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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-A
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934
SHOLODGE, INC.
(Exact name of registrant as specified in its charter)
Tennessee 62-1015641
(States or other jurisdiction of (IRS Employer
Incorporation) Identification No.)
217 West Main Street
Gallatin, Tennessee 37066
(Address of principal executive offices) (Zip Code)
If this form relates to the registration of a class of debt securities and is
effective upon filing pursuant to General Instruction A(c)(1) please check the
following box:
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If this form related to the registration of a class of debt securities and is to
become effective simultaneously with the effectiveness of a concurrent
registration statement under the Securities Act of 1933 pursuant to General
Instruction A(c)(2) please check the following box:
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Securities to be registered pursuant to Section 12(b) of the Act: NONE
Securities to be registered pursuant to Section 12(g) of the Act:
Series A Subordinated Preferred Stock
(Title of Class)
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INFORMATION REQUIRED IN REGISTRATION STATEMENT
ITEM 1. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED
The board of directors of ShoLodge, Inc. (the "Company") has declared a
dividend of one preferred share purchase right (a "Right") for each outstanding
share of common stock, no par value (the "Common Shares"), of the Company. The
dividend is payable on July 15, 1997 (the "Record Date"), to the shareholders of
record on that date. Each Right entitles the registered holder to purchase from
the Company one one-hundredth of a share of the Company's Series A Subordinated
Preferred Stock ("Preferred Share") at a price of $60.00 per one one-hundredth
of a Preferred Share (the "Purchase Price"), subject to adjustment. The
description and terms of the Rights are set forth in a Rights Agreement (the
"Rights Agreement") between the Company and SunTrust Bank, Atlanta, as Rights
Agent (the "Rights Agent"). A complete description of the Rights is set forth in
the Rights Agreement, a copy of which is filed as Exhibit 4.1 to this Form 8-A.
The Rights Agreement is incorporated herein by reference and this summary is
qualified in its entirety by reference thereto.
Until the earlier to occur of (i) 10 days following a public
announcement that a person or group of affiliated or associated persons (an
"Acquiring Person") has acquired beneficial ownership of 15% or more of the
outstanding Common Shares without the prior approval of the board of directors,
including a majority of "Continuing Directors," as that term is defined in the
Rights Agreement, or (ii) 10 business days (or such later date as may be
determined by action of the board of directors before such time as any person or
group of affiliated persons becomes an Acquiring Person) following the
commencement of, or announcement of an intention to make, a tender offer or
exchange offer the consummation of which would result in the beneficial
ownership by a person or group of 15% or more of the outstanding Common Shares
(the earlier of such dates being 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 certificate with a copy
of a Summary of Rights attached thereto.
The Rights Agreement provides that, until the Distribution Date (or
earlier redemption or expiration of the Rights), 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 outstanding as of
the Record Date, even without such notation or a copy of this Summary of Rights
being attached thereto, will also constitute the transfer of the Rights
associated with the Common Shares represented by such certificate. As soon as
practicable following the Distribution Date, separate certificates evidencing
the Rights ("Right Certificates") will be mailed to holders of record of the
Common Shares as of the close of business on the Distribution Date and such
separate Right Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date. The Rights
will expire on July 15, 2007 (the "Final Expiration Date"), unless the Final
Expiration Date is extended or
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unless the Rights are earlier redeemed or exchanged by the Company, in each case
as described below.
The Purchase Price payable, and the number of Preferred Shares or other
securities or property issuable, upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Preferred
Shares, (ii) upon the grant to holders of the Preferred Shares of certain rights
or warrants to subscribe for or purchase Preferred Shares at a price, or
securities convertible into Preferred Shares with a conversion price, less than
the then-current market price of the Preferred Shares or (iii) upon the
distribution to holders of the Preferred Shares of evidences of indebtedness or
assets (excluding regular periodic cash dividends paid out of earnings or
retained earnings or dividends payable in Preferred Shares) or of subscription
rights or warrants (other than those referred to above).
The number of outstanding Rights and the number of one one-hundredths
of a Preferred Share issuable upon exercise of each Right are also subject to
adjustment in the event of a stock split of the Common Shares or a stock
dividend on the Common Shares payable in Common Shares or subdivisions,
consolidations or combinations of the Common Shares occurring, in any such case,
before the Distribution Date.
Preferred Shares purchasable upon exercise of the Rights will not be
redeemable. Each Preferred Share will be entitled to an aggregate dividend of
the greater of (i) 100 times the dividend declared per Common Share and (ii) a
cumulative quarterly dividend of $1.00. In the event of liquidation, the holders
of the Preferred Shares will be entitled to receive, in preference to shares of
all junior classes of the Company's stock, the greater of (i) $1.00 per share
and (ii) an aggregate payment of 100 times the payment made per Common Share.
Each Preferred Share will have 100 votes, voting together with the Common
Shares. Finally, in the event of any merger, consolidation or other transaction
in which Common Shares are exchanged, each Preferred Share will be entitled to
receive 100 times the amount received per Common Share. These rights are
protected by customary antidilution provisions. A complete description of the
Preferred Shares is set forth in the Company's Articles of Amendment to Charter
(the "Articles"), a copy of which is filed as Exhibit 4.2 to this Form 8-A. The
Articles are incorporated herein by reference and the summary of the terms of
the Preferred Shares set forth herein is qualified in its entirety by reference
thereto.
Because of the nature of the Preferred Shares' dividend, liquidation
and voting rights, the value of the one one-hundredth interest in a Preferred
Share purchasable upon exercise of each Right should approximate the value of
one Common Share.
If the Company is acquired in a merger or other business combination
transaction or 50% or more of its consolidated assets or earning power are sold,
proper provision will be made so that each holder of a Right will thereafter
have the right to receive, upon the exercise thereof at the then current
exercise price of the Right, that number of shares of common stock of the
acquiring company which at the time of such transaction will have a market value
of two times the exercise price of the Right. In the event that any person or
group of affiliated or associated persons becomes an Acquiring Person, proper
provision shall be made so that each holder of a Right, other than Rights
beneficially owned by the Acquiring Person (which will thereafter be void), will
from the date of the first public announcement of the Acquiring Person's
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acquisition have the right to receive upon exercise that number of Common Shares
having a market value of two times the exercise price of the Right or, if there
is an insufficient number of authorized and unissued Common Shares to allow the
full exercise of the Rights, a package of other securities or property of the
Company and/or cash which the board of directors determines with the advice of
an investment banking firm to be equivalent to such number of Common Shares.
At any time after any Person becomes an Acquiring Person and before the
acquisition by such person or group of 50% or more of the outstanding Common
Shares, the board of directors of the Company may exchange the Rights (other
than Rights owned by such person or group which will have become void), in whole
or in part, at an exchange ratio of one Common Share, or one one-hundredth of a
Preferred Share (or of a share of a class or series of the Company's preferred
stock having equivalent rights, preferences and privileges), per Right (subject
to adjustment).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional Preferred Shares will be issued (other than
fractions which are integral multiples of one one-hundredth of a Preferred
Share, which may, at the election of the Company, be evidenced by depositary
receipts) and in lieu thereof, an adjustment in cash will be made based on the
market price of the Preferred Shares on the last trading day before the date of
exercise.
At any time before the close of business ten days after the date of the
first public announcement of the acquisition by a person or group of affiliated
or associated persons of beneficial ownership of 15% or more of the outstanding
Common Shares, the board of directors of the Company may redeem the Rights in
whole, but not in part, at a price of $.01 per Right (the "Redemption Price"),
payable in cash or in shares of the Company's stock. If, however, there is an
Acquiring Person at the time, a majority of Continuing Directors must concur in
the redemption of the Rights. The redemption of the Rights may be made effective
at such time on such basis with such conditions as the board of directors in its
sole discretion may establish. Immediately upon any redemption of the Rights,
the right to exercise the Rights will terminate and the only right of the
holders of Rights will be to receive the Redemption Price.
The terms of the Rights may be amended by the board of directors of the
Company without the consent of the holders of the Rights, including an amendment
to lower certain thresholds described above to not less than the greater of (i)
the sum of .001% plus the largest percentage of the outstanding Common Shares
then known to the Company to be beneficially owned by any person or group of
affiliated or associated persons and (ii) 10%, except that from and after such
time as there is an Acquiring Person no such amendment may adversely affect the
interests of the holders of the Rights.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including, without limitation, the right
to vote or to receive dividends.
The Rights have certain anti-takeover effects. The Rights may cause
substantial dilution to a person or group that attempts to acquire the Company
on terms not approved by the Company's Board of Directors. The Rights should not
interfere with any merger or other
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business combination approved by the Company's Board of Directors prior to the
time that the person or group became an Acquiring Person, since until such time
the Rights may be redeemed by the Company at a price of $0.01 each.
ITEM 2 EXHIBITS. The following items are filed as exhibits to this
Registration Statement:
<TABLE>
<CAPTION>
Exhibit No. Description of Document
<S> <C>
4.1 Rights Agreement dated as of June 27, 1997 between ShoLodge,
Inc. and SunTrust, Atlanta, as Rights Agent, including Exhibit
A thereto (Form of Articles of Amendment to the Charter
creating Series A Subordinated Preferred Stock), Exhibit B
thereto (Form of Right Certificate and Forms of Assignment and
Election to Purchase) and Exhibit C thereto (Summary of Rights
to Purchase Preferred Shares)
4.2 Articles of Amendment to the Charter of the Registrant, as
filed on July 1, 1997, creating Series A Subordinated
Preferred Stock
4.3 Form of press release announcing the declaration of the rights
4.4 Form of letter to shareholders announcing the declaration of
the rights
</TABLE>
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SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant has duly caused this registration statement to be
signed on its behalf by the undersigned thereunto duly authorized.
SHOLODGE, INC.
Date: July 3, 1997 By:/s/ Michael A. Corbett
--------------------------
Michael A. Corbett
Its: Chief Financial Officer
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EXHIBIT 4.1
- --------------------------------------------------------------------------------
SHOLODGE, INC.
and
SUNTRUST BANK, ATLANTA
as Rights Agent
Rights Agreement
Dated as of June 27, 1997
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
Section 1. Certain Definitions......................................................................................1
Section 2. Appointment of Rights Agent..............................................................................6
Section 3. Issue of Right Certificates..............................................................................6
Section 4. Form of Right Certificates...............................................................................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.................................................10
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights...........................................12
Section 8. Cancellation and Destruction of Right Certificates......................................................14
Section 9. Reservation, Authorization and Registration.............................................................14
Section 10. Preferred Shares Record Date............................................................................16
Section 11. Adjustment of Purchase Price, Number of Shares or Number of Rights......................................16
Section 12. Certificate of Adjusted Purchase Price or Number of Shares..............................................28
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power....................................28
Section 14. Fractional Rights and Fractional Shares.................................................................30
Section 15. Rights of Action........................................................................................32
Section 16. Agreement of Right Holders..............................................................................32
Section 17. Right Certificate Holder Not Deemed a Stockholder.......................................................33
Section 18. Concerning the Rights Agent.............................................................................34
Section 19. Merger or Consolidation or Change of Name of Rights Agent...............................................35
Section 20. Duties of Rights Agent..................................................................................36
Section 21. Change of Rights Agent..................................................................................38
Section 22. Issuance of New Right Certificates......................................................................40
</TABLE>
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<TABLE>
<S> <C> <C>
Section 23. Redemption and Termination..............................................................................40
Section 24. Exchange................................................................................................42
Section 25. Notice of Certain Events................................................................................44
Section 26. Notices.................................................................................................45
Section 27. Supplements and Amendments..............................................................................46
Section 28. Successors..............................................................................................47
Section 29. Benefits of this Agreement............................................................................. 47
Section 30. Severability............................................................................................47
Section 31. Governing Law...........................................................................................47
Section 32. Counterparts............................................................................................48
Section 33. Descriptive Headings....................................................................................48
Signatures................................................................................................................48
Exhibit A - Form of Certificate of Designations of ShoLodge, Inc.
Exhibit B - Form of Right Certificate
Exhibit C - Summary of Rights to Purchase Preferred Shares
</TABLE>
ii
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RIGHTS AGREEMENT
This Rights Agreement (the "Agreement"), is entered into as of
June 27, 1997, between SHOLODGE, INC., a Tennessee corporation (the "Company"),
and SUNTRUST BANK, ATLANTA (the "Rights Agent").
The Board of Directors of the Company has authorized and
declared a dividend of one preferred share purchase right (a "Right") for each
Common Share (as hereinafter defined) of the Company outstanding on July 15,
1997 (the "Record Date"), each Right representing the right to purchase one
one-hundredth of a Preferred Share (as hereinafter defined), upon the terms and
subject to the conditions herein set forth, and has further authorized and
directed the issuance of one Right with respect to each Common Share that
becomes outstanding between the Record Date and the earliest of the Distribution
Date, the Redemption Date and the Final Expiration Date (as such terms are
hereinafter defined).
Accordingly, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this
Agreement, the following terms have the meanings indicated:
(a) "Acquiring Person" means any Person (as hereinafter
defined) who or which, together with all Affiliates and Associates (as
hereinafter defined) of such Person, is the Beneficial Owner (as hereinafter
defined) of 15% or more of the Common Shares of the Company then outstanding,
but does not include the Company, any Subsidiary (as hereinafter defined) of the
Company, any employee benefit plan of the Company or of any Subsidiary of the
Company, any entity holding Common Shares for or pursuant to the terms of any
such plan or any Person who or which, together with all Affiliates and
Associates of such Person, is the Beneficial Owner
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of 15% or more of the Common Stock of the Company outstanding on the date of
this Agreement; provided, however, that if a Person becomes the beneficial owner
of 15% or more of the Common Shares of the Company then outstanding in a
transaction which is approved in advance of its occurrence by a majority of the
Company's Board of Directors and by a majority of Continuing Directors, as
hereinafter defined, as being in the best interests of the Company, such Person
shall not be deemed to be an "Acquiring Person." Notwithstanding the foregoing,
no Person shall become an "Acquiring Person" as the result of an acquisition of
Common Shares by the Company which, by reducing the number of shares
outstanding, increases the proportionate number of shares beneficially owned by
such Person to 15% or more of the Common Shares of the Company then outstanding;
provided, however, that if a Person becomes the Beneficial Owner of 15% or more
of the Common Shares of the Company then outstanding by reason of share
purchases by the Company and, after such share purchases by the Company, becomes
the Beneficial Owner of any additional Common Shares of the Company, then such
Person shall be deemed to be an "Acquiring Person." Notwithstanding the
foregoing, if the Board of Directors of the Company determines in good faith
that a Person who would otherwise be an "Acquiring Person", as defined pursuant
to the foregoing provisions of this paragraph (a), has become such
inadvertently, and such Person divests as promptly as practicable a sufficient
number of Common Shares so that such Person would no longer be an Acquiring
Person, as defined pursuant to the foregoing provisions of this paragraph (a),
then such Person shall not be deemed to be an "Acquiring Person" for purposes of
this Agreement.
