<PAGE>
As filed with the Securities and Exchange Commission on June 4, 1999
Registration Number 333-_____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM S-8
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
----------------------
Triad Hospitals, Inc.
(Exact name of registrant as specified in its charter)
Delaware 75-2816101
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
13455 Noel Road, 20th Floor
Dallas, Texas 75240
(Address of Principal Executive Offices) (Zip Code)
Triad Hospitals, Inc. Employee Stock Purchase Plan
(Full Title of the Plan)
Donald P. Fay, Esq.
Executive Vice President,
General Counsel and Secretary
Triad Hospitals, Inc.
13455 Noel Road, 20th Floor
Dallas, Texas 75240
(972) 789-2732
(Name, address and telephone number of agent for service)
----------------------
Copies to:
Aileen C. Meehan, Esq.
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019-6092
(212) 259-8000
----------------------
<PAGE>
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
============================================================================================================
Proposed
Title Of Each Proposed Maximum Amount Of
Class of Securities Amount To Be Maximum Offering Aggregate Offering Registration Fee
To Be Registered Registered(1) Price Per Unit (2) Price (2)
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock,
par value $.01 per
share (3) 3,000,000 $ 10.6563 $ 31,968,750 $ 8,887.31
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(1) This Registration Statement shall also cover any additional shares of
Common Stock which become issuable under the Triad Hospitals, Inc. Employee
Stock Purchase Plan by reason of any stock dividend, stock split,
recapitalization, merger, consolidation or reorganization of or by the
Registrant which results in an increase in the number of the Registrant's
outstanding shares of Common Stock.
(2) Estimated for the sole purpose of computing the registration fee. Pursuant
to Rules 457(c) and 457(h) under the Securities Act, the proposed maximum
offering price per unit is calculated as the average of the high and low
selling prices, as reported on the Nasdaq National Market, of the common
stock of the registrant on June 2, 1999.
(3) Includes Preferred Stock Purchase Rights which, prior to the occurrence of
certain events, will not be exercisable or evidenced separately from the
Common Stock.
2
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. Incorporation of Documents by Reference.
The following document filed with the Securities and Exchange
Commission by Triad Hospitals, Inc. ("Triad") (File No. 0-29816) is incorporated
herein by reference and made a part hereof:
Triad's Registration Statement on Form 10, as amended, filed pursuant to
Section 12 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), including the description of the common stock and
associated preferred stock purchase rights of Triad contained in such
Registration Statement on Form 10; such description is qualified in its
entirety by reference to the (i) Certificate of Incorporation of Triad and
(ii) By-Laws of Triad, filed as Exhibits 3.1 and 3.2, respectively, to this
Registration Statement, and any amendment or report filed for the purpose
of updating that description.
All documents filed by Triad pursuant to Sections 13(a), 13(c), 14 and
15(d) of the Exchange Act subsequent to the date of this Registration Statement
and prior to the filing of a post-effective amendment which indicates that all
securities offered have been sold or which deregisters all securities then
remaining unsold, shall be deemed to be incorporated by reference in this
Registration Statement and to be part hereof from the date of filing of such
documents.
The combined financial statements of Triad Hospitals, Inc. and its
subsidiaries at December 31, 1998 and 1997 and for each of the three years in
the period ended December 31, 1998, appearing in Triad's Registration Statement
on Form 10, as amended, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon included therein and incorporated
herein by reference. Such combined financial statements are incorporated herein
by reference in reliance upon such report on the authority of such firm as
experts in accounting and auditing.
ITEM 4. Description of Securities.
Not Applicable.
ITEM 5. Interests of Named Experts and Counsel.
Not Applicable.
ITEM 6. Indemnification of Directors and Officers.
Triad is a Delaware corporation. Reference is made to Section 145 of
the Delaware General Corporation Law as to indemnification by Triad of its
officers and directors. The general effect of such law is to empower a
corporation to indemnify any of its officers and directors against certain
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by the person to be indemnified in
connection
II-1
<PAGE>
with certain actions, suits or proceedings (threatened, pending or completed) if
the person to be indemnified acted in good faith and in a manner he or she
reasonably believed to be in, or not opposed to, the best interests of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful.
Article Fourteenth of Triad's Certificate of Incorporation (which
Certificate of Incorporation is incorporated by reference as Exhibit 3.1 to this
Registration Statement), provides for the indemnification of Triad's officers
and directors in accordance with the Delaware General Corporation Law. Article
Twelfth of Triad's Certificate of Incorporation includes, as permitted by the
Delaware General Corporation Law, certain limitations on the potential personal
liability of members of Triad's Board of Directors for monetary damages as a
result of actions taken in their capacity as Board members.
The directors and officers of Triad are covered by insurance policies
indemnifying them against certain liabilities arising under the Securities Act,
which might be incurred by them in such capacities.
ITEM 7. Exemption from Registration Claimed.
Not applicable.
ITEM 8. Exhibits.
The documents listed hereunder are filed as exhibits hereto.
Exhibit Number Description
- -------------- -----------
3.1 Certificate of Incorporation of Triad, as filed with the
Secretary of State of the State of Delaware on April 27,
1999, filed as exhibit 3.1 to Triad Hospitals, Inc.
Registration Statement on Form S-8 (No. 333-78189) under the
Securities Act of 1933, as amended, is incorporated herein
by reference.
3.2 By-Laws of Triad, filed as exhibit 3.2 to Triad Hospitals,
Inc. Registration Statement on Form S-8 (No. 333-78189)
under the Securities Act of 1933, as amended, is
incorporated herein by reference.
4.1 Form of Specimen Certificate for Triad Hospitals, Inc.
common stock, filed as exhibit 4.1 to Triad Hospitals, Inc.
Registration Statement on Form 10 under the Securities
Exchange Act of 1934, as amended, is incorporated herein by
reference.
4.2 Rights Agreement between Triad Hospitals, Inc. and National
City Bank, as rights agent.
23 Consent of Ernst & Young LLP.
II-2
<PAGE>
Exhibit Number Description
- -------------- -----------
99 Triad Hospitals, Inc. Employee Stock Purchase Plan.
ITEM 9. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement; and
(iii) to include any material information with respect to the
plan of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Dallas, State of Texas, as of the 4th day of June
1999.
TRIAD HOSPITALS, INC.
By: /s/ James D. Shelton
----------------------------
James D. Shelton
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Date: June 4, 1999 By: /s/ James D. Shelton
-----------------------------------------
James D. Shelton
Chairman of the Board, President
and Chief Executive Officer and Director
(Principal executive officer)
Date: June 4, 1999 By: /s/ Michael J. Parsons
-----------------------------------------
Michael J. Parsons
Executive Vice President and
Chief Operating Officer and Director
Date: June 4, 1999 By: /s/ Thomas G. Loeffler
-----------------------------------------
Thomas G. Loeffler
Director
Date: June 4, 1999 By: /s/ Thomas F. Frist III
-----------------------------------------
Thomas F. Frist III
Director
Date: June 4, 1999 By: /s/ Marvin Runyon
-----------------------------------------
Marvin Runyon
Director
II-5
<PAGE>
Date: June 4, 1999 By: /s/ Uwe E. Reinhardt
--------------------------------------------
Uwe E. Reinhardt, Ph.D
Director
Date: June 4, 1999 By: /s/ Dale V. Kesler
--------------------------------------------
Dale V. Kesler
Director
Date: June 4, 1999 By: /s/ Gale Sayers
--------------------------------------------
Gale Sayers
Director
Date: June 4, 1999 By: /s/ Burke W. Whitman
--------------------------------------------
Burke W. Whitman
Executive Vice President, Chief Financial
Officer and Treasurer
(Principal financial officer)
Date: June 4, 1999 By: /s/ W. Stephen Love
--------------------------------------------
W. Stephen Love
Senior Vice President of Finance/Comptroller
(Principal accounting officer)
II-6
<PAGE>
INDEX TO EXHIBITS
Exhibit Number Description
- -------------- -----------
3.1 Certificate of Incorporation of Triad, as filed with
the Secretary of State of the State of Delaware on
April 27, 1999, filed as exhibit 3.1 to Triad
Hospitals, Inc. Registration Statement on Form S-8 (No.
333-78189) under the Securities Act of 1933, as
amended, is incorporated herein by reference.
3.2 By-Laws of Triad, filed as exhibit 3.2 to Triad
Hospitals, Inc. Registration Statement on Form S-8 (No.
333-78189) under the Securities Act of 1933, as
amended, is incorporated herein by reference.
4.1 Form of Specimen Certificate for Triad Hospitals, Inc.
common stock, filed as exhibit 4.1 to Triad Hospitals,
Inc. Registration Statement on Form 10 under the
Securities Exchange Act of 1934, as amended, is
incorporated herein by reference.
4.2 Rights Agreement between Triad Hospitals, Inc. and
National City Bank, as rights agent.
99 Triad Hospitals, Inc. Employee Stock Purchase Plan.
II-7
<PAGE>
EXHIBIT 4.2
- --------------------------------------------------------------------------------
TRIAD HOSPITALS, INC.
and
NATIONAL CITY BANK,
as Rights Agent
____________
Rights Agreement
Dated as of May 11, 1999
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Section 1 Certain Definitions................................................................................ 1
Section 2 Appointment of Rights Agent........................................................................ 4
Section 3 Issue of Right Certificates........................................................................ 5
Section 4 Form of Right Certificates......................................................................... 6
Section 5 Countersignature and Registration.................................................................. 6
Section 6 Transfer, Split Up, Combination and Exchange of Right Certificates; Mutilated, Destroyed, Lost or
Stolen Right Certificates.......................................................................... 7
Section 7 Exercise of Rights; Purchase Price; Expiration Date of Rights...................................... 8
Section 8 Cancellation and Destruction of Right Certificates................................................. 8
Section 9 Availability of Preferred Shares................................................................... 9
Section 10 Preferred Shares Record Date....................................................................... 9
Section 11 Adjustment of Purchase Price, Number of Shares or Number of Rights................................. 10
Section 12 Certificate of Adjusted Purchase Price or Number of Shares......................................... 16
Section 13 Consolidation, Merger or Sale or Transfer of Assets or Earning Power............................... 16
Section 14 Fractional Rights and Fractional Shares............................................................ 17
Section 15 Rights of Action................................................................................... 18
Section 16 Agreement of Right Holders......................................................................... 19
Section 17 Right Certificate Holder Not Deemed a Stockholder.................................................. 19
Section 18 Concerning the Rights Agent........................................................................ 19
Section 19 Merger or Consolidation or Change of Name of Rights Agent.......................................... 20
Section 20 Duties of Rights Agent............................................................................. 20
Section 21 Change of Rights Agent............................................................................. 22
Section 22 Issuance of New Right Certificates................................................................. 23
Section 23 Redemption......................................................................................... 23
Section 24 Exchange........................................................................................... 24
Section 25 Notice of Certain Events........................................................................... 25
Section 26 Notices............................................................................................ 26
Section 27 Supplements and Amendments......................................................................... 26
Section 28 Successors......................................................................................... 27
Section 29 Benefits of this Rights Agreement.................................................................. 27
Section 30 Severability....................................................................................... 27
Section 31 Governing Law...................................................................................... 27
Section 32 Counterparts....................................................................................... 27
Section 33 Descriptive Headings............................................................................... 27
</TABLE>
Exhibit A - Form of Right Certificate
Exhibit B - Summary of Rights to Purchase Preferred Shares
<PAGE>
Rights Agreement
Rights Agreement, dated as of May 11, 1999, by and between Triad Hospitals,
Inc., a Delaware corporation (the "Company"), and National City Bank (the
"Rights Agent").
