Certificates (and, prior to the
Distribution Date, the registered holders of the Common Stock); and any
registered holder of any Rights 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 Rights Certificate (or, prior to the Distribution Date, of
the Common Stock), may, in his or her own behalf and for his or her own
benefit, enforce, and may institute and maintain any suit, action or
proceeding against the Company to enforce, or otherwise act in respect of, his
or her right to exercise the Rights evidenced by such Rights Certificate in
the manner provided in such Rights 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 hereunder and injunctive relief
against actual or threatened violations of the obligations hereunder of any
Person subject to this Agreement.
Section 16. Agreement of Rights Holders TC "Section 16. Agreement of
Rights Holders" \f C \l "1" . 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 Common Stock;
(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if
<PAGE>
surrendered at the principal office or offices of the Rights Agent
designated for such purposes, duly endorsed or accompanied by a proper
instrument of transfer and with the appropriate forms and certificates
fully executed;
(c) subject to Section 6(a) and Section 7(f) hereof, the Company
and the Rights Agent may deem and treat the person in whose name a
Rights Certificate (or, prior to the Distribution Date, the associated
Common Stock certificate) is registered as the absolute owner thereof
and of the Rights evidenced thereby (not withstanding any notations of
ownership or writing on the Rights 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, subject to the last sentence of Section 7(e) hereof, shall
be required to be affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Rights Agent shall have any liability to any
holder of a Right or other Person as a result of its inability to
perform any of its obligations under this Agreement by reason of any
preliminary or permanent injunction or other order, decree or ruling
issued by a court of competent jurisdiction or by a governmental,
regulatory or administrative agency or commission, or any statute, rule,
regulation or executive order promulgated or enacted by any governmental
authority, prohibiting or otherwise restraining performance of such
obligation; provided, however, the Company must use its best efforts to
have any such order, decree or ruling lifted or otherwise overturned as
soon as possible.
Section 17. Rights Certificate Holder Not Deemed a Stockholder.
No holder, as such, of any Rights Certificate shall be entitled to vote,
receive dividends or be deemed for any purpose the holder of the number of one
one-hundredths (1/100ths) of a share of 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
Rights Certificate be construed to confer upon the holder of any Rights
Certificate, as such, any of the rights of a stockholder of the Company or any
right to vote 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 Section 25 hereof), or to receive
dividends or subscription rights, or otherwise, until the Right or Rights
evidenced by such Rights Certificate shall have been exercised in accordance
with the provisions hereof.
Section 18. Concerning the Rights Agent.
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to
time, on demand of the Rights Agent, its reasonable expenses and counsel
fees and disbursements and other disbursements incurred in the
administration and execution of this Agreement and the exercise and
performance of its duties hereunder. The Company also agrees to
indemnify the Rights Agent for, and to hold it harmless against, any
loss, liability, or expense, incurred without negligence, bad faith or
willful misconduct on the part of the Rights Agent, for anything done or
omitted by the Rights Agent in connection with the acceptance and
<PAGE>
administration of this Agreement, including the costs and expenses of
defending against any claim of liability in the premises. In no case
will the Rights Agent be liable for special, indirect, incidental or
consequential loss or damage of any kind whatsoever (including but not
limited to lost profits), even if the Rights Agent has been advised of
the possibility of such loss or damage.
(b) The Rights Agent shall be protected and shall incur no
liability for or in respect of any action taken, suffered or omitted by
it in connection with its administration of this Agreement in reliance
upon any Rights Certificate or certificate for Common Stock or for other
securities of the Company, instrument of assignment or transfer, power
of attorney, endorsement, affidavit, letter, notice, 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.
(a) Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the
Rights Agent or any successor Rights Agent shall be a party, or any
corporation succeeding to the corporate trust or shareholder services
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, however, that such corporation would be
eligible for appointment as a successor Rights Agent under the
provisions of Section 21 hereof. In case at the time such successor
Rights Agent shall succeed to the agency created by this Agreement, any
of the Rights Certificates shall have been countersigned but not
delivered, any such successor Rights Agent may adopt the
countersignature of a predecessor Rights Agent and deliver such Rights
Certificates so countersigned; and in case at that time any of the
Rights Certificates shall not have been countersigned, any successor
Rights Agent may countersign such Rights Certificates either in the name
of the predecessor or in the name of the successor Rights Agent; and in
all such cases such Rights Certificates shall have the full force
provided in the Rights Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be
changed and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the
<PAGE>
countersignature under its prior name and deliver Rights Certificates so
countersigned; and in case at that time any of the Rights Certificates
shall not have been countersigned, the Rights Agent may countersign such
Rights Certificates either in its prior name or in its changed name; and
in all such cases such Rights Certificates shall have the full force
provided in the Rights Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Rights
Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (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.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable that any
fact or matter (including, without limitation, the identity of any
Acquiring Person or Adverse Person and the determination of Current
Market Price) 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 the Chairman of the Board, the Chief Executive Officer, the
President, any Vice President, the Treasurer, the Secretary or any
Assistant Secretary 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.
(c) The Rights Agent shall be liable hereunder only for its own
negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any
of the statements of fact or recitals contained in this Agreement or in
the Rights Certificates or be required to verify the same (except as to
its countersignature on such Rights Certificates), but all such
statements and recitals are and shall be deemed to have been made by the
Company only.
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery
hereof (except the due execution hereof by the Rights Agent) or in
respect of the validity or execution of any Rights Certificate (except
its countersignature thereof); nor shall it be responsible for any
breach by the Company of any covenant or condition contained in this
Agreement or in any Rights Certificate; nor shall it be responsible for
any adjustment required under the provisions of Section 11, Section 13
or Section 24 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 (except with respect to the exercise
of Rights evidenced by Rights Certificates after actual notice of 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 shares of Common Stock or Preferred Stock to be issued pursuant to
<PAGE>
this Agreement or any Rights Certificate or as to whether any shares of
Common Stock or Preferred Stock will, when so issued, be validly
authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged
and delivered all such further and other acts, instruments and
assurances as may reasonably be required by the Rights Agent for the
carrying out or performing by the Rights Agent of the provisions of this
Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder
from the Chairman of the Board, the Chief Executive Officer, the
President, any Vice President, the Secretary, any Assistant Secretary or
the Treasurer of the Company, and to apply to such officers for advice
or instructions in connection with its duties, and it shall not be
liable for any action taken or suffered to be taken by it in good faith
in accordance with instructions of any such officer.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights
or other securities of the Company or become pecuniarily interested in
any transaction in which the Company may be interested, or contract with
or lend money to the Company or otherwise act as fully and freely as
though it were not Rights Agent under this Agreement. Nothing herein
shall preclude the Rights Agent from acting in any other capacity for
the Company or for any other legal entity.