(b) "Affiliate" and "Associate" have the respective meanings ascribed
to such terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as in effect
on the date of this Agreement.
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(c) A Person shall be deemed the "Beneficial Owner" of and shall
be deemed to "beneficially own" any securities:
(i) which such Person or any of such Person's Affiliates or
Associates beneficially owns, directly or indirectly (as
determined pursuant to Rule 13d- 3 of the General Rules and
Regulations under the Exchange Act) including pursuant to any
agreement, arrangement or understanding, whether or not in
writing;
(ii) which such Person or any of such Person's Affiliates or
Associates has (A) the right to acquire (whether such right is
exercisable immediately or only after the passage of time)
pursuant to any agreement, arrangement or understanding (other
than customary agreements with and between underwriters and
selling group members with respect to a bona fide public
offering of securities), or upon the exercise of conversion
rights, exchange rights, rights (other than these Rights),
warrants or options, or otherwise; provided, however, that a
Person shall not be deemed the Beneficial Owner of, or to
beneficially own, securities tendered pursuant to a tender or
exchange offer made by or on behalf of such Person or any of
such Person's Affiliates or Associates until such tendered
securities are accepted for purchase or exchange; or (B) the
right to vote pursuant to any agreement, arrangement or
understanding; provided, however, that a Person shall not be
deemed the Beneficial Owner of, or to beneficially own, any
security if the agreement, arrangement or understanding to
vote such security (1) arises solely from a revocable proxy or
consent given to such Person in response to a public proxy or
consent solicitation made pursuant
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to, and in accordance with, the applicable rules and
regulations promulgated under the Exchange Act and (2) is not
also then reportable on Schedule 13D under the Exchange Act
(or any comparable or successor report or schedule); or
(iii) which are beneficially owned, directly or indirectly, by
any other Person with which such Person or any of such
Person's Affiliates or Associates has any agreement,
arrangement or understanding (other than customary agreements
with and between underwriters and selling group members with
respect to a bona fide public offering of securities) for the
purpose of acquiring, holding, voting (except to the extent
contemplated by the proviso to Section l(c)(ii)(B)) or
disposing of any securities of the Company.
Notwithstanding anything in this definition of Beneficial
Ownership to the contrary, the phrase "then outstanding," when used with
reference to a Person's Beneficial Ownership of securities of the Company, means
the number of such securities then issued and outstanding plus the number of
such securities not then actually issued and outstanding which such Person would
be deemed to own beneficially hereunder.
(d) "Business Day" means any day other than a Saturday, a
Sunday, or a day on which banking institutions in Nashville, Tennessee are
authorized or obligated by law or executive order to close.
(e) "Close of Business" on any given date means 5:00 P.M.,
Nashville, Tennessee time, on such date; provided, however, that if such date
is not a Business Day, "Close of Business" means 5:00 P.M., Nashville,
Tennessee time, on the next succeeding Business Day.
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(f) "Common Shares" when used with reference to the Company, means the
shares of common stock, no par value, of the Company. "Common Shares," when used
with reference to any Person other than the Company, means the capital stock (or
equity interest) with the greatest voting power of such other Person or, if such
other Person is a Subsidiary of another Person, of the Person or Persons which
has the power ultimately to control or direct the management of the
first-mentioned Person.
(g) "Continuing Director" means (i) any member of the Board of
Directors of the Company, while such Person is a member of the Board, who is not
an Acquiring Person, or an Affiliate or Associate of an Acquiring Person, or a
representative of an Acquiring Person or of any such Affiliate or Associate, and
was a member of the Board prior to the date of this Agreement, or (ii) any
Person who subsequently becomes a member of the Board, while such Person is a
member of the Board, who is not an Acquiring Person, or an Affiliate or
Associate of an Acquiring Person, or a representative of an Acquiring Person or
of any such Affiliate or Associate, if such Person's nomination for election or
election to the Board is recommended or approved by a majority of the Continuing
Directors.
(h) "Distribution Date" has the meaning set forth in Section 3 hereof.
(i) "Final Expiration Date" has the meaning set forth in Section 7
hereof.
(j) "Person" means any individual, firm, corporation or other entity,
and includes any successor (by merger or otherwise) of such entity.
(k) "Preferred Shares" means shares of Series A Subordinated Preferred
Stock of the Company, with the rights and preferences set forth in the amendment
to the Company's charter establishing such stock, the form of which amendment is
attached to this Agreement as Exhibit A.
(l) "Redemption Date" has the meaning set forth in Section 7 hereof.
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(j) "Person" means any individual, firm, corporation or other entity,
and includes any successor (by merger or otherwise) of such entity.
(k) "Preferred Shares" means shares of Series A Subordinated Preferred
Stock of the Company, with the rights and preferences set forth in the amendment
to the Company's charter establishing such stock, the form of which amendment is
attached to this Agreement as Exhibit A.
(l) "Redemption Date" has the meaning set forth in Section 7 hereof.
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(m) "Shares Acquisition Date" means the date of the first public
announcement (which, for purposes of this definition, shall include, without
limitation, a report or schedule filed pursuant to Section 13(d) under the
Exchange Act) by the Company or an Acquiring Person that an Acquiring Person has
become such.
(n) "Subsidiary" of any Person means any corporation or other entity of
which a majority of the voting power of the voting equity securities or other
equity interest is owned, directly or indirectly, by such Person.
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 before the Distribution Date also be
the holders of the Common Shares) in accordance with the terms and conditions
hereof, and the Rights Agent hereby accepts such appointment. The Company may
from time to time appoint such co-Rights Agents as it may deem desirable.
Section 3. Issue of Right Certificates.
(a) Until the earlier of (i) the Close of Business on the tenth day
after the Shares Acquisition Date (or, if the tenth day after the Shares
Acquisition Date occurs before the Record Date, the Record Date) or (ii) the
Close of Business on the tenth Business Day (or such later date as may be
determined by action of the Board of Directors before any Person becomes an
Acquiring Person) after the date of the commencement by any Person (other than
the Company, any Subsidiary of the Company, any employee benefit plan of the
Company or of any Subsidiary of the Company or any entity holding Common Shares
for or pursuant to the terms of any such plan or any Person who, or which,
together with all Affiliates and Associates of such Person, is the Beneficial
Owner of 15% or more of the Common Stock of the Company outstanding on the date
of this Agreement) of, or of the first public announcement of the intention of
any Person
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(other than the Company, any Subsidiary of the Company, any employee benefit
plan of the Company or of any Subsidiary of the Company or any entity holding
Common Shares for or pursuant to the terms of any such plan or any Person who,
or which, together with all Affiliates and Associates of such Person, is the
Beneficial Owner of 15% or more of the Common Stock of the Company outstanding
on the date of this Agreement) to commence, a tender or exchange offer the
consummation of which would result in any Person's becoming the Beneficial Owner
of Common Shares aggregating 15% or more of the then outstanding Common Shares,
including any such date which is after the date of this Agreement and before the
issuance of the Rights (the earlier of such dates being herein referred to as
the "Distribution Date"), the Rights will be evidenced (subject to the
provisions of Section 3(b) hereof) by the certificates for Common Shares
registered in the names of the holders thereof (which certificates shall also be
deemed to be Right Certificates) and not by separate Right Certificates, and the
right to receive Right Certificates will be transferable only in connection with
the transfer of Common Shares. As soon as practicable after the Distribution
Date, the Company will prepare and execute, the Rights Agent will countersign,
and the Company will send or cause to be sent (and the Rights Agent will, if
requested, send) by first-class, insured, postage-prepaid mail, to each record
holder of Common Shares as of the Close of Business on the Distribution Date, at
the address of such holder shown on the records of the Company, a Right
Certificate, in substantially the form of Exhibit B hereto (a "Right
Certificate"), evidencing one Right for each Common Share so held. As of the
Distribution Date, the Rights will be evidenced solely by such Right
Certificates.
(b) On the Record Date, or as soon as practicable thereafter, the
Company will send a copy of a Summary of Rights to Purchase Preferred Shares, in
substantially the form of Exhibit C hereto (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
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holder shown on the records of the Company. With respect to certificates for
Common Shares outstanding as of the Record Date, until the Distribution Date (or
earlier of the Redemption Date or the Final Expiration Date), the Rights will be
evidenced by such certificates registered in the names of the holders thereof
together with a copy of the Summary of Rights attached thereto. Until the
Distribution Date (or the earlier of the Redemption Date or the Final Expiration
Date), the surrender for transfer of any certificate for Common Shares
outstanding on the Record Date, with or without a copy of the Summary of Rights
attached thereto, shall also constitute the transfer of the Rights associated
with the Common Shares represented thereby.
(c) Certificates for Common Shares which become outstanding (including,
without limitation, reacquired Common Shares referred to in the last sentence of
this paragraph (c)) after the Record Date but before the earliest of the
Distribution Date, the Redemption Date or the Final Expiration Date shall have
impressed, printed or written on or otherwise affixed to them the following
legend:
This certificate also evidences and entitles the holder hereof to
certain rights as set forth in a Rights Agreement between ShoLodge,
Inc. and SunTrust Bank, Atlanta, dated as of June 27, 1997 (the "Rights
Agreement"), the terms of which are hereby incorporated herein by
reference and a copy of which is on file at the principal offices of
ShoLodge, Inc. Under certain circumstances, as set forth in the Rights
Agreement, such rights will be evidenced by separate certificates and
will no longer be evidenced by this certificate. ShoLodge, Inc. will
mail to the holder of this certificate a copy of the Rights Agreement
without charge after its receipt of a written request therefor. Under
certain circumstances, as set forth in the Rights Agreement, rights
issued to any Person who becomes an Acquiring Person (as defined in the
Rights Agreement) may become null and void.
With respect to certificates containing the foregoing legend, until the
Distribution Date, the Rights associated with the Common Shares represented by
such certificates shall be evidenced by such certificates alone, and the
surrender for transfer of any such certificate shall also constitute the
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transfer of the Rights associated with the Common Shares represented thereby. If
the Company acquires any Common Shares after the Record Date but before the
Distribution Date, any Rights associated with such Common Shares shall be deemed
canceled and retired so that the Company is not entitled to exercise any Rights
associated with the Common Shares which are no longer outstanding.
Section 4. Form of Right Certificates. The Right Certificates (and the
forms of election to purchase Preferred Shares and of assignment to be printed
on the reverse thereof) shall be substantially the same as Exhibit B hereto and
may have such marks of identification or designation and such legends, summaries
or endorsements printed thereon as the Company deems appropriate and as are not
inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law, rule or regulation or with any rule or
regulation of any stock exchange on which the Rights may from time to time be
listed or to conform to usage. Subject to the provisions of Section 24 hereof,
the Right Certificates shall entitle the holders thereof to purchase the number
of one one-hundredths of a Preferred Share set forth therein at the price per
one one-hundredth of a Preferred Share set forth therein (the "Purchase Price"),
but the number of such one one-hundredths of a Preferred Share and the Purchase
Price shall be subject to adjustment as provided herein.
Section 5. Countersignature and Registration. The Company's President
and Chief Executive officer, its Chief Financial Officer, its Chief Accounting
Officer, or any of its Vice Presidents shall execute the Right Certificates,
either manually or by facsimile signature, on behalf of the Company and the
Secretary or an Assistant Secretary of the Company shall attest such execution,
either manually or by facsimile signature. The Rights Agent shall manually
countersign the Right Certificates. No Right Certificate shall be valid for any
purpose unless countersigned. In case any officer of the Company who executed
any of the Right Certificates
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<PAGE> 14
ceases to hold the office in which capacity he executed before countersignature
by the Rights Agent and issuance and delivery by the Company, such Right
Certificates may nevertheless be countersigned by the Rights Agent and issued
and delivered by the Company with the same force and effect as though the person
who executed such Right Certificates continued to hold such office. Any Right
Certificate may be executed on behalf of the Company by any person who, at the
date of such execution, is authorized hereunder to execute such Right
Certificate, although as of the date of the execution hereof such person was not
so authorized.
Following the Distribution Date, the Rights Agent will keep or cause to
be kept at its principal office books for registration and transfer of the Right
Certificates issued hereunder. Such books shall show the names and addresses of
the respective holders of Right Certificates, the number of Rights evidenced by
each Right Certificate and the date of each Right Certificate.
Section 6. Transfer, Split Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates. Subject
to the provisions of Section 14 hereof, at any time after the Close of Business
on the Distribution Date, and at or before the Close of Business on the earlier
of the Redemption Date or the Final Expiration Date, any Right Certificate
(other than a Right Certificate representing Rights that have become void
pursuant to Section 11(a)(ii) hereof or that have been exchanged pursuant to
Section 24 hereof) may be transferred, split up, combined or exchanged for
another Right Certificate or Right Certificates, entitling the registered holder
to purchase a like number of one one-hundredths of a Preferred Share as the
Right Certificate surrendered entitled such holder to purchase. Any registered
holder desiring to transfer, split up, combine or exchange any Right Certificate
or Right Certificates shall deliver a written request to the Rights Agent and
shall surrender the Right Certificate or Right Certificates to be transferred,
split up, combined or exchanged at the principal office of the Rights Agent.
Thereupon the Rights Agent shall countersign and deliver to the
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<PAGE> 15
person entitled thereto a Right Certificate or Right Certificates as so
requested. The Company may require payment of a sum sufficient to cover any tax
or governmental charge imposed in connection with any transfer, split up,
combination or exchange of Right Certificates.
Upon receipt by the Company and the Rights Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a Right
Certificate and, in case of loss, theft or destruction, of indemnity or security
reasonably satisfactory to them and, at the Company's request, of reimbursement
to the Company and the Rights Agent of all reasonable expenses incidental
thereto, and upon surrender to the Rights Agent and cancellation of the Right
Certificate if mutilated, the Company will make and deliver a new Right
Certificate of like tenor to the Rights Agent for delivery to the registered
holder in lieu of the lost, stolen, destroyed or mutilated Right Certificate.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of
Rights.
(a) The registered holder of any Right Certificate may exercise the
Rights evidenced thereby (except as otherwise provided herein) in whole or in
part at any time after the Distribution Date upon surrender of the Right
Certificate, with the form of election to purchase on the reverse side thereof
duly executed, to the Rights Agent at the principal office of the Rights Agent,
together with payment of the Purchase Price for each one one-hundredth of a
Preferred Share as to which the Rights are exercised, at or prior to the
earliest of (i) the Close of Business on July 15, 2007 (the "Final Expiration
Date"), (ii) the time at which the Rights are redeemed as provided in Section 23
hereof (the "Redemption Date"), or (iii) the time at which such Rights are
exchanged as provided in Section 24 hereof.
(b) The purchase price for each one one-hundredth of a Preferred Share
purchasable pursuant to the exercise of a Right shall initially be Sixty and
no/100 Dollars ($60.00), subject to adjustment from time to time as provided in
Section 11 or 13 hereof (the
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<PAGE> 16
"Purchase Price"), and shall be payable in lawful money of the United States of
America in accordance with paragraph (c) below.
