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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
FORM 8-A/A
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934
NATIONAL SURGERY CENTERS, INC.
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(Exact name of registrant as specified in its charter)
Delaware 36-3549627
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(State of incorporation (I.R.S. Employer
or organization) Identification No.)
30 South Wacker Drive, Suite 2302, Chicago, IL 60606
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(Address of principal executive offices) (Zip Code)
Securities to be registered pursuant to Section 12(b) of the Act:
None
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(Title of Class)
Securities to be registered pursuant to Section 12(g) of the Act:
Title of each class to Name of each exchange
be so registered on which each class is
- ------------------------------ to be registered
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Preferred Stock Purchase Rights Nasdaq National Market
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Item 1. Description of Registrant's Securities to Be Registered
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On December 17, 1997, the Board of Directors of the Registrant declared a
dividend distribution of one right (a "Right") for each outstanding share of the
Registrant's Common Stock, $.01 par value per share ("Common Stock"), to
stockholders of record at the close of business on December 30, 1997 (the
"Record Date"). The Board of Directors of the Registrant also authorized the
issuance of one Right for each share of Common Stock issued after the Record
Date and prior to the earliest of the Distribution Date (as defined below), the
redemption of the Rights and the expiration of the Rights and, in certain
circumstances, after the Distribution Date. Except as set forth below and
subject to adjustment as provided in the Rights Agreement (defined below), each
Right entitles the registered holder to purchase from the Registrant one one-
thousandth of a share of Series A Junior Participating Preferred Stock (the
"Preferred Stock"), at a purchase price of $115 per Right (the "Purchase
Price"). The description and terms of the Rights are set forth in a Rights
Agreement, dated as of December 22, 1997 (the "Rights Agreement"), between the
Registrant and Harris Trust and Savings Bank, as Rights Agent.
Upon payment of the dividend at the close of business on the Record Date,
the Rights will be attached to all Common Stock certificates representing shares
then outstanding, and no separate Rights Certificates (as defined below) will be
distributed. The Rights will separate from the Common Stock upon the earliest
of (i) 10 days following a public announcement that a person or group (an
"Acquiring Person"), together with persons affiliated or associated with it, has
acquired, or obtained the right to acquire, beneficial ownership of 20% or more
of the outstanding shares of Common Stock (the "Stock Acquisition Date"), (ii)
10 business days (or such later date as the Board of Directors of the Registrant
shall determine) following the commencement of a tender offer or exchange offer
that would result in a person or group beneficially owning 20% or more of such
outstanding shares of Common Stock, or (iii) 10 business days following a
determination by the Board of Directors of the Registrant that a person (an
"Adverse Person"), alone or together with its affiliates and associates, has
become the beneficial owner of more than 10% of the outstanding Common Stock and
that (a) such beneficial ownership is intended to cause the Registrant to
repurchase the Common Stock beneficially owned by such person or to cause
pressure on the Registrant to take action or enter into transactions intended to
provide such person with short-term financial gain under the circumstances where
the Board of Directors of the Registrant determines that the best long-term
interests of the Registrant would not be served by taking such action or
entering into such transactions at the time or (b) such beneficial ownership is
causing or reasonably likely to cause a material adverse impact on the business
or prospects of the Registrant (the earliest of such dates being called the
"Distribution Date").
Until the Distribution Date (or earlier redemption or expiration of the
Rights), (i) the Rights will be transferred with and only with the Common Stock
(except in connection with redemption of the Rights), (ii) new Common Stock
certificates issued after the Record Date upon transfer, replacement or new
issuance of Common Stock will contain a notation incorporating the Rights
Agreement by reference and (iii) the surrender for transfer of any certificates
for Common Stock outstanding will also constitute the transfer of the Rights
associated with the Common Stock represented by such certificate.
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The Rights will become first exercisable on the Distribution Date and will
expire at the close of business on December 17, 2007 (the "Expiration Date"),
unless earlier redeemed by the Registrant as described below. Notwithstanding
the foregoing, the Rights will not be exercisable after the occurrence of a
Triggering Event (defined below) until the Registrant's right of redemption has
expired.
As soon as practicable after the Distribution Date, separate certificates
evidencing the Rights (the "Rights Certificates") will be mailed to holders of
record of the Common Stock as of the close of business on the Distribution Date
and, thereafter, such separate Rights Certificates alone will evidence the
Rights. Except for shares of Common Stock issued or sold after the Distribution
Date pursuant to the exercise of stock options or under any employee benefit
plan or arrangement granted or awarded prior to the Distribution Date, or the
exercise, conversion or exchange of securities issued by the Registrant, and
except as otherwise determined by the Board of Directors, only shares of Common
Stock issued prior to the Distribution Date will be issued with Rights.
In the event that any person shall become (a) an Acquiring Person (except
for certain persons who report their ownership on Schedule 13G under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or on Schedule
13D under the Exchange Act, provided that they do not state any intention to, or
reserve the right to, control or influence the Registrant and such persons
certify that they became an Acquiring Person inadvertently and they agree that
they will not acquire any additional shares of Common Stock) or (b) an Adverse
Person (either such event is referred to herein as a "Triggering Event"), then
the Rights will "flip-in" and entitle each holder of a Right, except as provided
below, to purchase, upon exercise at the then-current Purchase Price, that
number of shares of Common Stock having a market value of two times such
Purchase Price.
Any Rights beneficially owned at any time on or after the earlier of the
Distribution Date and the Stock Acquisition Date by an Acquiring Person, an
Adverse Person or an affiliate or associate of an Acquiring Person or an Adverse
Person (whether or not such ownership is subsequently transferred) will become
null and void upon the occurrence of a Triggering Event, and any holder of such
Rights will have no right to exercise such Rights.
Preferred Stock purchasable upon exercise of the Rights will not be
redeemable. Each share of Preferred Stock will be entitled to a minimum
preferential quarterly dividend payment of $.01 per share but will be entitled
to an aggregate dividend of 1,000 times the dividend declared per share of
Common Stock. In the event of liquidation, the holders of the Preferred Stock
will be entitled to a minimum preferential liquidation payment of $1,000 per
share but will be entitled to an aggregate payment of 1,000 times the payment
made per share of Common Stock. Each share of Preferred Stock will have 1,000
votes, voting together with the Common Stock. Finally, in the event of any
merger, consolidation, or other transaction in which shares of Common Stock are
exchanged, each share of Preferred Stock will be entitled to receive 1,000 times
the amount received per share of Common Stock. These rights are protected by
customary antidilution provisions.