(i) 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, default, neglect or
misconduct of any such attorneys or agents or for any loss to the
Company resulting from any such act, default, neglect or misconduct;
provided, however, reasonable care was exercised in the selection and
continued employment thereof.
(j) No provision of this Agreement shall require the Rights
Agent to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder or in the
exercise of its rights if there shall be reasonable grounds for
believing that repayment of such funds or adequate indemnification
against such risk or liability is not reasonably assured to it.
(k) If, with respect to any Rights Certificate surrendered to
the Rights Agent for exercise or transfer, the certificate attached to
the form of assignment or form of election to purchase, as the case may
be, has either not been completed or indicates an affirmative response
to clause 1 and/or 2 thereof, the Rights Agent shall not take any
further action with respect to such requested exercise of transfer
without first consulting with the Company.
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 Preferred Stock, by registered or certified mail, and to
the holders of the Rights Certificates by first-class mail. The Company may
<PAGE>
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 Preferred
Stock, by registered or certified mail, and to the holders of the Rights
Certificates by first-class mail. If the Rights Agent shall resign or be
removed or shall otherwise become incapable of acting, the Company shall
appoint a successor to the Rights Agent. If the Company shall fail to make
such appointment within a period of 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 Rights Certificate (who shall, with such notice, submit his Rights
Certificate for inspection by the Company), then any registered holder of any
Rights Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether
appointed by the Company or by such a court, shall be (A) a corporation
organized and doing business under the laws of the United States or of the
State of New York (or of any other state of the United States so long as such
corporation is authorized to do business as a banking institution in the State
of New York), in good standing, which is authorized under such laws to
exercise corporate trust powers or stock transfer 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 $100,000,000 or (B) a subsidiary of a corporation described in clause
(A) of this sentence. 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 the Preferred Stock, and mail a notice thereof
in writing to the registered holders of the Rights Certificates. Failure to
give any notice provided for in this Section 21, however, or any defect
therein, shall not affect the legality or validity of the resignation or
removal of the Rights Agent or the appointment of the successor Rights Agent,
as the case may be.
Section 22. Issuance of New Rights Certificates. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Rights Certificates evidencing Rights in such
form as may be approved by its Board of Directors 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 Rights Certificates made in
accordance with the provisions of this Agreement. In addition, in connection
with the issuance or sale of shares of Common Stock following the Distribution
Date and prior to the redemption or expiration of the Rights, the Company (a)
shall, with respect to shares of Common Stock so issued or sold pursuant to
the exercise of stock options or under any employee plan or arrangement,
granted or awarded as of the Distribution Date, or upon the exercise,
conversion or exchange of securities hereinafter issued by the Company, and
(b) may, in any other case, if deemed necessary or appropriate by the Board of
Directors of the Company, issue Rights Certificates representing the
appropriate number of Rights in connection with such issuance or sale;
provided, however, that (i) no such Rights 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 or the Person to whom such Rights Certificate would be issued, and
<PAGE>
(ii) no such Rights Certificate shall be issued if, and to the extent that,
appropriate adjustment shall otherwise have been made in lieu of the issuance
thereof.
Section 23. Redemption and Termination.
(a) The Board of Directors of the Company may, at its option, at
any time prior to the earlier of (i) the close of business on the tenth
day following the Stock Acquisition Date (or, if the Stock Acquisition
Date shall have occurred prior to the Record Date, the close of business
on the tenth day following the Record Date), or (ii) the Final
Expiration Date, redeem all but not less than all the then outstanding
Rights at a redemption price of $0.01 per Right, as such amount may be
appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof (such redemption
price being hereinafter referred to as the "Redemption Price"). The
Board of Directors may not redeem any Rights following a determination
pursuant to Section 11(a)(ii)(B) that any Person is an Adverse Person.
Notwithstanding anything contained in this Agreement to the contrary,
the Rights shall not be exercisable after the first occurrence of a
Section 11(a)(ii) Event until such time as the Company's right of
redemption hereunder has expired. The Company may, at its option, pay
the Redemption Price in cash, shares of Common Stock (based on the
Current Market Price, as defined in Section 11(d)(i) hereof, of the
Common Stock at the time of redemption) or any other form of
consideration deemed appropriate by the Board of Directors.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights, evidence of which shall
have been filed with the Rights Agent 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. Promptly after the action
of the Board of Directors ordering the redemption of the Rights, the
Company shall give notice of such redemption to the Rights Agent and the
holders of the then outstanding Rights by mailing such notice to all
such holders at each holder's last address as it appears 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. Each such notice
of redemption will state the method by which the payment of the
Redemption Price will be made.
(c) Notwithstanding the provisions of Section 23(a) hereof, in
the event that a majority of the Board is elected by stockholder action
by written consent, or is comprised of persons elected at a meeting of
stockholders who were not nominated by the Board in office immediately
prior to such meeting or action, then for a period of one hundred and
eighty (180) days following the effectiveness of such election the
Rights shall not be redeemed if such redemption is reasonably likely to
have the purpose or effect of allowing any Person to become an Acquiring
Person or otherwise facilitating the occurrence of a Triggering Event or
a transaction with an Acquiring Person.
Section 24. Exchange.
