<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-A
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934
Community Psychiatric Centers
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(Exact name of registrant as specified in its charter)
Nevada 94-1599386
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(State of incorporation or organization) (IRS Employer
Identification No.)
5110 West Sahara Avenue, Las Vegas, NV 89102
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(Address of principal executive offices) (Zip Code)
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
-------------------- -------------------------------
Preferred Stock Purchase Rights New York Stock Exchange, Inc.
Securities to be registered pursuant to Section 12(g) of the Act:
None
-------------------------------------
(Title of Class)
<PAGE>
Item 1. Description of Securities to be Registered.
------------------------------------------
On June 21, 1996 the Board of Directors of Community Psychiatric
Centers (the "Company") declared a dividend of one preferred stock purchase
right (the "Rights") on each outstanding share of Company common stock, $1.00
par value per share (the "Common Stock"), payable to stockholders of record on
July 16, 1996. Each Right will entitle the holder thereof after the Rights
become exercisable and until June 20, 2006 (or the earlier redemption, exchange
or termination of the Rights), to buy one one-hundredth of a share of Series B
Junior Participating Preferred Stock (the "Preferred Stock") at an exercise
price of $45.00, subject to certain antidilution adjustments (the "Purchase
Price"). The Rights will be represented by the Common Stock certificates and
will not be exercisable or transferable apart from the Common Stock until the
earlier of (i) the tenth day after the public announcement that a Person or
group has become an Acquiring Person (a Person who has acquired, or obtained the
right to acquire, beneficial ownership of 15% or more of the Common Stock), or
(ii) the tenth day after a Person or group commences, or announces an intention
to commence, a tender or exchange offer, the consummation of which would result
in the beneficial ownership by a Person or group of 15% or more of the Common
Stock (the earlier of (i) and (ii) being called herein the "Distribution Date").
Prior to the Distribution Date, the Board of Directors has the power, under
certain circumstances, to postpone the Distribution Date. Separate certificates
representing the Rights will be mailed to holders of the Common Stock as of the
Distribution Date. The Rights will first become exercisable on the Distribution
Date, unless earlier redeemed or exchanged, and may then begin trading
separately from the Common Stock. The Rights will at no time have any voting
rights.
In the event that a Person were to become an Acquiring Person (except
pursuant to certain cash offers for all outstanding Common Stock approved by the
Board of Directors of the Company) or if the Company were the surviving
corporation in a merger and its Common Stock were not changed or exchanged, each
holder of a Right, other than Rights that are or were acquired or beneficially
owned by the Acquiring Person (which Rights will thereafter be void), will
thereafter have the right to receive upon exercise that number of shares of
Common Stock having a market value of two times the then-current exercise price
of one Right. With certain exceptions, in the event that (i) the Company were
acquired in a merger or other business combination transaction in which the
Company is not the surviving corporation or its Common Stock is changed or
exchanged (other than a merger which follows certain cash offers for all
outstanding Common Stock approved by the Board) or (ii) more than 50% of the
Company's assets or earning power were sold, proper provision shall be made so
that each holder of a Right (except Rights which previously have been voided as
set forth above) shall thereafter have the right to receive, upon exercise
thereof, that number of shares of common stock of the acquiring company which at
the time of such transaction would have a market value of two times the then-
current exercise price of one Right.
At any time after a Person has become an Acquiring Person and prior to
the acquisition of 50% or more of the then-outstanding Common Stock by such
Acquiring Person, the Board of Directors may cause the Company to acquire the
Rights (other than Rights owned by an Acquiring Person which have become void),
in whole or in part, in exchange for that number of shares of Common Stock
having an aggregate value equal to the excess of the value of the Common Stock
issuable upon exercise of a Right after a Person becomes an Acquiring Person
over the Purchase Price.
<PAGE>
The Rights are redeemable at $0.01 per Right prior to the first date of
public announcement that a Person or group has become an Acquiring Person. Prior
to the expiration of the period during which the Rights may be redeemed, the
Board of Directors has the power, under certain circumstances, to extend the
redemption period. The Rights will expire on June 20, 2006 (unless earlier
redeemed or exchanged). ChaseMellon Shareholder Services, L.L.C. is the Rights
Agent. Under certain circumstances set forth in the Rights Agreement, the
decision to redeem or to lengthen or shorten the redemption period shall require
the concurrence of a majority of the Continuing Directors (as defined in the
Rights Agreement).
The Purchase Price payable, and the number of shares of Preferred Stock
or other securities or property issuable upon exercise of the Rights are subject
to adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Preferred
Stock, (ii) upon the grant to holders of the Preferred Stock of certain rights
or warrants to subscribe for or purchase the Preferred Stock or convertible
securities at less than the current market price of the Preferred Stock, or
(iii) upon the distribution to holders of the Preferred Stock of evidences of
indebtedness, cash, securities or assets (excluding regular periodic cash
dividends at a rate not in excess of 125% of the last regular periodic cash
dividend theretofore paid or, in case regular periodic dividends have not
theretofore been paid, at a rate not in excess of 50% of the average net income
per share of the Company for the four quarters ended immediately prior to the
payment of such dividend, or dividends payable in the Preferred Stock) or of
subscription rights or warrants (other than those referred to above). No
adjustments in the Purchase Price will be required until cumulative adjustments
require an adjustment of at least 1% in such Purchase Price.
As of May 31, 1996, there were 44,395,753 shares of Common Stock
outstanding and 1,128,000 shares were reserved for distribution under the
Company's 1989 Stock Incentive Plan and the Company's Combined Stock Option Plan
for Key Employees. One Right will be distributed to stockholders of the Company
for each share of Common Stock owned of record by them on July 16, 1996. As long
as the Rights are attached to the Common Stock, the Company will issue one Right
with each new share of Common Stock so that all such shares will have attached
Rights. Approximately 1,000,000 shares of Preferred Stock have been reserved for
issuance upon exercise of the Rights.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
on terms not approved by the Company's Board of Directors, except pursuant to an
offer conditioned on a substantial number of Rights being acquired. The Rights
should not interfere with any merger or other business combination approved by
the Board of Directors prior to the time that a Person or group has become an
Acquiring Person, as the Rights may be redeemed by the Company at $0.01 per
Right prior to such time.
2
<PAGE>
The Rights Agreement, dated as of June 21, 1996, between the Company
and the Rights Agent specifying the terms of the Rights, the text of the press
release announcing the declaration of the Rights, and the form of a letter to be
sent to the holders of the Company's Common Stock explaining the Rights, are
attached hereto as exhibits and are incorporated herein by reference. The
foregoing description of the Rights is qualified by reference to such exhibits.
Item 2. Exhibits.
--------
99.1 Rights Agreement dated as of June 21, 1996 between Community
Psychiatric Centers and ChaseMellon Shareholder Services, L.L.C.,
which includes the form of Certificate of Resolution Establishing
Designation, Preferences and Rights of Series B Junior Participating
Preferred Stock of Community Psychiatric Centers as Exhibit A, the
form of Right Certificate as Exhibit B and the Summary of Rights to
Purchase Preferred Shares as Exhibit C.
99.2 Form of Letter to the holders of Community Psychiatric Centers Common
Stock.
3
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SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant has duly caused this registration statement to be
signed on its behalf by the undersigned hereunto duly authorized.
COMMUNITY PSYCHIATRIC CENTERS
Dated: July 10, 1996 By /s/ Julia Kopta
-----------------------------
Julia Kopta
Executive Vice President
and General Counsel
4
<PAGE>
EXHIBIT INDEX
99.1 Rights Agreement dated as of June 21, 1996 between Community
Psychiatric Centers and ChaseMellon Shareholder Services, L.L.C.,
which includes the form of Certificate of Resolution Establishing
Designation, Preferences and Rights of Series B Junior Participating
Preferred Stock of Community Psychiatric Centers as Exhibit A, the
form of Right Certificate as Exhibit B and the Summary of Rights to
Purchase Preferred Shares as Exhibit C.
99.2 Form of Letter to the holders of Community Psychiatric Centers Common
Stock.
5
<PAGE>
EXHIBIT 99.1
================================================================================
COMMUNITY PSYCHIATRIC CENTERS
and
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
as Rights Agent
Rights Agreement
Dated as of June 21, 1996
================================================================================
<PAGE>
TABLE OF CONTENTS
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PAGE
----
<TABLE>
<CAPTION>
<S> <C> <C>
Section 1. Certain Definitions................................................. 1
Section 2. Appointment of Rights Agent......................................... 5
Section 3. Issuance 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.................. 9
Section 9. Reservation and Availability of Capital Stock....................... 9
Section 10. Preferred Shares Record Date........................................ 10
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.......... 17
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power 17
Section 14. Fractional Rights and Fractional Shares............................. 18
Section 15. Rights of Action.................................................... 19
Section 16. Agreement of Right Holders.......................................... 20
Section 17. Right Certificate Holder Not Deemed a Stockholder................... 20
Section 18. Concerning the Rights Agent......................................... 20
Section 19. Merger or Consolidation or Change of Name of Rights Agent........... 21
Section 20. Duties of Rights Agent.............................................. 21
Section 21. Change of Rights Agent.............................................. 23
</TABLE>
i
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<TABLE>
PAGE
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<S> <C> <C>
Section 22. Issuance of New Right Certificates.................................. 24
Section 23. Redemption.......................................................... 24
Section 24. Notice of Certain Events............................................ 25
Section 25. Notices............................................................. 26
Section 26. Supplements and Amendments.......................................... 26
Section 27. Exchange............................................................ 27
Section 28. Successors.......................................................... 28
Section 29. Benefits of this Rights Agreement................................... 28
Section 30. Severability........................................................ 28
Section 31. Governing Law....................................................... 28
Section 32. Counterparts........................................................ 28
Section 33. Descriptive Heading................................................. 29
</TABLE>
Exhibit A - Form of Certificate of Resolution Establishing Designation,
Preferences and Rights of Series B Junior Participating Preferred
Stock
Exhibit B - Form of Right Certificate
Exhibit C - Summary of Rights to Purchase Preferred Shares
ii
<PAGE>
RIGHTS AGREEMENT
----------------
Agreement, dated as of June 21, 1996, between COMMUNITY
PSYCHIATRIC CENTERS, a Nevada corporation (the "Company"), and
CHASEMELLON SHAREHOLDER SERVICES, L.L.C., as Rights Agent (the "Rights
Agent").
RECITALS
--------
The Board of Directors of the Company has authorized and
declared a dividend of one right (a "Right") for each Common Share (as
defined in Section 1.6) of the Company outstanding at the close of
business on July 16, 1996 (the "Record Date") and has authorized the
issuance of one Right (subject to adjustment as provided herein) 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 Final Expiration Date (as such terms are defined in
Sections 3.1 and 7.1), each Right initially representing the right to
purchase one one-hundredth of a share of Series B Junior Participating
Preferred Stock (the "Preferred Shares") of the Company having the
rights, powers and preferences set forth in the form of Certificate of
Resolution Establishing Designation, Preferences and Rights of Series B
Junior Participating Preferred Stock of Community Psychiatric Centers
attached hereto as Exhibit A, upon the terms and subject to the
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein set forth, the parties hereby agree as
follows:
Section 1. Certain Definitions. For purposes of this Rights
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Agreement, the following terms have the meanings indicated:
1.1 "Acquiring Person" shall mean any Person (as such term
is hereinafter defined) who or which, together with all Affiliates and
Associates (as such terms are hereinafter defined) of such Person,
shall be the Beneficial Owner (as such term is hereinafter defined) of
15% or more of the Common Shares of the Company then outstanding but
shall not include the Company, any Subsidiary of the Company or any
employee benefit plan of the Company or of any Subsidiary of the
Company or any entity holding shares of capital stock of the Company
for or pursuant to the terms of any such plan, in its capacity as an
agent or trustee for any such plan. Notwithstanding the foregoing, no
Person shall become an "Acquiring Person" as the result of an
acquisition of Common Shares by the Company which, by reducing the
number of shares outstanding, increases the proportionate number of
shares beneficially owned by such Person to 15% or more of the Common
Shares of the Company then outstanding; PROVIDED, HOWEVER, that if a
Person shall become the Beneficial Owner of 15% or more of the Common
Shares of the Company then outstanding solely by reason of share
purchases by the Company and shall, after such share purchases by the
Company, become the Beneficial Owner of any additional Common Shares of
the Company, then such Person shall be deemed to be an "Acquiring
Person." Notwithstanding the foregoing, if the Board of Directors of
the Company determines in good faith that a Person who would otherwise
be an "Acquiring Person," as defined pursuant to the foregoing
provisions of this Section 1.1, has become such inadvertently, and such
Person divests as promptly as practicable a sufficient number of Common
Shares so that such Person would no longer be an Acquiring Person, as
defined pursuant to the foregoing provisions of this Section 1.1, then
such Person shall not be deemed to be an "Acquiring Person" at any time
for any purposes of this Agreement.
1
<PAGE>
1.2 "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations, as in effect on the date of this Rights Agreement, under
the Securities Exchange Act of 1934, as amended (the "Exchange Act").
