<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): March 27, 2000
Shared Medical Systems Corporation
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(Exact Name of Registrant as Specified in Charter)
Delaware 0-7416 23-1704148
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(State or Other (Commission (I.R.S. Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
51 Valley Stream Parkway, Malvern, Pennsylvania 19355
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 610-219-6300
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Not Applicable
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(Former name or former address, if changed since last report.)
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ITEM 5. Other Events.
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The Company and Pittsburgh National Bank, as rights agent, entered into the
Rights Agreement, dated as of May 1, 1991 (the "Original Rights Agreement"). The
Company and ChaseMellon Shareholder Services, L.L.C. (successor rights agent to
Pittsburgh National Bank), as rights agent, entered into Amendment No. 1 to
Rights Agreement, dated as of March 27, 2000 ("Amendment No. 1"). Amendment No.
1 provided for a restatement of the Original Rights Agreement, as amended by
Amendment No. 1.
Amendment No. 1 deletes the requirement in the Original Rights Agreement
that certain actions be authorized by "Continuing Directors" (as defined in the
Original Rights Agreement), and substitutes therefor a requirement that such
actions be approved by the Company's Board of Directors.
The foregoing description of the amendment to the Company's rights plan is
qualified in its entirety by reference to Amendment No. 1 and the Amended and
Restated Rights Agreement, copies of which are filed as exhibits 4.1 and 4.2 to
this report.
ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits.
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(c) Exhibits.
4.1 Amendment No. 1 to Rights Agreement, dated as of March 27, 2000,
between Shared Medical Systems Corporation and ChaseMellon
Shareholder Services, L.L.C., as Rights Agent.
4.2 Amended and Restated Rights Agreement, dated as of March 27,
2000, between Shared Medical Systems Corporation and ChaseMellon
Shareholder Services, L.L.C., as Rights Agent, including the
exhibits thereto, including Exhibit C thereto, the Form of Rights
Certificate.
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SHARED MEDICAL SYSTEMS CORPORATION
By: /s/ Terrence W. Kyle
------------------------------
Terrence W. Kyle
Senior Vice President,
Chief Financial Officer,
Treasurer, and Assistant
Secretary
March 28, 2000
<PAGE>
Exhibit 4.1
AMENDMENT NO. 1 TO RIGHTS AGREEMENT
Amendment No. 1, dated as of March 27, 2000, to the Rights Agreement, dated
as of May 1, 1991, by and between Shared Medical Systems Corporation, a Delaware
corporation (the "Company"), and ChaseMellon Shareholder Services, L.L.C. (the
successor, pursuant to Section 19 of such agreement, to the original rights
agent) (the "Rights Agent").
Witnesseth
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WHEREAS, the Company and Pittsburgh National Bank (the original rights
agent) entered into the Rights Agreement, dated as of May 1, 1991 (the "Original
Agreement"); and
WHEREAS, the Board of Directors of the Company deems it advisable and in
the best interests of the Company and its stockholders to amend the Original
Agreement in the manner set forth herein in order to eliminate the "Continuing
Director" provisions of the Original Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, and intending to be legally bound, the parties hereby agree as
follows:
Section 1. Amendments. The Original Agreement is hereby amended by
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deleting (i) paragraph (k) of Section 1 thereof, and (ii) all requirements and
conditions set forth in the Original Agreement that the Continuing Directors (as
defined in the Original Agreement) or a majority or other subset of Continuing
Directors, exist, or that they approve, consent to, agree to, authorize, concur,
or otherwise take any action with respect to any matter, including without
limitation, any such requirements and conditions set forth in Sections 23 and 26
of the Original Agreement, and substituting therefor, in each such place, a
correlative requirement or condition that the Board of Directors of the Company
exist, approve, consent to, agree to, authorize, concur, or otherwise take
action, as the case may be.
Section 2. Restatement. The parties hereto shall restate the Original
-----------
Agreement, as amended by this Amendment No. 1.
Section 3. Agreement in Effect. Except as hereby amended, the Original
-------------------
Agreement shall remain in full force and effect.
Section 4. Governing Law. This Amendment shall be deemed to be a
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contract made under the laws of the jurisdiction of incorporation of the
Company, as the same may change from time to time, and for all purposes shall be
governed by and construed in accordance with the laws of such jurisdiction
applicable to contracts made and to be performed entirely within such
jurisdiction.
<PAGE>
Section 5. Counterparts. This Amendment may be executed in any number of
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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 6. Descriptive Headings. The descriptive headings of the
--------------------
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 by their duly authorized officers as of the day and year first
above written.
Attest: SHARED MEDICAL SYSTEMS CORPORATION
By /s/ Bonnie L. Shuman By /s/Terrence W. Kyle
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Name: Bonnie L. Shuman Name: Terrence W. Kyle
Title: Assistant Secretary Title: Senior Vice President, Chief
Financial Officer, Treasurer and
Assistant Secretary
Attest: CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
By /s/ Donald P. Messmer By /s/ Robert Kavanagh
______________________ __________________________________
Name: Donald P. Messmer Name: Robert Kavanagh
Title: Assistant Vice President Title: Vice President
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<PAGE>
Exhibit 4.2
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AMENDED AND RESTATED RIGHTS AGREEMENT
dated as of March 27, 2000
between
SHARED MEDICAL SYSTEMS CORPORATION
and
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
as
Rights Agent
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<PAGE>
Table of Contents
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<TABLE>
<CAPTION>
Section Page
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<S> <C>
1. Certain Definitions..................................................................... 1
2. Appointment of Rights Agent............................................................. 7
3. Issue of Rights Certificates............................................................ 7
4. Form of Rights Certificates............................................................. 9
5. Countersignature and Registration....................................................... 11
6. Transfer, Split Up, Combination and Exchange of Rights Certificates;
Mutilated, Destroyed, Lost or Stolen Rights Certificates................................ 11
7. Exercise of Rights; Purchase Price; Expiration Date of Rights........................... 12
8. Cancellation and Destruction of Rights Certificates..................................... 14
9. Reservation and Availability of Capital Stock........................................... 14
10. Preferred Stock Record Date............................................................. 16
11. Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights............. 16
12. Certificate of Adjusted Purchase Price or Number of Shares.............................. 25
13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power.................... 25
14. Fractional Rights and Fractional Shares................................................. 28
15. Rights of Action........................................................................ 29
16. Agreement of Rights Holders............................................................. 30
17. Rights Certificate Holder Not Deemed a Stockholder...................................... 30
18. Concerning the Rights Agent............................................................. 31
19. Merger or Consolidation or Change of Name of Rights Agent............................... 31
20. Duties of Rights Agent.................................................................. 32
21. Change of Rights Agent.................................................................. 33
22. Issuance of New Rights Certificates..................................................... 34
</TABLE>
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<TABLE>
<CAPTION>
Section Page
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<S> <C>
23. Redemption and Termination............................................................. 35
24. Notice of Certain Events............................................................... 38
25. Notices................................................................................ 38
26. Supplements and Amendments............................................................. 39
27. Successors............................................................................. 40
28. Determinations and Actions by the Board of Directors, Etc.............................. 40
29. Benefits of this Agreement............................................................. 40
30. Severability........................................................................... 41
31. Governing Law.......................................................................... 41
32. Counterparts........................................................................... 41
33. Table of Contents; Descriptive Headings................................................ 41
</TABLE>
Exhibit A - Designation of Powers, Preferences, Rights and Qualifications of
Preferred Stock
Exhibit B - Form of Summary of Rights and Rights Agreement
Exhibit C - Form of Rights Certificate
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<PAGE>
AMENDED AND RESTATED RIGHTS AGREEMENT
AMENDED AND RESTATED RIGHTS AGREEMENT, dated as of March 27, 2000 (the
"Agreement"), between SHARED MEDICAL SYSTEMS CORPORATION, a Delaware corporation
(the "Company"), and ChaseMellon Shareholder Services, L.L.C., a New Jersey
limited liability company, as successor to the original rights agent (the
"Rights Agent"), restating in its entirety the Rights Agreement, dated as of May
1, 1991 (the "Original Agreement"), as amended by Amendment No. 1 to Rights
Agreement, dated as of March 27, 2000, between the Company and the Rights Agent
(the "Amendment").
W I T N E S S E T H
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WHEREAS, on May 1, 1991 (the "Rights Dividend Declaration Date"), the
Company entered into the Original Agreement and the Board of Directors of the
Company authorized and declared a dividend distribution of one Right for each
share of common stock, $.01 par value, (the "Common Stock") of the Company
outstanding at the close of business on May 10, 1991 (the "Record Date"), and
authorized the issuance of one Right (as such number may hereinafter be adjusted
pursuant to the provisions of Section 11(p) hereof) for each share of Common
Stock of the Company issued between the Record Date (whether originally issued
or delivered from the Company's treasury) and the Distribution Date, each Right
initially representing the right to purchase, upon the terms and subject to the
conditions hereinafter set forth, one one-thousandth of a share of Series A
Junior Participating Preferred Stock of the Company having the rights, powers
and preferences set forth in the Designation of Powers, Preferences, Rights and
Qualifications attached hereto as Exhibit A (the "Rights"); and
WHEREAS, the parties hereto entered into the Amendment, which (i)
removed the "continuing director" provisions from the Original Agreement and
(ii) authorized this amended and restated Agreement in order to reflect the
Amendment. This Agreement is intended to reflect the Original Agreement, as
amended by the Amendment and, in the event of any conflict between this
Agreement and the Original Agreement as amended by the Amendment, the Original
Agreement as amended by the Amendment shall control.
NOW THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, and intending to be legally bound, the parties
hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
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following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or which, together
with all Affiliates and Associates of such Person, shall be the Beneficial Owner
of 15% or more of the shares of Common Stock then outstanding; provided that
any of the following Persons who
<PAGE>
without reference to this proviso would otherwise be an Acquiring Person shall
not be an Acquiring Person for purposes of this definition:
(i) the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or of any Subsidiary of the
Company now or hereafter existing, and any Person or entity
organized, appointed or established by the Company for or
pursuant to the terms of any such plan; or
(ii) any Person who or which shall have executed a written
agreement with the Company (approved by at least a majority
of the members of the Company's Board of Directors who are
not representatives, nominees, Affiliates or Associates of
such Person) prior to the date on which such Person
(together with its Affiliates and Associates) became the
Beneficial Owner of 15% or more of the shares of Common
Stock then outstanding and which agreement imposes one or
more thresholds on the amount of such Person's Beneficial
Ownership of shares of Common Stock, if, and so long as the
thresholds continue to be binding on such Person and such
Person is in substantial compliance (as determined by at
least a majority of the members of the Company's Board of
Directors who are not representatives, nominees, Affiliates
or Associates of such Person, in their discretion) with the
terms of such written agreement or of any amendment thereto,
which amendment is approved by at least a majority of the
members of the Company's Board of Directors who are not
representatives, nominees, Affiliates or Associates of such
Person; provided, however, that no amendment of any such
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agreement shall cure any prior breach of such agreement or
any amendment thereto.
(b) "Act" shall mean the Securities Act of 1933, as amended.
(c) "Adverse Person" shall have the meaning set forth in Section
11(a)(ii)(B) hereof.
(d) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Exchange Act, as amended and in effect on the date of this Agreement.
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(e) "Agreement" shall mean this Rights Agreement as originally
executed, as the same may be amended or supplemented from time to time pursuant
to the applicable provisions hereof.
(f) 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, directly or indirectly, has the right to acquire (whether such
right is exercisable immediately or only after the passage of time or the
fulfillment of one or more conditions or both) pursuant to any agreement,
arrangement or understanding (whether or not in writing) or upon the
exercise of conversion rights, exchange right, other rights, warrants or
options, or otherwise; provided, however, that a Person shall not be deemed
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the "Beneficial Owner" of, or to "beneficially own," (A) securities
tendered pursuant to a tender or exchange offer made by such Person or any
of such Person's Affiliates or Associates until such tendered securities
are accepted for purchase or exchange, or (B) securities issuable upon
exercise of Rights at any time prior to the occurrence of a Triggering
Event, or (C) securities issuable upon exercise of Rights from and after
the occurrence of a Triggering Event which Rights were acquired by such
Person or any of such Person's Affiliates or Associates prior to the
Distribution Date or pursuant to Section 3(a) or Section 22 hereof (the
"Original Rights") or pursuant to Section 11(i) hereof in connection with
an adjustment with respect to any Original Rights;
(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or dispose of or
has "beneficial ownership" of (as determined pursuant to Rule 13d-3 of the
General Rules and Regulations under the Exchange Act as in effect on the
date of this Agreement), including pursuant to any agreement, arrangement
or understanding (whether or not in writing), provided, however, that a
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Person shall not be deemed the "Beneficial Owner" of, or to "beneficially
own," any security under this subparagraph (ii) as a result of an
agreement, arrangement or understanding to vote such security if such
agreement, arrangement or understanding: (A) arises solely from a revocable
proxy given in response to a public proxy or consent solicitation made
pursuant to, and in accordance with, the applicable provisions of the
General Rules and Regulations under the Exchange Act, and (B) is not also
then reportable by such Person on Schedule 13D under the Exchange Act (or
any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by
any other Person (or any Affiliate or Associate thereof) with which such
Person (or any of such Person's Affiliates or Associates) has any
agreement, arrangement or understanding (whether or not in writing), for
the purpose of acquiring, holding, voting (except pursuant
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<PAGE>
to a revocable proxy as described in the proviso to subparagraph (ii) of
this subsection (f)) or disposing of any voting securities of the Company;
provided, however, that nothing in this subsection (f) shall cause a
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person engaged in business as an underwriter of securities to be the
"Beneficial Owner" of, or to "beneficially own," any securities acquired
through such person's participation in good faith in a firm commitment
underwriting until the expiration of forty days after the date of such
acquisition; and provided further that in no event shall an officer or
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director of the Company be deemed the Beneficial Owner of, or to
"beneficially own," any securities beneficially owned by another officer or
director of the Company solely by reason of actions undertaken by such
persons in their capacity as officers or directors of the Company.
(g) "Business Day" shall mean any day other than a Saturday, Sunday
or a day on which banking institutions in the Commonwealth of Pennsylvania or
the State of New York are authorized or obligated by law or executive order to
close.
(h) "Close of Business" on any given date shall mean 5:00 P.M.,
Eastern time, on such date; provided, however, that if such date is not a
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Business Day it shall mean 5:00 P.M., Eastern time, on the next succeeding
Business Day.
(i) "Common Stock" shall mean the Common Stock, $.01 par value, of
the Company, except that "Common Stock" when used with reference to any Person
other than the Company shall mean the capital stock of such Person with the
greatest aggregate voting power, or the equity securities or other equity
interest having power to control or direct the management of such Person.
(j) "Common Stock Equivalents" shall have the meaning set forth in
Section 11(a)(iii) hereof.
(k) (Intentionally Omitted)
(l) "Current Market Price" shall have the meaning set forth in
Section 11(d) hereof.
(m) "Current Value" shall have the meaning set forth in Section
11(a)(iii) hereof.
(n) "Distribution Date" shall have the meaning set forth in Section
3(a) hereof.
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<PAGE>
(o) "Equivalent Preferred Stock" shall have the meaning set forth in
Section 11(b) hereof.
(p) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(q) "Exchange Share" and "Exchange Value" shall have the meanings set
forth in Section 23(d) hereof.
(r) "Expiration Date" shall have the meaning set forth in Section
7(a) hereof.
(s) "Final Expiration Date" shall mean the close of business on
December 31, 2001.
(t) "NASDAQ" shall have the meaning set forth in Section 4(a) hereof.
(u) "Original Rights" shall have the meaning set forth in Section
1(f)(i) hereof.
(v) "Ownership Limitation" shall have the meaning set forth in
Section 11(a)(ii)(B) hereof.
(w) "Person" shall mean any individual, firm, joint venture,
association, trust, estate, corporation, partnership or other entity.
(x) "Preferred Stock" shall mean shares of Series A Junior
Participating Preferred Stock, $0.10 par value, of the Company, and, to the
extent that there are not a sufficient number of shares of Series A Junior
Participating Preferred Shares authorized to permit the full exercise of the
Rights, any other series of Preferred Stock, par value $.10, of the Company
designated for such purpose containing terms substantially similar to the terms
of the Series A Junior Participating Preferred Shares.
(y) "Principal Party" shall have the meaning set forth in Section
13(b) hereof.
(z) "Purchase Price" shall have the meaning set forth in Section 4(a)
hereof.
