SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): March 9, 2000
CAPITAL SENIOR LIVING CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE 1-17445 75-2678809
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(State or other jurisdiction of (Commission File Number) (IRS Employer
incorporation) Identification No.)
14160 Dallas Parkway, Suite 300
Dallas, Texas 75240
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (972) 770-5600
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ITEM 5. OTHER EVENTS.
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Rights Plan
On March 9, 2000, the Board of Directors of CAPITAL SENIOR LIVING
CORPORATION (the "Company") declared a dividend of one preferred share purchase
right (a "Right") for each outstanding share of common stock, par value $.01 per
share, of the Company (the "Common Stock"). The dividend is payable on March 20,
2000 (the "Record Date") to the stockholders of record on that date. Each Right
entitles the registered holder to purchase from the Company one one-thousandth
of a share of Series A Junior Participating Preferred Stock, par value $.01 per
share, of the Company (the "Preferred Stock") at a price of $22.00 per one one-
thousandth of a share of Preferred Stock (the "Purchase Price"), subject to
adjustment. The description and terms of the Rights are set forth in a Rights
Agreement dated as of March 9, 2000, as the same may be amended from time to
time (the "Rights Agreement"), between the Company and CHASEMELLON SHAREHOLDER
SERVICES, L.L.C., as Rights Agent (the "Rights Agent").
Detachment of Rights; Exercise. Until the earlier to occur of (i) 10
days following a public announcement that a person or group of affiliated or
associated persons (other than (A) James A. Stroud and an affiliated trust (as
long as together James A. Stroud and such affiliated trust do not own more than
49% of the outstanding shares of Common Stock) and (B) certain other excepted
persons) has acquired beneficial ownership of 15% or more of the outstanding
shares of Common Stock (an "Acquiring Person") or (ii) 10 business days (or such
later date as may be determined by action of the Board of Directors prior to
such time as any person or group of affiliated persons becomes an Acquiring
Person) following the commencement of, or announcement of an intention to make,
a tender offer or exchange offer the consummation of which would result in the
beneficial ownership by a person or group of 15% or more of the outstanding
shares of Common Stock (the earlier of such dates being called the "Distribution
Date"), the Rights will be evidenced, with respect to any of the Common Stock
certificates outstanding as of the Record Date, by such Common Stock certificate
together with a copy of the Summary of Rights in substantially the form of
Exhibit C to the Rights Agreement (the "Summary of Rights").
The Rights Agreement provides that, until the Distribution Date (or
earlier expiration of the Rights), the Rights will be transferred with and only
with the Common Stock. Until the Distribution Date (or earlier expiration of the
Rights), new Common Stock certificates issued after the Record Date upon
transfer or new issuances of Common Stock will contain a notation incorporating
the Rights Agreement by reference. Until the Distribution Date (or earlier
expiration of the Rights), the surrender for transfer of any certificates for
shares of Common Stock outstanding as of the Record Date, even without such
notation or a copy of the Summary of Rights, will also constitute the transfer
of the Rights associated with the shares of Common Stock represented by such
certificates. As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights ("Right Certificates") will be mailed to
holders of record of the Common Stock as of the close of business on the
Distribution Date and such separate Right Certificates alone will evidence the
Rights.
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The Rights are not exercisable until the Distribution Date. The Rights
will expire on March 9, 2010 (the "Final Expiration Date"), unless the Final
Expiration Date is advanced or extended or unless the Rights are earlier
redeemed or exchanged by the Company, in each case as described below.
If any person or group of affiliated or associated persons becomes an
Acquiring Person, each holder of a Right, other than Rights beneficially owned
by the Acquiring Person (which will thereupon become void), will thereafter have
the right to receive upon exercise of a Right that number of shares of Common
Stock having a market value of two times the exercise price of the Right.
If, after a person or group has become an Acquiring Person, the Company
is acquired in a merger or other business combination transaction or 50% or more
of its consolidated assets or earning power are sold, proper provisions will be
made so that each holder of a Right (other than Rights beneficially owned by an
Acquiring Person which will have become void) will thereafter have the right to
receive upon the exercise of a Right that number of shares of common stock of
the person with whom the Company has engaged in the foregoing transaction (or
its parent) that at the time of such transaction have a market value of two
times the exercise price of the Right.
At any time after any person or group becomes an Acquiring Person and
prior to the earlier of one of the events described in the previous paragraph or
the acquisition by such Acquiring Person of 50% or more of the outstanding
shares of Common Stock, the Board of Directors of the Company may exchange the
Rights (other than Rights owned by such Acquiring Person which will have become
void), in whole or in part, for shares of Common Stock or Preferred Stock (or a
series of the Company's preferred stock having equivalent rights, preferences
and privileges), at an exchange ratio of one share of Common Stock, or a
fractional share of Preferred Stock (or other preferred stock) equivalent in
value thereto, per Right.
Preferred Shares. Shares of Preferred Stock purchasable upon exercise
of the Rights will not be redeemable. Each share of Preferred Stock will be
entitled, when, as and if declared, to a dividend payment per share equal to an
aggregate dividend of 1,000 times the dividend declared per share of Common
Stock. Upon the liquidation, dissolution or winding up of the Company, the
holders of the Preferred Stock will be entitled to a minimum preferential
payment of $1.00 per share (plus any accrued but unpaid dividends) and 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, upon any merger, consolidation or other
transaction in which outstanding shares of Common Stock are converted or
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 Stock's dividend, liquidation
and voting rights, the value of the one one-thousandth interest in a share of
Preferred Stock purchasable upon exercise of each Right should approximately be
the value of one share of Common Stock.
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The offer and sale of shares of the Preferred Stock or shares of the
Common Stock issuable upon exercise of the Rights will be registered pursuant to
the Securities Act of 1933, as amended; such registration will not become
effective until the Rights become exercisable.
Antidilution and Other Adjustments. The number of one one-thousandths
of a Preferred Share or other securities or property issuable upon exercise of
the Rights, and the Purchase Price payable, are subject to customary adjustments
from time to time to prevent dilution.
Redemption of Rights. At any time prior to the time an Acquiring Person
becomes such, the Board of Directors of the Company may redeem all but not less
than all of the then outstanding Rights at a price of $.001 per Right (the
"Redemption Price"). The redemption of the Rights may be made effective at such
time, on such basis and with such conditions as the Board of Directors in its
sole discretion may establish. Immediately upon 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 Redemption Price.
No Rights as Stockholder. Until a Right is exercised, the holder
thereof, as such, will have no rights as a stockholder of the Company,
including, without limitation, the right to vote or to receive dividends.
Amendment of Rights. For so long as the Rights are then redeemable, the
Company may, except with respect to the redemption price, amend the Rights
Agreement in any manner. After the Rights are no longer redeemable, the Company
may, except with respect to the redemption price, amend the Rights Agreement in
any manner that does not adversely affect the interests of holders of the
Rights.
This summary description of the Rights does not purport to be complete
and is qualified in its entirety by reference to the Rights Agreement filed
herewith as Exhibit 4.1, which is hereby incorporated by reference.
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ITEM 7. Financial Statements and Exhibits.
---------------------------------
(c) Exhibits
(4) Instruments defining rights of security
holders, including indentures:
4.1 Rights Agreement, dated as of March
9, 2000, between Capital Senior
Living Corporation and ChaseMellon
Shareholder Services, L.L.C., which
includes the form of Certificate of
Designation of Series A Junior
Participating Preferred Stock, $.01
par value, as Exhibit A, the form of
Right Certificate as Exhibit B, and
the Summary of Rights as Exhibit C.
4.2 Form of Certificate of Designation
of Series A Junior Participating
Preferred Stock, $.01 par value
(included as Exhibit A to the Rights
Agreement, which is Exhibit 4.1
hereto).
4.3 Form of Right Certificate (included
as Exhibit B to the Rights
Agreement, which is Exhibit 4.1
hereto). Pursuant to the Rights
Agreement, printed Right
Certificates will not be mailed
until as soon as practicable after
the Distribution Date.
4.4 Form of Summary of Rights (included
as Exhibit C to the Rights
Agreement, which is Exhibit 4.1
hereto) that, together with
certificates representing the
outstanding shares of Common Stock
of the Company, shall represent the
Rights until the Distribution Date.
4.5 Specimen of legend to be placed,
pursuant to Section 3(c) of the
Rights Agreement, on all new Common
Stock certificates issued after
March 20, 2000 and prior to the
Distribution Date upon transfer,
exchange or new issuance (included
in Section 3(c) of the Rights
Agreement, which is Exhibit 4.1
hereto).
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: March 16, 2000
CAPITAL SENIOR LIVING CORPORATION
By: /s/ Lawrence A. Cohen
--------------------------
Name: Lawrence A. Cohen
Title: Chief Executive Officer
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EXHIBIT INDEX
Exhibit
No. Exhibit Description
(4) Instruments defining the rights of security holders,
including indentures:
4.1 Rights Agreement, dated as of March 9, 2000,
between Capital Senior Living Corporation and
ChaseMellon Shareholder Services, L.L.C., which
includes the form of Certificate of Designation
of Series A Junior Participating Preferred
Stock, $.01 par value, as Exhibit A, the form
of Right Certificate as Exhibit B, and the
Summary of Rights as Exhibit C.
4.2 Form of Certificate of Designation of Series A
Junior Participating Preferred Stock, $.01 par
value (included as Exhibit A to the Rights
Agreement, which is Exhibit 4.1 hereto).
4.3 Form of Right Certificate (included as Exhibit
B to the Rights Agreement, which is Exhibit 4.1
hereto). Pursuant to the Rights Agreement,
printed Right Certificates will not be mailed
until as soon as practicable after the
Distribution Date.
4.4 Form of Summary of Rights (included as Exhibit
C to the Rights Agreement, which is Exhibit 4.1
hereto) that, together with certificates
representing the outstanding shares of Common
Stock of the Company, shall represent the
Rights until the Distribution Date.
4.5 Specimen of legend to be placed, pursuant to
Section 3(c) of the Rights Agreement, on all
new Common Stock certificates issued after
March 20, 2000 and prior to the Distribution
Date upon transfer, exchange or new issuance
(included in Section 3(c) of the Rights
Agreement, which is Exhibit 4.1 hereto).
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Exhibit 4.1
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----------------------------
CAPITAL SENIOR LIVING CORPORATION
and
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.,
----------------------------
RIGHTS AGREEMENT
Dated as of March 9, 2000
----------------------------
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
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Page No.
<S> <C> <C>
Section 1. Certain Definitions..........................................................................1
Section 2. Appointment of Rights Agent..................................................................6
Section 3. Issue of Right Certificates..................................................................6
Section 4. Form of Right Certificates...................................................................8
Section 5. Countersignature and Registration............................................................8
Section 6. Transfer, Split Up, Combination and Exchange of Right Certificates;
Mutilated, Destroyed, Lost or Stolen Right Certificates...................................9
Section 7. Exercise of Rights, Purchase Price; Expiration Date of Rights................................9
Section 8. Cancellation and Destruction of Right Certificates..........................................11
Section 9. Availability of Shares of Preferred Stock...................................................11
Section 10. Preferred Stock Record Date................................................................12
Section 11. Adjustment of Purchase Price; Number and Kind of Shares and Number of
Rights..................................................................................12
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.................................20
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power.......................20
Section 14. Fractional Rights and Fractional Shares....................................................23
Section 15. Rights of Action...........................................................................24
Section 16. Agreement of Right Holders.................................................................25
Section 17. Right Certificate Holder Not Deemed a Stockholder..........................................25
Section 18. Concerning the Rights Agent................................................................26
Section 19. Merger or Consolidation or Change of Name of Rights Agent..................................26
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Section 20. Duties of Rights Agent.....................................................................27
Section 21. Change of Rights Agent.....................................................................29
Section 22. Issuance of New Right Certificates.........................................................30
Section 23. Redemption.................................................................................30
Section 24. Exchange...................................................................................31
Section 25. Notice of Certain Events...................................................................32
Section 26. Notices....................................................................................32
Section 27. Supplements and Amendments.................................................................33
Section 28. Successors.................................................................................34
Section 29. Benefits of this Agreement.................................................................34
Section 30. Determinations and Actions by the Board of Directors.......................................34
Section 31. Severability...............................................................................34
Section 32. Governing Law..............................................................................34
Section 33. Counterparts...............................................................................34
Section 34. Descriptive Headings.......................................................................34
</TABLE>
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RIGHTS AGREEMENT
----------------
Rights Agreement, dated as of March 9, 2000 (the "Agreement"), between
CAPITAL SENIOR LIVING CORPORATION, a Delaware corporation (the "Company"), and
CHASEMELLON SHAREHOLDER SERVICES, L.L.C., a New Jersey limited liability
company, as Rights Agent (the "Rights Agent").
The Board of Directors of the Company has authorized and declared a
dividend of one preferred share purchase right (a "Right") for each share of
Common Stock (as hereinafter defined) of the Company outstanding as of the Close
of Business (as defined below) on March 20, 2000 (the "Record Date"), each Right
representing the right to purchase one one-thousandth (subject to adjustment) of
a share of Preferred Stock (as hereinafter defined), upon the terms and subject
to the conditions herein set forth, and has further authorized and directed the
issuance of one Right (subject to adjustment as provided herein) with respect to
each share of Common Stock that shall become outstanding between the Record Date
and the earlier of the Distribution Date and the Expiration Date (as such terms
are hereinafter defined); provided, however, that Rights may be issued with
respect to shares of Common Stock that shall become outstanding after the
Distribution Date and prior to the Expiration Date in accordance with Section
22.