1.3 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 (as
determined pursuant to Rule 13d-3 of the General Rules and
Regulations under the Exchange Act as in effect on the date of
this Agreement);
(ii) which such Person or any of such Person's
Affiliates or Associates, directly or indirectly, has (A) the
right to acquire (whether such right is exercisable immediately,
or only after the passage of time, compliance with regulatory
requirements, fulfillment of a condition or otherwise) pursuant to
any agreement, arrangement or understanding, whether or not in
writing (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 the Rights), warrants
or options, or otherwise; PROVIDED, HOWEVER, that a Person shall
not be deemed the Beneficial Owner of, or to beneficially own, (1)
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 (2) securities issuable upon exercise of
Rights at any time prior to the occurrence of a Trigger Event, or
(3) securities issuable upon exercise of Rights from and after the
occurrence of a Trigger Event which Rights were acquired by such
Person or any of such Person's Affiliates or Associates prior to
the Distribution Date or pursuant to Section 3.1 or Section 22
hereof (the "Original Rights") or pursuant to Section 11.9 hereof
in connection with an adjustment made with respect to any Original
Rights, or (4) securities which such Person or any of such
Person's Affiliates or Associates may acquire, does or do acquire
or may be deemed to have the right to acquire, pursuant to any
merger or other acquisition agreement between the Company and such
Person (or one or more of his Affiliates or Associates) if such
agreement has been approved by the Board of Directors of the
Company prior to such Person's becoming an Acquiring Person; or
(B) the right to vote pursuant to any agreement, arrangement or
understanding (whether or not in writing); PROVIDED, HOWEVER, that
a Person shall not be deemed the Beneficial Owner of, or to
beneficially own, any security under this clause (B) 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 of 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 (or any Affiliate or Associate
thereof) with which such Person or any of such Person's Affiliates
or Associates has any agreement, arrangement or understanding
(other than customary agreements with and between underwriters and
selling group members with respect to a bona fide public offering
of securities), whether or not in writing, for
2
<PAGE>
the purpose of acquiring, holding, voting (except pursuant to a
revocable proxy as described in the proviso to Section 1.3(ii)(B))
or disposing of any securities of the Company.
1.4 "Business Day" shall mean any day other than a
Saturday, Sunday, or a day on which banking institutions in the State
of California are authorized or obligated by law or executive order to
close.
1.5 "close of business" on any given date shall mean 5:00
p.m., California time, on such date; PROVIDED, HOWEVER, that if such
date is not a Business Day it shall mean 5:00 p.m., California time, on
the next succeeding Business Day.
1.6 "Common Shares" when used with reference to the Company
shall mean the shares of common stock, par value $1.00 per share, of
the Company. "Common Shares" when used with reference to any Person
other than the Company shall mean the capital stock with the greatest
voting power, or the equity securities or other equity interest having
power to control or direct the management, of such other Person or, if
such Person is a Subsidiary of another Person, the Person or Persons
which ultimately control such first-mentioned Person, and which has
issued and outstanding such capital stock, equity securities or equity
interest.
1.7 "Continuing Director" shall mean (i) any member of the
Board of Directors of the Company, while such Person is a member of the
Board, who is not an Acquiring Person, or an Affiliate or Associate of
an Acquiring Person, or an employee, director, representative, nominee
or designee of any Acquiring Person or of any such Affiliate or
Associate, and was a member of the Board prior to the time that any
Person becomes an Acquiring Person or (ii) any Person (during such
period in which such Person is a member of the Board) who, after the
time that any Person becomes an Acquiring Person, becomes a member of
the Board and who is not an Acquiring Person, or an Affiliate or
Associate of an Acquiring Person, or an employee, director,
representative, nominee or designee of an Acquiring Person or of any
such Affiliate or Associate, if such Person's nomination for election
or election to the Board is recommended or approved by a majority of
the Continuing Directors.
1.8 "Person" shall mean any individual, partnership, joint
venture, limited liability company, firm, corporation, unassociated
association, trust or other entity, and shall include any successor (by
merger or otherwise) of such entity.
1.9 "Shares Acquisition Date" shall mean the first date of
public announcement (which, for purposes of this definition, shall
include, without limitation, the filing of a report pursuant to Section
13(d) of the Exchange Act or pursuant to a comparable successor
statute) by the Company or an Acquiring Person that an Acquiring Person
has become such or that discloses information which reveals the
existence of an Acquiring Person.
1.10 "Spin-off Distribution" shall mean the distribution, to
all holders of the Common Shares, of one share of common stock of
Spinco Corporation, an indirect wholly-owned subsidiary of the Company,
for each five Common Shares held by such stockholder. After such
distribution, the Company intends to change its name to "Apollo
Healthcare International" and Spinco Corporation intends to change its
name to "Community Psychiatric Centers."
3
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1.11 "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 interests is owned, of record or
beneficially, directly or indirectly, by such Person.
1.12 A "Trigger Event" shall be deemed to have occurred upon
any Person becoming an Acquiring Person. Notwithstanding the
foregoing, a Trigger Event shall not be deemed to have occurred if the
event causing the 15% ownership threshold to be crossed is an
acquisition of Common Shares made pursuant to a cash tender offer made
pursuant to the rules and regulations under the Exchange Act and filed
with the Securities and Exchange Commission on Schedule 14D-1 (or any
successor form) for all outstanding Common Shares not beneficially
owned by the Person making such offer (or by its Affiliates or
Associates) so long as the Board of Directors of the Company
determines, after receiving advice from one or more investment banking
firms, that such offer is (i) at a price and on terms which are fair to
stockholders (taking into account all factors which such members of the
Board deem relevant, including without limitation, prices which could
reasonably be achieved if the Company or its assets were sold on an
orderly basis designed to realize maximum value) and (ii) otherwise in
the best interests of the Company and its stockholders; PROVIDED,
HOWEVER, that there must be Continuing Directors then in office and any
such determination shall require the concurrence of a majority of such
Continuing Directors.
1.13 The following terms shall have the meanings defined for
such terms in the Sections set forth below:
<TABLE>
<CAPTION>
Term Section
- ------------------------------ -------
<S> <C>
Adjustment Shares 11.1.2
common stock equivalent 11.1.3
Company Recitals
current per share market price 11.4
Current Value 11.1.3
Distribution Date 3.1
equivalent preferred stock 11.2
Exchange Act 1.2
Exchange Consideration 27
Final Expiration Date 7.1
Nasdaq 9
Original Rights 1.3
Preferred Shares Recitals
Purchase Price 4
Record Date Recitals
Redemption Date 7.1
Redemption Price 23.1
Right Recitals
Right Certificate 3.1
Rights Agent Recitals
Security 11.4
Spread 11.1.3
Substitution Period 11.1.3
Summary of Rights 3.2
Trading Day 11.4
</TABLE>
4
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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, 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.
In the event the Company appoints one or more co-Rights Agents, the
respective duties of the Rights Agent and any co-Rights Agent shall be
as the Company shall determine. Contemporaneously with such
appointment, if any, the Company shall notify the Rights Agent thereof.
Section 3. Issuance of Right Certificates.
------------------------------
3.1 Rights Evidenced by Share Certificates. Until the
--------------------------------------
earlier of (i) the tenth day after the Shares Acquisition Date or (ii)
the tenth day after the date of the commencement of, or first public
announcement of the intent 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 shares of
capital stock of the Company for or pursuant to the terms of any such
plan, in its capacity as an agent or trustee for any such plan) to
commence, a tender or exchange offer the consummation of which would
result in any Person becoming the Beneficial Owner of Common Shares
aggregating 15% or more of the then outstanding Common Shares of the
Company (the earlier of (i) and (ii) being herein referred to as the
"Distribution Date," whether or not either such date occurs prior to
the Record Date), (x) the Rights (unless earlier expired, redeemed or
terminated) will be evidenced (subject to the provisions of Section
3.2) by the certificates for Common Shares registered in the names of
the holders thereof (which certificates for Common Shares shall also be
deemed to be Right Certificates) and not by separate certificates, and
(y) the Rights (and the right to receive certificates therefor) will be
transferable only in connection with the transfer of the underlying
Common Shares. The preceding sentence notwithstanding, prior to the
Distribution Date specified therein (or such later Distribution Date as
the Board of Directors of the Company may select pursuant to this
sentence), the Board of Directors of the Company may postpone, one or
more times, the Distribution Date beyond the earlier of the dates set
forth in such preceding sentence; PROVIDED, HOWEVER, that there must be
Continuing Directors then in office and any such postponement shall
require the approval of at least a majority of such Continuing
Directors. As soon as practicable after the Distribution Date, the
Rights Agent will send, by first-class, 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, one or more certificates for Rights, in substantially
the form of Exhibit B hereto (a "Right Certificate"), evidencing one
Right (subject to adjustment as provided herein) for each Common Share
so held. As of the Distribution Date, the Rights will be evidenced
solely by such Right Certificates.
3.2 Summary of Rights. On the Record Date or as soon as
-----------------
practicable thereafter, the Company will send or cause to be sent a
copy of a Summary of Rights to Purchase Preferred Shares, in
substantially the form attached hereto as Exhibit C (the "Summary of
Rights"), by first-class, postage-prepaid mail, to each record holder
of Common Shares as of the close of business on the Record Date at the
address of such holder shown on the records of the Company. With
respect to certificates for Common Shares outstanding as of the close
of business on the Record Date, until the Distribution Date (or the
earlier Redemption Date or Final Expiration Date), the Rights will be
evidenced by such certificates for Common Shares registered in the
names of the holders thereof together with a copy of the Summary of
Rights and the registered holders of the Common Shares shall also be
registered holders of the associated Rights. Until the Distribution
Date (or the earlier Redemption Date or Final Expiration Date), the
surrender for transfer of any certificate for Common Shares outstanding
at the close of business
5
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on the Record Date shall also constitute the transfer of the Rights
associated with the Common Shares represented thereby.
3.3 New Certificates After Record Date. Certificates for
----------------------------------
Common Shares which become outstanding (whether upon issuance out of
authorized but unissued Common Shares, issuance out of treasury or
transfer or exchange of outstanding Common Shares) after the Record
Date but prior to the earliest of the Distribution Date, the Redemption
Date or the Final Expiration Date, shall be deemed also to be
certificates for Rights, and shall have impressed, printed, stamped,
written or otherwise affixed onto them the following legend:
This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in a Rights Agreement between
Community Psychiatric Centers and ChaseMellon Shareholder
Services, L.L.C., dated as of June 21, 1996, as the same may be
amended from time to time (the "Rights Agreement"), the terms of
which are hereby incorporated herein by reference and a copy of
which is on file at the principal executive offices of Community
Psychiatric Centers. 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.
Community Psychiatric Centers will mail to the holder of this
certificate a copy of the Rights Agreement without charge after
receipt of a written request therefor. AS DESCRIBED IN THE RIGHTS
AGREEMENT, RIGHTS WHICH ARE HELD BY OR HAVE BEEN HELD BY ACQUIRING
PERSONS OR ASSOCIATES OR AFFILIATES THEREOF (AS DEFINED IN THE
RIGHTS AGREEMENT) SHALL BECOME NULL AND VOID.
With respect to such certificates containing the foregoing legend,
until the Distribution Date (or the earlier Redemption Date or Final
Expiration Date), the Rights associated with the Common Shares
represented by such certificates shall be evidenced by such
certificates (together with a copy of the Summary of Rights), and the
surrender for transfer of any such certificates 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,
certification and assignment to be printed on the reverse thereof)
shall be substantially the same as Exhibit B hereto and may have such
marks of identification or designation and such legends, summaries or
endorsements printed thereon as the Company may deem appropriate and as
are not inconsistent with the provisions of this 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 trading system on which the Rights may from time
to time be listed or quoted, or to conform to usage. Subject to the
terms and conditions hereof, the Right Certificates, whenever issued,
shall be dated as of the Record Date, and shall show the date of
countersignature by the Rights Agent, and on their face shall entitle
the holders thereof to purchase such number of one one-hundredths of a
Preferred Share as shall be set forth therein at the price per one one-
hundredth of a Preferred Share set forth therein (the "Purchase
Price"), but the number of such one one-hundredths of a Preferred Share
and the Purchase Price shall be subject to adjustment as provided
herein.
Section 5. Countersignature and Registration. The Right
---------------------------------
Certificates shall be executed on behalf of the Company by its Chairman
of the Board of Directors, the Chief Executive Officer,
6
<PAGE>
President or any Vice President, either manually or by facsimile
signature, and shall have affixed thereto the Company's seal or a
facsimile thereof which shall be attested by the Secretary or any
Assistant Secretary of the Company, either manually or by facsimile
signature. The Right Certificates shall be manually countersigned by
an authorized signatory of the Rights Agent, but it shall not be
necessary for the same signatory to countersign all of the Right
Certificates hereunder. No Right Certificate shall 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 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.
Following the Distribution Date, the Rights Agent will keep
or cause to be kept, at its principal office in California, 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, the certificate number of 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. Subject to the provisions of Section 11.1.2 and Section
------------
14, 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 Final Expiration Date, any Right Certificate or
Right Certificates (other than Right Certificates representing Rights
that have become void pursuant to Section 11.1.2 or that have been
exchanged pursuant to Section 27) may be transferred, split up or
combined or exchanged for another Right Certificate or Right
Certificates, entitling the registered holder to purchase a like number
of one one-hundredths of a Preferred Share (or, following a Trigger
Event, Common Shares, other securities, cash or other assets, as the
case may be) as the Right Certificate or Right Certificates surrendered
then entitled such holder to purchase. Any registered holder desiring
to transfer, split up or combine or exchange any Right Certificate
shall make such request in writing delivered to the Rights Agent, and
shall surrender, together with any required form of assignment and
certificate duly completed, the Right Certificate or Right Certificates
to be transferred, split up or combined or exchanged at the office of
the Rights Agent designated for such purpose. Neither the Rights Agent
nor the Company shall be obligated to take any action whatsoever with
respect to the transfer of any such surrendered Right Certificate or
Right Certificates until the registered holder shall have completed and
signed the certificate contained in the form of assignment on the
reverse side of such Right Certificate or Right Certificates and shall
have provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request. Thereupon
the Rights Agent shall 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 from the holders of
Right Certificates of a sum sufficient to cover any tax or governmental
charge that may be imposed in connection with any transfer, split up or
combination or exchange of such Right Certificates.