Because of the nature of the Preferred Stocks' dividend, liquidation, and
voting rights, the value of the one thousandth interest in a share of Preferred
Stock purchasable upon exercise of each Right should approximate the value of
one share of Common Stock.
In the event that, following a Stock Acquisition Date, the Registrant is
acquired in a merger or other business combination in which the Common Stock
does not remain outstanding or is changed or 50% of the assets or earning power
of the Registrant and its Subsidiaries (as defined in the Rights Agreement)
(taken as a whole) is sold or otherwise transferred to any person (other than
the Registrant or any Subsidiary of the Registrant) in one transaction or a
series of related transactions, the Rights will "flip-over" and entitle each
holder of a Right, except as provided in the preceding paragraph, to purchase,
upon the exercise of the Right at the then-current Purchase Price, that number
of shares of common stock of the acquiring company which at the time of such
transaction would have a market value of two times such Purchase Price.
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The Purchase Price is subject to adjustment from time to time to prevent
dilution upon the (i) declaration of a dividend on the Preferred Stock payable
in shares of Preferred Stock, (ii) subdivision of the outstanding Preferred
Stock, (iii) combination of the outstanding Preferred Stock into a smaller
number of shares, (iv) issuance of any shares of the Registrant's capital stock
in a reclassification of the Preferred Stock (including any such
reclassification in connection with a consolidation or merger in which the
Registrant is the continuing or surviving corporation), (v) grant to holders of
the Preferred Stock of certain rights, options, or warrants to subscribe for
Preferred Stock or securities convertible into Preferred Stock at less than the
current market price of the Preferred Stock, or (vi) distribution to holders of
the Preferred Stock of other evidences of indebtedness, cash (other than a
regular quarterly cash dividend payable out of the earnings or retained earnings
of the Registrant), subscription rights, warrants, or assets (other than a
dividend payable in Preferred Stock, but including any dividend payable in stock
other than Preferred Stock).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% of
the Purchase Price.
At any time until the earlier of (i) ten days following the Stock
Acquisition Date and (ii) the Expiration Date, the Registrant may redeem the
Rights in whole, but not in part, at a price of $.01 per Right, subject to
adjustments. The Registrant may, at its option, pay the redemption price in
cash, shares of Common Stock (based on the current market price of the Common
Stock at the time of redemption) or any other form of consideration deemed
appropriate by the Board of Directors of the Registrant. Immediately upon the
action of the Registrant's Board of Directors ordering redemption of the Rights,
the right to exercise the Rights will terminate and the only right of the
holders of Rights will be to receive the applicable redemption price. In
addition, after a Triggering Event, at the election of the Board of Directors of
the Registrant, the outstanding Rights (other than those beneficially owned by
an Acquiring Person, Adverse Person or an affiliate or associate of an Acquiring
Person or Adverse Person) may be exchanged, in whole or in part, for shares of
Common Stock, or shares of preferred stock of the Registrant having essentially
the same value or economic rights as such shares of Common Stock. Immediately
upon the action of the Board of Directors of the Registrant 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 such Rights
will only entitle holders to receive the shares issuable upon such exchange.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Registrant, including, without limitation, the
right to vote or to receive dividends. While the distribution of the Rights
will not be taxable to stockholders or to the Registrant, stockholders may,
depending upon the circumstances, recognize taxable income in the event that the
Rights become exercisable for Common Stock (or other consideration) of the
Registrant or for common stock of the acquiring company as set forth above.
At any time prior to the Distribution Date, the Registrant may, without the
approval of any holder of the Rights, supplement or amend any provision of the
Rights Agreement. Thereafter, the Rights Agreement may be amended only (i) to
cure ambiguities, (ii) to correct
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inconsistent provisions, (iii) to shorten or lengthen any time period thereunder
or (iv) in ways that do not adversely affect the Rights holders (other than an
Acquiring Person or Adverse Person). From and after the Distribution Date, the
Rights Agreement may not be amended to lengthen (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).
As of December 23, 1997, there were 18,502,369 shares of Common Stock
outstanding. Each outstanding share of Common Stock on the Record Date will
receive one Right. Until the Distribution Date, the Registrant will issue one
Right with each share of Common Stock that shall become outstanding so that all
such shares will have attached Rights. Five hundred thousand (500,000) shares
of Preferred Stock have been reserved for issuance upon exercise of the Rights.
The Rights have certain antitakeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the
Registrant on terms not approved by the Registrant's Board of Directors. The
Rights should not interfere with any merger or other business combination
approved by the Board of Directors of the Registrant since the Board of
Directors may, at its option, at any time until ten days following the Stock
Acquisition Date, redeem all, but no less than all, of the then outstanding
Rights at the applicable redemption price.
The foregoing summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement
(which includes as Exhibit B the Form of Rights Certificate), a copy of which is
incorporated herein by reference to Exhibit l to this registration statement.
Copies of the Rights Agreement will be available free of charge from the
Registrant.
Item 2. Exhibits
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The following documents are filed as exhibits to this registration
statement.
Rights Agreement, dated as of December 22, 1997, between the
Registrant and Harris Trust and Savings Bank as
Rights Agent, which includes as Exhibit B thereto the Form of
Rights Certificate............................................. 4
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Signature
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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.
January 12, 1998 NATIONAL SURGERY CENTERS, INC.
(Registrant)
By: /s/ Bryan S. Fisher
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Its: Chief Financial Officer
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Exhibit Index
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Description Exhibit
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Rights Agreement, dated as of
December 22, 1997, between the
Registrant and Harris Trust and Savings
Bank, as Rights Agent, which includes
as Exhibit B thereto the Form
of Rights Certificate 4
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NATIONAL SURGERY CENTERS, INC.