Accordingly, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
1. Certain Definitions. For purposes of this Agreement, the following
terms have the meaning indicated:
(a) "Acquiring Person" shall mean any Person (as hereinafter defined)
who or which shall be the Beneficial Owner (as hereinafter
defined) of 15% or more of the shares of Common Stock then
outstanding, but shall not include (i) an Exempt Person (as
hereinafter defined) or (ii) any such Person who has reported or
is required to report such ownership (but less than 16%) on
Schedule 13G under the Securities Exchange Act of 1934, as
amended (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 (including an
amendment to 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 13D (other than the disposition of the
Common Stock) and, within 10 Business Days (as such term is
hereinafter defined) of being requested by the Company to advise
it regarding the same, certifies to the Company that such Person
acquired shares of Common Stock in excess of 14.99% inadvertently
or without knowledge of the effect of the terms of the Rights and
who, together with all Affiliates and Associates, thereafter does
not acquire additional shares of Common Stock while the
Beneficial Owner of 15% or more of the shares of Common Stock
then outstanding; provided, however, that
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(a) if the Person requested to so certify fails to do so
within 10 Business Days or (B) if such Person thereafter
becomes obligated to file a Schedule 13D (including an
amendment to a Schedule 13D) that would 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 13D (other than the
disposition of the Common Stock), then such Person shall
become an Acquiring Person immediately thereafter.
Notwithstanding the foregoing, (x) if, as of the date hereof,
any Person (other than an Exempt Person) is the Beneficial
Owner of 15% or more of the shares of Common Stock
outstanding, such Person shall not be or become an "Acquiring
Person" unless and until such time as such Person shall become
the Beneficial Owner of an additional 1% of the shares of
Common Stock (other than pursuant to a dividend or
distribution paid or made by the Company on the outstanding
Common Stock in shares of Common Stock or pursuant to a split
or subdivision of the outstanding Common Stock), unless, upon
becoming the Beneficial Owner of such additional shares of
Common Stock, either such Person is not then the Beneficial
Owner of 15% or more of the shares of Common Stock then
outstanding or such Person is exempted from the definition of
"Acquiring Person" pursuant to Section 1(a)(ii) hereof and (y)
no Person shall become an "Acquiring Person" as the result of
an acquisition of shares of Common Stock by the Company which,
by reducing the number of shares outstanding, increases the
proportionate number of shares of Common Stock beneficially
owned by such Person to 15% or more of the shares of Common
Stock then outstanding; provided, however, that if a Person
shall become the Beneficial Owner of 15% or more of the shares
of Common Stock then outstanding by reason of such share
acquisitions by the Company and shall thereafter become the
Beneficial Owner of any additional shares of Common Stock
(other than pursuant to a dividend or distribution paid or
made by the Company on the outstanding Common Stock in shares
of Common Stock or pursuant to a split or subdivision of the
outstanding Common Stock), then such Person shall be deemed to
be an "Acquiring Person" unless, upon becoming the Beneficial
Owner of such additional shares of Common Stock, either such
Person is not then the Beneficial Owner of 15% or more of the
shares of Common Stock then outstanding or such Person is
exempted from the definition of "Acquiring Person" pursuant to
Section 1(a)(ii) hereof. For all purposes of this Agreement,
any calculation of the number of shares of Common Stock
outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding
shares of Common Stock of which any Person is the Beneficial
Owner, shall be made in accordance with the last sentence of
Rule 13d-3(d)(1)(i) of the General Rules and Regulations under
the Exchange Act as in effect on the date hereof.
(b) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act, as in effect on the date
hereof.
(c) A Person shall be deemed the "Beneficial Owner" of, shall be
deemed to have "Beneficial Ownership" of and shall be deemed
to "beneficially own" any securities:
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(i) which such Person or any of such Person's Affiliates or
Associates is deemed to beneficially own, directly or
indirectly, within the meaning of Rule 13d-3 of the
General Rules and Regulations under the Exchange Act as
in effect on the date hereof;
(ii) which such Person or any of such Person's Affiliates or
Associates has (A) the right to acquire (whether such
right is exercisable immediately or only after the
passage of time) pursuant to any agreement, arrangement
or understanding (other than customary agreements with
and between underwriters and selling group members with
respect to a bona fide public offering of securities),
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, (x)
securities tendered pursuant to a tender or exchange
offer made by or on behalf of such Person or any of
such Person's Affiliates or Associates until such
tendered securities are accepted for purchase, (y)
securities which such Person has a right to acquire
upon the exercise of Rights at any time prior to the
time that any Person becomes an Acquiring Person or (z)
securities issuable upon the exercise of Rights from
and after the time that any Person becomes an Acquiring
Person if such 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 ("Original Rights") or pursuant to
Section 11(i) or Section 11(n) with respect to an
adjustment to Original Rights; or (B) the right to vote
pursuant to any agreement, arrangement or
understanding; provided, however, that a Person shall
not be deemed the Beneficial Owner of, or to
beneficially own, any security by reason of such
agreement, arrangement or understanding if the
agreement, arrangement or understanding to vote such
security (1) arises solely from a revocable proxy or
consent given to such Person in response to a public
proxy or consent solicitation made pursuant to, and in
accordance with, the applicable rules and regulations
promulgated under the Exchange Act and (2) is not also
then reportable 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 and with respect to which such
Person or any of such Person's Affiliates or Associates
has any agreement, arrangement or understanding (other
than customary agreements with and between underwriters
and selling group members with respect to a bona fide
public offering of securities) for the purpose of
acquiring, holding, voting (except to the extent
contemplated by the proviso to this Section 1(c)(ii)(B)
or disposing of such securities of the Company;
provided, however, that no Person who is an officer,
director or employee of an Exempt Person shall be
deemed, solely by reason of such Person's status or
authority as such, to be the "Beneficial Owner" of, to
have
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"Beneficial Ownership" of or to "beneficially own"
any securities that are "beneficially owned" (as
defined in this Section 1(c)), including, without
limitation, in a fiduciary capacity, by an Exempt
Person or by any other such officer, director or
employee of an Exempt Person.
(d) "Business Day" shall mean any day other than a Saturday, a
Sunday or a day on which banking institutions in the States of
New York or Texas, or the city in which the principal office
of the Rights Agent is located, are authorized or obligated by
law or executive order to close.
(e) "Close of Business" on any given date shall mean 5:00 p.m.,
Dallas, Texas time, on such date; provided, however, that if
such date is not a Business Day it shall mean 5:00 p.m.,
Dallas, Texas time, on the next succeeding Business Day.
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(f) "Common Stock" when used with reference to the Company shall mean
the Common Stock, presently par value $.01 per share, of the
Company. "Common Stock" when used with reference to any Person
other than the Company shall mean the common stock (or, in the
case of an unincorporated entity, the equivalent equity interest)
with the greatest voting power of such other Person or, the
equity securities or other equity interest having power to
control or direct the management, of such other Person.
(g) "Common Stock Equivalents" shall have the meaning set forth in
Section 11(a)(iii) hereof.
(h) "Current Value" shall have the meaning set forth in Section
11(a)(iii) hereof.
(i) "Distribution Date" shall have the meaning set forth in Section 3
hereof.
(j) "Equivalent Preferred Shares" shall have the meaning set forth in
Section 11(b) hereof.
(k) "Exempt Person" shall mean (i) the Company or any Subsidiary (as
such term is hereinafter defined) of the Company, in each case
including, without limitation, in its fiduciary capacity, or any
employee benefit plan of the Company or of any Subsidiary of the
Company, or any entity or trustee holding Common Stock for or
pursuant to the terms of any such plan or for the purpose of
funding any such plan or funding other employee benefits for
employees of the Company or of any Subsidiary of the Company or
(ii) James A. Stroud or Senior Living Trust (as long as James A.
Stroud is the trustee thereof); provided, however, if James A.
Stroud and Senior Living Trust together shall become Beneficial
Owners of more than 49% of the shares of Common Stock of the
Company (other than pursuant to a dividend or distribution paid
or made by the Company on the outstanding Common Stock in shares
of Common Stock, pursuant to a split or subdivision of the
outstanding Common Stock or as a result of a buy back of shares
of Common Stock by the Company), then James A. Stroud and Senior
Living Trust shall no longer be Exempt Persons; and provided
further, if James A. Stroud shall no longer be an executive
officer of the Company, then neither James A. Stroud or Senior
Living Trust shall be an Exempt Person if James A. Stroud or
Senior Living Trust become the Beneficial Owner of any additional
shares of Common Stock of the Company after James A. Stroud is no
longer an executive officer of the Company, but this shall not
include becoming Beneficial Owner of shares of Common Stock
acquired by James A. Stroud through exercise of stock options
granted by the Company. James A. Stroud shall notify the Board of
Directors of the Company within 48 hours of any acquisition or
disposition as a Beneficial Owner by James A. Stroud or Senior
Living Trust, which when aggregated with any other acquisitions
or dispositions (as the case may be) not previously so reported
to the Board of Directors of the Company, equals more than 5% of
the outstanding shares of Common Stock of the Company.
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(l) "Exchange Ratio" shall have the meaning set forth in Section 24
hereof.
(m) "Expiration Date" shall have the meaning set forth in Section 7
hereof.
(n) "Flip-In Event" shall have the meaning set forth in Section
11(a)(ii) hereof.
(o) "Final Expiration Date" shall have the meaning set forth in
Section 7 hereof.
(p) "NASDAQ" shall mean The Nasdaq National Market.
(q) "National Exchange" shall mean the New York Stock Exchange, Inc.,
the American Stock Exchange, Inc. or another national securities
exchange.
(r) "Person" shall mean any individual, firm, corporation,
partnership, limited liability company, joint venture,
association, unincorporated organization, trust or other entity,
and shall include any successor (by merger or otherwise) to such
entity.
(s) "Preferred Stock" shall mean the Series A Junior Participating
Preferred Stock, par value $.01 per share, of the Company having
the rights and preferences set forth in the Form of Certificate
of Designation attached to this Agreement as Exhibit A.
(t) "Principal Party" shall have the meaning set forth in Section
13(b) hereof.
(u) "Redemption Date" shall have the meaning set forth in Section 7
hereof.
(v) "Redemption Price" shall have the meaning set forth in Section 23
hereof.
(w) "Right Certificate" shall have the meaning set forth in Section 3
hereof.
(x) "Securities Act" shall mean the Securities Act of 1933, as
amended.
(y) "Section 11(a)(ii) Trigger Date" shall have the meaning set forth
in Section 11(a)(iii) hereof.
(z) "Spread" shall have the meaning set forth in Section 11(a)(iii)
hereof.
(aa) "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) of the Exchange Act) by the Company or an Acquiring Person
that an Acquiring Person has become such, or such earlier date as
a majority of the Board of Directors of the Company have
determined that a Person shall have become an Acquiring Person.
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(bb) "Subsidiary" of any Person shall mean any corporation or other
entity of which securities or other ownership interests having
ordinary voting power sufficient to elect a majority of the board
of directors or other persons performing similar functions are
beneficially owned, directly or indirectly, by such Person, and
any corporation or other entity that is otherwise controlled by
such Person.
(cc) "Substitution Period" shall have the meaning set forth in Section
11(a)(iii) hereof.
(dd) "Summary of Rights" shall have the meaning set forth in Section 3
hereof.
(ee) "Trading Day" shall have the meaning set forth in Section
11(d)(i) hereof.
2. Appointment of Rights Agent. The Company hereby appoints the Rights
Agent to act as agent for the Company in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such
appointment. The Company may from time to time appoint such co-Rights
Agents as it may deem necessary or desirable. The Rights Agent shall
have no duty to supervise and in no event shall be liable for the acts
or omissions of any such co-Rights Agent.
3. Issue of Right Certificates.
---------------------------
(a) Until the Close of Business on the earlier of (i) the tenth day
after the Stock Acquisition Date or (ii) the tenth Business Day
(or such later date as may be determined by action of the Board
of Directors prior to such time as any Person becomes an
Acquiring Person) after the date of the commencement by any
Person of, or of the first public announcement of the intention
of such Person to commence, a tender or exchange offer the
consummation of which would result in any Person becoming an
Acquiring Person (the earlier of such dates being herein referred
to as the "Distribution Date"; provided, however, that if either
of such dates occurs after the date of this Agreement and on or
prior to the Record Date, then the Distribution Date shall be the
Record Date), (x) the Rights will be evidenced (subject to the
provisions of Section 3(b) hereof) by the certificates for Common
Stock registered in the names of the holders thereof and not by
separate Right Certificates, and (y) the Rights will be
transferable only in connection with the transfer of Common
Stock. As soon as practicable after the Distribution Date, the
Company shall promptly notify the Rights Agent thereof and
provide the Rights Agent with a shareholders list of Common
Stock, and the Company will prepare and execute, the Rights Agent
will countersign and the Company will send or cause to be sent
(and the Rights Agent will, if requested, send) by first-class,
insured, postage-prepaid mail, to each record holder of Common
Stock as of the Close of Business on the Distribution Date (other
than any Acquiring Person or any Associate or Affiliate of an
Acquiring Person), at the address of such holder shown on the
records of the Company, a Right Certificate, in substantially the
form of Exhibit B hereto (a "Right Certificate"), evidencing one
Right (subject to adjustment as provided herein) for each share
of Common Stock so
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<PAGE>
held. As of the Distribution Date, the Rights will be evidenced
solely by such Right Certificates.
(b) On the Record Date, or as soon as practicable thereafter, the
Company will send a copy of a Summary of Rights to Purchase
Shares of 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 (other than any Acquiring
Person or any Associate or Affiliate of any Acquiring Person), at
the address of such holder shown on the records of the Company.
With respect to certificates for Common Stock outstanding as of
the Record Date, until the Distribution Date, the Rights will be
evidenced by such certificates registered in the names of the
holders thereof together with the Summary of Rights. Until the
Distribution Date (or, if earlier, the Expiration Date), the
surrender for transfer of any certificate for Common Stock
outstanding on the Record Date, with or without a copy of the
Summary of Rights, shall also constitute the transfer of the
Rights associated with the Common Stock represented thereby.
(c) Certificates issued for Common Stock (including, without
limitation, upon transfer of outstanding Common Stock,
disposition of Common Stock out of treasury stock or issuance or
reissuance of Common Stock out of authorized but unissued shares)
after the Record Date but prior to the earlier of the
Distribution Date and the Expiration Date shall have impressed
on, printed on, written on or otherwise affixed to them the
following legend:
This certificate also evidences and entitles the holder hereof to
certain rights ("Rights") as set forth in a Rights Agreement
between CAPITAL SENIOR LIVING CORPORATION (the "Company") and
CHASEMELLON SHAREHOLDER SERVICES, L.L.C., as Rights Agent, dated
as of March 9, 2000, as the same may be 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 executive 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 without
charge after receipt of a written request therefor. Under certain
circumstances, as set forth in the Rights Agreement, Rights owned
by or transferred to any Person who is, was or becomes an
Acquiring Person (as defined in the Rights Agreement) and certain
transferees thereof, whether such Rights are then held by or on
behalf of such Person or by any subsequent holder, will become
null and void and will no longer be transferable.