(c) Upon receipt of a Right Certificate representing exercisable
Rights, with the form of election to purchase duly executed, accompanied by
payment of the Purchase Price for the shares to be purchased and an amount equal
to any applicable transfer tax required to be paid by the holder of such Right
Certificate in accordance with Section 9 hereof by certified check, cashier's
check or money order payable to the order of the Company, the Rights Agent shall
thereupon promptly (i) (A) requisition from any transfer agent of the Preferred
Shares certificates for the number of Preferred Shares to be purchased or (B)
requisition from the depositary agent depositary receipts representing such
number of one one-hundredths of a Preferred Share as are to be purchased (in
which case certificates for the Preferred Shares represented by such receipts
shall be deposited by the transfer agent with the depositary agent), (ii) when
appropriate, requisition from the Company the amount of cash to be paid in lieu
of issuance of fractional shares in accordance with Section 14 hereof, (iii)
after receipt of such certificates or depositary receipts, cause the same to be
delivered to or upon the order of the registered holder of such Right
Certificate, registered in such name or names as may be designated by such
holder and (iv) when appropriate, after receipt, deliver such cash to or upon
the order of the registered holder of such Right Certificate. The Company hereby
irrevocably authorizes and directs its transfer agents and depository agents to
comply with requests made hereunder.
(d) In case the registered holder of any Right Certificate exercises
less than all the Rights evidenced thereby, a new Right Certificate evidencing
Rights equivalent to the Rights remaining unexercised shall be issued by the
Rights Agent to the registered holder of such Right Certificate or to his duly
authorized assigns, subject to the provisions of Section 14 hereof.
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<PAGE> 17
(e) The Company covenants and agrees that it will cause to be reserved
and kept available out of its authorized and unissued Preferred Shares a number
of Preferred Shares that will be sufficient to permit the exercise in full of
all outstanding Rights in accordance with this Section 7.
(f) Notwithstanding anything in this Agreement to the contrary, neither
the Rights Agent nor the Company shall be obligated to take any action with
respect to a registered holder upon any purported exercise as set forth in this
Section 7 unless such registered holder shall have provided such evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company may reasonably require.
Section 8. Cancellation and Destruction of Right Certificates. All
Right Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Right
Certificates shall be issued in lieu thereof, except as expressly permitted by
any of the provisions of this Rights Agreement. The Company shall deliver to the
Rights Agent for cancellation and retirement, and the Rights Agent shall 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 cancelled Right Certificates, and in such case shall
deliver a certificate of destruction thereof to the Company.
Section 9. Reservation, Authorization and Registration.
(a) Following the Shares Acquisition Date, the Company covenants and
agrees that it will cause to be reserved and kept available out of its then
authorized and unissued
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<PAGE> 18
Common Shares the number of Common Shares that will be sufficient to permit the
exercise in full of all outstanding Rights, subject to the rights of the
Company under Section 11(a)(iii) hereof.
(b) Following the Shares Acquisition Date the Company covenants and
agrees that it will take all such action as may be necessary to ensure that all
Common Shares delivered upon exercise of Rights shall, at the time of delivery
of the certificates for such Common Shares (subject to payment of the Purchase
Price), be duly and validly authorized and issued and fully paid and
non-assessable shares.
(c) The Company shall use its best efforts to (i) file, as soon as
practicable following the earliest date after the Distribution Date on which the
consideration to be delivered by the Company upon exercise of the Rights has
been determined or as soon as is required by law following the Distribution
Date, as the case may be, a registration statement under the Securities Act of
1933, as amended (the "Act"), with respect to the securities purchasable upon
exercise of the Rights on an appropriate form, (ii) cause such registration
statement to become effective as soon as practicable after the filing, and (iii)
cause such registration statement to remain effective (with a prospectus at all
times meeting the requirements of the Act) until the earlier of (A) the date as
of which the Rights are no longer exercisable for such securities and (B) the
Final Expiration Date. The Company will also use its best efforts to comply with
the securities laws of the various states in connection with the exercisability
of the Rights. The Company may temporarily suspend, for a period of time not to
exceed ninety (90) days after the date set forth in clause (i) of the first
sentence of this Section 9(c), the exercisability of the Rights in order to
prepare and file such registration statements and permit them to become
effective. Upon any 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 any provision of this Agreement to the
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<PAGE> 19
contrary, the Rights shall not be exercisable in any jurisdiction unless the
requisite registration or qualification in that jurisdiction shall have been
obtained.
(d) The Company further covenants and agrees that it will pay when due
and payable any and all federal and state transfer taxes and charges which may
be payable in respect of the issuance or delivery of the Right Certificates or
of any Preferred Shares or Common Shares upon the exercise of Rights. The
Company shall not, however, be required to pay any transfer tax which may be
payable in respect of any transfer or delivery of Right Certificates to a Person
other than, or the issuance or delivery of certificates or depositary receipts
for the Preferred Shares or Common Shares in a name other than that of, the
registered holder of the Right Certificate evidencing Rights surrendered for
exercise or to issue or to deliver any certificates or depositary receipts for
the Preferred Shares or Common Shares upon the exercise of any Rights until any
such tax shall have been paid (any such tax being payable by the holder of such
Right Certificate at the time of surrender) or until it has been established to
the Company's satisfaction that no such tax is due.
Section 10. Preferred Shares Record Date. Each person in whose name any
certificate for Preferred Shares is issued upon the exercise of Rights shall for
all purposes be deemed to have become the holder of record of the Preferred
Shares represented thereby on, and such certificate shall be dated as of, the
date upon which the Right Certificate evidencing such Rights was duly
surrendered and payment of the Purchase Price (and any applicable transfer
taxes) was made; provided, however, that if the date of such surrender and
payment is a date upon which the Preferred Shares transfer books of the Company
are closed, such person shall be deemed to have become the record holder of such
shares on, and such certificate shall be dated as of, the next succeeding
Business Day on which the Preferred Shares transfer books of the Company are
open. Before the exercise of the Rights evidenced thereby, the holder of a Right
15
<PAGE> 20
Certificate shall not be entitled to any rights of a holder of Preferred Shares
for which the Rights shall be exercisable, including, without limitation, the
right to vote or to receive dividends or other distributions and shall not be
entitled to receive any notice of any proceedings of the Company, except as
provided herein.
Section 11. Adjustment of Purchase Price, Number of Shares or Number of
Rights. The Purchase Price, the number of Preferred Shares covered by each Right
and the number of Rights outstanding are subject to adjustment from time to time
as provided in this Section 11.
(a) (i) If at any time after the date of this Agreement the Company
(A) declares a dividend on the Preferred Shares payable in Preferred Shares,
(B) subdivides the outstanding Preferred Shares, (C) combines the outstanding
Preferred Shares into a smaller number of Preferred Shares or (D) issues any
shares of its capital stock in a reclassification of the Preferred Shares
(including any reclassification in connection with a consolidation or merger in
which the Company is the continuing or surviving corporation), except as
otherwise provided in this Section 11(a), the Purchase Price in effect at the
time of the record date for such dividend or of the effective date of such
subdivision, combination or reclassification, and the number and kind of shares
of capital stock issuable on such date, shall be proportionately adjusted so
that the holder of any Right exercised after such time shall be entitled to
receive the aggregate number and kind of shares of capital stock which, if such
Right had been exercised immediately prior to such date and at a time when the
Preferred Shares transfer books of the Company were open, he would have owned
upon such exercise and have been entitled to receive by virtue of such
dividend, subdivision, combination or reclassification.
(ii) Subject to Sections 23 and 24 of this Agreement, in the event any
Person becomes an Acquiring Person, each holder of a Right shall from the Shares
Acquisition Date have
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<PAGE> 21
a right to receive, upon exercise thereof at a price equal to the then-current
Purchase Price multiplied by the number of one one-hundredths of a Preferred
Share for which a Right is then exercisable, in accordance with the terms of
this Agreement and in lieu of Preferred Shares, such number of Common Shares of
the Company as shall equal the result obtained by (x) multiplying the then
current Purchase Price by the number of one one-hundredths of a Preferred Share
for which a Right is then exercisable and dividing that product by (y) 50% of
the then current per share market price of the Company's Common Shares
(determined pursuant to Section 11(d) hereof) on the date of the occurrence of
such event. In the event that any Person becomes an Acquiring Person while the
Rights are outstanding, the Company shall take no action which would eliminate
or diminish the benefits intended to be afforded by the Rights, provided that,
the Company's exercise of its power to redeem the Rights pursuant to Section 23
hereof or of any other right or power specifically reserved to it hereunder
shall not be deemed an elimination or diminution of such benefits.
On and after the Shares Acquisition Date, any Rights that are or were
acquired or beneficially owned by any Acquiring Person (or any Associate or
Affiliate of such Acquiring Person) shall be void, and any holder of such Rights
shall thereafter have no right to exercise such Rights under any provision of
this Agreement. No Right Certificate shall be issued pursuant to Section 3 that
represents Rights beneficially owned by an Acquiring Person whose Rights would
be void pursuant to the preceding sentence or by any Associate or Affiliate
thereof; no Right Certificate shall be issued at any time upon the transfer of
any Rights to an Acquiring Person whose Rights would be void pursuant to the
preceding sentence or to any Associate or Affiliate thereof or to any nominee of
such Acquiring Person, Associate or Affiliate; and any Right Certificate
delivered to the Rights Agent for transfer to an Acquiring Person whose Rights
would be void pursuant to the preceding sentence shall be cancelled.
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<PAGE> 22
(iii) Notwithstanding anything in this Agreement to the contrary, the
number of Common Shares required to be issued upon exercise of the Rights
pursuant to subparagraph (ii) of this Section 11(a) shall not exceed the total
number of authorized but unissued Common Shares as of the Record Date; provided
that, if at any time before the end of the Substitution Period, as hereinafter
defined, the total number of authorized but unissued Common Shares becomes
greater than the number of such Common Shares as of the Record Date, this
Agreement may be amended pursuant to Section 27 to increase the number of Common
Shares issuable upon exercise of the Rights under subparagraph (ii) of this
Section 11(a). In the event that the number of Common Shares which are
authorized by the Company's charter but not outstanding or reserved for issuance
for purposes other than upon exercise of the Rights is not sufficient to permit
the exercise in full of the Rights in accordance with the foregoing subparagraph
(ii) of this Section 11(a) (without regard to any adjustment in the number of
Common Shares issuable upon such exercise which is required by the first
sentence of this subparagraph (iii)), the Company shall: (A) determine the
excess of (x) the value of the unavailable Common Shares issuable upon the
exercise of a Right over (y) the Purchase Price applicable to such unavailable
Common Shares (such excess, the "Spread"), and (B) make adequate provision to
substitute for such unavailable Common Shares, upon payment of the applicable
Purchase Price, (1) cash, (2) other equity securities of the Company (including,
without limitation, shares, or units of shares, of preferred stock which the
Board of Directors of the Company has deemed to have the same value as Common
Shares (such shares of preferred stock, "common share equivalents"), (3) debt
securities of the Company, (4) other assets, or (5) any combination of the
foregoing, having an aggregate value equal to the Spread, where such aggregate
value has been determined by the Board of Directors of the Company based upon
the advice of a nationally recognized investment banking firm selected by the
Board of Directors of the Company (any of (1)-(5), the "Substitute
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<PAGE> 23
Consideration"); provided, however, if the Company shall not have made adequate
provision to deliver value pursuant to clause (B) above within thirty days
following the Shares Acquisition Date, then the Company shall be obligated to
deliver, upon the surrender for exercise of a Right and payment of the Purchase
Price, Common Shares (to the extent available) and then, if necessary, cash, in
an amount equal to the Spread. If the Board of Directors determines in
good faith that it is likely that sufficient additional Common Shares could be
authorized for issuance upon full exercise of the Rights, the thirty-day period
set forth above may be extended for not more than ninety additional days during
which the Company may seek shareholder approval for the authorization of such
additional Common Shares (such thirty-day period, as it may be extended, the
"Substitution Period"). If Substitute Consideration is paid on exercise of the
Rights, all outstanding Rights shall receive the same Substitute Consideration.
The Board of Directors may suspend the exercisability of the Rights until the
expiration of the Substitution Period. In the event of any such suspension, the
Company shall issue a public announcement stating that the exercisability of the
Rights has been temporarily suspended, as well as a public announcement at such
time as the suspension is no longer in effect. For purposes of this Section
11(a)(iii), the value of the Common Shares shall be the current per share market
price (as determined pursuant to Section 11(d) hereof) of the Common Shares on
the Shares Acquisition Date and the value of any "common share equivalent" shall
be deemed to have the same value as a Common Share on such date.
(b) If the Company fixes a record date for the issuance of rights,
options or warrants to all holders of Preferred Shares entitling them (for a
period expiring within 45 calendar days after such record date) to subscribe for
or purchase Preferred Shares (or shares having the same rights, privileges and
preferences as the Preferred Shares ("equivalent preferred shares") or
securities convertible into Preferred Shares or equivalent preferred shares at a
price per
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<PAGE> 24
Preferred Share or equivalent preferred share (or having a conversion price per
share, if a security convertible into Preferred Shares or equivalent preferred
shares) less than the then current per share market price of the Preferred
Shares (as defined in Section 11(d)) 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 before such record date by a fraction, the
numerator of which shall be the number of Preferred Shares outstanding on such
record date plus the number of Preferred Shares which the aggregate offering
price of the total number of Preferred Shares and/or equivalent preferred shares
so to be offered (and/or the aggregate initial conversion price of the
convertible securities so to be offered) would purchase at such current market
price and the denominator of which shall be the number of Preferred Shares
outstanding on such record date plus the number of additional Preferred Shares
and/or equivalent preferred shares to be offered for subscription or purchase
(or into which the convertible securities so to be offered are initially
convertible). If such subscription price may be paid in part or in whole in a
consideration other than cash, the value of such consideration shall be as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent.
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) If the Company fixes a record date for a distribution to all
holders of the Preferred Shares (including any distribution made in connection
with a consolidation or merger in which the Company is the continuing or
surviving corporation) of evidences of indebtedness or assets (other than a
regular quarterly cash dividend or a dividend payable in Preferred Shares) or
subscription rights or warrants (excluding those referred to in Section 11(b)
hereof), the
20
<PAGE> 25
Purchase Price to be in effect after such record date shall be determined by
multiplying the Purchase Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the then current per share market
price of the Preferred Shares on such record date, less the fair market value
(as determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent) of
the portion of the assets or evidences of indebtedness so to be distributed or
of such subscription rights or warrants applicable to one Preferred Share and
the denominator of which shall be such current per share market price of the
Preferred Shares. Such adjustments shall be made successively whenever such a
record date is fixed; and if such distribution is not so made, the Purchase
Price shall again be adjusted to be the Purchase Price which would be in effect
if such record date had not been fixed.