The Board of Directors of the Company has authorized and directed the
issuance of one preferred share purchase right (a "Right") for each Common Share
to be issued in the distribution of Common Shares effective May 11, 1999 (the
"Record Date"), as such distribution is described in the Company's Registration
Statement on Form 10 ( File No. 0-29816 ), dated April 27, 1999 (the "Spin-
Off"). Each Right represents the right to purchase one one-thousandth of a
Preferred Share, upon the terms and subject to the conditions herein set forth.
The Board of Directors of the Company has further authorized and directed the
issuance of one Right with respect to each Common Share that shall become
outstanding between the Record Date and the earliest of the Distribution Date,
the Redemption Date and the Expiration Date.
Accordingly, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Rights Agreement, the
-------------------
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or which, together
with all Affiliates and Associates of such Person, shall be the Beneficial Owner
of 15% or more of the Common Shares then outstanding, but shall not include (i)
the Company, any Subsidiary of the Company, any employee benefit plan of the
Company or of any Subsidiary of the Company, or any entity holding Common Shares
for or pursuant to the terms of any such plan, (ii) any Person who or which
becomes the Beneficial Owner of 15% or more of the Common Shares then
outstanding as the result of a reduction in the outstanding Common Shares
resulting from acquisition of Common Shares by the Company approved by the Board
of Directors, unless and until such Person becomes the Beneficial Owner of any
additional Common Shares, other than pursuant to a stock dividend or stock
split, (iii) any Person who or which the Board of Directors of the Company
determines, in good faith, became an Acquiring Person inadvertently, if such
Person divests as promptly as practicable a sufficient number of Common Shares
so that such Person would no longer be an Acquiring Person or (iv) any Person
who or which the Board of Directors of the Company determines, prior to the time
such Person would otherwise be an Acquiring Person, should be exempted from the
definition of Acquiring Person, provided that the Board of Directors may make
such exemption subject to such conditions, if any, which the Board may
determine. Notwithstanding anything in this paragraph (a) to the contrary,
neither Columbia/HCA Healthcare Corporation nor any of its affiliates shall be
deemed to be an Acquiring Person as a result of its ownership of Common Shares
prior to the Spin-Off.
<PAGE>
(b) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 under the Exchange Act.
(c) A Person shall be deemed the "Beneficial Owner" of and shall be
deemed to "Beneficially Own" any securities:
(i) which such Person or any of such Person's Affiliates or
Associates beneficially owns, directly or indirectly;
(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 (other than these Rights), warrants or options, or otherwise,
provided, however, that a Person shall not be deemed the Beneficial Owner of, or
to Beneficially Own, 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 or exchange
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 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 with 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 Section
1(c)(ii)(B)) or disposing of any securities of the Company.
Notwithstanding anything in this definition of Beneficial Ownership to the
contrary, the phrase "then outstanding," when used with reference to a Person's
Beneficial Ownership of securities of the Company, shall mean the number of such
securities then issued and outstanding together with the number of such
securities not then actually issued and outstanding which such Person would be
deemed to Beneficially Own hereunder.
(d) A determination, approval, consent or other action of the "Board
of Directors" shall require approval or consent of a majority of the Board of
Directors of the Company.
2
<PAGE>
(e) "Business Day" shall mean any day other than a Saturday, a Sunday,
or a day on which banking institutions in New York are authorized or obligated
by law or executive order to close.
(f) "Close of Business" on any given date shall mean 5:00 p.m., New
York City time, on such date, provided, however, that, if such date is not a
Business Day, it shall mean 5:00 p.m., New York City time, on the next
succeeding Business Day.
(g) "Common Shares" shall mean the shares of common stock, par value
$.01 per share, of the Company, except that "Common Shares" when used with
reference to any Person other than the Company shall mean the capital stock (or
equity interest) with the greatest voting power of such other Person or, if such
other Person is a Subsidiary of another Person, the Person or Persons which
ultimately control such first-mentioned Person.
(h) "Company" shall have the meaning set forth in the preamble hereof.
(i) "Current per share market price" shall have the meaning set forth
in Section 11(d) hereof.
(j) "Distribution Date" shall have the meaning set forth in Section
3(a) hereof.
(k) "Equivalent preferred shares" shall have the meaning set forth in
Section 11(b) hereof.
(l) "Exchange Act" shall mean the Securities Exchange Act of 1934.
(m) "Exchange Ratio" shall have the meaning set forth in Section 24(a)
hereof.
(n) "Expiration Date" shall mean the Close of Business on May 7, 2009.
(o) "NASDAQ" shall mean the National Association of Securities
Dealers, Inc. Automated Quotations System.
(p) "Person" shall mean any individual, firm, corporation, partnership
or other entity, and shall include any successor (by merger or otherwise) of
such entity.
(q) "Preferred Shares" shall mean shares of Series A Junior
Participating Preferred Stock, par value $.01 per share, of the Company having
the rights and preferences set forth in the Company's Certificate of
Incorporation.
3
<PAGE>
(r) "Purchase Price" shall initially be $90 for each one one-
thousandth of a Preferred Share purchasable pursuant to the exercise of a Right,
and shall be subject to adjustment from time to time as provided in Section 11
or 13 hereof.
(s) "Record Date" shall have the meaning set forth in the second
paragraph hereof.
(t) "Redemption Date" shall mean the time at which the Rights are
redeemed as provided in Section 23 hereof.
(u) "Redemption Price" shall have the meaning set forth in Section
23(a) hereof.
(v) "Right" shall have the meaning set forth in the second paragraph
hereof.
(w) "Right Certificate" shall have the meaning set forth in Section
3(a) hereof.
(x) "Rights Agent" shall have the meaning set forth in the preamble
hereof.
(y) "Security" shall have the meaning set forth in Section 11(d)(i)
hereof.
(aa) "Stock Acquisition Date" shall mean the first date of public
announcement (including, without limitation, by a filing under 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 shall become aware of the
existence of an Acquiring Person.
(bb) "Subsidiary" of any Person shall mean any corporation or
other entity of which a majority of the voting power of the voting equity
securities or equity interest is owned or otherwise controlled, directly or
indirectly, by such Person.
(cc) "Trading Day" shall have the meaning set forth in Section
11(d)(i) hereof.
Section 2. Appointment of Rights Agent. The Company hereby appoints the
---------------------------
Rights Agent to act as agent for the Company and the holders of the Rights (who,
in accordance with Section 3 hereof, shall prior to the Distribution Date also
be the holders of the Common Shares) 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.
4
<PAGE>
Section 3. Issue of Right Certificates. (a) (a) Until the earlier of the
---------------------------
Close of Business on the tenth day (or such other date as the Board of Directors
of the Company shall determine) after (i) the Stock Acquisition Date or (ii) the
date of the commencement by any Person (other than the Company, any Subsidiary
of the Company, any employee benefit plan of the Company or of any Subsidiary of
the Company or any entity holding Common Shares for or pursuant to the terms of
any such plan) of, or of the first public announcement of the intention of any
Person (other than the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or of any Subsidiary of the Company or any entity
holding Common Shares for or pursuant to the terms of any such plan) to
commence, a tender or exchange offer the consummation of which would result in
any Person becoming an Acquiring Person (including any such date which is after
the date of this Rights Agreement and prior to the issuance of the Rights; the
earlier of such dates being herein referred to as the "Distribution Date"), (x)
the Rights will be evidenced (subject to the provisions of Section 3(b) hereof)
by the certificates for Common Shares registered in the names of the holders
thereof (which certificates shall also be deemed to be Right Certificates) and
not by separate Right Certificates and (y) the right to receive Right
Certificates will be transferable only in connection with the transfer of Common
Shares. As soon as practicable after the Distribution Date, 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
Shares as of the Close of Business on the Distribution Date, at the address of
such holder shown on the records of the Company, a Right Certificate, in
substantially the form of Exhibit A hereto (a "Right Certificate"), evidencing
one Right for each Common Share so held. As of the Distribution Date, the Rights
will be evidenced solely by such Right Certificates.
(b) The Company will make available, as promptly as practicable
following the Record Date, a Summary of Rights to Purchase Preferred Shares, in
substantially the form of Exhibit B hereto, to any holder of Rights who may so
request from time to time prior to the Expiration Date. With respect to
certificates for Common Shares outstanding as of the Record Date, until the
Distribution Date, the Rights will be evidenced by such certificates and the
registered holders of the Common Shares shall also be the registered holders of
the associated Rights. Until the Distribution Date (or the earlier of the
Redemption Date or the Expiration Date), the surrender for transfer of any
certificate for Common Shares in respect of which Rights have been issued shall
also constitute the transfer of the Rights associated with such Common Shares.