8
<PAGE>
With respect to such certificates containing the foregoing legend, until the
Distribution Date the Rights associated with the Common Stock represented by
such certificates shall be evidenced by such certificates alone, and the
surrender for transfer of any such certificate, except as otherwise provided
herein, shall also constitute the transfer of the Rights associated with the
Common Stock represented thereby. If the Company purchases or otherwise acquires
any Common Stock after the Record Date but prior to the Distribution Date, any
Rights associated with such Common Stock shall be deemed canceled and retired so
that the Company shall not be entitled to exercise any Rights associated with
the Common Stock that are no longer outstanding.
Notwithstanding this paragraph (c), the omission of a legend shall not
affect the enforceability of any part of this Agreement or the rights of any
holder of the Rights.
4. Form of Right Certificates. The Right Certificates (and the forms of
election to purchase shares and of assignment to be printed on the reverse
thereof) shall 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, and which do not affect the rights, duties or responsibilities
of the Rights Agent, 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 interdealer quotation system on
which the Rights may from time to time be listed or quoted, or to conform
to usage. Subject to the provisions of Sections 11, 13 and 22 hereof, the
Right Certificates shall entitle the holders thereof to purchase such
number of one one-thousandths of a share of Preferred Stock as shall be set
forth therein at the price per one one-thousandth of a share of Preferred
Stock set forth therein (the "Purchase Price"), but the number of such one
one-thousandths of a share of Preferred Stock and the Purchase Price shall
be subject to adjustment as provided herein.
5. Countersignature and Registration.
(a) The Right Certificates shall be executed on behalf of the Company by
the President of the Company or any other duly authorized officer,
either manually or by facsimile signature, and shall be attested by
the Secretary of the Company, either manually or by facsimile
signature. The Right Certificates shall be manually countersigned by
the Rights Agent and shall not be valid for any purpose unless
countersigned. In case any officer of the Company who shall have
signed any of the Right Certificates shall cease to be such officer of
the Company before countersignature by the Rights Agent and issuance
and delivery by the Company, such Right 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 Right Certificates had not ceased to be such officer of
the Company; and any Right Certificate may be signed on behalf of the
Company by any Person who, at the actual date of the execution of such
Right Certificate, shall be a proper officer of the Company to sign
such Right Certificate, although at the date of the execution of this
Agreement any such Person was not such an officer.
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<PAGE>
(b) Following the Distribution Date and receipt by the Rights Agent of the
notice and shareholders list referred to in Section 3(a), the Rights
Agent will keep or cause to be kept, at an office or agency designated
pursuant to Section 26 hereof for such purpose, books for registration
and transfer of the Right Certificates issued hereunder. Such books
shall show the names and addresses of the respective holders of the
Right Certificates, the number of Rights evidenced on its face by each
of the Right Certificates and the date of each of the Right
Certificates.
6. Transfer, Split Up, Combination and Exchange of Right Certificates;
Mutilated, Destroyed, Lost or Stolen Right Certificates.
(a) Subject to the provisions of Sections 7(e), 11(a)(ii), 13 and 14
hereof, at any time after the Distribution Date and prior to the
Expiration Date, any Right Certificate or Right Certificates may be
transferred, split up, combined or exchanged for another Right
Certificate or Right Certificates, entitling the registered holder to
purchase a like number of one one-thousandths of a share of Preferred
Stock as the Right Certificate or Right Certificates surrendered then
entitled such holder to purchase. Any registered holder desiring to
transfer, split up, combine or exchange any Right Certificate or Right
Certificates shall make such request in writing delivered to the
Rights Agent, and shall surrender the Right Certificate or Right
Certificates to be transferred, split up, combined or exchanged at the
office or agency of the Rights Agent designated pursuant to Section 26
hereof for such purpose. Thereupon the Rights Agent shall countersign
and deliver to the Person entitled thereto a Right Certificate or
Right Certificates, as the case may be, as so requested. The Company
may require payment of a sum sufficient to cover any tax or charge
that may be imposed in connection with any transfer, split up,
combination or exchange of Right Certificates.
(b) Subject to the provisions of Section 11(a)(ii) hereof, at any time
after the Distribution Date and prior to the Expiration Date, upon
receipt by the Company and the Rights Agent of evidence satisfactory
to them of the loss, theft, destruction or mutilation of a Right
Certificate, and, in case of theft or destruction, of indemnity or
security satisfactory to them, and, at the Company's request,
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 Right Certificate if mutilated, the Company
will make and deliver a new Right Certificate of like tenor to the
Rights Agent for delivery to the registered holder in lieu of the
Right Certificate so lost, stolen, destroyed or mutilated.
7. Exercise of Rights, Purchase Price; Expiration Date of Rights.
(a) Except as otherwise provided herein, the Rights shall become
exercisable on the Distribution Date, and thereafter the registered
holder of any Right Certificate may, subject to Section 11(a)(ii)
hereof and except as otherwise provided herein, exercise
10
<PAGE>
the Rights evidenced thereby in whole or in part upon surrender of the
Right Certificate, with the form of election to purchase on the
reverse side thereof duly executed, to the Rights Agent at the office
or agency of the Rights Agent designated pursuant to Section 26 hereof
for such purpose, together with payment of the aggregate Purchase
Price with respect to the total number of one one-thousandths of a
share of Preferred Stock (or other securities, cash or other assets,
as the case may be) as to which the Rights are exercised, at any time
that is both after the Distribution Date and prior to the time (the
"Expiration Date") that is the earliest of (i) the Close of Business
on March 9, 2010 (the "Final Expiration Date"), (ii) the time at which
the Rights are redeemed as provided in Section 23 hereof (the
"Redemption Date"), or (iii) the time at which such Rights are
exchanged as provided in Section 24 hereof.
(b) The Purchase Price shall be initially $22.00 for each one
one-thousandth of a share of Preferred Stock purchasable upon the
exercise of a Right. The Purchase Price and the number of one
one-thousandths of a share of Preferred Stock or other securities or
property to be acquired upon exercise of a Right shall be subject to
adjustment from time to time as provided in Sections 11 and 13 hereof
and shall be payable in lawful money of the United States of America
in accordance with paragraph (c) of this Section 7.
(c) Except as otherwise provided herein, upon receipt of a Right
Certificate representing exercisable Rights, with the form of election
to purchase duly executed, accompanied by payment of the aggregate
Purchase Price for the shares of Preferred Stock to be purchased and
an amount equal to any applicable tax or charge required to be paid by
the holder of such Right Certificate in accordance with Section 9
hereof, in cash or by certified check, cashier's check or money order
payable to the order of the Company, the Rights Agent shall thereupon
promptly (i) (A) requisition from any transfer agent of the Preferred
Stock certificates for the number of shares of Preferred Stock to be
purchased and the Company hereby irrevocably authorizes its transfer
agent to comply with all such requests, or (B) requisition from the
depositary agent depositary receipts representing interests in such
number of one one-thousandths of a share of Preferred Stock as are to
be purchased (in which case certificates for the Preferred Stock
represented by such receipts shall be deposited by the transfer agent
with the depositary agent) and the Company hereby directs the
depositary agent to comply with such request, (ii) when necessary to
comply with this Agreement, requisition from the Company the amount of
cash to be paid in lieu of issuance of fractional shares in accordance
with Section 14 hereof, (iii) promptly 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 Right Certificate,
registered in such name or names as may be designated by such holder
and (iv) when necessary to comply with this Agreement, after receipt,
promptly deliver such cash to or upon the order of the registered
holder of such Right Certificate.
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<PAGE>
(d) Except as otherwise provided herein, in case the registered holder of
any Right Certificate shall exercise less than all of the Rights
evidenced thereby, a new Right Certificate evidencing Rights
equivalent to the exercisable Rights remaining unexercised shall be
issued by the Rights Agent to the registered holder of such Right
Certificate or to his duly authorized assigns, subject to the
provisions of Section 6 and Section 14 hereof.
(e) 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 of Rights upon the
occurrence of any purported transfer or exercise of Rights pursuant to
Section 6 hereof or this Section 7 unless such registered holder shall
have (i) properly completed and signed the Certificate contained in
the form of assignment or form of election to purchase set forth on
the reverse side of the Rights Certificate surrendered for such
transfer or exercise and (ii) provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) thereof
as the Company or the Rights Agent shall reasonably request.
8. Cancellation and Destruction of Right Certificates. All Right Certificates
surrendered for the purpose of exercise, transfer, split up, combination or
exchange shall, if surrendered to the Company or to 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 Right
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 Right Certificate purchased or
acquired by the Company otherwise than upon the exercise thereof. The
Rights Agent shall deliver all canceled Right Certificates to the Company,
or shall, at the written request of the Company, destroy such canceled
Right Certificates, and in such case shall deliver a certificate of
destruction thereof to the Company.
9. Availability of Shares of Preferred 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 or any shares of Preferred Stock held in its treasury; the
number of shares of Preferred Stock that will be sufficient to permit
the exercise in full of all outstanding Rights.
(b) So long as the shares of Preferred Stock issuable upon the exercise of
Rights may be listed or admitted to trading on a National Exchange, or
quoted on NASDAQ, 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 or admitted to
12
<PAGE>
trading on such National Exchange, or quoted on NASDAQ, upon official
notice of issuance upon such exercise.
(c) From and after such time as the Rights become exercisable, the Company
shall use its best efforts, if then necessary to permit the issuance
of shares of Preferred Stock upon the exercise of Rights, to register
and qualify such shares of Preferred Stock under the Securities Act
and any applicable state securities or "Blue Sky" laws (to the extent
exemptions therefrom are not available), cause such registration
statement and qualifications to become effective as soon as possible
after such filing and keep such registration and qualifications
effective until the earlier of the date as of which the Rights are no
longer exercisable for such securities and the Expiration Date. The
Company may temporarily suspend, for a period of time not to exceed 90
days, the exercisability of the Rights in order to prepare and file a
registration statement under the Securities Act and permit it to
become effective. Upon any such suspension, the Company shall promptly
notify the Rights Agent thereof and shall issue a public announcement
stating that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement (with prompt notice
thereof to the Rights Agent) at such time as the suspension is no
longer in effect. In addition, if the Company shall determine that a
registration statement is required following the Distribution Date,
the Company may, by issuing a public announcement, temporarily suspend
the right to exercise the Rights until such time as a registration
statement has been declared effective. The Company shall notify the
Rights Agent whenever it makes a public announcement pursuant to this
Section 9(c) and provide the Rights Agent with a copy of such
announcement. Notwithstanding any provision of this Agreement to the
contrary, the Rights shall not be exercisable in any jurisdiction
unless the requisite qualification in such jurisdiction shall have
been obtained and until a registration statement under the Securities
Act (if required) shall have been declared effective.
(d) The Company covenants and agrees that it will take all such action as
may be necessary to ensure that all shares of Preferred Stock
delivered upon exercise of Rights shall, at the time of delivery of
the certificates therefor (subject to payment of the Purchase Price),
be duly and validly authorized and issued and fully paid and
nonassessable shares.
(e) The Company further covenants and agrees that it will pay when due and
payable any and all taxes and charges that may be payable in respect
of the issuance or delivery of the Right Certificates or of any shares
of Preferred Stock upon the exercise of Rights. The Company shall not,
however, be required to pay any tax or charge that may be payable in
respect of any transfer or delivery of Right Certificates to a Person
other than, or the issuance or delivery of certificates or depositary
receipts for the Preferred Stock in a name other than that of, the
registered holder of the Right Certificate evidencing Rights
surrendered for exercise or to issue or deliver any certificates or
13
<PAGE>
depositary receipts for Preferred Stock upon the exercise of any
Rights until any such tax shall have been paid (any such tax or charge
being payable by that holder of such Right Certificate at the time of
surrender) or until it has been established to the Company's
reasonable satisfaction that no such tax or charge is due.
10. Preferred Stock Record Date. Each Person in whose name any certificate for
Preferred Stock is issued upon the exercise of Rights shall for all
purposes be deemed to have become the holder of record of the shares of
Preferred Stock represented thereby on, and such certificate shall be
dated, the date upon which the Right Certificate evidencing such Rights was
duly surrendered and payment of the Purchase Price (and any applicable
taxes and charges) was made; provided, however, that if the date of such
surrender and payment is a date upon which the Preferred Stock transfer
books of the Company are closed, such Person shall be deemed to have become
the record holder of such shares on, and such certificate shall be dated,
the next succeeding Business Day on which the Preferred Stock transfer
books of the Company are open. Prior to the exercise of the Rights
evidenced thereby, the holder of a Right Certificate shall not be entitled
to any rights of a holder of Preferred Stock for which the Rights shall be
exercisable, including, without limitation, the right to vote or to receive
dividends or other distributions, and shall not be entitled to receive any
notice of any proceedings of the Company, except as provided herein.
11. Adjustment of Purchase Price; Number and Kind of Shares and Number of
Rights. The Purchase Price, the number of shares of Preferred Stock or
other securities or property purchasable upon exercise of each Right and
the number of Rights outstanding are subject to adjustment from time to
time as provided in this Section 11.
(a) (i) If the Company shall at any time after the date of this Agreement
(A) declare and pay 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 of Preferred Stock 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), 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 capital stock issuable on such
date, shall be proportionately adjusted so that the holder of any
Right exercised after such time shall be entitled to receive the
aggregate number and kind of shares of capital stock that, 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, the
holder 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
consideration to be paid upon the exercise of one Right be less than
the aggregate
14
<PAGE>
par value of the shares of capital stock of the Company issuable upon
exercise of one Right.