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<PAGE>
(aa) "Record Date" shall mean May 10, 1991.
(bb) "Redemption Price" shall have the meaning set forth in Section
23(a) hereof.
(cc) "Rights" shall have the meaning set forth in the WHEREAS clause
at the beginning of this Agreement.
(dd) "Rights Certificates" shall have the meaning set forth in Section
4(a) hereof.
(ee) "Rights Dividend Declaration Date" shall mean May 1, 1991.
(ff) "Section 11(a)(ii) Event" shall mean any event described in
Section 11(a)(ii)(A) or (B).
(gg) "Section (11)(a)(ii) Trigger Date" shall have the meaning set
forth in Section 11(a)(iii) hereof.
(hh) "Section 13 Event" shall mean any event described in clauses (x),
(y) or (z) of Section 13(a) hereof.
(ii) "Spread" shall have the meaning set forth in Section 11(a)(iii)
hereof.
(jj) "Stock Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to Section 13(d) under the Exchange Act) by
the Company or an Acquiring Person that an Acquiring Person has become such.
(kk) "Subsidiary" shall mean, with reference to any Person, any
corporation of which an amount of voting securities sufficient to elect at least
a majority of the directors of such corporation is beneficially owned, directly
or indirectly, by such Person, or otherwise controlled by such Person.
(ll) "Substitution Period" shall have the meaning set forth in Section
11(a)(iii) hereof.
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<PAGE>
(mm) "Summary of Rights" shall have the meaning set forth in Section
3(b) hereof.
(nn) "Trading Day" shall have the meaning set forth in Section
11(d)(i) hereof.
(oo) "Triggering Event" shall mean any Section 11(a)(ii) Event or any
Section 13 Event.
As used herein, the phrase "date of this Agreement" (or words of
similar effect) shall mean the date of the Original Agreement.
Section 2. Appointment of Rights Agent. The Company hereby appoints the
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Rights Agent to act as agent for the Company and the holders of the Rights in
accordance with the terms and conditions hereof, and the Rights Agent hereby
accepts such appointment. The Company may from time to time appoint such Co-
Rights Agents as it may deem necessary or desirable and, under such
circumstances, the respective duties of the Rights Agent and any Co-Rights
Agents shall be as the Company shall determine.
Section 3. Issue of Rights Certificates.
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(a) Until the date that is the earliest of:
(i) the close of business on the tenth Business Day after the
Stock Acquisition Date (or, if the tenth Business Day after the Stock
Acquisition Date occurs before the Record Date, the Close of Business on
the Record Date);
(ii) the Close of Business on the tenth Business Day after the
date that a tender or exchange offer 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 Person organized, appointed or
established by the Company for or pursuant to the terms of any such plan)
is first published or sent or given within the meaning of Rule 14d-2(a) of
the General Rules and Regulations under the Exchange Act as in effect on
the date hereof, if upon purchase of all securities sought thereby, such
person would be the Beneficial Owner of 15% or more of the shares of Common
Stock then outstanding, unless the tender offer or exchange offer is for
all outstanding shares of Common Stock at a price and on terms determined
(as set forth in Section 11(a)(ii)(A)) by at least a majority of the
members of the Board of Directors who are not officers of the Company and
who are not representatives, nominees, Affiliates or Associates of an
Acquiring Person, after receiving advice from one or more investment
banking firms, to
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<PAGE>
be (1) fair to stockholders (taking into account all factors which such
members of the Board, in their discretion, deem relevant) and (2) otherwise
in the best interests of the Company and its stockholders, or
(iii) the close of business on the tenth day after a person
becomes an Adverse Person pursuant to the criteria set forth in
11(a)(ii)(B).
or, with respect to (i) and (ii) above, such later date or dates as the Board of
Directors may designate; provided, however, that if such later date or dates are
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designated, such designations shall be made on or prior to the date which would
otherwise have been controlling, (the earliest of (i), (ii) (subject to any such
delay of (i) or (ii)) or (iii) being herein referred to as the "Distribution
Date"),
then, (x) subject to the provisions of paragraph (b) of this Section
3, the Rights will be evidenced by the certificates for the Common Stock
registered in the names of the holders of the Common Stock (which certificates
for Common Stock shall be deemed also to be certificates for Rights) and not by
separate certificates, and (y) the Rights will be transferable only in
connection with the transfer of the underlying shares of Common Stock (including
a transfer to the Company).
As soon as practicable after the Distribution Date, the Rights Agent
will send by first-class, insured, postage prepaid mail, to each record holder
of the Common Stock as of the close of business on the Distribution Date, at the
address of such holder shown on the records of the Company, one or more Rights
Certificates, evidencing one Right for each share of Common Stock so held,
subject to adjustment as provided herein. In the event that an adjustment in
the number of Rights per share of Common Stock has been made pursuant to Section
11(p) hereof, at the time of distribution of the Rights Certificates, the
Company shall, unless prohibited by the terms of any agreement to which the
Company is a party on the date of this Rights Agreement (or, if the Board of
Directors so determines, after the date of this Agreement), make the necessary
and appropriate rounding adjustments (in accordance with Section 14(a) hereof)
so that Rights Certificates representing only whole numbers of Rights are
distributed and cash is paid in lieu of any fractional Rights, except that if
the Company is prohibited from paying cash in lieu of fractional Rights, then
the Company shall round the fractional Rights to the next highest number of
whole Rights so that Rights Certificates represent only whole numbers of Rights.
As of and after the Distribution Date, the Rights will be evidenced solely by
such Rights Certificates.
(b) As soon as practicable following the Record Date, the Company
will send a copy of the Summary of Rights and Rights Agreement, in substantially
the form attached hereto as Exhibit B (the "Summary of Rights"), by first-class,
postage prepaid mail, to each record holder of Common Stock as of the close of
business on the Record Date, at the address of such holder shown on the records
of the Company. Until the earlier of the Distribution Date or the Expiration
Date, the transfer of any certificates representing shares of Common Stock in
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<PAGE>
respect of which Rights have been issued shall also constitute the transfer of
the Rights associated with such shares of Common Stock.
(c) Rights shall be issued in respect of all shares of Common Stock
which are issued (whether originally issued or from the Company's treasury)
after the Record Date but prior to the earlier of the Distribution Date or the
Expiration Date. Certificates representing such shares of Common Stock shall
also be deemed to be certificates for Rights and shall bear substantially the
following legend:
This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in the Rights Agreement between Shared
Medical Systems Corporation (the "Company") and Pittsburgh National
Bank (the "Rights Agent") dated as of May 1, 1991, as the same may be
amended (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 the Company. Under certain circumstances, as set
forth in the Rights Agreement, such Rights will be evidenced by
separate certificates and will no longer be evidenced by this
certificate. The Company will mail to the holder of this certificate a
copy of the Rights Agreement, as in effect on the date of mailing,
without charge promptly after receipt of a written request therefor.
Under certain circumstances set forth in the Rights Agreement, Rights
issued to, or held by, any Person who is, was or becomes an Acquiring
Person or Adverse Person or any Affiliate or Associate thereof (as
such terms are defined in the Rights Agreement), whether currently
held by or on behalf of such Person or any subsequent holder, will
become null and void. Rights are subject to redemption, at the option
of the Company, at $.001 per Right on the terms set forth in the
Rights Agreement.
With respect to such certificates bearing the foregoing legend, until the
earlier of the Distribution Date or the Expiration Date, the Rights associated
with the Common Stock represented by such certificates shall be evidenced by
such certificates alone, and registered holders of Common Stock shall also be
the registered holders of the associated Rights, and the transfer of any of such
certificates shall also constitute the transfer of the Rights associated with
the Common Stock represented by such certificates.
Section 4. Form of Rights Certificates.
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(a) The Rights Certificates (the "Rights Certificates"), and the
forms of election to purchase and of assignment to be printed on the reverse
thereof, shall be substantially in the form set forth in Exhibit C hereto and
may have such marks of identification or designation and such legends, summaries
or endorsements printed thereon as the Company may deem appropriate and as are
not inconsistent with the provisions of this Agreement, or as may required to
comply with any applicable law or any rule or regulation made pursuant thereto
or
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<PAGE>
with any rule or regulation of any stock exchange, or the regulations of the
National Association of Securities Dealers Automated Quotation System
("NASDAQ"), on which the Rights may from time to time be listed or quoted, or to
conform to usage. Subject to the provisions of Section 11 and Section 22 hereof,
the Rights Certificates, whenever distributed, shall be dated as of the Record
Date and on their face shall entitle the holders thereof to purchase such number
of one one-thousandths of a share of Preferred Stock as shall be set forth
therein at the price set forth therein (such exercise price per one one-
thousandth of a share of Preferred Stock being hereinafter referred to as the
"Purchase Price"). The amount and type of securities purchasable upon the
exercise of each Right and the Purchase Price thereof shall be subject to
adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(a) or Section
22 hereof that represents Rights beneficially owned by: (i) an Acquiring
Person, an Adverse Person or any Associate or Affiliate of an Acquiring Person
or Adverse Person, (ii) a transferee of an Acquiring Person or Adverse Person
(or of any Associate or Affiliate of an Acquiring Person or Adverse Person) who
becomes a transferee after the Acquiring Person or Adverse Person becomes such,
or (iii) a transferee of an Acquiring Person or Adverse Person (or of any such
Associate or Affiliate) who becomes a transferee prior to or concurrently with
the Acquiring Person or Adverse Person becoming such and receives such Rights
pursuant to either (A) a transfer (whether or not for consideration) from the
Acquiring Person or Adverse Person (or from any such Associate or Affiliate) to
holders of equity interests in such Acquiring Person or Adverse Person (or in
any such Associate or Affiliate) or to any Person with whom such Acquiring
Person or Adverse Person (or any such Associate or Affiliate) has any continuing
agreement, arrangement or understanding regarding the transferred Rights or (B)
a transfer which at least a majority of the members of the Board of Directors of
the Company who are not officers of the Company and who are not representatives,
nominees, Affiliates or Associates of an Acquiring Person or an Adverse Person
has determined (whether before or after such transfer) is part of a plan,
arrangement or understanding which has as a primary purpose or effect avoidance
of Section 7(e) hereof, and any Rights Certificate issued pursuant to Section 6,
Section 11 or Section 22 hereof upon transfer, exchange, replacement or
adjustment of any other Rights Certificate referred to in this sentence, shall
contain (to the extent feasible) the following legend:
The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became an Acquiring Person
or Adverse Person or an Affiliate or Associate of an Acquiring Person
or Adverse Person (as such terms are defined in the Rights Agreement
between Shared Medical Systems Corporation and Pittsburgh National
Bank dated as of May 1, 1991, as the same may be amended).
Accordingly, this Rights Certificate and the Rights represented hereby
may become null and void in the circumstances specified in Section
7(e) of such Agreement.
The provisions of Section 7(e) of this Rights Agreement shall apply to Rights
beneficially owned by any and all such Persons regardless of whether the
foregoing legend is contained on such Rights Certificates.
-10-
<PAGE>
Section 5. Countersignature and Registration.
---------------------------------
(a) The Rights Certificates shall be executed on behalf of the
Company by its Chairman of the Board, its President or any Vice President,
either manually or by facsimile signature, and shall have affixed thereto the
Company's seal or a facsimile thereof which shall be attested by the Secretary
or an Assistant Secretary of the Company, either manually or by facsimile
signature. The Rights Certificates shall be manually countersigned by the Rights
Agent and shall not be valid for any purpose unless so countersigned. In case
any officer of the Company who shall have signed any of the Rights Certificates
shall cease to be such officer of the Company before countersignature by the
Rights Agent and issuance and delivery by the Company, such Rights 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 signed
such Rights Certificates had not ceased to be such officer of the Company; and
any Rights Certificates may be signed on behalf of the Company by any person
who, at the actual date of the execution of such Rights Certificate, shall be a
proper officer of the Company to sign such Rights Certificate, although at the
date of the execution of this Rights Agreement any such person was not such an
officer.
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its principal office or offices designated as the
appropriate place for surrender of Rights Certificates upon exercise or
transfer, books for registration and transfer of the Rights Certificates issued
hereunder. Such books shall show the names and addresses of the respective
holders of the Rights Certificates, the number of Rights evidenced on its face
by each of the Rights Certificates and the certificate number and the date of
each of the Rights Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Rights
------------------------------------------------------
Certificates; Mutilated, Destroyed Lost or Stolen Rights Certificates.
- ---------------------------------------------------------------------
(a) Subject to the provisions of Section 4(b), Section 7(e) and
Section 14 hereof, at any time after the close of business on the Distribution
Date, and at or prior to the close of business on the Expiration Date, any
Rights Certificate or Certificates may be transferred, split up, combined or
exchanged for another Rights Certificate or Certificates, entitling the
registered holder to purchase a like number of one one-thousandths of a share of
the Company's Preferred Stock (or following a Triggering Event, Common Stock,
other securities, cash or other assets, as the case may be) as the Rights
Certificate or Certificates surrendered then entitled such holder (or former
holder in the case of a transfer) to purchase. Any registered holder desiring to
transfer, split up, combine or exchange any Rights Certificate or Certificates
shall make such request in writing delivered to the Rights Agent, and shall
surrender the Rights Certificate or Certificates to be transferred, split up,
combined or exchanged at the principal office or offices of the Rights Agent
designated for such purpose. Neither the Rights Agent nor the Company shall be
obligated to take any action whatsoever with respect to the transfer of any such
surrendered Rights Certificate until the registered holder shall have completed
and signed the certificate
-11-
<PAGE>
contained in the form of assignment on the reverse side of such Rights
Certificate and shall have provided such additional evidence of the identity of
the Beneficial Owner (or former Beneficial Owner) and the Affiliates and
Associates thereof as the Company shall reasonably request. Thereupon the Rights
Agent shall, subject to Section 4(b), Section 7(e) and Section 14 hereof,
countersign and deliver to the Person entitled thereto a Rights Certificate or
Rights Certificates, as the case may be, as so requested. The Company may
require payment of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer, split up, combination or
exchange of Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Rights Certificate, and, in case of loss, theft or destruction, of indemnity
or security reasonably satisfactory to them, and reimbursement to the Company
and the Rights Agent of all reasonable expenses incidental thereto, and upon
surrender to the Rights Agent and cancellation of the Right Certificate if
mutilated, the Company will execute and deliver a new Rights Certificate of like
tenor to the Rights Agent for countersignature and delivery to the registered
owner in lieu of the Rights Certificates so lost, stolen, destroyed or
mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.
-------------------------------------------------------------
(a) Subject to Section 7(e) hereof, the registered holder of any
Rights Certificate may exercise the Rights evidenced thereby (except as
otherwise provided herein including, without limitation, the restrictions on
exercisability set forth in Section 9(c), Section 11(a)(iii) and Section 23(a)
hereof) in whole or in part at any time after the Distribution Date upon
surrender of the Rights Certificate, with the form of election to purchase and
the certificate on the reverse side thereof duly executed, to the Rights Agent
at the principal office or offices of the Rights Agent designated for such
purpose, together with payment of the aggregate purchase Price with respect to
the total number of one one-thousandths of a share of Preferred Stock (or Common
Stock or other securities, cash or other assets, as the case may be) as to which
such surrendered Rights are then exercisable, at or prior to the earliest of (i)
the Final Expiration Date, (ii) any expiration of the Rights pursuant to Section
13(d), or (iii) the time at which the Rights are redeemed as provided in Section
23 hereof (the earliest of (i), (ii) and (iii) being herein referred to as the
"Expiration Date").