AND
HARRIS TRUST AND SAVINGS BANK
RIGHTS AGENT
_____________________
RIGHTS AGREEMENT
DATED AS OF DECEMBER 22, 1997
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Table of Contents
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<TABLE>
<CAPTION>
Section Page
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<S> <C>
1. Certain Definitions...................................................... 1
2. Appointment of Rights Agent.............................................. 5
3. Issue of Rights Certificates............................................. 5
4. Form of Rights Certificates.............................................. 7
5. Countersignature and Registration........................................ 8
6. Transfer, Split Up, Combination and Exchange of Rights Certificates;
Mutilated, Destroyed, Lost or Stolen Rights Certificates................ 8
7. Exercise of Rights; Purchase Price; Expiration Date of Rights............ 9
8. Cancellation and Destruction of Rights Certificates......................11
9. Reservation and Availability of Capital Stock............................11
10. Preferred Stock Record Date.............................................13
11. Adjustment of Purchase Price, Number and Kind of Shares or Number of
Rights..................................................................13
12. Certificate of Adjusted Purchase Price or Number of Shares...............21
13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power.....22
14. Fractional Rights and Fractional Shares..................................24
15. Rights of Action.........................................................25
16. Agreement of Rights Holders..............................................26
17. Rights Certificate Holder Not Deemed a Stockholder.......................26
18. Concerning the Rights Agent..............................................27
19. Merger or Consolidation or Change of Name of Rights Agent................27
20. Duties of Rights Agent...................................................28
21. Change of Rights Agent...................................................30
</TABLE>
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<TABLE>
<CAPTION>
Section Page
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<S> <C>
22. Issuance of New Rights Certificates.....................................31
23. Redemption and Termination..............................................31
24. Exchange................................................................32
25. Notice of Certain Events................................................33
26. Notices.................................................................34
27. Supplements and Amendments..............................................35
28. Successors..............................................................36
29. Determinations and Actions by the Board of Directors, etc...............36
30. Benefits of This Agreement..............................................36
31. Severability............................................................36
32. Governing Law...........................................................37
33. Counterparts............................................................37
34. Descriptive Headings....................................................37
</TABLE>
Exhibit A -- Certificate of Designation, Preferences and Rights
Exhibit B -- Form of Rights Certificate
Exhibit C -- Summary of Rights to Purchase Preferred Stock
ii
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RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of December 22, 1997 (the "Agreement"), between
National Surgery Centers, Inc., a Delaware corporation (the "Company"), and
Harris Trust and Savings Bank, a Illinois banking corporation (the "Rights
Agent").
W I T N E S S E T H
WHEREAS, on December 17, 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 December 30, 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-thousandth (1/l000th) 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
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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, (iv) any Person
or entity organized, appointed or established by the Company for or pursuant to
the terms of any such plan or (v) any such Person who has reported or is
required to report that such Person is the Beneficial Owner of between 20% and
25% of the shares of common stock then outstanding, either on a Schedule 13G
under the Exchange Act (or any comparable or successor report) or on a 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) and, within 10 Business Days of being requested by the Company to
advise it regarding the same, certifies to the Company that such (x) Person
acquired shares of Common Stock representing in excess of 19.9% of the
outstanding Common Stock inadvertently or without knowledge of the terms of the
Rights and (y) has reduced its percentage of Beneficial Ownership of the
outstanding Common Stock to less than 20% by the Close of Business on such tenth
Business Day; provided, however, that if the Person requested to so certify
fails to do so within 10 Business Days, then such Person shall become an
Acquiring Person as of the Close of
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Business on such tenth Business Day. Notwithstanding the foregoing, no Person
shall become an "Acquiring Person" solely as the result of an acquisition of
Common Stock by the Company which, by reducing the number of shares outstanding,
increases the proportionate number of shares beneficially owned by 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."
(b) "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 of the outstanding Common Stock of the Company to be an Adverse Person if
and so long as such Person has reported if such ownership on Schedule 13G under
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).
(c) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended and in effect on the date of
this Agreement (the "Exchange Act").
(d) A Person shall be deemed the "Beneficial Owner" of, and shall be
deemed to "beneficially own," and shall be deemed to have "Beneficial Ownership"
of, 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," or to have "Beneficial Ownership" of, (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;
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(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, 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," or to have "Beneficial Ownership" of, 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 to all holders of the Common Stock 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 (c)) or disposing of any voting
securities of the Company; provided, however, that nothing in this paragraph (c)
shall cause a Person engaged in business as an underwriter of securities to be
the ``Beneficial Owner" of, or to "beneficially own," or to have "Beneficial
Ownership" of 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.
(e) "Book Value", when used with reference to Common Stock issued by any
Person, shall mean the amount of equity of such Person applicable to each share
of Common Stock, determined (i) in accordance with generally accepted accounting
principles in effect on the date as of which such Book Value is to be
determined, (ii) using all the consolidated assets and all the consolidated
liabilities of such Person on the date as of which such Book Value is to be
determined, except that no value shall be included in such assets for goodwill
arising from consummation of a business combination, and (iii) after giving
effect to (A) the exercise of all rights, options and warrants to purchase such
Common Stock, (other than the Rights), and the conversion of all securities
convertible into such Common Stock, at an exercise or conversion price, per
Common Stock, which is less than such Book Value before giving effect to such
exercise or conversion (whether or not exercisability or convertibility is
conditioned upon occurrence of a future event), (B) all dividends and other
distributions on the capital stock of such Person declared prior to the date as
of which such Book Value is to be determined and to be paid or made after such
date, and (C) any other agreement, arrangement or understanding (written or
oral), or transaction or other action contemplated prior to the date as of which
such Book Value is to be determined which would have the effect of thereafter
reducing such Book Value.
(f) "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 Illinois are
authorized or obligated by law or executive order to close.
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(g) "Close of Business" on any given date shall mean 5:00 P.M., Chicago
time, on such date; provided, however, that if such date is not a Business Day
it shall mean 5:00 P.M., Chicago time, on the next succeeding Business Day.
(h) "Common Stock" shall mean the common stock, par value $.01 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.
(i) "Major Part", when used with reference to the Company and its
Subsidiaries as of any date, shall mean assets (i) having a fair market value
aggregating 50% or more of the total fair market value of all the assets of the
Company and its Subsidiaries (taken as a whole) as of the date in question, (ii)
accounting for 50% or more of the total value (net of depreciation and
amortization) of all the assets of the Company and its Subsidiaries (taken as a
whole) as would be shown on a consolidated or combined balance sheet of the
Company and its Subsidiaries as of the date in question, prepared in accordance
with generally accepted accounting principles then in effect, or (iii)
accounting for 50% or more of the total amount of earnings before interest,
taxes, depreciation and amortization or of the revenues of the Company and its
Subsidiaries (taken as a whole) as would be shown on, or derived from, a
consolidated or combined statement of income or operations of the from, a
consolidated or combined statement of income or operations of the Company and
its Subsidiaries for the period of 12 months ending on the last day of the
Company's monthly accounting period next preceding the date in question,
prepared in accordance with generally accepted accounting principles then in
effect.
(j) "Outstanding," when used with reference to a Person's Beneficial
Interest of Securities of the Company, shall mean the number of such Securities,
then issued and outstanding together with the number of such Securities, not
then actually issued and outstanding which such Person would be deemed to
Beneficially Own hereunder.
(k) "Person" shall mean any individual, firm, corporation, partnership or
other entity.
(i) "Preferred Stock" shall mean shares of Series A Junior
Participating Preferred Stock, par value $.01 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.