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,
7
<PAGE>
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 countersignature and delivery to the registered owner in lieu
of the Right Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration
----------------------------------------------
Date of Rights.
--------------
7.1 Exercise of Rights. Subject to Section 11.1.3 and
------------------
except as otherwise provided herein, the registered holder of any Right
Certificate may exercise the Rights evidenced thereby 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 and
certification on the reverse side thereof duly executed, to the Rights
Agent at the office of the Rights Agent designated for such purpose,
together with payment of the Purchase Price for each one one-hundredth
of a Preferred Share as to which the Rights are exercised, at or prior
to the earliest of (i) the close of business on June 20, 2006 (the
"Final Expiration Date"), (ii) the time at which the Rights are
redeemed as provided in Section 23 (the "Redemption Date"), (iii) the
closing of any merger or other acquisition transaction involving the
Company pursuant to an agreement of the type described in Section
1.3(ii)(A)(4), at which time the Rights are deemed terminated, or (iv)
the time at which the Rights are exchanged as provided in Section 27.
7.2 Purchase Price. The Purchase Price for each one one-
--------------
hundredth of a Preferred Share pursuant to the exercise of a Right
shall initially be $45.00, shall be subject to adjustment from time to
time as provided in Sections 11, 13 and 26 and shall be payable in
lawful money of the United States of America in accordance with Section
7.3.
7.3 Payment Procedures. Upon receipt of a Right
------------------
Certificate representing exercisable Rights, with the form of election
to purchase and certification 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, by certified or
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 (or make available, if the
Rights Agent is the transfer agent) certificates for the number of
Preferred Shares to be purchased and the Company hereby irrevocably
authorizes its transfer agent to comply with all such requests, or (B)
if the Company shall have elected to deposit the total number of
Preferred Shares issuable upon exercise of the Rights hereunder with a
depositary agent, requisition from the depositary agent depositary
receipts representing such number of one one-hundredths 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 with the depositary agent) and the Company hereby
directs the depositary agent to comply with all such requests, (ii)
when appropriate, requisition from the Company the amount of cash to be
paid in lieu of the issuance of fractional shares in accordance with
Section 14, (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. In the event
that the Company is obligated to issue other securities of the Company,
pay cash and/or distribute other property pursuant to Section 11.1.3,
the Company will make all arrangements necessary so that such other
securities, cash and/or other property are available for distribution
by the Rights Agent, if and when appropriate.
7.4 Partial Exercise. 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
8
<PAGE>
to the Rights remaining unexercised shall be issued by the Rights Agent
and delivered to the registered holder of such Right Certificate or to
his duly authorized assigns, subject to the provisions of Section 14.
7.5 Full Information Concerning Ownership. Notwithstanding
-------------------------------------
anything in this Rights Agreement to the contrary, neither the Rights
Agent nor the Company shall be obligated to undertake any action with
respect to a registered holder of Rights upon the occurrence of any
purported exercise as set forth in this Section 7 unless the
certificate contained in the form of election to purchase set forth on
the reverse side of the Right Certificate surrendered for such exercise
shall have been duly completed and signed by the registered holder
thereof and the Company shall have been provided with such additional
evidence of the identity of the Beneficial Owner (or former Beneficial
Owner) or Affiliates or Associates thereof as the Company shall
reasonably request.
Section 8. Cancellation and Destruction of 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 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. Reservation and Availability of Capital Stock.
---------------------------------------------
The Company covenants and agrees that from and after the Distribution
Date it will cause to be reserved and kept available out of its
authorized and unissued Preferred Shares (and, following the occurrence
of a Trigger Event, out of its authorized and unissued Common Shares or
other securities or out of its shares held in its treasury) the number
of Preferred Shares (and, following the occurrence of a Trigger Event,
Common Shares and/or other securities) that will be sufficient to
permit the exercise in full of all outstanding Rights.
So long as the Preferred Shares (and, following the
occurrence of a Trigger Event, Common Shares and/or other securities)
issuable upon the exercise of Rights may be listed on any national
securities exchange or traded in the over-the-counter market and quoted
on the Nasdaq National Market ("Nasdaq"), the Company shall use its
best efforts to cause, from and after such time as the Rights become
exercisable, all shares reserved for such issuance to be listed on such
exchange or so traded in such over-the-counter market, upon official
notice of issuance upon such exercise.
The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all Preferred Shares (and,
following the occurrence of a Trigger Event, Common Shares and/or
other securities) delivered upon exercise of Rights shall, at the time
of delivery of the certificates for such shares (subject to payment of
the Purchase Price), be duly and validly authorized and issued and
fully paid and nonassessable shares.
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 (or Common Shares
and/or other securities, as the case may be) upon the exercise of
Rights. The Company shall not, however, be required to pay any
transfer tax which may be payable in respect of any transfer or
delivery of Right Certificates to a person other than, or the issuance
or delivery of certificates for the Preferred Shares (or Common Shares
9
<PAGE>
and/or other securities, as the case may be) in a name other than that
of, the registered holder of the Right Certificate evidencing Rights
surrendered for exercise or to issue or deliver any certificates for
Preferred Shares (or Common Shares and/or other securities, as the case
may be) in a name other than that of the registered holder upon the
exercise of any Rights until 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
satisfaction that no such tax is due.
Section 10. Preferred Shares Record Date. Each person in
----------------------------
whose name any certificate for Preferred Shares (or Common Shares
and/or other securities, as the case may be) is issued upon the
exercise of Rights shall for all purposes be deemed to have become the
holder of record of the Preferred Shares (or Common Shares and/or other
securities, as the case may be) 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 (or Common Shares and/or other securities, as the case
may be) transfer books of the Company are closed, such person shall be
deemed to have become the record holder of such shares (fractional or
otherwise) on, and such certificate shall be dated, the next succeeding
Business Day on which the Preferred Shares (or Common Shares and/or
other securities, as the case may be) transfer books of the Company are
open.
Section 11. Adjustment of Purchase Price, Number of Shares
----------------------------------------------
or Number of Rights. The Purchase Price, the number of shares covered
-------------------
by each Right and the number of Rights outstanding are subject to
adjustment from time to time as provided in this Section 11.
11.1 Post Execution Events.
---------------------
11.1.1 Corporate Dividends, Reclassifications, Etc. 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
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 11.1, 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, he would have owned upon such
exercise and been entitled to receive by virtue of such dividend,
subdivision, combination or reclassification. If an event occurs which
would require an adjustment under both Section 11.1.1 and Section
11.1.2, the adjustment provided for in this Section 11.1.1 shall be in
addition to, and shall be made prior to, the adjustment required
pursuant to, Section 11.1.2.
11.1.2 Acquiring Person Events; Triggering Events. Subject
------------------------------------------
to Sections 23.1 and 27 of this Agreement, in the event that
(A) any Acquiring Person or any Associate or Affiliate
of any Acquiring Person, at any time after the date of this Rights
Agreement, directly or indirectly, shall merge into the Company or
otherwise combine with the Company and the Company shall be the
continuing or surviving corporation of such merger or combination
and the Common Shares of
10
<PAGE>
the Company shall remain outstanding and not changed into or
exchanged for stock or other securities of any other Person or the
Company or cash or any other property, or
(B) a Trigger Event occurs,
then, from and after the first occurrence of such event, each holder of
a Right, except as provided below, shall thereafter have a right to
receive, upon exercise thereof at a price per Right equal to the then
current Purchase Price multiplied by the number of one one-hundredths
of a Preferred Share for which a Right is then exercisable (without
giving effect to this Section 11.1.2), in accordance with the terms of
this Rights Agreement, such number of Common Shares as shall equal the
result obtained by (x) multiplying the then current Purchase Price by
the then number of one one-hundredths of a Preferred Share for which a
Right is then exercisable (without giving effect to this Section
11.1.2) and (y) dividing that product by 50% of the current per share
market price of the Common Shares (determined pursuant to Section 11.4)
on the first of the date of the occurrence of, or the date of the first
public announcement of, one of the events listed above in this Section
11.1.2 (the "Adjustment Shares"); PROVIDED, HOWEVER, that if the
transaction that would otherwise give rise to the foregoing adjustment
is also subject to the provisions of Section 13, then only the
provisions of Section 13 shall apply and no adjustment shall be made
pursuant to this Section 11.1.2; PROVIDED, FURTHER, that nothing
contained in this Section 11.1.2 shall limit or otherwise diminish the
power of the Board of Directors (or, if applicable, the Continuing
Directors) to postpone the Distribution Date pursuant to Section 3.1 or
to extend the period during which the Rights may be redeemed pursuant
to Section 23.1; PROVIDED, FURTHER, that the Purchase Price and the
number of Adjustment Shares shall thereafter be subject to further
adjustment pursuant to Section 11.1.1 hereof. Notwithstanding the
foregoing, upon the occurrence of either of the events listed above in
this Section 11.1.2, any Rights that are or were acquired or
beneficially owned by (1) an Acquiring Person or any Associate or
Affiliate thereof, (2) a transferee of an Acquiring Person (or of any
such Associate or Affiliate) who becomes a transferee after the
Acquiring Person becomes such, or (3) a transferee of an Acquiring
Person (or of any such Associate or Affiliate) who becomes a transferee
prior to or concurrently with the Acquiring Person becoming such and
receives such Rights pursuant to either (A) a transfer (whether or not
for consideration) from the Acquiring Person to holders of equity
interests in such Acquiring Person or to any Person with whom the
Acquiring Person has any continuing agreement, arrangement or
understanding regarding the transferred Rights or (B) a transfer which
the Board of Directors of the Company has determined is part of a plan,
arrangement or understanding which has as a primary purpose or effect
avoidance of this Section 11.1.2, shall become void, and any holder
(whether or not such holder is an Acquiring Person or an Associate or
Affiliate of an Acquiring Person) of such Rights shall thereafter have
no right to exercise such Rights under any provision of this Rights
Agreement or otherwise. The Company shall not enter into any
transaction of the type described in this Section 11.1.2 if at the time
of such transaction there are any rights, warrants, instruments or
securities outstanding or any 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. Any Right
Certificate issued pursuant to Section 3 or Section 22 that represents
Rights beneficially owned by: (1) an Acquiring Person or any Associate
or Affiliate thereof, (2) a transferee of an Acquiring Person (or of
any such Associate or Affiliate) who becomes a transferee after the
Acquiring Person becomes such, or (3) a transferee of an Acquiring
Person (or of any such Associate or Affiliate) who becomes a transferee
prior to or concurrently with the Acquiring Person becoming such and
receives such Rights pursuant to either (A) a transfer (whether or not
for consideration) from the Acquiring Person to holders of equity
interests in such Acquiring Person or to any Person with whom the
Acquiring Person has any continuing agreement, arrangement or
understanding regarding the transferred Rights or (B) a transfer which
the Board of Directors of the Company has determined is part of a plan,
arrangement or understanding which has as a primary purpose or effect
avoidance of this Section 11.1.2, and any Right Certificate issued
11
<PAGE>
pursuant to Section 6, 7.4 or 22 or this Section 11 upon transfer,
exchange, replacement or adjustment of any other Right Certificate
referred to in this sentence, shall contain the following legend
(PROVIDED, HOWEVER, that the Rights Agent shall not be responsible for
affixing such legend unless it has actual knowledge as to the foregoing
circumstances or the Company has notified the Rights Agent in writing
thereof):
THE RIGHTS REPRESENTED BY THIS RIGHT CERTIFICATE ARE HELD OR
HAVE BEEN HELD BY A PERSON WHO IS OR WAS AN ACQUIRING PERSON
OR AN AFFILIATE OR AN ASSOCIATE OF AN ACQUIRING PERSON OR A
NOMINEE THEREOF. THIS RIGHT CERTIFICATE AND THE RIGHTS
REPRESENTED HEREBY HAVE BECOME NULL AND VOID AS SPECIFIED IN
SECTION 11.1.2 OF THE RIGHTS AGREEMENT.
The Company shall use all reasonable efforts to insure that
the provisions of this Section 11.1.2 are complied with, but shall have
no liability to any holder of Right Certificates or other Person as a
result of its failure to make any determinations with respect to any
Acquiring Person or its Affiliates, Associates or transferees
hereunder.