(b) The Purchase Price for each one one-thousandth of a share of
Preferred Stock pursuant to the exercise of a Right shall initially be $80 and
shall be subject to adjustment from time to time as provided in Sections 11 and
13(a) hereof and shall be payable in accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing exercisable
Rights, with the form of election to purchase and the certificate duly executed,
accompanied by payment, with respect to each Right so exercised, of the Purchase
Price per one one-thousandth of a share of Preferred Stock (or other Common
Stock or other securities, cash or other assets, as the case may be) to be
purchased as set forth below and an amount equal to any applicable transfer tax,
the Rights Agent shall, subject to Section 20(k) hereof, thereupon promptly (i)
(A) requisition from any transfer agent of the shares of Preferred Stock (or
make available, if the Rights Agent is the
-12-
<PAGE>
transfer agent for such shares) certificates for the total number of one one-
thousandths of a share of Preferred Stock to be purchased, and the Company
hereby irrevocably authorizes its transfer agent to comply with all such
requests, or (B) if the Company shall have elected to deposit the total number
of shares of Preferred Stock issuable upon exercise of the Rights hereunder with
a depositary agent, requisition from the depositary agent depositary receipts
representing such number of one one-thousandths of a share of Preferred Stock as
are to be purchased (in which case certificates for the shares of Preferred
Stock represented by such receipts shall be deposited by the transfer agent with
the depositary agent) and the Company will direct the depositary agent to comply
with such request, (ii) requisition from the Company the amount of cash, if any,
to be paid in lieu 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 Rights
Certificate, registered in such name or names as may be designed by such holder,
and (iv) after receipt thereof, deliver such cash, if any, to or upon the order
of the registered holder of such Rights Certificate. The payment of the Purchase
Price (as such amount may be reduced pursuant to Section 11(a)(iii) hereof)
shall be made (x) in cash or by certified bank check or bank draft payable to
the order of the Company or (y) if authorized by the Board of Directors, by
delivery of a certificate or certificates (with appropriate stock powers
executed in blank attached thereto) evidencing a number of whole shares of
Common Stock equal to the integer obtained by dividing the then Purchase Price
by the then Current Market Price (as determined pursuant to Section 11(d)) per
share of Common Stock on the date of such exercise, plus a certified bank check
or bank draft payable to the order of the Company in an amount equal to the
difference between the then Current Market Price (as determined pursuant to
Section 11(d)) of such whole shares and the aggregate Purchase Price. In the
event that the Company is obligated hereunder to issue other securities of the
Company (including, without limitation, Common Stock), pay cash and/or
distribute other property pursuant to Section 11(a) hereof, the Company will
make all arrangements necessary so that such other securities, cash and/or other
property are available for distribution by the Right Agent, if and when
appropriate. Prior to the occurrence of a Triggering Event, the Company reserves
the right to require that, upon any exercise of Rights, a number of Rights be
exercised so that only whole shares of Preferred Stock would be issued.
(d) In case the registered holder of any Rights Certificate shall
exercise less than all the Rights evidenced thereby, a new Rights Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent and delivered to, or upon the order of, the registered
holder of such Rights Certificate, registered in such name or names as may be
designated by such holder, subject to the provisions of Sections 6 and 14
hereof.
(e) Notwithstanding anything in this Agreement to the contrary, from
and after the first occurrence of a Section 11(a)(ii) Event, any Rights
beneficially owned by (i) an Acquiring Person or Adverse Person, or an Associate
or Affiliate of an Acquiring Person or Adverse Person, (ii) a transferee of an
Acquiring Person or Adverse Person (or of any such Associate or Affiliate) who
becomes a transferee after the Acquiring Person or Adverse Person becomes such,
or (iii) a transferee of an Acquiring Person or Adverse Person (or of any such
Associate or Affiliate) who becomes a transferee prior to or concurrently with
the Acquiring Person or Adverse Person becoming such and receives such Rights
pursuant to either (A) a
-13-
<PAGE>
transfer (whether or not for consideration) from the Acquiring Person or Adverse
Person (or from any such Associate or Affiliate) to holders of equity interests
in such Acquiring Person or Adverse Person (or in any such Associate or
Affiliate) or to any Person with whom such Acquiring Person or Adverse Person
(or any such Affiliate or Associate) has any continuing agreement, arrangement
or understanding regarding the transferred Rights or (B) a transfer which at
least a majority of the members of the Board of Directors of the Company who are
not officers of the Company and who are not representatives, nominees,
Affiliates or Associates of an Acquiring Person or an Adverse Person has
determined (whether before or after such transfer) is part of a plan,
arrangement or understanding which has as a primary purpose or effect the
avoidance of this Section 7(e), shall become null and void without any further
action, and no holder of such Rights shall have any rights whatsoever with
respect to such Rights, whether under any provision of this Agreement or
otherwise. The Company shall use all reasonable efforts to insure that the
provisions of this Section 7(e) and Section 4(b) hereof are complied with, but
shall have no liability to any holder of Rights Certificates or other Person as
a result of its failure to make any determinations with respect to an Acquiring
Person or Adverse Person or their respective Affiliates, Associates or
transferees hereunder.
(f) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a registered holder upon the occurrence of any purported
exercise as set forth in this Section 7 unless such registered holder shall have
(i) completed and signed the certificate contained in the form of election to
purchase set forth on the reverse side of the Rights Certificate surrendered for
such exercise, and (ii) provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) and the Affiliates and Associates
thereof as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Rights Certificates. All
---------------------------------------------------
Rights Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or 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 Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
the provisions of this Agreement. The Company shall deliver to the Rights Agent
for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Rights Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
cancelled Rights Certificates to the Company, or shall, at the written request
of the Company, destroy such cancelled Rights Certificates, and in such case
shall deliver a certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of Capital Stock.
---------------------------------------------
(a) Subject to the provisions of this Agreement (including, without
limitation, Section 11(a)(iii) hereof), the Company covenants and agrees that it
will cause to be reserved and kept available out of its authorized and unissued
shares of Preferred Stock (and, following the occurrence of a Triggering Event,
out of its authorized and unissued shares of Common Stock and/or other
securities or out of its authorized and issued shares held in its treasury), the
number of shares of Preferred Stock (and, following the occurrence of a
Triggering Event, Common
-14-
<PAGE>
Stock and/or other securities) that will be sufficient to permit the exercise in
full of all outstanding Rights pursuant to the terms of this Agreement.
(b) So long as the shares of Preferred Stock (and, following the
occurrence of a Triggering Event, Common Stock and/or other securities) issuable
and deliverable upon the exercise of the Rights may be listed on any national
securities exchange or quoted on NASDAQ, the Company shall use its best efforts
to cause, from and after such time as the Rights become exercisable, all shares
reserved for such issuance to be listed on such exchange or quoted on NASDAQ
upon official notice of issuance upon such exercise.
(c) The Company shall use its best efforts to (i) file, as soon as
practicable following the earliest date after the first occurrence of a Section
11(a)(ii) Event in which the consideration to be delivered by the Company upon
exercise of the Rights has been determined in accordance with Section 11(a)(iii)
hereof, or, if earlier, as soon as is required by law following the Distribution
Date, a registration statement under 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 such
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 date of the expiration of the Rights. The Company will
also take such action as may be appropriate under, or to ensure compliance with,
the securities or "blue sky" laws of the various states in connection with the
exercisability of the Rights. The Company may temporarily suspend, for a period
of time 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 statement and permit it to become
effective. Upon any such suspension, the Company shall issue a public
announcement stating that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement at such time as the suspension is no
longer in effect. In addition, if the Company shall determine that a
registration statement is required following the Distribution Date, the Company
may temporarily suspend the exercisability of the Rights until such time as a
registration statement has been declared effective. Notwithstanding any
provision of this Agreement to the contrary, the Rights shall not be exercisable
in any jurisdiction if the requisite qualification in such jurisdiction shall
not have been obtained, the exercise thereof shall not be permitted under
applicable law or a registration statement shall not have been declared
effective.
(d) The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all securities delivered upon exercise
of Rights shall, at the time of delivery of the certificates for such securities
(subject to payment of the Purchase Price), be duly and validly authorized and
issued and fully paid and nonassessable.
(e) 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 Rights
Certificates. The Company shall not be required to pay any transfer tax which
may become payable in respect of the issuance, delivery or transfer of any
certificates for a number of one one-thousandths of a share of Preferred Stock
(or Common Stock and/or other securities, as the case may be) upon the exercise
of Rights, or to issue or deliver any
-15-
<PAGE>
certificates for a number of one one-thousandths of a share of Preferred Stock
(or Common Stock and/or other securities, as the case may be) in a name other
than that of the registered holder upon the exercise of any Rights until such
tax shall have been paid (any such tax being payable by the holder of such
Rights 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 Stock Record Date. Each person in whose name any
---------------------------
certificate for a number of one one-thousandths of a share of Preferred Stock
(or Common Stock and/or other securities, as the case may be) is issued upon the
exercise of Rights shall for all purposes be deemed to have become the holder of
record of such fractional shares of Preferred Stock (or Common Stock and/or
other securities, as the case may be) represented thereby as of the close of
business on, and such certificate shall be dated, the date upon which the Rights
Certificate evidencing such Rights was duly surrendered and payment of the
Purchase Price (and all applicable transfer taxes) was made; provided, however,
-------- -------
that if the date of such surrender and payment is a date upon which the
Preferred Stock (or Common Stock and/or other securities, as the case may be)
transfer books of the Company are closed, such Person shall be deemed to have
become the record holder of such shares (fractional or otherwise) on, and such
certificate shall be dated, the next succeeding Business Day on which the
Preferred Stock (or Common Stock and/or other securities, as the case may be)
transfer books of the Company are open.
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or
----------------------------------------------------------
Number of Rights. The Purchase Price, the number and kind of shares covered by
- ----------------
each Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.
(a) (i) In the event the Company shall at any time after the date of
this Agreement (A) declare a dividend on the Preferred Stock payable in
shares of Preferred Stock, (B) subdivide the outstanding Preferred Stock,
(C) combine the outstanding Preferred Stock into a smaller number of
shares, or (D) issue any shares of its capital stock in a reclassification
of the Preferred Stock (including any such reclassification in connection
with a consolidation or merger in which the Company is the continuing or
surviving corporation), except as otherwise provided in this Section 11(a)
and Section 7(e) hereof, the Purchase Price in effect at the time of the
record date for such dividend or of the effective date of such sub-
division, combination or reclassification, and the number and kind of
shares of Preferred Stock or other capital stock, as the case may be,
issuable on such date, shall be proportionately adjusted so that the holder
of any Right exercised after such time shall be entitled to receive, upon
payment of the Purchase Price then in effect, the aggregate number and kind
of shares of Preferred Stock or other capital stock, as the case may be,
which, if such Right had been exercised immediately prior to such date and
at a time when the Preferred Stock transfer books of the Company were open,
he would have owned upon such exercise and been entitled to receive by
virtue of such dividend, subdivision, combination or reclassification. If
an event occurs which would require an adjustment under both this Section
11(a)(i) and Section 11(a)(ii) hereof, the adjustment provided for in this
Section 11(a)(i) shall be in addition to, and shall be made prior to, any
adjustment required pursuant to Section 11(a)(ii) hereof.
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<PAGE>
(ii) In the event that:
(A) any Person, shall, at any time after the Rights
Dividend Declaration Date, be or become an Acquiring Person, unless the
event causing such Person to have become an Acquiring Person is a
transaction set forth in Section 13(a) hereof, or is an acquisition of
shares of Common Stock pursuant to a tender offer or an exchange offer for
all outstanding shares of Common Stock at a price and on terms determined
by at least a majority of the members of the Board of Directors who are not
officers of the Company and who are not representatives, nominees,
Affiliates or Associates of an Acquiring Person, after receiving advice
from one or more investment banking firms, to be (x) fair to stockholders
(taking into account all factors which such members of the Board deem
relevant) and (y) otherwise in the best interests of the Company and its
stockholders, or
(B) (1) at least a majority of the members of the Board of
Directors who are not officers of the Company and who are not
representatives, nominees, Affiliates or Associates of a specified Person,
after reasonable inquiry and investigation, including consultation with
such persons as such directors shall have deemed appropriate, shall
determine that (x) Beneficial Ownership by such Person of an amount of
Common Stock exceeding the Ownership Limitation (as hereinafter defined)
is, or would likely be, intended to cause the Company to repurchase the
Common Stock beneficially owned by such Person or to cause pressure on the
Company to take action or enter into a transaction or series of
transactions intended to provide such Person with short-term financial gain
under circumstances where a majority of such disinterested directors has
determined that the best long-term interests of the Company and its
stockholders would not be served by taking such action or entering into
such transactions or series of transactions at that time or (y) Beneficial
Ownership by such Person of an amount of Common Stock exceeding the
Ownership Limitation is causing or reasonably likely to cause a material
adverse impact (including, but not limited to, impairment of relationships
with customers, suppliers or creditors, or impairment of the Company's
ability to maintain its competitive position) on the business or prospects
of the Company (provided, however, no such determination as provided in (x)
-------- -------
or (y) above shall be made with respect to any Person who or which shall
have executed a written agreement with the Company (approved by at least a
majority of the members of the Company's Board of Directors who are not
representatives, nominees, Affiliates or Associates of such Person) which
imposes one or more thresholds on the amount of such Person's Beneficial
Ownership of shares of Common Stock, if, and so long as the thresholds
continue to be binding on such Person and such Person is in substantial
compliance (as determined by at least a majority of the members of the
Company's Board of Directors who are not representatives, nominees,
Affiliates or Associates of such Person, in their discretion) with the
terms of such written agreement or of any amendment thereto, which
amendment is approved by at least a majority of the members of the
Company's Board of Directors who are not representatives, nominees,
Affiliates or Associates of such Person (provided, however, that no
-------- -------
amendment of any such agreement shall cure any prior breach of such
agreement or any amendment thereto,)); (2) a majority of the Board of
Directors who are
-17-
<PAGE>
not officers of the Company and who are not representatives, nominees,
Affiliates or Associates of such specified Person shall designate a
specific limitation on the amount of Common Stock which such specified
Person may beneficially own, which amount (the "Ownership Limitation") may
be less than, equal to, or more than the amount of shares of Common Stock
then owned by such Person, but shall in no event be less than 10% of the
Common Stock then outstanding; and (3) such specified Person, together with
his or its Affiliates and Associates, shall (before or after the occurrence
of (1) and (2) above) beneficially own a number of shares of Common Stock
that exceeds the Ownership Limitation (a specified Person meeting the
requirements of clauses (1), (2) and (3) of this Section 11(a)(ii)(B) being
referred to as an "Adverse Person"),
then, promptly following the first occurrence of any Section 11(a)(ii)
Event, each holder of a Right (except as provided below and in Section 7(e)
hereof) shall thereafter have the right to receive, upon exercise thereof
at the then current Purchase Price in accordance with the terms of this
Agreement, in lieu of a number of one one-thousandths of a share of
Preferred Stock, such number of shares of Common Stock of the Company as
shall equal the result obtained by (x) multiplying the then current
Purchase Price by the then number of one one-thousandths of a share of
Preferred Stock for which one Right was exercisable immediately prior to
the first occurrence of a Section 11(a)(ii) Event, and (y) dividing that
product (which, following such first occurrence, shall thereafter be
referred to as the "Purchase Price" for each Right and for all purposes of
this Agreement) by 50% of the Current Market Price (as determined pursuant
to Section 11(d) hereof) per share of Common Stock on the date of such
first occurrence (such number of shares issuable upon the exercise of a
Right being referred to herein as the "Adjustment Shares").
(iii) Unless at least a majority of the members of the Company's
Board of Directors who are not officers of the Company and who are not
representatives, nominees, Affiliates or Associates of an Acquiring Person
or an Adverse Person determine that the following is not permitted by the
terms of any agreement or instrument to which the Company is a party on the
date of this Agreement (or, if the Board of Directors so determines, after
the date of this Agreement), then in the event that the number of shares of
Common Stock which are authorized by the Company's articles or certificate
of incorporation but not outstanding or reserved for issuance for purposes
other than upon exercise of the Rights are not sufficient to permit the
exercise in full of the Rights in accordance with the foregoing
subparagraph (ii) of this Section 11(a), the Company shall: (A) determine
the excess of (1) the value of the Adjustment Shares issuable upon the
exercise of a Right (the "Current Value") over (2) the Purchase Price (such
excess being referred to herein as the "Spread"), and (B) with respect to
each Right, make adequate provision to substitute for the Adjustment
Shares, upon payment of the applicable Purchase Price, (1) cash, (2) a
reduction in the Purchase Price, (3) Common Stock or other equity
securities of the Company (including, without limitation, shares, or units
of shares, of preferred stock which the Board of Directors of the Company
has deemed to have substantially the same value as shares of Common Stock
(such shares of preferred stock being referred to herein as "common stock
equivalents")), (4) debt
-18-
<PAGE>
securities of the Company, (5) other assets, or (6) any combination of the
foregoing having an aggregate value equal to the Current Value, where such
aggregate value has been determined by the Board of Directors of the
Company based upon the advice of a nationally recognized investment banking
firm selected by the Board of Directors of the Company; provided, however,
-------- -------
if the Company shall not have made adequate provision to deliver value
pursuant to clause (B) above within thirty (30) days following the later of
(x) the first occurrence of a Section 11(a)(ii) Event and (y) the date on
which the Company's right of redemption pursuant to Section 23(a) expires
(the later of (x) and (y) being referred to herein as the "Section
11(a)(ii) Trigger Date"), then the Company shall be obligated to deliver,
upon the surrender for exercise of a Right and without requiring payment of
the Purchase Price, shares of Common Stock (to the extent available) and
then, if necessary, cash, which shares and/or cash have an aggregate value
equal to the Spread. If the Board of Directors of the Company shall
determine in good faith that it is likely that sufficient additional shares
of Common Stock could be authorized for issuance upon exercise in full of
the Rights, the thirty (30) day period set forth above may be extended to
the extent necessary, but not more than ninety (90) days after the Section
11(a)(ii) Trigger Date, in order that the Company may seek stockholder
approval for the authorization of such additional shares (such period, as
it may be extended, the "Substitution Period"); provided, however, that
--------- -------
there shall be no obligation on the part of the Company so to seek
authorization of such additional shares. To the extent that the Company
determines that some action need be (and may be) taken pursuant to the
first and/or second sentences of this Section 11(a)(iii), the Company (x)
shall provide, subject to Section 7(e) hereof, that such action shall apply
uniformly to all outstanding Rights, and (y) may suspend the exercisability
of the Rights until the expiration of the Substitution Period in order to
seek any authorization of additional shares and/or to decide the
appropriate form of distribution to be made pursuant to such first sentence
and to determine the value thereof. In the event of any such suspension,
the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a
public announcement at such time as the suspension is no longer in effect.
