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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
November 25, 1998 (November 25, 1998)
CHILDREN'S COMPREHENSIVE SERVICES, INC.
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(Exact name of registrant as specified in its charter)
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Tennessee 0-16162 62-1240866
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(State or other jurisdiction of incorporation) (Commission File Number) (I.R.S. Employer
Identification No.)
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3401 West End Avenue, Suite 500
Nashville, Tennessee 37203
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (615) 383-0376
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(Former name or former address, if changed since last report)
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Item 5. Other Events
On November 25, 1998, the Board of Directors of Children's
Comprehensive Services, Inc. (the "Company") declared a dividend distribution of
one right (a "Right") for each outstanding share of common stock, par value $.01
per share (the "Common Shares"), of the Company. The distribution is payable on
December 8, 1998 (the "Record Date") to the stockholders of record as of the
close of business on the Record Date. A Right will also accompany each Common
Share issued following the Record Date and prior to the Distribution Date. Each
Right entitles the registered holder to purchase from the Company one Common
Share at a price of $75.00 (the "Purchase Price") subject to adjustment. The
description and terms of the Rights are set forth in a Rights Agreement, dated
November 25, 1998 (the "Rights Agreement"), between the Company and SunTrust
Bank, Atlanta, as Rights Agent (the "Rights Agent").
Until the earlier to occur of (i) the close of business on the tenth
calendar day following a public announcement that a person or group of
affiliated or associated persons has acquired, or obtained the right to acquire,
beneficial ownership of 10% or more of the outstanding Common Shares (as
"Acquiring Person"), and (ii) the close of business on the tenth business day
(or such later date as may be specified by the Board of Directors) following the
commencement of a tender offer or exchange offer by a person or group of
affiliated or associated persons, the consummation of which would result in
beneficial ownership by such person or group of 10% or more of the outstanding
Common Shares (the earlier of such dates being hereinafter called the
"Distribution 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 certificates.
The Rights Agreement provides 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 Record Date upon transfer or new
issuance of Common Shares will contain a notation incorporating the Rights
Agreement by reference. Until the Distribution Date (or earlier redemption or
expiration of the Rights),the surrender for transfer of any certificates for
Common Shares in respect of which Rights have been issued will also constitute
the transfer of the Rights associated with the Common shares represented by such
certificates. As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights (the "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.
No Right is exercisable at any time prior to the Distribution Date. The
Rights will expire on December 8, 2008 (the "Final Expiration Date") unless
earlier redeemed or exchanged by the Company as described below. Until a Right
is exercised, the holder thereof,
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as such, will have no rights as a stockholder of the Company, including without
limitation the right to vote or to receive dividends.
The Purchase Price payable, and the number of Common Shares or other
securities 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 Common Shares, (ii) upon
the grant to holders of the Common Shares of certain rights or warrants to
subscribe for or purchase Common Shares at a price, or securities convertible
into Common Shares with a conversion price, less than the then current market
price of the Common Shares or (iii) upon the distribution to holders of the
Common Shares of evidences of indebtedness or cash (excluding regular periodic
cash dividends), assets, stock (excluding dividends payable in Common Shares) or
of subscription rights or warrants (other than those referred to above).
In the event (a "Flip-in Event") that (i) any person or group of
affiliated or associated persons becomes the beneficial owner of 10% or more of
the outstanding Common Shares, or (ii) any Acquiring Person merges into or
combines with the Company and the Company is the surviving corporation, proper
provision shall be made so that each holder of a Right, other than Rights that
are or were owned beneficially by the Acquiring Person (which, from and after
the later of the Distribution Date and the date of the earlier of any such
events, will be void), will thereafter have the right to receive, upon exercise
thereof at the then current exercise price of the Right, that number of Common
Shares (or, under certain circumstances, an economically equivalent security or
securities or assets of the Company) that has a market value of two times the
exercise price of the Right.
In the event (a "Flip-over Event") that, following the first date of
public announcement that a person has become an Acquiring Person, (i) the
Company merges with or into any person and the Company is not the surviving
corporation, (ii) any person merges with or into the Company and the Company is
the surviving corporation, but its Common Shares are changed or exchanged, or
(iii) 50% or more of the Company's assets or earning power, including without
limitation securities creating obligations of the Company, are sold, proper
provision shall be made so that each holder of a Right will thereafter have the
right to receive, upon the exercise thereof at the then current exercise price
of the Right, that number of shares of common stock (or, under certain
circumstances, an economically equivalent security or securities) of such other
person which at the time of such transaction would have a market value of two
times the exercise price of the Right.
At any time after the later of the Distribution Date and the first
occurrence of a Flip-in Event or Flip-over Event and prior to the acquisition by
any person or group of affiliated or associated persons of 50% or more of the
outstanding Common Shares, the Board of Directors of the Company may exchange
the Rights (other than any Rights which have become void), in whole or in part,
at an exchange ratio of one Common Share per Right (subject to adjustment).
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With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment in the Purchase
Price of at least 1%. The Company is not required to issue fractional Common
Shares or other securities issuable upon the exercise of Rights. In lieu of
issuing such securities, the Company may make a cash payment, as provided in the
Rights Agreement.
The Company may redeem the Rights in whole, but not in part, at a price
of $0.01 per Right (the "Redemption Price"), at any time prior to the earlier of
(i) the close of business on the tenth day following the Distribution Date and
(ii) the Final Expiration Date. Immediately upon any redemption of the Rights,
the right to exercise the Rights will terminate and the only right of the
holders of Rights will be to receive the Redemption Price.
The Rights Agreement may be amended by the Board of Directors in any
manner prior to the Distribution Date without the approval of any holders of
certificates representing Common Shares. After the Distribution Date, the Rights
Agreement may be amended by the Board of Directors without the approval of any
holders of Right Certificates, including amendments which add other events
requiring adjustment to the Purchase Price payable and the number of Common
Shares or other securities issuable or property purchasable upon the exercise of
the Rights or which modify procedures relating to the redemption of the Rights,
provided that no amendment may be made which decreases the stated Redemption
Price or the period of time remaining until the Final Expiration Date or which
modifies a time period relating to when the Rights may be redeemed at such time
as the Rights are not then redeemable.
As of November 24, 1998, 7,340,608 Common Shares were issued and
outstanding. Each Common Share outstanding on the Record Date and each Common
Share issued thereafter will receive one Right. As long as the Rights are
attached to the Common Shares, the Company will issue one Right for each Common
Share issued between the Record Date and the Distribution Date. A total of
10,000,000 Common Shares have been reserved for issuance upon exercise of the
Rights, subject to adjustment in accordance with the Rights Agreement.
The Rights may 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 a majority of the Board of Directors unless the
offer is conditioned on a substantial number of Rights being acquired. However,
the Rights should not interfere with any merger or other business combination
approved by the Board of Directors since the Rights may be redeemed by the
Company at $0.01 per Right at any time on or prior to the tenth day following
the Distribution Date. Thus, the Rights are intended to encourage persons who
may seek to acquire control of the Company to initiate such an acquisition
through negotiations with the Board of Directors. However, the effect of the
Rights may be to discourage a third party from making a partial tender offer or
otherwise attempting to obtain a substantial equity position in the equity
securities of, or seeking to obtain control of, the Company. To the extent any
potential acquirors are deterred by the Rights, the Rights may have the effect
of preserving incumbent management in office.
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The form of Rights Agreement between the Company and the Rights Agent
specifying the terms of the Rights, which includes as Exhibit A the form of
Rights Certificate, is attached hereto as Exhibit 99.2 and is incorporated
herein by reference. The foregoing description of the Rights does not purport to
be complete and is qualified in its entirety by reference to such Exhibit.
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits
99.1 Press Release dated November 25, 1998.
99.2 Rights Agreement, dated November 25, 1998, between
Children's Comprehensive Services, Inc. and SunTrust
Bank, Atlanta, including the Form of Rights
Certificate (Exhibit A) and the Form of Summary of
Rights (Exhibit B).
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CHILDREN'S COMPREHENSIVE SERVICES, INC.
Date: November 25, 1998 By: /s/ Donald B. Whitfield
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Donald B. Whitfield
Vice President Finance and Chief Financial
Officer
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EXHIBIT 99.1
CHILDREN'S COMPREHENSIVE SERVICES, INC. ANNOUNCES ADOPTION OF
SHAREHOLDER RIGHTS PLAN
NASHVILLE, TENNESSEE (November 25, 1998) - Children's Comprehensive
Services, Inc. ("CCS")(NM:KIDS) announced today that its Board of Directors has
adopted a Shareholder Rights Plan. Holders of CCS Common Stock as of December 8,
1998 will receive common stock purchase rights as a dividend at the rate of one
Right for each share of Common Stock. The Rights will expire on December 8,
2008.
The Shareholder Rights Plan is designed to deter certain types of
unfair takeover tactics and to prevent an acquiror from gaining control of the
Company without offering a fair price to all of the Company's shareholders. The
Plan is not intended to prevent a fully financed and adequate offer for the
Company. The Shareholder Rights Plan was not adopted in response to any specific
attempt to acquire control of the Company and the Company is not aware of any
such effort.
Each Right will initially entitle its holder to purchase one share of
CCS Common Stock at an exercise price of $75.00 per Right, subject to
adjustment. Because the Rights will not initially be exercisable and will trade
with the Common Stock, separate right certificates will not be provided to
shareholders at this time. Each Right will become exercisable only upon a
person's or group's acquisition of, or commencement of a tender or exchange
offer for, 10% or more of the Company's Common Stock. Rights will also become
exercisable in the event of certain mergers or asset sales involving more than
50% of the Company's assets or earning power.
Upon becoming exercisable, each Right will allow the holder (other than
the person or group whose action has triggered the exercisability of the
Rights), under alternative circumstances, to buy either securities of CCS or
securities of the acquiring company (depending on the form of the transaction)
having a value of twice the exercise price of the Rights. The Rights generally
are redeemable by the Board of Directors at $0.01 per Right at any time prior to
the tenth day following the time the Rights become exercisable. The Rights also
are generally exchangeable by the Board of Directors at an exchange ratio of one
share of Common Stock per Right at any time after the Rights have become
exercisable and prior to the acquisition by any person or group of 50% or more
of the Company's Common Stock.
Details of the Shareholder Rights Plan and Rights are summarized in a
letter that will be mailed to all CCS shareholders as of December 8, 1998.
Children's Comprehensive Services provides education, treatment and
juvenile justice services for at-risk and troubled youth either directly or
through management contracts. It currently offers these services through the
operation and management of nonresidential specialized education programs and
day treatment programs and both open and secured residential treatment centers
in Alabama, Arkansas, California, Florida, Kentucky, Louisiana, Michigan,
Montana, Pennsylvania, Tennessee, Texas and Utah.
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EXHIBIT 99.2
EXECUTION COPY
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CHILDREN'S COMPREHENSIVE SERVICES, INC.