(d) (i) For the purpose of any computation hereunder, the "current per
share market price" of any security (a "Security") for the purpose of this
Section 11(d)(i)) on any date shall be deemed to be the average of the daily
closing prices per share of the Security for the thirty (30) consecutive Trading
Days (as hereinafter defined) immediately before such date; provided, however,
that if the current per share market price of the Security is determined during
a period following the announcement by the issuer of such Security of (A) a
dividend or other distribution on such Security payable in shares of such
Security or securities convertible into such shares, or (B) any subdivision,
combination or reclassification of such Security and before the expiration of
thirty (30) Trading Days after the ex-dividend date for such dividend or
distribution or the record date for such subdivision, combination or
reclassification, then, and in each such case, the current per share market
price shall be appropriately adjusted to take into account ex-dividend trading.
The closing price for each day shall be the last sale price, regular way, or, in
case no such sale takes place on such day, the average of the closing bid and
asked prices,
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regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Security is not listed or
admitted to trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Security is listed or
admitted to trading or, if the Security is not listed or admitted to trading on
any national securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter market,
as reported by the National Association of Securities Dealers, Inc. Automated
Quotations System ("NASDAQ") or such other system then in use, or, if on any
such date the Security is not quoted by any such organization, the average of
the closing bid and asked prices as furnished by a professional market maker
making a market in the Security selected by the Board of Directors of the
Company. The term "Trading Day" shall mean a day on which the principal national
securities exchange on which the security is listed or admitted to trading is
open for the transaction of business or, if the Security is not listed or
admitted to trading on any national securities exchange, a Business Day.
(ii) For the purpose of any computation hereunder, the "current per
share market price" of the Preferred Shares shall be determined in accordance
with the method set forth in Section 11(d)(i). If the Preferred Shares are not
publicly traded, the "current per share market price" of the Preferred Shares
shall be conclusively deemed to be the current per share market price of the
Common Shares as determined pursuant to Section 11(d)(i) (appropriately adjusted
to reflect any stock split, stock dividend or similar transaction occurring
after the date hereof), multiplied by one hundred. If neither the Common Shares
nor the Preferred Shares are publicly held or so listed or traded, "current per
share market price" shall mean the fair value per share
22
<PAGE> 27
as determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent.
(e) No adjustment in the Purchase Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in the Purchase
Price; provided, however, that any adjustments which by reason of this Section
11(e) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Section
11 shall be made to the nearest cent or to the nearest one one-millionth of a
Preferred Share or one ten-thousandth of any other share or security as the case
may be. Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than the earlier of (i) three
years from the date of the transaction which requires such adjustment or (ii)
the date of the expiration of the right to exercise any Rights.
(f) If as result of an adjustment made pursuant to Section 11(a)
hereof, the holder of any Right thereafter exercised becomes entitled to receive
any shares of capital stock of the Company other than Preferred Shares,
thereafter the number of such other shares so receivable upon exercise of any
Right shall be subject to adjustment from time to time in a manner and on terms
as nearly as practicable equivalent to the provisions with respect to the
Preferred Shares contained in Section 11(a) through (c), inclusive, and the
provisions of Sections 7, 9, 10 and 13 with respect to the Preferred Shares
shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company after any adjustment
made to the Purchase Price hereunder shall evidence the right to purchase, at
the adjusted Purchase Price, the number of one one-hundredths of a Preferred
Share purchasable from time to time hereunder upon exercise of the Rights, all
subject to further adjustment as provided herein.
(h) Unless the Company has exercised its election as provided in
Section 11(i), upon each adjustment of the Purchase Price as a result of the
calculations made in Sections 11(b)
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and (c), each Right outstanding immediately prior to the making of such
adjustment shall thereafter evidence the right to purchase, at the adjusted
Purchase Price, that number of one one-hundredths of a Preferred Share
(calculated to the nearest on one-millionth of a Preferred Share) obtained by
(i) multiplying (x) the number of one one-hundredths of a share covered by a
Right immediately before this adjustment by (y) the Purchase Price in effect
immediately before 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 one one-hundredths of a Preferred Share purchasable
upon the exercise of a Right. Each of the Rights outstanding after such
adjustment of the number of Rights shall be exercisable for the number of one
one-hundredths of a Preferred Share for which a Right was exercisable
immediately before such adjustment. Each Right held of record before such
adjustment of the number of Rights shall become that number of Rights
(calculated to the nearest one ten thousandth) obtained by dividing the Purchase
Price in effect immediately before 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, it shall be at least ten (10) days later than the
date of the public announcement. If Right Certificates have been issued, upon
each adjustment of the number of Rights pursuant to this Section 11(i), the
Company shall, as promptly as practicable, cause to be distributed to holders of
record of Right Certificates on such record date Right Certificates evidencing,
subject to Section 14 hereof, the additional Rights to
24
<PAGE> 29
which such holders are 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
are entitled after such adjustment. Right Certificates so to be distributed
shall be issued, executed and countersigned in the manner provided for herein
and shall be registered in the names of the holders of record of Right
Certificates on the record date specified in the public announcement.
(j) Regardless of any adjustment or change in the Purchase Price or the
number of one one-hundredths of a Preferred Share issuable upon the exercise of
the Rights, the Right Certificates theretofore and thereafter issued may
continue to express the Purchase Price and the number of one one-hundredths of a
Preferred Share which were expressed in the initial Right Certificates issued
hereunder.
(k) 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
of the Preferred Shares and other capital stock or securities of the Company, if
any, issuable upon such exercise over and above the Preferred Shares and other
capital stock or securities of the Company, if any, issuable upon such exercise
on the basis of the Purchase Price in effect prior to such adjustment; provided,
however, that the Company shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such additional
shares upon the occurrence of the event requiring such adjustment.
(l) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that it in its sole discretion shall
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determine to be advisable in order that any consolidation or subdivision of the
Preferred Shares, issuance wholly for cash of any Preferred Shares at less than
the current market price, issuance wholly for cash of Preferred Shares or
securities which by their terms are convertible into or exchangeable for
Preferred Shares, dividends on Preferred Shares payable in Preferred Shares or
issuance of rights, options or warrants referred to hereinabove in Section
11(b), hereafter made by the Company to holders of its Preferred Shares shall
not be taxable to such stockholders.
(m) If at any time between the date of this Agreement and the
Distribution Date, the Company (i) declares or pays any dividend on the Common
Shares payable in Common Shares or (ii) effects a subdivision, combination or
consolidation of the Common Shares (by reclassification or otherwise than by
payment of dividends in Common Shares) into a greater or lesser number of Common
Shares, then (A) the number of one one-hundredths of a Preferred Share
purchasable after such event upon proper exercise of each Right shall be
determined by multiplying the number of one one-hundredths of a Preferred Share
so purchasable immediately before such event by a fraction, the numerator of
which is the number of Common Shares outstanding immediately before such event
and the denominator of which is the number of Common Shares outstanding
immediately after such event, and (B) each Common Share outstanding immediately
after such event shall have issued with respect to it that number of Rights
which each Common Share outstanding immediately before such event had issued
with respect to it. The adjustments provided for in this Section 11(m) shall be
made successively whenever such a dividend is declared or, if not declared,
paid, or such a subdivision, combination or consolidation is effected.
(n) The Company covenants and agrees that it shall not, at any time
after the Distribution Date, (i) consolidate with any other Person, (ii) merge
with or into any other Person or (iii) sell or transfer (or permit any
Subsidiary to sell or transfer), in one transaction or a series
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of related transactions outside the ordinary course of the Company's business,
assets or earning power aggregating more than 50% of the assets or earning power
of the Company and its Subsidiaries (taken as a whole) to any other Person or
Persons, if at the time of or immediately after such consolidation, merger or
sale there are any rights, warrants or other instruments or securities
outstanding or agreements in effect which would substantially diminish or
otherwise eliminate the benefits intended to be afforded by the Rights.
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Section 11 or 13 hereof, the
Company shall promptly (a) prepare a certificate setting forth such adjustment,
and a brief statement of the facts accounting for such adjustment, (b) file with
the Rights Agent and with each transfer agent for the Common Shares or the
Preferred Shares a copy of such certificate and (c) mail a brief summary thereof
to each holder of a Right Certificate in accordance with Section 25 hereof.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power. If, directly or indirectly, (a) the Company consolidates with, or
merges with and into, any other Person, (b) any Person consolidates with or
merges with and into the Company and the Company is the continuing or surviving
corporation of such merger and, in connection with such merger, all or part of
the Common Shares are changed into or exchanged for stock or other securities of
any other Person (or the Company) or cash or any other property or engages in a
share exchange with the Company in which all or part of the Common Shares are
changed into or exchanged for stock or other securities of any other Person or
(c) the Company sells or otherwise transfers (or one or more of its Subsidiaries
sells or otherwise transfers), in one or more transactions, assets or earning
power aggregating 50% or more of the assets or earning power of the Company and
its Subsidiaries (taken as a whole) to any Person other than the Company or one
or more of its wholly-owned Subsidiaries, then, and in each such case, proper
provision shall be
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made so that (i) each holder of a Right (except as otherwise provided herein)
shall thereafter have the right to receive, upon the exercise thereof at a price
equal to the then current Purchase Price multiplied by the number of one
one-hundredths of a Preferred Share for which a Right is then exercisable, in
accordance with the terms of this Agreement and in lieu of Preferred Shares,
such number of Common Shares of such other Person (including the Company as
successor thereto or as the surviving corporation) free and clear of any liens,
encumbrances, rights of first refusal or other adverse claims, as shall equal
the result obtained by (A) multiplying the then current Purchase Price by the
number of one one-hundredths of a Preferred Share for which a Right is then
exercisable and dividing that product by (B) 50% of the then current per share
market price of the Common Shares of such other Person (determined pursuant to
Section 11(d) hereof) on the date of consummation of such consolidation, merger,
sale or transfer; (ii) the issuer of such Common Shares shall thereafter be
liable for, and shall assume, by virtue of such consolidation, merger, sale or
transfer, all the obligations and duties of the Company under this Agreement;
(iii) the term "Company" shall thereafter be deemed to refer to such issuer; and
(iv) such issuer shall take such steps (including, but not limited to, the
reservation of a sufficient number of its Common Shares in accordance with
Section 9 hereof) in connection with such consummation to assure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably may
be, in relation to the Common Shares thereafter deliverable upon the exercise of
the Rights. The Company shall not consummate any such consolidation, merger,
sale or transfer until the Company and such issuer have executed and delivered
to the Rights Agent a supplemental agreement so providing. The Company shall not
enter into any transaction of the kind referred to in this Section 13 if at the
time of such transaction there are any rights, warrants, instruments or
securities outstanding or any agreements or arrangements which, as a result of
the consummation of such transaction, would eliminate or substantially diminish
the benefits intended
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to be afforded by the Rights. The provisions of this Section 13 shall similarly
apply to successive mergers or consolidations or sales or other transfers.
Section 14. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue fractions of Rights or
to distribute Right Certificates which evidence fractional Rights. In lieu of
such fractional Rights, the Company shall pay to the registered holders of the
Right Certificates with regard to which such fractional Rights would otherwise
be issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right. For 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 before the date on which such fractional Rights would otherwise
have been issuable. The closing price for any day shall be the last sale price,
regular way, or, in case no such sale takes place on such day, the average of
the closing bid and asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect to securities
listed or admitted to trading on the New York Stock Exchange or, if the Rights
are not listed or admitted to trading on the New York Stock Exchange, as
reported in the principal consolidated transaction reporting system with respect
to securities listed on the principal national securities exchange on which the
Rights are listed or admitted to trading or, if the Rights are not listed or
admitted to trading on any national securities exchange, the last quoted price
or, if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by NASDAQ or such other system then in use
or, if on any such date the Rights are not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a professional
market maker making a market in the Rights selected by the Board of Directors of
the Company. If on any such date no such market maker is making a market in the
Rights, the
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fair value of the Rights on such date as determined in good faith by the Board
of Directors of the Company shall be used.
(b) The Company shall not be required to issue fractions of Preferred
Shares (other than fractions which are integral multiples of one one-hundredth
of a Preferred Share) upon exercise of the Rights or to distribute certificates
which evidence fractional Preferred Shares (other than fractions which are
integral multiples of one one-hundredth of a Preferred Share). Fractions of
Preferred Shares in integral multiples of one one-hundredth of a Preferred Share
may, at the election of the Company, be evidenced by depositary receipts,
pursuant to an appropriate agreement between the Company and a depositary
selected by it; provided, that such agreement shall provide that the holders of
such depositary receipts have all the rights, privileges and preferences to
which they are entitled as beneficial owners of the Preferred Shares represented
by such depositary receipts. In lieu of fractional Preferred Shares that are not
integral multiples of one one-hundredth of a Preferred Share, the Company shall
pay to the registered holders of Right Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same fraction of the
current market value of one Preferred Share. For purposes of this Section 14(b),
the current market value of a Preferred Share shall be the closing price of a
Preferred Share (as determined pursuant to the second sentence of Section
11(d)(i) hereof) for the Trading Day immediately before the date of such
exercise.
(c) The holder of a Right by the acceptance of the Right expressly
waives his right to receive any fractional Rights or any fractional shares upon
exercise of a Right (except as provided above).
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
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registered holders of the Common Shares); and any registered holder of any Right
Certificate (or, prior to the Distribution Date, of the Common Shares), without
the consent of the Rights Agent or of the holder of any other Right Certificate
(or, prior to the Distribution Date, of the Common Shares), may, in his own
behalf and for his own benefit, enforce, 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
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 holders of Rights would not have an adequate
remedy at law for any breach of this Agreement and will be entitled to specific
performance of the obligations under, and injunctive relief against actual or
threatened violations of the obligations of any Person subject to, this
Agreement.
Section 16. Agreement of Right Holders. Every holder of a Right, by
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) before the Distribution Date, the Rights are transferable only in
connection with the transfer of the Common Shares;
(b) after the Distribution Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office of the Rights Agent, duly endorsed or accompanied by a
proper instrument of transfer;
(c) the Company and the Rights Agent may deem and treat the person in
whose name the Right Certificate (or, before the Distribution Date, the
associated Common Shares certificate) is registered as the absolute owner
thereof and of the Rights evidenced thereby (notwithstanding any notations of
ownership or writing on the Right Certificates or the associated Common Shares
certificate made by anyone other than the Company or the Rights Agent) for all
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<PAGE> 36
purposes whatsoever, and neither the Company nor the Rights Agent shall be
affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the contrary, neither
the Company nor the Rights Agent shall have any liability to any Person as a
result of its inability to perform any of its obligations hereunder by reason of
any preliminary or permanent injunction or any other order, decree or ruling of
a court of competent jurisdiction, 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
must take reasonable measures to have any such order, decree or ruling lifted or
otherwise reversed.