(ii) Subject to Section 24 of this Agreement, if any Person
becomes an Acquiring Person (the first occurrence of such event being referred
to hereinafter as the "Flip-In Event"), then (A) the Purchase Price shall be
adjusted to be the Purchase Price in effect immediately prior to the Flip-In
Event multiplied by the number of one one-thousandths of a share of Preferred
Stock for which a Right was exercisable immediately prior to such Flip-In Event
whether or not such Right was then exercisable, and (B) each holder of a Right,
except as otherwise provided in this Section 11(a)(ii) and in Section 11(a)(iii)
hereof, shall thereafter have the right to receive, upon exercise thereof at a
price equal to the Purchase Price (as so adjusted), in accordance with the terms
of this Agreement and in lieu of shares of Preferred Stock, such number of
shares of Common Stock as shall equal the result obtained by dividing the
Purchase Price (as so adjusted) by 50% of the current per share market price of
the Common Stock (determined pursuant to Section 11(d) hereof) on the date of
such Flip-In Event; provided, however, that the Purchase Price (as so adjusted)
and the number of shares of Common Stock so receivable upon exercise of a Right
shall, following the Flip-In Event, be subject to further adjustment as
appropriate in accordance with Section 11(f) hereof. Notwithstanding anything in
this Agreement to the contrary, however, from and after the Flip-in- Event, any
Rights that are beneficially owned by (x) any Acquiring Person (or any Affiliate
or Associate of any Acquiring Person), (y) a transferee of any Acquiring Person
(or any such Affiliate or Associate) who becomes a transferee after the Flip-In
Event or (z) a transferee of any Acquiring Person (or any such Affiliate or
Associate) who became a transferee prior to or concurrently with the Flip-In
Event pursuant to either (I) a transfer from the Acquiring Person to holders of
its equity securities or to any Person with whom it has any continuing
agreement, arrangement or understanding regarding the transferred Rights or (II)
a transfer that the Board of Directors of the Company has determined is part of
an agreement, arrangement or understanding which has the purpose or effect of
avoiding the provisions of this paragraph and subsequent transferees of such
Persons, shall be null and void without any further action and any holder of
such Rights shall thereafter have no rights whatsoever with respect to such
Rights under any provision of this Agreement. The Company shall notify the
Rights Agent when this Section 11(a)(ii) applies and shall use all reasonable
efforts to ensure that the provisions of this Section 11(a)(ii) are complied
with, but neither the Company nor the Rights Agent shall have any liability to
any holder of Right Certificates or other Person as a result of its failure to
make any determinations with respect to an Acquiring Person or its Affiliates,
Associates or transferees hereunder. From and after the Flip-In Event, no Right
Certificate shall be issued pursuant to Section 3 or Section 6 hereof that
represents Rights that are or have become null and void pursuant to the
provisions of this paragraph and any Right Certificate delivered to the Rights
Agent that represents Rights that are or have become null and void pursuant to
the provisions of this paragraph shall be canceled. From and after the
occurrence of an event specified in Section 13(a) hereof, any Rights that
theretofore have not been exercised pursuant to this Section 11(a)(ii) shall
thereafter be exercisable only in accordance with Section 13 and not pursuant to
this Section 11(a)(ii).
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<PAGE>
(iii) The Company may at its option substitute for a share of
Common Stock issuable upon the exercise of Rights in accordance with the
foregoing subparagraph (ii) a number of shares of Preferred Stock or fraction
thereof such that the current per share market price of one share of Preferred
Stock multiplied by such number or fraction is equal to the current per share
market price of one share of Common Stock. If there shall not be sufficient
shares of Common Stock issued but not outstanding or authorized but unissued to
permit the exercise in full of the Rights in accordance with the foregoing
subparagraph (ii), the Board of Directors of the Company shall, to the extent
permitted by applicable law and any material agreements then in effect to which
the Company is a party (A) determine the excess (such excess, the "Spread") of
(1) the value of the shares of Common Stock issuable upon the exercise of a
Right in accordance with the foregoing subparagraph (ii) (the "Current Value")
over (2) the Purchase Price (as adjusted in accordance with the foregoing
subparagraph (ii)), and (B) with respect to each Right (other than Rights that
have become null and void pursuant to the foregoing subparagraph (ii)), make
adequate provision to substitute for the shares of Common Stock issuable in
accordance with the foregoing subparagraph (ii) upon exercise of the Right and
payment of the Purchase Price (as adjusted in accordance therewith), (1) cash,
(2) a reduction in such Purchase Price, (3) shares of Preferred Stock or other
equity securities of the Company (including, without limitation, shares or
fractions of shares of preferred stock that, by virtue of having dividend,
voting and liquidation rights substantially comparable to those of the shares of
Common Stock, are deemed in good faith by the Board of Directors of the Company
to have substantially the same value as the shares of Common Stock (such shares
of Preferred Stock and shares or fractions of shares of Preferred Stock are
hereinafter referred to as "Common Stock Equivalents")), (4) debt securities of
the Company, (5) other assets, or (6) any combination of the foregoing, having a
value that, when added to the value of the shares of Common Stock issued upon
exercise of such Right, shall have an aggregate value equal to the Current Value
(less the amount of any reduction in such Purchase Price), where such aggregate
value has been determined by the Board of Directors of the Company upon the
advice of a nationally recognized investment banking firm selected in good faith
by the Board of Directors of the Company; provided, however, that if the Company
shall not make adequate provision to deliver value pursuant to clause (B) above
within thirty (30) days following the Flip-In Event (the "Section 11(a)(ii)
Trigger Date"), then the Company shall be obligated to deliver, to the extent
permitted by applicable law and any material agreement then in effect to which
the Company is a party, upon the surrender for exercise of a Right and without
requiring payment of such Purchase Price, shares of Common Stock (to the extent
available), and then, if necessary, such number or fractions of 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. If, upon the
occurrence of the Flip-In Event, the Board of Directors of the Company shall
determine in good faith that it is likely that sufficient additional shares of
Common Stock could be authorized for issuance upon exercise in full of the
Rights, then, if the Board of Directors of the Company so elects, 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 stockholder 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 the Company determines
that some action need be taken pursuant to the second and/or third sentence of
this
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<PAGE>
Section 11(a)(iii), the Company (x) shall provide, subject to Section 11(a)(ii)
hereof and the last sentence of this Section 11(a)(iii) hereof, that such action
shall apply uniformly to all outstanding Rights and (y) may suspend the
exercisability of the Rights until the expiration of the Substitution Period in
order to seek any authorization of additional shares and/or to decide the
appropriate form of distribution to be made pursuant to such second sentence and
to determine the value thereof. Upon any such suspension, the Company shall
promptly notify the Rights Agent thereof and issue a public announcement stating
that the exercisability of the Rights has been temporarily suspended, as well as
a public announcement (with prompt notice thereof to the Rights Agent) at such
time as the suspension is no longer in effect. For purposes of this Section
11(a)(iii), the value of the shares of Common Stock shall be the current per
share market price (as determined pursuant to Section 11(a)(i)) on the Section
11(a)(ii) Trigger Date and the per share or fractional value of any "Common
Stock Equivalent" shall be deemed to equal the current per share market price of
the Common Stock. The Board of Directors of the Company may, but shall not be
required to, establish procedures to allocate the right to receive shares of
Common Stock upon the exercise of the Rights among holders of Rights pursuant to
this Section 11(a)(iii).
(b) In case the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Preferred Stock
entitling them (for a period expiring within 45 calendar days after
such record date) to subscribe for or purchase Preferred Stock (or
shares having the same rights, privileges and preferences as the
Preferred Stock ("equivalent preferred shares")) or securities
convertible into Preferred Stock or equivalent preferred shares at a
price per share of Preferred Stock or equivalent preferred shares (or
having a conversion price per share, if a security convertible into
shares of Preferred Stock or equivalent preferred shares) less than
the then current per share market price of the Preferred Stock
(determined pursuant to Section 11(d) hereof) 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 and equivalent preferred
shares outstanding on such record date plus the number of shares of
Preferred Stock and equivalent preferred shares which the aggregate
offering price of the total number of shares of Preferred Stock and/or
equivalent preferred shares 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
and equivalent preferred shares outstanding on such record date plus
the number of additional shares of Preferred Stock and/or equivalent
preferred shares to be offered for subscription or purchase (or into
which the convertible securities so to be offered are initially
convertible); provided, however, that in no event shall the
consideration to be paid upon the exercise of one Right be less than
the aggregate par value of the shares of capital stock of the Company
issuable upon exercise of one Right. In case such subscription price
may be paid in a consideration part or all of which shall be in a form
other than cash, the value of such consideration shall be as
17
<PAGE>
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. Shares of Preferred Stock and equivalent preferred
shares owned by or held for the account of the Company shall not be
deemed outstanding for the purpose of any such computation. Such
adjustment shall be made successively whenever such a record date is
fixed; and if such rights, options or warrants are not so issued, the
Purchase Price shall be adjusted to be the Purchase Price that would
then be in effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for the making of a
distribution to all holders of the 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 or assets (other than a regular quarterly
cash dividend or a dividend payable in 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 then current per share market price of
the Preferred Stock (determined pursuant to Section 11(d) hereof) 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) of the
portion of the assets or evidences of indebtedness so to be
distributed or of such subscription rights or warrants applicable to
one share of Preferred Stock, and the denominator of which shall be
such current per share market price (determined pursuant to Section
11(d) hereof) of the Preferred Stock; provided, however, that in no
event shall the consideration to be paid upon the exercise of one
Right be less than the aggregate par value of the shares of capital
stock of the Company to be issued upon exercise of one Right. Such
adjustments shall be made successively whenever such a record date is
fixed; and if such distribution is not so made, the Purchase Price
shall again be adjusted to be the Purchase Price that would then be in
effect if such record date had not been fixed.
(d) (i) Except as otherwise provided herein, for the purpose of any
computation hereunder, the "current per share market price" of any
security (a "Security" for the purpose of this Section 11(d)(i)) on
any date shall be deemed to be the average of the daily closing prices
per share of such Security for the 30 consecutive Trading Days (as
such term is hereinafter defined) immediately prior to but not
including such date; provided, however, that, if the current per share
market price of the Security is determined during a period following
the announcement by the issuer of such Security of (A) a dividend or
distribution on such Security payable in shares of such Security or
securities convertible into such shares, or (B) any subdivision,
combination or reclassification of such Security, and prior to the
expiration of 30 Trading Days after
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<PAGE>
the ex-dividend date for such dividend or distribution or the record
date for such subdivision, combination or reclassification, then, and
in each such case, the current per share market price shall be
appropriately adjusted to reflect the current market price per share
equivalent of such Security. 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 by the principal consolidated
transaction reporting system with respect to securities listed or
admitted to trading on a National Exchange or, if the Security is not
listed or admitted to trading on a National Exchange, as reported in
the principal consolidated transaction reporting system with respect
to securities listed on the National Exchange on which the Security is
listed or admitted to trading or, if the Security is not listed or
admitted to trading on a National Exchange, the last quoted price or,
if not so quoted, the average of the high bid and low asked prices in
the over-the-counter market, as reported by NASDAQ or such other
system then in use, or, if on any such date the Security is not quoted
by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in
the Security selected by the Board of Directors of the Company. The
term "Trading Day" shall mean a day on which the National Exchange on
which the Security is listed or admitted to trading is open for the
transaction of business or, if the Security is not listed or admitted
to trading on a National Exchange, a Business Day.
(ii) For the purpose of any computation hereunder, if the
Preferred Stock is publicly traded, the "current per share market price" of the
Preferred Stock shall be determined in accordance with the method set forth in
Section 11(d)(i). If the Preferred Stock is not publicly traded but the Common
Stock is publicly traded, the "current per share market price" of the Preferred
Stock shall be conclusively deemed to be the current per share market price of
the Common Stock as determined pursuant to Section 11(d)(i) multiplied by the
then applicable Adjustment Number (as defined in and determined in accordance
with the Certificate of Designation for the Preferred Stock). If neither the
Common Stock nor the Preferred Stock is publicly traded, "current per share
market price" shall mean the fair value per share 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.
(e) No adjustment in the Purchase Price shall be required unless such
adjustment would require an increase or decrease of at least 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 one hundred-thousandth of a share of Preferred
Stock or one- hundredth of a share of Common Stock or other share or
security 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 years from the date of
the transaction that requires 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) hereof,
the holder of any Right thereafter exercised shall become entitled to
receive any shares of capital stock of the Company other than the
Preferred Stock, thereafter the Purchase Price and the number of such
other shares so receivable upon exercise of a Right 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), 11(b), 11(c), 11(e),
11(h), 11(i) and 11(m) hereof, as applicable, 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 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 11(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 of a share of Preferred
Stock (calculated to the nearest one hundred-thousandth of a share of
Preferred Stock) obtained by (i) multiplying (x) the number of one
one-thousandths of a share purchasable upon the exercise of a Right
immediately prior to such 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 pursuant to Sections 11(b) or 11(c) hereof to adjust
the number of Rights, in substitution for any adjustment in the number
of one one-thousandths of a share of Preferred Stock purchasable upon
the exercise of a Right. Each of the Rights outstanding after such
adjustment of the number of Rights shall be exercisable for the number
of one one-thousandths 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-hundredth)
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 (with prompt notice thereof to Rights
Agent) of its election to adjust the number of Rights, indicating the
record date for the adjustment, and, if
20
<PAGE>
known at the time, the amount of the adjustment to be made. Such
record date may be the date on which the Purchase Price is adjusted or
any day thereafter, but, if the Right Certificates have been issued,
shall be at least 10 days later than the date of the public
announcement. If Right Certificates have been issued, upon each
adjustment of the number of Rights pursuant to this Section 11(i), the
Company may, as promptly as practicable, cause to be distributed to
holders of record of Right Certificates on such record date Right
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 Right Certificates held by such holders prior to the date of
adjustment, and upon surrender thereof, if required by the Company,
new Right Certificates evidencing all the Rights to which such holders
shall be entitled after such adjustment. Right Certificates so to be
distributed shall be issued, executed and countersigned in the manner
provided for herein and shall be registered in the names of the
holders of record of Right 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 of a share of Preferred Stock issuable
upon the exercise of a Right, the Right Certificates theretofore and
thereafter issued may continue to express the Purchase Price and the
number of one one-thousandths of a share of Preferred Stock that were
expressed in the initial Right Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing the
Purchase Price below the then par value, if any, of the fraction of
Preferred Stock or other shares of capital stock issuable upon
exercise of a Right, the Company shall take any corporate action that
may, in the opinion of its counsel, be necessary in order that the
Company may validly and legally issue fully paid and nonassessable
shares of Preferred Stock or other such shares at such adjusted
Purchase Price.