AND
SUNTRUST BANK, ATLANTA
RIGHTS AGREEMENT
DATED NOVEMBER 25, 1998
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TABLE OF CONTENTS
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RECITALS .........................................................................................................1
Section 1. Certain Definitions.............................................................................1
Section 2. Appointment of Rights Agent.....................................................................7
Section 3. Issue of Right Certificates.....................................................................8
Section 4. Form of Right Certificates......................................................................9
Section 5. Countersignature and Registration..............................................................10
Section 6. Transfer, Split Up, Combination and Exchange of Right Certificates; Mutilated,
Destroyed, Lost or Stolen Right Certificates...................................................11
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights..................................12
Section 8. Cancellation and Destruction of Right Certificates.............................................14
Section 9. Company Covenants Concerning Securities and Rights.............................................15
Section 10. Record Date....................................................................................17
Section 11. Adjustment of Purchase Price, Number and Kind of Securities or Number of
Rights.........................................................................................18
Section 12. Certificate of Adjusted Purchase Price or Number of Securities.................................31
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power...........................31
Section 14. Fractional Rights and Fractional Securities....................................................35
Section 15. Rights of Action...............................................................................37
Section 16. Agreement of Rights Holders....................................................................38
Section 17. Right Certificate Holder Not Deemed a Stockholder..............................................39
Section 18. Concerning the Rights Agent....................................................................39
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Section 19. Merger or Consolidation or Change of Name of Rights Agent......................................40
Section 20. Duties of Rights Agent.........................................................................41
Section 21. Change of Rights Agent.........................................................................45
Section 22. Issuance of New Right Certificates.............................................................46
Section 23. Redemption.....................................................................................47
Section 24. Notice of Certain Events.......................................................................48
Section 25. Notices........................................................................................50
Section 26. Supplements and Amendments.....................................................................51
Section 27. Exchange.......................................................................................52
Section 28. Successors; Certain Covenants..................................................................54
Section 29. Benefits of this Agreement.....................................................................54
Section 30. Severability...................................................................................54
Section 31. Governing Law..................................................................................54
Section 32. Counterparts...................................................................................55
Section 33. Descriptive Headings...........................................................................55
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RIGHTS AGREEMENT
This RIGHTS AGREEMENT, dated November 25, 1998 (this "Agreement"), is
made and entered into by and between Children's Comprehensive Services, Inc., a
Tennessee corporation (the "Company"), and SunTrust Bank, Atlanta, a Georgia
banking corporation.
RECITALS
WHEREAS, on November 25, 1998, the Board of Directors of the Company
authorized and declared a dividend distribution of one right ("Right") for each
share of common stock, par value $.01 per share, of the Company outstanding as
of the Close of Business (as hereinafter defined) on December 8, 1998 (the
"Record Date"), each Right initially representing the right to purchase one
Common Share (as hereinafter defined), upon the terms and subject to the
conditions herein set forth, and further authorized and directed the issuance of
one Right with respect to each Common Share (as hereinafter defined) issued or
delivered by the Company (whether originally issued or delivered from the
Company's treasury) after the Record Date but prior to the earlier of the
Distribution Date (as hereinafter defined) and the Expiration Date (as
hereinafter defined).
NOW THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement,
the following terms shall have the meanings indicated:
(a) "Acquiring Person" shall mean any Person (other than the
Company or any Subsidiary of the Company or any employee benefit or stock
ownership plan of the Company or of any Subsidiary of the Company or any Person
holding Common Shares for or pursuant to the terms of any such plan or for the
purpose of funding any such plan or funding other employee
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benefits for employees of the Company or of any Subsidiary (as hereinafter
defined)) who or which, together with all Affiliates and Associates of such
Person, shall be the Beneficial Owner of 10% or more of the Common Shares then
outstanding; provided, however, that such a Person shall not be deemed to have
become an "Acquiring Person" solely as a result of a reduction in the number of
Common Shares outstanding unless and until (i) such time as such Person or any
Affiliate or Associate of such Person shall thereafter become the Beneficial
Owner of any additional Common Shares, other than as a result of a stock
dividend, stock split or similar transaction effected by the Company in which
all holders of Common Shares are treated equally, or (ii) any other Person who
is the Beneficial Owner of any Common Shares shall thereafter become an
Affiliate or Associate of such Person; and further provided, however, that if
the Board of Directors of the Company determines in good faith that a Person
who would otherwise be an "Acquiring Person" 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", then such
Person shall not be deemed to be an "Acquiring Person" for any purposes of this
Agreement.
(b) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Exchange Act, as in effect on the date of this Agreement.
(c) A Person shall be deemed the "Beneficial Owner" of, and to
"beneficially own," any securities:
(i) which such Person or any of such Person's Affiliates
or Associates, directly or indirectly, has the right to acquire
(whether such right is exercisable immediately or
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only after the passage of time) pursuant to any agreement, arrangement
or understanding (whether or not in writing), or upon the exercise of
conversion rights, exchange rights, rights, warrants or options, or
otherwise (in each case, other than upon exercise or exchange of the
Rights); provided, however, that a Person shall not be deemed the
Beneficial Owner of, or to beneficially own, securities tendered
pursuant to a tender or exchange offer made by or on behalf of such
Person or any of such Person's Affiliates or Associates until such
tendered securities are accepted for purchase or exchange; or
(ii) which such Person or any of such Person's Affiliates
or Associates, directly or indirectly, has the right to vote or
dispose of, including pursuant to any agreement, arrangement or
understanding (whether or not in writing); or
(iii) which are beneficially owned, directly or indirectly, by
any other Person (or any Affiliate or Associate thereof) with which
such Person (or any of such Person's Affiliates or Associates) has any
agreement, arrangement or understanding (whether or not in writing)
with respect to acquiring, holding, voting or disposing of any voting
securities of the Company;
provided, however, that a Person shall not be deemed the Beneficial Owner of,
or to beneficially own, any security (A) if such Person has the right to vote
such security pursuant to an agreement, arrangement or understanding (whether
or not in writing) which (1) arises solely from a revocable proxy given to such
Person in response to a public proxy or consent solicitation made pursuant to,
and in accordance with, the General Rules and Regulations under the Exchange
Act and (2) is not also then reportable by such Person on Schedule 13D under
the Exchange Act (or any comparable or successor report), or (B) if such
beneficial ownership arises solely as a result of
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such Person's status as a "clearing agency," as defined in Section 3(a)(23) of
the Exchange Act; and provided, further, that nothing in this paragraph (c)
shall cause a Person engaged in business as an underwriter of securities to be
the Beneficial Owner of, or to beneficially own, any securities of the Company
acquired through such Person's participation in good faith in a firm commitment
underwriting registered under the Securities Act until the expiration of 40
calendar days after the date of such acquisition, or such later date as the
Board of Directors of the Company may determine in any specific case.
(d) "Business Day" shall mean any day other than a Saturday,
Sunday or a day on which banking institutions in the State of Tennessee (or
such other state in which the principal office of the Rights Agent is located)
are authorized or obligated by law or executive order to close.
(e) "Close of Business" on any given date shall mean 5:00 P.M.,
Nashville, Tennessee time, on such date; provided, however, that if such date
is not a Business Day it shall mean 5:00 P.M., Nashville, Tennessee time, on
the next succeeding Business Day.
(f) "Common Shares" when used with reference to the Company shall
mean the common stock, par value $.01 per share, of the Company; provided,
however, that, if the Company is the continuing or surviving corporation in a
transaction described in Section 11(a)(ii) or Section 13(a)(ii) hereof, "Common
Shares" when used with reference to the Company shall mean the capital stock or
equity security with the greatest aggregate voting power of the Company.
"Common Shares" when used with reference to any Person other than the Company,
including an Issuer, shall mean the capital stock of such Person with the
greatest aggregate voting power of
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such Person or the equity securities or other equity interest having power to
control or direct the management of such Person.
(g) "Distribution Date" shall mean the earlier of: (i) the Close
of Business on the tenth calendar day after the Share Acquisition Date (or, if
the tenth day after the Share Acquisition Date occurs before the Record Date,
the Close of Business on the Record Date), and (ii) the Close of Business on
the tenth Business Day (or such later date as may be specified by the Board of
Directors of the Company) after the date of the commencement of a tender or
exchange offer by any Person (other than the Company or any Subsidiary of the
Company or any employee benefit or stock ownership plan of the Company or of
any Subsidiary of the Company or any Person holding Common Shares for or
pursuant to the terms of any such plan or for the purpose of funding any such
plan or funding other employee benefits for employees of the Company or of any
Subsidiary), within the meaning of Rule 14d-2 of the General Rules and
Regulations under the Exchange Act if upon the consummation thereof such Person
would become an Acquiring Person.
(h) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
(i) "Expiration Date" shall mean the earliest of (i) the Close of
Business on the Final Expiration Date, (ii) the time at which the Rights are
redeemed as provided in Section 23 hereof, and (iii) the time at which all
exercisable Rights are exchanged as provided in Section 27 hereof.
(j) "Final Expiration Date" shall mean the tenth anniversary of
the Record Date.
(k) "Flip-in Event" shall mean any event described in clauses (A)
or (B) of Section 11(a)(ii) hereof.
(l) "Flip-over Event" shall mean any event described in
subsections (i), (ii) or (iii) of Section 13(a) hereof.
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(m) "Issuer" shall have the meaning set forth in Section 13(b)
hereof.
(n) "NASDAQ" shall mean the National Association of Securities
Dealers, Inc. Automated Quotation System.
(o) "Person" shall mean any individual, firm, corporation,
partnership or other entity, and shall include any successor (by merger or
otherwise) of such entity.
(p) "Purchase Price" shall mean initially $75.00 per Common Share
and shall be subject to adjustment from time to time as provided in this
Agreement.
(q) "Redemption Price" shall mean $0.01 per Right, subject to
adjustment by resolution of the Board of Directors of the Company to reflect
any stock split, stock dividend or similar transaction occurring after the date
hereof.
(r) "Right" shall have the meaning set forth in the Recitals to
this Agreement.
(s) "Right Certificates" shall mean certificates evidencing the
Rights, in substantially the form of Exhibit A attached hereto.
(t) "Rights Agent" shall mean SunTrust Bank, Atlanta, unless and
until a successor Rights Agent shall have become such pursuant to the terms of
this Agreement, and thereafter, "Rights Agent" shall mean such successor Rights
Agent.
(u) "Securities Act" shall mean the Securities Act of 1933, as
amended.
(v) "Share Acquisition Date" shall mean the first date of public
announcement by the Company or an Acquiring Person (by press release, filing
made with the Securities and Exchange Commission pursuant to Section 13(d)
under the Exchange Act or pursuant to other applicable law or otherwise) that
an Acquiring Person has become such.
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(w) "Subsidiary" when used with reference to 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, directly or indirectly,
by such Person; provided, however, that for purposes of Section 13(b) hereof,
"Subsidiary" when used with reference to any Person shall mean any corporation
or other entity of which at least 20% of the voting power of the voting equity
securities or equity interests is owned, directly or indirectly, by such
Person.
(x) "Summary of Rights to Purchase Common Shares" shall mean the
Summary of Rights to Purchase Common Shares, in substantially the form of
Exhibit B attached hereto.
(y) "Trading Day" shall mean any day on which the principal
national securities exchange on which the Common Shares are listed or admitted
to trading is open for the transaction of business or, if the Common Shares are
not listed or admitted to trading on any national securities exchange, a
Business Day.
(z) "Triggering Event" shall mean any Flip-in Event or Flip-over
Event.
Section 2. Appointment of Rights Agent. The Company hereby
appoints the Rights Agent to act as agent for the Company and the holders of
the Rights (who, in accordance with Section 3 hereof, shall also be, prior to
the Distribution Date, the holders of the Common Shares) in accordance with the
terms and conditions hereof, and the Rights Agent hereby accepts such
appointment and hereby certifies that it complies with the requirements of
NASDAQ governing transfer agents and registrars. The Company may from time to
time act as Co-Rights Agent or appoint such Co-Rights Agents as it may deem
necessary or desirable. Any actions which may be taken by the Rights Agent
pursuant to the terms of this Agreement may be taken by any such Co-Rights
Agent. To the extent that any Co-Rights Agent takes any action pursuant to this
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Agreement, such Co-Rights Agent shall be entitled to all of the rights and
protections of, and subject to all of the applicable duties and obligations
imposed upon, the Rights Agent pursuant to the terms of this Agreement.
Section 3. Issue of Right Certificates.
(a) Until the Distribution Date, (i) the Rights shall be evidenced
by the certificates representing Common Shares registered in the names of the
record holders thereof (which certificates representing Common Shares shall
also be deemed to be Right Certificates), together with a copy of the Summary
of Rights, (ii) the Rights shall be transferable only in connection with the
transfer of the underlying Common Shares, and (iii) the surrender for transfer
of any certificates evidencing Common Shares in respect of which Rights have
been issued, with or without a copy of the Summary of Rights, shall also
constitute the transfer of the Rights associated with the Common Shares
evidenced by such certificates.
(b) As promptly as practicable after the Record Date, the Company
shall send a copy of 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
as of such date.