(l) "Section 11(a)(ii) Event'' shall mean any event described in Section
11(a)(ii) hereof.
(m) "Section 13 Event" shall mean any event described in clauses (x), (y)
or (z) of Section 13(a) hereof.
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(n) "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.
(o) "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.
(p) "Summary of Rights" shall have the meaning set forth in Section 3(b)
hereof
(q) "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 and the holders of the Rights
(who, in accordance with Section 3 hereof, shall prior to the Distribution Date
also be the holders of the Common Stock) in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such Co-Rights Agents as it may deem
necessary or desirable.
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 or a public announcement is made by any such Person of such Person's
intention to commence a tender or exchange offer, 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, at the
expense of the Company, 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
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holder shown on the records of the Company, one or more right 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) On the Record Date, as soon as practicable thereafter, the Company
will send a copy of a Summary of Rights to purchase preferred stock in
substantially the form of Exhibit C hereto, (the "Summary of Rights") by first
class, postage prepaid mail, to each record holder of Common Stock as of the
Close of Business, on the Record Date, at the address of such holder shown on
the records of the Company. 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 together with a copy of
the Summary of Rights attached thereto 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 surrender for transfer of any certificates for shares
of Common Stock outstanding on the Record Date, with or without a copy of the
Summary of Rights attached thereto, 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
bear the following legend:
This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in the Rights Agreement between National
Surgery Centers, Inc. (the "Company") and Harris Trust and Savings
Bank (the "Rights Agent"), dated as of December 22, 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
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<PAGE>
held by or on behalf of such Person or by any subsequent holder, may
become null and void.
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
surrender for transfer of any of such certificates shall also constitute the
transfer of the Rights associated with the Common Stock represented by such
certificates. In the event that the Company purchases or acquires any shares of
Common Stock after the Record Date but prior to the Distribution Date any Rights
associated with such shares of Common Stock shall be deemed canceled and
retired. Notwithstanding this paragraph (c), the omission of a legend shall not
affect the enforceability of any part of this Rights Agreement or the rights of
any holder of Rights.
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 or automated quotation system on which the Rights may from
time to time be listed or traded, 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-thousandths
(l/l000ths) of a share of Preferred Stock as shall be set forth therein at the
price set forth therein (such exercise price per one one-thousandth (l/l000th)
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)
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<PAGE>
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 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 and non-transferable 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 manually countersigned by the Rights Agent, 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-thousandths
(1/l000ths) of a share of Preferred Stock (or, following a Triggering Event,
Common Stock, other securities, cash
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<PAGE>
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
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.
(c) Notwithstanding any of the provision hereby, the Company and the
Rights Agent may amend this Rights Agreement to provide for uncertificated
Rights in addition to or in place of Rights evidence by Rights Certificate.
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-thousandths (1/l000ths) 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 December 17, 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").
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<PAGE>
(b) The Purchase Price for each one one-thousandth (l/l000th) of a share
of Preferred Stock pursuant to the exercise of a Right shall initially be One
Hundred Fifteen Dollars ($115.00), and shall be subject to adjustment from time
to time as provided in Sections 11 and 13(a) hereof and shall be payable in
lawful money of the United States of America in accordance with paragraph (c)
below.
(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-thousandth (l/l000th) 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-thousandths (1/l000ths) 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-
thousandths (l/l000ths) 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 required
hereunder.
(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)
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<PAGE>
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 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 and non-transferable without any
further action and no holder of such Rights (including any purported transferee
or subsequent holders) 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 canceled form,
or, if surrendered to the Rights Agent, shall be canceled 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 canceled Rights Certificates to the Company, or shall, at the
written request of the Company, destroy such canceled 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
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<PAGE>
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.
(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 (the "Registration Date"), 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 Registration Date, the exercisability of the
Rights in order to prepare and file such registration statement and permit it to
become effective; provided, however, that no such suspension shall remain
effective after, and the Rights shall without any further action by the Company
or any other Person become exerciseable immediately upon the effectiveness of
such Registration statement. 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 with respect to the securities purchasable upon
exercise of Rights is required to be effective under the Act at any other time
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 registration or qualification in such jurisdiction shall not have been
obtained on the exercise thereof shall not otherwise be permitted under
applicable law.
(d) The Company covenants and agrees that it will take all such action as
may be necessary to ensure that all one one-thousandths (1/l000ths) 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.
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<PAGE>
(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-thousandths (l/l000ths) 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 of
certificates for shares 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 shares 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. Each person in whose name
----------------------------------------
any certificate for shares 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 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
13
<PAGE>
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 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; provided, however, that in no
event shall the Purchase Price be reduced to less than the par value of the
capital stock of the Company then issuable upon exercise of the Rights. 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 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 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
14
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or impairment of the Company's ability to maintain its competitive
position) on the business or prospects of the Company;
then, promptly following the first 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-thousandths (1/l000ths) 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 number of one one-thousandths (1/l000ths) of
a share of Preferred Stock for which a Right was exercisable 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, by one or more of the
foregoing (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, 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 and
without requiring payment of the Purchase Price, shares of Common Stock (to
the extent available), then shares of Preferred 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
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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
(including Preferred Stock) 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 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
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<PAGE>
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 or
surviving 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; provided, however, that in no event
shall the Purchase Price be reduced to less than the par value of the capital
stock of the Company then issuable upon exercise of the Rights. 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 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
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<PAGE>
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 closing price quoted on the
Nasdaq Stock Market or, if such shares are not so quoted, the average of the
closing bid and asked quotations with respect to a share of Common Stock
reported on any National Association of Securities Dealers, Inc. quotation
system, or, if on any such date the shares of Common Stock are not so quoted,
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.
(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 1,000 (as such number may be appropriately adjusted for
such events as stock splits, stock dividends and recapitalizations with
respect to the Common Stock occurring after the date of this Agreement)
multiplied by the Current 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.
(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.
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<PAGE>
(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-thousandths
(l/l000ths) 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-thousandths
(l/l000ths) of a share of Preferred Stock (calculated to the nearest one
millionth) obtained by (i) multiplying (x) the number of one one-thousandths
(1/l000ths) 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-thousandths (1/l000ths) 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-thousandths (l/l000ths) 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 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
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<PAGE>
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-thousandths (1/l000ths) 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-
thousandths (1/l000ths) of a share and the number of one one-thousandths
(1/l000ths) 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-
thousandths (1/l000ths) 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 such number of one one-thousandths (1/l000ths) of a share of
Preferred Stock that are fully paid and nonassessable at such adjusted Purchase
Price.
(1) 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-thousandths (l/l000ths) 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-thousandths (1/l000ths) 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 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.