For purposes of this Section 11(a)(iii), the value of a share of Common
Stock shall be the Current Market Price (as determined pursuant to Section
11(d) hereof) per share of the Common Stock on the Section 11(a)(ii)
Trigger Date and the value of any "common stock equivalent" shall be deemed
to have the same value as the Common Stock on such date.
(b) In case the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Preferred Stock entitling them to
subscribe for or purchase (for a period expiring within forty-five (45) calendar
days after such record date) Preferred Stock (or shares having the same rights,
privileges and preferences as the shares of Preferred Stock ("equivalent
preferred stock")) or securities convertible into Preferred Stock or equivalent
preferred stock at a price per share of Preferred Stock or per share of
equivalent preferred stock (or having a conversion price per share, if a
security convertible into Preferred Stock or equivalent preferred stock) less
than the Current Market Price (as determined pursuant to Section 11(d) hereof)
per share of Preferred Stock 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
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<PAGE>
immediately prior to such record date by a fraction, the numerator of which
shall be the number of shares of Preferred Stock outstanding on such record
date, plus the number of shares of Preferred Stock which the aggregate offering
price of the total number of shares of Preferred Stock and/or equivalent
preferred stock so to be offered (and/or the aggregate initial conversion price
of the convertible securities so to be offered) would purchase at such Current
Market Price, and the denominator of which shall be the number of shares of
Preferred Stock outstanding on such record date, plus the number of additional
shares of Preferred Stock and/or equivalent preferred stock to be offered for
subscription or purchase (or into which the convertible securities so to be
offered are initially convertible). In case such subscription price may paid by
delivery of consideration part or all of which may be in a form other than cash,
the value of such consideration shall be as determined in good faith by the
Board of Directors of the Company, whose determination shall be described in a
statement filed with the Rights Agent and shall be binding on the Rights Agent
and the holders of the Rights. Shares of Preferred Stock owned by or held for
the account of the Company shall not be deemed outstanding for the purpose of
any such computation. Such adjustment shall be made successively whenever such a
record date is fixed, and in the event that such rights or warrants are not so
issued, the Purchase Price shall be adjusted to be the Purchase Price which
would then be in effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for a distribution to
all holders of Preferred Stock (including any such distribution made in
connection with a consolidation or merger in which the Company is the continuing
corporation) of evidences of indebtedness, cash (other than a regular quarterly
cash dividend out of the earnings or retained earnings of the Company), assets
(other than a dividend payable in Preferred Stock, but including any dividend
payable in stock other than Preferred Stock) or subscription rights or warrants
(excluding those referred to in Section 11(b) hereof), the Purchase Price to be
in effect after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the Current Market Price (as determined pursuant to
Section 11(d) hereof) per share of Preferred Stock on such record date, less the
fair market value (as determined in good faith by the Board of Directors of the
Company, whose determination shall be described in a statement filed with the
Rights Agent and shall be binding on the Rights Agent and the holders of the
Rights) of the portion of the cash, assets or evidences of indebtedness so to be
distributed or of such subscription rights or warrants applicable to a share of
Preferred Stock, and the denominator of which shall be such Current Market Price
(as determined pursuant to Section 11(d) hereof) per share of Preferred Stock.
Such adjustments shall be made successively whenever such a record date is
fixed, and in the event that such distribution is not so made, the Purchase
Price shall be adjusted to be the Purchase Price which would have been in effect
if such record date had not been fixed.
(d) (i) For the purpose of any computation hereunder, other than
computations made pursuant to Section 11(a)(iii) hereof, the "Current
Market Price" per share of Common Stock on any date shall be deemed to be
the average of the daily closing prices per share of such Common Stock for
the thirty (30) consecutive Trading Days (as such term is hereinafter
defined) immediately prior to such date, and for purposes of computations
made pursuant to Section 11(a)(iii) hereof, the "Current Market
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Price" per share of Common Stock on any date shall be deemed to be the
average of the daily closing prices per share of such Common Stock for the
ten (10) consecutive Trading Days immediately following such date;
provided, however, that in the event that the Current Market Price per
-------- -------
share of the Common Stock is determined during a period following the
announcement by the issuer of such Common Stock of (A) a dividend or
distribution on Common Stock payable in shares of Common Stock or
securities convertible into shares of Common Stock (other than the Rights),
or (B) any subdivision, combination or reclassification of such Common
Stock, and prior to the expiration of the requisite thirty (30) Trading Day
or ten (10) Trading Day period, as set forth above, 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 Market Price" shall be properly 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, 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 shares of Common Stock 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 shares of Common
Stock are listed or admitted to trading or, if the shares of Common Stock
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 shares of
Common Stock are not quoted by any such organization, the average of the
closing bid and asked prices as furnished by a professional market maker
making a market in the Common Stock selected by the Board of Directors of
the Company. If on any such date the Common Stock is not so listed, traded
or quoted, and no market maker is then making a market in the Common Stock,
the "Current Market Price" per share of Common Stock on such date shall
mean the fair value per share on such date as determined in good faith by
the Board of Directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent and shall be
conclusive for all purposes. The term "Trading Day" shall mean a day on
which the principal national securities exchange on which the shares of
Common Stock are listed or admitted to trading is open for the transaction
of business or, if the shares of Common Stock are not listed or admitted to
trading on any national securities exchange, a Business Day.
(ii) For the purpose of any computation hereunder, the "Current
Market Price" per share of Preferred Stock shall be determined in the same
manner as set forth above for the Common Stock in clause (i) of this
Section 11(d) (other than the penultimate sentence thereof). If the
Current Market Price per share of Preferred Stock cannot be determined in
the manner provided above or if the Preferred Stock is not publicly held or
listed or traded in a manner described in clause (i) of this Section 11(d),
the "Current Market Price" per share of Preferred Stock shall be
conclusively deemed to be an amount equal to 1000 (as such number may be
appropriately adjusted for such
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<PAGE>
events as stock splits, stock dividends and recapitalizations with respect
to the Preferred Stock or Common Stock occurring after the date of this
Agreement) multiplied by the Current Market Price per share of the Common
Stock of the Company. If neither the Common Stock of the Company nor the
Preferred Stock is publicly held or so listed or traded, "Current Market
Price" per share of the Preferred Stock shall mean the fair value per share
as determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent
and shall be conclusive for all purposes. For all purposes of this
Agreement, the "Current Market Price" of one one-thousandth of a share of
Preferred Stock shall be equal to the "Current Market Price" of one share
of Preferred Stock divided by 1000.
(e) Anything herein to the contrary notwithstanding, no adjustment in
the Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least one percent (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 ten-thousandth of a share of Common Stock
or other share or one-millionth of a share of Preferred Stock, 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
(3) years from the date of the transaction which mandates such adjustment, or
(ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section
11(a)(ii) or Section 13(a) hereof, the holder of any Right thereafter exercised
shall become entitled to receive any shares of capital stock other than
Preferred Stock, thereafter the number of such other shares so receivable upon
exercise of any Right and the Purchase Price thereof shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Preferred Stock contained in
Sections 11(a), (b), (c), (e), (g), (h), (i), (j), (k) and (m), and the
provisions of Sections 7, 9, 10, 13 and 14 hereof with respect to the Preferred
Stock shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-thousandths of a
share of Preferred Stock purchasable from time to time hereunder upon exercise
of the Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided
in Section 11(i), upon each adjustment of the Purchase Price as a result of the
calculations made in Sections 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of one one-thousandths of
a share of Preferred Stock (calculated to the nearest one-millionth) obtained by
(i) multiplying (x) the number of one one-thousandths of a share purchasable
with respect to a Right immediately prior to this adjustment, by (y) the
Purchase Price in effect immediately prior to such adjustment of the Purchase
Price, and (ii) dividing the
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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 lieu of any adjustment in
the number of one one-thousandths of a share of Preferred Stock purchasable upon
the exercise of a Right. In such event, each of the Rights outstanding after the
adjustment in the number of Rights shall be exercisable for the number of one
one-thousandths of a share of Preferred Stock for which a Right was exercisable
immediately prior to such adjustment. Each Right held of record prior to such
adjustment of the number of Rights shall become that number of Rights
(calculated to the nearest one ten-thousandth) obtained by dividing the Purchase
Price in effect immediately prior to adjustment of the Purchase Price by the
Purchase Price in effect immediately after adjustment of the Purchase Price. The
Company shall make a public announcement of its election to adjust the number of
Rights, indicating the record date for the adjustment, and, if known at the
time, the amount of the adjustment to be made. This record date may be the date
on which the Purchase Price is adjusted or any day thereafter, but, if the
Rights Certificates have been issued, shall be at least ten (10) days later than
the date of the public announcement. If Rights 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 Rights Certificates on such record date Rights Certificates
evidencing, subject to Section 14 hereof, the additional Rights to which such
holders shall be entitled as a result of such adjustment, or, at the option of
the Company, shall cause to be distributed to such holders of record in
substitution and replacement for the Rights Certificates held by such holders
prior to the date of adjustment, and upon surrender thereof, if required by the
Company, new Rights Certificates evidencing all the Rights to which such holders
shall be entitled after such adjustment. Rights Certificates so to be
distributed shall be issued, executed and countersigned in the manner provided
for herein (and may bear, at the option of the Company, the adjusted Purchase
Price) and shall be registered in the names of the holders of record of Rights
Certificates on the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or
the number of one one-thousandths of a share of Preferred Stock issuable upon
the exercise of the Rights, the Rights Certificates theretofore and thereafter
issued may continue to express the Purchase Price per one one-thousandth of a
share of Preferred Stock and the number of one one-thousandths of a share of
Preferred Stock which were expressed in the initial Rights Certificates issued
hereunder.
(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below the then stated value, if any, of the number of one
one-thousandths of a share of Preferred Stock issuable upon exercise of the
Rights, the Company shall take any corporate action which may be necessary in
order that the Company may validly and legally issue fully paid and
nonassessable such number of one one-thousandths of a share of Preferred Stock
at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may
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<PAGE>
elect to defer until the occurrence of such event the issuance to the holder of
any Right exercised after such record date the number of one one-thousandths of
a share of Preferred Stock and other capital stock or securities of the Company,
if any, issuable upon such exercise over and above the number of one one-
thousandths of a share of Preferred Stock and other capital stock or securities
of the Company, if any, issuable upon such exercise on the basis of the Purchase
Price in effect prior to such adjustment; provided, however, that the Company
-------- -------
shall deliver to such holder a due bill or other appropriate instrument
evidencing such holder's right to receive such additional shares (fractional or
otherwise) or securities upon the occurrence of the event requiring such
adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that in their good faith judgment the Board of Directors of the
Company shall determine to be advisable in order that any (i) consolidation or
subdivision of the Preferred Stock, (ii) issuance wholly for cash of any shares
of Preferred Stock at less than the Current Market Price, (iii) issuance wholly
for cash of shares of Preferred Stock or securities which by their terms are
convertible into or exchangeable for shares of Preferred Stock, (iv) stock
dividends or (v) issuance of rights, options or warrants referred to in this
Section 11, hereafter made by the Company to holders of its Preferred Stock
shall not be taxable to such stockholders.
(n) The Company covenants and agrees that it shall not, at any time
after the Distribution Date, (i) consolidate with any other Person (other than a
Subsidiary of the Company in a transaction which complies with Section 11(o)
hereof), (ii) merge with or into any other Person (other than a Subsidiary of
the Company in a transaction which complies with Section 11(o) hereof), or (iii)
sell or transfer (or permit any Subsidiary to sell or transfer), in one
transaction, or a series of related transactions, 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 (other than the
Company and/or any of its Subsidiaries in one or more transactions each of which
complies with Section 11(o) hereof), if (x) 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 or (y) prior to, simultaneously with or immediately after
such consolidation, merger or sale, the shareholders of the Person who
constitutes, or would constitute, the "Principal Party" for purposes of Section
13(a) hereof shall have received a distribution of Rights previously owned by
such Person or any of its Affiliates and Associates.
(o) The Company covenants and agrees that, after the Distribution
Date, it will not, except as permitted by Section 23 or Section 26 hereof, take
(or permit any Subsidiary to take) any action if at the time such action is
taken it is reasonably foreseeable that such action will diminish substantially
or otherwise eliminate the benefits intended to be afforded by the Rights.
(p) Anything in this Agreement to the contrary notwithstanding, in
the event that the Company shall at any time after the Rights Dividend
Declaration Date and prior to the
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<PAGE>
Distribution Date (i) declare a dividend on the outstanding shares of Common
Stock payable in shares of Common Stock, (ii) subdivide the outstanding shares
of Common Stock, or (iii) combine the outstanding shares of Common Stock into a
smaller number of shares, the number of Rights associated with each share of
Common Stock then outstanding, or issued or delivered thereafter but prior to
the Distribution Date, shall automatically be proportionately adjusted so that
the number of Rights thereafter associated with each share of Common Stock
following any such event shall equal the result obtained by multiplying the
number of Rights associated with each share of Common Stock issued and
outstanding immediately prior to such event by a fraction the numerator of which
shall be the total number of shares of Common Stock issued and outstanding
immediately prior to the occurrence of the event and the denominator of which
shall be the total number of shares of Common Stock issued and outstanding
immediately following the occurrence of such event.
(q) The failure by the directors, pursuant to Section 11(a)(ii)(B)
hereof, to determine a Person to be an Adverse Person following such Person's
(alone or together with the Affiliates and Associates of such Person) becoming
the Beneficial Owner of 10% or more of the Common Stock then outstanding shall
not limit the directors' right at any time in the future to declare such Person
or, subject to Section 11(a)(ii)(B) hereof, any other Person to be an Adverse
Person. Further, nothing contained in this Agreement shall preclude a majority
of the directors who are not officers of the Company and who are not
representatives, nominees, Affiliates or Associates of a Person determined to be
an "Adverse Person" from determining to terminate such Person's status as an
"Adverse Person", but no such determination to terminate a Person's status as an
"Adverse Person" shall affect any Section 11(a)(ii) Event which shall have
occurred.
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
----------------------------------------------------------
Whenever an adjustment is made as provided in Section 11 and Section 13 hereof,
the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent, and with each transfer agent for the
Preferred Stock and the Common Stock, a copy of such certificate, and (c) mail a
brief summary thereof to each holder of a Rights Certificate (or, if prior to
the Distribution Date, to each holder of a certificate representing shares of
Common Stock) in accordance with Section 25 hereof. The Rights Agent shall be
fully protected in relying on any such certificate and on any adjustment therein
contained.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning
--------------------------------------------------------------
Power.