<PAGE>
(a) The Board of Directors of the Company may, at its option, at
any time after any Person becomes an Acquiring Person or is determined
to be an Adverse Person pursuant to Section 11(a)(ii)(B), exchange 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 7(e) hereof) for shares of Common Stock at an exchange ratio of
one share of Common Stock per Right, appropriately adjusted to reflect
any stock split, stock dividend or similar transaction occurring after
the date hereof (such exchange ratio being hereinafter referred to as
the "Exchange Ratio"). Notwithstanding the foregoing, the Board of
Directors shall not be empowered to effect such exchange at any time
after any Person (other than the Company, any Subsidiary of the Company,
any employee benefit plan of the Company or any such Subsidiary, or any
entity holding Common Stock for or pursuant to the terms of any such
plan), together with all Affiliates and Associates of such Person,
becomes the Beneficial Owner of fifty per cent (50%) or more of the
Common Stock then outstanding.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the exchange of any Rights pursuant to subsection (a)
of this Section 24 and without any further action and without any
notice, the right to exercise such Rights shall terminate and the only
right thereafter of a holder of such Rights shall be to receive that
number of shares of Common Stock equal to the number of such Rights held
by such holder multiplied by the Exchange Ratio. The Company shall
promptly give public notice of any such exchange; provided, however,
that the failure to give, or any defect in, such notice shall not affect
the validity of such exchange. The Company promptly shall mail a notice
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 will 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 number of Rights (other
than Rights which have become void pursuant to the provisions of Section
7(e) hereof) held by each holder of Rights.
(c) In any exchange pursuant to this Section 24, the Company, at
its option, may substitute shares of Preferred Stock (or Equivalent
Preferred Stock, as such term is defined in paragraph (b) of Section 11
hereof) for shares of Common Stock exchangeable for Rights, at the
initial rate of one one-hundredth (1/100th) of a share of Preferred
Stock (or Equivalent Preferred Stock) for each share of Common Stock, as
appropriately adjusted to reflect adjustments in the voting rights of
the Preferred Stock pursuant to the terms thereof, so that the fraction
of a share of Preferred Stock delivered in lieu of each share of Common
Stock shall have the same voting rights as one share of Common Stock.
(d) In the event that there shall not be sufficient shares of
Common Stock issued but not outstanding or authorized but unissued to
permit any exchange of Rights as contemplated in accordance with this
Section 24, the Company shall take all such action as may be necessary
to authorize additional shares of Common Stock for issuance upon
exchange of the Rights.
(e) The Company shall not be required to issue fractions of
shares of Common Stock or to distribute certificates which evidence
<PAGE>
fractional shares of Common Stock. In lieu of such fractional shares of
Common Stock, there shall be paid 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.
For the purposes of this subsection (e), the current market value of a
whole share of Common Stock shall be the closing price of a share of
Common Stock (as determined pursuant to the second sentence of Section
11(d)(i) hereof) for the Trading Day immediately prior to the date of
exchange pursuant to this Section 24.
Section 25. Notice of Certain Events.
(a) In case the Company shall propose, at any time after the
Distribution Date, (i) 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 quarterly cash
dividend out of earnings or retained earnings of the Company), or (ii)
to offer to the holders of Preferred Stock rights or warrants to
subscribe for or to purchase any additional shares of Preferred Stock or
shares of stock of any class or any other securities, rights or options,
or (iii) to effect any reclassification of its Preferred Stock (other
than a reclassification involving only the subdivision of outstanding
shares of Preferred Stock), or (iv) to effect any consolidation or
merger into or with any other Person (other than a Subsidiary of the
Company in a transaction which complies with Section 11(o) hereof), or
to effect any sale or other transfer (or to permit one or more of its
Subsidiaries to effect any sale or other transfer), in one transaction
or a series of related transactions, of more than 50% of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to
any other Person or Persons (other than the Company and/or any of its
Subsidiaries in one or more transactions each of which complies with
Section 11(o) hereof), or (v) to effect the liquidation, dissolution or
winding up of the Company, then, in each such case, the Company shall
give to each holder of a Rights Certificate, to the extent feasible and
in accordance with Section 26 hereof, a notice of such proposed action,
which shall specify the record date for the purposes of such stock
dividend, distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of
participation therein by the holders of the shares of Preferred 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 (i) or (ii) above at least
twenty (20) days prior to the record date for determining holders of the
shares of Preferred Stock for purposes of such action, and in the case
of any such other action, at least twenty (20) days prior to the date of
the taking of such proposed action or the date of participation therein
by the holders of the shares of Preferred Stock whichever shall be the
earlier.
(b) In case any of the events set forth in Section 11(a)(ii)
hereof shall occur, then, in any such case, (i) the Company shall as
soon as practicable thereafter give to each holder of a Rights
Certificate, to the extent feasible and in accordance with Section 26
hereof, a notice of the occurrence of such event, which shall specify
the event and the consequences of the event to holders of Rights under
Section 11(a)(ii) hereof, and (ii) all references in the preceding
<PAGE>
paragraph to Preferred Stock shall be deemed thereafter to refer to
Common Stock and/or, if appropriate, other securities.
Section 26. Notices TC "Section 26. Notices" \f C \l "1" . Notices
or demands authorized by this Agreement to be given or made by the Rights
Agent or by the holder of any Rights Certificate to 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:
Sterling House Corporation
453 S. Webb Road, Suite 500
Wichita, Kansas 67207
Attention: Corporate Secretary
Subject to the provisions of Section 21, any notice or demand authorized by
this Agreement to be given or made by the Company or by the holder of any
Rights Certificate to or on the Rights Agent shall be sufficiently given or
made if sent by first-class mail, postage prepaid, addressed (until another
address is filed in writing with the Company) as follows:
ChaseMellon Shareholder Services, L.L.C.
Overpeck Centre
85 Challenger Road
Ridgefield Park, NY 07660
Attention: Ms. Stacy Tankel
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of 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.
Section 27. Supplements and Amendments TC "Section 27. Supplements
and Amendments" \f C \l "1" . Prior to the Distribution Date and subject to
the penultimate sentence of this Section 27, the Company and the Rights Agent
shall, if the Company so directs, supplement or amend any provision of this
Agreement without the approval of any holders of certificates representing
shares of Common Stock. From and after the Distribution Date and subject to
the penultimate sentence of this Section 27, the Company and the Rights Agent
shall, if the Company so directs, supplement or amend this Agreement without
the approval of any holders of Rights Certificates in order (i) to cure any
ambiguity, (ii) to correct or supplement any provision contained herein which
may be defective or inconsistent with any other provisions herein, (iii) to
shorten or lengthen any time period hereunder or (iv) to change or supplement
the provisions hereunder in any manner which the Company may deem necessary or
desirable and which shall not adversely affect the interests of the holders of
Rights Certificates (other than an Acquiring Person or Adverse Person or an
Affiliate or Associate of an Acquiring Person or Adverse Person); provided
this Agreement may not be supplemented or amended to lengthen, pursuant to
clause (iii) of this sentence, (A) a time period relating to when the Rights
may be redeemed at such time as the Rights are not then redeemable, or (B) any
other time period unless such lengthening is for the purpose of protecting,
enhancing or clarifying the rights of, and/or the benefits to, the holders of
Rights (other than an Acquiring Person or Adverse Person and its Affiliates
and Associates). 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 27, the Rights Agent shall
<PAGE>
execute such supplement or amendment. Prior to the Distribution Date, the
interests of the holders of Rights shall be deemed coincident with the
interests of the holders of Common Stock.