11.1.3 Insufficient Shares. In the event that upon the
-------------------
occurrence of one or more of the events listed in Section 11.1.2 above
there shall not be sufficient Common Shares authorized but unissued, or
held by the Company as treasury shares, to permit the exercise in full
of the Rights in accordance with the foregoing Section 11.1.2, the
Company shall take all such action as may be necessary to authorize
additional Common Shares for issuance upon exercise of the Rights,
PROVIDED, HOWEVER, that if the Company determines that it is unable to
cause the authorization of a sufficient number of additional Common
Shares, then, in the event the Rights become exercisable, the Company,
with respect to each Right and to the extent necessary and permitted by
applicable law and any agreements or instruments in effect on the date
hereof to which it is a party, shall: (A) determine the excess of (1)
the value of the Adjustment Shares issuable upon the exercise of a
Right (the "Current Value"), over (2) the Purchase Price (such excess,
the "Spread") and (B) with respect to each Right, make adequate
provision to substitute for the Adjustment Shares, upon payment of the
applicable Purchase Price, (1) cash, (2) a reduction in the Purchase
Price, (3) Common Shares or other equity securities of the Company
(including, without limitation, shares, or units of shares, of
preferred stock which the Board of Directors of the Company has deemed
to have the same value as Common Shares) (each such share of preferred
stock constituting a "common stock equivalent")), (4) debt securities
of the Company, (5) other assets or (6) any combination of the
foregoing having an aggregate value equal to the Current Value, where
such aggregate value has been determined by the Board of Directors of
the Company based upon the advice of a nationally recognized investment
banking firm selected by the Board of Directors of the Company;
PROVIDED, HOWEVER, that if the Company shall not have made adequate
provision to deliver value pursuant to clause (B) above within thirty
(30) days following the first occurrence of one of the events listed in
Section 11.1.2 above, then the Company shall be obligated to deliver,
upon the surrender for exercise of a Right and without requiring
payment of the Purchase Price, Common Shares (to the extent available)
and then, if necessary, cash, which in the aggregate are equal to the
Spread. If the Board of Directors of the Company shall determine in
good faith that it is unlikely that sufficient additional Common Shares
could, within the thirty (30) day period set forth above, be authorized
for issuance upon exercise in full of the Rights, such thirty (30) day
period may be extended and re-extended to the extent necessary, but not
more than ninety (90) days following the first occurrence of one of the
events listed in Section 11.1.2 above, in order that the Company may
seek stockholder approval for the authorization of such additional
shares (such period as may be extended, the "Substitution Period"). To
the extent that the Company determines that some action need be taken
pursuant to the first and/or second sentences of this Section 11.1.3,
the Company (x) shall provide that such action shall apply uniformly to
all outstanding Rights,
12
<PAGE>
and (y) may suspend the exercisability of the Rights until the
expiration of the Substitution Period in order to seek any
authorization of additional shares and/or to decide the appropriate
form of distribution to be made pursuant to such first sentence and to
determine the value thereof. In the event of any such suspension, the
Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended as well as
a public announcement at such time as the suspension is no longer in
effect. For purposes of this Section 11.1.3, the value of a Common
Share shall be the current per share market price (as determined
pursuant to Section 11.4) on the date of the first occurrence of one of
the events listed in Section 11.1.2 above and the value of any "common
stock equivalent" shall be deemed to have the same value as the Common
Shares on such date.
11.2 Dilutive Rights Offering. 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 securities having the same rights,
privileges and preferences as the Preferred Shares ("equivalent
preferred stock")) or securities convertible into Preferred Shares or
equivalent preferred stock at a price per share of Preferred Shares or
per share of equivalent preferred stock (or having a conversion or
exercise price per share, if a security convertible into or exercisable
for Preferred Shares or equivalent preferred stock) less than the
current per share market price of the Preferred Shares (as defined in
Section 11.4) 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 stock to be offered (and/or the
aggregate initial conversion price of the convertible securities so to
be offered) would purchase at such current per share 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 stock to be offered for subscription
or purchase (or into which the convertible securities so to be offered
are initially convertible). In case such subscription price may be
paid in a 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 or any Subsidiary of the Company shall not be deemed
outstanding for the purpose of any such computation. Such adjustments
shall be made successively whenever such a record date is fixed; and in
the event that such rights or warrants are not so issued, the Purchase
Price shall be adjusted to be the Purchase Price which would then be in
effect if such record date had not been fixed.
11.3 Distributions. 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, cash, securities
or assets (other than a regular periodic cash dividend at a rate not in
excess of 125% of the rate of the last regular periodic cash dividend
theretofore paid or, in case regular periodic cash dividends have not
theretofore been paid, at a rate not in excess of 50% of the average
net income per share of the Company for the four quarters ended
immediately prior to the payment of such dividend, or a dividend
payable in Preferred Shares (which dividend, for purposes of this
Agreement, shall be subject to the provisions of Section 11.1.1(A)
hereof)) or convertible securities, or subscription rights or warrants
(excluding those referred to in Section 11.2), the Purchase Price to be
in effect after such record date shall be determined by multiplying the
Purchase Price in effect immediately prior to such record date by a
fraction, the numerator of which shall be the current per share market
price of the Preferred Shares (as defined in Section 11.4) on such
record date, less the fair market value (as
13
<PAGE>
determined in good faith by the Board of Directors of the Company,
whose determination shall be described in a statement filed with the
Rights Agent) of the portion of the cash, assets, securities 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. 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.
11.4 Current Per Share Market Value.
------------------------------
11.4.1 General. For the purpose of any computation
-------
hereunder, the "current per share market price" of any security (a
"Security" for the purpose of this Section 11.4.1) on any date shall be
deemed to be the average of the daily closing prices per share of such
Security for the thirty (30) consecutive Trading Days (as such term is
hereinafter defined) immediately prior to such date; PROVIDED, HOWEVER,
that in the event that the current per share market price of the
Security is determined during any period following the announcement by
the issuer of such Security of (i) a dividend or distribution on such
Security payable in shares of such Security or securities convertible
into such shares or (ii) any subdivision, combination or
reclassification of such Security, and prior to the expiration of
thirty (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
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 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. If the Security is not publicly held or not 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 or,
if at the time of such determination there is an Acquiring Person, by a
majority of the Continuing Directors then in office, or if there are no
Continuing Directors, by a nationally recognized investment banking
firm selected by the Board of Directors, which shall have the duty to
make such determination in a reasonable and objective manner, whose
determination shall be described in a statement filed with the Rights
Agent and shall be conclusive for all purposes.
11.4.2 Preferred Shares. Notwithstanding Section 11.4.1,
----------------
for the purpose of any computation hereunder, the "current per share
market price" of the Preferred Shares shall be determined in the same
manner as set forth above in Section 11.4.1 (other than the last
sentence thereof). If the current per share market price of the
Preferred Shares cannot be determined in the manner described in
14
<PAGE>
Section 11.4.1, the "current per share market price" of the Preferred
Shares shall be conclusively deemed to be an amount equal to 100 (as
such number may be appropriately adjusted for such events as stock
splits, stock dividends and recapitalizations with respect to the
Common Shares occurring after the date of this Agreement) multiplied by
the current per share market price of the Common Shares. If neither
the Common Shares nor the Preferred Shares is publicly held or so
listed or traded, "current per share market price" of the Preferred
Shares shall mean the fair value per share as determined in good faith
by the Board of Directors of the Company, or, if at the time of such
determination there is an Acquiring Person, by a majority of the
Continuing Directors then in office, or if there are no Continuing
Directors, by a nationally recognized investment banking firm selected
by the Board of Directors of the Company, which shall have the duty to
make such determination in a reasonable and objective manner, which
determination shall be described in a statement filed with the Rights
Agent and shall be conclusive for all purposes. For purposes of this
Agreement, the "current per share market price" of one one-hundredth of
a Preferred Share shall be equal to the "current per share market
price" of one Preferred Share divided by 100.
11.5 Insignificant Changes. No adjustment in the Purchase
---------------------
Price shall be required unless such adjustment would require an
increase or decrease of at least 1% in such price. Any adjustments
which by reason of this Section 11.5 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 the
nearest ten-thousandth of a Common Share, as the case may be.
11.6 Shares Other Than Preferred Shares. If as a result of
----------------------------------
an adjustment made pursuant to Section 11.1, 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 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 Sections 11.1 through
11.3, 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.
11.7 Rights Issued Prior to Adjustment. All Rights
---------------------------------
originally issued by the Company subsequent to any adjustment made to
the Purchase Price hereunder shall evidence the right to purchase, at
the adjusted Purchase Price, the number of one one-hundredths of a
Preferred Share purchasable from time to time hereunder upon exercise
of the Rights, all subject to further adjustment as provided herein.
11.8 Effect of Adjustments. Unless the Company shall have
---------------------
exercised its election as provided in Section 11.9, upon each
adjustment of the Purchase Price as a result of the calculations made
in Sections 11.2 and 11.3, each Right outstanding immediately prior to
the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of one one-
hundredths of a Preferred Share (calculated to the nearest one-
millionth of a Preferred Share) obtained by (i) multiplying (x) the
number of one one-hundredths of a Preferred Share covered by a Right
immediately prior to this adjustment by (y) the Purchase Price in
effect immediately prior to such adjustment of the Purchase Price and
(ii) dividing the product so obtained by the Purchase Price in effect
immediately after such adjustment of the Purchase Price.
11.9 Adjustment in Number of Rights. 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-hundredths of a Preferred Share issuable upon the exercise
of a Right. Each of the Rights outstanding after such adjustment of
the number of Rights shall be exercisable for the
15
<PAGE>
number of one one-hundredths 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 ten-thousandth)
obtained by dividing the Purchase Price in effect immediately prior to
adjustment of the Purchase Price by the Purchase Price in effect
immediately after adjustment of the Purchase Price. The Company shall
make a public announcement of its election to adjust the number of
Rights, indicating the record date for the adjustment, and, if known at
the time, the amount of the adjustment to be made. This record date
may be the date on which the Purchase Price is adjusted or any day
thereafter, but, if the Right Certificates have been issued, shall be
at least ten (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 11.9, 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, the additional Rights to which such
holders shall be entitled as a result of such adjustment, or, at the
option of the Company, shall cause to be distributed to such holders of
record in substitution and replacement for the Right Certificates held
by such holders prior to the date of adjustment, and upon surrender
thereof, if required by the Company, new Right Certificates evidencing
all the Rights to which such holders shall be entitled after such
adjustment. Right Certificates so to be distributed shall be issued,
executed and countersigned in the manner provided for herein (and may
bear, at the option of the Company, the adjusted Purchase Price) and
shall be registered in the names of the holders of record of Right
Certificates on the record date specified in the public announcement.
11.10 Right Certificates Unchanged. Irrespective of any
----------------------------
adjustment or change in the Purchase Price or the number of one one-
hundredths 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 per share and the number of one
one-hundredths of a Preferred Share which were expressed in the initial
Right Certificates issued hereunder.
11.11 Par Value Limitations. Before taking any action that
---------------------
would cause an adjustment reducing the Purchase Price below one one-
hundredth 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.
11.12 Deferred Issuance. 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.
11.13 Reduction in Purchase Price. 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 of the 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
16
<PAGE>
exchangeable for Preferred Shares, dividends on Preferred Shares
payable in Preferred Shares or issuance of rights, options or warrants
referred to hereinabove in this Section 11, hereafter made by the
Company to holders of its Preferred Shares shall not be taxable to such
stockholders.
11.14 Certain Actions. The Company covenants and agrees
---------------
that after the Distribution Date it will not, except as permitted by
Section 23 or Section 26, take (or permit any Subsidiary to take) any
action if at the time such action is taken it is reasonably foreseeable
that such action will substantially diminish or otherwise eliminate the
benefits intended to be afforded by the Rights.
11.15 Corporate Dividends, Reclassifications, Etc.;
---------------------------------------------
Adjustment in Number of Rights. Notwithstanding anything contained in
------------------------------
this Agreement to the contrary, in the event that the Company shall at
any time after the date hereof and prior to the Distribution Date (i)
declare or pay any dividend on the outstanding Common Shares payable in
Common Shares, (ii) effect a subdivision or consolidation of the
outstanding Common Shares (by reclassification or otherwise than by the
payment of dividends payable in Common Shares), or (iii) combine the
outstanding Common Shares into a greater or lesser number of Common
Shares, then in any such case, the number of Rights associated with
each Common Share then outstanding, or issued or delivered thereafter
but prior to the Distribution Date, shall be proportionately adjusted
so that the number of Rights thereafter associated with each Common
Share following any such event shall equal the result obtained by
multiplying the number of Rights associated with each Common Share
immediately prior to such event by a fraction, the numerator of which
shall be the total number of Common Shares outstanding immediately
prior to the occurrence of the event and the denominator of which shall
be the total number of Common Shares outstanding immediately following
the occurrence of such event. The adjustments provided for in this
Section 11.15 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
---------
and 13, the Company shall (a) promptly prepare a certificate setting
forth such adjustment, and a brief statement of the facts accounting
for such adjustment, (b) promptly file with the Rights Agent and with
each transfer agent for the Common Shares or the Preferred Shares a
copy of such certificate and (c) mail a brief summary thereof to each
holder of a Right Certificate (or, if prior to the Distribution Date,
to each holder of a certificate representing Common Shares) in
accordance with Section 25. The Rights Agent shall be fully protected
in relying on any such certificate and on any adjustment therein
contained and shall not be deemed to have knowledge of any such
adjustment unless and until it shall have received such certificate.
Section 13. Consolidation, Merger or Sale or Transfer of
--------------------------------------------
Assets or Earning Power.
-----------------------
13.1 General. In the event that, from and after the first
-------
occurrence of a Trigger Event, directly or indirectly, (A) the Company
shall consolidate with, or merge with and into, any other Person and
the Company shall not be the continuing or surviving corporation, (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 the Company or any other Person or cash or any
other property, or (C) the Company shall sell, exchange, mortgage or
otherwise transfer (or one or more of its Subsidiaries shall sell,
exchange, mortgage 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 or Persons, then, and in each such case, proper
provision shall be made so that (i) each holder of a Right (except as
provided in Section
17
<PAGE>
11.1.2 and as otherwise provided herein) shall thereafter have the
right to receive, upon the exercise thereof at a price per Right equal
to the then current Purchase Price multiplied by the number of one one-
hundredths of a Preferred Share for which a Right was exercisable
immediately prior to the first occurrence of a Trigger Event (as
subsequently adjusted pursuant to Sections 11.1.1, 11.2, 11.3, 11.8,
11.9 and 11.12), 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 be equal to the result obtained by (x)
multiplying the then current Purchase Price by the number of one one-
hundredths of a Preferred Share for which a Right was exercisable
immediately prior to the first occurrence of a Trigger Event (as
subsequently adjusted pursuant to Sections 11.1.1, 11.2, 11.3, 11.8,
11.9 and 11.12) and (y) dividing that product by 50% of the then
current per share market price of the Common Shares of such other
Person (determined pursuant to Section 11.4) on the date of
consummation of such consolidation, merger, sale or transfer; PROVIDED,
that the price per Right so payable and the number of Common Shares of
such Person so purchasable shall thereafter be adjusted in accordance
with Sections 11.1.1, 11.2, 11.3, 11.8, 11.9 and 11.12 by reason of
such subsequent events covered thereby occurring in respect of such
Person; (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) 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 its Common Shares thereafter
deliverable upon the exercise of the Rights. 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 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 provisions of this
Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers.