Section 17. Right Certificate Holder Not Deemed a Shareholder. No
holder, as such, of any Right Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the Preferred Shares or any
other securities of the Company which may at any time be issuable on the
exercise of the Rights represented thereby, nor shall anything contained herein
or in any Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 25 hereof), or to receive dividends
or subscription rights, or otherwise, until the Right or Rights evidenced by
such Right Certificate shall have been exercised in accordance with the
provisions hereof.
Section 18. Concerning the Rights Agent. 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
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disbursements incurred in the administration and execution of this Agreement and
the exercise and performance of its duties hereunder. The Company also agrees to
indemnify the Rights Agent, and its officers, agents and directors, for, and to
hold them harmless against, any loss, liability, or expense incurred without
gross negligence, bad faith or willful misconduct on the part of the Rights
Agent, for anything done or omitted by the Rights Agent or such indemnified
Persons in connection with the acceptance and administration of this Agreement,
including the costs and expenses of defending against any claim of liability in
the premises.
The Rights Agent shall be protected by the Company 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 for the Preferred Shares or Common Shares or for
other securities of the Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement or other paper or document believed by it to be genuine
and to be signed, executed and, where necessary, verified or acknowledged, by
the proper person or persons, or otherwise upon the advice of counsel as set
forth in Section 20 hereof.
Section 19. Merger or Consolidation or Change of Name of Rights Agent.
Any corporation into which the Rights Agent or any successor Rights Agent may be
merged or with which it may be consolidated or any corporation resulting from
any merger or consolidation to which the Rights Agent or any successor Rights
Agent shall be a party or any corporation succeeding to the stock transfer or
corporate trust powers of the Rights Agent or any successor Rights Agent shall
be the successor to the Rights Agent under this 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
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to the agency created by this Agreement, any of the Right Certificates shall
have been countersigned but not delivered, any such successor Rights Agent may
adopt the countersignature of the predecessor Rights Agent and deliver such
Right Certificates so countersigned; and in case at that time any of the Right
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Right Certificates either in the name of the predecessor Rights
Agent or in the name of the successor Rights Agent; and in all such cases such
Right Certificates shall have the full force provided in the Right Certificates
and in this Agreement.
In case at any time the name of the Rights Agent shall be changed and
at such time any of the Right Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Right Certificates so countersigned; and in case at that time any of
the Right Certificates shall not have been countersigned, the Rights Agent may
countersign such Right Certificates either in its prior name or in its changed
name; and in all such cases such Right Certificates shall have the full force
provided in the Right Certificates and in this 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
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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 President and Chief Executive Officer, the Chief Financial
Officer, the Chief Accounting Officer, any Vice President, the Treasurer or the
Secretary of the Company and delivered to the Rights Agent; and such certificate
shall be full authorization to the Rights Agent for any action taken or suffered
in good faith by it under the provisions of this Agreement in reliance upon such
certificate.
(c) The Rights Agent shall be liable hereunder to the Company and any
other Person only for its own gross negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Right
Certificates (except its countersignature thereof) or be required to verify the
same, but all such statements and recitals are and shall be deemed to have been
made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect
of the validity of this Agreement or the execution and delivery hereof (except
the due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Right Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Right Certificate; nor shall it
be responsible for any change in the exercisability of the Rights (including the
Rights' becoming void pursuant to Section 11(a)(ii) hereof) or any adjustment in
the terms of the Rights (including the manner, method or amount thereof)
provided for in Section 3, 11, 13, 23 or 24, or the ascertaining of the
existence of facts that would require any such change or adjustment (except with
respect to the exercise of Rights evidenced by Right Certificates after actual
notice that such change or adjustment is required); nor shall it by an act
hereunder be deemed to make any
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representation or warranty as to the authorization or reservation of any
Preferred Shares to be issued pursuant to this Agreement or any Right
Certificate or as to whether any Preferred Shares 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 President and Chief Executive Officer, the Chief Financial Officer,
the Chief Accounting Officer, any Vice President, the Secretary or the Treasurer
of the Company, and to apply to such officers for advice or instructions in
connection with its duties, and it shall not be liable for any action taken or
suffered by it in good faith in accordance with instructions of any such officer
or for any delay in acting while waiting for those instructions.
(h) The Rights Agent and any stockholder, director, officer or employee
of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement.
(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.
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Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon thirty (30) days' notice in writing mailed to the Company and to each
transfer agent of the Common Shares or Preferred Shares by registered or
certified mail and to the holders of the Right Certificates by first-class mail.
The Company may remove the Rights Agent or any successor Rights Agent upon
thirty (30) days' notice in writing, mailed to the Rights Agent or successor
Rights Agent, as the case may be, and to each transfer agent of the Common
Shares or Preferred Shares by registered or certified mail and to the holders of
the Right Certificates by first-class mail. If the Rights Agent resigns or is
removed or otherwise becomes incapable of acting, the Company shall appoint a
successor to the Rights Agent. If the Company fails to make such appointment
within a period of thirty (30) days after giving notice of such removal or after
it has been notified in writing of such resignation or incapacity by the
resigning or incapacitated Rights Agent or by the holder of a Right Certificate
(who shall, with such notice, submit his Right Certificate for inspection by the
Company), then the registered holder of any Right Certificate may apply to any
court of competent jurisdiction for the appointment of a new Rights Agent. Any
successor Rights Agent, whether appointed by the Company or by such a court,
shall be a corporation organized and doing business under the laws of the United
States or of the State of Tennessee (or of any other state of the United States
so long as such corporation is authorized to do business as a banking
institution in the State of Tennessee), in good standing,
having an office in the State of Tennessee, which is authorized under such laws
to exercise corporate trust or stock transfer powers and is subject to
supervision or examination by federal or state authority and which has at the
time of its appointment as Rights Agent a combined capital and surplus of at
least $60,000,000. 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
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the predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder and shall execute and
deliver any further assurance, conveyance, act or deed necessary for the
purpose. Not later than the effective date of any such appointment, the Company
shall file notice thereof in writing with the predecessor Rights Agent and each
transfer agent of the Common Shares or Preferred Shares, and mail a notice
thereof in writing to the registered holders of the Right Certificates. Failure
to give any notice provided for in this Section 21, however, or any defect
therein, shall not affect the legality or validity of the resignation or removal
of the Rights Agent or the appointment of the successor Rights Agent, as the
case may be.
Section 22. Issuance of New Right Certificates. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Right Certificates evidencing Rights in such form
as may be approved by its Board of Directors to reflect any adjustment or change
in the Purchase Price and the number or kind or class of shares or other
securities or property purchasable under the Right Certificates made in
accordance with the provisions of this Agreement.
Section 23. Redemption and Termination.
(a) The Board of Directors of the Company may, at its option, at any
time before the earlier of (i) the Close of Business on the tenth day following
the Shares Acquisition Date and (ii) the Close of Business on the Final
Expiration Date, redeem all but not less than all the then outstanding Rights at
a redemption price of $.01 per Right, as such amount may be appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof or, in the discretion of the Board of Directors,
its equivalent in shares of the Company's stock, determined according to the
current per share market price of such shares as of the date of redemption (such
amount, the "Redemption Price"); provided, however, if at the
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<PAGE> 43
time the Board of Directors of the Company authorizes redemption of the Rights
(i) such authorization occurs on or after the time a Person becomes an Acquiring
Person or (ii) such authorization occurs on or after the date of a change
(resulting from a proxy or consent solicitation) in a majority of the directors
in office at the commencement of such solicitation if any Person who is a
participant in such solicitation has stated (or, if upon the commencement of
such solicitation, a majority of the Board of Directors of the Company has
determined in good faith) that such Person (or any of its Affiliates or
Associates) intends to take, or may consider taking any action which would
result in such Person's becoming an Acquiring Person, then in either such event
there must be Continuing Directors then in office and such authorization shall
require the concurrence of a majority of such Continuing Directors,
Notwithstanding anything contained in this Agreement to the contrary, the Rights
shall not be exercisable following an adjustment made pursuant to Section
11(a)(ii) prior to the expiration of the Company's right of redemption
hereunder.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights pursuant to paragraph (a) of this
Section 23, and without any further action and without any notice, the right to
exercise the Rights will terminate and the only right thereafter of the holders
of Rights shall be to receive the Redemption Price. The Company shall promptly
give public notice of any such redemption; provided, however, that the failure
to give, or any defect in, any such notice shall not affect the validity of such
redemption. Within ten (10) days after such action of the Board of Directors
ordering the redemption of the Rights, the Company shall mail a notice of
redemption to all the holders of the then outstanding Rights at their last
addresses as they appear upon the registry books of the Rights Agent or, prior
to the Distribution Date, on the registry books of the transfer agent for the
Common Shares. Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the
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holder receives the notice. Each such notice of redemption will state the method
by which the payment of the Redemption Price will be made. Neither the Company
nor any of its Affiliates or Associates may redeem, acquire or purchase for
value any Rights at any time in any manner other than that specifically set
forth in this Section 23 or in Section 24 hereof and other than in connection
with the purchase of Common Shares prior to the Distribution Date.
Section 24. Exchange.
(a) The Board of Directors of the Company may, at its option, at any
time after any Person becomes an Acquiring Person, exchange all or part of the
then outstanding and exercisable Rights (which shall not include Rights that
have become void pursuant to the provisions of Section 11(a)(ii) hereof) for
Common Shares at an exchange ratio of one Common Share per Right, appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof (such exchange ratio being hereinafter referred
to as the "Exchange Ratio"). Notwithstanding the foregoing, the Board of
Directors shall not be empowered to effect such exchange at any time after any
Person (other than the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or any such Subsidiary, or any entity holding Common
Shares for or pursuant to the terms of any such plan or any Person who, or
which, together with all Affiliates and Associates of such Person, is the
Beneficial Owner of 15% or more of the Common Stock of the Company outstanding
on the date of this Agreement), together with all Affiliates and Associates of
such Person, becomes the Beneficial Owner of 50% or more of the Common Shares
then outstanding.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the exchange of any Rights pursuant to paragraph (a) of this
Section 24 and without any further action and without any notice, the right to
exercise such Rights shall terminate and the only right thereafter of a holder
of such Rights shall be to receive a number of Common Shares
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<PAGE> 45
equal to the number of such Rights held by such holder multiplied by the
Exchange Ratio. The Company shall promptly give public notice of any such
exchange; provided, however, that the failure to give, or any defect in, such
notice shall not affect the validity of such exchange. The Company promptly
shall mail a notice of any such exchange to all of the holders of such Rights at
their last addresses as they appear upon the registry books of the Rights Agent.
Any notice which is mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice. Each such notice of exchange will
state the method by which the exchange of the Common Shares for Rights will be
effected and, in the event of any partial exchange, the number of Rights which
will be exchanged. Any partial exchange shall be effected pro rata based on the
number of Rights (other than Rights which have 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 24, the Company, at its
option, may substitute Preferred Shares (or common equivalent shares, as such
term is defined in Section 11(b) hereof) for Common Shares exchangeable for
Rights, at the initial rate of one one-hundredth of a Preferred Share (or
equivalent preferred share) for each Common Share, as appropriately adjusted to
reflect adjustments in the voting rights of the Preferred Shares pursuant to the
terms thereof, so that the fraction of a Preferred Share delivered in lieu of
each Common Share shall have the same voting rights as one Common Share.
(d) In the event that there are not sufficient Common Shares or
Preferred Shares authorized but unissued to permit any exchange of Rights as
contemplated in accordance with this Section 24, the Company shall take all such
action as may be necessary to authorize additional Common Shares or Preferred
Shares for issuance upon exchange of the Rights.
(e) The Company shall not be required to issue fractions of Common
Shares or to distribute certificates which evidence fractional Common Shares. In
lieu of such fractional
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Common Shares, the Company shall pay to the registered holders of the Right
Certificates with regard to which such fractional Common Shares would otherwise
be issuable an amount in cash equal to the same fraction of the current market
value of a whole Common Share. For the purposes of this paragraph (e), the
current market value of a whole Common Share shall be the closing price of a
Common Share (as determined pursuant to the second sentence of Section 11(d)(i)
hereof) for the Trading Day immediately prior to the date of exchange pursuant
to this Section 24.
Section 25. Notice of Certain Events.
(a) If the Company proposes (i) to pay any dividend payable in stock of
any class to the holders of its Preferred Shares or to make any other
distribution to the holders of its Preferred Shares (other than a regular
quarterly cash dividend), (ii) to offer to the holders of its Preferred Shares
rights or warrants to subscribe for or to purchase any additional Preferred
Shares or shares of stock of any class or any other securities, rights or
options, (iii) to effect any reclassification of its Preferred Shares (other
than a reclassification involving only the subdivision of outstanding Preferred
Shares), (iv) to effect any consolidation or merger into or with, or to effect
any sale or other transfer (or to permit one or more of its Subsidiaries to
effect any sale or other transfer), in one or more transactions, of 50% or more
of the assets or earning power of the Company and its Subsidiaries (taken as a
whole) to, or to engage in a share exchange with any other Person in which all
or part of the Common Shares are changed into or exchanged for stock or
securities of, any other Person, (v) to effect the liquidation, dissolution or
winding up of the Company, or (v) to declare or pay any dividend on the Common
Shares payable in Common Shares or to effect a subdivision, combination or
consolidation of the Common Shares (by reclassification or otherwise than by
payment of dividends in Common Shares), then, in each such case, the Company
shall give to each holder of a Right Certificate, in accordance with Section 26
42
<PAGE> 47
hereof, a notice of such proposed action, which shall specify the record date
for the purposes of such stock dividend, or distribution of rights or warrants,
or the date on which such reclassification, consolidation, merger, sale,
transfer, liquidation, dissolution, or winding up is to take place and the date
of participation therein by the holders of the Common Shares and/or Preferred
Shares, if any such date is to be fixed, and such notice shall be so given in
the case of any action covered by clause (i) or (ii) above at least ten (10)
days prior to the record date for determining holders of the Preferred Shares
for purposes of such action, and in the case of any such other action, at least
ten (10) days prior to the date of the taking of such proposed action or the
date of participation therein by the holders of the Common Shares and/or
Preferred Shares, whichever shall be the earlier.
(b) If the event set forth in Section 11(a)(ii) hereof occurs, then the
Company shall as soon as practicable thereafter give to each holder of a Right
Certificate, in accordance with Section 26 hereof, a notice of the occurrence of
such event, which notice shall describe such event and the consequences of such
event to holders of Rights under Section 11(a)(ii) hereof.
Section 26. Notices. Notices or demands authorized by this 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:
ShoLodge, Inc.