(c) Rights shall be issued by the Company in respect of all
Common Shares (other than Common Shares issued upon the exercise or exchange of
any Right) issued or delivered by the Company (whether originally issued or
delivered from the Company's treasury) after the Record Date but prior to the
earlier of the Distribution Date and the Expiration Date. Certificates
evidencing such Common Shares shall have stamped on, impressed on, printed on,
written on or otherwise affixed to them the following legend or such similar
legend as the Company may deem
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appropriate and as is not inconsistent with the provisions of this Agreement,
or as may be required to comply with any applicable law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any stock
exchange or transaction reporting system on which the Common Shares may from
time to time be listed or quoted, or to conform to usage:
This Certificate also evidences and entitles the holder hereof to
certain Rights as set forth in a Rights Agreement between Children's
Comprehensive Services, Inc. and SunTrust Bank, Atlanta, dated
November 25, 1998 (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 Children's Comprehensive
Services, Inc. Under certain circumstances, as set forth in the Rights
Agreement, such Rights may be redeemed, may be exchanged, may expire,
may be amended or may be evidenced by separate certificates and no
longer be evidenced by this Certificate. Children's Comprehensive
Services, Inc. will mail to the holder of this Certificate a copy of
the Rights Agreement without charge promptly after receipt of a
written request therefor. Under certain circumstances as set forth in
the Rights Agreement, Rights beneficially owned by an Acquiring Person
or any Affiliate or Associate of an Acquiring Person (as such terms
are defined in the Rights Agreement) may become null and void.
(d) As promptly as practicable after the Distribution Date, the
Company shall prepare and execute, the Rights Agent will countersign and the
Company shall send or cause to be sent (and the Rights Agent shall, if
requested, send), by first-class, insured, postage prepaid mail, to each record
holder of Common Shares as of the Close of Business on the Distribution Date,
at the address of such holder shown on the records of the Company, a Right
Certificate, evidencing one Right for each Common Share so held, subject to
adjustment. As of and after the Distribution Date, the Rights shall be
evidenced solely by such Right Certificates.
Section 4. Form of Right Certificates. The Right Certificates
(and the form of election to purchase and form of assignment to be printed on
the reverse thereof) shall be substantially in the form set forth as Exhibit A
hereto with such changes, marks of identification or designation
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<PAGE> 13
and such legends, summaries or endorsements printed thereon as the Company may
deem appropriate and as are not inconsistent with the provisions of this
Agreement, or as may be required to comply with any applicable law or with any
rule or regulation made pursuant thereto or with any rule or regulation of any
stock exchange or transaction reporting system on which the Rights may from
time to time be listed or quoted, or to conform to usage. Subject to the
provisions of Sections 22, 23 and 27 hereof, the Right Certificates, whenever
issued, on their face shall entitle the holders thereof to purchase such number
of Common Shares as shall be set forth therein at the Purchase Price set forth
therein, but the Purchase Price, the number and kind of securities issuable
upon exercise of each Right and the number of Rights outstanding shall be
subject to adjustment as provided herein.
Section 5. Countersignature and Registration.
(a) The Right Certificates shall be executed on behalf of the
Company by its Chairman of the Board, President or any Vice President, either
manually or by facsimile signature, and shall have affixed thereto the
Company's seal or a facsimile thereof which shall be attested by the Secretary
or an Assistant Secretary of the Company, either manually or by facsimile
signature. The Right Certificates shall be manually countersigned by the Rights
Agent and shall not be valid for any purpose unless so countersigned. In case
any officer of the Company who shall have signed any of the 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
10
<PAGE> 14
signed on behalf of the Company by any person who, at the actual date of the
execution of such Right Certificate, shall be a proper officer of the Company
to sign such Right Certificate, although at the date of the execution of this
Rights Agreement any such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent shall keep
or cause to be kept, at the principal office of the Rights Agent designated for
such purpose and at such other offices 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 any transaction reporting system on
which the Rights may from time to time be listed or quoted, books for
registration and transfer of the Right Certificates issued hereunder. Such
books shall show the names and addresses of the respective holders of the Right
Certificates, the number of Rights evidenced on its face by each of the Right
Certificates and the date of each of the Right Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates.
(a) Subject to the provisions of Sections 7(d) and 14 hereof, at
any time after the Close of Business on the Distribution Date and prior to the
Expiration Date, any Right Certificate or Right Certificates representing
exercisable Rights may be transferred, split up, combined or exchanged for
another Right Certificate or Right Certificates, entitling the registered
holder to purchase a like number of Common Shares (or other securities, as the
case may be) as the Right Certificate or Right Certificates surrendered then
entitled such holder (or former holder in the case of a transfer) to purchase.
Any registered holder desiring to transfer, split up, combine or exchange any
such Right Certificate shall make such request in writing delivered to the
Rights Agent, and shall surrender the Right Certificate or Right Certificates
to be transferred, split up,
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<PAGE> 15
combined or exchanged at the principal office of the Rights Agent designated
for such purpose. Thereupon or as promptly as practicable thereafter, subject
to the provisions of Sections 7(d) and 14 hereof, the Company shall prepare,
execute and deliver to the Rights Agent, and the Rights Agent shall countersign
and deliver a Right Certificate or Right Certificates, as the case may be, as
so requested. The Company may require payment of a sum sufficient to cover any
tax or governmental charge that may be imposed in connection with any transfer,
split up, combination or exchange of Right Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation
of a Right Certificate, and, in case of loss, theft or destruction, of
indemnity or security reasonably satisfactory to them, and 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 shall prepare, execute and deliver a new Right
Certificate of like tenor to the Rights Agent and the Rights Agent shall
countersign and deliver such new Right Certificate to the registered holder in
lieu of the Right Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date
of Rights.
(a) The registered holder of any Right Certificate may exercise
the Rights evidenced thereby (except as otherwise provided herein) in whole or
in part at any time after the Distribution Date and prior to the Expiration
Date, upon surrender of the Right Certificate, with the form of election to
purchase on the reverse side thereof duly executed, to the Rights Agent at the
office or offices of the Rights Agent designated for such purpose, together
with payment in cash, in lawful money of the United States of America by
certified check or bank draft payable to the order
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<PAGE> 16
of the Company equal to the sum of (i) the Purchase Price for the total number
of securities as to which such surrendered Rights are exercised and (ii) an
amount equal to any applicable transfer tax required to be paid by the holder
of such Right Certificate in accordance with the provisions of Section 9(c)
hereof.
(b) Upon receipt of a Right Certificate representing exercisable
Rights with the form of election to purchase duly executed, accompanied by
payment as described above, the Rights Agent shall promptly (i) requisition
from any transfer agent of the Common Shares (or make available, if the Rights
Agent is the transfer agent) certificates representing the number of Common
Shares to be purchased (and the Company hereby irrevocably authorizes and
directs its transfer agent to comply with all such requests), (ii) after
receipt of such certificates, 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, (iii) when appropriate,
requisition from the Company or any transfer agent therefor (or make available,
if the Rights Agent is the transfer agent) certificates representing the number
of equivalent common shares to be issued in lieu of the issuance of Common
Shares in accordance with the provisions of Section 11(a)(iii) hereof, (iv)
when appropriate, after receipt of such certificates, 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, (v) when appropriate, requisition from the Company the amount of cash,
debt securities or other assets to be paid in lieu of the issuance of
fractional shares in accordance with the provisions of Section 14 hereof or in
lieu of the issuance of Common Shares in accordance with the provisions of
Section 11(a)(iii) hereof, (vi) when appropriate, after receipt, deliver such
cash, debt securities or other assets to or upon
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<PAGE> 17
the order of the registered holder of such Right Certificate, and (vii) when
appropriate, deliver any due bill or other instrument provided to the Rights
Agent by the Company for delivery to the registered holder of such Right
Certificate as provided by Section 11(l) hereof.
(c) In case the registered holder of any Right Certificate shall
exercise less than all the Rights evidenced thereby, the Company shall prepare,
execute and deliver a new Right Certificate evidencing Rights equivalent to the
Rights remaining unexercised and the Rights Agent shall countersign and deliver
such new Right Certificate to the registered holder of such Right Certificate
or to his duly authorized assigns, subject to the provisions of Section 14
hereof.
(d) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to any purported transfer, split up, combination or
exchange of any Right Certificate pursuant to Section 6 hereof or exercise of a
Right Certificate as set forth in this Section 7 unless the registered holder
of such Right Certificate shall have (i) completed and signed the certificate
following the form of assignment or form of election to purchase, as
applicable, set forth on the reverse side of the Right Certificate surrendered
for such transfer, split up, combination, exchange or exercise, and (ii)
provided such additional evidence of the identity of the Beneficial Owner (or
former Beneficial Owner) or Affiliates or Associates thereof as the Company
shall have reasonably requested.
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 stock transfer agents, be delivered to the Rights Agent for cancellation or
in canceled form, or, if surrendered to the Rights Agent, shall be canceled by
it, and no Right Certificates shall be issued in lieu thereof except as
expressly permitted by this
14
<PAGE> 18
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. Company Covenants Concerning Securities and Rights.
The Company covenants and agrees that:
(a) So long as the Common Shares issuable upon the exercise of the
Rights may be quoted on a transaction reporting system, it shall endeavor to
cause, from and after such time as the Rights become exercisable, all
securities reserved for issuance upon the exercise of Rights to be quoted on
such transaction reporting system upon official notice of issuance.
(b) It shall take all such action as may be necessary to ensure
that all Common Shares and/or other securities delivered upon exercise of
Rights, at the time of delivery of the certificates for such securities shall
be (subject to payment of the Purchase Price) duly and validly authorized and
issued, fully paid and nonassessable securities.
(c) It shall pay when due and payable any and all federal and
state transfer taxes and charges that may be payable in respect of the issuance
or delivery of the Right Certificates and of any certificates representing
securities issued upon the exercise of Rights; provided, however, that the
Company shall not be required to pay any transfer tax or charge 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 representing
securities issued upon the exercise of Rights in a name other
15
<PAGE> 19
than that of, the registered holder of the Right Certificate evidencing Rights
surrendered for exercise, or to issue or deliver any certificates representing
securities issued upon the exercise of any Rights until any such tax or charge
shall have been paid (any such tax or charge being payable by the holder of
such Right Certificate at the time of surrender) or until it has been
established to the Company's reasonable satisfaction that no such tax is due.
(d) It shall use its best efforts (i) to file on an appropriate
form, as soon as practicable following the first occurrence of a Triggering
Event, a registration statement under the Securities Act with respect to the
securities issuable upon exercise of the Rights, (ii) to cause such
registration statement to become effective as soon as practicable after such
filing, and (iii) to cause such registration statement to remain effective
(with a prospectus at all times meeting the requirements of the Securities Act)
until the earlier of (A) the date as of which the Rights are no longer
exercisable for such securities and (B) the Expiration Date. The Company shall
also take such action as may be appropriate under, or to ensure compliance
with, the securities or "blue sky" laws of the various states in connection
with the exercisability of the Rights. The Company may temporarily suspend, for
a period of time after the date set forth in clause (i) of the first sentence
of this Section 9(d), the exercisability of the Rights in order to prepare and
file such registration statement and to permit it to become effective. Upon any
such suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a
public announcement at such time as the suspension is no longer in effect. In
addition, if the Company shall determine that a registration statement should
be filed under the Securities Act or any state securities laws following the
Distribution Date, the Company may temporarily suspend the exercisability of
the Rights in each relevant jurisdiction
16
<PAGE> 20
until such time as a registration statement has been declared effective and,
upon any such suspension, the Company shall issue a public announcement stating
that the exercisability of the Rights has been temporarily suspended, as well
as a public announcement at such time as the suspension is no longer in effect.
Notwithstanding anything in this Agreement to the contrary, the Rights shall
not be exercisable in any jurisdiction if the requisite registration or
qualification in such jurisdiction shall not have been effected or the exercise
of the Rights shall not be permitted under applicable law.