Section 28. Successors TC "Section 28. Successors" \f C \l "1" .
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 29. Determinations and Actions by the Board of Directors, etc.
For all purposes of this Agreement, any calculation of the
number of shares of Common Stock outstanding at any particular time, including
for purposes of determining the particular percentage of such outstanding
shares of Common Stock of which any Person is the Beneficial Owner, shall be
made in accordance with the last sentence of Rule 13d-3(d)(1)(i) of the
General Rules and Regulations under the Exchange Act. The Board of Directors
of the Company shall have the exclusive power and authority to administer this
Agreement and to exercise all rights and powers specifically granted to the
Board of Directors of the Company 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 a determination to redeem or
not redeem the Rights or to amend the Agreement). All such actions,
calculations, interpretations and determinations (including, for purposes of
clause (y) below, all omissions with respect to the foregoing) which are done
or made by the Board of Directors of the Company in good faith, shall (x) be
final, conclusive and binding on the Company, the Rights Agent, the holders of
the Rights and all other parties, and (y) not subject the Board of Directors
of the Company to any liability to the holders of the Rights.
Section 30. Benefits of This Agreement.
Nothing in this Agreement shall be construed
to give to any Person other than the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the Distribution
Date, registered holders of 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 Rights Certificates (and, prior to the Distribution Date,
registered holders of the Common Stock).
Section 31. 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 Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by
such court or authority to be invalid, void or unenforceable and the Board of
Directors of the Company determines in its good faith judgment that severing
the invalid language from this Agreement would adversely affect the purpose
or effect of this Agreement, the right of redemption set forth in Section 23
hereof shall be reinstated and
shall not expire until the close of business on the tenth day following the
date of such determination by the Board of Directors. Without limiting the
foregoing, if any provision requiring a majority of the members of the Board
of Directors who are not officers of the Company and who are not
<PAGE>
representatives, nominees, Affiliates or Associates of an Acquiring Person to
act is held by any court of competent jurisdiction or other authority to be
invalid, void or unenforceable, such determination shall be made by the Board
of Directors of the Company in accordance with applicable law and the
Company's Certificate of Incorporation and bylaws.
Section 32. Governing Law. This Agreement, each Right and each Rights
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Kansas and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts
made and to be performed entirely within such State.
Section 33. Counterparts.
This Agreement may be executed in any number of counterparts and each of such
counterparts shall for all purposes be deemed to be an original, and all such
counterparts shall together constitute but one and the same instrument.
Section 34. Descriptive Headings.
Descriptive headings of the several Sections of this
Agreement are inserted for convenience only and shall not control or affect
the meaning or construction of any of the provisions hereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Rights
Agreement to be duly executed and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
Attest: STERLING HOUSE CORPORATION
By: ___________________ By: ______________________
Name: Name:
Title: Title:
Attest: CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
By: ___________________ By: ______________________
Name: Name:
Title: Title:
<PAGE>
Exhibit A
FORM OF CERTIFICATE OF DESIGNATION,
PREFERENCES AND RIGHTS OF SERIES A JUNIOR
PARTICIPATING PREFERRED STOCK
of
STERLING HOUSE CORPORATION
Pursuant to Section 17-6401 of the General Corporation Code
of the State of Kansas
The undersigned officers of Sterling House Corporation, a corporation
organized and existing under the General Corporation Code of the State of
Kansas (the "Corporation"), in accordance with the provisions of Section 17-
6003 thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by
the Restated and Amended Articles of Incorporation, as corrected, of the said
Corporation, the said Board of Directors on June 25, 1997 adopted the
following resolution creating a series of 750,000 shares of Preferred Stock
designated as Series A Junior Participating Preferred Stock:
RESOLVED, that pursuant to the authority vested in the Board of
Directors of this Corporation in accordance with the provisions of its
Restated and Amended Articles of Incorporation, a series of Preferred Stock of
the Corporation be and it hereby is created, and that the designation and
amount thereof and the voting powers, preferences and relative, participating,
optional and other special rights of the shares of such series, and the
qualifications, limitations or restrictions thereof are as follows:
Section 1. Designation and Amount. The shares of such series shall be
designated as "Series A Junior Participating Preferred Stock" and the number
of shares constituting such series shall be 750,000.
Section 2. Dividends and Distributions.
(A) The holders of shares of Series A Junior Participating
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 last 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 A Junior Participating Preferred
Stock, in an amount per share (rounded to the nearest cent) equal to the
greater of (a) $2.00 or (b) subject to the provision for adjustment
hereinafter set forth, 100 times the aggregate per share amount of all
cash dividends, and 100 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, par value $.01 per share, of the
Corporation (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 A Junior Participating Preferred Stock. In the
<PAGE>
event the Corporation shall at any time after June 25, 1997 (the "Rights
Declaration Date") (i) declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock, or
(iii) combine the outstanding Common Stock into a smaller number of
shares, then in each such case the amount to which holders of shares of
Series A Junior Participating 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 A Junior Participating Preferred Stock as provided in
Paragraph (A) above 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 $2.00 per
share on the Series A Junior Participating 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 A Junior Participating Preferred Stock from
the Quarterly Dividend Payment Date next preceding the date of issue of
such shares of Series A Junior Participating Preferred Stock, 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 A Junior Participating 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 A Junior Participating Preferred Stock in an amount less than
the total 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 A
Junior Participating Preferred Stock entitled to receive payment of a
dividend or distribution declared thereon, which record date shall be no
more than 30 days prior to the date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series A Junior
Participating Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set
forth, each share of Series A Junior Participating Preferred Stock shall
entitle the holder thereof to 100 votes on all matters submitted to a
vote of the stockholders of the Corporation. In the event the
Corporation shall at any time after the Rights Declaration Date (i)
declare any dividend on Common Stock payable in shares of Common Stock,
(ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each
such case the number of votes per share to which holders of shares of
<PAGE>
Series A Junior Participating 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 or by law, the holders
of shares of Series A Junior Participating Preferred Stock and the
holders of shares of Common Stock shall vote together as one class on
all matters submitted to a vote of stockholders of the Corporation.