217 West Main Street
Gallatin, Tennessee 37066
Attention: Chief Financial Officer
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
43
<PAGE> 48
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
P.O. Box 4625
Atlanta, GA 30302
Attention: Department Manager
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
Section 27. Supplements and Amendments. Before the Distribution Date,
the Company and the Rights Agent shall, if the Company so directs, supplement or
amend any provision of this Agreement without the approval of any holders of
Common Shares. From and after the Distribution Date, the Company and the Rights
Agent shall, if the Company so directs, supplement or amend this Agreement
without the approval of any holders of Rights (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 (which shortening or lengthening, following the first
occurrence of an event set forth in clauses (i) and (ii) of the first proviso to
Section 23(a) hereof, shall be effective only if there are Continuing Directors
and shall require the concurrence of a majority of such Continuing Directors),
or (iv) to change or supplement the provisions hereunder in any manner which the
Company may deem necessary or desirable and which shall not adversely affect the
interests of the holders of Rights (other than an Acquiring Person or an
Affiliate or Associate of an Acquiring Person) so long as the duties,
liabilities and indemnification of the Rights Agent are not effected; provided,
however, that this Agreement may not be supplemented or amended to lengthen,
44
<PAGE> 49
pursuant to clause (iii) of this sentence, (A) a time period relating to when
the Rights may be redeemed at such time as the Rights are not then redeemable or
(B) any other time period unless such lengthening is for the purpose of
protecting, enhancing or clarifying the rights of, and/or the benefits to, the
holders of Rights. Upon the delivery of a certificate from an appropriate
officer of the Company which states that the proposed supplement or amendment is
in compliance with the terms of this Section 27, the Rights Agent shall execute
such supplement or amendment. Section 28. Successors. All the covenants and
provisions of this Agreement by or for the benefit of the Company or the Rights
Agent shall bind and inure to the benefit of their respective successors and
assigns hereunder.
Section 29. Benefits of this Agreement. Nothing in this Agreement shall
be construed to give to any person or corporation other than the Company, the
Rights Agent and the registered holders of the Right Certificates (and, prior to
the Distribution Date, the Common Shares) any legal or equitable right, remedy
or claim under this Agreement; but this Agreement shall be for the sole and
exclusive benefit of the Company, the Rights Agent and the registered holders of
the Right Certificates (and, prior to the Distribution Date, the Common 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 laws of the
State of Tennessee and for all purposes shall be governed by and construed in
accordance with the laws of such State applicable to contracts to be made and
performed entirely within such State.
45
<PAGE> 50
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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested, all as of the day and year first above written.
SHOLODGE, INC.
Attest:
By /s/ Bob Marlowe By /s/ Michael Corbett
---------------------------------- ----------------------------------
Title: Secretary Title: Chief Financial Officer
SUNTRUST BANK, ATLANTA
Attest:
By /s/ Sue Hamilton By /s/ Letitia Radford
---------------------------------- ----------------------------------
Title: Trust Officer Title: Vice President
46
<PAGE> 51
EXHIBIT A
ARTICLES OF AMENDMENT
Pursuant to the provisions of Sections 48-16-102 and 48-20-106
of the Tennessee Business Corporation Act, as amended, the undersigned
corporation adopts the following articles of amendment to its charter:
1. The name of the Corporation is ShoLodge, Inc.
2. The charter is amended to add a new Section (a)(iv) of
Article 6 as follows:
(iv) A series of preferred stock shall be and hereby is
designated as "Series A Subordinated Preferred Stock"
(hereinafter referred to as "Series A Subordinated Preferred
Stock"), shall consist of 100,000 shares, without nominal or
par value, and shall have, in addition to the rights and
preferences granted by law, the following characteristics,
rights and preferences:
1. Dividends. (a) Subject to the rights of the holders of
any shares of any class or series of Preferred Stock
(or any similar stock) ranking prior and superior to the
Series A Subordinated Preferred Stock with respect to
dividends, the holders of shares of Series A Subordinated
Preferred Stock, in preference to the holders of the Common
Stock and of any other junior stock, shall be entitled to
receive, when, as and if declared by the Board of Directors
out of funds legally available for the purpose, quarterly
dividends payable in cash on the last days of each fiscal
quarter of the Company in each year (each such date being
referred to herein as a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment Date after
the first issuance of a share or fraction of a share of
Series A Subordinated Preferred Stock, in an amount per share
(rounded to the nearest cent) equal to the greater of (a)
$1.00 or (b) subject to the provision for adjustment
hereinafter set forth, 100 times the aggregate per share
amount of all cash dividends, and 100 times the aggregate per
share amount (payable in kind) of all non-cash dividends or
other distributions, other than a dividend payable in shares
of Common Stock or a subdivision of the outstanding shares of
Common Stock (by reclassification or otherwise), declared on
the Common Stock since the immediately preceding Quarterly
Dividend Payment Date or, with respect to the first Quarterly
Dividend Payment Date, since the first issuance of any share
or fraction of a share of Series A Subordinated Preferred
Stock. In the event the Corporation shall at any time declare
or pay any dividend on the Common Stock payable
A-1
<PAGE> 52
in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of
Common Stock (by reclassification or otherwise than by payment
of a dividend in shares of Common Stock) into a greater or
lesser number of shares of Common Stock, then in each such
case the amount to which holders of shares of Series A
Subordinated Preferred Stock were entitled immediately prior
to such event under clause (b) of the preceding sentence shall
be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator
of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(b) The Corporation shall declare a dividend
or distribution on the Series A Subordinated Preferred Stock
as provided in paragraph (a) of this Section 1 immediately
after it declares a dividend or distribution on the Common
Stock (other than a dividend payable in shares of Common
Stock); provided that, in the event no dividend or
distribution shall have been declared on the Common Stock
during the period between any Quarterly Dividend Payment Date
and the next subsequent Quarterly Dividend Payment Date, a
dividend of $1.00 per share on the Series A Subordinated
Preferred Stock shall nevertheless be payable on such
subsequent Quarterly Dividend Payment Date.
(c) Dividends shall begin to accrue and be
cumulative on outstanding shares of Series A Subordinated
Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares, unless the date of
issue of such shares is prior to the record date for the first
Quarterly Dividend Payment Date, in which case dividends on
such shares shall begin to accrue from the date of issue of
such shares, or unless the date of issue is a Quarterly
Dividend Payment Date or is a date after the record date for
the determination of holders of shares of Series A
Subordinated Preferred Stock entitled to receive a quarterly
dividend and before such Quarterly Dividend Payment Date, in
either of which events such dividends shall begin to accrue
and be cumulative from such Quarterly Dividend Payment Date.
Accrued but unpaid dividends shall not bear interest.
Dividends paid on the shares of Series A Subordinated
Preferred Stock in an amount less than the total amount of
such dividends at the time accrued and payable on such shares
shall be allocated pro rata on a share-by-share basis among
all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of
holders of shares of Series A Subordinated Preferred Stock
entitled to receive payment of a dividend or distribution
declared thereon, which record date shall be A-2
A-2
<PAGE> 53
not more than sixty (60) days prior to the date fixed for the
payment thereof.
2. Voting Rights. The holders of shares of
Series A Subordinated Preferred Stock shall have the following
voting rights:
(a) Subject to the provision for adjustment
hereinafter set forth, each share of Series A Subordinated
Preferred Stock shall entitle the holder thereof to 100 votes
on all matters submitted to a vote of the shareholders of the
Corporation. In the event the Corporation shall at any time
declare or pay any dividend on the Common Stock payable in
shares of Common Stock, or effect a subdivision or combination
or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in
shares of Common Stock) into a greater or lesser number of
shares of Common Stock, then in each such case the number of
votes per share to which holders of shares of Series A
Subordinated Preferred Stock were entitled immediately prior
to such event shall be adjusted by multiplying such number by
a fraction, the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
(b) Except as otherwise provided herein, in
any other Charter Amendment creating a series of preferred
stock or any similar stock, or by law, the holders of shares
of Series A Subordinated Preferred Stock and the holders of
shares of Common Stock and any other capital stock of the
Corporation having general voting rights shall vote together
as one class on all matters submitted to a vote of
shareholders of the Corporation.
(c) Except as set forth herein, or as
otherwise provided by law, holders of Series A Subordinated
Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent they are
entitled to vote with holders of Common Stock as set forth
herein) for taking any corporate action.
3. Certain Restrictions. (a) Whenever
quarterly dividends or other dividends or distributions
payable on the Series A Subordinated Preferred Stock as
provided in Section 1 are in arrears, thereafter and until all
accrued and unpaid dividends and distributions, whether or not
declared, on shares of Series A Subordinated Preferred Stock
outstanding shall have been paid in full, the Corporation
shall not:
A-3
<PAGE> 54
(i) declare or pay dividends, or make any
other distributions, on any shares of stock ranking
junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A
Subordinated Preferred Stock;
(ii) declare or pay any dividends, or make
any other distributions, on any shares of stock
ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the
Series A Subordinated Preferred Stock except
dividends paid ratably on the Series A Subordinated
Preferred Stock and all such parity stock on which
dividends are payable or in arrears in proportion to
the total amounts to which the holders of all such
shares are then entitled;
(iii) redeem or purchase or otherwise
acquire for consideration shares of any stock ranking
junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A
Subordinated Preferred Stock, provided that the
Corporation may at any time redeem, purchase or
otherwise acquire shares of any such junior stock in
exchange for shares of any stock of the Corporation
ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series
A Subordinated Preferred Stock; or
(iv) redeem or purchase or otherwise
acquire for consideration any shares of Series A
Subordinated Preferred Stock, or any shares of stock
ranking on a parity with the Series A Subordinated
Preferred Stock, except in accordance with a purchase
offer made in writing or by publication (as
determined by the Board of Directors) to all holders,
of such shares upon such terms as the Board of
Directors, after consideration of the respective
annual dividend rates and other relative rights and
preferences of the respective series and classes,
shall determine in good faith will result in fair and
equitable treatment among the respective series or
classes.
(b) The Corporation shall not permit any
subsidiary of the Corporation to purchase or otherwise acquire
for consideration any shares of stock of the Corporation,
unless the
A-4
<PAGE> 55
Corporation could, under paragraph (a) of this Section 3,
purchase or otherwise acquire such shares at such time and in
such manner.
4. Reacquired Shares. Any shares of Series A
Subordinated Preferred Stock purchased or otherwise acquired
by the Corporation in any manner whatsoever shall be retired
and canceled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but
unissued shares of Subordinated Preferred Stock and may be
reissued as part of a new series of Subordinated Preferred
Stock, subject to the conditions and restrictions on issuance
set forth herein, in the Charter or in any amendment thereto
creating a series of Subordinated Preferred Stock or any
similar stock or as otherwise required by law.
5. Liquidation. Upon any liquidation, dissolution
or winding up of the Corporation, no distribution shall
be made (i) to the holders of shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Subordinated Preferred Stock,
unless prior thereto the holders of shares of Series A
Subordinated Preferred Stock shall have received $100 per
share, plus an amount equal to accrued and unpaid dividends
and distributions thereon, whether or not declared, to the
date of such payment, provided that the holders of shares of
Series A Subordinated Preferred Stock shall be entitled to
receive an aggregate amount per share, subject to the
provision for adjustment hereinafter set forth, equal to 100
times the aggregate amount to be distributed per share to
holders of shares of Common Stock, or (ii) to the holders of
shares of stock ranking on a parity (either as to dividends
or upon liquidation, dissolution or winding up) with the
Series A Subordinated Preferred Stock, except distributions
made ratably on tile Series A Subordinated Preferred Stock
and all such parity stock in proportion to the total amounts
to which the holders of all such shares are entitled upon
such liquidation, dissolution or winding up. In the event the
Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect
a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common
Stock, then in each such case the aggregate amount to which
holders of shares of Series A Subordinated Preferred Stock
were entitled immediately prior to such event under the
proviso in clause (i) of the preceding sentence shall be
adjusted by multiplying such amount by a fraction the
numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator
of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
A-5
<PAGE> 56
6. Consolidation, Merger, etc. In case the
Corporation shall enter into any consolidation, merger, share
exchange, combination or other transaction in which the shares
of Common Stock are exchanged for or changed into other stock
or securities, cash and/or any other property, then in any
such case each share of Series A Subordinated Preferred Stock
shall at the same time be similarly exchanged or changed into
an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 100 times the aggregate amount
of stock, securities, cash and/or any other property (payable
in kind), as the case may be, into which or for which each
share of Common Stock is changed or exchanged. In the event
the Corporation shall at any time declare or pay any dividend
on the Common Stock payable in shares of Common Stock, or
effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common
Stock, then in each such case the amount set forth in the
preceding sentence with respect to the exchange or change of
shares of Series A Subordinated Preferred Stock shall be
adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator
of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
7. No Redemption or Conversion. The shares of
Series A Subordinated Preferred Stock shall not be redeemable
or convertible.
3. The amendment was duly adopted by the Board of
Directors of the corporation at a meeting held on June 20, 1997. Shareholder
action was not required.
4. This amendment is to be effective upon filing of
these articles by the Secretary of State of the State of Tennessee.
Dated: June 27, 1997
SHOLODGE, INC.
By:
--------------------------------
Its:
-------------------------------
A-6
<PAGE> 57
Exhibit B
Form of Right Certificate
Certificate No. R- Rights
----
NOT EXERCISABLE AFTER _______________, 2007 OR EARLIER IF
REDEMPTION OR EXCHANGE OCCURS. THE RIGHTS ARE SUBJECT TO
REDEMPTION AT $____________ PER RIGHT AND TO EXCHANGE ON THE
TERMS SET FORTH IN THE RIGHTS AGREEMENT.
Right Certificate
SHOLODGE, INC.
This certifies that _________________, or registered assigns,
is the registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Rights Agreement dated as of _______________, 1997 (the 'Rights Agreement")
between ShoLodge, Inc., a Tennessee corporation (the "Company"), and
__________________________ (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 before 5:00 P.M., Nashville, Tennessee time, on
_____________________, 2007, at the principal office of the Rights Agent, or at
the office of its successor as Rights Agent, one one-hundredth of a fully paid,
non-assessable share of the Company's Series A Subordinated Preferred Stock
("Preferred Share"), at a purchase price of $____ per one one-hundredth of a
Preferred Share (the "Purchase Price"), upon presentation and surrender of this
Right Certificate with the Form of Election to Purchase duly executed. The
number of Rights evidenced by this Right Certificate (and the number of one
one-hundredths of a Preferred Share which may be purchased upon exercise hereof)
set forth above, and the Purchase Price set forth above, are the number and
Purchase Price as of _________________, 1997, based on the Preferred Shares as
constituted at such date. As provided in the Rights Agreement, the Purchase
Price and the number of one one-hundredths of a Preferred Share which may be
purchased upon the exercise of the Rights evidenced by this Right Certificate
are subject to modification and adjustment upon the happening of certain events.
This Right Certificate is subject to all of the terms,
provisions and conditions of the Rights Agreement,, which terms, provisions and
conditions are hereby incorporated herein by reference and made a part hereof
and to which Rights Agreement reference is hereby made for a full description of
the rights, limitations of rights, obligations, duties and immunities hereunder
of the Rights Agent, the Company, its officers and directors and the holders of
the Right Certificates. Copies of the Rights Agreement are on file at the
principal executive offices of the Company and the principal office of the
Rights Agent.