13.2 Approved Acquisitions. Notwithstanding anything
---------------------
contained herein to the contrary, in the event of any merger or other
acquisition transaction involving the Company pursuant to a merger or
other acquisition agreement between the Company and any Person (or one
or more of such Person's Affiliates or Associates) which agreement has
been approved by the Board of Directors of the Company prior to any
Person becoming an Acquiring Person, this Rights Agreement and the
rights of holders of Rights hereunder shall be terminated in accordance
with Section 7.1.
Section 14. Fractional Rights and Fractional Shares.
---------------------------------------
14.1 Cash in Lieu of Fractional Rights. 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 14.1, 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
18
<PAGE>
Exchange or, if the Rights are not listed or admitted to trading on the
New York Stock Exchange, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the
principal national securities exchange on which the Rights are listed
or admitted to trading or, if the Rights are not listed or admitted to
trading on any national securities exchange, the last quoted price or,
if not so quoted, the average of the high bid and low asked prices in
the over-the-counter market, as reported by Nasdaq or such other system
then in use or, if on any such date the Rights are not quoted by any
such organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the Rights
selected by the Board of Directors of the Company. If on any such date
no such market maker is making a market in the Rights, the fair value
of the Rights on such date as determined in good faith by the Board of
Directors of the Company shall be used.
14.2 Cash in Lieu of Fractional Shares. The Company shall
---------------------------------
not be required to issue fractions of Preferred Shares (other than
fractions which are integral multiples of one one-hundredth 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-hundredth of a
Preferred Share). Fractions of Preferred Shares in integral multiples
of one one-hundredth 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-
hundredth 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 per share market price of one Preferred Share. For purposes of
this Section 14.2, the current per share market price of a Preferred
Share shall be the closing price of a Preferred Share (as determined
pursuant to the second sentence of Section 11.4.2) for the Trading Day
immediately prior to the date of such exercise.
Following the occurrence of a Trigger Event, the Company
shall not be required to issue fractions of Common Shares upon exercise
of the Rights or to distribute certificates which evidence fractional
Common Shares. In lieu of fractional Common Shares, the Company may
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 per share market price of one Common
Share. For purposes of this Section 14.2, the current per share market
price of a Common Share shall be the closing price of a Common Share
(as determined pursuant to Section 11.4.1 hereof) for the Trading Day
immediately prior to the date of such exercise.
14.3 Waiver of Right to Receive Fractional Rights or Shares.
------------------------------------------------------
The holder of a Right by the acceptance of the Rights expressly waives
his right to receive any fractional Rights or any fractional shares
upon exercise of a Right, except as permitted by this Section 14.
Section 15. Rights of Action. All rights of action in
----------------
respect of this Rights Agreement, except the rights of action given to
the Rights Agent under Section 18, 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 his own behalf
and for his own benefit, enforce this Rights Agreement, and may
institute and maintain any suit, action or proceeding against the
Company to enforce this Rights Agreement, or otherwise enforce or act
in respect
19
<PAGE>
of his right to exercise the Rights evidenced by such Right 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 shall be entitled to specific performance of
the obligations under, and injunctive relief against actual or
threatened violations of, the obligations of any Person (including,
without limitation, the Company) 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) as of and after the Distribution Date, the Right
Certificates are transferable only on the registry books of the
Rights Agent if surrendered at the office of the Rights Agent
designated for such purpose, duly endorsed or accompanied by a
proper instrument of transfer with all required certifications
completed;
(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 Certificates 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;
and
(d) notwithstanding anything in this Rights Agreement to
the contrary, neither the Company nor the Rights Agent shall have
any liability to any holder of a Right or other Person as a result
of its inability to perform any of its obligations under this
Rights Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of
competent jurisdiction or by a governmental, regulatory or
administrative agency or commission, or any statute, rule,
regulation or executive order promulgated or enacted by any
governmental authority, prohibiting or otherwise restraining
performance of such obligation.
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 24), 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. The Company agrees
---------------------------
to pay to the Rights Agent reasonable compensation for all services
rendered by it hereunder in accordance with a fee schedule to be
mutually agreed upon and, from time to time, on demand of the Rights
Agent, its reasonable
20
<PAGE>
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, liability, or expense (including, without limitation, special,
indirect, incidental or consequential loss or damages), 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.
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 the Common Shares or for other securities of the Company,
instrument of assignment or transfer, power of attorney, endorsement,
affidavit, letter, notice, instruction, direction, consent,
certificate, statement, or other paper or document believed by it to be
genuine and to be signed, executed and, where necessary, verified or
acknowledged, by the proper person or persons.
Section 19. Merger or Consolidation or Change of Name of
--------------------------------------------
Rights Agent. Any corporation into which the Rights Agent or any
------------
successor Rights Agent may be merged or with which it may be
consolidated, or any corporation resulting from any merger or
consolidation to which the Rights Agent or any successor Rights Agent
shall be a party, or any corporation succeeding to the corporate trust
or stock transfer business 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. 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.
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 conditions, by all of which the Company
and the holders of Right Certificates, by their acceptance thereof,
shall be bound:
20.1 Legal Counsel. The Rights Agent may consult with legal
-------------
counsel selected by it (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.
20.2 Certificates as to Facts or Matters. 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
21
<PAGE>
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 of Directors, the Chief Executive Officer,
the President, the Chief Financial Officer, any Vice President, the
Treasurer, the Secretary or any Assistant Treasurer or Assistant
Secretary of the Company and delivered to the Rights Agent; and such
certificate shall be full authorization to the Rights Agent for any
action taken or suffered in good faith by it under the provisions of
this Rights Agreement in reliance upon such certificate.
20.3 Standard of Care. The Rights Agent shall be liable
----------------
hereunder only for its own negligence, bad faith or willful misconduct.
20.4 Reliance on Rights Agreement and Right Certificates.
---------------------------------------------------
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 as to 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.
20.5 No Responsibility as to Certain Matters. 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 11.1.2) or any adjustment required
under the provisions of Sections 3, 11, 13, 23 or 27 or responsible for
the manner, method or amount of any such adjustment or the ascertaining
of the existence of facts that would require any such adjustment
(except with respect to the exercise of Rights evidenced by Right
Certificates after actual notice of any such adjustment); nor shall it
by any act hereunder be deemed to make any representation or warranty
as to the authorization or reservation of any Preferred Shares to be
issued pursuant to this Rights Agreement or any Right Certificate or as
to whether any Preferred Shares will, when so issued, be validly
authorized and issued, fully paid and nonassessable.
20.6 Further Assurance by Company. 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.
20.7 Authorized Company Officers. 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 of Directors, the Chief Executive Officer, the President, the
Chief Financial Officer, any Vice President, the Treasurer, the
Secretary or any Assistant Treasurer or Assistant Secretary of the
Company, and to apply to such officers for advice or instructions in
connection with its duties under this Rights Agreement, and it shall
not be liable for any action taken or suffered to be taken by it in
good faith in accordance with instructions of any such officer or for
any delay in acting while waiting for these instructions. Any
application by the Rights Agent for written instructions from the
Company may, at the option of the Rights Agent, set forth in writing
any action proposed to be taken or omitted by the Rights Agent with
respect to its duties or obligations under this Rights Agreement and
the date on and/or after which such action shall be taken or omitted.
The Rights Agent shall not be liable to the Company for any action
taken or omitted in accordance with a proposal included in any such
application
22
<PAGE>
on or after the date specified therein (which date shall not be less
than three business days after the date any such officer actually
receives such application, unless any such officer shall have consented
in writing to an earlier date) unless, prior to taking of any such
action (or the effective date in the case of omission), the Rights
Agent shall have received written instructions in response to such
application specifying the action to be taken or omitted.
20.8 Freedom to Trade in Company Securities. 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.
20.9 Reliance on Attorneys and Agents. 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, omission, default, neglect or misconduct of any such
attorneys or agents or for any loss to the Company resulting from any
such act, omission, default, neglect or misconduct, PROVIDED that
reasonable care was exercised in the selection and continued employment
thereof.
20.10 Rights Holders List. At any time and from time to
-------------------
time after the Distribution Date, upon the request of the Company, the
Rights Agent shall promptly deliver to the Company a list, as of the
most recent practicable date (or as of such earlier date as may be
specified by the Company), of the holders of record of Rights.
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 thirty (30) days' notice in writing
mailed to the Company and to each transfer agent of the Common Shares
and/or Preferred Shares, as applicable, by registered or certified
mail. The Company shall promptly notify the holders of the Right
Certificates by first-class mail of any such resignation. The Company
may remove the Rights Agent or any successor Rights Agent upon thirty
(30) days' notice in writing, mailed to the Rights Agent or successor
Rights Agent, as the case may be, and to each transfer agent of the
Common Shares and/or Preferred Shares, as applicable, 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 resigning, removed, or
incapacitated Rights Agent shall remit to the Company, or to any
successor Rights Agent designated by the Company, all books, records,
funds, certificates or other documents or instruments of any kind then
in its possession which were acquired by such resigning, removed or
incapacitated Rights Agent in connection with its services as Rights
Agent hereunder, and shall thereafter be discharged from all duties and
obligations hereunder. Following notice of such removal, resignation
or incapacity, the Company shall appoint a successor to such Rights
Agent. If the Company shall fail to make such appointment within a
period of thirty (30) days after giving notice of such removal or after
it has been notified in writing of such resignation or incapacity by
the resigning or incapacitated Rights Agent or by the holder of a Right
Certificate (who shall, with such notice, submit his Right Certificate
for inspection by the Company), then the registered holder of any Right
Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether
appointed by the Company or by such a court, shall be a corporation
organized and doing business under the laws of the United States or of
the State of California (or 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 California) in good standing, having a
principal office in the State of California,
23
<PAGE>
which is authorized under such laws to exercise stock transfer or
corporate trust 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 $10 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
and/or Preferred Shares, as applicable, 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
its Board of Directors to reflect any adjustment or change in the
Purchase Price and the number or kind or class of shares or other
securities or property purchasable under the Right Certificates made in
accordance with the provisions of this Rights Agreement. In addition,
in connection with the issuance or sale of Common Shares following the
Distribution Date and prior to the redemption, exchange, termination or
expiration of the Rights, the Company (a) shall, with respect to Common
Shares so issued or sold pursuant to the exercise of stock options or
under any employee plan or arrangement, granted or awarded as of the
Distribution Date, or upon exercise, conversion or exchange of
securities hereinafter issued by the Company, and (b) may, in any other
case, if deemed necessary or appropriate by the Board of Directors of
the Company, issue Right Certificates representing the appropriate
number of Rights in connection with such issuance or sale; PROVIDED,
HOWEVER, that (i) no such Right Certificate shall be issued if, and to
the extent that, the Company shall be advised by counsel that such
issuance would create a significant risk of material adverse tax
consequences to the Company or the Person to whom such Right
Certificate would be issued, (ii) no such Right Certificate shall be
issued if, and to the extent that, appropriate adjustment shall
otherwise have been made in lieu of the issuance thereof and (iii) at
the time of a determination by the Board of Directors to cause the
Company to issue a Right Certificate under clause (b) above, there must
be Continuing Directors then in office and any such determination shall
require the approval of at least a majority of such Continuing
Directors.
Section 23. Redemption.
----------
23.1 Right to Redeem. The Board of Directors of the Company
---------------
may, at its option, at any time prior to the Shares Acquisition Date,
redeem all but not less than all of the then outstanding Rights at a
redemption price of $0.01 per Right, appropriately adjusted to reflect
any stock split, stock dividend, recapitalization or similar
transaction occurring after the date hereof (such redemption price
being hereinafter referred to as the "Redemption Price") and the
Company may, at its option, pay the Redemption Price in cash, Common
Shares (based on the "current per share market price," as defined in
Section 11.4.1 hereof, of the Common Shares at the time of redemption)
or any other form of consideration deemed appropriate by the Board of
Directors; PROVIDED, HOWEVER, that if the Board of Directors of the
Company authorizes redemption of the Rights after the time a Person
becomes an Acquiring Person, then there must be Continuing Directors
then in office and such authorization shall require the approval of at
least a majority of such Continuing Directors. The preceding sentence
notwithstanding, prior to the expiration of the period during which the
Rights may be redeemed as
24
<PAGE>
specified therein (or such longer period as the Board of Directors of
the Company may select pursuant to this sentence), the Board of
Directors of the Company may extend, one or more times, the period
during which the Rights may be redeemed beyond the Shares Acquisition
Date; PROVIDED, HOWEVER, that there must be Continuing Directors then
in office and any such extension shall require the approval of at least
a majority of such Continuing Directors. In the event that, pursuant
to the last sentence of Section 1.1 hereof, the Board of Directors
determines that a Person has become an Acquiring Person inadvertently,
and such Person divests Common Shares in accordance with such sentence,
then the Company's right of redemption hereunder shall be deemed to
have not expired as a result of such inadvertent acquisition. Anything
contained in this Rights Agreement to the contrary notwithstanding, the
Rights shall not be exercisable following a transaction or event
described in Section 11.1.2 prior to the expiration of the Company's
right of redemption hereunder.