(c) Rights shall be issued in respect of all Common Shares which are
issued (whether originally issued or from the Company's treasury) after the
Record Date but prior to the earliest of the Distribution Date, the Redemption
Date or the Expiration Date. Certificates representing such Common Shares
shall bear the following legend:
This certificate also evidences and entitles the holder hereof to
certain rights as set forth in a Rights Agreement between Triad
Hospitals, Inc. (the "Company") and the Rights Agent thereunder (the
"Rights Agreement"), the terms of which are hereby incorporated herein
by
5
<PAGE>
reference and a copy of which is on file at the principal offices of
the Company. Under certain circumstances, as set forth in the Rights
Agreement, such rights will be evidenced by separate certificates and
will no longer be evidenced by this certificate. The Company will mail
to the holder of this certificate a copy of the Rights Agreement
without charge after receipt of a written request therefor. Under
certain circumstances, as set forth in the Rights Agreement, rights
issued to any person who becomes an Acquiring Person (as defined in
the rights agreement), including such rights held by a subsequent
holder, may become null and void.
With respect to such certificates containing the foregoing legend, until
the Distribution Date, the Rights associated with the Common Shares represented
by such certificates shall be evidenced by such certificates alone, and the
surrender for transfer of any such certificate shall also constitute the
transfer of the Rights associated with the Common Shares represented thereby.
In the event that the Company purchases or acquires any Common Shares after the
Record Date but prior to the Distribution Date, any Rights associated with such
Common Shares shall be deemed cancelled and retired so that the Company shall
not be entitled to exercise any Rights associated with the Common Shares which
are no longer outstanding.
Section 4. Form of Right Certificates. The Right Certificates (and the
--------------------------
forms of election to purchase Preferred Shares and of assignment to be printed
on the reverse thereof) shall be substantially the same as Exhibit A 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 Rights Agreement, or as may be
required to comply with any applicable law or with any rule or regulation made
pursuant thereto or with any rule or regulation of any stock exchange or
automated quotation system on which the Rights may from time to time be listed,
or to conform to usage. Subject to the provisions of Sections 11 and 22 hereof,
the Right Certificates shall entitle the holders thereof to purchase such number
of one one-thousandths of a Preferred Share as shall be set forth therein at the
price per one one-thousandth of a Preferred Share set forth therein, but the
number of one one-thousandths of a Preferred Share and the Purchase Price shall
be subject to adjustment as provided herein.
Section 5. Countersignature and Registration. (a) The Right Certificates
---------------------------------
shall be executed on behalf of the Company by its Chairman of the Board, its
Chief Executive Officer, its President, any of its Vice Presidents or its
Treasurer, either manually or by facsimile signature, shall have affixed thereto
the Company's seal or a facsimile thereof, and shall be attested by the
Secretary or an Assistant Secretary of the Company, either manually or by
facsimile signature. The Right Certificates shall be countersigned by the Rights
Agent, either manually or by facsimile signature, and shall not be valid for any
purpose unless so countersigned. In case any officer of the Company who shall
have signed any of the 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
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<PAGE>
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 Rights Agreement any such Person was not
such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its principal office, 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.
Section 6. Transfer, Split Up, Combination and Exchange of Right
-----------------------------------------------------
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates.
- ---------------------------------------------------------------------
(a) Subject to the provisions of Section 14 hereof, at any time after
the Close of Business on the Distribution Date, and at or prior to the Close of
Business on the earlier of the Redemption Date or the Expiration Date, any Right
Certificate or Right Certificates (other than Right Certificates representing
Rights that have become void pursuant to Section 11(a)(ii) hereof or that have
been exchanged pursuant to Section 24 hereof) 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 Preferred Share 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 principal office of the
Rights Agent. 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 governmental charge that may be imposed in connection with any
transfer, split up, combination or exchange of Right Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Right Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably 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
<PAGE>
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.
-------------------------------------------------------------
(a) The registered holder of any Right Certificate may exercise the
Rights evidenced thereby (except as otherwise provided herein), in whole or in
part, at any time after the Distribution Date, 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 principal office of the Rights Agent,
together with payment of the Purchase Price for each one one-thousandth of a
Preferred Share as to which the Rights are exercised, at or prior to the
earliest of (i) the Expiration Date, (ii) 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 payable in lawful money of the United
States of America in accordance with paragraph (c) below.
(c) Upon receipt of a Right Certificate representing exercisable
Rights, with the form of election to purchase duly executed, accompanied by
payment of the Purchase Price for the shares to be purchased and an amount equal
to any applicable transfer tax required to be paid by the holder of such Right
Certificate in accordance with Section 9 hereof 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
Shares certificates for the number of Preferred Shares to be purchased and the
Company hereby irrevocably authorizes any such transfer agent to comply with all
such requests or (B) requisition from the depositary agent depositary receipts
representing such number of one one-thousandths of a Preferred Share as are to
be purchased (in which case certificates for the Preferred Shares represented by
such receipts shall be deposited by the transfer agent of the Preferred Shares
with such depositary agent) and the Company hereby directs such depositary agent
to comply with such request; (ii) when appropriate, 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 appropriate,
after receipt, promptly deliver such cash to or upon the order of the registered
holder of such Right Certificate.
(d) In case the registered holder of any Right Certificate shall
exercise less than all the Rights evidenced thereby, a new Right Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent to the registered holder of such Right Certificate or to
such holder's duly authorized assigns, subject to the provisions of Section 14
hereof.
Section 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 cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Right
Certificates shall be issued in lieu thereof except as
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<PAGE>
expressly permitted by any of the provisions of this Rights 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 cancelled Right Certificates to the Company,
or shall, at the written request of the Company, destroy such cancelled Right
Certificates, and, in such case, shall deliver a certificate of destruction
thereof to the Company.
Section 9. Availability of Preferred Shares.
--------------------------------
(a) The Company covenants and agrees that it will cause to be
reserved and kept available out of its authorized and unissued Preferred Shares
or any Preferred Shares held in its treasury, the number of Preferred Shares
that will be sufficient to permit the exercise in full of all outstanding Rights
in accordance with Section 7. The Company covenants and agrees that it will take
all such action as may be necessary to ensure that all securities delivered upon
exercise of Rights shall, at the time of delivery of the certificates for such
securities (subject to payment of the Purchase Price), be duly and validly
authorized and issued and fully paid and nonassessable.
(b) The Company further covenants and agrees that it will pay when
due and payable any and all federal and state transfer taxes and charges which
may be payable in respect of the issuance or delivery of the Right Certificates
or of any Preferred Shares upon the exercise of Rights. The Company shall not,
however, be required to pay any transfer tax which may be payable in respect of
any transfer or delivery of Right Certificates to a Person other than, or the
issuance or delivery of certificates or depositary receipts for the Preferred
Shares in a name other than that of, the registered holder of the Right
Certificate evidencing Rights surrendered for exercise or to issue or to deliver
any certificates or depositary receipts for Preferred Shares upon the exercise
of any Rights until any such tax shall have been paid (any such tax being
payable by the 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 is due.
(c) The Company will use its best efforts to ensure that any
securities issued pursuant hereto are issued in compliance with all applicable
laws.
Section 10. Preferred Shares Record Date. Each Person in whose name any
----------------------------
certificate for Preferred Shares is issued upon the exercise of Rights shall for
all purposes be deemed to have become the holder of record of the Preferred
Shares 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 transfer taxes) was made;
provided, however, that if the date of such surrender and payment is a date upon
which the Preferred Shares 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 Shares 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
9
<PAGE>
rights of a holder of Preferred Shares for which the Rights shall be
exercisable, including, without limitation, the right to vote, to receive
dividends or other distributions or to exercise any preemptive rights, and shall
not be entitled to receive any notice of any proceedings of the Company, except
as provided herein.
Section 11. Adjustment of Purchase Price, Number of Shares or Number of
-----------------------------------------------------------
Rights. The Purchase Price, the number of Preferred Shares covered by each Right
- ------
and the number of Rights outstanding are subject to adjustment from time to time
as provided in this Section 11.
(a) (i) In the event the Company shall at any time after the date of
this Rights Agreement (A) declare a dividend on the Preferred Shares payable in
Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C) combine
the outstanding Preferred Shares into a smaller number of Preferred Shares or
(D) issue any shares of its capital stock in a reclassification of the Preferred
Shares (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 which, if such
Right had been exercised immediately prior to such date and at a time when the
Preferred Shares transfer books of the Company were open, such 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 par value of the shares of capital stock of the Company
issuable upon exercise of one Right.
(ii) Subject to Section 24 of this Rights Agreement, in the event
any Person becomes an Acquiring Person, each holder of a Right shall thereafter
have a right to receive, upon exercise thereof at a price equal to the then
current Purchase Price multiplied by the number of one one-thousandths of a
Preferred Share for which a Right is then exercisable, in accordance with the
terms of this Rights Agreement and in lieu of Preferred Shares, such number of
Common Shares as shall equal the result obtained by (A) multiplying the then-
current Purchase Price by the number of one one-thousandths of a Preferred Share
for which a Right is then exercisable and dividing that product by (B) 50% of
the then current per share market price of the Company's Common Shares
(determined pursuant to Section 11(d) hereof) on the date of the occurrence of
such event. In the event that any Person shall become an Acquiring Person and
the Rights shall then be outstanding, the Company shall not take any action
which would eliminate or diminish the benefits intended to be afforded by the
Rights.
Notwithstanding anything in this Agreement to the contrary, from and after
the occurrence of such event, any Rights that are or were acquired or
Beneficially Owned by any Acquiring Person (or any Associate or Affiliate of
such Acquiring Person) shall be
10
<PAGE>
void and any holder of such Rights shall thereafter have no right to exercise
such Rights under any provision of this Rights Agreement. No Right Certificate
shall be issued pursuant to Section 3 that represents Rights Beneficially Owned
by an Acquiring Person whose Rights would be void pursuant to the preceding
sentence or any Associate or Affiliate thereof; no Right Certificate shall be
issued at any time upon the transfer of any Rights to an Acquiring Person whose
Rights would be void pursuant to the preceding sentence or any Associate or
Affiliate thereof or to any nominee of such Acquiring Person, Associate or
Affiliate; and any Right Certificate delivered to the Rights Agent for transfer
to an Acquiring Person whose Rights would be void pursuant to the preceding
sentence shall be cancelled.