20
<PAGE>
(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, a major part or 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 earlier of the Stock
Acquisition Date or 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.
(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 limit the Board of Directors' right at any time in the future to
declare such Person to be an Adverse Person upon the Board of Directors'
determination that the criteria set forth in Section 11(a)(ii)(B) apply to such
Person.
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
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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
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<PAGE>
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, and shall not be obligated
or responsible for calculating any adjustment, nor shall it be deemed to have
knowledge of such an adjustment unless and until it shall have received such
certificate.
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, a major part 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-thousandths
(1/1000ths) 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-thousandths (1/1000ths) of a
share for which a Right was exercisable immediately prior to the first
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 (or if the
Principal Party does not have outstanding shares of Common Stock that are, as of
the date of the consummation of such Section 13 Event, and have continuously
been for the twelve months immediately preceding that date, registered under
Section 12 of the Exchange Act, 50% of the Book Value per share of the Common
Stock of such Principal Party) on the date of
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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) 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 Section 13 Event, 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 Section 13 Event,
the Principal Party at its own expense 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
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<PAGE>
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) qualify or register the Rights and the security purchasable upon
exercise of the Rights under the blue sky or securities laws of such
jurisdictions as may be necessary or appropriate;
(iii) list the Rights and the securities purchasable upon exercise of
the Rights on each national securities exchange on which the Common Stock
was listed prior to the consummation of the Section 13 Event or, if the
Common Stock was not listed on a national securities exchange prior to the
consummation of the Section 13 Event, on a national securities exchange;
and
(iv) 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 exercised shall thereafter become
exercisable in the manner described in Section 13(a).
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
closing price quoted on the Nasdaq Stock Market or, if such shares are not so
quoted, the average of the closing bid and asked quotations with respect to a
Right, as reported on any National Association of Securities Dealers, Inc.
quotation system or, if on any such date the Rights are not so quoted , 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
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<PAGE>
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-
thousandth (l/l000th) 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-thousandth
(l/l000th) of a share of Preferred Stock). In lieu of fractional shares of
Preferred Stock that are not integral multiples of one one-thousandth (l/l000th)
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-thousandth (l/l000th) of a share of Preferred Stock. For purposes of this
Section 14(b), the current market value of one one-thousandth (1/l000th) of a
share of Preferred Stock shall be one one-thousandth (1/l000th) 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.
-----------------------------
(a) 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
25
<PAGE>
injunctive relief against actual or threatened violations of the obligations
hereunder of any Person subject to this Agreement.
(b) Any holder of Rights who prevails in an action to enforce the
provisions of this Rights Agreement shall be entitled to recover the recoverable
costs and expenses including attorneys' fees incurred in such action.
Section 16. Agreement of Rights Holders. Every holder of a Right by
----------------------------------------
accepting the same consents and agrees with the Company and the Rights Agent and
with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable only in
connection with the transfer of Common Stock;
(b) after the Distribution Date, the Rights Certificates are transferable
only on the registry books of the Rights Agent if 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 and will prosecute
such efforts expeditiously and until such time as a final non-appealable
judgment with respect to such matter has been obtained.
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-thousandths
(l/l000ths) 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
26
<PAGE>
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, and its officers, agents and
directors 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 or such indemnified party, for anything done or omitted by the
Rights Agent in connection with the acceptance and administration of this
Agreement, including the costs and expenses of defending against any claim of
liability in the premises. The costs and expenses of enforcing this right of
indemnification shall also be paid by the Company. The indemnification provided
for hereunder shall survive the expiration of the Rights and the termination of
this Agreement.
(b) The Rights Agent may conclusively rely upon and 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.
(c) Notwithstanding anything in this Agreement to the contrary, in no event
shall the Rights Agent be liable for special, indirect 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 likelihood of such loss or damage
and regardless of the form of the action.
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
27
<PAGE>
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 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, and no implied duties or obligations shall be read into this
Agreement against the Rights Agent, by all of which the Company and the holders
of Rights Certificates (or, prior to the Distribution Date, of the Common
Stock), by their acceptance thereof, shall be bound:
(a) Before the Rights Agent acts or refrains from acting, it 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 any one of the Chairman of the Board, the Chief Executive
Officer, the President, the Chief Financial Officer, a Vice President (whether
preceded by any additional title) or, the 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.
28
<PAGE>
(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 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, the Chief
Financial Officer, a Vice President (whether preceded by any additional title)
or the Secretary 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. Any application by the Rights Agent for
written instructions from the Company may, at the option of the Rights Agent,
set forth in writing any action proposed to be taken or omitted by the Rights
Agent under this Agreement and the date on or after which such action shall be
taken of such omission shall be effective. The Rights Agent shall not be liable
for any action taken by, or omission of, the Rights Agent in accordance with a
proposal included in any such application on or after the date specified in such
application (which date shall not be less than ten Business Days after the date
any officer of the Company actually receives such application, unless any such
officer shall have consented in writing to an earlier date) unless, prior to
taking any such action (or the effective date in the case of an omission), the
Rights Agent shall have received written instructions in response to such
application subject to the proposed action or omission and/or specifying the
action to be taken or omitted.
(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.
29
<PAGE>
(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.
(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) The Rights Agent shall not be required to take notice or be deemed to
have notice of any fact, event or determination (including, without limitation,
any dates or events defined in this Agreement or the designation of any Person
as an Acquiring Person, Affiliate or Associate) under this Agreement unless and
until the Rights Agent shall be specifically notified in writing by the Company
of such fact, event or determination.
(l) 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 not been
completed, the Rights Agent shall not take any further action with respect to
such requested exercise of transfer without first consulting the Company.
(m) If, with respect to any Right 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 l 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 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
30
<PAGE>
(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 $50,000,000 or 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, or upon the
exercise, conversion or exchange of securities 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 (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 time any Person becomes an Acquiring Person or
(or, if any Person becomes an Acquiring Person 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
31
<PAGE>
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. 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. Neither the
Company nor any of its Affiliates or Associates may redeem, acquire or purchase
for value any Rights at any time in any manner other than that specifically set
forth in this Section 23 or in Section 24 hereof, and other than in connection
with the purchase of shares of Common Stock prior to the Distribution Date.
Section 24. Exchange.
---------------------
(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) mandatorily, 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 percent (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
32
<PAGE>
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. If the Board of Directors
of the Company elects to exchange all the Rights for exchange consideration
pursuant to this Section 24 (the "Exchange Consideration") prior to the physical
distribution of the Rights Certificates, the Company may distribute the Exchange
Consideration in lieu of distributing Right Certificates, in which case for
purposes of this Rights Agreement holders of Rights shall be deemed to have
simultaneously received and surrendered for exchange Right Certificates on the
date of such distribution.