(C) (i) If at any time dividends on any Series A Junior
Participating Preferred Stock shall be in arrears in an amount
equal to six (6) quarterly dividends thereon, the occurrence of
such contingency shall mark the beginning of a period (herein
called a "default period") which shall extend until such time when
all accrued and unpaid dividends for all previous quarterly
dividend periods and for the current quarterly dividend period on
all shares of Series A Junior Participating Preferred Stock then
outstanding shall have been declared and paid or set apart for
payment. During each default period, all holders of Preferred
Stock (including holders of the Series A Junior Participating
Preferred Stock) with dividends in arrears in an amount equal to
six (6) quarterly dividends thereon, voting as a class,
irrespective of series, shall have the right to elect two (2)
Directors.
(ii) During any default period, such voting right of the
holders of Series A Junior Participating Preferred Stock may be
exercised initially at a special meeting called pursuant to
subparagraph (iii) of this Section 3(C) or at any annual meeting
of stockholders, and thereafter at annual meetings of
stockholders, provided that such voting right shall not be
exercised unless the holders of ten percent (10%) in number of
shares of Preferred Stock outstanding shall be present in person
or by proxy. The absence of a quorum of the holders of Common
Stock shall not affect the exercise by the holders of Preferred
Stock of such voting right. At any meeting at which the holders
of Preferred Stock shall exercise such voting right initially
during an existing default period, they shall have the right,
voting as a class, to elect Directors to fill such vacancies, if
any, in the Board of Directors as may then exist up to two (2)
Directors or, if such right is exercised at an annual meeting, to
elect two (2) Directors. If the number which may be so elected at
any special meeting does not amount to the required number, the
holders of the Preferred Stock shall have the right to make such
increase in the number of Directors as shall be necessary to
permit the election by them of the required number. After the
holders of the Preferred Stock shall have exercised their right to
elect Directors in any default period and during the continuance
of such period, the number of Directors shall not be increased or
decreased except by vote of the holders of Preferred Stock as
herein provided or pursuant to the rights of any equity securities
ranking senior to or pari passu with the Series A Junior
Participating Preferred Stock.
(iii) Unless the holders of Preferred Stock shall, during an
existing default period, have previously exercised their right to
<PAGE>
elect Directors, the Board of Directors may order, or any stockholder or
stockholders owning in the aggregate not less than ten percent
(10%) of the total number of shares of Preferred Stock
outstanding, irrespective of series, may request, the calling of
special meeting of the holders of Preferred Stock, which meeting
shall thereupon be called by the President, a Vice-President or
the Secretary of the Corporation. Notice of such meeting and of
any annual meeting at which holders of Preferred Stock are
entitled to vote pursuant to this Paragraph (C)(iii) shall be
given to each holder of record of Preferred Stock by mailing a
copy of such notice to him or her at his or her last address as
the same appears on the books of the Corporation. Such meeting
shall be called for a time not earlier than 10 days and not later
than 50 days after such order or request or in default of the
calling of such meeting within 50 days after such order or
request, such meeting may be called on similar notice by any
stockholder or stockholders owning in the aggregate not less than
ten percent (10%) of the total number of shares of Preferred Stock
outstanding. Notwithstanding the provisions of this Paragraph
(C)(iii), no such special meeting shall be called during the
period within 50 days immediately preceding the date fixed for the
next annual meeting of the stockholders.
(iv) In any default period, the holders of Common Stock,
and other classes of stock of the Corporation if applicable, shall
continue to be entitled to elect the whole number of Directors
until the holders of Preferred Stock shall have exercised their
right to elect two (2) Directors voting as a class, after the
exercise of which right (x) the Directors so elected by the
holders of Preferred Stock shall continue in office until their
successors shall have been elected by such holders or until the
expiration of the default period, and (y) any vacancy in the Board
of Directors may (except as provided in Paragraph (C)(ii) of this
Section 3) be filled by vote of a majority of the remaining
Directors theretofore elected by the holders of the class of stock
which elected the Director whose office shall have become vacant.
References in this Paragraph (C) to Directors elected by the
holders of a particular class of stock shall include Directors
elected by such Directors to fill vacancies as provided in clause
(y) of the foregoing sentence.
(v) Immediately upon the expiration of a default period,
(x) the right of the holders of Preferred Stock as a class to
elect Directors shall cease, (y) the term of any Directors elected
by the holders of Preferred Stock as a class shall terminate, and
(z) the number of Directors shall be such number as may be
provided for in the articles of incorporation or by-laws
irrespective of any increase made pursuant to the provisions of
Paragraph (C)(ii) of this Section 3 (such number being subject,
however, to change thereafter in any manner provided by law or in
the certificate of incorporation or by-laws). Any vacancies in
the Board of Directors effected by the provisions of clauses (y)
and (z) in the preceding sentence may be filled by a majority of
the remaining Directors.
(D) Except as set forth herein, holders of Series A Junior
Participating Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent they are
<PAGE>
entitled to vote with holders of Common Stock as set forth herein) for
taking any corporate action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Junior Participating 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 A Junior Participating Preferred Stock outstanding
shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise acquire for
consideration any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Series A Junior Participating Preferred Stock;
(ii) declare or pay dividends on 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 A Junior Participating Preferred Stock, except
dividends paid ratably on the Series A Junior Participating
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 on a parity (either as
to dividends or upon liquidation, dissolution or winding up) with
the Series A Junior Participating Preferred Stock, provided that
the Corporation may at any time redeem, purchase or otherwise
acquire shares of any such parity stock in exchange for shares of
any stock of the Corporation ranking junior (either as to
dividends or upon dissolution, liquidation or winding up) to the
Series A Junior Participating Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any
shares of Series A Junior Participating Preferred Stock, or any
shares of stock ranking on a parity with the Series A Junior
Participating 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 A Junior
Participating Preferred Stock purchased or otherwise acquired by the
Corporation in any manner whatsoever shall be retired and cancelled promptly
after the acquisition thereof. All such shares shall upon their cancellation
<PAGE>
become authorized but unissued shares of Preferred Stock and may be reissued
as part of a new series of Preferred Stock to be created by resolution or
resolutions of the Board of Directors, subject to the conditions and
restrictions on issuance set forth herein.