(iii) If there shall not be sufficient Common Shares 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 Company shall
take all such action as may be necessary to authorize additional Common Shares
for issuance upon exercise of the Rights. If the Company shall, after good faith
effort, be unable to take all such action as may be necessary to authorize such
additional Common Shares, the Company shall substitute, for each Common Share
that would otherwise be issuable upon exercise of a Right, a number of Preferred
Shares or fraction thereof (or a security with substantially similar rights,
privileges, preferences, voting power and economic rights) such that the current
per share market price of one Preferred Share (or such other security)
multiplied by such number or fraction is equal to the current per share market
price of one Common Share as of the date of issuance of such Preferred Shares or
fraction thereof (or other security).
(b) In case the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Preferred Shares entitling them
(for a period expiring within 45 calendar days after such record date) to
subscribe for or purchase Preferred Shares (or shares having the same rights,
privileges and preferences as the Preferred Shares ("equivalent preferred
shares")) or securities convertible into Preferred Shares or equivalent
preferred shares at a price per Preferred Share or equivalent preferred share
(or having a conversion price per share, if a security convertible into
Preferred Shares or equivalent preferred shares) less than the then current per
share market price of the Preferred Shares 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 Preferred Shares
outstanding on such record date plus the number of Preferred Shares which the
aggregate offering price of the total number of Preferred Shares 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
Preferred Shares outstanding on such record date plus the number of additional
Preferred Shares 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
11
<PAGE>
consideration part or all of which shall be in a form other than cash, the value
of such consideration shall be as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent and shall be binding on the Rights Agent and the
holders of the Rights. 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 in the event that such rights, options or warrants are not so issued, the
Purchase Price shall be adjusted to be the Purchase Price which would then be in
effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for the making of a
distribution to all holders of the Preferred Shares (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 Shares) 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 Shares on such
record date, less the fair market value (as determined in good faith by the
Board of Directors of the Company, whose determination shall be described in a
statement filed with the Rights Agent and shall be binding on the Rights Agent
and holders of the Rights) of the portion of the assets or evidences of
indebtedness so to be distributed or of such subscription rights or warrants
applicable to one Preferred Share and the denominator of which shall be such
current per share market price of the Preferred Shares; 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 in the event that such
distribution is not so made, the Purchase Price shall again be adjusted to be
the Purchase Price which would then be in effect if such record date had not
been fixed.
(d) (i) 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
immediately prior to such date; provided, however, that in the event that 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 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
12
<PAGE>
closing bid and asked prices, regular way, in either case, as reported in the
principal consolidated transaction reporting system with respect to securities
listed or admitted to trading on the New York Stock Exchange or, if the Security
is not listed or admitted to trading on the New York Stock Exchange, as reported
in the principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on which the
Security is listed or admitted to trading or, if the Security is not listed or
admitted to trading on any national securities exchange, the last quoted price
or, if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the 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. If on any such date no such market maker is making
a market in the Security, the fair value of the Security on such date as
determined in good faith by the Board of Directors of the Company shall be used.
The term "Trading Day" shall mean a day on which the principal national
securities 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 any national securities exchange, a Business Day.
(ii) For the purpose of any computation hereunder, the "current
per share market price" of the Preferred Shares shall be determined in
accordance with the method set forth in Section 11(d)(i). If the Preferred
Shares are not publicly traded, the "current per share market price" of the
Preferred Shares shall be conclusively deemed to be the current per share market
price of the Common Shares as determined pursuant to Section 11(d)(i)
(appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof), multiplied by one thousand. If
neither the Common Shares nor the Preferred Shares are publicly held or so
listed or 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-millionth of a Preferred
Share or one ten-thousandth of any 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 which requires such adjustment or (ii)
the date of the expiration of the right to exercise any Rights.
(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 Preferred Shares,
thereafter the number of such other shares so receivable upon exercise of any
Right shall be subject to
13
<PAGE>
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Preferred Shares contained in
Section 11(a) through (c), inclusive, and the provisions of Sections 7, 9, 10
and 13 with respect to the Preferred Shares 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
Preferred Share purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided
in Section 11(i), upon each adjustment of the Purchase Price as a result of the
calculations made in Sections 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of one one-thousandths of
a Preferred Share (calculated to the nearest one millionth of a Preferred Share)
obtained by (A) multiplying (x) the number of one one-thousandths of a share
covered by a Right immediately prior to this adjustment by (y) the Purchase
Price in effect immediately prior to such adjustment of the Purchase Price and
(B) dividing the product so obtained by the Purchase Price in effect immediately
after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment of
the Purchase Price to adjust the number of Rights in substitution for any
adjustment in the number of one one-thousandths of a Preferred Share 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 Preferred Share 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 millionth) obtained by dividing the Purchase
Price in effect immediately prior to adjustment of the Purchase Price by the
Purchase Price in effect immediately after adjustment of the Purchase Price. The
Company shall make a public announcement of its election to adjust the number of
Rights, indicating the record date for the adjustment, and, if known at the
time, the amount of the adjustment to be made. This record date may be the date
on which the Purchase Price is adjusted or any day thereafter, but, if the 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
shall, 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
14
<PAGE>
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 Preferred Share issuable upon the
exercise of the Rights, the Right Certificates theretofore and thereafter issued
may continue to express the Purchase Price and the number of one one-thousandths
of a Preferred Share which were expressed in the initial Right Certificates
issued hereunder.
(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below one one-thousandth of the then par value, if any, of
the Preferred Shares issuable upon exercise of the Rights, the Company shall
take any corporate action which may, in the opinion of its counsel, be necessary
in order that the Company may validly and legally issue fully paid and
nonassessable Preferred 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 until the occurrence of such
event the issuing to the holder of any Right exercised after such record date of
the Preferred Shares and other capital stock or securities of the Company, if
any, issuable upon such exercise over and above the Preferred Shares 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.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that, it, in its sole discretion, shall determine to be advisable in
order that any consolidation or subdivision of the Preferred Shares, issuance
wholly for cash of any Preferred Shares at less than the current market price,
issuance wholly for cash of Preferred Shares or securities which by their terms
are convertible into or exchangeable for Preferred Shares, dividends on
Preferred Shares payable in Preferred Shares or issuance of rights, options or
warrants referred to hereinabove in Section 11(b), hereafter made by the Company
to holders of its Preferred Shares shall not be taxable to such stockholders.
(n) In the event that at any time after the date of this Rights
Agreement and prior to the Distribution Date, the Company shall (i) declare or
pay any dividend on the Common Shares payable in Common Shares or (ii) effect a
subdivision, combination or consolidation of the Common Shares (by
reclassification or otherwise than by payment of dividends in Common Shares)
into a greater or lesser number of Common Shares, then in any such case (A) the
number of one one-thousandths of a Preferred Share purchasable after such event
upon proper exercise of each Right shall be determined by multiplying
15
<PAGE>
the number of one one-thousandths of a Preferred Share so purchasable
immediately prior to such event by a fraction, the numerator of which is the
number of Common Shares outstanding immediately before such event and the
denominator of which is the number of Common Shares outstanding immediately
after such event, and (B) each Common Share outstanding immediately after such
event shall have issued with respect to it that number of Rights which each
Common Share outstanding immediately prior to such event had issued with respect
to it. The adjustments provided for in this Section 11(n) shall be made
successively whenever such a dividend is declared or paid or such a subdivision,
combination or consolidation is effected.
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
----------------------------------------------------------
Whenever an adjustment is made as provided in Sections 11 or 13 hereof, the
Company shall promptly (a) prepare a certificate setting forth such adjustment,
and a brief statement of the facts accounting for such adjustment, (b) file with
the Rights Agent and with each transfer agent for the Common Shares or the
Preferred Shares a copy of such certificate and (c) if a Distribution Date has
occurred, mail a brief summary thereof to each holder of a Right Certificate in
accordance with Section 25 hereof.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
------------------------------------------------------
Earning Power. In the event, directly or indirectly, at any time after a Person
- -------------
has become an Acquiring Person, (a) the Company shall consolidate with, or merge
with and into, any other Person, (b) any Person shall consolidate with the
Company, or 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 Shares shall be changed into or exchanged for
stock or other securities of any other Person (or the Company) or cash or any
other property or (c) 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 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 of its wholly owned
Subsidiaries, then, and in each such case, proper provision shall be made so
that
(i) each holder of a Right (except as otherwise provided
herein) shall thereafter have the right to receive, upon the exercise thereof at
a price equal to the then-current Purchase Price multiplied by the number of one
one-thousandths of a Preferred Share for which a Right is then exercisable, in
accordance with the terms of this Rights Agreement and in lieu of Preferred
Shares, such number of Common Shares of such other Person (including the Company
as successor thereto or as the surviving corporation) as shall equal the result
obtained by (A) multiplying the then current Purchase Price by the number of one
one-thousandths of a Preferred Share for which a Right is then exercisable and
dividing that product by (B) 50% of the then current per share market price of
the Common Shares of such other Person (determined pursuant to Section 11(d)
hereof) on the date of consummation of such consolidation, merger, sale or
transfer;
16
<PAGE>
(ii) the issuer of such Common Shares 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;
(iii) the term "Company" shall thereafter be deemed to refer
to such issuer; and
(iv) such issuer shall take such steps (including, but not
limited to, the reservation of a sufficient number of its Common Shares in
accordance with Section 9 hereof) in connection with such consummation as may be
necessary to assure that the provisions hereof shall thereafter be applicable,
as nearly as reasonably may be, in relation to the Common Shares thereafter
deliverable upon the exercise of the Rights.
The Company shall not consummate any such consolidation, merger, sale or
transfer unless prior thereto the Company and such issuer shall have executed
and delivered to the Rights Agent a supplemental agreement so providing. The
Company shall not enter into any transaction of the kind referred to in this
Section 13 if at the time of such transaction there are any rights, warrants,
instruments or securities outstanding or any agreements or arrangements which,
as a result of the consummation of such transaction, would eliminate or
substantially diminish the benefits intended to be afforded by the Rights. The
provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers.
Section 14. Fractional Rights and Fractional Shares.
---------------------------------------
(a) The Company shall not be required to issue fractions of Rights
or to distribute Right Certificates which evidence fractional Rights. 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 the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the Rights are not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the Rights are listed or admitted to trading or, if the Rights are not
listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by NASDAQ or such other
system then in use or, if on any such date the Rights are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Rights selected by the Board of
Directors of the Company. If on any such
17
<PAGE>
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 Shares (other than fractions which are integral multiples of one one-
thousandth of a Preferred Share) upon exercise of the Rights or to distribute
certificates which evidence fractional Preferred Shares (other than fractions
which are integral multiples of one one-thousandth of a Preferred Share).