23.2 Redemption Procedures. Immediately upon the action of
---------------------
the Board of Directors of the Company ordering the redemption of the
Rights, and without any further action and without any notice, the
right to exercise the Rights will terminate and the only right
thereafter of the holders of Rights shall be to receive the Redemption
Price for each Right so held. Within ten (10) days after the action of
the Board of Directors ordering the redemption of the Rights, the
Company shall give, or cause the Rights Agent to give, notice of such
redemption to the holders of the then outstanding Rights by mailing
such notice to all such holders at their last addresses as they appear
upon the registry books of the Rights Agent or, prior to the
Distribution Date, on the registry books of the transfer agent for the
Common 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 27, and other
than in connection with the purchase, acquisition or redemption of
Common Shares prior to the Distribution Date.
Section 24. Notice of Certain Events. In case the Company
------------------------
shall propose at any time after the Distribution Date (a) to pay any
dividend payable in stock of any class to the holders of Preferred
Shares or to make any other distribution to the holders of Preferred
Shares (other than a regular periodic cash dividend at a rate not in
excess of 125% of the rate of the last regular periodic cash dividend
theretofore paid or, in case regular periodic cash dividends have not
theretofore been paid, at a rate not in excess of 50% of the average
net income per share of the Company for the four quarters ended
immediately prior to the payment of such dividends, or a stock dividend
on, or a subdivision, combination or reclassification of the Common
Shares), or (b) to offer to the holders of 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, or (c) to effect any reclassification of its Preferred
Shares (other than a reclassification involving only the subdivision of
outstanding Preferred Shares), or (d) 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 (other than pursuant to a merger or other
acquisition agreement of the type described in Section 1.3(ii)(A)(4)),
or (e) to effect the liquidation, dissolution or winding up of the
Company, or (f) 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 the Rights Agent and to each holder of
a Right Certificate, in accordance with Section 25, a notice of such
proposed action, which shall specify the record date for the purposes
of such stock dividend, distribution of rights or warrants, or the date
on which such reclassification, consolidation, merger, sale, transfer,
liquidation,
25
<PAGE>
dissolution, or winding up is to take place and the date of
participation therein by the holders of the Preferred Shares and/or
Common 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 (a) or (b)
above at least ten (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 ten (10) days prior to the date
of the taking of such proposed action or the date of participation
therein by the holders of the Preferred Shares and/or Common Shares,
whichever shall be the earlier.
In case any event set forth in Section 11.1.2 of this Rights
Agreement shall occur, then, in any such case, (i) the Company shall as
soon as practicable thereafter give to the Rights Agent and to each
holder of a Right Certificate, in accordance with Section 25, a notice
of the occurrence of such event, which notice shall describe the event
and the consequences of the event to holders of Rights under Section
11.1.2, and (ii) all references in this Section 24 to Preferred Shares
shall be deemed thereafter to refer to Common Shares and/or, if
appropriate, other securities.
Notwithstanding anything in this Rights Agreement to the
contrary, prior to the Distribution Date a filing by the Company with
the Securities and Exchange Commission shall constitute sufficient
notice to the holders of securities of the Company, including the
Rights, for purposes of this Rights Agreement and no other notice need
be given.
Section 25. 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:
Community Psychiatric Centers
5110 West Sahara Avenue
Las Vegas, Nevada 89102
Attention: Corporate Secretary
Subject to the provisions of Section 21, 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:
ChaseMellon Shareholder Services, L.L.C.
15821 Ventura Boulevard
Suite 670
Encino, California 91436
Attention: Mary Ann McElroy
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 (or, prior to the Distribution Date, to the holder of any
certificate representing Common Shares) 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 26. Supplements and Amendments. Prior to the
--------------------------
Distribution Date and subject to the last sentence of this Section 26,
the Company and the Rights Agent may, if the Company so
26
<PAGE>
directs, supplement or amend any term or provision of this Rights
Agreement without the approval of any holders of certificates
representing Common Shares, including, without limitation, the Purchase
Price upon the occurrence of the Spin-off Distribution. From and after
the Distribution Date and subject to the last sentence of this Section
26, the Company and the Rights Agent may from time to time supplement
or amend this Rights Agreement without the approval of any holders of
Right Certificates (i) to cure any ambiguity or to correct or
supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein, (ii) to shorten or
lengthen any time period hereunder (which shortening or lengthening,
after the time a Person becomes an Acquiring Person, shall be effective
only if there are Continuing Directors and shall require the approval
of at least a majority of such Continuing Directors) or (iii) so long
as the interests of the holders of the Right Certificates (other than
an Acquiring Person or an Affiliate or Associate of an Acquiring
Person) are not adversely affected thereby, to make any other changes
or provisions in regard to matters or questions arising hereunder which
the Company and the Rights Agent may deem necessary or desirable,
including but not limited to extending the Final Expiration Date;
PROVIDED, HOWEVER, that the right of the Board of Directors to extend
the Distribution Date or Redemption Date shall not require any
amendment or supplement hereunder. Upon the delivery of a certificate
from an appropriate officer of the Company which states that the
proposed supplement or amendment is in compliance with the terms of
this Section 26, the Rights Agent shall execute such supplement or
amendment. Prior to the Distribution Date, the interests of the
holders of Rights shall be deemed coincident with the interests of the
holders of Common Shares. Without limiting the foregoing, at any time
prior to such time as any Person becomes an Acquiring Person, the
Company and the Rights Agent may amend this Agreement to lower the
thresholds set forth in Sections 1.1 and 3.1 to not less than the
greater of (i) any percentage greater than the largest percentage of
the outstanding Common Shares then known by the Company to be
beneficially owned by any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or
any Subsidiary of the Company, or any entity holding Common Shares for
or pursuant to the terms of any such plan) and (ii) 10%.
Section 27. Exchange.
--------
27.1 Exchange of Common Shares for Rights. The Board of
------------------------------------
Directors of the Company may, at its option, at any time after the
occurrence of a Trigger Event, exchange Common Shares for 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
11.1.2) by exchanging that number of Common Shares having an aggregate
value equal to the Spread (with such value being based on the current
per share market price (as determined pursuant to Section 11.4) on the
date of the occurrence of a Trigger Event) per Right, appropriately
adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such amount per Right
being hereinafter referred to as the "Exchange Consideration").
Notwithstanding the foregoing, (i) the Board of Directors shall not be
empowered to effect such exchange at any time after any Person (other
than the Company, any Subsidiary of the Company, any employee benefit
plan of the Company or any such Subsidiary, or any entity holding
Common 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
and (ii) the Board shall not be empowered to effect an exchange for
more than that number of Rights for which there are sufficient Common
Shares authorized but unissued, or held by the Company as treasury
shares, to permit the exchange for Rights.
27.2 Exchange Procedures. Immediately upon the action of
-------------------
the Board of Directors of the Company ordering the exchange for any
Rights pursuant to Section 27.1 and without any further action and
without any notice, the right to exercise such Rights shall terminate
and the only right
27
<PAGE>
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 Consideration. 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 the Rights which have become void pursuant to the
provisions of Section 11.1.2) held by each holder of Rights.
27.3 No Fractional Shares Upon Exchange. 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, in an amount in cash equal
to the same fraction of the current market value of a whole Common
Share. For the purposes of this Section 27.3, the current market value
of a whole Common Share shall be the current per share market price (as
determined pursuant to Section 11.4) for the Trading Day immediately
prior to the date of exchange pursuant to this Section 27.
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 or
corporation 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 Nevada 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.
28
<PAGE>
Section 33. Descriptive Heading. 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.
[signature page to follow]
29
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Rights Agreement to be duly executed as of the day and year first above
written.
COMMUNITY PSYCHIATRIC CENTERS
By /s/ Julia Kopta
-------------------------------
Name: Julia Kopta
Title: Executive Vice President
and General Counsel
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
By /s/ Mary Ann McElroy
-------------------------------
Name: Mary Ann McElroy
Title: Assistant Vice President
S-1
<PAGE>
EXHIBIT A
---------
FORM
of
CERTIFICATE OF RESOLUTION
ESTABLISHING DESIGNATION, PREFERENCES AND RIGHTS
of
SERIES B JUNIOR PARTICIPATING PREFERRED STOCK
of
COMMUNITY PSYCHIATRIC CENTERS
(Pursuant to Section 78.195 of the
Nevada Revised Statutes)
_____________________________
Community Psychiatric Centers, a corporation organized and
existing under the laws of the State of Nevada (hereinafter called the
"Corporation"), hereby certifies that the following resolution was
adopted by the Board of Directors of the Corporation as required by
Section 78.195 of the Nevada Revised Statutes at a meeting duly called
and held on June 21, 1996.
RESOLVED, that pursuant to the authority granted to and vested in
the Board of Directors of this Corporation (hereinafter called the
"Board of Directors" or the "Board") in accordance with the provisions
of the Restated Articles of Incorporation, the Board of Directors
hereby creates a series of Preferred Stock, par value $1.00 per share
(the "Preferred Stock"), of the Corporation and hereby states the
designation and number of shares, and fixes the relative rights,
preferences, and limitations thereof as follows:
Series B Junior Participating Preferred Stock:
Section 1. Designation and Amount. The shares of such series
----------------------
shall be designated as "Series B Junior Participating Preferred Stock"
(the "Series B Preferred Stock") and the number of shares constituting
the Series B Preferred Stock shall be 1,000,000. Such number of shares
may be increased or decreased by resolution of the Board of Directors;
PROVIDED, that no decrease shall reduce the number of shares of Series
B Preferred Stock to a number less than the number of shares then
outstanding plus the number of shares reserved for issuance upon the
exercise of outstanding options, rights or warrants or upon the
conversion of any outstanding securities issued by the Corporation
convertible into Series B Preferred Stock.
A-1
<PAGE>
Section 2. Dividends and Distributions.
---------------------------
(A) Subject to the rights of the holders of any shares of any
series of Preferred Stock (or any similar stock) ranking prior and
superior to the Series B Preferred Stock with respect to
dividends, the holders of shares of Series B Preferred Stock, in
preference to the holders of Common Stock, par value $1.00 per
share (the "Common Stock"), of the Corporation, and of any other
junior stock, shall be entitled to receive, when, as and if
declared by the Board of Directors out of funds legally available
for the purpose, quarterly dividends payable in cash on the first
day of March, June, September and December in each year (each such
date being referred to herein as a "Quarterly Dividend Payment
Date"), commencing on the first Quarterly Dividend Payment Date
after the first issuance of a share or fraction of a share of
Series B Preferred Stock, in an amount per share (rounded to the
nearest cent) equal to the greater of (a) $1.00 or (b) subject to
the provision for adjustment hereinafter set forth, 100 times the
aggregate per share amount of all cash dividends, and 100 times
the aggregate per share amount (payable in kind) of all non-cash
dividends or other distributions, other than a dividend payable in
shares of Common Stock or a subdivision of the outstanding shares
of Common Stock (by reclassification or otherwise), declared on
the Common Stock since the immediately preceding Quarterly
Dividend Payment Date or, with respect to the first Quarterly
Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series B Preferred Stock. In the event the
Corporation shall at any time declare or pay any dividend on the
Common Stock payable in shares of Common Stock, or effect a
subdivision, combination or consolidation of the outstanding
shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or
lesser number of shares of Common Stock, then in each such case
the amount to which holders of shares of Series B Preferred Stock
were entitled immediately prior to such event under clause (b) of
the preceding sentence shall be adjusted by multiplying such
amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common
Stock that were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution
on the Series B Preferred Stock as provided in paragraph (A) of
this Section 2 immediately after it declares a dividend or
distribution on the Common Stock (other than a dividend payable in
shares of Common Stock); provided that, in the event no dividend
or distribution shall have been declared on the Common Stock
during the period between any Quarterly Dividend Payment Date and
the next subsequent Quarterly Dividend Payment Date, a dividend of
$1.00 per share on the Series B Preferred Stock shall nevertheless
be payable on such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series B Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such
shares, unless the date of issue of such shares is prior to the
record date for the first Quarterly Dividend Payment Date, in
which case dividends on such shares shall begin to accrue from the
date of issue of such shares, or unless the date of issue is a
Quarterly Dividend Payment Date or is a date after the record date
for the determination of holders of shares of Series B Preferred
Stock entitled to receive a quarterly dividend and before such
Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends
shall not bear interest. Dividends paid on the shares of Series B
Preferred Stock in an amount less than the total amount of such
dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares
at the time outstanding. The Board of
A-2
<PAGE>
Directors may fix a record date for the determination of holders
of shares of Series B Preferred Stock entitled to receive payment
of a dividend or distribution declared thereon, which record date
shall be not more than 60 days prior to the date fixed for the
payment thereof.
Section 3. Voting Rights. The holders of shares of Series B
-------------
Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set
forth, each share of Series B Preferred Stock shall entitle the
holder thereof to 100 votes on all matters submitted to a vote of
the stockholders of the Corporation. In the event the Corporation
shall at any time declare or pay any dividend on the Common Stock
payable in shares of Common Stock, or effect a subdivision,
combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a
dividend in shares of Common Stock) into a greater or lesser
number of shares of Common Stock, then in each such case the
number of votes per share to which holders of shares of Series B
Preferred Stock were entitled immediately prior to such event
shall be adjusted by multiplying such number by a fraction, the
numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) Except as otherwise provided herein, in any other
Certificate of Resolution creating a series of Preferred Stock or
any similar stock, or by law, the holders of shares of Series B
Preferred Stock and the holders of shares of Common Stock and any
other capital stock of the Corporation having general voting
rights shall vote together as one class on all matters submitted
to a vote of stockholders of the Corporation.