Section 6. Liquidation, Dissolution or Winding Up. (A) Upon any
liquidation (voluntary or otherwise), dissolution or winding up of the
Corporation, no distribution shall be made to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Junior Participating Preferred Stock unless, prior
thereto, the holders of shares of Series A Junior Participating Preferred
Stock shall have received $80.00 per share, plus an amount equal to accrued
and unpaid dividends and distributions thereon, whether or not declared, to
the date of such payment (the "Series A Liquidation Preference"). Following
the payment of the full amount of the Series A Liquidation Preference, no
additional distributions shall be made to the holders of shares of Series A
Junior Participating Preferred Stock unless, prior thereto, the holders of
shares of Common Stock shall have received an amount per share (the "Common
Adjustment") equal to the quotient obtained by dividing (i) the Series A
Liquidation Preference by (ii) 100 (as appropriately adjusted as set forth in
subparagraph (C) below to reflect such events as stock splits, stock dividends
and recapitalizations with respect to the Common Stock) (such number in clause
(ii), the "Adjustment Number"). Following the payment of the full amount of
the Series A Liquidation Preference and the Common Adjustment in respect of
all outstanding shares of Series A Junior Participating Preferred Stock and
Common Stock, respectively, holders of Series A Junior Participating Preferred
Stock and holders of shares of Common Stock shall receive their ratable and
proportionate share of the remaining assets to be distributed in the ratio of
the Adjustment Number to 1 with respect to such Preferred Stock and Common
Stock, on a per share basis, respectively.
(B) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series A Liquidation Preference and
the liquidation preferences of all other series of preferred stock, if any,
which rank on a parity with the Series A Junior Participating Preferred Stock,
then such remaining assets shall be distributed ratably to the holders of such
parity shares in proportion to their respective liquidation preferences. In
the event, however, that there are not sufficient assets available to permit
payment in full of the Common Adjustment, then such remaining assets shall be
distributed ratably to the holders of Common Stock.
(C) In the event the Corporation shall at any time after the
Rights Declaration Date (i) declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii)
combine the outstanding Common Stock into a smaller number of shares, then in
each such case the Adjustment Number in effect immediately prior to such event
shall be adjusted by multiplying such Adjustment 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.
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 the
shares of Series A Junior Participating Preferred Stock shall at the same time
be similarly exchanged or changed in an amount per share (subject to the
provision for adjustment hereinafter set forth) equal to 100 times the
aggregate amount of stock, securities, cash and/or any other property (payable
<PAGE>
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
after the Rights Declaration Date (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding Common
Stock, or (iii) combine the outstanding Common Stock into a smaller number of
shares, then in each such case the amount set forth in the preceding sentence
with respect to the exchange or change of shares of Series A Junior
Participating 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 shares of Series A Junior Participating
Preferred Stock shall not be redeemable.
Section 9. Amendment. The Amended and Restated Certificate of
Incorporation of the Corporation shall not be further amended in any manner
which would materially alter or change the powers, preferences or special
rights of the Series A Junior Participating Preferred Stock so as to affect
them adversely without the affirmative vote of the holders of a majority or
more of the outstanding shares of Series A Junior Participating Preferred
Stock, voting separately as a class.
Section 10. Fractional Shares. Series A Junior Participating Preferred
Stock may be issued in fractions of a share which 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 A Junior Participating Preferred Stock.
IN WITNESS WHEREOF, we have executed and subscribed this Certificate and
do affirm the foregoing as true under the penalties of perjury this 3rd day of
July, 1997.
STERLING HOUSE CORPORATION
____________________________________
Name: Timothy J. Buchanan, Chairman
Attest:
_____________________________
R. Gail Knott, Secretary
<PAGE>
STATE OF KANSAS )
) SS:
COUNTY OF SEDGWICK )
The foregoing instrument was acknowledged before me this _______ day of
_____________ , 19__, by Timothy J. Buchanan and R. Gail Knott, Chairman and
Secretary, respectively, of Sterling House Corporation, a Kansas corporation,
on behalf of the corporation.
________________________________
Notary Public
My Appointment Expires:
_______________________
<PAGE>
Exhibit B
[Form of Rights Certificate]
Certificate No. R- ________
Rights
NOT EXERCISABLE AFTER JUNE 25, 2007 OR EARLIER IF REDEEMED BY THE COMPANY.
THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $0.01
PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR ADVERSE
PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT
HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY
THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR
BECAME AN ACQUIRING PERSON OR ADVERSE PERSON OR AN AFFILIATE OR ASSOCIATE OF
AN ACQUIRING PERSON OR ADVERSE PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS
AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED
HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e)
OF SUCH AGREEMENT.]
Rights Certificate
STERLING HOUSE 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 June 25, 1997 (the "Rights Agreement"),
between Sterling House Corporation, a Kansas corporation (the "Company"), and
ChaseMellon Shareholder Services, L.L.C., a New Jersey limited liability
corporation (the "Rights Agent"), to purchase from the Company at any time
prior to 5:00 P.M. (New York City time) on June 25, 2007 at the office or
offices of the Rights Agent designated for such purpose, or its successors as
Rights Agent, one one-hundredth (1/100th) of a fully paid, non-assessable
share of Series A Junior Participating Preferred Stock (the "Preferred Stock")
of the Company, at a purchase price of $80.00 per one one-hundredth (1/100th)
of a share (the "Purchase Price"), upon presentation and surrender of this
Rights Certificate with the Form of Election to Purchase and related
Certificate duly executed. The number of Rights evidenced by this Rights
Certificate (and the number of shares which may be purchased upon exercise
thereof) set forth above, and the Purchase Price per share set forth above,
are the number and Purchase Price as of __________, ____ based on the
Preferred Stock as constituted at such date. The Company reserves the right
to require prior to the occurrence of a Triggering Event (as such term is
defined in the Rights Agreement) that a number of Rights be exercised so that
only whole shares of Preferred Stock will be issued.