Fractions of Preferred Shares in integral multiples of one one-thousandth of a
Preferred Share 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 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
Shares represented by such depositary receipts. In lieu of fractional Preferred
Shares that are not integral multiples of one one-thousandth of a Preferred
Share, the Company shall pay to the registered holders of Right Certificates at
the time such Rights are exercised as herein provided an amount in cash equal to
the same fraction of the current market value of one Preferred Share. For the
purposes of this Section 14(b), the current market value of a Preferred Share
shall be the closing price of a Preferred Share (as determined pursuant to the
second sentence of Section 11(d)(i) hereof) for the Trading Day immediately
prior to the date of such exercise.
(c) The Company shall not be required to issue fractions of Common
Shares or to distribute certificates which evidence fractional Common Shares.
In lieu of such fractional Common Shares, the Company shall pay to the
registered holder of the Right Certificates at the time such Rights are
exercised as herein provided an amount of cash equal to the same fraction of the
current market value of a whole Common Share. For the purpose of this Section
14(c), the current market value of a Common Share (as defined pursuant to
Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of
such exercise.
(d) The holder of a Right by the acceptance of the Right expressly
waives such holder's right to receive any fractional Rights or any fractional
shares upon exercise of a Right (except as expressly provided above).
Section 15. Rights of Action. All rights of action in respect of this
----------------
Rights Agreement, except 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 Shares); and any registered holder of any Right Certificate (or, prior to
the Distribution Date, of the Common Shares), 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 Shares), may, in such holder's own behalf and
for such holder's own benefit, enforce, and may institute and maintain any suit,
action or proceeding against the Company to enforce, or otherwise act in respect
of, such holder's right to exercise the Rights evidenced by such Right
18
<PAGE>
Certificate in the manner provided in such Right Certificate and in this Rights
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 Rights 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 Rights Agreement.
Section 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 Shares;
(b) after the Distribution Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office of the Rights Agent, 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
associated Common Shares certificate) is registered as the absolute owner
thereof and of the Rights evidenced thereby (notwithstanding any notations of
ownership or writing on the Right Certificate or the associated Common Shares
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.
Section 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 Shares or any other
securities of the Company which may at any time be issuable on the exercise of
the Rights represented thereby, nor shall anything contained herein or in any
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 Section 25 hereof), or to receive dividends
or subscription rights, or otherwise, until the Right or Rights evidenced by
such Right Certificate shall have been exercised in accordance with the
provisions hereof.
Section 18. Concerning the Rights Agent. (a) The Company agrees to pay to
---------------------------
the Rights Agent reasonable compensation for all services rendered by it
hereunder and, from time to time, on demand of the Rights Agent, its reasonable
expenses and counsel fees and other disbursements incurred in the administration
and execution of this Rights 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,
19
<PAGE>
liability or expense incurred without negligence, bad faith or willful
misconduct on the part of the Rights Agent, for anything done or omitted by the
Rights Agent in connection with the acceptance and administration of this Rights
Agreement, including the costs and expenses of defending against any claim of
liability in the premises.
(b) The Rights Agent shall be protected and shall incur no
liability for, or in respect of any action taken, suffered or omitted by it in
connection with, its administration of this Rights Agreement in reliance upon
any Right Certificate or certificate for the Preferred Shares or Common Shares
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.
Section 19. Merger or Consolidation or Change of Name of Rights Agent. (a)
---------------------------------------------------------
Any corporation into which the Rights Agent or any successor Rights Agent may be
merged or with which it may be consolidated, or any corporation resulting from
any merger or consolidation to which the Rights Agent or any successor Rights
Agent shall be a party, or any corporation succeeding to the stock transfer or
corporate trust powers of the Rights Agent or any successor Rights Agent, shall
be the successor to the Rights Agent under this Rights Agreement without the
execution or filing of any paper or any further act on the part of any of the
parties hereto; provided that such corporation would be eligible for appointment
as a successor Rights Agent under the provisions of Section 21 hereof. In case
at the time such successor Rights Agent shall succeed to the agency created by
this Rights Agreement, any of the Right Certificates shall 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 Rights 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 Rights Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the duties
----------------------
and obligations imposed by this Rights Agreement upon the following terms and
20
<PAGE>
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 opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action taken
or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Rights
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 or suffering any
action hereunder, such fact or matter (unless other evidence in respect thereof
be herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the Chairman of the Board, the
Chief Executive Officer, the President, any Vice President, the Treasurer or the
Secretary of the Company and delivered to the Rights Agent; and such certificate
shall be full authorization to the Rights Agent for any action taken or suffered
in good faith by it under the provisions of this Rights 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 negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Rights 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 be under any responsibility in respect
of the validity of this Rights 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 Rights Agreement or in any Right
Certificate; nor shall it be responsible for any change in the exercisability of
the Rights (including the Rights becoming void pursuant to Section 11(a)(ii)
hereof) or any adjustment in the terms of the Rights (including the manner,
method or amount thereof) provided for in Section 3, 11, 13, 23 or 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 actual notice that such change or adjustment is required);
nor shall it by any act hereunder be deemed to make any representation or
warranty as to the authorization or reservation of any Preferred Shares to be
issued pursuant to this Rights Agreement or any Right Certificate or as to
whether any Preferred Shares will, when issued, be validly authorized and
issued, fully paid and nonassessable.
21
<PAGE>
(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 Rights Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the Board, the Chief Executive Officer, the President,
any Vice President, the Secretary or the Treasurer of the Company, and to apply
to such officers for advice or instructions in connection with its duties, and
it shall not be liable for any action taken or suffered by it in good faith in
accordance with instructions of any such officer or for any delay in acting
while waiting for those instructions.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Rights Agreement. Nothing herein shall preclude the Rights Agent
from acting in any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct, provided reasonable care was exercised in the selection
and continued employment thereof.
Section 21. Change of Rights Agent. The Rights Agent or any successor
----------------------
Rights Agent may resign and be discharged from its duties under this Rights
Agreement upon 30-days' notice in writing mailed to the Company and to each
transfer agent of the Common Shares or Preferred Shares by registered or
certified mail, and 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 Shares or
Preferred Shares by registered or certified mail, and 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 or which shall, with such notice, submit such holder's 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
22
<PAGE>
such a court, shall be a corporation organized and doing business under the laws
of the United States or of the State of New York (or of any other state of the
United States so long as such corporation is authorized to do business as a
banking institution in the State of New York, in good standing, having an office
in the State of New York, which is authorized under such laws to exercise
corporate trust or stock transfer powers and is subject to supervision or
examination by federal or state authority and which has at the time of its
appointment as Rights Agent a combined capital and surplus of at least $50
million. 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 Shares
or Preferred Shares, and 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.
Section 22. Issuance of New Right Certificates. Notwithstanding any of the
----------------------------------
provisions of this Rights Agreement or of the Rights to the contrary, the
Company may, at its option, issue new Right Certificates evidencing Rights in
such form as may be approved by the Board of Directors of the Company 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 Rights Agreement.
Section 23. Redemption. (a) The Board of Directors of the Company may, at
----------
its option, at any time prior to the Distribution Date, redeem all but not less
than all the then outstanding Rights at a redemption price of $.01 per Right,
appropriately adjusted to reflect any stock split, stock combination, stock
dividend or similar transaction occurring after the date hereof (such redemption
price being hereinafter referred to as the "Redemption Price"). The redemption
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. Notwithstanding anything to
the contrary in this Agreement, the Rights shall not be exercisable after the
first occurrence of the event described in Section 11(a)(ii) until such time as
the Company's right of redemption hereunder has expired. The Company may, at its
option, pay the Redemption Price in cash, Common Shares (based on the current
market price at the time of redemption) or any other form of consideration
deemed appropriate by the Board of Directors.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights pursuant to paragraph (a) of this
Section 23, and without any further action and without any notice, the right to
exercise the Rights
23
<PAGE>
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 of the Company
ordering the redemption of the Rights, the Company shall mail a notice of
redemption to all the holders of the then outstanding Rights 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 Shares. Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each such notice of
redemption will state the method by which the payment of the Redemption Price
will be made. Neither the Company nor any of its Affiliates or Associates may
redeem, acquire or purchase for value any Rights at any time in any manner other
than that specifically set forth in this Section 23 or in Section 24 hereof, and
other than in connection with the purchase of Common Shares prior to the
Distribution Date.
Section 24. Exchange. (a) The Board of Directors of the Company may, at
--------
its option, at any time after any Person becomes an Acquiring Person, exchange
all or part of the then outstanding and exercisable Rights (which shall not
include Rights that have become void pursuant to the provisions of Section
11(a)(ii) hereof) for Common Shares at an exchange ratio of one Common Share per
Right, appropriately adjusted to reflect any adjustment in the number of Rights
pursuant to Section 11(i) (such exchange ratio 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 any
Person (other than the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or any such Subsidiary, or any entity holding Common
Shares for or pursuant to the terms of any such plan), together with all
Affiliates and Associates of such Person, becomes the Beneficial Owner of 50% or
more of the Common Shares then outstanding.
(b) Immediately upon 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 a holder
of such Rights shall be to receive that number of Common Shares equal to the
number of such Rights held by such holder multiplied by the Exchange Ratio. The
Company shall promptly give public notice of any such exchange; provided,
however, that the failure to give, or any defect in, such notice shall not
affect the validity of such exchange. The Company promptly shall mail a notice
of any such exchange to all of the holders of such Rights at their last
addresses as they appear upon the registry books of the Rights Agent. Any notice
which is mailed in the manner herein provided shall be deemed given, whether or
not the holder receives the notice. Each such notice of exchange will state the
method by which the exchange of the Common Shares for Rights will be effected
and, in the event of any partial exchange, the number of Rights which will be
exchanged. Any partial exchange shall be effected pro rata based on the number
of Rights (other than Rights which have
24
<PAGE>
become void pursuant to the provisions of Section 11(a)(ii) hereof) held by each
holder of Rights.