- -----
(a) In the event that, following the Stock Acquisition Date, directly
or indirectly, (x) the Company shall consolidate with, or merge with and into,
any other Person (other than a Subsidiary of the Company in a transaction which
complies with Section 11(o) hereof), and the Company shall not be the continuing
or surviving corporation of such consolidation or merger, (y) any Person (other
than a Subsidiary of the Company in a transaction which complies with Section
11(o) hereof) shall consolidate with, or merge with or into, the Company, and
the Company shall be the continuing or surviving corporation of such
consolidation or merger and, in connection with such consolidation or merger,
all or part of the outstanding shares of Common Stock shall be changed into or
exchanged for stock or other
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<PAGE>
securities of any other Person or cash or any other property, or (z) the Company
shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell
or otherwise transfer), in one transaction or a series of related transactions,
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 Person or Persons
(other than the Company or any Subsidiary of the Company in one or more
transactions each of which complies with Section 11(o) hereof), then, and in
each such case (except as may be contemplated by Section 13(d) hereof), proper
provision shall be made so that: (i) each holder of a Right, except as provided
in Section 7(e) hereof, shall thereafter have the right to receive, upon the
exercise thereof at the then current Purchase Price in accordance with the terms
of this Agreement, such number of validly authorized and issued, fully paid,
nonassessable and freely tradable shares of Common Stock of the Principal Party
(as such term is hereinafter defined), free and clear of any and all liens,
encumbrances, rights of first refusal or other adverse claims, as shall be equal
to the result obtained by (1) multiplying the then current Purchase Price by the
number of one one-thousandths of a share of Preferred Stock for which a Right is
exercisable immediately prior to the first occurrence of a Section 13 Event (or,
if a Section 11(a)(ii) Event has occurred prior to the first occurrence of a
Section 13 Event, multiplying the number of such one one-thousandths of a share
of Preferred Stock for which a Right was exercisable immediately prior to the
first occurrence of a Section 11(a)(ii) Event by the Purchase Price in effect
immediately prior to such first occurrence), and dividing that product (which,
following the first occurrence of a Section 13 Event, shall be referred to as
the "Purchase Price" for each Right and for all purposes of this Agreement) by
(2) 50% of the Current Market Price determined pursuant to Section 11(d)(i)
hereof) per share of the Common Stock of such Principal Party on the date of
consummation of such Section 13 Event; (ii) such Principal Party shall
thereafter be liable for, and shall assume, by virtue of such Section 13 Event,
all the obligations and duties of the Company pursuant to this Agreement; (iii)
the term "Company" shall thereafter be deemed to refer to such Principal Party,
it being specifically intended that the provisions of Section 11 hereof shall
apply only to such Principal Party following the first occurrence of a Section
13 Event; (iv) such Principal Party shall take such steps (including, but not
limited to, the reservation of a sufficient number of shares of its Common
Stock) in connection with the consummation of any such transaction as may be
necessary to assure that the provisions hereof shall thereafter be applicable,
as nearly as reasonably may be, in relation to its shares of Common Stock
thereafter deliverable upon the exercise of the Rights; and (v) the provisions
of Section 11(a)(ii) hereof shall be of no effect following the first occurrence
of any Section 13 Event.
(b) "Principal Party" shall mean
(i) in the case of any transaction described in clause (x) or
(y) of the first sentence of Section 13(a), the Person that is the issuer
of any securities into which shares of Common Stock of the Company are
converted in such merger or consolidation, and if no securities are so
issued, the Person that is the other party to such merger or consolidation;
and
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<PAGE>
(ii) in the case of any transaction described in clause (z) of
the first sentence of Section 13(a), the Person that is the party receiving
the greatest portion of the assets or earning power transferred pursuant to
such transaction or transactions;
provided, however, that in any such case, (1) if the Common Stock of such
-------- -------
Person is not at such time and has not been continuously over the preceding
twelve (12) month period registered under Section 12 of the Exchange Act,
and such Person is a direct or indirect Subsidiary of another Person the
Common Stock of which is and has been so registered, "Principal Party"
shall refer to such other Person; (2) in case such Person is a Subsidiary,
directly or indirectly, of more than one Person, the Common Stocks of two
or more of which are and have been so registered, "Principal Party" shall
refer to whichever of such Persons is the issuer of the Common Stock having
the greatest aggregate market value, and (3) in case such Person is owned,
directly or indirectly, by a joint venture formed by two or more Persons
that are not owned, directly or indirectly, by the same Person, the rules
set forth in (1) and (2) above shall apply to each of the Persons having an
interest in such joint venture as if such joint venture were a "Subsidiary"
of both or all of such joint venturers.
(c) The Company shall not consummate any such consolidation, merger,
sale or transfer unless the Principal Party shall have a sufficient number of
authorized shares of its Common Stock which have not been issued or reserved for
issuance to permit the exercise in full of the Rights in accordance with this
Section 13 and unless prior thereto the Company and such Principal Party shall
have executed and delivered to the Rights Agent a supplemental agreement
providing for the terms set forth in paragraphs (a) and (b) of this Section 13
and further providing that, as soon as practicable after the date of any
consolidation, merger or sale of assets mentioned in paragraph (a) of this
Section 13, the Principal Party will
(i) prepare and file a registration statement under the Act,
with respect to the Rights and the securities purchasable upon exercise of
the Rights on an appropriate form, and will use its best efforts to cause
such registration statement to (A) become effective as soon as practicable
after such filing and (B) remain effective (with a prospectus at all times
meeting the requirements of the Act) until the Expiration Date; and
(ii) use its best efforts to qualify or register the Rights and
the securities purchasable upon exercise of the Rights under all applicable
"blue sky" or state securities laws; and
(iii) will deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates which comply
in all respects with the requirements for registration on Form 10 under the
Exchange Act.
The provisions of this Section 13 shall similarly apply to successive
mergers or consolidations or sales or other transfers. In the event that a
Section 13 Event shall occur at any time after the occurrence of a Section
11(a)(ii) Event, the Rights which have not theretofore been exercised shall
thereafter become exercisable in the manner described in Section 13(a).
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<PAGE>
(d) Notwithstanding anything in this Agreement to the contrary,
Section 13 shall not be applicable to a transaction described in subparagraphs
(x) and (y) of Section 13(a) if (i) such transaction is consummated with a
Person or Persons who acquired shares of Common Stock pursuant to a tender offer
or exchange offer for all outstanding shares of Common Stock which complies with
the provisions of Section 11(a)(ii)(A) hereof (or a wholly owned subsidiary of
any such Person or Persons), (ii) the price per share of Common Stock offered in
such transaction is not less than the price per share of Common Stock paid to
all holders of shares of Common Stock whose shares were purchased pursuant to
such tender offer or exchange offer and (iii) the form of consideration being
offered to the remaining holders of shares of Common Stock pursuant to such
transaction is the same as the form of consideration paid pursuant to such
tender offer or exchange offer. Upon consummation of any such transaction
contemplated by this Section 13(d), all Rights hereunder shall expire.
Section 14. Fractional Rights and Fractional Shares.
---------------------------------------
(a) The Company may but shall not be required to issue fractions of
Rights, except prior to the Distribution Date as provided in Section 11(p)
hereof, or to distribute Rights Certificates which evidence fractional Rights.
If the Company shall determine not to issue fractional rights, then in lieu of
such fractional Rights, unless prohibited by the terms of any agreement to which
the Company is a party on the date of this Agreement (or, if the Board of
Directors so determines, after the date of this Agreement), there shall be paid
to the registered holders of the Rights 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, and if the Company
is prohibited from paying cash in lieu of fractional Rights then the Company
shall round up the fractional Rights to the next highest number of whole Rights
so that Rights Certificates represent only whole numbers of Rights. For purposes
of this Section 14(a), the current market value of a whole Right shall be the
closing price of such Right for the Trading Day immediately prior to the date on
which such fractional Rights would have been otherwise issuable. The closing
price of the Rights 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 the Rights are not so listed, traded or quoted, and no such market
maker is then making a market in the Rights, the current market value of a Right
on such date shall mean the fair value of the Right on such date as determined
in
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good faith by the Board of Directors of the Company, whose determination shall
be described in a statement filed with the Rights Agent and shall be conclusive
for all purposes.
(b) The Company shall, unless the Board of Directors determines
otherwise, issue fractions of shares of Preferred Stock upon exercise of the
Rights or distribute certificates which evidence fractional shares of Preferred
Stock. In the event the Company determines not to issue fractional shares of
Preferred Stock, the Company shall pay to the registered holders of Rights
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 a share of
Preferred Stock, or if the Company is prohibited from paying cash in lieu of
fractional shares, then such fractional shares shall be aggregated and
distributed to the Rights Agent to be sold in the open market and the proceeds
thereof distributed to the appropriate holders of Rights. For purposes of this
Section 14(b), the current market value of Preferred Stock shall be the closing
price of a share of Preferred Stock (as determined pursuant to Section 11(d)(ii)
hereof) for the Trading Day immediately prior to the date of such exercise.
(c) Following the occurrence of a Triggering Event, the Company
shall, unless the Board of Directors determines otherwise, issue fractions of
shares of Common Stock upon exercise of the Rights or distribute certificates
which evidence fractional shares of Common Stock (or other capital stock, if
applicable). In the event the Company determines not to issue fractional shares
of Common Stock (or other capital stock, if applicable), the Company shall pay
to the registered holders of Rights 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 a share of Common Stock (or other capital stock, if
applicable), or if the Company is prohibited from paying cash in lieu of
fractional shares, then such fractional shares shall be aggregated and
distributed to the Rights Agent to be sold in the open market and the proceeds
thereof distributed to the appropriate holders of Rights. For purposes of this
Section 14(c), the current market value of Common Stock (or other capital stock,
if applicable) shall be the closing price of a share of Common Stock (or other
capital stock, if applicable) (as determined pursuant to Section 11(d)(ii)
hereof for the Trading Day immediately prior to the date of such exercise.
(d) The holder of a Right by the acceptance of the Rights expressly
waives his right to receive any fractional Rights or any fractional shares upon
exercise of a Right, except as permitted by this Section 14.
Section 15. Rights of Action. All rights of action in respect of this
----------------
Agreement are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock); and any registered holder of any Rights Certificate (or, prior to
the Distribution Date, of the Common Stock), without the consent of the Rights
Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of the Common Stock), 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 Rights Certificate in the manner provided
in such Rights Certificate and in this Agreement. Without limiting the
foregoing or any remedies available to the holders of Rights, it is specifically
acknowledged that
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<PAGE>
the holders of Rights would not have an adequate remedy at law for any breach of
this Agreement and shall be entitled to specific performance of the obligations
hereunder and injunctive relief against actual or threatened violations of the
obligations hereunder of any Person subject to this Agreement. Holders of Rights
shall be entitled to recover the reasonable costs and expenses, including
attorneys' fees, incurred by them in any action to enforce the provisions of
this Agreement.
Section 16. Agreement of Rights Holders. Every holder of a Right by
---------------------------
accepting the same consents and agrees with the Company and the Rights Agent and
with every other holder of a right that:
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of Common Stock;
(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office or offices of the Rights Agent designated for such
purposes, duly endorsed or accompanied by a proper instrument of transfer and
with the appropriate forms and certificates fully executed;
(c) subject to Section 6(a) and Section 7(f) hereof, the Company and
the Rights Agent may deem and treat the person in whose name a Rights
Certificate (or, prior to the Distribution Date, the associated Common Stock
certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the
Rights Certificates or the associated Common Stock certificate made by anyone
other than the Company or the Rights Agent) for all purposes whatsoever, and
neither the Company nor the Rights Agent, subject to the last sentence of
Section 7(e) hereof, shall be required to 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 holder
of a Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, the Company shall use its
-------- -------
best efforts to have any such order, decree or ruling lifted or otherwise
overturned as soon as possible.
SECTION 17. Rights Certificate Holder Not Deemed a Stockholder. No holder,
--------------------------------------------------
as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the number of one one-
thousandths of a share of Preferred Stock 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 Rights Certificate be
construed to confer upon the holder of any Rights 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
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<PAGE>
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 24 hereof), or to receive dividends
or subscription rights, or otherwise, until the Right or Rights evidenced by
such Rights Certificate shall have been exercised in accordance with the
provisions hereof.
Section 18. Concerning the Rights Agent.
---------------------------
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
disbursements and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability, or expense, incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection with the acceptance
and administration of this Agreement, including the costs and expenses of
defending against any claim of liability in the premises.
(b) The Rights Agent shall be protected and shall incur no liability
for or in respect of any action taken, suffered or omitted by it in connection
with its administration of this Agreement in reliance upon any Rights
Certificate or certificate for Preferred Stock, Common Stock or for other
securities of the Company, instrument or assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement, or other paper or document believed by it to be genuine
and to be signed, executed and, where necessary, verified or acknowledged, by
the proper Person or Persons.
Section 19. Merger or Consolidation or Change of Name of Rights Agent.
---------------------------------------------------------
(a) Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Rights Agent
or any Successor Rights Agent shall be a party, or any corporation succeeding to
the corporate trust business of the Rights Agent or any successor Rights Agent,
shall be the successor to the Rights Agent under this Agreement without the
execution or filing of any paper or any further act on the part of any of the
parties hereto; provided, however, that such corporation would be eligible for
-------- -------
appointment as a successor Rights Agent under the provisions of Section 21
hereof. In case at the time such successor Rights Agent shall succeed to the
agency created by this Agreement, any of the Rights Certificates shall have been
countersigned but not delivered, any such successor Rights Agent may adopt the
countersignature of a predecessor Rights Agent and deliver such Rights
Certificates so countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor or in
the name of the successor Rights Agent; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.
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<PAGE>
(b) In case at any time the name of the Rights Agent shall be changed
and at such time any of the Rights Certificates shall have been countersigned
but not delivered, the Rights Agent may adopt the countersignature under its
prior name and deliver Rights Certificates so countersigned; and in case at that
time any of the Rights Certificates shall not have been countersigned, the
Rights Agent may countersign such Rights Certificates either in its prior name
or in its changed name; and in all such cases such Rights Certificates shall
have the full force provided in the Rights 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 Rights 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
(including, without limitation, the identity of any Acquiring Person and the
determination of "Current Market Price") be proved or established by the Company
prior to taking or suffering any action hereunder, such fact or matter (unless
other evidence in respect thereof is herein specifically prescribed) may be
deemed to be conclusively proved and established by a certificate signed by the
Chairman of the Board, the President, any Vice President, the Treasurer, any
Assistant Treasurer, the Secretary or any Assistant Secretary of the Company and
delivered to the Rights Agent; and such certificate shall be full authorization
to the Rights Agent for any action taken or suffered in good faith by it under
the provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its own
negligence, bad faith and 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 Rights
Certificates or be required to verify the same (except as to its
countersignature on such Rights Certificates), 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 Rights 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 Rights Certificate; nor shall it
be responsible for any adjustment required under the provisions of Section 11 or
Section 13 hereof or responsible for the manner, method or amount of any such
adjustment or the ascertaining of the existence of facts that would require any
such adjustment (except with respect to the exercise of Rights evidenced by
Rights Certificates after actual notice of any such adjustment); nor shall it by
any act hereunder be deemed to make any representation or warranty as to the
authorization or
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<PAGE>
reservation of any shares of Common Stock or Preferred Stock to be issued
pursuant to this Agreement or any Rights Certificate or as to whether any shares
of Common Stock or Preferred Stock will, when so 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 the
Chairman of the Board, the President, any Vice President, the Secretary, any
Assistant Secretary, the Treasurer or any Assistant 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 to be taken
by it in good faith in accordance with instructions of any such officer.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from acting
in any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct; provided, however, reasonable care was exercised in the
selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
there shall be reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.