(C) Except as set forth herein, or as otherwise provided by
law, holders of Series B Preferred Stock shall have no special
voting rights and their consent shall not be required (except to
the extent they are entitled to vote with holders of Common Stock
as set forth herein) for taking any corporate action.
Section 4. Certain Restrictions.
--------------------
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series B Preferred Stock as provided
in Section 2 are in arrears, thereafter and until all accrued and
unpaid dividends and distributions, whether or not declared, on
shares of Series B Preferred Stock outstanding shall have been
paid in full, the Corporation shall not:
(i) declare or pay dividends, or make any other
distributions, on any shares of stock ranking junior (either
as to dividends or upon liquidation, dissolution or winding
up) to the Series B Preferred Stock;
(ii) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or
winding up) with the Series B Preferred Stock, except
dividends paid ratably on the Series B Preferred Stock and
all such parity stock on which dividends are payable or in
arrears in proportion to the total amounts to which the
holders of all such shares are then entitled;
A-3
<PAGE>
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior (either as
to dividends or upon liquidation, dissolution or winding up)
to the Series B Preferred Stock, provided that the
Corporation may at any time redeem, purchase or otherwise
acquire shares of any such junior stock in exchange for
shares of any stock of the Corporation ranking junior (either
as to dividends or upon dissolution, liquidation or winding
up) to the Series B Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for
consideration any shares of Series B Preferred Stock, or any
shares of stock ranking on a parity with the Series B
Preferred Stock, except in accordance with a purchase offer
made in writing or by publication (as determined by the Board
of Directors) to all holders of such shares upon such terms
as the Board of Directors, after consideration of the
respective annual dividend rates and other relative rights
and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable
treatment among the respective series or classes.
(B) The Corporation shall not permit any Subsidiary of the
Corporation to purchase or otherwise acquire for consideration any
shares of stock of the Corporation unless the Corporation could,
under paragraph (A) of this Section 4, purchase or otherwise
acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series B Preferred
-----------------
Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and cancelled promptly after the
acquisition thereof. All such shares shall upon their cancellation
become authorized but unissued shares of Preferred Stock and may be
reissued as part of a new series of Preferred Stock subject to the
conditions and restrictions on issuance set forth herein, in the
Restated Articles of Incorporation, or in any other Certificate of
Resolution creating a series of Preferred Stock or any similar stock or
as otherwise required by law.
Section 6. Liquidation, Dissolution or Winding Up. Upon any
--------------------------------------
liquidation, dissolution or winding up of the Corporation, no
distribution shall be made (1) to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution
or winding up) to the Series B Preferred Stock unless, prior thereto,
the holders of shares of Series B Preferred Stock shall have received
$100 per share, plus an amount equal to accrued and unpaid dividends
and distributions thereon, whether or not declared, to the date of such
payment, provided that the holders of shares of Series B Preferred
Stock shall be entitled to receive an aggregate amount per share,
subject to the provision for adjustment hereinafter set forth, equal to
100 times the aggregate amount to be distributed per share to holders
of shares of Common Stock, or (2) to the holders of shares of stock
ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series B Preferred Stock, except
distributions made ratably on the Series B Preferred Stock and all such
parity stock in proportion to the total amounts to which the holders of
all such shares are entitled upon such liquidation, dissolution or
winding up. In the event the Corporation shall at any time declare or
pay any dividend on the Common Stock payable in shares of Common Stock,
or effect a subdivision, combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise
than by payment of a dividend in shares of Common Stock) into a greater
or lesser number of shares of Common Stock, then in each such case the
aggregate amount to which holders of shares of Series B Preferred Stock
were entitled immediately prior to such event under the proviso in
clause (1) of the preceding sentence shall be adjusted by multiplying
such amount by a fraction the numerator of which is the number of
shares of Common
A-4
<PAGE>
Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that are outstanding
immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the Corporation
--------------------------
shall enter into any consolidation, merger, combination or other
transaction in which the shares of Common Stock are exchanged for or
changed into other stock or securities, cash and/or any other property,
then in any such case each share of Series B Preferred Stock shall at
the same time be similarly exchanged or changed into an amount per
share, subject to the provision for adjustment hereinafter set forth,
equal to 100 times the aggregate amount of stock, securities, cash
and/or any other property (payable in kind), as the case may be, into
which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time declare or pay any
dividend on the Common Stock payable in shares of Common Stock, or
effect a subdivision, combination or consolidation of the outstanding
shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or
lesser number of shares of Common Stock, then in each such case the
amount set forth in the preceding sentence with respect to the exchange
or change of shares of Series B Preferred Stock shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the
number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common
Stock that were outstanding immediately prior to such event.
Section 8. No Redemption. The shares of Series B Preferred Stock
-------------
shall not be redeemable.
Section 9. Rank. The Series B Preferred Stock shall rank, with
----
respect to the payment of dividends and the distribution of assets,
junior to all series of any other class of the Corporation's Preferred
Stock, except to the extent that any such other series specifically
provides that it shall rank on a parity with or junior to the Series B
Preferred Stock.
Section 10. Amendment. The Restated Articles of Incorporation of
---------
the Corporation shall not be amended in any manner which would
materially alter or change the powers, preferences or special rights of
the Series B Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of at least two-thirds of the
outstanding shares of Series B Preferred Stock, voting together as a
single class.
A-5
<PAGE>
IN WITNESS WHEREOF, this Certificate of Resolution Establishing
Designation, Preferences and Rights of Series B Junior Participating
Preferred Stock of Community Psychiatric Centers is executed on behalf
of the Corporation by its Chairman of the Board and attested by its
Secretary this ___ day of ____________, 1996.
______________________________
Chairman of the Board
Attest:
______________________
Secretary
A-6
<PAGE>
EXHIBIT B
---------
[Form of Right Certificate]
Certificate No. R- _______ Rights
NOT EXERCISABLE AFTER JUNE 20, 2006 OR EARLIER IF NOTICE OF
REDEMPTION OR EXCHANGE IS GIVEN OR IF THE COMPANY IS MERGED OR
ACQUIRED PURSUANT TO AN AGREEMENT OF THE TYPE DESCRIBED IN SECTION
1.3(ii)(A)(4) OF THE RIGHTS AGREEMENT. THE RIGHTS ARE SUBJECT TO
REDEMPTION, AT THE OPTION OF THE COMPANY, AT $0.01 PER RIGHT ON
THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
-------------
CIRCUMSTANCES (SPECIFIED IN SECTION 11.1.2 OF THE RIGHTS
--------------------------------------------------------
AGREEMENT), RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON, OR
----------------------------------------------------------------
ITS AFFILIATES OR ASSOCIATES, OR ANY SUBSEQUENT HOLDER OF SUCH
--------------------------------------------------------------
RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS
-------------------------------
CERTIFICATE ARE HELD OR HAVE BEEN HELD BY A PERSON WHO IS OR WAS
AN ACQUIRING PERSON OR AN ASSOCIATE OR AFFILIATE OF AN ACQUIRING
PERSON OR A NOMINEE THEREOF. THIS RIGHT CERTIFICATE AND THE
RIGHTS REPRESENTED HEREBY HAVE BECOME NULL AND VOID AS SPECIFIED
IN SECTION 11.1.2 OF THE RIGHTS AGREEMENT.]/1/
Right Certificate
COMMUNITY PSYCHIATRIC CENTERS
This certifies that , or registered
assigns, is the registered owner of the number of Rights set forth
above, each of which entitles the owner thereof, subject to the terms,
provisions and conditions of the Rights Agreement, dated as of June 21,
1996, as the same may be amended from time to time (the "Rights
Agreement"), between Community Psychiatric Centers, a Nevada
corporation (the "Company"), and ChaseMellon Shareholder Services,
L.L.C., as Rights Agent (the "Rights Agent"), to purchase from the
Company at any time after the Distribution Date and prior to 5:00 P.M.
(California time) on June 20, 2006, at the offices of the Rights Agent,
or its successors as Rights Agent, designated for such purpose, one
one-hundredth of a fully paid, nonassessable share of Series B Junior
Participating Preferred Stock, par value $1.00 per share (the
"Preferred Shares") of the Company, at a purchase price of $45.00 per
one one-hundredth of a share, subject to adjustment (the "Purchase
Price"), upon presentation and surrender of this Right Certificate with
the Form of Election to Purchase and certification duly executed. The
number of Rights evidenced by this Right Certificate (and the number of
one one-hundredths of a Preferred Share which may be purchased upon
exercise thereof) set forth above, and the Purchase Price set forth
above, are the number and Purchase Price as of July 16, 1996 based on
the Preferred Shares as constituted at such date. Capitalized terms
used in this Right Certificate without definition shall have the
meanings ascribed to them in the Rights Agreement. As provided in the
Rights Agreement, the Purchase Price and the number of Preferred Shares
which may be purchased upon
- -------------------
1. The portion of the legend in brackets shall be inserted only if applicable
and shall replace the preceding sentence.
B-1
<PAGE>
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 offices of the
Company and the Rights Agent.
This Right Certificate, with or without other Right
Certificates, upon surrender at the offices of the Rights Agent
designated for such purpose, may be exchanged for another Right
Certificate or Right Certificates of like tenor and date evidencing
Rights entitling the holder to purchase a like aggregate number of one
one-hundredths of a Preferred Share 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 Board
of Directors may, at its option, (i) redeem the Rights evidenced by
this Right Certificate at a redemption price of $0.01 per Right at any
time prior to the Shares Acquisition Date (as such time period may be
extended pursuant to the Rights Agreement) or (ii) exchange Common
Shares for the Rights evidenced by this Certificate, in whole or in
part, after the occurrence of a Trigger Event. The period during which
redemption of the Rights is permitted may be extended by the Board of
Directors of the Company, but such an extension shall require the
concurrence of a majority of the Continuing Directors. In the event
that, pursuant to the last sentence of Section 1.1 of the Rights
Agreement, the Board of Directors determines that a Person has become
an Acquiring Person inadvertently, and such Person divests Common
Shares in accordance with such sentence, then the Company's right of
redemption shall be deemed to have not expired as a result of such
inadvertent acquisition. Under certain circumstances set forth in the
Rights Agreement, the decision to redeem shall require the concurrence
of a majority of the Continuing Directors.
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-hundredth 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, as such, 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.
If any term, provision, covenant or restriction of the Rights
Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the
B-2
<PAGE>
terms, provisions, covenants and restrictions of the Rights Agreement
shall remain in full force and effect and shall in no way be affected,
impaired or invalidated.
This Right Certificate shall not be valid or binding for any
purpose until it shall have been countersigned by the Rights Agent.
B-3
<PAGE>
WITNESS the facsimile signature of the proper officers of the
Company and its corporate seal. Dated as of _______________.
Attest: COMMUNITY PSYCHIATRIC CENTERS
By ______________________ By _________________________________
Title: Title:
Countersigned:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
By _____________________________
Authorized Signature
B-4
<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 and the Rights evidenced thereby, 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 an eligible institution (as
defined in Rule 17Ad-15 under the Securities Exchange Act of 1934)
which may include a commercial bank, trust company, savings
association, credit union or a member firm of the American Stock
Exchange, New York Stock Exchange, Pacific Stock Exchange or Midwest
Stock Exchange.
B-5
<PAGE>
- --------------------------------------------------------------------------------
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Right Certificate [ ]
are [ ] are not beneficially owned by an Acquiring Person or an
Affiliate or an Associate thereof; and
(2) after due inquiry and to the best knowledge of the
undersigned, the undersigned [ ] did [ ] did not acquire the Rights
evidenced by this Right Certificate from any person who is, was or
subsequently became an Acquiring Person or an Affiliate or Associate
thereof.
Dated: __________________
----------------------------------------
Signature
B-6
<PAGE>
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if holder desires to
exercise Rights represented by
the Right Certificate.)
To: COMMUNITY PSYCHIATRIC CENTERS
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
(or such other securities of the Company or of any other Person which
may be issuable upon the exercise of the Rights) and requests that
certificates for such shares be issued in the name of:
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 an eligible institution (as defined in
Rule 17Ad-15 under the Securities Exchange Act of 1934) which may
include a commercial bank, trust company, savings association, credit
union or a member firm of the American Stock Exchange, New York Stock
Exchange, Pacific Stock Exchange or Midwest Stock Exchange.
B-7
<PAGE>
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Right Certificate [ ] are [ ]
are not beneficially owned by an Acquiring Person or an Affiliate or an
Associate thereof; and
(2) after due inquiry and to the best knowledge of the
undersigned, the undersigned
[ ] did [ ] did not acquire the Rights evidenced by this Right
Certificate from any person who is, was or subsequently became an
Acquiring Person or an Affiliate or Associate thereof.
Dated:_______________
________________________
Signature
- --------------------------------------------------------------------------------
NOTICE
------
The signature in the foregoing Form of Assignment and Form of
Election to Purchase 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 Form of Election to Purchase is not completed, the
Company will deem the beneficial owner of the Rights evidenced by this
Right Certificate to be an Acquiring Person or an Affiliate or
Associate hereof and, in the case of an Assignment, will affix a legend
to that effect on any Right Certificates issued in exchange for this
Right Certificate.
B-8
<PAGE>
EXHIBIT C
---------
As described in the Rights Agreement, Rights which are held by
--------------------------------------------------------------
or have been held by Acquiring Persons or Associates or Affiliates
------------------------------------------------------------------
thereof (as defined in the Rights Agreement) shall become null and void.