(c) In the event that there shall not be sufficient Common Shares
issued but not outstanding or authorized but unissued to permit any exchange of
Rights as contemplated in accordance with this Section 24, the Company shall
take all such action as may be necessary to authorize additional Common Shares
for issuance upon exchange of the Rights. In the event the Company shall, after
good faith effort, be unable to take all such action as may be necessary to
authorize such additional Common Shares, the Company shall substitute, for each
Common Share that would otherwise be issuable upon exchange of a Right, a number
of Preferred Shares or fraction thereof (or a security with substantially
similar rights, privileges, preferences, voting power and economic rights) such
that the current per share market price of one Preferred Share (or other such
security) multiplied by such number or fraction is equal to the current per
share market price of one Common Share as of the date of issuance of such
Preferred Shares or fraction thereof (or other such security).
(d) The Company shall not be required to issue fractions of Common
Shares or to distribute certificates which evidence fractional Common Shares.
In lieu of such fractional Common Shares, the Company shall pay to the
registered holders of the Right Certificates with regard to which such
fractional Common Shares would otherwise be issuable an amount in cash equal to
the same fraction of the current market value of a whole Common Share. For the
purposes of this paragraph (d), the current market value of a whole Common Share
shall be the closing price of a Common Share (as determined pursuant to the
second sentence of Section 11(d)(i) hereof) for the Trading Day immediately
prior to the date of exchange pursuant to this Section 24.
Section 25. Notice of Certain Events. (a) In case the Company, at any time
------------------------
after the Distribution Date, shall propose (i) to pay any dividend payable in
stock of any class to the holders of its Preferred Shares or to make any other
distribution to the holders of its Preferred Shares (other than a regular
quarterly cash dividend), (ii) to offer to the holders of its Preferred Shares
rights or warrants to subscribe for or to purchase any additional Preferred
Shares or shares of stock of any class or any other securities, rights or
options, (iii) to effect any reclassification of its Preferred Shares (other
than a reclassification involving only the subdivision of outstanding Preferred
Shares), (iv) to effect any consolidation or merger into or with, or to effect
any sale or other transfer (or to permit one or more of its Subsidiaries to
effect any sale or other transfer), in one or more transactions, of 50% or more
of the assets or earning power of the Company and its Subsidiaries (taken as a
whole) to, any other Person, (v) to effect the liquidation, dissolution or
winding up of the Company, or (vi) to declare or pay any dividend on the Common
Shares payable in Common Shares or to effect a subdivision, combination or
consolidation of the Common Shares (by reclassification or otherwise than by
payment of dividends in Common Shares), then, in each such case, the Company
shall give 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 reclassification,
25
<PAGE>
consolidation, merger, sale, transfer, liquidation, dissolution, or winding up
is to take place and the date of participation therein by the holders of the
Common Shares and/or Preferred Shares, 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 Shares 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 Shares and/or
Preferred Shares, whichever shall be the earlier.
(b) In case the event set forth in Section 11(a)(ii) hereof shall
occur, then the Company shall as soon as practicable thereafter give to each
holder of a Right Certificate, 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) hereof.
Section 26. Notices. Notices or demands authorized by this Rights 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 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:
Triad Hospitals, Inc.
13445 Noel Road, 20/th/ Floor
Dallas, Texas 75240
Subject to the provisions of Section 21 hereof, any notice or demand
authorized by this Rights 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:
National City Bank, Dept. 3116
Corporate Trust Administration
P.O. Box 94915
Cleveland, Ohio 44101-4915
Notices or demands authorized by this Rights 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.
Section 27. Supplements and Amendments. The Board of Directors of the
--------------------------
Company may from time to time supplement or amend this Rights Agreement without
the approval of any holders of Right Certificates in order to cure any
ambiguity, to correct or supplement any provision contained herein which may be
defective or inconsistent with any other provisions herein, or to make any other
provisions with
26
<PAGE>
respect to the Rights which the Board of Directors of the Company may deem
necessary or desirable, any such supplement or amendment to be evidenced by a
writing signed by the Company and the Rights Agent, provided, however, after the
Distribution Date, this Rights Agreement shall not be amended in any manner
which would adversely affect the interests of the holders of Rights (other than
an Acquiring Person or Affiliate or Associate thereof).
Section 28. Successors. All the covenants and provisions of this Rights
----------
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 29. Benefits of this Rights Agreement. Nothing in this Rights
---------------------------------
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 Shares) any legal or equitable right, remedy
or claim under this Rights Agreement; but this Rights 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 Shares).
Section 30. Severability. If any term, provision, covenant or restriction
------------
of this Rights 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 Rights Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
Section 31. Governing Law. This Rights Agreement and each Right Certificate
-------------
issued hereunder shall be deemed to be a contract made under the laws of the
State of New York 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.
Section 32. Counterparts. This Rights Agreement may be executed in any
------------
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
Section 33. Descriptive Headings. Descriptive headings of the several
--------------------
Sections of this Rights Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions
hereof.
27
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Rights
Agreement to be duly executed and attested, all as of the day and year first
above written.
TRIAD HOSPITALS, INC.
By: /s/ Donald P. Fay
-----------------------------------
Name: Donald P. Fay
Title: Executive Vice President,
General Counsel and Secretary
NATIONAL CITY BANK
By: /s/ David B. Davis
-----------------------------------
Name: David B. Davis
Title: Vice President
28
<PAGE>
Exhibit A
---------
Form of Right Certificate
Certificate No. R-
____________Rights
NOT EXERCISABLE AFTER MAY 7, 2009 OR EARLIER IF REDEMPTION OR EXCHANGE OCCURS.
THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.01 PER RIGHT AND TO EXCHANGE ON THE
TERMS SET FORTH IN THE RIGHTS AGREEMENT.
Rights Certificate
Triad Hospitals, Inc.
This certifies that __________, or registered assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions and conditions of the Rights
Agreement, dated as of May 11, 1999 (the "Rights Agreement"), between Triad
Hospitals, Inc., a Delaware corporation (the "Company"), and National City Bank
(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., New York time, on May 7, 2009 at the principal office of the Rights
Agent, or at the office of its successor as Rights Agent, one one-thousandth of
a fully paid non-assessable share of Series A Junior Participating Preferred
Stock of the Company, par value $.01 per share (the "Preferred Shares"), at a
purchase price of $90 per one one-thousandth of a Preferred Share (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 Preferred Share
which may be purchased upon exercise hereof) set forth above, and the Purchase
Price set forth above, are the number and Purchase Price as of __________, based
on the Preferred Shares as constituted at such date. As provided in the Rights
Agreement, the Purchase Price and the number of one one-thousandths of a
Preferred Share which may be purchased upon the exercise of the 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, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Right Certificates. Copies of
the Rights Agreement are on file at the principal executive offices of the
Company and the offices of the Rights Agent.
A-1
<PAGE>
This Right Certificate, with or without other Right Certificates, upon
surrender at the principal office of the Rights Agent, 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
Preferred Shares 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 Right Certificate (i) may be redeemed by the Company at a
redemption price of $.01 per Right or (ii) may be exchanged, in whole or in
part, for Preferred Shares or shares of the Company's Common Stock, par value
$.01 per share.
No fractional Preferred Shares will be issued upon the exercise of any
Right or Rights evidenced hereby (other than fractions which are integral
multiples of one one-thousandth of a Preferred Share, which may, at the election
of the Company, be evidenced by depositary receipts), but in lieu thereof, a
cash payment will be made, as provided in the Rights Agreement.
No holder of this Right Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of the Preferred
Shares or of any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Right
Certificate shall have been exercised as provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
A-2
<PAGE>
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal.
Dated as of _______ __, 1999.
TRIAD HOSPITALS, INC.
By:_______________________
Name:
Title:
COUNTERSIGNED:
By_______________________________
Name:
Title:
A-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)
this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint ________________ Attorney, to
transfer the within Right Certificate on the books of the within-named Company,
with full power of substitution.
Dated: _______________________
Signature _________________________
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered
national securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States.
Certificate
-----------
The undersigned hereby certifies that the Rights evidenced by this
Right Certificate are not beneficially owned by an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement). After due
inquiry and to the best knowledge of the undersigned, the Rights evidenced by
this Right Certificate were not acquired or beneficially owned by an Acquiring
Person or an Affiliate or Associate thereof.
Dated:____________________________
Signature _________________________
The signature to the foregoing Assignment and Certificate must correspond to the
name as written upon the face of this Right Certificate in every particular,
without alteration or enlargement or any change whatsoever.
A-4
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise Rights
represented by the Right Certificate.)
To: _____________________
The undersigned hereby irrevocably elects to exercise ______ Rights
represented by this Right Certificate to purchase the Preferred Shares issuable
upon the exercise of such Rights and requests that certificates for such
Preferred Shares be issued in the name of:
Please insert social security
or other identifying number:_________________________________________________
_________________________________________
(Please print name and address)
__________________________________________
If such number of Rights shall not be all the Rights evidenced by this 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 identifying number:_________________________________________________
__________________________________________
(Please print name and address)
__________________________________________
Dated:_______________________________
Signature_____________________________
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered
national securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States.
A-5
<PAGE>
Certificate
-----------
The undersigned hereby certifies that the Rights evidenced by this
Right Certificate are not beneficially owned by an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement). After due
inquiry and to the best knowledge of the undersigned, the Rights evidenced by
this Right Certificate were not acquired or beneficially owned by an Acquiring
Person or an Affiliate or Associate thereof.
Dated:_______________________________
Signature_____________________________
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.
In the event the certification set forth above in the Form of
Assignment or the Form of Election to Purchase, as the case may be, is not
completed, the Company and the Rights Agent will deem the beneficial owner of
the Rights evidenced by this Right Certificate to be an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement) and such
Assignment or Election to Purchase will not be honored.
A-6
<PAGE>
Exhibit B
---------
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED SHARES
On May 11, 1999, the Board of Directors of Triad Hospitals, Inc. (the
"Company") authorized and declared the issuance of one preferred share purchase
right (a "Right") for each share of common stock, par value $.01 per share (the
"Common Shares"), of the Company to be issued in the distribution of Common
Shares effective May 11, 1999 (the "Record Date"), as such distribution is
described in the Registration Statement on Form 10 (File No. 0-29816) dated
April 27, 1999 (the "Spin-Off"). Each Right entitles the registered holder to
purchase from the Company one one-thousandth of a share of Series A Junior
Participating Preferred Stock of the Company, par value $.01 per share (the
"Preferred Shares"), at a price of $90 per one one-thousandth of a Preferred
Share (the "Purchase Price"), subject to adjustment. The description and terms
of the Rights are set forth in a Rights Agreement (the "Rights Agreement")
between the Company and National City Bank as Rights Agent (the "Rights Agent").