Upon the occurrence of a Section 11(a)(ii) Event (as such term is
defined in the Rights Agreement), if the Rights evidenced by this Rights
Certificate are beneficially owned by (i) an Acquiring Person or Adverse
Person or an Affiliate or Associate of any such Acquiring Person or Adverse
Person (as such terms are defined in the Rights Agreement), (ii) a transferee
of any such Acquiring Person or Adverse Person, Associate or Affiliate, or
(iii) under certain circumstances specified in the Rights Agreement, a
<PAGE>
transferee of a person who, after such transfer, became an Acquiring Person or
Adverse Person, or an Affiliate or Associate of an Acquiring Person or Adverse
Person, such Rights shall become null and void and no holder hereof shall have
any right with respect to such Rights from and after the occurrence of such
Section 11(a)(ii) Event.
As provided in the Rights Agreement, the Purchase Price and the number
and kind of shares of Preferred Stock or other securities which may be
purchased upon the exercise of the Rights evidenced by this Rights Certificate
are subject to modification and adjustment upon the happening of certain
events, including Triggering Events.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the
rights, limitations of rights, obligations, duties and immunities hereunder of
the Rights Agent, the Company and the holders of the Rights Certificates,
which limitations of rights include the temporary suspension of the
exercisability of such Rights under the specific circumstances set forth in
the Rights Agreement. Copies of the Rights Agreement are on file at the
above-mentioned office of the Rights Agent and are also available upon written
request to the Rights Agent.
This Rights Certificate, with or without other Rights Certificates, upon
surrender at the principal office or offices of the Rights Agent designated
for such purpose, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of one one-hundredths (1/100ths) of a share
of Preferred Stock as the Rights evidenced by the Rights Certificate or Rights
Certificates surrendered shall have entitled such holder to purchase. If this
Rights Certificate shall be exercised in part, the holder shall be entitled to
receive upon surrender hereof another Rights Certificate or Rights
Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Certificate may be redeemed by the Company at its option at a
redemption price of $0.01 per Right at any time prior to the earlier of the
close of business on (i) the tenth day following the Stock Acquisition Date
(as such time period may be extended pursuant to the Rights Agreement), and
(ii) the Final Expiration Date. In addition, the Rights may be exchanged, in
whole or in part, for shares of the Common Stock, or shares of preferred stock
of the Company having essentially the same value or economic rights as such
shares. Immediately upon the action of the Board of Directors of the Company
authorizing any such exchange, and without any further action or any notice,
the Rights (other than Rights which are not subject to such exchange) will
terminate and the Rights will only enable holders to receive the shares
issuable upon such exchange.
No fractional shares of Preferred Stock will be issued upon the exercise
of any Right or Rights evidenced hereby (other than fractions which are
integral multiples of one one-hundredth (1/100th) of a share of Preferred
Stock, which may, at the election of the Company, be evidenced by depositary
receipts), but in lieu thereof a cash payment will be made, as provided in the
Rights Agreement.
No holder of this Rights Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of shares of
Preferred Stock or of any other securities of the Company which may at any
<PAGE>
time be issuable on the exercise hereof, nor shall anything contained in the
Rights Agreement or herein be construed to confer upon the holder hereof, as
such, any of the rights of a stockholder of the Company or any right to vote
for the election of directors or upon any matter submitted to stockholders at
any meeting thereof, or to give or withhold consent to any corporate action,
or, to receive notice of meetings or other actions affecting stockholders
(except as provided in the Rights Agreement), or to receive dividends or
subscription rights, or otherwise, until the Right or Rights evidenced by this
Rights Certificate shall have been exercised as provided in the Rights
Agreement.
This Rights Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
<PAGE>
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal.
Dated as of ___________, ____
ATTEST: STERLING HOUSE CORPORATION
__________________________ By: _________________________________
Secretary Title:
Countersigned:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
By: ______________________
Authorized Signatur
<PAGE>
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
_____________________
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED _________________________________________________ hereby
sells, assigns and transfer unto
___________________________________________________
(Please print name and
address of transferee)
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _________________ Attorney,
to transfer the within Rights Certificate on the books of the within-named
Company, with full power of substitution.
Dated: ________________, ____
______________________________
Signature
Signature Guaranteed:
<PAGE>
CERTIFICATE
______________
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Rights Certificate [ ] is [ ] is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person or
Adverse Person or an Affiliate or Associate of any such Acquiring Person or
Adverse Person (as such terms are defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate
from any Person who is, was or subsequently became an Acquiring Person or
Adverse Person or an Affiliate or Associate of an Acquiring Person or Adverse
Person.
Dated: ________________, ____
______________________________
Signature
Signature Guaranteed:
<PAGE>
NOTICE
_____________________
The signature to the foregoing Assignment and Certificate must correspond to
the name as written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any change whatsoever.
FORM OF ELECTION TO PURCHASE
_____________________
(To be executed if holder desires to
exercise Rights represented by the
Rights Certificate.)
To: STERLING HOUSE CORPORATION
The undersigned hereby irrevocably elects to exercise __________ Rights
represented by this Rights Certificate to purchase the shares of Preferred
Stock issuable upon the exercise of the Rights (or such other securities of
the Company or of any other person which may be issuable upon the exercise of
the Rights) and requests that certificates for such shares be issued in the
name of and delivered to:
Please insert social security
or other identifying number
________________________________________________
(Please print name and address)
________________________________________________
<PAGE>
If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance 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:
<PAGE>
CERTIFICATE
______________
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are
not being exercised by or on behalf of a Person who is or was an Acquiring
Person or Adverse Person or an Affiliate or Associate of any such Acquiring
Person or Adverse Person (as such terms are defined pursuant to the Rights
Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate
from any Person who is, was or became an Acquiring Person or Adverse Person or
an Affiliate or Associate of an Acquiring Person or Adverse Person.
Dated: ________________, ____
______________________________
Signature
Signature Guaranteed:
<PAGE>
NOTICE
_______________
The signature to the foregoing Election to Purchase and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
The portion of the legend in brackets shall be inserted only if applicable
and shall replace the preceding sentence.
- -i-
July 3, 1997
Dear Stockholder:
The Board of Directors of Sterling House
Corporation (the "Company") has announced the
adoption of a Shareholders Rights Plan (the
"Plan"). The Plan provides for a dividend of
rights (the "Rights") to purchase shares of a new
series of Preferred Stock of the Company (the
"Preferred Stock") (or, in certain circumstances,
Common Stock of the Company or other
consideration), exercisable upon the occurrence of
certain events.