(e) Notwithstanding anything in this Agreement to contrary, after
the Distribution Date it shall not, except as permitted by Section 23 or
Section 26 hereof, take (or permit any Subsidiary to take) any action if at the
time such action is taken it is reasonably foreseeable that such action will
eliminate or otherwise diminish the benefits intended to be afforded by the
Rights.
(f) In the event that the Company is obligated to issue securities
of the Company other than Common Shares, pay cash and/or distribute other
property pursuant to Sections 11, 13 or 14 hereof, it shall 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.
Section 10. Record Date. Each Person in whose name any
certificate representing Common Shares is issued upon the exercise of Rights
shall for all purposes be deemed to have become the holder of record of the
Common Shares represented thereby on, and such certificate shall be dated, the
date upon which the Right Certificate evidencing such Rights was duly
surrendered and payment of the Purchase Price (and all applicable transfer
taxes) was made; provided, however, that if the date of such surrender and
payment is a date upon which the Common Shares transfer books of the Company
are closed, such Person shall be deemed to have
17
<PAGE> 21
become the record holder of such securities on, and such certificate shall be
dated, the next succeeding Business Day on which the Common Shares transfer
books of the Company are open. Prior to the exercise of the Rights evidenced
thereby, the holder of a Right Certificate shall not be entitled to any rights
of a stockholder of the Company with respect to securities for which the Rights
shall be exercisable, including, without limitation, the right to vote, to
receive dividends or other distributions or to exercise any preemptive rights,
and shall not be entitled to receive any notice of any proceedings of the
Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind of
Securities or Number of Rights. The Purchase Price, the number and kind of
securities issuable upon exercise of each Right and the number of Rights
outstanding are subject to adjustment from time to time as provided in this
Section 11.
(a) (i) In the event that the Company shall at any time after
the date of this Agreement (A) declare a dividend on the Common Shares payable
in Common Shares, (B) subdivide the outstanding Common Shares, (C) combine the
outstanding Common Shares into a smaller number of shares, or (D) issue any
shares of its capital stock in a reclassification of the Common Shares
(including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing or surviving corporation), 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/or
the number and/or kind of shares of capital stock issuable on such date upon
exercise of a Right, shall be proportionately adjusted so that the holder of
any Right exercised after such time shall be entitled to receive upon payment
of the Purchase Price then in effect the
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<PAGE> 22
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 Common Shares transfer books of the Company were open, the
holder of such Right would have owned upon such exercise and been
entitled to receive by virtue of such dividend, subdivision,
combination or reclassification. If an event occurs which would
require an adjustment under both this Section 11(a)(i) and Section
11(a)(ii) hereof or Section 13 hereof, the adjustment provided for in
this Section 11(a)(i) shall be in addition to, and shall be made prior
to, any adjustment required pursuant to Section 11(a)(ii) or Section
13 hereof.
(ii) Subject to the provisions of Section 27 hereof, in
the event that:
(A) any Acquiring Person or any Affiliate or
Associate of any Acquiring Person, at any time after the date
of this 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 (other than in a transaction
subject to Section 13 hereof); or
(B) any Person (other than the Company or any
Subsidiary of the Company or any employee benefit or stock
ownership plan of the Company or of any Subsidiary of the
Company or any Person holding Common Shares for or pursuant
to the terms of any such plan or for the purpose of funding
any such plan or funding other employee benefits for
employees of the Company or of any Subsidiary) who or which,
together with all Affiliates and Associates of such Person,
shall at any time after date of this Agreement, become an
Acquiring Person (other than pursuant to any transaction set
forth in Section 13(a) hereof),
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<PAGE> 23
then, and in each such case, proper provision shall be made so that each holder
of a Right, except as provided below, shall thereafter have a right to receive,
upon exercise thereof in accordance with the terms of this Agreement at an
exercise price per Right equal to the product of the then-current Purchase
Price multiplied by the number of Common Shares for which a Right was
exercisable immediately prior to the first occurrence of a Triggering Event,
such number of Common Shares as shall equal the result obtained by (x)
multiplying the then-current Purchase Price by the number of Common Shares for
which a Right was exercisable immediately prior to the first occurrence of a
Triggering Event, and dividing that product by (y) 50% of the current per share
market price of the Common Shares (determined pursuant to Section 11(d) hereof)
on the date of the first occurrence of a Triggering Event. Notwithstanding
anything in this Agreement to the contrary, from and after the later of the
Distribution Date and the first occurrence of a Flip-in Event, (1) any Rights
that are or were acquired or beneficially owned by any Acquiring Person (or any
Affiliate or Associate of such Acquiring Person) shall be void and any holder
of such Rights shall thereafter have no right to exercise such Rights under any
provision of this Agreement, (2) no Right Certificate shall be issued pursuant
to this Agreement that represents Rights beneficially owned by an Acquiring
Person or any Affiliate or Associate thereof, (3) no Right Certificate shall be
issued at any time upon the transfer of any Rights to an Acquiring Person or
any Affiliate or Associate thereof or to any nominee of such Acquiring Person
or Affiliate or Associate thereof, and (4) any Right Certificate delivered to
the Rights Agent for transfer to an Acquiring Person or any Affiliate or
Associate thereof shall be canceled.
(iii) Upon the occurrence of a Flip-in Event, if there
shall not be sufficient Common Shares authorized but unissued or
issued but not outstanding to permit the
20
<PAGE> 24
issuance of all the Common Shares issuable in accordance with
subsection (ii) hereof upon the exercise of a Right, the Board of
Directors of the Company shall use its best efforts promptly to
authorize and, subject to the provisions of Section 9(d) hereof, make
available for issuance additional Common Shares, or other equity
securities of the Company having equivalent voting rights and an
equivalent value (as determined in good faith by the Board of
Directors of the Company) to the Common Shares (for purposes of this
Section 11(a)(iii), "equivalent common shares"). In the event that
equivalent common shares are so authorized, upon the exercise of a
Right in accordance with the provisions of Section 7 hereof, the
registered holder shall be entitled to receive (A) Common Shares, to
the extent any are available and (B) a number of equivalent common
shares, which the Board of Directors of the Company shall have
determined in good faith to have a value equivalent to the excess of
(x) the aggregate current per share market value of all the Common
Shares issuable in accordance with subsection (ii) hereof upon the
exercise of a Right (the "Exercise Value") over (y) the aggregate
current per share market value of any Common Shares available for
issuance upon the exercise of such Right; provided, however, that if
at any time after 90 calendar days after the first occurrence of a
Flip-in Event, there shall not be sufficient Common Shares and/or
equivalent common shares available for issuance upon the exercise of a
Right, then the Company shall be obligated to deliver, upon the
surrender of such Right and without requiring payment of the Purchase
Price, (1) Common Shares (to the extent available), (2) equivalent
common shares (to the extent available), (3) cash (to the extent
permitted by applicable law and any agreements or instruments to which
the Company is a party in effect immediately prior to the first
21
<PAGE> 25
occurrence of any Flip-in Event), (4) debt securities of the Company,
(5) other assets, or (6) any combination of the foregoing, in any
event having an aggregate value which the Board of Directors shall
have determined in good faith to be equal to the excess of (I) the
Exercise Value over (II) the product of the then-current Purchase
Price multiplied by the number of Common Shares for which a Right was
exercisable immediately prior to the first occurrence of a Triggering
Event.
(iv) If the rules of the national securities exchange,
registered as such pursuant to Section 6 of the Exchange Act, or of
the national securities association, registered as such pursuant to
Section 15A of the Exchange Act, on which the Common Shares are
principally traded would prohibit such exchange or association from
listing or continuing to list, or from authorizing for or continuing
quotation and/or transaction reporting through an interdealer
quotation system, the Common Shares or other equity securities of the
Company because the issuance of Common Shares in accordance with
subsection (ii) hereof would nullify, restrict or disparately reduce
the per share voting rights of holders of Common Shares, the Company
shall: (A) determine the excess of (x) the Exercise Value over (y) the
aggregate current per share market value of all the Common Shares
issuable in accordance with subsection (ii) hereof, and (B) with
respect to each Right, make adequate provision to substitute for the
Common Shares issuable in accordance with subsection (ii) hereof, upon
payment of the applicable Purchase Price, (1) cash, (2) a reduction in
the Purchase Price, (3) equity securities of the Company, including,
without limitation, equivalent common shares (as defined in Section
11(a)(iii)), other than securities which would have the effect of
nullifying, restricting or disparately reducing the per share
22
<PAGE> 26
voting rights of holders of Common Shares, (4) debt securities of the
Company, (5) other assets, or (6) any combination of the foregoing, in
any event having an aggregate value which the Board of Directors shall
have determined in good faith to be equal to the aggregate current per
share market value of all the Common Shares issuable in accordance
with subsection (ii); provided, however, if the Company shall not have
made adequate provision to deliver value pursuant to clause (B) above
within 30 days after the first occurrence of a Flip-in Event, then the
Company shall be obligated to deliver, upon the surrender for exercise
of a Right and without requiring payment of the Purchase Price, cash
having an aggregate value equal to the excess of (x) the Exercise
Value and (y) the aggregate current per share market value of all the
Common Shares issuable in accordance with subsection (ii) hereof. To
the extent that the Company determines that some action need be taken
pursuant to the first sentence of this Section 11(a)(iv), the Company
(x) shall provide, subject to Section 11(a)(ii) hereof, that such
action shall apply uniformly to all outstanding Rights and (y) may
suspend the exercisability of the Rights, but not longer than 90
calendar days after the first occurrence of a Flip-in Event, in order
to decide the appropriate form of distribution to be made pursuant to
such first sentence and to determine the value thereof. In the event
of any such suspension, the Company shall issue a public announcement
stating that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement at such time as the
suspension is no longer in effect. For purposes of this Section
11(a)(iv), the value of the Common Shares shall be the current per
share market price of the Common Shares (determined pursuant to
Section (11(d) hereof) on the date of the first occurrence of a
Flip-in Event and the value of any
23
<PAGE> 27
equivalent common share shall be deemed to have the same value as a
Common Share on such date.
(b) In the event that the Company shall fix a record date for the
issuance of rights, options or warrants to all holders of Common Shares
entitling them (for a period expiring within 45 calendar days after such record
date) to subscribe for or purchase Common Shares (or securities having
equivalent rights, privileges and preferences as the Common Shares (for
purposes of this Section 11(b), "equivalent common shares")) or securities
convertible into Common Shares or equivalent common shares at a price per
Common Share or equivalent common share (or having a conversion price per
share, if a security convertible into Common Shares or equivalent common
shares) less than the current per share market price of the Common Shares
(determined pursuant to Section 11(d) hereof) on such record date, the Purchase
Price to be in effect after such record date shall be determined by multiplying
the Purchase Price in effect immediately prior to such record date by a
fraction, the numerator of which shall be the number of Common Shares
outstanding on such record date plus the number of Common Shares which the
aggregate offering price of the total number of Common Shares and/or equivalent
common shares so to be offered (and/or the aggregate initial conversion price
of the convertible securities so to be offered) would purchase at such current
per share market price and the denominator of which shall be the number of
Common Shares outstanding on such record date plus the number of additional
Common Shares and/or equivalent common shares 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
24
<PAGE> 28
Company, whose determination shall be described in a statement filed with the
Rights Agent. Common Shares owned by or held for the account of the Company
shall not be deemed outstanding for the purpose of any such computation. Such
adjustment shall be made successively whenever such a record date is fixed; and
in the event that such rights, options or warrants are not so issued, the
Purchase Price shall be adjusted to be the Purchase Price which would then be
in effect if such record date had not been fixed.
(c) In the event that the Company shall fix a record date for the
making of a distribution to all holders of Common 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 (other than a regular periodic cash dividend), assets, stock
(other than a dividend payable in Common Shares) or subscription rights,
options or warrants (excluding those referred to in Section 11(b) hereof), the
Purchase Price to be in effect after such record date shall be determined by
multiplying the Purchase Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the current per share market
price of the Common Shares (as determined pursuant to Section 11(d) hereof) on
such record date or, if earlier, the date on which Common Shares begin to trade
on an ex-dividend or when-issued basis for such distribution, less the fair
market value (as determined in good faith by the Board of Directors of the
Company, whose determination shall be described in a statement filed with the
Rights Agent) of the portion of the evidences of indebtedness, cash, assets or
stock so to be distributed or of such subscription rights, options or warrants
applicable to one Common Share, and the denominator of which shall be such
current per share market price of the Common Shares. Such adjustments shall be
made successively whenever such a record date is fixed; and in the event
25
<PAGE> 29
that such distribution is not so made, the Purchase Price shall again be
adjusted to be the Purchase Price which would then be in effect if such record
date had not been fixed.