This Right Certificate, with or without other Right
Certificates, upon surrender at the principal office of the Rights Agent, may be
exchanged for another Right Certificate or Right
B-1
<PAGE> 58
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of Preferred Shares as the Rights evidenced by
the Right Certificate or Right Certificates surrendered shall have entitled such
holder to purchase. If this Right Certificate shall be exercised in part, the
holder shall be entitled to receive upon surrender hereof another Right
Certificate or Right Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate (i) may be redeemed by the Company at a redemption
price of $.01 per Right payable in cash or in stock of the Company or (ii) may
be exchanged by the Company in whole or in part for Preferred Shares or shares
of the Company's common stock, no par value.
No fractional Preferred Shares will be issued upon the
exercise of any Right or Rights evidenced hereby (other than fractions which are
integral multiples of one one-hundredth of a Preferred Share, which may, at the
election of the Company, be evidenced by depositary receipts), but in lieu
thereof a cash payment will be made, as provided in the Rights Agreement.
No holder of this Right Certificate shall be entitled to vote
or receive dividends or be deemed for any purpose the holder of the Preferred
Shares or of any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a shareholder of the Company or any right to vote for the
election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting shareholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Right
Certificate shall have been exercised as provided in the Rights Agreement.
This Right Certificate shall not lie valid or obligatory for
any purpose until it is countersigned by, the Rights Agent.
WITNESS the facsimile signature of the authorized officers of
the Company.
Dated as of , .
-------------------- ------
ATTEST: SHOLODGE, INC.
By:
- ------------------------------------- -----------------------------------
Countersigned:
[Rights Agent]
By:
----------------------------------
Authorized Signature
B-2
<PAGE> 59
Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate.)
FOR VALUE RECEIVED
--------------------------------------------
hereby sells, assigns and transfers unto
----------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please print name and address of transferee)
- --------------------------------------------------------------------------------
this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint ___________________ Attorney, to
transfer the within Right Certificate on the books of the within-named Company,
with full power of substitution.
Dated: ,
---------------- ----
---------------------------
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered
national securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States.
- --------------------------------------------------------------------------------
The undersigned hereby certifies that the Rights evidenced by
this Right Certificate are not beneficially owned by an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement).
--------------------------------------------
Signature
- --------------------------------------------------------------------------------
B-3
<PAGE> 60
Form of Reverse Side of Right Certificate -- continued
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise Rights
represented by the Right Certificate.)
To SHOLODGE, INC.
The undersigned hereby irrevocably elects to exercise
____________________ Rights represented by this Right Certificate to purchase
the Preferred Shares issuable upon the exercise of such Rights and requests that
certificates for such Preferred Shares be issued in the name of:
Please insert social security
or other identifying number
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered
national securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States.
- --------------------------------------------------------------------------------
The undersigned hereby certifies that the Rights evidenced by
this Right Certificate are not beneficially owned by an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement).
--------------------------------------------
Signature
B-4
<PAGE> 61
NOTICE
The signature in the Form of Assignment or Form of Election to
Purchase, as the case may be, must conform to the name as written upon the face
of this Right Certificate in every particular, without alteration or enlargement
or any change whatsoever.
In the event the certification set forth above in the Form of
Assignment or the Form of Election to Purchase, as the case may be, is not
completed, the Company and the Rights Agent will deem the beneficial owner of
the Rights evidenced by this Right Certificate to be an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement) and such
Assignment or Election to Purchase will not be honored.
B-5
<PAGE> 62
EXHIBIT C
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED SHARES
The board of directors of ShoLodge, Inc. (the "Company") has
declared a dividend of one preferred share purchase right (a "Right") for each
outstanding share of common stock, no par value (the "Common Shares"), of the
Company. The dividend is payable on July 15, 1997 (the "Record Date"), to the
shareholders of record on that date. Each Right entitles the registered holder
to purchase from the Company one one-hundredth of a share of the Company's
Series A Subordinated Preferred Stock ("Preferred Share") at a price of $60.00
per one one-hundredth of a Preferred Share (the "Purchase Price"), subject to
adjustment. The description and terms of the Rights are set forth in a Rights
Agreement (the "Rights Agreement") between the Company and SunTrust Bank,
Atlanta, as Rights Agent (the "Rights Agent").
Until the earlier to occur of (i) 10 days following a public
announcement that a person or group of affiliated or associated persons (an
"Acquiring Person") has acquired beneficial ownership of 15% or more of the
outstanding Common Shares without the prior approval of the board of directors,
including a majority of "Continuing Directors," as that term is defined in the
Rights Agreement, or (ii) 10 business days (or such later date as may be
determined by action of the board of directors before such time as any person or
group of affiliated persons becomes an Acquiring Person) following the
commencement of, or announcement of an intention to make, a tender offer or
exchange offer the consummation of which would result in the beneficial
ownership by a person or group of 15% or more of the outstanding Common Shares
(the earlier of such dates being 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 certificate with a copy
of this Summary of Rights attached thereto.
The Rights Agreement provides that, until the Distribution
Date (or earlier redemption or expiration of the Rights), 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
outstanding as of the Record Date, even without such notation or a copy of this
Summary of Rights being attached thereto, will also constitute the transfer of
the Rights associated with the Common Shares represented by such certificate. As
soon as practicable following the Distribution Date, separate certificates
evidencing the Rights ("Right Certificates") will be mailed to holders of record
of the Common Shares as of the close of business on the Distribution Date and
such separate Right Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date.
The Rights will expire on July 15, 2007 (the "Final Expiration Date"), unless
the Final Expiration Date is extended or
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unless the Rights are earlier redeemed or exchanged by the Company, in each case
as described below.
The Purchase Price payable, and the number of Preferred Shares
or other securities or property issuable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution (i) in the event of
a stock dividend on, or a subdivision, combination or reclassification of, the
Preferred Shares, (ii) upon the grant to holders of the Preferred Shares of
certain rights or warrants to subscribe for or purchase Preferred Shares at a
price, or securities convertible into Preferred Shares with a conversion price,
less than the then-current market price of the Preferred Shares or (iii) upon
the distribution to holders of the Preferred Shares of evidences of indebtedness
or assets (excluding regular periodic cash dividends paid out of earnings or
retained earnings or dividends payable in Preferred Shares) or of subscription
rights or warrants (other than those referred to above).
The number of outstanding Rights and the number of one
one-hundredths of a Preferred Share issuable upon exercise of each Right are
also subject to adjustment in the event of a stock split of the Common Shares or
a stock dividend on the Common Shares payable in Common Shares or subdivisions,
consolidations or combinations of the Common Shares occurring, in any such case,
before the Distribution Date.
Preferred Shares purchasable upon exercise of the Rights will
not be redeemable. Each Preferred Share will be entitled to an aggregate
dividend of the greater of (i) 100 times the dividend declared per Common Share
and (ii) a cumulative quarterly dividend of $1.00. In the event of liquidation,
the holders of the Preferred Shares will be entitled to receive, in preference
to shares of all junior classes of the Company's stock, the greater of (i) $1.00
per share and (ii) an aggregate payment of 100 times the payment made per Common
Share. Each Preferred Share will have 100 votes, voting together with the Common
Shares. Finally, in the event of any merger, consolidation or other transaction
in which Common Shares are exchanged, each Preferred Share will be entitled to
receive 100 times the amount received per Common Share. These rights are
protected by customary antidilution provisions.
Because of the nature of the Preferred Shares' dividend,
liquidation and voting rights, the value of the one one-hundredth interest in a
Preferred Share purchasable upon exercise of each Right should approximate the
value of one Common Share.
If the Company is acquired in a merger or other business
combination transaction or 50% or more of its consolidated assets or earning
power are sold, proper provision will be made so that each holder of a Right
will thereafter have the right to receive, upon the exercise thereof at the then
current exercise price of the Right, that number of shares of common stock of
the acquiring company which at the time of such transaction will have a market
value of two times the exercise price of the Right. In the event that any person
or group of affiliated or associated persons becomes an Acquiring Person, proper
provision shall be made so that each holder of a Right, other than Rights
beneficially owned by the Acquiring Person (which will thereafter be void), will
from the date of the first public announcement of the Acquiring Person's
acquisition have the right to receive upon exercise that number of Common Shares
having a market value of two times the exercise price of the Right or, if there
is an insufficient number of authorized and unissued Common Shares to allow the
full exercise of the Rights, a package of other securities
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<PAGE> 64
or property of the Company and/or cash which the board of directors determines
with the advice of an investment banking firm to be equivalent to such number of
Common Shares.
At any time after any Person becomes an Acquiring Person and
before the acquisition by such person or group of 50% or more of the outstanding
Common Shares, the board of directors of the Company may exchange the Rights
(other than Rights owned by such person or group which will have become void),
in whole or in part, at an exchange ratio of one Common Share, or one
one-hundredth of a Preferred Share (or of a share of a class or series of the
Company's preferred stock having equivalent rights, preferences and privileges),
per Right (subject to adjustment).
With certain exceptions, no adjustment in the Purchase Price
will be required until cumulative adjustments require an adjustment of at least
1% in such Purchase Price. No fractional Preferred Shares will be issued (other
than fractions which are integral multiples of one one-hundredth of a Preferred
Share, which may, at the election of the Company, be evidenced by depositary
receipts) and in lieu thereof, an adjustment in cash will be made based on the
market price of the Preferred Shares on the last trading day before the date of
exercise.
At any time before the close of business ten days after the
date of the first public announcement of the acquisition by a person or group of
affiliated or associated persons of beneficial ownership of 15% or more of the
outstanding Common Shares, the board of directors of the Company may redeem the
Rights in whole, but not in part, at a price of $.01 per Right (the "Redemption
Price"), payable in cash or in shares of the Company's stock. If, however, there
is an Acquiring Person at the time, a majority of Continuing Directors must
concur in the redemption of the Rights. The redemption of the Rights may be made
effective at such time on such basis with such conditions as the board of
directors in its sole discretion may establish. Immediately upon any redemption
of the Rights, the right to exercise the Rights will terminate and the only
right of the holders of Rights will be to receive the Redemption Price.
The terms of the Rights may be amended by the board of
directors of the Company without the consent of the holders of the Rights,
including an amendment to lower certain thresholds described above to not less
than the greater of (i) the sum of .001% plus the largest percentage of the
outstanding Common Shares then known to the Company to be beneficially owned by
any person or group of affiliated or associated persons and (ii) 10%, except
that from and after such time as there is an Acquiring Person no such amendment
may adversely affect the interests of the holders of the Rights.
Until a Right is exercised, the holder thereof, as such, will
have no rights as a shareholder of the Company, including, without limitation,
the right to vote or to receive dividends.
A copy of the Rights Agreement has been filed with the
Securities and Exchange Commission as an Exhibit to a Registration Statement on
Form 8-A dated ________________, 1997. A copy of the Rights Agreement is
available free of charge from the Company. This summary description of the
Rights does not purport to be complete and is qualified in its entirety by
reference to the Rights Agreement, which is hereby incorporated herein by
reference.
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EXHIBIT 4.2
SHOLODGE, INC.
ARTICLES OF AMENDMENT TO CHARTER
Pursuant to the provisions of Sections 48-16-102 and 48-20-106
of the Tennessee Business Corporation Act, as amended, the undersigned
corporation adopts the following articles of amendment to its charter:
1. The name of the Corporation is ShoLodge, Inc.
2. The charter is amended to add a new Section (a)(iv)
of Article 6 as follows:
(iv) A series of Preferred Stock shall be and hereby
is designated as "Series A Subordinated Preferred Stock"
(hereinafter referred to as "Series A Subordinated Preferred
Stock"), shall consist of 100,000 shares, without nominal or
par value, and shall have, in addition to the rights and
preferences granted by law, the following characteristics,
rights and preferences:
1. Dividends. (a) Subject to the rights of the
holders of any shares of any class or series of Preferred
Stock (or any similar stock) ranking prior and superior to the
Series A Subordinated Preferred Stock with respect to
dividends, the holders of shares of Series A Subordinated
Preferred Stock, in preference to the holders of the Common
Stock and of any other junior stock, shall be entitled to
receive, when, as and if declared by the Board of Directors
out of funds legally available for the purpose, quarterly
dividends payable in cash on the last days of each fiscal
quarter of the Company in each year (each such date being
referred to herein as a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment Date after
the first issuance of a share or fraction of a share of Series
A Subordinated Preferred Stock, in an amount per share
(rounded to the nearest cent) equal to the greater of (a)
$1.00 or (b) subject to the provision for adjustment
hereinafter set forth, 100 times the aggregate per share
amount of all cash dividends, and 100 times the aggregate per
share amount (payable in kind) of all non-cash dividends or
other distributions, other than a dividend payable in shares
of Common Stock or a subdivision of the outstanding shares of
Common Stock (by reclassification or otherwise), declared on
the Common Stock since the immediately preceding Quarterly
Dividend Payment Date or,
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<PAGE> 2
with respect to the first Quarterly Dividend Payment Date,
since the first issuance of any share or fraction of a share
of Series A Subordinated Preferred Stock. In the event the
Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect
a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common
Stock, then in each such case the amount to which holders of
shares of Series A Subordinated Preferred Stock were entitled
immediately prior to such event under clause (b) of the
preceding sentence shall be adjusted by multiplying such
amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of
Common Stock that were outstanding immediately prior to such
event.
(b) The Corporation shall declare a dividend
or distribution on the Series A Subordinated Preferred Stock
as provided in paragraph (a) of this Section 1 immediately
after it declares a dividend or distribution on the Common
Stock (other than a dividend payable in shares of Common
Stock); provided that, in the event no dividend or
distribution shall have been declared on the Common Stock
during the period between any Quarterly Dividend Payment Date
and the next subsequent Quarterly Dividend Payment Date, a
dividend of $1.00 per share on the Series A Subordinated
Preferred Stock shall nevertheless be payable on such
subsequent Quarterly Dividend Payment Date.
(c) Dividends shall begin to accrue and be
cumulative on outstanding shares of Series A Subordinated
Preferred Stock from the Quarterly Dividend Payment Date
next preceding the date of issue of such shares,
unless the date of issue of such shares is prior to the
record date for the first Quarterly Dividend Payment Date, in
which case dividends on such shares shall begin to accrue
from the date of issue of such shares, or unless the date of
issue is a Quarterly Dividend Payment Date or is a date after
the record date for the determination of holders of shares of
Series A Subordinated Preferred Stock entitled to receive a
quarterly dividend and before such Quarterly Dividend Payment
Date, in either of which events such dividends shall begin to
accrue and be cumulative from such Quarterly Dividend Payment
Date. Accrued but unpaid dividends shall not bear interest.