(k) If, with respect to any Rights Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise of transfer without first consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any successor
----------------------
Rights Agent may resign and be discharged from its duties under this Agreement
upon thirty (30) days' notice in writing mailed to the Company and to each
transfer agent of the Common Stock and Preferred Stock, by registered or
certified mail, and to the holders of the Rights Certificates by
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<PAGE>
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 Stock and Preferred Stock, by registered or certified mail, and to the
holders of the Rights Certificates by first-class mail. If the Rights Agent
shall resign or be removed or shall otherwise become incapable of acting, the
Company shall appoint a successor to the Rights Agent. If the Company shall fail
to make such appointment within a period of 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
Rights Certificate (who shall, with such notice, submit his Rights Certificate
for inspection by the Company), then any registered holder of any Rights
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 any state of the United States so long
as such corporation has an office in the city of New York, New York, is in good
standing, and is qualified to act as a transfer agent for equity securities
registered on the New York Stock Exchange or other securities exchange on which
equity securities of the Company are then registered. After appointment, the
successor Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and transfer
to the successor Rights Agent any property at the time held by it hereunder, and
execute and deliver any further assurance, conveyance, act or deed necessary for
the purpose. Not later than the effective date of any such appointment of a
successor Rights Agent, the Company shall file notice thereof in writing with
the predecessor Rights Agent and each transfer agent of the Common Stock and the
Preferred Stock, and shall mail a notice thereof in writing to the registered
holders of the Rights 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 Rights Certificates. Notwithstanding any of
-----------------------------------
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Rights 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 or the number or kind or class of shares or other
securities or property purchasable under the Rights Certificates made in
accordance with the provisions of this Agreement. In addition, in connection
with the issuance or sale by the Company of shares of Common Stock following the
Distribution Date and prior to the redemption or expiration of the Rights, the
Company (a) shall, with respect to shares of Common Stock so issued or sold
pursuant to the exercise of stock options or under any employee plan or
arrangement, granted or awarded as of the Distribution Date, or upon the
exercise, conversion or exchange of securities hereafter issued by the Company,
and (b) may, in any other case, if deemed necessary or appropriate by the Board
of Directors of the Company, issue Rights Certificates representing the
appropriate number of Rights in connection with such issuance or sale; provided,
--------
however, that (i) no such Rights Certificate shall be issued if, and to the
- -------
extent that, the Company shall be advised by counsel that such issuance would
create a significant risk of material adverse tax consequences to the Company or
the Person to whom such Rights
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<PAGE>
Certificate would be issued, and (ii) no such Rights Certificate shall be issued
if, and to the extent that, appropriate adjustment shall otherwise have been
made in lieu of the issuance thereof.
Section 23. Redemption and Termination.
--------------------------
(a) The Board of Directors of the Company may, at its option, redeem
all but not less than all the then outstanding Rights at a redemption price of
$.001 per Right, as such amount may be appropriately adjusted to reflect any
stock split, stock dividend or similar transaction occurring after the date
hereof (such redemption price being hereinafter referred to as the "Redemption
Price"), at any time on or before the earlier of (i) the close of business on
the tenth business day following the Stock Acquisition Date (or, if the Stock
Acquisition Date shall have occurred prior to the Record Date, the close of
business on the tenth business day following the Record Date) or such later date
or dates as the Board of Directors, or any duly authorized committee thereof,
may designate; provided, however, that if such later date or dates are
-------- -------
designated, such designation shall be made on or prior to the date prior to
which redemption would otherwise be required, or (ii) the Final Expiration Date.
Notwithstanding the foregoing, the Board of Directors of the Company may not
redeem any Rights while any Person continues to retain the status of an Adverse
Person pursuant to Section 11(a)(ii)(B). The Company may, at its option, pay the
Redemption Price in cash, shares of Common Stock (based on the "Current Market
Price", as defined in Section 11(d)(i) hereof, of the Common Stock at the time
of redemption) or any other form of consideration deemed appropriate by the
Board of Directors and which does not violate the terms of any agreement to
which the Company is a party on the date of this Rights Agreement (or, if the
Board of Directors so determines, after the date of this Agreement).
Furthermore, if the Company shall determine to pay the redemption price in
Common Stock it may but shall not be required to issue fractional shares and may
aggregate fractional shares of Common Stock that would otherwise be due to
holders of Rights and distribute these shares to the Rights Agent to be sold in
the open market and the proceeds thereof shall be distributed to the appropriate
holders of Rights.
(b) Notwithstanding anything contained in this Agreement to the
contrary, the Rights shall not be exercisable after the first occurrence of a
Section 11(a)(ii) Event or Section 13 Event until such time as the Company's
right of redemption hereunder, as extended (if applicable), has expired.
(c) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights, evidence of which shall have been
filed with the Rights Agent, and without any further action and without any
notice, the right to exercise the Rights will terminate and the only right
thereafter of the holders of Rights shall be to receive the Redemption Price for
each Right so held. Promptly after the action of the Board of Directors ordering
the redemption of the Rights, the Company shall give notice of such redemption
to the Rights Agent and the holders of the then outstanding Rights by mailing
such notice to all such holders at each holder's last address as it appears upon
the registry books of the Rights Agent or, prior to the Distribution Date, on
the registry books of the Transfer Agent for the Common Stock. Such notice shall
state the method by which the payment of the Redemption Price will be effected.
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<PAGE>
(d) (i) Subject to the limitations of applicable law and to any
restrictions set forth in any agreements to which the Company is a
party on the date of this Rights Agreement (or, if the Board of
Directors so determines, after the date of this Agreement), the Board
of Directors of the Company may, at its option, at any time after the
occurrence of a Section 11(a)(ii) Event, exchange all or part of the
then outstanding and exercisable Rights (which shall not include
Rights that have become void pursuant to the provisions of Section
7(e) hereof) at an exchange ratio of (1) one share of Common Stock of
the Company for each Right so exchanged, adjusted as appropriate to
reflect any stock split, stock combination, stock dividend or similar
transaction occurring after the date hereof (such share of Common
Stock issuable in exchange for one Right being referred to herein as
an "Exchange Share"), or (2) Substitute Consideration, as that term is
defined below. The Board of Directors may determine whether to deliver
Exchange Shares or Substitute Consideration. Notwithstanding the
foregoing, the Board of Directors shall not be empowered to effect
such exchange at any time after any Acquiring Person or Adverse Person
(together with all Affiliates and Associates of such Acquiring Person
or Adverse Person) becomes the Beneficial Owner of shares of Common
Stock entitled to cast 50% or more of the aggregate number of votes
entitled to be cast by all shares of Common Stock then outstanding.
In the event that the Board of Directors shall determine to
deliver Substitute Consideration in exchange for Rights, the Company
shall (1) determine the value of the Exchange Shares (the "Exchange
Value"), and (2) with respect to each Right to be exchanged, make
adequate provision to substitute for the Exchange Share the following
(the "Substitute Consideration"): (v) cash, (w) common stock
equivalents (as that term is defined in Section 11(a)(iii) hereof),
(x) debt securities of the Company, (y) other assets, or (z) any
combination of the foregoing, having an aggregate value equal to the
Exchange Value, where such aggregate value has been determined by the
Board of Directors of the Company based upon the advice of a
nationally recognized investment banking firm selected by the Board of
Directors of the Company. For purposes of this Section 23(d), the
value of a share of Common Stock shall be the Current Market Price (as
determined pursuant to Section 11(d) hereof) per share of Common Stock
on the Section 11(a)(ii) Trigger Date; and the value of any common
stock equivalent shall be deemed to have the same value as the Common
Stock on such date.
(ii) Immediately upon the action of the Board of Directors of the
Company ordering the exchange of any Rights pursuant to this Section
23(d) 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 the Exchange Share or
Substitute Consideration for each Right exchanged by such holder.
Promptly after the action of the Board of Directors of the Company
authorizing any such exchange, the Company shall give notice of such
exchange to the Rights Agent and to the holders of the Rights by
mailing such notice to all such holders at each holder's last address
as it appears upon the
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<PAGE>
registry books of the Rights Agent or, prior to the Distribution Date,
on the registry books of the Transfer Agent for the Common Stock;
provided, however, that the failure to give, or any defect in, such
-------- -------
notice shall not affect the validity of such exchange. Each such
notice of exchange will state the method by which the exchange 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 7(e)
hereof) held by each holder of Rights.
(iii) In the event that there shall not be sufficient shares of
Common Stock or common stock equivalents issued but not outstanding or
authorized but unissued to permit any exchange of Rights as
contemplated by the Board of Directors in accordance with this Section
23(d), the Company may take all such action as may be necessary or
appropriate to authorize additional shares of Common Stock or common
stock equivalents for issuance upon exchange of the Rights.
(iv) Unless the Board of Directors determines otherwise, the
Company shall be required to issue fractions of shares of Common Stock
or to distribute certificates which evidence fractional shares of
Common Stock. In lieu of such fractional shares of Common Stock, the
Company shall pay to the registered holders of the Right Certificates
with regard to which such fractional shares of Common Stock would
otherwise be issuable an amount in cash equal to the same fraction of
the current market value of a whole share of Common Stock.
Section 24. Notice of Certain Events.
------------------------
(a) In case the Company shall propose, at any time after the
Distribution Date, (i) to pay any dividend payable in stock of any class to the
holders of Preferred Stock or to make any other distribution to the holders of
Preferred Stock (other than a regular quarterly cash dividend out of earnings or
retained earnings of the Company), or (ii) to offer to the holders of Preferred
Stock rights or warrants to subscribe for or to purchase any additional shares
of Preferred Stock or shares of stock of any class or any other securities,
rights or options, or (iii) to effect any reclassification of its Preferred
Stock (other than a reclassification involving only the subdivision of
outstanding shares of Preferred Stock), or (iv) to effect any consolidation or
merger into or with any other Person (other than a Subsidiary of the Company in
a transaction which complies with Section 11(o) hereof), 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 transaction or a series of related transactions,
of 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 (other than the
Company and/or any of its Subsidiaries in one or more transactions each of which
complies with Section 11(o) hereof), or (v) to effect the liquidation,
dissolution or winding up of the Company, then, in each such case, the Company
shall give to each holder of a Rights Certificate, to the extent feasible and in
accordance with Section 25 hereof, a notice of such proposed action, which shall
specify
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<PAGE>
the record date for the purposes of such stock dividend, distribution of rights
or warrants, or the date on which such reclassification, consolidation, merger,
sale, transfer, liquidation, dissolution, or winding up is to take place and the
date of participation therein by the holders of the shares of Preferred Stock,
if any such date is to be fixed, and such notice shall be so given in the case
of any action covered by clause (i) or (ii) above at least twenty (20) days
prior to the record date for determining holders of the shares of Preferred
Stock for purposes of such action, and in the case of any such other action, at
least twenty (20) days prior to the date of the taking of such proposed action
or the date of participation therein by the holders of the shares of Preferred
Stock whichever shall be the earlier.
(b) In case any Section 11(a)(ii) Event hereof shall occur, then (i)
the Company shall as soon as practicable thereafter give to each holder of a
Rights Certificate, to the extent feasible and in accordance with Section 25
hereof, a notice of the occurrence of such event, which shall specify the event
and the consequences of the event to holders of Rights under Section 11(a)(ii)
hereof, and (ii) all references in the preceding paragraph to Preferred Stock
shall be deemed thereafter to refer to Common Stock and/or, if appropriate,
other securities.
Section 25. Notices. Notices or demands authorized by this Agreement to
-------
be given or made by the Rights Agent or by the holder of any Rights Certificate
to or on the Company shall be sufficiently given or made if delivered by hand or
by messenger services, or if sent by first-class mail, postage prepaid,
addressed (until another address is filed in writing with the Rights Agent), as
follows:
Shared Medical Systems Corporation
51 Valley Stream Parkway
Malvern, Pennsylvania 19355
Attention: Secretary
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
Rights Certificate to or on the Rights Agent shall be sufficiently given or made
if delivered by hand or by messenger service, or if sent by first-class mail,
postage prepaid, addressed (until another address is filed in writing with the
Company) as follows:
ChaseMellon Shareholder Services, L.L.C.
44 Wall Street
New York, New York 10005
Attention: Robert F. Kavanagh
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Common Stock) shall be sufficiently given or made if delivered by hand
or by messenger service, or 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
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<PAGE>
Company. Any notice which is given to the holder of any Rights Certificate (or,
if prior to the Distribution Date, to the holder of certificates representing
shares of Common Stock) pursuant to this Agreement in the manner provided for
such notice shall be deemed given, whether or not such notice is actually
received.
Section 26. Supplements and Amendments. Prior to the Distribution Date
--------------------------
and subject to the penultimate sentence of this Section 26, 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 certificates
representing shares of Common Stock. From and after the Distribution Date and
subject to the penultimate sentence of this Section 26, 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 Certificates in order
(i) to cure any ambiguity, (ii) to correct or supplement any provision contained
herein which may be defective or inconsistent with any other provisions herein,
(iii) to shorten or lengthen any time period hereunder which lengthening or
shortening, following the first occurrence of an event set forth in clause (x)
or (y) of the second proviso to Section 23(a) hereof, shall be effective only if
approved by the Board of 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 Certificates (other than an Acquiring Person, an Adverse Person, or an
Affiliate or Associate of an Acquiring Person or Adverse Person); provided,
--------
however, this Agreement may not be supplemented or amended to lengthen, pursuant
- -------
to clause (iii) of this sentence, (A) a time period relating to when the Rights
may be redeemed at such time as the Rights already have ceased to be 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 (other than an Acquiring Person, an Adverse Person or an
Affiliate or Associate of an Acquiring Person or Adverse Person). Without
limiting, but subject to, the foregoing, the Company may at any time before any
Person has become an Acquiring Person amend this Agreement to change the
threshold or the method for determining whether a Person is or has become an
Acquiring Person. Upon the delivery of a certificate from an appropriate
officer of the Company which states that the proposed supplement or amendment is
in compliance with the terms of this Section 26, the Rights Agent shall execute
such supplement or amendment. Notwithstanding anything contained in this
Agreement to the contrary, no supplement or amendment shall be made which
changes the Redemption Price, the Final Expiration Date, the Purchase Price or
the number of one one-thousandths of a share of Preferred Stock for which a
Right is exercisable. Prior to the Distribution Date, the interests of the
holders of Rights shall be deemed coincident with the interests of the holders
of Common Stock.
Section 27. 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
including, without limitation, any corporation or other entity into which the
Company may be merged.
Section 28. Determinations and Actions by the Board of Directors, Etc.
---------------------------------------------------------
For all purposes of this Agreement, any calculation of the number of shares of
Common Stock outstanding at any particular time, including for purposes of
determining the particular
-39-
<PAGE>
percentage of such outstanding shares of Common Stock of which any Person is the
Beneficial Owner, shall be made in accordance with the last sentence of Rule
13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act as in
effect on the date hereof. The Board of Directors of the Company (with, where
specifically provided for herein, the concurrence of the disinterested
Directors) shall have the exclusive power and authority to administer this
Agreement and to exercise all rights and powers specifically granted to the
Board (with, where specifically provided for herein, the concurrence of the
disinterested Directors) or to the Company, or as may be necessary or advisable
in the administration of this Agreement, including without limitation, the right
and power to (i) interpret the provisions of this Agreement, and (ii) make all
determinations deemed necessary or advisable for the administration of this
Agreement (including, without limitation, a determination to redeem or not
redeem the Rights or to amend the Agreement). All such actions, calculations,
interpretations and determinations (including, for purposes of clause (y) below,
all omissions with respect to the foregoing) which are done or made by the Board
(with, where specifically provided for herein, the concurrence of the
disinterested Directors) in good faith, shall (x) be final, conclusive and
binding on the Company, the Rights Agent, the holders of the Rights and all
other parties, and (y) not subject the Board of Directors or the disinterested
Directors to any liability to the holders of the Rights. Further, nothing
contained in this Agreement shall be deemed to impose on the Board of Directors
or the Company any obligation to approve a tender offer, merger, acquisition or
other similar proposal by or from a Person even though the terms of such
proposal may be fair to stockholders of the Company.
Section 29. Benefits of this Agreement. Nothing in this Agreement shall
--------------------------
be construed to give to any Person other than the Company, the Rights Agent and
the registered holders of the Rights Certificates (and, prior to the
Distribution Date, registered holders of the Common Stock) any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the Distribution
Date, registered holders of the Common Stock).
Section 30. Severability. If any term, provision, covenant or
------------
restriction of this Agreement is held by a court or other authority of competent
jurisdiction 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;
provided, however, that notwithstanding anything in this Agreement to the
- -------- -------
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board of
Directors of the Company determines in its good faith judgment that severing the
invalid language from this Agreement would adversely affect the purpose or
effect of this Agreement, the right of redemption set forth in Section 23 hereof
shall be extended, or if expired shall be reinstated, and shall not expire until
the close of business on the tenth day following the date of such determination
by the Board of Directors. Without limiting the foregoing, if any provision
requiring that a determination be made by less than the entire Board of
Directors (or at a time or with the concurrence of a group of directors
consisting of less than the entire Board) is held by a court or other authority
of competent jurisdiction to be invalid, void or unenforceable, such
determination shall then be made by the Board in good faith
-40-
<PAGE>
in accordance with applicable law and the Company's certificate or articles of
incorporation and by-laws.