(d) For the purpose of any computation hereunder, the "current per
share market price" of Common Shares on any date shall be deemed to be the
average of the daily closing prices per share of such Common Shares for the 30
consecutive Trading Days immediately prior to such date; provided, however,
that in the event that the current per share market price of the Common Shares
is determined during a period following the announcement by the Issuer of such
Common Shares of (i) a dividend or distribution on such Common Shares payable
in such Common Shares or securities convertible into such Common Shares (other
than the Rights) or (ii) any subdivision, combination or reclassification of
such Common Shares, and prior to the expiration of 30 Trading Days after the
ex-dividend date for such dividend or distribution, or the record date for such
subdivision, combination or reclassification, then, and in each such case, the
current per share market price shall be appropriately adjusted to take into
account ex-dividend trading or to reflect the current per share market price
per Common Share equivalent. 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 Common Shares 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 Common Shares are listed or admitted to
trading or, if the Common Shares are not listed or admitted to trading on any
national securities exchange, the last quoted sale price or, if not so
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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 Common Shares are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Common Shares selected by the
Board of Directors of the Company. If the Common Shares are not publicly held
or not so listed or traded, or not the subject of available bid and asked
quotes, "current per share market price" shall mean the fair value per share as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent.
(e) Except as set forth below, 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; provided, however, that any adjustments which by
reason of this Section 11(e) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Section 11 shall be made to the nearest cent or to the nearest one
ten-thousandth of a Common Share or other security, as the case may be.
Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than the earlier of (i)
three years from the date of the transaction which requires such adjustment and
(ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section 11(a)
hereof, the holder of any Right thereafter exercised shall become entitled to
receive any securities of the Company other than Common Shares, thereafter the
number of such other securities so receivable upon exercise of any Right shall
be subject to adjustment from time to time in a manner and on terms as nearly
27
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equivalent as practicable to the provisions with respect to the Common Shares
contained in this Section 11, and the provisions of Sections 7, 9, 10 and 13
hereof with respect to the Common Shares shall apply on like terms to any such
other securities.
(g) All Rights originally issued by the Company subsequent to
any adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of Common Shares issuable
from time to time hereunder upon exercise of the Rights, all subject to further
adjustment as provided herein.
(h) Unless the Company shall have exercised its election as
provided in Section 11(i) hereof, upon each adjustment of the Purchase Price as
a result of the calculations made in Section 11(b) and Section 11(c) hereof
made with respect to a distribution of subscription rights, options or warrants
applicable to Common Shares, 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 Common Shares (calculated to the
nearest one-thousandth a Common Share) obtained by (i) multiplying (x) the
number of Common Shares issuable upon exercise of a Right immediately prior to
this adjustment by (y) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price, and (ii) dividing the product so obtained by
the Purchase Price in effect immediately after such adjustment of the Purchase
Price.
(i) The Company may elect, on or after the date of any adjustment
of the Purchase Price, to adjust the number of Rights in substitution for any
adjustment in the number of Common Shares 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 number of Common Shares for which a Right
was exercisable immediately prior to such adjustment. Each Right held of record
prior to such
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adjustment of the number of Rights shall become that number of Rights
(calculated to the nearest one-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 10 calendar days
later than the date of the public announcement. If Right Certificates have been
issued, upon each adjustment of the number of Rights pursuant to this Section
11(i), the Company shall, as promptly as practicable, cause to be distributed
to holders of record of Right Certificates on such record date Right
Certificates evidencing, subject to the provisions of Section 14 hereof, the
additional Rights to which such holders shall be entitled as a result of such
adjustment, or, at the option of the Company, shall cause to be distributed to
such holders of record in substitution and replacement for the Right
Certificates held by such holders prior to the date of adjustment, and upon
surrender thereof if required by the Company, new Right Certificates evidencing
all the Rights to which such holders shall be entitled after such adjustment.
Right Certificates so to be distributed shall be issued, executed and
countersigned in the manner provided for herein (and 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.
(j) Irrespective of any adjustment or change in the Purchase Price
or the number or kind of securities issuable upon the exercise of the Rights,
the Right Certificates theretofore and
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thereafter issued may continue to express the Purchase Price and the number and
kind of securities which were expressed in the initial Right Certificates
issued hereunder.
(k) Before taking any action that would cause an adjustment
reducing the Purchase Price below the then par value, if any, of the Common
Shares or other securities issuable upon exercise of the Rights, the Company
shall take any corporate action which may, in the opinion of its counsel, be
necessary or appropriate in order that the Company may validly and legally
issue fully paid and nonassessable Common Shares or such other securities at
such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised after such record date
the number of Common Shares or other securities of the Company, if any,
issuable upon such exercise over and above the number of Common Shares or other
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 Common
Shares or other securities upon the occurrence of the event requiring such
adjustment.
(m) Notwithstanding anything in this Agreement to the contrary,
the Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that in its good faith judgment the Board of Directors of the
Company shall determine to be advisable in order that any (i) consolidation or
subdivision of the Common Shares, (ii) issuance wholly for cash of Common
Shares at less than
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<PAGE> 34
the current per share market price therefor, (iii) issuance wholly for cash of
Common Shares or securities which by their terms are convertible into or
exchangeable for Common Shares, (iv) stock dividends, or (v) issuance of
rights, options or warrants referred to in this Section 11, hereafter made by
the Company to holders of its Common Shares shall not be taxable to such
stockholders.
Section 12. Certificate of Adjusted Purchase Price or Number of
Securities. Whenever an adjustment is made as provided in Section 11 or Section
13 hereof, the Company shall promptly (a) prepare a certificate setting forth
such adjustment and a brief statement of the facts accounting for such
adjustment, (b) file with the Rights Agent and with each transfer agent for the
Common Shares, a copy of such certificate, and (c) if such adjustment is made
after the Distribution Date, mail a brief summary of such adjustment to each
holder of a Right Certificate in accordance with Section 25 hereof.
Section 13. Consolidation, Merger or Sale or Transfer of Assets
or Earning Power.
(a) In the event that, following the Share Acquisition Date,
directly or indirectly:
(i) the Company shall consolidate with, or merge with or
into, any other Person and the Company shall not be the continuing or
surviving corporation of such consolidation or merger; or
(ii) any Person shall consolidate with the Company, or
merge with or into the Company and the Company shall be the continuing
or surviving corporation of such merger or consolidation and, in
connection with such merger or consolidation, all or part of the Common
Shares shall be changed into or exchanged for stock or other securities
of any other Person or cash or any other property; or
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(iii) the Company shall sell or otherwise transfer (or one
or more of its Subsidiaries shall sell or otherwise transfer), in one
or more transactions, assets or earning power (including, without
limitation, securities creating any obligation on the part of the
Company and/or any of its Subsidiaries) representing in the aggregate
more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any Person or Persons,
then, and in each such case, proper provision shall be made so that (A) each
holder of a Right (except as otherwise provided herein) shall thereafter have
the right to receive, upon the exercise thereof in accordance with the terms of
this Agreement at an exercise price per Right equal to the product of the
then-current Purchase Price multiplied by the number of Common Shares for which
a Right was exercisable immediately prior to the first occurrence of a
Triggering Event, such number of validly authorized and issued, fully paid,
nonassessable and freely tradeable Common Shares of the Issuer, free and clear
of any liens, encumbrances and other adverse claims and not subject to any
rights of call or first refusal, as shall be equal to the result obtained by
(x) multiplying the then-current Purchase Price by the number of Common Shares
for which a Right is exercisable immediately prior to the first occurrence of a
Triggering Event and dividing that product by (y) 50% of the current per share
market price of the Common Shares of the Issuer (determined pursuant to Section
11(d) hereof), on the date of consummation of such Flip-over Event; (B) the
Issuer shall thereafter be liable for, and shall assume, by virtue of the
consummation of such Flip-over Event, all the obligations and duties of the
Company pursuant to this Agreement; (C) the term "Company" shall thereafter be
deemed to refer to the Issuer; and (D) the Issuer shall take such steps
(including, without limitation, the reservation of a sufficient
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<PAGE> 36
number of its Common Shares to permit the exercise of all outstanding Rights)
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 possible, in relation to its Common Shares thereafter deliverable upon the
exercise of the Rights.
(b) For purposes of this Section 13, "Issuer" shall mean (i) in
the case of any Flip-over Event described in Sections 13(a)(i) or (ii) above,
the Person that is the continuing, surviving, resulting or acquiring Person
(including the Company as the continuing or surviving corporation of a
transaction described in Section 13(a)(ii) above), and (ii) in the case of any
Flip-over Event described in Section 13(a)(iii) above, the Person that is the
party receiving the greatest portion of the assets or earning power (including,
without limitation, securities creating any obligation on the part of the
Company and/or any of its Subsidiaries) transferred pursuant to such
transaction or transactions; provided, however, that, in any such case, (A) if
(1) no class of equity security of such Person is, at the time of such merger,
consolidation or transaction and has been continuously over the preceding
12-month period, registered pursuant to Section 12 of the Exchange Act, and (2)
such Person is a Subsidiary, directly or indirectly, of another Person, a class
of equity security of which is and has been so registered, the term "Issuer"
shall mean such other Person; and (B) in case such Person is a Subsidiary,
directly or indirectly, of more than one Person, a class of equity security of
two or more of which are and have been so registered, the term "Issuer" shall
mean whichever of such Persons is the issuer of the equity security having the
greatest aggregate market value. Notwithstanding the foregoing, if the Issuer
in any of the Flip-over Events listed above is not a corporation or other
entity having outstanding equity securities, then, and in each such case, (x)
if the Issuer is directly or indirectly wholly owned by
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<PAGE> 37
a corporation or other entity having outstanding equity securities, then all
references to Common Shares of the Issuer shall be deemed to be references to
the Common Shares of the corporation or other entity having outstanding equity
securities which ultimately controls the Issuer, and (y) if there is no such
corporation or other entity having outstanding equity securities, (I) proper
provision shall be made so that the Issuer shall create or otherwise make
available for purposes of the exercise of the Rights in accordance with the
terms of this Agreement, a kind or kinds of security or securities having a
fair market value at least equal to the economic value of the Common Shares
which each holder of a Right would have been entitled to receive if the Issuer
had been a corporation or other entity having outstanding equity securities;
and (II) all other provisions of this Agreement shall apply to the Issuer of
such securities as if such securities were Common Shares.
(c) The Company shall not consummate any Flip-over Event, unless
the Issuer shall have a sufficient number of authorized Common Shares (or other
securities as contemplated in Section 13(b) above) which have not been issued
or reserved for issuance to permit the exercise in full of the Rights in
accordance with this Section 13 and unless prior to such consummation the
Company and the Issuer shall have executed and delivered to the Rights Agent a
supplemental agreement providing for the terms set forth in subsections (a) and
(b) of this Section 13 and further providing that as promptly as practicable
after the consummation of any Flip-over Event, the Issuer shall:
(i) prepare and file a registration statement under the
Securities Act, with respect to the Rights and the securities issuable
upon exercise of the Rights on an appropriate form, and shall use its
best efforts to cause such registration statement to
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<PAGE> 38
(A) become effective as soon as practicable after such filing and (B)
remain effective (with a prospectus at all times meeting the
requirements of the Securities Act) until the Expiration Date;
(ii) take all such action as may be appropriate under, or
to ensure compliance with, the securities or "blue sky" laws of the
various states in connection with the exercisability of the Rights;
and
(iii) deliver to holders of the Rights historical financial
statements for the Issuer and each of its Affiliates which comply in
all respects with the requirements for registration on Form 10 under
the Exchange Act.