------------------------------------------------------------------------
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED SHARES
On June 21, 1996 the Board of Directors of Community Psychiatric
Centers (the "Company") declared a dividend of one Right for each share
of common stock, $1.00 par value (the "Common Shares"), of the Company
outstanding at the close of business on July 16, 1996 (the "Record
Date"). As long as the Rights are attached to the Common Shares, the
Company will issue one Right (subject to adjustment) with each new
Common Share so that all such shares will have attached Rights. When
exercisable, each Right will entitle the registered holder to purchase
from the Company one one-hundredth of a share of Series B Junior
Participating Preferred Stock (the "Preferred Shares") at a price of
$45.00 per one one-hundredth of a Preferred Share, subject to
adjustment (the "Purchase Price"). The description and terms of the
Rights are set forth in a Rights Agreement, dated as of June 21, 1996,
as the same may be amended from time to time (the "Rights Agreement"),
between the Company and ChaseMellon Shareholder Services, L.L.C., as
Rights Agent (the "Rights Agent").
Until the earlier to occur of (i) ten (10) days following a
public announcement that a person or group of affiliated or associated
persons (an "Acquiring Person") has acquired, or obtained the right to
acquire, beneficial ownership of 15% or more of the Common Shares or
(ii) ten (10) days following the commencement 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 Common Shares (the earlier of (i) and (ii) being
called the "Distribution Date," whether or not either such date occurs
prior to the Record Date), the Rights will be evidenced, with respect
to any of the Common Share certificates outstanding as of the Record
Date, by such Common Share certificate together with a copy of this
Summary of Rights.
The Rights Agreement provides that the Board of Directors, with
the concurrence of a majority of the Continuing Directors (as defined
below), may postpone the Distribution Date and that, until the
Distribution Date, the Rights will be transferred with and only with
the Common Shares. Until the Distribution Date (or earlier redemption
or expiration of the Rights), new Common Share certificates issued
after the close of business on the Record Date upon transfer or new
issuance of the Common Shares will contain a notation incorporating the
Rights Agreement by reference. Until the Distribution Date (or earlier
redemption, exchange, termination or expiration of the Rights), the
surrender for transfer of any certificates for Common Shares will also
constitute the transfer of the Rights associated with the Common Shares
represented by such certificate. As soon as practicable following the
Distribution Date, separate certificates evidencing the Rights ("Right
Certificates") will be mailed to holders of record of the Common Shares
as of the close of business on the Distribution Date and such separate
Right Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date. The
Rights will expire on June 20, 2006, subject to the Company's right to
extend such date (the "Final Expiration Date"), unless earlier redeemed
or exchanged by the Company or terminated.
Each Preferred Share purchasable upon exercise of the Rights
will be entitled to a minimum preferential quarterly dividend payment
of $1.00 per share but will be entitled to an aggregate dividend
C-1
<PAGE>
of 100 times the dividend, if any, declared per Common Share. In the
event of liquidation, the holders of the Preferred Shares will be
entitled to a minimum preferential liquidation payment of $100 per
share but will be entitled to an aggregate payment of 100 times the
payment made per Common Share. Each Preferred Share will have 100
votes and will vote together with the Common Shares. Finally, in the
event of any merger, consolidation or other transaction in which Common
Shares are exchanged, each Preferred Share will be entitled to receive
100 times the amount received per Common Share. These rights are
protected by customary antidilution provisions. Because of the nature
of the Preferred Share's dividend, liquidation and voting rights, the
value of one one-hundredth of a Preferred Share purchasable upon
exercise of each Right should approximate the value of one Common
Share.
The Purchase Price payable, and the number of Preferred Shares
or other securities or property issuable, upon exercise of the Rights
are subject to adjustment from time to time to prevent dilution (i) in
the event of a stock dividend on, or a subdivision, combination or
reclassification of the Preferred Shares, (ii) upon the grant to
holders of the Preferred Shares of certain rights or warrants to
subscribe for or purchase Preferred Shares or convertible securities at
less than the current market price of the Preferred Shares or (iii)
upon the distribution to holders of the Preferred Shares of evidences
of indebtedness, cash, securities or assets (excluding regular periodic
cash dividends at a rate not in excess of 125% of the rate of the last
regular periodic cash dividend theretofore paid or, in case regular
periodic cash dividends have not theretofore been paid, at a rate not
in excess of 50% of the average net income per share of the Company for
the four quarters ended immediately prior to the payment of such
dividend, or dividends payable in Preferred Shares (which dividends
will be subject to the adjustment described in clause (i) above)) or of
subscription rights or warrants (other than those referred to above).
In the event that a Person becomes an Acquiring Person (except
pursuant to certain cash offers for all outstanding Common Shares
approved by the Board) or if the Company were the surviving corporation
in a merger with an Acquiring Person or any affiliate or associate of
an Acquiring Person and the Common Shares were not changed or
exchanged, each holder of a Right, other than Rights that are or were
acquired or beneficially owned by the 15% stockholder (which Rights
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 then current Purchase Price of the Right. With certain
exceptions, in the event that (i) the Company is acquired in a merger
or other business combination transaction in which the Company is not
the surviving corporation or its Common Shares are changed or exchanged
(other than a merger which follows certain cash offers for all
outstanding Common Shares approved by the Board) or (ii) more than 50%
of its assets or earning power is sold, proper provision shall be made
so that each holder of a Right (except Rights which have previously
been voided as set forth above) shall thereafter have the right to
receive, upon the exercise thereof at the then current Purchase Price
of the Right, that number of shares of common stock of the acquiring
company which at the time of such transaction would have a market value
of two times the then current Purchase Price of the Right.
At any time after a Person becomes an Acquiring Person and prior
to the acquisition by such Acquiring Person of 50% or more of the
outstanding Common Shares, the Board of Directors may cause the Company
to acquire the Rights (other than Rights owned by an Acquiring Person
which have become void), in whole or in part, in exchange for that
number of Common Shares having an aggregate value equal to the Spread
(the excess of the value of the Common Shares issuable upon exercise of
a Right after a Person becomes an Acquiring Person over the Purchase
Price) per Right (subject to adjustment).
No adjustment in the Purchase Price will be required until
cumulative adjustments require an adjustment of at least 1% in such
Purchase Price. No fractional shares will be issued and in lieu
thereof, a payment in cash will be made based on the market price of
the Preferred Shares on the last trading date prior to the date of
exercise.
C-2
<PAGE>
The Rights may be redeemed in whole, but not in part, at a price
of $0.01 per Right (the "Redemption Price") by the Board of Directors
at any time prior to the first date of public announcement that a
Person has become an Acquiring Person. Prior to the expiration of the
period during which the Rights may be redeemed (or such longer period
as the Board of Directors may select pursuant to this sentence), the
Board of Directors, with the concurrence of a majority of the
Continuing Directors (as defined below), may extend the period during
which the Rights are redeemable beyond the first date of public
announcement that a Person has become an Acquiring Person. In the
event that, pursuant to the last sentence of Section 1.1 of the Rights
Agreement, the Board of Directors determines that a Person has become
an Acquiring Person inadvertently, and such Person divests Common
Shares in accordance with such sentence, then the Company's right of
redemption shall be deemed to have not expired as a result of such
inadvertent acquisition. Under certain circumstances set forth in the
Rights Agreement, the decision to redeem shall require the concurrence
of a majority of the Continuing Directors. Immediately upon the action
of the Board of Directors of the Company electing to redeem the Rights,
the Company shall make an announcement thereof, and upon such election,
the right to exercise the Rights will terminate and the only right of
the holders of Rights will be to receive the Redemption Price.
The term "Continuing Directors" means any member of the Board of
Directors of the Company who was a member of the Board prior to the
time that any Person becomes an Acquiring Person, and any person who is
subsequently elected to the Board if such person is recommended or
approved by a majority of the Continuing Directors. Continuing
Directors do not include an Acquiring Person, or an affiliate or
associate of an Acquiring Person, or any representative of the
foregoing.
Until a Right is exercised, the holder thereof, as such, will
have no rights as a stockholder of the Company beyond those as an
existing stockholder, including, without limitation, the right to vote
or to receive dividends.
Any of the terms or provisions of the Rights Agreement may be
amended by the Board of Directors of the Company prior to the
Distribution Date, including, without limitation, the Purchase Price
upon the occurrence of the distribution, to all holders of the Common
Shares, of one share of common stock of Spinco Corporation, an indirect
wholly-owned subsidiary of the Company, for each five Common Shares
held by such stockholder. After the Distribution Date, the Company and
the Rights Agent may amend or supplement the Rights Agreement without
the approval of any holders of Right Certificates to cure any
ambiguity, to correct or supplement any provision contained therein
which may be defective or inconsistent with any other provisions
therein, to shorten or lengthen any time period under the Rights
Agreement (so long as, under certain circumstances, a majority of
Continuing Directors approve such shortening or lengthening) or so long
as the interests of the holders of Right Certificates (other than an
Acquiring Person or an affiliate or associate of an Acquiring Person)
are not adversely affected thereby, to make any other provisions in
regard to matters or questions arising thereunder which the Company and
the Rights Agent may deem necessary or desirable, including but not
limited to extending the Final Expiration Date. The Company may at any
time prior to such time as any Person becomes an Acquiring Person amend
the Rights Agreement to lower the thresholds described above to not
less than the greater of (i) any percentage greater than the largest
percentage of the outstanding Common Shares then known by the Company
to be beneficially owned by any person or group of affiliated or
associated persons and (ii) 10%.
A copy of the Rights Agreement has been filed with the
Securities and Exchange Commission as an Exhibit to a Registration
Statement on Form 8-A. 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 incorporated herein by
reference.
C-3
<PAGE>
EXHIBIT 99.2
Community Psychiatric Centers
5110 West Sahara Avenue
Las Vegas, Nevada 89102
July ___, 1996
To Our Stockholders:
On June 21, 1996 Community Psychiatric Centers' Board of Directors
adopted a Stockholder Rights Plan that is intended to protect your interests in
the event you and Community Psychiatric Centers are confronted with coercive
takeover tactics.
The Plan provides for a dividend distribution of Rights to purchase
shares of a newly created series of Community Psychiatric Centers Preferred
Stock. Under certain circumstances, the Rights could become exercisable to
purchase Community Psychiatric Centers Common Stock, or securities of an
acquiring entity, at one-half market value. The Rights may be exercised only if
certain events occur. You are now the owner of one Right for each share of
Community Psychiatric Centers Common Stock you own. The Plan has been adopted
in order to strengthen the ability of the Board to protect your interests.
We are attaching a summary description that outlines the principal
features of the Plan, and we urge you to read the summary carefully. This
letter reviews our reasons for issuing the Rights.
NO ACTION BY STOCKHOLDERS IS REQUIRED OR PERMITTED AT THIS TIME, AND
NO MONEY SHOULD BE SENT TO COMMUNITY PSYCHIATRIC CENTERS. THE RIGHTS WILL
AUTOMATICALLY ATTACH TO THE SHARES OF COMMON STOCK YOU HOLD AND WILL TRADE WITH
THEM. SEPARATE RIGHT CERTIFICATES WILL BE SENT TO STOCKHOLDERS ONLY IF A PERSON
OR GROUP ACQUIRES 15% OR MORE OF COMMUNITY PSYCHIATRIC CENTERS' OUTSTANDING
COMMON STOCK OR MAKES A TENDER OFFER FOR 15% OR MORE OF THE COMMON STOCK.
COMMUNITY PSYCHIATRIC CENTERS COMMON STOCK CERTIFICATES ISSUED AFTER JULY 16,
1996 WILL CONTAIN A REFERENCE TO THE RIGHTS PLAN, BUT THERE IS NO NEED TO SEND
IN YOUR CERTIFICATES TO HAVE THIS REFERENCE ADDED.
The Rights are not being distributed in response to any specific
effort to acquire control of the Company. The Rights are designed to protect
stockholders in the event of an unsolicited attempt to acquire the Company,
including through an accumulation of Common Stock in the open market, a partial,
two-tier or inadequate tender offer that does not treat all stockholders equally
and other abusive takeover tactics which the Board of Directors believes are not
in the best interests of stockholders. These tactics unfairly pressure
stockholders, squeeze them out of their investment without giving them any real
choice and deprive them of the full value of their Common Stock. We consider
these Rights to be a valuable means of protecting both your right to retain your
equity investment in the Company and the full value of that investment, while
not foreclosing a fair acquisition bid for the Company.
The Rights are not intended to prevent a takeover of Community
Psychiatric Centers and will not do so. They are designed to deal with the
possibility of unilateral actions by hostile acquirors that could deprive the
Board of Directors and stockholders of Community Psychiatric Centers of their
<PAGE>
ability to determine the Company's destiny and obtain the highest price for
their Common Stock. Among the factors considered by the Board in adopting the
Plan were the substantial amount of cash the Company has on its balance sheet
due to the sale of Priory Hospitals Group, the Company's United Kingdom
operations, and the proposed spin-off of the Company's U.S. psychiatric
operations to its stockholders.
Adoption of the Plan should not by itself affect any prospective
acquiror who is willing to make an all-cash offer at a full and fair price or
who is willing to negotiate with the Company's Board of Directors. The Plan
certainly will not interfere with a merger or other business combination
transaction approved by the Board of Directors.
The issuance of the Rights has no dilutive effect, will not affect
reported earnings per share and is not taxable to the Company or to you.
Stockholders may, under certain circumstances, recognize taxable income if the
Rights become exercisable.
Our overriding objective is to continue building value for Community
Psychiatric Centers' stockholders, and we feel that the Plan will assist in that
effort.
Sincerely,
[Name and Title of Executive Officer]
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