Distribution Date; Exercisability
- ---------------------------------
Initially, the Rights will be attached to all Common Share
certificates and no separate Rights certificates will be issued. Separate
certificates evidencing the Rights ("Right Certificates") will be mailed to
holders of record of the Common Shares as of the close of business on the
earlier to occur of the tenth day (or such other date as the Board of Directors
of the Company shall determine) after (i) a public announcement that a person or
group of affiliated or associated persons (an "Acquiring Person") has acquired
beneficial ownership of 15% or more of the outstanding Common Shares or (ii) 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 Common Shares
(the earlier of such dates being the "Distribution Date").
The Rights Agreement provides that, until the Distribution Date (or
earlier redemption or expiration of the Rights), (i) the Rights will be
transferred with and only with the Common Shares, (ii) new Common Share
certificates issued after the Record Date upon transfer or new issuance of
Common Shares will contain a notation incorporating the Rights Agreement by
reference and (iii) the surrender for transfer of any certificates for Common
Shares outstanding as of the Record Date will also constitute the transfer of
the Rights associated with the Common Shares represented by such certificate.
The Rights are not exercisable until the Distribution Date. The
Rights will expire on May 7, 2009 (the "Expiration Date"), unless the Expiration
Date is extended or unless the Rights are earlier redeemed or exchanged by the
Company, in each case, as described below.
B-1
<PAGE>
Flip-In
- -------
If a person or group becomes an Acquiring Person, each holder of a Right
will thereafter have the right to receive, upon exercise, Common Shares (or, in
certain circumstances, Preferred Shares or other similar securities of the
Company) having a value equal to two times the exercise price of the Right.
Notwithstanding any of the foregoing, following the existence of an Acquiring
Person, all Rights that are, or (under certain circumstances specified in the
Rights Agreement) were, beneficially owned by any Acquiring Person will be null
and void.
For example, at an exercise price of $50.00 per Right, each Right not owned
by an Acquiring Person following an event set forth in the preceding paragraph
would entitle its holder to purchase $100.00 worth of Common Shares (or other
consideration, as noted above) for $50.00. Assuming a value of $25.00 per Common
Share at such time, the holder of each valid Right would be entitled to purchase
four Common Shares for $50.00.
Flip-Over
- ---------
In the event that 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 after a person or group has become an Acquiring Person,
proper provision will be made so that each holder of a Right will thereafter
have the right to receive, upon the exercise thereof at the then current
exercise price of the Right, that number of shares of common stock of the
acquiring company which at the time of such transaction will have a market value
of two times the exercise price of the Right. In the event that any person or
group becomes an Acquiring Person, proper provision shall be made so that each
holder of a Right, other than Rights beneficially owned by the Acquiring Person
(which will thereafter be void), will thereafter have the right to receive upon
exercise that number of Common Shares having a market value of two times the
exercise price of the Right.
Exchange
- --------
At any time after any person or group becomes an Acquiring Person and
prior to the acquisition by such person or group of 50% or more of the
outstanding Common Shares, the Board of Directors of the Company may exchange
the Rights (other than Rights owned by such person or group which will have
become void), in whole or in part, at an exchange ratio of one Common Share, or
one one-thousandth of a Preferred Share (or of a share of a class or series of
the Company's preferred stock having equivalent rights, preferences and
privileges), per Right (subject to adjustment).
Redemption
- ----------
At any time prior to the Distribution Date, the Board of Directors of
the Company may redeem the Rights, in whole but not in part, at a price of $.01
per Right (the "Redemption Price"). The redemption of the Rights may be made
effective at such time on such basis 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
B-2
<PAGE>
Redemption Price. The Rights are not exercisable after the first occurrence of
"flip-in" event (described above) until such time as the Company's right of
redemption has expired.
Amendment
- ---------
The terms of the Rights may be amended by the Board of Directors of
the Company without the consent of the holders of the Rights, except that after
the Distribution Date no such amendment may adversely affect the interests of
the holders of the Rights (other than the Acquiring Person).
Adjustment
- ----------
The number of outstanding Rights and the number of one one-thousandths
of a Preferred Share issuable upon exercise of each Right are subject to
adjustment under certain circumstances.
Preferred Stock
- ---------------
Because of the nature of the Preferred Shares' dividend, liquidation
and voting rights, the value of the one one-thousandth interest in a Preferred
Share purchasable upon exercise of each Right should approximate the value of
one Common Share.
Rights of Holders
- -----------------
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.
Further Information
- -------------------
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 10 dated
April 27, 1999. A copy of the Rights Agreement is available free of charge from
the Company. This summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement,
which is hereby incorporated herein by reference.
B-3
<PAGE>
Consent of Independent Auditors
We consent to the reference to our firm as "Experts" in Item 3 of the
Registration Statement (Form S-8) pertaining to the Triad Hospitals, Inc.
Employee Stock Purchase Plan and to the incorporation by reference therein of
our report dated February 26, 1999, with respect to combined financial
statements of Triad Hospitals, Inc. and its subsidiaries included in Triad's
Registration Statement on Form 10, as amended, at December 31, 1998 and 1997 and
for each of the three years in the period ended December 31, 1998, filed with
the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Ernst & Young LLP
Nashville, Tennessee
June 3, 1999
<PAGE>
TRIAD HOSPITALS, INC.
EMPLOYEE STOCK PURCHASE PLAN
<PAGE>
TRIAD HOSPITALS, INC.
EMPLOYEE STOCK PURCHASE PLAN
Index
-----
Page
----
ARTICLE 1 - Purpose................................................-1-
ARTICLE 2 - Eligible Employees.....................................-1-
ARTICLE 3 - Stock Subject to the Plan..............................-1-
ARTICLE 4 - Payment Periods and Stock Options......................-1-
ARTICLE 5 - Exercise of Option.....................................-2-
ARTICLE 6 - Authorization for Entering Plan........................-3-
ARTICLE 7 - Amount of Payroll Deductions...........................-3-
ARTICLE 8 - Change in Payroll Deductions...........................-3-
ARTICLE 9 - Withdrawal from the Plan...............................-3-
ARTICLE 10 - Establishment of Brokerage Account.....................-4-
ARTICLE 11 - Issuance of Stock; Fractional Shares...................-4-
ARTICLE 12 - No Transfer or Assignment of Employee's Rights.........-4-
ARTICLE 13 - Termination of Employee's Rights.......................-4-
ARTICLE 14 - Termination and Amendments to the Plan.................-5-
ARTICLE 15 - Limitations on Sale of Stock Purchased Under the Plan..-5-
ARTICLE 16 - Company's Payment of Expenses Related to the Plan......-5-
ARTICLE 17 - Participating Subsidiaries.............................-5-
ARTICLE 18 - Administration of the Plan.............................-6-
-i-
<PAGE>
ARTICLE 19 - Optionees Not Stockholders.............................-6-
ARTICLE 20 - Application of Funds...................................-6-
ARTICLE 21 - Changes in Capital.....................................-6-
ARTICLE 22 - Approval of Stockholders...............................-6-
-ii-
<PAGE>
TRIAD HOSPITALS, INC.
EMPLOYEE STOCK PURCHASE PLAN
ARTICLE 1 - Purpose
The Triad Hospitals, Inc. Employee Stock Purchase Plan (the ''Plan'') is
intended as an incentive and to encourage stock ownership by all eligible
employees of Triad Hospitals, Inc. (the ''Company'') and participating
subsidiaries so that they may share in the fortunes of the Company by acquiring
or increasing their proprietary interest in the Company. The Plan is designed
to encourage eligible employees to remain in the employ of the Company. It is
intended that options issued pursuant to this Plan shall constitute options
issued pursuant to an ''employee stock purchase plan'' within the meaning of
section 423 of the Internal Revenue Code of 1986, as amended (the ''Code'').
ARTICLE 2 - Eligible Employees
All full-time and regular part-time employees of the Company (or of any of
its participating subsidiaries) who have completed three months of employment
with the Company (or any of its subsidiaries) shall be eligible to receive
options under this Plan to purchase shares of the common stock of the Company
(the "Common Stock") (except employees in countries whose laws make
participation impractical). Months of employment credited to otherwise eligible
employees of the Company for purposes of eligibility to participate in the
Columbia/HCA Healthcare Corporation Employee Stock Purchase Plan will be
credited solely for purposes of eligibility determinations in 1999 as months of
employment under the Plan. Persons who have been so employed for three months
or more (or otherwise credited with three or more months of employment) on the
first day of a Payment Period shall receive their options as of such day. In no
event may an employee be granted an option under the Plan if such employee,
immediately after the option is granted, owns stock representing five percent
(5%) or more of the total combined voting power or value of all classes of stock
of the Company. For purposes of determining stock ownership under this Article,
the rules of section 424(d) of the Code shall apply, and stock which the
employee may purchase under outstanding options shall be treated as stock owned
by the employee.
ARTICLE 3 - Stock Subject to the Plan
The total number of shares of Common Stock of the Company that may be
issued pursuant to the Plan is 3,000,000 shares, which may consist, in whole or
in part, of unissued shares or treasury shares.
ARTICLE 4 - Payment Periods and Stock Options
The six-month periods, December 1 to May 31 and June 1 to November 30, are
the Payment Periods during which payroll deductions will be accumulated under
the Plan; provided, however,
<PAGE>
the initial Payment Period shall be a special, one-time, short period from July
1, 1999 to November 30, 1999. Each Payment Period includes only regular paydays
falling within it.
Two times each year, on the first business day of each Payment Period, the
Company will grant to each eligible employee who is then a participant in the
Plan an option to purchase on the last business day of such Payment Period, at
the Option Price, such number of shares of Common Stock reserved for the purpose
of the Plan which equals the number of whole or fractional shares whose purchase
price does not exceed ten percent (10%) of the participant's Covered
Compensation during the Payment Period divided by the price as determined below,
on condition that such employee remains eligible to participate in the Plan as
provided herein. The participant shall be entitled to exercise such options as
granted only to the extent of his accumulated payroll deductions through his
last payday in a Payment Period.