(d) The provisions of this Section 13 shall similarly apply to
successive mergers or consolidations or sales or other transfers. In the event
that a Flip-over Event occurs at any time after the occurrence of a Flip-in
Event, the Rights which have not theretofore been exercised shall thereafter
become exercisable only in the manner described in Section 13(a) hereof.
Section 14. Fractional Rights and Fractional Securities.
(a) The Company shall not be required to issue fractions of Rights
or to distribute Right Certificates which evidence fractional Rights. In lieu
of such fractional Rights, the Company shall pay as promptly as practicable to
the registered holders of the Right Certificates with regard to which such
fractional Rights otherwise would be issuable, an amount in cash equal to the
same fraction of the current market value of a whole Right. For the purposes of
this Section 14(a), the current market value of a whole Right shall be the
closing price of the Rights for the Trading Day immediately prior to the date
on which such fractional Rights otherwise would have been issuable. The closing
price for any day shall be the last sale price, regular way, or, in case no
such sale
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<PAGE> 39
takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Rights are not listed or
admitted to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the Rights are
listed or admitted to trading or, if the Rights are not listed or admitted to
trading on any national securities exchange, the last quoted sale price or, if
not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by NASDAQ or such other system then in use
or, if on any such date the Rights are not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a professional
market maker making a market in the Rights selected by the Board of Directors
of the Company. If on any such date no such market maker is making a market in
the Rights the fair value of the Rights on such date as determined in good
faith by the Board of Directors of the Company shall be used.
(b) The Company shall not be required to issue fractions of Common
Shares or other securities issuable upon exercise or exchange of the Rights or
to distribute certificates which evidence any such fractional securities. In
lieu of issuing any such fractional securities, the Company may pay to any
Person to whom or which such fractional securities would otherwise be issuable
an amount in cash equal to the same fraction of the current market value of one
such security. For purposes of this Section 14(b), the current market value of
a Common Share or other security issuable upon the exercise or exchange of
Rights shall be the closing price thereof (as determined in the same manner as
set forth for Common Shares in the second sentence of
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<PAGE> 40
Section 11(d) hereof) for the Trading Day immediately prior to the date of such
exercise or exchange; provided, however, that if neither the Common Shares nor
any such other securities are publicly held or listed or admitted to trading on
any national securities exchange, or the subject of available bid and asked
quotes, the current market value of one Common Share or such other security
shall be determined in good faith by the Board of Directors of the Company.
Section 15. Rights of Action. All rights of action in respect of
this Agreement, excepting the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of
the Common Shares); and any registered holder of any Right Certificate (and,
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 (and, prior to
the Distribution Date, of the holder of any Common Shares), may in his or her
own behalf and for his or her own benefit enforce, and may institute and
maintain any suit, action or proceeding against the Company to enforce, or
otherwise act in respect of, his right to exercise the Rights evidenced by such
Right Certificate or Common Share certificate in the manner provided in such
Right Certificate and in this Agreement. Without limiting the foregoing or any
remedies available to the holders of Rights, it is specifically acknowledged
that the registered holders of the Right Certificates (and, prior to the
Distribution Date, the registered holders of the Common Shares) would not have
an adequate remedy at law for any breach of this Agreement and shall be
entitled to specific performance of the obligations under this Agreement, and
injunctive relief against actual or threatened violations of the obligations of
any Person subject to this Agreement.
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Section 16. Agreement of Rights Holders. Every holder of a Right
by accepting the same consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) Prior to the Distribution Date, the Rights shall be
transferable only in connection with the transfer of the Common Shares;
(b) After the Distribution Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office of the Rights Agent designated for such purpose, duly
endorsed or accompanied by a proper instrument of transfer;
(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 Share certificate) is registered as the absolute owner
thereof and of the Rights evidenced thereby (notwithstanding any notations of
ownership or writing on the Right Certificate or the associated Common Share
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;
(d) Such holder expressly waives any right to receive any
fractional Rights and any fractional securities upon exercise or exchange of a
Right, except as otherwise provided in Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Rights Agent shall have any liability to any holder
of a Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
38
<PAGE> 42
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, that the Company shall use
its best efforts to have any such order, decree or ruling lifted or otherwise
overturned as soon as possible.
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 Common Shares or any
other securities of the Company which may at any time be issuable upon 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 hereof), or to receive dividends
or subscription rights, or otherwise, until the Right or Rights evidenced by
such Right Certificate shall have been exercised in accordance with the
provisions of this Agreement or exchanged pursuant to the provisions of Section
27 hereof.
Section 18. Concerning the Rights Agent.
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
other disbursements incurred in the administration and execution of this
Agreement and the exercise and performance of its duties hereunder. The
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<PAGE> 43
Company also agrees to indemnify the Rights Agent for, and to hold it harmless
against, any loss, liability, suit, action, proceeding or expense, incurred
without negligence, bad faith or willful misconduct on the part of the Rights
Agent, for anything done or omitted by the Rights Agent in connection with the
acceptance and administration of this Agreement, including the costs and
expenses of defending against any claim of liability arising therefrom,
directly or indirectly.
(b) The Rights Agent shall be protected and shall incur no
liability for or in respect of any action taken, suffered or omitted by it in
connection with its administration of this Agreement in reliance upon any Right
Certificate or certificate evidencing Common Shares or other securities of the
Company, instrument of assignment or transfer, power of attorney, endorsement,
affidavit, letter, notice, direction, consent, certificate, statement, or other
paper or document believed by it to be genuine and to be signed, executed and,
where necessary, verified or acknowledged, by the proper Person or Persons.
Section 19. Merger or Consolidation or Change of Name of Rights
Agent.
(a) Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Rights
Agent or any successor Rights Agent shall be a party, or any corporation
succeeding to the corporate trust business of the Rights Agent or any successor
Rights Agent, shall be the successor to the Rights Agent under this Agreement
without the execution or filing of any paper or any further act on the part of
any of the parties hereto, provided that such corporation would be eligible for
appointment as a successor Rights Agent under the provisions of Section 21
hereof. In case at the time such successor Rights Agent shall succeed to the
agency created by this Agreement, any of the Right Certificates shall have been
countersigned but not
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delivered, any such successor Rights Agent may adopt the countersignature of
the predecessor Rights Agent and deliver such Right Certificates so
countersigned; and in case at that time any of the Right Certificates shall not
have been countersigned, any successor Rights Agent may countersign such Right
Certificates either in the name of the predecessor Rights Agent or in the name
of the successor Rights Agent; and in all such cases such Right Certificates
shall have the full force provided in the Right Certificates and in this
Agreement.
(b) In case at any time the name of the Rights Agent shall be
changed and at such time any of the Right Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the
countersignature under its prior name and deliver Right Certificates so
countersigned; and in case at that time any of the Right Certificates shall not
have been countersigned, the Rights Agent may countersign such Right
Certificates either in its prior name or in its changed name; and in all such
cases such Right Certificates shall have the full force provided in the Right
Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes
the duties and obligations imposed by this Agreement upon the following terms
and conditions, by all of which the Company and the holders of Right
Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be
legal counsel for the Company), and the opinion of such counsel shall be full
and complete authorization and protection to the Rights Agent as to any action
taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement
the Rights Agent shall deem it necessary or desirable that any fact or matter
be proved or established by the
41
<PAGE> 45
Company prior to taking or suffering any action hereunder, such fact or matter
(unless other evidence in respect thereof be herein specifically prescribed)
may be deemed to be conclusively proved and established by a certificate signed
by any one of the Chairman of the Board, the President or any Vice President of
the Company and delivered to the Rights Agent; and such certificate shall be
full authorization to the Rights Agent for any action taken or suffered in good
faith by it under the provisions of this Agreement in reliance upon such
certificate.
(c) The Company hereby appoints the Rights Agent to act as agent
for the Company in accordance with the terms and conditions hereof, and the
Rights Agent hereby accepts such appointment. The Company agrees to pay to the
Rights Agent reasonable compensation for all services rendered by it hereunder
and, from time to time, on demand of the Rights Agent, its reasonable expenses
and counsel fees and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent, its
directors, officers, employees and agents for, and to hold each of them
harmless against, any loss, liability, or expense, incurred without gross
negligence, bad faith or willful misconduct on the part of the Rights Agent or
such indemnified party related to acts or omissions of the Rights Agent in
connection with the acceptance and administration of this Agreement or the
exercise or performance of its duties hereunder, including the costs and
expenses of defending against any claim of liability. The indemnity provided in
this Section 20(c) shall survive the expiration of the Rights and the
termination of this Agreement.
(d) The Rights Agent shall not be liable for or by reason of any
of the statements of fact or recitals contained in this Agreement or in the
Right Certificates (except its countersignature
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thereof) or be required to verify the same, but all such statements and
recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution and delivery hereof by the Rights Agent) or in
respect of the validity or execution of any Right Certificate (except its
countersignature thereof); nor shall it be responsible for any breach by the
Company of any covenant or condition contained in this Agreement or in any
Right Certificate; nor shall it be responsible for any adjustment required
under the provisions of Section 11 or Section 13 hereof (including any
adjustment which results in Rights becoming void) 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
shares of stock or other securities to be issued pursuant to this Agreement or
any Right Certificate or as to whether any shares of stock or other securities
will, when issued, be validly authorized and issued, fully paid and
nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge
and deliver or cause to be performed, executed, acknowledged and delivered all
such further and other acts, instruments and assurances as may reasonably be
required by the Rights Agent for the carrying out or performing by the Rights
Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the Board, the
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President or any Vice President of the Company, and to apply to such officers
for advice or instructions in connection with its duties, and it shall not be
liable for any action taken or suffered to be taken by it in good faith in
accordance with instructions of any such officer.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or
other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or lend
money to the Company or otherwise act as fully and freely as though it were not
Rights Agent under this Agreement. Nothing herein shall preclude the Rights
Agent from acting in any other capacity for the Company or for any other legal
entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent shall not be answerable
or accountable for any act, default, neglect or misconduct of any such
attorneys or agents or for any loss to the Company resulting from any such act,
default, neglect or misconduct, provided reasonable care was exercised in the
selection and continued employment thereof. The Rights Agent shall not be under
any duty or responsibility to insure compliance with any applicable federal or
state securities laws in connection with the issuance, transfer or exchange of
Right Certificates.
(j) If, with respect to any Right Certificate surrendered to the
Rights Agent for exercise, transfer, split up, combination or exchange, the
certificate attached to the form of assignment or form of election to purchase,
as the case may be, has either not been completed or indicates an affirmative
response to clause 1 or 2 thereof, the Rights Agent shall not take any
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<PAGE> 48
further action with respect to such requested exercise, transfer, split up,
combination or exchange, without first consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon 30 calendar days' notice in writing mailed to the Company and to
each transfer agent of the Common Shares by registered or certified mail, and
to the holders of the Right Certificates by first-class mail. The Company may
remove the Rights Agent or any successor Rights Agent upon 30 calendar 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 by registered or
certified mail, and to the holders of the Right Certificates by first-class
mail. If the Rights Agent shall resign or be removed or shall otherwise become
incapable of acting, the Company shall appoint a successor to the Rights Agent.