We believe that the Plan protects your
interests in the event that the Company is
confronted with an unsolicited offer to acquire
the Company at a price and on terms and conditions
which the Board of Directors believes to be
inadequate or otherwise unfair to stockholders.
The Plan also contains provisions to protect you
in the event of other coercive or unfair takeover
tactics, such as offers that do not treat all
stockholders equally, acquisitions in the open
market of shares constituting control without
offering fair value to all stockholders and other
coercive or unfair takeover tactics that could
impair the Board of Directors' ability to
represent your interests fully. The Board
of Directors believes it was prudent to put this
Plan in place so that the Board will be in a
position to protect your interests should such an
effort be made in the future.
The Plan will not affect an offer at a fair
price and otherwise in the best interests of the
Company and its stockholders as determined by the
Board of Directors. The Plan will not interfere
with a merger or other business combination
transaction that the Board of Directors approves
as fair and as constituting a recognition of full
value to the stockholders.
The Rights would become exercisable to
purchase shares of Preferred Stock (or, in certain
circumstances, Common Stock) only if (i) a person
<PAGE>
acquires 20% or more of the Company's Common
Stock, (ii) a person commences a tender or
exchange offer for 20% or more of the Company's
Common Stock or (iii) the Board of Directors
determines that a person's ownership of 10% or
more of the Company's Common Stock may have a
material adverse impact on the Company. In the
circumstances described in clause (i) above,
holders of Rights would be entitled to purchase,
in lieu of Preferred Stock, Common Stock of the
Company at a 50% discount from market value.
Moreover, in the event that the Company were to
enter into certain merger or asset sale
transactions, after the occurrence of the
circumstance described in clause (i), holders
would be entitled to exercise the Rights for
common stock of the acquiring entity. The
acquiring person described in clause (i) would not
be entitled to exercise Rights.
The issuance of Rights does not in any way
weaken the financial strength of the Company or
interfere with its business plans. The issuance
of the Rights has no dilutive effect, will not
affect reported earnings per share and will not
change the way in which you can currently trade
shares of the Company's Common Stock.
A summary of the Plan is enclosed. The Plan
is complex, and we urge you to read this summary
carefully. Its premise, however, is
straightforward: to serve and protect the
interests of the Company's stockholders.
Sincerely,
STERLING HOUSE CORPORATION
Timothy J. Buchanan
Chairman and Chief
Executive Officer
<PAGE>
SUMMARY OF RIGHTS
TO PURCHASE SERIES A JUNIOR
PARTICIPATING PREFERRED STOCK
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
Preferred 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, L.L.C.., a New Jersey limited liability
company, 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 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 (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
-2-
<PAGE>
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% 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 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
-3-
<PAGE>
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. 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.
-4-
<PAGE>
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to the Company's Registration Statement
on Form 8-A dated July 3, 1997. A copy of the Rights Agreement is available
free of charge from the Company by written request to Sterling House
Corporation, 453 S. Webb Road, Suite 500, Wichita, Kansas 67207. This
summary description of the Rights does not purport to be complete and is
qualified in its entirety by reference to the Rights Agreement which is hereby
incorporated herein by reference. In the event of a conflict between this
summary and the Rights Agreement, the Rights Agreement will prevail.
-5-
For: Sterling House Corp.
Contact: Timothy Buchanan
Chief Executive Officer
(316) 684-8300
Investor Relations:
Robert P. Jones/Jill Ruja
FOR IMMEDIATE RELEASE
Media Contact: David Sassoon
Morgen-Walke Associates
(212) 850-5600
STERLING HOUSE CORPORATION
ADOPTS SHAREHOLDERS RIGHTS PLAN
WICHITA, KS., June 25, 1997-Sterling House
Corporation (ASE:SGH) announced today that its
Board of Directors has adopted a Shareholders
Rights Plan. Under the Plan, Rights to purchase
shares of a new class of preferred stock will be
distributed as a dividend at the rate of one Right
for each share of Common Stock of Sterling held as
of close of business on July 3, 1997.
The Plan was adopted in accordance with
Sterling's goal of building long-term value for
its public stockholders and is designed to deter
coercive or unfair takeover tactics and to
prevent an acquiror from gaining control of the
corporation without offering a fair price to all
stockholders. Sterling is not aware of any effort
being contemplated to acquire control of the
corporation.
Each right will entitle the holder to buy one
one-hundredth of a share of newly created Series
A Junior Participating Preferred Stock of Sterling
at an exercise price of $80.00.
The Rights will detach from the Common Stock and
will initially become exercisable for such shares
of Preferred Stock if a person or group commences
a tender or exchange offer which would result in
such person or group beneficially owning 20% or
more of Sterling's Common Stock.
-more-
<PAGE>
If any person or group becomes the beneficial
owner of 20% or more of Sterling's Common Stock
and the Board does not within 10 days thereafter
redeem the Rights, or if the Board determines
that beneficial ownership of 10% or more of
Sterling's Common Stock by a person or group
(an "Adverse Person") is intended to cause or is
reasonably likely to cause a material adverse
impact on the business or prospects of Sterling;
each Right will then enable its holder to
purchase, at the Right's then-current exercise
price, Common Stock having a market value at that
time of twice the Right's exercise price. Rights
held by the acquiring person or the Adverse Person
will become void and will not be exercisable to
purchase shares at the bargain purchase price.
Under certain circumstances, if Sterling is
acquired in a merger or similar transaction with
another person, each Right that has not previously
been exercised will entitle its holder to
purchase, at the Right's then current exercise
price, common stock of such other entity having a
value at that time of twice the Right's exercise
price.
Sterling will generally be entitled to redeem
the Rights at $.01 per Right at any time until
the 10th day following public announcement that
a 20% position has been acquired. Prior to such
time, the redemption period may be extended by
the Board. The Rights will expire at the close
of business on June 25, 2007.
Details of the Plan are outlined in a letter
which will be mailed to all Sterling stockholders
after the record date.
Sterling House Corporation is a long-term care
provider offering a wide range of assisted living
care and services through the ownership,
operation, management and franchising of Sterling
House assisted living residences. The Company
currently operates and/or franchises a total of
80 residences throughout Kansas and Oklahoma,
Texas, Colorado, Florida and Ohio.