(l) In any case in which this Section 11 shall require that an adjustment
in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer (and shall promptly
notify the Rights Agent of any such election) until the occurrence of
such event issuing to the holder of any Right exercised after such
record date the Preferred Stock and other capital stock or securities
of the Company, if any, issuable upon such exercise over and above the
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 upon the occurrence of the event requiring such adjustment.
21
<PAGE>
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such adjustments in the Purchase
Price, in addition to those adjustments expressly required by this
Section 11, as and to the extent that it in its sole discretion shall
determine to be advisable in order that any consolidation or
subdivision of the Preferred Stock, issuance wholly for cash of any
shares of Preferred Stock at less than the current market price,
issuance wholly for cash of Preferred Stock or securities which by
their terms are convertible into or exchangeable for Preferred Stock,
dividends on Preferred Stock payable in shares of Preferred Stock or
issuance of rights, options or warrants referred to hereinabove in
Section 11(b), hereafter made by the Company to holders of its
Preferred Stock shall not be taxable to such stockholders.
(n) Anything in this Agreement to the contrary notwithstanding, if at
anytime after the date of this Rights Agreement and prior to the
Distribution Date, the Company shall (i) declare and pay any dividend
on the Common Stock payable in Common Stock or (ii) effect a
subdivision, combination or consolidation of the Common Stock (by
reclassification or otherwise than by payment of a dividend payable in
Common Stock) into a greater or lesser number of shares of Common
Stock, then, in each such case, the number of Rights associated with
each share of Common Stock then outstanding, or issued or delivered
thereafter, 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 each event by a fraction, the numerator of 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.
(o) The Company agrees that, after the earlier of the Distribution Date or
the Stock Acquisition Date, it will not, except as permitted by
Section 23, 24 or 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 eliminate
the benefits intended to be afforded by the Rights.
12. Certificate of Adjusted Purchase Price or Number of Shares. Whenever an
adjustment is made as provided in Section 11 or 13 hereof, the Company
shall promptly (a) prepare a certificate setting forth such adjustment and
a brief statement of the facts, computations and methodology accounting for
such adjustment, (b) file with the Rights Agent and with each transfer
agent for the Common Stock and the Preferred Stock a copy of such
certificate and (c) mail a brief summary thereof to each holder of a Right
Certificate in accordance with Section 25 hereof (if so required under
Section 25 hereof). The Rights Agent shall be fully protected in relying on
any such certificate and on any adjustment therein contained, and shall
22
<PAGE>
have no duty with respect to, and shall not be deemed to have knowledge of
any such adjustment unless and until it shall have received such
certificate.
13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power.
(a) If, directly or indirectly, at any time after the Flip-In Event (i)
the Company shall consolidate with or shall merge into any other
Person, (ii) any Person shall merge with and into the Company and the
Company shall be the continuing or surviving corporation of such
merger and, in connection with such merger, all or part of the Common
Stock shall be changed into or exchanged for stock or other securities
of any other Person (or of the Company) or cash or any other property,
or (iii) the Company shall sell or otherwise transfer (or one or more
of its Subsidiaries shall sell or otherwise transfer), in one or more
transactions, assets, cash flow or earning power aggregating 50% or
more of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person (other than the
Company or one or more wholly owned Subsidiaries of the Company), then
upon the first occurrence of such event, proper provision shall be
made so that: (A) each holder of a Right (other than Rights that have
become null and void pursuant to Section 11(a)(ii) hereof) shall
thereafter have the right to receive, upon the exercise thereof at the
Purchase Price (as theretofore adjusted in accordance with Section
11(a)(ii) hereof), in accordance with the terms of this Agreement and
in lieu of shares of Preferred Stock or Common Stock of the Company,
such number of validly authorized and issued, fully paid,
non-assessable and freely tradeable 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 equal the result obtained by dividing the Purchase
Price (as theretofore adjusted in accordance with Section 11(a)(ii)
hereof) by 50% of the current per share market price of the Common
Stock of such Principal Party (determined pursuant to Section 11(d)
hereof) on the date of consummation of such consolidation, merger,
sale or transfer; provided, however, that the Purchase Price (as
theretofore adjusted in accordance with Section 11(a)(ii) hereof) and
the number of shares of Common Stock of such Principal Party so
receivable upon exercise of a Right shall be subject to further
adjustment as appropriate in accordance with Section 11(f) hereof to
reflect any events occurring in respect of the Common Stock of such
Principal Party after the occurrence of such consolidation, merger,
sale or transfer; (B) such Principal Party shall thereafter be liable
for, and shall assume, by virtue of such consolidation, merger, sale
or transfer, all the obligations and duties of the Company pursuant to
this Rights Agreement; (C) the term "Company" shall thereafter be
deemed to refer to such Principal Party; and (D) such Principal Party
shall take such steps (including, but not limited to, the reservation
of a sufficient number of its shares of Common Stock in accordance
with Section 9 hereof) in connection with such consummation of any
such transaction as may be necessary to assure that the provisions
hereof shall thereafter be applicable,
23
<PAGE>
as nearly as reasonably may be, in relation to the shares of its
Common Stock thereafter deliverable upon the exercise of the Rights;
provided, however, that, upon the subsequent occurrence of any
consolidation, merger, sale or transfer of assets or other
extraordinary transaction in respect of such Principal Party, each
holder of a Right shall thereupon be entitled to receive, upon
exercise of a Right and payment of the Purchase Price as provided in
this Section 13(a), such cash, shares, rights, warrants and other
property that such holder would have been entitled to receive had such
holder, at the time of such transaction, owned the Common Stock of the
Principal Party receivable upon the exercise of a Right pursuant to
this Section 13(a), and such Principal Party shall take such steps
(including, but not limited to, reservation of shares of stock) as may
be necessary to permit the subsequent exercise of the Rights in
accordance with the terms hereof for such cash, shares, rights,
warrants and other property.
(b) "Principal Party" shall mean:
(i) in the case of any transaction described in (i) or (ii) of the
first sentence of Section 13(a) hereof: (A) the Person that is
the issuer of the securities into which the shares of Common
Stock are converted in such merger or consolidation, or, if there
is more than one such issuer, the issuer the shares of Common
Stock of which have the greatest aggregate market value of shares
outstanding, or (B) if no securities are so issued, (x) the
Person that is the other party to the merger, if such Person
survives said merger, or, if there is more than one such Person,
the Person the shares of Common Stock of which have the greatest
aggregate market value of shares outstanding or (y) if the Person
that is the other party to the merger does not survive the
merger, the Person that does survive the merger (including the
Company if it survives) or (z) the Person resulting from the
consolidation; and
(ii) in the case of any transaction described in (iii) of the first
sentence in Section 13(a) hereof, the Person that is the party
receiving the greatest portion of the assets or earning power
transferred pursuant to such transaction or transactions, or, if
each Person that is a party to such transaction or transactions
receives the same portion of the assets or earning power so
transferred or if the Person receiving the greatest portion of
the assets or earning power cannot be determined, whichever of
such Persons is the issuer of Common Stock having the greatest
aggregate market value of shares outstanding; provided, however,
that in any such case described in the foregoing clause (b)(i) or
(b)(ii), if the Common Stock of such Person is not at such time
or has not been continuously over the preceding 12-month period
registered under Section 12 of the Exchange Act, then (1) if such
Person is a direct or indirect Subsidiary of another Person the
Common Stock of which
24
<PAGE>
is and has been so registered, the term "Principal Party" shall
refer to such other Person, or (2) if such Person is a
Subsidiary, directly or indirectly, of more than one Person, the
Common Stock of all of which is and has been so registered, the
term "Principal Party" shall refer to whichever of such Persons
is the issuer of Common Stock having the greatest aggregate
market value of shares outstanding, or (3) if such Person is
owned, directly or indirectly, by a joint venture formed by two
or more Persons that are not owned, directly or indirectly, by
the same Person, the rules set forth in clauses (1) and (2) above
shall apply to each of the owners having an interest in the
venture as if the Person owned by the joint venture was a
Subsidiary of both or all of such joint venturers, and the
Principal Party in each such case shall bear the obligations set
forth in this Section 13 in the same ratio as its interest in
such Person bears to the total of such interests.
(c) The Company shall not consummate any consolidation, merger, sale or
transfer referred to in Section 13(a) hereof unless prior thereto the
Company and the Principal Party involved therein shall have executed
and delivered to the Rights Agent an agreement confirming that the
requirements of Sections 13(a) and (b) hereof shall promptly be
performed in accordance with their terms and that such consolidation,
merger, sale or transfer of assets shall not result in a default by
the Principal Party under this Agreement as the same shall have been
assumed by the Principal Party pursuant to Sections 13(a) and (b)
hereof and providing that, as soon as practicable after executing such
agreement pursuant to this Section 13, the Principal Party will:
(i) prepare and file a registration statement under the Securities
Act, if necessary, with respect to the Rights and the securities
purchasable upon exercise of the Rights on an appropriate form,
use its best efforts to cause such registration statement to
become effective as soon as practicable after such filing and use
its best efforts to cause such registration statement to remain
effective (with a prospectus at all times meeting the
requirements of the Securities Act) until the Expiration Date and
similarly comply with applicable state securities laws;
(ii) use its best efforts, if the Common Stock of the Principal Party
shall be listed or admitted to trading on a National Exchange, to
list or admit to trading (or continue the listing of) the Rights
and the securities purchasable upon exercise of the Rights on a
National Exchange, or, if the Common Stock of the Principal Party
shall not be listed or admitted to trading on a National
Exchange, to cause the Rights and the securities receivable upon
exercise of the Rights to be authorized for quotation on NASDAQ
or on such other system then in use;
(iii)deliver to holders of the Rights historical financial statements
for the Principal Party that comply in all respects with the
requirements for registration on Form 10 (or any successor form)
under the Exchange Act; and
(iv) obtain waivers of any rights of first refusal or preemptive
rights in respect of the Common Stock of the Principal Party
subject to purchase upon exercise of outstanding Rights.
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<PAGE>
(d) In case the Principal Party has a provision in any of its authorized
securities or in its certificate of incorporation or by-laws or other
instrument governing its corporate affairs, which provision would have
the effect of (i) causing such Principal Party to issue (other than to
holders of Rights pursuant to this Section 13), in connection with, or
as a consequence of, the consummation of a transaction referred to in
this Section 13, shares of Common Stock or Common Stock Equivalents of
such Principal Party at less than the then current market price per
share thereof (determined pursuant to Section 11(d) hereof) or
securities exercisable for, or convertible into, Common Stock or
Common Stock Equivalents of such Principal Party at less than such
then current market price, or (ii) providing for any special payment,
tax, charge or similar provision in connection with the issuance of
the Common Stock of such Principal Party pursuant to the provisions of
Section 13, then, in such event, the Company hereby agrees with each
holder of Rights that it shall not consummate any such transaction
unless prior thereto the Company and such Principal Party shall have
executed and delivered to the Rights Agent a supplemental agreement
providing that the provision in question of such Principal Party shall
have been canceled, waived or amended, or that the authorized
securities shall be redeemed, so that the applicable provision will
have no effect in connection with, or as a consequence of, the
consummation of the proposed transaction.
(e) The Company covenants and agrees that it shall not, at any time after
the Flip-In Event, enter into any transaction of the type described in
clauses (i) through (iii) of Section 13(a) hereof if (i) at the time
of or immediately after such consolidation, merger, sale, transfer or
other transaction there are any rights, warrants or other instruments
or securities outstanding or agreements in effect that would
substantially diminish or otherwise eliminate the benefits intended to
be afforded by the Rights, (ii) prior to, simultaneously with or
immediately after such consolidation, merger, sale, transfer or other
transaction, the stockholders of the Person who constitutes, or would
constitute, the Principal Party for purposes of Section 13(b) hereof
shall have received a distribution of Rights previously owned by such
Person or any of its Affiliates or Associates or (iii) the form or
nature of organization of the Principal Party would preclude or limit
the exercisability of the Rights.
14. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue fractions of Rights or to
distribute Right Certificates that evidence fractional Rights (except
prior to the Distribution Date in accordance with Section 11(n)
hereof). In lieu of such fractional Rights, there shall be paid to the
registered holders of the Right 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
the 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 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
26
<PAGE>
the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on a National Exchange or,
if the Rights are not listed or admitted to trading on a National
Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the National
Exchange on which the Rights are listed or admitted to trading or, if
the Rights are not listed or admitted to trading on a National
Exchange, the last quoted price or, if not so quoted, the average of
the high bid and low asked prices in the over-the-counter market, as
reported by NASDAQ or such other system then in use or, if on any such
date the Rights are not quoted by any such organization, the average
of the closing bid and asked prices as furnished by a professional
market maker making a market in the Rights selected by the Board of
Directors of the Company. If on any such date no such market maker is
making a market in the Rights, the fair value of the Rights on such
date as determined in good faith by the Board of Directors of the
Company shall be used.
(b) The Company shall not be required to issue fractions of Preferred
Stock (other than fractions that are integral multiples of one
one-thousandth of a share of Preferred Stock) or to distribute
certificates that evidence fractional shares of Preferred Stock (other
than fractions that are integral multiples of one one-thousandth of a
share of Preferred Stock) upon the exercise or exchange of Rights.
Interests in fractions of Preferred Stock in integral multiples of one
one-thousandth of a share of Preferred Stock may, at the election of
the Company be evidenced by depositary receipts, pursuant to an
appropriate agreement between the Company and a depositary selected by
it; provided, however, that such agreement shall provide that the
holders of such depositary receipts shall have all the rights,
privileges and preferences to which they are entitled as Beneficial
Owners of the Preferred Stock represented by such depositary receipts.