Dividends paid on the shares of Series A Subordinated
Preferred Stock in an amount less than the total amount of
such dividends at the time accrued and payable on such shares
shall be allocated pro rata on a share-by-share basis among
all such shares at the time outstanding. The Board of
Directors may
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<PAGE> 3
fix a record date for the determination of holders of shares
of Series A Subordinated Preferred Stock entitled to receive
payment of a dividend or distribution declared thereon, which
record date shall be not more than sixty (60) days prior to
the date fixed for the payment thereof.
2. Voting Rights. The holders of shares of
Series A Subordinated Preferred Stock shall have the following
voting rights:
(a) Subject to the provision for adjustment
hereinafter set forth, each share of Series A Subordinated
Preferred Stock shall entitle the holder thereof to 100 votes
on all matters submitted to a vote of the shareholders of the
Corporation. In the event the Corporation shall at any time
declare or pay any dividend on the Common Stock payable in
shares of Common Stock, or effect a subdivision or combination
or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in
shares of Common Stock) into a greater or lesser number of
shares of Common Stock, then in each such case the number of
votes per share to which holders of shares of Series A
Subordinated Preferred Stock were entitled immediately prior
to such event shall be adjusted by multiplying such number by
a fraction, the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
(b) Except as otherwise provided herein, in
any other Charter Amendment creating a series of preferred
stock or any similar stock, or by law, the holders of shares
of Series A Subordinated Preferred Stock and the holders of
shares of Common Stock and any other capital stock of the
Corporation having general voting rights shall vote together
as one class on all matters submitted to a vote of
shareholders of the Corporation.
(c) Except as set forth herein, or as
otherwise provided by law, holders of Series A Subordinated
Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent they are
entitled to vote with holders of Common Stock as set forth
herein) for taking any corporate action.
3. Certain Restrictions. (a) Whenever
quarterly dividends or other dividends or distributions
payable on the Series A Subordinated Preferred Stock as
provided in Section 1 are in arrears, thereafter and until all
accrued and unpaid dividends and
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<PAGE> 4
distributions, whether or not declared, on shares of Series A
Subordinated Preferred Stock outstanding shall have been paid
in full, the Corporation shall not:
(i) declare or pay dividends, or make any
other distributions, on any shares of stock ranking
junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A
Subordinated Preferred Stock;
(ii) declare or pay any dividends, or make
any other distributions, on any shares of stock
ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the
Series A Subordinated Preferred Stock except
dividends paid ratably on the Series A Subordinated
Preferred Stock and all such parity stock on which
dividends are payable or in arrears in proportion to
the total amounts to which the holders of all such
shares are then entitled;
(iii) redeem or purchase or otherwise
acquire for consideration shares of any stock ranking
junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A
Subordinated Preferred Stock, provided that the
Corporation may at any time redeem, purchase or
otherwise acquire shares of any such junior stock in
exchange for shares of any stock of the Corporation
ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series
A Subordinated Preferred Stock; or
(iv) redeem or purchase or otherwise
acquire for consideration any shares of Series A
Subordinated Preferred Stock, or any shares of stock
ranking on a parity with the Series A Subordinated
Preferred Stock, except in accordance with a purchase
offer made in writing or by publication (as
determined by the Board of Directors) to all holders,
of such shares upon such terms as the Board of
Directors, after consideration of the respective
annual dividend rates and other relative rights and
preferences of the respective series and classes,
shall determine in good faith will result in fair and
equitable treatment among the respective series or
classes.
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<PAGE> 5
(b) The Corporation shall not permit any
subsidiary of the Corporation to purchase or otherwise acquire
for consideration any shares of stock of the Corporation,
unless the Corporation could, under paragraph (a) of this
Section 3, purchase or otherwise acquire such shares at such
time and in such manner.
4. Reacquired Shares. Any shares of Series A
Subordinated Preferred Stock purchased or otherwise acquired
by the Corporation in any manner whatsoever shall be retired
and canceled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but
unissued shares of Subordinated Preferred Stock and may be
reissued as part of a new series of Subordinated Preferred
Stock, subject to the conditions and restrictions on issuance
set forth herein, in the Charter or in any amendment thereto
creating a series of Subordinated Preferred Stock or any
similar stock or as otherwise required by law.
5. Liquidation. Upon any liquidation,
dissolution or winding up of the Corporation, no distribution
shall be made (i) to the holders of shares of stock ranking
junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Subordinated
Preferred Stock, unless prior thereto the holders of shares of
Series A Subordinated Preferred Stock shall have received $100
per share, plus an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared,
to the date of such payment, provided that the holders of
shares of Series A Subordinated Preferred Stock shall be
entitled to receive an aggregate amount per share, subject to
the provision for adjustment hereinafter set forth, equal to
100 times the aggregate amount to be distributed per share to
holders of shares of Common Stock, or (ii) to the holders of
shares of stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series A
Subordinated Preferred Stock, except distributions made
ratably on the Series A Subordinated Preferred Stock and all
such parity stock in proportion to the total amounts to which
the holders of all such shares are entitled upon such
liquidation, dissolution or winding up. In the event the
Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect
a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common
Stock, then in each such case the aggregate amount to which
holders of shares of Series A Subordinated Preferred Stock
were entitled immediately prior to such event under the
proviso in clause (i) of the preceding sentence shall be
adjusted by multiplying such amount by a fraction the
numerator of which is the number of
5
<PAGE> 6
shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of
Common Stock that were outstanding immediately prior to such
event.
6. Consolidation, Merger, etc. In case the
Corporation shall enter into any consolidation, merger, share
exchange, combination or other transaction in which the shares
of Common Stock are exchanged for or changed into other stock
or securities, cash and/or any other property, then in any
such case each share of Series A Subordinated Preferred Stock
shall at the same time be similarly exchanged or changed into
an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 100 times the aggregate amount
of stock, securities, cash and/or any other property (payable
in kind), as the case may be, into which or for which each
share of Common Stock is changed or exchanged. In the event
the Corporation shall at any time declare or pay any dividend
on the Common Stock payable in shares of Common Stock, or
effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common
Stock, then in each such case the amount set forth in the
preceding sentence with respect to the exchange or change of
shares of Series A Subordinated Preferred Stock shall be
adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator
of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
7. No Redemption or Conversion. The shares of
Series A Subordinated Preferred Stock shall not be redeemable
or convertible.
3. The amendment was duly adopted by the Board of
Directors of the corporation at a meeting held on June 20, 1997. Shareholder
action was not required.
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<PAGE> 7
4. This amendment is to be effective upon filing of
these articles by the Secretary of State of the State of Tennessee.
Dated: June 27, 1997
SHOLODGE, INC.
By:/s/ Michael A. Corbett
-------------------------
Michael A. Corbett
Its: Chief Financial Officer
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<PAGE> 1
EXHIBIT 4.3
SHOLODGE INC. DISTRIBUTES PREFERRED SHARE PURCHASE RIGHTS
GALLATIN, Tenn., (July 1, 1997) -- ShoLodge, Inc., (nasdaq/NM:LODG) today
announced that its Board of Directors has authorized the distribution of one
preferred share purchase right on each outstanding share of ShoLodge common
stock. The rights will be exercisable only if a person or group acquires 15% or
more of ShoLodge's common stock or announces a tender offer the consummation of
which would result in ownership by a person or group of 15% or more of the
common stock. Each right would entitle shareholders to buy one one-hundredth of
a share of a new series of subordinated preferred stock at an exercise price of
$60.
Leon Moore, Chief Executive Officer of ShoLodge Inc., stated,
"The rights are designed to assure that all of ShoLodge's shareholders receive
fair and equal treatment in the event of any proposed takeover of the Company
and to guard against partial tender offers, squeezeouts, open market
accumulations and other abusive tactics to gain control of ShoLodge without
paying all shareholders an appropriate control premium."
If ShoLodge were acquired in a merger or other business
combination transaction, each right would entitle its holder to purchase, at the
right's then-current exercise price a number of the acquiring company's common
shares having a market value of twice such price. In addition, if a person or
group acquires 15% or more of ShoLodge's outstanding common stock, each right
would entitle its holder (other than the acquiring person or members of the
acquiring group) to purchase, at the right's then-current exercise price, a
number of ShoLodge's common shares having a market value of twice that price.
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<PAGE> 2
After a person or group acquires beneficial ownership of 15%
or more of the Company's common stock and before an acquisition of 50% or more
of the common stock, the Board of Directors could exchange the rights (other
than rights owned by the acquiring person or group), in whole or in part, at an
exchange ratio of one share of common stock (or one one-hundredth of a share of
the new series of preferred stock) per right.
Until a person or group has acquired beneficial ownership of
15% or more of the ShoLodge's common stock, the rights will be redeemable for
one cent per right at the option of the board of directors.
The rights are intended to enable all ShoLodge shareholders to
realize the long-term value of their investment in the Company. The Company
believes they will not prevent a takeover, but should encourage anyone seeking
to acquire the Company to negotiate with the board prior to attempting a
takeover.
The rights will be distributed to shareholders of record on
July 15, 1997 and will expire on July, 2007. The rights distribution is not
taxable to shareholders.
ShoLodge owns, develops and operates the Sumner Suites brand
of hotels and owns, develops, operates and franchises Shoney's Inns and Shoney's
Inns & Suites.
-END-
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EXHIBIT 4.4
[ShoLodge letterhead]
, 1997
-------------
To our Shareholders:
Your board of directors has authorized the distribution of
preferred share purchase rights (the "Rights"). This letter describes the Share
Purchase Rights Plan and the board's reasons for adopting it.
These Rights contain provisions designed to protect
shareholders in the event of an unsolicited attempt to acquire the Company,
including a gradual accumulation of shares in the open market, a partial or
two-tier tender offer that does not treat all shareholders equally, a squeezeout
merger and other abusive takeover tactics which the board believes are not in
the best interests of shareholders. These tactics frequently unfairly pressure
shareholders, squeeze them out of their investment without giving them any real
choice and deprive them of the full value of their shares.
Over 1,500 companies, including a sizable number of Fortune
500 comapnies, have issued rights to protect their shareholders against these
tactics. The board considers the Rights to be the best available means of
protecting both your right to retain your equity investment in
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<PAGE> 2
ShoLodge and the full value of that investment, while not foreclosing a fair
acquisition bid for the Company.
The Rights are not intended to prevent a takeover of ShoLodge
and will not do so. However, they should deter any attempt to acquire the
Company through the use of abusive tactics to deprive the board and the
shareholders of any real opportunity to determine the Company's destiny.
The Rights may be redeemed by the board for one cent per Right
until a single acquiror or group accumulates 15% or more of the Company's common
stock, through open-market purchases, a tender offer or otherwise. Thus, the
Rights should not interfere with any merger or business combination approved by
the board before that time.
Issuance of the Rights does not in any way weaken ShoLodge's
financial position or interfere with its business plans. The issuance of the
Rights has no dilutive effect, does not affect reported earnings per share, is
not taxable to the Company or to you and will not change the way in which you
can presently trade the Company's shares. As explained in detail below, the
Rights will only be exercisable if and when the problem that they were created
to deal with arises. They will then operate to protect you against being
deprived of your right to share in the full measure of your Company's long-term
potential.
The board was aware when it acted that some people have
advanced arguments that securities of the sort we are issuing deter legitimate
acquisition proposals. We carefully considered these views and concluded that
such arguments are speculative and do not justify leaving shareholders without
this protection against unfair treatment by an acquiror -- who, after all, is
seeking his own advantage, not yours. The board believes that these Rights
represent a sound and reasonable means of addressing the complex issues of
corporate policy created by the takeover environment.
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<PAGE> 3
The Rights will be issued on July 15, 1997, to shareholders of
record on that date and will expire in ten years. Initially, the Rights will not
be exercisable, certificates will not be sent to you, and the Rights will
automatically trade with the common shares. However, ten days after a person or
group acquires 15% or more of the Company shares, or ten business days (subject
to extension by the Board) after a person or group announces an offer the
consummation of which would result in its owning 15% or more of the shares (even
if no purchases actually occur), the Rights would become exercisable and the
Company would distribute separate certificates representing the Rights. We
expect the Rights would begin to trade independently from the Company's shares
at that time. At no time will the Rights have any voting power.
Upon the Rights' becoming exercisable, unless a person or
group had already acquired 15% or more of the Company's shares, a holder of
Rights would be entitled to buy one one-hundredth of a share of a new series of
the Company's subordinated preferred stock (the "New Preferred"), for $60.00. If
the Company were involved in a merger or other business combination at any time
after the Rights become exercisable, the Rights would entitle a holder to buy a
number of shares of common stock of the acquiring company having a market value
of twice the exercise price of each Right.
If any person or group acquires 15% or more of the Company's
outstanding common stock, the "flip-in" provision of the Rights would be
triggered and the Rights would entitle a holder (other than the acquiring person
or any member of the acquiring group) to buy a number of additional shares of
common stock of the Company having a market value of twice the exercise
price of each Right. Thus, if at the time of the 15% acquisition the Company's
stock were to have a market value per share of $20.00 the holder of each Right
(other than such person or any member of such group) would be entitled to
receive six shares of the Company's common stock for $60.00.
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<PAGE> 4
Following the acquisition by any person or group of 15% or
more of ShoLodge's common stock, but only before the acquisition by a person or
group of a 15% stake, the board would also have the ability to exchange the
Rights (other than Rights held by the acquiring person or group), in whole or in
part, for one share of common stock (or one one-hundredth of a share of the New
Preferred) per Right. This provision would have an economically dilutive effect
on the acquiror and provide a corresponding benefit to the remaining holders of
Rights, that is comparable to the flip-in without requiring holders to incur the
trouble and expense of exercising their Rights.
While, as noted above, the distribution of the Rights will not
be taxable to you or the Company, shareholders might recognize taxable income
upon the later occurrence of certain of the events just discussed.
In addition to authorizing the Rights, your board has
authorized the New Preferred purchasable upon exercise of the Rights. The shares
of this new series will be nonredeemable. Each New Preferred share will be
entitled to an aggregate dividend equal to 100 times the dividend declared on
the common shares. In the event of liquidation, the holders of the New Preferred
would be entitled to receive an aggregate liquidation payment equal to the
greater of $100 or 100 times the payment made per share of common stock. Each
New Preferred share will have 100 votes, voting together with the common shares.
Finally, in the event of any merger, consolidation or other transaction in which
common shares are exchanged, each New Preferred share would be entitled to
receive 100 times the amount received per common share. These rights are
protected by customary anti-dilution provisions. In the event of issuance of New
Preferred shares upon exercise of the Rights, a depositary receipt may be issued
for each one one-hundredth of a New Preferred share to facilitate trading. The
dividend, liquidation and voting rights and the non-redemption feature of the
New Preferred shares are designed so that the value of the
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one-hundredth interest in a preferred share purchasable with each Right will
approximate the value of one share of common stock.
In declaring the Rights dividend, we have expressed our
confidence in the future and our determination that you, our shareholders, be
given every opportunity to participate fully in that future.
On behalf of the board of directors.
-------------------------------------
Leon Moore
President and Chief Executive Officer
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