For purposes of the Plan, the "Option Price" for each Payment Period shall
be the lesser of (i) 85% of the average market price of the Company's Common
Stock on the first business day of the Payment Period, rounded up to avoid
fractions other than 1/4, 1/2 and 3/4, or (ii) 85% of the average market price
of the Company's Common Stock on the last business day of the Payment Period,
rounded up to avoid fractions other than 1/4, 1/2 and 3/4.
For purposes of the Plan, "Covered Compensation" means base compensation
for services, including shift or other regular compensatory premiums, and
payments in substitution for base pay, such as vacation, holiday, and sick pay,
but not including overtime, bonuses or short- or long-term disability payments.
For purposes of this Plan, the term ''average market price'' means the
closing price of Common Stock of the Company on the NASDAQ, or any other
exchange upon which the Company's Common Stock is then traded.
For purposes of this Plan, the term ''business day'' means a day on which
there is trading in the Company's Common Stock on the NASDAQ, or any other
exchange upon which the Company's Common Stock is then traded.
No employee shall be granted an option which permits his rights to purchase
Common Stock under the Plan and any similar plans of the Company (or any parent
or subsidiary corporations) to accrue at a rate which exceeds $25,000 of fair
market value of such stock (determined at the time such option is granted) for
each calendar year in which such option is outstanding at any time. The purpose
of the limitation in the preceding sentence is to comply with section 423(b)(8)
of the Code.
ARTICLE 5 - Exercise of Option
Each eligible employee who continues to be a participant in the Plan on the
third Friday of the last month of a Payment Period shall be deemed to have
irrevocably stated his intention to exercise his option on the last business day
of such Payment Period and shall be deemed to have purchased from the Company
the number of such whole or fractional shares of Common Stock
<PAGE>
reserved for the purposes of the Plan as his accumulated payroll deductions
during such Payment Period will purchase at the Option Price. If a participant
is not an employee on the third Friday of the last month of a Payment Period, he
shall not be entitled to exercise his option.
ARTICLE 6 - Authorization for Entering Plan
An employee may become a participant in the Plan by filling out, signing
and delivering to the Company's Human Resources Department an Authorization in
the form and manner satisfactory to the Company:
A. stating the whole percentage of Covered Compensation to be deducted
regularly from his pay; and
B. authorizing the purchase of Common Stock for him in each Payment Period
in accordance with the terms of the Plan.
Such Authorization must be received by the Company's Human Resources
Department no later than the third Friday of the last month of a Payment Period
in order to be effective for the following Payment Period.
The Company will accumulate and hold for the employee's account the amounts
deducted from his pay pursuant to his Authorization. No interest will be paid
on such amounts.
ARTICLE 7 - Amount of Payroll Deductions
An employee may authorize payroll deductions in a whole percentage amount
not less than one percent (1%) but not more than ten percent (10%) of his
Covered Compensation received during the Payment Period.
ARTICLE 8 - Change in Payroll Deductions
Deductions may be increased or decreased only at the beginning of a Payment
Period. A new Authorization will be required and must be received by the
Company's Human Resources Department no later than the third Friday of the last
month of a Payment Period in order to be effective for the following Payment
Period.
ARTICLE 9 - Withdrawal from the Plan
An employee may withdraw from the Plan, in whole but not in part, at any
time by delivering an Authorization to the Company's Human Resources Department
indicating such employee's intent to withdraw. An employee may change his
contribution rate effective the first day of a Payment Period. Once during each
Payment Period, an employee may reduce his contribution rate to 0% and may
either allow dollars contributed to participate in the allocation or receive a
refund prior to the
-3-
<PAGE>
allocation. If such Authorization is received at least five (5) business days
prior to the third Friday of the last month of a Payment Period, the Company
will promptly refund the entire balance of his deductions accumulated during
such period. If an employee's Authorization is received after such date, but
before the end of a Payment Period, deductions will be stopped as soon as
practicable, and deductions accumulated during such period will be applied to
the purchase of stock.
An employee who withdraws from the Plan is like an employee who has never
entered the Plan. To re-enter, he must file a new Authorization by the third
Friday of the last month of a Payment Period which cannot, however, become
effective before the beginning of the next Payment Period following his
withdrawal.
ARTICLE 10 - Establishment of Brokerage Account
By enrolling in the Plan, each participating employee will be deemed to
have authorized the establishment of a brokerage account in his name at a
securities brokerage firm approved by the Compensation Committee of the
Company's Board of Directors (the ''Committee'').
ARTICLE 11 - Issuance of Stock; Fractional Shares
Stock purchased under the Plan will be held in an account in the name of
the employee, or if his Authorization so specifies, in the name of the employee
and another person of legal age as joint tenants with rights of survivorship,
unless prohibited by state law. Certificates will be issued, at the employee's
request, only for whole numbers of shares. Fractional interests in shares will
be carried forward in an employee's account until such time as they equal one
full share, or until the termination of an employee's brokerage account,
whereupon an amount equal to the value of such fractional interest shall be paid
in cash to the employee.
ARTICLE 12 - No Transfer or Assignment of Employee's Rights
An employee's rights under the Plan are his alone and may not be
transferred, assigned to or availed of by any other person. Any option granted
to an employee may be exercised only by him.
ARTICLE 13 - Termination of Employee's Rights
An employee's rights under the Plan will terminate when he ceases to be an
employee because of retirement, resignation, discharge, death, change of status,
or for any other reason. A withdrawal Authorization will be considered as
having been received from the employee on the day his employment ceases, and all
payroll deductions not used to purchase stock will be refunded to the employee,
or in the event of the employee's death, to his estate.
If an employee's payroll deductions are interrupted by any legal process, a
withdrawal Authorization will be considered as having been received from him on
the day the interruption occurs.
-4-
<PAGE>
ARTICLE 14 - Termination and Amendments to the Plan
The Plan may be terminated at any time by the Committee. It will terminate
in any case when all or substantially all of the shares of stock reserved for
the purposes of the Plan have been purchased. If at any time shares of stock
reserved for the purpose of the Plan remain available for purchase but not in
sufficient number to satisfy all then unfilled purchase requirements, the
available shares shall be apportioned among participants in proportion to their
options, and the Plan shall terminate. Upon such termination or any other
termination of the Plan, all payroll deductions not used to purchase stock will
be refunded.
The Committee also reserves the right to amend the Plan from time to time
in any respect; provided, however, that no amendment shall be effective without
prior approval of the stockholders of the Company, which would (a) except as
provided in Article 21, increase the number of shares of Common Stock to be
offered above or (b) except as provided in Article 17, change the classes of
employees eligible to receive options under the Plan.
ARTICLE 15 - Limitations on Sale of Stock Purchased Under the Plan
The Plan is intended to provide Common Stock for investment and not for
resale. The Company does not, however, intend to restrict or influence any
employee in the conduct of his own affairs. An employee may, therefore, sell
stock purchased under the Plan at any time he chooses; provided, however, that
because of certain federal income tax requirements, each employee will agree by
entering the Plan, to give the Company prompt notice of any such stock disposed
of within (i) two years after the date of grant of the applicable option or (ii)
one year after the transfer of such stock to such employee showing the number of
such shares disposed of, and an appropriate legend requiring such notice shall
be placed on the certificates of Common Stock issued hereunder. The employee
assumes the risk of any market fluctuations in the price of such stock.
ARTICLE 16 - Company's Payment of Expenses Related to the Plan
The Company will bear all costs of administering and carrying out the Plan.
ARTICLE 17 - Participating Subsidiaries
The term ''participating subsidiaries'' shall mean any subsidiary of the
Company (i) which is at least fifty percent (50%) owned by the Company (or a
parent or a subsidiary), (ii) which is a "corporation" as determined under
section 424 of the Code and (iii) which is designated by the Committee to
participate in the Plan. The Committee shall have the power to make such
designation before or after the Plan is approved by the stockholders.
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ARTICLE 18 - Administration of the Plan
The Plan shall be administered by the Committee. Acts by a majority of the
Committee, or acts reduced to or approved in writing by a majority of the
members of the Committee, shall be the valid acts of the Committee.
The interpretation and construction by the Committee of any provisions of
the Plan or of any option granted under it shall be final. The Committee may
from time to time adopt such rules and regulations for carrying out the Plan as
it may deem best. No member of the Board of Directors or the Committee shall be
liable for any action or determination made in good faith with respect to the
Plan or any option granted under it.
ARTICLE 19 - Optionees Not Stockholders
Neither the granting of an option to an employee nor the deductions from
his pay shall make such employee the owner of the shares covered by an option
until such shares have been purchased by him.
ARTICLE 20 - Application of Funds
The proceeds received by the Company from the sale of Common Stock pursuant
to options granted under the Plan will be used for general corporate purposes.
ARTICLE 21 - Changes in Capital
If the Common Stock of the Company subject to the Plan shall at any time be
changed or exchanged by declaration of a stock dividend, stock split,
combination of shares, recapitalization, merger, consolidation or other
corporate reorganization in which the Company is the surviving corporation, the
number and kind of shares subject to this Plan and the option prices shall be
appropriately and equitably adjusted so as to maintain the option prices
thereof. In the event of a dissolution or liquidation of the Company or a
merger, consolidation, sale of all or substantially all of its assets, or other
corporate reorganization in which the Company is not the surviving corporation,
or any merger in which the Company is the surviving corporation but the holders
of its Common Stock receive securities of another corporation, any outstanding
options hereunder shall terminate. The existence of the Plan or options
hereunder shall not in any way prevent any transaction described herein, and no
holder of an option shall have the right to prevent such transaction.
ARTICLE 22 - Approval of Stockholders
Commencement of the Plan shall be subject to approval by the stockholders
of the Company within 12 months before or after the date the Plan is adopted by
the Board of Directors. Notwithstanding any provision to the contrary, failure
to obtain such stockholder approval shall void
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the Plan, any options granted under the Plan, any share purchases pursuant to
the Plan, and all rights of all participants.
This Employee Stock Purchase Plan has been executed effective this 1st
day of June, 1999.
TRIAD HOSPITALS, INC.
ATTEST: By: Rick Thomason
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Its: Vice President of Human Resources
- ----------------------------- ---------------------------------
Secretary
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