In lieu of fractional shares of Preferred Stock that are not integral
multiples of one one-thousandth of a share of Preferred Stock, the
Company shall pay to the registered holders of Right Certificates at
the time such Rights are exercised or exchanged as herein provided an
amount in cash equal to the same fraction of the current market value
of a whole share of Preferred Stock (as determined in accordance with
Section 14(a) hereof) for the Trading Day immediately prior to the
date of such exercise or exchange.
(c) The Company shall not be required to issue fractions of shares of
Common Stock or to distribute certificates that evidence fractional
shares of Common Stock upon the exercise or exchange of Rights. In
lieu of such fractional shares of Common Stock, the Company shall pay
to the registered holder of the Right Certificates with regard to
which such fractional shares of Common Stock would otherwise be
issuable an amount in cash equal to the same fraction of the current
market value of a whole share of Common Stock (as determined in
accordance with Section 14(a) hereof) for the Trading Day immediately
prior to the date of such exercise or exchange.
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<PAGE>
(d) The holder of a Right by the acceptance of the Right expressly waives
his or her right to receive any fractional Rights or any fractional
shares upon exercise or exchange of a Right (except as provided
above).
(e) The Rights Agent shall have no duty or obligations with respect to
this Section 14 unless and until it has received specific instructions
(and sufficient cash, if required) from the Company with respect to
its duties and obligations.
15. Rights of Action. All rights of action in respect of this Agreement,
excepting the rights of action given to the Rights Agent under Section 18
hereof, are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders
of the Common Stock); and any registered holder of any Right 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 Right Certificate
(or, prior to the Distribution Date, of the Common Stock), on his or her
own behalf and for his or her own benefit, may enforce, and may institute
and maintain any suit, action or proceeding against the Company to enforce,
or otherwise act in respect to his or her right to exercise the Rights
evidenced by such Right Certificate (or, prior to the Distribution Date,
such Common Stock) in the manner provided therein 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
will be entitled to specific performance of the obligations under, and
injunctive relief against actual or threatened violations of, the
obligations of any Person subject to this Agreement.
16. Agreement of Right 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 the Common Stock;
(b) after the Distribution Date, the Right Certificates are transferable
only on the registry books of the Rights Agent if surrendered at the
office or agency of the Rights Agent designated for such purpose, duly
endorsed or accompanied by a proper instrument of transfer; and
(c) the Company and the Rights Agent may deem and treat the Person in
whose name the Right Certificate (or, prior to the Distribution Date,
the Common Stock certificate) is registered as the absolute owner
thereof and of the Rights evidenced thereby (notwithstanding any
notations of ownership or writing on the Right Certificates or the
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 shall be affected by any notice to the contrary.
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17. Right Certificate Holder Not Deemed a Stockholder. No holder, as such, of
any Right Certificate shall be entitled to vote, receive dividends or be
deemed for any purpose the holder of the Preferred Stock or any other
securities of the Company which may at any time be issuable on the exercise
or exchange of the Rights represented thereby, nor shall anything contained
herein or in any Right Certificate be construed to confer upon the holder
of any Right Certificate, as such, any of the rights of a stockholder of
the Company or any right to vote for the election of directors or upon any
matter submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive notice of meetings
or other actions affecting stockholders (except as provided in this
Agreement), or to receive dividends or subscription rights, or otherwise,
until the Rights evidenced by such Right Certificate shall have been
exercised or exchanged in accordance with the provisions hereof.
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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 other disbursements incurred in the preparation, delivery,
amendment, administration and execution of this Agreement and the
exercise and performance of its duties hereunder. The Company also
agrees to indemnify the Rights Agent for, and to hold it harmless
against, any loss, liability, damage, judgment, fine, penalty, claim,
demand, settlement, cost or expense, incurred without gross
negligence, bad faith or willful misconduct (as finally determined by
a court of competent jurisdiction) on the part of the Rights Agent,
for any action taken, suffered or omitted by the Rights Agent in
connection with the acceptance and administration of this Agreement,
including without limitation the costs and expenses of defending
against any claim of liability arising therefrom, directly or
indirectly. The indemnity provided herein shall survive the
termination of this Agreement and the termination and the expiration
of the Rights. The costs and expenses incurred in enforcing this right
of indemnification shall be paid by the Company.
(b) The Rights Agent shall be authorized to rely on, 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, the
acceptance and administration of this Agreement in reliance upon any
Right Certificate or certificate for the Preferred Stock or 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, or otherwise upon the advice of counsel as set forth in
Section 20 hereof. The Rights Agent is not deemed to have knowledge, a
duty, or notice unless the Company has given it actual notice.
19. Merger or Consolidation or Change of Name of Rights Agent.
(a) Any Person into which the Rights Agent or any successor Rights Agent
may be merged or with which it may be consolidated, or any Person
resulting from any merger or consolidation to which the Rights Agent
or any successor Rights Agent shall be a party, or any Person
succeeding to the 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 Person 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 Right Certificates shall
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have been countersigned but not delivered, any such successor Rights
Agent may adopt the countersignature of the predecessor Rights Agent
and deliver such Right Certificates so countersigned; and in case at
that time any of the Right Certificates shall not have been
countersigned, any successor Rights Agent may countersign such Right
Certificates either in the name of the predecessor Rights Agent or in
the name of the successor Rights Agent; and in all such cases such
Right Certificates shall have the full force provided in the Right
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 Right Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the
countersignature under its prior name and deliver Right Certificates
so countersigned; and in case at that time any of the Right
Certificates shall not have been countersigned, the Rights Agent may
countersign such Right Certificates either in its prior name or in its
changed name and in all such cases such Right Certificates shall have
the full force provided in the Right Certificates and in this
Agreement.
20. Duties of Rights Agent. The Rights Agent undertakes the duties and
obligations, and only the duties and obligations, expressly imposed by this
Agreement (and no implied duties or obligations) upon the following terms
and conditions, by all of which the Company and the holders of Right
Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the advice or opinion of such counsel
shall be full and complete authorization and protection to the Rights
Agent, and the Rights Agent shall incur no liability for or in respect
of, any action taken, suffered or omitted by it in good faith and in
accordance with such advice or 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 be proved or established by the Company prior to taking,
suffering or omitting any action hereunder, such fact or matter
(unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and established by
a certificate signed by the President and the Secretary of the Company
and delivered to the Rights Agent; and such certificate shall be full
authorization and protection to the Rights Agent and the Rights Agent
shall incur no liability for or in respect of any action taken,
suffered or omitted in good faith by it under the provisions of this
Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the Company and any
other Person only for its own gross negligence, bad faith or willful
misconduct (as finally determined by a court of competent
jurisdiction). Anything in this Agreement to the contrary
notwithstanding, in no event shall the Rights Agent be liable for
special, punitive,
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indirect, incidental or consequential loss or damage of any kind
whatsoever (including, but not limited to, lost profits), even if the
Rights Agent has been advised of the possibility of such loss or
damage.
(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
Right Certificates (except its countersignature thereof) or be
required to verify the same, but all such statements and recitals are
and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not have any liability, nor 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 Right
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 Right Certificate; nor shall it
be responsible for any change in the exercisability of the Rights
(including the Rights becoming null and void pursuant to Section
11(a)(ii) hereof) or any adjustment in the terms of the Rights
provided for in Sections 3, 11, 13, 23 and 24, or the ascertaining of
the existence of facts that would require any such change or
adjustment (except with respect to the exercise of Rights evidenced by
Right Certificates after receipt of a certificate furnished pursuant
to Section 12, describing such change or 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 Preferred Stock
or other securities to be issued pursuant to this Agreement or any
Right Certificate or as to whether any shares of Preferred Stock or
other securities will, when 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 any person reasonably believed by the Rights Agent to be one of
the President or the Secretary of the Company, and to apply to such
officers for advice or instructions in connection with its duties, and
such advice or instructions shall be full authorization and protection
to the Rights Agent and the Rights Agent shall incur no liability for
or in respect of any action taken, suffered or omitted by it in good
faith in accordance with the advice or instructions of any such
officer or for any delay in acting while waiting for the advice or
instructions. The Rights Agent may conclusively rely on the most
recent instructions given by 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
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writing any action proposed to be taken or omitted by the Rights Agent
under this Agreement and the date on and/or after which such action
shall be taken or 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 five 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 specifying the action to
be taken, suffered or omitted.
(h) The Rights Agent and any stockholder, affiliate, 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 Person.
(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 or any
other Person resulting from any such act, default, neglect or
misconduct; absent gross negligence, bad faith or wilful misconduct in
the selection and continued employment thereof.
(j) If, with respect to any Rights Certificate surrendered to the Rights
Agent for exercise or transfer, the certificate contained in the form
of assignment or the form of election to purchase set forth on the
reverse thereof, as the case may be, has not been completed to certify
the holder is not an Acquiring Person (or an Affiliate or Associate
thereof), the Rights Agent shall not take any further action with
respect to such requested exercise or transfer without first
consulting with the Company. Without limiting the foregoing, unless
either (i) the Rights Agent has been notified by the Company of the
identity of an Acquiring Person or (ii) the certificate contained in
the form of assignment or the form of election to purchase set forth
on the reverse side of the Rights Certificate indicates that the
assignee or the purchaser of such Rights Certificate is an Acquiring
Person, the Rights Agent shall not be responsible for a Rights
Certificate's assignment to or purchase by an Acquiring Person.
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 30 days'
notice in writing mailed to
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the Company and to each transfer agent of the Common Stock or Preferred
Stock by registered or certified mail, and, following the Distribution
Date, to the holders of the Right Certificates by first-class mail. The
Company may remove the Rights Agent or any successor Rights Agent upon 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
or Preferred Stock by registered or certified mail, and, following the
Distribution Date, to the holders of the Right 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 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 Right Certificate (who
shall, with such notice, submit his Right Certificate for inspection by the
Company), then the registered holder of any Right 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 either (A) a Person organized and doing business
under the laws of the United States or the laws of any state of the United
States or the District of Columbia, in good standing, having an office in
the State of Texas or the State of New York, which 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 million, or (B) an affiliate of such Person. 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 or Preferred Stock, and, following the
Distribution Date, mail a notice thereof in writing to the registered
holders of the Right 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.
22. Issuance of New Right Certificates. Notwithstanding any of the provisions
of this Agreement or of the Rights to the contrary, the Company may, at its
option, issue new Right Certificates evidencing Rights in such forms 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 Right Certificates made in
accordance with the provisions of this Agreement. In addition, in
connection with the issuance or sale of Common Stock following the
Distribution Date and prior to the Expiration Date, the Company may with
respect to shares of Common Stock so issued or sold pursuant to (i) the
exercise of stock options, (ii) under any employee plan or arrangement,
(iii) upon the exercise, conversion or exchange of securities, notes or
debentures issued by the Company
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or (iv) a contractual obligation of the Company, in each case existing
prior to the Distribution Date, issue Right Certificates representing the
appropriate number of Rights in connection with such issuance or sale.
23. Redemption.
(a) The Board of Directors of the Company may, at any time prior to the
Flip-In Event, redeem all but not less than all of the then
outstanding Rights at a redemption price of $.001 per Right,
appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof (the redemption
price being hereinafter referred to as the "Redemption Price"). The
redemption of the Rights may be made effective at such time, on such
basis and with such conditions as the Board of Directors in its sole
discretion may establish. The Redemption Price shall be payable, at
the option of the Company, in cash, shares of Common Stock, or such
other form of consideration as the Board of Directors of the Company
shall determine.
(b) Immediately upon the action of the Board of Directors of the Company
ordering the redemption of the Rights pursuant to paragraph (a) of
this Section 23 (or at such later time as the Board of Directors may
establish for the effectiveness of such redemption), promptly 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. The Company shall
promptly give public notice of any such redemption; provided, however,
that the failure to give, or any defect in, any such notice shall not
affect the validity of such redemption. Within 10 days after such
action of the Board of Directors ordering the redemption of the Rights
(or such later time as the Board of Directors may establish for the
effectiveness of such redemption), the Company shall mail a notice of
redemption to the Rights Agent and all the holders of the then
outstanding Rights, in the case of notice to holders, at their last
addresses as they appear 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 shall state
the method by which the payment of the Redemption Price will be made.
24. Exchange.
(a) The Board of Directors of the Company may, at its option, at any time
after the Flip- In Event, exchange all or part of the then outstanding
and exercisable Rights (which shall not include Rights that have
become null and void pursuant to the provisions of Section 11(a)(ii)
hereof) for Common Stock at an exchange ratio of one share of
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Common Stock per Right, appropriately adjusted to reflect any stock
split, stock dividend or similar transaction occurring after the date
hereof (such amount per Right being hereinafter referred to as the
"Exchange Ratio"). Notwithstanding the foregoing, the Board of
Directors of the Company shall not be empowered to effect such
exchange at any time after an Acquiring Person shall have become the
Beneficial Owner of shares of Common Stock aggregating 50% or more of
the shares of Common Stock then outstanding. From and after the
occurrence of an event specified in Section 13(a) hereof, any Rights
that theretofore have not been exchanged pursuant to this Section
24(a) shall thereafter be exercisable only in accordance with Section
13 and may not be exchanged pursuant to this Section 24(a). The
exchange of the Rights by the Board of Directors of the Company may be
made effective at such time, on such basis and with such conditions as
the Board of Directors of the Company in its sole discretion may
establish.
(b) Immediately upon the effectiveness of the action of the Board of
Directors of the Company ordering the exchange of any Rights pursuant
to paragraph (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 the holders of such Rights shall be
to receive that number of shares of Common Stock equal to the number
of such Rights held by such holder multiplied by the Exchange Ratio.
The Company shall promptly give notice thereof to the Rights Agent and
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 shall promptly
mail a notice of any such exchange to the Rights Agent and all of the
holders of the Rights so exchanged at their last addresses as they
appear upon the registry books of the Rights Agent. Any notice that 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 shares of Common Stock
for Rights will be effected and, upon any partial exchange, the number
of Rights that will be exchanged. Any partial exchange shall be
effected pro rata based on the number of Rights (other than Rights
that have become null and void pursuant to the provisions of Section
11(a)(ii) hereof) held by each holder of Rights.