(c) 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. In the event, the
Company shall, after good faith efforts be unable to take all such action as may
be necessary to authorize such additional shares of Common Stock, it shall
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-thousandth
(1/1000th) 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) The Company shall not be required to issue fractions of shares of
Common Stock or to distribute certificates which evidence fractional shares of
Common Stock. 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 share 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
33
<PAGE>
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 a major part 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 paragraph to Preferred Stock shall be deemed thereafter to refer to
Common Stock and/or, if appropriate, other securities.
Section 26. Notices. 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:
National Surgery Centers, Inc.
30 South Wacker Drive
Suite 2302
Chicago, Illinois 60606
Attention: President
34
<PAGE>
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 sent by registered or certified
mail and shall be deemed given upon receipt and addressed (until another address
is filed in writing with the Company) as follows:
Harris Trust and Savings Bank
311 West Monroe Street
Chicago, Illinois 60603
Attention: Ed Gurgel
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. Prior to the time as any Person
---------------------------------------
becomes an Acquiring Person 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
time as any Person becomes an Acquiring Person 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 or to
correct or supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein in either case in a manner which
preserves or enhances the interests of holders of Rights Certificates (other
than an Acquiring Person or Adverse Person or an Affiliate or Associate of an
Acquiring Person or an Adverse Person, (ii) to shorten or lengthen any time
period hereunder or (iii) 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 (ii) 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 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. Notwithstanding
anything in this Agreement to the contrary, no supplement or amendment that
changes the rights and duties of the Rights Agent under this Agreement will be
effective against the Rights Agent without the execution of such supplement or
amendment by the Rights Agent.
35
<PAGE>
Section 28. Successors. All the covenants and provisions of this
-----------------------
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 29. Determinations and Actions by the Board of Directors, etc.
----------------------------------------------------------------------
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 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
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 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). Nothing contained in this Rights
Agreement shall be deemed to be in derogation of the obligation of the Board of
Directors of the Company to exercise its fiduciary duty. Without limiting the
foregoing, nothing contained herein shall be construed to suggest or imply that
the Board of Directors shall not be entitled to reject any tender offer, or to
recommend that holders of Common Shares reject any tender offer or other
acquisition proposal, or to take any other action (including, without
limitation, the commencement, prosecution, defense or settlement of any
litigation and the submission of additional or alternative offers or other
proposals) with respect to any tender offer or other acquisition proposal that
the Board of Directors believes is necessary or appropriate in the exercise of
such fiduciary duty.
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
36
<PAGE>
the Company and who are not 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 Delaware 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, except that the rights and
obligations of the Rights Agent shall be governed by the laws of the State of
Illinois.
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.
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: NATIONAL SURGERY CENTERS, INC.
By _____________________ By _____________________
Name: __________________ Name: __________________
Title: _________________ Title: _________________
Attest: HARRIS TRUST AND SAVINGS BANK
By _____________________ By _____________________
Name: __________________ Name: __________________
Title: _________________ Title: _________________
37
<PAGE>
Exhibit A
---------
FORM OF
CERTIFICATE OF DESIGNATION, PREFERENCES
AND RIGHTS OF SERIES A JUNIOR
PARTICIPATING PREFERRED STOCK
OF
NATIONAL SURGERY CENTERS, INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
The undersigned officers of National Surgery Centers, Inc., a corporation
organized and existing under the General Corporation Law of the State of
Delaware, in accordance with the provisions of Section 103 thereof, DO HEREBY
CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by the
Certificate of Incorporation, as amended, of the said Corporation, the said
Board of Directors on December 17, 1997 adopted the following resolution
creating a series of 500,000 shares of Preferred Stock designated as Series A
Junior Participating Preferred Stock:
BE IT FURTHER RESOLVED, that pursuant to the authority vested in the Board
of Directors of this Corporation in accordance with the provisions of its
Restated Certificate of Incorporation, as amended, a series of Preferred Stock
of the Corporation be and it is hereby 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 500,000. Such number of shares may be
increased or decreased by resolution of the Board of Directors; PROVIDED that no
decrease shall reduce the number of shares of Series A Junior Participating
Preferred Stock to a number less than the number of shares then outstanding plus
the number of shares reserved for issuance upon the exercise of outstanding
options, rights or warrants or upon the conversion of any outstanding securities
issued by the Corporation convertible into Series A Junior Participating
Preferred Stock.
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
A-1
<PAGE>
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) $0.01 or (b) subject to the provision for
adjustment hereinafter set forth, 1,000 times the aggregate per share amount of
all cash dividends, and 1,000 times the aggregate per share amount (payable in
kind) of all non-cash dividends or other distributions other than a dividend
payable in shares of Common Stock or a subdivision of the outstanding shares of
Common Stock (by reclassification or otherwise), declared on the Common Stock,
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
event the Corporation shall at any time after December 17,1997 (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 $0.01 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
A-2
<PAGE>
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 1,000 votes on all matters submitted to a vote of the stockholders of
the Corporation. In the event the Corporation shall at any time 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
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,
A-3
<PAGE>
the holders of 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 the 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 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 certificate 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
A-4
<PAGE>
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 or as otherwise provided bylaw, 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
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.
A-5
<PAGE>
(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 canceled promptly after the acquisition thereof.
All such shares shall upon their cancellation become authorized but unissued
shares of Preferred Stock and may be reissued as part of a new series of
Preferred Stock 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. Upon any
--------------------------------------------------
liquidation (voluntary or otherwise), dissolution or winding up of the
Corporation, no distribution shall be made (i) to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Junior Participating Preferred Stock unless, prior
thereto, the holders of shares of Series A Junior Participating Preferred Stock
shall have received an amount equal to the greater of (x) $1,000 per whole share
and (y) an aggregate amount per whole share, subject to adjustment as
hereinafter provided, equal to 1,000 times the aggregate amount to be
distributed per share to the holders of the Common Stock plus in either case an
amount equal to accrued and unpaid dividends and distributions thereon, whether
or not declared, to the date of such payment, and (ii) to the holders of stock
ranking or a parity ( either as to dividends or upon liquidation, dissolution or
winding up) with the Series A Preferred Stock, except distributions made ratably
on the Series A Preferred Stock, and all other such parity stock, in proportion
to the total amounts to which the holders of all such shares are entitled upon
such liquidation, dissolution or winding up. In the event the Corporation shall
at any time 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 referred to in clause (i) (y) of the
preceding sentence in effect 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.