Section 31. Governing Law. This Agreement, each Right and each Rights
-------------
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the jurisdiction of incorporation of the Company, as the same may change
from time to time, and for all purposes shall be governed by and construed in
accordance with the laws of such jurisdiction applicable to contracts made and
to be performed entirely within such jurisdiction.
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. Table of Contents; Descriptive Headings. The Table of
---------------------------------------
Contents and the 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 by their duly authorized officers as of the day and year first
above written.
Attest: SHARED MEDICAL SYSTEMS CORPORATION
By /s/ Bonnie L. Shuman By /s/ Terrence W. Kyle
------------------------------ -----------------------------------------
Name: Bonnie L. Shuman Name: Terrence W. Kyle
Title: Assistant Secretary Title: Senior Vice President, Chief
Financial Officer, Treasurer,
and Assistant Secretary
Attest: CHASEMELLON SHAREHOLDER
SERVICES, L.L.C.
By /s/ Donald P. Messmer By /s/ Robert Kavanagh
______________________________ __________________________________________
Name: Donald P. Messmer Name: Robert Kavanagh
Title: Assistant Vice President Title: Vice President
-41-
<PAGE>
Exhibit A
---------
SHARED MEDICAL SYSTEMS CORPORATION
DESIGNATION OF POWERS, PREFERENCES, RIGHTS AND
QUALIFICATIONS OF SERIES A JUNIOR PARTICIPATING
PREFERRED STOCK
Section 1. Designation and Amount. The shares of stock of such series
----------------------
shall be designated as "Series A Junior Participating Preferred Stock" and the
number of shares of stock constituting such series shall be 60,000.
Section 2. Dividends and Distributions.
---------------------------
(A) Subject to the prior and superior rights of the holders of
any shares of any series of Preferred Stock ranking prior and superior to the
shares of Series A Junior Participating Preferred Stock with respect to
dividends, the holders of shares of Series A Junior Participating Preferred
Stock which are issued and outstanding shall be entitled to receive, when, as
and if declared by the Board of Directors out of funds legally available for the
purpose, dividends in an amount per share (rounded to the nearest cent) subject
to the provision for adjustment hereinafter set forth, equal to 1,000 times the
per share amount of all cash dividends (payable in cash), and 1,000 times the
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 shares of the Common Stock, $.01 par value, of the
Company (the "Common Stock"). In the event the Company shall at any time after
May 1, 1991 (the "Rights Declaration Date") (i) declare any dividend on Common
Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common
Stock, or (iii) combine the outstanding Common Stock into a smaller number of
shares, then in each such case the amount of cash dividends or other
distributions to which holders of shares of Series A Junior Participating
Preferred Stock were entitled pursuant to the preceding sentence immediately
prior to such event 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 Company shall declare a dividend or distribution on the
issued and outstanding shares of Series A Junior Participating Preferred Stock
as provided in paragraph (A) above immediately after it declares a dividend or
distribution on the Common Stock (other than a dividend payable in shares of
Common Stock).
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Junior Participating Preferred Stock from the
date of declaration of any dividend on the Common Stock. Accrued but unpaid
dividends shall not bear interest. Dividends paid on the shares of Series A
Junior Participating Preferred Stock in an amount less than the total amount of
A-1
<PAGE>
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 Junior Participating Preferred Stock entitled
to receive payment of a dividend or distribution declared thereon, which record
date shall be no more than 30 days prior to the date fixed for the payment
thereof.
Section 3. Voting Rights. The holders of shares of Series A Junior
-------------
Participating Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set
forth, each share of Series A Junior Participating Preferred Stock shall entitle
the holder thereof to 1,000 votes on all matters submitted to a vote of the
stockholders of the Company. In the event the Company shall at any time after
the Rights Declaration Date (i) declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock or (iii)
combine the outstanding Common Stock into a smaller number of shares, then in
each such case the number of votes per share to which holders of shares of
Series A Junior Participating 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 or required by law, the
holders of shares of Series A Junior Participating Preferred Stock and the
holders of shares of Common Stock shall vote together as one class on all
matters submitted to a vote of the stockholders of the Company.
(C) (i) If at any time dividends on any Series A Junior
Participating Preferred Stock shall be in arrears for a period of two (2)
full fiscal quarters, the occurrence of such contingency shall mark the
beginning of a period (herein called a "default period") which shall extend
until such time as all accrued and unpaid dividends then outstanding shall
have been declared and paid or set apart for payment. During each default
period, all holders of Preferred Stock which does not rank senior to the
Series A Junior Participating Preferred Stock (including the Series A
Junior Participating Preferred Stock) with dividends in arrears thereon for
a period of two (2) full fiscal quarters, voting as a class, irrespective
of series, shall have the right to elect one (1) Director.
(ii) During any default period, such voting right of the
holders of Series A Junior Participating Preferred Stock may be
exercised initially at a special meeting called pursuant to
subparagraph (iii) of this Section 3(C) or at any annual meeting of
stockholders, and thereafter at annual meetings of stockholders,
provided that neither such voting right nor the right of the holders
of any other series of Preferred Stock, if any, to increase, in
certain cases, the authorized number of Directors shall be exercised
unless the holders of ten percent (10%) in number of shares of
Preferred Stock outstanding shall be present in person or by proxy.
The absence of a quorum of the holders of Common Stock shall not
affect
A-2
<PAGE>
the exercise by the holders of Preferred Stock of such voting right.
At any meeting at which the holders of Preferred Stock shall exercise
such voting right initially during an existing default period, they
shall have the right, voting as a class, to elect Directors to fill
such vacancies, if any, in the Board of Directors as may then exist up
to one (1) Director or, if such right is exercised at an annual
meeting, to elect one (1) Director. If the number which may be so
elected at any special meeting does not amount to the required number,
the holders of the Preferred Stock shall have the right to make such
increase in the number of Directors as shall be necessary to permit
the election by them of the required number. After the holders of the
Preferred Stock shall have exercised their right to elect Directors in
any default period and during the continuance of such period, the
number of Directors shall not be increased or decreased except by vote
of the holders of Preferred Stock as herein provided or pursuant to
the rights of any equity securities ranking senior to or pari passu
---- -----
with the Series A Junior Participating Preferred Stock.
(iii) Unless the holders of Preferred Stock shall, during
an existing default period, have previously exercised their right to
elect Directors, the Board of Directors may order, or any stockholder
or stockholders owning in the aggregate not less than ten percent
(10%) of the total number of shares of Preferred Stock outstanding,
irrespective of series, may request, the calling of a special meeting
of the holders of Preferred Stock, which meeting shall thereupon be
called by the Chairman, the President, a Vice President or the
Secretary of the Company. Notice of such meeting and of any annual
meeting at which holders of Preferred Stock are entitled to vote
pursuant to this paragraph (C) (iii) shall be given to each holder of
record of Preferred Stock by mailing a copy of such notice to him at
his last address as the same appears on the books of the Company. Such
meeting shall be called for a time not earlier than 20 days and not
later than 60 days after such order or request or in default of the
calling of such meeting within 60 days after such order or request,
such meeting may be called on similar notice by any stockholder or
stockholders owning in the aggregate not less than ten percent (10%)
of the total number of shares of Preferred Stock outstanding.
Notwithstanding the provisions of this paragraph (C)(iii), no such
special meeting shall be called during the period within 60 days
immediately preceding the date fixed for the next annual meeting of
the stockholders.
(iv) In any default period, the holders of Common Stock
and of Series A Junior Participating Preferred Stock, and other
classes of stock of the Company if applicable, shall continue to be
entitled to elect the whole number of Directors until the holders of
Preferred Stock shall have exercised their right to elect one (1)
Director voting as a class, after the exercise of which right (x) the
Director so elected by the holders of Preferred Stock shall continue
in office until his successor shall have been elected by such holders
or until the expiration of the default period, and (y) any vacancy in
the Board of Directors may (except as provided in paragraph (C) (ii)
of this Section 3 or in the articles or certificate of
A-3
<PAGE>
incorporation of the Company) be filled by vote of a majority of the
remaining Directors theretofore elected by the holders of the class of
stock which elected the Director whose office shall have become
vacant. References in this paragraph (C) to Directors elected by the
holders of a particular class of stock shall include Directors elected
by such Directors to fill vacancies as provided in clause (y) of the
foregoing sentence.
(v) Immediately upon the expiration of a default period, (x) the
right of the holders of Preferred Stock as a class to elect a Director
shall cease, (y) the term of any Director elected by the holders of
Preferred Stock as a class shall terminate, and (z) the number of
Directors shall be such number as may be provided for in the articles
or certificate of incorporation or by-laws irrespective of any
increase made pursuant to the provisions of paragraph (C)(ii) of this
Section 3 (such number being subject, however, to change thereafter in
any manner provided by law or in the articles or certificate of
incorporation or by-laws). Any vacancies in the Board of Directors
effected by the provisions of clauses (y) and (z) in the preceding
sentence may be filled by a majority of the remaining Directors.
(D) Except as set forth herein or as required by law, holders of
Series A Junior Participating Preferred Stock shall have no special voting
rights and their consent shall not be required (except to the extent they are
entitled to vote with holders of Common Stock as set forth herein) for taking
any corporate action.
Section 4. Certain Restrictions.
--------------------
(A) Whenever any dividends or distributions payable on the Series A
Junior Participating Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Series A Junior Participating Preferred Stock
outstanding shall have been paid in full, the Company shall not
(i) declare or pay dividends on, make any other distributions
on, or redeem or purchase or otherwise acquire for consideration any
shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Junior
Participating Preferred Stock, provided, that the Company may at any
time redeem, purchase or otherwise acquire shares of any such junior
stock in exchange for any stock of the Company ranking no higher
(either as to dividends or rights upon liquidation, dissolution or
winding up) than such junior stock;
(ii) declare or pay dividends on or make any other distributions
on any shares of stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with Series A Junior
Participating Preferred Stock, except dividends paid ratably on the
Series A Junior Participating Preferred Stock
A-4
<PAGE>
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 on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series A Junior
Participating Preferred Stock, provided that the Company may at any
time redeem, purchase or otherwise acquire shares of any such parity
stock in exchange for shares of any stock of the Company ranking
junior (either as to dividends or upon dissolution, liquidation or
winding up) to the Series A Junior Participating Preferred Stock or as
provided in clause (iv) below;
(iv) purchase or otherwise acquire for consideration any shares
of Series A Junior Participating Preferred Stock, or any shares of
stock ranking on a parity with the Series A Junior Participating
Preferred Stock, except in accordance with a purchase offer made in
writing or by publication (as determined by the Board of Directors) to
all holders of 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 Company shall not permit any subsidiary of the Company to
purchase or otherwise acquire for consideration any shares of stock of the
Company unless the Company could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series A Junior Participating
-----------------
Preferred Stock purchased or otherwise acquired by the Company in any manner
whatsoever shall be retired and cancelled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock and may be reissued as part of a new series
of Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein.
Section 6. Liquidation, Dissolution or Winding Up. (A) Upon any
--------------------------------------
liquidation (voluntary or otherwise), dissolution or winding up of the Company,
no distribution shall be made to the holders of shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or winding up) to the
Series A Junior Participating Preferred Stock unless, prior thereto, the holders
of shares of Series A Junior Participating Preferred Stock shall have received
$1.00 per share, plus an amount equal to any accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such payment (the
"Series A Liquidation Preference"). Following the payment of the full amount of
the Series A Liquidation Preference, no additional distributions shall be made
to the holders of shares of Series A Junior Participating Preferred Stock
unless, prior thereto, the holders of shares of Common Stock shall have received
an
A-5
<PAGE>
amount per share (the "Common Adjustment") equal to the quotient obtained by
dividing (i) the Series A Liquidation Preference by (ii) 1,000 (as appropriately
adjusted as set forth in subparagraph C below to reflect such events as stock
splits, stock dividends and recapitalizations with respect to the Common Stock)
(such number in clause (ii), the "Adjustment Number"). Following the payment of
the full amount of the Series A Liquidation Preference and the Common Adjustment
in respect of all outstanding shares of Series A Junior Participating Preferred
Stock and Common Stock, respectively, holders of Series A Junior Participating
Preferred Stock and holders of shares of Common Stock shall receive their
ratable and proportionate share of the remaining assets to be distributed in the
ratio of the Adjustment Number to 1 with respect to such Preferred Stock and
Common Stock, on a per share basis, respectively.
(B) Notwithstanding paragraph (A) of this Section 6, (i) in the
event, however, that there are not sufficient assets available to permit payment
in full of the Series A Liquidation Preference and the liquidation preferences
of all other series of preferred stock, if any, which rank on a parity with the
Series A Junior Participating Preferred Stock, then such remaining assets shall
be distributed ratably to the holders of the Series A Participating Preferred
Stock and of any such parity shares in proportion to their respective
liquidation preferences; and (ii) in the event that after the required
distributions to holders of Preferred Stock there are not sufficient assets
available to permit payment in full of the Common Adjustment, then such
remaining assets shall be distributed ratably to the holders of Common Stock.
(C) In the event the Company shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the Adjustment Number in effect immediately prior to such event shall be
adjusted by multiplying such Adjustment Number by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the Company shall enter
--------------------------
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Series A Junior Participating Preferred Stock shall at the same time be
similarly exchanged or changed in an amount per share (subject to the provision
of adjustment hereinafter set forth) equal to 1,000 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 Company shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (ii) combine the
outstanding Common Stock into a smaller number of shares, 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 Junior Participating 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
A-6
<PAGE>
such event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
Section 8. No Redemption. The shares of Series A Junior Participating
-------------
Preferred Stock shall not be redeemable.
Section 9. Ranking. The Series A Junior Participating Preferred Stock
-------
shall rank junior to all other series of the Company's Preferred Stock as to the
payment of dividends and the distribution of assets, unless the terms of any
such series shall provide otherwise.
Section 10. Amendment. The Certificate of Incorporation of the Company
---------
shall not be further amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series A Junior
Participating Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of a majority or more of the outstanding shares
of Series A Junior Participating Preferred Stock, voting separately as a class.
Section 11. Fractional Shares. Series A Junior Participating Preferred
-----------------
Stock may be issued in fractions of a share which shall entitle the holder, in
proportion to such holder's fractional shares, to exercise voting rights,
receive dividends, participate in distributions and to have the benefit of all
other rights of holders of Series A Junior Participating Preferred Stock.
A-7
<PAGE>
Exhibit B
---------
SHARED MEDICAL SYSTEMS CORPORATION
SUMMARY OF RIGHTS AND RIGHTS AGREEMENT
On May 1, 1991, the Board of Directors of SHARED MEDICAL SYSTEMS
CORPORATION (the "Company") declared a dividend distribution of one right (a
"Right") for each outstanding share of Common Stock, $.01 par value (the "Common
Stock"), to holders of Common Stock of record at the close of business on May
10, 1991. Each Right entitles the registered holder to purchase from the
Company one one-thousandth of a share of new Series A Junior Participating
Preferred Stock, $.10 par value (the "Preferred Stock"), at a Purchase Price of
$80 per unit, subject to adjustment. The terms of the Rights are set forth in a
Rights Agreement (the "Rights Agreement") between the Company and Pittsburgh
National Bank as Rights Agent.
The following description of the principal provisions of the Rights and the
Rights Agreement is a summary only, does not purport to be complete and is
qualified in its entirety by the provisions of the Rights Agreement (and
exhibits thereto), a copy of which has been filed by the Company with the
Securities and Exchange Commission. A copy of the Rights Agreement is available
free of charge from the Company upon written request directed to the Secretary
of the Company at its principal offices.
Until the Distribution Date (as defined below), (a) the Rights will be
evidenced by the Common Stock certificates and will be transferable only with
such Common Stock certificates, (b) new Common Stock certificates issued after
May 10, 1991 will contain a notation incorporating the Rights Agreement by
reference and (c) the surrender for transfer of any certificates for Common
Stock outstanding will also constitute the transfer of the Rights associated
with the Common Stock represented by such certificate. Pursuant to the Rights
Agreement, the Company reserves the right to require that, upon any exercise of
Rights, a number of Rights be exercised so that only whole shares of Preferred
Stock will be issued.
The Rights will not become exercisable until a Distribution Date
occurs and the Company's right to redeem the Rights (as hereinafter described)
has expired. Holders of Rights will have no rights as holders of the capital
stock purchasable upon exercise of the Rights (including, without limitation,
the right to vote or receive dividends) unless and until their Rights have been
exercised. The Rights will expire at the close of business on December 31, 2001,
unless they are earlier redeemed by the Company or expire in accordance with
other provision of the Rights Agreement as described below.