(c) The Company may at its option substitute, and, if there shall not be
sufficient shares of Common Stock issued but not outstanding or
authorized but unissued to permit an exchange of Rights for Common
Stock as contemplated in accordance with this Section 24, the Company
shall substitute to the extent of such insufficiency, for each share
of Common Stock that would otherwise be issuable upon exchange of a
Right, a number of shares of Preferred Stock or fraction thereof (or
equivalent preferred shares, as such term is defined in Section 11(b))
such that the current per share market price (determined pursuant to
Section 11(d) hereof) of one share of Preferred
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Stock (or equivalent preferred share) multiplied by such number or
fraction is equal to the current per share market price of one share
of Common Stock (determined pursuant to Section 11(d) hereof) as of
the date of such exchange.
25. Notice of Certain Events.
(a) In case the Company shall at any time after the earlier of the
Distribution Date or the Stock Acquisition Date propose (i) to pay any
dividend payable in stock of any class to the holders of its Preferred
Stock or to make any other distribution to the holders of its
Preferred Stock (other than a regular quarterly cash dividend), (ii)
to offer to the holders of its 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, (iii) to effect any reclassification of its Preferred Stock
(other than a reclassification involving only the subdivision or
combination of outstanding Preferred Stock), (iv) to effect the
liquidation, dissolution or winding up of the Company, or (v) to pay
any dividend on the Common Stock payable in Common Stock or to effect
a subdivision, combination or consolidation of the Common Stock (by
reclassification or otherwise than by payment of dividends in Common
Stock), then, in each such case, the Company shall give to the Rights
Agent and to each holder of a Right Certificate, 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, or
distribution of rights or warrants, or the date on which such
liquidation, dissolution or winding up is to take place and the date
of participation therein by the holders of the Common Stock and/or
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 10 days prior to the record date for determining
holders of the Preferred Stock for purposes of such action, and in the
case of any such other action, at least 10 days prior to the date of
the taking of such proposed action or the date of participation
therein by the holders of the Common Stock and/or Preferred Stock,
whichever shall be the earlier.
(b) In case any event described in Section 11(a)(ii) or Section 13 shall
occur then the Company shall as soon as practicable thereafter give to
the Rights Agent and to each holder of a Right Certificate (or if
occurring prior to the Distribution Date, the holders of the Common
Stock) in accordance with Section 26 hereof, a notice of the
occurrence of such event, which notice shall describe such event and
the consequences of such event to holders of Rights under Section
11(a)(ii) and Section 13 hereof.
26. Notices. Notices or demands authorized by this Agreement to be given or
made by the Rights Agent or by the holder of any Right Certificate to or on
the Company shall be sufficiently
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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:
CAPITAL SENIOR LIVING CORPORATION
14160 Dallas Parkway, Suite 300
Dallas, Texas 75240
Attention: Secretary
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Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Right Certificate to or on the Rights Agent shall be sufficiently given or made
if sent by first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Company) as follows:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
2323 Bryan Street, Suite 2300
Dallas, Texas 75201
Attention: Vice President
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate 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.
27. Supplements and Amendments. Except as provided in the third to last
sentence of this Section 27, for so long as the Rights are then redeemable,
the Company may in its sole and absolute discretion, and the Rights Agent
shall if the Company so directs, supplement or amend any provision of this
Agreement in any respect without the approval of any holders of the Rights.
At any time when the Rights are no longer redeemable, except as provided in
the penultimate sentence of this Section 27, the Company may, and the
Rights Agent shall, if the Company so directs, supplement or amend this
Agreement without the approval of any holders of Rights in order to (i)
cure any ambiguity, (ii) correct or supplement any provision contained
herein that may be defective or inconsistent with any other provision
herein, (iii) shorten or lengthen any time period hereunder, or (iv) change
or supplement the provisions hereunder in any manner which the Company may
deem necessary or desirable; provided, however, that no such supplement or
amendment shall adversely affect the interests of the Rights Agent or the
holders of Rights as such (other than an Acquiring Person or an Affiliate
or Associate of an Acquiring Person), and no such amendment may cause the
Rights again to become redeemable or cause the Agreement again to become
amendable other than in accordance with this sentence; further, provided,
that this Agreement may not be supplemented or amended to lengthen,
pursuant to clause (iii) of this sentence, (A) a time period relating to
when the Rights may be redeemed at such time as the Rights are not then
redeemable or (B) any other time period unless such lengthening is for the
purpose of protecting, enhancing or clarifying the rights of, and/or the
benefits to, the holders of Rights. Notwithstanding anything contained in
this Agreement to the contrary, no supplement or amendment shall be made
which changes the Redemption Price. Upon the delivery of a Certificate from
an appropriate officer of the Company that 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.
Notwithstanding the foregoing, any supplement or amendment shall not change
or increase the Rights Agent's duties, liabilities
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or obligation hereunder, unless consented to by the Rights Agent in writing
and, if requested by the Rights Agent, only following receipt of an opinion
of counsel in connection therewith.
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.
29. 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 Right Certificates (and, prior to the
Distribution Date, 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 Right Certificates (and, prior to the Distribution Date, the
Common Stock).
30. Determinations and Actions by the Board of Directors. The Board of
Directors of the Company shall have the exclusive power and authority to
administer this Agreement and to exercise the rights and powers
specifically granted to the Board of Directors of the Company or to the
Company, or as may be necessary or advisable in the administration of this
Agreement, including, without limitation, the right and power to (i)
interpret the provisions of this Agreement and (ii) make all determinations
deemed necessary or advisable for the administration of this Agreement
(including, without limitation, a determination to redeem or not redeem the
Rights or to amend this Agreement). All such actions, calculations,
interpretations and determinations (including, for purposes of clause (y)
below, all omissions with respect to the foregoing) that are done or made
by the Board of Directors of the Company in good faith, shall (x) be final,
conclusive and binding on the Company, the Rights Agent, the holders of the
Rights, as such, and all other parties, and (y) not subject the Board of
Directors to any liability to the holders of the Rights.
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.
32. Governing Law. This Agreement and each Right 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 to be made
and performed entirely within such State; provided, however, that all
provisions regarding the rights, duties and obligations of the Rights Agent
shall be governed by and construed in accordance with the laws of the State
of New York applicable to contracts made and to be performed entirely
within such State..
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.
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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.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, all as of the day and year first above written.
CAPITAL SENIOR LIVING CORPORATION
By: /s/ Lawrence A. Cohen
-------------------------
Name: Lawrence A. Cohen
Title: Chief Executive Officer
CHASEMELLON SHAREHOLDER SERVICES,
L.L.C., as Rights Agent
By: /s/ Tim Reagan
-------------------------
Name: Tim Reagan
Title: Relationship Manager
42
<PAGE>
Exhibit A
---------
FORM OF
CERTIFICATE OF DESIGNATION
of
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
CAPITAL SENIOR LIVING CORPORATION
Pursuant to Section 151 of the
Delaware General Corporation Law
CAPITAL SENIOR LIVING CORPORATION, a corporation organized and existing
under the laws of the State of Delaware, in accordance with the provisions of
Section 103 thereof, DOES HEREBY CERTIFY:
That pursuant to the authority vested in the Board of Directors in
accordance with the provisions of the Certificate of Incorporation of the said
Corporation, as amended, the said Board of Directors as of March 8, 2000,
adopted the following resolution creating a series of shares of Preferred Stock
designated as "Series A Junior Participating Preferred Stock":
RESOLVED, that pursuant to the authority vested in the Board
of Directors of this Corporation in accordance with the provisions of
the Certificate of Incorporation, a series of Preferred Stock, par
value $.01 per share, of the Corporation be and hereby is created, and
that the designation and number of shares thereof and the voting and
other powers, preferences and relative, participating, optional or
other rights of the shares of such series and the qualifications,
limitations and restrictions thereof are as follows:
Series A Junior Participating Preferred Stock
1. Designation and Amount. There shall be a series of Preferred Stock
that shall be designated as "Series A Junior Participating Preferred Stock," and
the number of shares constituting such series shall be 65,000. Such number of
shares may be increased or decreased by resolution of the Board of Directors;
provided, however, that no decrease shall reduce the number of shares of Series
A Junior Participating Preferred Stock to less than the number of shares then
issued and outstanding plus the number of shares issuable upon exercise of
outstanding rights, options or warrants or upon conversion of outstanding
securities issued by the Corporation.
A - 1
<PAGE>
2. Dividends and Distributions.
(A) Subject to the prior and superior right of the holders of
any shares of any class or series of stock of the Corporation ranking prior and
superior to the shares of Series A Junior Participating Preferred Stock with
respect to dividends, 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, dividends
payable in cash in an amount per share (rounded to the nearest cent) equal to
the Adjustment Number (as defined below) times the aggregate per share amount of
all cash dividends, and the Adjustment Number 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 earlier of (i) the date of the immediately preceding dividend
payment or (ii) the date of the first issuance of any share or fraction of a
share of Series A Junior Participating Preferred Stock. The "Adjustment Number"
shall initially be 1,000. If the Corporation shall at any time after March 9,
2000 (the "Rights Declaration Date"), (i) declare and pay any dividend on Common
Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common
Stock or (iii) combine the outstanding Common Stock into a smaller number of
shares, then in each such case the Adjustment Number in effect immediately prior
to such event shall be adjusted by multiplying such Adjustment Number by a
fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
(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).
(C) The Board of Directors may fix a record date for the
determination of holders of shares of Series A Junior Participating Preferred
Stock entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be no more than 60 days prior to the date fixed
for the payment thereof.
3. Voting Rights. The holders of shares of Series A Junior Parti-
cipating Preferred Stock shall have the following voting rights:
(A) Each share of Series A Junior Participating Preferred
Stock shall entitle the holder thereof to a number of votes equal to the
Adjustment Number on all matters submitted to a vote of the stockholders of the
Corporation.
A - 2
<PAGE>
(B) Except as required by law and by Section 10 hereof,
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.
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; or
(iii) purchase or otherwise acquire for considera-
tion 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 Series A
Junior Participating Preferred Stock, or to such holders and holders of any such
shares ranking on a parity therewith, upon such terms as the Board of Directors,
after consideration of the respective annual dividend rates and other relative
rights and preferences of the respective series and classes, shall determine in
good faith will result in fair and equitable treatment among the respective
series or classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under paragraph (A) of
this Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
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
A - 3
<PAGE>
promptly after the acquisition thereof. All such shares shall upon their
retirement 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 any conditions and
restrictions on issuance set forth herein.
6. Liquidation, Dissolution or Winding Up. (A) Upon any liquidation,
dissolution or winding up of the Corporation, voluntary or otherwise, no
distribution shall be made to the holders of shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or winding up) to the
Series A Junior Participating Preferred Stock unless, prior thereto, the holders
of shares of Series A Junior Participating Preferred Stock shall have received
an amount per share (the "Series A Liquidation Preference") equal to the greater
of (i) $1.00 plus an amount equal to accrued and unpaid dividends and
distributions thereon whether or not declared, to the date of such payment, or
(ii) the Adjustment Number times the per share amount of all cash and other
property to be distributed in respect of the Common Stock upon such liquidation,
dissolution or winding up of the Corporation.
(B) If, however, there are not sufficient assets available to
permit payment in full of the Series A Liquidation Preference and the
liquidation preferences of all other classes and series of stock of the
Corporation, if any, that rank on a parity with the Series A Junior
Participating Preferred Stock in respect thereof, then the assets available for
such distribution shall be distributed ratably to the holders of the Series A
Junior Participating Preferred Stock and the holders of such parity shares in
proportion to their respective liquidation preferences.
(C) Neither the merger or consolidation of the Corporation
into or with another corporation nor the merger or consolidation of any other
corporation into or with the Corporation shall be deemed to be a liquidation,
dissolution or winding up of the Corporation within the meaning of this Section
6.
7. Consolidation, Merger, Etc. In case the Corporation shall enter into
any consolidation, merger, combination or other transaction in which the
outstanding 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 each share
of Series A Junior Participating Preferred Stock shall at the same time be
similarly exchanged or changed in an amount per share equal to the Adjustment
Number 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.
8. No Redemption. Shares of Series A Junior Participating Preferred
Stock shall not be subject to redemption by the Company.
9. Ranking. The Series A Junior Participating Preferred Stock shall
rank junior to all other series of the Preferred Stock as to the payment of
dividends, and as to the distribution of assets
A - 4
<PAGE>
upon liquidation, dissolution or winding up, unless the terms of any such series
shall provide otherwise, and shall rank senior to the Common Stock as to such
matters.
10. Amendment. At any time that any shares of Series A Junior
Participating Preferred Stock are outstanding, the Certificate of Incorporation
of the Corporation shall not be amended in any manner that 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 two-thirds of the outstanding shares of
Series A Junior Participating Preferred Stock, voting separately as a class.
11. Fractional Shares. Series A Junior Participating Preferred Stock
may be issued in fractions of a share that shall entitle the holder, in
proportion to such holder's factional shares, to exercise voting rights, receive
dividends, participate in distributions and to have the benefit of all other
rights of holders of Series A Junior Participating Preferred Stock.
IN WITNESS WHEREOF, the undersigned has executed this Certificate this
______________day of March, 2000.
CAPITAL SENIOR LIVING CORPORATION
By:
---------------------------
Name:
---------------------------
Title:
---------------------------
A - 5
<PAGE>
Exhibit B
---------
Form of Right Certificate
Certificate No. R-__________ __________ Rights
NOT EXERCISABLE AFTER MARCH 9, 2010, OR EARLIER IF REDEMPTION OR
EXCHANGE OCCURS. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.001 PER
RIGHT AND TO EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.
UNDER CERTAIN CIRCUMSTANCES AS SET FORTH IN THE RIGHTS AGREEMENT,
RIGHTS OWNED BY OR TRANSFERRED TO ANY PERSON WHO IS OR BECOMES AN
ACQUIRING PERSON (AS DEFINED IN THE RIGHTS AGREEMENT) AND CERTAIN
TRANSFEREES THEREOF WILL BECOME NULL AND VOID AND WILL NO LONGER BE
TRANSFERABLE.