If the Company shall fail to make such appointment within a period of 30
calendar 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 States of Tennessee or Georgia (or of any other state of the United
States so long as such corporation is authorized to do business as a banking
institution in the States of Tennessee or Georgia), in good standing, having a
principal office in the States of Tennessee or Georgia, which is authorized
under such laws to exercise corporate trust powers and is subject
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<PAGE> 49
to supervision or examination by federal or state authority and which has at
the time of its appointment as Rights Agent a combined capital and surplus of
at least $50 million. After appointment, the successor Rights Agent shall be
vested with the same powers, rights, duties and responsibilities as if it had
been originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver
any further assurance, conveyance, act or deed necessary for the purpose. Not
later than the effective date of any such appointment, the Company shall file
notice thereof in writing with the predecessor Rights Agent and each transfer
agent of the Common Shares, 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 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 per share and the number or kind of
securities issuable or property purchasable upon exercise of the Rights made in
accordance with the provisions of this Agreement. In addition, in connection
with the issuance or sale by the Company of Common Shares following the
Distribution Date and prior to the Expiration Date, the Company (a) shall, with
respect to Common Shares so issued or sold pursuant to the exercise or
conversion of securities issued prior to the Distribution Date which are
exercisable for, or convertible into, Common Shares, and (b) may, in any other
case, if deemed necessary,
46
<PAGE> 50
appropriate or desirable by the Board of Directors of the Company, issue Right
Certificates representing an equivalent number of Rights as would have been
issued in respect of such Common Shares if they had been issued or sold prior
to the Distribution Date, as appropriately adjusted as provided herein as if
they had been so issued or sold; provided, however, that (i) no such Right
Certificate shall be issued if, and to the extent that, in its good faith
judgment the Board of Directors of the Company shall have determined that the
issuance of such Right Certificate could have a material adverse tax
consequence to the Company or to the Person to whom or which such Right
Certificate otherwise would be issued, and (ii) no such Right Certificate shall
be issued if, and to the extent that, appropriate adjustment otherwise shall
have been made in lieu of the issuance thereof.
Section 23. Redemption.
(a) The Board of Directors of the Company may, at its option, at
any time prior to the earlier of (i) the Close of Business on the tenth day
following the Distribution Date or (ii) the Final Expiration Date, redeem all,
but not less than all, of the then outstanding Rights at the Redemption Price.
The redemption of the Rights by the Board may be made effective at such time,
on such basis and with such conditions as the Board, in its sole discretion,
may establish. Notwithstanding anything in this Agreement to the contrary, the
Rights shall not be exercisable after the first occurrence of a Flip-in Event
until such time as the Company's right of redemption hereunder has expired.
(b) 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
47
<PAGE> 51
exercise the Rights shall terminate and the only right thereafter of the
holders of Rights shall be to receive the Redemption Price. Promptly after the
action of its Board of Directors ordering the redemption of the Rights, the
Company shall publicly announce such action, and within 10 calendar days
thereafter, the Company shall 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 Company; provided,
however, that the failure to give, or any defect in, any such notice shall not
affect the validity of the redemption of the Rights. Any notice which is mailed
in the manner herein provided shall be deemed given, whether or not the holder
receives the notice. The notice of redemption mailed to the holders of Rights
shall state the method by which the payment of the Redemption Price will be
made. The Company may, at its option, pay the Redemption Price in cash, Common
Shares (based upon the current per share market price of the Common Shares
(determined pursuant to Section 11(d) hereof) at the time of redemption) or any
other form of consideration deemed appropriate by the Board of Directors of the
Company (based upon the fair market value of such other consideration,
determined by the Board of Directors of the Company in good faith) or any
combination thereof.
Section 24. Notice of Certain Events.
(a) In case, after the Distribution Date, the Company shall
propose (i) to pay any dividend payable in stock of any class to the holders of
Common Shares or to make any other distribution to the holders of Common Shares
(other than a regular periodic cash dividend), (ii) to offer to the holders of
Common Shares rights, options or warrants to subscribe for or to purchase any
additional Common Shares or shares of stock of any class or any other
securities, rights or options, (iii) to effect any reclassification of its
Common Shares (other than a reclassification
48
<PAGE> 52
involving only the subdivision of outstanding Common Shares), (iv) to effect
any consolidation or merger into or with, or to effect any sale or other
transfer (or to permit one or more of its Subsidiaries to effect any sale or
other transfer), in one or more transactions, of assets or earning power
(including, without limitation, securities creating any obligation on the part
of the Company and/or any of its Subsidiaries) representing more than 50% of
the assets and earning power of the Company and its Subsidiaries, taken as a
whole, to any other Person or Persons, or (v) to effect the liquidation,
dissolution or winding up of the Company, then, in each such case, the Company
shall give to each holder of a Right Certificate, in accordance with Section 25
hereof, a notice of such proposed action, which shall specify the record date
for the purposes of such stock dividend, distribution or offering of rights,
options or warrants, or the date on which such reclassification, consolidation,
merger, sale, transfer, liquidation, dissolution, or winding up is to take
place and the date of participation therein by the holders of the 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 (i) or (ii) above, at least 10
calendar days prior to the record date for determining holders of the Common
Shares for purposes of such action, and, in the case of any such other action,
at least 10 calendar days prior to the date of the taking of such proposed
action or the date of participation therein by the holders of the Common
Shares, whichever shall be the earlier.
(b) In case any Triggering Event shall occur, then, in any such
case, the Company shall as soon as practicable thereafter give to the Rights
Agent and each holder of a Right Certificate, in accordance with Section 25
hereof, a notice of the occurrence of such event, which shall specify the event
and the consequences of the event to holders of Rights.
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<PAGE> 53
Section 25. Notices.
(a) Notices or demands authorized by this Agreement to be given or
made by the Rights Agent or by the holder of any Right Certificate to or on the
Company shall be sufficiently 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:
Children's Comprehensive Services, Inc.
3401 West End Avenue, Suite 500
Nashville, Tennessee 37203
Attention: Chief Executive Officer
with a copy to:
Leigh Walton, Esq.
Bass, Berry & Sims, PLC
2700 First American Center
Nashville, Tennessee 37238
(b) Subject to the provisions of Section 21 hereof, any notice or
demand authorized by this Agreement to be given or made by the Company or by
the holder of any Right Certificate to or on the Rights Agent shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed (until another address is filed in writing with the Company) as
follows:
SunTrust Bank, Atlanta
58 Edgewood Avenue, Room 225
Atlanta, Georgia 30303
Attention: Department Manager
(c) Notices or demands authorized by this Agreement to be given or
made by the Company or the Rights Agent to the holder of any Right Certificate
(or, if prior the Distribution Date, to the holder of any certificate
evidencing Common Shares) shall be sufficiently given or
50
<PAGE> 54
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, if the Company so
directs, the Company and the Rights Agent shall from time to time supplement or
amend any provision of this Agreement without the approval of any holders of
certificates representing Common Shares; provided, however, that any supplement
or amendment which changes the rights and duties of the Rights Agent under this
Agreement shall be effective only with the consent of the Rights Agent. From
and after the Distribution Date and subject to the last sentence of this
Section 26, if the Company so directs, the Company and the Rights Agent shall
supplement or amend this Agreement without the approval of any holders of Right
Certificates in order (i) to cure any ambiguity, (ii) to correct or supplement
any provision contained herein which may be defective or inconsistent with any
other provisions herein, (iii) to shorten or lengthen any time period
hereunder, or (iv) to supplement or amend the provisions hereunder in any
manner which the Company may deem desirable, including, without limitation, the
addition of other events requiring adjustment to the Rights under Sections 11
or 13 hereof or procedures relating to the redemption of the Rights, which
supplement or amendment shall not, in the good faith determination of the Board
of Directors, adversely affect the interests of the holders of Right
Certificates (other than an Acquiring Person or an Affiliate or Associate of an
Acquiring Person). Upon the delivery of a certificate from an 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; provided, however, that the failure or refusal of the
Rights Agent to execute such supplement or amendment
51
<PAGE> 55
shall not affect the validity of any supplement or amendment adopted by the
Company, any of which shall be effective in accordance with the terms thereof.
Notwithstanding anything in this Agreement to the contrary, no supplement or
amendment shall be made which decreases the stated Redemption Price or the
period of time remaining until the Final Expiration Date or which modifies a
time period relating to when the Rights may be redeemed at such time as the
Rights are not then redeemable.
Section 27. Exchange.
(a) The Board of Directors of the Company may, at its option, at
any time after the later of the Distribution Date and the first occurrence of a
Triggering Event, exchange all or part of the then-outstanding and exercisable
Rights (which shall not include Rights that have become void pursuant to the
provisions of Section 11(a)(ii) hereof) for Common Shares at an exchange ratio
of one Common Share per Right, appropriately adjusted to reflect any stock
split, stock dividend or similar transaction occurring after the date hereof
(such exchange ratio being hereinafter referred to as the "Exchange Ratio").
Notwithstanding the foregoing, the Board of Directors shall not be empowered to
effect such exchange at any time after any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or any such
Subsidiary, or any Person holding Common Shares for or pursuant to the terms of
any such plan or for the purpose of funding any such plan or funding other
employee benefits for employees of the Company or of any Subsidiary), who or
which, together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of 50% or more of the Common Shares then outstanding.
52
<PAGE> 56
(b) Immediately upon the action of the Board of Directors of the
Company ordering the exchange of any Rights pursuant to Section 27(a) hereof,
and without any further action and without any notice, the right to exercise
such Rights shall terminate and the only right with respect to such Rights
thereafter of the holder of such Rights shall be to receive that number of
Common Shares equal to the number of such Rights held by such holder multiplied
by the Exchange Ratio. Promptly after the action of the Board of Directors of
the Company ordering the exchange of any Rights pursuant to Section 27(a)
hereof, the Company shall publicly announce such action, and within 10 calendar
days thereafter shall give 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; provided, however, that the failure to give, or any defect
in, such notice shall not affect the validity of such exchange. 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 shall state
the method by which the exchange of the Common Shares for Rights will be
effected and, in the event of any partial exchange, the number of Rights which
will be exchanged. Any partial exchange shall be effected pro rata based on the
number of Rights (other than Rights which have become void pursuant to the
provisions of Section 11(a)(ii) hereof) held by each holder of Rights.
(c) In any exchange pursuant to this Section 27, the Company, at
its option, may substitute for any Common Share exchangeable for a Right, (i)
equivalent common shares (as such term is used in Section 11(a)(iii) hereof),
(ii) cash, (iii) debt securities of the Company, (iv) other assets, or (v) any
combination of the foregoing, in any event having an aggregate value which the
Board of Directors of the Company shall have determined in good faith to be
equal to the current
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<PAGE> 57
per share market price of one Common Share (determined pursuant to Section
11(d) hereof) on the Trading Day immediately preceding the date of exchange
pursuant to this Section 27.
Section 28. Successors; Certain Covenants. All the covenants and
provisions of this Agreement by or for the benefit of the Company or the Rights
Agent shall bind and inure to the benefit of their respective successors and
assigns hereunder.
Section 29. Benefits of this Agreement. Nothing in this Agreement
shall be construed to give to any Person other than the Company, the Rights
Agent and the registered holders of the Right Certificates (and, prior to the
Distribution Date, the registered holders of the Common Shares) any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of the Company, the Rights Agent and the
registered holders of the Right Certificates (and, prior to the Distribution
Date, the registered holders of the Common Shares).
Section 30. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
Section 31. Governing Law. This Agreement and each Right
Certificate issued hereunder shall be deemed to be a contract made under the
internal substantive laws of the State of Tennessee and for all purposes shall
be governed by and construed in accordance with the internal substantive laws
of such State applicable to contracts to be made and performed entirely within
such State.
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<PAGE> 58
Section 32. Counterparts. This Agreement may be executed in any
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
Section 33. Descriptive Headings. Descriptive headings of the
several Sections of this Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions
hereof.
(Next page is signature page)
55
<PAGE> 59
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and their respective corporate seals to be hereunto affixed
and attested, all as of the day and year first above written.
CHILDREN'S COMPREHENSIVE SERVICES, INC.
By /s/ Donald B. Whitfield
--------------------------
Title Vice President Finance and
--------------------------
Chief Financial Officer
--------------------------
SUNTRUST BANK, ATLANTA
By /s/ Letitia A. Radford
-------------------------
Title Vice President
-------------------------
56
<PAGE> 60
EXHIBIT A
FORM OF RIGHT CERTIFICATE
Certificate No. R- ____ ____ Rights
NOT EXERCISABLE AFTER DECEMBER 8, 2008 OR EARLIER IF
REDEEMED. 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 THE RIGHTS AGREEMENT, RIGHTS BENEFICIALLY OWNED BY AN
ACQUIRING PERSON OR AN AFFILIATE OR AN ASSOCIATE OF AN
ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS
AGREEMENT) MAY BECOME NULL AND VOID.