As soon as practicable after the occurrence of a Distribution Date,
Rights Certificates will be mailed to holders of record of the Common Stock as
of the close of business on the Distribution Date and thereafter the separate
Rights Certificates alone will represent the
B-1
<PAGE>
Rights. Shares of Common Stock issued prior to the Distribution Date will be
issued with Rights.
A Distribution Date will occur upon the earliest to occur of any of
the following events:
(a) ten business days following the date (the "Stock Acquisition
Date") of 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 shares of Common Stock then
outstanding, provided that an "Acquiring Person" will not include the
Company, its subsidiaries or any of their employee benefit plans, now
or hereafter existing, or persons with whom the Company has entered
into standstill agreements prior to the time they became holders of
15% or more of the outstanding Common Stock;
(b) ten business days following the commencement of a tender
offer or exchange offer that would result in a person or group
beneficially owning 15% or more of the outstanding Common Stock
(unless such tender offer or exchange offer is an offer for all
outstanding Common Stock which a majority of the independent directors
of the Company determines to be fair to and otherwise in the best
interests of the Company and its stockholders); and
(c) ten days after the date on which a person becomes an
"Adverse Person". A person will become an "Adverse Person" if all of
the following occurs: (i) a majority of the independent directors,
after reasonable inquiry and investigation and consultation with such
persons as they deem appropriate, determine that (x) beneficial
ownership by a specified person of an amount of Common Stock exceeding
the Ownership Limitation (as defined below) is, or would likely be,
intended to cause the Company to repurchase the Common Stock
beneficially owned by such person or to cause pressure on the Company
to take action or enter into a transaction or series of transactions
intended to provide such person with short-term financial gain under
circumstances where the majority of such independent directors
determines that the best long-term interests of the Company and its
stockholders would not be served by taking such action or entering
into such transactions or series of transactions at that time or (y)
beneficial ownership by such person of an amount of Common Stock
exceeding the Ownership Limitation is causing or reasonably likely to
cause a material adverse impact (including, but not limited to,
impairment of relationships with customers, suppliers or creditors or
impairment of the Company's ability to maintain its competitive
position) on the business or prospects of the Company; (ii) a majority
of such independent directors designate a specific limitation on the
amount of Common Stock which such specified person may beneficially
own, which amount (the "Ownership Limitation") may be less than, equal
to, or more than the amount of shares then owned by such person, but
not less than 10% of the outstanding shares); and (iii) the beneficial
ownership of shares of such
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person, including such person's affiliates and associates, shall
(either before or after the occurrence of the events specified in
clauses (i) or (ii) above) exceed the Ownership Limitation. A majority
of such independent directors also may terminate the status of a
person as an Adverse Person.
Notwithstanding the foregoing, with respect to the events specified in
clauses (a) and (b) above, the Board of Directors may designate, in accordance
with the Rights Agreement, a later date as the Distribution Date.
In the event that, following a Distribution Date, (i) a Person becomes
an Acquiring Person (except pursuant to an offer for all outstanding shares of
Common Stock which the independent directors determine to be fair to and
otherwise in the best interests of the Company, and its stockholders) or (ii) a
person becomes an Adverse Person (collectively, "Flip-In Events"), each holder
of a Right will thereafter have the right to receive, upon exercise of such
Right, instead of 1/1000th of a share of Preferred Stock for the Purchase Price,
shares of Common Stock (or, in certain circumstances, cash, property or other
securities of the Company) having a value equal to two times the Purchase Price
----------
of the Right. Notwithstanding the foregoing, following the occurrence of any of
the Flip-In Events set forth in this paragraph, all Rights that are, or (under
certain circumstances specified in the Rights Agreement) were, beneficially
owned by any Acquiring Person or an Adverse Person or by certain related parties
will be null and void. However, Rights will not be exercisable following the
occurrence of either of the Flip-In Events set forth above until such time as
the Rights are no longer redeemable by the Company as set forth below.
For example, at a Purchase Price of $80 per Right, each Right not
owned by an Acquiring Person or by an Adverse Person (or, by certain related
parties) following a Flip-In Event described in the preceding paragraph would
entitle its holder to purchase $160 worth of Common Stock (or, in certain
circumstances other cash, property or securities) for $80. Assuming that the
Common Stock had a per share value of $20 at such time, the holder of each valid
Right would be entitled to purchase 8 shares of Common Stock for $80.
The Purchase Price payable upon exercise of the Rights may be paid in
cash, by certified bank check or bank draft or, if authorized by the Board of
Directors, by delivery of shares of Common Stock.
Following a Flip-In Event, subject to applicable law, the Board of
Directors may determine to exchange for any or all Rights (other than Rights
held by an Acquiring Person or Adverse Person and certain related parties) one
share of Common Stock for each Right so exchanged or substitute value in the
form of cash, property, debt or equity securities, or any combination of the
foregoing. Such exchange will be on a pro rata basis if less than all Rights
are to be exchanged, and holders of Rights will not be required to pay any
consideration (other than delivery of the Right) in any such exchange.
In the event that, at any time following a Stock Acquisition Date, (a)
the Company is acquired in a merger or other business combination transaction
(other than certain
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<PAGE>
specified acquisitions, or an acquisition following an offer determined by the
independent directors to be fair), or (b) more than 50% of the Company's assets
or earning power is sold or transferred, each holder of a Right which has not
yet been exercised (except Rights of Acquiring or Adverse Persons and certain
other related persons which previously have been voided as set forth above)
shall thereafter have the right to receive, upon exercise, common stock of the
---
acquiring company having a value equal to two times the Purchase Price of
- --------- -------
the Right. The events set forth in this paragraph as well as Flip-In Events are
referred to as the "Triggering Events."
The number of Rights, the Purchase Price payable and/or the number of
shares of Preferred Stock (or other securities or property issuable upon
exercise of the Rights) and the redemption price hereinafter specified are
subject to mandatory or discretionary adjustment from time to time in certain
circumstances to prevent dilution or to avoid adverse tax consequences. With
certain exceptions, no adjustment in the Purchase Price will be required unless
cumulative adjustments amount to at least 1% of the Purchase Price.
The Company may determine not to issue fractional shares of Preferred
Stock or Common Stock upon exercise or exchange of the Rights, and, in lieu
hereof, an adjustment in cash may be made based on the market price of the
Preferred Stock (or Common Stock, as the case may be).
In general, at any time until ten business days following a Stock
Acquisition Date, or such later date as the Board of Directors may designate,
the Company may redeem the Rights in whole, but not in part, at a price of $.001
per Right (payable in cash, Common Stock or other consideration deemed
appropriate by the Board of Directors). The Company may not redeem the Rights
while a person continues to retain the status of an Adverse Person. Immediately
upon the action of the Board of Directors ordering redemption of the Rights, the
Rights will terminate and the only right of the holders of Rights will be to
receive the redemption price.
While the distribution of the Rights themselves will not be taxable to
stockholders or to the Company, stockholders may, depending upon the
circumstances, recognize taxable income in the event that the Rights become
exercisable for Common Stock of the Company (or for other consideration) or for
common stock of an acquiring company as set forth above.
The Rights Agreement vests the authority to administer the Agreement
in the Board of Directors (and, in some circumstances, the independent
directors). All actions, interpretations, calculations and determinations which
are taken or made by the Board of Directors (or the independent directors) in
good faith will be final and binding. Nothing contained in the Rights Agreement
will be deemed to impose on the Board of Directors or the Company any obligation
to approve a tender offer, merger, acquisition or other similar proposal by or
from a person even though the terms of such proposal may be fair to stockholders
of the Company.
Other than those provisions relating to certain principal economic
terms of the Rights which may not be amended, any of the provisions of the
Rights Agreement may be
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<PAGE>
amended by the Board of Directors of the Company at any time prior to the
Distribution Date. After the Distribution Date, the provisions of the Rights
Agreement may be amended by the Board in order to cure any ambiguity, to make
changes which do not adversely effect the interests of holders of Rights
(excluding the interest of any Acquiring Person or Adverse Person), or to
shorten or lengthen certain time periods under the Rights Agreement.
The issuance of the Rights themselves has no dilutive effect on the
Company and will not affect reported earnings per share of the Company.
As previously indicated, the foregoing is only a summary of the
principal provisions of the Rights and Rights Agreement. The specific terms of
the Rights and the Preferred Stock initially issuable upon exercise of the
Rights are set forth in the Rights Agreement and the Exhibits thereto
(particularly Exhibit A thereto setting forth the powers, preferences, rights
and qualifications of the Preferred Stock and Exhibit C thereto containing the
form of Rights Certificate), and reference is made to the Rights Agreement and
exhibits, copies of which are available free of charge from the Company.
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<PAGE>
Exhibit C
---------
[FORM OF RIGHTS CERTIFICATE]
Certificate No. R- __________ Rights
NOT EXERCISABLE AFTER DECEMBER 31, 2001 OR EARLIER IF REDEEMED BY THE COMPANY.
THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $.001 PER
RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR ADVERSE
PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT
HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS
RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME
AN [ACQUIRING] [ADVERSE) PERSON OR AN AFFILIATE OR ASSOCIATE OF AN [ACQUIRING)
[ADVERSE] PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT).
ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY
BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF SUCH
AGREEMENT.*]
Rights Certificate
SHARED MEDICAL SYSTEMS CORPORATION
This certifies that ________________, assigns, is the registered owner
of the number of Rights set forth above, each of which entitles the owner
thereof, subject to the terms, provisions and conditions of the Rights
Agreement, dated as of May 1, 1991, as the same may be modified or amended from
time to time (the "Rights Agreement"), between Shared Medical Systems
Corporation, a Delaware corporation (the "Company"), and Pittsburgh National
Bank, a national banking association (the "Rights Agent"), to purchase from the
Company at any time prior to 5:00 P.M. (Eastern time) on December 31, 2001, at
the office or offices of the Rights Agent designated for such purpose, or its
successors as Rights Agent, one one-thousandth of a fully paid, non-assessable
share of Series A Junior Participating Preferred Stock (the "Preferred Stock")
of the Company, at a purchase price of $80 per one one-thousandth of a share of
Preferred Stock (the "Purchase Price"), upon presentation and surrender of this
Rights Certificate with the Form of Election to Purchase and related Certificate
duly executed. The number of Rights evidenced by this Rights Certificate (and
the number of shares which may be purchased
______________________
* The portion of the legend in brackets shall be inserted only if applicable,
shall be modified to apply to an Acquiring Person or an Adverse Person as
applicable, and shall replace the preceding sentence.
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<PAGE>
upon exercise hereof) set forth above, and the Purchase Price per share set
forth above, are the number and Purchase Price as of May 1, 1991, based on the
Preferred Stock as constituted at such date. The Company reserves the right as
provided in the Rights Agreement to require prior to the occurrence of a
Triggering Event (as such term is defined in the Rights Agreement) that a number
of Rights be exercised so that only whole shares of Preferred Stock will be
issued.
Upon the occurrence of a Section 11(a)(ii) Event (as such term is
defined in the Rights Agreement), if the Rights evidenced by this Rights
Certificate are beneficially owned by (i) an Acquiring Person or Adverse Person
or an Affiliate or Associate of any such Acquiring Person or Adverse Person (as
such terms are defined in the Rights Agreement), (ii) a transferee of any such
Acquiring Person, Adverse Person, Associate or Affiliate, or (iii) under certain
circumstances specified in the Rights Agreement, a transferee of a person who,
after such transfer, became an Acquiring Person or Adverse Person or an
Affiliate or Associate of an Acquiring Person or Adverse Person, such Rights
shall become null and void and no holder hereof shall have any right with
respect to such Rights from and after the occurrence of such Section 11(a)(ii)
Event.
As provided in the Rights Agreement, the Purchase Price and the number
and kind of shares of Preferred Stock or other securities which may be purchased
upon the exercise of the Rights evidenced by this Rights Certificate are subject
to modification and adjustment upon the happening of certain events, including
Triggering Events.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificate, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the above-mentioned office of the
Rights Agent and are also available free of charge from the Company upon written
request, directed to the Secretary of the Company at its principal offices.
This Rights Certificate, with or without other Rights Certificates,
upon surrender at the principal office or offices of the Rights Agent designated
for such purpose, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of one one-thousandths of a share of Preferred
Stock (or other securities, if applicable) as the Rights evidenced by the Rights
Certificate or Rights Certificates surrendered shall have entitled such holder
to purchase. If this Rights Certificate shall be exercised in part, the holder
shall be entitled to receive upon surrender hereof another Rights Certificate or
Rights Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may be redeemed by the Company at its option at a
redemption price of $.001 per Right at any time prior to the earlier of the
close of business on (i) the tenth business day
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<PAGE>
following the Stock Acquisition Date (as such time period may be extended
pursuant to the Rights Agreement), (ii) the date the Rights expire pursuant to
Section 13(d) of the Rights Agreement, and (iii) the Final Expiration Date.
Subject to the provisions of the Rights Agreement, the Company may
determine not to issue fractional shares of Preferred Stock or other securities
issuable upon exercise or exchange of any Right or Rights evidenced hereby.
Fractional shares of stock may, at the election of the Company, be evidenced by
depository receipts. In lieu of fractional shares a cash payment will be made,
subject to certain exceptions, as provided in the Rights Agreement.
No holder of this Rights Certificate, as such, shall be deemed for any
purpose the holder of shares of Preferred Stock or of any other securities of
the Company upon the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed as conferring upon the holder hereof, as such,
any of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Rights
Certificate shall have been exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal.
Dated as of ________________, 19__
ATTEST: SHARED MEDICAL SYSTEMS CORPORATION
_____________________________ By_______________________________
Title: Title:
Countersigned:
CHASEMELLON SHAREHOLDER
SERVICES, L.L.C.
By___________________________
Authorized Signature
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<PAGE>
[FORM OF REVERSE SIDE OF RIGHTS CERTIFICATE]
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED _______________________________________________ hereby sells,
assigns and transfers unto ________________________
__________________________________________________________________________
(Please print name and address of transferee)
_______________________________________________________________________ this
Rights Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint ______________ Attorney, to
transfer this Rights Certificate on the books of the within named Company, with
full power of substitution.
Dated: _____________, 19__
__________________________
Signature
Signature Guaranteed:
CERTIFICATE
-----------
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) this Rights Certificate [_] is [_] is not being sold, assigned
and transferred by or on behalf of a Person who is or was an Acquiring Person,
an Adverse Person or an Affiliate or Associate of any such Person, (as such
terms are defined pursuant to the Rights Agreement.);
(2) after due inquiry and to the best knowledge of the undersigned,
it [_] did [_] did not acquire the Rights evidenced by this Rights Certificate
from any Person who is, was or subsequently became an Acquiring Person, an
Adverse Person or an Affiliate or Associate of any such Person.
Dated: _____________, 19__
__________________________
Signature
Signature Guaranteed:
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<PAGE>
NOTICE
------
The signature to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
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<PAGE>
[FORM OF ELECTION TO PURCHASE]
(to be executed if holder desires to
exercise Rights represented by the
Rights Certificate.)
To: SHARED MEDICAL SYSTEMS CORPORATION
The undersigned hereby irrevocably elects to exercise _____________
Rights represented by this Rights Certificate to purchase the shares of
Preferred Stock issuable upon the exercise of the Rights (or such other
securities of the Company or of any other person or other property as may be
issuable upon the exercise of the Rights) and requests that certificates for
such shares and or such other property be issued in the name of and delivered
to:
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
Rights Certificate, a new Rights Certificate, for the balance of such Rights
shall be registered in the name of and delivered to:
Please insert social security or other identifying number
_______________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
________________________________________________________________________________
Dated: _____________, 19__
__________________________
Signature
Signature Guaranteed:
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<PAGE>
CERTIFICATE
-----------
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Rights Certificate [_] are [_] are
not being exercised by or on behalf of a Person who is or was an Acquiring
Person, an Adverse Person or an Affiliate or Associate of any such Person (as
such terms are defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it
[_] did [_] did not acquire the Rights evidenced by this Rights Certificate from
any person who is, was or became an Acquiring Person, an Adverse Person or an
Affiliate or Associate of any such Person.
Dated: _____________, 19__
__________________________
Signature
Signature Guaranteed:
NOTICE
------
The signature to the foregoing Election to Purchase and Certificate
must correspond to the name as written upon the face of this Rights Certificate
in every particular, without alternation or enlargement or any change
whatsoever.
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