RIGHT CERTIFICATE
CAPITAL SENIOR LIVING CORPORATION
This certifies that ___________________________ or registered assigns,
is the registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Rights Agreement, dated as of March 9, 2000, as the same may be amended from
time to time (the "Rights Agreement"), between CAPITAL SENIOR LIVING
CORPORATION, a Delaware corporation (the "Company"), and CHASEMELLON SHAREHOLDER
SERVICES, L.L.C., a New Jersey limited liability company, as Rights Agent (the
"Rights Agent"), to purchase from the Company at any time after the Distribution
Date (as such term is defined in the Rights Agreement) and prior to 5:00 p.m.,
Dallas, Texas time, on March 9, 2010 at the office or agency of the Rights Agent
designated for such purpose, or of its successor as Rights Agent, one
one-thousandth of a fully paid non-assessable share of Series A Junior
Participating Preferred Stock, par value $.01 per share (the "Preferred Stock"),
of the Company at a purchase price of $22.00 per one one-thousandth of a share
of Preferred Stock (the "Purchase Price"), upon presentation and surrender of
this Right Certificate with the Form of Election to Purchase duly executed. The
number of Rights evidenced by this Right Certificate (and the number of one one-
thousandths of a share of Preferred Stock that may be purchased upon exercise
hereof) set forth above, and the Purchase Price set forth above, are the number
and Purchase Price as of March 20, 2000, based on the Preferred Stock as
constituted at such date. As provided in the Rights Agreement, the Purchase
Price, the number of one one-thousandths of a share of Preferred Stock (or other
securities or property) that may be purchased upon the exercise of the Rights
and the number
B - 1
<PAGE>
of Rights evidenced by this Right Certificate are subject to modification and
adjustment upon the happening of certain events.
This Right Certificate is subject to all of the terms, covenants and
restrictions of the Rights Agreement, which terms, covenants and restrictions
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 Right Certificates. Copies of
the Rights Agreement are on file at the principal executive offices of the
Company and the above-mentioned office or agency of the Rights Agent. The
Company will mail to the holder of this Right Certificate a copy of the Rights
Agreement without charge after receipt of a written request therefor.
This Right Certificate, with or without other Right Certificates, upon
surrender at the office or agency of the Rights Agent designated for such
purpose, may be exchanged for another Right Certificate or Right Certificates of
like tenor and date evidencing Rights entitling the holder to purchase a like
aggregate number of shares of Preferred Stock as the Rights evidenced by the
Right Certificate or Right Certificates surrendered shall have entitled such
holder to purchase. If this Right Certificate shall be exercised in part, the
holder shall be entitled to receive upon surrender hereof another Right
Certificate or Right Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Certificate (i) may be redeemed by the Company at a redemption price of
$.001 per Right or (ii) may be exchanged in whole or in part for shares of the
Company's Common Stock, par value $.01 per share, or shares of Preferred Stock.
No fractional shares of Preferred Stock or Common Stock will be issued
upon the exercise or exchange of any Right or Rights evidenced hereby (other
than fractions of Preferred Stock that are integral multiples of one
one-thousandth 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 Right Certificate, as such, shall be entitled to vote
or receive dividends or be deemed for any purpose the holder of the Preferred
Stock or of any other securities of the Company which may at any time be
issuable on the exercise or exchange 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 Right
Certificate shall have been exercised or exchanged as provided in the Rights
Agreement.
B - 2
<PAGE>
This Right 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 __________.
CAPITAL SENIOR LIVING CORPORATION
By:
---------------------------
Name:
---------------------------
Title:
---------------------------
ATTEST:
- ----------------------------------
Name:
---------------------------
Title:
---------------------------
Countersigned:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C., as Rights Agent
By:
---------------------------
Name:
---------------------------
Title:
---------------------------
B - 3
<PAGE>
Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate)
FOR VALUE RECEIVED, _________________________ hereby sells, assigns and
transfers unto _________________________________________________________________
________________________________________________________________________________
(Please print name and address of transferee)
________________________________________________________________________________
Rights represented by this Right Certificate, together with all right, title and
interest therein, and does hereby irrevocably constitute and appoint
_________________________, Attorney, to transfer said Rights on the books of the
within-named Company, with full power of substitution.
Dated:
------------------------------
----------------------------------------
Signature
Signature Guaranteed:
Signatures must be guaranteed by a bank, trust company, broker, dealer
or other eligible institution participating in a recognized signature guarantee
medallion program.
- --------------------------------------------------------------------------------
(To be completed)
The undersigned hereby certifies that the Rights evidenced by this
Right Certificate are not beneficially owned by, were not acquired by the
undersigned from, and are not being assigned to an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement).
----------------------------------------
Signature
B - 4
<PAGE>
Form of Reverse Side of Right Certificate - continued
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if holder desires to exercise
Rights represented by the Rights Certificate)
To CAPITAL SENIOR LIVING CORPORATION:
The undersigned hereby irrevocably elects to exercise _________ Rights
represented by this Right Certificate to purchase the shares of Preferred Stock
(or other securities or property) issuable upon the exercise of such Rights and
requests that certificates for such shares of Preferred Stock (or such other
securities) be issued in the name of:
- --------------------------------------------------------------------------------
(Please print name and address)
If such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identification number
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
Dated:
------------------------------
----------------------------------------
Signature
(Signature must conform to holder specified on Right Certificate)
Signature Guaranteed:
B - 5
<PAGE>
Signature must be guaranteed by a bank, trust company, broker, dealer
or other eligible institution participating in a recognized signature guarantee
medallion program.
Form of Reverse Side of Right Certificate - continued
- --------------------------------------------------------------------------------
(To be completed)
The undersigned certifies that the Rights evidenced by this Right
Certificate are not beneficially owned by, and were not acquired by the
undersigned from, an Acquiring Person or an Affiliate or Associate thereof (as
defined in the Rights Agreement).
----------------------------------------
Signature
- --------------------------------------------------------------------------------
NOTICE
------
The signature in the Form of Assignment or Form of Election to
Purchase, as the case may be, must conform to the name as written upon the face
of this Right Certificate in every particular, without alteration or enlargement
or any change whatsoever.
If certification set forth above in the Form of Assignment or the Form
of Election to Purchase, as the case may be, is not completed, such Assignment
or Election to Purchase will not be honored.
B - 6
<PAGE>
Exhibit C
---------
UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS
AGREEMENT, RIGHTS OWNED BY OR TRANSFERRED TO ANY PERSON WHO IS
OR BECOMES AN ACQUIRING PERSON (AS DEFINED IN THE RIGHTS
AGREEMENT) AND CERTAIN TRANSFEREES THEREOF WILL BECOME NULL
AND VOID AND WILL NO LONGER BE TRANSFERABLE.
SUMMARY OF RIGHTS TO PURCHASE
SHARES OF PREFERRED STOCK OF
CAPITAL SENIOR LIVING CORPORATION
The Board of Directors of CAPITAL SENIOR LIVING CORPORATION (the
"Company") has declared a dividend of one preferred share purchase right (a
"Right") for each outstanding share of common stock, par value $.01 per share,
of the Company (the "Common Stock"). The dividend is payable on March 20, 2000
(the "Record Date"), to the stockholders of record on that date. Each Right
entitles the registered holder to purchase from the Company one one-thousandth
of a share of Series A Junior Participating Preferred Stock, par value $.01 per
share, of the Company (the "Preferred Stock") at a price of $22.00 per one
one-thousandth of a share of Preferred Stock (the "Purchase Price"), subject to
adjustment. The description and terms of the Rights are set forth in a Rights
Agreement dated as of March 9, 2000, as the same may be amended from time to
time (the "Rights Agreement"), between the Company and CHASEMELLON SHAREHOLDER
SERVICES, L.L.C., as Rights Agent (the "Rights Agent").
Until the earlier to occur of (i) 10 days following a public
announcement that a person or group of affiliated or associated persons (with
certain exceptions, an "Acquiring Person") has acquired beneficial ownership of
15% or more of the outstanding shares of Common Stock or (ii) 10 business days
(or such later date as may be determined by action of the Board of Directors
prior to such time as any person or group of affiliated persons becomes an
Acquiring Person) following the commencement of, or announcement of an intention
to make, a tender offer or exchange offer the consummation of which would result
in the beneficial ownership by a person or group of 15% or more of the
outstanding shares of Common Stock (the earlier of such dates being called the
"Distribution Date"), the Rights will be evidenced, with respect to any of the
Common Stock certificates outstanding as of the Record Date, by such Common
Stock certificate together with a copy of this Summary of Rights.
The Rights Agreement provides that, until the Distribution Date (or
earlier expiration of the Rights), the Rights will be transferred with and only
with the Common Stock. Until the Distribution Date (or earlier expiration of the
Rights), new Common Stock certificates issued after the Record Date upon
transfer or new issuances of Common Stock will contain a notation incorporating
the
C - 1
<PAGE>
Rights Agreement by reference. Until the Distribution Date (or earlier
expiration of the Rights), the surrender for transfer of any certificates for
shares of Common Stock outstanding as of the Record Date, even without such
notation or a copy of this Summary of Rights, will also constitute the transfer
of the Rights associated with the shares of Common Stock represented by such
certificates. As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights ("Right Certificates") will be mailed to
holders of record of the Common Stock as of the close of business on the
Distribution Date and such separate Right Certificates alone will evidence the
Rights.
The Rights are not exercisable until the Distribution Date. The Rights
will expire on March 9, 2010 (the "Final Expiration Date"), unless the Final
Expiration Date is advanced or extended or unless the Rights are earlier
redeemed or exchanged by the Company, in each case as described below.
The Purchase Price payable, and the number of shares of Preferred Stock
or other securities or property issuable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution (i) upon a stock
dividend on, or a subdivision, combination or reclassification of, the Preferred
Stock, (ii) upon the grant to holders of the Preferred Stock of certain rights
or warrants to subscribe for or purchase Preferred Stock at a price, or
securities convertible into Preferred Stock with a conversion price, less than
the then-current market price of the Preferred Stock or (iii) upon the
distribution to holders of the Preferred Stock of evidences of indebtedness or
assets (excluding regular periodic cash dividends or dividends payable in
Preferred Stock) or of subscription rights or warrants (other than those
referred to above).
The number of outstanding Rights is subject to adjustment upon the
occurrence of a stock dividend on the Common Stock payable in shares of Common
Stock or subdivisions, consolidations or combinations of the Common Stock
occurring, in any such case, prior to the Distribution Date.
Shares of Preferred Stock purchasable upon exercise of the Rights will
not be redeemable. Each share of Preferred Stock will be entitled, when, as and
if declared, to a dividend payment per share equal to an aggregate dividend of
1,000 times the dividend declared per share of Common Stock. Upon liquidation,
dissolution or winding up of the Company, the holders of the Preferred Stock
will be entitled to a minimum preferential payment of $1.00 per share (plus any
accrued but unpaid dividends) 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,
upon any merger, consolidation or other transaction in which outstanding shares
of Common Stock are converted or 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 Stock's dividend, liquidation
and voting rights, the value of the one one-thousandth interest in a share of
Preferred Stock purchasable upon exercise of each Right should approximately be
the value of one share of Common Stock.
C - 2
<PAGE>
If any person or group of affiliated or associated persons becomes an
Acquiring Person, each holder of a Right, other than Rights beneficially owned
by the Acquiring Person (which will thereupon become null and void), will
thereafter have the right to receive upon exercise of a Right that number of
shares of Preferred Stock having a market value of two times the exercise price
of the Right. There are certain limited exemptions from the definition of
Acquiring Person, as more fully set forth in the Rights Agreement. These
exemptions include, with various limitations, the acquisition of shares by James
A. Stroud and Senior Living Trust, current holders of Common Stock.
If, after a person or group has become an Acquiring Person, the Company
is acquired in a merger or other business combination transaction or 50% or more
of its consolidated assets or earning power are sold, proper provisions will be
made so that each holder of a Right (other than Rights beneficially owned by an
Acquiring Person which will have become null and void) will thereafter have the
right to receive upon the exercise of a Right that number of shares of common
stock of the person with whom the Company has engaged in the foregoing
transaction (or its parent) that at the time of such transaction have a market
value of two times the exercise price of the Right.
At any time after any person or group becomes an Acquiring Person and
prior to the earlier of one of the events described in the previous paragraphs
or the acquisition by such Acquiring Person of 50% or more of the outstanding
shares of Common Stock, the Board of Directors of the Company may exchange the
Rights (other than Rights owned by such Acquiring Person which will have become
null and void), in whole or in part, for shares of Common Stock or Preferred
Stock (or a series of the Company's preferred stock having equivalent rights,
preferences and privileges), at an exchange ratio of one share of Common Stock,
or a fractional share of Preferred Stock (or other preferred stock) equivalent
in value thereto, per Right.
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional shares of Preferred Stock or Common Stock
will be issued (other than fractions of Preferred Stock that are integral
multiples of one one-thousandth of a share of Preferred Stock, which may, at the
election of the Company, be evidenced by depositary receipts), and in lieu
thereof an adjustment in cash will be made based on the current market price of
the Preferred Stock or the Common Stock.
At any time prior to the time an Acquiring Person becomes such, the
Board of Directors of the Company may redeem the Rights in whole, but not in
part, at a price of $.001 per Right (the "Redemption Price"). The redemption of
the Rights may be made effective at such time, on such basis and with such
conditions as the Board of Directors in its sole discretion may establish.
Immediately upon any 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 Redemption Price.
For so long as the Rights are then redeemable, the Company may, except
with respect to the Redemption Price, amend the Rights Agreement in any manner.
After the Rights are no longer
C - 3
<PAGE>
redeemable, the Company may, except with respect to the Redemption Price, amend
the Rights Agreement in any manner that does not adversely affect the interests
of holders of the Rights.
Until a Right is exercised or exchanged, the holder thereof, as such,
will have no rights as a stockholder of the Company, including, without
limitation, the right to vote or to receive dividends.
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
March ____, 2000. 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,
as the same may be amended from time to time, which is hereby incorporated
herein by reference.
C - 4