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 1,000 times the aggregate amount
of stock, securities, cash and/or any other property (payable in kind), as the
case may be, into which or for which each share of Common Stock is changed or
exchanged. In the event the Corporation shall at any time 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
A-6
<PAGE>
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 holders 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 lieu of
fractional shares, the Corporation, prior to the first issuance of a share or a
fraction of a share of Series A Junior Participating Preferred Stock, may elect
to issue depository receipts evidencing such authorized fraction of a share of
Series A Junior Participating Preferred Stock pursuant to an appropriate
agreement between the Corporation and a depository selected by the Corporation;
provided that such agreement shall provide that the holders of such depository
receipts shall have all the rights, privileges and preferences to which they are
entitled as holders of the Series A Junior Participating Preferred Stock.
Section 11. Rank. The Series A Junior Participating Preferred Stock shall
----------------
rank, with respect to the payment of dividends and the distribution of assets,
junior to all series of any other class of the Corporation's 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 22nd day of
December 1997.
NATIONAL SURGERY CENTERS, INC.
Name:____________________________
Title:___________________________
Attest:
________________________________
Secretary
A-7
<PAGE>
Exhibit B
---------
FORM
OF
RIGHTS CERTIFICATE
Certificate No. R- _________ Rights
NOT EXERCISABLE AFTER DECEMBER 17, 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 TERM IS 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.]/1/
Rights Certificate
NATIONAL SURGERY CENTERS, INC.
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 December 22, 1997 (the "Rights Agreement"), between
National Surgery Centers, Inc., a (Delaware corporation) (the "Company"), and
Harris Trust and Savings Bank, a Delaware corporation (the "Rights Agent"), to
purchase from the Company at any time prior to 5:00 P.M. (Chicago time) on
December 17, 2007 at the office or offices of the Rights Agent designated for
such purpose, or its successors as Rights Agent, one one-thousandth (1/1000th)
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 One Hundred
Fifteen Dollars ($115.00) per one one-thousandth (1/l000th) 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.
B-1
<PAGE>
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 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-thousandths (1/1000ths) 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.
B-2
<PAGE>
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-thousandth (1/1000th) of a share of Preferred Stock, which
may, at the election of the Company, be evidenced by depository receipts), but
in lieu thereof a cash payment will be made, as provided in the 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 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.
WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal.
Dated as of ____________ ___, ________
ATTEST: NATIONAL SURGERY CENTERS, INC.
____________________________ By ____________________________
Secretary Title:
Countersigned:
[__________________]
By _________________________________
Authorized Signature
B-3
<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:
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:
B-4
<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.
B-5
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to
exercise Rights represented by the
Rights Certificate.)
To: NATIONAL SURGERY CENTERS, INC.
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)
- --------------------------------------------------------------------------------
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:
B-6
<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:
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.
B-7
<PAGE>
Exhibit C
---------
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED SHARES
On December 17, 1997, the Board of Directors of the Registrant declared a
dividend distribution of one right (a "Right") for each outstanding share of the
Registrant's Common Stock, $.01 par value per share ("Common Stock"), to
stockholders of record at the close of business on December 30, 1997 (the
"Record Date"). The Board of Directors of the Registrant also authorized the
issuance of one Right for each share of Common Stock issued after the Record
Date and prior to the earliest of the Distribution Date (as defined below), the
redemption of the Rights and the expiration of the Rights and, in certain
circumstances, after the Distribution Date. Except as set forth below and
subject to adjustment as provided in the Rights Agreement (defined below), each
Right entitles the registered holder to purchase from the Registrant one one-
thousandth of a share of Series A Junior Participating Preferred Stock (the
"Preferred Stock"), at a purchase price of $115 per Right (the "Purchase
Price"). The description and terms of the Rights are set forth in a Rights
Agreement, dated as of December 22, 1997 (the "Rights Agreement"), between the
Registrant and Harris Trust and Savings Bank, as Rights Agent.
Upon payment of the dividend at the close of business on the Record Date,
the Rights will be attached to all Common Stock certificates representing shares
then outstanding, and no separate Rights Certificates (as defined below) will be
distributed. The Rights will separate from the Common Stock upon the earliest
of (i) 10 days following a public announcement that a person or group (an
"Acquiring Person"), together with persons affiliated or associated with it, has
acquired, or obtained the right to acquire, beneficial ownership of 20% or more
of the outstanding shares of Common Stock (the "Stock Acquisition Date"), (ii)
10 business days (or such later date as the Board of Directors of the Registrant
shall determine) following the commencement of a tender offer or exchange offer
that would result in a person or group beneficially owning 20% or more of such
outstanding shares of Common Stock, or (iii) 10 business days following a
determination by the Board of Directors of the Registrant that a person (an
"Adverse Person"), alone or together with its affiliates and associates, has
become the beneficial owner of more than 10% of the outstanding Common Stock and
that (a) such beneficial ownership is intended to cause the Registrant to
repurchase the Common Stock beneficially owned by such person or to cause
pressure on the Registrant to take action or enter into transactions intended to
provide such person with short-term financial gain under the circumstances where
the Board of Directors of the Registrant determines that the best long-term
interests of the Registrant would not be served by taking such action or
entering into such transactions at the time or (b) such beneficial ownership is
causing or reasonably likely to cause a material adverse impact on the business
or prospects of the Registrant (the earliest of such dates being called the
"Distribution Date").
Until the Distribution Date (or earlier redemption or expiration of the
Rights), (i) the Rights will be transferred with and only with the Common Stock
(except in connection with redemption of the Rights), (ii) new Common Stock
certificates issued after the Record Date upon transfer, replacement or new
issuance of Common Stock will contain a notation incorporating the
C-1
<PAGE>
Rights Agreement by reference and (iii) the surrender for transfer of any
certificates for Common Stock outstanding will also constitute the transfer of
the Rights associated with the Common Stock represented by such certificate.
The Rights will become first exercisable on the Distribution Date and will
expire at the close of business on December 17, 2007 (the "Expiration Date"),
unless earlier redeemed by the Registrant as described below. Notwithstanding
the foregoing, the Rights will not be exercisable after the occurrence of a
Triggering Event (defined below) until the Registrant's right of redemption has
expired.
As soon as practicable after the Distribution Date, separate certificates
evidencing the Rights (the "Rights Certificates") will be mailed to holders of
record of the Common Stock as of the close of business on the Distribution Date
and, thereafter, such separate Rights Certificates alone will evidence the
Rights. Except for shares of Common Stock issued or sold after the Distribution
Date pursuant to the exercise of stock options or under any employee benefit
plan or arrangement granted or awarded prior to the Distribution Date, or the
exercise, conversion or exchange of securities issued by the Registrant, and
except as otherwise determined by the Board of Directors, only shares of Common
Stock issued prior to the Distribution Date will be issued with Rights.