RIGHT CERTIFICATE
CHILDREN'S COMPREHENSIVE SERVICES, INC.
This certifies that , or registered assigns, is the registered
owner of the number of rights set forth above, each of which entitles the owner
thereof, subject to the terms, provisions and conditions of the Rights
Agreement, dated November 25, 1998 (the "Rights Agreement"), between Children's
Comprehensive Services, Inc., a Tennessee corporation (the "Company"), and
SunTrust Bank, Atlanta, a Georgia banking corporation (the "Rights Agent"), to
purchase from the Company at any time after the Distribution Date ( as such term
is defined in the Rights Agreement) and prior to 5:00 p.m. (Nashville, Tennessee
time) on December 8, 2008 at the principal office or offices of the Rights Agent
designated for such purpose, one fully paid nonassessable share of Common Stock,
par value $.01 per share (the "Common Shares"), of the Company, at a purchase
price of $75.00 per Common Share (the "Purchase Price"), upon presentation and
surrender of this Right Certificate with the Form of Election to Purchase and
1
<PAGE> 61
related Certificate duly executed. 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. The number of Rights evidenced by this Right Certificate (and the
number of Common Shares 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 November 25, 1998, based on the Common Shares as constituted at
such date.
As provided in the Rights Agreement, the Purchase Price and the number
and kind of securities issuable upon the exercise of the Rights evidenced by
this Right Certificate are subject to 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 of the Rights Agent,
the Company and the holders of the Right Certificates, which limitations of
rights include the temporary suspension of the exercisability of the Rights
under the circumstances specified in the Rights Agreement. Copies of the Rights
Agreement are on file at the above-mentioned office of the Rights Agent.
Pursuant to the Rights Agreement, from and after the later of the
Distribution Date and the first occurrence of a Flip-in Event (as such is
defined in the Rights Agreement), (i) any Rights that are or were acquired or
beneficially owned by any Acquiring Person (or any Affiliate or Associate of
such Acquiring Person) shall be void and any holder of such Rights shall
thereafter have no right to exercise such Rights under any provision of the
Rights Agreement, (ii) no Right Certificate
2
<PAGE> 62
shall be issued pursuant to the Rights Agreement that represents Rights
beneficially owned by an Acquiring Person or any Affiliate or Associate
thereof, (iii) no Right Certificate shall be issued at any time upon the
transfer of any Rights to an Acquiring Person or any Affiliate or Associate
thereof or to any nominee of such Acquiring Person or Affiliate or Associate
thereof, and (iv) any Right Certificate delivered to the Rights Agent for
transfer to an Acquiring Person or any Affiliate or Associate thereof shall be
canceled.
This Right Certificate, with or without other Right Certificates, may
be transferred, split up, combined or exchanged for another Right Certificate
or Right Certificates, entitling the holder to purchase a like number of Common
Shares (or other securities, as the case may be) as the Right Certificate or
Rights Certificates surrendered shall have entitled such holder (or former
holder in the case of a transfer) to purchase, upon presentation and surrender
hereof at the principal office of the Rights Agent designated for such purpose,
with the Form of Assignment (if appropriate) and the related Certificate duly
executed.
Subject to the provision of the Rights Agreement, the Rights evidenced
by this Certificate may be redeemed by the Company at its option at a
redemption price of $0.01 per Right.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may be exchanged by the Company at its option at
an exchange ratio of one Common Share per Right.
The Rights Agreement may be supplemented and amended by the Company as
provided therein.
The Company is not required to issue fractional Common Shares or other
securities issuable upon the exercise of any Right or Rights evidenced hereby.
In lieu of issuing such
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<PAGE> 63
fractional Common Shares or other securities, the Company may make a cash
payment, 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 Common
Shares or of any other securities of the Company which may at any time be
issuable upon the exercise of the Right or Rights represented hereby, nor shall
anything contained herein or in the Rights Agreement 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 executed in
accordance with the provisions of the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
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<PAGE> 64
WITNESS the signature of the proper officers of the Company.
Dated as of ________________, _______.
CHILDREN'S COMPREHENSIVE SERVICES,
INC.
By:
------------------------------
Title:
---------------------------
Countersigned:
SUNTRUST BANK, ATLANTA
By:
-----------------------------
Authorized Signature
5
<PAGE> 65
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate)
FOR VALUE RECEIVED, __________________________________________ hereby
sells, assigns and transfers unto _____________________________________________
(Please print name and address of transferee)
_______________________________________________________________________________
this Right Certificate, together with all right, title and interest herein, 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: ____________________________, 19__
--------------------------------------------
Signature
Signature Guaranteed:
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Right Certificate [ ] are [ ] are not
being sold, assigned, transferred, split up, combined or exchanged by or on
behalf of a Person who is or was an Acquiring Person or an Affiliate or
Associate of any such Person (as such terms are defined in the Rights
Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Right Certificate from
any person who is, was or became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.
Dated:_____________________________, ____
--------------------------------------------
Signature
6
<PAGE> 66
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to
exercise the Right Certificate)
To Children's Comprehensive Services, Inc.
The undersigned hereby irrevocably elects to exercise
__________________________________ Rights represented by this Right Certificate
to purchase the Common Shares or other securities issuable upon the exercise of
such Rights and requests that certificates for such securities 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)
- -------------------------------------------------------------------------------
7
<PAGE> 67
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Right Certificate [ ] are [ ] are
not being exercised by or on behalf of a Person who is or was an Acquiring
Person or an Affiliate or Associate of any such Person (as such terms are
defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this Right
Certificate from any Person who is, was or became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person.
Dated: ____________________________, ______
--------------------------------------------
Signature
NOTICE
Signatures on the foregoing Form of Assignment and Form of Election to
Purchase and in the related Certificates must correspond to the name as written
upon the face of this Rights Certificate in every particular, without
alteration or enlargement or any change whatsoever.
Signature must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States.
8
<PAGE> 68
EXHIBIT B
SUMMARY OF RIGHTS TO PURCHASE
COMMON SHARES
The Board of Directors of Children's Comprehensive Services, Inc. (the
"Company") has declared a dividend distribution of one right (a "Right") for
each outstanding share of common stock, par value $.01 per share (the "Common
Shares"), of the Company. The distribution is payable on December 8, 1998 (the
"Record Date") to the stockholders of record as of the close of business on the
Record Date. Each Right entitles the registered holder to purchase from the
Company one Common Share at a price of $75.00 (the "Purchase Price") subject to
adjustment. The description and terms of the Rights are set forth in a Rights
Agreement, dated November 25, 1998 (the "Rights Agreement"), between the
Company and SunTrust Bank, Atlanta, as Rights Agent (the "Rights Agent").
Until the earlier to occur of (i) the close of business on the tenth
calendar day following a public announcement that a person or group of
affiliated or associated persons has acquired, or obtained the right to
acquire, beneficial ownership of 10% or more of the outstanding Common Shares
(an "Acquiring Person"), and (ii) the close of business on the tenth business
day (or such later date as may be specified by the Board of Directors)
following the commencement of a tender offer or exchange offer by a person or
group of affiliated or associated persons, the consummation of which would
result in beneficial ownership by such person or group of 10% or more of the
outstanding Common Shares (the earlier of such dates being hereinafter called
the "Distribution 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 certificates.
The Rights Agreement provides 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 Record Date upon transfer or new
issuance of Common Shares will contain a notation incorporating the Rights
Agreement by reference. Until the Distribution Date (or earlier redemption or
expiration of the Rights),the surrender for transfer of any certificates for
Common Shares in respect of which Rights have been issued will also constitute
the transfer of the Rights associated with the Common Shares represented by
such certificates. As soon as practicable following the Distribution Date,
separate certificates evidencing the Rights (the "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.
No Right is exercisable at any time prior to the Distribution Date.
The Rights will expire on December 8, 2008 (the "Final Expiration Date") unless
earlier redeemed or exchanged by the Company as described below. Until a Right
is exercised, the holder thereof, as such, will have no rights as a stockholder
of the Company, including without limitation the right to vote or to receive
dividends.
<PAGE> 69
The Purchase Price payable, and the number of Common Shares or other
securities 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 Common Shares, (ii) upon
the grant to holders of the Common Shares of certain rights or warrants to
subscribe for or purchase Common Shares at a price, or securities convertible
into Common Shares with a conversion price, less than the then current market
price of the Common Shares or (iii) upon the distribution to holders of the
Common Shares of evidences of indebtedness or cash (excluding regular periodic
cash dividends), assets, stock (excluding dividends payable in Common Shares)
or of subscription rights or warrants (other than those referred to above).
In the event (a "Flip-in Event") that (i) any person or group of
affiliated or associated persons becomes the beneficial owner of 10% or more of
the outstanding Common Shares, or (ii) any Acquiring Person merges into or
combines with the Company and the Company is the surviving corporation, proper
provision shall be made so that each holder of a Right, other than Rights that
are or were owned beneficially by the Acquiring Person (which, from and after
the later of the Distribution Date and the first occurrence of Flip-in Event,
will be void), will thereafter have the right to receive, upon exercise thereof
at the then current exercise price of the Right, that number of Common Shares
(or, under certain circumstances, an economically equivalent security or
securities or assets of the Company) that has a market value of two times the
exercise price of the Right.
To illustrate the operation of such an adjustment, at a Purchase Price
of $75.00, assuming the current market price (as determined pursuant to the
provisions of the Rights Agreement) per Common Share was $15.00, each Right not
owned beneficially by an Acquiring Person at or after the time of such an
occurrence would entitle its holder to purchase (after the Distribution Date)
from the Company ten Common Shares (having a market value of $150.00) for
$75.00.
In the event (a "Flip-over Event") that, following the first date of
public announcement that a person has become an Acquiring Person, (i) the
Company merged with or into any person and the Company is not the surviving
corporation, (ii) any person merges with or into the Company and the Company is
the surviving corporation, but its Common Shares are changed or exchanged, or
(iii) 50% or more of the Company's assets or earning power, including without
limitation securities creating obligations of the Company, are sold, proper
provision shall be made so that each holder of a Right will thereafter have the
right to receive, upon the exercise thereof at the then current exercise price
of the Right, that number of shares of common stock (or, under certain
circumstances, an economically equivalent security or securities) of such other
person which at the time of such transaction would have a market value of two
times the exercise price of the Right.
At any time after the later of the Distribution Date and the first
occurrence of a Flip-in Event or Flip-over Event and prior to the acquisition
by any person or group of affiliated or associated persons of 50% or more of
the outstanding Common Shares, the Board of Directors of the Company may
exchange the Rights (other than any Rights which have become void), in whole or
in part, at an exchange ratio of one Common Share per Right (subject to
adjustment).
<PAGE> 70
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment in the Purchase
Price of at least 1%. The Company is not required to issue fractional Common
Shares or other securities issuable upon the exercise of Rights. In lieu of
issuing such securities, the Company may make a cash payment, as provided in
the Rights Agreement.
The Company may redeem the Rights in whole, but not in part, at a
price of $0.01 per Right (the "Redemption Price"), at any time prior to the
close of business on the tenth day following the Distribution Date. Immediately
upon any redemption of the Rights, the right to exercise the Rights will
terminate and the only right of the holders of Rights will be to receive the
Redemption Price.
The Rights Agreement may be amended by the Board of Directors in any
manner prior to the Distribution Date without the approval of any holders of
certificates representing Common Shares. After the Distribution Date, the
Rights Agreement may be amended by the Board of Directors without the approval
of any holders of Right Certificates, including amendments which add other
events requiring adjustment to the Purchase Price payable and the number of
Common Shares or other securities issuable or property purchasable upon the
exercise of the Rights or which modify procedures relating to the redemption of
the Rights, provided that no amendment may be made which decreases the stated
Redemption Price or the period of time remaining until the Final Expiration
Date or which modifies a time period relating to when the Rights may be
redeemed at such time as the Rights are not then redeemable.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Form 8-K and has been incorporated by
reference into 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 is as of November 25, 1998, does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement,
which is incorporated herein by this reference.