In the event that any person shall become (a) an Acquiring Person (except
for certain persons who report their ownership on Schedule 13G under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or on Schedule
13D under the Exchange Act, provided that they do not state any intention to, or
reserve the right to, control or influence the Registrant and such persons
certify that they became an Acquiring Person inadvertently and they agree that
they will not acquire any additional shares of Common Stock) or (b) an Adverse
Person (either such event is referred to herein as a "Triggering Event"), then
the Rights will "flip-in" and entitle each holder of a Right, except as provided
below, to purchase, upon exercise at the then-current Purchase Price, that
number of shares of Common Stock having a market value of two times such
Purchase Price.
Any Rights beneficially owned at any time on or after the earlier of the
Distribution Date and the Stock Acquisition Date by an Acquiring Person, an
Adverse Person or an affiliate or associate of an Acquiring Person or an Adverse
Person (whether or not such ownership is subsequently transferred) will become
null and void upon the occurrence of a Triggering Event, and any holder of such
Rights will have no right to exercise such Rights.
Preferred Stock purchasable upon exercise of the Rights will not be
redeemable. Each share of Preferred Stock will be entitled to a minimum
preferential quarterly dividend payment of $.01 per share but will be entitled
to an aggregate dividend of 1,000 times the dividend declared per share of
Common Stock. In the event of liquidation, the holders of the Preferred Stock
will be entitled to a minimum preferential liquidation payment of $1,000 per
share but will be entitled to an aggregate payment of 1,000 times the payment
made per share of Common Stock. Each share of Preferred Stock will have 1,000
votes, voting together with the Common Stock. Finally, in the event of any
merger, consolidation, or other transaction in which shares of Common Stock are
exchanged, each share of Preferred Stock will be entitled to receive 1,000 times
the amount received per share of Common Stock. These rights are protected by
customary antidilution provisions.
Because of the nature of the Preferred Stocks' dividend, liquidation, and
voting rights, the value of the one thousandth interest in a share of Preferred
Stock purchasable upon exercise of each Right should approximate the value of
one share of Common Stock.
In the event that, following a Stock Acquisition Date, the Registrant is
acquired in a merger or other business combination in which the Common Stock
does not remain outstanding or is changed or 50% of the assets or earning power
of the Registrant and its Subsidiaries (as defined in the Rights Agreement)
(taken as a whole) is sold or otherwise transferred to any person (other than
the Registrant or any Subsidiary of the Registrant) in one transaction or a
series of related transactions, the Rights will "flip-over" and entitle each
holder of a Right, except as provided in the preceding paragraph, to purchase,
upon the exercise of the Right at the then-current Purchase Price, that number
of shares of common stock of the acquiring company
C-2
<PAGE>
which at the time of such transaction would have a market value of two times
such Purchase Price.
The Purchase Price is subject to adjustment from time to time to prevent
dilution upon the (i) declaration of a dividend on the Preferred Stock payable
in shares of Preferred Stock, (ii) subdivision of the outstanding Preferred
Stock, (iii) combination of the outstanding Preferred Stock into a smaller
number of shares, (iv) issuance of any shares of the Registrant's capital stock
in a reclassification of the Preferred Stock (including any such
reclassification in connection with a consolidation or merger in which the
Registrant is the continuing or surviving corporation), (v) grant to holders of
the Preferred Stock of certain rights, options, or warrants to subscribe for
Preferred Stock or securities convertible into Preferred Stock at less than the
current market price of the Preferred Stock, or (vi) distribution to holders of
the Preferred Stock of other evidences of indebtedness, cash (other than a
regular quarterly cash dividend payable out of the earnings or retained earnings
of the Registrant), subscription rights, warrants, or assets (other than a
dividend payable in Preferred Stock, but including any dividend payable in stock
other than Preferred Stock).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% of
the Purchase Price.
At any time until the earlier of (i) ten days following the Stock
Acquisition Date and (ii) the Expiration Date, the Registrant may redeem the
Rights in whole, but not in part, at a price of $.01 per Right, subject to
adjustments. The Registrant may, at its option, pay the redemption price in
cash, shares of Common Stock (based on the current market price of the Common
Stock at the time of redemption) or any other form of consideration deemed
appropriate by the Board of Directors of the Registrant. Immediately upon the
action of the Registrant's Board of Directors ordering redemption of the Rights,
the right to exercise the Rights will terminate and the only right of the
holders of Rights will be to receive the applicable redemption price. In
addition, after a Triggering Event, at the election of the Board of Directors of
the Registrant, the outstanding Rights (other than those beneficially owned by
an Acquiring Person, Adverse Person or an affiliate or associate of an Acquiring
Person or Adverse Person) may be exchanged, in whole or in part, for shares of
Common Stock, or shares of preferred stock of the Registrant having essentially
the same value or economic rights as such shares of Common Stock. Immediately
upon the action of the Board of Directors of the Registrant 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 such Rights
will only entitle holders to receive the shares issuable upon such exchange.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Registrant, including, without limitation, the
right to vote or to receive dividends. While the distribution of the Rights
will not be taxable to stockholders or to the Registrant, stockholders may,
depending upon the circumstances, recognize taxable income in the event that the
Rights become exercisable for Common Stock (or other consideration) of the
Registrant or for common stock of the acquiring company as set forth above.
C-3
<PAGE>
At any time prior to the Distribution Date, the Registrant may, without the
approval of any holder of the Rights, supplement or amend any provision of the
Rights Agreement. Thereafter, the Rights Agreement may be amended only (i) to
cure ambiguities, (ii) to correct inconsistent provisions, (iii) to shorten or
lengthen any time period thereunder or (iv) in ways that do not adversely affect
the Rights holders (other than an Acquiring Person or Adverse Person). From and
after the Distribution Date, the Rights Agreement may not be amended to lengthen
(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).
As of December 23, 1997, there were 18,502,369 shares of Common Stock
outstanding. Each outstanding share of Common Stock on the Record Date will
receive one Right. Until the Distribution Date, the Registrant will issue one
Right with each share of Common Stock that shall become outstanding so that all
such shares will have attached Rights. Five hundred thousand (500,000) shares
of Preferred Stock have been reserved for issuance upon exercise of the Rights.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A dated
December 24, 1997. A copy of the Rights Agreement is available free of charge
from the Company. This summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement,
which is hereby incorporated herein by reference.
C-4
